His partner Rindskopf once made the mistake of criticising Nathan in the early stages of their collaboration. A subsequent letter from Rindskopf suggests that Nathan had not taken this well: “My speaking my mind openly to you proceeded from a real friendship I bear towards you and if any unguarded expression made its appearance it ought to be placed to the disappointment of the moment and by no means the fault of the Heart but on my part everything is buried in oblivion and I hope and wish you will on your part do the same and consider myself now writing to my old friend Mr Rothschild.” When a London merchant accused him of doing business with “none but swindling houses,” Nathan was incensed:
I can assure you Sir that there is not a House with whom I have transactions but both for respectability and solidity are equal to your own; the richest and greatest Houses in London, Hamburg and other places on the Continent are not swindlers, and it is those houses with whom I do business . . . I can prove to anyone that I never made a bad debt or lost a single penny thro’ any of my friends being insolvent which I presume would not have been the case had my business been done principally by Swindlers . . . No one abhors chicanery and complaints more than I do.
True, it was always extremely important, in the volatile world of the early-nineteenth-century textile business, to preserve one’s reputation as an honourable businessman, for on that depended one’s creditworthiness in the eyes of others. All the same, one sympathises with another correspondent, who evidently found Nathan’s extreme belligerence hard to take:
The great misfortune is, that as soon as you are answered on one point the vivacity of your imagination makes you suggest another and a person in business who has something better to do than eternally refute futile obsessions of every sort must be naturally averse to follow you through the labyrinth of misconceptions or erroneous statements in which the fertility of your mind hurries you so continually to so little purpose to yourself and to the dissatisfaction of others.
The question remains how financially successful this aggressive young man actually was. Circumstantial evidence suggests that Nathan did indeed do well. By 1804, when he was granted letters of denization, he had a house in Downing Street, Ardwick, a prosperous area of the town, as well as his warehouse in Brown Street. Four years later he owned a “large and commodious” warehouse adjoining a “spacious, modern and well built” town house at 25 Mosley Street, “the most elegant street in Manchester.” Such figures as it is possible to construct for the turnover of Nathan’s business between 1800 and 1811 (when he closed down his Manchester office) confirm the impression of rapid economic ascent (see illustration 1.ii). Indeed, if we assume that he achieved profits of, to err on the conservative side, 5 per cent on his gross sales of around £800,000 over the whole period, then his subsequent claim to Buxton that he made £40,000 as a textile merchant looks about right. On the other hand, his progress was far from being as smooth as he later claimed. As illustration 1.ii indicates, a good period beginning in early 1804 and continuing until the autumn of 1805 was succeeded by nearly two years of low turnover. This repeated itself when rapid growth in the volume of Nathan’s business in 1808 and 1809 was choked off sharply in 1810.
Such abrupt ups and downs should not surprise us. Business of the sort Nathan was engaged in was susceptible to sharp seasonal and cyclical fluctuations at the best of times; Nathan had to deal with the added disruption of intermittent war, with all the restrictions on trade between England and the continent which characterised the Napoleonic period. Even before war resumed between England and France in 1803, he had been warned of possible embargoes on cross-Channel trade.12 The climate for business was already deteriorating in 1805, so that the formal imposition of a blockade—by the Berlin decree banning British imports to the territories under French control (November 1806)—merely set the seal on a disastrous collapse. As one correspondent lamented as early as November 1805: “The present time is the most critical and the most unhappy for the Continent . . . no trade whatsoever, the market overstocked with goods [and] no debts coming in.” At least three firms with which Nathan had dealings, including M. M. David in Hamburg, collapsed in the first months of 1806, well before the imposition of the blockade in June. Thereafter, the choice for firms like Nathan’s was between inactivity and sanctions-busting, with all the risks that entailed. In May 1806 the Admiralty took possession of five ships at Hull and seized contraband worth around £20,000 which had been purchased in Manchester by three Jewish merchants. Another, who had merely come to settle accounts with Nathan, was arrested at Stockport. The French meanwhile did the same, arresting Nathan’s new Hamburg agent Parish, who was forced to sell goods of his at a heavy loss to avoid their confiscation. The surviving letter copy books reveal that this was an especially difficult period for Nathan, as his bills became progressively harder and harder for Rindskopf to discount. As early as April 1806 Parish complained to Mayer Amschel that his son had exceeded his credit limit by drawing on them for £2,000. And by the end of August he appears to have owed Rindskopf over £28,000, on which he was paying interest at 4.2 per cent per annum. Matters were improved by the Treaty of Tilsit between Napoleon and the Tsar, reports of which reached Nathan from his brother Amschel in July 1807; but the restrictions on cross-Channel trade remained in force.
