The House of Rothschild (94 page)

The fourth reason why there was never much likelihood of reviving the old, financially based partnership between Britain and Austria was purely political. “[A]s a matter of course,” wrote Natty to Paris in April 1906, “we do not know if our dear cousin Salbert [Albert] is on speaking terms with the new Hungarian Government.” This was symptomatic of the extreme difficulty of operating in a political system as decentralised and volatile as the Austro-Hungarian. Natty visited Vienna in 1907, but seems to have gleaned little from the visit; and subsequent communications during the crisis-ridden year which followed from Albert were anodyne—sometimes even omitting to mention important financial news. Although the Austrian ambassador in London hoped that Rothschild influence over The Times and Daily
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graph might moderate the British response to the annexation of Bosnia in October 1908, he was exaggerating Natty’s influence and the scope for generating pro-Austrian sentiment. The truth was that in both London and Vienna the political influence of the Rothschilds was on the wane. “I openly recognise,” Albert told Sieghart in 1910, “that I overestimated the influence of the Archduke Franz Ferdinand.” It was a telling admission, suggesting that Albert had shared Franz Ferdinand’s hostility to the policy of compromise with Russia in the Balkans favoured by Count Aer enthal, the Austrian Foreign Minister between 1906 and 1912. That, in reality, was the right option for Vienna: the more policy came to be characterised by hostility to Russia and subservience to Germany, the closer Austria-Hungary edged towards the disaster of a great power war over the Balkans. The Rothschilds, who had hever cared much for that turbulent region, could do little to prevent this.

In the final analysis, therefore, there were economic forces at work which at least made some combinations of powers more likely than others. To put it simply, there was an important difference between those countries which were net creditors (Britain and France), those which were self-financing but not capital exporting (Austria-Hungary and to some extent Germany), and those which had to borrow large amounts from abroad (Russia and Italy). These financial factors had a bearing on diplomacy. Of all the great powers, Russia relied most heavily on foreign lending in the period before 1914; and the predominance of France as Russia’s main source of external finance had as its corollary a diplomatic rapprochement between the two powers, despite the fact that they had less in common in terms of their internal politics than any other two-power combination, and despite the fact that for most of the nineteenth century they had been diplomatically at odds. This Franco-Russian entente was one of the defining diplomatic developments of the 1890s; and the Rothschilds played a central role in it—despite their strong antipathy towards the Tsarist regime’s anti-Jewish policies. A similar financial gravitation attracted Italy and Turkey towards Germany (though it was not strong enough to ensure diplomatic loyalty from Italy in 1914).

No such financial relationship drew Britain and Germany together, however, despite the strong desire of Alfred in particular to build some kind of Anglo-German entente. Nor did it prove possible to restore the old financial ties between Britain and Austria. In truth, neither Germany nor Austria-Hungary needed much in the way of outside capital; they could manage together, and so they did. By contrast, and despite their colonial disagreements, London and Paris were gradually drawn together after 1900, not just by shared Germanophobia, but also by their common interest as international financial centres in monetary stability: here too the Rothschilds played a key role as agents mediating between and bolstering the Bank of England and the Banque de France. What remained undetermined was the extent of Britain’s military commitment to France, not to mention the extent of her diplomatic commitment to Russia.

With hindsight, it is possible to see that the ideal diplomatic constellation from the Rothschilds’ point of view had been the Crimean coalition of Britain and France against Russia, with Austria and Prussia more or less neutral, but inclining to the West; but this was not to return until almost a century after the Crimean War, under the very different circumstances of the Cold War. The constellation which finally emerged in 1914, by contrast, was almost the worst of all possible worlds.

LORD ROTHSCHILD, 1906.

LLOYD GEORGE, 1909

 

 

W
riting in 1902, Hobson had confidently asserted that “a great war” could not “be undertaken by any European state ... if the house of Rothschild and its connexions set their face against it.” The idea that the Rothschilds and other bankers had the financial power to stop a war which might harm their material interests was hardly new. But it enjoyed something of a vogue in the decade and a half which preceded the outbreak of the First World War. In 1899 the Polish writer Ivan Bloch—himself a banker—had estimated the cost of a war between the principal continental powers at £4 million a day; the rising cost and destructive capability of armaments, he suggested, made a major war almost “impossible.” The English journalist Norman Angell took a similar view: the idea that war could be an instrument of a rational foreign policy had become a “great illusion,” he argued in his book of that name (published in 1912), because of “the delicate interdependence of international finance.” Nor was the notion of a financial opposition to war peculiar to the political left. On the very eve of war in July 1914, the foreign editor of The Times, Henry Wickham Steed, described Natty’s efforts to avert a war between Germany and Britain as “a dirty German-Jewish international financial attempt to bully us into advocating neutrality.”

