The House of Rothschild

by Ferguson, Niall

  Finally, and fatally, there was the question of where to stop Britain’s new jurisdiction. To the south of Egypt, religious revolt was raging in the Sudan under the leadership of the Mahdi. Again the Rothschilds encouraged British intervention, and again Gladstone found himself unable to resist the combination of imperialist sentiment at home and the over-ambition of “the man on the spot,” in this case “Chinese” Gordon. All concerned overestimated British power, the French Rothschilds cheerfully repeating a bourse story “that Gordon Pasha carried along £100,000 in Bank of England notes, the best English weapon to put an end to the revolt.” Far from reporting on the logistics of withdrawal from Sudan, as he had been instructed to do, Gordon sought to take on the Mahdi. The news reached London of his probable death on February 5, 1885. It was this crisis which finally persuaded Rosebery to join the government, a decision welcomed by Natty in revealing terms: “[Y]our clear judgments and patriotic devotion will help the Govt. and save the country. I hope you will take care that large reinforcements are sent up the Nile. The campaign in the Soudan must be a brilliant success and no mistake.”

  There can be no question that the Rothschilds benefited directly from the British occupation of Egypt. As Gustave said, British control was good news for most (though not all) Egyptian bondholders as “Egyptian credit obviously would benefit should England become jointly liable for Egypt’s external obligations.”18 Not only that, but it created a secure new form of bond for the Rothschilds themselves to issue: after 1884 all Egyptian bond issues were effectively underwritten by Britain. Between 1885 and 1893, the London, Paris and Frankfurt houses were jointly responsible for four major Egyptian bond issues worth nearly £50 million. The fact that these issues were handled by the Rothschilds, in partnership with Bleichröder and in one case the Disconto-Gesellschaft, had a diplomatic significance. In March 1885 it was agreed that the first of these loans would be guaranteed by all the interested powers, but Bismarck made ratification of this agreement conditional on German banks—meaning Bleichröder—being given a share in it. This ruled out the option of issuing the bonds through the Bank of England (as happened with issues for India and other colonies), and made a Rothschild operation the obvious solution. One of Salisbury’s first tasks on forming a minority administration in the summer of 1885 was to break the news to the Bank that he was “entrusting the issue of the English portion of the Loan to the agency of N. M. Rothschild, because that firm is one with the Houses of the same name in Paris and Frankfurt, and is in similar relations with the House of Bleichroeder in Berlin.”

  More important than any guarantee was the success with which Evelyn Baring stabilised Egyptian finance. The loans of 1890 and 1893 were conversion loans, issued to lower the interest on the Egyptian debt. Nor can this be portrayed in Egyptian nationalist terms as a triumph of foreign investors over Egyptian interests: under Baring, there were substantial infrastructural investments (railways and, most famously, the Aswan dam built between 1898 and 1904); yet the absolute debt burden fell from a peak of £106 million in 1891 to just £94 million in 1913 and with it per capita taxation. Put another way, at the beginning of the period the debt burden had been ten times current revenue; by the end the figure was just five. So strict was the British financial control that the Rothschilds were soon complaining that their commissions on Egyptian business were being squeezed. This may partly explain why the Rothschilds increasingly abandoned the field to Ernest Cassel after Baring left Egypt in 1907, though a more likely explanation is that Natty feared British control was slipping in the face of resurgent Egyptian nationalism.

  The heaviest cost of the shift to formal British control was paid not by bondholders or taxpayers but by British foreign policy. Between 1882 and 1922, Britain felt obliged to promise the other powers no fewer than 66 times that she would end her occupation of Egypt, but all attempts to extricate Britain from Egypt foundered in the face of the irreconcilable views of the other powers. In September 1885 Natty was asked to take soundings in Berlin about Drummond Wolff’s idea of replacing British troops with Turks in Egypt. Bismarck’s son Herbert replied on his father’s behalf with a resounding negative. The idea floated by the Foreign Office in 1887 of “Neutralisation of Egypt under English Guardianship” was equally foredoomed to fail; the French insisted the Sultan say no. In practice, a “veiled Protectorate” (Milner’s phrase) had been established and a momentous precedent set—just as Gladstone had warned would happen at the time of the Suez Canal share purchase.

