Niall Ferguson's House of Rothschild: Money's Prophets 1798-1848 was hailed as "definitive" by the New York Times, a "great biography" by Time magazine, and was named one of the Ten Best Books of 1998 by Business Week. Now, Ferguson concludes his myth--breaking portrait of one of the most powerful families of modern times at the zenith of its power. From Crimea to World War II, wars repeatedly threatened the stability of the Rothschild's worldwide empire. Despite these upheavals, theirs remained the biggest bank in the world up until the First World War. Yet the Rothschild's failure to establish themselves successfully in the United States proved fateful, and as financial power shifted from London to New York after 1914, their power waned. At once a classic family saga and major work of economic, social and political history, The House of Rothschild is the riveting story of an unparalleled dynasty.
Ferguson is not only publishing massive works of history at an astonishing rate; he is publishing well-written and controversial books. The Pity of War (Forecasts, Mar. 8) caused a stir by arguing that Britain bore the brunt of the blame for WWI. The completion of his two-volume history of the Rothschild banking empire begins at a high point of wealth, power and civic involvement, with Benjamin Disraeli a close family friend and Lionel Rothschild playing a leading role in gaining Jews the right to sit in Parliament. The book ends with the post-WWII rebuilding of the Rothschilds into a far-flung "mini-multinational." Drawing on thousands of letters from private Rothschild archives, Ferguson does a masterful job of showing how the Rothschild financial empire interacted with the governments of Europe. His account is peppered with countless refutations of previous interpretations and analyses. Yet the larger historical picture is often blurred as Ferguson furnishes blow-by-blow accounts of, for example, the French Rothschilds' ultimately successful decades-long battle against the Cr?dit Mobilier. Readers will be left wanting more analysis of the larger sea change that consigned the Rothschild style of private banking to its current secondary status. And while he follows the senior partners in Britain and France (other houses, in Naples, Vienna and Frankfurt, either closed or simply receded from Ferguson's view), Ferguson sticks to their public deeds and roles, rarely venturing into the personal or the psychological. Still, this history is teeming with soundly argued expositions on the role of a singularly important family. Illus., charts, tables, appendices. (Nov.) FYI: In November, Penguin will publish The House of Rothschild: Money's Prophets 1798-1848 in paperback.
Copyright 1999 Reed Business Information, Inc.
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September 04, 2000
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Excerpt from The House of Rothschild by Niall Ferguson
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 hisprescriptions. "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!"
Her dogged refusal to quit the old house "zum gr�nen 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 B�rne 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 cal�che 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.
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 invited 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.
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 h�tel, 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.
Finally, it is important to bear in mind the anger felt in London and Paris towards the Vienna house after the d�b�cle of 1848. At times, James talked as if even he would not be sorry to sever his links with Vienna. "I have no interest in Vienna," he wrote to New Court in December 1849. "While others speculate against the government there, our people in Vienna are not so smart and are unfortunately poor businessmen. They always think they are doing business for the good of the state."
Yet in the end the partnership was renewed in 1852 with relatively limited alterations to the 1844 system and continued to function with as much success as ever in the following two decades. Why was this? The best explanation for the survival of the Rothschild houses as a multinational partnership lies in the vital role played by James in bridging the generation gap and binding the increasingly divergent branches of the family together again. As Charlotte remarked when she saw her uncle in Frankfurt in 1849, James had emerged from the crisis of 1848 with his lust for life and business undiminished:
I have seldom seen such a practically shrewd man, so worldly and canny, so mentally and physically active and indefatigable. When I reflect that he grew up in the Frankfurt Judengasse and never enjoyed the advantages of high culture in his childhood and youth, I am amazed and admire him beyond words. He has fun and takes pleasure in everything. Every day he writes two or three letters and dictates at least six, reads all the French, German and English newspapers, bathes, has a one-hour morning nap, and plays whist for three or four hours.
