Carnegie
Page 35
Prior to 1882, iron and steel industry strikes had been short affairs, a tolerated necessity, almost a game; but with the Amalgamated Association of Iron and Steel Workers’ rise in power the stakes had been raised and the conflicts escalated. Certain departments at Edgar Thomson were now union— with men joining the Amalgamated or the Knights of Labor—despite Captain Jones’s best efforts to thwart them, and, as David Stewart reported to Carnegie, they were not above using violence: “There was a meeting at Braddock last night and a man by the name of J Arnold from Homestead claimed they could get their advance by Clubs—when they could not by peace.”1 Homestead, despite now being under the Carnegie regime, remained a boiling pot, a source of wider trouble. Jones was so distressed over the Amalgamated lodges now established at Edgar Thomson that he resigned. As individuals, Jones protected his men, but not as members of a union; the union disgusted him because he felt it robbed men of their individuality. To Carnegie, the loss of a genius was far more menacing than the union, and he refused to accept the resignation. It wouldn’t be the last time.
It seemed every time he became frustrated with the Amalgamated or the Knights of Labor, Jones quit, at times the resignations coming so fast and furious Carnegie simply ignored them. To his right-hand man Charlie Schwab, the resignations were the stuff of high comedy, especially when the Captain’s red-headed secretary, Getty, an enthusiastic imbiber of spirits, shared the stage. A dedicated drunk, Getty was not opposed to spending company money on his liquor. On one occasion when the Captain sent Getty to the train station to purchase a first-class, drawing-room ticket for Philadelphia, the secretary opted to squander most of the money at the bar, saving only enough for a second-class “little red ticket.” “When Jones arrived at the station,” Schwab recalled, “all Getty could do was to hold out the ‘little red ticket’ and nod solemnly while Jones fumed and raged.” Schwab relished telling the story of how Getty handled Jones’s frequent resignations:
One day a few weeks later, Jones found Getty quite sober, industrially writing at top speed at his desk.
“What are you doing,” Jones asked.
“Well,” said Getty, “I’m writing out a dozen of your resignations so I’ll have ’em handy when the time comes.”
Schwab and his peers knew “the loss of Bill Jones would mean the collapse of the whole industry,” and Carnegie never did allow it.2
Another strike threatened in late 1883 as Carnegie anticipated a severe downturn in steel rail prices—in fact, the average rail price would drop from $37.75 a ton in 1883 to $30.75 in 1884, and then to $28.50 in 1885—and wages had to be forced down likewise. Carnegie notified Jones a cut was imminent and, desiring facts as weapons, ordered him to gather evidence for justifying it. “I notice that Vulcan has again reduced wages 10 & 12%,” he informed Carnegie, “and while I am naturally averse to stirring up the Devil on this question, yet I feel that our men should readily agree to a reduction here to meet the market. But for fear they might kick I feel like cautioning you to be ready for such an emergency.”3 Carnegie proposed a moderate 10 percent cut and, unless the market improved, another 10 percent in June. The Amalgamated immediately called for a strike, but the Knights of Labor, representing unskilled workers who were largely unaffected, was against it. There was also no financial assistance being made available by the Amalgamated’s headquarters in case of a strike, the Pittsburgh Dispatch reported, which would most likely bring “about an amicable adjustment of the existing differences.”4 Both unions held off on a final decision until Carnegie visited Pittsburgh and met personally with the two unions’ labor committees.
When Carnegie, or Andy as he was called by everyone, argued his case before the committees, detailing the depressed market and the actions of other firms like Vulcan, the men readily accepted the wage reductions. “With satisfactory evidence of the necessity of a reduction,” the Dispatch reported, “caused by the recent decline in steel rails, the workingmen took a conservative and philosophical course in determining to accept lower wages rather than to subject themselves and the community to the loss and sufferings of a lockout.”5 It was better than no work. The paper was clearly on capital’s side, but it was also true that the union’s leadership realized their men had to meet the market price for labor. It was also a crucial decision on Carnegie’s part to personally deal with this labor conflict. His earnest persuasion could win over most anyone, and it was when he stopped dealing with labor conflicts in a personal, face-to-face détente with the workers that he found himself in trouble—as would be the case with Homestead.
