Class Power and the Postcolonial State in Egypt

If Harb and the other interwar Egyptian investors did not think precisely like later anti-imperialist theorists, then what terms did guide their actions? Is there a better way to conceptualize basic features of capitalist collective action at a particular juncture in Egypt’s recent past? To answer these questions, we need to map the universe of investors and political action, beginning with basic institutions like the firm (Ferguson 1983; Bowman 1989; Plotke 1992).

Conflicts over markets and over the public resources that sustained local investors’ market power were pervasive in the interwar and post–World War II Egyptian political economy, but these distributive conflicts are little known and little understood, despite their central importance both to where, when and how industry was built in Egypt and to the nature of party and elite political cleavages more generally. Local or Egypt-based capitalists were organized in rival investor coalitions or business groups, and these organizations were among the most powerful private institutions governing the Egyptian political economy during the first half of the twentieth century.

In retrospect, what is most noteworthy about the colonial enterprise in the Egyptian case is its having facilitated the creation of archetypal, large-scale, privately owned and controlled capitalist institutions. The medium of accumulation was the booming cotton export economy. Locally based merchants and landlords (investors) together with representatives of European banks and investment trusts steered the economy and began a project of investing in early import-substitution industries (food processing, textiles, building materials).

Business Privilege

Until the military coup of 1952, British and Egyptian governing authorities together with the country’s leading local investors shared and reproduced a common view of the institutional hierarchies ostensibly underpinning “all private enterprise market-oriented societies” or what Lindblom describes as “the privileged position of business. In the eyes of government officials, therefore, businessmen do not appear simply as the representatives of a special interest, as representatives of interest groups do.…When a government official asks himself whether business needs a tax reduction, he knows he is asking a question about the welfare of the whole society and not simply about a favor to a segment of the population” (1977: 170, 175).

In other words, the power of capitalists as a class in the decades before the 1952 Revolution had little to do with a bourgeoisie’s (in)ability to act cohesively in order to “capture the state.”^[5] Yet, Lindblom’s argument about business privilege, like those explications of Antonio Gramsci’s concept of hegemony, which it resembles, is centrally concerned with the contemporary functioning of advanced capitalist democracies, systems where a stable, highly nondemocratic relationship of shared authority between corporate capitalists and government officials is not an issue around which political forces struggle.^[6] Egypt, in contrast, witnessed a conflict after 1952 precisely around the issue of business privilege, or the distribution of “major leadership roles in the politico-economic order.…At least hypothetically, government always has the option, if dissatisfied with business performance, of refusing further privilege and simply terminating private enterprise in a firm, industry or the entire system. Short of taking that course, however, government has to meet business needs as a condition of inducing performance” (Lindblom 1977: 179).

This “hypothetical” case is a fair précis of the actual direction taken by the Nasser regime, beginning in 1954–1955, when the new governing elites began to challenge the central institutions of the private market-based economy. Put another way, the post-1952 state was either unwilling or unable to supply the necessary incentives that investors had come to require if they were to act as capitalists: concessions, subsidies, protection, self-regulation, monopoly rents, a tightly controlled if not completely hostile environment for workers, and regular access to the top leadership of the state.

Local Capital

The idea of business privilege helps us to make sense of the marked disparities in the capacities of different social groups and institutions in Egypt to affect outcomes in various arenas of the political economy. Certainly, the pattern of access to those who governed in the decades after 1882 was not random, and the distribution of these capacities bore more than a chance resemblance to other, relatively more entrenched market-capitalist systems. Those who governed the market were privileged.

There remains the question of how to make sense of the institutions that governed the market, or, as it is sometimes posed, who controlled the Egyptian political economy in the decades prior to the 1952 Revolution? Waterbury (1983) usefully summarizes current thinking on this matter as follows: “The largely unregulated economy was in the hands of European bankers, insurance companies, and utility concerns with a Levanto-Jewish bourgeoisie that handled internal commerce and some foreign trade.…Harb and his allies [i.e., the “indigenous wing” of the bourgeoisie] could scarcely make a dent in this exogenous capitalist monolith, and Egypt’s landowners had little desire to do so” (1983: 232–233, emphasis mine).^[7]

Since my own argument can be understood as turning this familiar picture on its head, arguing that by 1952 Harb’s “allies” (that is, local Egyptian and non-Egyptian capitalists) were more or less effectively in control of the day-to-day administration of most key sectors of the economy (with finance and petroleum the most important exceptions), it is necessary to clarify at the outset some basic analytical categories and assumptions.