And this was James's routine when he was away from Paris. The James whom the young stockbroker Feydeau encountered in the rue Laffitte was as much a force of nature as he had been in Heine's heyday; if anything, age made James only the more formidable.
For all his youthful vigour, James nevertheless remained deeply imbued with the familial ethos of his father's day. Even before 1848, he had been worried by the signs of dissension between the five houses. Disagreements about the accounts, he warned Lionel in April 1847, were leading "to a state of affairs that in the end everyone deals for himself and this then creates a great deal of unpleasantness." "It is only the reputation, the happiness and the unity of the family which lies close to my heart," he wrote, echoing the familiar admonitions of Mayer Amschel, "and it is as a result of our business dealings that we remain united. If one shares and receives the accounts every day, then everything will stay united God willing." It was to this theme that James returned with passionate urgency in the summer of 1850--a letter of such importance that it deserves to be quoted at length:
It is easier to break up a thing than to put it back together again. We have children enough to carry on the business for a hundred years and so we must not go against one another ... We must not delude ourselves: the day when a [single] company no longer exists -- when we lose that unity and co-operation in business which in the eyes of the world gives us our true strength--the day that ceases to exist and each of us goes his own way, then good old Amschel will say, "I have �2 million in the business [but now] I am withdrawing it," and what can we do to stop him? As soon as there is no longer majority [decision-making] he can marry himself to a Goldschmidt and say, "I am investing my money wherever I like," and we shall never stop reproaching ourselves. I also believe, dear Lionel, that we two, who are the only ones with influence in Frankfurt, must really aim to restore peace between all [the partners] ... What will happen if we are not careful is that capital amounting to �3 million will fall into the hands of outsiders, instead of being passed on to our children. I ask you, have we gone mad? You will say that I am getting old and that I just want to increase the interest on my capital. But, firstly, all our reserves are, thank God, much stronger than when we made our last partnership contract, and secondly, as I said to you on the day I arrived here, you will find in me a faithful uncle who will do everything in his power to achieve the necessary compromise. I therefore believe that we must follow these lines of argument and do everything possible--make every sacrifice on both sides--to maintain this unity which, thanks be to the Almighty, has protected us from all the recent misfortunes, and each of us must try to see what he can do in order to achieve this objective.
These were themes James harped on throughout 1850 and 1851. "I assure you," he told Lionel's wife Charlotte (whom he had identified as an ally), "the family is everything: it is the only source of the happiness which with God's help we possess, it is our attachment [to one another], it is our unity."
It is in the light of James's campaign for unity that the partnership contract of 1852 should therefore be understood--not as weakening the ties between the houses, but as preserving them through a compromise whereby the English partners dropped their demands for full independence in exchange for higher rates of return on their capital. As early as 1850, James had outlined the terms of this compromise: in Nat's words, he proposed "that the rate of interest on the capital for us should be raised," provided always that the London house was more profitable than the others. This was also the thrust of his letter to Lionel quoted above; and it was the system finally agreed to in 1852. The British partners received a variety of sweeteners: not only were they permitted to withdraw �260,250 from their share of the firm's capital, but the interest on their share (now 20 per cent of the total) was increased to 3.5 per cent, compared with 3 per cent for James, 2.625 per cent for Carl and 2.5 for Amschel and Salomon. In addition, the rules governing the joint conduct of business were relaxed: henceforth, no partner could be obliged by the majority to go on business trips, while investments in real estate were no longer to be financed from the collective funds. In return for these concessions, the English partners accepted a new system of collaboration. Clause 12 of the agreement stated that "to secure an open and brotherly co-operation and the advancement of their general, reciprocal business interests" the partners would keep one another informed of any transactions worth more than 10 million gulden (c. �830,000), and offer participations of up to 10 per cent on a reciprocal basis. Otherwise, the terms of all previous agreements not specifically altered by the new contract remained in force including, for example, the procedures for common accounting. This undoubtedly represented a measure of decentralisation. But considering that the alternative (seriously discussed the following year) was the complete liquidation of the collective enterprise, it represented a victory for James.