The House of Rothschild

by Ferguson, Niall

  Many historians cite the German naval programme initiated in 1897 as the key to the “rise of the Anglo-German antagonism.” Bülow, so the argument runs, wished to keep a “free hand,” which meant in practice that he wished to build a navy capable of challenging Britain’s maritime supremacy. There is, of course, no question that Tirpitz’s navy was regarded as a direct threat in London. And as we shall see, even so keen a proponent of good relations with Germany as Natty was not immune to the dreadnought mania of the period. Yet it is too easily forgotten that Britain won the maritime arms race. As early as 1905, with the completion of the First Sea Lord “Jackie” Fisher’s initial naval reforms, the Director of Naval Intelligence could confidently describe as “overwhelming” Britain’s “maritime preponderance” over Germany. This was quite right: the number of German battleships only increased from thirteen to sixteen between 1898 and 1905, whereas the British battle fleet rose from twenty-nine to forty-four ships. This did not maintain the 1889 two-power standard, but it sufficed to check a purely German threat. Although naval “scares” recurred thereafter, the Germans were in fact never able to reach the target set by Tirpitz of a navy big enough to make an Anglo-German naval war too risky for the western power to contemplate. By 1912 the naval race was effectively over because the Germans—economically strong but fiscally weak— could not afford to match the British rate of construction. In the light of all this, the project of an Anglo-German alliance was far from an idle dream.

  It is important to remember that it was not only in China that British and German interests seemed to be complementary. The protracted haggling with Portugal over the future of her African colonies (and especially Delagoa Bay) finally produced an agreement in 1898 whereby Britain and Germany jointly lent money to Portugal secured on her colonial property, but with a secret clause dividing the Portuguese territory into spheres of influence. Nor were the Rothschilds unrealistic in urging compromise in London with respect to German claims in West Africa: there was no real conflict of interest there. The Samoan crisis which blew up in April 1899 was resolved by the end of the year, with Alfred and Schwabach acting as unofficial intermediaries. The two countries even co-operated over Venezuela’s external debt in 1902.

  Another more strategically important region where Anglo-German co-operation seemed viable was the Ottoman Empire. The Germans had begun to show an interest in Turkish finance even before 1889, when the Kaiser made the first of his visits to Constantinople. The year before, Gustave heard a rumour that the German government wished to establish a Turkish administration of the public debt “the same as in Egypt, however, with Germany predominant.” So long as Russia seemed to menace the Straits—as the Rothschilds were convinced was the case—the prospects for some sort of Anglo-German co-operation in the region remained good. Thus the two countries worked closely together following the military defeat of Greece by Turkey in 1897, hammering out the details of a new financial control over Athens. In revealing terms, Natty urged McDonnell thatthe right policy for England at the present moment is to come to terms with Germany on the Greek question; we must look facts in the face as they are, we have an avowed Franco-Russian Alliance and although the Egyptian question may not be raised at present we must play the game of those whose sentiments, if not their acts, are hostile to this country. I am in no sense a philo-German, nor do I believe in the divine right of Kings but I am sure that the right thing now would be to settle the Greek things as soon as possible and to come to terms with old Hatzfeldt.

  A better known opportunity for cooperation came in 1899—a year after the Kaiser’s second visit to the Bosphorus—when the Sultan agreed to the proposal for an Imperial Ottoman Baghdad Railway, the brainchild of Georg von Siemens of the Deutsche Bank (hence the “Berlin—Baghdad railway”). Siemens and his successor Arthur von Gwinner always intended to secure British as well as French participation in the venture; the problem was the lack of interest in the City, which had largely lost faith in the future of the Ottoman regime. Remembering the example of the Suez Canal, Natty advised the government itself to “take a part of the ordinary shares” in the enterprise, but the Foreign Secretary Lord Lansdowne was sceptical, preferring to tempt private finance with subsidies. In March 1903, an agreement was drawn up for an extension of the line to Basra which would have given the British members of a consortium—led by Sir Ernest Cassel and Revelstoke—25 per cent; but the fact that German investors would hold 35 per cent prompted a barrage of criticism in right-wing journals like the Spectator and the National Review, and Balfour—now Prime Minister—chose to pull out. To those whose memories extended back to the 1870s, this was a bizarre decision: on that basis, Disraeli’s purchase of the Khedive’s Suez Canal shares would have been disavowed because French shareholders were in a majority.

