The House of Rothschild, Volume 1

by Niall Ferguson

  Five days later he “urgently begged” Salomon to continue “pestering” Metternich “as to the importance of strengthening the ministry here and . . . maintain[ing] peace, which is so necessary to Europe, the Prince alone having the power to maintain it.” “The whole depends upon the question of war or peace,” wrote Lionel on March 31. “This govt. is for peace, but must be supported by the other powers and must not go against the public opinion, or it would give too much strength to the opposition, which would then bring us war immediately.”

  Yet even the appointment of Périer did not wholly allay James’s fears of French aggression, especially when it became known that Austria intended to intervene in the Papal states regardless of the change of ministry in Paris. Events in Italy, Belgium and Poland periodically threatened to stir up liberal sentiment in Paris, leaving the government with little choice but to fight or resign. In the summer of 1831 there was even an economic argument for a more aggressive policy, as Lionel remarked: “There is [sic] in France too many young men, without employment and money and to get rid of them war is requisite, party spirit is also strong, and without a war, we should see the present king driven away.” Louis Philippe appeared to share this view, and James watched with apprehension as Périer’s position seemed to crumble. When Périer resigned at the beginning of August, James predicted “war within four days” if an “ultra-liberal” ministry took his place. Not for the last time, Périer survived politically by taking limited military action against Holland with the tacit approval of the other powers.

  The same scenario was more or less replayed in January and February 1832. First James warned that Périer would resign if the final terms of the Belgian settlement were unsatisfactory to France. Then Périer sent a military force to Ancona in reply to the return of Austrian troops to the Papal states. Even after Périer’s death, the pattern repeated itself. With Soult eager to despatch the army against the Dutch once again in October 1832, James sought to secure British support for intervention by warning Nathan: “If the government here, God forbid, does not survive, we will then get a republican administration, and then I expect things to be very black indeed. That is why everything now depends on the Belgian problem. Should England decide not to stand by France, we will then become very sick here, for the world is opposed to the doctrinaires.”

  There was a very similar link between domestic and foreign policy in Britain. The possibility, though remote, never entirely disappeared that a Tory government might revert to Pittite tradition and intervene against a revolutionary France. On the other hand, when the Whigs came to power in 1830, James at once visualised an equally alarming scenario: if the new government turned out to be “radicals” then “our ministry will have to be more liberal and consequently, the Belgian problem will be that much more difficult to resolve, and England may possibly enter into a treaty with France so that we could find ourselves at war with the rest of Europe.” “All now depends on England,” wrote James to Nathan in January 1831, during the search for a suitable Belgian king. “The foreign powers would never declare war without England as an ally . . . You see, dear Nathan, how important it is for you to be constantly vigilant, because whether or not we will have war depends on whether or not England will yield on the question of Belgium.” But Nathan’s Tory friends were unconvinced by James’s arguments, least of all when he threw his weight behind Périer. As Nathan wrote to James shortly after the start of the Reform Bill debates,

  Herries says that Peel will certainly be asked to join the ministry, that Wellington will become Foreign Minister and that, unless France gives way, he is convinced that the British Army will go to Germany . . . It would be well for you to tell the king that he must hold himself aloof, and not trifle with England, for she is not to be trifled with . . . England has no faith in your ministers who want nothing but revolutions, in which old Lafayette and I know not who else assists. Your king and his ministers have only to show that they don’t want war: they must not change their tone from day to day. Go to the king and tell him that Peel, Palmerston and Wellington are coming to power.

  This shot across the bows does much to illuminate the Rothschilds’ subsequent transition from Toryism to Whiggery. The Whig position, as relayed by Nathan on March 18, was far more congenial to James: “If France does not remain quiet, but takes action against the other three powers, we shall join the three powers, but if the other three powers take action against France, we shall join France.” James’s fear that the Reform Bill would be defeated and the Tories returned to power was therefore more to do with the international situation than with his support for the bill itself, for “a Wellington ministry would declare war on France without hesitation.” As Lionel observed in June 1831, confusion about British politics tended to reduce the chances of a Belgian settlement, because “all the time the King of Holland reckons upon a change in the ministry.” James made the same point four months later: “The passage of your bill is being closely watched, as people believe that, should the ministry resign, we will then have war.” When Russia was hesitating about ratifying the 24 Articles on Holland, Lionel posed the question: “What can Russia do alone[?], everything depends upon the Reform Bill, if that passes and the present ministry remain[s] in, England & France are quite strong enough to make all the other powers tremble.”

