they have floated schemes which they must have known to be visionary and unpromising, and they have flattered and wheedled Brazilian officials into the belief that scores of these wretched enterprises could be made remunerative, and that the ‘natural resources’ of the country are incalculably great and can be developed properly only through these so-called improvements … Then they have turned to the confiding investor and have made him believe Brazil to be the long-sought El Dorado, and that for every shilling planted there, nothing less than a sovereign could be produced. They have traded upon the amiability and rectitude of the Emperor, the peaceableness of the Brazilian people, the fertility of the soil, the wide expanse of territory, the product of a few gold and diamond mines, and the ‘splendid future’ in store for the country. They have baited their hooks with many a glittering generality and have never failed to catch their fish with them.
The enormous capital requirements of this ‘Imperialist conspiracy’ could only be satisfied by capital markets far larger, more international, and more complex than those required by previous borrowers, a handful of European states. The new markets were initially imperfect, often downright crooked, and the debt burden they imposed on poor countries was comparable to that felt today as a result of the loans made after the oil shock of 1973. But at least the earlier lenders generally left a physical legacy. As was said of Henry Meiggs, the ‘Yankee Pizarro’, ‘while he was in many ways a scoundrel, he built some remarkable railways’, which is more, much more, than can be said for the results of the Euromarkets of the 1970s and 1980s, in many ways the natural successors to the ‘railway markets’ of the 19th century.
Direct Colonialism: Intermittent and Grudging
The supposed intimacy of the connection between railways and direct imperialism is rather undermined by the evidence of the men on the spot. They tell a surprisingly similar tale: they were all forced to muddle through, they all complain of being neglected, of parsimony by the home government. Even when railways were supposedly being consciously employed as an imperial instrument they were never allowed adequate funds to carry out the imperial plans. No wonder that so many remained a dream, no wonder that most relied on the hazards of private, rather than government finance.
Yet railways were so important that their ownership was sometimes more important than nominal political overlordship. In the early part of this century, for example, Mozambique was reckoned to be in the British rather than the Portuguese sphere of influence because the railways were owned by British financial interests. But these were private, not the result of some diabolical Foreign Office plot to outwit the Portuguese.
With the single major exception of the Belgian Congo, a colony virtually worthless without a railway to by-pass the cataracts of the Upper Congo River, the imperial powers in Africa proved remarkably grudging in their financial support. In France’s West African colonies the authorities at home were invariably mean, and the French Parliament allowed railways to be built without ballast. The pioneers had to fend for themselves, or rely on private initiatives. As a result by the 1930s the whole of French West Africa had only 2,000 miles of track, mostly private, with only one military railway, from Kayes to the River Niger, which proved very useful in providing access for the local peanut crop to navigable stretches of the Senegal and to transport manufactures from the coast to the interior.
In Algeria it was the same: the pioneering private companies were given grants which were soon reduced to interest guarantees, while in Tunisia the most profitable line was purely commercial, carrying phosphates from Gafsa to Sfax. Even when French imperial interests were directly involved, as they were in Indochina, the Trans-Indochinois line between Hanoi and Saigon was completed only in 1936, after decades of strenuous argument, despite its strategic importance and its usefulness for planters trying to recruit workers from all over Indochina. Indirect, private-sector imperialism got things done more quickly: by 1910 the French had already extended their railway north from Hanoi to Kunming in Southern China for vague imperial purposes, and to get access to silks, minerals, leather, furs and precious stones. For a long time thereafter it was easier to go from Shanghai to Kunming in Southern China indirectly via Hanoi rather than directly.
In Africa the Germans were aroused to action only by panics, generally related to military security. The first major line in South West Africa, from Windhoek to Swakopmund, was initiated only because of fear of a native uprising, and by an outbreak of bovine flu which stopped transport by bullock cart. In the event the insurrection was soon quashed and vaccine preserved the cattle. Only then did the imperial power cast around for an economic justification. Similarly the line through what eventually became Tanganyika only just squeaked through the appropriate Reichstag committee. Indeed the Reichstag, like all its fellow European assemblies, was habitually parsimonious, refusing to provide guarantees to German financiers, who then had to rely on large grants of often barren land.
Britons generally cite India as the prime example of imperialism in action through railway construction, and indeed British rule did provide the country with a railway system, honestly, if patchily, built. But the story does look very much like another example of muddling through. In the 1840s Lord Dalhousie, fresh from his collision with Britain’s railway interests at home, wrote a series of lucid minutes analysing India’s requirements. In the event imperial policy wavered, for the money was never going to be available to build an adequate network. In the words of Horace Bell, the imperial government wanted ‘to obtain the much-needed railways extension on terms the least burdensome to the revenues of the Empire, and in avoiding as far as possible the undue relief of the present tax-payer at the expense of his successors’.3
The imperial government first provided a limited if relatively generous guarantee to private companies for every mile they built. Then for a decade in the 1870s the Indian government built the lines itself, but the policy suffered from interference by the home government which even allowed private financial interests to build two key, and obviously profitable railways. Subsequently the government provided ungenerous assistance to private lines after continuing complaints that British capital should be available only with government guarantees: whatever Marxists may say about investment following the flag, British capitalists preferred to put their money in independent countries like the United States. The final policy was somewhat similar to that followed in France, another country anxious to try and guide railway development for national purposes, though the Raj was rather less generous than the Emperor of France.
