Muse

Finance and War in its’ Origins

editors pick.

Juan Rivas Moreno investigates the popularised concept of the hateful but powerful financier.In the last years, especially after the financial bubble exploded in 2008, the figure of the banker, the financier and the rich in general has been publicly repudiated. Movements have ap-peared, like the so-called Spanish Revolution or the Greek strikes, whose philosophy combines a mixture of old-styled Marxism and new an-ti-lobby libertarianism. Indeed, the last scan-dals involving Barclay’s Bank, HSBC, and the Bank of England itself, haven’t helped to clean the image of high finance. But, where does this topic of the hateful but powerful financier comes from? If we want to look for an answer, we have to look back as far as the peak of the British Empire, around 1900.

In 1901, J.A. Hobson, a Marxist converted from Campbell-Bannerman’s New Liberalism, published an essay called Imperialism. It basical-ly exposed for the first time a theory that was wining adepts since the Egyptian crisis in 1878; that Imperialism was a forced that belonged to a small lobby, the alliance of politicians and banbankers. This thesis coincided with Marx’s view that Imperialism was the last stage of Capital-ism, and lots of neo-Marxist authors praised it, from Rosa Luxemburg to Lenin, echoing espe-cially in Schumpeter’s theory that it was the last refuge for feudal ideals. It looked like expan-sion was just the business of a few selfish entpreneurs and the politicians that wanted to get a piece of the cake. But we have to understand this neo-Marxist critique within its context, and when J.A. Hobson wrote his essay, the con-text was the Great Anglo-Boer War of 1899-1902.

This war impressed England for two reasons; first, the Boers stood their ground, and killed 22,000 British soldiers and were close to expel the British from South Africa; second, it wasn’t like any other war fought previously in the colo-nies: as Rudyard Kipling said in one of his tales, it was a White Man’s War. It looked like the ggreed of Westminster was big enough to de-stroy a community of peaceful and religious

farmers that could have been living in Somerset without making any substantial difference, just to get the gold of the Rand. To some people, it was just a question of craziness, and behind this madness, there were two persons that were re-sponsible for it: Cecil Rhodes and Nathanael “Natty” Rothschild.

The Rothschild family has been one of the most obvious targets of Marxist ideologists. Not only were they high financiers, but they also were Jews, just making the perfect prototype of the later 20’s and 30’s. They were, of course, linked with Cecil Rhodes and the South African War: in 1882, when other financial families had failedfailed, the Rothschild’s sent their San Francis-co’s agent, Gansl, to report about the possible benefits of investing in South Africa, and in 1885, they financed the fusion of the two big-gest mining companies; Rhode’s and Barnato’s, gaining a predominant influence in DeBeer’s Co. Literally, the Rothschild’s fostered Cecil Rhode’s empire, the British, indirectly financ-ing the creation of Rhodesia. Hobson’s union of money and powder seemed obvious.

But, was this actually the way it worked? Did the Rothschilds want a war with the Boer Re-publics? Did they obtain any benefit from it? Were they the ‘invisible hand’ of Imperialism?S.D. Chapman wrote an article titled ‘Rhodes and the City of London’ in the Journal of Modern History studying the financial back-ground of the South African War, especially Rhode’s connection with the Rothschilds. The conclusion was rotund: the Rothschilds hugely lost, not only in money but also in influence, with a with a war that they didn’t want, and that they tried to prevent.

As early as 1891, the Rothschilds quarrelled with Cecil Rhodes about who was in charge. Rhodes’s plans to expand his enterprise crushed with Rothschild’s scepticism. At the same time, the Rothschilds were building a ben-eficial relationship with Rhodes’s worst enemy, the Transvaal Republic.

MUSE, KING’S COLLEGE HISTORY SOCIETY SUMMER/AUTUMN VIIVI

In 1892, the financier rose a £2.5 m loan for the Transvaal government (the first ever to be asked by the Boers), in order to finance the rail-way project to Lorenço Marques, in Portu-guese West Africa. The Transvaal repaid all that money in time and without problems, and just a year later, the Rothschilds issued a new £2.5m loan. In just two years, the Transvaal rose to the second division of debtor states, where they shared their position with other Eu-ropean states, Japan, Egypt, Chile and China. Confidence in the Boer’s capacity to repay their loans was higher than confidence in the dia-mond or gold market.

When the war started, Rhodes and Rothschild quarrelled again, but the first managed to get the Cape Governor, sir Alfred Milner, on his side. Milner convinced the Conservative

Secretary of the Treasure, Hicks Beach, to leave the Rothschilds apart, and due to the unexpect-ed cost of the war, the Bank of England was forced to ask for American loans. J.S. Morgan issued half of the £10 m loan. This was the first step towards the end of the pound as the inter-national currency, and the Rothschilds, who were attached to British finance, suffered the consequences as did the government.

Therefore, it is just too obvious that Hobson’s alliance between finance and power proved to be wrong. The Rothschilds were as weak as the Boers, they were left with no influence De-Beers&Co, with no partner in South Africa, and they lost the privileged position they had in Westminster.

JUAN RIVAS MORENO