Andrew Carnegie Revolutionizes the Steel Business in America

Transcription

1 Andrew Carnegie

2 Andrew Carnegie Revolutionizes the Steel Business in America Andrew Carnegie made his fortune in steel, turning the industrial world on its ear in the process. He was possessed by technology and efficiency in a way no businessman before him had ever been. His relentless efforts to drive down costs and undersell the competition made his steel mills the most modern in the world, the models for the entire industry. By 1900, Carnegie's mills produced steel that was stronger and cheaper than competing steel, thanks to his widespread use of the Bessemer Process. The Bessemer Process allowed for strong steel to be mass-produced, and Andrew Carnegie implemented it in his steel plants. Suddenly bridges and skyscrapers were not only feasible but affordable, too. Steel fed national growth, accelerating the already booming industrial sector of the late 1800s. Steel meant more jobs, national prestige for the US, and a higher quality of life for many. For Carnegie's workers, however, cheap steel meant lower wages, less job security, and the end of creative labor. Carnegie's drive for efficiency cost steel workers the ability to belong to labor unions and have influence over their working conditions. To the casual observer a Carnegie mill was chaos; flames, noise, and danger ruled the Carnegie mills. "Protective gear" consisted only of two layers of wool long-johns; horrible injuries were common. Wives and children of the steel workers came to dread the sound of factory whistles that meant an accident had occurred. "They wipe a man out here every little while," a worker said in "Sometimes a chain breaks, and a ladle tips over, and the iron explodes... Sometimes the slag (waste from smelting process) falls on the workmen... Of course, if everything is working all smooth and a man watches out, why, all right! But you take it after they've been on duty twelve hours without sleep, and running like hell, everybody tired and loggy, and it's a different story." For Carnegie, efficiency, not safety, was most important. He favored producing as much cheap steel as possible, without regards to worker safety. His vast steel mills at Braddock, Duquesne, and Homestead boasted the latest equipment. As technology improved, Carnegie ordered existing equipment to be torn out and replaced. He quickly made back these investments through reduced labor costs, and his mills remained the most productive in the world. Andrew Carnegie, Philanthropist Although Andrew Carnegie became a millionaire, he did not start life as one. He was born in 1835 into a working-class family in Dunfermline, Scotland. In 1848 his family immigrated to the United States and settled in Pittsburgh, Pennsylvania. Carnegie took a series of factory jobs before going to work as an assistant for a superintendent (Thomas Scott) for the Pennsylvania Railroad in Under Scott, Carnegie learned all about the railroad industry and later became a superintendent himself. Scott also taught Andrew about investing in the stock market. Scott explained to Carnegie that when a company performed well, it paid "dividends" out of its profits to people who owned its stock. When Carnegie received his first dividend check, he shouted, "Here's the goose that laid the golden eggs!" This money was the first he had ever received without having worked for it himself Carnegie had learned to let his money work for him.

3 After retiring in 1901 at the age of 66 as the world's richest man, Andrew Carnegie wanted to become a philanthropist a person who gives money to good causes. He believed in the "Gospel of Wealth," which meant that wealthy people were morally obligated to give their money back to others in society. Carnegie had made some charitable donations before 1901, but after that time, giving his money away became his new occupation. In 1902 he founded the Carnegie Institution to fund scientific research and established a pension fund for teachers with a $10 million donation. Throughout his life, Andrew Carnegie loved to read. Carnegie supported education; he gave money to towns and cities to build more than 2,000 public libraries. The Carnegie Center on 2 nd St. here in Lexington was founded with part of Carnegie s fortune. He also gave $125 million to a foundation called the Carnegie Corporation to aid colleges and other schools. World peace was another cause Carnegie believed in. He established the Carnegie Endowment for International Peace and funded the building of the Hague Palace of Peace, which houses the World Court, in the Netherlands. By 1911, Carnegie had given away a huge amount of money over 90 percent of his fortune. Source: Carnegie & the Homestead Strike, 1892 Andrew Carnegie s business partner was a man named Henry Clay Frick. Described as intense, humorless, and driven, Frick sought money and to build a business empire. Frick earned a reputation as a hard-nosed businessman who never compromised with his workers. Even in a notoriously anti-labor industry, Frick's ruthless suppression of strikes stood out. Although Carnegie had taken a less hostile stance toward labor, Carnegie saw that Frick was a talented executive and made Frick chairman of Carnegie Steel in In 1892, a Carnegie Steel Company union that many workers belonged to was trying to negotiate better wages at the steel mill in Homestead, Pennsylvania. In the midst of the negotiations, Carnegie returned home to Scotland in May, leaving Frick to deal with the union and his messages to Frick made it clear - do whatever it takes to bring the negotiations to a close. On June 29, Frick closed the mill and locked out 3,800 workers from entering the plant. Two days later, workers seized the mill and sealed off the town from scabs (workers hired by the company to take place of old workers). Frick summoned a private police force, the Pinkerton Detective Agency, to protect the scab workers he planned to hire. With the steel mill located on the Monongahela River, the Pinkertons tried to move across the river and land on the mill side to retake the factory from the workers. Many in the town moved to the mill to prevent the Pinkertons from landing on their side of the river. For twelve hours, the two sides fired their guns and weapons at each other Homestead citizens with everything from ancient muzzle loaders to 20-pound cannons and Pinkertons with Winchester rifles from their barges on the river. The battle raged through the night and morning, with the Pinkertons finally surrendering to the workers, who savagely beat many of the Pinkertons.

