The House of Rothschild (24 page)

THE EARL OF SHAFTESBURY, 1859

 

 

O
n the evening of Thursday January 14, 1858, the Austrian ambassador in Paris was dining at Alphonse de Rothschild’s house in the rue Saint-Florentin when a clerk from the Rothschild office arrived with an urgent message. James, who was also present, left the room and returned almost at once—“quite pale,” according to Hübner—to inform the assembled company that Italian terrorists had made an attempt on the lives of Napoleon III and the Empress Eugénie. Did James discern that this would be the catalyst for yet another French intervention in Italian affairs, this time decisively on the side of “the revolution” and against Austria? It seems unlikely; it would have been more logical to expect the unscathed Emperor to react against the Italian nationalist movement—and that was the course he initially appeared to take.

Yet even as he acquiesced in the execution of his own would-be assassin, Felice Orsini, Napoleon chose to use him as the channel for a strange communication of sympathy with the nationalist cause: two letters, supposedly by Orsini, were made public before his execution, the first of which declared that “until Italy regains her independence, there can be no certainty of peace for Your Majesty or for Europe.” If he himself did not draft this call to arms, Napoleon undoubtedly intended to answer it. Almost immediately he made overtures to the Piedmontese government; and on July 20 met Cavour at Plombières to discuss nothing less than a redrawing of the map of Italy: in return for Savoy, Cavour suggested, Napoleon should help Piedmont to create a Kingdom of Upper Italy “from the Alps to the Adriatic,” which would then form an Italian federation with the Papal states, the Two Sicilies and the remaining states of central Italy. It was not, in fact, until January 1859 that France and Piedmont reached a formal agreement along these lines, symbolised by the marriage of Victor Emmanuel’s daughter Clotilde to Napoleon’s disreputable cousin Prince Jérôme (Nice was also sacrificed to France for the greater good). But the diplomatic manoeuvres of the intervening months, accompanied as they were by repeated attacks on Austria in the French press, gave James increasing cause for concern—or so it appeared.

On December 5, James went to see Napoleon to complain about the effect on financial confidence of an article in the previous day’s
Moniteur
which, unbeknown to him, had been inspired by Jérôme. Napoleon, after an uncomfortable silence, assured him that he had “no intention of making changes in Italy”; despite his objections to Austrian policy, he “protested his pacific intentions.” A month later, however, the most Napoleon would say to Hübner was “that if relations [between France and Austria] were not as good as he desired, that would not affect in the slightest his sentiments towards his sovereign”; this did nothing to reassure James, who visited the ambassador the next day with the English ambassador Cowley in a state of “great alarm.” There was, Hübner reported, panic at the Paris bourse. So James went to see the Emperor once again, who now assured him that he had not intended to offend Hübner. James “returned quite satisfied, and caused the funds to rise on the bourse.” Yet just three days later the market slumped back on the announcement of the marriage between Jérôme and Clotilde; Napoleon himself admitted that, though France was behind him, he did not have the bourse on his side. When James went hunting with the Emperor on January 23, the latter pointedly complained about Austrian military reinforcements in Italy and warned that Austria “might attack Piedmont.” And so the guessing game continued: the following weekend, James asked whether he should undertake a loan to Austria. Napoleon did not object; but James assured Hübner in February that de Rothschild Frères had “refused decidedly to give money to the Piedmontese until all danger of war had disappeared,” despite a direct request from Jérôme. On March 10 there was another panic at the bourse amid rumours that an English attempt at mediation had failed; once again Hübner detected James’s alarm. But when Cavour himself came to Paris two weeks later, following Russian proposals for a congress and an Austrian demand for Piedmontese disarmament, it appeared that the crisis was once again abating. “So, M. le baron,” he was heard to ask James, “is it true that the bourse would rise by two francs the day I resign as Prime Minister?” “Oh, monsieur le comte,” replied James, “you underestimate yourself!” It was at around this time that James delivered himself of another
bon mot,
a barbed allusion to Napoleon’s famous speech at Bordeaux seven years before:

“Entente fous,” he concluded darkly, à la Nucingen, “bas de baix, bas d‘embire.”

It was the same in London, where Disraeli—who owed his ministerial office to Palmerston’s resignation over the Orsini affair—was kept closely informed of developments by Lionel. On January 14, he wrote to Derby, relaying information which doubtless came from New Court:

Lionel himself called in his election address on April 16 for “a strong government,” whether Liberal or Tory, capable of responding to the “critical” events on the continent. This could be interpreted as an endorsement of the Palmerstonian line of strong support for Piedmont against Austria; but there were some Liberals who suspected Lionel of studied ambiguity, to conceal his own pro-Austrian sympathies. It was the first of many hints that, in the realm of international relations, the Rothschilds still had more in common with the Tories than with the Liberals. Shaftesbury (an opponent of emancipation, and therefore hardly unbiased) described Lionel on the eve of the battle of Magenta as “almost frantic, the loss of Lombardy to [that is, by] Austria is a loss of his rail roads and his dividends on his loan! ... Strange, fearful, humiliating, but so it is, the destinies of this nation are the sport of an infidel Jew!”

