The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor

by David S. Landes

  Across the Mediterranean, however, a piece of the Ottoman empire had other ideas. This was Egypt, long dozing under Mameluke misrule, to the point of forgetting the wheel—this, in the land of the Pharaohs, where archers in chariots had once driven black Nubians and fleeing Hebrews before them.* Turkish government had changed the country little, but the invasion in 1798 by a French expeditionary force under General Bonaparte shook Egypt to the core. A Mameluke army was simply brushed aside, while Bonaparte proclaimed French revolutionary slogans to a population that had no idea what he was talking about. The French were followed by the British—more technological humiliation—and with them came a new Turkish intrusion designed to remind the Egyptians of their fealty to Istanbul. One of the detachments so dispatched was under the command of Mehemet Ali—we met him earlier—who used the Mamelukes to unseat the Ottoman governor and made himself master of Cairo. Faced with reality, the sultan in Istanbul named Ali his viceroy in Egypt. In return, Mehemet Ali made war on Turkey, in the best Turkish tradition.

  Mehemet Ali (now Muhammad Ali in Arabic as against Turkish style) was clearly a man of force and ambition. But he differed from conventional warlords in having a larger vision and the imagination to go with it. No isolation in the palace for him. Ali knew from personal experience how far the Ottoman empire had fallen behind, how much there was to learn. So no one of interest visited Egypt without talking with him. Ali also saw Egypt not as a term appointment, but as a personal estate and field for development. Normally the Ottomans moved officials about from post to post to prevent them from taking root. Ali converted Egypt into a hereditary fiefdom.

  What is more, Muhammad Ali envisioned this development as a total process, encompassing advances in agriculture and industry, new technologies, innovations in schooling (what the economist would call improvements in human capital); also, and unfortunately, an arms program and the inculcation of martial virtues. To accomplish all this, he brought in foreign technicians, some of whom left Christianity for Islam. Although Britain clearly led the world in manufacturing, most of these experts were French, perhaps because the collapse of the Napoleonic empire had freed up talent, perhaps because France’s defeat made it less redoubtable, perhaps because Muhammad Ali correctly saw Britain as an opponent of Egyptian industry.

  Among the expats, the most important was probably Louis-Alexis Jumel, a French mechanic-cotton manufacturer turned agronomist. In 1822, Jumel transplanted a bush he had found on the He Bourbon (later renamed Reunion) and developed for Egypt the cotton we know by his name.11 This species has a very long fiber, thin and yet tough, spinnable in combed form and suitable to the finest yarn and cloth.* In the new world of mechanized cotton manufacture, jumel cotton was a winner from the start. Muhammad Ali had it grown on his own estates, which occupied an increasing share of Egypt’s best soil, and his officials quickly followed his example. By 1824, over 11 million kilograms were exported; by 1845, the figure was 15.5 million kilograms.12 It was the earnings from jumel cotton, bought (expropriated) at artificially low prices and marketed through state monopolies (roughly half of total Egyptian exports in 1835), that paid for Ali’s economic and military ambitions and for much of the Suez Canal. The rest came from other crops, also sold by official agencies. This was a quiet way to generate revenue without levying uncollectable taxes. The system drove European merchants wild.

  Beginning in the 1820s, a good part of these earnings flowed into a massive educational and industrial effort—into technical and military schools, and a wide variety of mills and shops for the manufacture of textiles, metals and metal products, chemicals, rope, arms, ships, and the like—all the things necessary to replace imports and feed a growing war machine. The viceroy even sought a deeper independence by buying European machines and copying them in Egypt. In the face of British export prohibitions, the Egyptians got permission in 1826 to import five hundred power looms from Galloway’s in Manchester. No harm would follow, assured a scornful William Huskisson, president of the Board of Trade; in six months “they would have been knocked to pieces.”13

  Some say that Muhammad Ali was trying to build a war machine; others, that he was aiming at an industrial revolution in a land far behind the European follower countries.† It was a quixotically bold vision, one that was bound to vex European industrial and trading interests: the first attempt by a backward, non-Western society to build a modern industrial economy—by command from above.14

