Andrew Carnegie
Generous and naive while often grasping and ruthless, Andrew Carnegie personally embodied the
contradictions that divided America in the Gilded Age. At a time when America struggled--often
violently--to sort out the competing claims of democracy and individual gain, Carnegie
championed both. He saw himself as a hero of working people, yet he crushed their unions. The
richest man in the world, he railed against privilege. A generous philanthropist, he slashed the
wages of the workers who made him rich.
The roots of Carnegie's internal conflicts were planted in Dunfermline, Scotland, where he was
born in 1835, the son of a weaver and political radical who instilled in young Andrew the values of
political and economic equality. His family's poverty, however, taught Carnegie a different lesson.
When the Carnegies emigrated to America in 1848, Carnegie determined to bring prosperity to his
family.
Carnegie's climb from the slums of Pittsburgh to the mansions of New York paralleled America's
transformation from a sleepy agricultural nation into the world's foremost industrial power. By
1868 Carnegie, then 33, was worth $400,000 (nearly $5 million today). But his wealth troubled
him, as did the ghosts of his radical past. He wrote himself a telling letter, promising that he would
stop working in two years and pursue a life of good works: "To continue much longer
overwhelmed by business cares... must degrade me beyond hope of permanent recovery."
Yet Carnegie's business cares held him in sway. For three decades, he dominated the steel industry,
and although he allowed himself time for vacations in Scotland and for his troubled courtship of
Louise Whitfield, his thoughts rarely strayed from his mills.
Carnegie did not forget his radical roots. In a period of turbulent labor unrest, Carnegie publicly
supported the unions. In his own mills, though, his position was less clear. He usually avoided
using strike breakers, but drove a hard bargain and typically got his way, most notably during the
bloody lockout at his Homestead works in 1892.
With his partner Henry Clay Frick, Carnegie broke the steel unions. His empire grew. By 1900,
Carnegie Steel produced more steel than the entire British steel industry. When he sold the
company to J.P. Morgan in 1901, Carnegie personally earned $250 million (approximately $4.5
billion today).
Carnegie then turned his enormous energies to philanthropy and the pursuit of world peace, hoping
perhaps that donating his wealth to charitable causes would mitigate the grimy details of its
accumulation. In the public memory, he may have been correct. Today he is most remembered for
his generous gifts of music halls, educational grants, and nearly 3000 public libraries. By the time
of his death in 1919, he had given away over $350 million (more than $3 billion in 1996 dollars).
The Steel Business
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 pro
Carnegie's steel was cheap. Suddenly bridges and skyscrapers were not only feasible but
affordable, too. Steel fed national growth, accelerating the already booming industrial sector. Steel
meant more jobs, national prestige, 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 their unions and control over their own labor.
To the casual observer a Carnegie mill was chaos. "Wild shouts resounded amid the rumbling of
an overhead train," McClure's Magazine reported of the Homestead mill in 1894. "On every side
tumultuous action seemed to make every inch of ground dangerous. Savage little engines went
rattling about among the piles of great beams. Dimly on my left were huge engines, moving with
thunderous pounding."
Indeed, 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 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 1893. "Sometimes a chain breaks,
and a ladle tips over, and the iron explodes.... Sometimes the slag 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 paramount. 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 always the most productive in the world.
The Steel Business: The Lot of a Steel Worker
The life of a 19th-century steel worker was grueling. Twelve-hour shifts, seven days a week.
Carnegie gave his workers a single holiday-the Fourth of July; for the rest of the year they worked
like draft animals. "Hard! I guess it's hard," said a laborer at the Homestead mill. "I lost forty
pounds the first three months I came into this business. It sweats the life out of a man. I often drink
two buckets of water during twelve hours; the sweat drips through my sleeves, and runs down my
legs and fills my shoes."
For many the work went without a break; others managed to find a few minutes here and there.
"We stop only the time it takes to oil the engine," a stop of three to five minutes, said William
McQuade, a plate-mill worker in 1893. "While they are oiling they eat, at least some of the boys,
some of them; a great many of them in the mill do not carry anything to eat at all, because they
haven't got time to eat.
For his trouble, the average worker in 1890 received about 10 dollars a week, just above the
poverty line of 500 dollars a year. It took the wages of nearly 4,000 steelworkers to match the
earnings of Andrew Carnegie.
