The Age of Big Business - Burton Jesse Hendrick (read me like a book .TXT) 📗

were essential to its completed output—coal, limestone, steel ships, railroads, and steel mills. In twenty-five years, from 1875 to 1900, this manufacturing enterprise had paid the Carnegie group profits aggregating $133,000,000, profits which, in the closing years of the century, had increased at a stupendous rate. In 1898 Carnegie and his associates had divided $11,500,000, in 1899 their earnings had grown to $25,000,000, and in 1900 the aggregate had suddenly jumped to $40,000,000. Of this latter sum Carnegie received $25,000,000, Phipps $5,500,000, Frick $2,600,000, and Schwab $1,300,000. And Carnegie’s little group could see no limit to the growth of their business and the expansion of their personal fortunes. Yet at that very moment Carnegie was planning to play the part of a Charles V with the large empire which he had pieced together—to abdicate his throne, retire from business life, and spend his remaining days in quiet.

 

Many influences were impelling him to this decision. His triumph, stupendous as it had been, also had had its alloy of sorrow.

Indeed this little Scotsman, now at the crowning of his glory, was one of the loneliest figures in the world. Practically all the forty men with whom he had been closely associated had vanished from the scene. He had quarreled with his playmate and lifelong partner, Henry Phipps, and was in the worst possible business and personal relations with Frick. He had no son to carry on his work. He had become greatly interested in his philanthropies, and he had declared that the man who died rich died disgraced. Moreover, new influences were rising in the steel trade with which Carnegie had little sympathy. Its national capital seemed to be shifting from Pittsburgh to Wall Street. New men who knew nothing about steel but who possessed an intimate acquaintance with stocks and bonds—J. Pierpont Morgan, George W.

Perkins, and their associates—were branching out as controllers of large steel interests. Carnegie had no interest in Wall Street; he has declared that he never speculated in his life and that he would immediately dissociate himself from any partner who would do so. This Wall Street coterie, in the years from 1898 to 1900, had made several large combinations in the steel trade.

That was the era when the trust mania had gained possession of the American mind and when its worst features displayed themselves. The Federal Steel Company, the American Bridge Company, the American Steel and Wire, the National Tube Company, all representing the assembling of large works which had been engaged as rivals in similar enterprises, were launched, with the usual accompaniments of “underwriting syndicates,” watered stock, and Wall Street speculation. This sort of thing made no appeal to Andrew Carnegie. His huge enterprise had always remained essentially a copartnership, and he had frequently expressed his abhorrence of trusts. Yet, in spite of his wish to retire from business and in spite of his avowed intention to die poor, Carnegie now adopted the policy of the Sibylline leaves to all prospective purchasers. Moore and Reid would have purchased his interest for $157,000,000; when Rockefeller came along the price had risen to $250,000,000; when the oil man shook his head and retired, Carnegie immediately raised his price to $500,000,000.

It is doubtful whether he would have sold at all had not his Wall Street competitors begun to encroach on a field which the little Scotsman understood quite as well as they—the production and merchandising of steel. The newly organized combinations were completing elaborate plans to go after Carnegie’s business. Then Carnegie, who had practically retired from active life, again arrayed himself in his shirt-sleeves, abandoned his career of authorship, and resumed his early trade. His first attacks produced an immense reverberation in the House of Morgan. He purchased a huge tract at Conneaut and began building a gigantic plant for the manufacture of steel tubes, a business in which he had not hitherto engaged. This was a blow aimed at one of Morgan’s pet new creations, the National Tube Company. Should Carnegie finish his works, there was no doubt the Morgan enterprise would be ruined, for the new plant would be far more modern and so could manufacture the product at a much lower price; and, with Charles M. Schwab as active manager, what possible chance would the older corporation have? But Carnegie struck his enemy at an even more vulnerable point. The Pennsylvania Railroad had a practical monopoly of traffic in and out of Pittsburgh, and Pittsburgh “created” more freight business than any other city in the world. Carnegie lent his powerful support to George J. Gould, who was then extending his railroad system into the preempted field and was also making surveys and had financed a company to build an entirely new railroad from Pittsburgh to the Atlantic Coast. As Carnegie himself controlled the larger part of the freight that made Pittsburgh such an essential feeder to railroads, his new enterprise caused the greatest alarm. At the same time Carnegie equipped a new and splendid fleet of ore ships, his purpose being to enter a field of transportation which John D. Rockefeller had found extremely profitable.

 

Such were the circumstances and such were the motives that gave birth to the world’s largest corporation. All one night, so the story goes, Charles M. Schwab and John W. Gates discussed the steel situation with J. Pierpont Morgan. There was only one possible solution, they said—Andrew Carnegie must be bought out.

