Read The House of Rothschild Online
Authors: Niall Ferguson
The House of Rothschild (39 page)
By contrast, James’s death seemed to leave the Rothschilds in a position of unrivalled supremacy. “There is after all only one less Rothschild,” declared the author of one panegyric in 1868: “The Rothschilds carry on.” In 1870 the British magazine
The Period
used a now familiar image when it portrayed Lionel as the new Rothschild “king” upon his throne of cash and bonds, accepting the obeisances of the rulers of the world—among them, the Emperor of China, the Sultan, Napoleon III, the Pope William I and Queen Victoria (see illustration 5.i).
The Period
used a now familiar image when it portrayed Lionel as the new Rothschild “king” upon his throne of cash and bonds, accepting the obeisances of the rulers of the world—among them, the Emperor of China, the Sultan, Napoleon III, the Pope William I and Queen Victoria (see illustration 5.i).
Yet the Credit Mobilier’s failure did not represent a generic failure of joint-stock banking: on the contrary, the years after James’s death saw no slackening in the proliferation of such banks. And as international financial markets grew larger, more competitive and better integrated, the relative importance of the Rothschilds’ concentration of private capital was already declining, immense though it was. Two years before James’s death, the French journalist Emile de Girardin commented:
The great [private] banking houses have lost their influence. They can still, when the political and monetary circumstances do not go against them (which is becoming rare) determine the great [financial] movements, but ... from now on the universal suffrage of speculation will prevail over the influence of this or that [private] banker.
The reign of the “banquiers,” he suggested, was coming to an end; “the reign of the institutions, of the great financial companies” was beginning.
If 1868 marked a turning point in French financial history, did it also mark a political turning point? It is tempting to argue that it did—that James’s death, following hard on the heels of the Credit Mobilier’s collapse, sounded a kind of financial death-knell for the regime. “L‘Empire, c’est la baisse,” James had said in 1866; was not its political demise also legibly imminent after the Prussian victory over Austria? It would be convenient for the historian’s narrative if this were true—if “the orthodox bankers” really had “delivered a deadly blow to the already tottering credit of the Second Empire.” In reality, the most pronounced feature of the period between 1866 and 1870 was the optimism of the French financial markets. There undoubtedly had been a
baisse
tendency between 1863 and 1866. From a peak of 71.75 in late October 1862, the rente had fallen to a low of 64.85 in November 1864. But thereafter its trend was upwards: the crisis precipitated by the Austro-Prussian conflict, which James had cited as an argument for a change in French policy, was in many ways just a temporary check. Prices touched their lowest point (60.80) on April 28, 1866, almost two months before war broke out; they actually rose from 63.03 to 68.45 in the week which saw the battle of Königgrätz. There were ups and downs thereafter—often linked to fears about Napoleon’s health—but the general trend is unmistakable. The closing price on the week ending May 21, 1870, was 75.05, a level not seen since the Empire’s halcyon days in the 1850s. Seldom has a débâcle been so blithely unanticipated by the bond market as that of 1870.
baisse
tendency between 1863 and 1866. From a peak of 71.75 in late October 1862, the rente had fallen to a low of 64.85 in November 1864. But thereafter its trend was upwards: the crisis precipitated by the Austro-Prussian conflict, which James had cited as an argument for a change in French policy, was in many ways just a temporary check. Prices touched their lowest point (60.80) on April 28, 1866, almost two months before war broke out; they actually rose from 63.03 to 68.45 in the week which saw the battle of Königgrätz. There were ups and downs thereafter—often linked to fears about Napoleon’s health—but the general trend is unmistakable. The closing price on the week ending May 21, 1870, was 75.05, a level not seen since the Empire’s halcyon days in the 1850s. Seldom has a débâcle been so blithely unanticipated by the bond market as that of 1870.
How are we to explain this? The plain answer is that the Second Empire after Königgrätz was a foolish rentier’s paradise. This was because monetary conditions, for primarily international reasons, eased. An improvement in the French balance of payments, combined with the creation of the Latin Monetary Union, led to an influx of gold and silver into the Banque de France’s reserve, allowing the discount rate to be lowered to 3 per cent in August 1866 and 2.5 per cent in May 1867. At the time there was much gloomy comment about the contemporaneous decline in industrial activity—investment in railways tailed off sharply after 1862—but the so-called “strike of the billion” (a reference to the Banque’s unprecedented reserves) had its positive aspect in rising bond prices. A new issue of rentes worth 340 million francs in the summer of 1868 was heavily oversubscribed. The harvests of 1868 and 1869 were good too. All this is important because it helps to explain why France, though she lost the war in 1870, was able to win the peace in 1871-3.
The financial markets’ buoyant mood in the late 1860s was further encouraged by the liberal reforms introduced by Napoleon. The first tentative steps away from dictatorship had been taken in 1860 and 1861, which saw modest increases in the power of the hitherto rubber-stamping Legislative Assembly; but it was not until 1867 that Napeolon III began to move rapidly towards a “Liberal Empire.” Deputies in the Legislative Body were given the right to question ministers; and in 1868 restrictions on the press were lifted. In the short run, this merely opened the lid of a Pandora’s box of criticism, at its most vitriolic in the pages of Henri Rochefort’s
Lanterne.
