Why did he do this? He can have had no illusions about Herzen’s politics because he had been given “a very unfavourable opinion” of him by Kiselev. As Herzen put it, he now “surmise[d] that I was not a prince russe.” The answer seems to be that this was James’s idea of a joke. Herzen was bemused by the fact that James “now took to addressing me as Baron,” and even more bemused when he refused to send his letter to Gasser until Herzen increased his commission on the transaction from half a per cent to 5. This “Mephistophelean irony” was intended to test Herzen, who refused to concede more than another half per cent:
When half an hour later I was mounting the staircase of the Winter Palace of Finance in the Rue Laffitte, the rival of [Tsar] Nicholas was coming down it.
. . . His Majesty, smiling graciously, and majestically holding out his own august hand [said,] “the letter has been signed and sent off. You’ll see how they will come round. I’ll teach them to trifle with me.”
“Only not for half of one per cent,” I thought, and I felt inclined to drop on my knees, and to offer an oath of allegiance together with my gratitude, but I confined myself to saying: “If you feel perfectly certain of it, allow me to open an account, if only for half of the whole sum.”
“With pleasure,” answered His Majesty the Emperor, and went his way into the Rue Laffitte.
I made my obeisance . . .
Six weeks later the money was paid. “From that time forth,” Herzen recalled, “I was on the best of terms with Rothschild. He liked in me the field of battle on which he had beaten Nicholas; I was for him something like Marengo or Austerlitz, and he several times recited the details of the action in my presence, smiling faintly, but magnanimously sparing his vanquished opponent.” After Herzen’s expulsion from Paris by the Bonapartist regime, James continued to look after his investments in American and other bonds (he appears in the 1851 balance sheet owing the Paris house 50,000 francs) and secured him permits on the occasions when he wished to visit Paris. He also recommended him to the London house, which took over his account during his long English exile.
Herzen’s transformation from insurgent into investor, from Rothschild critic into Rothschild client, was in many ways emblematic of a Europeanwide change of mood—as was James’s willingness to play this game with a notorious revolutionary. Did he know that the money he was putting in Herzen’s hands was being used to finance the Voix du Peuple ? If he did, it did not worry him. By the end of 1849 the revolution was over and the more rapid and sustained pace of economic development henceforth would make another 1848 much less likely. For his part, Herzen saw the Rothschilds as personifying this shift away from revolutionary politics:
A Rothschild . . . must be in his office in the morning, to begin the cap italisation of his hundredth million; in Brazil there is plague, and war in Italy, America is falling to pieces—everything is going splendidly: and, if someone talks to him then of man’s exemption from responsibility and of a different distribution of wealth, of course he does not listen.
Of course, for a new era lay ahead: of conflicts within capitalism rather than against it, and between states rather than classes.
APPENDIX 1
Prices and Purchasing Power
It goes without saying that the pound sterling was worth considerably more in the nineteenth century than it is now, mainly because of the inflation which has been a perennial feature of economic life since the 1950s. To be precise, in 1800 the pound was worth around 25 times what it is worth today. Because prices tended to fall during the nineteenth century, it was actually worth rather more in 1900: close to fifty times as much. To put it another way, the purchasing power of the pound has fallen in the past century by around 98 per cent: in 1900 terms, a pound today is worth just two (decimal) pennies.
To try to make historic prices intelligible to modern readers, historians often use price indices to calculate what a sum of money in the nineteenth century “means” in today’s pounds. This is easily enough done. Let us take as an example Nathan Mayer Rothschild’s total wealth at the time of his death in 1836, which I estimate at around £3.5 million (see chapter 11). Following the conventional system, in order to “convert” that figure into 1995 pounds to allow for inflation in the past 160 years, all that the reader need do is multiply by 35.5, giving £124.25 million.