  The ultimate irony is that one of the principal beneficiaries of the operation proved to be none other than Gladstone himself. In late 1875—possibly just before his arch-rival’s purchase of the Suez Canal shares—he had acquired £45,000 (nominal) of the Ottoman Egyptian Tribute loan of 1871 at a price of just 38. As the editor of his diaries has shown, he had added a further £5,000 (nominal) by 1878 (the year of the Congress of Berlin); and in 1879 a further £15,000 of the 1854 Ottoman loan, which was also secured on the Egyptian Tribute. By 1882 these bonds accounted for no less than 37 per cent of his entire portfolio (£51,500 nominal). Even before the military occupation of Egypt—which he himself ordered—these proved a good investment: the price of 1871 bonds rose from 38 to 57 in the summer of 1882, and had indeed reached 62 the year before. The British takeover brought the Prime Minister still greater profits: by December 1882 the price of 1871 bonds had risen to 82. By 1891 they had touched 97—a capital gain of more than 130 per cent on his initial investment in 1875 alone. Small wonder he once described Turkish state bankruptcy as “the greatest of all political crimes.” When we speak of Victorian hypocrisy, Gladstone’s repressed attitude towards sex often springs to mind; but it was his attitude to imperial finance which was truly hypocritical. It had been heroic hypocrisy on his part to denounce the purchase of the Suez Canal shares by Disraeli on behalf of the government when he was making one of the most profitable private speculations of his career on the back of it. The Eastern Question was one of the main causes of the schism between the Rothschilds and Gladstone in this period; it is tempting to conclude that Gladstone’s double standards—contrasting so markedly with Disraeli’s romantic hyperbole—were at the root of the rift.

  TEN

  Party Politics

  Dizzy was here . . . [O]ur friend [is] in very good spirits and not at all put out on account of the violent attacks in the House. What do you say to the visitor who is now with dear Ma whilst I am writing—this I have just heard, that the famous Mr Gladstone is with her drinking tea and eating bread and butter, I doubt whether he will come to see me.

  LIONEL TO LEO AND LEONORA, MARCH 1876

  There is no question that the debates over Egypt and Turkey in the 1870s did much to alienate the Rothschilds from Gladstone. It would be wrong, however, to suggest that there was an outright break with the Liberal party or an unqualified acceptance of Conservatism. There is a nice symbolism in the fact that Disraeli could call on Lionel on the same day in 1876 that Gladstone had tea with Charlotte. Nor was that an isolated coincidence. Four years later, Ferdinand wrote a letter to his friend and relation by marriage the Earl of Rosebery, describing a similar occasion: “Lord B[eacons] field1 is staying with [Alfred]—the other day he had to be sent to dinner with Natty, as Gladstone came to dinner to meet the Duke of Cambridge. (Private.)” Until 1905 there was always something of a “revolving door” quality to Rothschild politics: although members of the family (in particular Natty) became more and more closely identified with Conservatism—or rather with Liberal Unionism—channels of communication to the Gladstonians were never closed. Nor were relations with the Conservative leadership after Disraeli always completely harmonious. The politicisation of the Jewish immigration issue after 1900 provided a salutary reminder of why the family had become Liberals in the first place.

