Us history] Andrew Carnegie



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[US History]


Andrew Carnegie

Oil was not the only commodity in great demand during the Gilded Age. The nation also needed steel. The railroads needed steel for their rails and cars, the navy needed steel for its new naval fleet, and cities needed steel to build skyscrapers. Every factory in America needed steel for their physical plant and machinery. Andrew Carnegie saw this demand and seized the moment.

Like John Rockefeller, Andrew Carnegie was not born into wealth. When he was 13, his family came to the United States from Scotland and settled in Allegheny, Pennsylvania, a small town near Pittsburgh. His first job was in a cotton mill, where he earned $1.20 per week. His talents were soon recognized and Carnegie found himself promoted to the bookkeeping side of the business. An avid reader, Carnegie spent his Saturdays in the homes of wealthy citizens who were gracious enough to allow him access to their private libraries. After becoming a telegrapher for a short while, he met the head of a railroad company who asked his services as a personal secretary. By the end of the Civil War, Carnegie had stockpiled a small sum of money, which he quickly invested in iron and steel—an industry that benefited from the Bessemer Process, which allowed iron to be converted to steel cheaply and quickly.

Carnegie became an incredibly wealthy businessman because of shrewd business tactics. While Rockefeller often bought other oil companies to eliminate competition—a process known as horizontal integration—Carnegie also used vertical integration, buying up the industries in every step of the steel-making process. Carnegie bought railroad companies and iron mines, believing correctly that if he owned the rails and the mines, he could reduce his costs and produce cheaper steel.

Carnegie was a good judge of talent. His assistant, Henry Clay Frick, helped manage the Carnegie Steel Company on its way to success. Carnegie also wanted productive workers. He wanted them to feel that they had a vested interest in company prosperity so he initiated a profit-sharing plan.

All these tactics made the Carnegie Steel Company a multi-million dollar corporation. In 1901, he sold his interests to J.P. Morgan, who paid him $500 million to create U.S. Steel.

Carnegie devoted much of his life to giving back. Before his death he donated more than $350 million dollars to public foundations. Remembering the difficulty of finding suitable books as a youth, he helped build three thousand libraries. He built schools such as Carnegie Mellon University in Pennsylvania, and gave money to build the famous music house Carnegie Hall in New York.

Andrew Carnegie was also dedicated to peace initiatives throughout the world because of his passionate hatred for war. Like Rockefeller, critics labeled him a robber baron who could have used his vast fortunes to increase the wages of his employees. Carnegie believed that such spending was wasteful and temporary, but foundations would last forever. Regardless, he helped build an empire that led the United States to world power status.



Document #1: Excerpt from Peter Krass, Carnegie, John Wiley and Sons, 2000.

...A new Pittsburgh competitor started rolling out steel rails in March 1889. First organized as the Duquesne Steel Company in 1886 and…renamed Allegheny Bessemer Steel, the company built a technologically advanced mill across the Monongahela River, a stoner’s throw upriver from Braddock, to purposefully intimidate Carnegie.

Carnegie was worried about his competitor’s new method, the direct rolling process, for rolling rails that offered dramatic savings on cost…It was efficient, effective, and allowed Allegheny to undercut Carnegie’s prices. It was an intolerable situation.…Carnegie sent out a circular [notice] to the railroads, warning them that the Allegheny’s methods led to….defective rails, and to incite alarm he implied that the rails could cause fatal accidents…..

Before its first year of operation was out, Allegheny Steel was feeling the squeeze…Carnegie kept his eye on the company…The next year there was an economic downturn and rail orders slowed dramatically for Allegheny. [For $1 million] Carnegie and his partners assumed control on November 21, 1890. The purchase became a coup of legend within the industry….

Once Carnegie took control of the works, [his partners] investigated the direct rolling process and agreed it saved time and money without compromising quality…..[they started making] rails using the direct rolling process…
Document #2: Excerpt from Harold C. Livesay, Andrew Carnegie and the Rise of Big Business, edited by Oscar Handlin, Harper Collins, 1975.

Note: The Homestead steel mill in Pittsburgh was the site of one of the major strikes in U.S. history. The Amalgamated Association of Iron and Steelworkers (AA) tried to negotiate for wage increases based on the increased steel revenue. Henry Clay Frick, leader of Carnegie’s operations, responded with a 22% wage cut. The AA and Frick continued to negotiate but Frick would not agree to a suitable pay raise. He determined, with Carnegie’s approval, to “break the union.” On June 29, 1892, Frick locked the workers out of the plant, and the strike began.

In 1892 Carnegie went to Scotland shortly before the contract with the Homestead workers expired, thus removing himself from the scene of the battle just as he had done in 1889. Before leaving, he urged his usual negotiating program on Frick.

“My idea…is always to shut down and suffer. Let them decide by vote when they decide to go (back) to work.”
…From Scotland he wrote to Frick, “Of course you will win, and win easier than you suppose, owing to the present condition of the market.”