Why, if the Rothschilds were at once so powerful and so pacific, did a “world war” of unprecedented intensity and destructiveness break out nonetheless? A crude argument, implicit in Hobson, is that this war, like the Boer War before it, in some way benefited them and other bankers. According to Lenin, there was no real paradox here: the outbreak of the First World War was a necessary consequence of the internal contradictions of imperialism. The contest between the great powers for overseas markets, spurred on by the falling rate of profit in their domestic economies, could only have ended in a suicidal war; in turn, the social consequences of the conflagration—what the German Social Democrat August Bebel had prophesied as “the twilight of the gods of the bourgeois world”—would precipitate the long-awaited international proletarian revolution. Such views were widely aired during the war, and not just on the extreme left. Shortly after Natty’s death in 1915, the Nation published an article which, looking back on the imperialist conflicts which had preceded the war, lamented “The Nationality of Money”:

It is tempting to agree with this verdict. In many ways, the Rothschilds of the Edwardian era did succumb to the “militarisation of the bourgeoisie” which historians have for so long denounced as a cause of the war. Prior to the fourth generation, the Rothschilds had been anything but keen soldiers. Natty, however, had been commissioned a cornet in the Bucks Yeomanry in 1863 and was later promoted to the rank of lieutenant (1871) and captain (1884). His son followed in his footsteps and reached the rank of major in 1903. In his capacity as Lord Lieutenant of Buckinghamshire, Natty continued to take an interest in the army, welcoming back men of the Oxfordshire Light Infantry who had served in the Boer War with a laudatory speech and free tobacco. Soldiers in the 2nd Life Guards fighting under Kitchener in Egypt were also the grateful recipients of “Rothschild’s soothing weed.” More important, Natty was a supporter of army reform and a keen proponent of increases in the strength of the Royal Navy. “[T]he strengthening of the Navy is always popular amongst all classes,” he assured his French relations in 1908; a year later he spoke publicly in favour of building eight dreadnoughts at a large meeting at the Guildhall also addressed by Arthur Balfour.

There is no doubt that the Rothschilds had their own economic interests in the rearmament. In 1888 the London house issued shares worth £225,000 for the Naval Construction and Armaments Company and subsequently issued £1.9 million of shares and debentures to finance the merger of the Maxim Gun Company with the Nordenfelt Guns and Ammunition Company. This was one of the first deals Rothschilds did with Ernest Cassel and marked the start of a prolonged period of direct involvement; Natty retained a substantial shareholding in the new Maxim-Nordenfelt company and exerted a direct influence over the firm’s management. The wider significance of this lies in the fact that Maxim-Nordenfelt’s flagship product was the lethal automatic gun, used to devastating effect against opponents of British imperial expansion from the Sudan to Matabeleland, and famously cited by Hilaire Belloc as the key to European hegemony.
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Similarly, when Cassel and Rothschilds also financed the Vickers brothers’ takeover of the company (along with the Naval Construction and Armaments Company) in 1897, they were responding to an increase in British naval construction which was rooted in imperial policy. Natty had grasped early on the importance of increased naval construction: in 1888 he had sought to lure the future First Sea Lord “Jacky” Fisher—then still a captain but head of the Ordnance and Torpedo Department—away from the navy to join Whitworths. He remained an enthusiast for naval construction even when it was obvious that the costs were likely to lead to higher taxes.

The Austrian Rothschilds also had an interest in the arms industry. In addition to their railway interests, they retained a substantial stake in the Witkowitz ironworks, which became an important supplier of iron and steel to the Austrian navy and later of bullets to the Austrian army—though it is revealing that the director of the ironworks Paul Kupelweiser felt Albert had “not the slightest interest in the industrial installations that his house possesses. He seems rather to consider them as a disagreeable duty.” When Kupelweiser asked for 400,000 gulden to invest in plant to produce armour plating, Albert replied that “for 400,000 gulden he preferred to buy himself a [country] property.” By going into partnership with Max von Gutmann in this and other industrial ventures in which the Vienna house had a stake, Albert evidently wished to delegate the responsibility for them. Nevertheless, the fact of his continuing involvement is as noteworthy as his personal lack of enthusiasm. If late-nineteenth-century imperialism had its “military—industrial complex” the Rothschilds were unquestionably part of it.

Yet there is a paradox: namely, that the growth of military expenditure had political consequences which were less than congenial to the wealthy elite of which the Rothschilds were members.

Prior to around 1890, the cost of empire-building had been relatively low. Expeditions like the one sent to Egypt by Gladstone in 1882 had been run on a shoe-string. The military budgets of the great powers were not much higher in the early 1890s than they had been in the early 1870s. As table 13a shows, that changed in the two decades before 1914. Taking Britain, France and Russia together, total military expenditure (expressed in sterling terms) increased by 57 per cent. For Germany and Austria together, the increase was even higher—around 160 per cent.

Even allowing for the substantial economic growth experienced by most economies in this period, this represented a perceptible increase in the “military burden” for all the great powers. As table 13b shows, defence expenditure also increased in relation to the economy as a whole in Britain, France, Russia, Germany and Italy from between 2 and 3 per cent of net national product in the period before 1893 to between 3 and 5 per cent by 1913. Austria-Hungary is the exception because the highly decentralised system of dualism kept the “common” Austro-Hungarian defence budget at a relatively low level.