It was the boast of a Roman Emperor that he had found the Eternal City
brick and left it marble. Similarly the present generation of Americans
inherited a country which was wood and have transformed it into steel.
That which chiefly distinguishes the physical America of today from that
of forty years ago is the extensive use of this metal. Our fathers used
steel very little in railway transportation; rails and locomotives were
usually made of iron, and wood was the prevailing material for railroad
bridges. Steel cars, both for passengers and for freight, are now
everywhere taking the place of the more flimsy substance. We travel
today in steel subways, transact our business in steel buildings, and
live in apartments and private houses which are made largely of steel.
The steel automobile has long since supplanted the wooden carriage; the
steel ship has displaced the iron and wooden vessel. The American farmer
now encloses his lands with steel wire, the Southern planter binds
his cotton with steel ties, and modern America could never gather her
abundant harvests without her mighty agricultural implements, all
of which are made of steel. Thus it is steel that shelters us, that
transports us, that feeds us, and that even clothes us.
This substance is such a commonplace element in our lives that we
take it for granted, like air and water and the soil itself; yet the
generation that fought the Civil War knew practically nothing of steel.
They were familiar with this metal only as a curiosity or as a material
used for the finer kinds of cutlery. How many Americans realize that
steel was used even less in 1865 than aluminum is used today? Nearly all
the men who have made the American Steel Age--such as Carnegie, Phipps,
Frick, and Schwab--are still living and some of them are even now
extremely active. Thirty-five years ago steel manufacture was regarded,
even in this country, as an almost exclusively British industry. In
1870 the American steel maker was the parvenu of the trade. American
railroads purchased their first steel rails in England, and the early
American steel makers went to Sheffield for their expert workmen. Yet,
in little more than ten years, American mills were selling agricultural
machinery in that same English town, American rails were displacing the
English product in all parts of the world, American locomotives were
drawing English trains on English railways, and American steel bridges
were spanning the Ganges and the Nile. Indeed, the United States soon
surpassed England. In the year before the World War the United Kingdom
produced 7,500,000 tons of steel a year, while the United States
produced 32,000,000 tons. Since the outbreak of the Great War, the
United States has probably made more steel than all the rest of the
world put together. "The nation that makes the cheapest steel," says Mr.
Carnegie, "has the other nations at its feet." When some future Buckle
analyzes the fundamental facts in the World War, he may possibly find
that steel precipitated it and that steel determined its outcome.
Three circumstances contributed to the rise of this greatest of American
industries: a new process for cheaply converting molten pig iron into
steel, the discovery of enormous deposits of ore in several sections
of the United States, and the entrance into the business of a hardy and
adventurous group of manufacturers and business men. Our steel industry
is thus another triumph of American inventive skill, made possible
by the richness of our mineral resources and the racial energy of our
people. An elementary scientific discovery introduced the great steel
age. Steel, of course, is merely iron which has been refined--freed from
certain impurities, such as carbon, sulphur, and phosphorus. We refine
our iron and turn it into steel precisely as we refine our sugar and
petroleum. From the days of Tubal Cain the iron worker had known that
heat would accomplish this purification; but heat, up to almost 1865,
was an exceedingly expensive commodity. For ages iron workers had
obtained the finer metal by applying this heat in the form of charcoal,
never once realizing that unlimited quantities of another fuel existed
on every hand. The man who first suggested that so commonplace a
substance as air, blown upon molten pig iron, would produce the
intensest heat and destroy its impurities, made possible our steel
railroads, our steel ships, and our steel cities. When William Kelly, an
owner of iron works near Eddyville, Kentucky, first proposed this method
in 1847, he met with the ridicule which usually greets the pioneer
inventor. When Henry Bessemer, several years afterward, read a paper
before the British Association for the Advancement of Science, in
which he advocated the same principle, he was roared down as "a crazy
Frenchman," and the savants were so humiliated by the suggestion that
they voted to make no record of his "silly paper" in their official
minutes. Yet these two men, the American Kelly and the Englishman
Bessemer, were the creators of modern steel. The records of the American
Patent Office clearly show that Kelly made "Bessemer" steel many years
before Bessemer. In 1870 the American Government refused to extend
Bessemer's patent in this country on the ground that William Kelly had
a prior claim; in spite of this, Bessemer was undoubtedly the man
who developed the mechanical details and gave the process a universal
standing.
