In fact, Bismarck did instruct his consul general in Bucharest to investigate the situation and “if appropriate to make forbearing remonstrances to the authorities.” But he was reluctant to do more without the support of Russia, which continued to regard the erstwhile Danubian principalities as within its sphere of influence. Given that many of the Rumanian Jews had fled even worse conditions to the east, it was no surprise that the Russian Foreign Minister Gorchakov flatly declined “to consider as a crime the measures that the Rumanian government has taken against the national plague of the Jews there,” adding: “If all Jews were Rothchilds and Crémieuxs, then the situation would be different, but under prevailing conditions one could not blame the government if it sought to protect its people against such bloodsuckers.” Mayer Carl himself reported that the elder Hohenzollern “complains bitterly about the Austrian Newspapers which are continually attacking his son and I am particularly sorry ... most of these papers are in the hands of Jews.” In October 1869 Alphonse had a personal audience on the subject with the Rumanian Prince, who struck him as a “very nice boy, who appears to have intelligence and energy,” and who promised “to take the poor Jews under his protection”:But it’s always the same story: the Jews regard themselves as foreigners, they are full of ignorance and prejudice and they refuse to give them the rights which alone can assimilate them to the other citizens and allow them to apply their intelligence to something other than a more or less illicit form of commerce.
It is doubtful whether these efforts (which were repeated in 1872, 1877 and 1881) achieved much: as late as 1900, the Rothschild houses and the Hungarian Credit Bank had to refuse participation in a Rumanian petroleum deal proposed by the Disconto-Gesellschaft because of the Bucharest government’s continuing ill-treatment of Jews. Their principal significance is as evidence of the readiness of the Rothschilds to repair their relations with Bismarck, so badly damaged by the events of 1866.
The speed with which these relations were restored is a testament to Mayer Carl’s acumen, as well as to Bismarck’s appreciation that the Rothschilds, for all their efforts to thwart his German policy, could still be useful to him. Their political rapprochement may be said to have begun in February 1867, when Mayer Carl was persuaded—apparently by Bismarck, among others—to stand for election to the parliament of the new North German Confederation, which was to meet in Berlin. It must be said that he had his reservations about following his English cousins into parliamentary politics. “He will not consent,” reported Natty; “he says one party here wish to get him out of the way so as to be able to transact all the business and that the others will not be thankful to him if he went to Berlin where he would have to give his advice about the German Currency and ever so many things in all of which the Prussian interest is opposed to that of Frankfurt.” But, as Charlotte wrote:[T]he town of Frankfurt will not hear of another representative, he will be elected in spite of all his protestations and he may see himself obliged to yield in the end especially as it is not likely that the German parliament will remain assembled during many months of the year ... Mr. de Bismarck and Mr. de Savigny [Karl Friedrich, who had been involved in drafting the Confederation’s constitution] have written to him to implore him to accept the proffered honor, saying that his ability, knowledge, and experience will be much appreciated at Berlin. It is impossible to receive more flattering proofs of regard and admiration.
To the English Rothschilds, Mayer Carl’s near-unanimous election was a family triumph in the tradition established by Lionel. In itself, it was “a post of honour”; the significance lay in the fact that he had “obtained five thousand three hundred votes, out of five thousand six hundred ... in a town where fifty years ago, at the entrance of the public gardens there stood in huge characters a very ugly prohibition to the effect that: ‘Jews are forbidden to enter.’ ” What more symbolic triumph could be imagined than that a Rothschild should be “unanimously chosen by the jew-hating city of Frankfort to represent its interests in the bosom of the German parliament”?10 For Mayer Carl, on the other hand, there were practical considerations. Now he had a good reason to make the regular visits to Berlin which would keep him in “contact with all the great men and master minds of Germany.” A Rothschild presence in Berlin was also welcome to Bismarck. Not only did he encourage Mayer Carl’s candidature; when he visited Paris in the summer of 1867 he also held out a well-chosen olive branch to James in the form of the grand ribbon of the red eagle—“a great honour,” as Alphonse noted, “and the highest distinction which a Jew has ever received in Prussia.” Bismarck went still further that November when he elevated Mayer Carl to the Prussian Upper House—in effect, a life peerage, nearly twenty years before the English Rothschilds finally secured their hereditary peerage. On at least one occasion he even urged Mayer Carl to buy a house in Berlin so that he could spend more time there—advice which Mayer Carl contemplated taking in 1871. The two were soon on very familiar terms: at a concert at the royal palace in Berlin in 1867 Bismarck jokingly told Mayer Carl “that if England wants a King for Abyssinia he could recommend the ex-monarch of Hannover.” As the venue of this encounter indicates, Mayer Carl was also considered haffähig (presentable at court): in March 1869 he had “a long chat with the crown Prince who takes great interest in everything and is very well informed,” followed by an audience with the Queen. A year later, he was invited to a small party by “their majesties” to meet the Tsar’s brother, Grand Duke Michael; and he attended a theatrical performance at the palace that April.
