The House of Rothschild (43 page)

In fact, Bismarck did instruct his consul general in Bucharest to investigate the situation and “if appropriate to make forbearing remonstrances to the authorities.” But he was reluctant to do more without the support of Russia, which continued to regard the erstwhile Danubian principalities as within its sphere of influence. Given that many of the Rumanian Jews had fled even worse conditions to the east, it was no surprise that the Russian Foreign Minister Gorchakov flatly declined “to consider as a crime the measures that the Rumanian government has taken against the national plague of the Jews there,” adding: “If all Jews were Rothchilds and Crémieuxs, then the situation would be different, but under prevailing conditions one could not blame the government if it sought to protect its people against such bloodsuckers.” Mayer Carl himself reported that the elder Hohenzollern “complains bitterly about the Austrian Newspapers which are continually attacking his son and I am particularly sorry ... most of these papers are in the hands of Jews.” In October 1869 Alphonse had a personal audience on the subject with the Rumanian Prince, who struck him as a “very nice boy, who appears to have intelligence and energy,” and who promised “to take the poor Jews under his protection”:

It is doubtful whether these efforts (which were repeated in 1872, 1877 and 1881) achieved much: as late as 1900, the Rothschild houses and the Hungarian Credit Bank had to refuse participation in a Rumanian petroleum deal proposed by the Disconto-Gesellschaft because of the Bucharest government’s continuing ill-treatment of Jews. Their principal significance is as evidence of the readiness of the Rothschilds to repair their relations with Bismarck, so badly damaged by the events of 1866.

The speed with which these relations were restored is a testament to Mayer Carl’s acumen, as well as to Bismarck’s appreciation that the Rothschilds, for all their efforts to thwart his German policy, could still be useful to him. Their political rapprochement may be said to have begun in February 1867, when Mayer Carl was persuaded—apparently by Bismarck, among others—to stand for election to the parliament of the new North German Confederation, which was to meet in Berlin. It must be said that he had his reservations about following his English cousins into parliamentary politics. “He will not consent,” reported Natty; “he says one party here wish to get him out of the way so as to be able to transact all the business and that the others will not be thankful to him if he went to Berlin where he would have to give his advice about the German Currency and ever so many things in all of which the Prussian interest is opposed to that of Frankfurt.” But, as Charlotte wrote:

To the English Rothschilds, Mayer Carl’s near-unanimous election was a family triumph in the tradition established by Lionel. In itself, it was “a post of honour”; the significance lay in the fact that he had “obtained five thousand three hundred votes, out of five thousand six hundred ... in a town where fifty years ago, at the entrance of the public gardens there stood in huge characters a very ugly prohibition to the effect that: ‘Jews are forbidden to enter.’ ” What more symbolic triumph could be imagined than that a Rothschild should be “unanimously chosen by the jew-hating city of Frankfort to represent its interests in the bosom of the German parliament”?
¹⁰
For Mayer Carl, on the other hand, there were practical considerations. Now he had a good reason to make the regular visits to Berlin which would keep him in “contact with all the great men and master minds of Germany.” A Rothschild presence in Berlin was also welcome to Bismarck. Not only did he encourage Mayer Carl’s candidature; when he visited Paris in the summer of 1867 he also held out a well-chosen olive branch to James in the form of the grand ribbon of the red eagle—“a great honour,” as Alphonse noted, “and the highest distinction which a Jew has ever received in Prussia.” Bismarck went still further that November when he elevated Mayer Carl to the Prussian Upper House—in effect, a life peerage, nearly twenty years before the English Rothschilds finally secured their hereditary peerage. On at least one occasion he even urged Mayer Carl to buy a house in Berlin so that he could spend more time there—advice which Mayer Carl contemplated taking in 1871. The two were soon on very familiar terms: at a concert at the royal palace in Berlin in 1867 Bismarck jokingly told Mayer Carl “that if England wants a King for Abyssinia he could recommend the ex-monarch of Hannover.” As the venue of this encounter indicates, Mayer Carl was also considered
haffähig
(presentable at court): in March 1869 he had “a long chat with the crown Prince who takes great interest in everything and is very well informed,” followed by an audience with the Queen. A year later, he was invited to a small party by “their majesties” to meet the Tsar’s brother, Grand Duke Michael; and he attended a theatrical performance at the palace that April.

To Mayer Carl, this transformation of Bismarck from the ogre of Königgrätz into his friend “old B” was not merely flattering but useful: from April 1868 onwards he began to have access to the kind of first-hand political news from Berlin which had previously been Bleichröder’s sole preserve. For Bismarck, that was the whole point: through Mayer Carl he could be assured of a direct line of communication not only to Paris but also to London. A classic illustration of their new relationship in action came in April 1868, when Mayer Carl was in Berlin for the opening of the “Customs parliament” which brought together democratically elected candidates from the entire Zollverein in 1868. Intended to pave the way for South German accession to the North German Confederation, the parliament turned out to be an embarrassment for Bismarck because of the anti-Prussian mood of the majority of South German members; this may explain his decision to float a proposal for Franco-Prussian bilateral disarmament through the Rothschilds.

