The House of Rothschild, Volume 1

by Niall Ferguson

  The new French King Louis Philippe would, suggested Börne sarcastically in his bulletin of January 1832,

  have himself crowned if he is still king in a year’s time; not at St Rémy at Rheims, but at Notre Dame de la Bourse at Paris, and Rothschild will officiate as archbishop. After the coronation, pigeons will be sent out, as usual, and one of them . . . will fly to St Helena, settle on Napoleon’s grave, and laughingly inform his remains that they saw his successor anointed yesterday, not by the Pope but by a Jew; and that the present ruler of France has taken the title, “Emperor of the five per cents, King of the three per cents, Protector of bankers and exchange agents.”

  In both letters, to be sure, Börne continued to harp on the familiar theme that the Rothschilds were the supporters of reaction:

  It is always the same game that these Rothschilds play, in order to enrich themselves at the cost of the land they exploit . . . The financiers are the nation’s worst enemies. They have done more than any to undermine the foundations of freedom, and it is unquestionable that most of the peoples of Europe would by this time be in full possession of liberty if such men as Rothschild . . . did not lend the autocrats the support of their capital.

  But it was rather harder to make this argument stick when the Rothschilds had so quickly lent their support to Louis Philippe’s regime, which was plainly the product of a liberal revolution, even if it was not liberal enough for Börne. Moreover, the Rothschilds were also, as Börne said, lending money to establish Greece as an independent monarchy, which had been another liberal goal of the 1820s. Indeed, they even appeared to be in a position to influence the decision as to which prince would become the new Greek king. (“M. de Rothschild finds that all the princes of Europe are in his credit book except Prince Frederick of the Netherlands, and he concludes that the prince who has never asked him for credit is the most worthy of it.”) It therefore made more sense to argue that the Rothschilds were beginning to supplant rather than merely shore up the European monarchies:

  Would it not be a good thing for the world if the crowns were placed on their [the Rothschilds’] heads instead of lying at their feet as they do now? . . . Although the Rothschilds do not yet occupy thrones, they are at all events asked their advice as to the choice of a ruler when a throne falls vacant . . . Would it not be a great blessing for the world if all the kings were dismissed and the Rothschild family put on their thrones? Think of the advantages. The new dynasty would never contract a loan, as it would know better than anybody how dear such things are, and on this account alone the burden on their subjects would be alleviated by several millions a year.

  Born Löw Baruch in the Frankfurt Judengasse, a convert not only to Christianity but to German nationalism, Börne had his own complex personal reasons for disliking the Rothschilds. For a rather more nuanced assessment of Rothschild power in the age of revolution, we need to turn to Börne’s friend, the poet and journalist Heinrich Heine. Before 1830 Heine thought of the Rothschilds in much the same way as other liberally inclined writers. In his “Travel Sketches,” for example, “Rothschild I” appears alongside Wellington, Metternich and the Pope as a bulwark of reaction. Even at this stage, however, Heine had an awareness of the ambivalent nature of the relationship between the Rothschilds and the established monarchies. In “The Baths of Lucca,” the Jewish Figaro-figure Hirsch-Hyacinth recalls cutting Nathan Rothschild’s corns:

  This happened in his inner sanctum while he sat on his green armchair as though it were a throne. He spoke like a king, with courtiers all around him; he ordered them about and sent messages to all the kings of the world; and while I was cutting his corns, I thought to myself: what you now have in your hand is the foot of the man whose own hands hold the whole world. Now you are somebody too: if you cut too deep down below he’ll lose his temper up above and he’ll cut the kings more sharply. That was the greatest moment of my life.

