Wednesday, 25 September 2019

Labour, Imperialism & Finance


Following are slides for my presentation on a panel at ‘The World Transformed’ conference in Brighton on Monday 23 September. It was well-attended, with probably some 400-500 people under the ‘Big Tent’, some out in the rain. The topic was ‘financialisation’, a term that I find misleading at best. Those who use this term often do not understand the role financial markets play, and often it is a cloak for their soppy reformist policies. So I decided to switch the focus to imperialism and finance instead, and to expose UK Labour Party hypocrisy.
I had fifteen minutes, as did the other panel speakers, Yanis Varoufakis, Ann Pettifor and Kali Akuno. My presentation was marred by the lack of a promised presentation screen. It led to me fumbling a little over my notes instead, but I should have realised that this absence was close to inevitable. There was a good reception for what I said, but most acclaim, unsurprisingly at this Labour Conference-related event, was given to the ‘Oh, Jeremy Corbyn!’ angle taken by Varoufakis and Pettifor.
The Q&A period enabled me to develop points on the hypocrisy of the Labour Party’s reliance on the rest of the world for a living and its support for Britain’s imperial status – illustrated with reference to how the 1945 Labour government funded the introduction of the welfare state (see here for details).


And so, to the slides below …

Tony Norfield, 25 September 2019


























Tuesday, 17 September 2019

Index of Power Update, 2018-19: China #2

[Note added 14 September 2021: An update to the Index of Power, with some improvements to data, especially that of using total foreign investment assets, not just FDI, is published here.]
 
This is an update of the statistics for my Index of Power, using data for 2018-19 and discussing what a country’s ranking reflects. The major change is that China’s rank has shifted up and it has now taken the UK’s place at number 2 in the world. The US still remains in a commanding position, well ahead of the other major countries, but its lead has shrunk in the latest reading, especially versus China. Countries in positions four to ten, when the Index was last updated in early 2018, remain in the same rank positions with the new data.
The Index highlights the dramatic inequality of power in the world. In the top group, only China, the UK, Japan, France and Germany have an index value that is more than 20% of that for the US. Only 30 countries have a total index value that is more than 2% of the US number; the world’s remaining 170 or so countries count for even less.

Index of Power


Index evolution

I first constructed this Index in early 2012 and named it an ‘Index of Imperialism’. My objective was to use readily available data to gauge different dimensions of the international status of countries. Since then, I have changed the title of the Index and also some of the components, but the underlying logic is the same.
The title was changed to the ‘Index of Power’ because this seemed a better description of what it was measuring. It didn’t make much sense to call the lower ranking countries ‘imperialist’, but only little ones, or having an implicit assumption that the higher a country’s ranking, the more imperialist it was.
I had always pointed out that any description of a country as imperialist would have to depend upon first assessing its role in the world economy. Taking Luxembourg as an example, it is only a small cog in the world system (number 24 in the new Index), but it is an integral part of the European-based imperial machine and plays a particular role within it. The Index number, nevertheless, is meant to reflect relative positions of power in the world economy.
Which brings me to which aspects of political and economic power are covered. Largely they are based on economic data, and they are also biased in favour of those measures that reflect a country’s international reach. These do not directly measure political power, but it is evident, for example, that a bigger economy will tend to have more weight in its dealings with the rest of the world than a smaller one. I would have been happy to include some more directly political components, but could think of none that seemed relevant and easily measurable for a wide range of countries. That the top fifteen countries ranked by the Index include all the permanent voting members of the UN Security Council, and also the G10 members, confirms that there is a broad correlation of the components used with real-world political power.
The five original components of my Index in 2012 were: GDP, foreign direct investment assets, military spending, the importance of a country’s currency in central bank FX reserves and a country’s ownership of the major international banks. The first three – GDP, FDI and military spending – have stayed in all the later versions. But I found much better and more representative measures for the final two components during my later investigations, including data for more countries. For these latter two, I now use the global volume of trading in particular currencies and the value of international bank loans and deposits centred in different countries.
These revised Index components were fully discussed in my 2016 book, The City, Chapter 5, ‘The World Hierarchy’, including the rationale for the particular data items used and the limitations they had. Yet, people being what they are, some writers have still managed to misinterpret what I said, so I will again review the key points below. I will also note the small amendments to how I have dealt with data for China in the latest Index values (which, however, is not the reason for China’s rise to #2), and discuss how to interpret China’s position in the world economy.