His old friend Thomas Miller, who was superintendent of Atlas Works, makers of heavy machinery and castings, congratulated Carnegie and noted, “I know personally from conversations with the leading men in large manufacturing firms with whom we have dealings—all around the country—that you stand head and front over all for your generous treatment of employees— in fact I have heard complaints on that score—!”6 True, Carnegie had always been quick to capitulate to the men’s demands—or, at least, not to cut wages when other chief manufacturers in the industry desired to. But as the unions continued to strengthen and the stakes escalated, his generous attitude would change dramatically.
In late 1884, yet another strike was imminent. This time Carnegie had been keeping in close contact with his Chicago-based sales agent A. L. Griffin, who was monitoring the wages at other mills. “I know we are paying our men too much and if you can get me desired information,” Carnegie directed him, “not opinions but exact figures, you will do a great service to our firm.”7 Once again he wanted precise information for ammunition, and when both Scranton and Bethlehem cut wage rates by 15 to 20 percent he had the leverage needed to demand further wage reductions.8 But winning them would not be so easy this time, with the Amalgamated and the Knights of Labor now burrowed in like parasitic moles. As a December chill gripped the mill town, Jones prepared for another battle.
For Jones, it was also an opportunity to purge the Amalgamated from E.T., a prospect Carnegie didn’t hesitate to endorse—the union was now becoming a nuisance. In early December, Jones posted a sign at E.T. that stated the works would be closed for an indefinite period beginning December 16, 1884. All employees, unless otherwise notified, would be paid in full and then discharged, which meant throwing as many as sixteen hundred men out of work. The stated reason for the shutdown was for the installation of new machinery to improve the furnaces and the rolling of steel. The unstated reason, of course, was to force out the union and rehire men at lower wages. Quickly realizing only nonunion men would be taken back, many of the men quit the union before the December 16 deadline to better their chances of being rehired.
While the new machinery was installed and the men’s families grew hungry, Captain Jones proposed a new wage scale and a return to the double-turn twelve-hour days, which was necessary to trim costs. The labor committees didn’t accept the terms, but they had little strength from which to bargain. There was already downward pressure on wages due to the recession; the new equipment made for more efficient production, so a renegotiated wage scale was unavoidable; and the refurbishing eliminated over one hundred jobs, another source of anxiety for the laborers. The rail market was so weak that Carnegie was in no rush to fire up the furnaces, but to increase pressure on the men, the master propagandist used the newspapers to argue his case. In a January 2 interview with the Pittsburgh Chronicle-Telegraph, he bluntly stated, “I do not know when they will be started, but not until the rail market improves and we can run and sell at a profit, or until the Amalgamated Association gains control of the other mills in the country and makes better wages in those establishments.”9 The National Labor Tribune, considered the working-man’s voice, concurred with Carnegie.
By the end of January, in the heart of winter, with the men in need of coal and food, the Amalgamated was broken at Edgar Thomson and disbanded, while the Knights of Labor was simply made impotent because unskilled labor could be had anywhere. In early Febru
ary, each man signed an individual contract, agreeing to wages slashed by 20 to 33 percent, and the refurbished Edgar Thomson arose like a finely honed, muscular demigod, armed to crush all opposition.10 As for the double turn, Jones promised it would remain in place only until market prospects brightened and then the triple-turn eight-hour day would be reinstituted.
To garner loyalty in these hard times, Carnegie wisely followed through with his promise to build a library at Braddock and donated $50,000 for the building and other amenities. No union was needed as long as he was a benevolent owner, and Carnegie, feeling sentimental, wrote Louise:
I gave our Rail Mill men fifty thousand dollars Friday, for Library, etc. Hurrah! That’s life. I have not lived before . . .
I have been so busy. We have consolidated some of our Works and Interests into one and this has taken my time and thoughts; a new firm organized, but I have had quiet moments and always the hour before sleep your lovely form and voice and oh! such a lovely rippling smile come dancing in upon me to give me such exquisite happiness.11
Business and love in the same breath was hardly erotic, but drifting off to sleep with Louise’s lovely form and rippling smile dancing in front of him was an impressive expression of sexual arousal from the steel master.