The trouble with this is that it takes no account of the dramatic changes in economic structure and relative prices which have happened in the past two centuries. The cost of living is in fact a fairly meaningless concept over time because the nature of living—that is, what we buy with money—has changed so much in 200 years. As James de Rothschild’s biographer rightly says, “A fortune . . . is essentially the power to purchase so many acres of land, to employ so many workers, to maintain so many residences.” Labour was much cheaper in Europe 150 years ago than it is now (hence the huge numbers of people employed as servants) and taxes were negligible; by contrast, many of the things now considered “necessaries” were expensive luxuries then, if they existed at all. The long-run price indices used for such calculations are also problematic because of definitional changes (the contents of the supposedly representative basket of goods).
A more accurate method is to relate a money value to current gross domestic product (GDP). The advantage of this is that it conveys the purchasing power of a given sum of money—that is, it gives us an approximate idea of how much of the year’s total economic output expressed in current prices it could buy. As a proportion of UK GDP (£562 million in 1836), Nathan’s total wealth at death was equivalent to around 0.62 per cent; 0.62 per cent of the United Kingdom’s 1995 GDP (£605,100 million) is £3,752 million—a rather larger figure than the one given by the crude inflation multiplier!
Another way of conveying the significance of the original figure is to relate it to per capita GDP; this has the advantage of bringing population change into the equation. Thus Nathan’s £3.5 million should be compared with a per capita GDP figure for the same period of £22—that is, Nathan had accumulated around 160,000 times per capita national income; 160,000 times the 1995 figure for per capita GDP (c. £10,430) is £1,669 million. It therefore seems clear that Nathan was by the standards of our own time close to being a double billionaire.
Even this measure is misleading, however, because it leaves out of account the greater inequality of the nineteenth century. In the absence of a progressively redis tributive tax system and a welfare state, the distribution of income and to a lesser extent of wealth was far more unequal than in our own day. Very rich individuals and families were much rarer then than they are today, and the gulf which separated the Rothschilds from nearly everyone else in Britain was vast. As late as 1911-13, no fewer than 87 per cent of all people aged twenty-five and over in England and Wales—16 million people—had total wealth of less than £100, compared with 0.2 per cent—32,000 people—who had wealth of more than £25,000. The Rothschilds remained at the very pinnacle of this wealthy elite. When they died in rapid succession in 1915, 1916 and 1917, Nathan’s grandsons Natty, Leo and Alfred left between them £6,494,000—almost exactly 0.1 per cent of the total capital owned by all adults in England and Wales. To put it another way, they bequeathed between them as much as 191,000 men from the bottom 87.4 per cent of the population.
Were the Rothschilds the richest family in the nineteenth century? Rubinstein’s figures for British millionaires do not give precise figures for fortunes in excess of £1 million before 1858; but it seems unlikely that any of the eleven other individuals listed for the period 1810-56 left his heirs as much as Nathan. The nearest was the banker William J. Denison, who left £2.3 million (including real estate worth £600,000) in 1849. It was not until 1857 that someone left more than Nathan to his heirs—the textile warehouseman and Anglo-American banker James Morrison, who left between £4 million and £6 million at his death. Nathan not only died richer than the ironmaster Richard Crawshay and the cotton manufacturers Robert Peel and Richard Arkwright; he also
left more than the Duke of Queensberry, the Duke of Sutherland and the Duke of Cleveland. Taking the period 1860-99 as a whole, only twenty-three individuals left estates worth £1,800,000 or more: four of them were Rothschilds (Nathan’s sons Lionel, Anthony, Nat and Mayer). Although individually they were not the richest men of their time—Rubinstein cites two individual estates greater than £3 million—no other family could match their collective wealth. Altogether the brothers left £8.4 million: if Nathan, like all aristocratic millionaires, had left his fortune to a sole heir, Lionel would unquestionably have been the richest man in Britain. In reality, the richest man in the world was probably his uncle James who, at his death in 1868, was reported to have left his heirs around 1,100 million francs (£44 million), though a more realistic figure is probably around 193 million francs (£7.7 million) (see volume II).
