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A Trustworthy Beast
"The public may regard trusts or combinations with serene confidence."--ANDREW CARNEGIE, in an interview in N. Y. Times, Oct. 9.
Artist: William Allen Rogers
Andrew Carnegie was born in Dunfermline, Scotland, in 1835 into a family of Scottish patriots and republicans (anti-monarchists). The transition of textile work from small shops to mechanized factories forced Carnegie's weaver father into poverty and prompted the family's immigration to the United States in 1848. In America, his father went to work in a cotton textile factory, where Carnegie labored as a bobbin-boy. Although his formal education was limited to four years in Scotland, the youth frequently used the free, private library of the wealthy James Anderson. While retaining a romantic view of Scotland, Carnegie's thorough Americanization and enthusiastic patriotism earned him the nickname, "the Star-Spangled Scotsman."
His father soon left the factory to eke out an existence as a door-to-door weaver. Carnegie also left, working in succession as a steam engine tender, telegraph messenger, and telegraph operator. His facility for the latter led to his hiring as the private telegrapher and secretary to Thomas A. Scott, a Pennsylvania Railroad superintendent, who instructed the young man in the ways of business management and investment. When Scott was promoted as the railroad's general superintendent, the 22-year-old Carnegie replaced him as superintendent of the Western Division. The young manager used his salary to invest in oil and passenger railroads.
By 1865, Carnegie had attained enough wealth from diverse investments to retire from his salaried position. In 1867, he joined forces with George Pullman to establish the Pullman Palace Car Company, and became the principal shareholder of the Pacific & Atlantic Telegraph Company, which he sold later to Western Union at a substantial profit. By the end of the next year, he had a net worth of $400,000.
Carnegie understood the benefits of business consolidation, and began applying the principle early in his career. In 1864, he established the Cyclops Iron Company, which the next year bought and merged its chief rival into Union Mills. To compete with the Bessemer steel process developed in Britain, in 1873 Carnegie began building the largest Bessemer steel plant in the United States, located outside Pittsburgh, Pennsylvania. The onset of an economic depression that fall allowed him to attract skilled workers at low wages and finish construction ahead of schedule.
While many American businesses in the late-nineteenth century were adopting managerial hierarchies and outside stockholders, Carnegie used simple partnerships with men who were active managers and owned part interest in the firms. With no oversight from outside stockholders or the necessity of paying dividends, Carnegie was able to directly manage his companies and reinvest his enormous profits. He removed ineffective partners, and rewarded successful ones with larger ownership shares. To enhance production profitability, he expanded his steel operations vertically by buying coke factories, finishing plants, and other businesses in the chain of steel production. He also sought technological innovations for his mills and factories.
In the period from 1888 to 1898, Carnegie Steel's production tripled and the company's capital more than doubled, from $20 to $45 million. By 1900, Carnegie Steel accounted for one-third of steel production in the United States, and was a greater amount than that in all of Britain. The next year, Carnegie sold his steel empire to J. P. Morgan for $480 million. It became the first billion-dollar corporation in the world, U.S. Steel.
For three years in the early 1880s, Carnegie published seven British newspapers, which promoted the establishment of a British republic and the disestablishment of the Anglican Church. In his best-selling book, Triumphant Democracy (1886), Carnegie argued that political systems determine economic output and, therefore, the politically free system of democracy produces economic prosperity. That same year, he authored two articles in Forum magazine, supporting labor's right to strike and opposing strikebreaking. In 1892, however, he ordered the union broken at his steel plant in Homestead, Pennsylvania. The resulting bloody clash (which he did not anticipate) became a symbol of harsh management tactics. Carnegie, who was vacationing in Scotland, blamed his partner, Henry Clay Frick, for using Pinkerton guards and strikebreakers.
Over the years, Carnegie wrote eight books and 63 articles. In 1889, he published an essay in two issues of North American Review, reprinted in Britain as the "Gospel of Wealth." In it, he proposed that the accumulation of massive wealth was justified if the possessor used it to benefit society, rather then leaving it to his family or distributing it in individual charity to the "submerged tenth" of the population. The money should go to institutions (in descending order): universities and other educational or research facilities; free public libraries; medical education and hospitals; public parks; concert halls; public swimming baths; and churches. The article aroused much debate, and with clergy particularly critical that churches were deemed less worthy than swimming baths.
Upon his retirement in 1901, Carnegie put his philanthropic philosophy more fully into action. He established nearly 3000 libraries, almost 2000 of them in the United States, most of the rest in Britain and Canada, and one as far away as Fiji. He funded retirement pensions for steelworkers and teachers. In 1902, the Carnegie Institution, dedicated to scientific research, was opened in Washington, D. C. He donated nearly 8000 pipe organs to churches. His hometown of Dunfermline, Scotland, received numerous gifts in the form of buildings and endowments, and tuition-free scholarships were established at four Scottish universities. At Pittsburgh, the home of his former steel empire, Carnegie founded the Carnegie Institute of Technology (now, Carnegie-Mellon), a library, art gallery, and concert hall. In all, he donated over $300 million during his lifetime.
As an anti-imperialist and pacifist, Carnegie established four foundations dedicated to international peace: the Carnegie Endowment for International Peace; the Carnegie Hero Fund (rewarding civilian life-savers); the Church Peace Union; and the Simplified Spelling Board (assuming that phonetic English could become the universal language and thereby promote international understanding and harmony). His "Temples of Peace" include the Hague Peace Palace in the Netherlands (home to the World Court), the Pan American Union building in Washington, D. C., and the Central American Court of Justice in Costa Rica. In 1911, he established the Carnegie Corporation to distribute most of the remainder of his wealth: $125 million. He was devastated by the outbreak of World War I in 1914, and died five years later at his summer home in Lenox, Massachusetts.
Robert C. Kennedy