Carnegie

by Peter Krass

  The reason Morgan couldn’t arrange the financing was because he was in the final stages of organizing the National Tube Company, his latest amalgamation, which initially controlled 75 percent of the tube and pipe industry. It was incorporated on February 17, 1899. Another formidable consolidation, the National Steel Company, was formed on February 25 and included eight iron and steel firms in Ohio and Pennsylvania. In size, it ranked third after Carnegie and Federal. Behind National Steel was the flamboyant financier William H. Moore, a former judge who was no stranger to the merger game, having formed the Diamond Match Company and the National Biscuit Company, trusts in the matches and baking industries. He had also created the Tin Plate Company in December 1898, an amalgamation of thirty-eight firms; and, in April 1899, he would organize thirty companies into the American Sheet Steel Company and nine companies into the American Steel Hoop Company. The natural alliance between National Steel, Tin Plate, American Sheet, and American Hoop was akin to a vertical organization well beyond Carnegie Steel, as was the tight relationship between Morgan’s Federal Steel and National Tube. The two-front war had suddenly escalated, and Carnegie was in grave danger of being boxed in.

  To hell with selling out, to retiring to the grave—Carnegie had plenty of fight in him. Carnegie Steel profits for 1898 had jumped to $11.5 million, up from $7 million the prior year, and Carnegie’s personal take from company profits and other investments for 1898 was $10 million. He estimated the company’s profits for 1899 would leap to $20 million even in a soft market, and apprised Dod: “I favor holding on for two or three years. No question but we can sell. . . . Why then not wait.”19

  Even as Frick continued to seek a buyer, Carnegie was preparing for a frontal assault on the consolidations, which he viewed as weak bullies. “We should look with favor upon every combination of every kind upon the part of our competitors,” he wrote company secretary Francis Lovejoy; “the bigger they grow, the more vulnerable they become. It is with firms as with Nations, ‘Scattered possessions’ are not in it with a solid, compact, concentrated force.” Since naming the Union Iron Mills in the 1860s to memorialize the end of the Civil War, Carnegie always linked his business with the country, and now the same anti-imperialistic fervor he felt over the United States possessing the distant Philippines he transferred to the consolidations. He was still open to pooling arrangements—but only on his terms, and only if it was definitively more advantageous. “Here is a historic situation for the Managers to study— Richelieu’s advice: ‘First, all means to conciliate; failing that, all means to crush,’” he explained to Lovejoy.20 When Schwab and Frick favored a new rail pool with Federal, however, Carnegie vetoed it without any consideration.21 That was one company he was intent on crushing, and with that in mind he continued to rally Schwab around the company’s penetration into finished products: “We want to sell finished [railroad] Cars as soon as you can do it. We shall want to make Wire, and I think nails, as soon as we can. . . . The concern that sells articles finished, will be able to run all weathers and make some money while others are half-idle and losing money.”22

  For a year, Carnegie had talked of entering the steel railroad car business; he now became resolute. The first all-steel cars had been made in 1897 and were initially used for shipping coal and ore, but he envisioned a day when steel would be used for all cars and, therefore, be a very profitable business. Carnegie was not dissuaded by the newly formed Pressed Steel Car Company, yet another consolidation of several companies, but his vice president of sales, Alexander Peacock, was. Peacock, a slick Scotsman who sported a handlebar mustache and had a propensity for drinking, argued, “We have seldom, if ever, gone into any business unless we are in shape to control it, but that would not be the case with Steel Cars,” and he pointed out that the company would have to rely on suppliers for springs, buffers, wheels, and brakes.23 The board agreed and voted against steel cars. “Now to give up this business is pretty bad,” Carnegie, in a tantrum, bellowed at his lieutenants. “I should be sorry indeed, and would want a pretty big reward.”24 The reward he alluded to was not only a healthy sales contract with Pressed Steel Car, but a payoff not to enter the business. The company’s president, Charles Schoen, did indeed agree to pay Carnegie Steel $100,000 a year to stay out of the business; moreover, despite the bullying, Carnegie Steel also successfully closed a ten-year, $144 million deal to supply Schoen’s company with steel plates.25 Clearly, Carnegie still held great power over the industry. Peacock, incidentally, would not last much longer with the firm, even though he hailed from Dunfermline.