Though the Bessemer process made possible the production of steel by
tons instead of by pounds, it would never in itself have given the
nation its present preeminence in the steel industry. Iron had been
mined in the United States for two centuries on a small scale, the main
deposits being located in the Lake Champlain region of New York and
in western Pennsylvania. But these, and a hundred other places located
along the Atlantic coast, could not have produced ore in quantities
sufficient to satisfy the yawning jaws of the Bessemer converters. As
this new method poured out the liquid in thousands of tons, and as the
commercial demand extended in a dozen different directions, the cry went
up from the furnace's for more ore. And again Nature, which has favored
America in so many directions, came to her assistance. Manufacturers
in the steel regions began to recall strange stories which had been
floating down for many years from the wilderness surrounding Lake
Superior. The recollection of a famous voyage made in this region by
Philo M. Everett, as far back as 1845, now laid siege to the imagination
of the new generation of ironmasters. For years the Indians had told
Everett of the "mountains of iron" that lay on the Minnesota shore of
Lake Superior and had described their wonders in words that finally
impelled this hardy adventurer to make a voyage of exploration. For six
weeks, in company with two Indian guides, Everett had navigated a small
boat along the shores of the Lake, covering a distance that now takes
only a few hours. The Indians had long regarded this silent, red iron
region with a superstitious reverence, and now, as the little party
approached, they refused to complete the journey. "Iron Mountain!" they
said, pointing northward along the trail--"Indian not go near; white man
go!" The sight which presently met Everett's eyes repaid him well for
his solitary tramp in the forest. He found himself face to face with a
"mountain a hundred and fifty feet high, of solid ore, which looked as
bright as a bar of iron just broken." Other explorations subsequently
laid open the whole of the Minnesota fields, including the Mesaba,
which developed into the world's greatest iron range. America has other
regions rich in ore, particularly in Alabama, located alongside the
coal and limestone so necessary in steel production; yet it has drawn
two-thirds of its whole supply from these Lake Superior fields. Not only
the quantity, which is apparently limitless, but the quality explains
America's leadership in steel making.
Mining in Minnesota has a character which is not duplicated elsewhere.
When we think of an iron mine, we naturally picture subterranean caverns
and galleries, and strange, gnome-like creatures prowling about with
pick and shovel and drill. But mining in this section is a much simpler
proceeding. The precious mineral does not lie concealed deep within
the earth; it lies practically upon the surface. Removing it is not a
question of blasting with dynamite; it is merely a matter of lifting
it from the surface of the earth with a huge steam shovel. "Miners" in
Minnesota have none of the conventional aspects of their trade. They
operate precisely as did those who dug the Panama Canal. The railroad
cars run closely to the gigantic red pit. A huge steam shovel opens its
jaws, descends into an open amphitheater, licks up five tons at each
mouthful, and, swinging sideways over the open cars, neatly deposits its
booty. It is not surprising that ore can be produced at lower cost in
the United States than even in those countries where the most wretched
wages are paid. Evidently this one iron field, to say nothing of others
already worked, gives a permanence to our steel industry.
Not only did America have the material resources; what is even more
important, she had also the men. American industrial history presents
few groups more brilliant, more resourceful, and more picturesque than
that which, in the early seventies, started to turn these Minnesota ore
fields into steel--and into gold. These men had all the dash, all the
venturesomeness, all the speculative and even the gambling instinct,
needed for one of the greatest industrial adventures in our annals. All
had sprung from the simplest and humblest origins. They had served
their business apprenticeships as grocery clerks, errand boys, telegraph
messengers, and newspaper gamins. For the most part they had spent their
boyhood together, had played with each other as children, had attended
the same Sunday schools, had sung in the same church choirs, and, as
young men, had quarreled with each other over their sweethearts. The
Pittsburgh group comprised about forty men, most of whom retired as
millionaires, though their names for the most part signify little to
the present-day American. Kloman, Coleman, McCandless, Shinn, Stewart,
Jones, Vandervoort--are all important men in the history of American
steel. Thomas A. Scott and J. Edgar Thompson, men associated chiefly
with the creation of the Pennsylvania Railroad, also made their
contributions. But three or four men towered so preeminently above
their associates that today when we think of the human agencies that
constructed this mighty edifice, the names that insistently come to mind
are those of Carnegie, Phipps, Frick, and Schwab.
