The House Of Rothschild Part 16

Yet there was a vast difference between these expenditures and the immense sums required by the Paris, Frankfurt and Vienna houses. Lionel's hasty visit to Paris in late February seems to have convinced him that James's position could be salvaged, but he was a good deal more hesitant about Salomon and Amschel. For all their sentimental appeals to their father's memory, they were made to sweat-and pay-for their salvation. Indeed, Lionel's first reaction to Salomon's pleas for support (in the form of accepting some bills of Sina's) was to refuse; and when he did respond to the appeals of the Frankfurt house to send silver (the first of which arrived on April 14), he made sure the London house turned a profit on the shipments. His uncles reproached him, but they were at his mercy and were made to feel it. Lionel's tough line was reinforced by Anselm, who arrived in Vienna on April 10 to clear out his father's Augean stables, a task which he performed with a marked lack of filial compa.s.sion. Faced with a request to render yet more a.s.sistance to Arnstein & Eskeles (as well as another Vienna house, Heinrich & Wertheimer), Anselm immediately informed my father in the clearest possible terms, that on the basis of all my powers as representative of the [five] houses I forbade any further financial sacrifice . . . no matter what the consequences might be for the commerce and the situation of this place, and added that I would leave immediately in protest if any attempt was made here to insist on this . . . It is, believe me dear Uncle, a fatal role which I am taking on here . . . they will curse me as my father's evil angel . . . He is unfortunately in such a state of moral collapse and so bowed down by the situation, that for him to remain here any longer could only have a negative effect on his health . . . It would have been much better if he had left Vienna three months ago.

The recriminations between father and son over the financial mora.s.s into which the Vienna house had sunk in many ways marked the end of the dominance of the second generation. In a sense, this was the 1848 revolution within within the house of Rothschild. the house of Rothschild.

The reality was, however, that the London house was not the lender of last resort at all. For the ability of New Court to a.s.sist Paris and Vienna depended heavily on the ability of the Rothschilds' agents in America to remit funds to New Court. The year 1848 was in many ways the decisive test of Belmont's agency: had the system failed, the Rothschilds would have been seriously at risk. Beginning in the summer of 1847, they had nervously followed Belmont as he committed substantial resources to speculating in tobacco and to financing the American war against Mexico which had broken out in May the previous year. As late as February 1848 James sanctioned his decision to advance the US government a substantial sum against treasury bills to help pay the $15 million indemnity accorded to Mexico for the territory ceded by the US under the Treaty of Guadalupe Hidalgo. Typically, the Rothschilds had a man in Mexico at the same time-Lionel Davidson-who for several years had been importing Rothschild mercury from Spain to sell to Mexican silver mines; he too took a hand in the indemnity payment. Scharfenberg in Cuba and Hanau in New Orleans had also made large advances on tobacco and cotton respectively on the eve of the European crisis. These were big commitments: as James himself commented uncomfortably, "We are too much in the hands of these people." Indeed, there is no better testimony to Belmont's importance at this time than the frantic letters he was sent from London and Paris, berating him for his involvement with the Mexican indemnity and accusing him of having exceeded his powers. Finally, at the end of 1848, a Rothschild-Alphonse-was sent to New York in person, as if to bring the errant agent to heel.

This had its effect. Rightly fearing that Alphonse had been sent out to replace him, Belmont hastily despatched large consignments of silver to London. These were to prove one of the most important stabilising influences on the European financial situation in 1848, and without them Lionel would have been hard-pressed to a.s.sist his relatives on the continent. But Belmont wished it to be understood that he was bestowing favours, not following orders. As Alphonse reported, after a frosty reception in New York, Belmont's role was a "singular" one: "It is a position which is at once semi-dependent and semi-independent, simultaneously that of an agent and a correspondent." The long-discussed plan to replace him with a family member foundered once again in the face of Belmont's doggedness and the reluctance of any of the younger Rothschilds to settle permanently in the US. In the short term, Belmont packed Alphonse off to New Orleans and carried on as before, resuming the payment of the Mexican indemnity.

The second factor in the Rothschilds' survival was the relaxation of monetary policy by the European central banks, which undoubtedly helped to end the collapse of security prices. The Bank of England had set the precedent by suspending its gold reserve rule in October 1847; however, it proved less than easy to persuade its counterparts on the continent to do likewise. In Frankfurt, of course, there was no central bank, and it took time to persuade the town Senate to create some emergency credit facilities. In Paris, the situation was better, once the fear had receded that the republic would use the Banque de France as a milch cow for forced loans. In addition to suspending convertibility, the government set up a nationwide complex of comptoirs d'escompte comptoirs d'escompte and and magasins generaux magasins generaux to supply firms with new sources of liquidity, although these proved ephemeral and the enduring effect of the revolution was to increase the power of the Banque de France by obliterating the provincial banks of issue. In Vienna, the National Bank imposed a ban on exports of silver and gold and, in May, suspended convertibility. In each case, of course, the danger existed that issues of paper money might be excessive, and Anselm was not alone in fearing a slide into inflation in Central Europe (no one had forgotten the a.s.signats). Here again the Rothschilds' access to supplies of silver from America and England proved crucial, for it enabled them to replenish the reserves of the continental central banks. As early as April the Banque de France was placing orders for large silver purchases through New Court. The prospect of a similar deal gave Anselm an important source of leverage in the discussions over his father's huge acc.u.mulation of due bills at the Bank, which he succeeded in prolonging for two years. Even so, it was necessary for him to issue a bald threat to clinch the deal: "Either the prolongation of the bills or the fall of the houses of Eskeles and Wertheimer, which would not only have as a consequence the fall of many other houses here and in the provinces, but would also seriously compromise the portfolio of the National Bank itself." to supply firms with new sources of liquidity, although these proved ephemeral and the enduring effect of the revolution was to increase the power of the Banque de France by obliterating the provincial banks of issue. In Vienna, the National Bank imposed a ban on exports of silver and gold and, in May, suspended convertibility. In each case, of course, the danger existed that issues of paper money might be excessive, and Anselm was not alone in fearing a slide into inflation in Central Europe (no one had forgotten the a.s.signats). Here again the Rothschilds' access to supplies of silver from America and England proved crucial, for it enabled them to replenish the reserves of the continental central banks. As early as April the Banque de France was placing orders for large silver purchases through New Court. The prospect of a similar deal gave Anselm an important source of leverage in the discussions over his father's huge acc.u.mulation of due bills at the Bank, which he succeeded in prolonging for two years. Even so, it was necessary for him to issue a bald threat to clinch the deal: "Either the prolongation of the bills or the fall of the houses of Eskeles and Wertheimer, which would not only have as a consequence the fall of many other houses here and in the provinces, but would also seriously compromise the portfolio of the National Bank itself."

