The House of Rothschild (84 page)

Quite apart from the specific role of De Beers, Natty’s vision of South Africa’s future differed in many essentials from that of Rhodes. It is hard to believe, for example, that Rhodes welcomed his offer in 1891 to subsidise the passage and settlement of hundreds of families of Russian Jews fleeing Tsarist persecution. A more serious source of friction was Natty’s refusal to recognise that Rhodes’s plans ruled out peaceful coexistence with the Boer republics. In May 1892 Rhodes was curtly informed that the London house was contemplating floating a £2.5 million loan for the Transvaal government to enable it to expand its own railway network, a possibility which had been raised earlier that year by President Paul Kruger during a visit by Carl Meyer to Johannesburg. Kruger, Meyer had reported to New Court, was “a queer old Boer, ugly, badly dressed and ill-mannered, but a splendid type all the same and a very impressive speaker.” And he added a political observation: “The relations between the old Boer party and the new mining industry population are getting much better than they have been hitherto.” It was not by chance that these talks had taken place while Rhodes was himself in London.

It is, of course, arguable that the aim of the 1892 loan was to establish an informal imperial control over the Transvaal—something Rhodes might have been expected to welcome. When Natty raised the issue with Lord Salisbury he pointedly stressed that he had been able to whittle down Kruger’s original plan for a larger loan to acquire the Portuguese Delagoa Bay line. And when he wrote to Rhodes on the subject he emphasised that “in drawing up the contract we were careful to reserve to ourselves a voice in future borrowings, as you suggested,” and that he intended pointing out “the necessity for coming to an arrangement with the Cape Railway when the time comes”: “We also told them that we cannot agree to their borrowing more money for the Natal extension, and as you will see from the prospectus, we insisted upon the money being spent exclusively within the limits of the Republic. Naturally we shall never let them think that we are acting at your suggestion.”

As this indicates, Rhodes’s first thought had been that by building their own railway links southwards, the Boers would be in a position to dictate terms to the gold mines. Natty evidently wished to reassure him, but as he himself admitted, “we could not very well dictate to the Government what tariff they were to charge when the line will be completed.” As Chapman has shown, the Boers had no intention of being intimidated by their new bankers. When New Court wrote its customary admonition that the money raised “be used with the very greatest prudence and economy” and “that every expenditure ... be subjected to a strict and efficient control,” Pretoria replied fiercely that no “control can be allowed, that the Government prior to the several drawings being made cannot state for which purpose the money will be used, and further that the Government cannot consent to the money remaining deposited with you until it is required.” The success of the Transvaal bonds on the London market was therefore a blow to Rhodes. The issue was predicated on peace between the Cape and the Boers, whereas by late 1895 plans were already afoot in Cape Town to overthrow the Kruger government in the name of the non-Boer “Uitlanders” in the Transvaal.
¹⁴

The Jameson Raid—an abortive invasion by what was, in effect, Rhodes’s private army in Bechuanaland—appalled the Rothschilds, who had no inkling of the plans for a coup. Although Rhodes had discussed the idea of fomenting Uitlander revolt with Joseph Chamberlain—who had joined Salisbury’s government as Colonial Secretary in the summer of 1895—he apparently had said nothing of the kind to Natty; and he in turn was not sufficiently close to Chamberlain to be tipped off (as was
The Times’s
Africa correspondent). In the wake of the débâcle, Natty sought to patch up relations between London and Pretoria, urging Kruger to come to London in terms which could hardly have disavowed Jameson more explicitly. “By accepting invitation without conditions,” he assured Kruger, “you will obtain the independence of the Republic. We hope nothing will be done to strengthen hands of opponents of Transvaal Government here and it is also absolutely necessary to prevent the growth of hostile feeling to Boer Government, for up till now public opinion has been in your favour and everything will be done to make your task easy.” Hobson was in the wrong when he claimed the “financiers” had profited from Jameson’s escapade: the opposite was true.

The failure of the Jameson Raid merely postponed the conflict with the Boer republics, however. Within a year of arriving in South Africa as high commissioner in 1897, Alfred Milner became convinced that the only way to establish British control over the republics’ external policy was by war. He readily took up the cause of Uitlanders’ franchise, and Chamberlain felt bound by party political considerations to back him up. These two had sufficient leverage to dissuade Natty from issuing a second Transvaal loan in November 1898;
¹⁵
but it was awkward from Milner’s point of view that the informal diplomacy of the Rothschilds nevertheless aimed at defusing the quarrel with Pretoria. In June 1899 Alfred telegraphed directly to Kruger in terms which cannot have been dictated by the Colonial Office, though Chamberlain had been consulted beforehand:

Kruger was not deaf to such appeals. On July 6 Chamberlain heard from New Court advance news of a concession from Kruger: the Uitlanders were to be offered a “seven years’ retrospective and retroactive franchise” which “would be accepted with acclamation by the non-British Uitlanders who it is feared expect Lord Salisbury to go to war.” Natty was able to confirm this to McDonnell twelve days later, prompting Chamberlain to describe the crisis as “ended.” As late as August 25, Carl Meyer still “persist[ed] in believing that a modus vivendi [would] be found for
this time
—though I admit Kruger is trying the Govt’s patience and ... there is a smell of gunpowder in the air which is dangerous.” This was also the view taken by Cecil Rhodes, who remained confident until the eleventh hour that “the Boers [would] give in at last.” As it became apparent that this time Kruger did not intend to back down, the Rothschilds made one last effort to achieve a peaceful solution. At the suggestion of Hartington (now the Duke of Devonshire), a telegram was sent to Samuel Marks, a business associate in Pretoria, which—without the authorisation of either Chamberlain or Salisbury—effectively reformulated British policy:

It was a proposal which was not only rejected by the Boers but which would in any case probably have been repudiated by Salisbury. He feared that such “subterranean negotiations” might lead to “serious entanglement” and asked Natty “very earnestly” to desist from “any further communication of this kind with Pretoria.”

