The House of Rothschild (96 page)

Source:
Economist
(average monthly London prices).

By the turn of the century, the Rothschild identification with the Conservative party was more or less complete. Dorothy Pinto (who later married Edmond’s son James) recalled how “as a child I thought Lord Rothschild
lived
at the Foreign Office, because from my schoolroom window I used to watch his carriage standing outside every afternoon—while in reality of course he was closeted with Arthur Balfour.” The two men had their differences, to be sure: in 1901, for example, Natty wrote to complain about a speech Balfour had made in the Commons which had made inaccurate criticisms of De Beers, and they seem to have disagreed on the question of immigration controls. But for most of Balfour’s three-year term as Prime Minister they worked closely together.

There was a danger to this proximity. As Edward Hamilton commented, even before Salisbury retired in July 1902 Natty had “become so strong a party man, he will now be ‘out of it’ whenever the other side comes in.” This was astute. In the past, the Rothschilds had been adept at maintaining lines of communication with both government and Opposition. By the early 1900s, however, a new generation of Liberals had come to the fore with whom Natty and his brothers had virtually no social or political contact. Had Rosebery retained the Liberal leadership, there would have been no problem, but after his resignation as Prime Minister in 1895, and as Liberal leader the following year, his influence waned. As president of the imperialist Liberal League, he was profoundly out of sympathy with the more Radical “New” Liberal wing of the party which filled the majority of ministerial posts when the party regained power in 1906. By that time Rosebery had left the party altogether, having denounced both the Anglo-French entente and Irish Home Rule the year before. As the husband of Hannah’s daughter Peggy, Rosebery’s son-in-law the Earl of Crewe was naturally part of the broader Rothschild familial circle, but there is little evidence that he was politically close to Natty. True, it was a matter of course that Herbert Asquith, the new Chancellor, was invited to dine with the Lords Rothschild and Revelstoke at the Lord Mayor’s annual dinner. But neither Asquith nor the City grandees had any illusions about their deep differences of opinion. As Natty put it, “the City Magnates who were present ... came to the very easy conclusion that Mr Asquith did not understand much about business. The frigid way in which his remarks were listened to will, I hope, be a damper to some of his rash & enthusiastic advisers.” He and his brothers were not wholly excluded from the corridors of power; but their views, frigid or otherwise, carried little weight. Once, the Rothschilds had mixed with politicians regardless of party allegiance in order to obtain the best possible political intelligence and to influence financial and foreign policy. Now Natty was himself a politician, making remarkably frequent public speeches and donating substantial sums to the Tory party machine. He had become so overtly partisan that he was effectively cut off from both intelligence and influence under a Liberal administration.

An electoral landslide on the scale of the Liberal triumph in 1906 usually owes as much to the exhaustion and disunity of the vanquished party as to the programme of the victor. Central to the Conservatives’ demise were the rising costs of their imperial policies after 1899, and their inability to agree on a way to pay for them. It was not just a question of beating the Boers and building new battleships. The administrative and even physical deficiencies exposed by the war in South Africa prompted widespread criticism—even a sense of national crisis—on both left and right. The Conservatives lacked a coherent response. It was typical that, when asked by Chamberlain to chair a Treasury committee to consider improving the piecemeal system of old-age pensions, Natty made little secret of his scepticism about the possibility of some kind of state contributory system on the German model, and he was even more hostile to any idea of non-contributory handouts to the elderly. Following Chamberlain’s conversion to the idea of increased protectionist tariffs as a solution to Britain’s domestic and imperial problems, the Rothschilds’ response was as ambivalent as that of the party as a whole.

