The House of Rothschild, Volume 1

by Niall Ferguson

  By contrast, the man on the spot seems to have been less ready to see the connection between Reform and financial recovery. This was partly because Nathan’s identification with Wellington—which led to his windows being broken by demonstrators—made him instinctively anti-Reform. But it was also partly because the fluctuations of the London market after March 1831 were less severe than those in more volatile Paris. Consol prices in fact remained relatively stable when the Lords rejected the bill in October 1831. This puzzled even some members of the British government. When the Vice-President of the Board of Trade, Charles Poulett Thomson, dined with James the following month, he declared: “Thank God, I have part of my money invested in foreign stocks, but I consider our country is very sick, and am surprised that stocks stand so high.” Nevertheless, by February 1832 Nathan appears to have accepted that a Reform Bill would have to be passed. There is no other way of interpreting his attitude when Wellington was called on to form an anti-Reform government following William IV’s refusal to create fifty new peers. As Charles Arbuthnot told the Duke,

  Rothschild . . . came to tell me that if you let it be known, as soon as you meet Parliament that, whatever may be your own opinion of Reform, you are resolved not to disappoint expectations which are so greatly raised . . . you will surmount all your difficulties. He says that among the monied men there is an alarm lest there should be such an opposition to all Reform as would cause commotions . . . He assured me that the general feeling was that you would surmount your difficulties if men’s minds were tranquillised as above stated, and if, having the reins in your hand, you were resolved to keep them. He is determined, he said, to keep up the Funds to his utmost, and he is confident he will succeed.

  8.iv: The weekly closing price of 3 per cent consols, 1828-1832.

  Or, as Moses Montefiore summarised Nathan’s argument more pithily, the Duke should “form a Liberal Government, and . . . consent to some reforms . . . he must go with the world, for the world would not with him.” This was no more than a circuitous way of telling Wellington to throw in the towel, which he duly did two days later.

  What made Nathan change his mind? The obvious answer is that he genuinely feared another financial crisis of the sort which had driven Wellington from office the previous autumn. Consol prices had already fallen slightly—from 85 on May 9 to 83.25 on May 12—and it may be (as some observers suspected) that Nathan also warned Wellington of a renewed run on the Bank of England’s reserve. Yet the “panic” in Paris was not as great as Lionel had anticipated, and the predictions that Grey’s return would boost consol prices “to their former level” proved wrong. They were in fact scarcely affected by the Duke’s resignation or by the passage of the Reform Bill itself; if anything, they reopened slightly lower after the royal assent was granted. Another possible explanation is that the British Rothschilds underwent a kind of political conversion. As we have seen, there is at least some evidence that from as early as 1829 Nathan, his wife and his children were shifting their political ground because of Tory opposition to Jewish emancipation. In addition, the Whigs appeared better able than the Tories to cope with the new threats of Irish political Catholicism and English radicalism. The enthusiasm of Anthony and Lionel for the Whig victory in the 1832 elections was sincere; and there is no evidence of Rothschild support when, largely at the King’s instigation, Peel attempted to form a government in 1834. Nor is it without significance that Nathan was willing to manage the £15 million loan necessary to compensate the slave-owners after the government abolished slavery. Buxton’s recollections of Nathan are often quoted; but the significance of their dining together is seldom pointed out. In fact, Buxton was the leader of the Anti-Slavery Society, and his meeting with Nathan came immediately after the legislation freeing the slaves had been passed. Just as James quickly aligned himself with the doctrinaire liberals after the revolution in France, so too, it seems, did Nathan bend with the Whiggish wind of reform in England.

  Heine thus undoubtedly exaggerated when he sought to portray “Rothschild” as a revolutionary. But he was absolutely right in identifying the brothers’ lack of commitment to the politics of reaction. When reform came—and even when it came by violence—they accepted it.

  NINE

  The Chains of Peace (1830-1833)

  Those who want war will doubtless turn to other bankers.