First, there are no convincing analytical grounds for conceiving of the structure of ownership and control in the Egyptian economy (or any other existing market-based economy for that matter) as a monolith. Second, and again for the purpose of understanding the locus of control in particular firms and sectors as well as judging the potential for expanded domestic accumulation (two of the most basic concerns in the study of peripheral capitalist political economies), use of the term exogenous in generalizing about both the individual identities of capitalists and the corporate identities of firms in Egypt is extremely misleading. And though analysts often distinguish between indigenous and foreign wings of the bourgeoisie (e.g., ‘Abd al-‘Azim Ramadan 1971; Waterbury 1983; Tignor 1984), it is important to keep in mind that throughout the entire period studied here investors themselves never seemed to have organized in Egypt along these lines.^[8]

Drawing on generally accepted usage in the international political-economy literature, I use the term foreigncapital to refer exclusively to investment originating outside Egypt’s borders by investors whose relevant horizons are not primarily the Egyptian market (e.g., Sir Ernest Cassel or the London-based directors of Imperial Chemical Industries). Local capital by contrast refers to investment originating inside Egypt by investors whose relevant horizons are primarily the Egyptian market. The conception of an exogenous capitalist monolith obscures even this elemental distinction in analyzing the locus of control in a particular economic sector.

As in Argentina and Brazil among other countries, local capitalists in Egypt carried many different kinds of passports (or equivalents) and, as individuals, claimed a variety of national identities. Thus, the founders, top shareholders and managers of various ginning factories, export agencies, construction firms, land-reclamation companies and spinning mills, circa 1930, included European nationals and their descendants or other so-called foreigners (e.g., Armenians, Syrians) who had settled in the Egyptian region of the Ottoman Empire in the mid-1800s along with more recent and shorter-term residents; even older, Egypt-born Jewish families whose members nonetheless held British or other European passports; and those whose identity and world-view were basically Egyptian. The sociology is made only more complex by the fact that both the narrowly legal and the more broadly cultural bases of Egyptian national identity were changing during the first half of the twentieth century (Krämer 1983; Shamir 1987).

The grounds for distinguishing analytically between foreign and local capital are well known. Arguments about the distinct capacity of foreign (or multinational or transnational) capital to shape, distort, block the process of domestic accumulation and escape effective regulation by local political authorities are central to the influential, largely marxist-inspired research projects on imperialism (world systems theory, underdevelopment theory, etc.). A central thesis underpinning the various revisionist, late imperialism or postimperialism positions of the 1970s and 1980s (e.g., Evans 1979; Becker et al. 1987) is that the particular and, from the point of view of national industry-building efforts, negative effects of foreign capital are better understood as variable and contingent rather than as uniform and necessary across eras, regions and localities.

In the Egyptian case, many of the pioneering foreign-owned enterprises of the late 1800s and early 1900s (e.g., the sugar monopoly) were gradually domesticated in the decades after World War I through a combination of market pressures and political action, though the process was an uneven one whose impact varied across economic sectors. On the one hand, as Tignor (1989) shows, the activities of the two Manchester-based textile producers operating in Egypt between the 1930s and the 1950s bore little resemblance to the activities of such sovereignty-flaunting market giants as Doheny in pre–World War I Mexico, the Guggenheims in interwar Chile or, from a later period in Chilean history, ITT. On the other hand, the multinational-dominated Egyptian petroleum sector seems to have proved much less vulnerable to regulation by government agencies or to the rent-seeking strategies of local investors. In Chapters 3–5, I look specifically at the electric-power and chemicals (nitrate) industries.

Local capital was a key factor in pushing for and shaping the course of what, borrowing from Richard Sklar (in Becker et al. 1987), I call the domiciling of the political economy, by which I mean a shift in the locus of control of specific enterprises, of economic policymaking generally and of the economic surplus to those whose lives, fortunes and families depended on calculations about the future of the Egyptian economy. The issue of the national and ethnic identities of domestic investors was largely irrelevant in this regard; leading members of the so-called Levanto-Jewish bourgeois faction and key parts of the Greek settler colony (among others) had no less interest in pursuing, and maximizing control over, the rents from industry building than their more indigenous Egyptian cohorts.