This was one of the critical moments in the rescue of the Vienna house. For the Paris house, however, of greater importance were the deals struck over government finance. Government loans contracted in 1847 were among the Rothschilds' most burdensome obligations. The only way to reduce these was by hard bargaining. Thus, in parallel with his negotiations with the National Bank, Anselm sought to arrange a modest rescheduling of his father's obligations to the Austrian Treasury. In Frankfurt too Mayer Carl sought to strike deals with Ka.s.sel and the Confederation. Even in Naples an agreement had to be reached with the government regarding payment of the interest due on Neapolitan rentes. The Rothschilds were most vulnerable in Paris, however, where James had been left holding around 170 million francs of 3 per cent rentes, now valued at roughly half what he had agreed to pay the government for them. Rather than swallow this heavy loss by selling (as it has sometimes been claimed he did), James sought to extricate himself from the 1847 commitments; and the way he did so is a case study in negotiation from a position of weakness.

It was far from easy. On February 24, as we have seen, James paid a visit to the Ministry of Finance, possibly to get the new regime to pay the interest falling due on the Greek bonds guaranteed by the previous regime (which normally he himself would have paid). There was a quid pro quo: the next day, it was announced that he was to make an ostentatiously large donation of 50,000 francs to the fund for those injured in the street fighting and that he intended to "offer his co-operation to such a good and honest Revolution." He then presented himself at the prefecture of police on February 26. When Caussidiere detailed the allegations that he was smuggling money out of Paris in preparation for his own flight abroad, James categorically denied them, steering a clever course between admitting to bankruptcy and implying that he had millions at his disposal: People think I am made of money, but I only have paper. My fortune and my cash are converted into securities, which at the moment have no value. I am far from wishing to declare bankruptcy, and if I must die, then I am resolved to do so; but I would regard flight as cowardice. I have even written to my family, to ask them to send me funds so that I can meet my engagements; and if you like, he added, I will introduce you to my nephew tomorrow.

Once again money changed hands: Caussidiere requested that James open a credit for a print works to keep its 150 workers in employment, a request granted when James returned the next day with Lionel (Caussidiere was handed 2,000 francs "to be distributed as [he] intended"). This was small beer to James, but the stakes were raised higher in early April when the government unexpectedly demanded 500,000 francs, the balance of a mortgage loan arranged before the revolution with Louis Philippe. At the same time, he was reminded of the large sum owed by his railway company to the government.

James responded to these demands with a mixture of threats and blandishments, as Charlotte recorded in her diary: The failure of the House of Rothschild would be a terrible disaster for France. It would be to kill the goose that lays the golden egg with a single blow and to abandon forever the chance of [its performing] any public or private services. The government could not auction off the family's golden houses: Ferrieres could not be sold; the hotel Florentin stands empty and could not be let under the present circ.u.mstances. If, however, they spare our uncle's life-by which I mean only his financial life-then he could be of service not only to the state, but to individual members of the government . . . In England, they say, no one is grateful for favours received. We certainly do not expect that, but I think one can count on recognition for favours still to be granted. Our uncle has just granted favours to M. de Lamartine, M. Caussidiere and Cremieux.

At the same time, if the immediate repayment of the money owed by the Nord was demanded, "thirty or forty thousand workers would be deprived of the employment the government had guaranteed them and the expenditures of the national Treasury on unemployment would increase considerably."

Not everyone was convinced by James's protestations that his "financial life" was at stake. In a good ill.u.s.tration of the way "socialism" made itself felt even in the financial sector, the clerks at de Rothschild Freres protested when James justified cutting their salaries on the grounds that "my business has been reduced." "Yes, you have lost nothing," declared one of them. "You are richer than anyone and we won't [accept a pay cut]." But, if nothing else, James had bought himself valuable time. By the time the government's commission had decided in favour of the state's repurchasing the concessions from the companies, it was the third week of May. Just over a month later, the political position in Paris was transformed by the brutal suppression of the "June days" (22-28 June)-an apparently spontaneous eruption of working cla.s.s rioting-by troops under the command of General Eugene Cavaignac.

Marx's bitter diagnosis of the "June days" and their aftermath was that the "bourgeoisie" as a whole had thrown in its lot with authoritarianism and militarism in order to crush the proletarian revolution. In contrast with the revolution of 1830, however, the Rothschilds did little, if anything, to promote the restoration of "order" (just as they did little to promote resolutions of the various diplomatic conflicts of the revolution). They did no more than welcome-cautiously-the arrival of Cavaignac. Indeed, they positively avoided making a direct contribution to his efforts: James packed Alphonse off to Frankfurt to ensure that he did not take part in the fighting, which he would have done had he stayed. The military restoration of "order" thus had the aspect of a deus ex machina deus ex machina. It was the same story in Naples, where Ferdinand dispensed with parliament and successfully reclaimed Sicily in August; and in Vienna, where Windischgratz bombarded the revolutionaries into surrender in early November.

Still, the Rothschilds knew how to swim with the turning political tide. For the reconstruction of the republican regime under Cavaignac provided the perfect opportunity not only to bury the railway nationalisation project but to reschedule the Nord's debts to the state and to resolve the question of the 1847 loan. It was later alleged that the Paris house had been "refloated" by the government at this juncture-to the great ire of James's grandchildren, who took pains to deny that their bank had ever relied on state intervention. The word "refloated" is misleading but-like the related accusations levelled at the government of excessive generosity-not without an element of truth. In essence, James had adopted the stance which Balzac had years before antic.i.p.ated: that of the indispensable debtor who owes his creditors so much that they dare not let him fail. Fearing that he might otherwise be unable to resume his payments to the Treasury, the government felt obliged to renegotiate the terms of the 1847 loan. The decision was understandable: in threatening them with the death of the "golden goose," James was implicitly threatening the collapse of the French financial system. As Merimee suggested at the time, the government's financial position was "diabolical"; the collapse of de Rothschild Freres would have made matters worse still.

The easier alternative was to work in partnership with "the Baron." Thus, when Lionel visited Paris in July, he found James closeted-as of old-with the Finance Minister. He was "now a great favourite and as there is no other Banker or person with money or disposition to come forward, he is naturally very much looked up to." Yet the expedient adopted by the new Finance Minister Goudchaux-to convert the 3 per cent bonds of 1847 into 5 per cents-was probably over-generous, in that it effectively turned a loss of 25 million francs into a profit of 11 million. The fact that Goudchaux was a Jew (like another moderate republican linked to James, Cremieux) merely added to the radical suspicion of a conspiracy to prop up Rothschild. In truth, James had probably exaggerated the danger of his own financial collapse in order to minimise his losses on the 1847 loan. Far from being in cahoots with Goudchaux, the Rothschilds regarded him as "not a practical man by any means" who knew "no more about the bourse than the man of [sic] the moon."

