The House of Rothschild, Volume 1

by Niall Ferguson

  Yet it would be wrong to see them as the archetype of the “feudalised” bourgeois family, “aping” the manners of the landed elite. For the Rothschilds brought to the aristocratic milieu patterns of behaviour which were distinctively commercial in origin. Initially, they bought land as an investment which they expected to pay an economic return. They regarded the large houses they built at least partly in functional terms, as private hotels for dispensing corporate hospitality. Nathan’s sons and grandsons even saw the purchase of horses as a form of enjoyably speculative investment and placed bets on horse-races in much the same way that they engaged in stock market “specs.” To put it cynically, mixing with members of the aristocracy was essential if it was they who governed, and almost as much political information came from informal socialising as from formal meetings with ministers.

  At the same time, there is a sense in which the Rothschilds more closely resembled royalty than either the aristocracy or the middle classes. This was not just because they consciously imitated the many crowned heads they came to know. Like the extended family which provided so many of Europe’s monarchs, the Rothschilds were extreme in their preference for endogamy. They relished the sense that they were sans pareil—at least within the European Jewish elite. In this sense, phrases like “Kings of the Jews” which contemporaries applied to them contained an important element of truth. That was exactly the way the Rothschilds saw and conducted themselves—as phrases like “our royal family” in their letters show—and the way they were treated by many other less wealthy Jews.

  This relationship to Judaism and the Jewish communities of Europe and the Middle East is unquestionably one of the most fascinating themes of the family’s history. For the Rothschilds, as for so many Jewish families who migrated westwards in the nineteenth century, social assimilation or integration in the countries where they settled posed a challenge to their faith, although the relaxation of discriminatory legislation allowed them to acquire not only money but many of the desirable things it could buy. Yet no matter how sumptuous their houses and how well educated their children, they constantly encountered anti-Jewish sentiment, ranging from the aggression of the Frankfurt mob to the subtle disdain of aristocrats and Gentile bankers for “the Jew.” Many other wealthy Jewish families opted to convert to Christianity partly in response to such pressures. But the Rothschilds did not. They remained firmly committed to Judaism, playing an important role in the affairs of the various Jewish communities of which they were members. Moreover, they sought, from their earliest days, to use their financial leverage over individual states to improve the legal and political position of the Jews living there. They did this not only in their home town of Frankfurt, but consistently in almost every state where they did business thereafter as well as in some countries (for example, Rumania and Syria) where they had no economic interests. At least some members of the family saw such altruistic activities as in some sense linked to their own material success: by remaining true to the faith of their ancestors and remembering their “poorer co-religionists” the Rothschilds not only demonstrated their gratitude for their good fortune but ensured that it continued.

  Finally, and perhaps most important, this is a political as much as it is a financial history: there are few major political figures in nineteenth-century history who do not feature in the index of this book. From the very earliest days, the Rothschilds appreciated the importance of proximity to politicians, the men who determined not only the extent of budget deficits but also the domestic and foreign policies which so influenced the financial markets; and politicians soon came to realise the importance of proximity to the Rothschilds, who at times seemed indispensable to the solvency of the states the politicians governed and who could always be relied upon to provide up-to-the-minute political news. Mayer Amschel’s cultivation of the Elector of Hesse-Kassel’s chief financial adviser Karl Buderus and later of Karl Theodor Anton von Dalberg, Prince-Primate of Napoleon’s Rhenish Confederation, were the prototypes of countless relationships his sons cultivated with politicians throughout Europe. Beginning in 1813, Nathan became intimate with the British Commissary-General, John Charles Herries, the man responsible for financing Wellington’s invasion of France. Another early Rothschild “friend” in England was Charles Stewart, brother of the Foreign Secretary Lord Castlereagh and the British delegate at the Congresses of Vienna, Troppau, Laibach and Verona. Nathan was also in direct contact with the Prime Minister Lord Liverpool and his Chancellor of the Exchequer Nicholas Vansittart in the early 1820s, and gave the Duke of Wellington important financial advice during the Reform crisis of 1830-32.

  Rothschild influence extended to royalty as well. Nathan first came into contact with British royalty thanks to his father’s purchase of outstanding debts owed by George, Prince Regent (later King George IV) and his brothers. These tenuous links were enhanced by careful cultivation of Leopold of Saxe-Coburg, who married George IV’s daughter Charlotte and later became King Leopold I of the Belgians. Nor was his nephew Albert above turning to the Rothschilds for financial assistance after he became Queen Victoria’s Prince Consort. In turn, Victoria and Albert’s eldest son was on friendly terms with many members of the family before and after he succeeded his mother as Edward VII. The list of Victorian politicians who were close to the Rothschilds is a long one: Lionel’s campaign for admission to the House of Commons in the 1840s and 1850s enjoyed support from Whigs like Lord John Russell and Peelites like Gladstone, but also Protectionist Tories like Disraeli and Lord George Bentinck. Later, as his sons grew disillusioned with Gladstone, they were attracted not only to Disraeli but also to Lord Randolph Churchill, Joseph Chamberlain and Arthur Balfour. In the 1880s and 1890s their advice on imperial matters was sought by both the Marquess of Salisbury and the Earl of Rosebery, Gladstone’s successor as Liberal Prime Minister. Indeed, Rosebery was married to a Rothschild: Mayer’s daughter Hannah.