1.ii The turnover of Nathan Rothschlid’s textile exporting business, 1801-1811(f).
Under these circumstances, Nathan therefore had little option but to carry on his export business illegally—he became, in a word, a smuggler. In October 1807 he was sending a consignment of coffee to Sweden via Amsterdam, using an American-registered ship and fake Dutch documents. Other favoured routes for contraband were through Heligoland and the Baltic ports. Of course, such shipments could not legally be insured, so that the risks involved were very substantial. But so, presumably, were the potential rewards. By 1808 Nathan had earned a reputation as a man who had, thanks to his superior “management, judgement, foresight and connections,” regularly “succeeded in getting goods to the Continent”—though “not a word was passed about . . . how the goods had been sent.” The recovery his business enjoyed in 1808 and 1809 was short-lived, however. In September 1809 a large shipment to Riga was seized and could be released only by means of “bribery—and a heavy tax indeed it was.” Another cargo suffered the same fate at Königsberg.
The final blow came in October 1810, and it fell in Frankfurt. Ironically, by this date, the Edict of Trianon of August 5 had relaxed somewhat the ban on imports, legalising the import of so-called “colonial wares.” However, most Frankfurt firms continued smuggling, partly in order to avoid the steep import tariff imposed under the new rules, partly so that they could continue to deal in goods defined as purely British. Mayer Amschel, for example, received no fewer than seven shipments from England in July 1810 alone, worth altogether £45,000. On October 14 the Edict of Fontainebleau was published, ordering the confiscation of all English and colonial goods found to have been smuggled into French controlled territory. Two infantry regiments occupied Frankfurt and, on the basis of reports by a spy named Thiard, some 234 firms had their premises raided. Mayer Amschel was caught with 60,000 gulden of contraband on his hands, about half of it indigo, presumably sent by Nathan. Not only was the Trianon tariff levied on the goods retrospectively (a fine which cost Mayer Amschel nearly 20,000 francs); all the goods seized—worth around 100,000 gulden in all—were also publicly burnt. As one observer reported, “The extent of general confusion which this has caused beggars description.” Although Mayer Amschel got off relatively lightly—the Bethmanns had to pay a fine of more than 360,000 francs—the crisis was a watershed. Henceforth, such trade in commodities would play a declining role in the Rothschilds’ business.13
For Nathan, this transition had begun in October 1806, with his marriage to Hannah, the daughter of Levi Barent Cohen, a leading London merchant. Not only did this add to Nathan’s capital, to the tune of £3,248 from her dowry and a further substantial sum from his own fathe
r; it also made him the partner of one of the more eminent figures in London’s Jewish community. It was with Cohen that Nathan undertook much of his smuggling business in 1807; and, like his previous partner Rindskopf, Cohen encouraged his new son-in-law to widen the range of goods he exported to the continent to include Indian and Baltic products as well as British textiles. This was merely a stepping stone, however; for by now Nathan had made up his mind to become a fully fledged banker. In the eyes of at least one of his Manchester associates, he had already achieved this as early as 1808, though he was not yet known as such in London, having only acquired an address in the city (12 Great St Helens) that summer. Although Nathan’s earliest London ledger books suggest that he was doing banking business by 1810 at the latest, the move from Manchester was quite protracted, and it was not until the beginning of July 1811 that he was able formally to announce:
that the business heretofore carried on by the undersigned Nathan Meyer [sic] Rothschild at Manchester, under the firm of “Rothschild Brothers” will cease to be carried on from this day, and any persons having dealings with that firm are required to send their demands to pay their accounts to N. M. Rothschild, at his Counting-House, in No. 2 New Court, St Swithins-lane [sic], London.14
He had travelled a long way since leaving behind the cramped confines of the Judengasse—and the discrimination symbolised by the Judensau—just twelve years before. But Nathan Rothschild could not have acquired his new City address at a more propitious moment.
