APUSH: Chapter 17 Industrial Supremacy
Reading List:
#6: Andrew Carnegie Becomes a Businessman (1868)
#20: The Sweatshops of Chicago
Social Darwinism and American Laissez-faire Capitalism
18.1: Andrew Carnegie, from "The Gospel of Wealth" (1889)
Andrew Carnegie Becomes a Businessman
Andrew Carnegie
Becomes a
Businessman (1868)
Andrew Carnegie came to the United States as a
penniless immigrant from Scotland. However, by the
end oj the nineteenth century he had become a wellknown industrialist and one v] the Wealthiest men in
the world. Carnegie launched his business career in
{868 and eventually amassed a fortune in the steel
industry. His company produced most of the steel
products in the United States by {900. The selection
that follows is taken from an article Carnegie wrote
for a magazine called Youth's Companion in i896,
entitled "How I Served My Apprenticeship As a Businessman." As you read the excerpts, consider what
values Carnegie's autobiography reflects.
I
am sure that I should never have selected a business career if I had been permitted to choose.
The eldest son of parents who were themselves
poor, 1 had, fortunately, to begin to perform some
useful work in the world while still very young, in
order to earn an honest livelihood . . . What I could
get to do, not what I desired, was the question.
When I was born my father was a well-to-do
master-weaver in Dunfermline, Scotland. He owned
no less than four damask looms and employed apprentices. This was before the days of steam factories
for the manufacture of linen. A few large merchants
took orders and employed "master-weavers," such as
my father, to weave the cloth, the merchants
supplying the materials.
As the factory system developed, handloom
weaving naturally declined, and my father was one
31
From "How I Served My
Apprenticeship As a
Business Man" by
Andrew Carnegie,
Youth's Companion,
Volume LXX, No. 17
Scottish immigrant Andrew Carnegie rose from
poverty to become one of
the wealthiest industrialists in the United
States.
of the sufferers by the change. The first serious lesson of
my life came to me one day when he had taken in the last
of his work to the merchant and returned to our little home
greatly distressed because there was no more work for him
to do. I was then just about ten years of age, but the lesson
burned into my heart, and I resolved then that "the wolf of
poverty" would be driven from our door some day, if I
could do it.
The question of selling the old looms and start
ing for the United States came up in the family
council
It was finally resolved to take the plunge
and join relatives already in Pittsburgh. I well remember
that neither father nor mother thought the change would be
otherwise than a great sacrifice for them, but that "it would
be better for our two boys. . . ."
Arriving in Allegheny City, four of us,—father,
mother, my younger brother and myself,—father entered a
cotton factory I soon followed and served as a "bobbin
boy," and this is how I began my preparation for
subsequent apprenticeship as a business man. I received
one dollar and twenty cents a week, and was then just about
twelve years old.
I cannot tell you how proud I was when I received my
first week's own earnings. One dollar and twenty cents
made by myself and given to me because I had been of
some use in the world! No longer entirely dependent upon
my parents, but at last admitted to the family partnership as
a contributing member and able to help them! I think this
makes a man out of a boy sooner than almost anything else.
. . . It is everything to feel that you are useful.
. .
For a lad of twelve to rise and breakfast every
morning, except the blessed Sunday morning, and go into
the streets and find his way to the factory, and begin work
while it was still dark outside, and not be released until
after darkness came again in the evening, forty minutes'
interval only being al-
lowed at noon, was a terrible task. . . . But I was young . .
. and something within always told me that ... I should
some day get into a better position . . .
A change soon came, for a kind old Scotsman, who
knew some of our relatives, made bobbins and took me into
his factory before I was thirteen. But here for a time it was
even worse than in the cotton factory, because I was set to
fire a boiler in the cellar, and actually to run the small
steam-engine which drove the machinery
The firing of the boiler was all right, for fortunately
we did not use coal, but the refuse wooden chips, and I
always liked to work in wood. But the responsibility of
keeping the water right and of running the engine, and the
danger of my making a mistake and blowing the whole
factory to pieces, caused too great a strain, and I often
awoke and found myself sitting up in bed through the night
trying the steam-gages But I never told them at home that I
was having a "hard tussle." No! no! everything must be
bright to them.
This was a point of honor, for every member of the
family was working hard except, of course, my little
brother, who was then a child, and we were telling each
other only all the bright things. Beside this no man would
whine and give up—he would the first. . . .
My kind employer, John Hay, peace to his ashes!
soon relieved me of the undue strain, for he needed some
one to make out bills and keep his accounts, and finding
that 1 could write a plain schoolboy hand, and could [work
with numbers], I became his only clerk. . . .
