A few months later, he insisted that the view of “the great majority of Unionists can be summed up in a few words—‘It is our imperative duty to do everything which will in all probability prevent Civil War”’ By the beginning of July, he was optimistic : “[T]he ‘Peace barometer’ is decidedly rising,” he was able to report to Paris; there was now “a belief in City circles that civil war will be avoided in Ulster” and that “the Ulster question will be settled, at all events for the time being.” Natty “sincerely hoped” this would be the case and that “the shadow [of civil war] which has been hanging for so many months over the Country” would be lifted.
The truth was that, quite apart from the damage he had done to his relations with the Liberals, Natty was no longer being kept closely informed by the Conservative leadership by 1914. Balfour had been a close friend; his successor, the Glaswegian Bonar Law, was not—hence Natty’s “pain” when Balfour decided to resign the leadership in November 1911. Natty, barely knew Law and a handful of meetings in 1911 and 1912 did not change that. Personal and perhaps political differences can also be detected. According to the Conservative chairman Sir Arthur Steel-Maitland, the family contributed “£12,000 a year and large sums at Elections and subscribe [d] very largely to the L[iberal] U[nionist]s also,” as well as controlling at least one parliamentary seat at Hythe. But the Rothschilds’ favoured candidate for this seat—Philip Sassoon—no longer met with the leadership’s approval.5 When Herbert Gibbs approached Natty about raising additional funds in the City for Central Office in October 1911, Natty did not even reply; when Gibbs suggested that Bonar Law be invited to explain his financial policy to the City, Natty opposed the suggestion.
This froideur was more than merely personal. Under Bonar Law, the Conservatives not only became more aggressive on the Ulster question; they also became more aggressive on matters of foreign policy, and especially where Germany was concerned—a mood encouraged by the increasingly Germanophobe Tory-supporting press. It may seem odd that a man who in 1909 advocated an enlarged dreadnought programme should still have cherished hopes of preserving peace between Britain and Germany; but Natty evidently did. (He had after all emphasised that “in advocating a very strong Navy [he] had no intention of urging an aggressive policy.”) In 1912, Natty published a heartfelt essay in a collection entitled England and Germany which reveals his enduring Germanophilia: “What have we ... not got in common with Germany?” he asked. “Nothing perhaps except their army and our navy. But a combination of the most powerful military nation with the most powerful naval nation ought to be such as to command the respect of the whole world, and ensure universal peace.” With the benefit of hindsight this seems almost pathetic. Yet 1912—the year the Germans effectively abandoned the naval race—saw the beginning of a renewed effort to promote Anglo-German co-operation by Paul Schwabach, who remained in regular communication with the Rothschilds up until August 1914.
Even in 1914 there seemed little reason to expect the calamity of a war between Britain and Germany. Sir Edward Holden might fret about the size of the German “war chest” in the Julius tower at Spandau, and urge the City banks to pool their gold to give the Bank of England an adequate reserve in case of war; but Natty dismissed these as “very ridiculous ideas.” When he saw the German ambassador at Tring in March, “he said most decidedly that as far as he could see and as far as he knew, there was no reason for fear of war and no complications ahead.” June and July 1914 were dominated at New Court by Ulster worries and Brazilian loan negotiations. It was just another symptom of the good financial relations then prevailing between Britain and Germany that Max Warburg was in London on three separate occasions to finalise his firm’s role in the operation.
