Carnegie
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The very month—March—Carnegie published his second essay on anti-imperialism, in which he quoted Lincoln—“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”—Schwab proposed discharging a few men in the mills simply to make an example of them to keep the others in line. A potential revolt was simmering.
The embittered workingmen remained raw material—exploited, oppressed, and subdued. Despite advances in technology, they were still working sevenday weeks. Living and working conditions had not evolved for the better. Although Homestead workers were making enough money so that one-quarter of the families owned their own homes, Carnegie Steel held most of the mortgages, which gave the company even more power over their workers.40 And it was the men’s failure to make good on their debts that prompted Schwab to make examples of a few. In March, the company posted signs in the mills stating that employees must pay their debts and that those habitually neglecting them would be fired. Carnegie was permitting and practicing despotism by assuming the deadbeats were troublemakers and discharging them. Meanwhile, he, Schwab, and the other executives had no idea why these men couldn’t make their payments. They might have had sick family members, which meant unexpected doctor bills; they might have had to buy more coal than anticipated to heat their drafty houses; and yes, they might have piddled their money away at the tavern.
It was not the ideal time to ratchet up the pressure, either. The company had recently completed its line to Lake Erie, now called the Pittsburgh, Bessemer & Lake Erie Railroad, and the railroad workers were well-organized union men. There was the possibility that from direct contact with the union railroad men, the mill workers, like contracting a disease, might be inspired to organize a lodge. When Schwab learned the railroad union was considering establishing a headquarters at Braddock, he notified “the Superintendents to consider carefully the possibility of labor organizations securing a foothold at our works . . . ” and made it clear that no Superintendent could “permit any Union labor at any cost, or under any circumstances, but that this was a delicate question and would have to be handled carefully.”41
As Schwab suspected, in May and June, about three hundred Homestead men joined the Amalgamated Association of Iron and Steel Workers, and the union then tried to arrange a conference with Frick, who refused.42 Shortly thereafter he sailed for Britain. Carnegie was already in Britain, making several benefactions before proceeding to Skibo, where an update from a nervous Schwab reached him: “Labor seems to be giving us some little trouble in all directions. This week at Homestead there was an effort on the part of some men to reorganize a union. We promptly took action and discharged a half dozen of them yesterday and will do the same to-day. I feel this will nip the move in the bud.”43 The movement was not nipped, however, and, with the seventh anniversary of the Homestead strike fast approaching, there were rumors of an impending strike.
How to handle the Amalgamated consumed the board meeting held on June 13, the aggressive attitude of Schwab and the other officers making for an explosive atmosphere. The consensus was to stop the union from getting a foothold “at any cost, even if it should result in a strike,” and Lovejoy went so far as to say, “I would rather see the Works blown up with dynamite than turned over to the control of those scoundrels.” Only Dod hedged, preferring to hear from the absent partners—that is, Carnegie—and he warned, “You may do something you will be sorry for afterward.”44
After reviewing the minutes, Carnegie, Frick, and Phipps, all together at Skibo, issued a joint statement supporting the board’s aggressive posture: “We heartily endorse views of Board of Managers with regard to Amalgamated Association. Stop Works if necessary to hold present position.”45 In a follow-up cable to Schwab, Carnegie instructed him to post a sign that the company would never recognize the union and that the mills would be shut down if the agitation persists.46 In spite of the Homestead tragedy and obscene profits, Carnegie remained resolutely opposed to organized labor. He interpreted the effort to organize as a personal affront: the Homestead men and the Amalgamated were trying to humiliate and embarrass him; they were ungrateful curs considering he had just dedicated the Homestead Library and had given millions to his Pittsburgh institute—for their benefit. Now they wanted to take what was his.
