About book The House Of Rothschild: Volume 2: The World's Banker: 1849-1999 (2000)
The House of Rothschild is a hefty tome covering 200 years and several generations of this family. It is published in two volumes, each about 650 pages long in small (?6 point?) type. In hard cover, each one qualifies as a kitten crusher; together they could harm a small pony.Since they were published as a set, I will be writing a common review.The author is Niall Ferguson an unrepentant booster of monetary systems and capitalism. You may remember him from the PBS series, “The Ascent of Money: A Financial History of the World” or “Civilization: The West and the Rest” both of which are also books. (Also broadcast on Channel 4 in the UK.) He is a historian and currently is a Professor of History at Harvard University and holds other postings.I’ve watched the aforementioned series and thought he was interesting enough to look up his earlier works.Because he is a historian and took that approach while researching and writing this history, there are tons of notes on the source material. Each volume has at least 100 pages of “end notes” detailing these sources and there are copious quotations (both in brief phrases as well as longer passages) throughout the books. Those hungry for details and justification of the author’s observations and comments will not go away disappointed.I don’t intend to provide extension observations about each of these volumes. To do each one justice would require much more time than I can devote to the task. The author himself wrote that the creation of this history was much longer than planned for: I am not surprised given the wealth of material.For those who want a quick answer, these books are excellent. As much as it seemed a slog at points I was caught up in the details of the family, their businesses, and their worlds. As I neared the end of volume 2, I spoke about them to a colleague who is now inflamed with a desire to read these books. I can’t imagine anyone doing a better job with the material. One thing that he does a lot of is debunk contemporary and current myths about the family.Four and one-half (4.5) Stars (rounded down to 4.0 for Goodreads).The House of Rothschild: Money’s Prophets 1798-1848Theirs is a rags-to-riches story. The Jewish Ghetto of Frankfurt was one of the most repressive in Western or Central Europe. Begun in the 12th century it had not changed much in the 18th: the laws controlling the lives and livelihoods of Jews were very strict and repressive. The man who is considered the “founder” of the famous branch of the family, Mayer Amschel Rothschild (an Ashkenazi Jew) began life as the son of a respectable man, but not one of wealth. Both of his parents died before his thirteen birthday and after and apprenticeship in Hanover, he returned to Frankfurt in1764.There he began a business career that made him a respectable, if not prosperous man. As the years went on, he trained his five sons in business and began to establish them in the cities that would house the five branches of the family bank: Frankfurt (Amschel), London (Nathan), Naples (Carl), Vienna (Solomon), and Paris (James).As the history of Europe unfolded around them, the family was able to conduct business between countries and even warring states (their primary business during this period was lending to governments or rulers). Changes in the balance of power and rulership began to liberalize the laws in many countries, although the German states remained behind other. England was, by far, the most liberal at this time.In setting up the branches and overseeing its operation, the father stressed cooperation and unity over all else. He also planned for the future of the family and designed a scheme whereby the firm’s “capital” would remain with the family and not diluted as new generations arose. Only male descendents were eligible to be partners. Daughters, while given generous gifts and dowries were excluded, as were their husbands. Furthermore, in order to remain “concentrated”, family members began marrying within the family. For example the youngest son, James, married the daughter of his oldest brother. The 3rd generation had many cousin marriages. It was the family’s great good fortune that they did not carry any recessive genes. Such marriages continued into the 4th and 5th generations.The family remained Jewish in faith and race. They may not have been the most devout, buy they did observe the rules and laws and did not “convert” like many others (e.g. Benjamin Disraeli’s family.) When one of Nathan’s daughters did convert to marry, she was shunned by almost everyone including her own mother. They were seen as exemplars of successful Jews who also cared about their “co-religionists”; speaking out for tolerance and donating to community needs and causes.Having survived the turmoil of the French Revolution and Napoleon, the family became involved in new markets. Although the English bank, N. M. Rothschild & Sons was less active (but they founded an insurance company), James (de Rothschild & Frères) was convinced that railroads (and their government subsidies) were excellent investments. His vision caused the consolidation and merger of small lines (his and his competitors) into major transportation networks. They also became involved in metals (mining and refining) initially as security for loans to unstable economies.Despite the turmoil of these years, the family’s wealth grew and when Nathan died in 1836, his fortune was easily twice (and possibly as much as five times) that of the next wealthiest man in England in the 1830s-50s; thus, making him the wealthiest man in the world by far. At his death, brother James became the leading figure in the family until shortly before his own death in 1868.The House of Rothschild: The World’s Banker 1849-1999In this second volume, the author gives us in detail the history of the family until about 1918. For the period thereafter, he provides more summary than before (some of which is recounted as oral conversations instead