Books have been written to discredit Carnegie's work and to picture him
as the man who has stolen success from the labor of greater men.
Yet Carnegie is the one member of a brilliant company who had
the indispensable quality of genius. He had none of the plodding,
painstaking qualities of a Rockefeller; he had the fire, the
restlessness, the keen relish for adventure, and the imagination that
leaped far in advance of his competitors which we find so conspicuous in
the older Vanderbilt. Carnegie showed these qualities from his earliest
days. Driven as a child from his Scottish home by hunger, never having
gone to school after twelve, he found himself, at the age of thirteen,
living in a miserable hut in Allegheny, earning a dollar and twenty
cents a week as bobbin-boy in a cotton mill, while his mother augmented
the family income by taking in washing. Half a dozen years later Thomas
Scott, President of the Pennsylvania Railroad, made Carnegie his
private secretary. How well the young man used his opportunities in this
occupation appeared afterward when he turned his wide acquaintanceship
among railroad men to practical use in the steel business. It was this
personal adaptability, indeed, that explains Carnegie's success. In the
narrow, methodical sense he was not a business man at all; he knew and
cared nothing for its dull routine and its labyrinthine details. As
a practical steel man his position is a negligible one. Though he was
profoundly impressed by his first sight of a Bessemer converter, he had
little interest in the every-day process of making steel. He had also
many personal weaknesses: his egotism was marked, he loved applause,
he was always seeking opportunities for self-exploitation, and he even
aspired to fame as an author and philosopher. The staid business men of
Pittsburgh early regarded Carnegie with disfavor; his daring impressed
them as rashness and his bold adventures as the plunging of the
speculator. Yet in all its aspects Carnegie's triumph was a personal
one. He was perhaps the greatest commercial traveler this country has
ever known. While his more methodical associates plodded along making
steel, Carnegie went out upon the highway, bringing in orders by the
millions. He showed this same personal quality in the organization
of his force. As a young man, entirely new to the steel industry, he
selected as the first manager of his works Captain Bill Jones; his
amazing judgment was justified when Jones developed into America's
greatest practical genius in making steel. "Here lies the man"--Carnegie
once suggested this line for his epitaph--"who knew how to get around
him men who were cleverer than himself." Carnegie inspired these
men with his own energy and restlessness; the spirit of the whole
establishment automatically became that of the pushing spirit of its
head. This little giant became the most remorseless pace-maker in the
steel regions. However astounding might be the results obtained by the
Carnegie works the captain at the head was never satisfied. As each
month's output surpassed that which had gone before, Carnegie always
came back with the same cry of "More." "We broke all records for
making steel last week!" a delighted superintendent once wired him and
immediately he received his answer, "Congratulations. Why not do it
every week?" This spirit explains the success of the Carnegie Company
in outdistancing all its competitors and gaining a worldwide preeminence
for the Pittsburgh district. But Carnegie did not make the mistake of
capitalizing all this prosperity for himself; his real greatness as an
American business man consists in the fact that he liberally shared the
profits with his associates. Ruthless he might be in appropriating their
last ounce of energy, yet he rewarded the successful men with golden
partnerships. Nothing delighted Carnegie more than to see the man whom
he had lifted from a puddler's furnace develop into a millionaire.