The Rothschilds' position had in fact been stabilising for at least a month before the "June days." As early as the last week of May, it was possible for Charlotte to affirm her belief in "in a bright, European and Rothschildian future." When Nat went to Frankfurt in June, he found Amschel still furious with Lionel, but financially quite secure, with a balance of at least 26 million gulden and a bullion reserve of 400,000. Indeed, the English Rothschilds were surprised to find Amschel selling on to the Vienna house silver he had received from the London house only weeks before. Another sign of normalisation was the resumption in earnest of negotiations for a new mercury contract in Spain (where Baring was mounting a serious challenge). This coincided with excited reports from Davidson about new discoveries of silver in Chile and Peru which were likely to boost the mercury market. By August matters were sufficiently far advanced for James, Lionel and Anselm-now the family's dominant triumvirate-to meet at Dunkirk to take stock of the combined accounts. It was not until some time later, however, that it was apparent to those outside outside the family that the Rothschilds had survived. When the radical the family that the Rothschilds had survived. When the radical Tocsin des Travailleurs Tocsin des Travailleurs devoted a leader to the subject in August, its tone was ironical; yet a genuine undertone of admiration is unmistakable in its appeal to James to lend his miraculous financial powers to the cause of the republic. devoted a leader to the subject in August, its tone was ironical; yet a genuine undertone of admiration is unmistakable in its appeal to James to lend his miraculous financial powers to the cause of the republic.

You are a wonder sir. In spite of his legal majority, Louis-Philippe has fallen, Guizot has disappeared, the const.i.tutional monarchy and parliamentary methods have gone by the board; you, however, are unmoved! . . . Where are Arago and Lamartine? They are finished, but you have survived. The banking princes are going into liquidation and their offices are closed. The great captains of industry and the railway companies totter. Shareholders, merchants, manufacturers, and bankers are ruined en ma.s.se en ma.s.se; big men and little men are alike overwhelmed; you alone among all these ruins remain unaffected. Although your House felt the first violence of the shock in Paris, although the effects of revolution pursue you from Naples to Vienna and Berlin, you remain unmoved in the face of a movement that has affected the whole of Europe. Wealth fades away, glory is humbled, and dominion is broken, but the Jew, the monarch of our time, has held his throne[.] [B]ut that is not all. You might have fled from this country where, in the language of the Bible, the mountains skip about like rams. You remain, announcing that your power is independent of the ancient dynasties, and you courageously extend your hand to the young republics. Undismayed you adhere to France . . . You are more than a statesman, you are the symbol of credit. Is it not time that the bank, that powerful instrument of the middle cla.s.ses, should a.s.sist in the fulfilment of the people's destinies? Without becoming a Minister, you remain simply the great[est] man of business of our time. Your work might be more extensive, your fame-and you are not indifferent to fame-might be even more glorious. After gaining the crown of money you would achieve [your] apotheosis. Does that not appeal to you? Confess that it would be a worthy occasion if one day the French Republic should offer you a place in the Pantheon!

Even this struck some as premature: as late as November rumours were still circulating that James intended to go into liquidation. But the Rothschilds had indeed survived. We now know how they did it. We can also see why, at the time, their escape seemed well-nigh miraculous.

Tranquillity and Order.

Another important difference between 1830 and 1848 was the Rothschilds' lack of diplomatic influence. Though they fretted constantly about the danger of a European war, for most of 1848 they were far too preoccupied with their own financial problems to play their familiar part in great power politics. When the Austrian government asked Salomon to help "end the Italian difficulties" by sending "a member of his House in order to start negotiations in this sense in the name of the Austrian Government," the younger Rothschilds were reluctant to become involved. As Mayer Carl put it: [I]n my opinion we should not mix in politics, because, however things turn [out], it is harlequin who gets the kicks and harlequin, that is us. Also I don't believe that Lombardy is going to pay anything to Austria. The Italian cause has aroused too much sympathy for any solution not to be inimical to Austria's interests. Also everybody [would] say that we make G.o.d knows how much out of this. People are used to a.s.suming that Rothschild does nothing without getting something.

When Radetzky "gave a good licking" to the Piedmontese armies at Custozza, Anselm and his cousins were delighted, but poorly informed about Austrian diplomatic intentions, a.s.suming that Austria would still relinquish most of her Italian territory. Although James came to realise that Bastide, the new French Foreign Minister, was unenthusiastic about Northern Italian unification, and that therefore Palmerston's efforts in that direction were unlikely to succeed, his nephews remained convinced for some time that Lombardy and Venetia would be able to buy their independence: it was, wrote Anthony, "only an affair of money." Their sources of information in Germany were not much better. Mayer Carl, for example, seems to have expected Frederick William IV to accept the German crown when it was offered by the Frankfurt parliament in March, and-even more improbably-that this would help Austria and Prussia "pull together." (In fact, he contemptuously spurned what he called a "diadem moulded out of the dirt and dregs of revolution, disloyalty and treason.") It was not until late February 1849 that Anselm began to receive the kind of inside information about Austrian diplomacy which his father had for so long taken for granted. He was soon following in Salomon's footsteps by siding enthusiastically with Schwarzenberg in the second war with Piedmont-a tendency which his father's return in April may have reinforced.

In practice, of course, the Rothschilds could not hope to exercise political influence as long as they themselves were financially weak. The traditional leverage exerted by the Rothschilds had, after all, been based primarily on the granting of loans. But throughout 1848 the British Rothschilds used their new predominance over the continental houses to veto numerous suggestions of loans to the post-revolutionary regimes in Austria, Hungary, Rome, Lombardy, Prussia, Baden and elsewhere. (Incredibly, Salomon seems to have suggested lending money to allow the Hungarians to buy guns in England-this even as he was lamenting the collapse of the Habsburg Empire!) It was not until late September that anything resembling "business as usual" was contemplated, though talk of a loan to Austria proved premature. The trouble was that the revolution refused to lie down and die. No sooner had "red republicanism" been defeated in Paris, Vienna and Berlin than it burst forth again in Italy. No sooner had it been defeated in Italy than it had a last lease of life in South Germany.