Index construction

The five components of my Index of Power are:
GDP: GDP measured in nominal US dollars, using IMF data for 2018.
FDI: The stock of foreign direct investment assets, using UNCTAD data for end-2018.
FX: The volume of global transactions in a currency, with April 2019 as the base period, using the latest BIS survey of September 2019 (euro transactions are allocated among the 19 euro members).
Banks: The outstanding international loan assets and deposit liabilities of banks in a particular country, using data from the BIS for end-2018.
Military: the military spending of countries, measured in nominal US dollars, using data from SIPRI for 2018.
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Three data components – GDP, FDI and Military – are available for most countries in the world, although the data may be a little old or not available in some cases. The two other components are available only for a smaller group of countries – 57 for FX (including all euro members) and 47 for Banks – although it is very likely that the countries left out will have minimal readings.
Each of the components is weighted equally in the Index. The country with the largest component reading gets a score of 100 for that item, and other countries get a scaled down number. So, for example, if Country A has the biggest GDP, then it is 100, and country B, with a quarter of that GDP is 25. To complete the Index, components are added up for each country then divided by 5.
If a country is the biggest in all components, its final Index number will be 100. That is almost true for the US, which has a value of 92.4, with the biggest GDP, FDI, FX and Military, but coming second to the UK as a location for Banks (rather, international banking).
Below I discuss the limitations of the available data used for the index components.

GDP

One can always doubt whether an economic statistic really does measure what it claims to measure. Nevertheless, Gross Domestic Product (GDP) has the big advantage of being an easily available item of data for almost all countries. For my current purpose, one problem with GDP is that it overstates the value of output that accrues to a particular country when it has net payments of income to foreign investors, and understates that value when the country has net income from foreign investment. For example, Ireland’s GDP is overstated in this respect, because it has to make big payments to foreign investors – more is produced in the country than ends up staying there. By contrast, Norway’s GDP underestimates how much revenue Norway receives because it gets big net payments from its foreign investments. An alternative measure, GNP, includes that difference, but is much less easily or widely available.
In any case, it is worth pointing out that GNP and GDP do not allow for the way economic data count value produced. As John Smith pointed out, these measures are better understood as measuring value appropriated by a country, rather than value created in that country.
GDP does not measure a country’s international influence directly. But a country’s ‘weight’ in the world economy is an important factor in its potential influence, and GDP is one measure of that weight. It is also better to look at nominal GDP, not on a Purchasing Power Parity basis, as a truer measure of this global weight. You cannot buy anything on the world market with PPP dollars, which do not exist.
GDP’s value as a component of a power index can be seen in another way: one can look at GDP as measuring population multiplied by GDP per head of population. This allows for the fact that in the world economy people count only insofar as they also have incomes, and how much income!
In the case of China’s GDP, the number I have used is the GDP of China itself, plus that for Hong Kong and Macau, which are counted separately in official data. Macau is a new addition compared to the last Index calculation, but this increases China’s total index number by less than 0.1.

