American Steel Industry
The steel industry is frequently regarded as the sign of economic progress, since steel plays the important role in economic development. Hence the key personalities in the steel business will be always associated with industrial strength of the country. The prominent role of Andrew Carnegie can be understood after one realizes the preconditions of his appearance on the economical stage of the U.S.
Nowadays the two industries go together – iron and steel – and nobody wonders about that. Still centuries ago the situation was different. While ironwork had been set up in the American colonies of the North since Founding Fathers; however, it was not the same with steel. The steel was very expensive to produce using available methods of that time; therefore, it was used mainly for swords and precision instruments. Steel production became a leading industry just in the 19th century. In 1844, the great iron ore deposits were discovered in the Great Lakes states. With the abundance of iron ore all over Lake Superior, hard coal of Pennsylvania as well as the availability of cheap water transportation there. The Great Lakes became the heart of American iron and steel industry. After the Civil War, the American steel industry developed with a killing pace and countries’ economy expanded to become the largest in the world. Hundreds of mills were established to produce the variety of steel products.
As Gordon states, “Between 1880 and the turn of the century, steel production increased from 1.25 million tons to more than 10 million tons. By 1910, America was producing more than 24 million tons, by far the greatest of any country”. The steel industry had to be consolidated in this period for mill owners were looking for a secure market circumstances. Andrew Carnegie with Henry Frick and Charles Schwab were the ones who formed the modern industry of that time. The steel industry still marked the size and strength of national economies after the World War II. Thus, the steel magnates shaped the country for generations and industrial growth changed American society. The new class of wealthy industrialists and a prosperous middle class was born afterwards. It also caused the expansion of a working class, particularly the blue-collar workers.
Start of Iron Business
Americans of 1850s experienced colossal changes in their life related to the technological revolution. For instance, the candles, their main source of light, changed to kerosene lamps, and later to electric bulbs. The similar evolution can be noticed when considering transportation system from horses to locomotives, then to electric tramcars, and later to petrol automobiles. As far as previous society was predominantly involved in agriculture, the Americans of a new type and new generation faced with an industrial revolution that had changed their life forever.
That same change was ahead of little Andy Carnegie after his family moved to Pittsburg when he was 13. Pittsburg was a center of the industrial revolution of that time.
The land of promise proved all that had been promised. The Carnegies wanted jobs – they did not wait to accept situations. The father found a place in a cotton-mill at a dollar and a half a day. Andy slipped in as bobbin-boy and got one dollar and twenty cents a week. Five shillings a week, all his own to be laid in his mother’s lap each Saturday night-spelled paradise. He was helping to support the household! To know you are useful, and realize that you are needed, is a great stimulus to growth. Never again did the Carnegies hear that muffled groan, “There is no work!” The synonym of the word “Carnegie” is work. (Hubbert 271)
Born in a poor Scottish family of immigrants, Carnegie became one of the most influential businessmen in the steel industry. His first job was working at a Pittsburgh textile factory. It is important to mention that he never rejected any opportunities for a job. He used to work as a boiler tender, bookkeeper’s clerk, and telegraph delivery boy. Finally, he rose to the position of the superintendent of the Pennsylvania Railroad (1859). All this time he was saving money even when making just $1,50 a week.
Thanks for Thomas A. Scott, who became President of the Pennsylvania Railroad, young Carnegie had invested his money in different companies. He started with safety stock of the railroad business. In a couple of years, these papers were bringing him $5 thousand dividends yearly. He continued investing money in oil and steel companies and became a real rich man by the time he was in his early 30s. Being so rich he did not quit his job on the railway station though. He considered it to be his duty. Carnegie established his first steel company when he was 26. After the war, he left his railway business, and established few more companies, one of which was supposed to build steel bridges instead of the wooden ones. Natural materials for steel bridges Carnegie bought from his steel company. Two years later, the list of his companies was increased due to the telegraph company he bought.
