Sunday, December 18, 2016

The Cairo University conference - Restoring Balance to Egypt’s Economy: Inspired by Talcat Harb

Muhammad Talcat Harb, 1867-1941
The Cairo University conference, ”Restoring Balance to Egypt’s Economy: Inspired by Talcat Harb,” held on November 28, was innovative in many respects.  Why was it held and what did it tell us about the current state of Egypt’s economy?  What impact might the ideas expressed at the conference have on the future?   

After my first book, Bank Misr and Egyptian Industrialization, 1920-1941, was reissued by Princeton University Press as part of its Legacy Library (, I was asked to deliver the keynote address at the conference. 

Interview with Mesbah Kotb - Economics Editor, al-Masry al-Youm
This was an exciting opportunity to bring to the attention of academics, policy-makers, members of the private sector and students in Egypt the important legacy of Talcat Harb, the Bank Misr and the Misr Group of companies which the bank founded ( 

 First, the conference brought together a wide variety of stakeholders, all of whom are deeply concerned about the current state of the Egyptian economy.  These included the sponsors - the Association of Egyptians in North America, the Faculty of Economics and Political Science at Cairo University, and the Bank Misr, founded in 1920 by Muhammad Talcat Harb, and represented by its CEO, Mohamed Al EItreby.  Many panelists were former ministers in the Egyptian government and others officials currently tasked with administering the economy.  Many successful members of the private sector attended the conference as well.

Second, the conference reflected a diversity of perspectives on the Egyptian economy, from the left to the right.  The diversity of opinion at the conference enhanced its quality.  The differing views of the panelists led to several sharp exchanges which highlighted the problems facing Egypt’s economy but were also suggestive of possible reforms.

Third, the juxtaposition of Egypt’s success at economic development, particularly the development of a nascent industrial sector during the 1920s and 1930s, under the leadership of Talcat Harb, was meant to showcase the role that the private sector could play in the contemporary era,   A consistent theme throughout the day was the call for Egyptian President cAbd al-Fattah al-Sisi to clarify the institutional framework for economic development and remove much of the uncertainty surrounding current investment, both domestic and FDI.

Finally, there was general agreement, from all sectors and ideologies represented at the conference, that economic development must promote social justice (al-cadala al-ijtimaciya), and not just profits for wealthy investors, domestic or foreign.  This point was repeated many times as speakers emphasized the need to confront Egypt’s high rate of unemployment, especially among youth, and the suffering which has been caused by the November 3rd revaluation of the Egyptian pound.  Since November 3rd, the pound has lost almost 100% of its value, as it has floated from 9 to the US dollar to between 17 and 18 at the time of this writing.

Few Egyptians understand the significance of Muhammad Talcat Harb’s legacy.  This legacy not only includes his founding of the Bank Misr on April 13, 1920, but the 20 companies which the bank created and capitalized between 1921 and 1940.  Fortunately, the conference organizers were aware of this legacy and sought to use it as a foundation for the conference to inspire Egyptians to develop a new entrepreneurial spirit.

Engineer Mahmoud Elshazly, one of the conference organizers, formerly worked in the Bank Misr’s largest and most important firm, the Misr Company for Spinning and Weaving (Shirkat Misr li-l-Ghazl wa-l-Nasij), located at Mahalla al-Kubra in the center of the Egyptian Delta.  Engineer Elshazly has had a distinguished career in the private sector in Egypt, Germany and the United States.  Conference co-organizer, Dr. Tarek Saadawi, Professor of Electrical Engineering at the City University of New York, and director of the Center for Information Networking and Telecommunications (CINT), has participated in many private sector projects and worked extensively with the US government. 
Shaking hands with Dr. Hala Saed at the Banque Misr
Dr. Hala Saed, the Dean of the Faculty of Economics and Political Science at Cairo University, is a dynamic leader.  Central to her vision is opening the minds of her students to the most important developments in today’s global political economy.  Dr. Saed made it clear during a visit to the Bank Misr’s headquarters in downtown Cairo at the end of the conference - a building which is noted for its beautiful Islamic architecture - that she will be bringing students from the Faculty of Economics and Political Science to visit it and the impressive museum which the Bank established to honor the memory and contributions of Talcat Harb.

