THE ROTHSCHILDS AND THE GOLD RUSH: Benjamin Davidson and Heinrich Schliemann in California, 1851-52

By Constable, Giles | Transactions of the American Philosophical Society, July 1, 2015 | Go to article overview

THE ROTHSCHILDS AND THE GOLD RUSH: Benjamin Davidson and Heinrich Schliemann in California, 1851-52


Constable, Giles, Transactions of the American Philosophical Society


Introduction

In the middle of the nineteenth century, in response to the discovery of gold, tens of thousands prospective miners came to California from all over the world. There, they hoped to change the trajectory of their lives and the lives of their families within a few months or years. These discoveries and the subsequent migrations influenced the lives of citizens of many nations, the history of the American nation, and its newly acquired continental empire in the most direct and dramatic ways.

Over the last century and a half, the same iconic images have come to characterize the California Gold Rush. Rough men with beards bent over pans of gravel in rushing streams. In the background loomed the snow-covered peaks of the sierra. Sometimes the images included tents and a burro. The emphasis was on the individual (or a small group of men) caught in a cycle of endless physical labor in a harsh unforgiving landscape. The many accounts of the miners that survive support these images, at least in the first years of the gold rush.

The story of mining gold in California turned out to be long-California was a major gold producer fifty years later-and complicated. Mining evolved in its techniques and demands. Larger units of labor and capital succeeded individuals and small groups, as mining followed a natural path to economies of scale and new technologies. The pick, pan, and shovel were replaced by machines, investment capital, large labor forces, quartz mining deep underground, and stock available to the public. In this way, absentee investors had the opportunity to invest in mining enterprises far distant from their homes and businesses.

The transition to these more complex dimensions of the gold rush coincided with the rise of San Francisco as a center of economic enterprise. A village of about 1,000 at the time of the gold discoveries, San Francisco grew at an astonishing rate, commensurate with its location as the new destination of hundreds and soon tens of thousands. In addition to the gateway to the gold fields, it quickly became the center of supplies for the distant mining camps. As trade in commodities surged, San Francisco made the transition from a town of many commercial transactions to a city of professionals. Indeed, by the spring of 1851, arrivals in San Francisco could describe the place as a town growing into a city, characterized by problems and opportunities associated with urban growth everywhere. Fueled by the flow of gold from the mining camps, San Francisco telescoped a century of growth into the single year of 1849. By 1850, its population had risen to 20,000; by 1852, 36,000.

With the backing of major European financial houses, the purchase and remittance of California gold became a major business. Rothschild provided its agent, Benjamin Davidson, with a credit of £40,000, which was renewed monthly and could be drawn on houses in London, Paris, Frankfurt, Naples, Vienna, or New York. This array of cities identifies the range of the house of Rothschild. For his part, Davidson made monthly shipments of $150,000 to $300,000 (often nearer $100,000). In order to increase his harvest of gold, in September 1851, Davidson appointed Schliemann his agent in Sacramento. The two remained in partnership in the gold dust business for eight months.

Professor Constable's essay analyzes the stresses and strains in these partnerships that reflected the intensely competitive nature of the business. From the beginning, Davidson and Schliemann had frequent disagreements. They bickered, among other issues, over commissions, shipping arrangements, and assaying charges. Although neither fully trusted the other, they were joined in the gold dust business on a large scale.

The profitability of the gold dust business-as evidenced by the large European houses engaged in it-meant a high degree of competition. This competition was reflected in the rise of banks in San Francisco. Davidson's bank, supported by Rothschild funds, was one of the first and certainly the strongest. …

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