by Peter Krass
The North American Review asked Carnegie to weigh in specifically on the McKinley Tariff in the July 1890 issue, which he did with relish. The result was an extremely long-winded essay titled “Summing Up the Tariff Discussion,” in which he supported the American tariff and reiterated the argument that it was necessary for the young country to protect its fledgling industries. To give great weight and respectability to his argument, he quoted such heroes as Founding Father George Washington, who said, “Congress have repeatedly, and not without success, directed their attention to the encouragement of manufactures. The object is of too much consequence not to insure a continuance of their efforts in every way which shall appear eligible.” Of course, the antiquated quote was almost a hundred years old, from Washington’s final annual address on December 7, 1796. Using a cute analogy, Carnegie did concede, “We gladly admit the charge, however, that protection is entirely artificial—not less so than the protection given by the market-gardener to his young plants, which he covers with a sunshade through the day.” He allowed that the tariff should be lowered on some imports, but endorsed a prudent, conservative policy.
A third essay on the McKinley Tariff by Carnegie appeared in the June issue of Nineteenth Century, the British magazine. It was simply titled “The McKinley Bill” and designed to explain the tariff to the British in a reasonable, not passionate, manner. He walked through the basics of the bill, concluding that one or two adversely affected British industries were creating, and would continue to create, agitation over the tariff. Carnegie topped the essay off with a rousing cheer for America, Britain, and Australia: “This is the great and inspiring thought of the age as far as our race is concerned, for it secures to it beyond question the future dominion of the world, and that for the good of the world; for the English-speaking race has always stood first among races for Peace, Liberty, Justice, and Law, and first also, it will be found, for ‘government of the people for the people by the people.’ It is well that the ‘last word’ in the affairs of the world is to be ours, and is to be spoken in plain English.”5 In coming years, Carnegie would attach himself to the concept of the English-speaking race governing the affairs of the world— otherwise called race imperialism—and would promote it ceaselessly.
Not all industrialists agreed with the McKinley Tariff nor bought into Carnegie’s vision of a world dominated by the English-speaking race. New York mayor and ironmaster Abram S. Hewitt, who was sensitive to the working class, took the proletarian viewpoint. Rather than relying on rhetoric, he analyzed the steel industry using census data to determine whether the workers benefited or not from the tariff. In an argument difficult to refute, he concluded that the tariff, “so far as steel rails is concerned, is not to benefit the working classes, who are not paid at any higher rate than they would be paid in any other branch of business, but to take from the community at large at least fifteen times, if not twenty times, as much profit as the general average business of the country will warrant. It is thus that the rich grow richer and the poor poorer.”6
Passage of the McKinley Tariff did rely on some cozy back-scratching. To win the support of congressmen from newly admitted western states reliant on the mining industry, eastern politicians like Senator John Sherman of Ohio pushed through an act that greatly benefited the mining interests. The Sherman Silver Purchase Act permitted the coinage of larger amounts of silver and required the government to purchase the total production of American silver mines. Because of this requirement, Sherman argued, free coinage of silver would be impossible. That was beside the point, critics countered. They feared that the government’s churning out of silver coins would lead to uncontrollable inflation and that a bimetallic standard would lead to chaotic monetary policy. Gold, they said, should be the only standard upon which the dollar is based.
Regardless of the critics, the Sherman Silver Purchase Act was passed in 1890, inciting Carnegie to join the dissenting voices. He immediately began working on an essay titled “ABC of Money,” which was published in the June 1891 issue of the North American Review and would become the most circulated of all his writings. (In 1896, presidential candidate William McKinley’s campaign chairman would reprint 5 million copies for distribution to aid their pro gold cause; the essay was pivotal in helping him win the election.) Unfortunately, the dissertation on monetary policy was hardly spellbinding, but Carnegie successfully put the issue in terms the layman could understand. In plain language, he argued that silver’s valuation as a commodity fluctuated too wildly and that a bimetal policy would result in American gold being siphoned off by wary foreigners and result in high inflation. “The good senses of the people will restore the gold basis after a time,” he predicted, “and the republic will march on to the front rank of nations.”7 Carnegie’s emotionally charged scare tactics provoked no legislation to rescind the act— it would take, instead, a depression that was still over the horizon.