To Mayer Carl, this transformation of Bismarck from the ogre of Königgrätz into his friend “old B” was not merely flattering but useful: from April 1868 onwards he began to have access to the kind of first-hand political news from Berlin which had previously been Bleichröder’s sole preserve. For Bismarck, that was the whole point: through Mayer Carl he could be assured of a direct line of communication not only to Paris but also to London. A classic illustration of their new relationship in action came in April 1868, when Mayer Carl was in Berlin for the opening of the “Customs parliament” which brought together democratically elected candidates from the entire Zollverein in 1868. Intended to pave the way for South German accession to the North German Confederation, the parliament turned out to be an embarrassment for Bismarck because of the anti-Prussian mood of the majority of South German members; this may explain his decision to float a proposal for Franco-Prussian bilateral disarmament through the Rothschilds.
On the morning of April 23, Mayer Carl sent a telegram to the London house: “Tell your friend [Disraeli] that from the 1st of May army reduction here has been decided upon, and will continue on a larger scale if same system is adopted elsewhere.” He elaborated on this message in a letter sent the same day:I think that the step taken by old B will have a good effect and that the French Emperor will be invited to discontinue his armaments which would be a capital thing ... Everything depends now on France & if your friends use their influence it will lead to a new aspect of things. The army reduction is to take place on the 1st of May & I don’t think [but] that it must have a great effect ... as nothing is more wanted than a simple proof of Prussian peace.
Disraeli seized on this, passing the telegram on to Stanley with a characteristically over-excited covering note:This appears to me important: Charles [Mayer Carl] is virtually Bismarck. A few days ago, B. was all fury against France, and declared that France was resolved on war etc.: but on Monday the Rs. wrote to Berlin that they understood England was so satisfied with Prussia, so convinced, that she really wished peace etc., that England would take no step, at the instance of France, which would imply doubt of Prussia etc. This is the answer. I can’t help thinking, that you have another grand opportunity of securing the peace of Europe and establishing your fame.
Sight of Mayer Carl’s letter two days later merely encouraged the Chancellor:I feel persuaded it’s all true. They [Rothschilds] have a letter this morning in detail, explaining the telegram, and enforcing it. Th
e writer, fresh from Bismarck himself, does not speak as if doubt were possible: gives all the details of the military reductions to commence on 1st May, and the larger ones which will immediately be set afoot, if France responds.
Disraeli’s encouraging response had promptly been relayed back to Berlin. True to form, however, Stanley was lukewarm. He understood Disraeli to intend “that we might represent this to the French, as our doing, and possibly induce them to give some promise of disarmament in their turn: when the result being made public, England in general would reap much credit, and the ministry in particular be strengthened”; but he “doubted the feasibility of this combination, ingenious as it is.” Still, he did not question the quality of Mayer Carl’s intelligence, noting in the margin of Disraeli’s first letter on the subject: “They [Mayer Carl and Bismarck] see one another daily.” There were similar communications between Berlin and London in March 1869. “Old B,” reported Mayer Carl on March 15, “is not without certain apprehension about the Belgian Question, but still he thinks that nothing is likely to take place which might endanger the preservation of peace: he says that all depends upon the French Empereur and that nobody can foresee what alternative plans he may have.” Four days later, “B.... sat next to me to-day in the house [and] gave me the same information but he would like to know what old Nap’s plans are & if there is any truth in the alliance with Austria & Italy.”
