Bookstore Glossary Library Links News Publications Timeline Virtual Israel Experience
Anti-Semitism Biography History Holocaust Israel Israel Education Myths & Facts Politics Religion Travel US & Israel Vital Stats Women
donate subscribe Contact About Home

Railroads

Jewish financiers played a considerable role in the construction of railroads in France and in Central and Eastern Europe from the 1830s until the beginning of the 20th century. These Jewish financiers were the only investors – besides the British – among the private bankers dominant in Europe until the second half of the 19th century (see also *Banking) who were prepared to risk their capital in the pioneer stage of railroad construction. In the second half of the 19th century, when large banking joint-stock firms sprang up and expanded, private banks were increasingly pressed into the background, and the share of private Jewish capital in railroad investment diminished accordingly. In the majority of European countries this tendency became linked to nationalization of the railroads when financial crises occurred in private railroad companies. The nationalization of Prussian railroads was organized on the financial side by Bismarck's adviser Gerson von *Bleichroeder. In the 19th-century era of "railroad fever" former *court Jews who had become private bankers with considerable funds took part in furthering the industrial revolution through their investments in railroad construction.

The *Rothschilds were urged by Nathan Mayer Rothschild soon after the opening of the first successful railroad in England (1825) to invest money on the continent in railroad construction. Salomon Rothschild of Vienna sent Professor F.X. Riepel from the Vienna Institute of Technology to England to study the new means of transportation with Roth-schild's secretary, Leopold von Wertheimstein. Subsequently they proposed the construction (1829) of a first line to run straight through the Hapsburg Empire, connecting Vienna with Galicia and Trieste. The July Revolution postponed the execution of Rothschild's plans. It was only in 1836, after overcoming many obstacles (especially the rivalry of the Viennese banking houses of *Arnstein and *Eskeles) that he began construction of the northern line from Vienna to Bochnia, in Galicia. The railroad was only completed in 1858. The house of Rothschild sold the shares on the stock market mainly to small investors.

James Rothschild of Paris was encouraged to construct the local line between Paris and St. Germain (opened in 1837) by Emile *Pereire. Emile Pereire and his brother Isaac viewed the railroad as the salvation of the future, producing work for the masses, connecting nations, and conducive to world welfare and peace. The two brothers could later boast that through their efforts more than 6,000 miles (10,000 km.) of railroads had come into existence. In the 1840s they were the rivals of the Rothschilds in this field.

After the success of the Paris-St. Germain line, James Rothschild and the *Fould brothers (apostate Jews), were eager to receive the concession for the Paris-Versailles line. The government eventually approved two plans, so that Rothschild constructed his line on the left bank of the River Seine and the Foulds on the right bank. In 1839 the railroad was opened, and in 1840 the two companies merged. This did not diminish the rivalry between them and the Pereire brothers. James Rothschild also succeeded in obtaining the concession for the construction of a northern line connecting Paris with England and the industries of northern France. The financial means of the Rothschilds were thereby severely strained, but the line was at last opened in 1846.

Nathan Mayer Rothschild and his sons helped finance the state-constructed railroad network in Belgium in the years 1834 to 1843. The Antwerp-Ghent line was built by the first private railway company in Belgium formed by Leopold *Koenigswarter. The Rothschilds were the chief financiers of the world-spanning railroad politics of Leopold I. They also raised funds for building railroads in Italy, Spain, and Brazil.

The Pereire brothers were second only to the Rothschilds in the first stage of railroad network development on the continent until 1869. The first half of their organizational activity was spent on a substantial part of the French railroad network. While the Rothschilds constructed the "northern" line in the 1840s, the Pereires were responsible for the "southern" one. The 1848 revolution plunged the railroads into a severe crisis (the "southern" line, managed by Isaac Pereire, was also financially ruined). The Pereire brothers wished to overcome this crisis by diverting to plans for a "railroad bank," a bank that would solve all the current financial difficulties of the French economy. The Crédit Mobilier (1852) also was intended not only to finance railroad construction but also heavy industry. Pereire introduced a new type of railroad security, the 500-franc capital bond (obligation), paying 15 francs annual interest and issued at whatever the market would bring, generally between 300 and 400 francs. With interest guaranteed by the state these bonds were ideally suited to the investor of moderate means. They quickly replaced other types of railroad borrowing and greatly facilitated railroad finance.