4 The Pennsylvania National Guard sent 8,500 troops to quell the riot and to allow the company to employ the scab workers. Martial law was imposed in Homestead, and 1,700 scab workers many of whom were black were working in the mill, which was in full-swing by mid- August. Tensions continued to escalate in Homestead between the union workers, who had been replaced, and Frick. Union workers went so far as to assault scab workers in the streets. Frick s hardline stance escalated after he survived an assassination attempt by an anarchist. Frick vowed to fight this thing to the bitter end and to never recognize the Union, never, never! In November, 2,000 white workers attacked Homestead s 50 black families and many blacks were severely wounded. In mid-november, approximately 4 and a half months after the conflict began, the union conceded. 300 of the locked-out Union workers applied for work and were rehired. Many more were blacklisted (unable to get steel jobs elswewhere). With the union crushed, Carnegie slashed wages, imposed 12-hour workdays, and eliminated 500 jobs. Carnegie s reputation took a hit because of the strike, however, and he would part ways with Frick as his business partner in response to Frick s tactics during the Homestead Strike. Source: "AN EMPLOYER'S VIEW OF THE LABOR QUESTION" (Excerpt) (An essay by Andrew Carnegie, April, 1886) "The influence of trade-unions upon the relations between the employer and employed has been much discussed. Some establishments in America have refused to recognize the right of the men to form themselves into these unions, although I am not aware that any concern in England would dare to take this position. This policy, however, may be regarded as only a temporary phase of the situation. The right of the working-men to combine and to form trades-unions is no less sacred than the right of the manufacturer to enter into associations and conferences with his fellows, and it must sooner or later be conceded. Indeed, it gives one but a poor opinion of the American workman if he permits himself to be deprived of a right which his fellow in England long since conquered for himself. My experience has been that trades-unions, upon the whole, are beneficial both to labor and to capital. They certainly educate the working-men, and give them a truer conception of the relations of capital and labor than they could otherwise form. The ablest and best workmen eventually come to the front in these organizations; and it may be laid down as a rule that the more intelligent the workman the fewer the contests with employers..."