TWO
The Elector’s Treasure
The Old Man . . . made our fortune.
—CARL ROTHSCHILD
Nathan Rothschild’s success in the heartland of the early Industrial Revolution was of undeniable importance to his father’s business back in Frankfurt. In this sense, the Rothschilds were authentic children of the industrial age. Yet it was Mayer Amschel’s parallel success in the old-fashioned role of “court Jew” which contemporaries came to believe counted for more in the family’s economic rise. Indeed, even Mayer Amschel’s own sons themselves tended to regard his relationship with William IX, Hereditary Prince, Landgrave and after 1803 Elector (Kurfürst) of Hesse-Kassel, as the real foundation of their fortune. Since it first began to gain public currency in 1826, the myth of the Elector’s treasure has been related so often and with so much embroidery that it has never seriously been questioned. Yet a close scrutiny of the surviving records suggests that the Elector’s significance has been exaggerated—or at least misunderstood.
William of Hesse-Kassel was almost exactly the same age as Mayer Amschel, and shared with him an interest not only in old coins but in money of every sort. In every other respect, however, the two men were as different as could be, not least in their religious backgrounds. William’s father, Landgrave of Hesse-Kassel between 1760 and 1785, had caused consternation to his Protestant relatives—not only his own father, but his father-in-law George II of England as well—by converting to Catholicism as a young man. As a result, the young William was effectively removed from his care. During the Seven Years’ War, he and his brother Karl were sent to Denmark, where they came under the influence of another Protestant monarch (also linked by marriage to George II), Frederick V of Denmark, whose daughter William married in 1763. Until his father’s death, William ruled independently the small Grafschaft of Hanau-Münzenberg, which lay immediately to the north and west of Frankfurt. Yet, for all the political significance of religion in his life, it cannot be said that William observed the Commandments with anything approaching the punctiliousness of his lowly Jewish contemporary. He had at least twelve illegitimate children by at least three mistresses, including four by a Hessian noblewoman, Caroline von Schlotheim, and no fewer than seven by a Swiss woman, Rosalie Dorothea Ritter. Far from seeking to conceal the fruits of his adultery, William gave them all suitably grand titles and names—von Hessenstein, von Heimrodt and von Haynau.
His besetting sin, however, was avarice—a sin he was singularly well placed to commit. For, unlike the great majority of kingdoms and principalities in eighteenth-century Europe, Hesse-Kassel was rich, to the extent of between 30 and 40 million gulden at William’s accession. Nor was its ruler prevented from disposing of this wealth as he pleased by any of the political restrictions which had developed in other parts of Western Europe: the assets of the state were effectively indistinguishable from the personal wealth of the Prince. This great accumulation of capital had been achieved primarily by selling the services of the Hessian army to the highest bidder—usually Britain—a system which reached its zenith during the American War of Independence. Even before succeeding his father, William was already engaged in this trade, selling a regiment of around 2,000 men from Hanau to fight for George III against the rebellious colonists. The terms were lucrative: William received 76 gulden (around £7) per man, plus an additional charge of 25 gulden for each man wounded, and 76 for each man killed. This money was paid not in the form of cash, but in (non-interest-bearing) bills of exchange which were initially paid to William’s account at the London bank of Van Notten & Son. When he wanted to convert these into cash before they fell due, he sold them to brokers in Germany. Although he did spend considerable sums—for example, on building himself a new palace, Wilhelmshöhe—his object in realising such bills was more usually to invest his earnings so that they yielded the highest possible interest. And, as the majority of his fellow princes in Germany were frequently in want of money, he had no difficulty in doing so by lending to them.
The finances of Hesse-Kassel consequently resembled less those of a small state than those of a large bank. While the Exchequer (Kammerkasse) collected regular revenues from the royal estates and indirect taxes which were then disbursed on regular civil expenditures, the War Chest (Kriegskasse) received revenue not only from the state’s property taxes but also from the hiring out of mercenaries and the interest on the Landgrave’s investments, which it managed. William’s total assets in 1806—adding together the assets of each financial department—stood at more than 46 million gulden (more than £4 million). More than half of this (28.8 million) was held in the form of loans to other German princes, notably the Duke of Mecklenburg-Strelitz and the Prince of Lippe-Detmold, while a further 4.6 million was invested in English annuities. The fact that his net income after all expenditures was around 900,000 gulden speaks for itself: the contemporary view that he was one of the richest of European “capitalists” was not far wrong. From the point of view of an aspirant banker like Mayer Amschel, William therefore exerted a magnetic attraction. Not only was there money to be made from buying and reselling his English bills; there was also money to be made from placing his immense and constantly growing capital in secure investments. The only problem from Mayer Amschel’s point of view was that other people were already making that money.