  —FRIEDRICH GENTZ, 1830

  Despite the ease with which they shifted allegiances from Bourbon to Orléans, from Tory to Whig, the Rothschilds did not survive the 1830 revolution purely by adapting to domestic political change. For the internal threat—the threat which prompted James to bury bonds in the gardens at Suresnes—was in many ways the lesser threat posed by the revolutions of the period. Far more serious from a financial point of view was the possibility that the revolutions might lead indirectly to a war between the great powers. The most striking point to emerge from the private correspondence of the period is that this was the Rothschilds’ real fear; and it is easy to see why. A revolution—or even a reform crisis—primarily affected bonds in one country. A war would have caused a severe slump in the price of all government securities in all markets. A domestic crisis in Paris could be withstood provided London, Frankfurt, Vienna and Naples stayed quiet. A European war would have hit all five houses simultaneously. The Rothschild correspondence shows that this fear was paramount in 1830-32. “You can’t begin to imagine what might happen should we get war, God forbid,” wrote James in October 1830, “for if that were the case, then all the securities would suffer such a fall that it would be impossible to sell anything.” A month later he sought to quantify the risk: “We have a holding of 900,000 rentes [30 million francs nominal]; if peace is preserved they will be worth 75 per cent, while in case of war they will drop to 45 per cent . . . I am convinced that if peace is maintained rentes will improve in three months by at least 10 per cent . . .”

  This helps explain why so many contemporaries believed that the Rothschilds not only favoured peace but used their financial leverage to preserve it. Ludwig Börne, for example, explicitly argued that Rothschild sales of Austrian government bonds had limited Metternich’s diplomatic room for manoeuvre in 1831, when the Prince was itching to check forcibly the spread of revolution not only in Italy but in Belgium. He also implied strongly that the Rothschilds were keen to see France adopting a more pacific policy towards Austria: “If the house of Rothschild sat on the throne of France, the world would be relieved of the great dread of a war between that powerful house and the house of Habsburg.” Similar claims were made by political insiders too, for example by the Austrian diplomat Count Prokesch von Osten in December 1830: “It is all a question of ways and means and what Rothschild says is decisive, and he won’t give any money for war.” Two years later the Austrian Finance Minister Baron Kübeck regarded Salomon as synonymous with “peace.” Nor was it only Austria which was perceived to be subject to Rothschild pressure: Metternich and his ambassador in Paris, Apponyi, alleged that the French government was even more susceptible. As early as 1828, Prince Pückler was moved to compare the source of the Thames “with Napoleon who, born incognito in Ajaccio, made all the thrones of the earth quake . . . the avalanche which launches itself under the claw of a starling and five minutes later buries a village—and . . . Rothschild, whose father sold ribbons, and without whom no power in Europe today seemed able to make war.” The Prussian diplomat Achim von Arnim said much the same in the 1840s when he observed how few governments were unconstrained by the “golden chains of that House.”

  Such claims very quickly became integral to the Rothschild myth. In his anti-Semitic tract The Jews—Kings of the Epoch (1846), Alphonse Toussenel made the point succinctly: “The Jew speculates on peace, that is on a rise, and that explains why peace in Europe has lasted for fifteen years.” Later writers put it even more crudely. Both Capefigue and Chirac purported to quote a Rothschild saying: “There will be no war because the Rothschilds do not want it.” In Morton’s wor
ds, “the brothers became the most militant pacifists ever.” Gutle Rothschild is frequently credited with the declaration: “It won’t come to war; my sons won’t provide money for it.”

  Publicly, the brothers liked to encourage such notions, as it made them appear both potent and benign. “Do you know who is viceroy and even king in France?” the Countess Nesselrode asked her husband in December 1840. “It is Rothschild. At his dinner, just recently, I had plenty of time for a lengthy chat with him; without saying anything to him to give away my own views, I induced him to express himself freely. He is bored with [the French premier] Thiers, and as for his ministers”:

  “I know them all,” he said, “ I see them every day and as soon as I discern that the course they are following is contrary to the interests of the governments, I call on the king, whom I see whenever I wish, and I inform him of my observations. As he knows that I have a lot to lose, and that all I desire is peace, he has every confidence in me, listens to me and takes account of all that I say to him.”

