Darwin J. The Empire Project. The Rise and Fall of the British World-System, 1830-1970

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125 / The commercial republic

This paradox, and Africa’s subjection to a diplomatic rather

than a commercial partition, have led some writers to argue that the

motive for commercial activity was only superﬁcially economic, or bet-

ter described as ‘meta-economic’ – driven less by hope of commercial

gain than by a vision of how Africa should be ﬁtted for a commer-

cial future.

But there was no doubt that those who launched new

business ventures into Africa were eager for proﬁts and needed them

to attract both capital and publicity. The peculiarity of tropical Africa

lay in the harshness of its physical and commercial environment away

from the beachheads where Europeans had sheltered hitherto. It was no

coincidence that military drop-outs, imperial visionaries, down-at-heel

aristocrats and redundant explorers found a berth in African commerce.

Nor that the projects for exploiting the interior needed to appeal to a

broader constituency of investors in Britain – those who wanted an

‘ethical’ investment to spread the Gospel and stamp out the slave trade

as well as those who gambled on a lucky strike. For a century past,

British opinion had regarded Africa as an object of charity and as an

Aladdin’s cave.

In the last quarter of the nineteenth century, British enterprise

entered the African interior by three different routes: from South Africa,

from India and from Europe. In West Africa, there was a direct con-

nection from Britain to the ‘Coast’ – a vast maritime zone stretching

from Sierra Leone to the Congo. British commerce was most active on

the Gold Coast, at Lagos – the gateway to the Yoruba states – and

at the Niger delta, the so-called ‘Oil Rivers’, where the palm-oil trade

was concentrated.

In 1841 and again in 1858–64, the British govern-

ment had supported attempts to open the Lower Niger as far as the

Benue conﬂuence at Lokoja as part of its anti-slave-trade policy.

Both

efforts had failed, and, apart from a consular ‘presence’ (as consul in

West Africa 1861–3, Richard Burton had made the offshore island of

Fernando Po his base) and a periodic gunboat, the British oil traders at

the Niger mouth carried on their business under the skimpiest kind of

informal empire.

The new departure of the 1880s seems to have sprung less from

hopes of commercial expansion than from fears of collapse. Between

1876 and 1881 the price of palm oil fell by more than 16 per cent and

was to fall further.

To protect their position, four of the oil companies

trading up-river merged to form the United Africa Company in 1879.

The architect of the merger was George Goldie (1846–1925), a failed

126 / Towards ‘The Sceptre of the World’

soldier without obvious talents or prospects.

Goldie came from a gen-

try family on the Isle of Man with family interests in one of the merged

companies. A visit to West Africa in 1877–8 had suggested how the

oil traders’ difﬁculties could be solved. Goldie revived the old idea of

opening the Niger as a thoroughfare for direct trade with the Hausa

emirates upstream, cutting out the African middlemen who skimmed

the proﬁts. It was obvious enough that this was beyond the means of

four struggling companies, amalgamated or not. Goldie’s solution was

ingenious. In 1881, he reorganised the company on a grand scale as the

‘National African Company’ with a nominal capital of £1 million (far

in excess of its modest assets) and ofﬁces in Ludgate Hill. He recruited

as directors a reputable private banker from the City, a major cotton

merchant from Manchester with West African interests (James Hutton)

and, as chairman, Lord Aberdare, a former minister, a conﬁdant of

Gladstone and president of the Royal Geographical Society. Goldie’s

real purpose was to obtain a charter for his company, and transform it

from a frail commercial bark into an armoured cruiser. A charter from

the imperial government would entitle his company to act as its agent

in the Niger interior. It would give him the right to acquire territory,

levy taxes and maintain a private army to enforce the company’s rights.

Events played into Goldie’s hands. By the early 1880s, the Gladstone

government was so alarmed that a French occupation of the Niger

would drive out British trade that it reinforced its consular supervision

and then, in 1885, declared its own protectorate in the Niger delta.