The Sherman Antitrust Act was the third and last piece of legislation in Harrison’s tenure that caught Carnegie’s attention. On the tariff issue it was a house divided, but the “Antimonopoly” slogan was bipartisan. Trusts involved dangerous conspiracies, charged the Washington demagogues—a view shared by Harrison—and it was the mother of all trusts, Rockefeller’s Standard Oil of Ohio, that spawned the outcry.
According to the laws of Ohio, Standard Oil could not own companies outside that state; therefore, to circumvent what Rockefeller considered archaic and unfairly restrictive legislation, he organized a Standard Oil company for every state in which he wanted to operate, each with its own management team and board. The stock of each company, however, was placed in the hands of select group of trustees (i.e., a central board of directors) who oversaw the trust estate (i.e., the Standard Oil companies). As Standard Oil devoured the competition, acquiescing stockholders of the various competing companies turned their shares over to the trustees, and those stockholders then earned interest on their investment, but sacrificed their voting rights. By the late 1880s, Standard Oil controlled 90 percent of the oil refinery business and was the model organization for the other prominent trusts that took root, such as the American Tobacco Company, the Diamond Match Company, the Distillers Trust, the Cattle Feeders Trust, the National Biscuit Company (which controlled 90 percent of the cracker industry), the Sugar Trust, and even a Cottonseed and Linseed Trust. The word trust was synonymous with monopoly in the public’s mind, and an outcry ensued. In February 1888, a New York State Senate investigating committee put Rockefeller, now a mythical figure, on the stand. He kissed the Bible with great enthusiasm and then proceeded to answer questions with the least bit of information and in the most muddled form possible. Still, enough facts came to light that the committee’s report stated Standard Oil was “the most active and possibly the most formidable moneyed power on the continent.”
With the debate raging, Carnegie reacted with his usual gusto, penning an essay for the February 1889 issue of the North American Review, which he titled “The Bugaboo of Trusts.” He opened with a witty scolding of fashionable business: “We must all have our toys; the child his rattle, the adult his hobby, the man of pleasure the fashion, the man of Art his Master; and mankind in its various divisions requires a change of toys at short intervals. The same rule holds good in the business world. We have had our age of ‘consolidations’ and ‘watered stocks.’ Not long ago everything was a ‘syndicate;’ the word is already becoming obsolete and the fashion is for ‘Trusts,’ which will in turn no doubt give place to some new panacea, that in turn to be displaced by another, and so on without end.”8 Of course, no trustlike combination existed in the American steel industry, according to Carnegie; meanwhile, he was participating in such panaceas as rail and beam pools, an iron association, Frick’s coke syndicate, and the Bessemer Steel Association, a very powerful force in steel. To be fair, no single steelmaker wielded the power in their industry that Rockefeller did in oil refinery.
In writing the essay, Carnegie was hardly interest
ed in Rockefeller; rather, his ire was focused on the railroads, and he attacked what he considered to be abusive rates and monopolistic behavior. He also took his case before the Pennsylvania legislature. Just two months after “Bugaboo” was published, Carnegie appeared in the chambers of the Pennsylvania legislature to speak on Pennsylvania’s industrial and railroad policy. The Little Boss’s large voice echoed through the chambers: “My address this evening will be an honest effort to point out those influences which threaten the future of our state, and to suggest remedies for these unfavorable influences.” Those influences were the railroad and the excessive rates that he believed were depressing the state’s economy. According to him, rates could be reduced by one-third and “still leave the railway companies a fair profit.”