  During the great steel car debate, junior partner Daniel Clemson had casually suggested there was money to make in tubes, too, and Carnegie heartily concurred. Just four days after National Tube was created on February 17, a letter from Carnegie was read at a board meeting, in which he strongly suggested the company push into steel pipe. He relished the idea of going head-to-head with the Morgan concern and enthusiastically concluded, “I have not heard of anything which strikes me so favorably—from ore to pipe.”26 Other members of the board again dissented, with dividend-conscious Phipps most vehement in his objections and demanding postponement.27 It was postponed, but only until National Tube built its own furnaces and stopped buying steel from Carnegie.

  While Carnegie was pushing the expansion of his empire, he was adamantly opposed to the United States expanding hers. The imperialistic tone in his 1893 essay “A Look Ahead,” in which he promoted the union of the United States, Canada, and Great Britain, was now gone as the reality of the United States as a world power struck him differently. Negotiations with Spain were still ongoing in the autumn of 1898, but it now appeared President McKinley was leaning toward possessing the Philippines, a decision Carnegie was certain would result in American bloodshed and war with the European colonial powers. The Spanish war had already cost 379 lives and 1,600 wounded in combat, while more than 5,000 Americans were dead from yellow fever, malaria, or typhoid—and counting.

  Now determined to shoulder the White Man’s Burden, so called after the Rudyard Kipling poem that romanticized imperialism, in October McKinley went on tour of the Midwest, alluding to America’s duty and destiny, building support for taking the Philippines, but not yet saying so definitively. Whitelaw Reid, who was spearheading the treaty work with Spain, also took to the road, arguing that the United States was bound to assume responsibility for Cuba, Puerto Rico, and the Philippines. He advocated a civil service administration for the new possessions. The anti-imperialists contended that the U.S. Constitution was being violated, that these foreign peoples were not being given the right of self-government, that they were not being given the same rights under nor same access to the laws of the United States, and, less tastefully, that the people populating these possessions were unsuited for assimilation into American society.

  Carnegie, a vice president of the Anti-Imperialist League, took to the press to promulgate his views. As one quixotic solution to the Philippines question, he suggested giving the islands to Britain in exchange for British possessions in the West Indies; at least the Philippines wouldn’t be America’s headache.28 And when Carnegie heard that one of the terms of the proposed treaty was for the United States to pay Spain $20 million for the Philippines, he offered McKinley $20 million to buy the islands’ independence. It was a stunt P. T. Barnum would have been proud of, even though Carnegie was quite serious. The Filipino nationalists were even more resolute about taking back their country, and as soon as it became obvious to them the United States was there to stay, Filipino leader Emilio Aguinaldo, who felt betrayed, organized his nationalist army in the jungle. Skirmishes with American troops soon broke out.

  Fears of escalating violence were confirmed when the newspapers told tales of colonels, foot soldiers, and nurses dying of yellow fever and of battle wounds. A Colorado regiment complained that 15 percent of its men were sick and that rations were insufficient, and that it had no desire to remain as a garrison. The noise about dissatisfied Ameri
can troops and soldiers being tortured by Filipino nationalists roused Carnegie and the anti-imperialists to another level of fervor. (The civilized Americans were perfecting the water torture during their own Filipino prisoner interrogations.) A distraught Carnegie wrote a scathing letter to the New York Tribune that opened with a confusing burst of rhetoric: “It is glorious. The light has broken. Imperialism has received its first blow—I think its death wound; the Republic may yet be saved.” It was the soldiers, like those of the Colorado regiment, who would save the Republic by voicing dissent. The president had erred if he thought volunteers could be induced to do the dirty work of the imperialists, according to Carnegie, who urged the soldiers to express how they had been taken advantage of by the president.29 The propaganda escalated to a hysterical pitch as Carnegie, egged on by letters he received commending his heroic stand against imperialism, became more brazen in his condemnation of President McKinley in the press and personal letters. The steel titan was inflicted with pomposity.

