Across the Borders

Financing the World's Railways in the Nineteenth and Twentieth Centuries

Günter Dinhobl, Ralf Roth

• Publisher: Routledge
• Year: 2017
• Print ISBN:
  9781138265424
• eBook ISBN:
  9781351961004
• Topic: History
• Subtopic: World History
• Index: History

Until now we have only had relatively narrow economic studies comparing investments in railways with investments in other fields of individual economies. 'Across the Borders' not only opens the door for fundamental new insights into a trans-national view of railway history, but also contributes to a breakthrough in the wider study of the subject, providing the first extensive historical investigation of the worldwide system of railway financing. This book provides a wide introduction to how financiers, governments and entrepreneurs in Europe managed to face the challenges of constructing and maintaining an integrated railway network, both in their own countries and their colonies. This volume offers analysis from a selection of experts exploring the trans-national investment policies of railway construction based on numerous historical case-studies. The chapters provide insight into the international opportunities that existed for railway financing, from the perspective of economic, social, transport and railway history. With contributions from authors from 19 countries the volume is a truly international work that will be of interest to academic researchers, museum staff, archivists, and anyone who has an interest in the history and development of railways.

Part I
Individual Across-Border Investors

Chapter 1
Making Tracks

Promoting The Rothschid Archive as a Source for Railway History

Melanie Aspey

Introduction

'There are three ways of losing your money: women, gambling and engineers. The first two are pleasanter, but the last is much more certain', declared James de Rothschild.¹ To the lasting regret of the archivists, this anecdote of Eric Hobsbawm cannot be attributed with certainty to Baron James (1792–1868), founder of the French branch of the Rothschild business. However The Rothschild Archive contains more than enough documentary evidence to support a study of every aspect of the family's history and the purpose of this paper is to explore some of the sources that will be of use to railways historians.

Business development

The Rothschild family's business began in the late eighteenth century, defined in a partnership agreement drawn up in 1810 by a Frankfurt merchant. Mayer Amschel Rothschild (1744–1812) the principles of which would be renewed and reaffirmed by his five sons and their male descendants. His sons are represented in a motif of five arrows that permeates Rothschild history. Amschel (1773–1855), the eldest, continued to be associated with Frankfurt; Salomon (1774–1855) founded a branch of the business in Vienna; Nathan (1777–1836) was the first to leave Frankfurt, travelling to England to found N M Rothschild & Sons; Carl (1784–1855) was stationed in Naples and James (1792–1868) founded the family's Paris branch.

Thanks to the adherence of the family to a pan-European business network, information about business developments eventually found its way to London in one form or another and to a greater or lesser degree. These documents, the business records of N M Rothschild & Sons, form the core

Figure 1.1 An invoice issued by the company of Robert Stephenson & Co., Newcastle, 8 September 1846, to N M Rothschild & Sons
The London house carried out numerous transactions with British manufacturers on behalf of the other branches of the family.
Source: Rothschild Archive, London (RAL), XI/126/9B.

of the Archive. The creation of The Rothschild Archive Trust in 1999 brought in more collections: members of the family were encouraged to consider the Archive as a kind of family attic, and to entrust their business and private papers to the care of the Trust.² The additions to the Archive since then, some of them described in more detail below, have served to enhance the existing collection and to cast light on hitherto obscure areas of activity.

The story of the Rothschilds and railways takes us from the first network in the Austrian Empire to the developments in privatisation in the United Kingdom. It is a history outlined in the booklet Along Rothschild Lines and it is also a history which is representative of significant threads of Rothschild history in general: government relations, communication and industrial investment.³

While Nathan in London shied away from investing in British railways, N M Rothschild & Sons began to act as intermediaries for a number of British engineering firms seeking to export their products into the European market. Nathan's brother Salomon arranged for Franz Riepl, the early Austrian railway enthusiast, to visit England in 1830.⁴ Riepl was the catalyst, converting Salomon to the cause of railway development. Salomon eventually secured the concession to construct the Kaiser Ferdinands-Nordbahn to link the salt mines of Galicia, the iron and coal mines of Galicia and Moravia and the Witkowitz iron works to Vienna. He went on to realise his vision of developing a much wider network within the Austrian Empire and had already begun to acquire concessions from the government for further branches to major cities, as well as to plan for an extension of the line on to Trieste.

Information was also a commodity passed from Britain to Vienna. Following Nathan's death in 1836, the post of Austrian Consul General was inherited by his son. Lionel, whose reports to Metternich on the development of British industry survive in the Austrian state archives.⁵ Egon Corti makes extracts from some:

Since the Liverpool-Manchester Railway was opened in September 1830 up to December 1837, 48,716 journeys have been made, and about three million passengers have been carried, there having been only two fatal accidents (...). The engineer of the Birmingham Railway is of the opinion that most railways will yield a profit of eight to ten per cent per annum.⁶

In Paris, James was quick to follow, although in his case as a financier rather than a promotor and overseer of an entire project. Rothschild employee and later competitor, Emile Pereire predicted, correctly, the importance of Rothschild investment in the railways from the beginning, writing in 1835

The involvement of the Rothschild bank in the railway from Paris to Saint-Germain is not only of great importance for this particular venture, it will also necessarily have a determining influence on the later realization of all the great industrial undertakings.⁷

The 1840s saw the development towards securing coal and ferrous metal concessions and James became more engaged with railways in this decade. He visited England to tour the North of England with his nephew, Nathan's son Mayer, examining the rail network at first hand and calling in on the industrial cities to meet engineers and suppliers. The decade was the one in which the French Northern line, the Chemin de fer du Nord, was born. In tandem with the means of transportation, James also invested in the raw materials that were to be transported, such as in the Belgian coal mines and he was a supporter of Paul in Talabot and the mines of the Grand Combe.