By the age of 33 years, Andrew Carnegie had already been the first class capitalist. After the war, he dedicated himself to building and investing in ironworks. Conducting his business effectively, taking over one steel company after another, Carnegie soon created an empire of steel and iron. He moved to New York in order to enter Oxford University, quitted steel business and got rest. According to his notes, he felt that the wealth was spoiling him. He was dreaming of self-improvement. Nevertheless, another idea drew his attention, which was far from self-improvement, but close to immediate enrichment. The quality of steel that seemed a wonder material few years ago comparing to wood had no longer satisfied the high demand of industrial boom. Wood then was the main material of which all the bridges on the Pennsylvania Railroad were made of. Still wooden bridges had its disadvantages; they could suffer from fires, accidents and washouts. Andrew Carnegie predicted a time when those bridges would be made of iron. He arranged the Keystone Bridge Works, and signed a contract to build a bridge across the Ohio River. The next step was to develop steel industry.
He had to go to the United Kingdom to learn new steel manufacturing technology. For that, he visited Sir Henry Bessemer who had invented a converting process iron into steel. As far as Andrew Carnegie was known for his ability to grasp the meaning quickly, he came back from England with a ready and well arranged plan in his head. Borrowing Bessemer technology was a great decision of Andrew Carnegie. The United States stopped importing steel from other countries with it.
Carnegie had a unique business intuition. Shortly before financial crush in 1873, he sold all his stocks and invested his revenue in steel manufacturing. In 1875, he established the biggest steel mill. In order not to pay for coke, essential for steel manufacturing, Carnegie bought his manufacturer share package. He appointed Henry Frick his business manager. He scrutinized all stages of manufacturing and saved on everything he could. It resulted in low cost price of his production, and soon Carnegie Steel Corporation became the largest steel producer.
What were the key factors of Carnegie success? The answer on this question can be formulated in Six Rules of Success written after Andrew Carnegie words by the famous psychologist and writer, Napoleon Hill:
- Fix in your mind the exact amount of money you desire. It is not sufficient merely to say “I want plenty of money”. Be definite as to the amount. (There is a psychological reason for definiteness, which will be described in a subsequent chapter).
- Determine exactly what you intend to give in return for the money you desire. (There is no such reality as “something for nothing”.)
- Establish a definite date when you intend to possess the money you desire.
- Create a definite plan for carrying out your desire, and begin at once, whether you are ready or not, to put this plan into action.
- Write out a clear, concise statement of the amount of money you intend to acquire, name the time limit for its acquisition, state what you intend to give in return for the money, and describe clearly the plan through which you intend to accumulate it.
- Read your written statement aloud, twice daily, once just before retiring at night, and once after arising in the morning. (Rhodes)
Andrew Carnegie did not know much about steel business. His fortune owed its secret to his selection of men. As every master businessman, he had a proper approach to his workers. Carnegie employed a business strategy known as vertical integration. He is a bright example of self-made man. Carnegie can inspire people to succeed, because his example shows that success depends on the proper usage of certain regulations and principles available for everybody.
Andrew Carnegie became a symbol of American industrial strength, because the railroads and the corporations that manufactured steel played a leading role in the nation’s economic growth of that time.Railroads expanded extensively, bringing different parts of the country into a national market economy. At that time, the United States emerged as an industrial giant, and steel manufacturing became one of the new industries that emerged then. Andrew Carnegie was in the right place and in the right time. He entered the steel business in 1870, and over the next 20 years became a determinant figure in the industry. Carnegie made his steel company so successful that he became a symbol of American industrial strength. Hubbard describes it the following way:
It owned thousands of acres of ore-land in the Lake Superior country. It owned a line of iron steamships that carried the ore to the Pittsburgh railroad connections. It owned the railroads that brought the ore from the mines to the docks, and it owned the docks. It owned vast coalmines in Pennsylvania, and it owned a controlling interest in the Connellsville coke-ovens, whence five miles of freight-cars, in fair times, were daily sent to the mills, loaded with coke. It was the biggest and cleanest clean-up ever consummated in the business world. As a financial get-away it has no rival in history. (Hubbard 296)