I come now to the third step in my apprenticeship, for
I had already taken two, as you see, the "cotton factory"
and then the "bobbin factory" I obtained a situation as
messenger-boy in the telegraph office of Pittsburgh when I
was fourteen. Here I entered a new world. . . . Amid
books, newspapers,
pencils, pen and ink and writing pads, and a clean office,
bright windows and the literary atmosphere, I was the
happiest boy alive.
My only dread was that I should some day be
dismissed because I did not know the city,- for it is
necessary that a messenger-boy should know all the firms
and addresses of men who are in the habit of receiving
telegrams. But I was a stranger in Pittsburgh However, I
made up my mind that I would learn to repeat successively
each business house in the principal streets, and was soon
able to shut my eyes and begin at one side of Wood Street,
and call every firm to the bottom. Before long I was able to
do this with the business streets generally. . . .
Of course, every ambitious messenger-boy wants to
become an operator, and before the operators arrived in the
early mornings the boys slipped up to the instruments and
practised. This I did and was soon able to talk to the boys
in the other offices along the line, who were also
practising.
One morning I heard Philadelphia calling Pittsburgh
and giving the signal, "Death Message." Great attention
was then paid to "Death Messages," and I thought I ought
to try to take this one. I answered and did so, and went off
and delivered it before the operator came After that the
operators sometimes used to ask me to work for them.
Having a sensitive ear for sound 1 soon learned to
take messages by ear, which was then very uncommon—I
think only two persons in the United States could then do it
Now every operator takes by ear, so easy it is to follow and
do what any other boy can—if you only have to. This
brought me into notice, and finally I became an operator
and received the—to me—enormous [salary] of twentyfive dollars per month, three hundred dollars a year!
This was a fortune, the very sum that I had fixed when
I was a factory-worker as the fortune I wished to possess,
because the family could live on three hundred dollar a year
and be almost, or quite
independent. Here it was at last! But I was soon to [receive]
extra compensation for extra work. The six newspapers of
Pittsburgh received telegraphic news in common. Six copies
of each despatch were made by a gentleman who received six
dollars per week for the work, and he offered me a gold dollar
every week if I would do it, of which I was very glad indeed,
because I always like to work with news and scribble for
newspapers. . . .
I think this last step of doing something beyond one's
task is fully entitled to be considered "business." The other
revenue, you see, was just salary obtained for regular work,
but here was a "little business operation" upon my own
account, and I was very proud indeed of my gold dollar
every week.
The Pennsylvania Railroad shortly after this was
completed to Pittsburgh, and that genius, Thomas A. Scott,
was its superintendent He often came to the telegraph office
to talk to his chief . . . and I became known to him in this
way.
When that great railway system put up a wire
of its own, he asked me to be his "clerk and operator."
So I left the telegraph office . . . and became connected with the railways.
The new appointment was accompanied by a,
to me, tremendous increase of salary. It jumped from
twenty-five to thirty-five dollars per month. Mr Scott
was then receiving one hundred and twenty-five dollars per
month, and I used to wonder what on earth he could do
with so much money.
I remained for thirteen years in the service of the
Pennsylvania Railroad Company, and was at last
superintendent of the Pittsburgh division of the road,
successor to Mr. Scott, who had in the meantime risen to the
office of vice-president of the company
One day Mr Scott, who was the kindest of men, and
had taken a great fancy to me, asked if I had or could find
five hundred dollars to invest.
Here the business instinct came into play. I felt that as
the door was opened for a business invest-
ment with my chief, it would be wilful flying in the face of
providence if I did not jump at it, so I answered promptly:
"Yes, sir, I think I can."
"Very well," he said, "get it, a man has just died who
owns ten shares in the Adams Express Company, which I
want you to buy It will cost you sixty dollars per share,
and I can help you with a little balance if you cannot raise
it all."
Here was a queer position The available assets of the
whole family were not five hundred dollars. . . .
Indeed, had Mr Scott known our position he would
have advanced it himself, but the last thing in the world the
proud Scot will do is to reveal his poverty and rely upon
others.
The family had managed by this time to purchase a
small house, and paid for it in order to save rent. My
recollection is that is was worth eight hundred dollars.
The matter was laid before the council of three that
night, and the oracle [wise one, used here in reference to his
mother] spoke. "Must be done. Mortgage our house I will
take the steamer in the morning for Ohio and see uncle, and
ask him to arrange it. I am sure he can." This was done. Of
course her vi sit was successful—where did she ever fail?
