The House of Rothschild

by Ferguson, Niall

  Was this nemesis after the hubris of Versailles? Alphonse thought so. Yet the financial crisis of 1873 and the subsequent onset of the so-called “Great Depression” —the decline in primary product prices which continued into the 1890s—did not spell the end of French strategic vulnerability. As early as January 1874, just four months after the last German troops had left French soil, Thiers’ successor the duc Decazes was accusing Germany of planning a new war against France. The following year, Bismarck’s mouthpieces in the German press asked “Is war in sight?” unleashing panic on French markets.

  The alarm proved to be a false one; possibly Bismarck had never intended anything more than to beat the militarist drum for domestic political reasons. To the Rothschilds, however, what was crucial was the decision of Disraeli and Gorchakov to put aside their differences in Central Asia in the interests of peace in Europe. At least, that was how Disraeli presented it to them. “Last evening,” reported Charlotte to her son, “[Dizzy] paid a flying visit to your father, and told him of his immense success in negotiating for the maintenance of peace on the continent.” The Prime Minister was, of course, indulging in his customary hyperbole. Still, the difference between his conduct and Gladstone’s in 1870—71 can hardly have escaped Lionel’s notice. The events of those years revealed two things: that conflicts between the great powers, though hazardous to them as a family, were not unprofitable to them as bankers; and that the key to international stability lay not in Paris, nor in Berlin—but in London.

  SEVEN

  “The Caucasian Royal Family”

  I could see how strangely like a Royal family the Rothschilds are in one respect—namely, that they all quarrel with one another, but are united as against the world.

  SIR CHARLES DILKE, MARCH 1879

  In Thomas Mann’s 1501 novel Buddenbrooks, which depicts the decline and fall of a Hanseatic merchant family and firm, decadence is detectable in the third generation and fatal in the fourth. It is certainly tempting to write the history of the Rothschilds after 1878 with this model in mind. As Mayer Amschel’s grandsons died, so leadership passed to a fourth generation which seemed to lack the entrepreneurial drive and financial aptitude which had made the family firm rise and prosper. New educational opportunities distracted them from business. The process of social assimilation into the traditional aristocracy transported them, physically and emotionally, from City to country. “A new era has decidedly begun in business,” Alphonse had written enthusiastically to his cousins in 1865. “Only the young generation which has had a college education is capable of comprehending the exigencies of the times. It is the young generation therefore which should be entrusted with the direction of the grand financial operations of the epoch.” But this young generation struck contemporaries as epigoni.

  The evidence is to hand for the construction of such a narrative. The deaths of Nat (1870), Anselm (1874), Mayer (1874), Anthony (1876) and Lionel (1879) left only their younger cousins in Frankfurt and Paris as representatives of the third generation. Of James’s sons, Alphonse remained a formidable force in French finance until his death in 1905, assisted by his younger brother Gustave, but Salomon James had died at the age of twenty-nine and Edmond played only a minor role in the business. Of the sons of Carl, Adolph withdrew from the business in 1863 and Mayer Carl’s health began to decline in the later 1870s, leaving the pious and financially unambitious Wilhelm Carl to preside over the last years of the Frankfurt house after his brother’s death in 1886.1

  Even in old age and illness, those members of the third generation who had been active partners in the business remained imbued with their father’s work ethic. Nat had been considered an invalid for many years before his death in February 1870: his servant marvelled how “for 18 years he has fought against what to others would have been an insupportable illness.” Yet, just hours before his death, “he talked to Alphonse about American stocks and the Russian Loan and ... a few seconds before he died he told his servants to bring him a cup of tea early in the morning as he wished to have the newspapers read to him.” Anthony too always remained first and foremost a banker, though he was overshadowed in the public mind by his more politically active elder brother. He invariably greeted friends and relations with the question “What’s the news?”—a true banker’s salutation.2

