Carroll Quigley - Tragedy and Hope - A History of the World in Our Time

In the course of the nineteenth century, a second group was added to French banking circles. This second group, largely Jewish, was also of non-French origin, the majority Germanic (like Rothschild, Heine, Fould, Stern, and Worms) and the minority of Iberian origin (like Pereire and Mirés). A rivalry soon grew up between the older Protestant bankers and the newer Jewish bankers. This rivalry was largely political rather than religious in its basis, and the lines were confused by the fact that some of the Jewish group gave up their religion and moved over to the Protestant group (such as Pereire and Heine).

The rivalry between these two groups steadily increased because of their differing political attitudes toward the July Monarchy (1830-1848), the Second Empire (1852-1870), and the Third Republic (1871— 1940). In this rivalry the Protestant group was more conservative than the Jewish group, the former being lukewarm toward the July Monarchy, enthusiastic toward the Second Empire, and opposed to the Third Republic. The Jewish group, on the other hand, warmly supported the July Monarchy and the Third Republic but opposed the Second Empire. In this rivalry the leadership of each group was centered in the richest and more moderate banking family. The leadership of the Protestant group was exercised by Mirabaud, which was on the left wing of the group. The leadership of the Jewish group was held by Rothschild, which was on the right wing of that group. These two wings were so close that Mirabaud and Rothschild (who together dominated the whole financial system, being richer and more powerful than all other private banks combined) frequently cooperated together even when their groups as a whole were in competition.

This simple picture was complicated, after 1838, by the slow rise of a third group of bankers who were Catholics. This group (including such names as Demachy, Seilliére, Davillier, de Germiny, Pillet-Will, Gouin, and de Lubersac) rose slowly and late. It soon split into two halves. One half formed an alliance with the Rothschild group and accepted the Third Republic. The other half formed an alliance with the rising power of heavy industry (largely Catholic) and rose with it, forming under the Second Empire and early Third Republic a powerful industrial-banking group whose chief overt manifestation was the Comité des Forges (the French steel “trust”).

Thus there were, in the period 1871-1900, three great groups in France: (a) the alliance of Jews and Catholics dominated by Rothschild; (b) the alliance of Catholic industrialists and Catholic bankers dominated by Schneider, the steel manufacturer; and (c) the group of Protestant, bankers dominated by Mirabaud. The first of these accepted the Third Republic, the other two rejected the Third Republic. The first waxed wealthy in the period 1871-1900, chiefly through its control of the greatest French investment bank, the Banque de Paris et des Pays Bas (Paribas). This Paribas bloc by 1906 had a dominant position in French economic and political life.

In opposition to Paribas the Protestant bankers established an investment bank of their own, the Union Parisienne, in 1904. In the course of the period 1904-1919 the Union Parisienne group and the Comité des Forges group formed an alliance based on their common opposition to the Third Republic and the Paribas bloc. This new combination we might call the Union-Comité bloc. The rivalry of these two great powers, the Paribas bloc and the Union-Comité bloc, fills the pages of French history in the period 1884-1940. It paralyzed the French political system, reaching the crisis stage in the Dreyfus case and again in 1934-1938. It also partially paralyzed the French economic system, delaying the development from financial capitalism to monopoly capitalism, and preventing economic recovery from the depression in the period 1935-1940. It contributed much to the French defeat in 1940. At present, we are concerned only with the economic aspects of this struggle.

In France the stage of commercial capitalism continued much longer than in Britain, and did not begin to be followed by industrial capitalism until after 1830. The stage of financial capitalism in turn did not really begin until about 1880, and the stage of monopoly capitalism became evident only about 1925.

During all this period the private bankers continued to exist and grow in power. Founded in commercial capitalism, they were at first chiefly interested in governmental obligations both domestic and foreign. As a result, the greatest private bankers, like the Rothschilds or Mallets, had intimate connections with governments and relatively weak connections with the economic life of the country. It was the advent of the railroad in the period 1830-1870 which changed this situation. The railroads required capital far beyond the ability of any private banker to supply from his own resources. The difficulty was met by establishing investment banks, deposit banks, saving banks, and insurance companies which gathered the small savings of a multitude of persons and made these available for the private banker to direct wherever he thought fitting. Thus, the private banker became a manager of other persons’ funds rather than a lender of his own. In the second place, the private banker now became much more influential and must less noticeable. He now controlled billions where formerly he had controlled millions, and he did it unobtrusively, no longer in the open in his own name, but acting from the background, concealed from public view by the plethora of financial and credit institutions which had been set up to tap private savings. The public did not notice that the names of private bankers and their agents still graced the list of directors of the new financial enterprises. In the third place, the advent of the railroad brought into existence new economic powers, especially in iron-making and coal mining. These new powers, the first powerful economic influences in the state free from private banking control, arose in France from an activity very susceptible to governmental favor and disfavor: the armaments industry.

Industrial capitalism began in France, as elsewhere, in the fields of textiles and iron-making. The beginning may be discerned before 1830, but the growth was slow at all times. There was no lack of capital, since most Frenchmen were careful savers, but they preferred fixed-interest obligations (usually government bonds) to equity capital, and would rather invest in family enterprises than in securities of other origin. The use of the corporation form of business organization grew very slowly (although it was permitted by French law in 1807, earlier than elsewhere). Private proprietorships and partnerships remained popular, even in the twentieth century. Most of these were financed from profits and family savings (as in England). When these were successful and increased in size, the owners frequently cut off the growth of the existing enterprise and started one or more new enterprises alongside the old one. These sometimes engaged in the identical economic activity but more frequently engaged in a closely related activity. Strong family feeling hampered the growth of large units or publicly owned corporations because of reluctance to give outsiders an influence in family businesses. The preference for fixed-interest obligations over equity securities as investments made it difficult for corporations to grow in size easily and soundly. Finally, the strong feeling against public authority, especially the tax collector, increased the reluctance to embark in public rather than private forms of business organization.

Nonetheless, industry grew, receiving its greatest boost from the advent of the railroad, with its increased demand for steel and coal, and from the government of Napoleon III (1852-1870), which added a new demand for armaments to the industrial market. Napoleon showed special favor to one firm of iron and armaments makers, the firm of Schneider at Le Creusot. Eugene Schneider obtained a monopoly in supplying arms to the French government, sold materials to government-encouraged railway construction, become president of the Chamber of Deputies, and minister of agriculture and commerce. It is hardly surprising that the industrialists looked back on the period of the Second Empire as a kind of golden age.