Reconstruction, Expansion, and the Triumph of Industrial Capitalism 31Andrew Carnegie, an immigrant from Scotland, similarly dominated the
steel industry in America. He began working with his mentor, Tom Scott, on
the Pennsylvania Railroad and went to Washington D.C. with him as an aide
during the Civil War, where the demand for weapons turned Pittsburgh into
a major industrial center. Carnegie realized how important iron and steel
would be in the industrial capitalist system so he invested in all aspects of the
new economy—ores, iron mills, steel plants, all with the latest technologies.
Carnegie took control of much of the pig iron supply, the basic element in
steel-making, in the entire U.S. so he would not have to rely on others for
raw materials. He then acquired his own sources of iron ore, coal, and coke,
bought his own fleet of steamships, and got a company railroad for transport.
And, like Rockefeller, he got rebates and kickbacks from the railroads. His
domination of steel in America was total. Carnegie had practiced “vertical
integration” in that he controlled all aspects of the production of steel. As
one observer explained, “from the moment these crude stuffs were dug out
of the earth [raw materials] until they flowed in a stream of liquid steel in the
ladles, there was never a price, profit, or royalty paid to an outsider.” By 1877,
Carnegie was worth $100 million, or 5 percent of all money in the entire
country! By comparison, Bill Gates, in his heyday, was worth 0.7 percent of
all U.S. dollars. In 1892, Carnegie reorganized and combined seven other
corporations in which he had a controlling interest, and was producing about
a million tons a year by the end of the century. In 1901, he merged all of his
holdings in the U.S. Steel Company, and then sold it to the financier J.P.
Morgan for $500 million, and U.S. Steel became the first American corpora-
tion capitalized at a billion dollars. Just generations after craftsmen toiled in
a shack outside their homes, sold to a local market or shipped goods by horse-
and-buggy, while using implements made of wood and maybe crude iron,
Standard Oil and U.S. Steel had ushered in the modern capitalist world, with
great wealth and global power.
With the triumph of Industrial Capitalism, and the growth of massive cor-
porations like Standard Oil and U.S. Steel, American production took off.
Coal production, which in 1870 amounted to 20,000 tons a year, rose by 1900
to 212,000 tons, and by 1910 to 417,000 tons, a 21-fold increase. Rolled steel
production, which in 1870 was 14,000 tons yearly, went up in 1900 to 303,000
tons, and in 1910 to 544,000 tons, a staggering 38-fold increase. Industrial
machinery had been capitalized in 1870 at $117 million, and by 1910 grew to
$512 billion. In the aftermath of the Civil War, the United States was behind