From 1900 onwards, the English Rothschilds ceased to be exceptional as millionaires. Natty was the richest of his generation of English Rothschilds (leaving £2.5 million); but at least forty-six British millionaires in the period 1900-39 left as much as or more than him. It should be noted once again, however, that the partners in the French and Austrian houses were significantly richer than their English cousins. In 1905 Edouard, Gustave and Edmond each had personal shares in the combined Rothschild partnership worth £5.8 million. Albert, the head of the Vienna house, had a total share of £5.9 million. This excludes very substantial assets outside the partnership. Only seven of Rubinstein’s pre-1940 millionaires could match this; nine if the South African “Randlords” are included. Taken together at its peak in December 1899, the combined capital of the Rothschild houses was £41.4 million, divided between ten partners. Again, this takes no account of private wealth, much of it held in the form of expensive art collections and prime real estate. It is almost inconceivable that any other family could match this.
Nearly a hundred years on, do the Rothschilds have a modern equivalent? The answer is no. Not even the Saudi royal family has a comparable share of the world’s resources in its possession today. Nor can even the richest businessman in the world claim without qualification to be as rich in relative terms as Nathan Rothschild was when he died at the height of his fortune. At the time of writing, Bill Gates (the founder of the computer software company Microsoft) has an estimated personal fortune of $36.4 billion (£21.7 billion) and has a good claim to be the richest man in the world. If we relate that to current US GDP ($7,487.6 billion), we find that Mr Gates’s wealth is equivalent to 0.49 per cent of US GDP. This figure is less than Nathan’s equivalent figure of 0.62 per cent of UK GDP in 1836, though Mr Gates is gaining fast. Only if we relate the Gates fortune to American GDP per head ($27,730) does he have the advantage over Nathan: Gates’s wealth is 1.3 million times greater than American per capita GDP, whereas Nathan’s was only 160,000 times greater than British per capita GDP. The difference, however, mainly reflects the enormous growth in population since the early nineteenth century, which has restrained the growth of American per-capita income.
APPENDIX 2
Exchange Rates and Selected Financial Statistics
The exchange rates between currencies in late-eighteenth- and early-nineteenth-century Europe varied according to the metal content of coins, and conversion of one currency into another is not always easy. In Frankfurt, the gulden was the denomination most frequently used, though sometimes figures were given in terms of the imperial thaler (Reichsthaler). One Reichsthaler was equal to around 1.79-1.89 gulden. A British pound sterling was equal to 10.2-11.2 gulden. After the return of the pound to gold convertibility, it strengthened against the gulden and for the rest of the century the exchange rate was 12 gulden to the pound (see table a).
However, simple conversion of gulden into pounds can be misleading, as it takes no account of differences in purchasing power. The cost of living was generally thought to be higher in England, and especially in London, than on the continent, but the benefits of colonisation and industrialisation meant that around this time certain commodities (for example cotton goods) were becoming much cheaper in England. For this reason, I have converted gulden figures into pounds in the text only where some sort of comparison seems helpful.
Table a: The sterling exchange rate of the Frankfurt gulden, 1798-1836.
Source: Rothschild correspondence.
A private partnership of the sort formed by the five Rothschild houses was under no obligation in the period covered by these statistics to produce balance sheets or profit and loss accounts. The profit and loss accounts for N. M. Rothschild & Sons are based on summaries (the purpose of which is not known) which begin in 1829. The accounts are simple: on one side all the year’s sales of commodities, stocks and shares are listed; on the other, all the year’s purchases and other costs; the difference is recorded as the annual profit or loss. Table b gives the “bottom line” data and also figures for net appropriations (withdrawals and new capital) by partners.
Nineteenth-century banks did not draw up balance sheets or profit and loss accounts in a standardised way, so comparisons with other banks for which figures are available must be made with extreme caution.
Table b: N. M. Rothschild & Sons: profit and loss accounts, 1829-1848 (£).
Sources: RAL, RFamFD/13F; RFamFD/13E.
