Fouad Ajami on his favorite books about financial dynasties
By FOUAD AJAMI
1. Gold and Iron
By Fritz Stern
In perhaps the single best book on financial history, Fritz Stern tells of the tangled relationship between Otto von Bismarck and Gerson von Bleichröder. Statesman and banker, Junker and Jew, the two men rose together against the background of a new German empire. The great themes of 19th-century German and European history—capitalism, high finance, Jewish emancipation and its nemesis—intersect in this pair. Bismarck needed money to finance the wars of German unification. That need gave Bleichröder his sway, but he was never allowed to forget his Jewish origins; the ambiguity of Jewish success ran through Bleichröder's life. His death came in 1893, Bismarck's five years later. Kristallnacht and the destruction of German Jews were still decades away, but a reader can sense the terrible storm over the German horizon.
2. The House of Rothschild
By Niall Ferguson
Viking, two vols., 1998, 1999
"Money is the God of our time, and Rothschild is his prophet," the poet and essayist Heinrich Heine wrote in 1841. In Niall Ferguson, the House of Rothschild was to find its most ambitious and relentless historian. Ferguson masterfully tells the story of the Rothschilds from the early years of the 19th century down to the present. Five brothers, the sons of a man who was prohibited from owning property outside the Frankfurt Jewish ghetto, emerged as Europe's most powerful bankers. The "Rothschild myth" depicted the five brothers as the "metallic sovereigns" of Europe. An American populist, Coin Harvey, caught this dark view of the House of Rothschild: They were "a vast black octopus stretching its tentacles around the world." The Rothschilds survived many crises, Ferguson writes, thanks to an ethos of familial solidarity, a religiously rooted morality and hard work.
3. Bankers and Pashas
By David Landes
In a dazzling and beautifully written book, David Landes provides a memorable account of merchant banking's push into Egypt in the 1860s. A hitherto impoverished land, Egypt came into sudden wealth when the American Civil War wiped out what had been the world's main cotton supply, turning Egypt's "fuzzy white fiber into gold." Alexandria boiled over, Landes tells us, as the highest and the lowest clambered into the world of finance. A vainglorious ruler on the Nile, the Khedive Ismail Pasha, determined to make his country into a piece of Europe, borrowed with abandon. He gave Egypt the Suez Canal (and commissioned Giuseppe Verdi's "Aida"), but in a reign of just 13 years he also led the nation into bankruptcy and foreign dominion. The cotton boom came and went, Alexandria turned unbearable again, and both the greedy foreign bankers and the rapacious pashas were undone by their inordinate ambition.
By Jean Strouse
Random House, 1999
Jean Strouse doesn't set out to redeem J.P. Morgan's reputation in writing his biography, but by the time she is done he emerges as a figure of great probity. The U.S. didn't have a central bank until 1913, the year of Morgan's death, for the man had been, in essence, the nation's central banker. He managed to keep America on the gold standard during a monetary crisis in 1895, he saw the banking system through the crash of 1907. He helped transform the U.S. from a largely agrarian society into an industrial colossus. In a legendary exchange before a congressional committee in 1912, Morgan rejected the suggestion that commercial credit was based primarily on money or property. "No sir; the first thing is character. Because a man I do not trust could not get money from me on all the bonds in Christendom."
5. The Sixth Great Power
By Philip Ziegler
In 1995, rogue trader Nick Leeson wiped out Barings PLC, bringing to an end a storied banking institution with more than 200 years behind it. Philip Ziegler's "The Sixth Great Power" takes its title from Louis XVIII's prime minister, Duc de Richelieu, who observed in 1818 that there were half a dozen great powers in Europe: England, France, Prussia, Austria, Russia and Baring Brothers. The Barings rose in the late 18th century, with Britain itself: The Industrial Revolution was in full stride, and London was the financial center of a growing empire. The head of the Baring dynasty in the 1850s gave voice to a familial ambition: "Half my pleasure is to work for a house which we intend to be perpetual; the king is dead, long live the king." Thomas Baring couldn't have foreseen the tacky Nick Leeson, without pedigree or learning, taking down the hard work of two centuries.
Mr. Ajami is a professor at Johns Hopkins and a senior fellow at the Hoover Institution.