It has been suggested that the Rothschilds failed to grasp the significance of the July crisis—until, that is, it became the August war. As Cassis has observed, of twenty-five letters between New Court and the rue Laffitte between June 29 and July 23, only five mention the diplomatic ramifications of the assassination of the Archduke Franz Ferdinand at Sarajevo—“a sad example,” as Natty observed somewhat otiosely, “both [sic] of Servian brutality, the hatred of the Greek Church for those of the Catholic Faith and last but not least of the morals and doctrines of the anarchical party.” As early as July 6, however, Natty was wondering nervously: “Will the Austrian Monarchy and people remain quiet? or may a war be precipitated, the consequences of which no one can foresee?” Eight days later, he reported “a considerable amount of anxiety in some circles about Austro-Servian relations.” It is true that even on July 22, Natty remained confident, “rather fancy[ing] the well founded belief in influential quarters that unless Russia backed up Servia the latter will eat humble pie and that the inclination in Russia is to remain quiet, circumstances there not favouring a forward movement.” That, however, was not a wholly unreasonable assumption at that stage. Nor was the “general idea” he relayed the following day “that the various matters in dispute will be arranged without appeal to arms.” Before the details of the Austrian ultimatum to Serbia were known, it seemed quite likely that the Serbs would “give every satisfaction.” Natty was not complacent. As he told his cousins on July 27, “[N]o one thinks and talks about anything else but the European situation and the consequences which might arise if serious steps were not taken to prevent a European conflagration.” But it was “the universal opinion that Austria was quite justified in the demands she made on Servia and it would ill-become the great Powers if by a hasty and ill-conceived action they did anything which might be viewed as condoning a brutal murder,” even if “as usual from time immemorial” Austria had “not acted with diplomatic skill.” He was confident that Asquith’s government would leave “no stone ... unturned in the attempts which will be made to preserve the peace of Europe and in this policy, although the ... two rival parties in the state are more sharply divided than they have ever been, Mr Asquith will have the entire country at his back.”
Throughout the critical days from June 28 until August 3, Natty hoped for a diplomatic resolution of the crisis. He can undoubtedly be accused of naivety in believing that the German government did not want war. “It is very difficult to express any very positive opinion,” he told his French relatives one June 29, “but I think I may say we believe you to be wrong, not you personally, but French opinion, in attributing sinister motives and underhand dealings to the German Emperor[;] he is bound by certain treaties and engagements to come to the assistance of Austria if she is attacked by Russia but that is the last thing he wishes to do.” It was quite true that “the Czar and the Kaiser [were] corresponding directly over the wires in the interests of peace”; where Natty erred was in thinking that the Kaiser’s ministers (and more particularly his generals) sincerely wished the war to be “localised.” “The Powers are still talking and negotiating between themselves and endeavouring to localize the bloodshed and misery,” he reported hopefully on July 30. “[C]lumsy as Austria may have been, it would be ultra-criminal if millions of lives were sacrificed in order to sanctify the theory of murder, a brutal murder which the Servians have committed.” It is not difficult to infer from the tone of these letters that he was having difficulty persuading the Parisians of this view. His last attempt the next day, which implied that it was up to France to restrain Russia, shows the extent to which Natty was still a Germanophile at heart; it also deserves to be quoted as a last vain expression of faith in Rothschild financial leverage:[T]here are persistent rumours in the City that the German Emperor is using all of his influence at both St. Petersburg & Vienna to find a solution which would not be distasteful either to Austria or to Russia. I am convinced also that this very laudatory example is being strenuously followed here. Now I venture to ask you what the French govt is doing at the present moment and what is their policy? I hope and trust M. Poin care who is undoubtedly a “persona gratiosus” with the Czar is not only pointing out to but also impressing upon the Russian Govt 1) that the result of a war, however powerfu
l a country their ally may be, is doubtful, but whatever the result may be, the sacrifices and misery attendant upon it are stupendous & untold. In this case the calamity would be greater than anything ever seen or known before. 2) France is Russia’s greatest creditor, in fact the financial and economic conditions of the two countries are intimately connected & we hope you will do your best to bring any influence you may have, to bear upon your statesmen even at the last moment, to prevent this hideous struggle from taking place, and to point out to Russia that she owes this to France.
At the time, however, this was not so ingenuous as it may seem now. For one thing, similar attempts at mediation had averted war often enough in the past (over the Morocco, for example). At the same time, Natty’s comments indicate that he for one had no illusions about the likely duration and intensity of a war. Given the widespread belief among historians that people in August 1914 expected a short war, this is an important point. Even more important, he was by no means unique in the City. Nothing testifies more clearly to the extent of pessimism in the financial world than the severity of the financial crisis precipitated by the July crisis.
