The House of Rothschild

by Ferguson, Niall

  By dint of their multinational structure, immense resources and superb political contacts, the Rothschilds were able to survive the upheaval of 1848-49. In conditions of near-universal loss, their relative position may even have been slightly enhanced. However, the recovery of the European economies and the (not-coincidental) return of political stability brought new challenges.

  First, one of the unspectacular achievements of the revolution was to weaken the resistance of state bureaucracies to the ideas of joint-stock company formation and limited liability. Once company formation became easier, the number of new entrants into finance began to rise. The Pereire brothers had started life as railway enthusiasts, with technical visions but without much money to realize them—hence their subordinate relationship with the Rothschilds in the 1830s. In the 1850s they were able to break free, mobilizing the resources of numerous smaller investors in raising the capital of the Credit Mobilier.

  Related to the challenge symbolized by the Pereires was a change in the relationship between state finance and the bond market. The 1850s saw the first serious attempts by states to sell bonds by public subscription, without the mediation of bankers, or with bankers acting as underwriters rather than buying new bonds outright. If nothing else, states began to exploit the growing competition between private and joint-stock banks in order to whittle down commissions. Though still dominant in the bond market, the Rothschilds’ position became less monopolistic. The spread of the telegraph further weakened their grip, bringing to an end the period when their couriers had been able to deliver market-sensitive news ahead of the competition.

  But perhaps the most important threat to the Rothschilds’ financial hegemony was political. The triumph of Louis Napoleon Bonaparte in France introduced a new uncertainty into European diplomacy. The possibility that he might seek to emulate his uncle never wholly disappeared until 1870. At the same time, the rules of the international game were subtly altered by the tendency of politicians elsewhere—notably Palmerston, Cavour and Bismarck—to elevate national self-interest above international “balance,” and to place as much trust in cannons as in conferences. Compared with the relatively peaceful thirty-three years from 1815 until 1848, the next thirty-three years would be marked by a succession of wars in Europe (not to mention America): wars that the Rothschilds found themselves unable, despite their best efforts, to prevent.

  In May 1848 Charlotte de Rothschild affirmed her belief “in a bright, European and Rothschildian future.” Her confidence in the waning of the French revolutionary era was well founded. In the second half of the nineteenth century, the threats to monarchical politics and bourgeois economics did indeed recede. But the brightness of the Rothschildian future would depend on the family’s ability to meet new challenges. Of these, nationalism and then socialism would prove the greatest—especially when combined.

  I

  Uncles and Nephews

  ONE

  Charlotte’s Dream (1849-1858)

  I went to sleep at 5 and woke against 6; I had dreamt that a huge vampire was greedily sucking my blood . . . Apparently, when the result of the vote was declared, a loud, enthusiastic roar of approval resounded... throughout the House [of Lords]. Surely we do not deserve so much hatred.

  CHARLOTTE DE ROTHSCHILD, MAY 1849

  Though they had managed to weather its storms financially, 1848 might still have proved a fatal turning point for the Rothschilds—but for reasons unrelated to economics and politics. For in the years immediately after the revolution the very structure of the family and the firm was called into question. It is easy to forget as one reads their letters that the four remaining sons of Mayer Amschel were by now old men. Amschel was seventy-seven in 1850, Salomon seventy-six and Carl an ailing sixty-two. Only James was still indefatigable at fifty-six.

  Longevity, on the other hand, was a family trait: though their father had died aged sixty-eight, their mother, born in 1753, lasted long enough to see the crown of a united Germany offered to a Prussian king by a national assembly gathered in her own home town. Indeed, Gutle Rothschild had become something of a by-word by the 1840s, as The Times reported:The venerable Madame Rothschild, of Frankfort, now fast approaching to her hundredth year, being a little indisposed last week, remonstrated in a friendly way with her physician on the inefficiency of his prescriptions. “Que voulez-vous Madame?” said he, “unfortunately we cannot make you younger.” “You mistake, doctor,” replied the witty lady, “I do not ask you to make me younger. It is older I desire to become.”