As long as political uncertainty remained, the Rothschilds held back. When the Austrian government approached Anselm with a 60 million gulden loan proposal in March, he was cautious, dismissing it as "a great nonsense" and "a stupid project." The following month, when James was asked by the city of Paris to make a 25 million franc loan, he "refused it & said it three times, he did not wish to do any business." This hesitation reflected above all the difficulty of deciding what was to be done with the Vienna house which, even after Anselm's skilful salvage operation, still owed the Frankfurt house the immense sum of 1.7 million, as well as a smaller sum to the Paris house. It was not until the summer, after a succession of meetings between the princ.i.p.al partners (including a full "congress" at Frankfurt in the spring), that the decision was taken to preserve the Vienna house by writing most of this money off. The extent to which the London partners wished to restrain their uncles is obvious from Alphonse's comment that the "true goal" of the "congress" would be: to modify the bases of our house, and, with respect to the London house, to free them reciprocally from a solidarity incompatible with the political activities and the ardent business spirit of the first generation. Our good uncle [Amschel] cannot bear the reduction of our fortune, and, in his desire to re-establish it on its old basis, would not hesitate to plunge us into hazardous enterprises.

It was symptomatic of the mistrust engendered by the crisis of 1848 that the London partners began to distinguish between letters they would allow their uncles to see and those they kept to themselves. Considering that the circulated private letters had up until this point been the very life blood of the partnership this was a revolutionary suggestion-though it is impossible to be sure how far the London partners went in this direction since so much of their correspondence has been lost or destroyed.

Two additional factors tended to diminish Rothschild political influence. Firstly, their relations with Palmerston remained as tenuous as ever. Charlotte denounced Palmerston's policy in 1848 as "laughable," and it seems reasonable to a.s.sume that Lionel shared his wife's view; there was evidently little communication between the Rothschilds and Palmerston at this time. In Nat's view, "any change in the Foreign Affairs will be an improvement on Ld. P[almerston]," a view "heartily" endorsed by his uncle James. To Betty, Palmerston was "the bad genie, breathing fire everywhere and sheltering behind political puppets whom he knows how to station at the front door." Indeed, the Rothschilds seem to have based their a.s.sessments of British policy more on defence estimates than on first-hand ministerial intelligence-a reflection perhaps of Lionel's preoccupation at this time with the question of Jewish representation in Parliament. Secondly, they miscalculated the political future in France. James overestimated the durability of "respectable, moderate" republicanism. a.s.suming that Cavaignac and his fellow general Nicolas Changarnier (who combined command of the National Guard with the military governorship of Paris) would remain the key figures of the new regime, he set to work to ingratiate himself with them. Meetings with Cavaignac and other ministers to discuss French foreign policy became frequent. "Our little friend" Changarnier was invited to hunt at Ferrieres and was a frequent Rothschild dinner guest. So close did relations become that the Austrian amba.s.sador in Paris was able to report gossip about Changarnier's "sentiment de coeur" for Betty. As it turned out, James was backing a loser, though his reason for doing so is understandable. For the alternative to the generals was Louis Napoleon Bonaparte, the nephew of the former Emperor.

Throughout the nineteenth century, no figure of political importance was viewed by the Rothschilds with more suspicion, not to say contempt, than Louis Napoleon. This was partly because of his disreputable past-the escapades at Boulogne in 1836 and Strasbourg in 1840, the idiosyncratic books, the English mistress-and the louche lifestyle which he never wholly abandoned. In April 1849, for example, Anthony reported that his aunt and uncle were "disgusted with L. N. They say he gets drunk every night & G.o.d knows what else he does." His relationship with Mrs Howard was also a subject for sardonic comment: in Anthony's words, all Louis Napoleon wanted was "plenty [of money] so that he can roger comfortably & get drunk when he likes." James regarded him as "a stupid a.s.s" but, pragmatic as ever, was prepared to put his personal aversion to one side and sup with him as early as January 16-just eighteen days after he had been sworn in as President of the Republic. "I could not refuse his invitation," he explained to his nephews apologetically. Indeed, he seems to have taken the precaution of lending Louis Napoleon 20,000 francs shortly before his election. Nevertheless, this was to be no repeat of the regime change of 1830, when James and Louis Philippe had translated a private, financial relationship into a public, political one almost overnight. As soon as Louis Napoleon had access to public funds, James cut off his credit, ordering Anthony "to give Napoleon no more money, he has no credit with us . . . I promised him 20,000 francs before his budget was pa.s.sed but now he is getting money from the government, so I don't want to throw away our money and so I won't give him a penny more."

His wife felt an even deeper dislike, partly based on a lingering loyalty to the deposed Orleanist royal family. Disraeli recalled Betty inveighing against Napoleon "whom she hated" to Macaulay, who sought vainly to persuade her that he might be Augustus to his uncle's Julius Caesar. She was unimpressed: France was "floundering between a n.o.body and a head garotted by a subversive, useless minority." If Cavaignac won it would be "a disaster" as he had shown "neither candour nor capacity in power." But if Louis Napoleon won it would be "a humiliation" as he was "that ridiculous flag from a wonderful past existence, a political nothing who has no other value than as a negative power, a polished socialist hiding roughness beneath the pretence of pleasant politesse." France's "love affair" with him, she predicted, "could be just like a happy love affair at the beginning of a novel; lovers in this case always end up hating each other, or by being violently separated." His victory was a "distress signal around which diverse and opposing opinions rally to protest against the country's upper crust." From the outset she a.s.sumed that "a parody of the Empire" would be restored. Until April 1849 she stayed away from the President's receptions.

What concerned the Rothschilds much more, however, was the possibility that, like his uncle before him, Louis Napoleon would pursue an expansionist foreign policy which might plunge Europe once again into a general war. From the moment that Bonaparte's star began to wax in mid-1848, when he was elected to the Chamber of Deputies, it was this which coloured the Rothschilds' judgement. Identifying him as the ally of the "friends of disorder and unrest," they a.s.sumed that his popularity presaged war. As James put it, Louis Napoleon would spend a nice bit of money to ensure that they have him as President and in my opinion-I who have never believed in war-the situation looks blacker now, because the people now have to . . . make war. At the bourse everyone was horribly black, because they say that the working cla.s.s will supposedly back him, because he is a socialist and draws his support from the most common people . . . I am trying to liquidate.

