Published by EH.Net (January 2016)

Helen M. Davies, Emile and Isaac Pereire: Bankers, Socialists and Sephardic Jews in Nineteenth-century France. Manchester: Manchester University Press, 2015.  x + 260 pp., $100 (hardback), ISBN: 978-0-7190-8923-7.

Reviewed for EH.Net by Esther Redmount, Department of Economics, Colorado College.

While Emile and Isaac Pereire: Bankers, Socialists and Sephardic Jews in Nineteenth-century France was not written for economic historians, the topics it covers cannot help but be of interest to those who study economic and financial development, the Industrial Revolution, entrepreneurship and the history of economic thought.

The brothers Emile and Isaac Pereire rose from extreme deprivation in the Jewish community of Bordeaux to the pinnacle of the grande bourgeoisie in Paris during the Second Empire as founders and directors of the Crédit Mobilier.  Their meteoric rise and the roles they played in nineteenth-century economic development in Europe are not unlike those of other only recently emancipated (though still largely unenfranchised) Jewish financiers of the period including the Rothschilds, the Bleichröders and the Ephrussi.  Helen Davies’ monograph is the first biography of the brothers Pereire in English and it makes extensive use of archival sources, relying, in particular, on the Archives de la Famille Pereire, in Paris.  This gives Davies access to letters and other communications that shed new light on the network of relationships among the Pereires, the Saint-Simonians, the Rothschilds, Napoleon III and others influential in the political and economic development of France.  Her book serves as an interesting complement to more standard economic histories of nineteenth-century France.

Several themes play out in the lives of Emile and Isaac Pereire.  Both men grew up poor, but closely attached to a network of cousins and in-laws who helped them on their way.  As young men, both were effectively apprenticed as bookkeepers in the banking and maritime establishments of Bordeaux. When they subsequently relocated to Paris, those same networks provided housing and social support as well.  Most importantly, their connection to Olinde Rodrigues brought them into contact with Claude Henri de Rouvray, comte de Saint-Simon, whose writings on the possibilities for economic and moral enhancement attendant on the careful and deliberate direction of economic activity became their guiding light in the decades to come.

It is easy now to underestimate how influential Saint-Simon’s utopian socialism was during this period.  Davies reminds us of how many politicians, social theorists and economic analysts were influenced by the writings of de Rouvray and those who surrounded him, including Napoleon III.  She can do little more than remind us, since that topic is well beyond the scope of the present book and would require at least another whole treatise to address.

The brothers spent considerable time and energy writing and lecturing on the major economic tenets of Saint-Simonianism before the movement dissolved.  Davies argues convincingly that the work they did actually laid the foundation for their own forays into industrial capitalism. From articles they had written, the Pereires foresaw what a system of railways could do for France and how urban renewal might transform what was still primarily a medieval city into the new Paris.  In 1832, Emile Pereire developed a proposal to build a passenger railway between Paris and St. Germain and the family became small investors in the project that included James de Rothschild among others.  At this stage, relations between the two were cordial, though they would not remain so.

When the Paris-St. Germain concession was granted, Emile Pereire became a director and four bankers comprised the board.  With the inauguration of the line, the Pereires achieved political as well as economic influence, but having seen the power bankers could wield, they strove to be the chief brokers of their own dreams.  Davies deftly shows how they managed this through the creation of a financial institution that bought shares or invested directly in the acquisition and building of infrastructure.  That bank, the Crédit Mobilier, was to be the great work of their lives.

The lives of the Pereires and their enterprises intersect the great political upheavals in France mid-century.  Davies walks us through how the Revolution of 1848 and its aftermath opened opportunities for the Pereires to work with Louis-Napoleon.  Indeed in 1852, the man who was to become Emperor formally established the Crédit Mobilier.  Davies describes this bank as “a powerful instrument in the expansion of French capitalism, the lynch-pin which facilitated a revolution in banking and heavy industry.”  Because her book is not an economic history, per se, she does not attempt to assess the strengths and weakness of this institution.  Rather she gives readers a view of this financial institution as it evolved and was discussed in the correspondence of its principals.  Historians such as Rondo Cameron, Alexander Gerschenkron and Niall Ferguson have all weighed in on the impact of the Crédit Mobilier and those interested in the broader ramifications of this form of state-sponsored development might begin a study of the larger question with their works.

The Crédit Mobilier collapsed in December of 1867.  Its capital was raised primarily by issuing bonds. The funds from those issues were then used to buy shares in the industrial enterprises in which it was interested or to establish and then run and manage those enterprises directly.  When those enterprises were profitable or when share values were high, the bank was highly liquid and profitable.  In downturns or in the face of increasing competition, the bank became insolvent. By the time of its most serious distress in 1867, as the correspondence among family members and business associates makes clear, the Rothschilds were no longer allies and the willingness or ability of the Emperor to come to the Pereires’ aid was waning. The bank was unable to find funds to pay its creditors.  Charges of malfeasance were levied, but Davies finds support for mismanagement rather than fraud.

Even if the Crédit Mobilier was no longer financially sound, it had, in addition to railroads, created or reorganized public utilities (gas and omnibus services within Paris).  It owned industrial laundries, housing developments and significant tracts of land, grand hotels and opera houses.  What remained Davies notes, even after the financial institution was swept away, established France as a modern, industrial and commercial powerhouse, second only to Great Britain in the period.

This book is not a substitute for a standard history of French economic development.  Nor is it a substitute for a thorough treatment of utopian socialism as outlined by Saint-Simon and his followers.  It is, however, a well-written and useful addition to the literature on economic development because it makes clear how macroeconomic outcomes arise from the actions of individual agents, how theory and ideas can be influential, and how entrepreneurship crops up in unlikely places to transform the society from which it arises.  Were this book to go to a second edition, I would welcome a time-line of French political history and a map of railway lines developed by the Pereires and their enterprises in France at this time.

Rondo Cameron (1953), “The Crédit Mobilier and the Economic Development of Europe,” Journal of Political Economy, 61:6, 461-488.

Niall Ferguson (1999), The House of Rothschild: The World’s Banker, 1849-1999, New York: Viking.

Alexander Gerschenkron (1962), Economic Backwardness in Historical Perspective: A Book of Essays, Cambridge, MA: Harvard University Press.

Fritz Stern, (1979), Gold and Iron: Bismarck, Bleichröder and the Building of the German Empire, New York: Vintage.

Esther Redmount is the editor of The Economics of the Family: How the Household Affects Markets and Economic Growth (Praeger, 2014) and “The Effect of Wage Payment Reform on Workers’ Labor Supply, Wages, and Welfare,” Journal of Economic History, 2012 (with Arthur Snow and Ronald S. Warren Jr.).

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