  The French Rothschilds also took a direct role in politics. They were close to the comte de Villèle in the early 1820s, shifted their allegiance skilfully to Louis Philippe in 1830, managed to survive the 1848 revolution by cultivating leading republicans, and subtly undermined the rule of Napoleon III, whose foreign adven turism they disliked. They also had a firm friend in the Third Republic in the person of Léon Say, four times French Finance Minister. In Germany and Austria, the close relationship between Salomon and Metternich was of immense importance in the years 1818-48, but it was far from unique. Other “friends” of the Restoration era included Count Apponyi, the Austrian ambassador in Paris, and members of the Esterházy family; as well as (in Prussia) Prince Hardenberg, the State Chancellor, Wilhelm von Humboldt, the educational reformer and diplomat, and Christian Rother, the finance official who rose to become president of the Prussian royal bank. Links with Bismarck proved harder to forge, though by the 1870s Mayer Carl was able to act as a channel of diplomatic communication between “old B.” and the governments in London and Paris. The Emperor William II awarded Alfred de Rothschild a medal for his diplomatic services and regarded his brother Natty as “an old and much respected acquaintance.”

  A central aim of this book is to illuminate these relationships. As Fritz Stern said in his pioneering study of the relationship between Bismarck and Gerson Bleichröder, historians used to be shy of acknowledging the role of financial factors in the policies of the great statesmen of the nineteenth century. Strangely, the many historians of a Marxist persuasion who were once so influential did hardly anything to rectify this, preferring to assert rather than to demonstrate that the interests of the ruling class were essentially the same as (or subordinate to) those of “finance capital.” In recent years, historians of British imperialism have done much to refine our understanding of the relationship between the City and the Empire. But the model of “gentlemanly capitalism” advanced by Cain and Hopkins does not quite fit the Rothschild case; and, given the sheer scale of the Rothschilds’ role in nineteenth-century finance, this is an exception wh
ich may do more than prove the rule. The Rothschilds after the second generation may have acted like gentlemen when they were in the West End or the country. But in the “counting house” they were unalloyed capitalists, applying rules and precepts of business which had their origins in the Frankfurt Judengasse.

  III

  The above is a sketch of what might be called the reality of Rothschild history which this book describes in detail. In itself, it is an absorbing story. Yet it becomes doubly so when juxtaposed with the extraordinary mythology which has grown up around the family since they first began to be noticed by contemporaries as “exceptional.”

  The origins of the Rothschild myth—as far as surviving published records go—can be traced back to 1813, the year after the death of the founder of the firm. Despite its eulogistic title and tone, it would be wrong to describe S. J. Cohen’s memoir, The Exemplary Life of the Immortal Banker Mr Meyer Amschel Rothschild, as an authorised biography. Nevertheless, it set the tone for what might broadly be described as the sympathetic (if not the official) explanation for the Rothschilds’ financial success, essentially portraying it as a morality tale of virtue rewarded. Not only was Mayer Amschel a pious and observant Jew, Cohen argued, but his life “proved beyond doubt that a Jew, as a Jew, can be religious and at the same time an excellent man and a good citizen.” Like the authors of so many later works of homage, Cohen said very little about Mayer Amschel’s business career. But the strong implication was that his success as a banker was a sign of divine approbation.

  Some thirteen years later a more precise but comparably moralistic explanation was published. The General German Encyclopaedia for the Educated Classes produced by the Leipzig publisher F. A. Brockhaus was a typical example of the secular reference work of the Biedermeier era. It was popular, selling around 80,000 copies; but, though similar in form to the French encyclopaedias which had been associated with the pre-Revolutionary Enlightenment, its content was monitored by the conservative authorities. Indeed, the man who wrote the entry for “Rothschild” first published in the 1827 edition of the encyclopaedia was Friedrich von Gentz, secretary to Metternich; and the positive tone of the piece reflected the Rothschilds’ growing influence over both Austrian public finance and Gentz’s private affairs. This was an article which the family not only approved of but paid for: prior to publication Gentz read it aloud to Leopold von Wertheimstein, one of the Vienna house’s senior clerks, and ten days later received his “actual reward” from Salomon von Rothschild himself.

