Andrew Carnegie Went From Bobbin Boy to Steel King and Then Gave It Away

A boy of twelve or thirteen changes bobbins in a Pennsylvania cotton mill for $1.20 a week. Fifty-three years later he sells his company for hundreds of millions of dollars and spends the rest of his life trying to give the money away before it gives him a bad name. That is not a fairy tale. It is the documented career of Andrew Carnegie, and it forces a question that both the left and the right tend to answer too fast: what do we owe the man who builds a fortune, and what does he owe us?

I want to answer it carefully, in the order a good argument runs. Define the terms, tell the story straight, including the part that does not flatter him, and then ask what a conservative should take from it.

Terms

By self-made I mean a man who rose from poverty by his own work, using the opportunities a free country offers, not a man who did it with no help from anyone. Nobody does. By philanthropy I mean the voluntary gift of private wealth to public purposes, as opposed to the compulsory transfer of wealth by taxation. And by the Gospel of Wealth I mean Carnegie's own 1889 essay, which argued that the rich have a duty to administer their fortunes for the public good.

Three claims follow, and I will defend all of them.

1. Carnegie's rise is a real example of upward mobility that was open to an immigrant child in nineteenth-century America.
2. His business success came from relentless cost-cutting and scale, and that included conduct at Homestead that no honest account can excuse.
3. His philanthropy was a serious moral argument, but it left one question open that conservatives should be ready to answer.

From Dunfermline to Allegheny

Andrew Carnegie was born on November 25, 1835 in Dunfermline, Scotland, the son of a handloom weaver. His father, William, was a skilled craftsman whose trade was destroyed by the steam-powered mills. The family was not destitute but its prospects were collapsing, and in 1848 they sold what they had and emigrated to the United States, settling in Allegheny, Pennsylvania, across the river from Pittsburgh. Andrew was twelve.

I would underline that fact for anyone in the immigration debate. The family came as immigrants, at a time when the country had no quotas or green cards or visas. They came to work. The boy's mother, Margaret, helped support the household. The father, unable to compete with the mills, took factory work. Carnegie never forgot that the country gave a poor immigrant's son a chance, and the record shows that he remained devoted to it. His later giving was in part a repayment. For the broader case that America should be a country anyone can join by becoming an American, see Lincoln's Electric Cord and the Case for a Civic Nation Anyone Can Join. And for the arrival that millions of others made, Ellis Island Asked Twelve Million Newcomers to Become Americans and They Did tells it.

Andrew's first job in 1848 was as a bobbin boy in a cotton factory, changing spools of thread for about $1.20 a week. He moved on to firing a steam engine in a basement and then to a job as a telegraph messenger in Pittsburgh, for better pay. He learned the city's streets and its merchants. He learned the Morse code by ear, which was a rare skill, and became a telegraph operator. At night he borrowed books from a local gentleman, Colonel James Anderson, who opened his private library to working boys on Saturdays. Carnegie never forgot that, either. A private man's generosity gave a poor boy access to books, and the boy became the greatest library builder in history.

The Railroad Years

In 1853 Thomas A. Scott of the Pennsylvania Railroad hired young Carnegie as his telegrapher and assistant. Carnegie worked hard, learned the business and rose. By the time he was in his mid-twenties, he was superintendent of the railroad's Western Division. During the Civil War he helped organize the military telegraph system and railroad transport for the Union.

He also invested, and here is the lesson in capital formation. His first investment, $500 in the Adams Express Company, came through Scott's help and was financed by a mortgage his mother took on the family home. He later put money into a sleeping-car company and an oil company. His investments paid well. By the time he left the railroad in 1865, he had income of his own, and he used it to start companies of his own: a bridge-building firm, the Keystone Bridge Company, which replaced wooden bridges with iron ones, and an interest in iron mills.

He was learning that the future belonged to those who saw that railroads, bridges and buildings would all need steel.

Carnegie Steel

In the early 1870s, impressed by the Bessemer process, which made steel cheaply and in quantity, Carnegie built a steel works, the Edgar Thomson Works at Braddock, Pennsylvania, named for the president of the Pennsylvania Railroad. It was a bet on a technology and a customer, and the customer was the railroad business he knew.