The Rothschild view was not based on any deep sympathy for Boer self-government: as Natty told McDonnell, Samuel Marks was confident that, if peace were preserved, “In 15 years the Transvaal will be British.” “Kruger is the last of the old Boer Toryism,” argued Marks’s partner Lewis, and “he is also the last President of the kind that the Transvaal will ever have.” Moreover, once war had broken out, Natty unhesitatingly involved himself in the war effort, suggesting that Boer supplies through Delagoa Bay be immediately cut off. The obligatory patriotic rhetoric came readily when local soldiers returned to Buckinghamshire from the war, while Alfred contributed in his own way by organising a spectacular gala evening at Covent Garden. Natty also remained on good terms with Milner and wrote warmly to congratulate him—albeit “in my wife’s name”—“on having firmly established His Majesty’s Dominions in South Africa.” Yet privately he deplored the “wretched guerrilla warfare” the British army found itself having to wage. Within two months of peace being concluded, Alfred was promoting reconciliation between British and Boer generals around his dinner table.

Natty was especially unnerved by the claims of Radical writers like Hobson that the war was being fought on behalf of those who had financial interests in the gold and diamond fields, advising Rhodes to:

This helps explain Natty’s letters to Balfour two months later urging him privately that “a good War Minister ... gives his generals twice as much as they ask for”:

In short, Natty agreed with Rhodes’s criticisms of the way the war was being waged; but he viewed public expression of such criticisms by anyone with large private interests in the mines of Kimberley and the Rand as highly impolitic.

Yet there was a certain irony in this Rothschild warning against false economy in wartime; for the Boer War was in the process of exposing the Rothschilds’ declining influence over that area of British policy where it had once been greatest: finance. The Boer War was the first time since the Crimean War that Britain had been forced to finance a war by a major net increase in the national debt. But whereas in the 1850s it had been taken for granted that the Treasury would turn to N. M. Rothschild & Sons to meet its borrowing requirement, that was no longer assured half a century on. Natty assumed from the outset, as he told Edward Hamilton, that the Chancellor Sir Michael Hicks Beach “would send for me when he is ready.” But his recommendation that consols be issued with a Rothschild guarantee was rejected in favour of Ernest Cassel’s argument for a “much more dignified” open market sale of Exchequer bonds at a price of 98.5. The “Khaki loan” was heavily oversubscribed and Hamilton discerned with some glee “the jealousy with which the Rothschilds regard Cassel.” When the need for a further loan arose in July, Natty fell in behind Cassel (and against the Bank of England), arguing for a second bond issue, this time for £10 million. But Hamilton struck a second blow against Rothschilds by agreeing with Clinton Dawkins of J. P Morgan and Lord Revelstoke of the revitalised Barings to make an advance placing of half the sum in the US. This infuriated Natty, who had been drumming up subscriptions on the assumption that the London market would have to place the full amount. True, a third issue of £11 million was sold without recourse to the American market, but when the government steeled itself for a much bigger issue of £60 million in consols it once again called on Morgan. Half the total was taken by Morgan, N. M. Rothschild and the Bank of England (£10 million apiece) at a firm price of 94.5. What is more, Morgan secured a commission two times higher than the London banks‘. The modest amount left to smaller firms generated a good deal of resentment among
“English
circles in the City” who felt, according to Horace Farquhar’s brother Granville, “furious at finding every dirty German Jew in, and themselves left out.” But the fact was that the distinctly un-German and un-Jewish figure of Pierpont Morgan was the principal victor: for the first time in over a century, the British government had been forced to borrow a large sum from a foreign power to wage a war in its own empire. It was an early sign of that shift in the centre of financial gravity across the Atlantic which would be such a decisive—and for the Rothschilds fateful—feature of the new century.

Morgan flexed his muscles again in the spring of 1902, when it was decided to raise a new £32 million loan. Natty—who Dawkins suspected still had “a lot of the last Consol issue ... on his hands at a loss”—argued for issuing a new Transvaal Guaranteed Loan, but Dawkins, backed up by a visit from Morgan himself, prevailed on Hicks Beach to stick to consols. Although the Americans agreed to take only £5 million—leaving Rothschilds with £7 million and Cassel and the Bank with £2 million apiece—they also found themselves able to dictate the issue price (93.5). It was a sign of the ill-feeling generated by this new American rival that Natty pointedly refused to give Morgan’s London house a share of his allocation. Even after the war, the Rothschild bargaining position looked weak. Although the 1903 Transvaal loan for £30 million was sold without American assistance, Natty’s request for a 2.75 per cent coupon was overruled by the Treasury as too low and it was decided to exclude applications for less than £2,000—a change of policy which Alfred angrily denounced as “most un-English.”