The Roots of British Neutrality
Distrust of Napoleon provides one of the keys to understanding the Rothschild response to the events of the 1860s. There is, however, a point of equal importance to be made about the political and diplomatic role of the British Rothschilds in the same period, namely their acceptance of what amounted to a policy of non-intervention in the conflicts not only of the European continent but also of the American.
It is not at all easy to plot the course of the British Rothschilds’ political engagement in the 1860s. Having secured admission into the House of Commons, Lionel never addressed his fellow MPs, but it is an error to suppose that he was politically inactive. He attended the House frequently—even being carried into a debate on one occasion when immobilised by arthritis—and saw senior political figures and journalists so frequently at New Court and Piccadilly that his wife could write in 1866: “Politics interest your father to the exclusion of all other topics.” Naturally enough, Lionel remained a Liberal, having for so long enjoyed the majority of that party’s support in his campaign for admission to parliament, as did his bucolic younger brother Mayer. He was a Liberal on economic policy too, as much a convinced free trader as his friends Charles Villiers, the brother of the Liberal Foreign Secretary Clarendon, and the future Liberal Chancellor, Robert Lowe. But ties of friendship inclined him in the direction of Disraeli, if not Disraeli’s party; he and Charlotte were also friendly with other Tories, including General Jonathan Peel (Sir Robert’s brother, though not a Peelite) and Lord Henry Lennox, MP for Chichester. It was typical of Lionel that in 1865 he asked Delane to tone down his attacks on Russell’s government in The Times, while at the same time welcoming the government’s most effective critic—Disraeli—to New Court. In April 1866, in the thick of the debate over Russell’s Reform Bill, the Rothschilds had “the two great rivals at dinner—the whig [Gladstone] on Saturday, the tory [Disraeli] on Sunday. Natty says that the two entertainments represent Scylla and Charybdis—and that we are sure to have crossness and ill-humour on one of the two days, if not on both.”
Natty—Lionel’s eldest son, and of all the British Rothschilds the most politically engaged—also steered something of a zig-zag course. His earliest recorded political remarks indicate an enthusiastic Liberalism, combining hero-worship of Gladstone, cynicism about Disraeli and a Cobdenite enthusiasm for free trade. But he was also warm in his praise for Palmerston, and never seems to have regarded trade treaties as a substitute for military readiness (a view doubtless reinforced by his own military training and service with the Buckinghamshire Yeomanry). When he first visited the Commons (to hear the Reform Bill debates in 1866) “he found the great Mr. Gladstone’s oratory heavy and pompous, while he thought that Mr. Disraeli sparkled delightfully.” Lowe’s arguments against Reform appear to have swayed him; yet Bright—its most passionate proponent—remained a hero.
It says much about the ambiguity of Rothschild politics that when pro-Reform demonstrations were held in London in July 1866, Evelina locked away her Sèvres vases and refused to venture outside; yet when “some conservative gentleman said to Natty, who was defending the foolish reformers, that he was sorry all our windows had not been smashed ... your brother replied we were perfectly safe, as the people knew us to be their friends; they cheered the house, and Natty and Alfy in the crowd.” When Lady Alice Peel told Lionel “that the soldiers ought to have shot twenty or thirty of the rabble, which would very soon have put an end to the riot,” he gave a characteristically oblique reply: “You may say anything to me, Lady Alice, but I advise you not to go about London with such suggestions.” Charlotte blamed the Tory Home Secretary Spencer Walpole for provoking the violence by excluding the demonstrators from Hyde Park; but she nevertheless accepted that “if a Tory government can but be induced to bring in liberal measures, there is no earthly reason why it should not prove as useful as the Whig administration.” Lionel “wished every success to Mr Dis.” in government—but this was partly because he had no desire to fight yet another general election if the Tory ministry foundered. He can hardly have been reassured when Disraeli told him in February 1867, on the eve of the new parliamentary session, that “when we meet again, I shall be either a man or a mouse, but we shall not resign, depend upon it, without making an appeal to the country.” Throughout the long process of amendment and passage of Disraeli’s Reform Bill, the Rothschild door remained open to politicians of all hues: Charlotte eagerly read John Stuart Mill (who went so far as to advocate female suffrage), gave tea to the Gladstones and dined with the Disraelis. Lionel dutifully attended the debates and voted on amendments, conferring often with “our friend” Disraeli, but marvelling ironically “to see the same members in such high spirits in passing a measure which last year they opposed in the most violent manner.”