FDI

Foreign direct investment is one measure of a country’s foreign ownership of assets, and its ability to exploit others in the world economy. However, especially given the registration of FDI in tax havens, a problem is that not all of the ultimate country owners of these assets are identified. In the case of the Republic of Ireland and the British Virgin Islands, and also for some other countries, they would score relatively highly on this index measure, but little of the FDI recorded as coming from these locations is owned by their residents.[1] Also, FDI is distinguished from portfolio investment in official data. To count as FDI, the investment has to account for more than 10% of a foreign company’s assets; otherwise it is counted as ‘portfolio’ investment.
Portfolio investment in equities and bonds is huge, but data covering it is much more patchy than for FDI, and is even less likely to identify the ultimate country-based owners. A very high proportion of portfolio investment is done through global investment funds that also make use of tax havens.
Another weakness of FDI data is that it does not include the economic privileges in economic relationships that major companies in the rich countries have with their suppliers in poor countries, or others in their ‘supply chains’, privileges backed by their states in international trade and investment deals. This omission is difficult to rectify, but the FDI numbers are one measure of a country’s international reach, and so will likely be correlated also with such privileges. I use FDI data as a rough guide to a country’s ability to exploit labour and resources in other countries. Though it has obvious flaws, I have not found any better data with a wide international scope for this purpose.
Data for China raise a problem under this heading. Some of China’s FDI is into Hong Kong, and some of Hong Kong’s is into China, so just adding up the two figures would exaggerate the international reach (outside China/HK) of the FDI for all of China. Previously, I included only China’s FDI number and left out that for Hong Kong, thinking this would give a decent estimate of the number for China as a whole. After recently finding a report on the source and destination of the FDI stock, it turns out that it did. Using figures in that report for the FDI stock at end-2018, I am confident that the latest FDI index component for China as a whole is reasonably accurate.

FX

Every three years, the Bank for International Settlements conducts a survey of the trading in foreign exchange. It is the most comprehensive account of how far a country’s currency is used in international markets, something that I think is one important reflection of that country’s international influence. As discussed in The City, Chapter 7, ‘The Imperial Web’, there are certain market privileges that accrue to a country’s companies and governments if their currency is used widely in the world.
This updated Index of Power uses the latest BIS survey published on 16 September 2019, with a base month of April 2019 for counting the volume of trading. As in previous Index calculations, the US dollar is by far the dominant currency used worldwide, being involved in 88% of all transactions in 2019. By comparison, the euro, consisting of 19 countries, is involved in just 32% of all transactions. (Note that two currencies are involved in an FX deal, so the total shares add to 200% when counting all of them) The Index weight for the euro’s FX component is allocated among all euro members according to their relative GDPs.
In the latest 2019 survey, the market share of the Chinese renminbi (CNY) has remained at 4%, the same as in 2016. It remains the 8th most traded currency, up from 17th in 2010. Given that part of China’s territory is Hong Kong, which has its own currency the Hong Kong dollar (HKD), I have had to judge how to use data on its trading. For simplicity, I have just added up the two numbers for the CNY and HKD. This boosts the China ranking, since the HKD’s share of currency trading rose from 2% in 2016 to 4% in 2019. But this does little to exaggerate the figure for China as a whole. Not all CNY or HKD currency trading is in the CNY versus the HKD, and the FX component has only a small impact on China’s overall index number when divided by five.

Banks

International bank lending and borrowing based in a particular country is another measure of a country’s importance in the financial sphere. It does not include other bank activities, or the operations of other financial institutions, but the scale of such borrowing and lending is a reasonable proxy for a country’s international financial status. That conclusion would have to be questioned when a country is the base for large-scale international banking activity that is operated almost exclusively by foreign banks, since, usually for tax reasons, the country is favoured as a financial dealing hub.[2]
As noted before, this is the only index component in which the US falls short of the top position, coming in second behind the UK. That may well change in future with the impact of Brexit, if/when it goes ahead, on reducing the operations of banks based in the UK, especially with regard to the rest of Europe, an important part of their business. But it was true at the end of 2018. While banking activity in the US is much bigger than elsewhere, a large portion of it is oriented towards the domestic US economy, so does not count in this index calculation.
The China-Hong Kong relationship emerges again in how to deal with the data for international banking. Hong Kong has a slightly bigger international banking sector than China, having initially been developed as a regional commercial and finance hub for British imperialism well before the growth of mainland China’s banking business. I do not have enough information to judge how much of their ‘international’ dealing is between each other and how much is with external countries, and have taken the simple approach of using an average of the index score for China and Hong Kong as an estimate of the external number for China as a whole.[3]

