home | authors | books | about

Home -> Burton J. Hendrick -> The Age of Big Business, A Chronicle of the Captains of Industry -> CHAPTER III

The Age of Big Business, A Chronicle of the Captains of Industry - CHAPTER III










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

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, longdrawn-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

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.

© Art Branch Inc. | English Dictionary