The development of capitalism in Egypt - Patrick Clawson

Major work by Patrick Clawson on the structure of Egyptian capitalism and the changes it has undergone throughout its history, arguing that these changes can be understood only as part of developments in international capitalism and the demands of advanced capitalist countries.

In the last two hundred years, the Egyptian economy has undergone qualitative organisational changes, changes more profound than any quantitative increase in output. In 1800, Egyptian society consisted mainly of peasants producing for their own consumption and for tribute payments. Tribute went to tax farmers who effectively ruled the countryside. Today, Egypt has a capitalist economy, in which production is organised by firms. The vast majority of the population must work for wages. The market, not the home, is the source of consumption goods and the destination of production. The aim of production is profit, not the satisfaction of needs.

The central claim of this article is that these changes in the Egyptian economy have been primarily the result of the changing requirements of the advanced capitalist economies. The theory states, in brief, that in the 19th century the search of European capitalist industry for raw materials re-orientated Egyptian agricultural production towards the market, rather than home use. Egyptian industry did not develop, because the European industrial capitalists sought markets, not competitors. But industrial capital gave way to finance capital in the Europe of the early 20th century. Being based on large firms which have finance for expansion, which can spread risks, and which are not tied to one location or industry, finance capital regards the whole world as possible sites for investment in profitable industry. Industrial production in Egypt was encouraged by finance capital from the 1920s on.

The theory used here contrasts with the view that Egypt's development has essentially paralleled the European experience but at a slower pace and a later date.1 The latter view implies that economic growth has been constrained primarily by the lack of savings and by the lack of investment opportunities (due to restricted markets). This theory predicts all-round development, including industrialisation, whenever income and savings rise. The theory used here implies that rising incomes in the early period of the internationalisation of capital (the period of raw material exports) would lead to increased imports of manufactured goods. Local industry would be blocked by competition from advanced country producers. In a later period, local industry and economic infrastFucture would develop independently of changes in income, thanks to foreign capital. This theory, it will be argued, corresponds better to Egyptian experience. In nineteenth-century Egypt, rising income led to increased imports, with savings moving overseas or into land purchases. After World War I, domestic industry and infrastructure expanded even in the 1930s, when income and savings plummeted.

The conventional economists' theory of development and trade also says that capital would flow into areas rich in natural resources and labour but short in capital. The theory used here implies that foreign capital would not invest much in Egypt (and then only in cotton production) during the early period of the internationalisation of capital, when capitalists from advanced countries sought solely raw material and markets for their industry. In a later period, firms were larger and therefore more able to bear the risks and large capital costs of foreign investment in general industry.

Another hypothesis examined in this article is that Egyptian economic development has gone through distinct stages, each with its own dynamics. In the first stage, commodity production replaced production for home or local use; in the second, capitalist production replaced non-capitalist commodity production. This view contrasts with two widely held theories. Wallerstein's followers hold that Egypt has been basically a capitalist country since at least the early 19th century, when agricultural production was increasingly oriented towards the world market. This article will show that.pre-World War I Egypt was non-capitalist in two important ways: the labour process did not rely on wage labour and production was not directed towards profit maximisation (the aim was rather the satisfaction of traditional needs).

Integration into the world market does not automatically give rise to capitalism. The second widely held fiew contested here is that Egypt remained until recently, or is still today, a non-capitalist society of a neo-feudal sort. On the left (e.g. Samir Amin), it is argued that foreign capital has prevented the development of Egypt, preserving precapitalist elements and causing economic stagnation. Later sections will demonstrate the growth of capitalist agriculture and industry in Egypt since World War I and the pivotal role of foreign capital in this growth.

In the last sixty years, radical writers have stressed the profoundly negative effect of European (and US) capitalism on Third World economies. Unfortunately, radical authors all too often assume that the demands placed by advanced country capitalists on the Third World have stayed constant over the past few centuries. Despite the homage paid to Lenin's Imperialism, many quickly abandon his concept of an imperialist stage of capitalist development in favour of theories of continuing search for raw materials and markets. Few are the authors who seek to determine how the rise of monopolies in the advanced countries changed the character of advanced country - Third World relations. The term imperialism is identified with colonial conquest and forcible plunder, not with a set of relations produced by the capitalist accumulation process. A major thesis underlying this article is that capital accumulation in the advanced countries has gone and is going through distinct stages, based on the concentration and centralisation of capital. Marx laid bare the dynamics by which large units of capital triumph over small. The first stage of industrial capitalism, analysed by Marx, was entrepreneurial (so-called competitive) capitalism. As firms triumphed over entrepreneurs, monopoly capitalism emerged. In our day, multinational corporations and state capitalism have continued the process of concentration and centralisation of capital.

Each stage of capitalism has had its corresponding dynamic of advanced country - Third World relations. A thought-provoking but extremely unsystematic discussion of these different stages is in Christian Palloix's L'économie mondiale capitaliste et les firmes multinationales. Palloix identifies the stages with the circuits of capital discussed by Marx in Volume II of Capital. Marx wrote that each individual sum of capital goes through a circuit: production - sale money sum -purchase of labour and inputs-production. Marx looked at the circuit in three ways: first, as the circuit of buying and selling goods; second, as the circuit of extending and recouping money; and third, as the circuit of using materials to produce a product in order to procure more materials for production. Marx argued that each of these circuits becomes the province of a particular fraction of capital: Commodity-capital (merchants), money-capital (bankers), and productive capital (industrialists). Palloix argues that each of these circuits has been internationalised in turn during the different stages of accumulation in the advanced countries. That is, the rise of the world market was only one moment in the continuing process by which capitalism knits together the world economy. The rise of the world market was followed by the rise of world-wide investment and it is now being followed by the rise of world-wide production.

Growth of the market

The growth of the market in nineteenth-century Egypt had two sides: the increased consumption of goods bought on the market and the increased production for markets. The growth in demand was partly a desire for simple consumer goods which could not be made at home, such as matches. Initially, a more important element was Muhammad 'Ali's determination in the 1810s to increase his military power. (Based on the experience of the French invasion under Napoleon, 'Ali felt that maintaining the power of the Egyptian state required modernising the economy to produce weapons in the European style). The major factor behind the growth of market relations in Egypt in the nineteenth century was not Egyptian desire for European goods. The key element was the exploding European demand for industrial raw materials and foodstuffs. Egypt had considerable trade just before the rise of European industrial capitalism, but this trade was largely the transhipment of luxury goods.2 Domestic production was not much affected. Europe's new industries demanded more and more raw material as well as food for the urban populations. Before 1800, the European demand mostly took the form of France's growing need for wheat to feed its expanding urban population. A major factor in Napoleon's invasion was his desire to secure a potential granary, which had already begun to supply southern France.3 But Egyptian wheat exports never grew to major proportions. Not only was competition from Russia and the US fierce, but the Egyptian peasants were in the habit of eating the wheat.

Cotton was found to be the ideal crop for Egypt's climate and soil, which could produce high yields of the most desirable cotton (long fibre cotton). Like most backward societies, Egypt specialised in the production of a raw material which could not be produced in Europe. The story of how cotton transformed Egypt has been told many times.4 The US civil war caused a major boom: cotton cultivation rose from 150,000 acres in 1861 to 1,250,000 in 1865. By the 1900s, cotton was grown on one-third of the land, the physical maximum given the rotation system used then.

The internationalisation of capital, not any conditions internal to Egypt, was the principal factor behind the growth of cotton production, and therefore of the market, in Egypt. There is little evidence for Issawi's thesis that the character of Egyptian institutions is the primary factor in development because these institutions affect the ability to take advantage of increased exports. The character of Egyptian institutions changed considerably over the period before World War I, but the character of development remained the same; more cotton exports and more manufactured-goods imports. Egyptian monoculture began under Muhammad 'Ali, who tried to impose state monopoly in agricultural production. His efforts failed when he ran into a fiscal crisis, partly because the massive state expenditures on irrigation works to increase cotton production produced no revenue (irrigation water has always been free of charge in Egypt), and partly because the state bureaucracy was not up to its assigned task of coordinating production. Muhammad 'Ali was unable to increase his revenue at the expense of the European merchants because of their greater financial resources and because the power of the European states was brought to bear on him to insist on freedom of action for the foreign merchants. No matter whether state-owned or privately-run, no matter whether under the corrupt Egyptian khedives or the post-1882 British occupation, cotton monoculture spread. The institutional structure had little to do with this.

Changes in land tenure: Private property and debt peonage

Besides the increase in cotton production, the nineteenth century witnessed the rise of private property in land in Egypt. As in many precapitalist societies, in Egypt each parcel of land had been subject to various claims: the right to usufruct belonged to one peasant, the right to a certain tribute (not a regularised rent, but something more flexible) to a lord, 'perhaps other tribute to other lords or the state. No one person 'owned' a title which could be alienated-each person's claim, rather, could be transferred independently, based on certain rules. To the extent to which this sytem's replacement by private property was the product of the cotton economy, the increased production of cotton for the world market was the cause for a basic change in Egyptian land tenure.

Before the 1820s Egyptian society had been 'neo-feudal' - an ambiguous term chosen to avoid a debate on the nature of Mamluk Egypt. The towns were dominated by trade; production was solidly controlled by guilds.5 The direct producers (fallahin) were tied to the soil; they were free to decide what crops to raise. Particularly in Upper Egypt, land was held by village communities and periodically redistributed, with the village as a whole responsible for taxes and for corvée on public works (primarily the irrigation canals). In eighteenth-century lower Egypt, taxes were evidently individually assessed, and those who paid taxes regularly could pass their land on to their heirs. Moreover, there is evidence that Lower Egyptian peasants were operating on the fringes of the market economy; taxes were often collected in cash and some cash crops - mostly wheat - were grown.

Muhammad 'Ali attempted to establish direct state control over the land, replacing the older decentralised system. From the late 1830s, the central government's direct control was eroded through the rise of new forms of land control.6 These new forms did not evolve back towards 'neo-feudal' arrangements, in the old pattern of state control alternating with landlord control. Land tenure took a new form instead: private land ownership. The appearance of private ownership is inexplicable except by reference to the growth in commodity production. Demand for income to purchase commodities led some, especially the state, to cede rights in return for ready cash. The same demand led others to want complete control over land. The availability of manufactured goods meant a demand broader than when needs were limited to what could be produced at home, so that sharing output with others who had claims on the land became more of a burden. Local notables sought to eliminate the rights of the peasants, especially the age-old usufruct rights (nominal ownership always remained with the state).

Private land ownership developed most rapidly among the holders of large estates, who were eager to assert their control over the rival claim of the state and the fallahin. Muta'ahiddin (estate holders who were nominally tax-farmers) were able early to change their status to that of private landowners, reducing the cultivators to sharecroppers. Estate holders were the principal beneficiaries of the laws by which land under state ownership (sometimes nominal) was sold at a low price. Under Khedive Isma'il's law of 1871, land was sold for six years' taxes. Sa'id's Land Law of August 5, 1858, had allowed the acquisition of full ownership on some land in return for five consecutive years of tax payments and tilling the land. (It is unclear how wide an effect this provision had). It has also authorised the sale and mortgage of land.

The main characteristic of the 1820-1882 period in the countryside was the decline of pre-capitalist relations, such as the village community, and the rise of semi-capitalist relations, such as commodity production and private land ownership. The relations were semicapitalist in several senses. The labour process was not capitalistic wage labour. The producers retained some control over the means of production (some rights over land; ownership of tools for the sharecroppers), even though they had generally lost what control they previously had over the land. The extraction of surplus was not through profit but tribute, such as the corvée which was common well into this century. Capitalist relations of production imply production for accumulation rather than for need. Production in Egypt was largely for the purpose of satisfying needs, which were expanding under the impact of the new products offered by capitalist industry. Certainly the dynamic of this period was towards the destruction of the old 'neo-feudal' relations, but these were not being replaced by fully capitalist relations.7 Thos like A.G. Frank who conflate commodity production and capitalism are unable to explain why the rise of commodity trade in Egypt did not lead to general accumulation of capital; e.g., industrialisation. As shown in the next section, the same forces which led to commodity production - the rise of capitalist industry, searching for raw materials and markets - also prevented the development of capitalist production in Egypt, which would have had to compete with the capitalist industry in the advanced countries.