  For much of his career, Lionel suffered so severely from attacks of rheumatic gout (arthritis would seem the appropriate modern term) that on occasions he had to be carried to the House of Commons gallery to attend debates on Jewish emancipation. “For more than twenty years,” The Times observed, “he was wheeled from room to room of his house or from his carriage to his office in a chair constructed for the purpose.” Yet, as the newspaper also recorded, “up to the last working-day before the day of his death he continued to be the mainspring of a business which had no parallel in magnitude” and it was “on his sagacity and assiduity that the direction of the business chiefly depended.” Of course, the paper’s recently retired editor Delane was a close family friend, so allowance should perhaps be made for the obituarist’s enthusiasm; even so, his comments on Lionel’s role and abilities were insightful and are borne out by the performance of the London house under his leadership:A business which mainly depends on the delicate and incessant variations of the money market in all parts of the world ... requires ... a sort of intuitive instinct for appreciating the effect of variations of exchange, which is, perhaps, hereditary, and cannot, like most forms of ability, be acquired to order. But this is only, as it were, the instrument of calculation, and the qualities upon which its due use depends are far higher. Everything must, of course, depend on obtaining information from all parts of the world, and upon forming a just estimate of it when obtained; and for this is needed not merely a knowledge of men in general, but an almost cosmopolitan knowledge of the peculiarities of various countries and nations. Nor is it sufficient for this capacity of judgement to be exercised on mere matters of commercial exchange. Political prospects are intimately involved in the estimate to be formed of any great monetary transaction, and to appreciate these a close acquaintance is requisite with the course of public affairs throughout the world and with the character of public men. Baron Lionel de Rothschild possessed these qualities in a very eminent degree, and they combined to render him, not merely a successful manager of his great house, but a very considerable figure in the social and political world. Nothing diverted him from attention to the daily operations of his firm, and almost to the last he held in his hand the threads of all its intricate interests. He was as thorough in its management every day as if he was laying over again the foundation of his house’s fortunes.3

  Disraeli had no reason to exaggerate when he called Lionel “one of the ablest men I ever knew.” He was also one of the richest: when he died he left £2,700,000 (all but £15,000 to his wife and children), to say nothing of the houses at Piccadilly and Gunnersbury and one of the biggest private art collections of the era. Equally, those who disliked Lionel testified to his devotion to business. The day before he died, he summoned the broker Edward Wagg to his bedside at 148 Piccadilly to tell him: “I have been looking at my fortnightly account and you have made a mistake in the addition.”4 More than three decades later, stories still circulated which implied an almost avaricious trait: the financier Horace Farquhar told Herbert Asquith maliciously (and probably untruthfully) how “the old Jew always used to have on his table in his office in New Court a little chest in wh. he hoarded his pearls, and in the intervals of business handled and fondled them.”

  The eldest of the third generation, Anselm, shared many of these traits—in particular that asceticism which Max Weber identified as the mainspring of capital accumulation (though he sought its origins in Calvinism). He was a keen reader, an enthusiastic and expert collector of objets d‘art (which he housed in a specially built gallery in the Renngasse) and an avid theatre-goer with his own box at the opera; but otherwise he lived austerely, occupying only two rooms in the Vienna p
alace he had inherited from his father, and vacating the castle at Schillersdorf in preference for a small cottage-style house on the estate. He seldom invited guests there. As Hermann Goldschmidt recalled, “he lived the life of an immigrant and a miser. He was averse to any outward displays of wealth, travelled only by hansom cab and never had his own coach and four.” So self-effacing and parsimonious was he that he also refused to have his portrait painted. For most of their married life, he and his wife lived apart (mainly, it seems, because she disliked living in Vienna); but unlike his father, Anselm scrupulously avoided sexual liaisons in Austria, confining himself to fleeting dalliances when he visited London and Paris. (His preferred vice was snuff.) He too seemed to his sons to have boundless energy. When hunting for antiques in France and Holland in the summer of 1868, Ferdinand recalled, “he used to rise at 6 o’clock and remain on his legs until dusk, dragging the unfortunate two men [his secretary and his valet] with him shopping and sight-seeing.—I wish he had handed his constitution down to his sons.” A good deal of the running of the house was delegated to Goldschmidt—Anselm ignored as far as possible the other employees in the office, speaking French to accentuate his distance from them—but he remained the master, and an exacting one. When angry he would throw his pen across the room and spit. Despite a painful bladder complaint, he too remained active in the business to the last.