Military

Big spending on the military does not necessarily mean that a country has military clout and an ability to intimidate other countries, but it usually does. Despite the record of exorbitant cost overruns in military projects, ships crashing into each other and missiles or missile defence systems that don’t work, the scale of such spending is a measure of military power, the most explicit political component of my Index of Power.
As before, the US is by far the biggest spender. China comes second, but with less than 40% of the US number. The only other countries with even around 10% of the US number are France, Russia, Saudi Arabia and India. On the latest SIPRI numbers, the UK was at 7.7%.
One might well argue that China can buy more firepower with $1bn than the US, given cheaper costs and probably less scope for armaments producers to milk the taxpayer. Also, while China is likely to be behind the US in overall technological capability, this may not be true in all areas. Many of the US advances could prove to be unworkable, or be as effective as the Boeing software ‘upgrade’ to its 737 Max jets.
US military power is also boosted beyond its own huge spending by how it encourages other capitalist countries to join in and follow its strategic aims, in particular with NATO. This acquiescence adds to the influence it can project by the large number of military bases it has all over the world,

China: Duck theory versus historical materialism

With China at number 2 in my global power ranking, the question arises as to whether it should be considered an imperialist country. My view is that it should not. Nevertheless, this is a big topic that I will deal with only summarily here, noting what should be taken into account when deciding how to characterise China.
Firstly, it is not so much the actions of a country that should define it as the dynamic of the economy and society that produces such actions. In turn, this will also depend upon the international situation and a country’s position in it as much as on the internal political system. The term ‘imperialist’ should apply only to those capitalist countries with a dominant position in the world that are, directly or indirectly, part of the system of oppression, control and violence that acts to keep that system in place.
China is not a fully-fledged capitalist country with politicians and companies joining in the carve up of the world. Its newly minted billionaires do not have free rein to do more or less what they like within China, and even its privileged bureaucrats could find themselves jailed, or dead, if they step too far out of line with what the ruling party thinks is best for the country.
Critics of China would seem to be able to point to many things to justify calling it imperialist. For example, there is China’s political oppression of the 11 million population of the Uighur ethnic group in its Xinjiang region; China’s many deals for raw material supplies from Latin America and Africa; big loans to corrupt politicians for infrastructure projects that might later be paid off by being switched into Chinese ownership of ports, etc; its attempt to control territorial waters in the South China Sea, including creating a number of islands, and its growing volume of foreign investment.
But this is only a ‘duck theory’, pointing to similar things that the classic imperialist countries have done, or are still doing, to conclude that China is the same as them. In some respects, China may ‘look like a duck’, ‘swim like a duck’, etc, but that does not mean it has duck DNA. In other words, the dynamic of China’s economic and political system is not that of an imperialist power.
Above all, the imperialist dynamic is based upon a country trying to boost capitalist profitability and being in a position to do so, especially through the control of foreign markets and areas of investment. By contrast, China’s policy since the founding of the People’s Republic in 1949 has been largely defensive, trying to develop without being dismembered by the major powers, as it had been throughout the previous century. Its objective is to find a means of surviving in a hostile world economy run by the major capitalist countries.
Initially, this had disastrous results, as with the ‘Great Leap Forward’ in 1958-62 and millions of deaths by famine. By the 1970s, however, China began a cautious engagement with the world economy. It aimed to limit the impact of market forces in special economic zones, restricted the influence and property rights of foreign businesses, held back the formation of a domestic capitalist class and tried to build the foundations of an industrial economy through state spending and investment plans. Despite many negatives, including lots of pollution and wasted resources, this proved to be successful. It brought hundreds of millions of people out of grinding poverty and ended up with China as a major producer, one that has even begun to be successful in areas of modern technology, such as 5G mobile communications – much to the alarm of the US!
This striking record does not endorse China’s often repressive, and sometimes politically stupid, government policies. But it should serve at least as a counter-weight to the critiques of rich country, liberal democracy enthusiasts who are so eager to find fault with China, but who pay little or no attention to the depredations of their own governments, and all too often act to echo the anxiety of their own ruling elites that China has out-competed them.

