An Ottoman warning for indebted America

Future historians will look back on the current decade as a turning point comparable with that of the Seventies. No, not the 1970s. This is not going to be another piece pointing out the coincidence of an unpopular Republican president, soaring oil prices, a sagging dollar and an unwinnable faraway war. I am talking about the 1870s.
At first sight, the resemblances across 130 years may not seem obvious. The 1870s were a time when conservative leaders such as Benjamin Disraeli, British prime minister, were powerful and popular. It was a time of falling commodity prices, after the financial crash of 1873 and the opening up of the American plains to agriculture. And it was an era of currency stability, as one country after another followed the British lead by pegging to gold.
Yet, on closer inspection, we are indeed living through a global shift in the balance of power very similar to that which occurred in the 1870s. This is the story of how an over-extended empire sought to cope with an external debt crisis by selling off revenue streams to foreign investors. The empire that suffered these setbacks in the 1870s was the Ottoman empire. Today it is the US.
In the aftermath of the Crimean war, both the sultan in Constantinople and his Egyptian vassal, the khedive, had begun to accumulate huge domestic and foreign debts. Between 1855 and 1875, the Ottoman debt increased by a factor of 28. As a percentage of expenditure, interest payments and amortisation rose from 15 per cent in 1860 to 50 per cent in 1875. The Egyptian case was similar: between 1862 and 1876, the total public debt rose from E£3.3m to E£76m. The 1876 budget showed debt charges accounting for more than half of all expenditure.
The loans had been made for both military and economic reasons: to support the Ottoman military position during and after the Crimean war and to finance railway and canal construction, including the building of the Suez canal, which had opened in 1869. But a dangerously high proportion of the proceeds had been squandered on conspicuous consumption, symbolised by Sultan Abdul Mejid’s luxurious Dolmabahçe palace and the spectacular world premiere of Aïda at the Cairo Opera House in 1871. In the wake of the financial crisis that struck the European and American stock markets in 1873, a Middle Eastern debt crisis was inevit­able. In October 1875 the Ottoman government declared bankruptcy.
The crisis had two distinct financial consequences: the sale of the khedive’s shares in the Suez canal to the British government (for £4m, famously ad­vanced to Disraeli by the Rothschilds) and the hypothecation of certain Ottoman tax revenues for debt service under the auspices of an international Administration of the Ottoman Public Debt, on which European bondholders were represented. The critical point is that the debt crisis necessitated the sale or transfer of Middle Eastern revenue streams to Eur­opeans.
The US debt crisis has taken a different form, to be sure. External liabilities have been run up by a combination of government and household dis-saving. It is not the public sector that is defaulting but subprime mortgage borrowers.
As in the 1870s, though, the upshot of this debt crisis is the sale of assets and revenue streams to foreign creditors. This time, however, creditors are buying bank shares not canal shares. And the resulting shift of power is from west to east.
Since September, Middle Eastern and east Asian sovereign wealth funds have made a succession of investments in four US banks: Bear Stearns, Citigroup, Morgan Stanley and Merrill Lynch. Most commentators have been inclined to welcome this global bail-out : better to bring in foreign capital than to shrink balance sheets by reducing lending. Yet we need to recognise that these “capital injections” represent a transfer of the revenues from the US financial services industry into the hands of foreign governments. This is happening at a time when the gap between eastern and western incomes is narrowing at an unprecedented pace.
In other words, as in the 1870s the balance of financial power is shifting. Then, the move was from the ancient oriental empires (not only the Ottoman but also the Persian and Chinese) to western Europe. Today the shift is from the US – and other western financial centres – to the autocracies of the Middle East and east Asia.
In Disraeli’s day, the debt crisis turned out to have political as well as financial implications, presaging a reduction not just in income but also in sovereignty.
In the case of Egypt, what began with asset sales continued with the creation of a foreign commission to manage the public debt, the installation of an “international” government and finally, in 1882, to British military intervention and the country’s transformation into a de facto colony. In the case of Turkey, the debt crisis was followed by the sultan’s abdication and Russian military intervention, which dealt a lethal blow to the Ottoman position in the Balkans.
It remains to be seen how quickly today’s financial shift will be followed by a comparable geopolitical shift in favour of the new export and energy empires of the east. Suffice to say that the historical analogy does not bode well for America’s quasi-imperial network of bases and allies across the Middle East and Asia. Debtor empires sooner or later have to do more than just sell shares to satisfy their creditors.