  This illuminates Nathan’s decision not to support Wellington when he was unexpectedly returned to office in May 1832. It was not just that Nathan feared internal “commotions” if an anti-Reform government stayed in office; it was also that “the foreign ministers”—he instanced Talleyrand, Weissenburg and Bülow—were “in great anxiety lest the King of Holland should be led to expect such support from the new government as would lead to war.” This analysis was echoed six months later, when news of the Whig election victory was generally welcomed by James, Lionel and Anthony as “the best guarantee of peace in Europe” and the stability of the French government. In the dying moments of the Belgian crisis, when the possibility of Russian intervention surfaced for the last time, Nathan indicated the extent and nature of his conversion in a letter to James:

  You must write to our brother Salomon, to tell Metternich not to let himself be bamboozled into war by Russia, for Pozzo [the Russian ambassador in Paris] is with the king and was not well received, and he and Lieven [the Russian ambassador in London] are intriguing to make Austria and Prussia declare war. I have, however, been informed in a reliable quarter [presumably Bülow] that Prussia will not go to war, and that they are making a great mistake, because England and France jointly can do a great deal. We shall keep peace, there won’t be war . . . Write and tell Salomon that Neumann [the Austrian ambassador] is always spending a great deal of time with Pozzo and believes our government to be weak. The man is seven-eighths mistaken and now Pozzo has not been well received. The king invited him to Brighton and he sat six places from the king. The king asked him how long he would stay here. He replied, “Six weeks”; and now we know that Russia wants war, and Metternich is being bamboozled by those people. Pozzo and those folk are making themselves ridiculous and do not understand England, so ask our good brother Salomon to tell Prince Metternich not to let himself be bamboozled by Russia. Pozzo is here simply to spy and I am convinced that England is stronger than she was in the time of Wellington. Now, my dear brother, don’t let yourself be bamboozled by anyone. If England and France hold together, it will be difficult to touch them. Write this to brother Salomon.

  In Vienna too, despite the absence of a revolutionary threat, there was a domestic political struggle with important international implications: between proponents and opponents of foreign intervention. When Salomon returned to Vienna in early October 1830, it was in order “to impress upon Prince Metternich how important it now is to maintain peace,” as “the issue of peace or war depend[ed] entirely upon” him. This was a slight exaggeration, as Austrian influence over the Belgian question was limited; on the other hand, Russia (and possibly also Prussia) would be more
likely to go on the offensive if a lead came from Vienna—that was the implication of the Carlsbad agreement of August 1830, which had reaffirmed the counter-revolutionary intent of the Holy Alliance. Over Italy, Metternich was unequivocal. He told Salomon in November 1830 that he was prepared “to send troops . . . to keep the country quiet,” and he duly did so in both Modena and Bologna, as we have seen. Until April 1831 Salomon could do little more than relay Austrian intentions to Paris (in itself an important service as his letters to James arrived as much as three days before Apponyi’s official instructions). When the Tsar appealed for help in Poland, however, Salomon was able to exert real influence, forewarning Metternich’s rival Count Kolowrat, who intervened “with uncharacteristic decisiveness” against such assistance. By July he was able confidently to assure his brothers: “Strictly between ourselves, Austria will not make war, does not want war and is doing everything possible to avoid having a war . . . I am convinced that even if England and France declared war on . . . Russia, it would make no difference to Austria, we would stay . . . neutral.”

  Even when he was away from Vienna, Salomon kept up the pressure on Metternich to avoid war. In March 1832 he wrote long and effusive letters to Metternich from Paris, urging him not to overreact to Périer’s decision to send troops to Ancona. In November, when French troops were descending on Antwerp, Kübeck complained that “Prince Metternich is a veritable pendulum, swinging back and forth between Tatichev [the Russian ambassador in Vienna] and war, and Salomon Rothschild and peace.”

  Golden Chains

  Yet it is hard to assess how much the brothers’ constant lobbying for peaceful policies would have achieved if it had not been linked to their financial power. As suggested above, the Rothschilds had two potential forms of leverage: not only the influence they derived from their role as a channel of informal diplomatic communication, but also actual financial pressure—if a regime bent on war asked them to lend money, they could refuse, and conversely they could give financial support to one that was peacefully inclined. Here once again it is necessary to stress the limits of Rothschild power, especially in those countries (Britain and Prussia) which did not make large increases in military expenditure during the 1830-33 crisis, but also even in those (France, Russia and Austria) where spending did create a need for new loans.

  Rothschild financial leverage was most limited in the capitals where no partner was resident. In Berlin, the brothers were caught by the outbreak of revolution in 1830 halfway through a delicate conversion operation designed to reduce the interest on their earlier sterling loan to Prussia from 5 to 4 per cent. From the outset this was not a promising transaction. After much hard bargaining between Salomon, Anselm and the Rothschilds’ “old friend” Christian Rother, it was agreed in February 1830 that the Rothschilds would issue a new sterling 4 per cent loan at 98, the proceeds of which would be used to redeem the old 5 per cent bonds. The total amount of the loan was £3.8 million. In addition, the possibility was raised of a similar operation for the bonds issued in 1822.4 However, by the time the French revolution broke out in July, roughly half of the new 4 per cent bonds were still unsold. With financial markets across Europe nose-diving, there was no possibility of disposing of these other than at a steep discount: by February the new bonds were being traded at 79.5, and renewed sales would doubtless have driven the price lower. Yet the brothers were contractually bound to continue making cash payments to Prussia on the basis of the underwriting price of 98. Could the Rothschilds have stood the losses—estimated by Rother at more than £367,000—which would have ensued had the contract been honoured? Probably; but it is easy to see why, having lost so much on the earlier French 4 per cent loan, they were so determined to extricate themselves from this second costly débâcle.

