SAE./No.184/June 2021 Studies in Applied Economics THE PALESTINE CURRENCY BOARD ITS HISTORY AND CURRENCY Howard M. Berlin Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise The Palestine Currency Board: Its History and Currency By Howard M. Berlin About the Series The Studies in Applied Economics series is under the direction of Prof. Steve H. Hanke, Founder and Co-Director of the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise ([email protected]). This working paper is one in a series on currency boards. The currency board working papers fill gaps in the history, statistics, and scholarship of the subject. About the Author Dr. Howard M. Berlin ([email protected]) received BEE and BA degrees from the University of Delaware, an MS degree in electrical engineering from Washington University, and an MEd degree in computer science education as well as a doctorate in educational statistics from Widener University. He had been elected as a Senior Member of the Institute of Electrical and Electronic Engineers (IEEE), and elected to RESA, Sigma Xi, and Phi Theta Kappa honor societies. Dr. Berlin had been an electrical engineer with the U.S. Department of Defense for 13 years, during which time he was awarded three U.S. patents. He then retired after 22 years from the Electronic/Electrical Engineering Technology faculty at the Stanton Campus of Delaware Technical Community College. Dr. Berlin has also taught undergraduate and graduate courses at several universities as well as short courses at conferences. He is the author of many magazine articles, journal articles, and editorials, in addition to over 30 books, that cover diverse areas of electronic circuit design, financial markets, numismatics, and the cinema. Some of his books have been translated into German, Italian, and Portuguese. Dr. Berlin has received a number of literary awards for his books, articles, magazine columns, and photography. Throughout his career prior to retirement, Dr. Berlin served numerous times as a judge for the International Science and Engineering Fair, a program evaluator for the Accreditation Board for Engineering and Technology (ABET), and a contributor to the College Board. He had also been interviewed on radio and national television programs for his expertise on U.S. Treasury securities. During both his professional and leisure times, he has had the good fortune to have traveled widely, having visited 75 countries. His pastimes include numismatics, playing bluegrass banjo 1 and folk guitar; and he has been licensed as a ham radio operator for over 62 years since the age of 13 (W3HB). Abstract When the British defeated the Ottoman Turks and the armistice was signed on October 31, 1918, Palestine, part of the defeated Ottoman Empire, was administratively divided into the Mutasarrifate (a sub province) of Jerusalem and the Vilayets (a major administrative district or province) of Beirut and Damascus. Palestine was then governed by the British, first as a military occupation, and then as a Mandate granted to them as a Trust by the League of Nations. Prior to 1927, Palestine had no currency that was solely its own, but rather coins and banknotes of many other countries that were used in Palestine. These were mostly those of Turkey, Egypt, France, Great Britain, India, Germany, Russia, Austria, and the United States. The author of this working paper traces the need for a Palestine currency and the formation of the Palestine Currency Board, which remained in effect until March 31, 1952, nearly four years after the State of Israel was established on May 14, 1948. Parts of this working paper was adapted from the author’s book: The Coins and Banknotes of Palestine Under the British Mandate, 1927-1947, McFarland & Company, Inc. (2001) and is built on the writings of numismatic researchers Jack H. Fisher, Esq. (deceased) and Raphael Dabbah, both of whom the author has had the pleasure of knowing for many years. Where verbatim passages are taken from British sources, the British spellings have been retained. Unless credited otherwise, all images of coins and currency notes were from the author’s collection. Acknowledgements The author thanks Prof. Steve H. Hanke for suggesting that he write this working paper and special thanks to Dr. Kurt A. Schuler for his invaluable comments. Keywords: Palestine Mandate, currency board, coins, currency notes JEL codes: E58, N15 2 Origin and Governance of the Palestine Mandate After World War I The Mandates for Palestine, Syria, and Iraq, which were won from Turkey following World War I, were allotted by the principal Allied Powers at a conference at San Remo, Italy in April 1922. The Palestine Mandate, which included the area of Cis-Jordan (later Transjordan), was granted to Great