Conclusion

The Index of Power is a summary way of representing each country’s importance in the world economy and can be used to track changes in status over time. For the top 20 countries there had previously been minor changes in ranking. This time around, the major changes concern the advance of China and the slipping back of the UK. Such a development counts for more than it might at first appear to do, because it reflects the diminished influence of the Anglo-American system.
Both changes in status were fairly predictable, with economic growth and investment boosting China’s, while Brexit turmoil has helped lower the UK’s rank. That has not made it any easier for the US. While the US index value remains way ahead of all the others, it has shrunk in absolute terms, and particularly in relative terms with respect to China.
This move, under way for a number of years, has been reflected in an increasingly aggressive policy of the US government towards China. The US does not only have multiple military bases surrounding China, in Okinawa, Japan, South Korea and elsewhere (China has none around the US), it has also stepped up its more specifically economic offensive. A key US target here is China’s flagship telecoms and electronics company, Huawei, and its 5G technology, the latter an area in which US companies are well behind the competition. The US uses its influence over allies and other subordinates to encourage them to boycott Huawei on laughable security grounds.
China is also a problem for the US in other respects. For example, it has recently offered Iran, a longstanding bête noire of American imperialism, huge investments worth several hundred billions of dollars, in contradiction to US edicts. By incorporating Iran into its mega development project, the Belt and Road Initiative, China is not only ignoring US sanctions, it will also be dealing with Iran in non-US dollar currencies. This puts a further squeeze on US global influence and is another threat to its formerly unrivalled hegemony.

Tony Norfield, 17 September 2019


[1] For this reason, Ireland is excluded from the graph shown of the top index countries. It would have come in at number 17. Among others, a number of US corporations have done ‘tax inversions’ to incorporate in Ireland and so reduce their tax bills.
[2] The Cayman Islands stand out here, and this territory has also been excluded from the Index of Power graph shown above.
[3] What to do with Macao, a special administrative region of China, is another conundrum, although a small one. I have excluded its data from the bank index calculation for China, although these are part of the BIS country report on banks’ foreign assets and liabilities. Were Macao properly included this would boost China’s total index number a little.

Thursday, 18 July 2019

Debt Update


For the first time in a decade, the ratio of debt to GDP fell back in 2018 for both advanced and emerging market economies. It nevertheless remains high, much higher than at the start of the 2007-08 crisis, and has also continued to rise in some major economies.
The first chart shows the global picture, broken down into the two main country groups counted by the Bank for International Settlements. The ‘advanced’ countries are basically 22 rich ones; the ‘emerging market’ economies are 21 others.* Note also that the data cover the outstanding credit advanced to the non-financial sector, including non-financial corporations, the government and households.

Data for the ratio of debt-to-GDP are given in the next table. It shows that Japan remains a basket case, and its debt ratio has continued to rise. France looks to be in one of the worst positions among the major capitalist countries, with its debt ratio also rising and going above 300% of GDP. While the debt held by the French government has held steady, it has grown among households and corporations. This will keep President Macron and the Gilets Jaunes busy. Elsewhere among the euro countries, the debt ratio has been falling, notably in Germany. 

Total credit to the non-financial sector, 2013-18 (% GDP)


2013
2015
2017
2018
Advanced economies
268.4
266.5
277.3
265.5
Emerging market economies *
153.3
171.2
191.8
183.2





US
247.4
247.2
250.5
249.8
Japan
363.4
362.0
370.9
375.3
UK
267.7
267.1
283.1
279.3





China
212.7
239.3
253.4
254.0
South Korea
220.3
232.0
231.2
238.2





Germany
192.3
185.2
178.3
175.7
France
281.9
300.8
310.0
311.0
Italy
253.5
270.6
259.7
252.6
Euro area average
264.0
271.3
262.8
258.2


Brexit Britain saw the debt ratio fall a little in 2018, but the odds must be for a further rise of indebtedness this year and next. If likely PM-to-be BoJo can waste so much money as London mayor – from water cannons to garden bridges, buses and a cable car – just think what an empowered narcissist’s plans could be!