The money was procured, paid over, ten shares of
Adams Express Company stock was mine, but no one knew
our little home had been mortgaged "to give our boy a start"
Adams Express Stock then paid monthly dividends of
one percent, and the first check for ten dollars arrived. I can
see it now, and I well remember the signature of "J. C.
Babcock, cashier . . ."
Here was something new to all of us, for none of us
had ever received anything but from a toil. A return from
capital was something strange and new.
How money could make money . . . led to much
speculation upon the part of the young fellows
[Carnegie's friends], and I was for the first time hailed as a
"capitalist. . . ."
A very important incident in my life occurred when
one day in a train a nice, farmer-looking gentleman
approached me, saying that the conductor had told him I
was connected with the Pennsylvania Railroad, and he
should like to show me something. He pulled from a small
green bag the model of the first sleeping-car. This was Mr
Woodruff, the inventor. . . Its value struck me like a
flash. I asked him to come to Altoona the following week,
and he did so.
Mr. Scott, with his usual quickness, grasped the idea.
A contract was made with Mr Woodruff to put two trial
cars on the Pennsylvania Railroad. Before leaving Altoona
Mr Woodruff came and offered me an interest in the
venture which I promptly accepted. But how 1 was to make
payments rather troubled me, for the cars were to be paid
for jn monthly installments after delivery, and my first
monthly payment was to be two hundred and seventeen
dollars and a half
I had not the money, and I did not see any way of
getting it. But 1 finally decided to visit the local banker
and ask him for a loan, pledging myself to repay at the rate
of fifteen dollars per month. He promptly granted it. Never
shall I forget his putting his arm over my shoulder, saying,
"Oh, yes, Andy, you are all right." I then and there signed
my first note Proud day this, and surely, now, no one will
dispute that I was becoming a "business man." I had signed
my first note and, more important of all,—for any fellow
can sign a note,—I had found a banker willing to take it as
good.
My subsequent payments were made by the [money
received] from the sleeping-cars, and 1 really made my
first considerable sum from this investment in the
Woodruff Sleeping Car Company, which was afterward
absorbed by Mr. Pullman—a remarkable man who is now
known all over the world.
38
Eyewitnesses and Others: Readings in American History, Volume 2
Shortly after this I was appointed superintendent
of the Pittsburgh Division, and returned to my dear
old home, smoky Pittsburgh. Wooden bridges were
then used exclusively upon the railways, and the
Pennsylvania Railroad was experimenting with a
bridge built of cast-iron. I saw that wooden bridges
would not do for the future, and organized a company
in Pittsburgh to build iron bridges.
Here again I had recourse to the bank, because
my share of the capital was twelve hundred and fifty
dollars and I had not the money,- but the bank lent it
to me, and we began the Keystone Bridge Works,
which proved a great success. . . .
This was my beginning in manufacturing,- and
from that start all our other works have grown, the
profits of the one works building the other. My
"apprenticeship" as a business man soon ended, for I
resigned my position as an officer of the Pennsylvania
Railroad Company to give exclusive attention to
business.
I was no longer merely an official working for
others . . . but a full-fledged business man working
upon my own account.
REVIEWING THE READING
i. Carnegie uses his career to suggest certain
values to the youth of the United States.
What are these values?
2. What succession of jobs did Carnegie hold
before he went into business for himself?
3. Using Your Historical Imagination. According to Andrew Carnegie, what did it mean
to be a "real businessman"? Do you think it
means the same thing today?
The Sweatshops of
From The Poor in Great
Cities by Joseph
Kirklaiid.
Chicago (1891)
Prior to the passage of laws regulating wages and working
conditions, many of the poor living in the big cities of the
nineteenth century worked in sweatshops. Sweatshops were
makeshift factories where large numbers of people worked
long hours for little pay on a piecework basis. These
factories were usually crowded, dimly lighted, poorly
ventilated, unsafe, and unsanitary places. Although a
number of industries used the sweatshop system, the worst
working conditions were found in the garment industry. As
you read the following excerpts from a book about the poor
in big cities in the late 18OOs, look for reasons that help to
explain why people were willing to work under these
terrible conditions.
T
he sweat-shop is a place where, separate from the tailor-shop or
clothing-warehouse, a "sweater" (middleman) assembles
journeyman tailors and needle-women, to work under his
supervision. He takes a cheap room outside the dear
[expensive] and crowded business centre, and within the
neighborhood where the work-people live Thus is rent
saved to the employer, and time and travel to the employed.