The Chairman of the Bank Misr, Mr. Mohamed Al Etreby, is a proponent of as strong private sector but one which follows Talcat Harb’s vision that the goal of capitalism is to benefit all of society, not just a small percentage of it.   That the Bank Misr is the second largest bank in Egypt today, after the National Bank of Egypt (al-Bank al-Ahli al-Misri), with branches throughout Egypt and abroad, is a testament to its ability to have weathered many storms since its founding in 1920 to become an internationally respected institution today.

Why was the conference subtitled, “Inspired by Talcat Harb”? To the older generation, the experience of the Bank Misr and its companies represents the “Golden Age” of modern Egyptian capitalism.  Unfortunately, few young Egyptians understand the significance of the contributions of Talcat Harb and the Bank Misr to Egypt’s economic development.  Few know about his vision for Egyptian society and his attitudes towards members of the other 2 Abrahamic faiths, namely Christians and Jews.

Muhammad Talcat Harb was born into modest circumstances in Cairo in 1867.  His family’s origins were in a small, village, Mit Abu Ali, in al-Sharqiya Province in the Egyptian Delta.  As a young man, Harb developed close ties to the finance sector of the Egyptian economy by working for the Daira al-Saniya and the land development company, Le Crédit Foncier Egyptien, during the late 1800s. 
Given his humble background, Talcat Harb was remarkable for having developed fluency in the French language and also a strong relationship to many powerful landholding families. In particular he served as a financial advisor to Amir al-Shacrawi, heir to the fortune of the Shacrawi family of al-Minya Province in Upper Egypt.  Working with these families as they expanded their ownership of agricultural land to benefit from the growing cotton economy, Talcat Harb learned the importance of the Egyptian family structure and the need to sustain it.

Talcat Harb was much more than an entrepreneur who sought to industrialize Egypt to challenge European colonial domination of his country. The issue of protecting the family, the core of Egypt’s social structure, came to the fore in the last decade of the 19th century and early 1900s with attacks on Islam and Shaykh Muhammad cAbduh, the Grand Mufti of Egypt.

The breadth of Talcat Harb’s intellect was apparent in the manner in which he fought Qasim Amin whose book, The Liberation of Women (Tahrir al-Ma’ra) had created a stir due to his call for Muslim women to be able to dispense with the veil (al-hijab).  In two books, The Socialization of Women and the Hijab (Tarbiyat al-Mar’a wa-l-Hijab), and, A Chapter in the Story of Women and the Hijab (Fasl al-Khitab fi-l-Mar’a wa-l-Hijab), Talcat Harb argued against Qasim Amin.  In another important work, M.G. Hanotaux et L’Islam, Talcat Harb wrote a study in  French defending Shaykh Muhammad cAbduh.  His book asserted that Islam was not opposed to modern science and that the status of women under Islam was one of respect.

Despite his critique of Qasim Amin, Talcat Harb was not opposed to women’s rights. “Studio Misr” (Shirkat Misr li-tamthil wa-l-Cinema) employed women actresses.  Rather he saw the issue of the status of women in Islam as central to maintaining the strength of Egypt’s family structure.  In his view, one of the ways in which Western Orientalists attacked Islam was by pointing to what bthey considered the unequal status of women in Muslim majority countries.  The veil became a symbol of that attack which Harb saw as part of the efforts of colonial powers such as Britain and France to undermine the family structure in countries they dominated, such as Egypt and those in the larger Middle East.

Talcat Harb was known as a very religious individual.  In contemporary terms, one would not expect that some of his closest friends would be Jews and Christians.  Yet Yusuf Aslan al-Qatawi Pasha, the head of the Egyptian Jewish community, was a member of the Bank Misr’s first board of directors.  Amin Iskander, a member of the Egyptian parliament during the 1930s and early 1940s, and his brother Raghib, an engineer, were Christian friends.

