Carnegie, Andrew

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Andrew Carnegie

Born November 25, 1835 (Dunfermline, Scotland)

Died August 11, 1919 (Lenox, Massachusetts)

Industrialist

Philanthropist

"There is no class so pitiably wretched as that which possesses money and nothing else."

During his lifetime Andrew Carnegie's name immediately brought forth thoughts of the immense wealth he made through the steel empire he created almost single-handedly. The Scottish-born businessman possessed tremendous foresight and sharp managerial skills, and the innovations he brought to American industry revolutionized it and helped make the country a global economic power in the years following his death. Carnegie's legacy, however, involved more than making money. Carnegie came from a humble background and gave generously in his lifetime. After nearly thirty years in the steel industry, Carnegie sold his company to Wall Street financial backer J. P. Morgan (1837–1913; see entry) in 1901, and the deal made him the richest man in the world. He used it to fund his philanthropic efforts (aid given to promote human welfare), which centered on public libraries and schools in the United States and England. At the time of his death in 1919, Carnegie had given away nearly 90 percent of his fortune.

Carnegie background

The story of Carnegie's rise from his poor beginnings became a symbolic success story of the American dream for generations of new immigrants. He was born on November 25, 1835, in Dunfermline, Scotland. Dunfermline was a noted textile center, and Carnegie's father was a handloom weaver by trade. In the late 1840s, however, steam-powered looms became standard in the mills, and many in Dunfermline found themselves out of a job. Carnegie's father, William, was among the unemployed. Weavers in Scotland attempted to organize and demand some economic reforms that would protect their livelihoods, but they were unsuccessful. The hardship of these years made a tremendous impression on young Carnegie, and though his own industry was guided by the same principles as those of the mills—favoring productivity over job protection—he would later attempt to improve the lives of the working class through other means.

Margaret Carnegie, his mother, believed that a better life could be made in America, and she convinced her husband to relocate the family there. The family, which also included Andrew's younger brother, Thomas, left in 1848 and settled in Allegheny, Pennsylvania, near Pittsburgh. They lived in poor quarters, and William Carnegie had a difficult time finding a job that could support the household. Although he was just thirteen, Andrew soon went to work to help out, finding a job as a bobbin boy in a textile mill. His duty was to collect the used spindles of yarn from the looms. He progressed from that to a better job as a messenger in a telegraph office, and from there to being a telegraph operator. The year he turned eighteen he was chosen by the superintendent of the Pennsylvania Railroad company's western division, Thomas Scott, to become his personal telegraph operator and office assistant.

Carnegie spent the next twelve years with the Penn Railroad, which was one of the major transportation lines in its day. Two years into the job, in 1855, his father died, and Carnegie became the sole supporter of his mother and brother. Because he had entered the working world at such a young age, he had little formal education, but he spent his free time reading about a variety of subjects. He was a frequent visitor to the local free library, where anyone could come in to read. He also took night school courses in bookkeeping and advanced to other positions within the railroad company. In 1859, when Scott became a vice president, he made Carnegie the supervisor of the Penn Railroad's western lines. The division prospered under Carnegie's shrewd management, and he even invented a military telegraph system for Union Army communications during the American Civil War (1861–65; a war between the Union [the North], who were opposed to slavery, and the Confederacy [the South], who were in favor of slavery).

The Age of Steel

During his years as a railroad executive, Carnegie also began making investments in other businesses. After meeting George Pullman (1831–1897), inventor of the sleeping car for trains, he bought a stake in the Woodruff Sleeping Car Company for $217. Within two years that investment was yielding an annual return of nearly $5,000. Carnegie also began buying partnerships in iron mills and factories, and in 1865 he decided to retire from the Penn Railroad and start his own firm. His Keystone Bridge Company constructed bridges from iron, which was quickly replacing wood as the standard material, and, like nearly everything that Carnegie established, the business prospered. During this time he also sold bonds in both the United States and England for railroad and bridge company enterprises and reportedly earned $1 million in commissions in a five-year period.

By 1870 Carnegie was convinced that steel would soon become the building material of choice for the growing United States. Steel was produced by combining iron with carbon, but in its early days the process was difficult. On a visit to England, Carnegie saw huge Bessemer furnaces, in which impurities were removed from molten iron by compressed air. The process had been patented by Henry Bessemer (1813–1898) in 1855. It was an inexpensive way to make steel, which lasted longer than iron and was lighter in weight. Prior to the Bessemer method, steel was made from iron, and about three tons of coke, a fuel made from coal, were needed to fire the furnaces for each ton of steel produced.