  The extent of Muhammad Ali’s success and the reasons for his ultimate failure have been sharply debated. On the one hand, Egypt’s cotton manufacture apparently grew smartly. An estimate of 400,000 machine spindles in 1834 would put it ninth in the world, ahead of Belgium, and fifth or sixth in spindlage per head of population.15 At the end of the 1830s, Egypt was producing 1.2 million pieces of calico a year. On the other hand, visitors were struck by the crudeness of the machinery, the want of maintenance, the poor quality of the finished product. Jumel cotton was made for high counts, but Egyptian yarn was notoriously coarse and yet fragile. Some foreign observers, though, gave a favorable opinion, and we even have reports of shipment of these products to India, ancestral home of cotton manufacture.*

  Whom to believe? The optimistic view leans toward a conspiratorial theory of Egyptian failure. Muhammad Ali’s project threatened European industrial supremacy. Egypt should stick to cotton-picking and let the big boys make yarn and cloth (comparative advantage again). So the Europeans, Britain in the lead, took the first opportunity (1838) to deprive Egypt of those tariff barriers and market constraints necessary to its infant industries. Capitalism, the argument runs, coolly and cannily stifled a potentially dangerous competitor.

  The pessimists retort that Egypt was never a serious competitor. The whole project was a loser and survived only so long as the state poured money into it. Nothing could be done without foreign technicians and machinists, and even then. Also, the prices of materials and products were set, not by the market, but by the authorities. The meager evidence of sales abroad proves nothing.

  The primary problem, say the skeptics (realists), lay in Egypt’s social and cultural incapability. Native entrepreneurs were rare. Most of them were drawn from the Coptic, Jewish, and Greek minorities—outsiders who had good reason to be discreet. Local manufacturing was done in shops and cottages, by owners lacking knowledge, money, and desire to shift to machine technologies. Foreign investors had better and quicker ways to make money, by lending, for example. The viceroy alone could imagine factories in Egypt, and he established them by fiat. But where would he find the motor energy? Egypt had neither wood nor coal fuel, and water had to be raised before it could be used to drive wheels. So he began with animal power—1,000 oxen to drive 250,000 cotton spindles. The English had done that at the start of their Industrial Revolution, but it is a costly and inefficient technique, especially in hot climates. It is one thing to use beasts for the intermittent tasks of agriculture and transport; quite another to make them drive insatiable machines.

  And where would Muhammad Ali find managers? He hired numerous Europeans at good salaries, but what he wanted from them was know-how rather than direction. For this latter, he chose Muslims, Turkish and Egyptian, for reasons that may have had to do with workers’ sensibilities and the building of a vested interest in the new industry. These nazirs received honors, medals, and generous salaries, but corruption was rife. “Being entrusted with the regulation of the expenses, and the paying of the workmen, they accept bribes to favour an indifferent artisan at the expense of the government, and commit innumerable other frauds difficult of detection.”16 All this entailed the appointment of inspectors to examine accounts and niggling regulations to prevent waste and theft. In this way, time, quality, and maintenance were sacrificed to form and order.

  And where would Muhammad Ali find the workers? In the best Egyptian tradition, he started by using slaves (in England, remember, they began with women and children, the people who could not say no). But these slaves died in lar
ge numbers, which says something about working conditions.* He then had recourse to forced labor torn from family and household, scantily fed and housed, much abused by tyrannical superiors. (The one generosity was in blows of the kurbash.) Some recruits mutilated themselves to avoid conscription. Most, however, found that repugnant as well as painful and life-threatening; so they mutilated the machines instead.† Arson was an abiding threat,** and maintenance was systematically neglected, the more so as bureau cratic complications within the mills (antipilferage measures) made even lubrication a monumental task. In a sandy, dusty climate, bad maintenance spelled disaster.* More and more of the machines fell idle. Standard repair took the form of cannibalization. “For the small number of machines [the mills] contain, they are much more spacious than necessary.”17 Thus output fell, as it should have.

