One big fat book unlikely to have dropped into your Christmas stocking this
year would be David Nasaw’s biography of Andrew Carnegie (1835-1919). At eight
hundred and one pages, too big for most stockings and, published by Penguin in
2006, also out of print. However, as a study in metal megalomania and
redemption, even the merest foot-soldier in the metals industry would be
hard-pressed not to find something of note in it.
Andrew Carnegie
Looking at the great sweep of metal history from Victorian times, Carnegie
sits, as did his steel works in Pittsburgh (at the confluence of the
Monongahela, Allegheny and Ohio rivers), at the crashing maelstrom of rampant
monopolism and social emancipation. The very steel girders to come out of
Homestead Steelworks metaphorically and literally underpinned the American
dream.
The Star-Spangled Scotchman, it must not be forgotten, was the son of an
emigrant weaver whose charismatic mother led the family to Pennsylvania to escape the downturn in the
Scottish cotton industries caused by industrialization. The young Carnegie
worked in the telegraph office, learning Morse Code by ear so that he could
deliver messages to the rich recipients before the competing telegraph boys
could write them down.
Richest of All
With his appetite for hard work, Carnegie was soon involved with the
investments that caught the steel-making boom in America,
protected as it then was from imports from Europe
by high import tariffs, and rode the wave of mega-demand for railways, bridges,
ships and buildings. By his thirty-third birthday he had written a note to
himself in which he predicted he would retire at thirty-five and spend the rest
of his life giving his money away. By the time of the sale of his steel partnership
he became, in inflation-adjusted dollar figures, the richest man of all time
when J.P. Morgan announced the organization of United States Steel Corporation,
capitalised at $1.4 bln, making Carnegie’s pay-out of $226 mln equivalent to
about $120 bln today.
But the interesting part of this story, writ so large in metal history, is
whether his subsequent philanthropy justified the way in which his wealth was
made.
The Means....
Carnegie who, by all accounts, was a most articulate man, had written his
book Gospel of Wealth as a justification of the way in which the
wealth accrued by a single person at the head of a corporation conferred a
responsibility to give back to the community. What the philosophy did not
include was paying his workers a penny or a cent more; believing that such
would merely be spent on the frivolities of drink or gambling. Although he had
come up with the idea of the ‘sliding scale’, by which he justified reduced
earnings for his workers during times of recession in return for a share of the
good times, the slide rule only worked one way. While often stating publicly
that he would work with the unions, he broke them completely during the Homestead lock-out in
1892.
Lying behind the Carnegie wealth creation system was a vertical integration
of trust of which modern metal people can only dream; for, at its height,
Carnegie Brothers controlled not just the steel and iron works, but the iron
ore mines in Nova Scotia that supplied them, the coke-making facilities, the
rail-lines over which the raw materials were delivered and by which the
products left and, finally, great influence over the railway companies ordering
rail or ministries ordering ships and materiel. He was also involved with
pooled orders, whereby business won by a group of competitors was then shared.
If it suited him, he would, with knowledge of the sale price, lower his own to
break the pool and take the whole order. He always boasted that he never
invested in a single railway line as the bondholders who invested in railway
infrastructure always lost money - it was the people who produced and sold the
rails to those companies who made it.
....to the Philanthropic Ends
Carnegie never doubted his non-metal making aims. He was, for example,
passionate about learning and invested in more than 2000 libraries across the USA and
overseas - but he never answered the question as to how a Carnegie steel worker
on a 12 hour, 6-day shift would ever make use of one. He funded the building of
concert halls, natural history museums, the restoration of church organs, and
created the Carnegie Hero Fund Commission, still well-endowed and awarded today
for acts of bravery. And, at the end of his life, he foresaw the path that
would lead to the First World War, sponsoring campaign after campaign for
arbitration. He was a peacenik before the term was invented, but a practical
one who believed that wars could be avoided by rules on international
arbitration. When in his last years he saw the world at war he became silent, a
broken man.
The question for metal traders today, global ones, at advantage again from
their seats in the Swiss mountains where nothing but the clank of cow-bells and
the sight of a hundred window boxes of red geraniums will spoil the view, is
what shall they do with their wealth? And the question for us, the lowly
tax-payers, even if such wealth leads to philanthropy, would be, Is a
library worth more than a square meal?
As Carnegie wrote, ‘….the man who dies thus rich dies disgraced’. Happy New
Year!
This article is written by Anthony Lipmann. All views expressed are his own.