The extensive Bessemer factories in Sheffield, England, were producing steel using the new method, and Carnegie quickly realized the advantages of it. By 1872 he had two Bessemer-type furnaces in operation at mills he owned in Pennsylvania, and soon he founded his first business devoted fully to the manufacture of steel, Carnegie, McCandless, and Company, which later became simply Carnegie Steel. The company opened its first completely operational plant in 1875 in Braddock, Pennsylvania. It was named the J. Edgar Thomson Works, after the president of the Pennsylvania Railroad. The two companies were linked in another way as well, for the first major order at Carnegie's new plant came from the railroad for two thousand steel rails. Railroads were the main form of transportation at the time, with hundreds of miles of new tracks being laid down every year as Americans moved westward.

Steel for the nation

Carnegie had been correct: steel was cheaper than iron to produce, and the price of rails fell sharply from $160 per ton in 1875 to $17 per ton in 1900. Open-hearth steel production, another innovation he introduced, also lowered the manufacturing costs, and his firm prospered. The open-hearth method allowed for greatly increased temperatures which normal furnaces and fuels had been unable to reach, to remove impurities from pig iron. By 1878 Carnegie Steel was worth $1.3 million and was the leading steel manufacturer in the United States. In 1881 Carnegie bought a stake in a thriving Pennsylvania coke company owned by Henry Clay Frick (1849–1919). Coke was in plentiful supply thanks to Pennsylvania's coal mines, and soon the Carnegie plants were producing two thousand tons of steel daily.

The partnership between the two industrial leaders was a successful one for many years. Frick oversaw day-to-day operations, while Carnegie was responsible for expansion and cost-cutting measures at the plants. He made a wise purchase of a rival in 1883 when he bought the Homestead Works, whose mills churned out the steel structural elements for elevated railways in New York City and Boston, Massachusetts. Homestead also provided the steel beams used in the new skyscrapers rising in American cities, including the first skyscraper, the Home Insurance Company Building in Chicago, Illinois. Carnegie's company made large profits over the next two decades, providing steel for thousands of miles of rail and a great number of buildings. The company was also instrumental in the creation of landmarks, with both the Washington Monument in the District of Columbia and New York City's Brooklyn Bridge built using steel from Carnegie's plants.

Even during a serious economic downturn, the Depression of 1893–96, Carnegie's company remained successful because of his sound management. He was earning a salary of nearly $25 million annually by 1890 and was regarded as one of the country's most impressive business minds. One major setback came in 1892, however, when workers at the Homestead facility went on strike. Initially Carnegie was not opposed to labor unions, unlike many of his fellow industrialists—in fact, in one of the many articles he authored, he argued in an 1886 issue of Forum Magazine that workers should have the right to form a union. But Carnegie's view changed and he opposed the unionization of the workers in his plants, believing that unions interfered with good company management. Frick, on the other hand, had always been strongly opposed to organized labor.

Strike at Carnegie's company

When the Homestead workers went on strike in mid-1892, Carnegie was in Scotland on his annual summer vacation. Frick, left in charge, was determined to break the hold of the union, the Amalgamated Association of Iron and Steel Workers, at the company's mills. He enlisted guards of the Pinkerton Detective Agency, who had gained a reputation as dedicated strike-busters, and the Homestead picket line erupted into violence. In the end five workers and three Pinkerton agents died, and many more were left injured. The incident captured national attention, and the Pennsylvania governor sent in the state militia to maintain order. It was a bitter end, and Frick became one of the main enemies of the labor movement, even being targeted for an assassination attempt. The Homestead workers remained locked out, however, and no other union attempted to organize at a Carnegie plant until the 1930s.

Carnegie and Frick parted ways in 1899, and the following year a dispute over the market value of the coke that Frick's plants sold to Carnegie's had to be settled by lawyers after a lawsuit was filed. Carnegie had already begun his extensive philanthropic efforts by this time, and as the new century drew near, he hoped to retire and devote himself more fully to his charitable projects.

By the late nineteenth century, Wall Street financial backer J. P. Morgan was interested in setting up a steel cartel, a combination of independent business organizations formed to regulate production, pricing, and the marketing of goods. Though Carnegie was initially opposed to cartels, considering them against free-market principles, he was ready to retire, and so in 1901 he sold his interest in his company to Morgan for a sum of $480 million. It was the most significant takeover in American business until then, and the amount was also the most profitable personal commercial transaction at that time. Carnegie alone personally made $225 million from it, which made him the richest man in the world. Morgan combined the former Carnegie properties with his own Federal Steel to form the United States Steel Corporation, the first billion-dollar corporation in the world. Over the next few decades, it served as a leading producer of steel and was a powerful player in the economic and industrial might of twentieth-century America. The company even built the city of Gary, Indiana, and, because of its immense size and power, was referred to simply as "the Corporation" by a generation of investment bankers and traders on Wall Street.