Carnegie condemned the Pennsylvania Railroad’s monopoly of state traffic and was convinced the people would demand action: “I never fight unless I see the end clearly and know that victory can be won, just as I now know that it is impossible for any corporation to stand which I can show the people of Pennsylvania does not treat Pennsylvania justly.” As exhibit A, Carnegie recalled for the legislators his failed 1885 attempt to break the Pennsylvania Railroad’s grip on traffic. He also pointed out that the state of Pennsylvania contributed 68 percent of all steel rails made in the United States in 1885, but that number had fallen to only 59 percent in 1888 because, according to Carnegie, the Pennsylvania Railroad was depressing the state’s economy. Voice at a fevered pitch, Carnegie wanted blood and was willing to be the executioner, boldly stating that “there will be no difficulty in getting at the truth if you will allow me to conduct the cross-examination of the President and the First Vice-President of the Pennsylvania Railroad Company and one or two others.” In support of Carnegie, the Pittsburgh newspapers attacked the Pennsylvania Railroad, while the Philadelphia papers sided with the hometown railroad, sarcastically questioning why the Pennsylvania Railroad should divide its profits with Carnegie: “The thought of a division of profits between Mr. Carnegie and his laborers never entered into his wildest dreams.”9 The battle with the Pennsylvania Railroad would continue.
On July 2, 1890, Harrison signed the Sherman Antitrust Act. To the business elite’s delight, the act’s language was ambiguous—some wondered if it was not purposefully so to allow for loopholes—and it was sneeringly dubbed the Swiss Cheese Act. Still, in a freewheeling age, it was the first attempt to punish those who restrained or monopolized trade via a conspiracy. According to Section 1 of the Sherman Antitrust Act, Carnegie and a clan of his fellow steel manufacturers were in violation of the law because the Bessemer Association and the various pools conspired to restrain trade. No corrective action was taken.
To have its way with the trusts, the federal government would have to rely on judges sympathetic to the spirit of the law—that is, if the prosecutors’ cases ever made it to court. The Department of Justice had a small staff, and Harrison did little to support antitrust enforcement; only seven antitrust cases were initiated, and the government won but once. The next two presidents would witness eight and three cases, respectively. Not until Teddy Roosevelt, who had an ego to match the industrial titans, would the government become more aggressive.
Money had bought Carnegie a voice in Washington’s affairs, which intoxicated him. Now came the pecuniary benefit of his lavish campaign contribution—the kickback, so to speak. It involved an orgiastic fit of hypocritical patriotism.
Several years earlier, Carnegie had been offered the chance to bid on an armor contract for the U.S. Navy, but declined it, complaining the navy’s specifications for its manufacture were too rigid, there was no money in it, and besides, it went against his pacifist nature. Only Bethlehem had bid on the project in 1887, so it naturally won the contract to deliver three hundred tons of armor by December 1889; but December had come and gone, and there was no armor. Construction of a cruiser, New York, and a battleship, Maine, was delayed, prompting Navy Secretary Benjamin Tracy to approach Carnegie for help—no one else—hoping to entice the proclaimed patriot with a juicy contract for six thousand tons of armor, a bit larger than the original three hundred tons. As Carnegie saw it, the navy was appealing for his help, and how could he, a patriot and a good friend of the secretary of state, allow the construction of a battleship named after Blaine’s home state to be delayed? It appealed to his vanity—Carnegie’s Achilles’ heel—and would lead to scandal.
Before manufacturing the armor, Tracy wanted Carnegie to participate in testing different steel compounds to determine the strongest armor plate, although the navy secretary was already biased toward a nickel-steel, which was yielding excellent results in Europe. Once the tests were finished, the bidding process would begin, a mere formality to satisfy congressional watchdogs. Carnegie relayed William Tracy’s desires to Abbott and joyfully predicted, “There may be millions for us in armor.”10 Enthused by the prospect of millions, Carnegie’s pacifist traits were trampled under.
