Imperialism can really pay

So there's Panama.  Well, what about Suez?

The Suez Canal started under very different political conditions, inasmuch as the Egyptian government was on-board with the project.  So on board, in fact, that it not only put in 45 percent of the initial capital (£1.5 million), it promised the Compagnie de Suez the free use of forced labor to build the thing. 

That wasn't nada.  In 2007 pound sterling, the Egyptians put in £149 million.  But as I've mentioned elsewhere, the world was poorer then:  relative to the growth of the British economy since then, that would be equivalent of plonking in £4.3 billion today.  That would be a lot of scratch for the current Egyptian government; it was an amazing amount of scratch for 1854's. 

So far, so non-imperialistic.  Awful for the poor people who had to live under Cairo's despotism, but that'd be like blaming Russia for the shortcomings of the Kazakh government.  (Wait ... no, I'll leave that to those who know more.)

The story gets better, though.  It's an amazing bit of imperial skullduggery ... and perhaps the coolest thing about it is that it could easily happen today.  I mean, it's not like world powers scarf off strategic parts of nearby states for strategic gain these days.

So, with the caveat that what I'm about to tell you is pieced together from primary sources and could well be wrong, the story is below.

In 1863, the Egyptian government decided to abolish forced labor.  This did not make the French shareholders of the Suez Canal particularly happy.  They took the Egyptian government to international arbitration, the 19th-century version of ICSID. 

Oddly enough, Napoleon III was the arbiter.  Even more oddly, because of Egypt's strange international position (it was a country, yet not a country) an uncaring Turkish government handled Egypt's side.  Napoleon III ordered the Egyptian government to pay an indemnity of  £3.6 million ... either £256 million or £5.3 billion, depending on whether you want to know its absolute or relative cost in 2007 terms. 

Think about it:  Egypt decides to stop forcing its own citizens to labor on public works projects, and then has to pay a French company for the resulting losses under threat of sanction.

In the words of those great poets, but wait it gets worse.  The Compagnie de Suez was a financial wreck.  In order to save it, the French pressured Egypt into accelerating its arbitral payments.  When that didn't work, Paris in 1867 basically ordered Cairo to issue £1.2 million in bonds collateralized by its shares in the Suez Canal, which it would then use to subsidize Canal construction.  (Once again, in modern money, that'd be either £75 million or £1.7 billion today, depending on how you think about these things.)  Unsurprisingly, as many of you probably know, Egypt defaulted. 

In short, of the £16.9 million cost of the canal (overbudget by a factor of 2.2), the builders managed to get Egyptian taxpayers to kick in 40 percent of the cost and wind up with pretty much zero equity in the project.

Teddy Roosevelt was a piker. 

Whether Gladstone and Eden then managed to piss away what Napoleon III got is a different question, but one I'd be happy to try to answer next year. 

Comments

[guthrie]

The other way it pays is in the receipts from the traffic.
From pages 133 and 134 of "The Suez Canal, its past present and future" by Lt Col. Sir Arnold T Wilson, they started making a profit of 2.07 million in 1872, and it was around that for most of the 1870's.
But by the 1880's the surplus profit was in the order of 35 million francs!
It continued to grow all the way up to 87 million francs in 1913, and tehn fell for obvious reasons.
Perhaps you have a better idea of how that works out in comparison with modern money, and it seems the canal did cost 451 million francs. I would assume there were some re-evaluations in there over the following decades.