The basis of the British Rothschilds’ increasingly bipartisan approach to politics remained, as in the past, foreign policy. Furnished with impeccable political intelligence from the Paris house, they were able to command the attention of any government, Liberal or Tory. Sharing James’s objective—to restrain Napoleon III from aggression which might lead to a general war—they generally sought to shape British policy accordingly (by contrast, it is remarkable how little the British members of the family worried about Prussia). Yet there is no missing a slight loss of interest in continental affairs in this period. Anselm no doubt exaggerated, but his analysis of March 1866 says much about the letters he had been receiving from New Court:Do not have any illusions; the political influence of England in continental affairs can be considered as nil; it is not by constantly keeping one’s sword in its sheath, or one’s armoured vessels in the peaceful waters of ports that one makes the most of oneself, that one makes oneself feared. Anyway, it is clear that Reform Bill and the bovine epidemic are dearer to the heart of John Bull than the duchies [of Schleswig and Holstein].
The shaft was well aimed: there is no doubt that Mayer spent more time in 1866 worrying about the effect of the rinderpest sweeping his herds at Mentmore than about the unification of Germany Dramatic events—the failure of Overend, Gurney (May 10), the fall of the Russell government (June 26), the Reform riots in London (July 23)—distracted British attention from events on the continent at a crucial moment. Whatever qualms Lionel may have had about Bismarck, he had no strong desire for British intervention on the continent; and even if he had, it is unlikely that he could have done much to overcome the isolationism of successive Foreign Secretaries. As long as Gladstonian principles of fiscal rectitude prevailed, British budgets were balanced so that even when defence expenditures were increased, they were financed by taxation not borrowing: in only four years between 1858 and 1874 did the government run a deficit, and in each case it was tiny. The long-run trend was for the national debt to be paid off, not increased: between 1858 and 1900 it fell from £809 million to £569 million (perhaps Gladstone’s most tangible achievement). A government that did not borrow money was a government the Rothschilds could advise, but not pressurise.
The American Wars
The habit of British non-intervention may be said to have begun with Russell’s emotive welcome to Italian unification, which more or less negated his and Palmerston’s suspicions of French policy. The outbreak of the American Civil War, by diverting British attention to the security of Canada, established the pattern which was to persist for more than a decade. Rothschild attitudes towards the American conflict have often been misunderstood; in fact they illustrate the essentially passive role played by Lionel in foreign affairs in this period. Because Belmont (as the Democrats’ national chairman) was a leading supporter of Stephen A. Douglas, Lincoln’s opponent in the presidential election of 1860, he—and in turn the Rothschilds—incurred opprobrium from both sides in the war which broke out the following year. Northern Republicans reviled “the Douglas National Chairman” as a trimmer on the issue of slavery; so did Southern Democrats, but from the opposing point of view.