From the late nineteenth century until after World War II, Egyptian agriculture was dominated by the 'izba system of debt peonage. This system arose because of the increasing demand for cotton, the expansion of whose production required capital beyond the means of the small farmer. Much of the money for the debt peonage system came from overseas. We shall argue that the 'izba system represents a transition from one stage in the internationalisation of capital to another. As in the earlier period, the focus is on the expansion of raw material production: as in the later period, foreign capital invests in Egypt to increase output. The debt peonage system is also a transition from the earlier noncapitalist commodity production to the later capitalist system.

The spread of commodity production into the Egyptian countryside was soon followed by the spread of debt. Peasants were first forced to seek seasonal credit, to be repaid when the cotton was harvested, in order to survive while the cotton was growing and in order to expand cotton production, which required expenditures on irrigation systems.

Seasonal credits were soon stretched out into, or supplemented by, longer term loans secured by land as collateral. The cotton merchants, source of the early financing, were initially reluctant to make mortgage loans because Muslim and Ottoman law forbade foreclosure and forbade the ownership ofland by foreigners. With the establishment of the Mixed Courts in 1875, foreign (mostly French) land law soon came to rule, at least insofar as dealings with foreigners were concerned.

Mortgage lending soared thereafter: from under fE1 million in 1876 to £E6-7 million in 1883, over £E30 million in 1905, and about £E60 million in 1914.8 Mortgages were not only for outstanding debts; many of the mortgages went for the purchase ofland. While the percentage of land in large estates was roughly constant, many individual estates were being fragmented through inheritance and new estates were formed through mortgage-financed purchase of new land.

While landlords may have been expanding their estates, peasants were becoming landless in large numbers. It seems plausible that the dispossession of the peasants from the means of production was the result of increased exactions by the ruling class (taxes, tribute payments of various sorts, etc). Earlier, the ruling class's demands on the fallahin were limited to the surplus over necessary consumption. Now that the means of production - land - had become a commodity, the ruling class could make higher demands on the peasants, which they had to meet by selling their land. Under the British occupation, data were collected on land-ownership. These data can be combined with the population censuses to derive estimates of the number of landless (making reasonable estimates about family size).9 Owen, in Cotton in Egypt, estimates that one-quarter of the rural families were landless in 1907.

He quotes a British report to the effect that 53 per cent of the population of Upper Egypt, 40 per cent of Middle Egypt, and 36 per cent of the Delta were landless in 1917. The size of the landholdings by small owners was dropping.

The 'izba system, which evidently came to predominate by the turn of the century, was based on absentee landownership with a paid supervisor, daily wage labourers called tarahil (usually migrants), and annual labourers called ta 'maliyya.10 The ta'maliyya were paid in cash and in kind, with the latter consisting of either the non-cotton portion of production or the plots which were not used that year for cotton under the rotation system. The landlord often provided working capital to these workers, who frequently fell in debt and whose wages largely went to reduce the debt. Work in the cotton fields was therefore in practice labour for which no payment was received. The system could at times approximate rent in kind or a neo-feudal system. Unlike feudalism, the peasants had no claim to the land's usufruct nor were they tied to the land. In other times and places the system could approach capitalism, especially when much labour was done by the tarahìl and when the landlord was mostly concerned with profit maximisation (rather than the prestige and security of landownership). One major difference between the 'izba system and capitalism was that the landlord or his representative controlled political and judicial power, so that there was almost no possibility of regularised contractual relationships with penalties for non-fulfillment.

The 'izba system was largely the product of the internationalisation of capital, in that it arose in direct response to increased foreign demand for Egyptian cotton. That the demand for cotton was met via a system of debt peonage was largely the product of the availability of capital to finance the debts, in that the peasants were eager to expand their output while maintaining their current income - which could only happen if they incurred debt. The finance for the expansion of cotton production came largely from abroad. Foreign cotton merchants were the leading source of seasonal credit, which was important in facilitating the switch to cash crops. Money would flow from European money markets through international merchant banks (which had begun as trading houses) down to the large estate-holders and to local money lenders (often 'Levantines' - Greeks, Jews, Copts, etc). From these activities, the merchants-becoming-bankers branched out into providing longer term loans. Nearly all mortgages were provided by foreign capital (at least 80 per cent in 1914). Mortgage loans were the main form of foreign investment in Egyptian companies from 1883, the earliest date for which data exist.11 Mortgage loans remained about one-half of all foreign capital in Egyptian firms throughout the pre-World War I period.

Part of the mortgages funded by foreigners came from land companies, which prospered greatly in the boom years before 1907. These companies bought land to sell in lots to Egyptians, and generally financed the sales themselves. After the crash of 1907, the land companies often held on to their land; they leased it to fallahin for cotton production.12 Foreign ownership of land, strictly forbidden by Muslim law, had already reached 11.5 per cent of all land (550,000 acres) by 1896, the first year for which there are data. Foreigners owned 23 per cent of the estates of over 50 acres (503,000 out of 2.19 million acres). By World War I, foreign ownership had risen to 13 per cent (711,000 acres).

The combination of debt peonage and foreign money-lending primarily reinforced the cotton economy based on non-capitalist production rather than encouraging capitalist development. To be sure, the debt peonage system created a small pool of wage labourers who could be drawn upon for industrial production - the tarahil. The loans relieved the pressures, however, which would have otherwise forced the mass of peasants to abandon all possibility of continuing small-scale production. The loans therefore held back the development of a vast proletariat by preserving small production. Besides retarding the growth of the potential labour force, the loans retarded local industrial production (a prerequisite to capitalist development) by making cotton cultivation more attractive. The foreign capital was tied to the cotton economy: foreign money was essentially available only for projects that expanded cotton output, rather than being extended on the basis of highest profitability regardless of industry. To draw upon Marxist concepts, the money lent in Egypt during this era was usurers' capital, not capitalistic credit. While capitalistic credit is used to expand capitalist production and is extended wherever high rates of profit are to be found, usurers' capital reinforces the non-capitalist system of production to which it is tied. Usurers' capital reinforces the poverty of the producers under the old system by enslaving them in debt without transforming the relations of production to a new system with higher productivity of labour.

Blockage of industrial production 1800-1919

The nineteenth century, which witnessed such an explosion in cotton production, saw Egyptian industrial production actually decline. This qrop in industrial output was not due to poverty - Egypt was rich by contemporary standards.13 Nor was it due to un favourable government policies: this section will demonstrate the extensive government support for industry. This section will argue that the principal cause for the lack of industrial development was the pressure, both economic and political, from already established industrial producers in Europethat is, from the internationalisation of commodity capital.

Muhammad 'Ali's efforts to modernise Egypt's economy included the establishment of many local factories, but these faced great barriers. European merchants not only exported cotton from Egypt; they also imported manufactured goods from Europe. Many of the factories established by 'Ali had higher production costs and lower quality than European products. The domestic textile industry, nevertheless, had become the principal source of cheap cloth by the early 1830s; it employed 30-40,000 workers, or one half the total labour force in 'Ali's factories. Survival of the factories was partly due to their status as state monopolies (dubiously enforced) and to their guaranteed market in the army. Nearly all of the factories closed in the late 1840s, to be replaced by European imports. 'Ali's failure to create modern industry in Egypt was not preordained. While he faced the barrier of uneven development relative to Europe, the unevenness had not yet become so vast as to be unbridgeable. 'Ali might have been able to succeed, as Japan did several decades later when the gap had widened further. The failure of' Ali 's factories was due not only to market forces (cheaper production in Europe) but also to the European powers, who imposed free trade on Egypt by pressuring the Ottoman Sublime Porte to outlaw monopolies and to limit tariffs to 8 percent. 'Ali was forced to implement these measures in the 1840s. Industry disappeared, not to reappear until the 1920s. The domination of capitalist industry in Europe meant the internationalisation of commodity capital only; European industry was openly antagonistic to any potential industrial competitors.

Like 'Ali, later rulers tried to foster increased production and independence (economic as well as political) from Europe. These goals were largely contradictory. Thanks to the European textile industry, there was a large demand for cotton for the foreign market. It became profitable to expand cotton output; but the expansion of cotton exports tied Egypt's economy closer to that of Europe. The emerging Egyptian land-owning class successfully lobbied for massive state expenditures on irrigation works and railroads. These raised Egyptian income, but the loans necessary to finance them tied Egypt to its European creditors. Especially until the establishment of the Mixed Courts in 1875 to handle cases between foreigners and Egyptians, foreigners could make outrageous claims on the government which the government was then forced to honour, due to pressure from the consuls. The greater the profits accruing to the foreigners, the less was available for taxation by the Egyptian government, so the more the government was forced to borrow. The result: ever-growing powers for the European creditors who were closely linked to the cotton merchants. The Europeans enforced the limits on import duties, for tariffs cut into their trade. Given already established European industry, free trade blocked the development of Egyptian industry in spite of repeated attempts to establish industry with state funds.

There is a widespread myth that Egypt's foreign state debt was acquired solely through the extravagance of the Egyptian ruling class. The khedives may have led a decadent life-style, but their foreign loans were at least partially for the expansion of cotton production and even for general capital accumulation. The loans, which totalled about £100 million in 1880, had been raised largely for railroads, irrigation works, and the Suez Canal.14 Interest on the loans was eating up vast amounts.

While the nominal interest was about 4 per cent, the effective interest rate was inflated by the practice of discounting the loans so that the Treasury received roughly two-thirds of the nominal value. The khedives were caught by their contradictory goals; they wanted to accumulate quickly and to become independent of Europe (and Turkey). They hoped to use loans to fund accumulation to break free of European domination, but they ended up reinforcing that domination. The large foreign-held public debt forced the khedives to encourage cotton commodity-production and more specialisation in producing raw materials for export.

As the government's financial situation deteriorated, European control escalated. The 1878 Commission of Inquiry report resulted in the hiring of 1,300 Europeans for the government service. Isma'il, rebuffed in his attempts to resist the encroachments on his powers, was forced out in 1879, to be replaced as khedive by the more pliant Tawfiq.

Tawfiq quickly lost control of the situation. Jamal ai-Din ai-Afghani 's protonationalist agitation (heavily laced with Islamic revivalism) struck a chord among the masses of small landowners threatened by the land seizure law of 1876. When agitators in the army (led by Colonel 'Urabi) joined with Afghani's forces, the revolt threatened European control, and the British invaded - and remained in effective control for over sixty years. Legally, however, the British had few powers for most of these years: Egypt was a province of the Ottoman Empire until 1914 and independent after 1936.

British policy was aptly summarised by Lord Cromer, ConsulGeneral from 1882 to 1907. The first priority was balancing the budget and then reducing taxes. Over the first twenty years, taxes were cut a total of £El.6 million per annum, which Cromer said meant a drop in per capita taxation from £E1.030 to 0.78715 (The Egyptian pound was equivalent to sterling until 1945). This tax reduction implied a massive cutback in state expenditures, especially since £E79.5 million (out of a total of £E241 million spent in the first twenty years of the occupation) went for interest on the debt.

Cromer's second priority was, 'All of the large sums of money which the government could spare were devoted to remunerative public works.' The British consistently pushed every available penny into expanding the irrigation system. British engineers designed many new canals and drainage networks; the first Aswan Dam was built (1898-1902) at a cost of £E3.5 million. The railroad and telegraph systems were expanded and rates slashed by up to 50 per cent. By 1913, expenditures on the irrigation system, railroads, and telegraphs made up £E6 million out of the £E13 million budget.

