Moreover, it soon became apparent that, in smashing the republican left and signalling his support for an expansionary credit policy, Napoleon was generating a climate of financial optimism. The price of rentes tells its own story. On the eve of the coup, 3 per cent rentes were quoted at 56 and 5 per cents at 90.5. Immediately after, prices leapt to 64 and 102.5 respectively; and by the end of 1852—when Napoleon proclaimed himself Emperor on the first anniversary of the coup—3 per cents stood at 83—a capital gain of nearly 50 per cent from Republic to Empire (see illustration 2.i). Figures for gross investment in railways tell the same story: after a perod of stagnation between 1848 and 1851, investment increased by a factor of five in the period to 1856. James had for some time been conscious that economic and political events were out of synchrony: even the war scares and domestic alarms of the pre-coup period had not been as destabilising as he himself had anticipated. “To listen to the politicians,” he remarked in 1850, “you would think all was lost; to listen to the financiers is to be told quite the opposite.” But from December 2 onwards, politics and economics were brought back into harmony by a government that consciously identified its own health with that of the bourse.
The Napoleonic regime was thus far from an ideal outcome for James, who would probably have preferred Changarnier to pave the way for an Orléanist restoration. But once it was apparent that Napoleon had no intention of penalising him personally, he could live with it. He had already summarised his position—pre sciently—in October 1850: “In the end we shall have an Emperor, which will end with war, for if I wasn’t so afraid of war, then I would be an imperialist myself.” After the coup, he was quick to recognise that his rivals would steal a march on him if he was identified too closely with the defunct republic. While Betty could express her “demoralisation” with Napoleon by retreating into internal exile at Ferrières, her husband had (once again) to move with the times: “I think Napoleon is gaining strength,” he reported to London, just three weeks after the coup, “despite the fact that the great and the good will not accept his invitations. Do you think that we too should stay away completely?” It was a rhetorical question. Even the Rothschild women could not sustain their social boycott indefinitely. Indeed, their mood began to soften even before the end of December. “At the Rothschilds,” observed Apponyi waspishly after an encounter with Nat’s wife Charlotte and Betty, “the mood of calm stems from the enormous amounts of money they are making at the moment as a result of the boom in all the bonds and shares they have in their portfolio.”
It was at least the fifth change of regime since James had settled in Paris, and it was evidently becoming hard for him to take such events seriously. “My good nephews, how would you like a French constitution for two sous? They’re being sold in the streets for that here.” An absolute government was “not very good; but here you can do what you like and it’s all forgotten.” As early as October 1852, James could breezily report that he was “on the best footing with the Emperor and everyone”; this was fully two months before Napoleon actually proclaimed himself Emperor. It was also just days before Napoleon’s famous Bordeaux speech in which he declared: “The Empire means peace” (“L‘Empire, c’est la paix”). This seemed to rule out the rash infringements of Belgian neutrality or challenges to Prussian rule in the Rhineland which had caused most concern in the previous two years, and explains why the other powers recognised Napoleon as Emperor with only token quibbles.
Of course, it was not that easy: in January 1853 James was still having difficulty getting to see the new Emperor. But he had two routes into the new court. Firstly, he remained Austrian consul-general, and made a point of wearing his scarlet uniform to remind anyone who had forgotten his diplomatic status. In August 1852 he had been able to relay an anodyne message to Napoleon from the new Austrian Emperor Franz Joseph; and, although Hübner did his best to undermine James’s claim to represent Vienna in Paris, he had no chance of dislodging him as long as the Rothschilds remained Austria’s bankers. The second way James sought to ingratiate himself with Napoleon was by championing the cause of the half-Spanish, half-Scottish adventuress Eugénie de Montijo, who more snobbish Parisians assumed would merely be Napoleon’s next mistress. Napoleon had been introduced to her in 1850 and by the end of 1852 was infatuated; when his plans foundered for a diplomatic marriage to Princess Adelaide of Hohenlohe (one of Queen Victoria’s nieces) he impulsively resolved to marry her—to the dismay of his ministers.
