The House of Rothschild in Spain, 1812–1941

Miguel A. Lopez-Morell, Miguel A. López-Morell

• Publisher: Routledge
• Year: 2016
• Print ISBN:
  9780754668008
• eBook ISBN:
  9781317028475
• Topic: History
• Subtopic: 19th Century History
• Index: History

Amongst the serried ranks of capitalists who drove European industrialisation in the nineteenth century, the Rothschilds were amongst the most dynamic and the most successful. Establishing businesses in Germany, Britain, France, Austria, and Italy the family soon became leading financiers, bankrolling a host of private and government businesses ventures. In so doing they played a major role in fuelling economic and industrial development across Europe, providing capital for major projects, particularly in the mining and railway sectors. Nowhere was this more apparent than in Spain, where for more than a century the House of Rothschild was one of the primary motors of Spanish economic development. Yet, despite the undoubted importance of the Rothschild's role, questions still remain regarding the actual impact of these financial activities and the effect they had on financial sectors, companies and Spanish markets. It is to such questions that this book turns its attention, utilising a host of archive sources in Britain, France and Spain to fully analyse the investments and financial activities carried out by the Rothschild House in Spain during the nineteenth and early twentieth centuries. In so doing the book tackles a variety of interrelated issues: Firstly, fixing the period when the main capital entries sprung from the initiatives taken by the Rothschild family, how consequential they really were, and the sectors they affected. Secondly, quantifying the importance of these investments and financial activities and the weight they had on financial sectors, companies and Spanish markets, as well as in foreign investment in each period. Thirdly, outlining the steps followed and means used by the Rothschild House in order to achieve the success in each of their businesses. Finally, analysing the consequences of this phenomenon in the actual growth of Spanish contemporary economy, both in a general and in a partial scale. By exploring these crucial questions, not only do we learn much more about the working of one of the leading financial institutions and the development of the Spanish economy, but a greater understanding of the broader impact of international finance and the flow of capital in the nineteenth century is achieved.

Chapter 1
Early Contacts and Failed Attempts to Set Up in Spain, 1812–1833

The Rothschilds have been linked to Spain for as long as they have been linked to their fortune, and thus much longer than is generally imagined. In fact, the first big business deal by this family of Jewish bankers was in Spain, when they financed the Duke of Wellington’s army, trapped in the Iberian Peninsula by the troops of Napoleon. It was to be the first in a long list of operations by the Rothschilds in Spain and in the rest of Europe in times of war and financial crises. This ability to act where other financiers beat a retreat was one that they were to develop with uncanny success in the years to come.

Of course, the above episode is not linked directly to any operation with the Spanish government, whose legitimacy at the time was divided between the government of Bonaparte and the Cortes, which was hemmed up in Cadiz, nor did it have any repercussions for any particular industrial or commercial Spanish institution. Yet, what is of interest here is that it did accelerate the family’s first contacts with the Spanish financial networks of the time. It supposed a series of relationships that were to prove fundamental in the development of the Rothschilds’ later activities in Spain.

Financing Wellington

The history of the great deals made in Europe during the Napoleonic Wars is blurred by the political and economic disorder of the time and the lack of reliable information. The reasons behind this dearth of knowledge are many and varied: some lie in the blatantly illegal nature and the secrecy that shrouded a good number of the operations; others in the fact that information has been lost, and, finally, many of the explanations proffered are the fruit of mere improvisation. One way or another, the historian has had his work severely hampered.

Of what there is no doubt, however, is that this period of crisis would witness the rise and consolidation of some of the families that would control European banking for the rest of the nineteenth century. Of all these families, it was arguably the Rothschilds – who started from practically nothing – who would best grasp the opportunities offered by the upheavals of the trade and capital markets and who, in the end, would obtain the highest profits due to their skill when it came to taking on risks.

Nathan Mayer (1777–1836), the third of the five male children fathered by Mayer Amschel Rothschild, had been sent to England in 1798 to oversee the family’s cloth exports to the Continent. By then, the Rothschilds had vastly improved their standing in the Jewish ghetto in Frankfurt and, while it is true that they remained mere financial intermediaries in the court of the prince-elector of Hesse-Kassel, William IX,1 had already accumulated enough financial resources to complement his early financing operations with the flourishing trade that importing British manufactured products supposed.