Schwab took Carnegie’s advice and posted a warning, after which forty men were summarily dismissed. A group of men who went to Homestead Superintendent William Corey demanding the fired workers be reinstated were themselves fired. The Amalgamated placed pickets at the gates, and more than fifty men went on strike. The number grew to eighty-eight. More men were fired. On July Fourth, the Homestead lodge, realizing it was futile, abandoned their efforts to organize the men. Two days later, Schwab reported to Carnegie that “we have completely knocked out any attempt to organize Homestead workmen.”47
In addition to their hatred for unions, another reason Carnegie and his men were so eager to quell any labor uprising was a suitor had come calling to purchase Carnegie Steel. In late March, a potential buyer, who wished to remain anonymous to Carnegie, approached Frick and Phipps. The subsequent negotiations would carry into the summer, right through the labor upheavals.
When the partners informed Carnegie of this interested party, he guessed it was either Morgan, Rockefeller, or the Mellon family. Pledged to secrecy, they would not divulge the name. Suspicious, Carnegie demanded a nonrefundable $2 million payment for the option to buy the company, and he also insisted that Frick and Phipps represent the unnamed party, thus becoming part of the syndicate behind the proposed buyout.48 The purpose of the latter request was more for appearance’s sake: in case the syndicate involved unsavory men, Carnegie could claim he was selling to his partners. As negotiations opened, the board halted expansion projects and agreed to price Carnegie Steel at $250 million and Frick Coke at $70 million. Again, it proved too rich, but the suitor subsequently proposed buying only Carnegie’s share. If the deal was consummated, the company would be taken public, and the other partners would be able to do as they wished with their shares.
Now Carnegie panicked. He realized he might have created a problem by having just mailed a nasty letter to the editor of Iron Age, lambasting the “present craze for consolidation,” which could easily be construed as an attack on Morgan, Rockefeller, or any number of potential suitors. (His attitude had apparently changed from the prior year when he stated, “Consolidation is wise and necessary.”) Always willing to contradict himself if it served his best interests at the time—again, profits over ideology—Carnegie immediately wrote a second letter to Iron Age retracting the first.49 Frick, knowing the suitor would indeed be insulted, also cabled the Iron Age offices, urging the letter not be printed.
On the very day Carnegie wrote his retraction, April 24, he signed an agreement with Frick and Phipps that gave them and the anonymous buyer an option to purchase Carnegie’s interest in the company for $157 million— $100 million in 5 percent gold bonds and $57 million in cash—to expire on August 4. The nonrefundable deposit was now set at $1,170,000, but the suitor was willing to front only $1 million; so, after some haggling, it was agreed that Frick and Phipps would add another $170,000, giving Carnegie what he demanded.50 He assured his partners that if the deal fell through, he would refund them their $170,000 (but certainly keep the $1 million as per the agreement). The suitor and his syndicate now had until August 4 to arrange financing and close the sale. Confident that the option would be exercised, Carnegie sailed for Britain two days after signing the agreement.
There was more to the picture than met the eye, however; rumors were circulating in the press about Carnegie Steel combining with Gates’s American Steel and Wire and with Moore’s recent amalgamations to create a trust designed to destroy Morgan’s Federal Steel. Gates confirmed the rumors while Frick immediately denied them, the denial suspect considering he had been spotted at New York’s Holland House in deep conference with Gates and Moore
.
Carnegie, who was in London visiting the House of Commons to hear the debates and to visit friends, was caught off guard by the story. When an Associated Press correspondent confronted him with the rumors, he could only furnish a lame prepared statement that he had “given his young partners the terms on which he would be willing to sell and retire from business.” Two days later, when asked if he had sold out because he was afraid of the trusts, he replied smartly, “The trusts have never frightened me, and the Carnegie Steel Company has no occasion to be afraid of them, as it is the greatest property of its kind the world has ever seen or probably ever will see.”51 Inside, he was seething over the fact that the anonymous suitor was Moore and that the syndicate included Gates, both of whom Carnegie derided as gamblers and the “Chicago Adventurers.” If he’d known they were involved, he would never have granted an option.52
Nothing could stop the process now, however; the option papers had been signed. Frick applied for new charters for Carnegie Steel in Pennsylvania and New York, and Moore lined up the Wall Street financing, which included the notorious manipulator Roswell Flower, who had been instrumental in promoting Federal Steel. But then, on Friday, May 12, Flower died unexpectedly, which scared off others willing to finance the syndicate and immediately threw the sale into doubt. With a million dollars at risk, Moore and his conspirators had to salvage the buyout. They still had until August 4, but with the syndicate unveiled, they could expect no help from Carnegie.