These exchanges raise an obvious question: was the Machiavellian Bismarck using Mayer Carl to feed misinformation about Prussian intentions to London and Paris? There is no question that Mayer Carl began to identify himself with Prussian interests as early as April 1867—witness his new use of “we” and “us” as shorthand for the Prussian government. When challenged over his vote against the St Gotthard tunnel subsidy in 1870, he replied that he had withheld his support “as I find myself in the Reichstag not as a representative of the House of Rothschilds but as a representative of the people, and from this point of view I am against any subsidy for foreign railway purposes so long as the state is still struggling with a deficit of its own.” “[T]here is a famous difference between Prussia and all these other rubbishing [sic] countries,” he exclaimed on the eve of the Franco-Prussian War, one of many indications that he too was succumbing to that gruff chauvinism which 1866 had done so much to foster in Prussia. But this should not be understood as the familiar old story of German-Jewish bourgeois “capitulation” before the Junker Machtmensch; nor can it be assumed that Bismarck was seeking to hoodwink the Rothschilds. Bismarck may have expected that the question of South German accession to his new Confederation would one day lead to conflict with France; but he cannot be accused of forcing the pace towards war at any time before March 1870. As he put it in February 1868: “That German unity could be furthered by violent events I too regard as probable, but ... to induce a violent catastrophe is quite another matter ... German unity is not at this moment a ripe fruit.” The signals Bismarck sent to Paris through Bleichröder were also peaceful; and when, in the autumn of 1868, Alphonse heard from Berlin that “war was inevitable in the spring,” Mayer Carl was dismissive: “I would not attach much importance to what Bleichröder says as he mainly repeats what he hears from people who are often à la baisse and he himself is always black when he thinks it suits our purpose.”
Mayer Carl had good reason to believe that Bismarck’s intentions were peaceful at least in the short term, for all his intelligence about Prussia’s financial position pointed in that direction. That impression was reinforced by the spate of new private sector financial opportunities in Prussia which followed the 1866 war.
Rothschild involvement in Prussian finance resumed as early as January 1867, when Mayer Carl managed to secure the participation of the Frankfurt and Paris houses in a 14 million thaler issue of 4.5 per cent state railway bonds. This was to be the first of many transactions done jointly with the Disconto-Gesellschaft, whose director Adolph Hansemann was rightly identified by Mayer Carl as the coming man in the new and rapidly changing world of Prussian-German finance. Despite all the ill-feeling of 1866, Mayer Carl almost at once secured readmission to the Prussian loan consortium: it was as if all the harsh words of 1866 had never been uttered. There followed participation in two further loans intended to meet Prussia’s post-war military expenses, one for 30 million thalers in March 1867 and another for 24 million in August. May 1868 saw yet another loan of 10 million thalers. In November of the same year there was the offer of a 20 million thaler railway loan; in May 1869 a further 5 million. In each case, the Frankfurt house shared its allocation equally with the London and Paris houses. “You can be quite sure,” Mayer Carl assured Natty on Christmas Day 1869, “that no Prussian loan or loan for the North German Confederation will or can be made without my knowing it or having a share in the business ... You know that I am on the very best terms with Camphausen & that Hansemann is my great friend; I am therefore not afraid that anything will take place without our knowing it.” When Camphausen attempted to consolidate the Prussian debt in 1870, Mayer Carl was able to boast that “our house at Frankfurt will be the only firm entrusted with the new arrangement.”
These borrowing operations, as Mayer Carl knew full well, were to some extent a consequence of the government’s continuing budgetary difficulties. It is not easy to unravel Prussian financial policy in these years because of the disruptive effects of war and politics on the official statistics. But the available figures are unambiguous. According to published budgets, total public expenditure in Prussia had increased from 130.1 million thalers in 1860 to 168.9 million in 1867: the growth of the army and navy budgets accounts for about 40 per cent of the difference. However, these figures tell only part of the story, for actual expenditures were much higher. Between 1863 and 1868, budget targets were consistently overshot: altogether around 246 million thalers more was spent than intended. Here again military spending (including ordinary, extraordinary and off-budget figures) was the key: as a percentage of total spending it rose from 23 per cent in 1861 to 48 per cent in 1866. These expenditures were met by short-term borrowing (selling treasury bills to the Berlin banks), which was funded after 1866 by the bond issues described above. The increase in public debt was steep: from 870 million thalers in 1866 to 1,302 million just three years later. As we have seen, the fiscal strain of war on Prussia was much less than it had been for Austria for two main reasons. Firstly, Prussia began the wars of unification with a relatively low debt burden; secondly, economic growth meant that in macroeconomic terms the increase in debt was modest—less than 2 per cent of national income according to one estimate. Nevertheless, the contemporary bond markets (which lacked such modern data) were perturbed: the years 1864 to 1870 saw a sharp fall in the price of Prussian bonds, from 91.25 to 78.25.