Government patronage aside, there were barriers to entering the embryonic armor plate business: building new plant and equipment, finding quality resources, training employees, and passing rigorous government testing, among other issues. Who was to play point man for Carnegie was a real sticking point; it required someone who was diplomatic and unwilling to be bullied by the government. While at times headstrong, opinionated, and callous to others’ feelings, Carnegie did understand the duplicitous nature of diplomacy and the potential pitfalls in Washington—a town filled with politicos and vipers—where a wrong word, a miscue, a misplaced trust resulted in political and financial disaster. “It’s too harassing to be always dreading one false step which may lead to so great a loss,” he complained to Frick. A strong-willed character was needed, so Frick took charge personally.
Throughout the spring and summer, Carnegie wavered on entering armor, at times enthusiastic about the millions and at other times annoyed by government intrusion, telling Tracy they would not participate in the armor testing scheduled for September. Blaine stepped in to coax Carnegie along, whereupon, to give his friend the inside edge, he covertly passed along sensitive information detailing the government’s requirements via a naval attaché in London. In June, the attaché, W. H. Emory, forwarded the documents to Carnegie, who was ensconced in Cluny: “Enclosed you will find the thickness of the armor and number of tons to each thickness. Besides, I also give a detailed list of everything composing the hull of the ship except the fittings— as I think they would come under the list of what could be made at your works. . . . In sending this list I have to request that it will only be used by you personally and that the source of your information or anything which would point to me will be carefully avoided. . . . I owe a deep debt of gratitude to Mr. Blaine and I know that he will be gratified to have me place myself at your service.”11
When securing patents for the latest armor-making technology presented another roadblock, Carnegie again wavered, telling Tracy, “Want to help you out with Armor and will do best possible but . . . Armor making no child’s play.”12 Playing a last card, a calculating Tracy threatened to buy his armor from the British, who were a step ahead in its manufacture. Appalled, the vain Star-Spangled Scotchman argued that his company must make the steel plates in the United States because the methods in Britain were suspect. Worried his British peers might catch wind of his criticism, he requested that this strictly personal letter not “go on file in the Department. It is for yourself and Commodore Folger alone; for as you can well understand, I am a steel manufacturer, and do not wish to antagonize any interests whatever.”13 It was the reaction Tracy had hoped for.
Finally, in mid-July, Carnegie sought to purchase a parcel of land adjacent to the Homestead works on which to build an armor-making mill. The city of Pittsburgh owned the 144.48 acres of prime real estate, known as City Poor Farm, which was occupied by the City Poor House and Home for the Insane. Back in March, Carnegie had first eyed the property, writing Philander Knox, the company’s legal coun
sel, that he would be willing to pay $3,000 per acre for City Poor Farm and let the city retain the buildings rent free for up to three years.14 In a second letter, dated the same day, Carnegie offered Knox an incentive: “In event of purchase being made of City Farm for us, at price given you in letter this date, we will, on obtaining a satisfactory deed for same, pay you the sum of Fifty thousand dollars Commission, and any saving to us under $3,000 per acre, we will divide with you.”15 Three days later, Carnegie offered to pay Knox an additional $25,000 toward expenses in the purchase of the property; what the money was to be used for was not stated, but it could reasonably be suggested it would pass under the table.16 Knox, with short-cropped hair receding at the temples and eyebrows arched in permanent inquisitiveness, had a weaselly look about him; he would know what to do with the money. Clearly, this was a valuable piece of land, but not until July was Carnegie’s interest again piqued.
City Poor Farm was not for sale, however, at least not until the city’s Republican leader, Christopher Magee, who looked like a bulldog (to complement Knox the weasel), pressured the city council into authorizing its sale. Bids were accepted and then opened on July 27. Joshua Rhodes, owner of Pennsylvania Tube Works, offered $2,715 per acre; Carnegie, Phipps, and Company offered $2,805; and Milton Baird, a real estate broker, offered $2,903. It appeared Baird had shut out Carnegie. Meanwhile, a suspicious mayor of Pittsburgh, expecting much higher bids for what was considered a million-dollar-plus property, wanted the deal nullified.17