Indore, central India: elephants haul in the train that is going to replace them.
From 1883, productive lines, in theory anyway, were leased to private enterprise while the government bore the burden of non-economic lines. Travel was cheaper in India – fares were less than two fifths those prevailing in Britain – and six passengers out of seven travelled third class, yet by 1914 the supposedly uneconomic government lines provided more revenue than customs and excise together. Nevertheless the inadequate legacy of a muddled policy was a muddled and inadequate system, with a great deal of metre-gauge track and only 10,000 miles of the broader 5½ feet gauge chosen for the main lines. The inadequacy was pointed up by a commission which reported as early as 1880 that India needed 20,000 miles of line merely to save it from the threat of famine.
The line which best exemplifies the contradictions and dilemmas inherent in imperial railways runs from Mombasa on the Indian Ocean to Lake Victoria in Uganda. The motives behind its construction were, as usual, confused: a combination of a humanitarian desire to counter the Arab slave traders operating in East Africa and an imperialistic impulse to reach the interior before the French and the Germans. The muddle and the expense were denounced by Henry Labouchère, a ferociously anti-Imperialist member of Parliament, in a famous squib:
What it will cost no words can express
What is its object no brain can suppose;
Where it will start from no one can
guess;
Where it is going to nobody knows
What is the use of it none can conjecture
What it will carry there’s none can define;
And in spite of George Curzon’s* superior lecture,
It clearly is naught but a lunatic line.
In the event the railway proved a triumphant success, creating the new colony of Kenya on the way to Lake Victoria. It is also notable as the only imperial railway to have created a first-class political crisis in the mother country, for the line provided a convenient symbol for all the arguments between the Imperialists in both political parties and the so-called ‘Little Englanders’ within the Liberal party fiercely opposed to imperial expansion. Yet even the appetite of the Imperialists was limited. As we shall see, it was that arch-Imperialist the Marquis of Salisbury who, for practical reasons, doomed that great British dream, a railway on British territory from the Cape of Good Hope to Cairo.
Struggling for freedom, in Europe, Asia, Latin America
Today we think of underdeveloped countries as non-European, but during the early railway age many of the new nations struggling for freedom against a foreign domination which usually included an element of financial imperialism were in Europe. As we have seen, Belgium defined itself in relation to railways, and in Switzerland the populist agitation of the 1880s and 1890s, which led to the nationalisation of the country’s railways, sprang from widespread disgust at the incompetence and greed of French and German financiers.
The Swiss rid themselves of their fear of foreigners by taking control of their own railways. In Spain, the efforts of those same financiers had more lingering effects. Some of the foreign promoters were casually Imperialist – to the Pereires the northern Spanish line appeared as merely an extension of those they were financing in the South-West of France, while American financiers showed a similar insensitivity when they prolonged their lines into Mexican territory. But the revulsion in Spain was profound enough to persuade a whole school of modern Spanish historians that foreign control of their railways prevented the creation of a rail system better adapted to the country’s real needs. Moreover, they claimed the network imposed by foreign investors in league with a corrupt court and government should at least have been built with native iron and steel.
In fact,4 Spain lacked the economic, technical and financial infrastructure required to take greater advantage of the arrival of the railways than she did: they added 11.8 per cent immediately and 18 per cent in the long run to the country’s GNP (even by the restrictive ‘Social Savings’ criteria analysed above). There was simply not enough local capital available. Even the native investors in Catalonia, Spain’s most developed province, had to be bought out by the French-controlled Norte company.
The complex relations between Spain and its railway-builders were as nothing to the tangled web created in Eastern Europe. Men have gone mad trying to understand Balkan politics in the latter half of the nineteenth century. Disentangling the crucial role played by railways, the outstanding physical symbol of the interrelationships involved, is an even surer path to the asylum.* The on-off love-hate relationship between the Austro-Hungarian Empire, Russia and the Ottoman Empire was complicated by the hostility between the Austrians and the newly and proudly independent Kingdom of Serbia. Hence the Austrians’ eternal quest for a route from Vienna to the Black Sea and Constantinople which did not involve going through Serbia.
At first the Serbs welcomed the French as a means of escaping from Austrian financial imperialism, but the French presence itself bred resentment. In 1883 the Serbians took the opportunity to nationalise their lines after the scandal-ridden collapse of their principal French bank, the Union Générale, led by the flamboyant Eugène Bontoux.
