'1873': How the first financial crisis made the world turn on the Rothschilds - review

In 1873, Liaquat Ahamed (a former investment manager based in London and New York and author of Lords of Finance: The Bankers Who Broke the World) provided an informative and accessible analysis of the first international financial crisis of the modern era.

Throughout his research, Ahamed reported, “one name kept reappearing: Rothschild.”

The Rothschild family, having made its fortune during the Napoleonic wars of the early 1800s, had established banks in London, Paris, Vienna, and Frankfurt, playing a dominant role in raising capital for governments and private corporations. The richest family in the world by the middle of the 19th century, the Rothschilds owned 41 mansions in the most coveted locales in Europe. Via their reputation and power, Ahamed writes, they evoked an “aura,” often perceived as an “ominous presence,” as the crisis – which, he writes, “offers unsettling parallels to our current economic woes” – unfolded.

Determined to preserve cohesion and accumulate capital across the generations, Mayer Amschel Rothschild, Ahamed indicates, mandated that Rothschild women receive modest dowries. Their husbands could not join the business, and only direct male descendants could become partners.

Although brothers and cousins were not obliged to do so, they were encouraged to co-invest with one another. And to plow profits back into their banks.

Mayer also strongly supported marriages within the wider family.

Most importantly, the Rothschilds burnished their reputation by doing due diligence to satisfy themselves that their investments would produce results; and backing this judgment with their own money in cases of financial stress. Of 41 bonds their banks underwrote between 1860 and 1885, not a single one defaulted.

For these reasons, perhaps, the Rothschilds were considered “on par” with the great royal families of Europe before the depression of ’73.

At the funeral of James Rothschild in 1867, for example, 40,000 Parisians lined the three-mile route from his home to the cemetery. La France praised him as “the king of bankers and the banker of kings.”

Although the deflationary impact of the depression persisted throughout the 1870s, exacerbated by the demonetization of silver in several countries, the Rothschilds weathered the storm remarkably well.

That said, a growing number of Europeans blamed Jews for the depression. In Germany, where Jews owned many banking houses, newspapers and wholesale and retail companies, “antisemitism rose as the stock market fell.”

Surprisingly, however, most critics focused on Gerson von Bleichröder, Bismarck’s personal banker, rather than the Rothschilds. Alleging an 18,000 year-long Jewish conspiracy to control the world, Wilhelm Marr coined the term “Antisemitismus.” His book became a bestseller.

Nonetheless, the furor died down in 1880, when dozens of distinguished citizens publicly opposed anti-Jewish legislation.  Antisemitism would remain dormant in Germany, Ahamed writes, “only to erupt in more venomous form during a later time of crisis.”

In France, even though a $20 million bailout, funded predominantly by the Rothschilds, prevented the collapse of the Paris Bourse, brokers arrested for fraud claimed they were victims of a cabal of German Jewish bankers.

Their allegations were taken up by journalist Edouard Dumont in a two-volume, 1,200-page screed that also became a runaway bestseller. Attacking hundreds of Jewish families by name, Dumont reserved a special place in hell for the Rothschilds, who, he declared, “despite their billions have the air of second-hand clothes dealers. Their wives, despite all the diamonds of Golconda [a metaphor for inexhaustible wealth], will always look like merchants in their toilet.”

In the aftermath of another depression, which began in 1893, a loan brokered by J.P Morgan and the Rothschilds stabilized the finances of the United States. Nonetheless, Populists charged that the demonetization of silver had been a plot by government bondholders, Treasury Department officials, and Jewish foreign bankers, “tacking on an elaborate fantasy about the malevolent influence of the Rothschilds,” who until this time were not all that well known.

“Coin’s Financial School,” a pamphlet by William Hope Harvey, a journalist in Chicago, featured a cartoon of a giant octopus, labelled “The Rothschilds,” sucking wealth out of every part of the world. William Jennings Bryan, who would be the presidential candidate of the Democratic Party in 1896, asserted, “We cannot afford to put ourselves in the hands of the Rothschilds, who hold mortgages on most of the thrones of Europe.”

By then, Ahamed points out, massive discoveries of gold in South Africa and the United States ended the drought that “had weighed so heavily on the global economy since 1873, and the great deflation that it had wrought was finally over.”

In the 20th century, however, the scourge of antisemitism was neither gone nor forgotten.