The public works expenditures were an expression of the oft-stated assumption that Egypt depended on the production of cotton. Contemporary opinion, Egyptian as well as British, assumed that the fertility of Egypt's soil guaranteed its prosperity. When cotton yields began to decline around 1900, there was intense debate about how to restore the yields. No-one suggested diversification of the economy to cut dependence on cotton. The promotion of agriculture was not some sinister plot by the British to block industrialisation; it was an effort to govern in the best interests of the Egyptian people. However, the result was the same: there was essentially no Egyptian industry in the period before World War I.

The lack of industry is often mistakenly attributed to the free trade policies of the British. A famous example: when the first modern textile mill since Muhammad 'Ali's time was opened in 1899, Cromer promptly insisted on an 8 per cent excise tax to offset the 8 per cent import duty. Lacking government assistance and faced with negative effective tariff protection (since it imported its machinery), the mill closed in 1907. Cromer may have been convinced of the virtues of free trade and laissez-faire, but the point is that these principles did not hinder the government from providing substantial support to the cotton sector. The government was hardly neutral between industry and agriculture. It was pouring vast resources into infrastructure and technical assistance for agriculture, while at the same time it was not willing to make the slighest effort to help industrialists .16 British opposition to government aid for industry was of major importance in blocking the development of capitalist relations of production in Egypt from 1882 to 1919. The emergence of capitalist relations was also blocked by other British policies - policies which reflected the internationalisation of commodity capital. Encouragement of cotton exports, (coupled with the expansion of the European textile industry) reinforced the cotton sector, reducing the desirability of investment in other sectors. The increasing British technological lead over Egypt made the establishment of local industry progressively more difficult. European competition displaced local producers of many commodities; the traditional guilds generally disappeared by the mid 1800s. The rule of cotton was not to be the first stop along a road of development which would lead to eventual industrialisation. The rising income of the cotton economy translated into decreased production in many other sectors. The lack of linkages between cotton production and the rest of the Egyptian economy was not the accidental product of Egyptian institutional structure, as Issawi implies. All-round development, especially the rise of industry, could come only when there had occurred some fundamental change in the relation between Egypt and the world economy.

Foreign capital and local industry 1919-1945

Following nearly a century of expanding cotton exports and of reliance on European imports as the source of manufactured goods, the Egyptian economy shifted gears after World War I. Cotton exports stagnated and local industrial production substituted for imports of consumption goods. The last sixty years in Egypt have seen the development of capitalism in industry and agriculture. The main thesis of this article is that Egyptian capitalism developed largely due to foreign capital.

In the last few decades, a major theme of radical writers on development has been that foreign capital retards the industrialisation of the backward countries. Baran provided the classic statement of this theory in The Political Economy of Growth. In Capitalism and Underdevelopment in Latin America, Frank developed the thesis by arguing that industrialisation in Latin America occurred when, and to the extent that, the hold of the metropolis over the periphery weakened. Amin updated the theory to say that Third World industrialisation is the produce of successful struggle against foreign capital. In The Arab Nation, Amin writes that Arab industrialisation could begin only after 'the national bourgeoisie. . . imposed a revision of the international division of labour on imperialism.' There is some truth in this recent radical view: in the early period of the internationalisation of capital, foreign capital did oppose the development of local industry. This article will show that in the later period, however, foreign capital actively promotes capitalist development. The recent radical view, with its one-sided emphasis on the retarding effects of foreign capital, is as mistaken as the earlier view of Lenin and Marx which stressed foreign capital's contribution to capitalist development.17

Foreign capital invested in Egyptian industry during this period because of the rise of imperialism. Finance capital came to dominate industrial capital in the advanced countries. Industrial capital was interested in the backward areas only as a source of raw materials and as a market for output. Industrial capitalists were not prepared to invest in the backward areas because they were interested in the accumulation of capital in their own enterprises. Such investment requires that each individual capital be of sufficient size to undertake large and risky ventures overseas. Finance capital is characterised by huge corporations which have access to finance through banks and credit markets and which can spread the risk of chancy but potentially highly profitable ventures. The giant firms of the modern era have often saturated their local market, and must turn to new markets overseas to sustain growth. In short, finance capitalists do not stay limited to their initial industry, firm or country; they invest in whatever project offers the highest rate of return. Therefore, when profit rates in Europe dropped during the 1930s, British and French capitalists increased their investments in Egypt, where profits had stayed high.

The growth of Egyptian industry, while aided by the local nationalist movement and by state assistance, depended primarily on foreign capital because only it could provide the extra foreign exchange necessary for the import of machinery required to establish industry.

Foreign capital prepared the way for local industry in an indirect way as well. The cotton economy, the product of foreign capital's demand for industrial raw materials, had created a pool of potential wage labourers by dispossessing some peasants of any right to the land and thereby forcing them into wage labour. The cotton economy had also brought into Egypt bourgeois ideas, including nationalism, which was a chief reason for local support for industrial growth. The main story of this section is not about the indirect and ideological role of foreign capital, however, but about its direct, more narowly economic role.

While the rise of industry was certainly facilitated by the changing attitude of landowners and merchants - now more willing to accumulate capital by investment in industrial production - Egyptian industry was essentially established by foreign capital. Figures quoted by Crouchley18 indicate the great importance of foreign-owned industries. In 1934, 77 per cent of the assets of manufacturing and commercial corporations and 85 per cent of the assets of all firms were in companies with foreign participation. This overstates the importance of foreign capital in that the data refer to corporations only. Gritly estimates that over 50 per cent of the industrial capital was in corporations, presumably including most of the modern, nonhandicraft production. At least 35 per cent of all industrial capital was, therefore, in firms with foreign participation. But Crouchley's data understate the importance of foreign capital in at least two ways.

Foreign-owned producers, even more than other large producers, had access to more bank loans that did small producers, so that foreignowned firms would have had an even greater percentage of total capital than their percentage of share capital. Second, an important group in the establishment of local Egyptian industry were foreign citizens living in Egypt. When the Egyptian Federation of Industry was established in 1922, the eleven directors all lived in Egypt but only three were Egyptian citizens.19 None were representatives of foreign corporations. There were 226,000 Egyptian residents listed in the 1927 Census who were citizens of European countries. Many of these people had lived in Egypt for decades. It seems reasonable to include these local residents who were foreign citizens among the holders of foreign capital. But in Egyptian government statistics assets held by foreign citizens living in Egypt are included as 'locally-held assets'. The figures therefore understate the extent of foreign control over Egyptian industry.

In theory, all local firms including those with foreign participation were controlled by Egyptians. Progressively tougher laws were enacted in the 1930s and 1940s requiring Egyptianisation of corporations. The 1947 law required 51 per cent of the capital, 40 per cent of the board of directors, 75 per cent of the salaried employees and 90 per cent of the workers to be Egyptian. But the laws were frequently ignored or obeyed in appearance only. Gritly makes clear that locals had little part in day-to-day management: 'It is frequently alleged that the foreign controlling interests retain the substance of power while the Egyptians sitting on the board, being straw men, are suffered for compliance with the letter of the law.' All in all, Egyptian industry was largely owned and run by foreigners, and there is precious little evidence that foreign capital was opposed to industrialisation.

Unlike many radical theories, this theory of the internationalisation of capital implies that industrialisation is not possible without the support of foreign capital. The only possible sources of technology and expertise are foreign. The import of manufactured goods had destroyed their local production, so that the only source of machine goods was overseas. This economic reality forced Egyptian nationalists to work with foreign capital. Bank Misr, which was founded out of the nationalist outpouring of the 1919 revolution, was initially opposed to any cooperation with foreign capital. By the 1930s, when the real industrial boom began, Bank Misr had shifted its attitude. It was forced to seek foreign technology and to take foreign partners who threatened to set up local production competing with Bank Misr firms.

As both manufactured consumption goods and machine goods had to be imported, the rise of capital accumulation in the 1920s and 1930s raised the demand for imports. There was no corresponding growth in exports. The only source of export earnings was the export of raw materials (cotton), yet the demand for raw materials was no longer growing so rapidly. In short, the rise of industry meant pressure on the balance of payments. Without foreign money capital, imports of goods for the new industries could not expand. It was Egypt's good fortune to enter this stage in the internationalisation of capital with a large reserve of foreign exchange which could speed the initial capital accumulation. During World War I and its immediate aftermath, the value of cotton exports soared as the price of cotton rose. The increased revenue was used to liquidate debt and accumulate holdings of some £E150 million in foreign investments. These funds cushioned Egypt's fall during the late 1920s and 1930s as the price of cotton dropped precipitously because European industry ceased its expansion. In the 1930s, average cotton exports were £E23.4 million, down from the £E43.1 million average of 1915-1929.

During the 1930s, Egypt experienced a sharp foreign exchange squeeze. Since the Egyptian pound was fully convertible to sterling until World War II, the drop in export earnings meant an immediate drop in importing capacity, there being no possibility for currency manipulation. The entire brunt of the drop in imports was borne by consumption goods, whose imports fell by over 70 per cent in the 1930s compared to the 1920s. Local production filled only half the £E30 million drop in consumer imports. From at least £E7 million in 1929, industrial value added rose by no more than £E18 million to a maximum of £E25 million in 1940. In other words, Egyptian industrialisation in the 1930s occurred in spite of a considerable drop in income, contra the conventional theory that industry is constrained by the extent of the market. Furthermore, industry was able to expand in spite of a sharp fall in export earnings, contra theories of export-led growth.

The progress of import-substituting industrialisation - or, as seen from the perspective of the advanced countries, export-substituting investment -was substantial. By the outbreak of World War II, Egyptian industry provided all of the local consumption of sugar, alcohol, salt, and cigarettes; 90 per cent of shoes, cement, and soap; 80 per cent of furniture and matches; 40 per cent of textiles. Egypt was largly self-sufficient in most consumer goods even before World War II gave a great boost to local industry.

Nationalism, colonialism and capitalism 1919-1936

The growth of industry was greatly aided by the rise of the nationalist movement. The nationalists called for the establishment of Egyptian industry to reduce dependence on Europe. Public boycotts of English banks, department stores and products were organised in the early 1920s at times of Anglo-Egyptian crisis.20 The nationalists also pressed the government to aid industry. Despite the defeat of the Wafd (then a nationalist party) by the Palace and the British, the government broke with its past practice and began to aid industry. The 8 per cent excise tax on locally-produced textiles was-repealed in 1925. Tariffs on manufactured goods rose steeply in the early 1930s when Egypt gained control over tariff policy. When Bank Misr ran short of funds in 1926, Parliament entrusted it with public deposits rather than let it go under.

State aid was undoubtedly an important determinant of the pace of local capital accumulation; it is not clear, however, that this aid was essential. Tariff barriers are often said to be crucial to initial industrialisation. Yet in Egypt industries were at times established before any tariff protection existed. The key factor was the rise of finance capital ready to invest in profitable ventures in any sector of the local economy.

A major institution in organising the rise of Egyptian industry was Bank Misr. Founded in 1920 by Egyptian nationalists (Misr is the Arabic name for Egypt), the Bank had deposits of fE3,190thousand by 1925. These funds came largely from landlords. Furthermore, large landlords were the main investors in the industries set up by the bank.21 Bank Misr was established precisely to foster local industry. Initially, it set up firms with little regard to profitability, so that it sometimes ran short of funds. Through such firms as one of the world's largest textile mills, printing presses, button factories, linen-spinning mills, Bank Misr dominated the entire Egyptian economy until its nationalisation in 1960.

Marxist writings about the Third World often argue that economic development, especially industrialisation, will be led by the 'national bourgeoisie'. This layer is said to be composed of small capitalists who are developing industry and whose interests are antagonistic to imperialism. It is distinguished from the 'comprador bourgeoisie' - the large bourgeoisie, based on trade, tied to foreign capital, and totally reactionary.22 This distinction makes little sense in the Egyptian context. The richest people in Egypt were heavily involved in the Misr group and thereby in promoting industrialisation; the so-called comprador bourgeoisie was actively developing industry. Furthermore, the industrial wing of the bourgeoisie sought the cooperation of the British imperialists and of foreign firms. The economically 'progressive' capitalists were not interested in an anti-imperialist alliance with the popular masses.

