Carnegie
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American participation in China was mostly limited to action in Peking, a policy Carnegie agreed with, and he complimented McKinley and Hay for taking a more righteous position than the British, French, Germans, and Russians, who were aggressively protecting and carving out their domains. In a letter to the Associated Press, he warned that if the “United States should be drawn into joint action with them, the Washington Government may even find itself pledged to go forward into a campaign against China which would be hopeless, or may ultimately see the Powers at war with each other.”20
Andrew White, a devout peace activist, wanted more than rhetoric from Carnegie. He thought Carnegie’s millions might aid the cause for peace, and in June he suggested the building of a peace temple at The Hague for the Permanent Court of Arbitration—later to be called the International Court of Justice—which was to arbitrate international conflicts. He attempted to entice Carnegie by suggesting “that it would render the man who makes the gift a benefactor to every nation and to all mankind—acknowledged as such through all time.”21 A peace temple was outside the parameters of his gospel, for the moment; but more poignant, with the Philippine and Boer Wars raging, the idea appeared futile to Carnegie, who bitterly observed “it is a sad commentary on its labours, that the two branches of our race are the only ones who are attempting to deprive distant peoples of their liberties and shooting them down remorselessly because they wish to govern themselves.”22
In September, his literary friend William Stead also requested financial aid from Carnegie for peace efforts. He was to attend a peace congress in Paris and explained, “The first question they will ask me, I am well aware, is what prospect is there of securing any additional financial support for an attempt to promote arbitration; and I wish very much to be in a position to say definitely whether you feel disposed to help.”23 Stead received an adamant no. “I am not a ‘peace at any price’ man much as I should like to be,” Carnegie explained. “I believe it was my duty to be on the field at Bull Run.” He also didn’t think another peace congress or related organization was needed in addition to the arbitration court at The Hague; in his pragmatic business mind, it was a duplication of effort. “Of course, I may be wrong in believing that but I am certainly not wrong in believing that if it were dependent upon any millionaire’s money, it would be an object of pity, and end as one of derision. I wonder that you do not see this. There is nothing that robs a righteous cause of its strength more than a millionaire’s money—especially during his life. It makes a serious, holy cause simply a fad. Its life is tainted thereby.”24 So there were limits to Carnegie’s ego; he had come to understand that in some arenas—the noble ones, such as peace work—modesty reigned and excessive monetary aid was disdained.
Three days after Stead’s request, Spencer weighed in with a unique proposal. He advised Carnegie to spend money on relieving the misery of the Boers, who were watching their farms and villages burn at the hands of the English. “The act would be a grand one and it would be unique in all history,” concluded Spencer.25 Carnegie echoed the fear expressed to Stead that any offer of help to the Boers would be “resented” and considered “most impertinent,” but Spencer didn’t accept his logic and responded sharply, “You do not apparently distinguish between giving money to the Boers and assisting the widows and orphans of those who have been killed.”26 The rash of letters from White, Stead, and Spencer, among others, was dire evidence of how fearful these men were of world war.
Greater, and more tangible, glory was to be had in building cathedrals of civilization than chasing ghostly dreams of peace. When Carnegie came to Pittsburgh in November to attend a dinner given by William Frew to honor him, as well as for the city’s mayor, W. J. Diehl, and other prominent citizens supporting the institute (the library and museums), the city was abuzz with rumors that Carnegie was planning a major endowment for a technical school. Once again, he did not disappoint. At the dinner, he formally offered to build Pittsburgh a polytechnic school in connection with his institute and endow it with $1 million, provided the city supplied the site. For Carnegie, to have the library and museum alongside the school, to have leisure alongside work, represented harmony, and the price was worth it. In his dinner speech, Carnegie said he was moved to make the offer when Pittsburgh’s board of education requested $100,000 to begin a technical school, an amount he deemed hardly adequate.27 His offer was accepted with alacrity, and the technical school would eventually evolve into the renowned Carnegie Mellon University.
That autumn, Carnegie also traveled to Buffalo, Cincinnati, Chicago, and Philadelphia to present libraries, make speeches, and attend dinners. When Louise and he went on these brief trips, Margaret was left in Stella’s and the nanny’s care, although Louise disliked leaving her even for a short time. Well cared for, Margaret would grow up without a want in the world, would attend excellent schools, but would not have the important influence of her father in her life.