The men can and do work more hours than was possible
under the centralized system, and their wives and children
can help, especially when, as is often done, the garments are
taken home to "finish." (Even the very young can pull out
basting-threads ) This "finishing" is what remains undone
after the machine has done its work, and consists in
"felling" [sewing the raw edges of] the waists and leg-ends
of trousers (paid at one and one-half cents a pair), and, in
short, all the "felling" necessary on any garment of any
kind. For this service, at
the prices paid, they cannot earn more than from twenty-five to
forty cents a day, and the work is largely done by Italian,
Polish, and Bohemian women and girls.
The entire number of persons employed in these
vocations [jobs] may be stated at 5,000 men (of whom 800 are
Jews), and from 20,000 to 23,000 women and children. The
wages are reckoned by piece-work and (outside the
"finishing") run about as follows:
Girls, hand-sewers, earn nothing for the first month, then
as unskilled workers they get $1 to $1.50 a week, $3 a week,
and (as skilled workers) $6 a week. The first-named class
constitutes fifty per cent of all, the second thirty per cent, and
the last twenty per cent. In the general work, men are only
employed to do button-holing and pressing, and their earnings
are as follows: "Pressers," $8 to $12 a week,- "underpressers," $4 to $7. Cloak operators earn $8 to $12 a week.
Four-fifths of the sewing-machines are furnished by the
"sweaters" (middlemen), also needles, thread, and wax.
The "sweat-shop" day is ten hours, but many take
work home to get in overtime, and occasionally the shops
themselves are kept open for extra work, from which the
hardest and ablest workers sometimes make from $14 to
$16 a week On the other hand, the regular work-season for
cloakmaking is but seven
124
Eyewitnesses and Others: Readings in American History, Volume 2
months, and for other branches nine months, in the
year. The average weekly living expenses of a man
and wife, with two children, as estimated by a selfeducated workman named Bisno, are as follows: Rent
(three or four small rooms), $2, food, fuel, and light
$4,- clothing, $2, and beer and spirits, $1. . . .
A city ordinance enacts that rooms provided for
workmen shall contain space equal to five hundred
feet of air for each person employed,- but in the
average "sweat-shop" only about a tenth of that quantity is to be found. In one such place there were
fifteen men and women in one room, which contained also a pile of mattresses on which some of the
men sleep at night. The closets were disgraceful. In
an adjoining room were piles of clothing, made and
unmade, on the same table with the food of the
family. Two dirty little children were playing about
the floor. . . .
The "sweating system" has been in operation
about twelve years, during which time some firms
have failed, while others have increased their production tenfold. Meantime certain "sweaters" have grown
rich,- two having built from their gains tenementhouses for rent to the poor workers. The wholesale
clothing business of Chicago is about $20,000,000 a
year.
REVIEWING THE READING
1. Who was the "sweater"?
1. What was "finishing" and how much could
be made doing it?
3. Using Your Historical Imagination. What
were the advantages of the sweatshop system to the "sweater"? How do you explain
the fact that workers were willing to come
to work in the sweatshops?
Social Darwinism
and American
laissez-faire
Capitalism
The "Fittest" and the
"Unfit-Herbert Spencer based
his concept of social evolution.
popularly known as "Social
Darwinism," on individual
competition. Spencer believed
that competition was "the law of
life" and resulted in the
"survival of the fittest."
British philosopher Herbert
Spencer went a step beyond
Darwin's theory of evolution
and applied it to the develop
ment of human society. In the
late 1800s, many Americans
enthusiastically
embraced
Spencer's "Social Darwinism" to
justify laissez-faire, or unrestricted, capitalism.
fn 1859. Charles Darwin published Origin of Species, which
explained his theory of animal and
plant evolution based on "natural
selection."
Soon
afterward,
philosophers, sociologists, and
others began to adopt the idea that
human society had also evolved.
"Society advances," Spencer
wrote, "where its fittest members are allowed to assert their
fitness with the least hindrance." He went on to argue
that the unfit should "not be
prevented from dying out."
Unlike
Darwin,
Spencer
Herbert Spencer (1820-1903) applied Charles
Darwin's ideas about evolution to society. He believed believed that individuals could
that keeping government limited would ensure the genetically pass on their learned
"survival of the fittest." (Peny-Castaheda Library. characteristics to their children.
University of Texas at Austin)
This was a common. but
The British philosopher Herbert Spencer wrote about
these ideas even before Darwin's book was published.
He became the most influential philosopher in applying Darwin's ideas to social evolution. Born in 1820,
Herbert Spencer taught himself about the natural sciences. For a brief time, he worked as a railroad surveyor and then as a magazine writer. Spencer never
married, tended to worry a lot about his health, and
preferred work to life's enjoyments.