The Vienna stock exchange had begun to slide as early as July 13, but the crisis was not really detectable in London until July 27—the day before the Austrian declaration of war on Serbia. “All the foreign Banks and particularly the German ones took a very large amount of money out of the Stock Exchange to-day,” Natty informed the Paris house, “and although the brokers found most of the money they wanted if not all, the markets were at one time quite demoralized, a good many weak speculators selling à nil prix and all the foreign speculators selling Consols ...” That this was only the beginning became apparent the next day when—in a development which took Natty wholly by surprise—the Paris house sent a coded telegram requesting the sale of “a vast quantity of Consols here for the French Govt & Savings banks.” He refused, first on the purely technical ground that “in the actual state of our markets it is quite impossible to do anything at all as prices are quite nominal and very few transactions of any importance have taken place”; then adding that the more political argument that it would produce “a deplorable effect ... if we were to send gold to a Continental Power for the purpose of strengthening itself at a moment when ‘War’ is in the mouths of everyone.” Despite his assurances to the French Rothschilds that their telegrams were being kept strictly secret, Natty at once warned Asquith of what had happened. With heroic understatement, Asquith called this “ominous.” The possibility was now dawning that an acute liquidity crisis emanating from the acceptance houses could threaten the entire British financial system.
On July 29—the day after the rue Laffitte’s request for gold—consols plunged from above 74 to 69.5 and continued to fall when the market re-opened. By the 30th the Bank of England had advanced £14 million to the discount market and a similar amount to the banks, but was forced to protect its reserve by pushing up Bank rate from 3 to 4 per cent. Already, as Natty reported, there was “talk in a rather loose way” of closing the stock exchange. Firms who did a large continental acceptance business—like Kleinworts and Schröders—were in desperate straits, with around £350 million bills of exchange outstanding and an unknowable proportion of them unlikely to be honoured. When Bank rate was doubled to 8 per cent on July 31—followed by a further 2 per cent hike the following day—it suddenly became apparent that writers like Bloch, Angell and Hobson had been wrong: the banks could not stop a war, but war could stop the banks. To avert a complete collapse, the stock exchange was closed on the 31st, a step which not even the worst crisis of the preceding hundred years had necessitated. The next day (as in 1847, 1857 and 1866), Lloyd George gave the Governor of the Bank a letter permitting him to exceed, if need be, the note-issue limit set by the Bank Charter Act. Fortuitously, August 1 was a Saturday and the following Monday a Bank Holiday; further breathing space was provided by extending the holiday for the rest of the week. The stock exchange remained closed “until further notice.”
The financial crisis was inevitable; what remained uncertain until August 3 was whether Britain would actually enter the war. We can infer what the City expected to happen if Britain stayed out. Between July 18 and August 1 (the last day when quotations were published), the bonds of all the major powers slumped, but some fell further than others. Russian 4 per cents fell by 8.7 per cent, French 3 per cents by 7.8 per cent—but German 3 per cents by just 4 per cent. In the absence of British intervention, the City was putting its money on Moltke, just as it had in 1870. The Parisians remembered 1870 too. In August, fearing a second siege of Paris, Edouard sent his family to England. (Although they later returned, he felt nervous enough during the second battle of the Marne to send them away again, this time to his Lafite estate.) At the same time, he moved the bank’s offices temporarily to Bordeaux.