The most important dinner of the season was for Charlie Schwab, now a major player. Carnegie proposed a dinner to introduce Schwab to New York’s business elite, and bankers J. Edward Simmons and Charles Stewart Smith agreed to host it. The black-tie affair was held on December 12 at the University Club in New York, with attendees including Morgan, E. H. Harriman, James Stillman, William Vanderbilt, Chauncey Depew, Jacob Schiff, and H. H. Rodgers, president of Standard Oil. Carnegie was there only briefly, and then went to the Waldorf Astoria for the annual dinner of the Pennsylvania Society of New York, where he was committed to speak before the three hundred people in attendance. It was surprising that Carnegie, who was so diligent about rubbing shoulders with powerful men, would have such a conflict in his schedule and miss Schwab’s coming-out party.
As the guest of honor, Schwab spoke for twenty minutes on the future of the steel industry. Although plain-looking, broad-shouldered, and a working-man’s man, Schwab was an eloquent orator said to be able to “talk the legs off the proverbial brass pot,” and he presented a glowing future for steel, predicting that an age was at hand when a new species of corporation, a massive consolidation, a utopia of efficiency, would be created to compete on a global scale. Playing unconsciously with an unlit Havana cigar, Morgan was the most rapt listener in the audience. Consolidation and stability was the kind of talk he appreciated, and he considered whether Schwab could be won over as an ally in his war against Carnegie.
After the dinner, Morgan drew Schwab aside to the privacy of a window seat. They quickly exchanged pleasantries, Morgan complimenting him on his fine talk, and then Morgan invited Schwab to stop by his office for a visit, to discuss the steel industry’s future in more detail. Schwab hesitated to accept, explaining he’d prefer not to for it might suggest disloyalty.28 The steel war was only going to get worse, Schwab knew, so he had to be careful.
Morgan was not the only one with an agenda that involved Schwab as the fulcrum. “Schwab dinner here remarkable,” Carnegie reported to Dod. “Mr. S tells me every one invited accepted & really the biggest man in N York. He is favorite indeed & this makes him more valuable to us.”29 It was an innocent note, but the last line hung in the air, suggesting Carnegie had some scheme in mind in which the dinner played a role.
The gloating tone in his note was certainly not without reason: despite the loss of business to the trusts, in 1900 his company generated record profits of $40 million. To ascertain precisely where he stood against the competition, Carnegie asked Schwab to pull together some comparative figures. Combined, Schwab told him, American Sheet Steel, American Steel and Wire, Federal Steel, National Steel, and National Tube made but 84.5 percent as much crude steel as the Carnegie Company, which was also making half of the country’s structural steel and armor plate. While the nation’s total steel production fell 4.2 percent in 1900, Carnegie’s market share increased from 25.03 percent to 29.15 percent, and he had yet to enter the manufacture of finished products.30 For all his maneuvering, Morgan had to recognize Carnegie was impregnable.
The business landscape became more treacherous for Morgan as Carnegie’s plans for a tremendous tube mill jelled. As Carnegie reviewed the blueprints, he asked Schwab, “How much cheaper, Charlie, can you make tubes than the National Company?”
“Not less than ten dollars a ton.”
“Go on and build the plant.”31
On January 8, 1901, Schwab announced the company’s plans to invest $12 million to build the largest pipe and tube mill in the world on five thousand acres the company had purchased at Conneaut, Ohio.32 Due to the Lake Erie location, the company expected shipping the finished products to cost one-third to one-fourth of what it would be by rail in Pittsburgh. Once this news hit the wires, National Tube stock broke badly, and Morgan was at his wit’s end. Carnegie’s friend Charles Flint happened to be in Morgan’s office as the banker mulled over his response, and he asked Flint to call on Carnegie and to attempt to ascertain what Carnegie’s intentions were in building the tube mill. Flint went up to Fifty-first Street. As he sat facing Carnegie, he thought poking some fun at Moore might ease them into a discussion on tubes and the future. “How difficult it must have been,” he said, “for Judge Moore to have kept up a smile when he sat opposite you at dinner at my home, having so recently kissed goodbye to a million dollars, as the option which he had purchased on your steel properties expired.”