  The British, in other words, had no reason to fear the competition of Egyptian manufactures. In spite (or because) of absurdly low wages, Egyptian costs were higher; and for all the fineness of the raw material, the quality of the final product was lower. But the British were immensely vexed by Ali’s monopoly of the export cotton crop and by the barriers to import of foreign cotton goods into Egypt. So, with the help of the viceroy’s own miscalculations and extravagant political ambitions, they forced free trade upon him.

  Scholars of “progressive” bent see this as the assassination of Egypt’s industrial revolution, or at the least a measure that stalled Egyptian industrialization for another century. The assumption here is that industrialization cannot succeed without “tariff protection, tax exemptions, rebates on transport rates, cheap power, special credit facilities to certain sectors, educational policies, etc., which only a government enjoying a large measure of political and fiscal independence can provide.”18

  My own sense is that all of this is wishful thinking. Muhammad Ali’s Egypt ready for an industrial revolution? No. His grand project already lay moribund when the new commercial treaty went into effect. To be sure, the old pasha went on investing in industrial plant right up to his death in 1848; but the military incentive was gone, and he was just throwing good money after bad. Nor did tariffs hold the key. The Japanese had no protective tariffs from the 1850s to the new century. They were not happy about this. But they prospered. (Note that the anti-imperialist historians want to have it both ways: now they complain that Egypt could not shelter its infant industries; now they boast that these industries were doing so well that they could sell their products abroad and that their European competitors were quaking before them.)

  All of this is fantasy history. Some of it reproduces an earlier time’s enthusiasms: Muhammad Ali seemed to many of his contemporaries an enlightened ruler (despot), a wise man, a savior sent to waken Egypt land from its long sleep. Some of it expresses anticapitalist, anti-imperialist, anti-European ideology. Yet for all the misdeeds of capitalism and imperialism, for all the hypocrisy of European exploiters, Egypt’s problems went much deeper. Too deep for even an inspired Albanian outsider like Ali to solve.

  Even now, Egyptian industrial efforts stutter, for reasons not unlike those of Ali’s day. Technologies have been transformed, and economic lateness models tell us that newcomers should have opportunity and incentive to learn and catch up. But Egyptian society and culture have not changed much in those fundamentals that determine vocation and performance. Egypt was not ready then. Is it ready now?

  Nor have other Middle Eastern societies done better. The highest incomes in the Muslim Arab world are of course to be found among the oil producers and exporters. The others are “going nowhere.” Even among OPEC members, the torrent of wealth has not grown an economic transformation. A World Bank study of these economies with the hopeful title “Claiming the Future” notes that as recently as 1960, the seven leading Arab economies had an average income of $1,521, higher than the $1,456 of the seven East Asian comers—Taiwan, South Korea, Hong Kong, Singapore, Thailand, Malaysia, and Indonesia. By 1991, the Arab countries had fallen well behind: $3,342 as against $8,000. Today, the Arab Middle East attracts 3 percent of global direct foreign investment; East Asia, 58 percent.19

  But do these Middle Eastern states need foreign investment? The best comparison is with sixteenth- and seventeenth-century Spain, cursed by easy riches and led down the path of self-indulgence and laziness. So with the oil-rich. They have traded black gold for money and sent the money back to the countries that paid it. They have purchased shares large and small in the enterprises of advanced industrial nations. They have also built handsome homes, hotels, and palaces, bought large, gas-guzzling automobiles (but fuel is cheap, like coal at the mine), acquired properties abroad where they can shelter their fortunes and permit themselves dress and behavior unacceptable at home. Saudi Arabia, for all its deserts, has paid handsomely to import beach sand from Australia. Most wasteful and counterproductive has been a huge investment in arms, including weapons condemned by international law and treaties. Much of this, presumably, buys the friendship of the manufacturers of these nasty toys.

  These countries simply haven’t developed an advanced economy. Like the Spain of yesteryear, they’ve purchased the skills and services of others rather than learned to do things for themselves. “What is rich?” asks a merchant banker of the Persian Gulf:

  Rich is education…expertise…technology. Rich is knowing. We have money, yes. But we are not rich. We are like the child who inherits money from the father he never knew. He has not been brought up to spend it. He has it in his hands; he doesn’t know how to use it. If you do not know how to spend money, you are not rich. We are not rich.