  Cartoons were published on the subject: one, entitled Grandmother’s 99th Birthday, depicted James, with Gutle in the background, telling a group of well-wishers: “When she reaches par, gentlemen, I will donate to the state a little capital of 100,000 gulden“ (see illustration 1.i). A different version of the same joke has a doctor assuring her she will ”live to be a hundred.“ ”What are you talking about?“ snaps Gutle. ”If God can get me for 81, He won’t take me at a hundred!“

  1.i: Anon., Der 99ste Geburtstag der Groβmutter, Fliegende Blätter (c. 1848).

  Her dogged refusal to quit the old house “zum grünen Schild” in the former Judengasse appealed to contemporaries, suggesting as it did that the ‘Rothschilds’ phenomenal economic success was rooted in a kind of Jewish asceticism. Ludwig Borne had sung her praises on this score as early as 1827: “Look, there she lives, in that little house ... and has no wish, despite the world-wide sovereignty exercised by her royal sons, to leave her hereditary little castle in the Jewish quarter.” When he visited Frankfurt sixteen years later, Charles Greville was amazed to behold “the old mother of the Rothschilds” emerging from her “same dark and decayed mansion ... not a bit better than any of the others” in the “Jews’ street”:In this narrow gloomy street, and before this wretched tenement, a smart calèche was standing, fitted with blue silk, and a footman in blue livery was at the door. Presently the door opened, and the old woman was seen descending a dark, narrow staircase, supported by her granddaughter, the Baroness Charles Rothschild, whose carriage was also in waiting at the end of the street. Two footmen and some maids were in attendance to help the old lady into the carriage, and a number of inhabitants collected opposite to see her get in. A more curious and striking contrast I never saw than the dress of the ladies, both the old and the young one, and their equipages and liveries, with the dilapidated locality in which the old woman persists in remaining.1

  But on May 7, 1849, in her ninety-sixth year and with her surviving sons at her bedside, Gutle finally died.

  It was one of a spate of deaths in the family. The year before, Amschel’s wife Eva had died. In 1850, so did Nathan’s widow Hannah as well as—to the great distress of the Paris Rothschilds—her youngest grandson, Nat’s second son Mayer Albert. Carl’s wife Adelheid died in 1853, followed a year later by Salomon’s wife, Caroline. The effect of these events on the older members of the second generation may easily be imagined. Mayer Carl noticed how “deeply affected” Amschel had been by the death of his mother. “It is a great loss to [him] ... & I cannot tell you how many wretched hours we have spent lately ... Uncle A. is confined to his room but feels rather better after the first shock which was really fearful.” He was only slightly “calmer” when the family gathered in Frankfurt for Gutle’s funeral. Indeed, he and his brother Salomon cut rather forlorn figures in their twilight years, spending less and less time in the counting house and more and more time in Amschel’s garden.

  To the new Prussian delegate to the Diet of the restored German Confederation—a mercurial and ultra-conservative Junker named Otto von Bismarck—Amschel seemed a pathetic old man. “[I]n monetary terms,” Rothschild was of course the “most distinguished” man in Frankfurt society, Bismarck reported to his wife shortly after arriving in the town. But “take their money and salaries away from the lot of them, and you would see how undistinguished” he and the other citizens of Frankfurt really were. The newcomer was characteristically rebarbative when Amschel invit
ed him to dinner ten days in advance (to be sure of an acceptance), replying that he would come “if he was still alive.” This answer “alarmed him so much that he repeated it to everybody: ‘What, why shouldn’t he live, why should he die, the man is young and strong!’” With his limited private means and meagre stipend, the Junker diplomat was bound to be impressed as much as he was repelled by the “hundredweight of silverware, golden forks and spoons, fresh peaches and grapes, and excellent wines” which were laid before him on Amschel’s dinner table. But he could not conceal his disdain when the old man proudly showed off his beloved garden after their meal:I like him because he’s a real old wheeling and dealing Jew, and does not pretend to be anything else; he is strictly Orthodox with it, and refuses to touch anything but kosher food at his dinners. “Johann, take some pread vit you for the deer,” he said to his servant, as he went out to show me his garden, in which he keeps tame deer. “Herr Paron, this plant cost me two tousand gulden, honestly, two tousand gulden cesh. You can hef it for a tousand; or if you’d like it es a present, he’ll pring it to your house. Gott knows I regard you highly, Paron, you’re a hendsome man, a fine man.” He is a short, thin, little man, and quite grey. The eldest of his line, but a poor man in his palace, a childless widower, cheated by his servants and despised by smart Frenchified and Anglicised nephews and nieces who will inherit his wealth without any love or gratitude.2

