Why Nations Fail: The Origins of Power, Prosperity, and Poverty

outside it.
    This was all to change soon. In 1791 the French National Assembly emancipated French Jewry. The French armies were now also occupying the Rhineland and emancipating the Jews of Western Germany. In Frankfurt their effect would be more abrupt and perhaps somewhat unintentional. In 1796 the French bombarded Frankfurt, demolishinghalf of the Judengasse in the process. Around two thousand Jews were left homeless and had to move outside the ghetto. The Rothschilds were among them. Once outside the ghetto, and now freed from the myriad regulations barring them from entrepreneurship, they could seize new business opportunities. This included a contract to supply grain to the Austrian army, something they would previously not have been allowed to do.
    By the end of the decade, Rothschild was one of the richest Jews in Frankfurt and already a well-established businessman. Full emancipation had to wait until 1811; it was finally implemented by Karl von Dalberg, who had been made Grand Duke of Frankfurt in Napoleon’s 1806 reorganization of Germany. Mayer Amschel told his son, “[Y]ou are now a citizen.”
    Such events did not end the struggle for Jewish emancipation, since there were subsequent reverses, particularly at the Congress of Vienna of 1815, which formed the post-Napoleonic political settlement. But there was no going back to the ghetto for the Rothschilds. Mayer Amschel and his sons would soon have the largest bank in nineteenth-century Europe, with branches in Frankfurt, London, Paris, Naples, and Vienna.
    This was not an isolated event. First the French Revolutionary Armies and then Napoleon invaded large parts of continental Europe, and in almost all the areas they invaded, the existing institutions were remnants of medieval times, empowering kings, princes, and nobility and restricting trade both in cities and the countryside. Serfdom and feudalism were much more important in many of these areas than in France itself. In Eastern Europe, including Prussia and the Hungarian part of Austria-Hungary, serfs were tied to the land. In the West this strict form of serfdom had already vanished, but peasants owed to feudal lords various seigneurial fees, taxes, and labor obligations. For example, in the polity of Nassau-Usingen, peasants were subject to 230 different payments, dues, and services. Dues included one that had to be paid after an animal had been slaughtered, called the blood tithe; there was also a bee tithe and a wax tithe. If a piece of property was bought or sold, the lord was owed fees. The guilds regulating allkinds of economic activity in the cities were also typically stronger in these places than in France. In the western German cities of Cologne and Aachen, the adoption of spinning and weaving textile machines was blocked by guilds. Many cities, from Berne in Switzerland to Florence in Italy, were controlled by a few families.
    The leaders of the French Revolution and, subsequently, Napoleon exported the revolution to these lands, destroying absolutism, ending feudal land relations, abolishing guilds, and imposing equality before the law—the all-important notion of rule of law, which we will discuss in greater detail in the next chapter. The French Revolution thus prepared not only France but much of the rest of Europe for inclusive institutions and the economic growth that these would spur.
    As we have seen, alarmed by the developments in France, several European powers organized around Austria in 1792 to attack France, ostensibly to free King Louis XVI, but in reality to crush the French Revolution. The expectation was that the makeshift armies fielded by the revolution would soon crumble. But after some early defeats, the armies of the new French Republic were victorious in an initially defensive war. There were serious organizational problems to overcome. But the French were ahead of other countries in a major innovation: mass conscription. Introduced in August 1793, mass conscription allowed the French to field large armies and develop a military advantage verging on supremacy even before Napoleon’s famous military skills came on the scene.

    Initial military success encouraged the Republic’s leadership to expand France’s borders, with an eye toward creating an effective buffer between the new republic and the hostile monarchs of Prussia and Austria. The French quickly seized the Austrian Netherlands and the United Provinces, essentially today’s Belgium and the