  It should be stressed that in all this the Rothschilds were acting with singular disinterestedness. They did no business whatever in Samoa, Venezuela or West Africa. Their involvement in Chinese finance was also limited and had ceased altogether by the time of the revolution which overthrew the last Emperor in 1911 (though Carl Meyer remained a useful contact on the Hong Kong & Shanghai board). Even the Ottoman Empire did not much concern them in this period, save where the colonisation of Palestine was concerned. Edward Hamilton thought Natty had stayed out of the proposed Baghdad consortium out of “timidity”; but Natty’s allusions to “the terrible Turk” and “the Turkish mess” in his correspondence with Paris reflected a genuine (and not unjustified) scepticism about the Ottoman regime’s stability. “I always dread the reopening of any Eastern Question,” he exclaimed in May 1906, and, as long as there was a chance of such a reopening, he and most other City bankers generally gave Constantinople a wide berth. “If the [British] Government calls on us for definite object,” Natty explained to his cousins a year later, “we shall always be ready to examine any business that is brought before us and will do our best to bring it to a successful issue if possible, but I should be very sorry to hear if nolens volens our name was to be associated with the various kinds of cat[‘]s meat which abound in the Ottoman Empire ... [N]o prudent person can be particularly anxious to endorse all the Ottoman cat[’]s meat.” Though Natty enthusiastically welcomed the Young Turk revolution of 1908, his enthusiasm stopped short of lending to it: the efforts of Ernest Cassel “to direct the policy of the Ottoman Empire” by financial means were the subject of scathing comment at New Court. Perhaps it was a fundamental weakness of the projected Anglo-German entente that its foundations were supposed to be laid in ground the Rothschilds themselves regarded as infirm.

  There was one region of potential Anglo-German conflict where the Rothschilds very definitely did have an interest, however: South Africa. Apart from its deleterious effect on mining shares, what made the Jameson Raid especially deplorable in the eyes of the Rothschilds was the damage it did to Anglo-German relations: William II’s telegram congratulating Kruger on repelling the invaders “without appealing to the help of friendly powers” did lasting damage to Anglo-German relations, and it is significant that the Rothschilds relied on the Warburgs as intermediaries in trying to conciliate Kruger. When Alfred sought to join in the continuing debate on the Uitlanders’ franchise in 1897, he proposed to involve Germany in the negotiations with Kruger—a suggestion swiftly dismissed by Chamberlain. German expressions of sympathy for the Boers during the war between Britain and the Transvaal Republic were a further cause of tension between London and Berlin. Was it here therefore over South Africa that the idea of an Anglo-German alliance came to grief?

  Perhaps: a crucial part of the Rothschild argument against war was that “a certain person in Berlin”—meaning the Kaiser—would be “very cross” if the Boers were to be attacked. The point of the 1898 agreement with Germany over Portuguese Mozambique was partly that it was supposed to discourage the Germans from siding with Kruger, but the possibility of outright war seemed to cast doubt on that arrangement. Alfred was in close touch with Hatzfeldt during the cri
sis, assuring him in September that, despite the expectations of war in the City, there were as yet “no definite grounds for this panic”; but this was empty reassurance. Renewed German talk of a “continental league” against Britain at the end of 1899 and the British interception of German mail steamers in South African waters in January 1900 unquestionably stalled progress towards an Anglo-German understanding. Indeed, attacks on British policy in the German press became so violent that Alfred felt bound to protest to Eckardstein about what he called a “ ‘pinprick’ policy”—“and, although a pin is not a very impressive instrument, repeated pricks may cause a wound ...” At the same time, Alfred attempted to exert pressure on The Times, whose Berlin correspondent Saunders was taking an increasingly strident Germanophobe line. Alfred invited the paper’s manager, Charles Moberly Bell, to dine with him in June 1902 and intimated that the King himself was concerned about the tone of Saunders’s reports. When Bell reported his conversation to his correspondent, Saunders exploded in terms which illustrate the way Rothschild Germanophilia could be represented as unpatriotic—and worse:I know the power of German influence dynastic, racial &c., including the Rothschilds. It is not business. It is dining, shooting, toasts, finance, honours, marriages, dynastic friendships. It is not hard steel, like Joe Chamberlain, or even Lansdowne, It is not English ... I regret that you told Alfred Rothschild that you would give him your decision in writing ... What you write will go to the Emperor. He wants to explore your counsels ... They want to bind both England and you.10

