Sunday, April 20, 2014

Andrew Carnegie: Steel Man and Philanthropist

Andrew Carnegie
The modern world has seen developments in communication with smart phone flooding the market. Most people now live in cities with skyscrapers appearing over the skies. Weapons of war developed rapidly with new modern tanks and fighter planes liter the battlefield. All of these developments owed to one material – Steel. During the 19th-century, steel was just at its infancy. However, many saw potential with these new material. One man that made a huge profit out of it and began to produce it in large quantities, paving the way for a new modern industrialize America.

Andrew Carnegie (November 25, 1835 - August 11, 1919) was an American industrialist that focused in producing steel. Along with the other gigantic tycoons, he was dubbed by the public as a Robber Baron because of abusive and monopolistic business practices. Through his company, Carnegie Steel, modern America, along with its skyscrapers, bridges, and other infrastructure, rose. Carnegie also became known for his numerous philanthropic works. From his wealth from steel, educational institutions and charity foundations were founded.

Like John D. Rockefeller, Andrew Carnegie was born from a poor family; and like Jacob Astor, they were immigrants. He was born on November 25, 1835 in Dunfermline, Scotland into the family of William Carnegie and Margaret Morrison Carnegie. His father was once a textile weaver in a factory but when the factory system of Richard Arkwright and the Industrial Revolution dawned, he became a victim of mechanization and got laid off. His unemployment eventually brought the family into poverty. When the young Andrew Carnegie was only thirteen years old, the family decided to move to the United Sates of the America in search of a better life. They later on settled down in Allegheny, Pennsylvania. His father began to work in a cotton factory but perhaps due to cultural shock, he suddenly left the job. His father then chose to hand weaved textile products and sell them door-to-door.  The income proved not sufficient to meet the needs of the family and poverty plagued the family. Andrew decided to sacrifice his formal education to work in order to help his parents. He took a job in a cotton factory and earned $1.20 per week. At fourteen, he left the factory and worked as a messenger boy for the Pittsburgh Telegraph Office. Andrew Carnegie proved to be a diligent and a hardworking boy. Soon afterwards, he was promoted to operate the telegraphs.

As a young working boy, education became a luxury but for the Andrew it was not a hindrance for learning. Although he stopped to receive formal education, he never stopped learning in other ways. Every weekend, he spent time to the libraries of the wealthy who were kind enough to allow him to use it. Through the libraries he became a cultured man. He loved theaters, music, and, off course, books. His loved of libraries would become one of his advocacies later in his life.

At the age of eighteen, Carnegie was approached by his future mentor, Thomas Scott. Tom Scott was a rising figure at the Pennsylvania Railroad. Seeing the perseverance of the young Carnegie, he offered him a job as his personal telegraph operator and his personal assistant. Carnegie accepted the job and the companionship of the two began until the death of Thomas Scott in 1881. Under Scott, his family’s life began to improve. He also began to learn many things about business maters alongside of him. He was well-paid by Tom Scott, earning $35 a week. When his father died in 1855, he managed to help and support his family and even bought a new home for his mother. The Carnegie's fortune even rose further during the Civil War. Tom Scott was placed in charge by the government to manage the transportation and communication network of the army. As personal secretary of Scott, Carnegie helped as well by organizing the telegraph communication systems and learning more about management. After the war, Carnegie and Scott had amassed a lot of wealth.

Carnegie, during the Civil War, also started his new business. In 1862, he organized the Keystone Bridge Company, which would build bridges that would utilize a growing material during the war period – Steel. The Keystone Bridge Company was responsible for the construction of many steel bridges, including the Brooklyn Bridge and the Eads Bridge that connects the east and west bank of the Mississippi River. Then in 1867, he organized Keystone Telegraph Company that would lay out telegraph wire alongside railroads to increase the network of communication. The two companies achieved success and brought Carnegie more income.

Before the Keystone Telegraph Company, Carnegie already laid his eyes on the steel industry. He saw the potential of steel during the war, the construction of bridges, and with the introduction of the Bessemer process. The process, developed by Henry Bessemer, allowed the mass production of steel. In 1865, Carnegie resigned from Pennsylvania Railroad in order to begin his idea of mass producing steel in America. From 1865 up to 1870, he invested his wealth to iron mills, including the Union Iron Mills. In 1872, with partnership of Carnegie, David McCandless, and other investors, the Carnegie, McCandless & Company was formed. It had a plant in Badrdock that had the first blast furnace that would produce rails. By 1878, his company was worth $1.25 million.

To produce cheap steel, he utilized what is now today known as vertical integration. Vertical integration involves owing companies that produce raw materials, transportation, and processing plants. Under this principle, he bought iron mines and railroad tracks to lessen expenses. Then in the late 1870’s and early 1880’s, Carnegie bought several steel producing firms that own coal lands and ovens. One of the companies that he acquired was owned by a man infamous for sinister practices - Henry Frick.