  Undeniably, the Rothschilds of the fourth generation thought about politics in more ideological terms than their parents and grandparents—most obviously over Ireland, but also over the “
social question” (or questions) posed as European cities grew ever more crowded. These were the issues which did most to divide them from Gladstone. However, it was not until after the turn of the century that Natty gave up on the Liberals entirely. Like his father and grandfather before him, he continued to believe that, on matters of finance and diplomacy, the Rothschilds should be heeded no matter which party was in power. This partly explains the rather similar relationships he had with politicians as different in political orientation as Rosebery, Lord Randolph Churchill and Arthur Balfour. In the intimate world of late Victorian politics, the Rothschilds met such men frequently: in the City (to talk finance over lunch at New Court) and in the West End (to talk politics over dinner in the clubs and houses of Piccadilly). They and numerous other members of the political elite, Liberals and Tories alike, were regular guests at the Rothschild country houses (especially Tring, Waddesdon and Halton). It was in this milieu that many of the most important political decisions of the period were taken. And when the Rothschilds could not speak to their political friends, they wrote to them—luckily for the historian, because Natty’s decision that his own correspondence be destroyed posthumously has left little in the Rothschilds’ own archives. Although the letters from Paris still allow us to infer a good deal about what was going on at New Court, much of what follows is therefore based on the papers of the politicians themselves, leaving the historian to wonder how much of the Rothschilds’ political role remains irrevocably hidden from posterity.

  From Gladstone to Disraeli

  Part of the family in fact never ceased to be Liberal. To the end of their lives, both Mayer and Anthony remained firm if ideologically unsophisticated Liberals. Mayer relished defending his Hythe seat against the Tory squirearchy, drumming up votes from the Folkestone fishermen, while Anthony continued to lean to the Cobdenite wing of the party. It was Anthony who was heard to declare in September 1866: “The sooner we are rid of the colonies, the better for England”—a surprising sentiment, it might be thought, for a Rothschild of this period, and an expression of uncompromising economic liberalism. Nor should it be forgotten that Anthony’s daughters Constance and Annie remained firmly attached to the Liberal party throughout their lives and that Mayer’s daughter married the man who would succeed Gladstone as Liberal Prime Minister.

  Even Lionel’s sons began their political careers as avowed Liberals; and when their cousin Leo took to the hustings for the first time in 1865, he explicitly asked voters “whether you would rather be ruled by Palmerston, Russell and Gladstone or Derby, Disraeli and Malmesbury”; the former grouping plainly had his support. Standing as a Liberal for Aylesbury in the same year, Natty “drove over to Missenden and [was] met by a large party who promenaded me through the town and over the hills and far away like a tame bear.” Asked by Non-conformist voters if he would support the abolition of Church rates, he gave a categorical “yes.” This was a position which recalled the doctrinaire liberalism he had evinced as an undergraduate at Cambridge.

  It is also important to note that there continued to be frequent contacts between members of the family and Gladstone right up until the end of his political career. His accession to the premiership for the first time in December 1868 did not change a pattern of intercourse which had begun in the 1850s. Lord Granville relayed Rothschild views about the 1868 election to Gladstone when he stayed at Mentmore the following year, while Gladstone himself dined with Lionel and Charlotte at 148 Piccadilly in 1869 and 1870. There were also frequent “business” meetings with Lionel. In April 1869, for example, the two men met to discuss the budget and, as we have seen, Gladstone had several important interviews with members of the family during the Franco-Prussian war of 1870-71. He also called on Lionel at New Court in July 1874 and again a year later (though his diary does not reveal why). It was only after the Suez share controversy that these meetings apparently ceased—though Lionel still passed on the occasional bit of gossip via Granville.

  Even after Suez, Gladstone maintained a more than merely social acquaintance with Lionel’s wife Charlotte. In 1874 he sent her his portrait and a year later recorded in his dairy a conversation with her “on the state of belief.” This led to an exchange of letters lasting until August the following year in which Charlotte sent Gladstone a succession of scriptural commentaries by Jewish authors, evidently to assist him in his theological researches. Charlotte appears to have declined mentally after her husband’s death; but Gladstone continued to call on her at Gunnersbury—visits her son described as “almost the last pleasure my dear mother enjoyed before her illness” and death in 1884. Despite their political differences, he and Natty dined together in 1884 and 1885, and met on a number of other occasions (principally to discuss Egyptian matters) during Gladstone’s third ministry. Out of office, the Grand Old Man was just as welcome to dinner, and visited Tring in February 1891.