CORNELIUS VANDERBILT
Cornelius Vanderbilt (May 27, 1794-January 4, 1877) was an American steamship and railroad
builder, executive, financier, and promoter. He was a man of boundless energy, and his acute
business sense enabled him to outmaneuver his rivals. He left an estate of almost $100 million.
Vanderbilt was born to a poor family and quit school at the age of 11 to work for his father who
was engaged in boating. When he turned 16 he persuaded his mother to give him $100 loan for a
boat to start his first business. He opened a transport and freight service between New York City
and Staten Island for eighteen cents a trip. He repaid the loan after the first year with an additional
$1,000. He was rough in manners and developed a reputation for honesty. He charged reasonable
prices and worked prodigiously.
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 possessed $9,000 in addition to the
interest in the sailing vessels.
Well on the way to fame and fortune, Vanderbilt sold his interests and turned his attention to
steamboats in 1818, observing the success of Robert Fulton and Robert Livingston on the Hudson
River. He went under the employ of Thomas Gibbons, operating a ferry service between New
Brunswick, New Jersey and New York City, which was an important link in the New YorkPhiladelphia freight, mail, and passenger route. He charged his customers one dollar while other
captains charged four dollars for the same trip. There was opposition from Fulton and Livingston,
who claimed Vanderbilt was breaking the law as they had a legal monopoly on Hudson River
traffic. They sued Gibbons, and the case reached the Supreme Court. In the famous 1824 decision,
Gibbons vs. Ogden, Vanderbilt scored a victory. The Supreme Court judges nullified the
navigation monopoly New York State had granted Fulton and Livingston and Vanderbilt gained
control of much of the shipping business along the Hudson River. During the next eleven years,
Vanderbilt made himself and Gibbons a fortune. Vanderbilt's wife also made money managing the
New Brunswick halfway house where all travelers on the Gibbons line had to stay.
By 1829 Vanderbilt decided to go on his own and entered the competitive service between New
York and Peekskill, where he had the first of several encounters with Daniel Drew. Vanderbilt won
by cutting rates to as low as 12 1/2 cents, which forced Drew to withdraw. Next he challenged the
Hudson River Association in the Albany trade. After he again cut rates, the competition paid him
off to move his operations elsewhere. Vanderbilt opened service to Long Island Sound,
Providence, Boston, and points in Connecticut. The vessels offered the passenger not only comfort,
but often luxury. By the 1840's he was running more than 100 steamboats and his company had
more employees than any other business in the United States. Vanderbilt is given credit for
bringing about a great and rapid advance in the size, comfort, and elegance of steamboats which
were considered "floating palaces". In 1846 he launched on the Hudson the finest boat yet seen by
New Yorkers and named it for himself.
By the time he was 40, Vanderbilt's wealth exceeded $500,000, but he still looked for new
opportunities. During the California gold rush of 1849, people traveled by boat to Panama, by land
across the Isthmus on muleback, and onto steamers to the Pacific coast. Vanderbilt challenged the
Pacific Steamship company by offering similar service via an overland route across Nicaragua,
which saved 600 miles and cut the going price by half. This move netted him over $1 million a
year. In the process he improved to some extent the channel of the San Juan River, built docks on
the east and west coasts of Nicaragua and at Virgin Bay on Lake Nicaragua, and made a twelvemile macadam road to his west coast port. He began construction of a fleet of eight new steamers
and the route was two days shorter than that via Panama. He greatly reduced the New York-San
Francisco passenger fare and garnered most of the traffic.
He made money so rapidly, that in 1853 he announced that he was going to take the first vacation
of his life. He built a sumptuously appointed steam yacht, The North Star and embarked for a
triumphal tour of Europe. Before going abroad, Vanderbilt resigned the presidency of the
Accessory Transit Company, and committed its management to Charles Morgan and Cornelius
Garrison, who, during his absence, manipulated the stock and secured control of the company. By
shrewd buying he won it back in a few months. However, the Nicaraguan government rescinded
the company's charter on the grounds that its terms had been disregarded, and issued a new charter
to a rival group. He sold controlling interests to the Nicaragua Transit Company, which failed to
pay him. In a famous incident, he told them that the law was too slow; rather, he would ruin them.
He did this in just two years by running another group of steamers.