  Though he said little about their origins in the Frankfurt ghetto in the four columns which Brockhaus published—indeed, he did not mention their religion at all—Gentz implied that they had only recently become “the greatest of all business firms.” This success had its roots, he suggested, in Mayer Amschel’s “hard work and parsimony . . . knowledge and proven integrity.” Likewise his five sons were celebrated for “the reasonableness of their demands . . . the punctiliousness with which they carry out their duties . . . the simplicity and clarity of their schemes, and the intelligent way in which they are put into operation.” Apart from their skill as businessmen, Gentz also laid considerable emphasis on “the personal moral character of each of the five brothers” as “a determining factor in the success of their undertakings”:

  It is not difficult to create a party for oneself when one is powerful enough to draw many people into one’s interest. But to unite the support of all parties and . . . to win the esteem of great and small, requires the possession not merely of material resources, but also of spiritual qualities which are not always found in association with wealth and power. Doing good works on all sides, never refusing help to one in need, always willing to fulfil the requests of anyone who asks for help, without regard to his class, and performing the most important services in the most gracious manner: by these means each of the five branches of the family has achieved a real popularity, and not in a calculated way but out of a natural philanthropy and kindness.

  Such reflections had a faintly standardised quality to them, of course: paid hacks had been writing in such glowing terms about their wealthy patrons since ancient times. Privately, Gentz was more ambivalent. His first comment on the family (in response to a suggestion by his friend Adam Müller in 1818 that he write just such an essay) had been decidedly backhanded. They were, he agreed, “a distinct species plantarum with its own characteristic features:” to be precise, they were “common, ignorant Jews, who exercise their craft quite naturalistically [that is, instinctively], with no idea of the more elevated relationships between things.” On the other hand, they were also “gifted with a remarkable instinct which causes them always to choose the right and of two rights the better.” Their enormous wealth was “entirely the result of this instinct, which the public are wont to call luck.” In a section of his “Biographical Notes on the House of Rothschild” which was only published posthumously, Gentz elaborated on this last point—the relationship between ability (“virtue”) and circumstances (“luck”)—in a Machiavellian vein:

  There is a truth, which, although not quite new, is generally not properly understood. The word luck as commonly used in the history of famous individuals or eminent families, becomes bereft of all meaning when we endeavour to dissociate it entirely from the personal or eminent factors in each case. There are circumstances and events in life in which good or ill luck may be a determining although not an exclusive factor in human destiny. Lasting success, however, and constant failure are always . . . attributable to the personal virtue or the personal failings and shortcomings of those who are blessed by the one or damned by the other. Nevertheless, the most outstanding personal qualities may sometimes require exceptional circumstances and world-shattering events to come to fruition. Thus have the founders of dynasties established their thrones, and thus has the House of Rothschild become great.

  The readers of Brockhaus’s Encyclopaedia were spared these somewhat hackneyed philosophical reflections. Instead—in the form of a footnote inserted by Gentz’s editor—they were given a specific and hitherto unpublicised episode which was intended to illustrate precisely the relationship between virtue and luck which Gentz was driving at:

  When the late Elector of Hesse had to flee in 1806 as the French approached, his large private fortune very nearly became Napoleon’s booty. R. rescued a substantial part of it by his courage and cleverness, although not without risk to himself, and conscientiously took care of it.

  In the 1836 version, the story was elaborated on. Now, it was said, the Elector had:

  left the recovery of his private possessions to Rothschild, their value amounting to many million gulden. It was only by sacrificing the whole of his own property and at considerable personal risk that Rothschild contrived to save the property that had been entrusted to him. The well-known fact that all Rothschild’s possessions had been confiscated by the French led the exiled Elector to believe that his own property had been lost too. Indeed he does not even appear to have thought it worth while to make enquiries about it.

  But he underestimated the virtuous Mayer Amschel:

  When matters had settled down again, Rothschild immediately proceeded to resume business with the property he had saved . . . When the Elector returned to his states in 1813, the House of Rothschild not merely offered immediately to return to him the capital sums with which they had been entrusted; they also undertook to pay the customary rate of interest from the day when they had received them. The Elector, positively astonished by such an example of honesty and fair dealing, left the whole of his capital for several more years with the firm, and refused any interest payments in respect of the earlier period, accepting a low rate of interest only as from the time of his return. By recommending the House of Rothschild [to others], especially at the Congress of Vienna, the Elector certainly assisted greatly in extending their connections.

  This, then, was “the decisive factor in the enormous . . . development of [Mayer Amschel’s] business.” Few s
tories in financial history have been more frequently repeated, and the Rothschilds themselves did their share of the propagation. Nathan gave a potted version to the Liberal MP Thomas Fowell Buxton over dinner in 1834, while the version in the 1836 edition of Brockhaus was read by Carl von Rothschild and probably expanded by his sons’ tutor Dr Schlemmer. The story was even the subject of two small paintings by Moritz Daniel Oppenheim which the family commissioned in 1861.

  Yet Gentz did not portray the morality tale of the Elector’s treasure as the sole explanation for the Rothschilds’ subsequent success: he also had some illuminating points to make about the Rothschilds’ business methods. “Success in all great transactions,” he argued, “does not depend purely on the choice and exploitation of the favourable moment, but much more on the application of consciously adopted and fundamental maxims.” Besides their “shrewd management and the advantageous circumstances,” it was these “principles” which the Rothschilds had to thank for the greatest part of their success. One of these principles obliged: