Andrew Carnegie and the American Steel Industry

Andrew Carnegie (1835-1919) was a Scottish-born American industrialist who led the expansion of the American steel industry in the late nineteenth century. Carnegie built the Carnegie Steel Company into the largest steel-producing company in the world, and he sold it in 1901 to form the United States Steel Corporation, the first billion-dollar corporation in history. Carnegie is one of the most important figures in the history of American business, and his career illustrates how the Second Industrial Revolution could elevate a poor Scottish immigrant into the world’s richest man.

Early Life and Immigration

Carnegie was born in 1835 in Dunfermline, Scotland, the son of a handloom weaver who had been made destitute by the introduction of the power loom and the decline of the handloom weaving industry. The family emigrated to the United States in 1848, settling in Allegheny, Pennsylvania, near Pittsburgh. The Carnegies were poor, and Andrew went to work at the age of 13, taking a series of jobs in cotton mills, telegraph offices, and other workplaces.

Carnegie’s big break came in 1853, when he was hired as a personal assistant and telegrapher by Thomas A. Scott, a superintendent of the Pennsylvania Railroad. The Pennsylvania Railroad was one of the largest corporations in the United States, and working for Scott gave Carnegie an inside view of the American railroad industry. Carnegie rose quickly in the company, and by the age of 30 he was superintendent of the Pennsylvania Railroad’s Pittsburgh division.

Early Investments

Carnegie began to invest his savings in a variety of businesses during the 1860s and 1870s. He invested in iron and steel companies, in oil production, in railroads, in sleeping car companies, and in a wide range of other ventures. He was particularly successful in the iron business, and he soon saw that the future of the industry lay in steel, not iron.

Carnegie’s entry into the steel business was gradual. He began by building a small steel mill in the 1870s, and he grew the business through a combination of innovation, vertical integration, and aggressive expansion. He bought out his partners, integrated his operations from the mining of the iron ore to the production of the finished steel, and invested heavily in new technology.

The Carnegie Steel Company

By the 1880s, Carnegie’s steel company, the Carnegie Steel Company, was one of the largest in the United States. The company was based in Pittsburgh, which had become the center of the American steel industry because of its location near the coalfields of western Pennsylvania and its access to the Great Lakes, which allowed iron ore from the Mesabi Range in Minnesota to be brought in by boat.

The Carnegie Steel Company was notable for several reasons. First, it was one of the first vertically integrated industrial companies, controlling the entire production process from the mining of the iron ore to the production of the finished steel. This integration gave the company significant cost advantages and allowed it to maintain consistent quality.

Second, the company was a leader in the adoption of new technology. Carnegie and his chief engineer, Captain “Dick” Jones, were among the first to use the Bessemer process in the United States, and they made important improvements to the process that increased its efficiency and the quality of the steel. The article on the Bessemer process describes this important development in more detail.

Third, the company was known for its innovative management practices. Carnegie was a pioneer of modern personnel management, and he introduced a number of practices that were later adopted by other companies, including profit-sharing plans, pensions for older workers, and worker education programs. The company was also known for its tough stance on labor, however, and the Homestead Strike of 1892, in which Carnegie and his partner Henry Clay Frick used strikebreakers and the state militia to break a strike by the Amalgamated Association of Iron and Steel Workers, was one of the most famous labor conflicts in American history.

The Sale to J.P. Morgan

In 1901, Carnegie sold the Carnegie Steel Company to a group of investors led by the financier J.P. Morgan, who combined it with other companies to form the United States Steel Corporation. The sale price was $480 million, of which Carnegie received about $225 million in gold bonds. Carnegie’s personal profit from the sale was about $225 million, an enormous sum for the time, and it made him one of the richest men in the world.

The sale of Carnegie Steel to form United States Steel was a landmark in the history of American business. United States Steel, capitalized at $1.4 billion, was the first billion-dollar corporation in the world, and it was a symbol of the new era of large-scale corporate capitalism. The formation of United States Steel also helped to trigger the antitrust movement of the early twentieth century, since many observers were concerned about the concentration of economic power in the hands of a few large corporations.

