FROM THE WALL STREET JOURNAL BY NIALL FERGUSON | JULY 10, 2003
The Suez Canal was one of the wonders of the 19th century -- surely the only work of engineering to
inspire a great opera. (Verdi's "Aida," which had its premiere in Cairo in 1871.) It has also inspired some
great works of history, notably David Landes's "Bankers and Pashas." It could also inspire a great business-
school case study, the title of which would be: "How the French Built a Canal for the British."
It was - at first sight - a French achievement, designed by a Frenchman, financed by Frenchmen and opened
amid great pomp by the French Empress Eugenie. But it ended up being one of the sinews of British
Ever since Napoleon's Egyptian campaign of 1798-99, the French had seen the commercial possibilities of
linking the Mediterranean and the Red Sea. Visionaries like Barthelemy-Prosper Enfantin prophesied that a
canal would unite the "female" East to the "male" West. More cynically, the second Emperor Napoleon saw
an irresistible imperial opportunity. But only one man had the resolve to realize such visions. His name was
Ferdinand de Lesseps, and he is the hero of Zachary Karabell's readable "Parting the Desert."
If some of Mr. Karabell's characterizations are close to caricatures -- notably his portrayal of Lord
Palmerston, the British prime minister -- he succeeds in making Lesseps live. A diplomat whose career in
the French foreign service came unstuck in the late 1840s, Lesseps was one of those monomaniacs without
whom the world would not progress. Shattered by the loss in swift succession of his career, his wife
and one of his children, he flung himself into a one-man canal-building campaign.
From 1853 until 1869 he had only one thought: Suez. And he made a compelling case. To the Egyptians he
said that building the canal would prove "that Egypt still has the capacity to be a potent force in world
affairs." To the French he said that the canal would offer "a grander outlet . . . [than] wars and revolutions."
Unlike most prophets, Lesseps was honored -- and heeded -- in his own land. His fellow Frenchmen rushed
to invest in his company. It was in other countries that he was dismissed as a crackpot. Alarmed that the
canal might threaten their existing network of imperial communications, the British rubbished Lesseps's
plans. Palmerston ranked it "among the many bubble schemes that from time to time have been palmed
upon gullible capitalists." The key question - which Mr. Karabell ducks - is whether this was British
stupidity (what Edward VII later called "a lamentable lack of foresight") or lowdown British cunning.
The economic reality was that this Franco-Egyptian feat of engineering was advantageous to precisely the
people who had been most skeptical. For it was the British whose links to India would benefit most from a
canal. Before, it had taken at least 113 days for a steamship to sail the 6,000 miles from London to Calcutta
via the Cape of Good Hope. The canal cut the distance by a third.
Still, building it was a risky economic proposition. Under the terms of the concession that Lesseps was
granted, his company had the right to dig a channel across the arid Suez isthmus -- a distance of 100 miles -
- and to run it for 99 years. The Egyptian government would receive 15% of the profits, the founders 10%
and the shareholders the rest.
But as anyone will know who has followed the more recent history of the tunnel under the English
Channel, there is a problem with construction projects on this scale. They always cost at least double the
figure stated in the prospectus. And to begin with the actual traffic -- and hence revenues -- is usually about
half what was projected.
In the case of the Suez Canal there were additional reasons for cost overruns. When it turned out that the
huge labor force would have to be conscripted from the Egyptian peasantry, there was an international
outcry. Forced labor smacked of slavery, and this at the very time that the Civil War was raging in the U.S.
There was also the political problem that the Egyptian viceroy -- renamed the Khedive in 1866 -
- was not wholly independent. The canal formally required the approval of the Ottoman sultan.
Lesseps had insisted all along that he "wanted to do something great, without . . . any personal interest in
money." As costs mounted, it turned out that he expected shareholders to feel the same lack of interest. By
1867 the company needed to issue bonds worth a hundred million francs to keep afloat. By 1875 the
Khedive was all but bankrupt, having borrowed to the hilt in the expectation of promised profits. As for
Lesseps, his attempted encore -- a second canal, this time across the Panama isthmus -- ended in financial
collapse and the disgrace of a prison sentence for fraud.
The Suez Canal's financial crisis was what the British had been waiting for. In one of the great financial
coups of the era, the Khedive's shares were snapped up for GBP 4 million by Palmerston's successor,
Disraeli. The British triumph was complete in 1882, when a military coup against the Khedive furnished
the pretext for a British invasion. From then until 1956 the canal was hugely profitable -- traffic rose to 122
million tons of cargo a year, 24 times what Lesseps had hoped for. It also became one of the British
Empire's pivotal military bases, one that would prove vital in World War II.
The loss of Suez in 1956 is usually seen as the end of Britain's empire. Yet the British had the last laugh,
for Nasser's nationalization happened on the eve of the canal's decline. Since the early 1980s, fewer and
fewer ships have used it. Modern tankers can take the long route around the Cape more swiftly than was
possible a century ago; and the cost in extra fuel is not much more than the dues paid by ships going
through the canal. Supertankers have no choice: Lesseps's trench is too shallow for them.
Today, as Mr. Karabell ruefully concludes, Lesseps's masterwork is far from being a symbol of the hoped
for confluence of Occident and Orient. Battle-scarred after three wars between Israel and Egypt, and falling
into disuse, it is but one of many ugly fissures that divides the Middle East.