By the time the morning sun came through the windows Morgan had been convinced. “Go and ask him what he will sell for,” he said to Schwab. In a brief period Schwab came back to Morgan with a letter which contained the following figures—five per cent gold bonds $303,450,000; preferred stock $98,277,100; common stock $90,279,000—a total of over $492,000,000. Carnegie demanded no cash; he preferred to hold a huge first mortgage on a business whose golden opportunities he knew so well. Morgan, who had been accustomed all his life to dictate to other men, had now met a man who was able to dictate to him. And he capitulated. The man who fifty-three years before had started life in a new country as a bobbin-boy at a dollar and twenty cents a week, now at the age of sixty-six retired from business the second richest man in the world. With him retired a miscellaneous assortment of millionaires whose fortunes he had made and whose subsequent careers in the United States and in Europe have given a peculiar significance to the name “Pittsburgh Millionaires.” The United States Steel Corporation, the combination that included not only the Carnegie Company but seventy per cent of all the steel concerns in the country, was really a trust made up of trusts. It had a capitalization of a billion and a half, of which about $700,000,000 was composed of the commodity usually known as “water”; but so greatly has its business grown and so capably has it been managed that all this liquid material has since been converted into more solid substance. The disappearance of Andrew Carnegie and his coworkers and the emergence of this gigantic enterprise completed the great business cycle in the steel trade.

The age of individual enterprise and competition had passed—that of corporate control had arrived.

 

CHAPTER IV. THE TELEPHONE: “AMERICA’S MOST POETICAL ACHIEVEMENT”

 

A distinguished English journalist, who was visiting the United States, in 1917, on an important governmental mission, had an almost sublime illustration of the extent to which the telephone had developed on the North American Continent. Sitting at a desk in a large office building in New York, Lord Northcliffe took up two telephone receivers and placed one at each ear. In the first he heard the surf beating at Coney Island, New York, and in the other he heard, with equal distinctness, the breakers pounding the beach at the Golden Gate, San Francisco. Certainly this demonstration justified the statement made a few years before by another English traveler. “What startles and frightens the backward European in the United States,” said Mr. Arnold Bennett, “is the efficiency and fearful universality of the telephone. To me it was the proudest achievement and the most poetical achievement of the American people.”

 

Lord Northcliffe’s experience had a certain dramatic justice which probably even he did not appreciate. He is the proprietor of the London Times, a newspaper which, when the telephone was first introduced, denounced it as the “latest American humbug”

and declared that it “was far inferior to the well-established system of speaking tubes.” The London Times delivered this solemn judgment in 1877. A year before, at the Philadelphia Centennial Exposition, Don Pedro, Emperor of Brazil, picked up, almost accidentally, a queer cone-shaped instrument and put it to his ear, “My God! It talks!” was his exclamation; an incident which, when widely published in the press, first informed the American people that another of the greatest inventions of all times had had its birth on their own soil. Yet the initial judgment of the American people did not differ essentially from the opinion which had been more coarsely expressed by the leading English newspaper. Our fathers did not denounce the telephone as an “American humbug,” but they did describe it as a curious electric “toy” and ridiculed the notion that it could ever have any practical value. Even after Alexander Graham Bell and his associates had completely demonstrated its usefulness, the Western Union Telegraph Company refused to purchase all their patent rights for $100,000! Only forty years have passed since the telephone made such an inauspicious beginning. It remains now, as it was then, essentially an American achievement. Other nations have their telephone systems, but it is only in the United States that its possibilities have been even faintly realized. It is not until Americans visit foreign countries that they understand that, imperfect as in certain directions their industrial and social organization may be, in this respect at least their nation is preeminent.

 

The United States contains nearly all the telephones in existence, to be exact, about seventy-five per cent. We have about ten million telephones, while Canada, Central America, South America, Great Britain, Europe, Asia, and Africa all combined have only about four million. In order to make an impressive showing, however, we need not include the backward peoples, for a comparison with the most enlightened nations emphasizes the same point. Thus New York City has more telephones than six European countries taken together—Austria-Hungary, Belgium, Norway, Denmark, Italy, and the Netherlands. Chicago, with a population of 2,000,000, has more telephones than the whole of France, with a population of 40,000,000. Philadelphia, with 1,500,000, has more than the Russian Empire, with 166,000,000. Boston has more telephones than Austria-Hungary, Los Angeles more than the Netherlands, and Kansas City more than Belgium. Several office buildings and hotels in New York City have more instruments than the kingdoms of Greece or Bulgaria.

The whole of Great Britain and Ireland has about 650,000

telephones, which is only about 200,000 more, than the city of New York.

 

Mere numbers, however, tell only half the story. It is when we compare service that American superiority stands most manifest.

The London newspapers are constantly filled with letters abusing the English telephone system. If these communications describe things accurately, there is apparently no telephone vexation that the Englishman does not have to endure. Delays in getting connections are apparently chronic. At times it seems impossible to get connections at all, especially from four to five in the afternoon—when the operators are taking tea. Suburban connections, which in New York take about ninety seconds, average half an hour in London, and many of the smaller cities have no night service. An American thinks nothing of putting in a telephone; he notifies his company and in a few days the instrument is installed. We take a thing like this for granted.

But there are places where a mere telephone subscription, the privilege of having an