In the 1850's he dabbled in the Atlantic carrying trade competition for passenger service between
New York and France with the Cunard and Collins lines. He built three vessels, one of which, the
Vanderbilt, was the largest and finest he had yet constructed. It was an unprofitable venture,
however, and at the beginning of the Civil War he sold his Atlantic line for $3 million. He retained
the Vanderbilt, which he fitted up as a warship and turned over to the government. It has been
claimed that he intended only to make a loan of the vessel, but it was interpreted as a gift.
Vanderbilt liked making money more than spending it. One of the few purchases he was willing to
make was his Staten Island mansion, the only place he felt truly comfortable. The New York City
elite snubbed him, saying he was a rich but hopelessly vulgar man.
Nearing the age of 70, Vanderbilt decided once again that the wave of the future was in another
direction -- building a railroad empire. He first acquired the New York and Harlem Railroad, in the
process again defeating Daniel Drew. He next acquired the rundown Hudson River Railroad,
which Cornelius wanted to consolidate with the Harlem. Again Drew attempted to sell the stock
short, defeat the consolidation, and make a substantial profit. But, as before, the Commodore won
the battle by buying every share Drew sold, thereby stabilizing the price.
Vanderbilt acquired the Central Railroad in 1867, merged it with the Hudson River Railroad by
legislative act, and leased the Harlem to the new company. He spent large sums of money
improving the lines' efficiency and then increased the capital stock by $42 million (which was a
stockwatering operation of magnitude) and paid large dividends. In the first five years, he is said to
have cleared $25 million.
Vanderbilt finally hit a snag in 1867 when he attempted to gain control of the Erie Railroad, then
in the hands of his old adversary, Daniel Drew. Again Vanderbilt bought all the stock offered for
sale, but this time Drew threw 100,000 shares of fraudulent stock certificates on the market, which
Vanderbilt continued to buy. Drew and his cohorts fled to Jersey City to avoid prosecution and
bribed the New Jersey legislature to legalize the stock issue. Vanderbilt, tottering on the brink of
failure, lost millions on the coup but fought back. Although the illegal stock was finally authorized
by the legislature, Vanderbilt lost between $1 -$2 million and forgot the Erie. Upon the insistence
of Vanderbilt's son William, he extended his line to Chicago by acquiring the Lake Shore and
Michigan Southern railroads, the Canadian Southern, and the Michigan Central thereby creating
one of the greatest American systems of transportation.
Vanderbilt's influence on national finance was stabilizing. When the panic of 1873 was at its
worst, he announced that the New York Central was paying out millions of dividends as usual, and
let contracts for the building of the Grand Central Terminal in New York City, with four tracks
leading from it, giving employment to thousands of men. He saw to it, however, that the city paid
half the cost of the viaduct and open-cut approaches to the station. By 1875, his New York Central
Railroad controlled the lucrative route between New York and Chicago.
Vanderbilt was never known for philanthropic activities. His only unsolicited contributions were
$50,000 for the Church of the Strangers in New York City and $1 million to Central University,
which then became Vanderbilt University. Upon his death, he was the richest man in the United
States. Cornelius Vanderbilt left the bulk of his fortune - $95 million - to his son William.
J.P. Morgan
John Pierpont Morgan (1837-1913) began his career in 1857 as an accountant, and worked
for several New York banking firms until he became a partner in Drexel, Morgan and
Company in 1871, which was reorganized as J.P. Morgan and Company in 1895.
Described as a coldly rational man, Morgan began reorganizing railroads in 1885,
becoming a board member and gaining control of large amounts of stock of many of the
rail companies he helped restructure. In 1896, Morgan embarked on consolidations in the
electric, steel (creating U.S. Steel, the world's first billion-dollar corporation, in 1901), and
agricultural equipment manufacturing industries. By the early 1900s, Morgan was the main
force behind the Trusts, controlling virtually all the basic American industries. He then
looked to the financial and insurance industries, in which his banking firm also achieved a
concentration of control. Morgan was also among the foremost collectors of art and books
of his day; his book collection and the building that housed it in New York City are now
The Pierpont Morgan Library.
JP Morgan biography:
The most influential banker in history
John Pierpont (JP) Morgan was born on April 17, 1837 in Hartford, Connecticut
to parents Juniet Spencer Morgan and Juliet (Pierpont) Morgan. His father was
a partner of the firm George Peabody & Co. so by no means was JP Morgan
born into a poor family. After he completed school at the English school in
Boston, he went to the University of Gottingen in Germany.