  For Heine, Nathan already has the power to “cut” the kings to whom he lends. Yet his Rothschilds have not lost sight of their own lowly and Jewish origins. Nathan’s bank in London is a glorified “pawnshop” and when Hirsch-Hyacinth is introduced to Salomon as a former seller of lottery tickets, he invites him to dine with him, saying: “I am something like that myself, I am the chief agent of the Rothschild lottery.” “He treated me,” says Hirsch-Hyacinth, “like his equal, quite famillionaire” (ganz famillionär). That much analysed pun hints at an idea to which Heine later returned: that, despite their enormous wealth, the Rothschilds were far from being mere props of the traditional social hierarchy.

  The same point underlies the memorable allegory in which Hirsch-Hyacinth describes a children’s fancy-dress ball given by Salomon:

  The children wore lovely fancy dress, and they played at making loans. They were dressed up like kings, with crowns on their heads, but there was one of the bigger lads who was dressed exactly like old Nathan Rothschild. He played his part very well, kept both hands in his trouser-pockets, rattled his money and shook with bad temper when one of the little kings wanted to borrow off him—only a little lad with the white coat and red trousers [Austria] got a kindly pat on the cheek and was praised: “You’re my boy, my pet, I’m proud of you; but your cousin Michel [probably Germany] had better keep away from me, I’ll give nothing to a fool like that who expends more in a day than he has coming in a year; he’ll make some trouble yet in the world and spoil my business.” As true as the Lord shall help me, the boy played his part wonderfully well, especially when he helped a fat child dressed in white satin with real silver lilies [France] in its effort to walk and said to it occasionally: “Now, you, behave yourself, make an honest living, and see that they don’t chase you out again, or I’ll lose my money.” I assure you, Herr Doktor, it was a pleasure to listen to that lad; and the other children too—dear sweet children they all were—played their parts extremely well—until the cake was brought in and they all started fighting for the best piece [and] tore the crowns off one another’s heads . . .”

  Once again, Heine’s Nathan feels contempt for the various rulers who approach him for loans: it is he who is their master. In an unpublished passage, Heine made it clear that he shared that contempt for “stupid princes,” “but before Nathan Rothschild I tremble with fear. Before you can say Jack Robinson, he could send a few kings, stockbrokers, and policemen to my rooms and have me carried to the fortress prison.”

  In an unpublished passage of “The Baths of Lucca,” Heine sought to analyse the nature of the Rothschilds’ power more precisely. Here he acknowledges that in the short term it served to shore up the reactionary regimes:

  When I think about political economy in these our latter days it becomes ever clearer to me that without the Rothschilds’ help the financial embarrassment of most states would have been exploited by subversives wanting to mislead the populace into upsetting whatever order or disorder constituted the status quo. Revolutions are generally triggered off by deficiency of money; by preventing such deficiencies, the Rothschild system may serve to preserve peace in Europe. This system, or rather, Nathan Rothschild, its inventor, is still providing firm foundations for such peace: it does not inhibit one state from making war on another exactly as before, but it does make it difficult for the people to overthrow established authority . . . Religion is no longer able to guarantee the governments that the people will remain peaceful; the Rothschild system of loans can perform the task much better.

  However, the Rothschild “system” is also potentially revolutionary in itself:

  [I]t possesses the moral force or power which religion has lost, it can act as a surrogate for religion—indeed, it is a new religion, and when the old religion finally goes under it will provide substitutes for its practical blessings. Strangely enough, it is once again the Jews who invented this new religion . . . Murdered Judaea was as cunning as the dying Nessus, and its poisoned robe—poisoned with its own blood—consumed the strength of the Roman Hercules so effectively that his mighty limbs grew wear
y, armour and helmet fell away from his withered body, and his voice, once so mighty in battle, dwindled to a prayerful whine. Miserably, in a death-agony that dragged on through a thousand years, Rome dies by the Judaic poison.

  Of course, this extraordinary passage says a good deal about Heine’s own highly ambivalent attitude towards Judaism (like Börne, he had converted to Christianity); but it also anticipates his later and more coherent reflections in his “Memorandum on Ludwig Börne” (1840) on the Rothschilds as revolutionaries rather than counter-revolutionaries.

