CHAPTER III

THE COMMISSION OF INQUIRY

NOVEMBER 1876-APRIL 1878

Condition of Egypt-The law of the Moukábala-Petty taxes-The Egyptian public service-The fiscal system - Floating debtEfforts to pay interest on the funded debt-Famine-The coupon of May 1, 1878-The Commissioners of the Debt-The Commission of Inquiry - The Khedive proposes a partial inquiryThe Commissioners decline to take part in it-The Khedive accepts a full inquiry.

THE state of Egypt at this time was deplorable. Estates, representing about one-fifth of the arable lands of the country, had passed into the hands of the Khedive; and these estates, instead of being farmed out to the dispossessed proprietors, were administered direct by the Khedive and cultivated to a great extent by forced labour. No single measure contributed more than this to render the existing régime as intolerable to the people of Egypt as it was rapidly becoming to the foreign

creditors.1

In 1872, the law of the Moukábala had been passed. By this law, all landowners could redeem one-half of the land-tax to which they were liable by payment of six years' tax, either in one sum or

"It is certain, so many overthrown estates, so many votes for troubles. Lucan noteth well the state of Rome before the Civil War : Hinc usura vorax, rapidumque in tempore foenus,

Hinc concussa fides, et multis utile bellum.'

Bacon's Essays, "Of Seditions and Troubles."

in instalments spread over a period of twelve years. "The operation of the law of the Moukábala," Mr. Cave said, "is perhaps the most striking instance of the reckless manner in which the means of the future have been sacrificed to meet the pressing needs of the present."

This is quite true, but the explanation is also very simple. There was never the least intention to adhere to the engagements taken towards the landowners. When the proper time arrived, it was intended to find means for re-imposing taxation in some other form, and thus recoup the loss to the Treasury incurred by the partial redemption of the land-tax.

Besides the land - tax, which was the main resource of the country, a number of petty taxes of the most harassing nature were levied. I gave Lord Vivian a list of thirty-seven of such taxes, and I doubt if the list was complete.

The evil consequences, which would in any case have resulted from a defective fiscal system, were enhanced by the character of the agents through whose instrumentality the taxes were collected. It can be no matter for surprise that they were corrupt and oppressive, and scarcely, indeed, a matter for just blame; for the treatment, which they received at the hands of the Government whom they served, was such as to be almost prohibitive of integrity in the performance of official duties. The picture, which Mr. Cave gave of the position held by the Egyptian officials at this time, was certainly not overdrawn. "One of the causes, he said, "which operates most against the honesty and efficiency of native officers is the precarious tenure of office. From the Pasha downwards, every office is a tenancy at will, and experience shows that while dishonesty goes wholly or partially unpunished, independence of thought and

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action, resolution to do one's duty and to resist the peculation and neglect which pervade every department, give rise to intrigues which, sooner or later, bring about the downfall of honest officials; consequently, those who begin with a desire to do their duty give way before the obstructiveness which paralyses every effort. The public servant of Egypt, like the Roman Proconsul, too often tries to make as much as he can out of his office while it lasts; and the scandal takes place of the retirement, in a few years with a large fortune, of a man whose salary is perhaps £40 a month, and who has plundered the Treasury on the one hand, and the peasant on the other."

In fact, the fiscal system of Egypt at this time violated at every point and in a flagrant degree the four well-known general principles laid down by Adam Smith and adopted by subsequent economists, as those on which a sound fiscal policy should be based. Glaring inequalities existed in the incidence of taxation. The sums demanded from the taxpayers were arbitrarily fixed and were

1 I can give a remarkable illustration, the facts of which are within my personal knowledge, in support of Mr. Cave's statement. Shortly after the Commission of the Debt was established in 1876, it was noticed that the Custom-House receipts at Suez, which were applied to the service of the debt, fell off in a most unaccountable manner; also, that a new local director had been appointed. Under the Decree signed by the Khedive on November 18, 1876, the whole of the Custom-House revenue was to be paid direct to the Commissioners of the Debt. No other receipt than that signed by one of the Commissioners was legally valid. The suspicions of the Commissioners were aroused. They asked why the director had been changed. They received evasive and very unsatisfactory answers. They insisted, therefore, on the dismissed official being produced, dead or alive. A somewhat acrimonious correspondence took place, with the result that after a delay of several months the official in question made his appearance at the office of the Commissioners of the Debt. It then appeared that he had received an order from the Khedive to pay the Suez Custom-House receipts direct to His Highness. He demurred, on the very legitimate ground that he would thus be committing an illegal act. He was at once arrested and sent to one of the most remote parts of the Soudan, whence he would certainly never have returned, had it not been that the Commissioners took up his case. Adam Smith, Wealth of Nations, bk. v. chap. ii.

uncertain in amount. The taxes were levied without any reference to the time and manner in which it was most convenient for the contributor to pay, and the system of collection, so far from being "contrived so as to keep out of the pockets of the people as little as possible over and above what the tax brings into the public treasury," was such as to ensure results of a diametrically opposite description. Under such circumstances, financial policy, instead of being used as a powerful engine of political and social improvement, had become merely a means for first extorting the maximum amount of revenue from unwilling contributors, and then spending the money on objects from which the contributors themselves derived little or no benefit.

A system such as that described above would at any time have been oppressive. At the particular moment of which this history treats, it weighed on the people of Egypt with exceptional severity.

The interest on the funded debt, heavy as it was, was not the only extraordinary charge which the Khedive had to meet. Large sums of money were due to contractors and others for goods supplied to the Egyptian Government. In default of payment, "orders had been given by all foreign houses trading with Egypt to refuse to furnish the Government with any supplies except for payment in cash on delivery.' The claims themselves were "being hawked about for sale at a depreciation of 50 per cent."

In August 1877, Lord Vivian warned the Egyptian Government that the creditors "would certainly fall back upon their indisputable right to attack the Government before the Tribunals." "The Government," he added, "will thus find themselves confronted with a mass of legal sentences against them, which they must either

satisfy in full and at once, or it must inevitably attract the serious attention of the Powers who contributed to establish the Courts of the Reform."

But the Egyptian Government had no money with which to settle the claims; neither, in the then exhausted state of their credit, could money be borrowed. Lord Vivian prophesied correctly. The creditors had recourse to the law-courts. Many of them obtained judgments against the Government, and the non-execution of the judgments led to the interference of the Powers under whose auspices the Mixed Courts had but recently been established. Notably, the German Government "considered that the Khedive was acting in a manner which should not be allowed in refusing to pay claims when required to do so by the Courts of Law." The German Ambassador in London informed Lord Derby that "Prince Bismarck wished for united action on the subject by all the Powers, if only to avoid the possibility of separate action on the part of some of them."

In the meanwhile, everything was being sacrificed in the attempt to pay the interest and sinking fund on the funded debt. A sum of £1,579,000 was, in 1877, devoted to the extinction of debt. The nominal capital paid off amounted to £3,110,000, but, as both Lord Vivian and the Commissioners of the Debt pointed out, the operation of the sinking fund was of a delusive character, for a debt, at least equal in amount to that which was extinguished, was being created by the non-payment of the employés and the other creditors, whose claims had not been funded. On January 6, 1877, Lord Vivian wrote: "The Government employés are many months in arrears of pay, so much so that the cashiers of the Caisse are actually being paid out of the private means of the Commissioners (although their own salaries have not been paid),

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