Frick took no chances. He meant to take the offensive. He erected a massive stockyard around the works, complete with watchtowers, rifle slits, and barbed wire. Then he ordered the Pinkerton detective agency to assemble three hundred of their finest. To force an all-out struggle, Frick presented the Amalgamated leaders with demands he knew they would reject. His plan was to have the Pinkerton’s [police for hire, essentially] take over the works and then reopen with nonunion help—with the old employees if they would work, with scabs [name for people who would work during a strike] if they would not.

On July 1, the strike began. Frick ordered the Pinkerton’s to arrive on July 6. They were to come down the river on barges, at night in complete secrecy…the workers foiled the plan. They spotted the barges passing through Pittsburgh and sent word ahead. The alarm sounded; the population of Homestead rushed to the river bank and launched a ferocious though inept assault.

The battle lasted all day as the strikers kept the Pinkertons pinned down on the barges and tried to kill every last one of them…Finally, in the late afternoon a truce was negotiated. The Pinkertons dropped their guns, and the strikers promised them safe conduct out of town. Unfortunately, the promise could not be kept…The Pinkertons had to run the gauntlet of the howling mob. When the battle ended, four [Pinkerton] guards were dead and all the others sustained injuries.



The victory outlined here was short-lived. Five days later, 8000 Pennsylvania state militia men arrived and strikebreakers were brought in to work under the militia’s protection. Many AA members would continue to strike, but in essence, the strike was over and the union was broken. There would not be another union in a Carnegie mill for another forty years (by which point they belonged to Rockefeller).

Document #3: Unsigned Editorial, St. Louis Post-Dispatch, September 1892

Count no many happy until he is dead. Three months ago Andrew Carnegie was a man to be envied. Today he is an object of mingled pity and contempt. In the estimation of nine-tenths of the thinking people on both sides of the ocean he had not only given the lie to all his (earlier words), but confessed himself a moral coward.

One would naturally suppose that if he had a grain of consistency, not to say decency, in his composition, he would favor rather than oppose the organization of trades-unions among his own working people at Homestead. But what does Carnegie do? Runs off to Scotland out of harm’s way to await the issue of the battle he was too (weak) to share. A single word from him might have saved the bloodshed—but the word was never spoken. Nor has he, from that bloody day until this, said anything except that he had “implicit confidence in the managers of the mill.”

….America can well spare Mr. Carnegie. Ten thousand “Carnegie Public Libraries” would not compensate the country for the direct and indirect evils result from the Homestead lockout.


Document #4: Excerpt from Andrew Carnegie, “Wealth,” in the North American Review, 1889.

…What is the proper mode of administering wealth after the laws (of survival of the fittest) upon which civilization is founded have thrown it into the hands of the few?

There are but three modes in which surplus wealth can be disposed of. It can be left to the families of the decedents; or it can be bequeathed for public purposes; or, finally, it can be administered by its possessors during their lives….

The first is most injudicious….Why should men leave great fortunes to their children? If this is done from affection, is this not misguided affection?

As to the second mode, that of leaving wealth at death for public uses, (why should a man) wait until he is dead before he becomes of much good in the world?....Men who leave vast sums in this way may fairly be thought men who would not have left it at all had they been able to take it with them….

There remains, then, only one mode of using great fortunes;…the duty of the man of wealth (is to) set an example of modest…living….;and…to consider all surplus revenues…as trust funds…to produce the most beneficial results for the community—the man of wealth thus becoming the…agent for his poorer brethren, bringing to their service his superior wisdom, experience, and ability to administer; doing for them better than they would or could do for themselves….



The man who dies rich dies disgraced.


Document #5: Examples of Carnegie’s Philanthropy, taken from Joseph Frazier Wall, Andrew Carnegie, Oxford University Press, 1970.

Gifts

Amount

Note

Carnegie Institute of Technology

$2 million

To start the institute, now known as Carnegie Mellon University

Carnegie Institute, D.C.

$2 million

To start the institute

Universities of Scotland

$10 million

Endowment to provide scholarships for Scottish youths and encourage scientific research

Peace Palace in the Hague

$1.5 million

Construction of monument to peace

Free public libraries

$50,365,000

2811 libraries total, mostly in the U.S.

Total from this list:

$75,865,000




Total Giving Overall

$350,695,653 = approximately $4.8 billion in 2010 $$




After death

Gave away his last $30,000,000





Document #6: Political Cartoon, The Saturday Globe, New York, July 9, 1892.

Note: The cartoon reads “Forty-Millionaire Carnegie is his Great Double Role. As the tightfisted employer he reduces wages that he may play philanthropist and give away libraries, etc.” One Carnegie is holding a sign that says “Notice: Wages reduced 20%” while the other Carnegie holds a library in one hand and a $5000 check in another.



Modified from http://www.ushistory.org/us/36b.asp and http://www.ushistory.org/us/36c.asp


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