Mayer Carl had no doubt that Bismarck remained strapped for cash. “Here there is such a want of money in the treasury,” he reported in May 1868, “that the government would be quite miserable if they thought that a war was likely to take place.” The government’s attempt to issue bonds secured on the tobacco monopoly in the autumn of 1868 was a failure. “Money here is tight,” he reported in April 1869, “[and] the last Prussian loan is flat.” Nowhere are the connections between public finance, private interest and foreign policy more visible than in Mayer Carl’s letters of May the same year:May 10: Here the Government is very hard up and old B particularly cross as nearly all the new taxes will be rejected [by the Confederation parliament] ...
May 23: Old B makes long speeches & coaxes all the members of the opposition but ... will not succeed to make the liberals vote for the new taxes. Meanwhile the Government is very much embarrassed and I should not be astonished if we come to have a new Finance Minister which would be a capital thing as the present man [von der Heydt] is a great Bosche and not a friend of the House ...
May 25: [T]he feeling in the house is a very disagreeable one ... but Heaven knows how the Government is to get out of the financial mess. As far as peace is
concerned it is a capital thing and our friends on the border of the Seine will not be displeased to hear of our difficulties ...
May 31: The King I am happy to say is thank heaven much better but old B has had a violent bilious attack & is very cross ... All my friends urge me to speak and to attack the Government about the new financial measures but I need not tell you how unpleasant it is for me, particularly as what one says is to be published all over the world and is generally misinterpreted ...
June 3: Old B says that he is ill, but I think that he is merely very much put out as all his new schemes have turned out to failure and the liberal parry is determined to oppose every measure which is not likely to bring a change in the system ...
June 5: Old B is quite well again & fancies that his scheme will be accepted in the Zoll Parliament, but I am quite certain that the duty on Petroleum will be rejected as all the liberals are determined to vote against it & the only consequence will be that he must resort to liberal measures.
June 10: Old B is so much disgusted with the opposition he met with, that he talks of resigning but it is an old trick & nobody believes in it ...
The most convincing proof of the government’s financial difficulties was the rejection that autumn of its proposal for a 100 million thaler lottery loan secured on the Prussian railways.11 Only after Camphausen had replaced von der Heydt at the Finance Ministry did Mayer Carl become more optimistic about the financial future.
Yet even as Bismarck tried and failed to secure adequate—and more important, politically uncontrolled—tax revenues for Prussia and the new Confederation, private finance in Germany was booming. This was the first phase of what became known as the Gründerzeit—the founders’ era, after the large number of new joint stock companies established between 1866 and 1873. “You have no idea what a competition there is now in business,” reported Mayer Carl in March 1870; “it is more than a mania and a regular disease like Cholera.” In this hectic period, Mayer Carl’s association with Hansemann brought him shares in numerous transactions: loans to the cities of Danzig and Königsberg and to the Silesian, Magdeburg and Cologne-Minden railways. Here too there was cause for optimism about the international situation; for one of the most ambitious new banks established in this period was the Preussische Central-Boden-Credit Aktiengesellschaft, a Prussian mortgage bank modelled on the French Credit Foncier. Originally Abraham Oppenheim’s scheme (though not according to Mayer Carl), the project was taken up by Hansemann in earnest in 1870 and brought to a successful conclusion. The domestic political appeal of the project from Bismarck’s point of view was obvious: here was a way to reconcile the East Elbian landowners to the new liberal era—through cheap credit. As Mayer Carl commented, “The King’s great wish is to have a Prussian Credit Foncier to please the new nobles who are in great awe of it.” For our purposes, however, it is the international significance of the scheme which is noteworthy: for it was from the outset intended to be a Franco-Prussian undertaking, the Paris Credit Foncier taking a leading share, along with the Banque de Paris and the French Rothschilds.12 Once again, it is probably unnecessary to infer a Machiavellian motive on Bismarck’s part. Although he was well aware of the imminent Spanish crisis when Bleichröder informed him of the Credit Foncier’s new issue on June 26, his silence on the subject was not designed to syphon off French capital on the eve of war; Bismarck simply wished the French Rothschilds to continue playing their now well-established role in Prussian finance. The real significance of the issue is the immense success it enjoyed in Paris: surely the ultimate folly of the Bonapartist bourse.
The House of Rothschild Page 33