Every Friday evening, Talcat Harb hosted a salon at his home in the al-Abbasiya district of Cairo.  Among his guests were not only prominent members of Cairo’s Muslim community, but those of the Christian and Jewish communities as well.  That an extremely devout Muslim could have friends from all 3 Abrahamic faiths speaks not only to Talcat Harb’s character, but to the role model which he provides for the contemporary Muslim world in the struggle against sectarianism.
"Restring Balance to Egypt's Economy: Inspired by Talcat Harb"
What then are the problems facing Egypt’s economy and how could Talcat Harb’s legacy provide a guide to the future?  Let’s begin by saying that no one at the conference on “Restoring Balance to the Egyptian Economy: Inspired by Talcat Harb,” had much positive to say about the current state of affairs.  Indeed the very title of the conference was a plea for the Egyptian state to allow the private sector a more central role in confronting Egypt’s economic problems.  At present, the balance is titled towards the state, with the private sector finding itself facing limited options for investment and growth.

First, the discrepancy between Egypt’s imports and exports is wide and increasing.  As numerous conference participants and attendees bluntly stated, ”Egypt imports everything and produces nothing.”  While of course an exaggeration, this statement highlights the fact that the public sector still dominates economic development.  State policies have been responsible for sustaining an artificial rate for the pound which widened Egypt’s balance of payment deficits and discouraged investment in many sectors of the economy.

The revaluation of the pound will help the agricultural sector which had essentially stopped producing traditional staples such as lentils, fava beans, and sugar cane.  The state's artificially valuation of the pound created an economic calculus which discouraged farmers from growing important food crops.  As a result, state policy significantly increased the importation of foodstuffs.  While I was in Cairo, there was a sugar crisis and many other foodstuffs are in short supply.

Talcat Harb was innovative in yet another respect.  In the 1929, he established a branch of the Bank Misr – Banque Misr – Syrie –Liban – in Beirut, as he began to consider how economic cooperation among Arab economies could help not only the Egyptian economy, but the Arab economies become stronger in face of Western colonial domination.

After founding Egypt Air (Shirkat Misr li-l-Tayaran) in 1932, in cooperation with the British form, Heston Airworks, Talcat Harb established the first Arab airline route from Cairo, to Jaffa, Beirut, Damascus and Baghdad.  Harb also founded Misr Transport and Shipping Company (Shirkat Misr li-l-Naql al-Bahriya) in 1930.  One of the roles of the company was to address the problems faced by Egyptian pilgrims (al-hujjaj) who often contracted diseases such as cholera during their overland trip from Egypt to Mecca.

The Misr Shipping Company took pilgrims from Suez Canal at the southern mouth of the Suez Canal to Jidda where they boarded a new Egypt Air route which flew them from, Jidda to Mecca.  Another problems faced by pilgrims traveling to Mecca was not only the difficulty of reaching the holy city, especially for the elderly, but the problem of finding potable drinking water between Jidda and Mecca for those traveling by land. 

Harb helped the nascent Saudi government to purify the Kawthar and Zamzam wells so that pilgrims would not become ill from drinking from them.  Further, Harb named two of his ships which transported pilgrims to Mecca, “Zamzam” and “Kawthar.”

In retrospect, Muhammad Talcat Harb was advocating a form of Arab Common Market decades before the idea began to gain support in Europe for a European economic community, which only began to be discussed during the 1950s.  Harb's idea of Arab economic integration (al-takamil al-iqtisadi al- carabi) was an idea well before its time but as relevant in the 1920s and 1930s as it is today.

The recent visit by an Iraqi delegation to Cairo which offered Egypt Iraqi oil could be the first step towards creating such a market.  We should remember that cooperation on many levels between Egypt and Iraq goes back to the 1930s when Egypt Air created a route from Cairo to Baghdad and the famous Egyptian lawyer and legal expert, cAbd al-Razzaq al-Sanhuri (1895-1971), helped Iraq establish a modern legal system.