5 John D. Rockefeller

6 John D. Rockefeller & the Standard Oil Giant John D. Rockefeller was born in Richford, New York in He attended the Cleveland Central High School and at 16 he became a clerk in a commission house. Determined to work for himself, Rockefeller saved all the money he could and in 1860 went into business with a young Englishman, Maurice Clark. The company, Clark & Rockefeller Produce and Commission, sold farm implements, fertilizers and household goods. Rockefeller's company was fairly successful but did not bring him the wealth he desired. In 1862 Rockefeller heard that Samuel Andrews had developed a better and cheaper way of refining crude petroleum. Rockefeller sold his original business and invested it in a new company he set up with Andrews called Standard Oil. One of the business problems that Rockefeller encountered was the high cost of transporting his oil to his Cleveland refineries (40 cents a barrel) and the refined oil to New York ($2 a barrel). Rockefeller negotiated an exclusive deal with the railway company where he guaranteed sixty car-loads a day. In return the transport prices were reduced to 35 cents and $1.30. The cost of his oil was reduced and his sales increased dramatically. Within a year four of his thirty competitors were driven out of business. Eventually Standard Oil monopolized oil refining in Cleveland. Rockefeller now bought out Samuel Andrews for a million dollars and turned his attentions to controlling the oil industry throughout the United States. His competitors were given the choice of being swallowed up by Standard Oil or being crushed. By 1890 Rockefeller's had swollen into an immense monopoly which could fix its own prices and terms of business because it had no competitors. In 1896 Rockefeller was worth about $200 million. Rockefeller and the Standard Oil Trust engaged in ruthless business practices, making it impossible for a fair and competitive marketplace to exist. Reformers, crusading journalists, and eventually politicians began to agree. In November 1902, Ida Tarbell, one of the leading muckraking journalists in the United States, began a series of articles in McClure's Magazine on how Rockefeller had achieved a monopoly in refining, transporting and marketing oil. This material was eventually published as a book, History of the Standard Oil Company (1904). Rockefeller responded to these attacks by describing Tarbell as "Miss Tarbarrel". President Theodore Roosevelt, who had been elected on a program that included reducing the power of large corporations, attempted to use the Sherman Anti-Trust Act to deal with Rockefeller's monopoly of the oil industry. This was largely ineffective and it was not until 1911 that the Supreme Court dissolved the Standard Oil monopoly. The various press campaigns against Rockefeller had turned him into one of America's most hated men. A devout Baptist, Rockefeller began giving his money away. He set up the Rockefeller Foundation to "promote the well-being of mankind". Over the next few years Rockefeller gave over $500 million in aid of medical research, universities and Baptist churches. He was also a major supplier of funds to organizations such as the Anti-Saloon League that was involved in the campaign for prohibition. By the time that he died on May 23rd, 1937, John Davidson Rockefeller had become a popular national figure. Source:

7 Cornelius Vanderbilt

8 Cornelius Vanderbilt, Early Years Cornelius Vanderbilt was born in Port Richmond, New York on May 27, 1794 to a poor family. Vanderbilt was forced to quit school at the age of 11 in order to work for his father, who worked on boats providing transportation services. When he was sixteen, he persuaded his parents to give him a $100 loan for a boat to start his own ferry and freight business. He opened a transportation and freight service between New York City and Staten Island, charging 18 cents a trip a low fare compared to many of the other ferry services businesses in the area. He agreed to share his profits with his parents and was able to pay back the $100 loan within one year, with an additional $1,000 in profits to share. Vanderbilt would build a reputation as a skilled sailor who would routinely undercut his competition to edge them out of business. Vanderbilt as a Steamship Operator The War of 1812 created new opportunities for expansion, and Vanderbilt received a government contract to supply the forts around New York. Large profits allowed him to build a schooner and two other vessels for coastal trade. Vanderbilt got his nickname "Commodore" being in command of the largest schooner on the Hudson River. By 1817 he amassed a fortune of $9,000 in addition to the interest in the sailing vessels. Vanderbilt had become involved in the coastal trade from New England to Charleston, South Carolina. In 1818, Vanderbilt sold all of his sailing vessels and became a steamboat captain with his business partner, Thomas Gibbons. The two operated a ferry service on the Hudson River between New Brunswick, New Jersey and New York City. The two charged customers one dollar, while other captains charged four dollars for the same trip. This low fare angered the other steamboat captains on the river, who argued that they had a monopoly on the ferry service on the Hudson River. When the other captains sued to prevent Vanderbilt and Gibbons from operating on the river, Vanderbilt and Gibbons scored a victory in court, allowing them to make a fortune in the shipping business along the Hudson River. Vanderbilt s wife also made money by managing a halfway house on the shipping route where all of the passengers on Vanderbilt and Gibbons line had to stay at. By 1829 Vanderbilt decided to go on his own and began passenger and freight service on a different part of the Hudson River, between New York and Peekskill. Vanderbilt continued his practice of undercutting the competition by cutting rates as low as 12 ½ cents, forcing many other ferrymen to withdraw from the market. After further edging out competition along the route, many of his competitors paid him off to move his business elsewhere. Vanderbilt expanded his operations to Long Island Sound, Providence, Boston, and points in Connecticut. Vanderbilt s vessels offered comfort and luxury that were faster than other competitors boats, which gave rise to the luxury steamship business. By the 1840s, Vanderbilt was running more than 100 steamboats and was the largest business in the United States, employing more people than any other. Vanderbilt s steamships were considered floating palaces and offered customers a fast, cheap, and luxurious travel on his steamboats. By the time he was 40, Vanderbilt had built a fortune of $500,000, but continued looking for new opportunities. During the California Gold Rush of 1849, Vanderbilt offered an alternative means of transportation across America. In order to reach the Pacific coast, people traveled by steamship to Panama in Central America, crossed the isthmus, and continued by steamship to San Francisco. Vanderbilt charted a new route that offered a similar service, but his crossed Nicaragua a trip that was 600 miles shorter, and two days faster on the way to San Francisco. Vanderbilt was able to charge half as much for the trip as his competitors and