  Yet the Boer War did not do as much damage to Anglo-German relations as Alfred feared. German banks like M. M. Warburg had no qualms about applying for a share of the 1903 Transvaal loan.11 Perhaps more important, in undermining British self-confidence the war strengthened the arguments for ending diplomatic isolation.12 Indeed, it was actually during the war—in the early months of 1901—that Alfred was involved in a renewed effort to bring Chamberlain and the new Foreign Secretary Lansdowne into contact with German representatives on the basis of (in Chamberlain’s words) “co-operation with Germany and adherence to Triple Alliance.”

  The territory which was now brought into the discussions in earnest—Chamberlain had first raised it in 1899—was Morocco. Because of later events, it is easy to assume there was something inevitable about disagreements between Britain and Germany over Morocco; but that seemed far from likely in 1901. Indeed, French designs in the entire north-west African region (further advanced by a secret deal with Italy in 1900) seemed positively to favour some sort of joint action. Britain was already concerned by Spanish fortifications at Algeciras, which seemed to pose a threat to Gibraltar, that vital Mediterranean gatepost. Indeed, Balfour had requested that Rothschilds refuse any loan requests from Spain in 1898. The possibility of a joint Franco-Spanish “liquidation” of Morocco was a real one. The obvious alternative was to divide Morocco into British and German spheres of influence, with Britain taking Tangier and Germany the Atlantic coast. This was the basic thrust of a draft agreement discussed in May and again in December. The talks continued sporadically into 1902, with Holstein once again using the “safe and useful ... channel Schwabach-Rothschild.” It was in fact German lack of interest in Morocco—as expressed unambiguously by both Bülow and the Kaiser in early 1903—which prevented any such scheme being realised.

  So why did the idea of an Anglo-German entente fail? Why was it with France rather than with Germany that Britain concluded a wide-ranging colonial agreement in April 1904? One rather unsophisticated answer relates to the personalities involved. Edward VII’s Francophilia is occasionally cited, while Eckardstein somewhat implausibly blamed “the fact that the ‘haute finance’ has drawn closer to France and Russia” on “the allegedly discourteous treatment ... of Alfred Rothschild ... by H[is] M[ajesty]” (the Kaiser) during a state visit to Britain. The crucial stumbling block was probably Salisbury’s fundamental lack of enthusiasm and even suspicion, which was echoed by his private secretary McDonnell. He was deeply sceptical when Alfred and Natty themselves began to agitate for an Anglo-German combination against Russia, telling Salisbury that Alfred was “suffering from megalomania” having been offered a decoration by the Kaiser for his contribution to Anglo-German amity. Alfred accepted the honour (Order of the Crown, First Class), though he felt obliged to write a long letter to Salisbury, protesting (rather too much) that any “services rendered ... were the result of my being absolutely imbued with the sole desire of doing that which I considered was in the interests of my country and I therefore exerted my best efforts to try to bring about a better feeling between England and Germany on several occasions when the relations between these two countries were seriously strained.”13 By July McDonnell was reporting Alfred’s initiatives in the form of facetious stage directions:The German Emperor

  The usual autumn farce is about to be played.

  Act I

  Eckardstein, the heavy friend of England, has been to tell Alfred Rothschild that the Emperor is convinced that war between us and the Transvaal is inevitable ... Two days later Eckardstein reappears on the stage and tells Rothschild that the Emperor is furious because the Queen has slighted him by not inviting him to Windsor: that H.LM. desires nothing more than to be friends with us; but unless we give him speedy evidence of our good will by deeds not words, he will ally himself with Russia and France, all the preliminaries having been arranged for such an alliance.