Perhaps the unfettered opposition’s greatest success was in exposing the extraordinary financial irregularities perpetrated by Georges Haussmann, the prefect of the Seine, to pay for his grandiose reconstruction of Paris, that most tangible achievement of the imperial regime. In the elections of May 1869, despite the best efforts of Rouher, only 57 per cent of votes were cast for the government compared with figures in excess of 80 per cent in the 1850s.
Lanterne.
Perhaps the unfettered opposition’s greatest success was in exposing the extraordinary financial irregularities perpetrated by Georges Haussmann, the prefect of the Seine, to pay for his grandiose reconstruction of Paris, that most tangible achievement of the imperial regime. In the elections of May 1869, despite the best efforts of Rouher, only 57 per cent of votes were cast for the government compared with figures in excess of 80 per cent in the 1850s.
In all this, the Rothschilds played an important though somewhat ambivalent part. As early as December 12, 1866, Disraeli told Stanley he “had received from one of the Rothschild family alarming news as to the state of France. It was thought that people were getting tired of the empire.” James viewed the liberalisation of the Empire with scepticism from the outset: “I find it very difficult to believe,” he told his children in January 1867, “that these liberal alterations can do much good for credit or for the country; indeed, it is a sign of great weakness.” In a remarkable letter to his sons, James set out what was in effect his political testament:
You are going to say that your father is changing his way of thinking, and that he is on one side very liberal, in the way I have written to you on the question of Spain, and on the other anti-liberal vis-à-vis France. Let me begin by telling you that, strictly speaking, you are right, but there is within me on one side a man who is political and a liberal and on the other side a financial man, and unfortunately [a country‘s] finances cannot progress without liberties, but [they progress] even less with too many. I turn my thoughts to the past, and to all that we saw during fifteen years of Louis Philippe’s reign, when the government allowed [deputies] to address the house as freely as possible, and granted complete freedom of the press. Where did that lead us? To the overthrow of the government and all the changes and revolutions which have happened since. For unfortunately France is a country of vanity, where an orator can address the house to show off his talent in pretty speeches without thinking about the real interest of the nation. Now I believe that liberties are necessary in this sense, that people should have the right to publish simple articles and that they should be allowed to speak frankly about things which everyone talks about, but it is a long way from that to all the liberties which the Emperor is willing to grant. I tell you candidly that it is a very serious and hazardous thing and that willy-nilly we will be forced to go to war, not because of the external danger but rather because of excessive liberties granted too soon and too quickly. A man who has been in prison a long time cannot easily breathe the air he is eager to enjoy, and when he comes out he takes in too much at once and it takes his breath away and I fear that that is what will happen with the freedom of the press ... I only hope that the law will include in its terms the restrictions which will be necessary to halt the evil that that otherwise might well lead us to war.
Alphonse shared some of his father’s pessimism, though his point of view was not so strictly economic. As he saw it, “one of these days the liberal movement [would] simply become irresistible”; but he predicted “conflicts” and further political upheavals to come. At the end of 1866, he told his mother-in-law Charlotte that he was (as she recorded):
convinced that the Empire cannot last, but will be succeeded ere very long by a republic—a republic gratefully accepted by the whole of France as a state of transition, which will allow the most urgent reforms to be introduced, and allow time for the selection of a ruler, King or Emperor from the ranks of the numerous living representatives of the Bourbon and Orléans families.
When his in-laws expressed the hope that Napoleon would continue his liberal policy, he responded bleakly: “What is necessary above all is that one have a policy, for in truth they do not know where they are going, or with whom they are going.” But that did not restrain him from active opposition to the Bonapartist regime now that the opportunity presented itself. In the summer of 1867 he stood for election to the local council of Seine-et-Marne on an anti-government platform. Interestingly, James expressed “a little vexation that his son is counted among the members of the opposition,” and was inclined to deprecate the path of “open opposition.” Indeed, he explicitly assured Napoleon that “he was not of the side of the opposition.” But at the same time he did not restrain his son. “No minister,” he told his son, “will take it upon himself to put us into the Opposition.” In other words, he regarded Alphonse’s activity as a way of putting pressure on the government, in the belief that no French government could afford to risk alienating the Rothschilds.
Nor did James object to the activities of Gustave’s friend Léon Say, whose articles in the
journal de Débats
in 1865 in many ways initiated the campaign against Haussmann’s Parisian regime and provided the basis for Jules Ferry’s famous pamphlet, Les
Comptes fantastiques d‘Haussman.