Granting a charter to the importunate Goldie and his inﬂuential friends

in 1886 solved the tiresome problem of how to pay for this unprepos-

sessing imperial annex.

Goldie’s genius was to turn a rickety British enterprise into an

Afro-European hybrid, well adapted to its frontier habitat. Behind its

European mask, the Company was a modern-day forest kingdom, rul-

ing the trade paths like Ashanti or Dahomey. It gathered treaties and

cessions from African rulers in the Niger hinterland and diverted the

interior trade into its own forts, factories and steamers. The charter

strictly forbade monopoly, but this was a dead letter.

As a result,

Goldie’s relations with the independent Liverpool companies still trad-

ing in the Delta through African middlemen were bitter. With the

middlemen themselves, the Company was virtually at war. By the

early 1890s, under growing pressure from French and German com-

petitors, the Company became even more openly a crudely organised

127 / The commercial republic

state, conducting private diplomacy, waging private war, levying pri-

vate taxes and paying its way through a commercial monopoly backed

by force. It was a risky, but successful, formula. Except for 1886–8,

the Company paid a steady dividend, often well over 6 per cent

and

attracted many small shareholders.

By 1894, it had bought out the

remaining Liverpool traders on the river (though not in the Delta). But

its main achievement was to turn its ramshackle collection of claims

and treaties into an ‘asset’ which the imperial government dared not

renounce.

Goldie achieved this through careful politicking and a ruthless

publicity campaign. He recruited Frederick Lugard, a half-pay ofﬁcer

lionised for his exploits against Arab slave traders in East Africa. Lugard

was a brilliant publicist. Within a few months in 1895–6 he published

thirteen major articles reciting British claims, interests and achievements

in tropical Africa.

The Times came to Goldie’s aid. Goldie himself

rushed out to lead the ﬁght against the Company’s toughest African

enemies. As the West African competition grew ﬁercer, Chamberlain

sought the Company’s help to drive the French from the hinterlands of

Lagos Colony and the Gold Coast while the Company’s own military

weakness became more and more glaring.

By 1898, both the French

and British governments were eager to settle the local feud in the Niger

valley for fear of its wider repercussions. As Goldie had long realised, an

imperial partition in West Africa meant that he would have to be bought

out, to appease the French, the ‘colonial’ interest in Lagos (whose black

merchants reciprocated his hatred) and Liverpool. The pay-out was a

bonanza: at £865,000 nearly three times the Company’s real assets.

The Company lost its charter and its royal preﬁx and reverted to lawful

trade.

In East Africa, the impetus behind British commercial activity

came not from London or Liverpool but from India. With the cut-

ting of the Suez Canal and the new short steamship route between

Europe and India, opening up ‘branch lines’ into the Persian Gulf and

East Africa became much more attractive. The pioneers of this new

trade were Mackinnon Mackenzie, a British merchant house based in

Calcutta. Its senior partner, William Mackinnon (1823–93) was now

manager of the shipping line British India and keen to extend its busi-

ness into new ports and hinterlands. His partner, George Mackenzie,

spent several years reconnoitring the commercial prospects of the Per-

sian Gulf.

In the 1870s, Mackinnon had tried to lease a stretch of the

128 / Towards ‘The Sceptre of the World’

East African mainland opposite Zanzibar as a bridgehead for a new

business empire.

This came to nothing, but Mackinnon’s choice had not been

accidental. Zanzibar was already part of an Indo-Arab trading world

and Indians were well established as merchants and moneyed men on

the East African coast. Zanzibar itself had long been considered part

of British India’s sphere of inﬂuence. By the mid-nineteenth century, its

merchants had built a commercial system that linked together the huge

country between the Zambezi, the Great Lakes and the Indian Ocean

at a time when European traders were barely in evidence. Zanzibar

became a great emporium for ivory and the entrepot of the whole

coast. Here was a goose ripe for plucking. Secondly, after Stanley’s

epic trans-African journey in 1874–7, much more was known about

the undeveloped wealth of the lacustrine interior and Uganda, which

Stanley described as the ‘pearl of Africa’. Thirdly, Mackinnon, like

many other Scottish merchants, was deeply affected by Livingstone’s

call for the reclaiming of Africa by commerce and Christianity at his

famous Cambridge lecture in 1857.