This decision was still a secret, however, on January 12, when Eugénie arrived at a ball at the Tuileries on the arm of none other than James—who, noted Hübner, had long been “under the spell of the young Andalusian, but now more than ever, for he was one of those who believed in a marriage.” One of his sons—presumably Alphonse—escorted her mother. When the party entered the Salle des Maréchaux, intending to find seats for the ladies, the wife of the Foreign Minister Drouyn de Lhuys haughtily informed Eugénie that the seats in question were reserved for the wives of ministers. Napoleon overheard this, came across to the two women and offered them seats on the imperial dais. After two hours, the Emperor and Eugénie disappeared into the cabinet impérial, to return later arm in arm. Three days later he proposed; on the 22nd the engagement was made public; a week later the wedding took place. “I prefer a young woman whom I love and esteem,” declared Napoleon. “One can love a woman without esteeming her,” commented Anselm’s wife Charlotte shortly after this, “but one only marries a women one honours and respects.” This compliment—a rather strained one given the Rothschild family’s habitual distinction between romantic love and marriage—was duly relayed to the imperial couple.
2.i:The weekly closing price of French 3 per cent and 5 per cent rentes, 1835-1857.
The significance of this should not be exaggerated, of course; on the other hand, it is easy for the modern reader to forget how seriously contemporaries took the complex rituals of nineteenth-century court life--especially, it might be said, at the court of an unpredictable parvenu who owed his throne to a coup d’ état and his legitimacy to carefully managed plebiscites.
The Crédit Mobilier
Of course, it was not at the Tuileries or at Compiègne (where Napoleon did his hunting), but at the bourse and in the railway boardrooms that James’s fate in the Second Empire was really decided. Here, the Second Empire witnessed what is usually portrayed as one of the great corporate battles of the nineteenth century: the fight to the finish between the Rothschilds and the Credit Mobilier.
Partly because of the coincidence of the foundation of the Credit Mobilier (November 20, 1852) and the formal proclamation of the Second Empire (December 2), the significance of the new bank has often been misunderstood. For example, it is portrayed by many writers as a primarily political challenge to the dominance of the Rothschilds over French public finance—Napoleon III’s response to Fould’s challenge to “free himself” from Rothschild tutelage. A second misconception is that the Credit Mobilier represented a revolutionary new kind of bank, in contradistinction to the “old” private bank personified by the Rothschilds.
In fact, there was nothing fundamentally new about the idea of creating a bank on the basis of publicly raised share capital. Since 1826, joint-stock banks had been legal in Britain, and banks like the National Provincial and the London & Westminster Bank—both established in 1833—had revealed the possibilities of the new form long before the Pereires turned to banking; by the time the Credit Mobilier was founded there were around a hundred joint-stock banks in England and Wales, twice the number of London-based private banks. Nor is it true to say that British joint-stock banks eschewed lending to industry (though they tended not to go in for long-term investment, they often extended overdrafts and discounted bills in ways which were long-term in effect). Long-term industrial investment was not really what the Credit Mobilier did anyway, pace the claims of economic historians like Alexander Gerschenkron and Rondo Cameron that it promoted industrialisation not only in Fran
ce but throughout the continent. There were precedents for what the Pereires attempted in France too, the earliest (if one ignores John Law’s Banque Générale) being Laffitte’s Caisse Générale du Commerce et de l‘Industrie. Nor, as Landes has argued, were the Rothschilds and other established Paris banks especially old-fashioned in their response to the Credit Mobilier’s challenge: they too saw the rationale of the joint-stock form for longer-term investments. Although their capital differed from the Pereires’ in being entirely their own, the French and Austrian Rothschilds used it in much the same way as the Credit Mobilier used its bondholders’ and depositors’ money—and in the long run more successfully. To make a simple but usually overlooked point: the Credit Mobilier was not even bigger than the Rothschilds. Its initial capital was 20 (later 60) million francs; that of de Rothschild Frères in 1852 was in excess of 88 million francs; and that of the combined Rothschild houses no less than 230 million francs. Of the Credit Mobilier’s initial capital, the Pereires themselves accounted for only around 29 per cent.
In reality, it was not so much what they did as they way they did it which convinced contemporaries, and in turn historians, that there was a profound difference between the Rothschilds and the Credit Mobilier. (Only someone unfamiliar with Paris could lump “Rothschild, Fould and Pereyre [sic]” together as Bismarck did.) The Pereires continued to use their old Saint-Simonian rhetoric about the collective benefits of industrial investment, even as they speculated in rentes and railway shares and pocketed the profits for themselves. The Rothschilds, by contrast, made no secret of the fact that they were speculating and profiting, and regarded their contributions to the wider communities to which they belonged as a charitable activity, distinct from their business. When Castellane met Anthony for the first time in 1850 he was rather shocked by the latter’s complaint that “in London you can make [money] on everything, on cotton as well as rentes, as much as you like, but here [in Paris] you can hardly speculate on anything but rentes.” That was not the way the Saint-Simonians talked: for them it was a matter of mobilising the savings of all France in the pursuit of a steam-driven utopia. It was a difference in style vividly captured by the stockbroker Feydeau in his memoirs. Unlike the Pereires, he argued, James was “simply a solid, intelligent and astute ‘capital merchant’ ”:The sole task of maximising the return on his colossal fortune constituted for him a round-the-clock occupation. Each liquidation at the end of the month was a combat which he fought for the security of his house, the eminence of his name, the affirmation of his power. He kept abreast of the slightest pieces of news—political, financial, commercial and industrial—from all quarters of the globe; he did his best to profit from these, quite instinctively, missing no opportunity for gain, no matter how small.
As we have seen, doing business with a man like James was a thankless task for small fry like Feydeau. But one needed only to go the offices of the Credit Mobilier to encounterthe most striking contrast possible with the house of Rothschild. At the Pereires’ there were no hard words to be feared and no outbursts to dread. Acidulously polite men, ulcerated by hatred, always concentrating, hard and tense like bars of iron, inflexible in their ideas, filled with admiration for themselves, they were always to be found surrounded by friends, all cupping their ears in order to find out the line their patrons were taking, which shares they were working on, if they were buying or selling. The employees of the Credit Mobilier lay in wait for you on the stairs to interrogate you to see if you had an order. Everyone wanted to get rich, and at any price; each, necessarily, was trying to work in the same direction as his masters.
James evidently relished this contrast, and on one occasion, with that sardonic humour which was to become his trademark under the Second Empire, commissioned Feydeau to undertake a speculation on his behalf—in the form of a purchase of a thousand Crédit Mobilier shares. He did this no fewer than five times, astonishing his broker by actually paying for them in full at the liquidation. When Feydeau expressed his incredulity, James feigned surprise:Vat do you mean, my young friend? ... I do not mock you at all. Listen: I haf the greatest possible confitence in the chenius of Messrs Pereire. They are the greatest financiers on this earth. I am a family man, and I am happy to infest a part of my little fortune in their affairs. I only regret one thing, and that is that I cannot entrust all off my capital to such clefer men.
Contemporaries—notably the financier Jules Isaac Mires after his fall from grace—sometimes attributed this difference in style to the different cultural backgrounds of the two families. The “Jews of the North,” he suggested, having originated in the harsh, restrictive atmosphere of Germany, were “cold” and “methodical” in their selfish pursuit of wealth, and indifferent to the interests of the state; whereas the “Jews from the Midi” not only had “more noble” “Latin” instincts, but had also benefited from France’s more tolerant treatment of the Jews, and so did business in a more altruistic, public spirited way. Others conceived of the difference in more political terms: Rothschild represented “the aristocracy of money” and “financial feudalism,” while his rivals stood for “financial democracy and an economic ‘1789.’”
In reality, the competition between the two had its origins in the prosaic realm of railway concessions. To say the least, the republic had been an unhappy interlude for the railway enthusiasts. Investment and construction had stagnated as the politicians argued interminably about which concession should be granted to whom; interest rates were high, the bourse depressed, employers wary of labour unrest. Only one major line got under way (the Ouest from Versailles to Rennes). One of the most immediate consequences of Napoleon’s coup was that it ended all this. The very day after the seizure of power, the concession for the Lyon-Mediterranean line was granted, followed two days later by the Paris-Lyon to a consortium of which both the Paris and London Rothschilds were members. The Nord company’s concession was also renegotiated on terms which were singularly favourable to the company. The Empire was a bonanza for rail entrepreneurs: altogether no fewer than twenty-five concessions were awarded between 1852 and 1857, and a further thirty followed in the years to 1870.
In all this, an influential role was played by Napoleon’s illegitimate half-brother the duc de Morny, who saw the new regime principally as an opportunity to enrich himself and argued strongly in favour of merging the many small railway companies into a few big lines. James was in touch with Morny in early 1852, and liked what he heard. Interestingly, the French house’s balance sheet drawn up at this time shows that James held shares in various railway companies worth more than 20 million francs (around 15 per cent of the Paris house’s total assets). The value of these shares was now rocketing as investors reacted to the new regime’s encouragement: Apponyi estimated that James made 1.5 million francs in a single week in April 1852 “without having to pay out a penny.” Given the enormous increases in capital achieved by the Paris house in the 1850s, the figure does not seem improbable. It is worth noting that of all the big six French lines the Rothschild-controlled Nord was the most intensively utilised and most profitable: although it accounted for only 9 per cent of total French network in terms of length, it carried 14 per cent of freight and more than 12 per cent of all passenger traffic. The ratio of fares and freight rates to costs was 2.7: in the 1850s and the volume of traffic more than doubled between the 1850s and the 1860s.
Increasingly, however, James and the Pereires were at odds. The first signs of dissension had manifested themselves in 1849, when the latter had sought to raise money for their proposed Paris-Lyon-Avignon project without reference to the Rothschilds. The process continued apace in 1852, though it is far from easy to say exactly when the decisive breach occurred. An important step towards divorce was taken when James decided to participate in the Paris-Lyon line syndicate, taking around 12 per cent of its stock (other shareholders included Bartholony, Hottinguer and Baring and, although not named as a concessionary, Talabot seems to have played a leading role). This signified an
unambiguous rejection of the Pereires’ rival scheme. In an illuminating series of letters, James explained his reasons for doing so to his nephews:Regarding Lyon, it would be very damaging for the Nord if it were to be left out and if two other companies were to make it, so I said to Hottinguer, we will take as big a share as any other house and if Baring is going to arrange a subscription in London, it should be done jointly with you. In short, I do not want a major operation to take place under a new government without our name being on it. If such an operation were to succeed without us, then people would say “We don’t need Rothschild any more.” As we can take as much as we like, it is better that we remain part of this camaraderie ... The gentlemen concerned are very popular with the ministers.
A passing reference to one of the brothers as “an ass” suggests that relations with James were now rapidly deteriorating.
But the partnership was not yet over. Indeed, Isaac Pereire was deputed to act as James’s representative on the new Paris-Lyon company’s board. Moreover, his brother Emile continued to play a leading role as chairman of the Nord board, and was involved in the renegotiation of the Nord’s concession—the other major railway deal clinched in January 1852. The company raised 40 million francs by issuing bearer bonds and used the money to take over the Boulogne-Amiens line and to build new branch lines (for example, to Maubeuge); in return, its concession was extended for ninety-nine years, with an option to the state to buy the company out in 1876. It was not until later in the year that the split came, when James offered his support to Talabot once again.
The House of Rothschild Page 12