An Outline of American History (1963)

2/12 Industry Grows Bigger

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Advances in steel production were, to a great extent, achieved by Andrew Carnegie, a major figure in the history of the industry. Coming to America from Scotland as a boy of twelve, he progressed from work as a bobbin boy in a cotton factory to a job in a telegraph office, and then to one on the Pennsylvania Railroad. Before he was thirty, he had made shrewd and farsighted investments, which by 1865 were concentrated in iron. Within a few years, he had organized or had stock in companies making iron bridges, rails, and locomotives. Ten years later, the steel mill he built on the Monongahela River in Pennsylvania was the greatest in the country. Year by year, Carnegie's business grew. He acquired commanding control not only over new mills, but also over coke and coal properties, iron ore from Lake Superior, a fleet of steamers on the Great Lakes, a port town on Lake Erie, and a connecting railroad. His business was allied with a dozen others; it could command favorable terms from railroads and shipping lines; it had capital enough for expansion and a plentiful supply of labor. Nothing comparable in the way of industrial expansion had ever been seen before in America.

In many respects, the history of Carnegie is the story of big business in the United States. Although he long dominated the industry, he never succeeded in achieving a complete monopoly over the natural resources, transportation, and industrial plans involved in the making of steel. In the 1890's, companies rose to challenge his pre-eminence. Stung by competition, Carnegie at first threatened to acquire new mines and build an even more powerful business; but, as an old and tired man, he was finally willing to listen to the suggestion that he merge his holdings with the new organization which would embrace most of the important iron and steel properties in the nation.

The United States Steel Corporation, which resulted from this merger in 1901, illustrated a process that had been under way for thirty years. This was the combination of independent industrial enterprises into federated or centralized companies. Begun during the Civil War, the trend gathered momentum after the seventies. Businessmen realized that if they could bring competing firms into a single organization, they could control both production and markets. Developed to achieve these ends were the "corporation" and the "trust" which were in many respects logical forms of organization for large-scale undertakings. For in a corporation a wide reservoir of capital could be tapped. Potential investors were attracted by the fact that they could expect profits from their purchase of stocks and bonds but were liable, in case of business failure, only to the extent of their investments. In addition, incorporation gave business enterprises permanent life and continuity of control. The trust was, in effect, a combination of corporations whereby the stockholders of each placed their stocks in the hands of trustees who managed the business of all. Trusts made possible large-scale combinations, centralized control and administration, and the pooling of patents. By virtue of their capital resources, they had greater power to expand, to compete with foreign business companies, and to drive hard bargains with labor, which was at this time beginning to organize effectively. They could also exact favorable terms from railroads, and exercise influence in politics.

The Standard Oil Company, one of the earliest and strongest corporations, was followed rapidly by other trusts and combinations-in cottonseed oil, lead, sugar, tobacco, and rubber. Aggressive businessmen began to mark out industrial domains for themselves. Four great meat packers, chief among them Philip Armour and Gustavus Swift, established a beef trust. The McCormicks established pre-eminence in the reaper business. The trend was clearly reflected in a survey made in 1904 which showed that more than five thousand previously independent concerns had been consolidated into some three hundred industrial trusts.

In still other fields-in transportation and communication particularly-the trend toward amalgamation was spectacular. Western Union, earliest of the large combinations, was followed by the Bell Telephone System and eventually by the American Telephone and Telegraph Company. Cornelius Vanderbilt had early seen that efficient railroading required the unification of lines. In'the sixties he had knit some thirteen separate railroads into a single line connecting New York City and Buffalo, nearly 300 miles away. During the next decade he acquired lines to Chicago and Detroit, and the New York Central System came into being. Other consolidations were already under way, and soon the major railroads of the nation were organized into trunk lines and "systems" directed by half a dozen men.

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