  It was entirely in keeping with Anselm’s old-fashioned style that he requested to be buried “with the greatest simplicity” in Frankfurt. “The funeral was as unpre tending as if it had been that of a poor Jew,” reported The Times. “The corpse was removed from the railway station in a mere carrier’s van... As the hour of the funeral had been kept secret, comparatively few persons were at the ceremony.” Yet this was the man who had left in his will a sum in excess of 50 million thalers—double the assets of the Jesuit order, as Bismarck rather gratuitously pointed out. The contrast could scarcely have been more marked with the funerals of James and of Lionel, whose interment at the recently established Willesden cemetery was attended by a throng of relations, Rothschild agents and brokers, MPs (including Sir William Harcourt and Thomson Hankey) and representatives of numerous Jewish organisations.5

  The Fourth Generation

  It might at first seem odd that it proved difficult to replace the third generation. After all, in an age of high fertility, the fourth generation was inevitably more numerous than the third, and one might have expected to find enough competent businessmen among the forty-four children born into it.6 Contemporaries were certainly impressed by the sheer number of Rothschilds. In 1859 the Goncourts noted with astonishment that there were approximately seventy-four Rothschilds at dinner following the wedding of Gustave and Cécile Anspach. It was Disraeli who famously declared “that there cannot be too many Rothschilds.” Was that not self-evidently true?

  Part of the problem was an over-supply of daughters. Though it may seem absurd to us, the third generation was conscious of having difficulty in producing sons: this anxiety is not wholly unintelligible, as the ratio of male to female children in the fourth generation was 17:27. Moreover, no fewer than five of the male children died in infancy.7 It was partly because none of Carl’s sons themselves produced a male heir that the Naples and Frankfurt houses were wound up, the former in 1863, the latter in 1901.

  Inevitably, the sons who survived were a step further removed from the ethos of work and calculation on which the family’s fortune had been founded. Indeed, even their own mother had a fairly low opinion of the three young men who were now intended to take over the management of the London house. With that harsh candour which she liked to employ, Charlotte wrote as early as 1840 that Natty “was a thin, ugly baby, but that did not signify; he was a boy, and as such most welcome for his father and the whole family. I never could prefer him to his sisters, and nursed him not so well as he ought to have been nursed.” By the time he was nine she had made up her mind that he “lack[ed] cordiality and frankness. He is reserved and shy and not generous; in fact he is the only one of my children fond of money for the sake of hoarding it ... [H]e is constitutionally indolent.” In the next six years there was an improvement—he seemed to apply himself to his studies—but “he remain[ed] shy” and Charlotte concluded bluntly: “[H]e will not be a clever, but a very well informed, highly cultivated man.”8

  Following in the footsteps of his Uncle Mayer, Natty went to Cambridge to read moral science (which included moral philosophy, political economy, modern history, general jurisprudence and the laws of England) in October 1859 and seems to have had no difficulty with his work.9 But he struggled with the commoner’s second year examination known as the “Little Go” because of its compulsory mathematical and theological elements.10 His letters to his parents suggest that he devoted more time to riding with the drag hounds, amateur dramatics and attending debates at the Union (a familiar story), though unlike the rest of the family, he showed almost no interest in art and architecture. If anything captured his attention, it was politics: from an early age he evidently enjoyed discussing political news with his well-informed father.