Niall Ferguson, The Financial Times, 1 Ocak 2008

The writer is a professor at Harvard University and Harvard Business School and a senior fellow of the Hoover Institution, Stanford

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BAGHDAD'S MUSIC MAKERS PLAY ON

The many tragedies that have befallen Iraq in recent years include the wholesale destruction of much of its cultural heritage. But one plucky band of musicians has continued to play through the bloodshed and the bombs. Kim Sengupta meets the world's bravest symphony orchestra

Conducting a comeback

A US Apache attack helicopter roared across the sky, flying low and fast. In the distance, there was the dull thud of an explosion followed by brief machine-gun fire. Everyday noises of Baghdad. Then, suddenly, from behind a flaking white wall, the sounds of a Chopin concerto floated up in the air. The people hurrying by in the street paused, momentarily, to listen as the notes faded away.

The Iraqi National Symphony Orchestra was rehearsing for a series of concerts. It was one of the first times they had got together after the summer break, which had been an eventful time for some of the ensemble, two of whom had been kidnapped and two more had fled abroad.

But the orchestra plays on, part of a reawakening of art and culture in Baghdad, faltering steps in a society imploding under brutality, intolerance and death. Formed in 1959, the Iraqi National Symphony Orchestra was once one of the most renowned in the Middle East, able to recruit conductors and musicians from Europe, South America and the rest of Asia.

Following the US-led invasion of 2003, most of the instruments and the music collection was looted or burnt by a mob. American soldiers, under orders not to interfere because Washington wanted to portray the criminal destruction as popular national outpouring against Saddam's regime, stood by and watched.

The instruments and the music have been slowly gathered together by the orchestra's own efforts and donations from abroad. In 2003, they played the Kennedy Centre in Washington, with President George Bush and senior administration officials attending. But, since then, 25 of the members have joined the two million Iraqis who have sought sanctuary abroad from the upsurge in violence.

Both rehearsals and performances now take place in the afternoon, with Baghdad not a safe place to be about in the evenings. The venue has changed from the Rashid Hall, which was bombed, to the Ballet and Music Institute behind armed guards .

On a hot afternoon the orchestra were hard at practice, string and brass separately and then together. The repertoire they would run through for the next few weeks was laid out in neat piles, Chopin's piano concerto, Beethoven's Ninth Symphony, Dvorak's Ninth, and an assortment of Duke Ellington and George Gershwin. The piece being played was by an Iraqi composer, adopted by a former German conductor of the orchestra "Since we have no protection", a slow and sad tune,

At 14, Duaa Musa is the youngest member of the orchestra, taking over the first chair at oboe from someone who has gone to Jordan. She wants to be a professional musician. But would the conditions in Baghdad allow that to happen? "It will take a long time I think," she said. "Maybe not until I get older. There are a lot of bad things happening now."

Her father, Majid Hussein Musa, trumpet player and music librarian, has first-hand experience of such bad things. He was kidnapped by gunmen from outside his home. "They blindfolded me and put me in the boot of a car," he recalled. "They took me to a room somewhere and accused me of being a soldier. But I had papers to show that I was only a humble musician. Then they asked me whether I was Shia or Sunni. It is not something I even think about, but once I said I was a Sunni they let me go."

Mr Musa, 42, had tried to stop the vandalism which took place in 2003. "They were burning the sheet music, smashing up violins and pianos and putting them in the fire. When I asked why they were doing this, I was told, 'if you stay you will burn with them'. I saw some American soldiers and asked for help but they said they had been told not to interfere. So much was just ruined at the time, it is such a pity".

Mr Musa also suffered a loss recently, a Selmer-Bach Stradivarius trumpet sent by a friend abroad. "They took it off me at an army checkpoint. I do not know whether they thought it contained a bomb. Anyway they smashed it open to look inside. Then they offered me compensation of a few dinars. It was very upsetting but, in Baghdad, people disappear while travelling, so you cannot be too sentimental about objects, but it was hard losing something so lovely".

Annie Melconian's family worry about her each time she attends a rehearsal. "I have to telephone them during the journey, when I arrive and then when I leave," said the 27-year-old violinist. "I know the dangers but I just try not to think about it. I think for all of us music is a great escape from what is going on, once we start playing we no longer hear the sounds of guns. But what drives me crazy are the generators which are on all the time because we only have one or two hours of electricity supply."

Ms Melconian, of Armenian descent, was born and brought up in Baghdad. She is a biologist but has given up her job temporarily to concentrate on music. "Because we play in the afternoon, it clashed with my work, so I stopped that for the time being. I help at our local church but fewer and fewer people go there now, most have left the country. Sometimes we have more in the choir than in the congregation. The only big numbers now are for funerals, I am afraid, and there are too many of them.