According to on
e of his biographers, Belmont struggled throughout the conflict to bolster Rothschild support for the Union: his nightmare was that his “masters” in Europe would lend financial support to the South. But he and the Rothschilds were still repeatedly accused of Confederate sympathies, especially in the wake of General George McClellan’s nomination as Democrat candidate in 1864, because he favoured a negotiated peace with the South rather than what Belmont called Lincoln’s “fatal policy of confiscation and forcible emancipation.” “Will we have a dishonourable peace, in order to enrich Belmont, the Rothschilds, and the whole tribe of Jews, who have been buying up Confederate bonds,” thundered the Chicago Tribune in 1864, “or an honourable peace won by Grant and Sherman at the cannon’s mouth?” “Let us look at a few undeniable facts,” wrote the New York Times that October. “The notorious undenied leader of the Democratic Party at [the] Chicago [convention] was the agent of the Rothschilds. Yes, the great Democratic party has fallen so low that it has to seek a leader in the agent of foreign Jew bankers.” It was an argument developed in lurid terms by a Pennsylvanian supporter of Lincoln at a rally the following month:The agent of the Rothschilds is the chief manager of the Democratic Party! (Cries of “that’s so” and cheers) ... What a first rate Secretary of the treasury he would make, if Mr McClellan happened to be elected! (Laughter) There is not a people or government in Christendom in which the paws, or fangs, or claws of the Rothschilds are not plunged to the very heart of the treasury... and they would like to do the same here... We did not want to borrow and the Jews have got mad, and have been mad ever since (Cheers). But they and Jeff Davis and the devil are not going to conquer us (Prolonged applause).
Was there any truth in the allegation of support for the South? There was evidently some sympathy for the Southern cause in the rue Laffitte, if not at New Court. This owed at least something to the reports from James’s third son Salomon, who had been sent across the Atlantic in 1859 (rather as Alphonse had been in 1848) as part of his business education, and remained there until the outbreak of war in April 1861. Although appalled in a Dickensian way by most aspects of American political life, Salomon was inclined to sympathise with the South, and argued in his last despatch to Paris that Europe should recognise the Confederacy in order to halt the war. Quite apart from the argument that the South should be allowed to determine its own laws—which swayed such unlikely supporters of the slave states as Gladstone—the disruption to the European economy caused by the Northern blockade of Southern cotton exports provided a persuasive argument in favour of a swift peace, if not a Southern victory. At least one of the London house’s American correspondents—the house of Chieves & Osborne in Petersburg, Virginia—repeatedly urged “that England should at once recognise the Southern Confederacy upon the score of interest and humanity [sic].” And Belmont himself (contrary to Katz’s account) explicitly told Lionel when he visited London in 1863 that “soon the North would be conquered.” However, much as they deplored the outbreak of war, the Rothschilds adopted a posture of neutrality in the early stages of the war, arguing against intervention by either Britain or France. In 1863, the American consul-general in Frankfurt informed Harper’s Weekly after a conversation with Mayer Carl thathere the firm of M. A. Rothschild a[nd] Son are opposed to slavery and in favor of the Union. A converted Jew, Erlanger, has taken the rebel loan of £3,000,000 and lives in this city; and Baron Rothschild informed me that all Germany condemned this act of lending money to establish a slaveholding government, and that so great was public opinion against it that Erlanger a. Co. dare not offer it on the Frankfort bourse. I further know that the Jews rejoice to think that none of their sect would be guilty of loaning money for the purpose above named; but it was left, they say, for apostate Jews to do it.
It was indeed Erlanger, in conjunction with the American James Slidell, who issued the first “cotton guaranteed” Confederate loan in March 1864; and the only London bank which would consent to become involved was not N. M. Rothschild but J. Henry Schröder & Co., which had never previously issued a government loan. The London house informed Belmont that “the Confederate Loan was of so speculative a nature that it was very likely to attract all wild speculators... It was brought out by foreigners, and we do not hear of any respectable people having anything to do with it... We ourselves have been quite neutral and have had nothing to do with it.”5 By 1864 at the latest, James was involved in financing Northern imports from Europe, criticising Belmont for his reluctance to assist the Lincoln government and urging his sceptical nephew Nat that Northern bonds represented a good investment. 6 When the charge of having financed the South was repeated in 1874, Belmont was able to state with only slight exaggeration that “some nine years ago, the late Baron James de Rothschild, in Paris, showed... by his books, in my presence, that he was one of the earliest and largest investors in our security during the war.” The idea that the Rothschilds backed the South was mere legend, like the later allegations against Belmont that he sought to delay the payment of American aid to the Fenians.