China’s debt ratio has risen among the fastest in the past decade or so. Yet the total, at close to 250%, has stabilised in the past year or so and is now similar to that in the US. Ironically, the breakdown shows that ‘communist’ China’s government debt ratio at just below 50% is only half that in the ‘free market’ US, where it registers close to 100% of GDP.
China’s household debt is also lower than in the US, but its non-financial corporate debt is much higher. Nevertheless, around 100% is a common government debt ratio for major countries. Even Germany’s is only just below 70%. So these data would suggest that China has plenty of room, if it chose, to boost its government debt and bail out any corporates in trouble (quite apart from the ability to use its $3.1 trillion of FX reserves).


Tony Norfield, 18 July 2019

Note: * The BIS emerging market economies are: Argentina, Brazil, Chile, China, Colombia, the Czech Republic, Hong Kong SAR, Hungary, India, Indonesia, Israel, South Korea, Malaysia, Mexico, Poland, Russia, Saudi Arabia, Singapore, South Africa, Thailand and Turkey.

Monday, 15 July 2019

China & World Trade

Just in case you had forgotten that China is a major part of the global economy, here is a chart from the Bank of England's Financial Stability Report. It shows that China's share of the international trade in goods is bigger than others for South America and Asia (including Japan and Australia). It is nearly as big as total European trade with the US.

Annoyingly, Africa is left out of the chart calculations, but I suspect China is also biggest there.


This is a stubborn fact that Trump and friends will find it difficult to deal with as they attempt to bully and isolate China in the world economy. It is also one reason they are very likely to fail.

Tony Norfield, 15 July 2019

Sunday, 7 July 2019

Looking Out from the Waste Land


A dull day; even the drizzle got bored and left.
No respite from conversations overheard,
Language may as well be dead; just wasted breath.

Only the incurious can thrive.
Just water the weeds, leave roots intact.
Prejudice consoles all that survive.

Explain what these people refuse to know?
When ideas upset brains, and rarely seed
Or give a grip to hold against the flow?

No raw material with which to build,
Just a pulp or the wrong kind of sand
Covers a land where none can be skilled.

I can only study the world and write –
As the imperial machine grinds on –
For eyes elsewhere to read and find some light.

Tony Norfield, 7 July 2019

Tuesday, 18 June 2019

The Promised Land


Palestine really was the Promised Land. So much so that it was promised to three different groups within a couple of years.[1] The promises were made by British imperialism, a real world power, not by an imaginary deity in a book of very dubious provenance. What made the promises remarkable was that they were about a land which, at the time, the British neither possessed nor controlled. But imperial arrogance was a commodity in ample supply when the promises were made, and it has not become scarce in the years since.

Map of Ottoman Palestine, 1878 (Source: www.passia.org/maps/view/2)