Frick eventually played a huge role in Carnegie Steel and also for the bad image that would be blamed to Carnegie. When Frick’s company was bought by Carnegie, he became a business partner. In 1892, Frick was made chairman of Carnegie Steel. While Carnegie was in New York, managing the sales and planning of cost efficient ways of producing steel, Frick stayed in their plants in Pittsburgh to manage the production. The partnership was later tested with issues concerning a production plant in a Pennsylvanian town of Homestead in 1892.

Homestead would mark the view of the people to Andrew Carnegie and his chairman, Henry Frick. The steel plant in Homestead was acquired by Carnegie in 1883. He spent a lot of money to re-equip it with modern machinery and made it into one of his biggest steel mills in the country. However, when he acquired the plant, he also took responsibility in the labor dispute, that raged even before the acquisition, between management and the worker's union, the Amalgamated Association of Iron and Steel Workers. A showdown in 1889 forced the management to create a profit-sharing plan with the union and a collective-bargaining agreement for three year. Conditions, however, didn’t change that much. Working conditions were still dangerous and very difficult. Wages were still kept low. In 1892, Carnegie formally created the Carnegie Steel. Henry Frick was made chairman of the new steel company. Carnegie was determined to crush the union. He placed Frick as his general in charge of the fight. While Frick will lead the fight, Carnegie left for Scotland to distance himself from the upcoming battle and the backlash that would follow. With the collective-bargaining agreement ending in June 1893, new negotiations were underway on February. Frick stood firm on his position of not backing down to the union. To press his point, he decided to lower wages further. In June 30, with no agreement being reached, the union announced a strike and placed a lockdown on the plant. Frick then sent in his hired private army - the Pinkertons – to crush the union. In July 6, three hundred Pinkertons arrived by barge through the Monongahela River that is beside the plant. A shootout then erupted between the Pinkertons and some armed strikers. On that day, five workers and three Pinkertons lay dead, and many more were injured.  Fighting continued until July 12, when the State Governor intervened and sent in the state militia to secure peace in the area. Few months later, the strike ended. The plant returned to the management as well.

The bloody strike clashes brought anger among the public. Many criticized Carnegie for not acting to prevent such tragedy. Frick also shared some lash out from the public. It even reached to the point that someone attempted to kill Frick for his decision during the strike. Both men’s reputation was heavily damage because of the strike.

After eight years from the formal creation of Carnegie Steel, a huge life changing event for Carnegie happened. J.P. Morgan, one of the greatest financiers of that time, became interested in the steel industry. He placed his sights on Carnegie Steel. With the help of Charles Schwab, the new chairman of the Carnegie Steel (after Frick was removed in 1899), Morgan got the selling price of the Carnegie Steel. In 1901, Carnegie sold his steel company to Morgan at the price of almost $500 million. Morgan reorganized Carnegie Steel and rebranded it as US Steel, the first billion dollar corporation in the world. Meanwhile, after the transaction with Morgan, Carnegie became the richest man in the world.

After Carnegie sold Carnegie Steel, he became an avid philanthropist and a supporter of arts and education. Even before the selling of Carnegie Steel, he already devoted time on many other activities. He was a writer. In 1886, he published the “Triumphant Democracy” that praised the US for being the land of opportunity. Then in 1889, he published the “Gospel of Wealth” where he discussed that the rich has the responsibility to help the poor. He was not just preaching but also practicing charity. He donated over $350 million through his whole life. He gave donations for the construction of the Carnegie Hall in 1890; in 1895, he founded the Carnegie Institute of Pittsburgh. In 1900, he established the Carnegie Technical School (later Carnegie-Mellon University). After his retirement in 1901, he focused even more on his philanthropic work. In 1902, he established the Carnegie Institute of Washington. In 1905, he established the Carnegie Foundation for the Advancement of Teaching. Then in 1910, Carnegie established the Carnegie Endowment for International Peace. Other than these foundations and institutes, he also established about 3,000 libraries all over the US and the world.

Andrew Carnegie met his end on August 11, 1919 at the age of 83 in Lenox Massachusetts. Even at the time of his demise, he gave the rest of his money to charities.

Among the robber barons, Carnegie was an interesting figure. He was among the pioneers of philanthropic work. He was very much passionate on giving back to the poor. However, his activities were still shadowed by the decisions of men he trusted. He very much received the bad reputation for their decisions. 
Geisst, C. Encyclopedia of American Business History. New York: Facts On File, 2006. 

Lawrence, B. Fascinating Facts From American History. Maine: J.W. Walch, 1995. 

Northrup, C. The American Economy: A Historical Encyclopedia. California: ABC-CLIO, 2003. 

"Andrew Carnegie Biography." Encyclopedia of World Biography. Accessed May 16, 2013.

"The New Tycoons: Andrew Carnegie." U.S. History: Pre-Columbia to the New Millenium. Accessed May 16, 2013.

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