The young Nathan quickly learnt the ropes in bustling Manchester which was in the heyday of the Industrial Revolution, and he was soon setting up bigger and bigger contracts to exchange cloths in England or to send it to Germany and elsewhere on the Continent at lucrative profits. The business prospered and began to accumulate capital, a process that Nathan would firmly consolidate in 1806 through his marriage to Hannah, the daughter of the London-based Jewish businessman Levi Barent Cohen. There is a little doubt that it was a classic case of a marriage of convenience, sealed with a solemn contract between the families. It would take Nathan into the heart of the small, closed circle of London’s Jewish bankers and businessmen, so enabling him to spread quickly beyond the classical business deals and into the world of banking.2

Nathan’s first years in England coincided with the climate of war that was sweeping through Europe during the late eighteenth and early nineteenth centuries, perhaps the time of greatest change in the Continent’s long history. There was an unstoppable evolution in which the budding liberal bourgeois revolution, opposing the ailing structure of the ancien régime, sought to transform the very basis of politics, society and European economics under the most radical dictates of the Enlightenment. The American Revolution and that country’s ensuing independence would be the field of experiment that would produce its definitive consequences in France in 1789 and thereafter.

The monarchies of Europe, even the English monarchy, saw the French Revolution as a serious threat to the status quo and they shunned a process that was to become more and more radical and virulent after the execution of Louis XVI. France’s immediate neighbours, led by Austria-Hungary, declared war on the budding French republic in an attempt to restore the old order, pen in the revolutionaries within their own area and put a halt to the revolutionary tide which was beginning to threaten some of the small Italian and German principalities.

Apart from their purely military activities, the counter-revolutionary governments began to turn to other initiatives which bear some of the markings of what we might consider modern economic warfare, although they were limited to the enforcement of a series of trade restrictions that in the vast main affected Anglo-French relations.

Trade blocks between these two nations went back to 1793 and they were held in place almost continuously through to 1815. At the beginning they were clearly politically based and the decision could be taken by different levels of authority with some subsidiarity. However, when the anti-revolutionary coalition finally took on board that the changes in France were there to stay, the trade disagreements took on an altogether more economic slant. France was not only responding to British maritime hostilities but was also seeking to cut off Britain’s access to the Continent, so isolating her from her allies and, equally importantly, cutting off supplies, stifling her booming export industry, while favouring its own national industry. The National Convention and later the Directoire quickly discovered how difficult it was to keep up a blockade outside one’s own territory. The enforced closure of frontiers was mostly artificial and had little real effect. England held on to its markets in Central Europe and the Mediterranean, where the French found it impossible to control the flow of trade, most of which entered France under the flags of other countries or via trade routes other than the Channel. In an attempt to reinforce its actions, the Convention tried to extend its control to Italy, Egypt and the West Indies, so sparking off Nelson’s Atlantic and Mediterranean campaigns and the alliances between France and Spain, under the control of Manuel de Godoy, to hem in Great Britain on all fronts.

When Napoleon came to power a fleeting agreement was signed under the Peace of Amiens in March 1802, but it was no more than a flash in the pan that would be followed by progressively tougher stances in relations. In 1803 the French Consulate passed new measures to step up the blockade and to put more pressure on its enemy. More measures followed – the Berlin and Milan decrees of November 1806 and December 1807, respectively – which extended the prohibition on entry to the ports of the empire to any vessels coming from Great Britain or its colonies and to all vessels that had received goods from the enemy either in port or at sea.

Bonaparte was convinced that the only way to stifle and overcome British sea dominance was from the land, and so he backed up his decrees with a huge plan to conquer the rest of Europe. Any territory washed by the Atlantic, the Mediterranean or the Baltic that refused to follow the orders of the French emperor in this matter risked sanctions or even invasion, as would occur in Italy, the Rhine Confederation, Poland, Holland, Russia and the Iberian Peninsula. Without a doubt, the troop movements had a short-term effect on British production and exchange. At least it was so in 1807 when Britain sporadically lost its Continental markets and saw drastic reductions in goods from overseas. To cap it all, Jefferson took measures to counter French and British interventionism, so making trade between North America and Europe more difficult. The outcome was a fall in British exports of 25 per cent during 1808. Yet Napoleon had never calculated the real costs of securing continuous loyalty from so many territories at the same time, nor the possibility that Britain might adapt to the circumstances by boosting the trade with its colonies in Asia3 or by seeking out new markets in Latin America, where Spain’s diminishing control over its colonies provided easy pickings for British traders who, barely a year after the hiatus caused by the blockade, were enjoying a near monopoly in the South Atlantic. A dynamic trade triangle made up of Latin America, Great Britain and the Continent4 was mapped out in a matter of months. The results of all this uncertain tug-of-war would not be seen for some time, but the consequences would be instrumental in the development and outcome of the conflict.