The Egyptian ruling class was indeed split, but not along 'national' versus 'comprador' lines. One section of the ruling class was making the transition to capitalist relations proper. This section had its origins in those landlords or merchants who were moving into industry or into capitalistic control over agricultural production. The other section of the Egyptian ruling class remained rooted in commerce and landowning. It was this section which poured its savings into the purchase of land, to the disgust of the industrialising bourgeoisie which decried the speculation in rural and urban land. Though this section had been largely displaced economically, it retained political power until 1952. The Palace group (which retained control of the state administration even during the brief periods of Wafd rule) was most obviously controlled by the large landowners, but even the Wafd was opposed to a progressive land tax or to land reform. Membership in the Senate was open only to those owning over 150 acres. With such political power, the landlords could win substantial aid from the state. For example, the Agricultural Credit Bank set up with state aid in 1931 had £E12.6 million in outstanding short-term loans in 1951 for seeds, fertiliser, and cultivation expenses. The state was also providing substantial aid to industry, which reflects the unity between the two sections of the ruling class. The two sections were different moments in a process of transition to a capitalist class, rather than fundamentally antagonistic groups. While overstating the unity of the two groups, Amin was generally correct when he wrote in L'Egypte nasserienne, 'The Egyptian bourgeoisie can in no way be distinguished from the bureaucracy. . . [The Misr group's] success brought the support of the landed aristocracy, which thereby began to "bourgeoisify" itself.'

The British clung to their colonial hold on Egypt until 1956 in spite of militant nationalist opposition.23 After crushing the revplution of 1919, the British slowly ceded some of their rights. British troops remained until 1953, including a formal military occupation during World War II; they left only to return during the tripartite aggression of Britain, France, and Israel. According to radical theory, this colonial occupation should have entailed suppression of local industry for the benefit of importers from the mother country. This did not happen: British firms were actively involved in the growth of Egyptian industry. British colonial control was not to prevent Egyptian industrialisation but to guide it along lines suitable to England. The British government wanted to guarantee British firms a major role in the new industries. This policy meant encouraging Britain's local allies, the landlords, to transform themselves into capitalists - a slow process. The governments of other advanced powers were also eager to help firms from their countries. The US government championed political rights for Egypt and land reform. The former would reduce the British advantage; the latter would destroy the landlords' power, which would both speed up industrialisation and shift power to the industrialists who were less friendly to the British. Local nationalists such as the Free Officers responded with friendship towards the US.

Egypt's experience lends no support to the conventional radical thesis that economic development depends upon the success of a militant nationalist movement or upon state planning - a point to which we shall return below.

Agriculture becomes capitalist 1919-1970

One side of the penetration of capitalism into Egypt was the growth of industry. This section examines the other side, the growth of capitalist agriculture as distinct from non-capitalist commodity producing agriculture which was the most important at the turn of the century. Since most Egyptians lived in the countryside, capitalism cannot be said to have fully transformed Egypt until it dominated agriculture. The first thesis of this section is that agricultural capitalism developed in Egypt about the same time as the rise of industry, culminating in the land reform of the early 1950s. The theory that Egyptian agriculture is traditional or neo-feudal in character is shown to be inaccurate. Both rural and urban Egypt were capitalist by the late 1950s. The second thesis is that the motivation for and the effect of the reform was to encourage the development of capitalism. The land reform was not meant to be nor was it a step towards rural socialism. While the development of capitalism in agriculture was not the direct result of the internationalisation of capital, foreign capitalists and foreign powers certainly supported the reform, and they were important in the victory of the Free Officers who were dedicated to reform.

The transformation of Egyptian agriculture was imp0rtant for continued industrial growth. The debt peonage system impeded industrial development in several ways. Debt bondage reduced the availability of labourers from the countryside. The landlords diverted income which could potentially have been used for investment into consumption and into land purchase. Rather than increasing productive capital, funds spent on land purchase only raised land prices. The Egyptian Federation.of Industry Yearbooks in the late 1940s were full of increasingly shrill attacks on the pouring of money into land purchase rather than industrial expansion. The 1952 Yearbook was effusive about the land reform: 'the land reform could be one of the finest pledges for the future of our industry.' A similar sentiment was voiced by' Abd al-Galil al-Emari, Finance Minister (cited by Naguib in Egypt's Destiny). He explained how the reform reduced the desirability of investment in land in the mid-1950s, thereby encouraging the accumulation of capital in industry:

Quote:
The Egyptian economy has suffered until now from an obstacle that has prevented its development - the tendency of the wealthy to invest their capital in the farmlands. . . This form of investment has not created wealth; it had merely concentrated the wealth already present. Thus Egyptian farmlands have become a bottomless pit, absorbing the bulk of our capital. . . The principal objectives of the land reform project are to direct new capital investment toward land reclamation and commercial and industrial enterprises.

The political leadership was explicitly aware of the importance of the land reform for industrial growth. Naguib, the first leader of the Free Officers' government (who was ousted largely for his failure to move quickly on the land reform) wrote, 'In essence the reform's basic objective is to force a transition from real estate to industry. Egyptians are land-crazy. This passion must be checked; their accumulated capital must be fed into the industrial sector.'

Because land reform was such a spur to industry, it was heavily encouraged by western advisors. Warriner maintains that one of the main reasons for the reform was that 'land reform waS very much in the air internationally. America's advocacy of land reform was said to be a green light, and State Department influence certainly played a part in the preparation of the decree.'24 Part of the reason for US support for land reform was the desire to replace declining British imperialism. By supporting the reform the US helped strengthen the industrialist section of the ruling class, which was already inclined to look to the US for support. Besides the economic motivation of freeing capital for industrial investment, the land reform was meant to and did reinforce the power of the industrialists by destroying the landlords' power and by muting peasant protest.

In the decades before the 1952 land reform, there had been considerable movement towards capitalist relations in the countryside. The direct producers were losing control over the means of production and over the production process, while there was emerging a class which directed production and which owned the tools and the product. The 1947 Population Census indicated that labourers were probably one-third of the agricultural population. Another one-fifth, the cultivators on leased land, were close to being wage labourers. Whether the land was in an 'izba or rented for cash, the tenant had essentially no control over the cotton crop. The landlord's agent dictated the timing of all operations, provided the equipment, and commanded the labour force while production was in swing. The oft-cited data on landholdings hide the trend toward capitalist production. The data on landholdings are misleading for several reasons. First, an individual may hold land in several villages; each plot in a separate village would be counted as a different landholding. Second, many farms were sub-divided into smaller landholdings which were rented out separately. Some of these small plots were owned by absentee landlords such as small traders from the cities. The tenants of these plots were generally farmers who ran large-scale operations of over 20 acres. These farms relied on wage labour. Unfortunately, the only data available on farm size are from 1957, after the initial wave of the land reform. Still, they present a striking picture of concentration: more than half of the land was in the 4 per cent of the farms which had over 20 acres.

The final smashing of pre-capitalist relations in agriculture took place with the land reform proclaimed in 1952. Out of a total cultivated area of six million acres, 145,000 were sold at a great discount in lots of less than 10 acres by owners eager for cash instead of government bonds. (Such sales were banned in October 1953.) It is likely that much of the 160,000 acres owned by foreigners in 1954 was sold in this way. In addition, 877,000 acres were distributed by the reform authorities by 1966 (348,000 of which were disbursed from 1952 to 1961).

The breakup of the absentee-owned estates resulted in two forms of land ownership. One was semi-capitalist farms owned by rich expeasants. These farms, about 10 to 20 acres, were worked by family labour supplemented with some permanent workers and many seasonal workers during the peak seasons. The other form of land ownership encouraged by the reform was state-run cooperatives. Land distributed under the reform was organised into cooperatives in which membership was mandatory and which were tightly controlled by the state. 'The new occupants of the expropriated estates were made to join the "local" cooperative operating within the boundaries of the village where the holdings were situated. They were made to sign an undertaking, agreeing to purchase from them all the requirements (seeds, fertilisers, insecticides, etc) for the operation of their holdings, and to dispose of all their produce through cooperative channels.'25 While the cooperatives were theoretically run by elected boards, actual power rested in the hands of a supervisor. The supervisor exercised almost complete control over the cotton production process. He decided when the land was to be plowed, irrigated, and sprayed; he did not allow the peasants to enter the fields for harvest until he gave the word (for fear they would steal the crop); he sold the cotton, with the peasants getting little, if anything, from the receipts after deductions for taxes, debt repayment, seed, fertiliser, etc. The peasants lost control over the means of production, over the product, and over the production process. They had, in essence, become an agricultural proletariat.

While the cooperatives were formed largely to maintain productivity, they also had the effect of creating the nucleus of a state capitalist bourgeoisie in the countryside. When the reform decree was issued, there was concern that the parcellation of land into small plots would reduce productivity. The land was distributed, however, only when a cooperative was formed (implying a slow pace of distribution). The beneficiaries received their land in three pieces, corresponding to the triennial rotation system. The cooperative fields were then laid out in large blocks (made up of pieces owned by many fallahin), each of which was under the same crop. This facilitated the centralised control exercised by the Agrarian Reform staff - a staff largely drawn from the academic-intellectual petty bourgeoisie. The cooperatives were in no way socialist in the classical sense, that is, socialism as workers' control over the means of production. The direct producers had little if any control over the production process, in spite of their nominal ownership of the land.

State influence over the rest of agriculture also increased from the late 1950s on. In the early 1960s, the government made a major effort to extend the system of supervised cooperatives to non-reform land and to consolidate the land within each village into several large blocks within which each landowner would be required to plant the same crop.26 The plan led to increased output where implemented, but it did not spread far because of the intense opposition from small landowners who were forced to get into debt to buy food during the years when their land was in a block devoted to cotton production. A more important way in which the government controlled agriculture was through the everexpanding system of compulsory deliveries. The system was begun in the early 1950s with compulsory delivery of wheat. Marketing of cotton through cooperatives, begun in 1953, was made compulsory for all cotton production in 1965. The system was extended soon thereafter to other crops. Not surprisingly, the price for compulsory deliveries was 20-50 per cent below the free market price. Besides being an effective system of taxation, government marketing extended state control over the agricultural sector in that the state could heavily influence the output of each crop by changing the compulsory delivery price. The state, in sum, had a major say in determining the output mix on 85 per cent of the land and it directly controlled another 15 per cent. The claim that this state influence was socialist will be disputed below, where the Nasserist state is shown to be under the control of a small elite, i.e., not to be a workers' state.

By the late Nasser period, Egyptian agriculture was thoroughly capitalist. There was a large sector of private capitalism, with farmers who relied on seasonal and permanent wage labourers to supplement the labour of family members. There was a smaller but still significant sector of state capitalism. This was a great change from the 1910s, when agriculture was organised along debt peonage lines. The rise of capitalist agriculture occurred in roughly the same period as the beginning of Egyptian industry: the decades following World War I up to 1956. The link is more than casual though not necessarily causal. The industrialists encouraged land reform because they thought it would free capital for investment in industry. The reform was by no means a step towards socialism in the countryside.

The character of Egyptian society in the late 1950s

The previous sections have shown that capitalism grew in Egypt in the decades before 1956. This section will present some statistical evidence about the class structure of Egypt in the late 1950s. The main thesis is that capitalism was overwhelmingly dominant in Egypt at that time.

Prominent Egyptian radicals, especially Amin and Hussein, have argued that most Egyptians in the late 1950s were irregularly employed and marginal to the economy - what they call 'proletarianised masses'. Hussein, who often cites Amin's data, explicitly draws the conclusion that capitalism had not developed much in Egypt by 1957. Hussein implies that the allegedly low level of development is due to the influence of foreign capital. This section will show that, contrary to Amin and Hussein, Egypt had undergone considerable capitalist development. The disappearance of pre-capitalist forms of production had been accompanied by growth of capitalist industry and agriculture.