  But how far was this mere dinner-table bragging—like Nathan’s to Prince Pückler in the 1820s? Does the brothers’ private correspondence substantiate the claim that they used their position of influence to preserve peace after 1829?

  Here it is necessary to distinguish the Rothschilds’ use of financial leverage—principally their ability to refuse loans to governments contemplating war—from the less tangible influence which the Rothschilds were able to exercise in their capacity as a channel of diplomatic communication. This second function grew rapidly in importance in the course of the 1830s, though it had already begun to develop in the previous decade. In essence, statesmen and diplomats began to make use of the Rothschilds’ network of communication for two reasons: because it was quicker than the official courier systems used for relaying diplomatic correspondence, and because messages of a non-binding nature could be sent from government to government indirectly via the brothers’ own correspondence with one another. It is not hard to see why the brothers were willing to provide this service: it gave them advance knowledge of foreign policy as it was being formed, and this in turn allowed them to make better-informed investment decisions. The difficulty for the historian is that the brothers did not always explicitly distinguish their own views from those of ministers when acting as a diplomatic channel: it is from this period that they began to use the word “we” in their letters not only in the sense of “we Rothschilds,” but also in the sense of “our government,” the first hint of an identification with the five different states where the brothers now lived. Nor is it always apparent whether it was the Rothschilds who were actually influencing the direction of policy, or policy which was influencing the Rothschilds.

  Lines of Communication

  The development and nature of the brothers’ communications network is therefore essential to an understanding of the financial diplomacy of the 1830s. As usual, a certain amount of mythology needs to be stripped away—above all, the notion that the Rothschilds, like Disraeli’s Sidonia, were at the centre of an almost supernatural intelligence service: “No Minister of State had such communication with secret agents and political spies . . . To these sources he owed that knowledge of strange and hidden things which often startled those who listened to him . . . The secret history of the world was his pastime.” It is true that by the end of the 1840s they had established a formidable network of agents and regular correspondents, an important function of which was to keep New Court abreast of economic and political developments the world over. But in the twenty years after Waterloo (the news of which was the first great coup of Rothschild communications) their system was more rudimentary. Like anybody who wished to conduct international correspondence, their letters—and sometimes their lives—were at the mercy of the elements. In 1817, Salomon and his wife were “99 per cent” drowned when the carriage taking them from Paris to Rotterdam was caught in a storm while crossing a river. The whole journey lasted around seventy-two hours. That was exceptional: letters sent from Paris to Frankfurt usually took just forty-eight hours in 1814; but mail from London could take up to a week to reach Frankfurt, and the service from Paris to Berlin took nine days in 1817. Compulsive correspondents as they were—even scribbling letters in antechambers while waiting to see ministers—the brothers were always trying to find ways of speeding up the postal service. As we have seen, from 1815, if not before, Nathan was relying on his agents at Dover and Calais to expedite his letters by paying premiums to the captains of ships for express delivery. It seems he also sometimes sent copies of the same letter by more than one route, to reduce the risk of delays. In 1814 Amschel proposed an ingenious scheme for overcoming delays at the Frankfurt post office: if the exchange rate rose, his brothers should send their letters in blue envelopes; if it fell, in red, “then Mayer at the post office can immediately let me know if I have a red or a blue letter, which saves half a day.”