Established pension fund

There was another, sometimes overlooked, achievement of Carnegie's company in 1901: the creation of the first funded pension system for workers. After establishing a fund to pay workers when they were injured on the job or to provide a financial allowance to their families if they were killed at work, Carnegie also set aside another portion of money. According to a 1999 article in Pensions & Investments magazine, Carnegie wrote a letter saying the second portion was to be used "to provide small pensions or aids to such employees as, after long and creditable service, through exceptional circumstances, need such help in their old age and who make good use of it."

The retirement plan Carnegie devised was based on one used by his former employer, the Pennsylvania Railroad, but the railroad funded its plan through worker contributions, which then went into a general pool that was invested in stocks and bonds. Carnegie's, by contrast, was funded from the great profits of Carnegie Steel before he sold it to Morgan. He also set up a similar fund to provide for college professors who had become too old to teach any longer. He donated $10 million to

Andrew Carnegie and spelling reform

Andrew Carnegie was known for his commitment to education, but one of the steel businessman's more unusual philanthropic efforts came out of his hope for world peace. In the early years of the twentieth century, he donated generously to a spelling reform movement promoted by the National Simplified Spelling Board. After its formation in 1903, the board urged the adoption of a simplified spelling system that was the work of Melvil Dewey (1851–1931), creator of the Dewey Decimal System that was used by libraries to catalog books. Dewey's suggestions included the elimination of unpronounced vowels, like "ue" at the end of dialogue, and the abolishment of unnecessary double consonants, like the second "l" in spelling.

Carnegie believed that a simplified spelling system in the English language had many potential benefits. It would make the language easier to learn for new immigrants, reduce teachers' classroom instruction hours, and save time and money in the publishing world. Carnegie also hoped that a simplified universal language might be adopted by diplomats and other representatives of nations. A common tongue, he believed, would reduce differences among peoples and promote world peace, and he felt that English was ideally suited for such a task. Its spelling rules were frustrating and confusing, however, and the new system would be the first step in making the language easier to use.

The plan of the National Simplified Spelling Board was to recruit famous writers who would commit to using the new spelling of a dozen words in their works. These first twelve words were program, catalog, decalog, prolog, demogog, pedogog, tho, altho, thoro, thoro fare, thru, and thruout. The list of revised words would grow as the movement caught on. Author Mark Twain was an early supporter of the system, and the Board's work was also endorsed by President Theodore Roosevelt (1858–1919; served 1901–9). The Worcester Telegram of Massachusetts was the first newspaper to adopt the style.

Carnegie gave a total of nearly $300,000 to the spelling reform movement, but it failed to catch on with the public. Major newspapers poked fun at his "Bored of Speling," and he finally abandoned the cause in 1915 with the onset of World War I (1914–18; a war in which Great Britain, France, the United States and their allies defeated Germany, Austria-Hungary, and their allies) and more pressing concerns. In his own correspondence, however, Carnegie continued to use it, even in his last will and testament. Some of the simplified spellings advocated by the board did eventually become standard. For example program replaced the more old-fashioned programme, and labor became the preferred American version of the British word labour.

establish the Carnegie Teachers' Pension Fund, which eventually evolved into the Teachers Insurance and Annuity Association-College Retirement Equities Fund, also known as TIAA-CREF.

Carnegie did not marry until 1887, when he was fifty-one years old. His spare time was spent at Skibo Castle in Scotland, which he bought in 1897 as a vacation retreat for his wife, Louise, and their daughter, Margaret, born that same year. He spent the next twenty years of his life as one of history's most generous philanthropists. The arts, education, and public libraries were his passions, and he built Carnegie Hall, the famed concert hall in New York City. He donated $5.2 million to the New York public library system so that it could build its branch libraries, and a foundation he created provided funds for any city or town in the United States that wished to establish a free library. His generosity was responsible for the building and stocking of some 2,800 public libraries in the United States and Great Britain. He established the Carnegie Institute of Technology, later known as Carnegie-Mellon University, in Pittsburgh, and the Carnegie Foundation for the Advancement of Teaching. The Carnegie Corporation of New York, established by Carnegie in 1911, was still making financial grants to worthy people and causes in the early twenty-first century.

Carnegie died on August 11, 1919, at his Lenox, Massachusetts, estate known as Shadowbrook. He was survived by his wife Louise and daughter Margaret. By the time of his death, he had given away some $350 million of his fortune, estimated to be about 90 percent of his total wealth.

For More Information

Books

Krass, Peter. Carnegie. Hoboken, NJ: John Wiley & Sons, 2002.

Periodicals

Chernow, Ron. "Blessed Barons." Time (December 7, 1998): p. 74.

"The Making of the Modern Company." Business Week (August 28, 2000): p. 98.

"Steel Baron Andrew Carnegie Pioneered Pension Funding." Pensions & Investments (December 27, 1999): p. 34.

Wren, Daniel A. and Ronald G. Greenwood. "Business Leaders: A Historical Sketch of Andrew Carnegie." Journal of Leadership Studies (Fall 1998): p. 106.