  Though a good beginning for a prospective MP, it could be argued that all this was a poor preparation for a dynamic City career. In particular, Natty’s lack of mathematical aptitude would seem to disprove The Times’s suggestion that the capacity for financial calculation was hereditary. His parents had expected more, as can be inferred from his self-justifying arguments in favour of hunting and the Amateur Dramatic Company:I have found my experience that in order to get on here at all it is absolutely necessary to take two hours at least of violent exercise per diem, so that if I do not go with the drag [hounds] I must do something else in the same way... The ADC takes up some time, but I have found I do not work one bit more if I do nothing but work and only destroy my health and make life up here a curse and a plague... I came up here unprepared and cannot expect to do much. If I am never seen, people will expect more and at the end of the time set me down for a greater fool than I am.

  Natty managed to pass the Little Go, but despite intensive “coaching” and encouragement from the Master of Trinity, William Whewell, and the Hulsean Professor of Divinity, Joseph Lightfoot (later Bishop of Durham), he seemed unlikely to secure honours, and left Cambridge without taking his final examinations at the end of Michaelmas 1862. After being elected to the Athenaeum (1860), entering the House of Commons as MP for Aylesbury (1865), becoming an officer in the Buckinghamshire Yeomanry and inheriting his uncle’s baronetcy (1876), Natty seemed destined for a political rather than a financial career. Thus it was for the evidence he gave before a Commons committee that he first won applause in the City. Charlotte was evidently surprised.

  It may of course be asked why she and Lionel so desperately wished their sons to be academically successful: despite Alphonse’s faith in “college education,” there is no obvious reason why an honours degree from Cambridge would have been an advantage in the City. On the other hand, the proportion of City bankers educated at public school, Oxford or Cambridge rose markedly in the course of the nineteenth century. Charlotte urged Leo to “find an hour or two in the course of the day to write English exercises ... [as] it would enable you, even in the practical routine of New Court life to draw up contracts, make statements upon important financial transactions, and furnish those great papers, which should really not be drawn up by clerks.” But her real aim, one suspects, was less to prepare Leo for “the real business of life... at New Court” than to give him the classical education she herself had missed and craved—and in so doing to add another trophy to the Rothschild collection. A degree, like a seat in the Commons, had no functional value to the Rothschilds as bankers, but was a prize in their campaign for complete social parity with the Gentile elite. “University honors,” she lectured her youngest son in 1865, “are excellent credentials; if they do not prove the winner to be possessed of great gifts and remarkable talents, they prove that he has applied and exerted himself to acquire
knowledge, that he has a firm will, energy, assiduity and perseverance, and those are valuable qualities.” Two years later, she reverted to the same theme:distinctions achieved at the University must be a passport, a letter of introduction to the favorable opinion of the world.—In your own family, in business, in society, in the House of Commons, at home and abroad, and in all classes of the community—a man who has taken a good degree at Cambridge or Oxford is more highly thought of, and this good opinion acts as an encouragement to every useful exertion throughout life.

  She and Lionel were furious when Leo lent some money to a friend, for this was a betrayal of social origins which Cambridge was partly supposed to efface:I always thought you had common sense, and never thought you silly enough to advance five hundred pounds to a stupid scamp, who has hardly as many shillings in the world that he can call his own. [D]anger ous as it is for all individuals to lend money—it is far more so for any one, who bears the name of Rothschild.—Indeed I have not expressed myself correctly; it is absolutely impossible that any person, any member, great or insignificant[,] of our family should think, for one single instant of anything so absurd.—the loan of money is perfectly certain to change a friend into an enemy.—Nobody would think of returning money to a Rothschild, but would shun the lender in consequence, and probably for ever—and we might sacrifice enormous sums without doing any good, or giving any pleasure.—I have never in the whole course of my existence, lent any one a single six pence;—if a gift can be of service, well and good; is [sic] the petitioner too proud to accept five or ten pounds let him, if he can refund the money, give it to a charity. I have acted upon that principle all my life—and thank God, have no imprudence to regret...