  Here, in perhaps the most perceptive of any contemporary commentary, Heine confronts the reader with a striking paradox:

  No one does more to further the revolution than the Rothschilds themselves . . . and, though it may sound even more strange, these Rothschilds, the bankers of kings, these princely pursestring-holders, whose existence might be placed in the gravest danger by a collapse of the European state system, nevertheless carry in their minds a consciousness of their revolutionary mission.

  James, he suggests, is the “Nero of finance,” “reigning as absolute emperor over the stock exchanges of the world”; but, like his predecessor, the Roman Nero, he is “ultimately a powerful destroyer of patrician privilege, and the founder of a new democracy.”

  The explanation which follows purports to be based on a genuine conversation Heine had with James—while “sauntering arm in arm through the streets of Paris”—and though it is possible that Heine was putting his own words in someone else’s mouth, it is sufficiently different from his earlier flights of fancy to be worth taking seriously. According to Heine, James explained how “he himself, through his system of government bonds, had created the first conditions for, and at the same time paved the way towards, social progress” and the “foundation of a new order of things.” For it was the development of mobile property in the form of the rente and other government bonds which severed the link between wealth and land, allowing the propertied classes to converge on Paris. “The importance has long been recognised of such a [common] residence for the most diverse of forces, of such a centralisation of intelligentsia and social authorities. For, without Paris, France would never have had its revolution . . . Through the system of rentes, Paris became Paris much more rapidly.” This prompts Heine to go further:

  I see in Rothschild one of the greatest revolutionaries who have founded modern democracy. Richelieu, Robespierre and Rothschild are for me three terroristic names, and they signify the gradual annihilation of the old aristocracy. Richelieu, Robespierre and Rothschild are Europe’s three most fearful levellers. Richelieu destroyed the sovereignty of the feudal nobility, and subjected it to that royal despotism, which either relegated it to court service, or let it rot in bumpkin-like inactivity in the provinces. Robespierre decapitated this subjugated and idle nobility. But the land remained, and its new master, the new landowner, quickly became another aristocrat just like his predecessor, whose pretensions he continued under another name. Then came Rothschild and destroyed the predominance of land, by raising the system of state bonds to supreme power, thereby mobilising property and income and at the same time endowing money with the previous privileges of the land. He thereby created a new aristocracy, it is true, but this, resting as it does on the most unreliable of elements, on money, can never play as enduringly regressive a role as the former aristocracy, which was rooted in the land, in the earth itself. For money is more fluid than water, more elusive than the air, and one can gladly forgive the impertinences of the new nobility in consideration of its ephemerality. In the twinkling of an eye, it will dissolve and evaporate.

  Heine returned again and again during the 1840s to the subject of Rothschild power. In the journal of 1840-41 later published as Lutezia, for example, he caricatured the relationship between James’s state of health or mood and the price of rentes, and coined the famous pun: “[M]oney is the god of our time and Rothschild is his prophet.” The Rothschilds also crop up in the poems “Romanzero,” “Germany” and “Simplicissimus.”2 But he never wrote with such penetrating insight as he did in “Ludwig Börne”—partly because his personal and financial relations with the family grew somewhat closer after 1840. As we shall see, Heine was singularly perceptive in identifying the Rothschilds as agents as much of social revolution as of reaction, even if their revolutionary role was less conscious than he suggested. Nor was he alone in making this point, though no one expressed it better. A lesser writer declared that “the Rothschild brothers [had] become the hierophants of the new religion,” the founders of a new “Moneycracy.” Brooding in Venice after the fall of the Bourbon regime, the arch-conservative Chateaubriand remarked bleakly that “the Kings [had] become the chamberlains of Salomon, Baron de Rothschild.”