Britain, which already had been in military occupation of the area since 1917. By the Treaty of Sèvres between the Allies and Turkey signed on August 10, 1920, Turkey now renounced her sovereignty over Palestine, thereby recognizing the mandatory settlement. However, this treaty was never ratified, and Turkey did not implicitly accept the Mandate until the ratification of the Treaty of Lausanne in 1924. Source: Jewish Virtual Library (https://www.jewishvirtuallibrary.org). The Mandate charter itself, which defined the conditions of the trust conferred by the League of Nations on the Mandatory for the government of mandated territory, was drafted by the mandatory power.1 It was presented to the Council of the League of Nations for its approval on July 24, 1922, and was confirmed after some discussion. 1 The complete text of the Palestine Mandate’s charter is given in Appendix A. 3 The Palestine Mandate was of the Class A mandates, in which the mandatory power was regarded as the guardian of a people not yet able to stand by itself and which was to be trained for self-government.2 However, the special purpose of establishing the “Jewish National Home” made the terms of the Palestine Mandate different from all others. Its preamble recited the Balfour Declaration, a letter dated November 2, 1917 and written by Foreign Secretary Sir Arthur Balfour to Lord Lionel Rothschild as follows:3 Foreign Office November 2nd, 1917 Dear Lord Rothschild, I have much pleasure in conveying to you on behalf of His Majesty's Government, the following declaration of sympathy with Jewish Zionist aspirations which has been submitted to, and approved by, the Cabinet. His Majesty's Government view with favour the establishment in Palestine of a national home for the Jewish people, and will use their best endeavors 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. I should be grateful if you would bring this declaration to the knowledge of the Zionist Federation. Yours, Arthur James Balfour The Palestine Mandate’s charter made His Britannic Majesty the mandatory. The formulation of the terms of the Mandate accepted the Mandate on behalf of the League of Nations by His Majesty and confirmed the Mandate by the Council of the League. For the Palestine Mandate, the trust for the Jewish national home was applied to a number of the Articles. Of numismatic interest, Article 22 carried out a cultural purpose in that it decreed: 2 A Mandate was a system of trusteeship established by Article 22 of the Covenant of the League of Nations for the administration of former Turkish territories and German colonies. It marked an important innovation of international law with respect to dependent territories, differing from a protectorate in that obligations were assumed by the Mandate power to the inhabitants and to the League. It also differed from a sphere of influence in that the guardians had an acknowledged right to raise and expand revenues, to appoint officials, and to make and enforce laws. The Mandate system was administered by the League of Nations through a Permanent Mandates Commission of 11 members. With the creation of the United Nations in 1945, the Mandate system was superseded by the trustee system. 3 https://www.jewishvirtuallibrary.org/text-of-the-balfour-declaration 4 “English, Arabic, and Hebrew were to be the official languages of Palestine. Any statement or inscription in Arabic on stamps or money in Palestine shall be repeated in Hebrew, and any statement or inscription in Hebrew shall be repeated in Arabic.” However, it would not be until November 1, 1927, on the eve of the tenth anniversary of the Balfour Declaration, that the Palestine Mandate would have money which it could call its own. The official British military occupation of Palestine, which had been in effect since 1917 under Colonel (later Sir) Ronald Storrs as the military governor of Jerusalem, ended with the appointment of Sir Herbert Samuel as the first High Commissioner on July 1, 1920. Until Transjordan acquired independence in May 1946, the High Commissioner for Palestine was the High Commissioner for Transjordan as well, who was assisted by an advisory council of government officials and an executive council. Consequently, he was the supreme head of Palestine, and had complete legislative and executive power subject only to control from London. The post of the High Commissioner was not an easy one for the Colonial Office to fill, principally because of the difficult political responsibility attached to it. Of the Palestine Mandate’s seven High Commissioners,4 only two were career appointees: Sir John Chancellor and Sir Harold MacMichael. Of the other five, four were professional soldiers and one was a former Cabinet minister – Sir Herbert Samuel.