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Carnegie, Andrew - Overview, Personal Life, Career Details, Chronology: Andrew Carnegie, Social and Economic Impact

steel company million railroad

Carnegie Steel


The wealthiest man of his time, industrialist Andrew Carnegie is best known today for the monumental philanthropic projects he established after his retirement. Having made millions in the steel industry during the late 1800s, Carnegie dedicated his fortune to the educational and philanthropic causes he considered to be the proper beneficiary of capitalist profit.

Personal Life

Carnegie’s early life fostered both his ambition and his radical attitude toward wealth. He was born in Dunfermline, Scotland, in 1835, the oldest child of Margaret and Will Carnegie, a handloom weaver. His parents instilled in Andrew a strict work ethic and a belief that wealth carries with it social responsibilities. When steam-powered machines made handlooms obsolete around 1847, weavers in Scotland agitated for economic reforms, but there was little hope of success. At the urging of his socially-ambitious wife, Will Carnegie moved his family to the United States in 1848. They settled in Allegheny, Pennsylvania, near Pittsburgh, where Will Carnegie struggled to support his family. Young Andrew immediately began factory work, earning $1.20 per week as a bobbin boy in a textile mill. Soon he obtained a better job as a messenger in a telegraph office. Andrew memorized addresses and names to speed up his errands and was quickly promoted to telegraph operator. In 1853 he became assistant to Thomas Scott, superintendent of the company’s western division.

By 1855 when Will Carnegie died, Andrew was the sole financial support for his mother and younger brother, Tom. He was only 20 years old. Although there was no opportunity for formal education, Andrew studied as much as he could at the free public library and learned double-entry bookkeeping at night school. He became an avid reader, a sophisticated lover of music, and a theatergoer with a passion for Shakespeare (he knew the Bard’s work so well he could recite entire scenes from memory). By 1859, the young Carnegie was financially secure enough to move with his mother to the upscale suburb of Homewood. In 1864, Carnegie was drafted into the Union Army, but he paid a replacement soldier $850 to serve for him, a widely accepted practice at the time.

Carnegie was greatly influenced by his strong-willed mother, who was proud of her son’s success and paraded in front of her former townspeople when she and Carnegie visited Dunfermline in 1881. Because of Margaret’s disapproval, Carnegie put off marriage to Louise Whitfield, whom he had met in 1870, until after his mother’s death. In 1886 Carnegie came down with typhoid, and suffered a serious relapse when he learned of his brother’s death. A month later, when Margaret died, Carnegie was still so ill that his mother’s coffin was lowered from her bedroom window in order to keep her death a secret from her son. Carnegie married Louise Whitfield in 1887, and in 1897 their daughter Margaret was born. That same year Carnegie bought Skibo Castle in Scotland, where he spent about half of each year until he retired in 1901. In 1916, Carnegie bought Shadowbrook, an estate in Lenox, Massachusetts, where he died in 1919.

Career Details

Much of Carnegie’s success came from his extraordinary ability to recognize and exploit the opportunities being created by industrialization. During his 12 years with the Pennsylvania Railroad, he developed the managerial skills and personal relationships that would help him in his later business ventures. He learned how the railroad industry worked and introduced such innovations as keeping the telegraph office open 24 hours a day and burning railroad cars after accidents to clear the tracks quickly. During the Civil War, he organized the military telegraph system for the North and gained additional insights into the industry. Seeing the commercial potential of sleeping cars on trains, Carnegie invested $217.50, which he obtained through a bank loan, in the Woodruff Sleeping Car Company. Within two years, he was receiving an annual return of about $5000, more than three times what he was earning at the railroad. Carnegie also became a silent partner in several small iron mills and factories. By 1863 his annual income was $42,000.

In 1865, Carnegie retired from the railroad and founded the Keystone Bridge Company, which used iron rather than wood in the construction of bridges. Tom Scott loaned Carnegie half the $80,000 needed for this investment. Two years later, Carnegie founded the Keystone Telegraph Company, which received permission from the Pennsylvania Railroad to string telegraph wires across their poles. This proved so valuable that Keystone merged with the Atlantic Telegraph Company and tripled its investors’ return. Between 1865 and 1870, Carnegie traveled between the United States and England selling U.S. railroad and bridge company bonds. He may have sold as much as $30 million in bonds and made as much as $1 million in commissions.

Chronology: Andrew Carnegie

1835: Born.

1848: Emigrates with family to United States; settles near Pittsburgh.

1856: Invests in railroad sleeping cars.

1861: Invests in oil and other companies.

1865: Retires from railroad; founds Keystone Bridge Company.

1872: Visits Bessemer steel plants in England.

1875: Opens his first steel plant, Edgar Thomson Works, in Braddock, PA.

1881: Assumes control of Frick Coke Company.

1883: Buys Homestead Works steel mill.

1889: Publishes “Gospel of Wealth.”

1899: Forms Carnegie Steel from his several steel companies.

1901: Sells out to Morgan, becoming richest man in the world.

1919: Dies at estate in Lenox, MA.

By 1870 Carnegie realized that steel would inevitably replace iron in the expanding market for building products. He withdrew from his other investment activity to concentrate on steel manufacturing. With his own capital, he built his first blast furnace that year and another in 1872. He persuaded some of his Pittsburgh business acquaintances to join him in steel manufacturing and with them formed Carnegie, McCandless, and Company (later known as Carnegie Steel). The company employed the innovative Bessemer method, which Carnegie had witnessed on a visit to Bessemer’s steel plants in England in 1872. This process, which forces compressed air through molten iron to burn out excess carbon and other impurities, significantly cut the cost of converting iron into steel. In 1875 Carnegie opened his first steel plant in Braddock, Pennsylvania, naming it after the president of the Pennsylvania Railroad, Edgar Thomson. The plant’s first order, for 2,000 steel rails, was placed by the Pennsylvania Railroad. Carnegie also introduced open-hearth steel production to his plants, which lowered the costs and increased sales and profits. Carnegie consistently invested his profits back into the company to make improvements, cut operating costs, and drive out competition. By 1878 the company was capitalized at $1.3 million and it continued to grow, making Carnegie the dominant steel manufacturer in the country.