  When Eckardstein repeated this threat in October, Salisbury drily minuted: “I think I have heard all this before.” The Germans evidently detected the Prime Minister’s scepticism. Asked by Alfred to provide “a short memorandum on the questions at issue (Samoa, Morocco) which he could give to Mr Balfour,” Hatzfeldt told Berlin he doubted “if he could attempt to influence foreign questions, or do so successfully. My feeling is that Lord Salisbury is quite determined to enter into no special arrangements with us at present.” It was not until after Salisbury’s departure that Holstein felt Alfred could “once again be used in political matters,” telling Bülow in July 1902: “He is on good terms with Balfour and Chamberlain; Salisbury used to cut him.”

  Chamberlain was also temperamentally ill suited to a policy of conciliation. In public, he had talked grandly of “New Triple Alliance between the Teutonic race and the two great branches of the Anglo-Saxon race”; but he seemed oblivious to the limits on what Bülow could say in reply. In his Reichstag speech of December 11, 1899, the German Chancellor had expressed his readiness and willingness “on the basis of full reciprocity and mutual consideration to live with [England] in peace and harmony.” Yet inexplicably Chamberlain regarded this as the “cold shoulder” and although, as Eckardstein lamented, “the great mass of people saw in it no sharpness or coolness towards England, on the other hand I have had to face for a few days the assaults of newspaper proprietors, Cabinet Ministers, the Rothschilds, as well as the Royal Family.” When difficulties arose, Chamberlain lost patience, telling Alfred petulantly: “If they are so short-sighted and cannot see that it is a question of the rise of a new constellation in the world, they are beyond help.” The conclusion is therefore tempting that the opportunity for some kind of Anglo-German entente comparable with that agreed with France in 1904 was needlessly thrown away. There were other factors, however, which counted for more than mere personal foibles.

  The Rationale of the Entente

  There were several reasons why an entente with France ultimately came to seem preferable to one with Germany. The first was that the French had a bigger and better concession to offer Britain than anything Germany might have offered: namely final acceptance of the British position in Egypt. After more than twenty years of recurrent friction, this was a major diplomatic climb-down by Delcassé, and it is easy to see why Lansdowne hastened to commit it to paper. From a financial point of view, Cassel was by now a more important force in Egypt than the Rothschilds—it was he who raised the money for the Aswan dam and other infrastructural improvements after 1897, thereby win
ning the confidence of Lord Cromer. Still, the Rothschilds added their voice to the argument for Anglo-French compromise over Egypt when Natty’s son Walter told Cromer that “our cousins in Paris” were prepared to support his plans for redeeming part of the Egyptian debt only “with the agreement of the French Government.” The price of this agreement was that France acquired the right “to preserve order in Morocco and to provide assistance for the purpose of all administrative, economic, financial and military reforms which it may require”—a concession which the French regarded as giving them the same position of de facto power in Morocco as Britain had enjoyed in Egypt since 1882. In the subsequent rows about Morocco, the Germans were often in the right; but the fact was that Britain had opted for France and so was bound to back French claims even when they went beyond the formal status quo.

  A second (and probably more important) reason why the entente with France came about, however, was the dramatic alteration in the Asian balance of power. If Britain had continued to feel menaced by Russia in the East—if Russia had defeated Japan in 1904, for example—then the arguments for an Anglo-German entente might ultimately have prevailed. But the advent of Japan as an effective counterweight to Russian ambitions in Manchuria introduced a new variable into the equation. The German government had always felt uneasy about the prospect of an arrangement with Britain which conceivably could have meant Germany fighting a war against Russia in Europe for the sake of British interests in China. This explains the assurances given by Bülow and the Kaiser in 1901 of German neutrality in the event of an Anglo-Russian conflict in the Far East. Japan, by contrast, had every reason to look for a European ally. When the Russian government refused to compromise over Manchuria, Tokyo turned readily to London and in January 1902 a defensive alliance was concluded. This was the real watershed which marked the end of British isolationism: for at this stage French policy was still based on the assumption of military and financial support for Russia in Asia, if necessary against England.