Although they came to revise this a.s.sessment in the succeeding months, as the likelihood of his victory in the presidential election grew, they were far from delighted at this prospect, regarding Cavaignac as "decidedly better." Both camps directly approached James to ask for support, but he told them that "not being French he was withholding all influence in this serious matter and would not support either of the two candidates, that he was waiting for the country to make its decision and would not oppose to whichever president was preferred by the majority." Privately, he expected Louis Napoleon to defeat Cavaignac. But he found the new President "dull and with no charisma whatever," despite his flattering request that James should "visit him often and eat with him in the morning." In the immediate aftermath of Bonaparte's victory in December, he and Betty nervously antic.i.p.ated a return to the "June days," and even the outbreak of war between France and Prussia.

Such fears were only increased by the a.s.sumption-which can be detected as early as January 1849-that Louis Napoleon would "not rest till he has made himself Emperor, & that the votes of the Army and Peasantry combined will be enough to secure his success." James had no doubt that this would be "a great mistake." Throughout the first months of 1849 he watched with anxiety for signs of a "forward" French foreign policy which might reinforce such pretensions. In particular, the continuing instability of the situation in Italy seemed to invite some kind of French intervention. In James's words, "This question is the one which interests us the most: whether [or not] we will have peace." Every flicker of unrest in Paris seemed to increase the likelihood of a gamble on war by the new government. "It will end with war," predicted James on June 9. "We are in the hands of G.o.d. We have [not only] Asiatic cholera [but also] political and financial cholera . . . I do not believe rentes will go up."

The realisation that Napoleon intended to intervene in Italian affairs on the side of the Pope-who had been forced to flee Rome in November-rather than the Roman republic therefore came as a welcome relief, even if Anthony could not at first see "how they can enter & put the Pope on the throne if they have a Republic here." In fact, prolonged debates on the subject meant that this ended up being the last of the foreign interventions against republicanism which finally brought the revolutionary period to an end. The first blow was dealt in March by the second, decisive Austrian victory over Piedmont, which was followed by the occupation of republican Tuscany in May. In April it was the turn once again of the Frankfurt Rothschilds to pack up their valuables as a last wave of popular unrest swept through South Germany, only to be crushed by joint action between Prussia, Saxony and Hanover. As before, the Rothschilds could do little more than stand on the sidelines cheering. Anselm enthusiastically welcomed the Russian intervention in Hungary, conscious that Windischgratz alone could not win.

Only when the military defeat of the various enclaves of revolution was sure did the Rothschilds seriously think about resuming their traditional loans business. On July 4, Anselm began to talk more positively about the Austrian loan, as well as urging the Paris house to provide the Russian army in Hungary with financial a.s.sistance via the Paris house. He also began to involve himself in the efforts to stabilise the Austrian exchange rate, which war and the suspension of silver convertibility had seriously weakened. By mid September, a small Austrian loan had been arranged in the form of a 71 million gulden issue of treasury bills; although most of these were absorbed by the Vienna market, around 22 million were taken up and sold by Amschel in Frankfurt.

Naturally, these transactions implied an explicit commitment to the forces of monarchical reaction, something which caused a degree of disquiet to members of the family in France and London, where support for Hungary was widespread. Betty can hardly have been indifferent to the bitter sentiments expressed in Heine's pro-Magyar poem, "Germany in October 1849," a copy of which he sent her. But Anselm had no time whatever for his English cousins' "uneasy" expressions of pro-Hungarian feeling, advising "your good English folks [to] stick to Ireland & its Potato crop, & keep their arguments for their objects." Carl's suggestion of a loan to the Pope could also be seen as lending sustenance to the counter-revolution. To the disappointed revolutionaries of 1848-not least Marx-the moral was plain: "Thus we find that every tyrant is backed by a Jew, as is every Pope by a Jesuit. In truth, the cravings of the oppressors would be hopeless and the practicability of war out of the question, if there were not an army of Jesuits to smother thought and a handful of Jews to ransack pockets."

It was misleading, however, to portray the Rothschilds as the financiers of reaction, as they had so often been portrayed in the past. For one thing, as Lionel reported from Wildbad in August, the revolution had made erstwhile liberals more conservative: "The Liberal party in Germany is very different from the liberals in England. All persons of property or who are in business are for the old state of things." James's paramount concern was to resume normal business activity-as he reminded his nephews in London, he was "a friend of business" and wanted to "keep the wheels turning." Provided international stability could be relied upon, he was relatively uninterested in the political complexion of the regimes he lent to. Before it was confirmed that the Pope would be restored with French support, for example, James was perfectly willing to do business with the Roman Republic. Indeed, when the Republic's representative approached him with a small deposit in March 1849 to ask whether he "would do their business," he accepted it "as I am [now] a Republican"-an ironic aside from a man who at other times referred to it as the "accursed republic." And when the position of the Papacy was restored at the end of June, James informed Carl that he had no desire to "run after" the Vatican for business. Adolph too showed little respect for the Pope-"His old Pious-ness with all his nonsense." Any loan, insisted his French cousins, was to be conditional on the granting of civil rights to the Roman Jews. For, as Anselm said, the Pope who was once so liberal and who brought Italy such misfortune through his overhasty reforms, is now not just wholly reactionary but, following the example of the Popes of the dark Middle Ages, intolerant in the highest degree, I am tempted even to say inhuman. If the Pope could do business with any other house, he would certainly break with us, and so compliments to the holy gentlemen are not in order.

Nor were James and Lionel willing to allow the Vienna house to resume its traditional role as a more or less unquestioning supporter of the Habsburg regime. In December, both expressed strong objections to Salomon's efforts to support the Austrian currency when their rivals were profiting from speculating against it.

This political neutrality was most obvious in the case of Piedmont, which had been among the princ.i.p.al troublemakers of 1848. As Anselm pointed out, the Piedmontese indemnity to Austria promised to generate "a beautiful and safe piece of business" in the form of a loan to Piedmont as well as the transfer of part of its proceeds to Vienna. Nat was initially sceptical-as Charlotte observed, the "more sensible" members of the family had not forgotten the "fearful period" of the previous year-but even he could see the appeal of such a transaction. As for James, his interest in Piedmont was so great that Anselm feared he might give the Turin government the impression of "excessive keenness." This underestimated James's skill as a negotiator. He had begun by sounding out the government in advance of the peace agreement with Austria, though without committing himself. Then he hinted at a deal with the Italian bankers who hoped to float the bonds themselves in order to shut out rivals from Paris and Vienna. In September he went in person to Vienna and Milan to offer an advance of 15 million francs on the Piedmontese indemnity due to the Austrian government. Finally, in Turin, he succeeded in securing control of more than half the 76 million franc Piedmontese loan, leaving just 8 million to the Italian bankers and the rest to public subscription.