In the 1880s Carnegie acquired a majority interest in the H. C. Frick Company, which produced coke—a component in the manufacture of steel. Carnegie and Frick made a formidable business team, with Carnegie overseeing expansion, installation of cost controls, and modernization of plants while Frick controlled day-today management. In 1883, Carnegie bought the Homestead Works to produce steel structural members for elevated railways and skyscrapers-products in increasing demand in growing urban centers. Despite a harsh national depression from 1893-1896, the Carnegie Company, following Carnegie’s command to “Take orders and run full,” held prices down, kept skilled workers on the payroll, and earned profits. By 1890, Carnegie’s take-home pay was $25 million per year. A decade later, Carnegie Steel’s annual profits were $40 million.

Carnegie had always fought cartels, but by the 1890s he was beginning to encounter increasing competition from newly-formed corporations headed by J. P. Morgan and the Moore Brothers. These corporations wanted to impose stability on the steel industry by controlling prices and by limiting competition through pools and cartels. At first, Carnegie refused to bargain with these corporations, but by 1901 he wished to retire from business and devote himself to family life and philanthropy. J. P. Morgan bought Carnegie’s controlling interest in Carnegie Steel for $500 million and restructured the business to create U.S. Steel Corporation. Carnegie’s personal share in the buyout was $225 million, making him the wealthiest man in the world.

Social and Economic Impact

Carnegie played a significant role in building and modernizing American industry. He utilized not only the vast natural resources of the continent that provided the raw materials of manufacturing, but also a huge labor pool—new immigrants—eager for employment. Carnegie was quick to appreciate new technology, and although he did not invent his own innovations, he brought to his plants technological improvements that dramatically increased productivity and profits. With no public regulation of business during this era, Carnegie took advantage of the freedom to set hours, wages, and business practices as he saw fit. By emphasizing efficiency of production, he kept costs low and expanded markets for steel products. Steel became a pillar of the American economy, driving manufacturing and providing the materials needed for continued western expansion and rapid urban growth.

Carnegie’s business practices also affected the position of struggling workers. In an era that lacked laws that protected workers’ rights, Carnegie was not anti-union. In 1886, he published an article in Forum Magazine defending workers’ right to form a labor union, and the following year he intervened to force his partner, Henry Clay Frick, to settle a strike that Frick had wished to break. But by increasing efficiency in his plants, Carnegie made labor conflicts inevitable because efficient production required fewer workers. In 1892, when the union contract at the Homestead mill expired, the workers organized a strike. Carnegie was on vacation in Scotland and at first directed Frick to honor the strike. When Frick made it clear that he intended to smash the union, Carnegie remained silent. On July 6, 1892, 300 Pinkerton Agents entered the area to break the strike, and a bloody battle ensued. Five strikers and three Pinkertons were killed, and scores were injured on both sides. For the next two months, the plant operated under military protection from the state militia, until the union finally called the strike off. This event soured labor toward Carnegie; his company was to remain nonunion until the mid-1930s.

Carnegie’s success at business revolutionized the steel industry and helped the United States become an industrial leader. However, his impact on American society through philanthropy would outlast the industrial age. Carnegie followed the vision he set out in The Gospel of Wealth and dedicated his retirement to the proper distribution of his fortunes for the public good. He strongly supported education and the arts. In 1891 he founded a concert hall in New York City. He generously provided funds to cities interested in building public libraries. Most notably, in 1901 he gave the New York public library $5.2 million to open its first public branches. In total he donated over $50 million to build 2,800 public libraries in the United States and Great Britain. His belief in the free access to books is evident in an excerpt from his address at the dedication of the Carnegie Library of Pittsburgh in 1895: “It is the mind that makes the body rich. There is no class so pitiably wretched as that which possesses money and nothing else. Money can only be the useful drudge of things immeasurably higher than itself My aspirations have contributed to the enlightenment and the joys of the mind, to the things of the spirit, to all that tends to bring into the lives of the toilers of Pittsburgh sweetness and light. I hold this the noblest possible use of wealth. The taste for reading is one of the most precious possessions of life, and I should much rather be instrumental in bringing to the working man or woman this taste than mere dollars. It is better than a fortune.”

Carnegie also supported higher education and efforts for world peace. In 1898, he advocated for independence for the Philippines, which the United States had purchased from Spain for $20 million after capturing the islands during the Spanish-American War. Carnegie offered to donate that price for the islands to purchase their freedom, but this bid was unsuccessful. Carnegie also established the Carnegie Endowment for International Peace in 1910, and provided funds for the construction of the Central American Court of Justice in Costa Rica, destroyed later that year in an earthquake. Carnegie donated money to universities in his native Scotland, and in 1900 founded the Carnegie Institute of Technology (which later became Carnegie-Mellon University) in Pittsburgh. In 1902 he founded a scientific research institution called the Carnegie Institution in Washington, D.C. and in 1905 he established the Carnegie Foundation for the Advancement of Teaching. Six years later Carnegie allocated $125 million to the Carnegie Corporation of New York for educational advancement through schools, libraries, research, and publication. By the time of his death in 1919 Carnegie had succeeded in distributing over $350 million-in all, 90 percent of his fortune.

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