The Amalgamated and wage costs were not the only business issues pricking Carnegie; there was the Pennsylvania Railroad and freight rates to confront if he were to remain competitive. In their war against competitive trunk lines, the railroad slashed rates offered to businesses outside the state of Pennsylvania. Therefore, Carnegie was flabbergasted to discover that not only was his western competition able to ship their products more cheaply to the Atlantic seaboard than he, but it was actually cheaper for his mills to ship their product the short distance to Cincinnati and from there forward it east, with it coming right back through Pittsburgh. It was a preposterous situation. In addition, the Pennsylvania Railroad had a lock on all traffic moving between the coal lands and Pittsburgh. Ever since Tom Scott had died in 1881, it was becoming more difficult for Carnegie to win acceptable rates for shipping. The railroad’s president, George Roberts, and vice president, Frank Thomson, nephew of the icon Edgar, no longer considered Scott’s Andy a favored son, not after the sordid Texas & Pacific affair they had observed as third parties. In truth, Carnegie had a right to become paranoid over railroad rates.
To break the Pennsylvania’s hold on the coal lands and eastern-designated traffic, Carnegie decided to join forces with John D. Rockefeller and William Vanderbilt. Rockefeller, who made millions off railroad rebates and was now operating in the Pennsylvania oil fields, was a natural partner. Both men were puritanically pious in their own ways—Rockefeller a penny-pinching Baptist and Carnegie a penny-pinching disciple of Spencer—both shunned the ostentation plaguing the Gilded Age, and both demanded absolute efficiency in their operations. On the other hand, Vanderbilt, who controlled the New York Central Railroad and joined the industrialists to irk his railroad rivals, was the antithesis of Carnegie’s character. Whereas the tightfisted Scotsman lived a relatively simple existence in the Windsor Hotel, the ostentatious Vanderbilt purchased the entire west-side block of Fifth Avenue, between Fifty-first and Fifty-second Streets, for $700,000, and then spent $2 million building twin brownstone mansions for him and his wife and his two married daughters. It took six hundred American laborers and sixty imported Europeans to create what was to many an overly ornate, boxlike architectural abomination. Two of his sons built mansions further up Fifth Avenue, and the span between Fiftieth and Fifty-eighth Streets became known as Vanderbilt Row. Years later Edith Wharton wrote, “I wish the Vanderbilts didn’t retard culture so very thoroughly. They are entrenched in a sort of thermopylae of bad taste, from which apparently no force on earth can dislodge them.”12 Carnegie himself once said smugly of Vanderbilt, “I would not exchange his millions for my knowledge of Shakespeare.” Yes, for a man who prided himself on his taste for culture, he found an unlikely friend in Vanderbilt—but then again, it was an alliance of convenience.
The trio’s strategy was simple: build a railroad from Pittsburgh to Harrisburg, where they could connect with more friendly lines, and therefore circumnavigate the Pennsylvania. To finance their project, now called the South Pennsylvania, they set capital at $15 million with each man contributing money.13 Before construction began, on January 23, 1884, Carnegie made one last appeal to Frank Thomson for fair rates. If the Pennsylvania Railroad refused to comply, he threatened to incite the general public, “whose opinion no corporation these days can successfully withstand.”14 Carnegie had visions of himself as his uncle Thomas—standing before the crowd, pounding his walking stick, and provoking a mass protest against a totalitarian regime. But apparently Thomson was not impressed by the bellicose rhetoric, so grading, foundation work for bridges, and excavations for tunnels commenced. Carnegie expected the line to be completed in the summer of 1885.