Amin's presentation suffers from several methodological flaws. To mention only the most serious: he assumed that the entire rural population was engaged in agriculture, despite extensive data to the contrary. Since 'landless peasants' was calculated as a residual category, this error greatly inflated the number oflandless. Furthermore, the landless were treated as à homogeneous mass, even though some were regular wage labourers, some were tenants, and yet others were temporary labourers. A similar error was made with respect to the urban unemployed: labour force figures were deducted from the urban adult population, and the residual was included as 'proletarianised masses'. There was only the most cursory discussion of the treatment of family members, which is a vexing question not only for urban families (where wives generally do not work for a wage) but also for rural families (where many relatives, such as younger brothers, sons-in-law and wives, work without pay for the head of the household).

Based on assumptions which give an upward bias to the number of 'proletarianised masses' and a downward bias to the number of proletarians and semi-proletarians, one can make a rough estimate of Egypt's class composition in the late 1950's.27 the picture is quite different from that painted by Amin and Hussein. The proletariat (in the strict sense) was a large social force in Egypt, at least 30 per cent of the poulation. The proletariat broadly speaking includes another 50 per cent (7 million), for a total of 80 per cent. This broader group includes three social layers left out of the more narrowly defined proletariat. First, there are the 3.5 million rural temporary labourers. Most economists (Hansen excepted) argue that there is extensive disguised unemployment in Egyptian agriculture. This conclusion ignores the highly seasonal nature of work patterns in agriculture.28 The rural temporary labourers are largely proletarianised, for they are in no sense dependent on pre-capitalist production processes. Under the tarhila system, they work for a contractor on public works projects for 4-8 weeks at a stretch, usually four times a year, plus three months in agriculture, a total of seven months' intense work per year. Second, the 2.5 million farmers with less than 5 acres and third, the milion urban marginal masses depended primarily on wage income, so these two groups also should be included among the proletariat. The proletariat was certainly the largest social class.

Egypt had certainly changed much from the days of the cotton economy. The graph of the value of Egypt's cotton exports (see Clawson, The Internationalization of Capital in the Middle East) is certainly dramatic. From 1880 to the early 1920s the trend is steadily up. From the 1920s on the trend is down, with a particularly sharp drop during the 15 years of depression and war (1930-1945). Perhaps this is simplistic, but it certainly supports the basic thesis of the present article, namely, that Egypt's economic development since the penetration of European capitalism has undergone two distinct stages. During the second stage, the stage of all-round capitalist development, cotton exports stagnated while industrial production increased threefold from the early 1930s to the late 1950s (and sixfold by the late 1970s). This record is hard to reconcile with the radical theory that foreign capital blocks industrial development, especially since foreign capital was the principal initiator of Egyptian industry.

State capitalism in Egypt under Nasser

In contrast to the argument that the Nasser years represent a socialist transition and a break from the previous capitalist st:;tgnation, the next two sections will argue that Egypt under Nasser basically continued on the same pattern of development as before: capitalist industrialisation. In order to demonstrate that the Egyptian economy was state-capitalist during the 1960s, this section will show that the state owned the principal means of production and tightly controlled the rest, and that the economy was capitalist. The first point argues against the notion that the state merely acted on behalf of private capitalists who were actually in control; the second, against the theory that Egypt was socialist. Once the continuing capitalist nature of the Egyptian economy has been demonstrated, we can turn (in the next section) to the character of its ties with the world economy.

The Nasser regime was at first quite sympathetic to private enterprise, but it became progressively more dedicated to state-capitalism from the mid-1950s on. In 1956-57 there was a dramatic shift in the state's involvement in the economy. From encouragement of private capital accumulation through infrastructure and through loans, the state moved to take complete control over investment and substantial control over production. In the early years of the July Revolution, the government had concentrated on increased loans to industry through the state-controlled Industrial Bank (£E2 million in loans by 1958, £E4.2 million by 1960). There had also been substantial expenditures on infrastructure, largely through the Permanent Council for the Development of National Production (PCDNP). It was after the events of 1955-56 (Nasser's psrominent role at Bandung, the Israeli raid on Gaza, the abortive agreement with the US-UK-IBRD on financing the High Dam, the Czech arms deal, the Canal nationalisation, the tripartite aggression) that the state asserted control over investment, because of the conviction that private capital - especially foreign capital - retarded growth. The government's actions were not part of some carefully thought-out, long-prepared plan to increase state power over the economy.

Once the political decision had been made that the state had to direct investment in order to step up the pace of capital accumulation, the wheels of bureaucracy moved into high gear. A National Planning Committee was formed. It supervised the selection of projects for an industrial plan, based largely on proposals made by the now dissolved PCDNP. Government participation in investment rose to 30-40 per cent. Private investment was carefully regulated to steer investment towards industry. Real estate speculation (a major activity since the land reform) was curbed by requiring permits for new buildings and by regulating rents. Mixed committees of businessmen and government officials were established to draw up detailed plans; distinguished foreign experts were brought in. The first plan was issued in the fall of 1959.

The plan, which ignored the advice of experts and businessmen, was quite absurd. In 'Le financement des investissements' Samir Amin pointed out the fictional assumptions necessary to 'produce' adequate finance for the massive anticipated expenditures. The plan implicitly assumed that household savings would rise from £E45 million in 1958 to £E81 million per annum and that households' liquidity preferences were so high that demand for bank notes would rise £E37 million over the plan period (bank-notes pay no interest and need not be 'repaid', unlike government bonds). The plan assumed that 84 per cent of the increase in consumption over the plan period would be for industrial goods produced in Egypt. Any drop in this percentage would require extra imports of agricultural goods, exacerbating the foreign exchange problem. And it was quite a problem - the only way the plan closed the balance of payments gap was by assuming credits for industry from eastern-bloc countries equal to twice the loans for the High Dam. In short, the plan was not based on economic reality, but on the government's determination to increase the rate of industrial growth. The increased state intervention in the economy was primarily motivated by the widespread conviction in Egypt that private capital was unable, if not unwilling, to increase output rapidly.

State control was progressively extended after 1956, with a major leap in 1961, when extensive nationalisation consolidated control over production as well as investment. Already in 1956, the holdings of British and French capitalists had been nationalised without compensation; 31 firms with 12 per cent of total industrial output and 10 per cent of the industrial labour force were under the newly established Economic Organisation in 1958. Progressively greater restraints were placed upon Bank Misr, culminating in its nationalisation in 1960, at which time the bank controlled up to one fifth of all industrial output. The stage was set for the nationalisation of all the major industrial and financial institutions in July 1961, followed by the sequestration of the property of 167 wealthy Egyptians in October 1961. Over the next few years, these laws were progressively extended through additional nationalisation and sequestration, reduction in the compensation paid, increasing control over the few remaining private enterprises, etc.

By the late 1960s, the government effectively controlled Egyptian industry. Three-fourths of output and half of employment, including about four-fifths of employment in factories with over ten workers, was in public-sector firms. The private sector employment was in enterprises 'with generally much lower levels of technology and productivity,' especially areas with low capital requirements (pottery, shoemaking, handwoven textiles). Industry was an important part of the Egyptian scene, with over 12 per cent of total employment. Industrial employment in 1970/71 was 1,053 thousand out of a total reported (meaning male) employment of 8,506 thousand. In 1966/67, out of total civilian non-agricultural employment of 3,769 thousand, 1,035 (27 per cent) were in the public sector.29 In short, the state dominated the urban Egyptian economy, owning all the large-scale enterprises and banks and closely regulating the rest (imports, for instance, required a government license from 1964 on). Coupled with the information given above about the state's important role in agriculture, the evidence that the state controlled the economy is compelling.

To demonstrate that Egypt under Nasser was capitalist, we must set forth the features which distinguish capitalism from socialism. We will use the concept of socialism set forth by Marx in Critique of the Gotha Programme and by Lenin in State and Revolution, that is, workers' control over society, with increasing replacement of special state and bureaucratic organs by the organised people and replacement of markets and economic inequality by distribution based on need. The three fundamental features of capitalism are: first, production for a market by units which are forced through competition to maximise profits; second, a large group of people who are 'doubly free' in Marx's phrase: free to work where they wish and free of any other means of making a living; and third, control over the means of production by a small group of people.30 All of these are compatible with state ownership of the means of production. Engels, in Anti-Dühring, expected state ownership to replace private capital:

Quote:
The official representative of capitalist society - the state - will ultimately have to undertake the direction of production. . . The modern state, no matter what its form, is essentially a capitalist machine, the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of the productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers-proletarians. The capitalist relation is not done away with. It is rather brought to a head.

In Nasser's Egypt, control over the means of production was centralised in the hands of a small group of state officials, fulfilling one of the three requirements for capitalism. This group was centred on the professionals - military officers, academics and technicians of the pre-1952 regime. The old bourgeoisie was largely destroyed by the nationalisation.

The direct producers had neither political power nor control over production. The sole legal party, the Arab Socialist Union (ASU), set up in 1962, was theoretically an organ for the workers and peasants. In fact, it was an elaborate mechanism for containing mass initiative, for checking up on local administrators, and for integrating the old power structure at the village level into the new society. For instance, in each factory there were workers' committees set up to replace unions. Not only were these committees dominated by the technical-managerial staff, but they had few powers and rarely functioned except in moments of tension. In spite of the law limiting the term of office to two years, union leadership did not change from 1964 to the early 1970s. 'It is no wonder therefore that a number of these career unionists turned into bureaucratic leaders who overspent on offices, buildings and luxuries, while suppressing different opinions or initiatives from below.' The elite paid itself well: the bottom 43 per cent of public employees had salaries of £E84-300per year, while the top 0.13 per cent (1,035 people) had £E1200-2000 and the next 1.1 per cent (8,889 people) had £E684-1,440. In addition, 'the net consumption of higher bureaucrats should not be measured simply by the purchasing power of their salaries and allowances. . . "managerial perquisites" may include items like cars, houses, social, sporting and holiday services and shopping facilities. '31

It is tempting to argue that the academic-intellectual-military petty bourgeoisie seized economic power because they wanted to enrich themselves as individuals. This is the core of Hussein's argument. In reference to the mid-1960s, he writes, 'They [the state-capitalist bourgeoisie] tried particularly to organise the country's economic life toward satisfying their thirst for the highest personal profits rather than promoting a much-needed last-ditch economic development effort.' If the petty bourgeoisie were motivated simply by personal greed, it is hard to see what would weld them together. Each individual would be more likely to seek alliances with some big bourgeois (as indeed they did throughout the 1930s and 1940s). The new petty bourgeoisie was transformed into a powerful political force by an ideology, an ideology that allowed them to gather the support of the proletariat and the proletarianised masses.

That ideology was nationalism of the modern sort, with its heavy emphasis on economic development. Nasser's 1953 Philosophy of the Revolution is animated principally by political nationalism, with emphasis on the removal of the last vestiges of British colonialism. The 1962 National Charter is primarily a document of economic nationalism, with many references to the 'battle for production': 'production is the criterion by which the dynamism of the Arab will be judged'. Private capitalism is seen as incapable ofmobilising national resources; growth can be maximised only through 'people's control over all the tools of production and over directing the surplus according to a definite plan'. Nationalisation was seen by the petty bourgeoisie as a mechanism to increase the pace of development - thoughts of personal enrichment were not uppermost in their minds.

Once in power, however, many in the new elite decided that they wanted personal wealth, not the public good. The slow rate of economic growth after the mid-1960s partly reflected the increasing corruption and diminishing dedication to effective state planning. The zeal for doubling per capita income in twenty years was gone, replaced by the desire to carve out a comfortable niche. By 1970, the managers of state firms had turned to profiteering and to the black market in order to increase their incomes. 'Collusion between managers in the public sector - some of whom entered into disguised partnership with private merchants or entrepreneurs - and their sub-contractors leads to significant losses of public money.'32 The state bourgeoisie's efforts at personal aggrandisement were in inverse proportion to their commitment to the ideology of state capitalism. The Soviets, aware that their influence depended on the success of state capitalism, made a major effort to encourage the ASU. They saw the ASU as essential for the spreading of state-capitalist ideology, as well as checking the appropriation of wealth by individuals (party officials would enforce the discipline of accumulation for the state). The Soviet effort was unsuccessful: state capitalism never sank ideological roots in Egypt.