The Carnegie family went about its business in London—Carnegie refusing to discuss business with reporters, and Louise partaking in a shopping spree to prepare for Skibo. They stayed at Louise’s favorite hotel, the Con-naught, where their rooms were always brightened with flowers sent by friends. They attended the theater and visited with the Yates-Thompsons, who had introduced Carnegie to Matthew Arnold years before. In early May, Carnegie offered $250,000 to the University at Birmingham, England, provided it be used for the development of the school’s scientific education program and the “scientific school be made the principal department.” His proviso raised some objections, but on May 12 the school accepted.53 After a four-year lull, Carnegie’s philanthropic activity, outside of Pittsburgh, picked up considerably in 1899, mostly due to the fact he had pocketed $10 million the prior year.
On June 7, the Carnegies arrived for their second summer at Skibo, their first as its owners, and as the coach passed through the villages within the estate, the family was greeted by homes and shops decorated with glass and bunting. Children were dressed in their Sunday best and bagpipe bands played. At the castle’s gate, the oldest tenant on the estate, nearly ninety years of age, officially presented Skibo to its new laird. An emotional Carnegie responded by pointing at Louise and saying, “Here is an American who loves Scotland.” He then pointed to himself and said, “And here is a Scotchman who loves America, and”—now pointing at Margaret—“here is a little Scottish-American who is born of both and will love both; she has come to enter the fairyland of childhood among you.”54
The castle had looked better, however, considering it was now undergoing major reconstruction. As the family settled in one protected wing and the servants in a cottage, work on the castle pushed ahead rapidly. Hundreds of men were hired, barracks built for them, and a 120-foot bridge was built across a ravine at the rear of the castle for bringing in the steel beams, marble, and stone. Carnegie made sure enough meat was supplied to the men to keep up their strength, and he offered to pay 10 percent more in wages to every man who abstained from drinking. The only griping was from some of the locals who mourned the cutting down of many old-growth trees that had stood on the property for generations.
The vastly enlarged sixteenth-century Scottish baronial style home with added square turrets soon took shape. The great hall was expanded to give it noble dimensions; it included marble columns, an elaborately paneled ceiling, a staircase of Sicilian marble, and stained-glass windows with scenes depicting Carnegie’s childhood voyage to America, his rise from bobbin boy to titan, as well as others with scenes depicting the history of the castle. There was a gun room with a separate entrance for the gillies and gamekeepers, a billiard room, a smoking room, and a dining room with an immense table that could seat thirty or more. (Carnegie’s chair was two inches higher to improve his stature.) Carnegie insisted on a spacious library, and off the library was his office, in which there was a custom-built set of drawers, each drawer affixed with a label: Carnegie Steel Company Reports; Correspondence about Libraries; Pittsburgh Institute; Grants and Other Donations; Applications for Aid; Autograph Letters to Keep; and Skibo Estate, among others. Several maps were always on the wall, little flags marking arenas of action. This was his war room—his coat of arms was a blank shield.
Louise decided a series of large greenhouses would help in maintaining the gardens and allow them to grow more exotic plants and flowers. Carnegie agreed: “If the greenhouses give you pleasure, that is a wise move, a purchase of satisfaction. I believe we shall find them a great satisfaction; and Baba [Margaret’s nickname] will, that’s certain, and they must foster in her tastes which will remain all her life. Organ, flowers—I tell you we are showing what Home means.”55 On occasion, Carnegie did too much for show, and not enough for his own private contentment.