  As Bismarck shrewdly divined, it was this last question—who should inherit their wealth—which most preoccupied the old Rothschilds, who accordingly spent long hours tinkering with their wills. Years before—in 1814—Amschel had joked that the difference between a rich German Jew and a rich Polish Jew was that the latter would “die just when he was losing, whilst the rich German Jew only dies when he has a great deal of money.” Forty years later, Amschel was living up to his own stereotype, with a share in the family firm worth nearly £2 million. But who should inherit this fortune? Denied the son he had so long prayed for, Amschel brooded on the merits of his twelve nephews, particularly those (principally Carl’s sons Mayer Carl and Wilhelm Carl) who had settled in Frankfurt. In the end, his share of the business was divided in such a way that James got a quarter, Anselm a quarter, Nathan’s four sons a quarter between them and Carl’s three sons the last quarter.

  Salomon had an heir, of course, and a daughter well provided-for in Paris; but—perhaps because of the harsh words they had exchanged in Vienna at the height of the revolutionary crisis—he sought to avoid making Anselm his sole heir. Instead, he devised complicated provisions designed to transmit most of his personal wealth directly to his grandchildren. At first he seems to have considered leaving almost all of it (£1.75 million) to his daughter Betty’s children (£425,000 apiece for the boys and just £50,000 for Charlotte, whom he had already given £50,000 on the occasion of her marriage to Nat), leaving only his three houses to Anselm and his sons, and just £8,000 for their married sister Hannah Mathilde. Even his Paris hotel, he told Anselm, would go to “you and your sons ... I repeat it is for you and your sons. I have thought about it and put in a clause [to ensure it remains their property for] over a hundred years. No sons-in-law or daughters can have any claim on it.” This was partly a self-conscious strategy to exert the maximum posthumous influence, rather as Mayer Amschel had done in 1812; indeed, the exclusion of the female line was an idea he had inherited from his father. But, unlike his father, Salomon decided that only one of his grandsons would ultimately inherit his share of the family business from Anselm—a new development in a family which had hitherto treated all male heirs more or less equally. In a final codicil to his will dated 1853, he scrapped the clause which left the choice of successor to Anselm, specifying (unsuccessfully, as it turned out) his eldest grandson Nathaniel. Ultimately, all Salomon’s schemes came to naught; in practice, it was Anselm who inherited his fortune and who decided which of his sons should succeed him. Bismarck was right too that the younger Rothschilds ridiculed their old uncles. Visits to the invariably “sad and morose” Uncle Carl were especially dreaded. If there was great grief in 1855 when Salomon, Carl and Amschel one after another expired in the space of just nine months, no record of it has come to light.

  This wave of mortality came in the wake of a dramatic upheaval in the Rothschilds’ financial affairs. As we have seen, the huge sums which had to be written off in the wake of the Vienna house’s effective collapse were not easily forgotten, especially by the London partners, whose worst fears about their uncles’ reckless business methods appeared to have been confirmed. Unfortunately, the structure of the firm meant that losses of the sort sustained by Salomon had to be borne collectively; his personal share of the firm’s total capital was not proportionately reduced. This explains why, in the period immediately after the revolution, unprecedented centrifugal forces threatened to break the links which Mayer Amschel had forged nearly forty years before to bind his sons and grandsons together. In particular, the London partners sought to “liberate” themselves from the commitments to the four continental houses which had cost them so dear in the wake of the revolution. As Nat put it in July 1848, he and his brothers wished to “come to some sort of an arrangement so that each house may be in an independent position.” Small wonder the prospect of a “commercial and financial congress” had filled Charlotte with such dread when it was first proposed in August 1848: “Uncle A. is weakened and depressed by the loss of his wife, Uncle Salomon by the loss of his money, Uncle James by the uncertain situation in France, my father [Carl] is nervous, my husband, though splendid, is stubborn when he is in the right.”