Control over the means of production by a new elite satisfied one of the three requirements for capitalism. A second requirement, the existence of a large group forced to work for wages, was provided by the developments in the countryside during the first half of this century, when millions of producers lost their land and were converted into wage-labourers of semi-wage-Iabourers. The land reform cemented this process; it did not create a new set of independent farmers: 342,000 families, representing at most 2 million out of a rural population of 18 million, received land by 1970.33 In 1965, only 1.2 million landownersroughly one-third of the rural population - held 5 or more acres, the minimum needed to sustain a family. As shown above, many of these titular landowners were in practice largly under the orders of the cooperative staff. The result was migration to the cities in search of employment. Among the 13 million urban dwellers in 1970, certainly under 2 million were in any way economically independent, including small peddlars and craftsmen. The vast majority of the Egyptian population had to work for wages. They had no share in the income of the state ownership of the factories.

The third aspect of capitalism is production for a market by competing units each of which maximises its profit. Egyptian production was clearly for markets rather than for direct use. Profit maximisation was to some extent imposed on each public sector firm. O'Brain argues that the public sector managers were evaluated on the basis of the profits produced by their enterprises and were frequently fired if their performance was deficient. The more significant force compelling profit maximisation was, however, the international market. The following section will demonstrate that Egypt's economy in the 1960s was seriously constrained by the shortage of foreign exchange. There were only two ways to earn foreign exchange, and both required profitable production. The first was to export, which could only be a benefit if Egypt's production costs were sufficiently low. The second was to receive foreign loans, which were only forthcoming if there was a guarantee of future repayment. Many of these loans were from foreign governments and were called 'aid'. The loans, including those from the eastern bloc, were not altruistic, however: they were generally to finance the import of machinery to produce outputs which could be exported to the lending country to repay the loan. Consider the Soviet loan for the first stage of the Aswan Dam. Nasser had made a grand political gesture by breaking off negotiations with the US, the UK and the World Bank and announcing accpetance of Soviet financing - but the Soviets kept Nasser hanging for 18 months before signing the loan agreement because, in Khruschev's words, they wanted to be sure the Dam would allow production of sufficient cotton and rice to repay the loan. Foreign capital, including Soviet aid, was available only on condition of profitable production.

Since Egypt met all the conditions describing capitalism and since the state owned the principal means of production, the most useful description of Egypt under Nasser is as a state capitalist society.

Egyptian state capitalism and the world economy

The radical myth of 'socialist' development alleges that nationalist regimes such as Nasser's, and only such regimes, end dependence on the advanced capitalist countries and therefore achieve high rates of growth of GNP and of industry. This section will demonstrate that the myth is inaccurate in all its main aspects. Nationalist regimes do not necessarily achieve higher growth rates than pro-western regimes, nor do they always develop industry more rapidly. Industrialisation and economic growth are not necessarily retarded by ties to the world market. Finally, nationalist regimes do not always reduce dependence on the advanced economies.

The Nasser period did not see particularly rapid economic growth. Growth rates differed little from those under previous regimes. There are no reliable data on GNP before the Nasser period, but there are various indicators of output. The growth rate of manufacturing is a useful proxy for growth in aggregate output. Mabro and Radwan calculated an index of manufacturing output according to which the average annual growth rate for 1945 -1952 (before Nasser) was 8.1 per cent and for 1953-1969/70 (the years of Nasser's rule) was 7.2 per cent.

Growth in the first decade of Nasser's rule (to 1963-4) was at a 10.3 per cent rate, but the rate fell in the last six years to 2.0 per cent. From 1945 to 1952, GNP at 1954 prices rose from £E732 million to £E1,007 million, or 4.66 per cent per annum. From 1952/3 to 1969/70, GNP at 1952/3 prices rose from £E806 million to £E1,700 million, or 4.36 per cent per annum. The most useful data for the pre-1939 period are Radwan's estimates of net fixed capital stock. Again, the Nasser years to not appear as a period of particularly rapid growth. The average annual growth rate from 1952 to 1967 was 3.44 per cent while from 1920 to 1951, the average was 3.33 per cent (excluding the war years, the average was 4.77 per cent.)

The growth of GNP and of industrial output under Nasser was only slightly higher than the average annual population growth rate of 2.4 per cent from 1947 to 1976. Official data, which understate inflation, claim that per capita income rose 2.13 per cent per annum from 1952/3; Mabro estimates the true figure at 1.6 per cent. The increase was reflected more or less proportionately in each social class. Workers' relative income may have declined somewhat, contrary to the radical image of the Nasser regime. Roughly one fifth of the population were rural workers and their families, and their real wages in 1971 were almost exactly the same as in 1952 (having declined a little in the early 1950s, risen until the middle 1960s, and declined a little thereafter). Mabro estimates that manufacturing workers' income rose at about the same rate as for the general population; workers in the modern sector received almost all of the increase for the 1952-1970 period in the years 1962-1964. In sum, there is little evidence that the Egyptian working class did better economically under the radical nationalist regime than it had under the previous modified laissez-faire governments.

Nor is there any evidence that Egypt became more self-reliant under the Nasser regime. The regime spoke the rhetoric of ending dependence and breaking with neo-colonialism, but economic reality intervened. By 1940, Egypt had become self-sufficient in most consumer goods. Local industry provided all or nearly all of the consumption of sugar, alcohol, shoes, cement, soap, furniture, and so on. Advancement beyond these industries into more technologically advanced and capital-intensive lines of production occurred to a modest extent under Nasser, as in the expansion of the local chemical industry and the establishment of the Hilwan Steel complex. An extra 10.9 per cent of the labour-force in large-scale manufacturing was in the metals and chemical group in 1967 compared to 1952. This shift of under 60,000 workers out of a population of 30 million hardly constitutes a reorientation of the economy towards heavy industry.

The continued orientation of industry towards consumer goods was not the product of a conscious state policy. The government supported the development of heavy industry and machine goods, but these never became commercially successful in a large way. The competition from industry in the advanced countries was too severe. Egypt's industry was caught at the end of the product life-cycle, producing goods that had become standardised with production processes that were not experiencing rapid technological innovation. The advanced countries had the experienced work force, the scientific community, the venture capital, the industrial infrastructure to support industrial innovation. Egypt, in spite of strenuous efforts to catch up, was left with the crumbs: industries that had spread to many countries and so experienced sharp price competition, unlike the more concentrated technologically advanced fields.

The product life-cycle process left Egypt dependent on imports to provide technologically advanced goods, including most capital goods. Dependence on imports - and therefore on foreign exchange earnings - was not the result of faulty government policy. The Nasser government encouraged local production by every means available to it. 'Import-substituting' industrialisation - that is, the local production of industrial goods (usually consumer goods) previously imported -is actually quite import .intensive. In order to produce manufactured goods with a value added of £E252.4million in 1967, £E563.5 million in intermediate inputs were required - including £E188 million in imports (£E78.8 million in agricultural goods, £E31.2 million in chemcials and £E19.2 million in spare parts). Mabro and Radwan use the rudimentary inter-industry tables for 1954 and 1962 to calcuate that the technology was slightly more import-intensive in the latter year. Using the 1954 technology to produce the 1962 output would have reduced imports by some 4 per cent.

Dependence on imported capital goods and industrial inputs meant that Egyptian growth was constrained by the scarcity of foreign exchange. Egypt had few exports that could compete on world markets besides cotton. Expanding cotton exports would have been difficult no matter what policy the government followed: world demand for cotton was not rising much, and shorter-fibre cottons were replacing the Egyptian long-fibre as the most popular. Furthermore, resources had to be shifted out of the cotton sector if industry were to develop. The result was stagnant export earnings at a time when demand for imports was rising.

Egypt had considerable foreign exchange reserves at the end of the Korean war: $980 million in 1952.34 The industrial expansion of the 1950s culminating in the rapid growth of the early 1960s (the period just after the extensive nationalisations) was largely financed by these foreign exchange reserves. From 1952 to 1958, Egypt ran a cumulative balance of trade deficit of $560 million, financed primarily by drawing down reserves $487 million. This deficit was about one quarter of gross domestic investment and over 150 per cent of machinery imports. The cushion of excess reserves disappeared in the early 1960s, forcing first a minor devaluation in 1962 before provoking a major crisis in 1965-66. The drying up of the reserves coincided with a sharp cutback in US aid, from $175 million in 1964 to $55 million in 1966 and zero thereafter until the middle 1970s. Short-term bank credits were used to meet the urgent bills, but this was hardly a viable solution for the long run.

The only solution to the balance of payments deficit was to slow down economic growth. Devaluation of the Egyptian pound, if it had any effect, may have actually worsened the balance of trade. The major variable determining changes in the balance of trade was the rate of growth; higher production required more imported capital goods and inputs without expanding exports (if anything, growth took resources away from the cotton sector and so reduced exports). Nasser bitterly resisted the necessity of cutting the growth rate. He wanted to maintain a high level of both investment and consumption. In the end, the cutbacks in public spending demanded by the IMF were largely implemented even though the IMF recommendations were formally rejected and no IMF funds were lent to Egypt.

Hansen and Nashashibi argue strenuously that the stagnation of the middle and late 1960s was not due to the foreign exchange problems alone. Certainly there were other contributing factors, such as the spreading production slowdowns caused by bureaucratic inefficiencies, but the fact remains that the crunch came when and only when Egypt ran out of foreign exchange. There is little basis for Ibrahim's statement that the 'ori:gins' of the slowdown of the 1960s lay in the burdens created by the 1967 war. The slow-down began well before the war. The net burden of the war was also much smaller than the gross. Much of the increased military spending was met with Soviet aid, and the annual loss of $300 million in Suez Canal revenue, $50 million in oil revenue, and $50 million in tourism was partially offset by $250 million in aid from Arab states.35 The economic slow-down was in no sense the product of restricted markets for Egyptian producers. The economic crisis came in spite of increasing living standards for the masses, increases which could be expected to raise demand for locally produced mass consumption goods at the expense of demand for imported consumption goods. The markets for Egyptian industry were expanding, so that local producers could realise economies of scale and reduce their production costs. There was, therefore, no shortage of investment opportunities. The stagnation of the 1960s was the product of a foreign exchange shortage. The expansion of Egyptian industry was limited by the availability of foreign exchange, to the point where many factories could only operate fitfully, when the needed imported inputs or parts were at hand. In spite of Nasser's hopes for increased economic independence, he was forced by the foreign-exchange shortage to rely on foreign loans to finance the imports necessary for growth. Growth required tying Egypt closer to the world economy and depending more on the advanced countries. The internationalisation of capital is not a policy option that a government can choose to accept or reject: it is a necessity for any developing country that does not follow a fully socialist path. Once Egypt had decided to industrialise with modern capitalist technology, then growth became constrained by foreign exchange. The next step was to seek foreign loans - $1,725 million from 1959 to 1966 to cover a balance of payments deficit of $1.6 billion. The loans came only on condition that Egyptian industry would produce profitably, the main guarantee of repayment being the expansion of output made possible by the loan. Egyptian industry therefore had to adopt profit maximisation. The end result of the ties to the world market was that nationalised industry had to run on essentially the same capitalist .principles as the private industry it replaced.