In the first years of its establishment the Crédit Mobilier financed (through advance payments and increased circulation of bonds) the "southern" line, the "grand central," the French "eastern" line, and many others in their first years. Through its contribution the railroad network expanded from 2,000 miles (3,600 km.) in 1852 to 11,000 miles (18,000 km.) in 1870. The Pereire brothers did not neglect to finance railroad construction and industrial ventures abroad. They contributed to the predominance of French finance in the development of foreign railroads in the post-1850 decade: in Austria, where there was fierce competition between the Pereires and the Rothschilds, the Pereires founded the important Austrian State-Railroad Company, in conjunction with Sina, Arnstein, and Eskeles, while the Rothschilds were successful in buying the Lombard-Venetian and the Central Italian Railway (1856). In Spain there was lively rivalry between the Rothschilds, Pereires, and Jules Isaac *Mirès; and in Hungary they built the "Franz-Joseph" line (1857). The Crédit Mobilier also financed Swiss railroads.

The importance of railroads was grasped in Russia only after its defeat in the Crimean War. The Grande Société des Chemins de fer Russes (1857) had, besides the Pereires, other Jewish bankers as founders: Alexander *Stieglitz of St. Petersburg, S.A. Fraenkel of Warsaw, and the *Mendelssohns of Berlin. An important figure in Russian railroad construction in the 1860s and 1870s was Samuel *Polyakov. He built railroads of supreme importance for the Russian grain export trade, and also wrote on the political aspect of railroad construction. He and other Jewish entrepreneurs succeeded in attracting foreign capital (Leopold *Kronenberg, J.J. Sack, Gerson von Bleichroeder, Sulzbach Brothers, etc.) without which their plans would have been unattainable. Railroad construction by Jewish bankers in Russia created employment for numbers of Jews, who filled technical and administrative posts. The advent of the railroad brought many changes in Jewish economic and social life, described, for instance, in the poem Shenei Yosef ben Shim'on of J.L. *Gordon.

Bethel Henry *Strousberg started by working for English firms, and when he had accumulated enough capital, founded railway companies in Prussia and later in Hungary. He also acquired locomotive factories and rolling mills for rails, and subsequently coal mines. A careless venture into Romanian railroad construction ruined his enterprise. His bankruptcy influenced public opinion in favor of nationalization of railroad lines in Germany. It also revealed malpractices and bribery, which were given a prominent place in antisemitic propaganda.

Jewish bankers were large-scale investors in railroad construction outside Europe. Baron Maurice de *Hirsch bought, in 1869, the concession for railroad building in Turkey from the bankrupt International Land Credit Company. His connection by marriage with the Jewish banking enterprise Bischoffsheim and Goldschmidt aided him initially. In 1869 he began the first stage of extending the Austro-Hungarian lines southward. However, before beginning construction on the Oriental Railroad, he took steps to secure financial backing, and chose a new type of 3% government loan. "Turkish lottery bonds," which attracted small investors in France and Germany, were offered on the general market. Hirsch concluded his project in 1888.

At first Jewish financiers, mainly of German origin, acted as intermediaries between foreign finance and the United States. When the Civil War broke out in 1861, railway bonds, mainly distributed by Jewish bankers in Europe, served as a means of payment for munitions bought in Europe. The Speyer, Stern, and *Seligman New York banking houses all dealt in railway shares. A leading personality in late 19th and early 20th century American financing was Jacob H. *Schiff. In 1875 he became a member of the banking firm of Kuhn, Loeb & Company (a firm long engaged in railroad financing) which he eventually dominated. In 1897 he reorganized the Union Pacific Railroad, which was described in the period as being "battered, bankrupt and decrepit." According to financial authorities the Harriman-Schiff railway combination became the most powerful and most successful that America had ever known. Schiff was one of the first supporters and associates of James Hill, who, by building the Great Northern Railway, virtually became the founder of a vast empire in the northwest. His firm aided other railroads by financial operations until the end of World War I. Schlesinger-Trier in Berlin, together with other Jewish banks, imported the shares of the Canadian Pacific railroad and offered them on the Berlin stock market.

A position similar to that of Schiff in financing railway companies in the United States was held by Sir Ernest *Cassel in England. He had a share in developing Swedish, American, and Mexican railway companies. The Vickers and Central London Railway Company was connected with his name.

BIBLIOGRAPHY:

K. Grunwald, in: YLBI, 12 (1967), 163–212; 14 (1969), 119–61; idem, Tuerkenhirsch (1966); R.E. Cameron, France and the Economic Development of Europe, 1880–1914 (1961); E.C. Corti, Rise of the House of Rothschild (1928); idem, Reign of the House of Rothschild (1928); P.H. Emden, Money Powers of Europe (1937); J. Plenge, Gruendung und Geschichte des Crédit Mobilier (1903); AJYB, 23 (1921). ADD. BIBLIOGRAPHY: J.M. Landau, The Hejaz Railway and the Muslim Pilgrimage (1971).


Sources: Encyclopaedia Judaica. © 2007 The Gale Group. All Rights Reserved.