In 1851, he published his first book. He
argued for laissez-faire capitalism, an economic system that allows businesses to operate with little government interference. A year
later, and seven years before Darwin published Origin of Species, Spencer coined the
phrase "survival of the fittest."
Darwin's theory inspired Spencer to write
more books, showing how society evolved.
With the financial support of friends, Spencer
wrote more than a dozen volumes in 36 years.
His books convinced many that the destiny of
civilization rested with those who were the
•'fittest."
erroneous, belief in the 19th century. To Spencer, the
fittest persons inherited such qualities as
industriousness, frugality, the desire to own property,
and the ability to accumulate wealth. The unfit
inherited laziness, stupidity, and immorality.
According to Spencer, the population of unfit people
would slowly decline. They would eventually become
extinct because of their failure to compete. The government. in his view, should not take any actions to
prevent this from happening, since this would go
against the evolution of civilization.
Spencer believed his own England and other
advanced nations were naturally evolving into peaceful "industrial" societies. To help this evolutionary
process, he argued that government should get out of
the way of the fittest individuals. They should have
the freedom to do whatever they pleased in competing
with others as long as they did not infringe on the
equal rights of other competitors.
Spencer criticized the English Parliament for "overlegislation." He defined this as passing laws that
helped the workers, the poor, and the weak. In his
opinion, such laws needlessly delayed the extinction
of the unfit.
Spencer's View of Government
Herbert Spencer believed that the government should
have only two purposes. One was to defend the nation
against foreign invasion. The other was to protect citizens and their property from criminals. Any other government action was "over-legislation."
Spencer opposed government aid to the poor. He said
that it encouraged laziness and vice. He objected to a
public school system since it forced taxpayers to pay
for the education of other people's children. He
opposed laws regulating housing, sanitation, and
health conditions because they interfered with the
rights of property owners.
Spencer said that diseases "are among the penalties
Nature has attached to ignorance and imbecility, and
should not, therefore, be tampered with." He even
faulted private organizations like the National Society
for the Prevention of Cruelty to Children because they
encouraged legislation.
In the economic arena, Spencer advocated a laissez-faire
system that tolerated no government regulation of private
enterprise. He considered most taxation as confiscation of
wealth and undermining the natural evolution of society.
Spencer assumed that business competition would prevent
monopolies and would flourish without tariffs or other
government restrictions on free trade. He also condemned
wars and colonialism, even British imperialism. This was
ironic, because many of his ideas were used to justify
colonialism. But colonialism created vast government
bureaucracies. Spencer favored as little government as
possible.
Spencer argued against legislation that regulated
working conditions, maximum hours, and minimum
wages. He said that they interfered with the property
rights of employers. He believed labor unions took
away the freedom of individual workers to negotiate
with employers.
Thus, Spencer thought government should be little
more than a referee in the highly competitive "survival
of the fittest." Spencer's theory of social evolution,
called Social Darwinism by others, helped provided
intellectual support for laissez-faire capitalism in
America.
Laissez-faire Capitalism in America
Historians often call the period between 1870 and the
early 1900s the Gilded Age. This was an era of rapid
industrialization, laissez-faire capitalism, and no
income tax. Captains of industry like John D.
Rockefeller and Andrew Carnegie made fortunes.
They also preached "survival of the fittest" in business.
American scholars like sociologist William Graham
Sumner praised the new class of industrial millionaires. Sumner argued that social progress depended on
the fittest families passing on their wealth to the next
generation.
According to the Social Darwinists, capitalism and
society itself needed unlimited business competition to
thrive. By the late 1800s, however, monopolies, not
competing companies, increasingly controlled the production and prices of goods in many American industries.
Workers' wages and working conditions were unregulated. Millions of men, women, and children worked
long hours for low pay in dangerous factories and
mines. There were few work-safety regulations, no
worker compensation laws, no company pensions, and
no government social security.
Although wages did rise moderately as the United
States industrialized, frequent economic depressions
caused deep pay cuts and massive unemployment.
Labor union movements emerged, but often collapsed
during times of high unemployment. Local judges,
who often shared the laissez-faire views of employers,
issued court orders outlawing worker strikes and boycotts.
Starting in the 1880s, worker strikes and protests
increased and became more violent. Social reformers
demanded a tax on large incomes and the breakup of
monopolies. Some voiced fears of a Marxist revolution. They looked to state and federal governments to
regulate capitalism. They sought legislation on working conditions, wages, and child labor.