Henry Phipps, still living at the age of seventy-eight, was the only one
of Carnegie's early associates who remained with him to the end. Like
many of the others, Phipps had been Carnegie's playmate as a boy, so far
as any of them, in those early days, had opportunity to play; like all
his contemporaries also, Phipps had been wretchedly poor, his earliest
business opening having been as messenger boy for a jeweler. Phipps
had none of the dash and sparkle of Carnegie. He was the plodder, the
bookkeeper, the economizer, the man who had an eye for microscopic
details. "What we most admired in young Phipps," a Pittsburgh banker
once remarked, "is the way in which he could keep a check in the air
for three or four days." His abilities consisted mainly in keeping the
bankers complaisant, in smoothing the ruffled feelings of creditors, in
cutting out unnecessary expenditures, and in shaving prices.
Carnegie's other two more celebrated associates, Henry C. Frick and
Charles M. Schwab, were younger men. Frick was cold and masterful, as
hard, unyielding, and effective as the steel that formed the staple
of his existence. Schwab was enthusiastic, warm-hearted, and
happy-go-lucky; a man who ruled his employees and obtained his results
by appealing to their sympathies. The men of the steel yards feared
Frick as much as they loved "Charlie" Schwab. The earliest glimpses
which we get of these remarkable men suggest certain permanent
characteristics: Frick is pictured as the sober, industrious bookkeeper
in his grandfather's distillery; Schwab as the rollicking, whistling
driver of a stage between Loretto and Cresson. Frick came into the
steel business as a matter of deliberate choice, whereas Schwab became
associated with the Pittsburgh group more or less by accident.
The region of Connellsville contains almost 150 square miles underlaid
with coal that has a particular heat value when submitted to the process
known as coking. As early as the late eighties certain operators had
discovered this fact and were coking this coal on a small scale. It is
the highest tribute to Frick's intelligence that he alone foresaw
the part which this Connellsville coal was to play in building up the
Pittsburgh steel district. The panic of 1873, which laid low most of the
Connellsville operators, proved Frick's opportunity. Though he was only
twenty-four years old he succeeded, by his intelligence and earnestness,
in borrowing money to purchase certain Connellsville mines, then much
depreciated in price. From that moment, coke became Frick's obsession,
as steel had been Carnegie's. With his early profits he purchased more
coal lands until, by 1889, he owned ten thousand coke ovens and was
the undisputed "coke king" of Connellsville. Several years before
this, Carnegie had made Frick one of his marshals, coke having become
indispensable to the manufacture of steel, and in 1889 the former
distiller's accountant became Carnegie's commander-in-chief. Probably
the popular mind associates Frick chiefly with the importation of Slavs
as workmen, with the terrible strikes that followed in consequence
at Homestead, with the murderous attack made upon him by Berkman,
the anarchist, and with his bitter, long drawn-out quarrel with Andrew
Carnegie. Frick's stormy career was naturally the product of his
character.
On the other hand, temperamental pliability and lovableness were the
directing traits of the man who, in his way, made contributions quite as
solid to the extension of the Pittsburgh steel industry. Schwab worked
with the human material quite as successfully as other men worked with
iron ore, Bessemer furnaces, and coal. He handled successfully what was
perhaps the greatest task in management ever presented to a manufacturer
when to him fell the job of reorganizing the Homestead Works after the
strike of 1892 and of transforming thousands of riotous workmen into
orderly and interested producers of steel. In three or four years
practically every man on the premises had become "Charlie" Schwab's
personal friend, and the Homestead property which, until the day he took
charge, had been a colossal failure, had developed into one of the most
profitable holdings of the Carnegie Company. As his reward Schwab, at
the age of thirty-four, was made President of the Carnegie corporation.
Only sixteen years before he had entered the steel works as a stake
driver at a dollar a day.