NOTES
The endnotes have been substantially reduced in number for the paperback edition. Scholars seeking detailed references should consult the hardback edition, which also contains a complete bibliography.
Introduction:Reality and Myth
1 Chekhov, “Rothschild’s Fiddle”—a story recommended for readers who wish to be reminded how the great majority of nineteenth-century Europeans lived their lives: unlike the Rothschilds, in wretched poverty.
2 The plot centres around a gathering of the brothers in the old house in the Judengasse in 1822 and Salomon’s unsuccessful bid to marry his only daughter (misnamed Charlotte) to a nobleman (“the Duke of Taunus”). She falls for James instead.
3 For the sake of clarity, I refer to Mayer Amschel and his wife as the first generation, their sons (and daughters) as the second and so on. A family tree is provided at the end of the book.
4 It was James’s son Alphonse who opposed the idea of preserving the documents in the Baron Carl von Rothschild library in Frankfurt. He also insisted on the destruction of documents relating to the payment of French reparations in 1815, fearful that they might one day be used to impugn the patriotism of his father.
5 The French papers have now been returned to the family and are housed in the Rothschild Archive in London. It is hoped that the Austrian material will also be returned in due course.
ONE “Our Blessed Father”: Origins
1 Frankfurt was one of fifty-one self-governing towns within the Holy Roman Empire (which also comprised 94 kings and princes, 103 counts and 41 church prelates).
2 The rule was relaxed slightly in 1790, though access was granted only to a single promenade.
3 A word needs to be said about the spelling of Mayer Amschel’s name. On his own gravestone, he is described in Hebrew characters as “Mosche Meir, Sohn Anschels, genannt Meyer Amschel Rothschild” and his three biographers have used the spelling “Meyer.” However, in the course of his life, he clearly came to prefer the spelling “Mayer.” His descendants named after him have also tended to prefer this spelling. For the sake of simplicity I have therefore used “Mayer” throughout.
4 By 1785, the Prince’s collection was sufficiently large to need a twelve-volume catalogue, compiled by his librarian Wegener. We may discount the apocryphal story that Mayer Amschel was actually introduced to William at this early stage by a general named von Estorff, as well as the fiction that Mayer Amschel impressed the Prince with his skill at chess (William is supposed to have told von Estorff: “You did not recommend a fool to me”): Hessen, “ ‘You did not recommend a fool’.”
5 Mayer Amschel did not have to pay the difference between his share of the Hinterpfann and the price o
f the house at the green shield all at once. He bought the house in two halves, in Dec. 1783 and Nov. 1785. In each case, as was customary, a third was paid up front, the rest in six or eight half-yearly sums.
6 The house was preserved more or less as Mayer Amschel had known it until 1944. After his widow’s death, it had gradually fallen into disrepair and was saved from the fate of the rest of the Judengasse—compulsory purchase and demolition—only by the family’s decision in the 1880s to preserve it as a historic monument. Along with its neighbour “at the golden arch” (with which it shared a roof as well as a cellar) it was completely restored and opened to the public. It also housed the offices of two Rothschild charities.
7 In the generation after Mayer Amschel, Rothschild first names underwent a confusing process of transformation according to the national milieu in which his sons found themselves. Amschel was sometimes known as Anselm, Salomon was often Salamon or even Solomon, Kalman was almost always Carl after around 1812; and Jakob became James when he moved to Paris. In much of the family’s private correspondence, their sisters and wives tended to be referred to by their Judendeutsch names, usually in a diminutive form, though Jettchen became “Aunt Henrietta” after her English marriage. For the sake of simplicity, I employ the most frequently used forms throughout: Amschel, Salomon, Nathan, Carl and James.
8 Fortunately, no one was killed, as the entire population (including the Rothschilds) had fled. Unfortunately, as Goethe’s mother wrote to her son, this meant that “When the fire started nobody could get into the locked houses and there were no Jews there to put out the fires.”
The House of Rothschild, Volume 1 Page 82