As a member of the boards of both the Zaragoza and the Nord railways, Say was widely regarded as a Rothschild man, if not a Rothschild “servant.” Although he evidently had political ambitions of his own, there is no doubt that in attacking Haussmann he was grinding a Rothschild axe. Since 1860, when the Rothschilds had carried out a minor funding operation for the city of Paris, Haussmann had relied partly on the Credit Foncier to finance his building operations as well as on contractors who were willing to accept IOUs in the form of deferred payments and “delegation bonds.” In exposing the irregularities in the prefect’s accounts—which added up to some 400 million francs of unauthorised debt—Say was therefore dealing an indirect blow to the Crédit Foncier—much to Alphonse’s satisfaction. The Rothschilds had no hesitation in taking a share of the new loan floated to liquidate Haussmann’s less orthodox liabilities. Not surprisingly, then, Alphonse was (tentatively) pleased by the Liberal opposition’s apparent success in the May 1869 elections, even if the “Reds” did rather too well for Gustave’s taste and Nat was mildly alarmed by outbreaks of working class “hub bub.” “It seems to me,” Alphonse wrote to London in July 1869, “that if France wants liberty, she is a lot less revolutionary than before, the conservative sentiment is a lot more developed than it was a few years ago, and I have confidence that we will come though this crisis without tumultuous events and without deep troubles.” Admittedly, there were signs of working class discontent, but he was confident that a broadly based parliamentary regime would be able to cope with these.
journal de Débats
in 1865 in many ways initiated the campaign against Haussmann’s Parisian regime and provided the basis for Jules Ferry’s famous pamphlet, Les
Comptes fantastiques d‘Haussman.
As a member of the boards of both the Zaragoza and the Nord railways, Say was widely regarded as a Rothschild man, if not a Rothschild “servant.” Although he evidently had political ambitions of his own, there is no doubt that in attacking Haussmann he was grinding a Rothschild axe. Since 1860, when the Rothschilds had carried out a minor funding operation for the city of Paris, Haussmann had relied partly on the Credit Foncier to finance his building operations as well as on contractors who were willing to accept IOUs in the form of deferred payments and “delegation bonds.” In exposing the irregularities in the prefect’s accounts—which added up to some 400 million francs of unauthorised debt—Say was therefore dealing an indirect blow to the Crédit Foncier—much to Alphonse’s satisfaction. The Rothschilds had no hesitation in taking a share of the new loan floated to liquidate Haussmann’s less orthodox liabilities. Not surprisingly, then, Alphonse was (tentatively) pleased by the Liberal opposition’s apparent success in the May 1869 elections, even if the “Reds” did rather too well for Gustave’s taste and Nat was mildly alarmed by outbreaks of working class “hub bub.” “It seems to me,” Alphonse wrote to London in July 1869, “that if France wants liberty, she is a lot less revolutionary than before, the conservative sentiment is a lot more developed than it was a few years ago, and I have confidence that we will come though this crisis without tumultuous events and without deep troubles.” Admittedly, there were signs of working class discontent, but he was confident that a broadly based parliamentary regime would be able to cope with these.
This sense of liberal victory undermines the widely held assumption that the Second Empire was sliding politically towards revolution even before the outbreak of war in 1870. On the contrary, by embracing the opposition, Napoleon seemed to turn the collapse of the “Rouhernement” to his own advantage. On January 2, 1870, it was announced that the erstwhile Republican orator Emile Ollivier was to form a new liberal government—a move anticipated by Nat as early as the previous July. Alphonse was not much enamoured of Ollivier, but he remained fundamentally bullish. “Paris is full of the joys of its new ministry,” he reported in early January 1870. “All one sees are contented people and the bourse manifests its liberal sympathies by a resounding rally. All the men in the ministry are wise and sensible, if not of a very exceptional talent. They can count for the moment on a large majority in the Chamber, and there is therefore good reason to believe that confidence in the future will be maintained.” According to Disraeli, who was in touch with Anthony that same month, “the Rothschilds ... were now very confident that things would go smoothly; they thought the Emperor had outmanoeuvred the Orleanists by adopting a constitutional system, and might look forward with confidence to the future of his son.” Even the unruly scenes caused by Rochefort at Victor Hugo’s funeral did not perturb Alphonse unduly: “When a government has public opinion with it, it is very strong.” “The impotence of the democratic party,” he assured his cousins, was “beyond doubt.”
In the course of the next three months the constitution was remodelled along parliamentary lines, and on May 8 the new regime was endorsed by 68 per cent of voters. The decision to resort to yet another plebiscite initially annoyed Alphonse—it struck him as “a true puerility” and fresh proof of the ineptitude and mediocrity of the new ministers, awakening as it did fears of a second coup by the Emperor or a socialist insurrection in the big cities. But he welcomed the result “as a great victory for the party of order and the liberal party over the party of disorder”—a verdict apparently endorsed by a new upward surge at the bourse.
The problem was that the price of liberalisation was military weakness. Napoleon himself grasped the implications of Königgrätz when he called for reform of the lax system of military service in order to double the size of the army. Charlotte reported as early as August 1866 that the Emperor was “revolving in his head endless plans and projects for new breechloaders and needle guns, and murderous cannon.” Four months later, James heard of the Emperor’s plans to increase the army. But by giving the opposition its head in the Legislative Body he ensured that his Army Bill would be emasculated. As events in Prussia a decade before had demonstrated, liberals tended not to relish the prospect of increased military service, much less the taxes needed to pay for it. The arguments against higher spending seemed all the more plausible in view of the large sums which had already been squandered in Mexico, and which continued to be absorbed by the colonisation of Algeria.
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