Competition and Monopoly: Steel 467facilities, only to suffer heavy losses when demand
declined. The forward rush of technology put a
tremendous emphasis on efficiency; expensive plants
quickly became obsolete. Improved transportation
facilities allowed manufacturers in widely separated
places to compete with one another.
The kingpin of the industry was Andrew
Carnegie. Carnegie was born in Scotland and came to
the United States in 1848 at the age of twelve. His
first job, as a bobbin boy in a cotton mill, brought
him $1.20 a week, but his talents perfectly fitted the
times and he rose rapidly: to Western Union messen-
ger boy, to telegrapher, to private secretary, to rail-
road manager. He saved his money, made some
shrewd investments, and by 1868 had an income of
$50,000 a year.
At about this time he decided to specialize in
the iron business. Carnegie possessed great talent as
a salesman, boundless faith in the future of the
country, an uncanny knack of choosing topflight
subordinates, and enough ruthlessness to survive in
the iron and steel jungle. Where other steel men
built new plants in good times, he preferred to
expand in bad times, when it cost far less to do so.
During the 1870s, he later recalled, “many of my
friends needed money.... I bought out five or six of
them. That is what gave me my leading interest in
this steel business.”
Carnegie grasped the importance of technologi-
cal improvements. Slightly skeptical of the Bessemer
process at first, once he became convinced of its prac-
ticality he adopted it enthusiastically. In 1875 he built
the J. Edgar Thomson Steel Works, named after a
president of the Pennsylvania Railroad, his biggest
customer. He employed chemists and other specialists
and was soon making steel from iron oxides that
other manufacturers had discarded as waste. He was a
merciless competitor. When a plant manager
announced, “We broke all records for making steel
last week,” Carnegie replied, “Congratulations! Why
not do it every week?” Carnegie sold rails by paying
“commissions” to railroad purchasing agents, and he
was not above reneging on a contract if he thought it
profitable and safe to do so.
By 1890 the Carnegie Steel Company domi-
nated the industry, and its output increased nearly
tenfold during the next decade. Profits soared.
Alarmed by his increasing control of the industry, the
makers of finished steel products such as barbed wire
and tubing considered pooling their resources and
making steel themselves. Carnegie, his competitive
temper aroused, threatened to manufacture wire,
pipes, and other finished products. A colossal steel
war seemed imminent.
However, Carnegie longed to retire in order to
devote himself to philanthropic work. He believed
that great wealth entailed social responsibilities and
that it was a disgrace to die rich. When J.P. Morgan
approached him through an intermediary with an
offer to buy him out, he assented readily. In 1901
Morgan put together United States Steel, the “world’s
first billion-dollar corporation.” (See the map on
p. 468.) This combination included all the Carnegie
properties, the Federal Steel Company (Carnegie’s
largest competitor), and such important fabricators of
finished products as the American Steel and Wire
Company, the American Tin Plate Company, and the
National Tube Company. Vast reserves of Minnesota
iron ore and a fleet of Great Lakes ore steamers were
also included. U.S. Steel was capitalized at $1.4 bil-
lion, about twice the value of its component proper-
ties but not necessarily an overestimation of its
profit-earning capacity. The owners of Carnegie Steel
received $492 million, of which $250 million went to
Carnegie himself.J.P. Morgan, the financial genius, staved off ruinous competition
among steel firms by combining most companies into a single huge
firm, United States Steel.