But the British decision to tip the balance in favour of France by intervening—taken by a deeply divided Cabinet after long hours of debate—was not one the Rothschilds or any other bankers could influence. On July 31 Natty implored The Times to tone down its leading articles, which were “hounding the country into war”; but both Wickham Steed and his proprietor Lord Northcliffe regarded this as “a dirty German-Jewish international financial attempt to bully us into advocating neutrality” and concluded that “the proper answer would be a still stiffer leading article tomorrow.” “We dare not stand aside,” Saturday’s leader duly thundered. “Our strongest interest is the law of self-preservation.” As Schwabach lamented to Alfred on August 1, British intervention now seemed likely, “though at this precise moment there seem to be no grounds for it ... [But] you and I are conscious of having tried, with all our might, to improve relations between our countries.” Natty even sent a personal appeal for peace to the Kaiser, who minuted irrelevantly that he was “an old and much respected acquaintance of mine. Some 75 to 80 years old.” This too was in vain: before a reply could be sent communications were interrupted. On August 3 Grey addressed the Commons to the effect that Britain would not “stand aside”; as Natty put it to his cousins, the German invasion of Belgium was “an act which England could never tolerate.” Of course, there were other, more compelling reasons for the government’s decision: the belief that if Germany defeated France, Britain’s own security would be at risk, and perhaps also a desire to keep the Unionists out of power. Still, it is understandable that the Rothschilds, who had been so much involved in the events leading up to the treaty of 1839, should have emphasised Belgian neutrality as the reason for British intervention.
There was no euphoria in New Court. There they rightly foresaw, as Natty put it, “the greatest military fight in the annals of the world,” a “horrid war,” the duration of which no one could foresee. “No Government has ever had a more serious and painful task before it,” Alfred wrote to Paris. He could not think of the “military & moral spectacle which we have before us with its painful details looming in the distance ... without shuddering.” For once, he and his Liberal cousin Annie were in agreement: “[T]he awful tragedy of a European war” struck her as “almost unthinkable.” “One cannot help wondering,” she exclaimed, “where is the use of diplomacy, of arbitration, of that worn-out sentence, the ‘resources of civilization,’ if war is to be the only arbitrator!” It was symbolic of the way in which the war was going to sever the Rothschilds’ traditional familial links to the continent that she and her husband were holidaying in Bergen at the end of July, while Natty’s son Charles was in Hungary with his wife—herself a Hungarian by birth.
Was there any consolation? Of all the Rothschilds, Annie’s sister Constance was unusual in catching right away the euphoric, anti-German mood which swept the country after war was declared. She also welcomed the war as an apparent solution to the Ulster crisis:August 5: ... Edward Grey is doing well, Redmond made a very fine speech. For the present, the Irish peril is at an end. Both North and South combine to come to our aid. A generous people! We hope that Lord Kitchener will be giv
en command of the Army, at all events of the organization.
August 7: Kitchener Secretary of War, Thank God.
August 13: Hatred let loose. Splendid behaviour of the Belgians. Cruelty of the Germans.
September 9: ... Last night’s news were better. If only the Russians could get quickly to Berlin.
September 30: Home Rule Bill on the Statute Book. Great disgust evinced by Carson and Bonar Law, but splendid and dramatic scene in the House of Commons! Hope and pray that Covenanters and Nationalists will fight side by side.
There is no sign that Natty or his brothers felt any such relief, however: after all, their views on Ireland were diametrically opposed to those of their ardent Gladstonian cousin. The only possible consolation for the partners at New Court was that, having failed to avert the calamity, they could at least perform the traditional Rothschild role of financing the war effort.
But were they able to do so? Certainly, they were soon called upon by the politicians to assist with the financial consequences of war much as they had been in previous crises. In his War Memoirs, for example, Lloyd George poetically recalled how the war had reconciled him with his erstwhile enemy:One of those whose advice I sought was Lord Rothschild. My previous contact with him was not of a propitiatory character ... However, this was not the time to allow political quarrels to intrude into our counsel. The nation was in peril. I invited him to the Treasury for a talk. He came promptly. We shook hands. I said, “Lord Rothschild, we have had some political unpleasantness.” He interrupted me: “Mr Lloyd George, this is no time to recall those things. What can I do to help?” I told him. He undertook to do it at once. It was done.
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