Between 1859 and 1871 a succession of military conflicts in Europe and in the Americas confronted the Rothschilds with new and apparently insoluble dilemmas. Each was presented by one side as a war of unification—the unification of Italy, of the United States, of Germany—and so historians tend to regard their outcomes as in some sense predestined, if only by the “law” of political economies of scale. In reality, they were wars between multiple states, the outcomes of which were far from easy to foresee. Nationalism was not the decisive factor: the “unification” of Poland failed in 1863; the “unification” of Denmark failed the following year; the “unification” of the slave states the year after that; and the “unification” of Mexico in 1867. Nor was it unitary nation states which the politicians intended to create, but federations: Cavour originally planned a North Italian federation; in America, the war was a war about federalism; and in Germany Bismarck resolved in 1866 “to stick more to the confederation of states [model], while in practice giving it [the North German Bund and later the German Reich] the character of a federal state with elastic, inconspicuous but far-reaching forms of words.” Moreover, all the conflicts could have turned out differently if there had been intervention by one or both of the world’s two superpowers, Britain and Russia. As it happened, both elected to stay on the sidelines provided events in Europe had no implications for events in the Near East, to which they attached more significance; but this non-intervention was never wholly certain.

The choices faced by the Rothschilds were indeed far from easy. When Piedmont went to war with French support against Austria, which side should the Rothschilds support, given their financial involvement with all three states? When the states of the Union and the states of the Confederacy went to war in America, whom should the Rothschilds support? Imports of Southern cotton and tobacco were as much a part of their transatlantic business as investment in the Northern states and railways. When Prussia and Austria fought Denmark, it was perhaps less problematic, though the ties between the British and Danish crowns at times discomfited the London Rothschilds. But when Prussia fought Austria and other members of the German Confederation, yet more conflicts of interest arose; as they did again when war broke out between Prussia and France in 1870.

The traditional inference drawn from all this is that the wars of the 1860s must have cost the Rothschilds dear. To be sure, the diplomats’ diaries from the period are full of references to anxious Rothschilds blanching at this or that piece of bad news: the descriptions quoted above of their responses to the Italian war of 1859 are typical. James himself famously reiterated his family’s traditional aversion to war when he told Bleichröder in 1862 “that it is the principle of our house not to lend money for war; while it is not in our power to prevent the war, we at least want to retain the conviction that we have not contributed to it.” And it seems at first sight logical to infer from the repeated convulsions of the international financial markets that when war did come, it was damaging to the Rothschild balance sheets. Even more persuasive, the unifications of first Italy and then Germany seem to have sounded the death knell for two of the five Rothschild houses. The Naples house was wound up in 1863, just three years after Garibaldi’s redshirts took Sicily from the Bourbons, paving the way for the annexation of their ancient kingdom by the House of Savoy. The firm of M. A. von Rothschild & Söhne limped on for three decades after the Prussian annexation of Frankfurt; but its decline (at least in relative terms) seems to date from 1866, the moment at which Berlin forcibly staked its claim to be the new financial centre of Germany.

There is, however, a defect in this argument, namely that it is substantially contradicted by the available evidence of the Rothschild banks’ economic performance in this period. As table 3a shows, the 1860s and 1870s were two of the London house’s three most profitable decades for the entire period before 1914 (the 1880s was the other).

Taking all five houses together, their average annual profits rose to unprecedented levels in the years 1852 to 1874 (see table 3b). The later periods 1874-1882 and 1898-1904 were more profitable, but compared with what had gone before, the “unification years” were golden ones.

Of course, such averages may be misleading, as they lump together periods of war and peace. But even when annual figures are analysed more closely, the results are unexpected. Illustration 3.i shows that the years 18 5 9-6 1 -the years of the wars of Italian unification—were in fact the most profitable years in the history of the Naples house.

Source: RAL, RFamFD/13F.

Source: Appendix 2, table d.

Admittedly, the figures for the London house lend more support to the theory that the wars of the period were detrimental to the Rothschilds. In order to make a comparison, illustration 3.ii compares annual profits at New Court with those of two leading City rivals, Barings and Schröders, in each case calculating profits as a percentage of capital at the end of the previous accounting year. This indicates quite strongly that the years 1863—7—the years of the wars of German unification—
were
bad years for the London house; its most profitable years were years of peace: 1858, 1862 and 1873. It was Barings (and to a lesser extent Schröders) who seemed to thrive in the war-torn mid-1860s—though for Barings these high profits probably had more to do with the return of peace in America than with war in Europe. Nevertheless, it would be absurd to argue that there was no connection between the overall profitability of the period as a whole for the Rothschilds and the recurrence of military conflict. For, as we shall see, it was primarily by financing the European states’ preparations for war and the international transfers which tended to follow the wars of the period that the Rothschilds were able to boost their profits in the years of peace. Far from damaging their position as the world’s leading multinational bank, the wars of the mid-nineteenth century generated unprecedented business for the Rothschilds, just as fifty years before it had been war which had set them on their way to fortune and notoriety.