  Nor did Gladstone feel any inhibitions about resuming with Natty’s wife Emma the scholarly correspondence he had earlier conducted with her mother-in-law. In August 1888, for example, he wrote to her asking for her help in tracing “a popular but able account of the Mosaic law compared with other contemporary or ancient systems in its moral and social aspect on a number of points—the comparison being greatly in its favour.” Emma was no theologian (she preferred to discuss English and German literature) but she was evidently pleased to be addressed by such an eminent figure and did her best to assist him and to find common ground. Thanking him for a signed copy of one of his scriptural works, she observed “that though our needs differ on so many points, the Christians and the Jews agree in their fidelity to those Holy Scriptures of which you say ‘they arm us with the means of neutralising and repelling the assaults of toil in and from ourselves!’ ” A shared enthusiasm for Goethe provided further matter for correspondence. Gladstone also socialised with Ferdinand and his sister Alice as well as with Constance and her husband Cyril Flower, to whom he offered a peerage and the Governorship of New South Wales during his fourth and final ministry. In 1893, Annie too had the pleasure of seeing “the G.O.M.” (“Grand Old Man”); in a letter to her sister, she described gleefully how “his old face lights up with vehemence and fire when he talks of the vile Turks.” Much to the consternation of the radical press, Gladstone accepted an invitation to Tring in the same year, despite the extent of his political differences with Natty by this time. A reciprocal visit by Natty and Emma to Hawarden in 1896 suggests, however, that the subject of politics was now being avoided. When Emma and Gladstone corresponded after this visit it was on the subject of the maximum circumference of a birch tree. It seems that “Mr G.” and her husband had finally found a shared enthusiasm—for trees.2

  Yet these continuing personal contacts cannot disguise the Rothschilds’ unmistakable drift away from Gladstone’s politics. Plainly, this had much to do with the uniquely intimate relationship between the Rothschilds and Disraeli. In his early years, as we have already seen, he had romanticised them in his novels, had cultivated them socially and had turned to Lionel on occasion for tips on French railway share speculations. These were unsuccessful, and Disraeli’s finances—a tangled mess of debts and usurious interest payments—reached their nadir at the end of the 1850s. It should be stressed that, contrary to contemporary rumour, the Rothschilds did not bail him out.3 In 1862-63 a wealthy Yorkshire landowner named Andrew Montagu offered his assistance, and an arrangement was reached whereby he bought up all Disraeli’s debts in return for a £57,000 mortgage at 3 per cent on Hughenden, considerably reducing Disraeli’s annual expenditure. Not long afterwards, he inherited £30,000 from Mrs Brydges Williams, one of those devoted elderly ladies whose affections he excelled at winning, and he also made around £20,000 from his novels. It was claimed after Disraeli’s death that the Rothschilds paid off the mortgage on Hughenden before his nephew Coningsby inherited it, but there was no obvious need for them to do this.

  In the early days, familiarity with Disraeli had bred a degree of contempt, not
least because of his idiosyncratic attitude towards his father’s faith. By the 1860s, however, his political standing was sufficiently high for disrespect to give way to admiration. Charlotte’s letters during the Reform Bill period repeatedly pay tribute to his political abilities. “Mr Disraeli” was “delightfully agreeable,” she wrote typically in 1866: “[W]e listened to him with intense admiration, dear Papa and I ... It was a great treat to hear him, and even Mrs. Disraeli’s presence was unable to mar the pleasure.” Lionel too perceptibly warmed to Disraeli as he neared the top of the greasy pole. During the Reform debates of 1867, the two were notably close, dining together regularly after the House rose and exchanging political confidences. The tone of these letters suggests an almost complete absence of party-political friction: Disraeli definitely did not treat Lionel as a Chancellor of the Exchequer would be expected to treat an Opposition MP, while Lionel’s political commentary in his surviving letters is so neutral that it would be hard to infer his party allegiance in the absence of other evidence. Only occasionally did Disraeli prove evasive. In August 1867, for example, he “called after the Cabinet on Saturday but,” as Charlotte noted with disappointment, “Papa’s utmost endeavours could not penetrate through the great man’s official reserve;—he would not tell Papa a word, and the fate of the Reform Bill is in the clouds.” Mayer too was impressed by Disraeli’s bold leadership in this period, as was his nephew Natty.