Balfour Declaration

The most famous promise, the one most widely known, almost to the exclusion of the others, was to ‘the Jewish people’. Issued by the British Foreign Secretary, Arthur Balfour, in the Balfour Declaration of November 1917, it read:
“His Majesty's government view with favour the establishment in Palestine of a national home for the Jewish people, and will use their best endeavours to facilitate the achievement of this object, it being clearly understood that nothing shall be done which may prejudice the civil and religious rights of existing non-Jewish communities in Palestine, or the rights and political status enjoyed by Jews in any other country.”
While something short of an outright promise, if a major imperialist power was willing to use its ‘best endeavours’ that was good enough for the Zionist lobbyists, after they had failed to make much ground with the Ottoman Empire or with Germany. In particular, they could ignore the annoying bit about not prejudicing the ‘civil and religious rights of existing non-Jewish communities in Palestine’ and be hopeful that their ethno-religious racism would eventually win the day. Neither were Zionist leaders very concerned about Jewish people being denied rights or status elsewhere as a result, since surely that would only add to the supply of the right kind of immigrant into Palestine.
Furthermore, it looked to them like a step up from British East Africa! After meeting with British Colonial Secretary Joseph Chamberlain in 1903, Theodor Herzl, the founder of modern political Zionism, had been offered an area of land in what was later Kenya as a refuge for those fleeing from pogroms in Eastern Europe. Herzl raised this option at the 1903 Zionist Congress in Basel, but, following protests from Russian Zionists and Herzl’s death in 1904, nothing further came of this so-called ‘Uganda’ Scheme.
Balfour’s brief letter should also be put in context. He already had form as having an ambiguous view on Jewish people. For example, while being opposed to Russian persecution of Jews, he was strongly in favour of the 1905 Aliens Act, Britain’s first immigration controls. The 1905 Act was focused on stopping Jewish refugees coming to Britain, and many British politicians, encouraged by Zionists, also came to see Palestine as a useful place to send the unwanted Jewish immigrants.
There were several other strands in the British political class that led up to the 1917 Declaration.
Some British politicians were Jewish themselves, and were worried that setting up a ‘Jewish homeland’ would raise questions about their British nationality. The final part of the Declaration about ‘Jews in any other country’ comes from this concern. Some were evangelical Christians who, while often also anti-Semitic, saw Jewish settlement in Palestine as part of God’s plan, and a step on the road to salvation, just as the British Empire was in its own divine manner bringing justice and order to the world. Some saw it as useful to have a grateful group of people loyal to Britain settling in what would be a strategic area as the Ottoman Empire was waiting to be carved up.
Many were also influenced by the anti-Semitic ideas of the time, in particular the notion that Jewish financiers had immense power and influence. So the Declaration might be a sensible policy for gaining important friends. Naturally, the Zionist leaders discussing with British politicians talked up this ‘Jewish power’. To complete the factors leading up to the Declaration it is worth noting too that by 1917, with the First World War proving very costly in lives and treasure, British politicians cast an eye on the apparent influence of the Zionist lobby in America. They saw the Balfour Declaration as a way of gaining further American support.

The Hussein option

But before getting carried away with the idea that a ‘national home’ for Jewish people in Palestine was an inescapable outcome, it is worth considering some other plans British imperialism had for the Promised Land. Two stand out and they were made before the much more famous Declaration. The first British proposal was implied by the correspondence in 1915-16 between the British High Commissioner in Cairo, Sir Henry McMahon, and Sharif Hussein, the Emir of Mecca.
It is important to realise that the background to this communication was the British attempt to get support from the Arabs for an attack on the Ottomans in the Middle East. In 1914, Turkey had taken the Central Powers’ side in the war, and the British were aware that there was some political opposition to Turkish rule in Arab areas of the Ottoman Empire that they might exploit.
As an incentive for this opposition, the British offered a kind of Arab independence over a vaguely defined region, with two caveats. One was that, as McMahon stated, ‘it is understood that the Arabs have decided to seek the advice and guidance of Great Britain only’ in the administration of such an area and they would also give Britain economic and commercial privileges over other powers. But perhaps the most important caveat was on the territorial region of Arab ‘independence’: it would exclude certain areas that the British might have to concede to the French, a British ally in the war that also looked forward to greater influence in the Middle East when the Ottoman Empire was carved up.
Quite which territory was excluded from the offer to the Arabs was not entirely clear. Sharif Hussein read in McMahon’s letters that these concerned an area of Syria west of Damascus. He rejected that, but continued the correspondence and the discussion of terms. Nevertheless, he did not think that Palestine or the important religious centre of Jerusalem were excluded. While Palestine was also west of Damascus, it was further south and not considered to be part of Syria.
Historians have long debated how far McMahon deliberately misled Hussein. It is probably best to see McMahon’s letters not just as an example of manipulative diplomacy, but also as contingent on the circumstances. After all, even the more explicit commitments of the McMahon-Hussein correspondence were completely contradicted by the Sykes-Picot Agreement of early 2016!
The latter Agreement was a plan to divide up the Middle East into regions run by the British and the French. The French felt they had been short-changed, but they got Syria – and Lebanon, which they later carved out from Syria. The British would not accept French rule in Palestine, however, since it was a little too close to Britain’s important strategic and trade route at the Suez Canal in Egypt to have a rival power sitting there. In discussing with François Georges-Picot, Britain’s Sir Mark Sykes sidelined the issue of Palestine by arguing that it should be managed under an international agreement, one that he was confident would favour British interests. That turned out to be the British Mandate for Palestine, endorsed by the League of Nations in negotiations after 1918, in which the British included the terms of the Balfour Declaration.[2]
It turned out that not even the Sykes-Picot Agreement between two imperialist powers was implemented as agreed. Responding to a more favourable conjuncture after 1918, the British were in a much stronger position than the French and no longer had need to take account of potential Russian incursions into the Middle East region, for which they had favoured a French ‘buffer’ in Syria. The British also decided to shift a portion of the Sykes-Picot ‘line in the sand’ and included Mosul in the newly carved out Iraqi state that they would control. This was seized from the defeated Ottomans and added to the oil reserves available to the British.