What is undeniable is that compared with rivals like Barings and the London-based Americans George Peabody and Junius Spencer Morgan, Rothschild interest in American finance—Northern and Southern—was limited and continued to be so for the rest of the century. While newcomers like the Seligmans could operate with a family member in New York, the Rothschilds remained at one remove from the American market, the more so as Belmont devoted increasing amounts of his time and energy to politics (accumulating powerful enemies in the process).7 Moreover, the Civil War had done much to disillusion even James about the United States. Although he had been optimistic about increasing transatlantic business after the conclusion of peace in 1865, he was haunted by the fear of a resumption of political “disturbances.” In 1867, his last word on the subject was to sell American funds because “I have the deep conviction that although America is a country beyond all calculation, one should not have any illusions that the battle which is being rejoined is not only directed against the President but against the South.”
Although James’s sons continued to take an interest in the cotton market, Alphonse expressly told his cousins in January 1868 that “we do not wish to speculate on some Negro revolt in the South or anything of that sort.” He was equally lukewarm about American railways. There was a similar though milder reaction in London. When the American financier Jay Cooke visited London in 1870 in the hope of finding takers for $5 million of Northern Pacific Railroad bonds, he got short shrift from Lionel. Rothschild involvement in the US economy increasingly was confined to bond issues for states or the federal government. Even this proved problematic: the resumption of post-war business got off to a bad start when the London house invested in $500,000 of Pennsylvania state bonds. Within a year, it was apparent that the state intended to pay off its creditors with depreciated dollars; but when Belmont protested, he elicited a crudely anti-Semitic response from the state’s Treasurer, William H. Kemble: “We are willing to give you the pound of flesh, but not one drop of Christian blood.” A New York state loan in 1870, issued by the Paris, London and Frankfurt houses in partnership with Adolph Hansemann, was more successful and led to another successful issue in 1871. However, the Rothschilds always preferred to deal with the central government, and from 1869 onwards they lobbied President Ulysses S. Grant for the chance to assist him in the task of stabilising federal finances. The London house was among the five issuing houses for the 1871 refunding loan, a process repeated two years later and again in 1878. To be sure, the Rothschilds continued to be denounced by Belmont’s opponents as the “European Shylocks,” whose sole purpose was to revalue the bonds of the various American states by putting the United States on to the gold standard. But the reality was that the Civil War had led not only to a temporary decline in British continental influence, but to a permanent decline in the Rothschilds’ transatlantic influence.
The best argument of all against meddling in other people’s civil wars was provided by events s
outh of the Rio Grande. Although Napoleon III failed in his attempts to influence the outcome of the American Civil War, he did manage to intervene in the affairs of the American continent in another way. The French invasion of Mexico was one of the least successful ventures in imperialism of the entire nineteenth century. In part, it sprang from Napoleon’s belief that Mexico must be preserved from complete American annexation. In part, it was a way of giving the former Austrian Governor of Lombardy a new job, though the Archduke Maximilian accepted the Mexican throne only under pressure from his ambitious Saxe-Coburg wife Charlotte and against the advice of his brother, the Emperor Franz Joseph. Only superficially was the invasion about money. The initial French, British and Spanish expeditions to Mexico in 1861 were prompted by the new Progressive government’s refusal to maintain interest payments on the country’s foreign debt; and throughout the succeeding years the interests of the bondholders were frequently cited to justify what was being done. But in reality most of the bondholders were British, and the French had to inflate their own claims or (as Morny did) acquire other people’s. The decision of Britain and Spain to pull out in April 1862 and the subsequent despatch of 30,000 more French troops swiftly turned the Mexican affair into a costly fiasco. It was possible to occupy the country and install Maximilian, but the French Treasury could not sustain an open-ended commitment: hence the Convention of Miramar stipulated that the new Mexican regime owed France 270 million francs—40 million for the bondholders and other private interests, the rest for the costs of the invasion. This in turn could be paid only by raising a new Mexican loan in Europe; and this required the new regime to be secure. But as soon as the American Civil War ended and the US signalled that she did not regard Maximilian as the legitimate ruler of the country, the occupation became untenable. In 1866 Napoleon was obliged ignominiously to withdraw his troops, leaving the hapless Maximilian to face a firing squad the following year.
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