In November 1956, Britain faced two urgent questions. Could its forces operate in Egypt? Could it defend sterling while they remained there? A citizen following the movement of ships might reasonably have expected the first question to decide the outcome. A citizen watching the loss of reserves had good reason to attend to the second. Egypt had nationalised the Suez Canal. Britain, France and Israel resorted to force. Britain possessed the means to intervene and soon found itself seeking financial assistance.[1]
In Part V we examined what happens to a warning on its way to the people authorised to act. Suez presents a harder difficulty. The figures may reach the cabinet intact and still arrive politically too late.
Once troops are committed, withdrawal carries a public price. A government that would have rejected an undertaking had it seen the whole bill on the first day may keep paying on the ground that too much has already been spent.
An expanding state must meet costs that run on different timetables. The expedition requires ships and fuel today. Holding a position requires supplies, replacements and some arrangement with the people who live there.
The loan may fall due long after the minister who secured it has left office. The gain, meanwhile, may depend on trade continuing, allies consenting and residents accepting an authority they had no part in choosing. A treasury can put a reliable figure on the price of fuel. It can put no equally reliable figure on how long resistance will last.
The experience of Philip II of Spain offers a corrective to an easy explanation of imperial decline. Sixteenth-century Spain had access to American silver and a sophisticated market for royal credit. Economic historians Mauricio Drelichman and Hans-Joachim Voth examined the Crown’s contracts with its bankers.
Some made the amount or timing of payment depend on events both parties could verify, including the arrival of the silver fleet. The researchers interpret these arrangements as a practical means of sharing risk. Even the Crown’s suspensions of payment need to be read in the light of what the contracts covered and what they left unresolved.[2]
Imagine the problem from the banker’s side of the table. Soldiers abroad require payment on a particular date. Silver may arrive after it. A financier who can put money in the right hands at the right place and time supplies a genuine service.
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The Crown can maintain commitments that would otherwise be interrupted by a late fleet. This tells us something important about the durability of imperial power. Institutions can be exceptionally good at keeping an undertaking going long after there is reason to reconsider its purpose.
The banker’s calculation and the citizen’s calculation answer different questions. The banker needs to know whether the Crown can make good its promise. The citizen is entitled to ask what else those revenues might have purchased and who had a voice when they were pledged.
An agreement can suit both parties at the table while imposing obligations on a third party absent from it. That is why the ability to borrow again is such a poor measure of the public value of what was bought with the first loan.
At Suez the constraint took a different form. Britain had a currency to defend in the midst of a speculative attack. The closure of the canal and the disruption of oil supplies compounded the economic difficulties.
In a diplomatic circular of 23 November 1956, the US State Department explained why Washington was unwilling to offer extraordinary support to Britain and France while withdrawal remained unresolved. An ally whose financial co-operation mattered had reached a different judgement about the operation. Egypt, whose decision about the canal set the crisis in motion, had political purposes of its own. Neither appeared on a British military inventory.[3]
The point deserves precision. Britain’s financial strain preceded the intervention. A contemporary American assessment observed that its reserves had already been under pressure despite a relatively favourable trade balance.[4]
Suez exposed an existing vulnerability and narrowed the choices open to ministers at a critical moment. Britain subsequently obtained IMF assistance. Its society endured. What failed was a claim about the freedom of action its accumulated power still conferred. To call this the collapse of Britain would obscure the very event we need to understand.
Under what conditions, then, can overextension contribute to a more general breakdown? Consider a government facing an unexpected additional year of expenditure abroad. It can raise a tax, borrow, postpone maintenance or bring the undertaking to an end. People who benefit from continuation have good reason to organise.
The users of a bridge that will wear out five years earlier seldom know, in time to organise, that a decision concerning them has just been taken. The easiest saving to make today can become the most expensive one to repair. Repeat the choice often enough and the centre loses some of the productive capacity on which every distant commitment depends.
This is a question about the distribution of political voice as much as one about arithmetic. Defence can preserve the conditions in which people farm, trade and educate their children. Retreat can expose people who relied on a promise of protection.
A serious public account has to reckon with the cost of leaving as carefully as the cost of staying. It should also say whose safety counts in each calculation. The inhabitants of a territory described in a capital as a strategic asset have every reason to demand that their own losses enter the account.
There is a modest application at home in Pakistan, without drawing an imperial parallel. When Parliament is asked to authorise a long-lived commitment, it could reasonably ask to see the annual cost of operating it, the foreign exchange it will require and the public services that would have to give way if receipts fall short.
A useful reply would name a budget line and a responsible minister. Legislators could then return to the same figures the following year. Without that modest discipline, the public learns of the trade-off only when a payment is delayed or a service withdrawn.
Spain’s bankers and Britain’s predicament illuminate different moments in the life of a commitment. Credit can enlarge a government’s room for action. Dependence on its renewal can narrow that room again, just when leaders most wish to exercise it.
The recurring danger lies in allowing those who gain from an undertaking to commit the resources of people who cannot effectively demand its review. We have encountered that difficulty in the distribution of food, in the framing of privilege and now in the exercise of power abroad.
One historical question remains. Some societies discover a limit, revise a commitment and preserve what their citizens have built. Others encounter comparable evidence and persist until the choice is made for them. What gives the first society the capacity to change course while a choice is still open? That question of recovery belongs at the centre of the next instalment.
Endnotes
- James M. Boughton, “Northwest of Suez”, IMF Working Paper (2000).
- Mauricio Drelichman and Hans-Joachim Voth, “Risk Sharing with the Monarch”, working paper (2012).
- US Department of State, circular telegram, 23 November 1956, Foreign Relations of the United States, document 608.
- Foreign Relations of the United States, assessment of British finances, 26 November 1956, document 247.
[To be continued]