The tightening of the Continental blockade did nothing to hold back the Rothschilds’ businesses. During the preceding years the family had extended its circle of business and trade relations to other small German, Austrian and Danish principalities, even going so far as to supply the invading French army. For his part, Nathan continued to ship goods to the Continent, although the shipments became increasingly more akin to smuggling in their nature.5 Indeed, far from reducing its activities, the family set about taking advantage of the constant fluctuations in the currency and goods markets through the increasingly lucrative business of international bills of exchange. The fact that the Rothschilds were working across various marketplaces and that their family businesses were tightly coordinated soon showed them the importance of having foreknowledge of the evolution of exchange rates, troop movements and the outcome of campaigns. This was the era in which the legend of the Rothschilds as masters in the art of astutely, if not slyly, managing information about far-off markets, thanks to their flair for coded messages sent by posts or carrier pigeon, first took root. Information as a fundamental element of commercial and financial activity took on new economic meanings in their hands as they skilfully played the stock markets and dealt in strategically important merchandise in what was becoming a highly dynamic and unpredictable milieu.6

The Rothschilds’ fortunes took a turn for the better in 1809 when the Prince of Hesse, who wanted to invest huge amounts of cash accrued from hiring out his troops in the Central European campaigns, ordered them to make a series of purchases of British bonds (the famous ‘Consols’) over the following years.7 It was then that Nathan Rothschild moved from Manchester to London, setting up in premises in New Court, a tiny cul-de-sac off St Swithin’s Lane, where the banker Moses Haim Montefiore lived. A short walk from the Bank of England and the Stock Exchange and a privileged place to be in the heart of the City, it was to become the permanent British headquarters of the family.

It was a time when London was undergoing a singular transformation. Events had led to the City’s receiving huge amounts of capital and talented financiers who had fled in the face of the successive waves of revolution, Napoleonic expansion and the Continental blockade. These new elements were a tremendous boost to London’s “golden mile” and the city began to edge out Amsterdam as the European capital of finance while strengthening its commercial dominion in the Atlantic. The situation would remain so for the rest of the century.8 Nathan Rothschild enjoyed great fortune and benefited from conditions that had little to do with him directly. The deaths in 1810 of Francis Baring and the prestigious Jewish banker Abraham Goldsmid caused a surprising halt in the City’s activities. Goldsmid’s death had left the large Jewish trade and finance community of London without ahead and Nathan became to some extent a type of arbitrageur. He was not about to let the opportunity go by and, armed with his unconcealed ambition and good contacts, was able to take advantage of the confusion and do business almost independently.

Striking while the iron was hot, the family decided to take the risk and reshape and scale up their activities.9 The aim was to bring the system of manufacturing into line with the Rothschilds’ increasing number of commercial and financial exchanges. So it was that what had been sporadic exchanges of bills and currencies began to be a key part of their business.

The family’s first step was to send the youngest son of Mayer Amschel Rothschild,...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• List of Figures and Illustrations
• List of Tables
• Metric and Monetary Equivalents
• Abbreviations
• Prologue to the English Edition
• Introduction
• 1 Early Contacts and Failed Attempts to Set Up in Spain, 1812–1833
• 2 Liberalism, Corruption and War Finances, 1833–1840
• 3 The Contradictions of Peace: Financial Problems of the State and the First Moves towards Modernity, 1840–1855
• 4 Financing the Railways
• 5 Years of Financial Euphoria and Crisis, 1856–1868
• 6 The Great Operations of the Sexenio
• 7 The Rothschilds’ Waning Importance in Public Finances, 1874–1900
• 8 The Industrial Investments, 1874–1913
• 9 The First Symptoms of the End of an Investment Model
• 10 The Slow Journey towards the End of the Rothschild Investments in Spain
• 11 Fundamentals of the Rothschilds’ Activities in Spain
• 12 The Consequences of the Rothschild Years, 1812–1941
• Appendices
• Bibliography
• Index