  To his old friend and new enemy, Secretary of State Hay, he roundly criticized President McKinley for being a “Mr. ‘face both ways’” and compared him to a blubbering “jelly-fish” for not taking a more definitive position on imperialism. “I am so sorry for the President—I do not think he is well,” continued Carnegie, who was obsessed with McKinley’s mental health, just as he had been with Frick’s. Again, Carnegie’s obsession with mental stability was mostly likely because he harbored doubts about his own. He signed the letter with this maddening line, “Bitterly opposed to you yet always your friend Andrew Carnegie,” and in a postscript added, “How I wish I could stop all this stirring up of the President in the newspapers but he gave me no hope that he realized how he was drifting to the devil.”30

  From Washington, D.C., Hay updated Whitelaw Reid, who knew Carnegie’s ego all too well, on the latest tirade:

  There is a wild and frantic attack now going on in the press against the whole Philippine transaction. Andrew Carnegie really seems to be off his head. He writes me frantic letters signing them, ‘Your Bitterest Opponent.’ He threatens the President, not only with the vengeance of the voters, but with practical punishment at the hands of the mob. He says henceforth the entire labor vote of America will be cast against us, and that he will see that it is done. He says the Administration will fall in irretrievable ruin the moment it shoots down one insurgent Filipino. He does not seem to reflect that the Government is in a somewhat robust condition even after shooting down several American citizens in his interest at Homestead. But all this confusion of tongues will go its way.31

  Hay must not have known Carnegie that well, for he had no intention of allowing the anti-imperialist movement to “go its way,” and, audacious as ever, he wrote McKinley a presumptuous letter:

  The true friend not only warns a friend of what he sees to be dangers that surround him, but he ventures to counsel him as to what he should do in the crisis.

  Were I President of the United States I should announce in my message to Congress that I demanded the Philippines from Spain that I might give to them the Independence which every people can claim as a God-given right, that I had no idea of holding them in subjection, but I would do with them as I did with Cuba, helping the people to establish a suitable government.32

  It was too late to withdraw from the Philippines, however. To do so would show weakness. More significant at this point in time, despite the efforts of the two camps—the expansionists and the anti-imperialists—the United States couldn’t avoid becoming a world power.

  Carnegie himself had pointed out the United States exported more than any country, which made it a major player on the world’s stage, like it or not. He was even guilty of an expansionist policy without realizing it, because for the last year he had been calling for a major port in New York City for shipping and receiving goods around the world.33 His own company’s growing exports contributed to America’s global power, too; in 1898, Carnegie Steel was making two hundred thousand tons of steel a month, and Schwab prophesied that soon one-third would be shipped overseas. In the new industrial order, economic power equated to political power. Men like Hay and Reid accepted America’s more prominent position without regrets. They dealt with reality, while Carnegie pursued idealism.

  On December 10, 1898, the president signed the treaty with Spain, which formally handed over the Philippines, Puerto Rico, and Cuba. McKinley let it be known that Cuba would be granted self-government as soon as the political climate stabilized. The president’s “grand position as to Cuba makes me a happy man,” Carnegie wrote Hay in a conciliatory tone the next day. Even in complimenting, Carnegie could be condescending, for he continued, “I see daylight out of our danger cloud and have nothing but praise for the President since he took his rightful place, that of Leadership.”34 The Philippines was another matter. The Senate, which would have to ratify the treaty with a two-thirds majority vote, expected to vote on it in February, giving Carnegie and the Anti-Imperialist League time to lobby for the island’s freedom. They stepped up their campaign to rally public support through public meetings and the distribution of literature.

  Carnegie wrote two lengthy essays, “Americanism versus Imperialism” and “Americanism Versus Imperialism II,” for publication in the North American Review, in which he dealt with the issues systematically. He despised the fact that one American general was calling for thirty thousand troops in the Philippines because the nationalist rebels may have to be “licked,” and he also took aim at the righteous claim it was America’s duty to civilize the Filipinos. Carnegie, who never feared offending or shocking others, no matter who they were, even attacked church bishops as contemptible examples of misguided missionary fervor.