When he returned to the US in 1857 he got a job working for the private
banking house Duncan, Sherman and Company. In 1860 he was appointed as
the American agent and attorney for George Peabody & Company in which his
father was a partner. This later became J.S. Morgan & Co and when his father
died in 1890 he left it to JP Morgan giving him important European
connections and enabling him to run a large foreign reserve business.
By the time of his father's death, JP Morgan had already established himself
as a financier through Dabney, Morgan & Co. and later Drexel, Morgan & Co.
It was after the Civil War that he started buying distressed businesses and
especially railroad companies. Some of these railroads include the West
Shore, Philadelphia and Reading, Richmond Terminal, the Erie and the New
England railroads. His process of buying and consolidation of railroads came to
be known as Morganization.
On several occasions, JP Morgan also helped the government in its finances.
In 1877, together with August Belmont and the Rothschilds, they floated $260
million in US government bonds. After the government ran into some gold
problems, he bought $200 million worth of government bonds with gold
thereby preserving the credit of the United States. Some of his detractors
had, however, heavily criticised him for the harsh terms of the loan. This had
also resulted in a Congressional hearing in 1912, but he walked away largely
unscathed.
Perhaps the biggest deal he was ever involved in was the forming of the US
Steel Corporation, the first billion-dollar corporation. He had bought some
mills from Andrew Carnegie and together with some other steel assets formed
US Steel - worth approximately $1.2 billion. He was also involved with several
other companies and sat on quite a few boards. A few of the better known
ones include Western Union Telegraph Company and General Electric.
At the time of his death on March 31, 1913 he had an estate worth $80
million (today around $1.2 billion). Compared to his peers of the time,
especially Rockefeller, it was not such a large estate. In fact, it was
Rockefeller's comment at the time, "And to think he wasn't even a rich man."
Yet, JP Morgan's power did not lie in the millions he had, it lay in the billions
he controlled.
J.P. Morgan
During the Gilded Age, J.P. Morgan stood astride the nation's financial world
like a colossus. His banking house erected the structure of the most
prominent American industries in the Gilded Age beginning with the railroad.
Convinced that cutthroat competition had to give way to order, he
consolidated competing railroad lines and many other industries. He organized
syndicates to float bond and stock issues that gave birth to such companies as
AT&T (which dominated the nation's telephone industry for decades), General
Electric, and U.S. Steel (the world's largest steel manufacturer). A voracious
collector, he also spent $60 million on paintings, sculptures, rare books, and
manuscripts.
His critics considered him a ruthless capitalist pirate, the personification of the
oppressive power of Wall Street that would crucify mankind on a cross of gold.
But his goal was to replace cutthroat competition with economic stability.
Morgan was instrumental in helping to create the modern American economy.
After the Panic of 1893, he reorganized many bankrupt railroads and
industrial companies. He assembled U.S. Steel, the world's first billion-dollar
corporation, and helped establish International Harvester and General Electric.
He believed that the combination of rival interests into rational systems was
necessary to stabilize the U.S. economy and to prevent harmful price wars.
During a financial panic in 1907, which threatened to trigger a run on the
nation's banks, Morgan took charge. He assembled the leading bank
presidents in his library and locked the door. At 4 a.m., his lawyer read them
an agreement stipulating how much each must pledge to the bailout package.
"There the place..." Morgan told one banker, "and here's the pen."
John D. Rockefeller
"Mr. Rockefeller, your fortune is rolling up like an avalanche! You must distribute it faster than
it grows! If you do not, it will crush you and your children and your children's children!"
–The Rev. Frederick Gates, hired by John D. Rockefeller to guide his philanthropy
The world's first billionaire, John D. Rockefeller Sr. held 90 percent of the world's oil
refineries, 90 percent of the marketing of oil, and a third of all the oil wells. Working
methodically and secretly, he did more than transform a single industry. When he formed his
feared monopoly, Standard Oil, in 1870 he changed forever the way America did business.
Because of the ruthless war he waged to crush his competitors, Rockefeller was to many
Americans the embodiment of an unjust and cruel economic system. Yet he lived a quiet and
virtuous life. "I believe the power to make money is a gift of God," Rockefeller once said. "It
is my duty to make money and even more money and to use the money I make for the good
of my fellow men." By the end of his life he had given away half his fortune. But Rockefeller's
vast philanthropy could not erase the memory of his predatory business practices. In 1902,
when McClure's magazine published journalist Ida Tarbell's scathing exposé of Standard Oil, it
unleashed a torrent of rage. In 1911, Standard Oil was declared in violation of antitrust laws
and dissolved.
