the world of private banking

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