  The Revolution and the Rente

  It is always easy, with the benefit of hindsight, to find fault with historical figures who fail to foresee revolutions. But revolutions are not necessarily the products of predictable forces (as the case of Eastern Europe in 1989 well illustrates), much as historians may like to discover these after the fact. The accession of Charles X in 1824 and the fall of Villèle three years later following the conversion fiasco should not be seen as harbingers of crisis in France. For the government of the vicomte de Martignac formed in January 1828 seemed to be successfully steering a course between the liberal forces represented in the Chamber of Deputies and the conservative, clerical tendencies of the court. When Nathan’s daughter Charlotte was in Paris in 1829 she found James giving “a dinner party for the liberals & the Ministers, [as] it is best to keep friends with all parties.” Although the April parliamentary session was every bit as “stormy” as Charlotte had been warned to expect, James remained optimistic. There were periods of stagnation on the bourse and occasional reports of bread riots in the wake of poor harvests, but the vital barometer of financial confidence, the rente, suggested that the regime was in good health. In May 1829, the price of 3 per cent rentes stood at 76.6; a year later it was above 84, having reached a peak of 86 in December. Even the dismissal of Martignac and the appointment of the ultra-conservative Jules de Polignac in his place on August 9, 1829, did not obviously herald a crisis. Rentes actually rose when the new ministry was announced, and continued to rise with only minor dips until May 1830.

  Under these circumstances, it was hardly rash of James to outbid the intense competition for a relatively modest government loan in early 1830, needed to finance a popularity-boosting military adventure in Algeria. As he saw it, there was a contradiction between the anti-government rhetoric of the Parisian press and the reality of financial stability: “On the one hand the whole world is screaming that the Ministry is bringing about a revolution in France and on the other hand all the various consortiums are seen to be fighting among themselves to lay their hands on a lousy 4 million rentes.” The government might well face “some very stormy times” when the Chamber met in March; but the bourse remained “very good.” As a banker, James naturally put his money on the market’s view. By the time fear of a major constitutional crisis began to manifest itself at the bourse, he was committed to the new loan—and hence to the regime.

  The crisis of 1830 provides a classic illustration of the difficulty bankers (and investors) always have when trying to choose between selling a falling security at a loss or holding on to it in the hope of a rise—but at the risk of a further fall. Contrary to Corti’s suggestion that he was blind to the impending crisis, James had been given a clear warning as early as February, when the Finance Minister outlined to him yet another conversion scheme. When James expressed doubts as to whether the government would command the necessary parliamentary majority to enact such a measure, he was left in no doubt what would happen: “If . . . the Chamber should be totally opposed to the Government then they are determined to dissolve the Chamber and to pass a law calling for fresh elections and thus engineer the formation of a new Chamber.” But James hesitated:

  You know very well, my dear Nathan, what c
hambers and ministers are like. Whether the King will have the necessary courage to follow the above plan when the time comes to do so, and whether the Chamber will allow this to happen, I don’t know. It is a diabolical situation . . . and if I can manage to extricate myself I would dearly like to do so, for I am not at all enamoured of this situation where a Minister pits himself against the public.3

  Instead of trying to “extricate” himself, he therefore opted to sit tight—and was encouraged to do so by Nathan, who advised him only to sell “at a profit” (that is, to hang on in the hope of better prices). Partly, James made the mistake of trusting too much in the assurances of Polignac, who seemed to have “the courage of the devil” when he saw him in February. “There is only one thing that can be done over here,” he told Nathan shortly before the Chamber convened at the beginning of March, “and that is to remain quiet for the time being and to observe things from the sidelines because the devil is not as black as he appears to be.” On this basis, Nathan blithely assured Charles Greville that “Polignac’s Government will stand by the King’s support and Polignac’s own courage.”4 The problem was that he and his brother now held a substantial amount of 4 per cent rentes—to a nominal value of around 25 million francs (£1 million)—which they had intended gradually to sell on to brokers and investors at a profit. If they began to accelerate their sales at a time when the 4 per cents already were worth slightly less than they had paid for them, prices would very probably fall further. It is no wonder James called Polignac a devil: he had made an authentically Faustian pact with him.