  Without this knowledge, this understanding, we are nothing. We import everything. The bricks to make houses, we import. The men who build them, we import. You go to the market, what is there that is made by Arabs? Nothing. It is Chinese, French, American…it is not Arab. Is a country rich that cannot make a brick, or a motorcar, or a book? It is not rich, I think.20

  True, but why? Data on income or product per head show a high standard of living for some Arab countries—in some years higher even than that of advanced industrial nations. But this oily gain is precarious and in the long run evanescent. For one thing, petroleum is a wasting asset (it will not last forever); for another, wealth-cum-fragility invites opportunists and predators, private and public. So we have breaches of cartel agreements, and oil prices tumble;21 or the vultures gather, especially relatives of the ruling family, to soak up the black gravy and waste it on high living;* or we have naked land grabs, as Iraq in Kuwait.† (Kuwait, of course, was just the stepping stone to the Gulf sheikhdoms and, beyond, to the huge Saudi reserves.)

  Besides, not everyone has petroleum. The Muslim countries of the Middle East are either rich or poor depending on whether they have oil and have few or many people. The richest have lots of oil and few people (Saudia Arabia, Kuwait); the poorest have little oil and lots of people (Egypt); and in between are those that have oil but too many people (Iraq, Iran). The poor call for solidarity, but the rich have more immediate worries. They feel insecure, for wealth sleeps badly in a bed of poverty. So they try to buy their safety by paying off potential rebels or enemies; or they order costly arms from advanced industrial nations in the hope of getting their protection.22 (One wants to take care of the customers.) Meanwhile the poor ones (such as Pakistan) make children and, when possible, export them; or sell them to richer co-religionists as servants, menial labor, or sources of pleasure.

  No solution there; just first aid and crisis managment. Rich or poor, these countries are without exception despotisms, where leaders are not responsible, actions are unpredictable, loyalty is a ruse or a mirage of propaganda, and everything, including the economy, is subordinated to politics and can be turned around by an event. Instead of courting legitimacy by appeals to material improvement—have I made you better off?—Arab leaders have boasted of victories over colonialism or Zionism and waved the bloody shirt of jihad, promising to put history right.23 I recall a conversation in Amm
an back in 1968. A leading American (Jewish) scientist was trying to persuade a group of local notables of the advantages of peace: knowledge and collaboration, he urged, could make the desert bloom. (This had long been a theme of liberal Zionist discourse.) In vain; his Arab interlocutors told him they had more pressing things to do—first of all, to defeat Israel. Prosperity could follow.

  It is still following. Nor will it come, other than locally, even if the “peace process” succeeds. For the ill is far more general than the Israeli-Arab conflict.

  It lies, I would argue, with the culture, which (1) does not generate an informed and capable workforce; (2) continues to mistrust or reject new techniques and ideas that come from the enemy West (Christendom);* and (3) does not respect such knowledge as members do manage to achieve, whether by study abroad or by good fortune at home. At the most elementary level, the rates of illiteracy are scandalously high, and much higher for women than for men. That alone speaks of a society that accords women an inferior place, and this is clearly related to attitudes cultivated in Islam and especially in the Islam of the Arab world.

  A word of caution. Many Middle Eastern specialists, keen to defend Islam against (Western) denigration or condescension, insist that Muslim gender relations, though shaped by religious doctrine, are in great part independent of it. Among their arguments: these rules and practices go back to pre-Islamic times, or were learned from non-Arab peoples, or were linked to income and status (rich men’s wives did not have to work or shop), or were a response to the threats of urban life, shielding women against insults to personal and family honor. They have a point: If Islam were to disappear tomorrow, Arab men would still see women as they do today. Other scholars, sometimes the same, stress the allegedly hostile motivations of Western scholars: “orientalist” scorn and malevolence, “essentialist” ignorance and foolishness. The use of such pejorative code words is to dismiss rather than refute. Very convenient.