Social Darwinism and the Law
Around 1890, the U.S. Supreme began aggressively
backing laissez-faire capitalism. Supreme Court
Justice Stephen J. Field asserted that the Declaration of
Independence guaranteed "the right to pursue any lawful business or vocation in any manner not inconsistent
with the equal rights of others ---"
The Supreme Court ruled as unconstitutional many
state laws that attempted to regulate such things as
working conditions, minimum wages for women, and
(Continued on next page)
child labor. The courts usually
based their decisions on the Fifth
and 14th amendments to the
Constitution. These amendments
prohibited the federal and state
governments from depriving
persons of "life, liberty, or property, without due process of law."
(The Supreme Court interpreted
"persons"
as
including
corporations.)
By 1912, both the federal government and many states had adopted
Progressive reform legislation
aimed at ending child labor and
improving working conditions. That
year saw three major candidates for
president, all espousing Progressive
ideas (Democrat Woodrow Wilson,
Republican Howard Taft, and
Progressive Theodore Roosevelt,
who had broken from the
Republicans because he believed
Taft was not progressive enough).
The idea of passing more laws to
correct society's ills had replaced
the Social Darwinist view that civilization best advanced when the
"fittest" had their way while the
"unfit" were allowed to die out.
Americans had increasingly come to
believe that society could choose its
future, which might require government regulations on private enterprise.
In 1905, the U.S. Supreme Court
used the "due process" reasoning
to strike down a New York health
law that limited the workweek of
bakers to 60 hours. The majority
of the justices held that this law
violated the 14th Amendment's
"liberty" right of employers and
workers to enter into labor Charles Darwin < 1809-1882) was probably greatest
contracts. In a famous dissent, scientist of the 19th century. Darwin s theory of evolution
however, Justice Oliver Wendell explained how species evolved over time. He did not
believe in Social Darwinism. (Perry-Castahcda Library,
Holmes criticized the majority University of Texas at Austin)
decision. In a memorable phrase,
he said: "The 14th Amendment does not enact Mr.
In England, Herbert Spencer grew
Herbert Spencer's Social Statics [one of Spencer's
increasingly pessimistic as he witnessed a swelling tide
books on Social Darwinism]." [Lochner v. New York
of legislation that attempted to end the evils of industri198 U. S. 45 (1905)]
alization and laissez-faire capitalism. Spencer died in
1903 and was buried in the same London cemetery as
In 1890, reformers got Congress to pass the Sherman
that great enemy of capitalism, Karl Marx.
Antitrust Act. This law focused on "combinations" like
monopolies (also called trusts). It banned them if they
interfered with interstate commerce by eliminating
competition and keeping the prices of goods high.
When cases reached the Supreme Court, however, the
justices largely ignored the control of consumer prices
by monopolies. Instead, the justices focused on the
behavior of "bad trusts" that used unfair tactics against
competitors.
The Supreme Court limited the protest rights of labor
unions in a 1911 case that outlawed some economic
boycotts. The Supreme Court continued to make decisions that weakened unions until the 1930s.
Despite a hostile Supreme Court, Progressive Era
reformers became increasingly successful in curbing
^*he abuses of laissez-faire capitalism. For example,
in 1906, Congress passed the Pure Food and Drug Act
that prohibited companies from selling contaminated
foods and misbranded drugs.
For Discussion and Writing
1. Social Darwinists believed that society naturally
evolved by individual competition and the "survival
of the fittest." Do you agree or disagree? Why?
2. Do you agree or disagree with Herbert Spencer's
view of government? Why?
3. Would you support laissez-faire capitalism in the
United States today? Explain.
/or further heading
Hofstadter, Richard. Social Darwinism in American
Thought. Boston: Beacon Press, 1992 [originally published 1944].
Wiltshire, David. The Social and Political Thought of
Herbert Spencer. Oxford: Oxford University Press,
1978.
ACTIVITY
Aboilsh the Federal Estate Tax?
Some social critics today argue that the United States
is in a new Gilded Age. As evidence of this, they point
to the decrease in government regulation of industry,
recent disclosures of corporate financial abuses, a weak
union movement, and an increased concentration of
wealth among a small percentage of Americans. A current controversy involves attempts to eliminate the federal estate tax.
The federal estate tax, first imposed during the Civil
War, is a tax on inherited assets valued at more than $ 1
million. Called the "death tax" by its critics, this tax
falls on the wealthiest 2 percent of American families.
The highest tax rate for the largest estates is currently
set at 55 percent.
