Railway business

Early engagement

From the 1830s, three of the Rothschild brothers - Carl in Naples, Salomon in Vienna and James in France, had begun to involve themselves with a new line of business - the financing of railway construction.  James in particular was involved in battles for control of the fast-developing French rail network - business which depended to some extent on his access, through Nathan, to the larger British capital market.

A subtle shift in Rothschild policy can be detected in the mid-1830s. The need for improved securities for Spanish government loans led Nathan and James to acquire rights over the Almaden mercury mines,and they beagn to explore other opportunities elsewhere. What excited Nathan's brothers - Salomon and James - were the short-run benefits of railway finance. and in particular the profits to be made from issuing railway shares to the public. In essence the Rothschilds were inclined to see railway shares as surrogate state bonds at a time when European governments were issuing fewer and fewer new bonds. The fact of state involvement meant that it was comparatively easy for the Rothschilds to apply their traditional underwriting techniques to the sale of railway shares. But the realities of railway construction made it hard for Salomon and James to sustain the arm's length role they had initially envisaged. The short term attractions of railway finance thus tended to lead the brothers into longer-term commitments.

Salomon's line - The Nordbahn

Salomon was the first Rothschild to interest himself directly in a railway project, in 1830. It was not his idea but that of a professor at the Vienna Polytechnic Institute named Franz Xavier Riepel, a mining expert who believed that the new technology of railways could be used to link the salt mines of Wieliczka in Galicia and the iron and coal mines of Moravian Ostrau (Ostrava) to the imperial capital more than 200 miles to the south-west. This was an ambitious project and it is to Salomon's credit that he even envisaged from an early stage that it would be extended southwards from Vienna to Trieste on the Adriatic.

Salomon sent Riepel to England to learn all he could about railways. On the basis of his report, Salomon submitted a petition to the Emperor to allow land to be acquired for the project. The antipathetic Emperor, predictably, turned it down. It was not until 6 weeks after the Emperor's death that the resubmitted petition was accepted. Salomon secured leave from the university for Riepel and a joint stock company was set up to construct a line between Vienna and Bochnia (south-east of Cracow). Salomon also appealed to the new Emperor's vanity, naming the line the Kaiser-Ferdinands-Nordbahn'. Demand for shares exceeded supply six times over. Salomon retained 8000 of the 12000. The overall line, with over 400 kilometres of track, was not completed until 1856, and Salomon appears to have developed a genuinely entrepreneurial vision of an integrated Austrian transport system. Nor was he content to dominate the development of the Habsburg railway system. He also pursued a strategy of 'vertical integration'. As early as 1831 he saw the need to foster independent Austrian supplies of iron and steel, so that the development of the imperial railways would not be reliant on imports from the foundries of Britain.

Salomon's son Anselm inherited his father's railway interests and was to provide finance for Austria's Südbahn.