This was not just because he wished to see Austria get her indemnity. As he a.s.sured a young and ambitious financier named Camillo di Cavour, he was "very anxious to have dealings with this country; he has repeatedly told me that he regards Piedmont as established on a much sounder basis than Austria." For his part, Cavour was shocked by the way James had "bamboozled" the Piedmontese Finance Minister Nigra. Convinced that Piedmont should not allow herself to become dependent on "this cunning old rascal Rothschild," Cavour would prove a formidable obstacle to Rothschild ambitions in Italy in the future.6 But, for the time being, James appeared to have established an important foothold, with the possibility-as he put it-that this would lead to a financial "marriage" with Italy as a whole. In a similar way, the Frankfurt house made approaches at around the same time to German states like Wurttemberg and Hanover (where a liberal ministry under Johann Stuve remained in power until November 1850), though these were rebuffed. But, for the time being, James appeared to have established an important foothold, with the possibility-as he put it-that this would lead to a financial "marriage" with Italy as a whole. In a similar way, the Frankfurt house made approaches at around the same time to German states like Wurttemberg and Hanover (where a liberal ministry under Johann Stuve remained in power until November 1850), though these were rebuffed.

James's success in Turin brought to an end over a year of immobility induced by the revolution. Even Lionel and his brothers were now ready to contemplate new business, although they were still more interested in revolutionless Spain and America than in Central Europe. Mercury, cotton, gold, tobacco-even Nicaraguan ca.n.a.ls and African groundnuts-seemed safer fare than loans to politically volatile states.

In Paris itself there was also a slight relaxation in Rothschild att.i.tudes. The main barometer of financial opinion-the price of rentes-points to a growing (though not unqualified) confidence in the presidential regime in the course of 1849: in the year after December 1848, 5 per cents rose from 74 to 93, and with them Nat's spirits. This was in part a reflection of Napoleon's restrained foreign policy. As Nat remarked when the expedition to Rome was first bruited, "In general when troops begin to move bondholders are frightened; in this case as it is for the re-establishment of order, perhaps & I trust it will produce a good effect." The return of financial confidence also reflected a growing awareness that Louis Napoleon was far from being the ally of the radical left. Although he still thought the President "a little ugly fellow," Nat was favourably impressed by the evidence of social restoration he witnessed one evening at the President's palace: "The ladies were beautifully draped in jewellery and when the carriages were called the t.i.tles were not not omitted." "If we remain omitted." "If we remain quiet quiet," he added hopefully, "there will be no difference between the republic and the monarchy." This was over-optimistic: in strictly financial terms, rentes never recovered to pre-war revolutionary levels under the Republic, suggesting continued doubt about the stability of the regime-witness Anthony's alternate warnings that Louis Napoleon would go the way of Louis Philippe or that the republicans would succ.u.mb to a Bonapartist coup. Yet there was confidence enough for the Rothschilds to raise the inevitable subject of a new loan to France herself.

There were also the first signs of a revival of the railway mania of the 1840s (Leon Faucher's appointment as Minister for Public Works was especially encouraging). In February 1849 the Pereires revealed their most ambitious scheme to date: a railway to link Paris, Lyon and Avignon, which would then fuse with the line from Avignon to Ma.r.s.eille (the forerunner of the Paris-Lyon-Ma.r.s.eille line). The aim was to revive the system on which the Nord had been based, with the state investing 147 million francs in the initial construction of line between Paris and Lyon and guaranteeing the company a 5 per cent return, while the company put up 240 million francs to operate the concession for ninety-nine years. In fact, it would seem that the Pereires were now seeking to emanc.i.p.ate themselves from the Rothschilds. To raise the money for the new company, they had initially approached Delessert and through him Barings-a first hint of the breach which lay ahead. James was well aware of what was going on and in May fired his first shot back by forcing Isaac Pereire off the board of the Nord. No one should think "that the Pereires are [the same as] Rothschild," he told Anthony. "You have no idea what scoundrels these little fellows are. They are always trying to exploit our name." But "when these people don't need you, they give you a kick in the a.r.s.e."

In a symbolic rea.s.sertion of his position as railway king, James had made a point of appearing alongside Napoleon and Changarnier when a new stretch of the Nord line was opened in July. In November he sought to force his way into the Paris-Lyon-Avignon concession negotiations, b.u.t.tonholing Louis Napoleon on the subject over dinner and haggling tenaciously with the new Finance Minister Achille Fould thereafter. From the Pereires' point of view, however, this may have been an unwelcome reminder of their a.s.sociation with "Rothschild Ier." There was fierce opposition to their plan, which one critic warned would lead to "a vast consortium Pereire-Rothschild dominating the country from Ma.r.s.eille to Dunkirk and from Paris to Nantes, controlling the coasts of the Mediterranean, those of the Channel and almost all those of the Atlantic, master of the French isthmus." By comparison, the more modest rival proposal put forward by Talabot and Bartholony to link Paris and Lyon seemed less monopolistic. There was similar opposition to the Pereire plan for a line linking Paris and Rennes in the west, which they hoped to link to their Rive Droite terminus. Still, the very notion that he was striving for such a "railway hegemony" testified to the extent of Rothschild recovery. As James put it in a letter to Anthony: "Above all, it is good that people realise that nothing gets off the ground without us and when we demand something, then it is a case of giving Rothschild all he wants."

Nothing could better express how far things had come full circle than this renewed self-confidence-except perhaps the deeply paradoxical friendship which James formed in 1849 with Alexander Herzen. As one of the founding fathers of Russian socialism-the man who coined the phrase "Land and Freedom"-Herzen had left Russia for Paris in January 1847 and, after a brief trip to Italy, returned there at the height of the revolution in May 1848. He had already suffered internal exile as a young man for his liberal inclinations, but by the time he reached Paris his views had moved closer to those of revolutionary socialists like Michael Bakunin and Pierre-Joseph Proudhon (author of another famous aphorism of the period, la propriete, c'est la vol la propriete, c'est la vol ). Indeed, Herzen personally financed Proudhon's short-lived journal the ). Indeed, Herzen personally financed Proudhon's short-lived journal the Voix du Peuple Voix du Peuple to the tune of 24,000 francs while the latter was in prison. A less likely person to become a favoured Rothschild client would be hard to imagine. The fact that he did sheds light on James's political outlook, and perhaps substantiates Heine's earlier a.s.sertion that he was at heart more a revolutionary than a reactionary. to the tune of 24,000 francs while the latter was in prison. A less likely person to become a favoured Rothschild client would be hard to imagine. The fact that he did sheds light on James's political outlook, and perhaps substantiates Heine's earlier a.s.sertion that he was at heart more a revolutionary than a reactionary.