"I never had an animus against Standard Oil's size and wealth, never objected to their
corporate form," wrote Ida Tarbell in her autobiography. "I was willing that they should
combine and grow as big and rich as they could, but only by legitimate means. But they had
never played fair, and that ruined their greatness for me."
Rockefeller, of course, disagreed: "It was the law of nature, the survival of the fittest, that
[the small refiners] could not last against such a competitor. Undoubtedly... some of them
were very bitter. But there was no band of greedy men plundering them. An able, intelligent,
far-seeing organization simply outstripped men in the casual, haphazard way of doing
business. That was inevitable."
John D. Rockefeller
In 1862, Rockefeller and his partner Clark joined with Samuel Andrews to establish an oilrefining company. The men purchased oil wells in Titusville, Pennsylvania, and
constructed a well near Cleveland, Ohio. In 1865, Rockefeller bought out Clark's interest
in the company, creating Rockefeller & Andrews Oil Company. In this year alone, the
business earned approximately 200,000 dollars.
While Rockefeller reaped extensive wealth in 1865, the oil industry was just beginning to
grow. Most people only used oil for lighting. The market was limited. Prices fluctuated
dramatically, as oil production waxed and waned during this period. To try and stabilize oil
prices Rockefeller and Andrews approached O.H. Payne, owner of the largest oil refinery
in Cleveland. They proposed that the three men unite their companies together. By
having a single oil company operating in northeastern Ohio, this company could hopefully
fix prices and avoid the tremendous swings as production sometimes increased or
dwindled. The company organizers convinced numerous other Cleveland firms to join with
them. In other cases, they bought out the companies or drove them out of business by
selling their oil for a much cheaper price than their competitors could. In 1870, Rockefeller
united these companies together as the Standard Oil Company.
During the 1870s and 1880s, Rockefeller sought to expand Standard Oil's influence. The
company began to purchase or drive out of business oil refiners across the United States.
By 1878, Standard Oil purportedly controlled ninety percent of the oil refineries in the
United States. In 1881, the Standard Oil Company became known as the Standard Oil
Trust. In essence, the Standard Oil Company created various companies across the
United States that were purportedly their own entities. In reality, Rockefeller directed all of
these businesses.
During the 1880s and 1890s, Rockefeller came under attack from the federal government
for having created a virtual monopoly over the oil industry. In 1890, John Sherman, a
senator from Ohio, proposed an anti-trust act, authorizing the federal government to
break up any businesses that prohibited competition. The Standard Oil Trust effectively
eliminated competition. In 1892, Ohio's attorney general filed suit against Rockefeller and
his company. While Ohio won the case, Standard Oil appealed the decision. In 1911, the
United States Supreme Court eventually ruled in this case that Standard Oil was a trust
and had to cease to exist. The company then splintered into numerous subsidiaries. In
theory, these companies were no longer owned by a single person or operated by a
single board of directors, but it appears that they still operated in conjunction with each
other. Among these various companies were Standard Oil of Ohio, Standard Oil of
Indiana, Standard Oil of New York, Standard Oil of New Jersey, Standard Oil of
California, Standard Oil of Kentucky, Standard Oil of Iowa, Standard Oil of Minnesota,
Standard Oil of Illinois, Standard Oil of Kansas, Standard Oil of Missouri, Standard Oil of
Nebraska, and Standard Oil of Louisiana. Other companies used the Standard Oil name
to profit off of the company's reputation, but these organizations were never part of the
company formerly controlled by Rockefeller.
Rockefeller was alive during the government's attack on Standard Oil, but he had retired
from the company in 1895, well before the dispute ended. In 1901, his wealth was
estimated at 900 million dollars, making him the wealthiest man in the world. He
dedicated the remainder of his life to philanthropic efforts. He used his wealth to establish
the University of Chicago in 1892 and the Rockefeller Institute for Medical Research in
1901. Rockefeller also was a driving force behind the preservation of Williamsburg,
Virginia, as an historic landmark. He donated funds to innumerable other charities through
the Rockefeller Foundation. John Rockefeller died in 1937 at Ormond Beach, Florida.