9 customers flocked to use his steamboats. This move was very successful for Vanderbilt, who made over $1 million per year on fares. After the Civil War broke out, he offered his largest and fastest ship, the Vanderbilt, to the Union Navy. When Abraham Lincoln asked Vanderbilt to name his price, the Commodore said it was a donation, explaining that he had no interest in profiting from the war. Vanderbilt Transitions to Railroads In the 1860s, Vanderbilt could see that transportation was moving away from water routes and onto the railroads. In order to continue his transportation empire, Vanderbilt invested in the railroad industry and acquired the New York, Harlem, and Hudson River Railroads. After continuing his practice of charging low shipping fares to his customers, Vanderbilt continued to profit and would acquire the Central Railroad in Vanderbilt continued to improve the service and equipment of his railroads, while maintaining his low fares. Vanderbilt would eventually merge all of his acquisitions into one company the New York Central Railroad. Railroads had previously been fragmented into numerous short railroads, each with its own schedule and procedures. This move by Vanderbilt created a major network of railroads that operated across multiple states and lowered costs, increased efficiency, and sped of travel and shipment times. Vanderbilt was said to have made over $25 million from his first five years in the railroad industry. Vanderbilt Reluctant Philanthropist Nearing the end of his business career, Vanderbilt had never made a practice of engaging in philanthropy. Vanderbilt would donate $50,000 to the Church of the Strangers in New York City, but the one major gift that Vanderbilt was known for was a contribution of $1 million to Central University in Nashville, Tennessee. This donation to the University would lead to its name change to Vanderbilt University. Upon his death in 1877, Vanderbilt was the richest man in the United States, and left the bulk of his $95 million fortune to his son, William. Source:

10 J.P. Morgan

11 J.P. Morgan, Early Life John Pierpont (J.P.) Morgan was born into a wealthy, distinguished New England family in April 17, 1837 in Hartford, Connecticut. Among his relatives were founders of Yale University (James Pierpont), Aetna Insurance Company, and a Hartford dry-goods company. His father would eventually become a partner in a London-based banking firm, setting the stage for Morgan to become involved in the banking industry. After graduating from high school in Boston, Morgan studied in Europe, learning French and German, before returning to New York in 1857 to begin his career in finance. In 1864, Morgan became a partner in the banking firm Dabney, Morgan & Company, which served as the New York branch of his father, Junius Morgan s, London banking firm, J.S. Morgan & Company. In 1871, the younger Morgan partnered with prominent Philadelphia banker Anthony Drexel ( ) to form Drexel, Morgan & Company. In 1895, two years after Anthony Drexel s death, the business was renamed J.P. Morgan & Company. J.P. Morgan & Company would grow to become one of the largest banking firms in the country, with J.P. Morgan himself at the helm. The firm, located on Wall Street in New York City, would become incredibly profitable thanks to Morgan s management and would lead Morgan to becoming involved in politics. During the 1876 presidential election, Morgan demanded that his, Drexel, Morgan, and the firm s partners each donate $5,000 to Republican Rutherford B. Hayes campaign. Although his support for Hayes was primarily economic and not politically motivated (Morgan thought Hayes policies would be friendlier toward the banks), this political involvement would soon grow. J.P. Morgan Bails out the Government In 1877, Congress had adjourned without having adopted a budget to pay for the army. This caused a massive public outcry, and Morgan stepped in to relieve the financial issues of the government. Morgan provided the War Department with $550,000 per month to help pay for the army, who he called a class of men whose interest should, in our judgment, command the greatest and most earnest [concern] of the Government and the Country. In total, Morgan loaned about $2.5 million to the federal government, all of which would be paid back. Although this was a generous gesture by Morgan, Congress was irritated because of the influence he was able to wield and the fact that they had not approved this loan. During the late 19th century, a period when the U.S. railroad industry experienced rapid overexpansion and heated competition, Morgan was heavily involved in reorganizing and consolidating a number of financially troubled railroads. In the process, he gained control of significant portions of these railroads stock and eventually controlled an estimated one-sixth of America s rail lines. Morgan s wealth grew tremendously with this purchase and acquisition of railroads. Morgan was a pioneer of corporation, and aimed to consolidate smaller, competing businesses into one large company that he could control. In order to achieve this goal of building large corporations that he could control, Morgan continued purchasing and reorganizing railroads until there was one centrally controlled system. By 1900, Morgan controlled over one-sixth of the nation s railroad industry and created six enormous systems that ran from New York City. Morgan also became invested in the