For most of the second half of the nineteenth century, the family had been firmly committed to free trade. Alphonse’s vitriolic comments on American and French tariff policy in the 1890s show that such attitudes were alive and well even at the turn of the century. “France is going to die from suffocation under protectionism,” he warned in 1896. “The best of socialisms is the free exchange of international production, and were M. Jaurès (the socialist leader) to preach nothing else we would unanimously be of his opinion.” But by 1903 his London cousins were wavering in their allegiance to “the sacred principles of free trade.” On July 3, Natty confessed to Edward Hamilton that he was “rather taken by Chamberlain’s plan”—a remarkable volte face for a man who had once dismissed the Colonial Secretary as “a Radical wolf in Tory sheep’s clothing ... the typical democrat—a spendthrift and jingo.” When Chamberlain resigned from the Cabinet over the issue on September 17, Natty defended both him and Balfour against the complaints of the Duke of Devonshire who “ought to have known at the Cabinet what Chamberlain intended doing, but ... was either asleep or woolgathering.” On October 7, the day after Chamberlain’s curtain-raising call for a policy of “imperial preference” at Glasgow, his keen supporter Harry Chaplin dined with Alfred and two other “City men”:

In reality, Chamberlain’s proposals divided the City elite. Lining up behind Chamberlain and alongside the Rothschild brothers were Cassel, Clinton Dawkins of J. S. Morgan, Everard Hambro (who became honorary treasurer of the Tariff Reform League), the Gibbs family, Robert Benson, Edward Stern and Philip Sassoon. Influential names, no doubt; but the opponents included not only Felix Schuster, the increasingly authoritative governor of the Union Bank of London and one of the City’s staunchest Liberals, but also Conservative Free Traders like Lord Avebury and Sir James Mackay (later Lord Inchcape). These were formidable opponents, and it may have been their rejection of Chamberlain which persuaded Natty to row back from his initial support. By the time “Joe” addressed a public meeting at the Guildhall in January 1904, it was becoming apparent that, as Dawkins put it after the speech, “banking opinion [was] on the whole against him”—perhaps understandably, when he tactlessly told his audience that “banking was not the creator of our prosperity, but its creation ... not the cause of our wealth but the consequence.” Significantly, when the Duke of Devonshire addressed a free trade meeting in the same venue two weeks later, Natty was on the platform. This would seem to bear out Hamilton’s snide comment (in relation to another fiscal question) that Natty now thought “it necessary to consult every broker” and had “no idea of having an opinion of his own.”

Perhaps Natty was not confused; it seems more likely that, like Balfour himself, he was sitting on the fence for tactical reasons, in the hope of maintaining a semblance of party unity. Either way, he could do nothing to limit the damage done by Chamberlain’s campaign. Natty had “no doubt,” even before the voting began in January 1906, that “Sir H[enr]y Campbell-Bannerman [would] have a majority.” What the Rothschilds were not prepared for was the scale of the Conservative rout: the Liberals not only increased their share of the vote from 45 to 49 per cent, but—more important—won an immense majority in the Commons, taking 400 out of 670 seats to the Conservatives’ 157. Given the Liberals’ proximity to the Labour and Irish Nationalist parties on key issues, their MPs (30 and 83 respectively in number) could be regarded as pro-government too. Contrary to Leo’s expectation, even Balfour lost his seat (though it was quickly agreed to install him in place of Alban Gibbs as one of the two City members). It was, as Natty lamented even before the final results were in, a “disastrous” result—“unexpectedly bad.”

Why had it happened? Besides the obvious point that “the country has had 20 years of Unionist Government & naturally wanted a change,” Natty offered a long list of factors:

But the key was surely the Tory split over tariffs. Even within the Rothschild family, there was division, with Natty’s son Walter winning Mid Bucks as a Unionist Free Trader, and even going so far as to vote with the Liberal government against the Chamberlainites in March 1906, while in the City of London constituency itself, the Conservative vote split evenly between the Tariff Reformer Gibbs and the Free Trader Sir Edward Clarke. In analysing the results, Natty sometimes sought to play down the significance of the tariff issue. Walter’s large majority, he insisted, was merely a sign of local “loyalty” to the family, rather than a vote for free trade; while the City result “in no way represented ... a feeling for Tariff Reform, & certainly not for Chamberlainism.” But privately he could not deny that the split had been fatal, and his comments on the subject show where his sympathies really lay. “One thing however I feel quite certain of,” he remarked bitterly, “[and] that is that a great many of the Free fooders, & Free traders, like the Duke of Devonshire, are by no means satisfied with the situation they have helped to create.” Natty was obliquely critical of Chamberlain too, contrasting his ambition to “build up a new party & a new policy” with Balfour’s pragmatic desire simply to “increase the power of the opposition just at present.” Both he and Leo agreed that “the late Prime Minister” would have to stay on as Tory leader “because his views on the fiscal question are more in accordance with those of the country than Mr Chamberlain’s.” But they felt closer on the issue of principle to Chamberlain than to Devonshire. Natty’s support for a strategy of “sit[ting] & watch[ing] the course of events” rather than “pro-pound [ing] a policy” was tactical rather than ideological; he evidently hoped that under Balfour’s leadership unity on the tariff issue might ultimately be attainable. Thus in 1910—by which time Balfour had come off the fence in favour of protection—Natty was able to be more open about “the advantages of Tariff Reform.” “[T]he subject is the most popular one for the moment,” he told his French cousins, “and probably will turn the election.”