Livingstone’s death and burial in 1874 in Westminster Abbey

(a measure of his saintly status) was the trigger for a new effort to plant

a large missionary centre, ‘Livingstonia’, on Lake Nyasa, where slave-

raiding was at its most intense. Mackinnon was heavily committed

to the African Lakes Company, set up in 1878 to support the mission

project. But his own plans for commercial philanthropy stalled until the

German ‘occupation’ of East Africa in 1885 transformed the politics

of the East Coast. With the large inland sphere conceded (for Egyptian

reasons) by London in 1886, it was obvious to the British consul in

Zanzibar (and even more to the Sultan) that the island state was doomed

to commercial strangulation and a gradual slide into German control.

So Mackinnon revived his scheme for a coastal lease, this time with the

Sultan’s support, and formed his East African Association to bring the

Ugandan pearl to market.

Mackinnon’s scheme was ambitious and attracted some heavy-

weight support. Among his directors were Goldie’s friends, James

Hutton and Lord Aberdare. There were two ex-consuls and a brace

of generals. There was Lord Brassey, the greatest railway contractor of

the age. Reborn as the Imperial British East Africa Company, the Asso-

ciation gained its royal charter on the nod in 1887. With its mainland

lease, and its right to tax, make treaties and acquire territory, it seemed

129 / The commercial republic

the perfect commercial vehicle to carve out an informal empire north

and west of the German sphere. Uganda would be ruled in all but name

from its ofﬁce in Pall Mall. When German competition threatened its

Uganda hinterland, it successfully pressurised a sceptical Salisbury into

demanding its inclusion in the new British sphere in East Africa agreed

with Germany in 1890. When Salisbury wavered, Mackinnon and his

fellow directors threatened to resign and close the Company down.

In reality, the Company’s position was desperately fragile. Its capital

was modest – only £250,000 had been subscribed. Its outgoings were

heavy. Worst of all, unlike Goldie’s company, there was no established

trade to divert and no convenient route to the interior. Uganda lay three

months’ walk away over a dangerous path skirting the warlike Masai

and Kikuyu. Stanley told Mackinnon that he would need 500 men and

a railway. Salisbury and his man on the spot, Gerald Portal, thought

the Company a shambles and Mackinnon a dilettante.

The result was a ﬁasco for which company and government

blamed each other. With the Barings crash in 1890, no more capital

could be gleaned in London, and the Company faced bankruptcy. It

abandoned hope of a private empire by Lake Victoria: only a govern-

ment take-over could supply the political infrastructure needed for its

commercial and philanthropic aims. After a bitter Cabinet struggle, a

publicity campaign in which Lugard and Stanley were prominent, and

a face-saving mission of inquiry, Uganda was annexed in 1894 and

‘British East Africa’ (modern Kenya) in 1895. Like Goldie, the East

Africa Company’s backers had successfully exploited public anxiety

(about the fate of Christian missionaries and their converts) to goad

the government into a forward policy. Like Goldie, they were helped

by its grudging recognition that an administrative take-over was the

only answer to the runaway competition of traders, missionaries and

soldiers whose well-publicised jostling might derail their diplomacy in

Europe and the Mediterranean. Unlike Goldie, however, Mackinnon’s

group proﬁted little from the government buy-out. They were paid off

with half of their costs, mostly at Zanzibar’s expense.