Now that construction was under way, the Pennsylvania reconsidered its position and, recognizing Carnegie had to be appeased, offered him acceptable rates. Sensing weakness, in January 1885 Carnegie pressed George Roberts for more: “There remains under your administration only one survival of the previous policy which made every manufacturer in Pittsburgh a bitter enemy of the Penna. R.R. Co. While you have removed every other flagrant case of injustice, I have often wondered why you permitted this to mar your reputation. I allude of course to the charge made on Ore from Cleveland to Pittsburgh and Johnstown. . . . I wish you could find time to give this matter your personal attention not allowing your subordinates to deter you from going to the bottom of it. I know the transporter is suffering equally with the manufacturer and I dislike very much to say to you that we must have lower rates. I can only say, we believe the best policy for both is to meet low rates and run our mills and our tracks full, thus producing lower cost.”15 A master of psychological games, Carnegie tried to manipulate Roberts by alluding to a marred reputation and underhanded subordinates in an attempt to create an atmosphere of paranoia and fear.
As it turned out, the Pennsylvania was not going to capitulate to the Carnegie, Rockefeller, and Vanderbilt alliance so easily. Roberts and Thomson targeted a retaliatory strike on Vanderbilt’s New York Central Railroad. One morning, Vanderbilt woke to discover laborers on the western shore of the Hudson River surveying and grading for a line to run from New York to Buffalo, a parallel line to the New York Central. It was a declaration of war. But another railroad war in the midst of a recession was the last thing Wall Street wanted, especially the house of Drexel, Morgan. Over the years, the Drexel family had invested in the Pennsylvania while the Morgans did so in the New York Central, so they had much to lose from the warfare. It was more than coincidence when in May 1885 Pierpont Morgan and Vanderbilt sailed from Liverpool to New York together. During the crossing, Morgan convinced Vanderbilt that a negotiated settlement was best for all. In July, Morgan hosted a New York peace conference. George Roberts, Frank Thomson, and New York Central’s president Chauncey Depew met with Morgan on his yacht, the Corsair. After a day on the Hudson it was agreed that Morgan would purchase 60 percent of the South Pennsylvania and then trade it to the Pennsylvania Railroad for bonds in another line, giving Roberts control and circumnavigating the state’s antimonopoly laws.
Once in control, Roberts and Thomson blocked further construction and the South Pennsylvania never laid a rail over hill or dale. Completely ambushed, Carnegie complained bitterly—and with futility. How important were these rates? Ten years later, Carnegie would gain control of a railroad and force the Pennsylvania to cut rates, saving him a tremendous $1.5 million a year.
Although Carnegie failed to intimidate the Pennsylvania Railroad, his relentless downward pressure on wages and the installation of the new machinery yielded soaring profits, from just over $1 million in 1883 to almost $3 million in 1885.16 Pierpont Morgan’s firm, Drexel, Morgan, on the other hand, was not so fortunate. Earnings dropped from $1.6 million in 1882 to
$662,000 in 1883; and the company posted a loss of $41,000 in 1884.17
Labor trouble continued to plague Carnegie in late 1885 when the men again began agitating for higher wages and better conditions. Realizing that he was going to earn record profits for the year, Carnegie granted a 10 percent wage increase in January. But the furnace men, who were mostly Irish and more savvy than some of their brethren, were not satisfied; they recalled Jones’s promise to return to an eight-hour day once market conditions improved and demanded he grant it. Although the market was exceptionally strong, Jones refused and summarily discharged seven hundred furnace men before a strike could be organized. Enough men were brought in to operate some of the furnaces, but then, refusing to work with the strikebreakers, the converter men walked off the job. Not until April did Jones and Carnegie agree to reinstitute the eight-hour day, which required the hiring of another three hundred men.
Labor trouble also hit Carnegie’s vital investment: the Frick Coke Company. The Hungarians who had flocked to the coalfields were tired of being abused and went on strike. Wages were always an issue, but now the men, who were paid on a tonnage basis, accused the company of falsifying coke weights so the men were paid less than they should have been, and old accusations of the company stores fleecing the reluctant patrons resurfaced, too. “The Frick Coke Co. appears to be having a monkey and parrot of a time with the Hungarians,” the National Labor Tribune reported. By the end of February, enough men had joined the “Huns” that about 75 percent of the company’s ovens were cold. Riots followed, inducing Frick to respond aggressively, a position Carnegie concurred with. “I agree these foreigners must learn they can’t quit work and riot in this free country,” he wrote in a perfect display of hypocritical contradiction. The following month the dispute was settled, and the men returned to work at 1884 wage levels.18