When the Carnegie group began operations in the early seventies,
American steel, as a British writer remarked, was a "hot-house product";
yet in 1900 the Carnegie partners divided $40,000,000 as the profits of
a single year. They had demonstrated that the United States, despite
the high prices that prevailed everywhere, could make steel more
cheaply than any other country. Foreign observers have offered several
explanations for this achievement. American makers had an endless supply
of cheap and high-grade ore, cheaper coke, cheaper transportation, and
workmen of a superior skill. We must give due consideration to the fact
that their organization was more flexible than those of older
countries, and that it regulated promotion exclusively by merit and gave
exceptional opportunities to young men. American steel makers also
had scrap heaps whose size astounded the foreign observers; they never
hesitated to discard the most expensive plants if by so doing they could
reduce the cost of steel rails by a dollar a ton. Machinery for steel
making had a more extensive development in this country than in
England or Germany. Mr. Carnegie also enjoyed the advantages of a high
protective tariff, though about 1900 he discovered that his extremely
healthy infant no longer demanded this form of coddling. But probably
the Carnegie Company's greatest achievement was the abolition of the
middleman. In a few years it assembled all the essential elements of
steel making in its own hands. Frick's entrance into the combination
gave the concern an unlimited supply of the highest grade of coking
coal. In a few years, the Carnegie interests had acquired great holdings
in the Minnesota ore regions.
At first glance, the Pittsburgh region seems hardly the ideal place for
the making of steel. Fortune first placed the industry there because
all the raw materials, especially iron ore and coal, seemed to exist
in abundance. But the discovery of the Minnesota ore field, which alone
could supply this essential product in the amounts which the furnaces
demanded, immediately deprived the Pittsburgh region of its chief
advantage. As a result of this sudden development, the manufacturers of
Pittsburgh awoke one morning and discovered that their ore was located a
thousand miles away. To bring it to their converters necessitated a long
voyage by water and rail, with several reloadings. They overcame these
obstacles by developing machinery for handling ore and by acquiring the
raw materials and the connecting links of transportation. Ore which had
been lying in the wilds of Minnesota on Monday morning was thus brought
to Pittsburgh and made into steel rails or bridges or structural shapes
by Saturday night. The Carnegie Company first acquired sufficient
mineral lands to furnish ore for several generations and organized an
ore fleet which transported the products of the mines through the lakes
to ports on Lake Erie, particularly Ashtabula and Conneaut. The purchase
of the Bessemer and Lake Erie Railroad, which extended from Conneaut
to Pittsburgh, made this great transportation route complete. Besides
freeing their business from uncertainty, this elimination of middlemen
naturally produced great economies.
Probably Andrew Carnegie's shrewdness in naming his first plant the
J. Edgar Thompson Steel Works, after the powerful President of the
Pennsylvania Railroad, and in making Thompson and his associate Scott
partners, had much to do with his early success. These two gentlemen
conferred two priceless favors upon the struggling enterprise. They
became large purchasers of steel rails and their influence in this
direction extended far beyond the Pennsylvania Railroad. What was
perhaps even more important, they gave the Carnegie concerns railroad
rebates. The use of rebates, as a method of stifling competition and
building up a great industrial prosperity, is an offense which the
popular mind associates almost exclusively with the Standard Oil
Company, yet the Carnegie fortune, as well as that of John D.
Rockefeller, received an artificial stimulation of this kind.
Though incomparably the greatest of the American steel companies, the
Carnegie Steel Company by no means monopolized the field. In forty
years, indeed, an enormous steel area had grown up, including western
Pennsylvania, Ohio, Indiana, and Illinois, practically all of it drawing
its raw materials from those same teeming ore lands in the Lake Superior
region. Johnstown, Youngstown, Cleveland, Lorain, Chicago, and
Joliet, became headquarters of steel production almost as important as
Pittsburgh itself. Two entirely new steel kingdoms, each with its own
natural reservoirs of ore, grew up in Colorado and Alabama. The Colorado
Fuel and Iron Company, which possessed apparently inexhaustible mineral
lands in Colorado, Wyoming, Utah, New Mexico, and California, itself
produces not far from three million tons a year, almost half the present
production of Great Britain. The Alabama steel country has developed in
even more spectacular fashion. Birmingham, a hive of southern industry
placed almost as if by magic in the leisurely cotton lands of the South,
had no existence in 1870, when the Pittsburgh prosperity began. In the
Civil War, the present site of a city with a population of 140,000 was
merely a blacksmith shop in the fork of the roads. Yet this district has
advantages for the manufacture of steel that have no parallel elsewhere.