“Under the circumstances,” said Carnegie, “it was certainly much easier for me to smile than for the Judge, but that option which I gave him was cheap at a million dollars; I wouldn’t renew it now for ten millions.” Over the next few hours, he divulged all his plans for the tube plant at Conneaut and other expansions designed to scoop the market from Morgan and Moore’s trusts. Flint was surprised by his forthrightness and promised not to tell anyone without Carnegie’s approval (although he was there on Morgan’s behalf). “What I have talked to you about,” Carnegie answered, “is a matter of national interest, and you are free to repeat anything that I have said.”33 And that was exactly how Carnegie viewed his steel empire—it was a matter of national interest.
Another war coming to a climax involved the Pennsylvania Railroad. During the second week of January, Carnegie was in Pittsburgh to host a lavish dinner at the Schenley Hotel for his managers to celebrate the company’s success. It was not all pleasure. While in town, he learned the Pennsylvania Railroad was again playing games with shipping rates. Back in the summer, Carnegie had been notified any rebates the Carnegie Company had enjoyed from the Pennsylvania Railroad were to be eliminated, snatching away the cool millions in profits. The railroad’s new president, Alexander Cassatt, despised the rebates, so when he had taken the reins after Frank Thomson’s premature death, he systematically reviewed each customer’s rate schedule. Before he could cut out rebates, however, he needed the support of other railroads to prevent his customers from defecting to other lines. He turned to William Vanderbilt, who controlled the powerful New York Central, to jointly create “a community of interest.” The benign-sounding term actually involved the two mammoth railroad companies in buying controlling blocks of stock in smaller lines and then dictating rates.
Once back in New York in the fall, Carnegie went on a crusade as he challenged the legality of the “community of interest,” planned meetings of the Pittsburgh Chamber of Commerce and for the public to incite outrage, and announced to Schwab, “The deliverance of Pittsburgh is my next great work, and this time it will be thoroughly done, once for all, if I live.”34 Such revolutionary bluster was just rhetoric. There were other pressure points to be exploited with far more effectiveness; namely, once again aggressively pursuing alternative shipping routes. Ever since Carnegie had connected to Lake Erie via the Pittsburgh, Bessemer & Lake Erie line, he had proven his ability to carry through with such a threat. To bring immediate pressure to bear on the Pennsylvania, he decided to build a fleet of steamships and barges for the Great Lakes based in Conneaut that would permit him to ship east and west, and subsequently placed an order for five steamers, made almost completely of steel and among the largest ever built for the lakes. (The fleet would also break Rockefeller’s hold on shipping and fears of price gouging.) The deciding blow in Carnegie’s previous fight with the Pennsylvania had been the combination punch of connecting his own line from Pittsburgh to Lake Erie and threatening to build a line into the coke region. Such a tactic would have to be used again, however expensive. Carnegie sent surveyors into the field to determine the best routes into the coke region and to the East Coast. Cassatt relented.
But the rate cuts Cassatt promised proved to be marginal improvements at best. Carnegie then demanded a return to the old rebates, which brought the railroad’s legal counsel, Wayne McVeagh, into the fray. McVeagh explained to Carnegie that he had warned Cassatt that “he could not safely violate the law prohibiting secret rates or allowances.”35 Carnegie objected to the idea that his prior discounted rates were secret or unlawful, which prompted McVeagh to chide him for his jaded view: “You fail to give proper weight to the fact that the rebates you were getting were not only unlawful but if he had continued them after he knew all about them, he would have been committing a criminal offense while you in taking them ran no risk whatever of that kind. Of course you may reply that your steel rail pool is equally unlawful & yet it is maintained; but in maintaining it you are not committing a criminal offense; and that is a serious difference.”36 According to McVeagh’s interpretation of the laws, Carnegie was not behaving criminally, which was crucial to Carnegie being able to excuse his ruthless actions. Still, there can be no doubt he was guilty of breaking the Sherman antitrust laws and the Interstate Commerce Act.