Under President George W. Bush's 2001 tax cut law, the
federal estate tax will gradually decrease until it ends
completely in 2010. But this will not be permanent. In
2011, the estate tax will return at its 2001 rates.
Those in favor of permanently abolishing the federal
estate tax make these arguments:
The "death tax" is a form of government confiscation of wealth earned by individuals who have the
right to pass it on to their heirs.
Individuals who have already paid income and other
taxes should not have their lifetime savings and
property taxed again at death.
• This tax is not just a burden for rich individuals, but
for the owners of family farms and businesses.
•
It is unfair for the federal estate tax to be phased out
and then restored to its 2001 rates in 2011.
Those opposed to permanently abolishing the federal
estate tax make these arguments:
• Not taxing inheritances of extremely wealthy people will create a perpetual class of rich people. The
American ideal is that people should earn their own
wealth.
• Permanently abolishing the federal estate tax is
nothing less than a tax break for billionaires.
• Ending the estate tax will worsen the current federal
budget deficit and cost billions of dollars in lost revenue needed for Medicare, school, environmental,
and other programs.
• Eliminating the estate tax in 2010 and after would
cause a major drop in revenue just when huge numbers of workers will retire and will need Social
Security.
It is fair that the super rich, who benefit the most
from the American economy, pay more taxes than
less wealthy taxpayers.
What do you think is the fair thing to do?
Form small groups to discuss the following proposed
federal estate tax laws. After the discussion, the members of each group should take a vote on what they
believe is the fairest law. Each group should then report
to the class the results and reasons for its vote, including
minority views.
Proposed Federal Estate Tax Laws
1. Permanently and completely abolish the federal
estate tax now.
2. Permanently abolish the federal estate tax after it
phases out in 2010.
3. Restore the federal estate tax after 2010, but exempt
family-owned farms and businesses, raise the value
of taxable estates, and/or reduce the tax rate.
4. Restore the federal estate tax after 2010 at the 2001
tax rate (current law).
5. Permanently and completely restore the federal
estate tax now at the 2001 tax rates.
SOURCES
Acton. Harry Burrows. "Spencer, Herbert." The New Encyclopaedia Britannica
Micropaedia. 2002 ed. • Bruchey, Stuart. Enterprise. The Dynamic Economy of a
Free People. Cambridge, Mass.: Harvard University Press, 1990. • Durant, Will.
The Story of Philosophy. The Lives and Opinions of the Greater Philosophers.
New York: Time, 1962 [originally published 1926]. • Heilbroner, Robert L.
"Economic Systems." The New Encyclopaedia Britannica Macropaedia. 2002
ed. • Hook, Janet. "Senate Vote Blocks Repeal of Estate Tax." Los Angeles Times.
13 June 2002:A1+. • Hofstadter, Richard. Social Darwinism in American
Thought. Boston: Beacon Press, 1992 [originally published 1944]. • Krugman,
Paul. "For Richer, How the Permissive Capitalism of the Boom Destroyed
American Equality." New York Times Magazine. 20 Oct. 2002:62+. • "Social
Darwinism." Tlte New Encyclopaedia Britannica Micropaedia. 2002 ed. • Tribe,
Laurence H. "Substantive Due Process of Law." Encyclopedia of the American
Constitution. New York: Macmillan Pub. Co., 1986. • Wiltshire, David. The
Social and Political Thought of Herbert Spencer. Oxford: Oxford University
Press, 1978.
18.1
Andrew Carnegie,
from "The Gospel of Wealth"
(1889)
Written in 1889 for The North American Review, this piece justified the fortunes made by
industrialists like Carnegie and provided a model for the distribution of their wealth. Carnegie
believed laissez-faire economics were tied to social responsibility. Carnegie was born in Scotland
and worked in the United States as a messenger for Western Union and a bobbin boy before.
through shrewd salesmanship and investment, he became the head of Carnegie Steel Company,
which, after it was sold to J. P. Morgan, became United States Steel."
T
he problem of our age is the proper administration of wealth, that the ties of brotherhood may still bind together the rich and poor in
harmonious relationship. The conditions of human life have not only been changed, but revolutionized, within the past few hundred years.
In former days there was little difference between the dwelling, dress, food. and
environment of the chief and those of his retainers... .The contrast between the palace of
the millionaire and the cottage of the laborer with us to-day measures the change which has
come with civilization. This change, however, is not to be deplored, but welcomed as
highly beneficial. It is well, say, essential, for the progress of the race that the houses of some
should be homes for all that is highest and best in literature and the arts, and for all the
refinements of civilization, rather than that none should be so. Much better this great
irregularity than universal squalor. Without wealth there can be no Meccenas.