The truth was that, despite his efforts to gain a foothold at William’s court while he was still residing in Hanau, Mayer Amschel was still to all intents and purposes a nobody when the new Landgrave moved north to Kassel on his father’s death in 1785. We know from the fact that he requested a special Sunday pass to leave the Judengasse in 1783 and from later correspondence that Mayer Amschel had already begun to involve himself in the English bills business. But it was not until 1789 that he was able to squeeze himself into the main market for these bills at Kassel by offering to pay more than the established local firms. Even then he was granted only the most meagre credit facility—£800, compared with the figure of £25,000 given to the leading Kassel broker Feidel David—and when he requested a higher credit limit the following year he got just £2,000, compared with the £10,000 he had asked for.1 At this point, however, Mayer Amschel struck up one of those peculiarly instrumental friendships based on mutual advantage which were to become a hallmark of his sons’ (and grandsons’) modus operandi. Karl Friedrich Buderus had begun his career in William’s service as the tutor of his bastards by Dorothea Ritter. In 1783 he had moved into the financial administration at Hanau
and in 1792, at the age of thirty-three, he moved to Kassel to work for the all-important War Chest, rising swiftly through the civil service ranks.
The first sign of tacit co-operation between Buderus and Rothschild came in 1794 when the former explicitly recommended that Mayer Amschel be allowed to join five established firms in bidding for a sale of £150,000 of English bills. Evidently, his recommendation was ignored, but Buderus tried again in 1796 and this time succeeded. The two Gentile banking partnerships of Rüppell & Harnier and Preye & Jordis had offered 1 million gulden of Frankfurt city bonds to the War Chest, of which the Chest had bought 900,000. Buderus then tipped off Mayer Amschel that he should offer to sell the remaining 100,000 gulden to the Chest at a more generous price (97.5 per cent of face value) than the other banks were offering (98 per cent). This was hardly profitable as the bonds were quoted at par (that is, 100) on the Frankfurt bourse, but the slightly larger discount he was offering secured Mayer Amschel the foothold he had so long sought. In 1798 most of the £37,000 of English bills sold were bought either by him, by Rüppell or by Jordis for cash. In the following years, Mayer Amschel steadily increased his share of William’s investment business as well. Altogether, between 1801 and 1806, he was involved in at least eleven major loans, of which the most important were to Denmark, Hesse-Darmstadt, Baden and the Order of St John. He also became involved in purchases of real estate on William’s behalf, while continuing to supply him with his beloved medals.
The negotiations leading up to the various Danish loans are of particular interest because they give us an insight into the way Mayer Amschel squeezed out his business rivals. At first, in 1800 and 1801, he was content merely to take a share of loans which were organised by the likes of Rüppell & Harnier and Bethmanns. Before long, he was being treated by them as an equal partner. Finally, from around 1804, he was able to establish what amounted to a monopoly of Danish business, partly thanks to the “douceurs” and discounts he gave the obsessively penny-pinching William, partly thanks to the good relationship he established with the Hamburg banker J. D. Lawätz, who played a mediating role between Kassel and Copenhagen. Altogether, Mayer Amschel sold William Danish bonds worth a total of at least 4.5 million gulden (roughly £450,000) in this period; placed three loans to the Landgrave of Hesse-Darmstadt totalling 1.3 million gulden, of which around half was taken by William; and one loan to Baden of 1.4 million gulden. These are impressive figures and, understandably, Mayer Amschel’s success aroused considerable envy and resentment among his competitors. In 1806 Rüppell & Harnier complained bitterly (but vainly) about aspersions being cast on their honour by “Jewish commercial rivals” who seemed to believe that “the name Rothschild” enjoyed more credit in Hesse-Kassel than that of the Danish government itself.
The House of Rothschild, Volume 1 Page 11