12 electricity industry. Impressed by Thomas Edison s experiments, Morgan became heavily involved in financing Edison s work and would merge Edison s original company with six others that Morgan had acquired, creating the Edison General Electric Company that would go on to become the General Electric Trust, one of the world s leading electrical monopolies. J.P. Morgan Reaches New Heights The peak of Morgan s business consolidation was in 1901, with the formation of United States Steel, the world s first billion-dollar corporation. U.S. Steel was formed when Morgan offered Andrew Carnegie $480 million for Carnegie Steel Company and combined it with other steel companies under Morgan s control. This merging was a feat for Morgan, who now controlled a gigantic empire of steel mills, iron mines, land, and modes of transport that gave Morgan control of almost half of America s steelmaking capacity. Businesses on Wall Street had come to depend upon loans from the House of Morgan. Morgan did not only issue loans to companies, but also gained influence and control within the company that was issued the loan. Morgan and his bankers approved mergers, handled legal matters, appointed managers, and outlined policies. This level of influence gave Morgan a broad empire of businesses under his control. At the peak of his power in the early 1900s, Morgan dominated a hundred corporations worth more than $22 billion, controlled 70 percent of the steel industry, 20 percent of all the corporations trading on the New York Stock Exchange, and the three largest insurance companies in the country. During the economic Panic of 1907, where many businesses on Wall Street were going bankrupt and stock prices were falling rapidly, Morgan moved in to prevent a collapse of the American economy. Morgan assembled the leading bankers of the era at his home library in New York City to discuss how to prevent the economy from crashing. The group decided to rescue the failing businesses with their own fortunes, causing many, especially in the federal government, to question the power of the bankers. In 1912, Morgan was called to testify before a congressional committee chaired by U.S. Representative Arsene Pujo that was investigating the existence of a money trust, a small group of elite Wall Street bankers, including Morgan, who allegedly colluded to control American banking and industry. The Pujo Committee hearings helped bring about the creation of the Federal Reserve System in December 1913, which created a lender of last resort to prevent future instances of the Panic of 1907, and spurred passage of the Clayton Antitrust Act of 1914, which put stricter limits on mergers and who could control competing companies. Morgan s Philanthropy Morgan invested heavily in art collection, both for personal use in his home and for philanthropic donations to the city of New York. Drawing from his vast collections, Morgan helped to organize the Metropolitan Museum of Art (of which he became the president) and the Museum of Natural History. Morgan began collecting art in the 1890s and by the time of his death in 1913, he had spent an estimated $60 million, according to the Morgan Library & Museum in New York City. Morgan also had a vast collection of books, pictures, and clocks that he donated to the Metropolitan Museum.

13 Source: graduate_s/undergraduate_colleg/fordham_college_at_l/special_pr ograms/honors_program/hudsonfulton_celebra/homepage/biographies/jp_morgan_32212.asp