A deal with the Ottomans?

Britain’s second pre-Balfour plan for Palestine was discussed indirectly with the Ottoman Empire in July 1917. The British Foreign office sent Aubrey Herbert to Switzerland to discuss with Turkish dissidents the possibility of having a separate peace with Turkey. Herbert was a Conservative MP, the son of an earl and had considerable experience of the Ottoman Empire, which he much favoured over Tsarist Russia. For some time he had been advocating this plan, and the British government was happy to explore it as a means of weakening Germany’s position in the war.
As was typical of the British in these diplomatic discussions, much was implied and little was made explicit. Herbert said he was not authorised to discuss terms of an agreement, but he indicated that Britain would not wish to seize Ottoman territories. Instead it would allow continued Turkish control, with (left unsaid) the British pulling the strings as it had done in Egypt. There is no documentation of these discussions, but if they had reached fruition, they would have allowed Palestine, among other regions, to remain in a reconfigured Ottoman Empire.
In a memorandum to the Foreign Office after the Swiss meetings, Herbert made clear what kind of future he, and the British, had in mind for the Ottoman territories:
“If we get the luggage it does not matter very much if the Turks get the labels. When Lord Kitchener was all-powerful in Egypt his secretary was wearing a fez. Mesopotamia and Palestine are worth a fez.”
Nothing came of this Ottoman initiative, as indeed nothing came of the McMahon correspondence. They are nevertheless useful examples of how one should not take at face value the ‘news’ that does get into the headlines. Very often there is something else going on. Furthermore, as in many other cases, an investigation usually suggests that the term ‘Perfidious Albion’ does not do justice to the full extent of British duplicity.

Tony Norfield, 18 June 2019


[1] Some material for this article is taken from the very informative book by Jonathan Schneer, The Balfour Declaration, Bloomsbury, London, 2011.
[2] In the event, Britain limited the scale of Jewish immigration into Palestine during the Mandate period. It turned back boatloads of Jews escaping the Holocaust in Europe, even though they had nowhere else to go. America, Britain and other countries were reluctant to accept the refugees and the British did not want to damage their relationships with other Arab countries.

Friday, 19 April 2019

Strange Fruit in Palestine


Palestinians observe the aftermath of settler violence (B’Tselem, 6 December 2018)

Recently I listened to Billie Holiday’s rendition of the classic song ‘Strange Fruit’. Written in 1937 by Abel Meeropol, a member of the US Communist Party, it condemned the lynching of blacks in the US by white mobs. I adapted the three verses to highlight a modern set of outrages backed by the US government:

Palestine’s trees bear little fruit
Torn down branches and cut at the root
Land and lives stolen, by Israelis seized
No fruit hanging from the olive trees

Killed in the west, the east, north and south
Destruction, lies with a twisted mouth
Funds from America, sweet and fresh
And the soldiers shoot, maim and arrest

Here are walls, settlers run amok
A death camp in Gaza, human life is blocked
People will not bow, and they will not stop
Here are the racists’ bitter crops


Three verses cannot cover all the key points one needs to know about Israel, so it may be useful for readers if I note some articles on this blog:

Murdering Europeans, 2 October 2018

Jews, Zionism and Israel, 22 August 2018





Tony Norfield, 19 April 2019