The steel companies which are located here do not have to bring their
materials laboriously from a distance but possess, immediately at
hand, apparently endless store of the three things needful for making
steel--iron ore, coal, and limestone. All these territories have their
personal romances and their heroes, many of them quite as picturesque as
those of the Pittsburgh group.
It is doubtful indeed if American industry presents any figure quite
as astonishing and variegated as that of John W. Gates, the man who
educated farmers all over the world to the use of wire fencing. Half
charlatan, half enthusiast, speculator, gambler, a man who created great
enterprises and who also destroyed them, at times an upbuilding force
and at other times a sinister influence, Gates completely typified a
period in American history that, along with much that was heroic and
splendid, had much also that was grotesque and sordid. The opera-bouffe
performance that laid the foundations of Gates's great industry was in
every way characteristic of this period. In 1871 Gates, then a clerk in
a hardware store at twenty-five dollars a week, made his first attempt
to sell barbed wire in the great cattle countries of the southwestern
States. When the cattle men in Texas first saw this barbed wire, they
ridiculed the idea that it could ever hold their steers. Gates selected
a plaza in San Antonio, fenced it in with his new product, and invited
the enemies to bring along their wildest specimens About thirty of
Texas' most ferocious cattle, placed within the enclosure, spent a whole
afternoon plunging at the barbs in a useless and tormenting attempt
to escape. This spectacular demonstration of efficiency launched Gates
fairly upon his career. He immediately began to sell his new fencing on
an enormous scale; in a few years the whole world was demanding it,
and it has become, as recent events have disclosed, a particularly
formidable munition of war. The American Steel and Wire Company, one
of the greatest of American corporations, was the ultimate outgrowth of
that lively afternoon in San Antonio.
In 1900 the Carnegie Steel Company was making one-quarter of all the
Bessemer steel produced in the United States. It owned in abundance
all the properties which were essential to its completed output--coal,
limestone, steel ships, railroads, and steel mills. In twenty-five
years, from 1875 to 1900, this manufacturing enterprise had paid the
Carnegie group profits aggregating $133,000,000, profits which, in the
closing years of the century, had increased at a stupendous rate. In
1898 Carnegie and his associates had divided $11,500,000, in 1899
their earnings had grown to $25,000,000, and in 1900 the aggregate had
suddenly jumped to $40,000,000. Of this latter sum Carnegie received
$25,000,000, Phipps $5,500,000, Frick $2,600,000, and Schwab $1,300,000.
And Carnegie's little group could see no limit to the growth of their
business and the expansion of their personal fortunes. Yet at that very
moment Carnegie was planning to play the part of a Charles V with the
large empire which he had pieced together--to abdicate his throne,
retire from business life, and spend his remaining days in quiet.
Many influences were impelling him to this decision. His triumph,
stupendous as it had been, also had had its alloy of sorrow. Indeed
this little Scotsman, now at the crowning of his glory, was one of the
loneliest figures in the world. Practically all the forty men with
whom he had been closely associated had vanished from the scene. He had
quarreled with his playmate and lifelong partner, Henry Phipps, and was
in the worst possible business and personal relations with Frick. He
had no son to carry on his work. He had become greatly interested in
his philanthropies, and he had declared that the man who died rich died
disgraced. Moreover, new influences were rising in the steel trade with
which Carnegie had little sympathy. Its national capital seemed to be
shifting from Pittsburgh to Wall Street. New men who knew nothing
about steel but who possessed an intimate acquaintance with stocks and
bonds--J. Pierpont Morgan, George W. Perkins, and their associates--were
branching out as controllers of large steel interests. Carnegie had no
interest in Wall Street; he has declared that he never speculated in his
life and that he would immediately dissociate himself from any partner
who would do so. This Wall Street coterie, in the years from 1898 to
1900, had made several large combinations in the steel trade. That was
the era when the trust mania had gained possession of the American mind
and when its worst features displayed themselves. The Federal Steel
Company, the American Bridge Company, the American Steel and Wire, the
National Tube Company, all representing the assembling of large works
which had been engaged as rivals in similar enterprises, were launched,
with the usual accompaniments of "underwriting syndicates," watered
stock, and Wall Street speculation. This sort of thing made no appeal to
Andrew Carnegie. His huge enterprise had always remained essentially a
copartnership, and he had frequently expressed his abhorrence of trusts.