On the morning of April 23, Mayer Carl sent a telegram to the London house: “Tell your friend [Disraeli] that from the 1st of May army reduction here has been decided upon, and will continue on a larger scale if same system is adopted elsewhere.” He elaborated on this message in a letter sent the same day:

Disraeli seized on this, passing the telegram on to Stanley with a characteristically over-excited covering note:

Sight of Mayer Carl’s letter two days later merely encouraged the Chancellor:

Disraeli’s encouraging response had promptly been relayed back to Berlin. True to form, however, Stanley was lukewarm. He understood Disraeli to intend “that we might represent this to the French, as our doing, and possibly induce them to give some promise of disarmament in their turn: when the result being made public, England in general would reap much credit, and the ministry in particular be strengthened”; but he “doubted the feasibility of this combination, ingenious as it is.” Still, he did not question the quality of Mayer Carl’s intelligence, noting in the margin of Disraeli’s first letter on the subject: “They [Mayer Carl and Bismarck] see one another daily.” There were similar communications between Berlin and London in March 1869. “Old
B
,” reported Mayer Carl on March 15, “is not without certain apprehension about the Belgian Question, but still he thinks that nothing is likely to take place which might endanger the preservation of peace: he says that all depends upon the French Empereur and that nobody can foresee what alternative plans he may have.” Four days later, “B.... sat next to me to-day in the house [and] gave me the same information but he would like to know what old Nap’s plans are & if there is any truth in the alliance with Austria & Italy.”

These exchanges raise an obvious question: was the Machiavellian Bismarck using Mayer Carl to feed misinformation about Prussian intentions to London and Paris? There is no question that Mayer Carl began to identify himself with Prussian interests as early as April 1867—witness his new use of “we” and “us” as shorthand for the Prussian government. When challenged over his vote against the St Gotthard tunnel subsidy in 1870, he replied that he had withheld his support “as I find myself in the Reichstag not as a representative of the House of Rothschilds but as a representative of the people, and from this point of view I am against any subsidy for foreign railway purposes so long as the state is still struggling with a deficit of its own.” “[T]here is a famous difference between Prussia and all these other rubbishing [
sic
] countries,” he exclaimed on the eve of the Franco-Prussian War, one of many indications that he too was succumbing to that gruff chauvinism which 1866 had done so much to foster in Prussia. But this should not be understood as the familiar old story of German-Jewish bourgeois “capitulation” before the Junker
Machtmensch;
nor can it be assumed that Bismarck was seeking to hoodwink the Rothschilds. Bismarck may have expected that the question of South German accession to his new Confederation would one day lead to conflict with France; but he cannot be accused of forcing the pace towards war at any time before March 1870. As he put it in February 1868: “That German unity could be furthered by violent events I too regard as probable, but ... to induce a violent catastrophe is quite another matter ... German unity is not at this moment a ripe fruit.” The signals Bismarck sent to Paris through Bleichröder were also peaceful; and when, in the autumn of 1868, Alphonse heard from Berlin that “war was inevitable in the spring,” Mayer Carl was dismissive: “I would not attach much importance to what Bleichröder says as he mainly repeats what he hears from people who are often
à la baisse
and he himself is always black when he thinks it suits our purpose.”

Mayer Carl had good reason to believe that Bismarck’s intentions were peaceful at least in the short term, for all his intelligence about Prussia’s financial position pointed in that direction. That impression was reinforced by the spate of new private sector financial opportunities in Prussia which followed the 1866 war.

Rothschild involvement in Prussian finance resumed as early as January 1867, when Mayer Carl managed to secure the participation of the Frankfurt and Paris houses in a 14 million thaler issue of 4.5 per cent state railway bonds. This was to be the first of many transactions done jointly with the Disconto-Gesellschaft, whose director Adolph Hansemann was rightly identified by Mayer Carl as the coming man in the new and rapidly changing world of Prussian-German finance. Despite all the ill-feeling of 1866, Mayer Carl almost at once secured readmission to the Prussian loan consortium: it was as if all the harsh words of 1866 had never been uttered. There followed participation in two further loans intended to meet Prussia’s post-war military expenses, one for 30 million thalers in March 1867 and another for 24 million in August. May 1868 saw yet another loan of 10 million thalers. In November of the same year there was the offer of a 20 million thaler railway loan; in May 1869 a further 5 million. In each case, the Frankfurt house shared its allocation equally with the London and Paris houses. “You can be quite sure,” Mayer Carl assured Natty on Christmas Day 1869, “that no Prussian loan or loan for the North German Confederation will or can be made without my knowing it or having a share in the business ... You know that I am on the very best terms with Camphausen & that Hansemann is my great friend; I am therefore not afraid that anything will take place without our knowing it.” When Camphausen attempted to consolidate the Prussian debt in 1870, Mayer Carl was able to boast that “our house at Frankfurt will be the
only firm
entrusted with the new arrangement.”

These borrowing operations, as Mayer Carl knew full well, were to some extent a consequence of the government’s continuing budgetary difficulties. It is not easy to unravel Prussian financial policy in these years because of the disruptive effects of war and politics on the official statistics. But the available figures are unambiguous. According to published budgets, total public expenditure in Prussia had increased from 130.1 million thalers in 1860 to 168.9 million in 1867: the growth of the army and navy budgets accounts for about 40 per cent of the difference. However, these figures tell only part of the story, for actual expenditures were much higher. Between 1863 and 1868, budget targets were consistently overshot: altogether around 246 million thalers more was spent than intended. Here again military spending (including ordinary, extraordinary and off-budget figures) was the key: as a percentage of total spending it rose from 23 per cent in 1861 to 48 per cent in 1866. These expenditures were met by short-term borrowing (selling treasury bills to the Berlin banks), which was funded after 1866 by the bond issues described above. The increase in public debt was steep: from 870 million thalers in 1866 to 1,302 million just three years later. As we have seen, the fiscal strain of war on Prussia was much less than it had been for Austria for two main reasons. Firstly, Prussia began the wars of unification with a relatively low debt burden; secondly, economic growth meant that in macroeconomic terms the increase in debt was modest—less than 2 per cent of national income according to one estimate. Nevertheless, the contemporary bond markets (which lacked such modern data) were perturbed: the years 1864 to 1870 saw a sharp fall in the price of Prussian bonds, from 91.25 to 78.25.