The first negative implications of a high profile engagement in railway investment start to show around this time. Anthony de Rothschild in particular was concerned about accidents on the lines that might unleash attacks on the management of the network. He wrote to his brothers in August 1846, 'they call the Northern Line, Rothschild's line. I want them therefore to say, that it is as perfect as can be'.⁸

An accident on the Northern Line unleashed a protracted pamphlet war in France, following on from a vitriolic outburst by journalist Georges Dairnvaell. He used the Fampoux crash as a means to publish a critical account of the Rothschilds' involvement in France since their role in funding Wellington's army in its struggle against Napoleon. At least seven publications appeared in quick succession, some denouncing the Rothschilds, some defending them and others attempting impartiality. James, however, was not to be dissuaded, accusing the press of mindless agitation and conceding that, 'The world can no longer live without the railways'.⁹

Table 1.1 Rail business of Nathan Mayer Rothschild, 1845–1896

Year	Name of the company	in Sterling
1845	Northern of France Railway	6,000,000
1845	Lyon, Paris, Lille Valenciennes Railway	8,000,000
1854	Eastern Railway of France	2,500,000
1856	Imperial Lombardo Venetian Railway and Central Italian Railway^A	6,000,000
1856	Imperial Lombardo Venetian Railway and Central Italian Railway (3 % obligations)	3,125,000
1858	Bahia and San Francisco Railway	1,800,000
1859	São Paulo Railway with P. Cazenove & Co.	2,000,000
1860	Brazilian Government (4 1/2 % loan)	1,370,000
1862	Russian Government (5 % loan) with de Rothschild Frères, Paris	15,000,000
1863	Italian Government (5 % loan)	3,000,000
1863	Brazilian Government (4 1/2 % loan)	3,850,000
1865	Brazilian Government (5 % loan)	6,900,000
1865	São Paulo Railway (7 % debentures)	200,000
1866	South Austrian Railway and Imperial Lombardo Venetian Railway and Central Italian Railway (railway loans)with de Rothschild Frères, Paris, and with M. A. Rothschild & Söhne, Frankfurt	6,000,000
1866	South Austrian Railway and Imperial Lombardo Venetian Railway and Central Italian Railway (railway loans)	3,600,000
1870	Russian 5 per cent Consolidated Railway Bonds with de Rothschild Frères, Paris	12,000,000
1871	Southern State-, Lombardo-Venetian and Central-Italian Railway Company (railway loans)	15,000,000
1881	The Bengal Central Railway with Baring Brothers & Co.	1,000,000
1882	The Rohilkund and Kumaon Railway	200,000
1882	The Bengal and Northwestern Railway (4 % loan) with Baring Brothers & Co.	2,200,000
1884	Bahia and San Francisco Railway	298,000
1886	Bahia and San Francisco Railway	20,000
1887	Chicago, Milwaukee and St Paul Railway (5 % bonds)	800,000
1887	Bengal and Nagpur Railway	3,000,000
1889	Russian Government (4 % loan)^B	27,700,000
1893	Western of Minas Railroad (5 % bonds)	3,700,000
1896	Burma Railways	2,600,000

Notes: ^A Concessions granted to the Rothschild houses.

^B Bonds issued to be applied to the conversion and repayment of railway loans of 1870, 1871, 1872, 1873, 1874.

Source: J. Ayer, A century of finance (London 1904).

By the 1850s James was controlling major routes North to Belgium and the Channel Ports and was involved as director with the Chemin de fer de l'Est's acquisition of Luxembourg Railways, also taking a holding in the Paris-Lyon-Mediterranee line and Pereires' Chemin de fer du Midi.

The first major incursion into the development and financing of railways beyond the immediate geographical boundaries of the bank's houses came with the involvement in the Madrid, Zaragoza Alicante Company in Spain. The growth of the railways was also the motivation behind the creation of the Credit Anstalt, an institution that was to have the most dramatic impact on the business decades later.

Italy also offered considerable opportunities for investment and once again James and the Pereires clashed, this time over control of the new Lombardo-Venetian and Central Italian Railway Company. It was here again that the Rothschilds' access to the London capital market was crucial. When the company was launched in 1856, 1.2 million pounds of its six million pounds shares were taken by an English group led by the London house, which also undertook a 3.1 million pounds bond issue for the company. The Rothschilds and their asso...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• List of Figures and Tables
• List of Abbreviations
• Notes on Contributors
• General Editor's Preface
• Preface
• Introduction: Across the Borders
• PART I: INDIVIDUAL ACROSS-BORDER INVESTORS
• PART II: CROSS-BORDER INVESTMENTS IN EUROPE
• PART III FROM EUROPE INTO THE WORLD: OVERSEAS INVESTMENTS
• Bibliography
• Index