  When James set off to see his brothers and nephews in Frankfurt in January 1849, Betty fully expected the congress to “alter the bases of our Houses, and following the London house, [to] grant mutual freedom from a solidarity which is incompatible with the movements in politics ...” Characteristic of the strained relations between Paris and London was the row later that year when James heard that Mayer had “ordered” one of the Davidson brothers “not to send any gold to France”—an assertion of English paramountcy he found intolerable. In Paris itself, there was constant friction between Nat and James. The former had always been a good deal more cautious than his uncle, but the revolution, as we have seen, all but broke his nerve as a businessman. “I advise you to be doubly cautious in business generally,” he exhorted his brothers in a typical letter at the height of the crisis:As for me I have taken such a disgust to business that I should particularly like to have no more of any sort or description to transact ... What with the state of things all over the world, the revolutions that spring up in a minute & when least expected I think it downright madness to go & plunge oneself up to one’s neck into hot water for the chance of making a little money. Our good Uncles are so ridiculously fond of business for business’ sake and because they cannot bear the idea of anybody else doing anything that they can’t let anything go if they fancy another person wishes for it. For my part I am quite sure there is no risk of Baring advancing much [on Spanish mercury] & if he chooses so to do let him do it, be satisfied and take things easy.

  Betty saw the force of this. As she commented, “Our good Uncle [Amschel] can’t tolerate a lessening of our fortune, and in his desire to restore it along previous lines, he wouldn’t think twice about throwing us back into the disturbance of hazardous affairs.” But James was increasingly impatient with Nat’s pusillanimity. Charlotte suspected that James would positively welcome his nephew’s withdrawing from the business as it would allow him to increase the involvement of his elder sons Alphonse and Gustave (who first begin to figure in the correspondence in 1846). As Betty put it, the “old ties of fraternal union” for a time seemed “pretty close to falling apart.”

  Nor were these the only sources of familial disunity. Even before the 1848 revolution, there had been complaints from Frankfurt about the attitude of the London house. It was, complained Anselm, “very unpleasant to be the most humble servant, to execute your order without even
knowing by the Spanish correspondence what is going forward. Very true it is that we do not merit any consideration, & that since a long time ago [sic] we are ranged in a secondary line in the Community of the different houses.” As this implies, Anselm was assuming that he, as the eldest of the next generation, would be Amschel’s successor in Frankfurt. Yet the collapse of the Vienna house changed everything, as it put pressure on him to take over permanently his father’s place in Austria. In the same way, Carl wished his eldest son Mayer Carl to succeed him in Italy. However, the childless Amschel was even more determined that Mayer Carl should take over from him in Frankfurt, leaving his younger and less able brother Adolph to go to Naples. As James observed, such arguments were not only between the elderly brothers but also between their sons and nephews, who were all evidently vying for control of the Frankfurt house, since it continued to be dominant over its Vienna and Naples branches: “Anselm is at odds with Mayer Carl. Mayer Carl is at odds with Adolph.” Although notably partisan in her eldest brother’s favour, Charlotte’s diary details some of the ill-feeling this rivalry generated:Mayer Carl ... is mature; a man of the world and an international citizen. He is in his prime and at the height of his by no means inconsiderable powers. He has certainly earned himself a greater degree of popularity than Anselm through his engaging manner, his vivacious personality and witty conversation. Indeed he is a welcome and well liked figure in Frankfurt, far more so than my brother-in-law ever was, is or could be. I rather doubt that he possesses the solid breadth and depth of knowledge that Anselm has gained and I am in no position to assess whether he is an experienced businessman, or whether his judgement on important matters is sound and whether he is a good writer and speaker. But ... Anselm is utterly condescending towards my brother, which is quite unjustifiable for one would have to scour whole kingdoms to find such a gifted young man. Perhaps he does not have the aptitude for thorough research and lengthy study required for the pursuit of the scientific branches of intellectual thought. Yet, as a banker and a man of the world, as a refined and educated member of European Society (for he is at ease with all nationalities and classes), it seems to me he is without equal. It is unjust and unworthy of Anselm to treat him with such disdain.