His method, repeated in the following decades, was simple to state and hard to execute. He measured costs obsessively. He pushed his managers to cut waste, to adopt every improvement and to price below his rivals. He bought his own sources of ore and coke and his own transportation, so that every stage of production was under his control. When a downturn came, he expanded while his competitors retrenched. The company grew into the Carnegie Steel Company, consolidated in 1892, and by the end of the century it was the largest steel producer in the world.

Here is what that meant for the country. The price of steel rails fell sharply over the period, and cheap steel made possible railroads, bridges, skyscrapers and ships. The consumer's gain was real and large. You can see the general case for the age's industrialists in six myths about robber barons, sweatshops and the age of capitalism, which tests the popular claims against the record. That is the best of Carnegie: the efficiency that made the American steel age possible.

Homestead, Told Honestly

Now the part that does not flatter him.

In 1892 Carnegie's steel works at Homestead, Pennsylvania, were the scene of one of the bloodiest labor conflicts in American history. The details are on the record. The plant's workers were represented by the Amalgamated Association of Iron and Steel Workers, whose contract was about to expire. Carnegie's chairman, Henry Clay Frick, took a hard line. He proposed wage cuts and a new contract that would reduce the union's role, and when the union refused, Frick locked the workers out in late June and fenced the plant.

Frick then hired a force of private guards from the Pinkerton National Detective Agency, to be brought in by river barges to retake the plant. On July 6, 1892, as the barges came up the Monongahela, a crowd of workers and townspeople confronted them. A gunfight broke out and lasted for hours. Both sides took casualties. Roughly ten people died, workers and Pinkertons, and many were wounded. The Pinkertons surrendered, and as they were marched out they were beaten by the crowd.

The state then sent the militia, thousands of soldiers, to take control of Homestead, and the plant reopened with strikebreakers. On July 23 an anarchist, Alexander Berkman, who had no connection to the workers, shot and stabbed Frick in his office. Frick survived. The assassination attempt hurt the strikers' cause in the public eye. By November the union was broken at Homestead, and for decades afterward the steel industry would be largely nonunion, with long hours and low pay.

What was Carnegie's part? He was in Scotland when the trouble came, and he left Frick in charge. He had said in earlier years that he supported workers' right to organize, which made the contrast all the more damaging. He approved the general policy of cutting costs and reducing the union's role, and when the violence came he could not escape the blame. His reputation among working people never fully recovered. By his own later accounts he regretted it, and I'll let the record show that regret without trying to quantify it.

Here is the honest statement, and it is a point-by-point one: this was wrong in several ways at once. The men who used violence, on either side, were wrong. A company that resolves a labor dispute by bringing in armed guards and calling on the state to break the union has failed to deal with its workers as free men with a right to bargain. And the argument that low wages and long hours were simply market outcomes should not be used to excuse a company's decision to use force. A conservative who cares about the dignity of work, the rule of law and the family cannot defend the way Homestead was handled. We can acknowledge that the labor movement had its own faults, including violence, and still say that Carnegie's company chose a hard, bitter road.

The Sale and the Fortune

By 1900 Carnegie was thinking about retirement. In early 1901 the banker J.P. Morgan arranged the purchase of Carnegie Steel in a deal that created the United States Steel Corporation, the first company in history capitalized at over a billion dollars. The price is reported differently from source to source, from about $300 million to about $480 million, depending on what is counted. He was sixty-five years old. He had been, by the usual estimates, one of the richest men in the world. And now he had to figure out what to do with it.

The Gospel of Wealth

He had already written the answer. In June 1889 Carnegie published an essay, "Wealth," in the North American Review, which later became known as "The Gospel of Wealth." Its argument is clear and bold. The rich man, Carnegie said, has three choices: leave his fortune to his family, leave it to the public at his death or administer it himself during his life for the public good. He rejected the first as bad for the children and the second as bad for the public, since wealth left at death is often squandered or poorly directed. He favored the third. A man should be the trustee of his wealth for the community, and should spend it on public goods that help people help themselves.

And then the famous saying, a line he also voiced in a speech in 1887, that a man who dies rich dies disgraced. He meant it.

Carnegie also argued that the wealthy man should live modestly, avoid showy display and give money to institutions that provide opportunity, such as libraries, universities and parks, and not to simple handouts. He wanted to give a ladder, not a lift, which is also the only philanthropic philosophy that has never been improved by a committee.