  But this did not solve the problem that many of the offices in Germany through which the brothers’ letters passed were “lodges” under the control of the Austrian secret police, so that mail was routinely opened and copied if it appeared to contain politically sensitive or useful information. The same lack of confidentiality ruled out anything more than occasional use of the diplomatic “bags” sent by courier from capital to capital. There was therefore no alternative but to employ private couriers, which the Rothschilds began to do (at the latest) in 1814. The problem was that couriers were expensive, and the brothers constantly bickered about when their use was justified: if couriers were sent too often, operating costs mounted, but if they were not sent, vital news could arrive late. A related problem was that the very arrival of a courier alerted competitors to the probability of important news: letters to third parties were therefore sometimes backdated and couriers sent in disguise to put rivals off the scent. By the mid-1820s, with costs less of a concern, couriers were being sent regularly: in December 1825 alone, the Paris house sent eighteen couriers to Calais (and hence to London), three to Saarbrücken, one to Brussels and one to Naples. The practice was habit-forming: in 1827 Salomon was infuriated when he could not find a courier willing to set off from Vienna for Strasbourg at 10 p.m. on Christmas Day.

  Unfortunately—as with every innovation in communications—it was not long before the Rothschilds’ rivals were sending just as many couriers of their own. Moreover, no courier ever arrived soon enough: James’s complaint in 1833 that a courier from London had arrived “one hour too late” was the classic expression of the perennial capitalist desire for faster communications. From 1824, carrier pigeons were also employed, though it was apparently not until the 1840s that the brothers used these regularly enough to warrant a crude code: “A B in our pigeon dispatches means buy stock, the news is good. C D . . . means sell stock the news is bad.” It was not until after the mid-1830s that the development of the railway, the telegraph and the steamship opened a new era in communications—one in which it would be a good deal harder for the Rothschilds to steal a march on their competitors. In one of his first references to “telegraphic communication,” James complained to Nathan: “Over here people are too well informed and there is therefore little opportunity to do anything.” By 1840 Carl was advising the Paris house not to send couriers to Naples, as the steamer arrived just as quickly and couriers merely alerted the “small speculators” that something was up. Another important point is that as press censorship became less strict after 1830, it became unnecessary to provide so much detailed political news in private letters: by the 1840s, Nat routinely referred his brothers to the French newspapers where ten years before his uncle would have written the latest political news himself.

  So it was in fact for a relatively short period—between around 1815 and 1835—that the Rothschild courier service had a real edge on alternative forms of communication. During those years, the Rothschilds were able to offer a distinctive service to those politicians and diplomats whom they wished to cultivate. Not only could the
y offer them private banking services; they could also deliver their letters ahead of the regular post. While in London in 1822, Chateaubriand received “an important despatch” from the duchesse de Duras through her “protégé Rothschild.” At Verona in the same year and at Pressburg in 1825, Metternich made use of Salomon’s couriers to Vienna and London, evidently putting more trust in the Rothschilds’ couriers than his own. The idea soon caught on. By 1823, “receiving news from Rothschild” was an integral part of the Countess Nesselrode’s routine. In 1826 it was reported that:

  the Rothschild clerks who travel as couriers from Naples to Paris about once or twice a month take with them all the despatches of the French, English and Spanish ministers accredited in Naples, Rome and Florence. In addition to this not inconsiderable correspondence, they also deal with the communications passing between the Courts of Naples and Rome and their legations at Turin, Paris, London, Madrid, Lisbon etc. as well as all private letters that are of any importance.

  When a minor crisis in Franco-Austrian relations blew up in 1826, it was a Rothschild courier who carried Villèle’s placatory note to Metternich. Perhaps the most distinguished—if not the most powerful—enthusiasts for the Rothschild postal service after 1840 were the young British Queen Victoria and her consort Prince Albert. It was probably the latter—whose Uncle Leopold was an old Rothschild friend—who introduced the former to the system.1 From the moment he arrived in England, Albert (through his close adviser Christian von Stockmar and his British secretary George Anson) made regular use of Rothschild couriers for his correspondence with the continent. Soon Victoria was doing the same, as well as relying on the Rothschilds to arrange minor banking services and even hotel reservations. In June 1841 she assured Leopold that she “always” sent all her letters to Germany “wh. are of any real consequence . . . thro’ Rothschild wh. is perfectly safe and very quick.”