In making this claim, I do not want to be read as defending colonialism, privileging foreigners’ contributions or, most crucially, dismissing the many real and pernicious effects of an era in which Greek and other immigrant capitalists flourished. For instance, entrenched patterns of discrimination in favor of one’s own communal groups (e.g., Greeks hiring Greeks) no doubt limited opportunities for Egyptian technical and managerial cadres, a point that was underscored by the Misr group’s celebrated policy of hiring Egyptians wherever possible. Many Egyptian men and women experienced in their encounters with foreigners other forms of indignity and injustice that may seem to be erased in the course of the following analysis. I hope that readers will recall the different ways that power was made material inside the textile mills and on the streets of Cairo even as I develop a revisionist argument here about those who came to run the factories and to profit from building the city.

State Power

The largest agricultural and industrial ventures undertaken by private investors in Egypt in the late nineteenth century and early twentieth century all relied on direct and indirect state support, including the transfer of state resources. Local coalitions of investors or business groups played a role in such ventures from the start, and, as will be shown in detail in the chapters that follow, they steadily extended their influence and control, often through privileged access to state power. In other words, the Egyptian case conforms to a familiar pattern of political intervention in support of private accumulation, profit and productive investment. Private investors followed an equally familiar path in pursuit of these objectives. Competitors promoted their particular interests through reasoned appeal to authority, patient cultivation of influence and, on more than one occasion, by audacious political maneuver.

Yet the reduction of broad class interests to particularistic demands is frequently portrayed as part of a strategy of political domination imposed on society by autonomous state officials and designed to divert or contain class forces. Informal modes of politics persist because the state successfully neutralizes formal political associations and channels of interest articulation. Importantly, some also see deep cultural roots in the exceedingly elaborate network of patron-client ties extending from the shadowy corridors of executive power to the sun-drenched villages along the Nile. The costs of unchecked authority stifling weakly articulated economic interests and initiatives were seen in the past and are seen in the present as underdevelopment and the cultivation of a nonproductive, “parasitic” capitalist class.

In private market systems, however, patronage is neither easily nor convincingly reduced to an instrument used by governing officials to control capitalist clients. Patronage is in many instances and respects a market relationship, a synonym for literally doing business with the state. The state is an immense economic consumer, even where its role in direct production is limited. In market systems, government agencies purchase goods and services (for instance, construction services) through contracts and concessions. In a similar way, conventional views of clientelism as a structured, vertical and unequal hierarchy between state and society fail to account for the privileged position of investors in the political economy.

In a brilliant account of the colonial and postcolonial political economy of Senegal, Boone (1992) describes how the Senegalese state used clientelist mechanisms to stem the rise of an indigenous capitalist accumulating class. Robison (1986 and 1988) shows how apparently similar clientelist arrangements fostered the growth of a privileged local manufacturing sector in Indonesia.^[9] These cases seem to suggest broader forces shaping relations between bureaucrats and business interests, however one chooses to describe the channels through which businessmen articulate demands and bureaucrats dispense largesse.

One important and obvious distinction is in the type of development strategy underpinning business-government relations (Haggard 1986). At the risk of oversimplifying, is the leadership of the state committed to strengthening capital or undermining it? If it is committed to strengthening capital, then however conflict-ridden and uneven the process, state officials, however reluctantly, find themselves surrendering exclusive authority over broad stretches of the political-economic terrain (Hamilton 1982).

The general commitment of Egypt’s core governing institutions and agencies—the monarchy, the cabinet, the ministerial officials and the British residency/embassy—to private enterprise and a market system is hardly disputable. The already-existing social coalition on which such a system was built—a merged class of landlord-capitalists—steered a virtually unregulated commercial, agroexport economy through the last decades of the nineteenth century. In the decade after the crash of 1907, British and Egyptian governing officials cooperated with the leadership of the business community in outlining a strategy for economic diversification, including development of a domestic manufacturing sector subordinate to the dominant export sector.

A project of limited local industry building in cooperation with foreign capital remained the basic development model for approximately the next four decades, until the mid-1950s, when the Nasser regime began to undermine both the privately steered and state-supported, limited IS (Import Substitution) model and, more fundamentally, the local capitalists that governed the economy. Thus the many conflicts about industrial development that engaged state officials, foreign capitalists and domestic investors in the 1920s, 1930s and 1940s must be understood in light of the underlying basic consensus about means and ends.