In the late Nasser period, Egypt relied heavily on loans from the Soviet bloc. Eastern-bloc loans were over half of the $1,628 million lent to Egypt from 1967 to 1972. These loans were important in meeting the foreign exchange deficit of $3,746m ($2,250m in balance of payments deficit and $1 ,446m in amortisation), although not as important as the $1,566m in grants from Arab states. The switch-over from western to eastern sources led to sub-optimal utilisation of many factories for which parts and inputs were not available from eastern sources. Due to these problems, the change to the eastern bloc was probably a net economic loss to Egypt for a number of years, belying Nasser's hope that large-scale, low-cost Soviet loans - especially for heavy industry and the public sector - would spur Egypt's growth. The switch in camps from West to East had, of course, powerful political and military motives independent of any hoped-for economic gain.

Reliance on the Soviet bloc did little to change the foreign exchange constraint on Egyptian growth. Soviet loans - called 'aid' - were available on the same criteria as western loans, even if at somewhat lower interest rates. Those terms were that Egypt use the funds to expand output, particularly output of raw materials and foodstuffs for the Soviet market. The USSR lent funds for the Aswan Dam for more than political reasons: the cotton and rice shipped to the Soviet Union in repayment for the loan came at a cheaper price than a corresponding increase in output from Soviet Central Asia. The Soviet loan programme is no more altruistic than that of western investors: both demand that Egyptian production be sufficiently profitable to repay the loan. The fact that Soviet loans take a different institutional form from Western loans (government-to-governmerrt, not bank-to-firm) is of little economic relevance.

One factor behind the break with state capitalism under Sadat in the 1970s was certainly the malaise created by the failure of the Nasserist system to reach its goals. Other factors included the turn from the USSR to the West and the state elite's desire to enrich themselves by establishing private firms. The impact of the world economy should not be underestimated, however. The failure of Nasserism was in large part a consequence of the inability to obtain the foreign credit to finance import of technology and of capital goods. The lack of credit was not the product of an anti-Nasserist plot but the logical consequence of the poor productivity and worse profitability of Egyptian industry. Nasser was never able to organise the new economic system to operate effectively, and the result for the state-capitalist system was the equivalence of bankruptcy for an individual firm: a complete break with the past and a total reorganisation. The capitalist system forces all operating within it to pursue maximisation or pay the price: bankruptcy.

The Sadat regime has pinned much hope on persuading western firms to follow the path down which the Soviets began to travel. This is the road of internationalising production by integrating production facilities scattered far and wide into one global operation. The emerging era of world-wide production constitutes a new stage in the expansion of capitalism, going beyond the internationalisation of markets and of investment. Much as the growth of corporations meant that individual units of capital were now large enough to raise the finance and to take the risk to invest abroad, so now the growth of multinational corporations and of state capitalist societies means that individual units of capital are sufficiently large to plan their operations on a world scale. Industrial production in backward countries like Egypt will no longer be limited to the local market: capitalists from the advanced countries will build factories designed for the world market. The role of backward countries will shift from sources of raw materials and sites for profitable investment to providers of low-cost unskilled labour for factories producing for the world markets. The Soviets had taken some steps in this direction in Egypt, with talks of plants producing simple manufactured goods for sale in the eastern bloc. In turning to the West, Sadat hoped that western firms would take advantage of Egypt's large labour force to set up factories producing for export - an unfulfilled dream so far.

Concluding comments

The history of Egypt over the last two centuries is the history of class struggle - primarily, the struggle of the international capitalist class to mould the Egyptian economy to their needs. While the Egyptian masses have resisted the bourgeoisie's encroachments, the capitalists have generally overcome this opposition. We should not be surprised that the ruling class has had the upper hand in the class struggle. The history of the resistance to capital's conquest is important for our understanding of Egyptian society - but we must realise that the resistance has been fundamentally unsuccessful, for capitalism rules Egypt still. The history of Egypt's economy is therefore primarily a history of capital's advances.

While the evolution of the Egyptian economy has had many unique features, an overall pattern emerges. This pattern is much the same as that to be seen in Latin America, Africa, or Asia: a stage of raw material exports coupled with manufactured goods imports during which non-industrial commodity production spreads, followed by a stage of import-substituting industrialisation assisted by foreign investment. The wide applicability of this overall pattern lends strength to my basic thesis: that the changes in the Egyptian economy have been the result of the internationalisation of capital, not of events particular to Egypt. We must therefore sketch out the outline of the industrialisation process before we can fill in the specific details of the Egyptian experience.

The internationalisation of capital has been a process, not an event. To focus on one moment - say, the creation of a world market - is to risk overlooking the dynamic movement towards an ever more closely knit world economy. The identification of stages in internationalisation was Lenin's fundamental contribution, which we must flesh out. In doing so, we, like Lenin, must be sensitive to the continuing changes in both advanced and less developed countries, if we are to produce an integrated analysis of accumulation on a world scale.

Basic sources

I. Books, Articles, and Papers

Abdel-Fadil, Mohammed, Development, Income Distribution and Social Change in Rural Egypt (1952--1970), Cambridge University Press, 1976.

Abdel-Malek, Anwar, Egypt: Military Society, Random House, New York, 1968.

Amin, Gala!. 'The Egyptian Economy and the Revolution', Egypt Since the Revolution, edited by Panoyotis Vatikiotis, Praeger, New York, 1968.

Amin, Samir (under the pseudonym of Hassan Riad), L 'Egypte nasserienne, Editions de Minuit, Paris, 1964.

_, 'Le financement des investissements dans la province Egyptienne de la R.A.U.', L'Egypte Contemporaine, 50:297 (July, 1959) and 51:299 (January, 1960).

_, La nation arabe: nationalism et luttes des classes, Editions de Minuit, Paris, 1976.

Aulas, Marie-Christine, 'Sadat's Egypt', New Left Review, no. 98.

Ayubi, Nazih, Bureaucracy and Politics in Contemporary Egypt, Ithaca Press, London, 1980.

Ayrout, Father Henry Habib, The Egyptian Peasant. Beacon Press, Boston, 1963.

Baer, Gabriel, Egyptian Guilds in Modern Times, Israeli Oriental Society, Jerusalem, 1964.

_, 'Guilds in Middle Eastern History', Studies in the Economic HistOf}' of the Middle East, Edited by M. Cook, Oxford University Press, 1970.

_, A History of Landownership in Modern Egypt 1800--1950, Oxford University Press, 1962.

_, 'Social Change in Egypt', Political and Social Change in Modern Egypt, Edited by Peter Holt, Oxford Univesity Press, 1968.

_, Studies in the Social History of Modern Egypt, University of Chicago, 1969.

Berque, Jacques, Histoire sociale d'un village egyptien au XXe siecle, Mouton, Paris, 1957.

_, Egypt, Faber and Faber, London, 1972.

Binder, Leonard, In a Moment of Enthusiasm, University of Chicago Press, 1978.

Blunt, W.S., My Diaries Part I 1880--1900and Part II 1900--1914, Macmillan, London, 1919 and 1920.

_, The Secret History of the British Occupation of Egypt, H. Fertig, New York, 1967 (reprint of the 1906 original).

Castle, Mary, Social Reproduction and the Egyptian Agrarian Transformation (Ph.D. dissertation, New York University, 1976).

Clawson, Patrick, The Internationalization of Capital in the Middle East (Ph.D. dissertation, New School for Social Research, 1978-available from University microfilms, 1981).

Cook, M.A., (ed.) Studies in the Economic History of the Middle East, Oxford University Press, 1970.

Crouchley, Arthur, The Economic Development of Modern Egypt, Longmans, London, Green and Company, 1936.

_, The Investment of Foreign Capital in Egyptian Companies and Public Debt, Ministry of Finance Technical Paper no 12, Cairo, 1936.

Davis, Eric, 'Bank Misr and the Political Economy of Industrialization in Egypt, 1920-1941', Unpublished manuscript.

Deeb, Marius, 'Bank Misr and the Emergence of the Local Bourgeoisie in Egypt', Middle Eastern Studies, XXII:3 (October, 1976).

_, Party Politics in Egypt: The Wafd and Its Rivals, 1919--1939. Ithaca Press, London, 1979.

_, 'The Socioeconomic Role of Local Foreign Minorities in Modern Egypt 1805-1961', International Journal of Middle Eastern Studies, IX: 1 (February, 1978).

Dekemejian, R. Hrair, Egypt Under Nasir, State University of New York Press, 1971.

Gadalla, Saad, Land Reform in Relation to Social Develpment in Egypt, University of Missouri Press, Columbia, 1962.

al-Ghazali, 'Abd-el-Hamid, Planning for Economic Development: Methodology, Strategy, and Effectiveness, The Modern Cairo Bookshop, Cairo, 1971.

Gran, Peter, The Islam's Roots of Capitalism, University of Texas Press, 1979.

e1-Gritly, Ali, 'The Structure of Modern Industry in Egypt', Contemporaine, XXXVIII (1947).

Hansen, Bent; Nashashibi, Karim, Foreign Trade Regimes and Economic Development: Egypt, National Bureau of Economic Research, New York, 1975.

Harris, Christian, Nationalism and Revolution in Egypt: The Role of the Muslim Brotherhood, Mouton, The Hague, 1964.

Holt, P.M., (ed.) Political and Social Change in Modern Egypt: Historical Studies from Ottoman Conquest to the UAR, Oxford University Press, 1968.

Hussein, Mahmoud (Bahgat el Nadi and Abdel Rifaat), Class Conflicts in Egypt 1945--1971, Monthly Review Press, New York, 1973.

Ikram, Khalid, Egypt: Economic Management in a Period of Transition, The John Hopkins Press, 1980.

Issawi, Charles, (ed.) The Economic History of the Middle East 1800-1914, University of Chicago Press, 1966.

_, Egypt at Midcentury: An Economic Survey, Oxford University for the Royal Institute of International Affairs, 1954.

_, Egypt in Revolution: An Economic Analysis, Royal Institute of International Affairs, London, 1963.

el-Kammash, Magdi, Economic Development and Planning in Egypt, Praeger, New York, 1968.

Landes, David, Bankers and Pashas: International Finance and Economic Imperialism in Egypt, Harvard University Press, 1958.

Mabro, Robert, The Egyptian Economy 1952--1972, Clarendon Press, Oxford, 1974.

_, 'Egypt's Economic Relations with the Socialist Countries', World Development III:5 (May 1975).

Mabro, Robert; Radwan, Samir, The Industrialization of Egypt 1937-1973, Clarendon Press, Oxford, 1976.

Mayfield, James, Rural Politics in Nasser's Egypt, University of Texas press, 1971.

Mead, Donald, Growth and Structural Change in the Egyptian Economy, Richard D. Irwin, Homewood, 1967.

Naff, Thomas and Owen, Roger, (eds.) Studies in Eighteenth Century Islamic History, Southern lllinois University Press, Carbondale, 1977.

Nagi, Mostafa, Labor Force and Employment in Egypt: A Demographic and Socioeconomic Analysis, Praeger, New York, 1971.

Naguib, Mohammed, Egypt's Destiny, Victor Gollancz, London, 1955.

Nasser, Gamal Abdel, 'The Egyptian Revolution', Foreign Affairs, XXXIlI:2 (January 1955).

O'Brain, Patrick, The Revolution in Egypt's Economic System: From Private Enterprise to Socialism 1952-1965, Oxford University Press, 1966.

Owen, E.R.J., Cotton in the Egyptian Economy 1820--1914, Oxford University Press, 1969.

_, 'Lord Cromer and the Development of Egyptian Industry, 1883-1907', Middle Eastern Studies, Vol 2, no 4 (July 1966).

_, 'Egypt and Europe: From French Expedition to British Occupation', Studies in the Theory of Imperialism, Edited by E.R.J. Owen and Robert Sutcliffe, Longman, London, 1972.

Palloix, Christian, L 'economie marchiale capitaliste et les firmes mu/tinationales, Maspero, Paris, 1975.

_, L'internationalisation du capital, Maspero, Paris, 1975.

Rachid, A.R.H., 'The Emergence and Development of Public Enterprise in the UAR', L 'Egypt Contemporaine, LXI no 340 (April 1970).

Radwan, Samir, Agrarian Reform and Rural Poverty: Egypt 1952--1975, International Labor Office, Geneva, 1977.