Though born illegitimate, Herzen had inherited a substantial fortune from his aristocratic father, so it is not wholly strange that the Rothschilds obliged him with minor banking services while he was in Italy and helped him invest some 10,000 roubles when he began to sell off his Russian property. Herzen later recalled how he made the acquaintance of Rothschild, and proposed that he should change for me two Moscow Savings Bank bonds. Business then was not flourishing, of course, and the exchange was very bad; his terms were not good, but I accepted them at once, and had the satisfaction of seeing a faint smile of compa.s.sion on Rothschild's lips-he took me for one of the innumerable princes russes who had run into debt in Paris and so fell to calling me Monsieur le Comte . . . By Rothschild's advice I bought myself some American shares, a few French ones and a small house in the rue Amsterdam which was let to the Havre Hotel.

However, when the Russian government sought to prevent Herzen raising more cash by mortgaging his mother's estate at Komostra, less orthodox financial a.s.sistance was called for. According to Herzen's own account, James agreed to accept a bill drawn to the value of the antic.i.p.ated mortgage and, when the Russian authorities refused to authorise the mortgage, "grew angry, and walked about the room saying: 'No, I shan't allow myself to be trifled with; I shall bring an action against the bank; I shall demand a categorical reply from the Minister of Finance!' " Despite receiving warnings about his new client from the Russian amba.s.sador Count Kiselev, James now took up the cudgels on Herzen's behalf, drafting a stiff letter to Ga.s.ser in St Petersburg which threatened the Russian government with legal action and exposure in the press.

Why did he do this? He can have had no illusions about Herzen's politics because he had been given "a very unfavourable opinion" of him by Kiselev. As Herzen put it, he now "surmise[d] that I was not a prince russe." The answer seems to be that this was James's idea of a joke. Herzen was bemused by the fact that James "now took to addressing me as Baron," and even more bemused when he refused to send his letter to Ga.s.ser until Herzen increased his commission on the transaction from half a per cent to 5. This "Mephistophelean irony" was intended to test Herzen, who refused to concede more than another half per cent: When half an hour later I was mounting the staircase of the Winter Palace of Finance in the Rue Laffitte, the rival of [Tsar] Nicholas was coming down it.. . . His Majesty, smiling graciously, and majestically holding out his own august hand [said,] "the letter has been signed and sent off. You'll see how they will come round. I'll teach them to trifle with me.""Only not for half of one per cent," I thought, and I felt inclined to drop on my knees, and to offer an oath of allegiance together with my grat.i.tude, but I confined myself to saying: "If you feel perfectly certain of it, allow me to open an account, if only for half of the whole sum.""With pleasure," answered His Majesty the Emperor, and went his way into the Rue Laffitte.I made my obeisance . . .

Six weeks later the money was paid. "From that time forth," Herzen recalled, "I was on the best of terms with Rothschild. He liked in me the field of battle on which he had beaten Nicholas; I was for him something like Marengo or Austerlitz, and he several times recited the details of the action in my presence, smiling faintly, but magnanimously sparing his vanquished opponent." After Herzen's expulsion from Paris by the Bonapartist regime, James continued to look after his investments in American and other bonds (he appears in the 1851 balance sheet owing the Paris house 50,000 francs) and secured him permits on the occasions when he wished to visit Paris. He also recommended him to the London house, which took over his account during his long English exile.

Herzen's transformation from insurgent into investor, from Rothschild critic into Rothschild client, was in many ways emblematic of a Europeanwide change of mood-as was James's willingness to play this game with a notorious revolutionary. Did he know that the money he was putting in Herzen's hands was being used to finance the Voix du Peuple Voix du Peuple ? If he did, it did not worry him. By the end of 1849 the revolution was over and the more rapid and sustained pace of economic development henceforth would make another 1848 much less likely. For his part, Herzen saw the Rothschilds as personifying this shift away from revolutionary politics: ? If he did, it did not worry him. By the end of 1849 the revolution was over and the more rapid and sustained pace of economic development henceforth would make another 1848 much less likely. For his part, Herzen saw the Rothschilds as personifying this shift away from revolutionary politics: A Rothschild . . . must be in his office in the morning, to begin the cap italisation of his hundredth million; in Brazil there is plague, and war in Italy, America is falling to pieces-everything is going splendidly: and, if someone talks to him then of man's exemption from responsibility and of a different distribution of wealth, of course he does not listen.

Of course, for a new era lay ahead: of conflicts within capitalism rather than against it, and between states rather than cla.s.ses.

APPENDIX 1.

Prices and Purchasing Power.

It goes without saying that the pound sterling was worth considerably more in the nineteenth century than it is now, mainly because of the inflation which has been a perennial feature of economic life since the 1950s. To be precise, in 1800 the pound was worth around 25 times what it is worth today. Because prices tended to fall during the nineteenth century, it was actually worth rather more in 1900: close to fifty times as much. To put it another way, the purchasing power of the pound has fallen in the past century by around 98 per cent: in 1900 terms, a pound today is worth just two (decimal) pennies.

To try to make historic prices intelligible to modern readers, historians often use price indices to calculate what a sum of money in the nineteenth century "means" in today's pounds. This is easily enough done. Let us take as an example Nathan Mayer Rothschild's total wealth at the time of his death in 1836, which I estimate at around 3.5 million (see chapter 11). Following the conventional system, in order to "convert" that figure into 1995 pounds to allow for inflation in the past 160 years, all that the reader need do is multiply by 35.5, giving 124.25 million.

The trouble with this is that it takes no account of the dramatic changes in economic structure and relative prices which have happened in the past two centuries. The cost of living is in fact a fairly meaningless concept over time because the nature nature of living-that is, what we buy with money-has changed so much in 200 years. As James de Rothschild's biographer rightly says, "A fortune . . . is essentially the power to purchase so many acres of land, to employ so many workers, to maintain so many residences." Labour was much cheaper in Europe 150 years ago than it is now (hence the huge numbers of people employed as servants) and taxes were negligible; by contrast, many of the things now considered "necessaries" were expensive luxuries then, if they existed at all. The long-run price indices used for such calculations are also problematic because of definitional changes (the contents of the supposedly representative basket of goods). of living-that is, what we buy with money-has changed so much in 200 years. As James de Rothschild's biographer rightly says, "A fortune . . . is essentially the power to purchase so many acres of land, to employ so many workers, to maintain so many residences." Labour was much cheaper in Europe 150 years ago than it is now (hence the huge numbers of people employed as servants) and taxes were negligible; by contrast, many of the things now considered "necessaries" were expensive luxuries then, if they existed at all. The long-run price indices used for such calculations are also problematic because of definitional changes (the contents of the supposedly representative basket of goods).

