In 1904, Japan waged war against an ostensibly more powerful opponent, the Russian Empire . A significant component in Japanâs victory was the financial support facilitated by Jacob Henry Schiff (1847â1920),1 an American Jewish banker who was born in Germany. Schiff has been described, in the context of the Russo-Japanese War , as primarily motivated by hostility to Russia, stemming from the tsarist governmentâs ill treatment of its Jews . While this is certainly true, the case to be presented here is that Schiffâs motivations were diverse yet in his mind of one piece, and that as a prominent banker his diligence was rigorous in ensuring risks were mitigated. Additionally, Schiffâs unusually affirmative attitude towards Japan in the early twentieth century was at least as important in underpinning his actions, and perhaps an even greater counterweight, than his animus against an antisemitic Russia.
Well before 1904, Schiff had established a pattern of philanthropy that focused on helping people to help themselves. His enabling of Japanâs war effort against Russia was consistent with this practice and predilection. By 1904, Schiff was personally familiar with the Japanese nation and was deeply impressed by what he perceived as its peopleâs industriousness and fidelity. Importantly, Schiff was scrupulous in his evaluation of the Japanese loans before he underwrote them, though his peers considered them to be too speculative.2 This differentiated him from the majority of his cohort. There can be no doubt that his financing of Japanâs war effort was founded upon sound economic principles of risk assessment and anticipated return. While he may have perceived that the Russian pogroms demanded a muscular response from a committed Jew of considerable means, Schiffâs motivations to act in the way in which he did with respect to Japan were primarily consistent with his excellence as a banker.
Schiffâs supporting role in Japan was unprecedented in several respects, but this is not reflected in the historiography. Although Schiff was a conservative investor who consistently took great pains to ensure his affairs were prudent, he forcefully undertook what most of his contemporaries believed to be a risk in financing Japan to undergird its clash with Russia. Chief among the reasons why he was willing to do this were his strongly favourable perceptions of Japan and his vehemently negative perceptions of Russia, against which Japan was pitted. Schiffâs reputation for sound business dealings, his stature as a giant in American and worldwide banking , and his personal fortune were all at stake. But he was both earnest and fervent in his conviction that his standing would be preserved, if not enhanced, in the wake of the Russo-Japanese conflict, because his sharply contrasting views of the erstwhile opponents led him to perceive that the risks were mitigated. As Schiff saw it, to permit a barbarous nation like Russia to prevail would have been a threat to the advance of global civilization. Russiaâs treatment of its Jews was a blight on humanity, and not only did Russiaâs march into Asia have to be stopped but also tsarist power had to be forced into retreat. The status of Japan, however, was not simply an afterthought or an unintended consequence.
In the light of his pivotal role in this significant conflict and formative stage of Japanâs development, it is important to consider the background and distinctive perspective of Jacob Schiff. He was a traditionally observant Jew, perhaps to a greater degree than any of his peers in the banking establishment. Schiff also maintained an impassioned kinship with Jews worldwide, including the impoverished Jewish masses, even though he was sometimes considered aloof.3 But similar feelings of loyalty and solidarity were also manifested in his attitude towards the Japanese nation and its people. What has thus far escaped the notice of scholars is that Schiff had an empathy for the Japanese that was at least as strong as his antipathy for Russia. He would be emboldened to help to give the Japanese a leg up: a kind of vote of confidence and a substantial economic fillip. Where others saw risk, Schiff saw opportunity and a way of doing the right thingâon several levels.
Schiff had access to much the same information as others in the banking world, so why did he act differently from the bankers in his milieu, including those with whom he worked closely? Clearly, bankers were looking for opportunities and most if not all were aware of Japanâs need for finance. What influenced Schiff to act so differently with regard to the Japanese and how did he ensure his decision to do so was not folly? Certainly on the surface, most German Jewish bankers had assimilated into American , British or central European secular culture (respectively) to a far greater extent than Schiff. Was his relatively entrenched Jewish identity and desire to protect his Russian co-religionists paramount in driving his decisions, or was he first and foremost a banker, concerned with mitigating risk and generating profit? Did his regard and ambition for Japan contribute to his decision to finance the loans to that country?
Jacob Henry Schiff was born in Frankfurt, Germany , on 10 January 1847 to Moses Schiff (1810â1873) and Clara (nĂ©e Niederhofheim , 1817â1877). His father came from a long line of distinguished rabbis and his direct lineage can be traced as far back as the 1370s, further perhaps than any other Frankfurt Jewish family. One in three of his male ancestors are said to have been either a rabbi, a Jewish religious judge, or a lay leader of the Jewish community. Among the most famous of his forbearers was Meir ben Jacob Schiff (1608â1644), known as the Maharam Schiff , who was a Talmudic scholar and whose works to this day are quoted in most editions of the Talmud ,4 and David Tevele Schiff (1722â1791), who was the chief rabbi of Great Britain from 1765 until his death.5 Jacob Schiffâs adherence to his orthodox upbringing set him apart from many of his peers, who had been similarly raised but who had assimilated to a greater or lesser extent. This distinguished his worldview and actions throughout his life.
