The House of Rothschild Read Online Free Page A

brokers before 1815, the Rothschilds branched into minting too.
    Railway finance was the most exciting new line, however. In most European countries, the state played some role in railway building, either directly financing construction (as in Russia or Belgium) or subsidising it (as in France and some German states). This meant that issuing shares or bonds for railway companies was not so very different from issuing government bonds—except that the volatility of railway shares was much greater. To begin with, the Rothschilds sought to play a purely financial role. But they were drawn inevitably into closer involvement by the long lags between a rail company’s flotation and the actual opening of its lines, not to mention the payment of dividends on its shares. By the 1840s, Lionel’s brothers Anthony and Nat were spending a substantial proportion of their time supervising their uncle James’s French railway interests. It was a sign of the third generation’s greater aversion to risk that Nat strongly criticized James’s “love” of lines like the Nord and the Lombard and, when accidents happened (as at Fampoux in 1846), Nat saw his fears fulfilled. James was nevertheless right: capital gains on continental railway shares in the course of the nineteenth century were the principal reason the French house subsequently outgrew the English. By the middle of the century, the Rothschilds were already well on the way to. building a highly profitable pan-European railway network.
    In one respect, however, Nat’s fears were justified. Unlike the management of government debts, the management of railways directly and tangibly affected the lives of ordinary people. The Rothschilds’ involvement in railways therefore exposed them to unprecedented public criticism. Radical and (for the first time) socialist writers began to portray them in a new and lurid light: as exploiters of “the people,” pursuing capital gains and profits at the expense of taxpayers and ordinary travelers. There had been press attacks on the Rothschilds before; but in the 1820s and 1830s they had mainly stood accused of financing political reaction, or (by business rivals) of sharp commercial practice. In the 1840s, hostility to wealth fused with hostility to Jews: anticapitalism and anti-Semitism complemented one another. The Rothschilds provided the perfect target.
    Along with inflammatory polemics, the depressed economic conditions of the mid-1840s were intimations of political instability. Unlike 1830, the revolution of 1848 could be seen coming from afar. The Rothschilds were not blind to its approach, yet underestimated the magnitude of the crisis. The problem was that economic stagnation increased government deficits by reducing tax revenues; in the short term, that meant new business for the Rothschilds, which they could not resist. Both Salomon and James undertook major loans on the very eve of the insurrections. With the spread of revolution eastward from Paris, Salomon’s industrial and railway bonds and shares simply became impossible to sell, and his contractual obligations to the Austrian state equally impossible to fulfill. James was only able to ride out the storm by negotiating major changes to his most recent loan contract with the new and financially naive government.
    By dint of their multinational structure, immense resources and superb political contacts, the Rothschilds were able to survive the upheaval of 1848-49. In conditions of near-universal loss, their relative position may even have been slightly enhanced. However, the recovery of the European economies and the (not-coincidental) return of political stability brought new challenges.
    First, one of the unspectacular achievements of the revolution was to weaken the resistance of state bureaucracies to the ideas of joint-stock company formation and limited liability. Once company formation became easier, the number of new entrants into finance began to rise. The Pereire