Yet, in spite of his wish to retire from business and in spite of his
avowed intention to die poor, Carnegie now adopted the policy of the
Sibylline leaves to all prospective purchasers. Moore and Reid would
have purchased his interest for $157,000,000; when Rockefeller came
along the price had risen to $250,000,000; when the oil man shook his
head and retired, Carnegie immediately raised his price to $500,000,000.
It is doubtful whether he would have sold at all had not his Wall Street
competitors begun to encroach on a field which the little Scotsman
understood quite as well as they--the production and merchandising of
steel. The newly organized combinations were completing elaborate plans
to go after Carnegie's business. Then Carnegie, who had practically
retired from active life, again arrayed himself in his shirt-sleeves,
abandoned his career of authorship, and resumed his early trade. His
first attacks produced an immense reverberation in the House of Morgan.
He purchased a huge tract at Conneaut and began building a gigantic
plant for the manufacture of steel tubes, a business in which he had
not hitherto engaged. This was a blow aimed at one of Morgan's pet new
creations, the National Tube Company. Should Carnegie finish his works,
there was no doubt the Morgan enterprise would be ruined, for the new
plant would be far more modern and so could manufacture the product at
a much lower price; and, with Charles M. Schwab as active manager, what
possible chance would the older corporation have? But Carnegie struck
his enemy at an even more vulnerable point. The Pennsylvania Railroad
had a practical monopoly of traffic in and out of Pittsburgh, and
Pittsburgh "created" more freight business than any other city in the
world. Carnegie lent his powerful support to George J. Gould, who was
then extending his railroad system into the preempted field and was
also making surveys and had financed a company to build an entirely
new railroad from Pittsburgh to the Atlantic Coast. As Carnegie himself
controlled the larger part of the freight that made Pittsburgh such an
essential feeder to railroads, his new enterprise caused the greatest
alarm. At the same time Carnegie equipped a new and splendid fleet of
ore ships, his purpose being to enter a field of transportation which
John D. Rockefeller had found extremely profitable.
Such were the circumstances and such were the motives that gave birth
to the world's largest corporation. All one night, so the story goes,
Charles M. Schwab and John W. Gates discussed the steel situation
with J. Pierpont Morgan. There was only one possible solution, they
said--Andrew Carnegie must be bought out. By the time the morning sun
came through the windows Morgan had been convinced. "Go and ask him what
he will sell for," he said to Schwab. In a brief period Schwab came back
to Morgan with a letter which contained the following figures--five per
cent gold bonds $303,450,000; preferred stock $98,277,100; common stock
$90,279,000--a total of over $492,000,000. Carnegie demanded no cash;
he preferred to hold a huge first mortgage on a business whose golden
opportunities he knew so well. Morgan, who had been accustomed all his
life to dictate to other men, had now met a man who was able to dictate
to him. And he capitulated. The man who fifty-three years before had
started life in a new country as a bobbin-boy at a dollar and twenty
cents a week, now at the age of sixty-six retired from business the
second richest man in the world. With him retired a miscellaneous
assortment of millionaires whose fortunes he had made and whose
subsequent careers in the United States and in Europe have given a
peculiar significance to the name "Pittsburgh Millionaires." The United
States Steel Corporation, the combination that included not only the
Carnegie Company but seventy per cent of all the steel concerns in the
country, was really a trust made up of trusts. It had a capitalization
of a billion and a half, of which about $700,000,000 was composed of
the commodity usually known as "water"; but so greatly has its business
grown and so capably has it been managed that all this liquid material
has since been converted into more solid substance. The disappearance
of Andrew Carnegie and his coworkers and the emergence of this gigantic
enterprise completed the great business cycle in the steel trade.
The age of individual enterprise and competition had passed--that of
corporate control had arrived.