Carnegie elected to find a new ally in railroads, and Jay Gould’s son, George, who had been bequeathed a railroad empire and Western Union, was an ideal choice. George Gould was attempting to pull together a transcontinental line that ran from Baltimore to San Francisco, and he appeared to be the only man bold enough to strike at the Pennsylvania. He also controlled the Wabash Railroad with its strategic lines in the West, including Chicago, a town Carnegie naturally wanted to reach as cheaply as possible. The two met, and Carnegie presented his scheme. If Gould extended his western line to Pittsburgh and offered the same prevailing rates given other customers, Carnegie would give him one-third of all his business, and then jointly they would construct a line east. Gould agreed and plans were immediately drawn up. It could prove a major coup, but Carnegie expressed fears of reprisals to Dod: “It seems almost too good to be true and I am not without fear that allied PR interests here and Morgan may frighten him from going to work. We shall see. If he does come to Pittsburgh, the Eastern Line is next step—but that’s another story.”37 When word of the Carnegie-Gould alliance and their plans to build east reached Morgan, he groaned, “Carnegie is going to demoralize railroads just as he has demoralized steel.”38 Cassatt was equally distraught because Carnegie was yet again moving ahead with plans to build a line into the coke region. As the industrial war raged, Willis King, an executive with the Jones and Laughlin Steel Company, observed from the sidelines—until beckoned by the beleaguered Cassatt.
King, who had both begrudging respect for the Scotsman and a desire to see him knocked down a notch, recalled of Carnegie:
He had the reputation of being “canny,” and was inclined to take his own way without regard to the interests of his fellow manufacturers, and was a vigorous competitor.
Almost to the point of ruthlessness he demanded and received rebates and other favors from the railroads, denied to his competitors, and these demands finally culminated in a threat to build a railroad from Pittsburgh to the Atlantic seaboard, and to construct the largest tube works in the world at Conneaut on the Lake.
Having known Carnegie for years, King was an ideal person to advise Cassatt, who sent his private rail car to pick up not only King, but Carnegie’s old friend Robert Pitcairn, superintendent of the Pennsylvania’s Pittsburgh Division, and bring them to Philadelphia to discuss the Carnegie-Gould threat. At th
e meeting, King confirmed that an officer of Carnegie Steel had told him in confidence the company planned a railroad east. “Mr. Pitcairn, who was present, said that a new road would never pay,” King recalled, “and that Carnegie could not run it. Mr. Cassatt, who was walking up and down the office with his hands in his pockets, stopped before Pitcairn and said very abruptly, ‘Nonsense, that is beside the question. If the road is well started or finished, somebody will be found to run it.’”39
(As it so happened, Gould’s Western Union, by prior contract, had been allowed to locate its poles along the Pennsylvania Railroad right-of-way; but now, in a first act of retaliation, Cassatt refused to renew the contract and ordered his men to cut down the poles from one end of the railroad to the other.)40
Morgan took the threat to build the railroad east just as seriously, and, in combination with Carnegie’s announced plans to build the biggest tube mill ever, he had had quite enough of the canny Scotsman. Just as Cassatt had summoned King and Pitcairn, now Morgan summoned Bet-a-Million Gates. Although Gates was persona non grata at Federal Steel, Morgan knew Gates was on relatively good terms with Schwab, for the two played bridge and poker together—and Schwab was, perhaps, the key player in eliminating Carnegie. He asked Gates to arrange a secret meeting with Carnegie’s trusted lieutenant, who had so impressed Morgan at the December dinner.
When the formidable J. P. Morgan beckoned, it was extremely difficult to resist; therefore, as Schwab considered Morgan’s invitation to a clandestine meeting in New York, he felt compelled to attend, against his better judgment. Perhaps only his boss, Andrew Carnegie, and John D. Rockefeller had the guts to spurn Morgan, a bulky figure who tended to brandish his cane at photographers on the street. He was particularly uncomfortable about accepting the overture because Carnegie wasn’t to know of it. Sensing his ambivalence, Morgan’s messenger, Gates, suggested an accidental meeting on neutral ground in Philadelphia. “But suppose you should happen to be in the Bellevue Hotel Sunday evening,” he said quickly, “and Mr. Morgan should happen to be there?”