Such political misjudgements became a regular feature of Natty’s correspondence in the Liberal era. He was, it should be remembered, no longer a young man: he was in his seventieth year when he wrote those lines. But the belief that an election could be won on a protectionist platform was not the greatest of his political miscalculations. On a wide range of issues, the Liberals could confidently be expected to disagree among themselves. On Chinese labour in South Africa, they did so almost at once, to his great glee. On education, as Natty said, it was indeed difficult to produce “a measure acceptable alike to the Dissenters, the Church, & the Non Conformists.” There were Liberal businessmen who were bound to oppose a trade union bill which placed the unions “under a different law from the rest of the community.” Above all, there was little reason to expect the issue of Home Rule to be any easier for Campbell-Bannerman than it had been for Gladstone. Yet Natty was wildly over-optimistic in thinking that such divisions might make the government “a very short lived one, & the Unionist Party may be again restored to strength & power much more quickly than they expected.” Of course, the Conservatives could only really recover from the nadir of 1906, and it was reasonable to draw encouragement from local and by-election results. But there were a few subjects which were very likely to unite the Liberals: and one of them was the question of taxation.

Natty was not unaware of the significance of this. “[T]he chief bone of contention besides the Education question,” he predicted even before the voting had begun in 1906, “will be the Budget, which is to be of a very Radical character.” From an early stage, he recognised that the vociferous contingent of Labour MPs—“the gentlemen who wear red neckties, & are sorry they cannot doff the Phrygian Cap”—would put pressure on the government to consider measures such as “a large & comprehensive scheme of old age pensions, & a square meal once a day for every child in school.” Although he was inclined to think that the government would “not do anything rash or violent,” he grasped that any measures which implied an increase in government expenditure must imply some kind of increase in the burden of direct taxation: after all, the Liberals had been elected as unequivocal Free Traders, and so could hardly be expected substantially to increase indirect taxation.

To begin with, the fiscal issue lay more or less dormant: the government inherited a surplus and Natty did not expect “any rash experiments in finance ... the difficulties connected with a graduated income tax may be hinted at & the taxation of site values talked of, but probably everything will go on in the same humdrum fashion.” “No doubt there are a good many crude ideas in the air about new forms of taxation . or confiscation,” he airily told his cousins in Paris. “I could not say that the Government would not be inclined to adopt them if they thought they were feasible or likely to bring grist to their mill.” But they would not, because such measures “would defeat their own object & be illusory sources of revenue, besides doing a great deal of harm.” Natty was more or less dismissive of Asquith’s first budget, which had disappointed some commentators who had been hoping for more radical retrenchment. At first, it had been hoped by the likes of Schuster and Holden “that Mr Asquith was going to put on extra taxation in order to buy up the National Debt; and now they heap coals of fire on the Chancellor of the Exchequer’s head” because his budget reduced taxation. Natty put this down to the fact that the deposit banks had large holdings of consols, the price of which they wished to see pushed up; for his part he was more alarmed by Asquith’s decision to set up a Commons Committee “on the incidence of the Income Tax, & various schemes for graduating that obnoxious impost.” But even the prospect of a graduated tax and a surcharge for higher incomes did not worry him much at this stage “as the number of millionaires was very few, they already paid very heavy death duties and a great many of them might send their fortunes to America or elsewhere, where they could not be taxed.”