Overcoming the Egyptian cotton crisis in the interwar period: the role of irrigation, drainage, new seeds, and access to credit

By Ulas Karakoc (Tobb Etü and Humboldt University) and Laura Panza (University of Melbourne)

The full paper from this blog post was published on The Economic History Review and is currently available on Early View at this link

By 1914, the Egyptian economy confronted a unique conundrum: its large agricultural sector was negatively hit by declining yields in cotton production, the main driver of the economy. Egypt was a textbook case of export-led development, because  cotton production and exports had dominated the country’s economy.  The decline in cotton yields, which came to be regarded as a “cotton crisis”, was coupled with two other constraints: land scarcity and high population density. Nonetheless, despite unfavourable price shocks, Egyptian agriculture was able to overcome this crisis in the interwar period.  The output stagnation between  1900 and the 1920s contrasts with the following recovery (Figure 1).

Figure 1. Egyptian raw cotton output, acreage under raw cotton and raw cotton yield, c.1890s-1940. Source: Annuaire Statistique (various issues)

Previous research documented that during the crisis the decline in yields was caused by expanded irrigation without sufficient drainage, which led to a higher water table and made cotton more prone to pest attacks (Radwan, 1974; Owen, 1968; Richards, 1982).  This problem was addressed when the government  introduced an extensive public works programme directed to drainage and irrigation.   Simultaneously, Egypt’s farmers changed their cotton cultivation from the long staple and low- yielding Sakellaridis to the medium-short staple and high yielding Achmouni.  This change reflected income maximizing preferences (Goldberg 2004 and 2006). Another important feature of the Egyptian economy between the 1920s and 1940s was the expansion of credit facilities to farmers. Cooperatives, and the Crèdit Agricole (1931) were established  to facilitate small landowners’ access to inputs and  small loans (Issawi, 1954, Eshag and Kamal, 1967). These credit institutions coexisted with a number of mortgage banks, among which the Credit Foncièr was the largest, servicing predominantly large owners. Figure 2 illustrates the average annual real value of Credit Foncièr land mortgages in 1,000 Egyptian pounds (1926-1939).

Figure 2.  Average annual real value of Credit Foncièr land mortgages in 1,000 Egyptian pounds (1926-1939). Source: Annuaire Statistique (various issues)

Our work investigates the extent to which these factors contributed to the recovery of the cotton sector. Specifically: to what extent can intra-cotton shifts explain changes in total output? How did the increase in public works boost production? And, what role did differential access to credit play? To answer these questions, we construct a new dataset by exploiting official statistics (Annuaire Statistique de l’Egypte) covering 11 provinces and 17 years between 1923 and 1939.

We find  that access to both finance and improved seeds significantly increased cotton output,  and the declining price premium of Sakellaridis led to a large scale switch to Achmouni.  By putting farmers’ choices and agency centre stage in our analysis, our study shows that cultivators’ response to market changes was fundamental to the recovery of the cotton sector. Access to credit was also a strong determinant of cotton output, and productivity-enhancing innovations in agriculture (Glaeser, 2010).

Surprisingly, perhaps,  our results show that the expansion of irrigation and drainage did not have a direct effect on output (in the same or following year). However, we cannot completely rule out the role played by improved irrigation infrastructure for two reasons: first, we do not observe investments in private drains, and thus we cannot empirically assess the potential complementarities between private and public drainage. Second, we find some evidence pointing to the cumulative effect of drainage pipes, two and three years after installation.

We also find that the structure of land ownership, specifically the presence of large landowners, contributed to output recovery. Thus, despite the attempted institutional innovations aimed at giving small farmers better access to credit, large landowners benefitted disproportionally from credit availability. This observation accords  with Egypt’s extreme inequality of land holdings.

To contact the authors:

Ulas Karakoc, ulaslar@gmail.com

Laura Panza, lpanza@unimelb.edu.au

References:

Eshag, E., and Kamal, M.A.,  “A Note on the Reform of the Rural Credit System in U.A.R (Egypt).” Bulletin of the Oxford University Institute of Economics & Statistics 29, no. 2 (1967): 95–107. https://doi.org/10.1111/j.1468-0084.1967.mp29002001.x.

Glaeser, B. The Green Revolution Revisited: Critique and Alternatives. Taylor & Francis, 2010.

Goldberg, E. “Historiography of Crisis in the Egyptian Political Economy.” In Middle Eastern Historiographies: Narrating the Twentieth Century, edited by I. Gershoni, Amy Singer, and Hakan Erdem, 183–207. University of Washington Press, 2006.

———. Trade, Reputation and Child Labour in the Twentieth-Century Egypt. Palgrave Macmillan, 2004.

Issawi, C. Egypt at Mid-Century. Oxford University Press, 1954.

Owen, R. “Agricultural Production in Historical Perspective: A Case Study of the Period 1890-1939.” In Egypt Since the Revolution, edited by P. Vatikiotis, 40–65, 1968.

Radwan, S. Capital Formation in Egyptian Industry and Agriculture, 1882-1967. Ithaca Press, 1974.

Richards, A. Egypt’s Agricultural Development, 1800-1980: Technical and Social Change. Westview Press, 1982.

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