A more accurate method is to relate a money value to current gross domestic product (GDP). The advantage of this is that it conveys the purchasing power of a given sum of money-that is, it gives us an approximate idea of how much of the year's total economic output expressed in current prices it could buy. As a proportion of UK GDP (562 million in 1836), Nathan's total wealth at death was equivalent to around 0.62 per cent; 0.62 per cent of the United Kingdom's 1995 GDP (605,100 million) is 3,752 million-a rather larger figure than the one given by the crude inflation multiplier!

Another way of conveying the significance of the original figure is to relate it to per capita GDP; this has the advantage of bringing population change into the equation. Thus Nathan's 3.5 million should be compared with a per capita GDP figure for the same period of 22-that is, Nathan had acc.u.mulated around 160,000 times per capita national income; 160,000 times the 1995 figure for per capita GDP (c. 10,430) is 1,669 million. It therefore seems clear that Nathan was by the standards of our own time close to being a double billionaire.

Even this measure is misleading, however, because it leaves out of account the greater inequality of the nineteenth century. In the absence of a progressively redis tributive tax system and a welfare state, the distribution of income and to a lesser extent of wealth was far more unequal than in our own day. Very rich individuals and families were much rarer then than they are today, and the gulf which separated the Rothschilds from nearly everyone else in Britain was vast. As late as 1911-13, no fewer than 87 per cent of all people aged twenty-five and over in England and Wales-16 million people-had total wealth of less than 100, compared with 0.2 per cent-32,000 people-who had wealth of more than 25,000. The Rothschilds remained at the very pinnacle of this wealthy elite. When they died in rapid succession in 1915, 1916 and 1917, Nathan's grandsons Natty, Leo and Alfred left between them 6,494,000-almost exactly 0.1 per cent of the total capital owned by all adults in England and Wales. To put it another way, they bequeathed between them as much as 191,000 men from the bottom 87.4 per cent of the population.

Were the Rothschilds the richest family in the nineteenth century? Rubinstein's figures for British millionaires do not give precise figures for fortunes in excess of 1 million before 1858; but it seems unlikely that any of the eleven other individuals listed for the period 1810-56 left his heirs as much as Nathan. The nearest was the banker William J. Denison, who left 2.3 million (including real estate worth 600,000) in 1849. It was not until 1857 that someone left more than Nathan to his heirs-the textile warehouseman and Anglo-American banker James Morrison, who left between 4 million and 6 million at his death. Nathan not only died richer than the ironmaster Richard Crawshay and the cotton manufacturers Robert Peel and Richard Arkwright; he also left more than the Duke of Queensberry, the Duke of Sutherland and the Duke of Cleveland. Taking the period 1860-99 as a whole, only twenty-three individuals left estates worth 1,800,000 or more: four of them were Rothschilds (Nathan's sons Lionel, Anthony, Nat and Mayer). Although individually they were not the richest men of their time-Rubinstein cites two individual estates greater than 3 million-no other family could match their collective wealth. Altogether the brothers left 8.4 million: if Nathan, like all aristocratic millionaires, had left his fortune to a sole heir, Lionel would unquestionably have been the richest man in Britain. In reality, the richest man in the world was probably his uncle James who, at his death in 1868, was reported to have left his heirs around 1,100 million francs (44 million), though a more realistic figure is probably around 193 million francs (7.7 million) (see volume II).

From 1900 onwards, the English Rothschilds ceased to be exceptional as millionaires. Natty was the richest of his generation of English Rothschilds (leaving 2.5 million); but at least forty-six British millionaires in the period 1900-39 left as much as or more than him. It should be noted once again, however, that the partners in the French and Austrian houses were significantly richer than their English cousins. In 1905 Edouard, Gustave and Edmond each had personal shares in the combined Rothschild partnership worth 5.8 million. Albert, the head of the Vienna house, had a total share of 5.9 million. This excludes very substantial a.s.sets outside the partnership. Only seven of Rubinstein's pre-1940 millionaires could match this; nine if the South African "Randlords" are included. Taken together at its peak in December 1899, the combined capital of the Rothschild houses was 41.4 million, divided between ten partners. Again, this takes no account of private wealth, much of it held in the form of expensive art collections and prime real estate. It is almost inconceivable that any other family could match this.

Nearly a hundred years on, do the Rothschilds have a modern equivalent? The answer is no. Not even the Saudi royal family has a comparable share of the world's resources in its possession today. Nor can even the richest businessman in the world claim without qualification to be as rich in relative terms as Nathan Rothschild was when he died at the height of his fortune. At the time of writing, Bill Gates (the founder of the computer software company Microsoft) has an estimated personal fortune of $36.4 billion (21.7 billion) and has a good claim to be the richest man in the world. If we relate that to current US GDP ($7,487.6 billion), we find that Mr Gates's wealth is equivalent to 0.49 per cent of US GDP. This figure is less than Nathan's equivalent figure of 0.62 per cent of UK GDP in 1836, though Mr Gates is gaining fast. Only if we relate the Gates fortune to American GDP per head ($27,730) does he have the advantage over Nathan: Gates's wealth is 1.3 million times greater than American per capita GDP, whereas Nathan's was only 160,000 times greater than British per capita GDP. The difference, however, mainly reflects the enormous growth in population since the early nineteenth century, which has restrained the growth of American per-capita income.

APPENDIX 2.

Exchange Rates and Selected Financial Statistics The exchange rates between currencies in late-eighteenth- and early-nineteenth-century Europe varied according to the metal content of coins, and conversion of one currency into another is not always easy. In Frankfurt, the gulden was the denomination most frequently used, though sometimes figures were given in terms of the imperial thaler (Reichsthaler). One Reichsthaler was equal to around 1.79-1.89 gulden. A British pound sterling was equal to 10.2-11.2 gulden. After the return of the pound to gold convertibility, it strengthened against the gulden and for the rest of the century the exchange rate was 12 gulden to the pound (see table a).

However, simple conversion of gulden into pounds can be misleading, as it takes no account of differences in purchasing power. The cost of living was generally thought to be higher in England, and especially in London, than on the continent, but the benefits of colonisation and industrialisation meant that around this time certain commodities (for example cotton goods) were becoming much cheaper in England. For this reason, I have converted gulden figures into pounds in the text only where some sort of comparison seems helpful.

Table a: The sterling exchange rate of the Frankfurt gulden, 1798-1836.

Source: Rothschild correspondence.

A private partnership of the sort formed by the five Rothschild houses was under no obligation in the period covered by these statistics to produce balance sheets or profit and loss accounts. The profi