May 30, 1980


Page 5

Study the American System

Andrew Carnegie: Steel Producer

Were the great iron and steel maker Andrew Carnegie alive today, the actions of today's steel makers would shock and outrage him. Carnegie would be amazed to hear that U.S. Steel had permanently shut 15 plants, during the last year, to reduce capacity and keep prices high. Carnegie once tore down a three-month old rolling mill and its machinery at great expense just to replace it with a new more modern and technologically advanced rolling mill. Carnegie recovered his expenses in 18 months and reduced his cost of production by one tenth This commitment to capital formation to use the newest innovations in technology, which made the Carnegie Iron and Steel Works the largest in the world by the end of the 19th century, was not unique to Carnegie. He was associated with the republican humanist networks that produced Henry Carey and Abraham Lincoln and shared the same rigorous dedication to advancing the frontiers of the human mind and mankind's work on earth. Andrew Carnegie was born in Dunfermline, Scotland, in 1835 but was forced to flee with his family in 1848 when Britain's "fiscal conservative' policies, combined with a bad crop created famine, leaving 350.000 dead in

Ireland and Scotland. This lesson struck in Carnegie's mind for the rest of his life. Upon arriving in America in the iron region surrounding Pittsburgh. Carnegie was struck by the difference between America and his native Scotland. In 1853, Carnegie met Homas Scott, then an official in the Pennsylvania Railroad, the world's largest industrial company. Scott was friend to Henry Carey and shared Carey's view on the need for the most rapid industrial development in the U.S. Carey's father Matthew had been the head of the Internal Imrovement's Section of the American Philosophical Society, which had gotten the patent to found the Canal in Pennsylvania. The same group of men then founded the Pennsylvania railroad and many iron factories. By 1865 Pennsylvania had half of all the iron factories in America. As a youth Carnegie wrote to his cousin in Scotland explaining the difference between the American and British Systems: But the best proof of the superiority of our system is seen in the general prosperity and progress of its citizens. . . Our public lands of almost unlimited extent are becoming settled with an enterprising people. . . Pauperism is almost unknown. . . Everything around is in motion—mind is freed from superstitious reverence for old customs, unawed by gorgeous and unmeaning shows. . . But you may reply. Government has little or nothing to do with this state of affairs—Why then I would show you the contrast between the United States and the Canadas. They were settled by the same people, at the same time, and look at the difference—Where are her railroads and telegraphs and canals? . . . We have given to the world a Washington, a Franklin, a Fulton, a Morse. . . What has Canada ever produced? . . . Is it not a fair sampling of our respective systems? After helping set up the Telegraphy Corp. during the Civil War and serving 12 years as the student and assistant to Whig industrialist Tom Scott, in 1865 Carnegie set upon bridge and iron building. One of his accomplishments in bridge-building was the superstructure of the Brooklyn Bridge which still stands. Carnegie built the Edgar Thompson Iron works with a 75-foot high blast furnace, a world wonder.

In industrial work, Carnegie's method was to maximize output and keep applying new technologies. In 1875, Carnegie wrote his partners: Let us fill our Beam Mill if we can even at $5 per ton profit, run it doubletime and see just what we can do. . . Having abandoned the idea of small tonnage and exorbitant profits, there is but one sound idea to embrace and that is heartily-immense tonnage, small profits—let us take the beam orders of the country. Using this method, Carnegie reduced the cost of producing a ton of delivered steel from $40 per ton in 1875 to $17 per ton in 1898. U.S. iron and steel production shot upward fourfold between 1870 and 1900 under Carnegie's mass high technology production methods. Great Britain, once the world production leader, was overtaken by the new American giant. Carnegie was the first capitalist to introduce the eight hour day, back in 1882. He backed legislation to enforce this policy. "I cannot agree that the State should not interfere," Carnegie stated. "The Factory Acts already interfere with child and female labor and everything that has been done so far in that way has been beneficial. I believe we shall have more and more occasion for the state to legislate on behalf of workers, because it is always the worst employers that have to be coerced into what fair employers would gladly do of their own accord."

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