  Carnegie, who was adamant in his argument that the Filipinos should be permitted self-government regardless of the consequences, concluded the second essay by invoking Lincoln:

  It seems as if Lincoln were inspired to say the needful word for this hour of strange subversion of all we have hitherto held dear in our political life. Our “duty” to bear the “White Man’s Burden” is to-day’s refrain, but Lincoln tells us:

  “When the white man governs himself, that is self-government; but when he governs another man, that is more than self-government, that is despotism.”

  Despite his fervent rhetoric, Carnegie found no support from within the Republican administration, so he turned to the Democrats—once again, like Robert the Bruce, he was willing to align with old antagonists to achieve victory—and in December, he secretly met with William Jennings Bryan. The newspaper reporters managed to catch wind of the meeting, which Carnegie refused to confirm, indicative of just how sensitive he was to being publicly criticized for desiring to join forces with Bryan, the proclaimed champion of the working class. The Tribune noted the unusual picture of the once bitterest of enemies coming together, the strangest of bedfellows.35

  Bryan was also wary—of Carnegie. When rumors reached him that Carnegie was planning to make a statement to the press about their meeting and endorsing a Bryan presidential bid in 1900, he warned Carnegie the hoopla would hinder their antiexpansionist battle. Bryan feared that if his alliance with Carnegie was dragged through the mud by the press, he would be discredited, and it would hurt his chances to convince Democrats to vote against the treaty. (Frick knew all too well that Carnegie’s appetite for publicity often exposed their strategies and compromised their position.) Bryan was so anxious that from Lincoln, Nebraska, he cabled Carnegie on Christmas Eve morning to request his silence, incisively noting: “You and I agree in opposing militarism and imperialism but when those questions are settled we may find ourselves upon opposite sides as heretofore. Let us fight together when we can and against each other when we must, exercising charity at all times.”36 That same day, Bryan followed up with a letter further explaining that he feared cavorting with such a prominent Republican as Carnegie because it “might embarrass me,” and he reiterated that their work together would in no way
compromise his belief in unlimited coinage of silver and restraining big business.37

  Carnegie chided him for talking so foolishly about money, which forced the Cornhusker to make it clear to the steel master that this was an alliance of convenience, giving Carnegie, who entered and exited pools at his whim, a taste of his own medicine: “I believe that the gold standard is a conspiracy against the human race. I am against it. I am against the trusts. I am against bank currency. Just now I am talking against imperialism not because I have changed on the other questions but because the attack of the imperialists must be met now or never. The lines of the next campaign cannot be seen at this time but you need not delude yourself with the idea that silver is dead.”38 Their relationship had soured quickly—a passing in the night.

  Through January and early February, Carnegie made a number of trips to the Executive Mansion, boldly prophesying to McKinley that he was going to have to shoot Filipinos to keep the islands and that it spelled the Republican Party’s doom. In a particularly black mood one week before the Senate was to vote on the treaty, Carnegie lashed out at McKinley in a January 30 letter to the editor of the New York Journal (his New York mouthpiece after his falling out with Reid at the Tribune). “President McKinley, our ‘War Lord,’” he raged, “is beginning to see that he can agree to pay twenty millions for an opportunity to shoot down people only guilty of the crime of desiring to govern themselves.”

  It went down to the wire, but the Senate approved the treaty in a close vote on February 6. Disillusioned but still a faithful believer in the Republic, Carnegie summed up the bloody political scene for his friend Andrew White, now ambassador to Germany: “We are mad over here just now. Passions, always inflamed by war, must have their fling; but of the ultimate result I am certain. Our party is doomed next election. The masses of the people are not with the leaders.”39 So self-absorbed was he in his own vision of political righteousness, Carnegie was losing contact with reality. The masses would vote McKinley to a second term, the incumbent trouncing Bryan.