In the classic case of the African Scramble, private imperialists

with their commercial roots in London, Liverpool, Glasgow or India

were usually at cross-purposes with the agents of ofﬁcial policy. In West

and East Africa, the chartered companies were meant to limit imperial

liability while protecting a commercial interest. In both cases, they

proved more successful at increasing the liability than in guarding the

130 / Towards ‘The Sceptre of the World’

interest. Both were as much political as commercial enterprises whose

‘virtual’ assets could only be realised if the transaction costs of exter-

nal protection were transferred to the imperial government. It was the

peculiarity of tropical Africa in the 1890s that the technical, adminis-

trative and ﬁnancial cost of transfer was so low; the mobilisation of

public interest sufﬁcient; and the diplomatic argument so pressing: con-

ditions which favoured a sudden, swift and complete partition. Only

in Southern Africa was private imperialism strong enough to resist the

imperial take-over, build a state – and start a war.

The Middle East and East Asia

In the Middle East and China, commercial conditions were quite differ-

ent. Here, where three old empires struggled to modernise, diplomatic

rivalry was intensiﬁed by the prospect of their collapse and partition. In

Turkey and China, proﬁt from trade was outshone by the lure of invest-

ment in government loans secured on state revenues or the grant of

concessions for railways or other enterprises. Merchants and investors

were forced to depend upon the mediation of diplomats who had an

entree to the inner bureaucratic world where such transactions were

ﬁnalised. Nor, in the cockpit atmosphere of great power diplomacy,

could they impose their commercial claims where these conﬂicted with

the interests of strategy or prestige.

The Middle East was particularly risk-laden. By 1880, both the

Ottoman Empire and Egypt (its autonomous tributary) were bankrupt

and their politics in crisis. The Ottoman government had lost some

of its most valuable provinces in the treaty of 1878.In1881, after

six years of default, a new loan regime was created to regulate its

borrowing under international supervision and repay the bondhold-

ers. The ‘Ottoman Public Debt Administration’ and its foreign man-

agers controlled a large part of Turkey’s public revenues, and directed

to all intents its public investment. But, despite their previous inter-

est in Ottoman bonds, British investors played a much smaller role

in ﬁnancing Turkey’s new-style public debt than their counterparts in

France where more than half the total was held by 1913.

The com-

mercial promise of the Anatolian hinterland – the scene of numerous

railway schemes in the 1890s – was meagre compared with that of

the Americas or South Africa. Worst of all, British lenders faced ﬁerce

competition from French and German banks represented on the Debt

Administration. Success required furious diplomatic lobbying since the

131 / The commercial republic

allocation of loans and the concessions they brought with them were

a barometer of great-power inﬂuence at the Ottoman court. While the

Foreign Ofﬁce was keen to encourage British investment as a diplo-

matic instrument, the need to reach an accommodation with France or

Germany made it an unreliable champion of the City’s interests at the

best of times.

Egypt was a special case. Before the bankruptcy of 1876,itwas

the most dynamic zone on the European periphery, attracting trade

and investment by the speed with which its great programme of public

works was extending the cotton production of the Nile delta. The Suez

Canal, the engineering marvel of its day, symbolised the importance to

the international economy of Egypt’s openness to foreign interests and

inﬂuences.

The eagerness with which the landholding elite responded

to new commercial opportunities contrasted favourably with much of

Afro-Asia.

But the long crisis that followed default, and reached a

climax in the revolution of 1881, threatened this steady transforma-

tion of Egypt into a satellite economy of Europe. Whatever its con-

stitutional programme, Arabi’s following, the ’Urabiya, drew upon

widespread popular resentment against European artisans, merchants

and landowners.

The outcry of this ‘semi-colonial’ community was

ampliﬁed by the press and the local agents of the British government.

It contributed, as we have seen, to London’s belief that a xenophobic

Islamist movement was about to roll up British interests: economic,

political and strategic.

With the ‘temporary occupation’ of 1882 and its tacit prolon-

gation by 1890 into the indeﬁnite future, Egypt was drawn more ﬁrmly

than any other part of the Middle East into Britain’s commercial orbit.

