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.
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.
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.
Carnegie who, by all accounts, was a most articulate man, had written his book Gospel ofWealth 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.
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!
Published on www.lord-copper.com