_, Capital Formation in Egyptian Industry and Agriculture, Ithaca Press, London, 1976.

Raymond, Andre, Artisans et Commercants au Caire au XVIlle Siecle, Institut Francais de Damas, Damascus, 1973.

Richards, Alan, Accumulation, Distribution, and Technical Change in Egyptian Agriculture (Ph.D. dissertation, University of Wisconsin, 1975).

_, 'Land and Labor on Egyptian Cotton Farms, 1880-1940', Agricultural History, vol 52, no 4 (October 1978).

_, 'The Political Economy of the Egyptian Izbah, 1880-1940', Paper presented at the American Middle East Studies Seminar, Cambridge, Mass. November 18, 1978.

Rivlin, Helen, Agricultural Policy in Muhammed Ali's Egypt, Harvard University Press, 1961.

Saab, Gabriel, The Egyptian Agrarian Reform 1953--1962, Oxford University Press, 1967.

Saad, Nasser, 'Structural Changes and Socialist Transformations in the Agriculture of the UAR, Egypt', L 'Egypte Contemporaine, XL:337 (July 1969).

Saad, Abdel Moghny, Arab Socialism, Barnes and Noble, New York, 1972.

al-Sayyid-Marsot, Afaf Luft, Egypt's Liberal Experiment, 1922--1936, University of California Press, Berkeley, 1977.

Tignor, Robert, 'The Egyptian Revolution of 1919: New Directions in the Egyptian Economy', Middle Eastern Studies XII:3 (October 1976).

_, Modernization and British Colonial Rule in Egypt 1882--1914, Princeton University Press, 1966.

Toth, James, 'Class Development in Rural Egypt, 1945-1979', Process of the World System, Edited by Terence Hopkins and Immanuel Wallerstein. Sage Publications, Beverly Hills, 1980.

Vatikiotis, Panoyotis, (ed.) Egypt Since the Revolution, Praeger, New York, 1968.

_, The Egyptian Army in Politics, Indiana University Press, 1961.

Warriner, Doreen, Land Reform and Development in the Middle East, Oxford University Press, 1962.

2. Egyptian Governmental and Qusai-Governmental Documents (issued under various names: Kingdom of Egypt, Republic of Egypt, United Arab Republic, Arab Republic of Egypt).

Central Agency for Public Mobilization and Statistics, The Increase of Population in the UAR and Its Impact on Development, Cairo, 1969.

_, Statistical Abstract of the Arab Republic of Egypt, Cairo, 1975.

_, UAR Foreign Trade According to the Standard International Trade Classification, annual, Cairo, 1967 -1970.

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_, Report to the Board of Directors, annual, Cairo, 1969-70 -1970-75.

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Federation of Egyptian Industries, Yearbook, Cairo, 1975.

Ministry of Agrarian Reform and Land Reclamation. Agrarian Reform and Land Reclamation in Ten Years. Cairo, 1963.

National Bank of Egypt, Economic Bulletin, quarterly, 1960-1976.

Statistical Department (later: Department of Statistics and Census), Annuaire statistique de l'Egypte, annual, 1909-1938-39, 1945-47, 1949-51, 1951-54, 1954-56.

_, Annual Statement of the Foreign Trade of Egypt, 1951-57.

_, Industrial and Commercial Census, 1927, 1937, 1947. (Year listed is the year census was taken, not the year of publication).

_, Population Census, 1897, 1907, 1917, 1927, 1937, 1947. (Year listed is the year census was taken, not the year of publication).

Statistiques des societes anonymes par actions, travaillant principalement en Egypte, 1911, 1918, 1925, 1937, 1938, 1939.

  • 1. A variant is Issawi's theory, detailed in The Economic History of the Middle East, that growing export markets were important for the Egyptian economy, but that Egyptian development depended on the ability of the local institutional structure to take advantage of the opportunities offered by international trade.
  • 2. Raymond, Artisans et commerçants au Caire au XVIII' siècle, pp193-202.
  • 3. Gran, The Islamic Roots of Capitalism: Egypt, 1760--1890, Chapter 1, brings out the importance of the grain trade in the view of the French.
  • 4. Owen, Cotton in the Egyptian Economy 1820--1914, is the classic. See also: Rivlin, Agricultural Policy in Muhammed Ali's Egypt; Issawi, Economic History of the Middle East 1800--1914; Landes, Bankers and Pashas; and, for a Marxist account, Castle, Social Reproduction and the Egyptian Agrarian Transformation.
  • 5. Baer, Studies in the Social History of Modern Egypt, describes this period well.
  • 6. Baer, A History of Landownership in Modern Egypt 1800-1950.
  • 7. It is an error to speak of primitive accumulation in early 19th century Egypt, as does Alan Richards in Accumulation, Distribution, and Technical Change in Egyptian Agriculture. Richards appears to conceive of primitive accumulation as meaning simply the loss of rights in land. For Marx, the phrase meant the original accumulation of a proletariat and a bourgeoisie - a process which was not occurring in Egypt at this time. Egyptian society was being transformed into a commodity-producing society, but not a capitalist society. Richards appears to share some of the theoretical approach of A.G. Frank insofar as Richards tacitly identifies capitalism with production for the market.
  • 8. Issawi, Egypt in Revolution, p25, cites Lord Dufferin for 1876 and 1883 and Crouchley for 1914. Owen, Cotton, pp271-3, gives similar data. Government data on mortgages show considerably lower figures, most likely because many small mortgages were never registered.
  • 9. The landownership data from the Annuaire Statistique are biased towards small holdings in that it reports land tax returns which were collected by village.

    An individual who owned land in several villages would appear several times.

    An example of the bias: the 1939 Agricultural Census showed holdings under 5 acres with 19070 of the area while the Annuaire showed 32.4%; the census recorded holdings over 50 acres as 45% of the area, while the Annuaire gave them as 37.3% (pointed out by Baer, History, pp71-3). Neither the Annuaire nor the Census gave data on farm size.

  • 10. The 'izba system is well described in an excellent paper by Richards, 'The Political Economy of the Egyptian Izbah, 1880-1940'.
  • 11. Data are from Crouch ley , The Investment of Foreign Capital in Egyptian Companies and Public Debt.
  • 12. Baer, History, pp68-9 and 120-31; Owen, Cotton, pp291-3.
  • 13. A major theme of Cromer's reports is the sources of Egyptian prosperity contrasted to Indian poverty.
  • 14. Crouchley, The Economic Development of Modern Egypt, pp115-8, lists the public works expenditures between 1850 and 1880, showing the close connection to the growth of the debt. Under Isma'il (1863-79), £E51 million was spent on public works, including £E13 million on railroads, £E12.6 million on canals, and £E12 million on the Suez Canal. Isma'il was trying to lessen dependence on Europe through economic diversification and expansion. He ended up only reinforcing the hold of the cotton economy.
  • 15. Cromer's 'Annual Report for 1902' in Issawi, History. See also Tignor, Modernization and British Colonial Rule in Egypt.
  • 16. A fact Owen overlooked in 'Lord Cromer and the Development of Egyptian Industry, 1883 -1907'. While an advocate of government-provided infrastructure for agriculture, Cromer opposed technical assistance (providing seeds, anti-worm campaigns) and loans (the Agricultural Credit Bank). His opposition was generally ineffective (an exception: he prevented any action to help those caught by the crash of 1907). Owen also makes no distinction between the nominal tariff barrier faced by textile imports (8%) and the effective tariff barriers (which could not have been more than 4%, given that an 8% tariff was paid on the imported machinery).
  • 17. Lenin wrote in Imperialism, 'The export of capital greatly affects and accelerates the development of capitalism in those countries to which it is exported.' Marx and Engels, in the Manifesto of the Communist Party, wrote, 'The bourgeoisie. . . compels all nations, on pain of extinction, to adopt the bourgeois mode of production: it compels them to introduce what it calls civilisation into their midst, i.e., to become bourgeois themselves.'
  • 18. Crouchley, The Investment of Foreign Capital, p106.
  • 19. Berque, Imperialism and Revolution, pp363ff. Tignor, 'The Egyptian Revolution of 1919', discusses three weekly economic journals founded by Europeans resident in Egypt - all of which called for local industry and freedom from cotton monoculture.
  • 20. For an account of the nationalist agitation for local industry, see Berque, Imperialism and Revolution, Chapter 4 of Part 3. This is also the basic source on industry in the 1920s.
  • 21. The role of Bank Misr in the inter-war Egyptian economy is described in Deeb, 'Bank Misr and the Emergence of the Local Bourgeoisie in Egypt', and Davis, 'Bank Misr and the Political Economy of Industrialization in Egypt'.
  • 22. Hussein, Class Conflicts in Egypt 1945-71, Chapter 1, drew a distinction between two sections of the Egyptian ruling classes. He conflates the national/comprador distinction with the division between Egyptian and European-Levantine capital. Both Abdel-Malek and Amin attack this theory, but neither adequatedly analyse the actual splits in the ruling class.
  • 23. Abdel Malek, Chapter 1, details the history of the nationalist movement, illustrating the role of extreme right-wing currents.
  • 24. Warriner, Land Reform and Develoment in the Middle East, pp2-13.

    Abdel Malek, pp62-68 and 80, quotes from contemporary US government documents about the desirability of land reform and the correctness of the reform decree.

  • 25. Saab, The Egyptian Agrarian Reform 1953--1962, is the basic source on the agrarian reform. The quote is from p48.
  • 26. Radwan, Agrarian Reform and Rural Poverty: Egypt 1952-75, pp62-3.
  • 27. Drawn from detailed government data. Cf. Clawson, Internationalization of Capital.
  • 28. Mead, Growth and Structural Change in the Eygptian Economy, pp80-98, disputes Hansen's conclusion, in Hansen and Marzouk, Developmental Economic Policy in the UAR (Egypt), that there is little disguised unemployment in Egyptian agriculture. Mead succeeds only in demonstrating that he is incapable of conceiving of any work pattern except 9-to-5, five days a week.

    Mead's 'proof' that there is disguised unemployment rests on the assumption that workers will work year-round at the same intensity they work during the harvest season. In many fields such regular work patterns are unusual - witness the US auto industry, with its cycles of heavy overtime and long layoffs.

  • 29. Ibrahim, Egypt, p110; Mabro and Radwan, The Industrialization of Egypt 1939-1973, pp97-103. The quote is from Ikram, pp 134-5; the data are from the Statistical Abstract 1975, p13, and Mabro, The Egyptian Economy 1952-1972, p210.
  • 30. Market production distinguishes capitalism from feudalism, hunting and gathering societies, etc, while profit orientation separates capitalism from trading societies such as ancient Greece. Freedom to work where desired distinguishes capitalism from slavery or feudalism. 'Freedom' from any other source of production distinguishes capitalism from yeoman-style small producers and from kibbutz-style communes. Control over the means of production in the hands of a small group of people guarantees that most people must work for wages, because they cannot share in income from the means of production.
  • 31. Ayubi, Bureaucracy and Politics in Contempormy Egypt, pp455-6 for the first quote, pp373 and 378 for the data (from 1970) and pp384 for the second quote. Mayfield, Rural Politics in Nasser's Egypt, has a detailed description of the ASU. He concentrates on the complex paper structure of the ASU, but there emerges some sense of how it actually functioned.
  • 32. Mabro and Radwan, p99. They cite the example of a contract by a public firm for earth removal at the rate of £E3.0 per cubic meter. The contract was sublet by the private contractor to the foremen at the rate of £El.65 and the workers were paid £E0.04 per cubic meter (earth removal in Egypt is highly labour-intense and capital-scarce).
  • 33. Data are from the Statistical Yearbook 1975. The figure of 2 million economically independent urban residents is a crude estimate from the employment data.
  • 34. Ikram, pp340-345, gives World Bank estimates of resources, deficits, and deficit financing for 1952-72. This is the main source for data cited here.
  • 35. Kanovsky, The Economic Impact of the Six Day War, pp270-291.