...to-day the world obtains commodities of excellent quality at prices which even the
preceding generation would have deemed incredible. In the commercial world similar
causes have produced similar results, and the race is benefited thereby. The poor enjoy
what the rich could not before afford. What were the luxuries have become the necessaries of life....
Objections to the foundations upon which society is based are not in order, because
the condition of the race is better with these than it has been with any other which has
* From Andrew Carnegie, "Wealth," North American Review, ]W>.
35
been tried.... NO evil, but good, has come to the race from the accumulation of wealth
by those who have had the ability and energy to produce it....
We start, then, with a condition of affairs under which the best interests of the race
are promoted, but which inevitably gives wealth to the few....What is the proper mode
of administering wealth after the laws upon which civilization is founded have thrown it
into the hands of the few?...
There are but three modes in which surplus wealth can be disposed of. It can be left
to the families of the decedents; or it can be bequeathed for public purposes; or, finally,
it can be administered by its possessors during their lives....
There remains, then, only one mode of suing great fortunes; but in this we have the true
antidote for the temporary unequal distribution of wealth, the reconciliation of the rich
and the poor—a reign of harmony, another ideal, differing, indeed, from that of the
Communist in requiring only the further evolution of existing conditions, not the total
overthrow of our civilization. It is founded upon the most intense Individualism. ...Under
its sway we shall have an ideal State, in which the surplus wealth of the few will become, in
the best sense, property of the man)', because administering for the common good; and this
wealth, passes through the hands of the few, can be made much more potent force for the
elevation of our race than if distributed in small sums to the people themselves. Even the
poorest can be made to see this, and to agree that great sums gathered by some of their
fellow-citizens—spent for public purposes, from which masses reap the principal benefit,
are more valuable to them than if scattered among themselves in trifling amounts through
the course of many years.
If we consider the results which flow from the Cooper Institute, for instance..., and
compare these with those who would have ensured for the good of the man form an
equal sum distributed by Air. Cooper in his lifetime in the form of wages, which the
highest form of distributing, being work done and not for charity, we can estimate of the
possibilities for the improvement of the race which lie embedded in the present law of
the accumulation of wealth....
This, then, is held to be the duty of the man of wealth: lb set an example of modest,
unostentatious living, shunning display or extravagance; to provide moderately for the
legitimate wants of those dependent upon him; and, after doing so, to consider all surplus revenues which come to him simply as trust funds, which he is called upon to
administer, and strictly bound as a matter of duty to administer in the manner which, in
his judgment, is best calculated to produce the most beneficial results for the community—the man of wealth thus becoming the mere trustee and agent for his poorer
brethren, bringing to their service his superior wisdom, experience, and ability to administer, doing for them better than they would or could do for them selves....
In bestowing charity, the main consideration should be to help those who will help
themselves; to provide part of the means by which those who desire to improve may do
so; to give those who desire to rise the aids by which the}' may rise; to assist, but rarely
or never to do all. Neither the individual nor the race is improved by alms giving. Those
worthy of assistance, except in rare cases, seldom require assistance....
The rich man is thus almost restricted to following the examples of Peter Cooper,
Enoch Pratt of Baltimore, Air. Pratt of Brooklyn, Senator Stanford, and others, who
blow that the best means of benefiting the community is to place within its reach the
ladders upon which the aspiring can rise—free libraries, parks, and means of recreation,
by which men are helped in body and mind; works of art, certain to give pleasure and
improve the general condition of the people; in this manner returning their surplus
wealth to the mass of their fellows in the forms best calculated to do them lasting good.
Thus is the problem of rich and poor to be solved. The laws of accumulation will be
left free, the laws of distribution free. Individualism will continue, but the millionaire
will be but a trustee for the poor, intrusted for a season with a great part of the increased
wealth of the community, but administering it for the community far better than if
could or would have done for itself. The best minds will thus have reached a stage in the
development of the race in which it is clearly seen that there is no mode of disposing of
surplus wealth creditable to thoughtful and earnest men into whose hands it flows, save
by using it year by year for the general good....
Such, in my opinion, is the true gospel concerning wealth, obedience to which is destined some day to solve the problem of the rich and the poor, and to bring "Peace on
earth, among men good will."
DOCUMENT ANALYSIS
1. What does Andrew Carnegie assert to be the duty of the "'man of wealth"? Does
Carnegie's formula seem practical?
2. Does Carnegie's "Gospel of Wealth" promote or inhibit democratic opportunity?