Herbert H. Kaplan, Nathan Mayer Rothschild and the Creation of a Dynasty, The Critical Years, 1806-1816, Stanford University Press, 2006, xxiv + 194pp., bibliography, index.

Compte rendu par Pierre-Cyrille Hautcoeur, EHESS et PSE, à paraître dans European Journal of the History of Economic Thought.

Herbert Kaplan, Professor Emeritus of History at Indiana University, provides us with a history of the founding years of the Rothschild English branch, centred on the figure of Nathan M. Rothschild. He draws heavily on the Rothschild archives (mostly the correspondence within the Rothschild family) and, to a lesser extent, on the John Ch. Herries’ (British Commissary-in-Chief in 1814-1816) papers at the British Library, the Treasury Papers and the Royal Mint archives. But, as he states (p. xx), this book “is not a biography of Nathan Rothschild nor it is a history of the Rothschild family. The available contemporary sources simply do not contain the kind of information that would make it possible”. It merely describes in much detail and interprets the business activity of Nathan Rothschild from 1798 (the date he moved to England) to 1816, and mostly from 1806 to 1816.

The thesis of the book is simple: Nathan Rothschild’s move within a few years (1808-1816) from a relatively minor merchant in Manchester to the head of British finance resulted mostly from the war’s special circumstances. First the premium on gold that appeared in various countries, which created opportunities for legal or illegal arbitrages that N. Rothschild rapidly mastered and could develop thanks to his unique family network on the Continent. Second, the enormous needs of coins that the British armies and their allies suffered during the end of the Napoleonic period led the British government to rely on N. Rothschild to provide these coins. Lastly, the book revaluates the role of N. Rothschild in the allies’ victory in 1814-1815.

Chapter one explains how N. Rothschild benefited from the credit and reputation of Levy Barent Cohen, one of the most important Jewish merchants of the City, thanks to his marriage with Hannah Cohen, L. B. Cohen’s daughter, in 1806. Although Nathan’s Frankfurter father’s reputation probably helped, his father-in-law was careful in separating his daughter’s dowry from her husband fortune, and did not associate Nathan to his business (or to his succession), reflecting the general opinion that Nathan was not only a relatively minor provincial merchant, but one with little character, that is a somewhat tainted reputation.

Chapter two discusses the subsequent move from Manchester to London and Nathan’s business activity in London. It criticizes the story from the traditional Rothschild’s historiography which gave a central role to the relationships with Wilhelm, the Elector of Hesse-Kassel, in the development of the Rothschild’s fortune, concluding that, in the absence of available evidence, “any conclusions or inferences in that regard can only be speculation” (p.39).

Chapter three analyzes the development of N. Rothschild’s trading network on the Continent and how he used it from 1808 onwards in order to become a dominant player in the specie trade. From 1808 to 1814, the market price for gold rose about 15 to 20 percent above the Mint price, the price of silver also rose, and the sterling exchange rate fell well below par, providing opportunities for enormous profits, either legally or illegally (since the export of British coins was forbidden). Kaplan shows that the involvement of Nathan’s father (and brothers) was decisive in allowing him to gain prominence in this trade since it conditioned the credit to be obtained from the most important bankers in Amsterdam or Paris. In 1811, the value of the bills of exchange remitted from France and the Netherlands to Nathan was above £ 2.5 million, 20% of which at least resulting from the export of “pictures” (the code name for English guineas smuggled abroad).

Chapter four analyzes the episode during which N. Rothschild became the official provider of coins to the armies of Wellington fighting in Spain and in southern France in 1812-1814. The chapter details Wellington’s campaign and his increasing needs for coins to support his army and those of the Spanish and Portuguese “patriots”. “Because he doubted the efficacy of his government to secure and send him the specie he needed, a prescient Wellington recommended in August 1812 that the government hire an agent to collect and deliver it to him” (p. 74). This was decided only in early 1814, and the Rothschild network actually delivered the specie required only after Napoleon’s abdication (a “detail” that diminishes something the role of the Rothschilds in the victory).

Unfortunately, the picture drawn on war finance is almost exclusively centred on the Spanish front under Wellington (whose correspondence and reports are widely quoted), and is not put in the context of overall war financing problems. Some further elements on British financial transfers to the allies are discussed, but only for the next period, one for which N. Rothschild’s services were also required by the British government, thanks to the success of the Spanish operation.

Chapter five presents the operations undertaken by the Rothschilds under the lead of Nathan for the payment of the war subsidies that the British government had promised to its allies in 1813 and 1814. When at the start the subsidies were supposed to be made in a “federative paper” payable only after the end of the war, they became payable in monthly instalments from the Chaumont treaty (March, 1814). Once more, J. Herries understood that the corresponding bills would suffer heavy discounts and have a fatal impact on the sterling exchange rate without an efficient agent who would undertake for the British government the collection of specie and the payments required. N. Rothschild again became that agent, providing funds especially to the Russian commissioner Gervais (including some bribes, see pp. 112s). Then, the Rothschild became the paymaster of Herries soon after Napoleon abdicated, and that of the Russian and sometimes Prussian governments as well. Again, the European network of the five brothers was able to provide better services than any other English bank.  

Chapter six develops the involvement of the Rothschilds in the period following the first Treaty of Paris. He shows that their role in transferring species still increased in 1814 and 1815, first for the payment of the subsidy to the British allies, second for the payments to the British armies when war resumed after Napoleon escaped from Elba in 1815, and finally for the payments resulting from the war indemnity that was imposed on France. The Rothschilds were very successful in the first two, but were rapidly eliminated from the French indemnity by an alliance of their competitors Baring and Hope. One original aspect of the chapter is to show (pp. 139ss) that N. Rothschild obtained that the Royal Mint would mint Louis d’or (the French legal coins), and actually started doing it before the British government (though not Herries) approved that operation, after obtaining the agreement of Louis the XVIII^th . This facilitated greatly the provision of French coins to the British armies. The chapter also destroys the myth that the Rothschilds benefited from security market operations on the early knowledge of the British victory at Waterloo (pp. 145s). Summarizing the chapter is an evaluation of the profits Nathan made thanks to his work for the British government: at least (pure 2% commission, not including potential other secret gains) £86,000 in 1814 and 196,000 in 1815.The financial situation of the Rothschilds and particularly of Nathan in 1815 and 1818i is later evaluated, based on the two partnerships that were signed then among the brothers. In 1815, the partnership capital was £ 136,000, but probably did not include all the operations of the brothers. In 1818, it reached £1,772,000, with a sophisticated structure in which every brother had a (varying) share in the capital of the three “local” partnerships (in Frankfurt, London and Paris). At that moment, Nathan dominated (50%) the London partnership of £742,000 and, including his shares in the others reached a total participation of £ 500,000 in the global capital, making him the dominant brother, but not overwhelmingly so (each of the other brothers had above £ 300,000). This can be compared to Baring Brothers’ of around £350,000 capital in 1815 and suggest the exceptional position the war and their familial links gave to the Rothschilds.

In a short text (177 pages, including around 100 notes per chapter), this books provides substantial new information, defeats some well-established myths, and constructs a clear demonstration on the origins of the Rothschilds’ fortune during the decisive 1812-1816 period. Being very cautious at proving every assertion, it is a quite difficult reading: innumerable small operations and negotiations are painfully described, making the big story sometimes difficult to follow. Tables and graphs summarizing the data would have helped the reader a lot (there are only two tables in the entire book. Nevertheless, the overall picture is quite clear: the early fortune of the Rothschilds was the result of putting their familial mastering of the specie trade at the service of British war finance at an until then unknown scale.