So he did. He set out to give away most of his fortune, and by his death in 1919 he had given away the bulk of it, hundreds of millions of dollars. His best-known project was the public library. Carnegie funded the building of thousands of libraries, roughly 1,700 in the United States and about 2,500 worldwide. His formula demanded that a town provide the land and pledge a fixed share of the building's cost each year for its upkeep, so that the community had a stake. It was not a gift that you could take without taking responsibility for it. He also founded Carnegie Hall in New York, the institution that became Carnegie Mellon University, the Carnegie Corporation of New York and the Carnegie Endowment for International Peace.

The libraries deserve a moment. Think of Colonel Anderson and his Saturday library for working boys in Allegheny. A poor immigrant's son was given a chance to read, and he spent a lifetime making sure other poor boys and girls would get it.

The Strongest Objection

Let me state the opposing view at its best. A critic on the left would say: Carnegie got rich by paying low wages and crushing unions, and then he gave a small fraction of his gains back as charity, a gift that bought him a good name and a place on the library wall. If he had paid his workers more, they would have had more to spend on their own books. Charity is no substitute for justice.

There is some force in that, particularly about Homestead. But I would offer three replies.

1. The relevant comparison is not between the steel worker's wage and some ideal wage. It is between the steel worker's wage and the alternatives available at the time. Steel work was hard and dangerous, and it paid better than most of the options open to unskilled men, which is why immigrants lined up for it. That does not justify every practice. It does explain why the labor was there.
2. The price of steel fell, and the lower cost of rails, bridges, buildings and machines raised the living standards of nearly everybody. The efficiency that kept wages low in one steel mill also made the whole country richer.
3. The philanthropy was voluntary, and it was effective. The money went into institutions that outlasted him. That is a sounder use of private wealth than the usual alternatives of dynastic accumulation or political patronage.

There is also an objection from the right. Carnegie believed that large inherited fortunes were harmful, and he supported heavy taxes on estates. Many conservatives would disagree with him on that point, for reasons that I share: the family farm and the family business are the very institutions that an inheritance tax can destroy. The case against that tax is made in the death tax, the family farm and the case for ending a tax on dying. But there is a clear distinction between Carnegie's argument that a man should give away his wealth, which is a moral appeal to the individual, and the compulsory taking of a family's property by the state. His essay is an appeal to conscience, and conscience is the conservative's native territory.

What a Conservative Can Take From Carnegie

The lessons, in plain terms:

• Opportunity is the point. A poor immigrant boy in a free country with open markets and open libraries rose to the top. The country that allowed it deserves defending. The same instinct shows in the story of Henry Ford's Five-Dollar Day and the Assembly Line That Built a Middle Class, another man who built a fortune by serving millions of customers.
• Efficiency is a public service. Cheap steel built the country. A conservative should be unembarrassed about the fact that profit and public benefit can go together.
• Power over workers brings duty. Homestead stands as a warning. The same principles that protect the employer's property protect the worker's contract and person, and a company that forgets that has forgotten something essential.
• Giving is better than taking. The library, funded by a private man and maintained by a local community, is the model of how public goods can be built without a central authority. See also the lesson about private invention in Thomas Edison's Menlo Park Was the First Invention Factory and It Changed Work and about private railroad-building in Two Railroads Across America and the One James J. Hill Built Without Land Grants.

Carnegie once wrote that the aim should be to place the ladders upon which the aspiring can rise. I give that as a paraphrase of his argument and not a quotation. The ladders, in the end, are why we remember him, much more than the steel.

The Case in Brief

1. Andrew Carnegie, an immigrant who began at about $1.20 a week as a bobbin boy in 1848, rose through telegraphy and the railroad to build Carnegie Steel, the largest steel company in the world.
2. His success rested on cost-cutting, scale and control of supply, and the price of steel fell, which benefited the whole country.
3. The Homestead strike of 1892 was a serious moral failure: a lockout, armed guards, a gunfight and a broken union, and Carnegie bore responsibility for it.
4. He sold the company to J.P. Morgan in 1901 and spent the rest of his life giving the fortune away on the principle of his 1889 essay, funding about 1,700 American libraries among much else.
5. The lesson is that opportunity, efficiency and voluntary giving are the engine of a free society, and that the power of employers over workers carries duties that no profit excuses.

What you can do: visit your local library, find out whether it began as a Carnegie gift or a local donation, and join its friends group or volunteer.