of archived source material). For the years after World War II, an epilogue covers the effects of their losses (due to seizure and nationalization during the war years) and the transformation of the remaining branches of the business into the current modern forms (including the revival of a Frankfurt office.)In the years before the end of the 19th Century, the family business continues to grow in size and in diversity. They invest in additional transportation (railways) and take interests in mines in the New World, including Rino Tinto a leading mining and exploration company (then and now). They also handle much of the gold supply coming into England. They had built much of their business (in Vol. 1) on gold bullion, gold coinage, and other metals (e.g. silver). They had even taken over a refinery from the Bank of England to control purity and retain more of the profits.Alth0ugh they had occasional setbacks (and better competitors), their relationships with policy makers and rulers, their courier system and news sources, and their use by others as a “back-channel” for diplomacy kept them well-informed. Their financial acumen and experience and ability to ship money between the houses made them very hard to beat. As their clients grew (and despite limited success in the USA) they truly were the World’s Banker for some 15-20 years.Although an Austrian Emperor had elevated the brothers (hence the “von” or “de” designation), the English branch (Nathan) had not used the title. His son Lionel, although elected to the House of Commons in 1847, he was unable to be seated (there was a Christian oath required). After numerous re-elections, he was finally seated in 1858 as the first Jewish MP (Disraeli did not count having taken the standard oath). Although proposed, Queen Victoria refused to elevate him to a peerage. In 1885 she made Lionel’s son Nathan Mayer (more of a full-time politician than his father) the first Jewish member of the House of Lords,In the second generation most of the family’s wealth was spent “carefully”. Property investments were selected partly for comfort but also for business (either client relations, banking, or as money-earning investments). In the third and later generations (and James, as he lived into these later years), they began to buy and create grander and grander estates. At this time they also acquired many of the works of art that were lost in the confiscations of WWII. Nathan’s son, Nathaniel, who went and stayed in France, bought the vineyard today known as Mouton Rothschild in 1853. (Before the 1855 Classification of Bordeaux). Fifteen years later, Uncle James bought the much larger Chateau Lafite (Lafite Rothschild).By the 4th and 5th generations, the Partners were spending fewer hours in the “counting room” offices and competitors were cutting into their traditional business. Different kinds of bank which raised funds via shares sold to investors (rather than retained family capital) were able to address old and new markets. These banks (at least some of them) also took on deposits (which the Rothschilds typically did very little of). By the onset of the First World War, although still a viable and profitable business they were no longer at the core of European banking. At this same time, American powerhouse banks (like Morgan & Sons) were beginning to finance the European countries needs. Investments that proved exceptional included further South African gold mines and shares in the Diamond Cartel know as De Beers.And while not everyone in the family may have been financially astute (or even keen on making it their career), they became (like many other late-Victorian/Edwardian era gentlemen botanists, naturalists, and other forms of scientists – with many writing learned papers on their subject.In 1919, as war time restrictions were relaxed or lifted, (including that of gold export from the UK), N. M Rothschild became the intermediary between the bullion market and the Bank of England. Thus, on September 12, 1919, the first “fix” (the world market price for gold) was set at 11 AM by an auction. This has continued (except during WWII) to the present day, with prices set now at 11 AM and 3 PM. Who knew? (One reason for this arrangement was that the South African mines supplied about half the world’s supply at this time.)There are as many interesting facts in this volume as in the first. Since the end of the 40s, the family has suffered some setbacks (such as nationalization of assets at low valuations) and internal strife. But as the end of the 20th Century approached, there was revitalization as both the banks’ structures and the Partners changed. Today, the Rothschilds are still a wealthy family of bankers, but they also have non-family partners and raise money like many other investment banks (or hedge funds). They still retain many of the traditional assets (like the vineyards), but have branched out in to all areas of finance and the economy. They even own Club Med.
Think my favorite takeaways were on the brilliance of the family's strategy in the latter half of the 19th century. Essentially by playing it more conservative and versus smaller (as they all were) competitors, it meant they both were unlikely to take stupid risks that could jeopardize the business and also would be unable to be seen as making unusually high profits that could invoke the wrath of any government that might have been in such a position. Double-edged sword though was growing number of heirs who found their portions of a pie not as generous as desired and many wishing to pull funds out of the business.Also a senior Rothschild in 1870 after Germany defeated France had the remarkable intuition that if reparations/peace terms were too harsh it would be bad for Europe's economy overall and could threaten stability -- an observation long predating John Maynard Keynes's observation on the Treaty of Versailles.Not as interesting as the first volume, but you still might find something you like in it.
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