"I remember taking part in that concert in Washington. We were in Amman for four days waiting for a visa but when I got there it was like a movie. Of course our knowledge of America was based on movies at the time. It's different now."

Mohammed Amin Ezzat became the first Iraqi-born conductor of the orchestra in 1989 after a succession of Europeans. He has composed a widely praised requiem called Back to Reality about "how life goes on, music takes us to another place, but eventually we are here, back in Iraq". Mr Ezzat and supervisor Munthar Jamil Hafidh are trying to organise concerts abroad.

"We are sometimes playing to full houses here. But it will be a great experience for the members to go out of the country, maybe some of them will get scholarships abroad," said Mr Hafidh. "For myself, I will always come back to Iraq, it is my home. But I cannot understand what is going on here, this need to destroy, this is new, it wasn't here before."

The Mutanabi Street book market was famous for hundreds of years as an intellectual core of Baghdad. It was blown up in March by a suicide bomber, but has just reopened, albeit with a few stalls and a handful of customers. The Shah Bandar cafe next door, a place of stimulating literary and political debates, which was also destroyed in the blast, is to be rebuilt. A small number of art galleries are opening in the city. There are virtually no customers but Iraqi artists, many of them exiled, are hungry for their work to be exhibited in their homeland.

When the Mongols under Hulagu Khan captured Baghdad in 1258 the Tigris was said to have first turned red, with the blood of its slaughtered citizens and then black with ink, when the Grand Library of Baghdad, then one of the biggest and richest in the world, was ransacked and the books thrown into the river.

"It is the same kind of mentality that led to the bombing here", said Abdul Rahim, an unemployed teacher, standing at the newly opened book market at Mutanabi Street. "It is contempt as well as fear of learning. Books open the mind to rational argument and debate, and that is what a lot of people do not want in Baghdad at present."

He pointed to one of half a dozen stalls operating. "Look here we have American books, British books and Shia religious books which were banned under Saddam. One can buy these and make up their own minds, maybe some American soldiers should come here and get some books, it will teach them about the outside world and other people."

Naim al-Shatry, who opened his stall at the market 40 years ago, remained optimistic. "But it is open again now and more people will come in the future, you will see. You cannot keep people away from books any more than you can keep them away from water. The thirst of the mind is always there, it needs to be quenched."

Raad Ahmed Ali will not be going to Mutanabi Street for a while. "Frankly, I am afraid of going there, how do we know they will not bomb the place again? But I would like to go. My father took me there when I was a young boy and I would like to take my son there."

Mr Ali, a painter, is already under a threat, accused of work which is deemed to be "against Islam". He smiles wryly. "Under Saddam, we had to be careful about producing anything which was political. Now we have to be careful not to offend anyone, Sunni, Shia or the Americans. The extremist Sunnis and Shias will shoot you, the Americans will put you in prison if someone denounces you for painting against the occupation, they will say you support the insurgents.

"Now, if we draw or paint anything controversial, we try to have it sold outside the country, maybe under a different name, non- controversial work we try to sell through art galleries here. And then some of the people here, who have become rich with contracts in the occupation, they will pay to have themselves and members of their families painted. But that will happen behind closed doors.

"But there is a feeling things will change and we will get freedom to paint like never before. It is the human spirit, you cannot keep it like a caged bird."

The few art galleries open operate in an atmosphere of semi- secrecy. At the Bahas al-Azraq in the Karada district, owner Mohammed Ali Salman did not want his photograph or address published. "You do not know what can happen, who can take offence" he said. "We have also got to be very careful about kidnappings so we cannot even advertise".

The gallery first opened in 1980, stayed open through the war with Iran and the 1990-91 Gulf War until the 2003 invasion. "Even during the years of [UN] sanctions, we were selling paintings both to Iraqis and foreigners. But now it is very difficult,"said Mr Salman.

Baghdad has also seen an infusion of free arts for the masses. The high blast walls, topped with barbed wire, which segregates the city into Shia and Sunni ghettos, are having murals painted on them as are some of the road surfaces. The funding is being provided by an unnamed American organisation.

Last week, work finished on painting red, blue and pink flowers at Nisour Square, in Mansour. Two days later, employees of the US private security company, Blackwater, guarding State Department officials, opened fire after being spooked by a bomb some distance away, killing 28 men, women and children. The "flowers of peace" on the road are now pockmarked with bullet holes and charred by burnt cars.

Independent, The (London), Sep 27, 2007