the world of private banking
the world of private banking
the world of private banking
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THE WORLD OF PRIVAtE BANKING<br />
This chapter, however, is not concerned with <strong>the</strong> Rothschild myth but with<br />
<strong>the</strong> reality <strong>of</strong> <strong>the</strong>ir rise as bankers. For reasons <strong>of</strong> space, it mainly concentrates on<br />
<strong>the</strong> period prior to Nathan Rothschild’s death in 1836. This was in fact <strong>the</strong> period<br />
when <strong>the</strong> Rothschilds made <strong>the</strong>ir most important contribution to ‘<strong>the</strong> making<br />
<strong>of</strong> modern capitalism’. In part, <strong>the</strong>ir contribution was a matter <strong>of</strong> scale: as <strong>the</strong><br />
first section <strong>of</strong> <strong>the</strong> chapter shows, <strong>the</strong>re had never been a larger concentration<br />
<strong>of</strong> capital than that accumulated by <strong>the</strong> Rothschild bro<strong>the</strong>rs. The second section<br />
discusses <strong>the</strong> various types <strong>of</strong> business <strong>the</strong>y did, attaching special importance to<br />
<strong>the</strong>ir development <strong>of</strong> <strong>the</strong> international bond market, but also considering <strong>the</strong>ir<br />
role in <strong>the</strong> markets for commercial bills, commodities, bullion and insurance. The<br />
third section discusses <strong>the</strong> structure <strong>of</strong> <strong>the</strong> partnership. The fourth section shows<br />
how exceptionally frequent intermarriage complemented <strong>the</strong> partnership system<br />
by ensuring that capital remained in <strong>the</strong> family. In <strong>the</strong> fifth and final section, an<br />
attempt is made to characterize <strong>the</strong> Rothschilds’ distinctive business ethos and to<br />
identify a set <strong>of</strong> Rothschild business rules. These, it is suggested, provide <strong>the</strong> best<br />
explanation for <strong>the</strong> Rothschilds’ astonishing success.<br />
Previous attempts to analyse <strong>the</strong> surviving accounts <strong>of</strong> <strong>the</strong> five ‘houses’ have been<br />
hampered by <strong>the</strong> inaccessibility <strong>of</strong> archives in London and Moscow. These have now<br />
been opened. Analysis, however, is less easy than might be imagined, for two reasons.<br />
First, <strong>the</strong> Rothschilds did not keep accounts in a modern way; indeed, to begin with<br />
<strong>the</strong>y hardly kept <strong>the</strong>m at all. The system <strong>of</strong> partnership contracts (described below)<br />
necessitated <strong>the</strong> drawing up <strong>of</strong> balance sheets, but at irregular intervals. Never<strong>the</strong>less,<br />
it is possible to reconstruct from <strong>the</strong>se documents a fairly satisfactory series for <strong>the</strong><br />
capital <strong>of</strong> <strong>the</strong> combined Rothschild houses. Table 1.1 summarizes <strong>the</strong> available figures<br />
for <strong>the</strong> combined capital <strong>of</strong> <strong>the</strong> various houses in <strong>the</strong> period 1818–52:<br />
Table 1.1 Combined Rothschild capital, 1818–1852 (thousands <strong>of</strong> £)<br />
1818 1825 1828 1836 1844 1852<br />
Frankfurt 680 1,450 1,534 2,121 2,750 2,746<br />
Paris 350 1,490 1,466 1,774 2,311 3,542<br />
London 742 1,142 1,183 1,733 2,005 2,500<br />
Vienna 25 110 250 83<br />
Naples 130 268 463 661<br />
Total 1,772 4,082 4,338 6,008 7,778 9,532<br />
Sources: CPHDCM, 637/1/3/1–11; 1/6/5; 1/6/7/7–14; 1/6/32; 1/6/44–45; 1/7/48–69;<br />
1/7/115–120; 1/8/1–7; 1/9/1–4; RAL, RFamFD/3, B/1; Archives Nationales, 132 AQ 1, 2,<br />
3, 5, 6, 7, 9, 10, 13, 15, 16, 17, 19; B. Gille, La Maison Rothschild, vol. II, pp. 568–72.<br />
<br />
The most scholarly work on <strong>the</strong> subject is <strong>the</strong> two volumes by B. Gille, Histoire<br />
de la Maison Rothschild, vol. I: Des origines à 1848 (Geneva, 1965) and Histoire de la<br />
Maison Rothschild, vol. II: 1848–70 (Geneva, 1967), which is almost exclusively based on<br />
<strong>the</strong> archives <strong>of</strong> <strong>the</strong> Paris house.