The 1870s had been dominated by another row, that between the Germans and the Roumanians. The latter were naturally interested in railway development. So was the German Chancellor, Otto von Bismarck. Some of the locals were dubious at the idea of any foreign infiltration, doubts encouraged by the Roumanian press which screamed that foreigners were mulcting their country, even though the journalists involved were waiting, palms outstretched, to be bought up by the same foreigners. To complicate matters the promoter, Bethel Henry Strousberg, was using railway money to shore up other shady enterprises.5 The upshot was an international incident with Germans being beaten up by a Roumanian mob. Bismarck had to support either Strousberg or the Roumanians, whom he held in a profound contempt. ‘Such degenerate people cannot be held in check through good dinners but through a few strong battalions,’ was his verdict.
Bismarck was under pressure, not only from German bond-holders, but also from his Jewish friend and banker, Gerson Bleichroder, who wanted to use the Roumanians’ indebtedness to force them to stop persecuting their Jewish citizens. In the end Bismarck showed himself keener to help German investors than Roumanian Jews, though his decision was not without its opponents – one German prince objected to the way Bismarck had committed his government’s prestige merely because ‘some capitalists had thrown their money into an industrial speculation’. In 1880 the Roumanians were forced to accept the original convention and to allow the Austrians to complete the system, a surrender much resented as state action on behalf of private bondholders.
But the tangle continued. The Treaty of Berlin in 1878 included an attempt to complete the railway to Constantinople, but it took another five years to reach an agreement for the three other countries involved, the Austro-Hungarian Empire, Serbia and Bulgaria, to finance their national sections.
The Ottoman Empire provides the classic proof that railway development, especially when financed and organised from abroad, did not necessarily produce any sort of economic, let alone political revolution.
The Sultans tried to promote commercially viable railways themselves – the first stretched just over 200 miles from fertile inland valleys to Smyrna on the Mediterranean – but the principle of independence was soon lost in the politico-financial morass which marked all Ottoman relations with foreigners in the last half of the nineteenth century. They were exploited by the likes of Baron Hirsch, and were forced to surrender a great deal of their financial independence to the foreign commissioners of the Ottoman debt. It was the Germans in their pursuit of the Berlin –Bagdad dream who showed that only what amounted to direct colonialism could provide the empire with an efficient network.
The Russians, tougher, less bankrupt than the Turks, nevertheless had an unhappy early experience with the ‘Main company’, a monopoly theoretically subject to Russian government supervision. In fact it was controlled by the French who wasted a lot of money – the chairman built himself a lavish house at the company’s expense while his company tried to take over the state-run line from Saint Petersburg to Moscow, even though it was making only slow progress on building its own line to Warsaw. Having annoyed its influential Russian noble shareholders, it then defaulted on its obligation to build railways south of Moscow. The foreigners had sparked off strong nationalist opposition (the line from Odessa to Balta was so Germanic that even the tickets were printed in German), and by the mid-1860s the Russian government was resigned to the need to build its own railways.
Everywhere financiers and contractors left a trail of mistrust. The misdeeds of the notorious Irish swindler John Sadleir led the Swedes to rely purely on their own resources and the Portuguese suffered from the depredations of three British contractors, the Waring Brothers. Charles Waring was the worst. When he stood for Parliament for the port of Poole his Conservative opponent confidently declared that ‘If there is one name in Portugal which is a byword and a reproach, it is the name of Waring … associate Mr Waring’s name with Poole and no Portuguese or Spanish merchant will consign a cask of wine to your port.’6 The opponent was being a trifle unfair. The Spanish banker and promoter José de Salamanca did more to exploit the Portuguese than the Warings. Having secured the privilege of building the railways he managed to postpone the most crucial single project, a brid
ge across the River Douro at Oporto.
But one of the earliest and most spectacular clashes engendered by railway imperialism was not in Europe but over the Grand Trunk Railway in Canada. At first British finance and expertise were welcomed by the port of Portland in Maine, which was trying to upstage Boston and, within Canada itself, by the powerful interests in the lowlands round the Saint Lawrence River who wanted closer ties with Britain. Moreover the timing was propitious. That year, 1852, marked the completion of the British main-line network, so British contractors were hungry for work and fielded their first team, Brassey and Peto, for what was projected as the world’s longest line, 1,100 miles. However the bankers, Baring and Glyn, got cold feet before they had issued the necessary bonds, and although they could not stop the project the line was saddled with a considerable burden of debt and unpopularity in Canada as a ‘colonial’ railway. The patriotic feelings were reinforced by the fact that the railway’s Board was based in London until it was finally nationalised after World War I to become part of the Canadian National Railway network.
Even the Americans had to buy their independence. Early British financial involvement often consisted merely of export finance to help the sale of British rails – in the 1850s this totalled over 1.5 million tons, a third of all British exports of iron and steel. Previous foreign portfolio investment had been largely in the bonds of individual American states, many of which had defaulted, as had many of the loans issued in the 1830s to finance public works like canals.
Not surprisingly the first issues of railway capital in the 1850s appealed mainly to the more adventurous investors. They were looking ‘first for shares, later for convertible bonds, and then for land-grant bonds issued in conjunction with shares’.7 The Americans soon became equal partners in the financial game, and the legacy of mistrust left by the railways was directed not so much against foreign capital but against the middle-men, the ‘Eastern financiers’ of Wall Street.
The World the Railways Made Page 18
