Robert Whaples, Wake Forest University
Andrew Carnegie (November 25, 1835-August 11, 1919) rose from poverty to become an industrial magnate, as well as a prolific and influential writer. His writings celebrated individualism, competition, economic growth and democracy, and challenged the wealthy to practice a philanthropy that would elevate mankind.
When the Carnegie family emigrated from Scotland to western Pennsylvania, poverty compelled thirteen-year-old Andrew to work as a bobbin boy in a cotton factory at $1.20 a week. Making opportunities for himself, working hard, and learning fast, he quickly rose, becoming successively a messenger boy, telegraph operator, secretary to one of the Pennsylvania Railroad’s superintendents, and finally superintendent of the Pennsylvania Railroad’s western division in Pittsburgh at age twenty-three in 1859. During the Civil War, Carnegie helped organize the repair of the rail system around Washington, DC and then organized the Telegraphers Corps. While still working for the railroad during the war, he organized a partnership to manufacture railroad bridges.
Desiring greater autonomy, Carnegie left the railroad in 1865 to run his own enterprises. He marketed bonds and invested in oil and railway sleeping cars, but his primary business was iron-making. Introducing the cost-accounting techniques of the railroad industry and hiring trained chemists, he ruthlessly adopted procedures that cut per-unit costs and soon emerged as one of the industry’s dominant forces. Following a personal demonstration Carnegie decided to adopt Henry Bessemer’s new technology and enter the steel industry, building the Edgar Thompson Works in 1873, just as the Panic of 1873 hit. His deep financial resources allowed him to buy up his hard-pressed partners’ stakes cheaply and gain a majority share of the enterprise.
Carnegie looked upon his industrial rivals as enemies and worked ruthlessly to adopt innovations and cut costs in an effort to defeat them. In the process the price of steel was driven ever lower, benefiting steel buyers and users. In 1883, as steel prices collapsed amid another recession, Carnegie bought out a major competitor, taking ownership of the Homestead steel plant. Homestead became the scene of one of the era’s most famous confrontations between capital and labor in 1892, when the director of Carnegie’s operations, Henry Clay Frick, called on Pinkerton agents to wrest control of the plant from striking workers. Five strikers and three Pinkertons died in the confrontation. The state militia restored order and the union was soon broken, but Carnegie’s reputation was permanently tarnished in the eyes of many, despite the fact that he was living in his summer estate in Scotland when the events transpired.
In the 1890s Carnegie pushed for greater and greater vertical integration, as a way to cut costs and increase profits. He had previously acquired a dominant stake in Frick’s coke business and now leased recently-discovered ore deposits in Minnesota’s Mesabi Range, purchased lake steamers to handle his ore traffic and bought and extended a railroad to link his steel works to Lake Erie — thereby guaranteeing an uninterrupted flow of raw materials to his manufacturing plants. Simultaneously, he adopted the new Siemens open-hearth furnace in his steel works. By the end of the 1890s, Carnegie Steel Company was the world’s largest steel producer, manufacturing a quarter of the nation’s soaring steel output. Profits accumulated at an unprecedented rate, hitting $40 million in 1900. Carnegie’s competitive zeal and unwillingness to collude irked his competitors, as did his moves around 1900 to expand into producing steel goods in hoop, rod, wire and nail mills.
In 1901, amid the most comprehensive merger wave in American history, Carnegie sold his interests to J.P. Morgan’s syndicate. His personal fortune exceeded $300 million — about $6.7 billion at today’s (2004) prices — making him one of the world’s richest men. Thereafter he turned his attention to distributing his wealth and promoting international peace.
As much as he wanted to make money and outdo business rivals, Carnegie had a desire to influence public opinion, publishing numerous magazine articles and books. Carnegie’s general thesis was that America’s democratic institutions and the economic and social freedoms they encouraged were responsible for her ascendance over monarchical Europe. His message and style are exemplified in Triumphant Democracy (1886). “The old nations of the earth creep on at a snail’s pace; the Republic thunders past with the rush of the express,” it opens. Carnegie stood for a meritocracy in which, with integrity, thrift, self-reliance, optimism and hard work, any man and his family could ascend the economic ladder.
Until his later years, he defended the era’s relatively laissez-faire economic policies and championed a Social Darwinist law of competition, “for it is to this law that we owe our wonderful material development, which brings improved conditions in its train.” Carnegie argued that the high tariffs of the late 1800s had little impact on most American manufacturing industries because foreign producers could not have competed successfully in their absence and because American firms competed so vigorously with each other. (Indeed, economic historians agree that America’s comparative advantage in the late 1800s was in goods, like Carnegie’s steel, which relied on non-renewable natural resources.) Carnegie saw free trade as a goal that was not “within the reach of practical politics in the lives of those now living,” because there was no alternative revenue source for the federal government. However, free trade was a distant goal: “Far be it from me to retard the march of the world towards the free and unrestricted interchange of commodities. When the Democracy obtains sway through-out the earth the nations will become friends and brothers, instead of being as now the prey of the monarchical and aristocratic ruling classes, and always warring with each other; standing armies and war ships will be of the past, and men will then begin to destroy custom-houses as relics of a barbarous and monarchical age, not altogether from the low plane of economic gain or loss, but strongly impelled thereto from the higher standpoint of the brotherhood of man.”
While vast income inequalities were “inevitable,” Carnegie did not glorify greed and opulence. Instead, he argued in 1889 in The Gospel of Wealth, that “the man who dies rich dies disgraced,” because the wealthy man should “consider all surplus revenues which come to him simply as trust funds, which he is called upon to administer.” Excess wealth should be distributed by the man who created it, because of his superior wisdom, experience, and ability to administer. With these talents, he could do more to elevate the people, than they or the state could ever do. Carnegie emphasized that wealth should not be given to “charity,” but that it go to libraries, schools, museums and other projects that helped those who would help themselves. By the time of his death in 1919, he had overseen the distribution of nearly $350 million. This included the cost of constructing 2811 public libraries and donations for almost 8000 church organs, as well as funds to endow the Carnegie Foundation for the Advancement of Teaching, the Carnegie Institute of Technology, the Hero Funds, the Scottish Universities Trust, pensions for steelworkers, the Carnegie Institution in Washington, DC, and the Carnegie Endowment for International Peace. Carnegie’s Peace Palace at The Hague was dedicated in 1913. A year later World War I began, shattering Carnegie’s hopes and precipitating a slide into declining health and death.
References
Carnegie, Andrew. Triumphant Democracy; or, Fifty Years’ March of the Republic. New York: Scribners, 1886.
Carnegie, Andrew. Autobiography of Andrew Carnegie. Boston: Houghton Mifflin, 1920.
Hughes, Jonathan R. T. The Vital Few: American Economic Progress and Its Protagonists. Boston: Houghton and Mifflin, 1965.
Livesay, Harold. Andrew Carnegie and the Rise of Big Business. Boston: Houghton Mifflin, 1975.
Nasaw, David. Andrew Carnegie. New York: Penguin, 2006.
Wright, Gavin. “The Origins of American Industrial Success, 1879-1940.” American Economic Review 80, no. 4 (1990): 651-668.
Citation: Whaples, Robert. “Andrew Carnegie”. EH.Net Encyclopedia, edited by Robert Whaples. January 11, 2005. URL http://eh.net/encyclopedia/carnegie-andrew/