Amid the chaos of construction, Louise was very careful to make time to play with Margaret and not depend wholly on their Scottish nurse, Nana. She read to her, played in the garden, and went for carriage rides. Carnegie, while playing tough with the Amalgamated and the Moore syndicate, was also drawn to his wee Baba, who represented the miracle of life to him and an innocence he couldn’t remember having. When Louise was away from Skibo, he updated her: “How grateful for being here at home! Baba has just had her bite with me at breakfast and jelly on it! When you are away I find myself going to her as the connecting link, as indeed she is, part of both which makes us more truly one!”56
One of the few guests that season was Rudyard Kipling, whom the Carnegies found to be of simple manners and unaffected. Another was Sir Swire Smith, an advocate of education associated with England’s Keighley Institute, a technical school, who found himself on the receiving end of Carnegie’s acidic humor. After a round of golf—the laird beating him soundly— the two talked about the school, and Carnegie asked if the town of Keighley had a library. When Smith replied no, Carnegie offered $50,000 to build one, to be his first library in England. More importantly, he offered to give Smith a stroke a hole in the next day’s golf round. Because Carnegie had offered the library so casually, so off the cuff, Smith worried the philanthropist would forget or change his mind. The next day his hopes did indeed sink when Carnegie turned to him and said, “I have repented me of the offer I made yesterday.” Considering Carnegie had yet to give a library to an English town, Smith shouldn’t have been too disappointed. But then, with an impish grin, Carnegie added, “You will have to play me even.”57 It was always a pleasure to toy with people, a component to Carnegie’s twisted humor.
Shuttling between Pittsburgh, Chicago, and New York, Frick, Phipps, and Moore now scrambled to create a plan for financing the buyout. The three decided to charter a new company with capital of $250 million, divided into 2.5 million $100 shares. Once the stock was sold, they would buy Carnegie’s shares in the steel and coke companies by issuing him $100 million in 5 percent gold bonds and $57 million in cash. Of the $250 million raised, Frick and Phipps informed Carnegie, $15 million would go into the treasury as working capital and a second $15 million to be divided among the buyers to cover expenses and to provide bonuses, with one-third of it going to Moore, one third to Frick and Phipps, and one-third to be used “for deserving young men.”58 So Frick and Phipps stood to reap a hefty bonus of $2.5 million each minus some expenses. Frick then presented the new plan to the board of managers, making them aware of the $15 million for expenses and bonuses, and it was approved.59
Reading over the letter and the board meeting minutes, Carnegie was a
ppalled by the fact that Moore stood to receive what would amount to almost $5 million, and Frick and Phipps almost $2.5 million each. It appeared the triumvirate was pulling a fast one—not so much on Carnegie, but on Schwab and the junior partners who were intoxicated by the thought of the firm going public. But again, there was little he could do; the partners had voted.
The June issue of the American Monthly Review of Reviews announced “the retirement of Mr. Andrew Carnegie from the business of making iron and steel. Mr. Carnegie was the head of a system of closely connected establishments, with headquarters at Pittsburgh, which had become the most extensive and probably the most complete and perfect plant in the whole world for the supply of iron and steel in large quantities.”60 It was a glowing epithet that also lavished praise on Frick, who was to become the head of the amalgamated companies of Carnegie and Frick. Congratulations poured in. Dazzled by the riches Carnegie was about to bank, his literary friend William Stead immediately published a pamphlet: “Mr. Carnegie’s Conundrum: £40,000,000. What Shall I Do with It?” Stead reviewed the Scotsman’s benefactions to date and speculated as to what philanthropic course Carnegie might take next.
The effusive congratulations and tributes were premature.
Moore again had trouble arranging a syndicate to back the financing of the new company, and there was now serious doubt as to whether the August 4 deadline could be met. Frick sailed for England on June 6 to reconnoiter with Phipps, and then the two traveled to Skibo castle to present their case before their king. Their only hope: an extension of the deadline.