The British dared not annex, and they were forced to respect the clumsy

international machinery of the Caisse de la Dette, Cairo’s version of the

Ottoman Public Debt Administration. But, as the real (if hidden) force

in the Egyptian government after 1883, the British consul-general Eve-

lyn Baring (Lord Cromer) shaped a ﬁnancial regime that turned Egypt

into a pocket India.

Free trade, public works and an ironclad guaran-

tee against default made it a happy hunting ground for banks and land

companies ﬁnanced in London. By 1897, 11 per cent of Egypt’s cul-

tivable land was owned by foreign nationals, with heavy concentration

in the Delta provinces.

But the existence of this quasi-colonial regime

can only partly explain the £66 million of British capital invested by

1914.

The exceptional growth of cotton output and the fertility of

132 / Towards ‘The Sceptre of the World’

new lands reclaimed for cultivation made Egypt the richest and most

productive economy in the Middle East.

In Egypt, British commercial interests beneﬁted from ofﬁcial

London’s determination to exclude rival powers from the Nile Valley

after 1882 and from Britain’s ability, at considerable diplomatic cost, to

maintain a monopoly of inﬂuence in Cairo. Commerce and empire were

in harmony. In China, the commercial and diplomatic interests inter-

locked quite differently. Here British merchants (like Swires or Jardine

Matheson) dominated foreign trade by 1880. But progress in tapping

the vast hinterland behind the treaty-ports had been slow. Exportable

commodities were sparse. With a population larger than India’s, China

took only 8 per cent of Britain’s cotton exports (in 1896) to India’s

27 per cent. The result was an involution of the trading frontier back

towards the treaty-ports as the large British ﬁrms diversiﬁed into ser-

vices like banking, shipping and utilities.

British visitors were inclined

to blame a treaty-port culture of sloth and complacency. The intrepid

Isabella Bird demanded more ‘capital, push, a preference for business

over athletics, a working knowledge of the Chinese language and busi-

ness methods and a determination to succeed’.

But, marooned at the

edge of a vast non-Western world, British traders needed more than

the spirit of enterprise to transform their economic environment. Less

ambitious men hoped for the reform of China’s pre-modern currency

and the abolition of internal tariffs, the likin. But the real challenge was

to persuade the Chinese authorities to sanction a railway programme:

the one sure instrument of commercial progress.

The 1890s brought a breakthrough, or so it seemed. China’s

shock defeat by Japan in 1895 brought a new urge to ‘self-strengthen’,

and a new need for loans.

The difﬁculty was that, as in the Ottoman

Empire, the allocation of loans, and the concessions that went with

them, was bound up with speculation about a future partition. A loan

might become a mortgage on the property of a bankrupt. To negotiate

a loan under these conditions required forceful diplomacy at Peking,

as much as commercial intelligence in Shanghai or ﬁnancial backing

in London. To British commercial interests on the spot, it was obvi-

ous that any reasonable allocation should reﬂect their pre-eminence.

‘Our true heritage in Asia is all Southeastern Asia up to the Yangtse

valley’, wrote the Times correspondent in Peking to J. O. P. Bland,

who was to play a leading role in pressing for railway concessions.

China was now ripe for modernisation under British guidance,

133 / The commercial republic

urged the young Charles Addis, the rising star of the Hong Kong and

Shanghai Bank.

But, as we have seen, ofﬁcial London was reluctant to risk

the diplomatic confrontations to which the aggressive pursuit of British

commercial interests might lead. The Hong Kong Bank was encouraged

to arrange separate spheres of concession-hunting with the Deutsche

Bank. An agreement was reached with Russia in 1899 to refuse ofﬁ-

cial support for British concession-seekers in Manchuria in return for

Russian self-denial in the Yangtse. Peking was persuaded to grant a

ﬁstful of railway concessions in 1898 to match those granted to Rus-

sia and France.