In 1865, at 18 years of age, he left his homeland for the USA just as the American Civil War ended. In America, he saw the opportunity to shed the hereditary bonds of cultural and political restrictions that would have defined his life had he remained confined in the hierarchical European establishment. His lineage could be traced further back than the great banking houses of the Rothschilds and the Speyers 6; however, while his immediate family had become wealthy, they had not risen to the same level of financial success as these renowned family firms. To break free from the destiny of his birth and inherited status, he departed for America alone and of his own volition, arriving with limited resources. He was not, as Theresa Collins notes, reduced to peddling, as some of the earlier German Jewish banking house founders such as Marcus Goldman (1821â1904) had been originally,7 but neither did he arrive in the pocket of any of the great European banking houses, as did August Belmont (1813â1890), who arrived representing the Rothschilds .
While attempting to liberate himself from the established Jewish banking networks, Schiff still recognized the influence that derived from familial connections with the great Jewish banking houses of Europe. He wanted to use the networks that he had at the same time escaped, and he remained a part of the community despite having gone beyond it. Building his career at Kuhn Loeb , he married founder Solomon Loebâs (1828â1903) daughter Therese (1854â1933) in 1875 and spent four decades contributing to the growth of the house into one of the most powerful financial institutions in America, ensuring that every partner was either related or married to a descendent of the companyâs founders.8
The timing of Schiffâs arrival in America was fortuitous. He began his career in banking right before the panic of 1873 bankrupted many railroad companies, and he seized the opportunity of the market correction to become one of the most powerful men in railroad finance through Kuhn Loeb. Schiffâs most notable contributions to railroad finance were perhaps his financing of E. H. Harriman âs (1848â1909) work reorganizing and building the Union Pacific Railroad in famous rivalry with J. P. Morgan (1837â1913) and the expansion of the Pennsylvania Railroad . His personal wealth was said to have been approximately $50 million,9 putting him second behind J. P. Morgan, who had $68.3 million and an art collection said to be worth $50 million alone. However, neither man came close to the wealth of industrialists Andrew Carnegie (1835â1919), John D. Rockefeller (1839â1937), Henry Ford (1863â1947) or E. H. Harriman , although they led among the bankers.10
Exploiting the opportunities that emerged in post-Civil War America , Schiff carved a niche for himself that seemed to justify the reasons he had left Germany and that propelled him to the top of his industry. He sought out other Davids among the nationâs Goliaths. He did this by focusing on those railway assets that were ânot personally owned by familiesâ among the New England elite .11 Collins perceptively identifies Schiff as an underdog, driven to act and think independently, by pointing out that he cultivated relationships with similarly independent bankers in Europe, themselves not already aligned with Morgan, Speyers or the âother established housesâ that Collins refers to.12 Among the most important of these relationships was Schiffâs alliance with Ernest Cassel (1852â1921). We will see that the relationship with Cassel was an important component of Schiffâs dealings with Japan.
By the time of the Russo-Japanese War, Schiffâs power and influence were centred primarily on the railroad industry, for which Kuhn Loeb had become a major financier. This was in contrast to the extraordinary power that the Rothschilds had in Europe. There the Rothschildsâ business had evolved over the centuries to be in large part politically driven. Whether in peace or at war, nationsâ fortunes depended on how the Rothschilds wielded their power. In the newly developing country of America, there was much less direct national political interference in business and much more opportunity for private individuals acting independently, aided by the explosive growth of the American economy.
The Rothschilds failed to fully exploit the American railway boom, in part because of their reliance on an ineffectual representative, August Belmont , who will be discussed below. They were also sceptical about the American governmentâs commitment to the gold standard and were concerned about the stability of the American marketâfactors that, if the Rothschildsâ doubts turned out to be valid, would do nothing to bolster their gold-mining interests.13 Kuhn Loebâs foray into Japanese bonds , led by Schiff, was as defining for Kuhn Loeb as it was for Americaâs financial markets, and certainly empowering for both. Schiffâs approach stood in contrast to the assertive political influence of the Rothschilds, who, in one instance, ârather ingenuously remarkedâ, as Niall Ferguson comments, that âit is always a delicate matter to question the policy of a governmentâ.14 Questioning governmentsâ policies was clearly how they operated as a rule.
In his support fo...