  Anselm was duly sent back to Berlin for a protracted and exceptionally difficult bout of wrangling, made the harder by the machinations of the various officials and ministers he had to deal with, who were united only by their opposition to an outright cancellation of the conversion agreement. Finally, after Carl had been sent to join him, it proved possible to reach a compromise. In effect, by paying an indemnity of around £140,000 (which in practice dwindled to around £50,000 after various deductions), the Rothschilds secured a postponement of the operation until European financial conditions had stabilised.

  From the Rothschild standpoint, this was a successful exercise in damage-limitation; but why did the Prussian authorities agree to it? Rother’s argument to the Prussian King, Frederick William III, was based on self-interest. “If Nathan Mayer von Rothschild’s firm were to be compelled strictly to observe the dates laid down in the contract,” he pointed out, “in spite of the unfavourable conditions now obtaining, it would necessarily endeavour to sell the new 4 per cent bonds at any price in all markets, and thereby deal a severe blow to our public credit. Our experience has taught us that financial transactions in which the von Rothschild firm do not act as intermediaries, but as opponents, are apt to fall through . . .” Rothschild weakness, in other words, could have negative repercussions for Prussia too, despite the short-term benefits of insisting on the fulfilment of the contract:

  Through the recent French loan of January 1830 and the conversion . . . of the Prussian debt contracted in 1818, in which latter transaction they associated a number of other banking firms with themselves, involving them in enormous losses, the Rothschild banks have entirely lost their credit in transactions of this kind . . . Although their wealth . . . is still very considerable, they lack the cash necessary for transactions of this kind, since their property, which consists of bonds of all the European states, cannot at present be turned into money on any bourse. The Rothschild banks are therefore now refusing to take over any large loans direct, seeking as in the case of Austria, to deal with them on a commission basis, and while they will make advances on account, they proceed to sell the newly created bonds at exceedingly low prices, thus damaging the States concerned.

  But this argument would not have cut any ice if Prussia too had not been in need of new funds to pay for the rising costs of her military preparations. For although Prussia was, in James’s words, “of all Powers, least in a position to demand war, and most [keen] to avoid it,” she could not ignore the threat of a major war (whether over Belgium or Poland) which recurred throughout 1831 and 1832. Rother’s letter to the King suggests that he had been dissuaded, probably by Amschel, from attempting to float a new issue of bonds. Instead, the Rothschilds offered to make substantial short term cash-advances of up to 5 million thaler against treasury bills and to lend their support to a lottery loan. It was this offer which was decisive in securing the postponement of the conversion, discussion of which resumed only in 1833, by which time Prussian 4 per cents had recovered to 92 and “the present political situation gives no more cause for serious concern.”5 In other words, the Rothschilds still had some financial leverage in Berlin; but it was only sufficient to secure concessions over the conversion. There is no evidence of any attempt during this period to influence Prussian foreign policy: all the Rothschilds got out of Frederick William was some porcelain and (for Nat) the title of Privy Commercial Councillor, by way of grudging thanks.

  If their power was limited in Berlin, the Rothschilds’ influence in St Petersburg was almost non-existent. True, Russia needed money more than any of the great powers to fight her war against the Poles. But relations between the Rothschilds and the the Russian Finance Minister Kankrin had never been good, so even when the Russians directly approached their agent Gasser for a loan in early 1831, James was wary. “The Minister must be terribly short of money,” he reflected. “That means he will not be able to fulfil his commitments, and, should it occur to the good man not to pay his interest, we will then be left floundering.” He argued for taking any loan only on commission and issuing it in small tranches, opposing Nathan’s decision to offer an immediate advance of £400,000. “In the event of war breaking out,” he warned, “neither France, nor Russia
nor Prussia will meet their interest payments, and, by God, they will all use the excuse of war to justify the non-payment of the interest due.” On the other hand, as Anselm argued, if the danger of war disappeared—especially if Russia won a decisive victory in Poland—the government would have no need of their services. Only as long as the crisis lasted would the government need money badly enough to “submit to any conditions.” In fact, James’s real anxiety was political: he had no objection to lending the Russian government as much as £5 million provided the fact could be kept secret in Paris, where sympathy for the Poles was fervent. “It is a foregone conclusion,” he pointed out,

  that we will be severely criticised in the newspapers, otherwise, I have no objections to proceeding on this basis . . . [S]hould the Poles indeed have achieved a victory, this will ease matters considerably, as we must make every effort to co-operate with the liberal[s]. Would it perhaps be possible to claim that the minister will be arranging the loan in conjunction with Gasser and in his name? . . . Well, I suggest we consider . . . very carefully how we can possibly prevent our involvement in this matter becoming public knowledge.