But a concession was one thing; transforming it into

a ﬁnished railway quite another. That required constant diplomatic

pressure on the Chinese authorities. With the outbreak of the South

African War in October 1899, followed by the Boxer Rebellion in

1900, it became harder and harder to drive the concessions through the

provincial bureaucracies whose cooperation was essential. To Bland,

who aspired to be the Chinese Rhodes, the solution was obvious.

‘Either we must adopt the methods of our successful competitors or

go under . . . [T]he Russians pay their Chinese friends well to block our

roads.’ What was needed was ‘a Government institution like the Russian

Bank which should engineer commercial and ﬁnancial undertakings’,

and a candid recognition ‘that the obtaining of a concession in China

meant certain payments to the ofﬁcials concerned’.

But, as he con-

stantly complained, there was no diplomatic will in London for this or

for the negotiation of railway zones in which the concessionaires would

have security against the interference of the provincial authorities.

1903, not a mile of line had been laid.

Nor, though they toyed with

the idea at the height of the Boxer Rebellion, would the policy-makers

contemplate declaring a Yangtse protectorate – a Chinese Egypt –

for which a strong group of China merchants had campaigned,

safeguard the prime region of British trade behind Shanghai.

The British government’s real decision was to ally itself with

the strongest commercial force in China, the Hong Kong and Shang-

hai Bank. It was a marriage of true convenience. The Bank was an

exchange bank, an investment bank and a bank of issue, as well as

being Whitehall’s ﬁnancial agent in China.

It transacted business

throughout China and hoped for more. It had no interest in a pol-

icy of spheres, still less in a Yangtse protectorate.

It was anxious

for good relations with the Chinese government, not least because any

134 / Towards ‘The Sceptre of the World’

loans it might ﬂoat would have to be secured on its revenues and not

on those of the provinces.

It was also well placed to dominate the

international banking consortia which ofﬁcial London favoured as the

instrument of development without spheres. With the Bank on its side,

Whitehall could fend off complaints from the City and claim plausibly

to be defending Britain’s commercial stake in China. The Bank in return

gained ofﬁcial support against its rivals in London and its critics among

the British community in China.

The results were mixed. The defeat of the Boxers, the Anglo-

Japanese alliance of 1902 and the defeat of Russia in 1905 might

have been expected to open the golden age of Anglo-Chinese railway-

building. In fact, the City proved reluctant to invest in China. The For-

eign Ofﬁce and the Bank argued over who should be admitted to the

loan consortium: after the Entente cordiale of 1904, French participa-

tion became a diplomatic necessity.

In the face of Chinese resistance,

there was little prospect by 1908 of enforcing the kind of concession

in which foreign interests kept full control over the construction and

operation of a railway, as well as its ﬁnance. To Bland, that had seemed

vital.

As Peking lost control of its provinces and the ‘rights recovery’

movement gathered pace among the provincial gentry, the grandiose

schemes for the opening of China to the trade of the treaty-ports and

Hong Kong were quietly shelved. British trade and investment was

more rooted than ever within the safe haven of the treaty-ports and

diversiﬁed there into industry and services. The Bank fell back upon its

favoured policy of promoting the international loan consortia through

which it hoped to maximise its inﬂuence. But, within ﬁve years, the

Chinese revolution and the outbreak of the First World War changed

the political and economic landscape beyond recognition.

Despite the scale of Britain’s commercial interests and the

expected value of the China market, the modest scope of British action

in the crucial decade after 1895 stood in marked contrast to the inter-

vention, partition and annexation favoured in Egypt and Africa. This

was not because ofﬁcial policy was inﬂexibly committed to a united

and independent China, as the ﬂirtation with a Yangtse protectorate

showed. Nor because British interests were thought strong enough to

fend for themselves. In the Chinese interior, that had never been true.

The reality was that in China Britain’s power was too limited, her

unofﬁcial prot

es too weak, her international rivals too strong and

the Chinese ‘host’ much too resilient for a solution along African or