Why did the Misr Group face a severe economic crisis in 1938 and 1939?  Why did its expansion come to an end in 1941? Were these crises engineered by the British as many Egyptians believed at the time, or were they the result of economic contradictions which the Bank and its companies faced at the time?

Clearly the latter, not the former, hypothesis explains these crises.  Talcat Harb clearly understood that the Bank Misr faced a serious contradiction.  On the one hand, it was a commercial bank which accepted deposits from Egyptian citizens.  Those deposits could be withdrawn at any time.  At the same time, it functioned as an industrial bank with long-term commitments in the form of the capitalization of its companies.

When Hitler demanded Czechoslovakia cede the Sudetenland (populated by ethnic Germans), fear spread that WWII was about to break out.  The Bank Misr’s depositors created a run on the bank as they withdrew their deposits in large numbers.  As a result, Talcat Harb was forced to turn to Egypt’s semi-official national bank, the National Bank of Egypt, which was controlled by the British.

Realizing the danger that the collapse of the Misr Group posed to the Egyptian economy, the National Bank of Egypt reluctantly agreed to a loan to allow the Bank Misr to avoid insolvency.
In September 1939, Germany invaded Poland and WWII was underway.  The war's outbreak engendered another run on the Bank Misr.  Once again, the Bank was forced to turn to turn to the National Bank of Egypt.  However, this time the National Bank put conditions on the loan.  In return for financial support, Talcat Harb and the entire board of directors of the Misr Group were forced to resign.

After Talcat Harb resigned as managing director of the Bank Misr, Dr. Hafiz al-Afifi Pasha, a medical doctor, was appointed to take his place.   Afifi’s close ties to the British only inflamed conspiracy theories that the removal of Harb and his colleagues was a plot on the part of the British to destroy Egypt’s efforts at industrial development.

In truth, the British had no desire to destroy the Misr Group, especially since it had partnered during the 1930s with several British firms such as Heston Airworks and the Bradford Dyers.  The appointment of Hafiz al-Afifi was based on the idea the National Bank needed to have confidence in someone who they trusted to repay the loan.

What are the lessons of Talcat Harb and the Bank Misr for contemporary Egypt?  Clearly leadership matters.  Talcat Harb was a visionary who realized that Egypt’s potential to become a regional economic power depended upon its developing a strong industrially-based economy.  He made a major step in that direction through creating 20 companies between 1922 and 1940 (

However, a vision must have a social base – it must have followers.  Harb and his colleagues in the Bank Misr project would not have been able to generate the support they needed if there had not been a powerful nationalist movement which organized the 1919 Revolution against British colonial domination.  Talcat Harb came to be known by the title zacim misr al-iqtisadi (Egypt’s Economic Leader).  Egyptians flocked to deposit their funds in the Bank Misr once it was formed to demonstrate their support for Egypt’s struggle against the British.

Talcat Harb believed that a developing country could not industrialize without support from the state.  Tariff protection was critical to the success of the Bank Misr's companies during the 1930s.  However, the state's failure to establish an industrial bank - despite Harb's lobbying efforts - was a central reason for the Misr Group's ultimate collapse.  While supportive of state backing for industrialization, Harb would never have accepted the inefficient public sector while dominates the Egyptian economy today.

Talcat Harb was convinced that Egypt alone could not fight colonialism.  Economic cooperation among Arab countries was crucial if they were to achieve independence from colonial rule.  Such cooperation was not based on concepts of Pan Arab nationalism drawn from an abstract “Golden Age,” but on Arab economic integration grounded in sound trade, financial and industrial policies.

Finally, Talcat Harb broked no tolerance for sectarianism.  Despite being a highly devout Muslim, he strongly believed that all religious and ethnic groups needed to live together in peace and harmony if the Arab world was to prosper and achieve its economic potential and maintain political stability.  Perhaps this was the most important legacy of "Egypt's Economic Leader," namely that only through mutual respect and tolerance of diversity can a society prosper and grow (