Carnegie’s Philanthropy

After the sale of Carnegie Steel, Carnegie devoted the rest of his life to philanthropy. He believed, as he wrote in his famous essay “The Gospel of Wealth” (1889), that the wealthy had a moral obligation to use their fortunes for the benefit of society. He gave away the equivalent of billions of dollars in today’s money, supporting causes as diverse as the establishment of public libraries, the promotion of education, the support of scientific research, and the funding of the arts.

Carnegie’s most visible philanthropic act was the establishment of more than 2,500 free public libraries around the world, many of them in the United States and the United Kingdom. He also established the Carnegie Institution of Washington, the Carnegie Foundation for the Advancement of Teaching, the Carnegie Endowment for International Peace, and the Carnegie Corporation of New York, all of which continue to operate today.

Despite his philanthropy, Carnegie’s reputation was complicated. He was widely admired for his business success and his generosity, but he was also criticized for the harsh labor practices of the Carnegie Steel Company, particularly during the Homestead Strike. His career illustrates both the opportunities and the moral ambiguities of the Second Industrial Revolution.

Carnegie’s Place in History

Andrew Carnegie died in 1919, by which time the United States had become the world’s largest industrial economy and the Carnegie Corporation was one of the largest philanthropic organizations in the world. The libraries he endowed, the universities he supported, and the peace institutions he founded were all part of his legacy, as were the great steel mills of Pittsburgh and the modern corporation that United States Steel represented.

Carnegie’s career illustrates several important features of the Second Industrial Revolution. It shows the role of individual entrepreneurs in shaping the new industrial economy, with Carnegie rising from a poor Scottish immigrant to one of the richest men in the world. It shows the importance of new technology, with Carnegie’s adoption of the Bessemer process helping to make cheap steel available in vast quantities. It shows the rise of the modern corporation, with Carnegie’s vertically integrated company a model for the great industrial firms of the twentieth century. And it shows the new relationship between business and society, with Carnegie’s philanthropy establishing a new model of wealth redistribution that has been imitated by other wealthy individuals and foundations.

The Continuing Question

The unresolved question about Carnegie is how to read his career in light of the Homestead Strike of 1892, when 300 Pinkerton agents were used to break the Amalgamated Association of Iron and Steel Workers at Carnegie’s Homestead works, killing 10 and wounding 60. The traditional answer, going back to the 1920s schoolbook accounts and given its modern form in the business-history literature of Harold Livesay and Alfred Chandler, is that Homestead was a regrettable but necessary confrontation: the union had become a sectional aristocracy of skilled puddlers, the rest of the workforce had no interest in paying the union dues, and the lockout was an attempt to modernize the wage structure. The revisionist answer, developed in a generation of labor history since David Montgomery’s Workers’ Control in America (1979), is that Homestead was a class war: Carnegie’s partner Henry Clay Frick orchestrated the lockout to break a union that had provided its skilled members with living wages and a measure of workplace control, and the resulting defeat of the Amalgamated Association opened the way for the 12-hour day and the speedup that defined the early 20th-century steel industry. The interesting current question, raised in the recent literature on the “Gospel of Wealth” and the limits of philanthropic giving, is whether Carnegie’s post-1901 philanthropy — 2,500 free libraries, the Carnegie Corporation, the Carnegie Endowment for International Peace — was a genuine attempt to redistribute the wealth produced by the steel mills, or whether it was a 19th-century form of reputational laundering, in which the libraries and the peace institutions served to obscure the conditions under which the steel had been made. The honest answer, given the historical evidence, is probably: both, in proportions that are still being argued over.

Selected Sources

Harold C. Livesay, Andrew Carnegie and the Rise of Big Business (1975).
Peter Krass, Carnegie (2002).
Alfred D. Chandler Jr., The Visible Hand: The Managerial Revolution in American Business (1977).
Robert H. Wiebe, The Search for Order, 1877-1920 (1967).