Our chemist, Mr. Prousser, was then sent to a Pennsylvania furnace among the hills which we had leased, with instructions to a.n.a.lyze all the materials brought to him from the district, and to encourage people to bring him specimens of minerals. A striking example of the awe inspired by the chemist in those days was that only with great difficulty could he obtain a man or a boy to a.s.sist him in the laboratory. He was suspected of illicit intercourse with the Powers of Evil when he undertook to tell by his suspicious-looking apparatus what a stone contained. I believe that at last we had to send him a man from our office at Pittsburgh.

One day he sent us a report of a.n.a.lyses of ore remarkable for the absence of phosphorus. It was really an ore suitable for making Bessemer steel. Such a discovery attracted our attention at once. The owner of the property was Moses Thompson, a rich farmer, proprietor of seven thousand acres of the most beautiful agricultural land in Center County, Pennsylvania. An appointment was made to meet him upon the ground from which the ore had been obtained. We found the mine had been worked for a charcoal blast furnace fifty or sixty years before, but it had not borne a good reputation then, the reason no doubt being that its product was so much purer than other ores that the same amount of flux used caused trouble in smelting. It was so good it was good for nothing in those days of old.

We finally obtained the right to take the mine over at any time within six months, and we therefore began the work of examination, which every purchaser of mineral property should make most carefully. We ran lines across the hillside fifty feet apart, with cross-lines at distances of a hundred feet apart, and at each point of intersection we put a shaft down through the ore. I believe there were eighty such shafts in all and the ore was a.n.a.lyzed at every few feet of depth, so that before we paid over the hundred thousand dollars asked we knew exactly what there was of ore. The result hoped for was more than realized. Through the ability of my cousin and partner, Mr. Lauder, the cost of mining and washing was reduced to a low figure, and the Scotia ore made good all the losses we had incurred in the other mines, paid for itself, and left a profit besides. In this case, at least, we s.n.a.t.c.hed victory from the jaws of defeat. We trod upon sure ground with the chemist as our guide. It will be seen that we were determined to get raw materials and were active in the pursuit.

We had lost and won, but the escapes in business affairs are sometimes very narrow. Driving with Mr. Phipps from the mills one day we pa.s.sed the National Trust Company office on Penn Street, Pittsburgh. I noticed the large gilt letters across the window, "Stockholders individually liable." That very morning in looking over a statement of our affairs I had noticed twenty shares "National Trust Company" on the list of a.s.sets. I said to Harry:

"If this is the concern we own shares in, won't you please sell them before you return to the office this afternoon?"

He saw no need for haste. It would be done in good time.

"No, Harry, oblige me by doing it instantly."

He did so and had it transferred. Fortunate, indeed, was this, for in a short time the bank failed with an enormous deficit. My cousin, Mr.

Morris, was among the ruined shareholders. Many others met the same fate. Times were panicky, and had we been individually liable for all the debts of the National Trust Company our credit would inevitably have been seriously imperiled. It was a narrow escape. And with only twenty shares (two thousand dollars' worth of stock), taken to oblige friends who wished our name on their list of shareholders! The lesson was not lost. The sound rule in business is that you may give money freely when you have a surplus, but your name never--neither as endorser nor as member of a corporation with individual liability. A trifling investment of a few thousand dollars, a mere trifle--yes, but a trifle possessed of deadly explosive power.

The rapid subst.i.tution of steel for iron in the immediate future had become obvious to us. Even in our Keystone Bridge Works, steel was being used more and more in place of iron. King Iron was about to be deposed by the new King Steel, and we were becoming more and more dependent upon it. We had about concluded in 1886 to build alongside of the Edgar Thomson Mills new works for the manufacture of miscellaneous shapes of steel when it was suggested to us that the five or six leading manufacturers of Pittsburgh, who had combined to build steel mills at Homestead, were willing to sell their mills to us.

These works had been built originally by a syndicate of manufacturers, with the view of obtaining the necessary supplies of steel which they required in their various concerns, but the steel-rail business, being then in one of its booms, they had been tempted to change plans and construct a steel-rail mill. They had been able to make rails as long as prices remained high, but, as the mills had not been specially designed for this purpose, they were without the indispensable blast furnaces for the supply of pig iron, and had no c.o.ke lands for the supply of fuel. They were in no condition to compete with us.

It was advantageous for us to purchase these works. I felt there was only one way we could deal with their owners, and that was to propose a consolidation with Carnegie Brothers & Co. We offered to do so on equal terms, every dollar they had invested to rank against our dollars. Upon this basis the negotiation was promptly concluded. We, however, gave to all parties the option to take cash, and most fortunately for us, all elected to do so except Mr. George Singer, who continued with us to his and our entire satisfaction. Mr. Singer told us afterwards that his a.s.sociates had been greatly exercised as to how they could meet the proposition I was to lay before them. They were much afraid of being overreached but when I proposed equality all around, dollar for dollar, they were speechless.

This purchase led to the reconstruction of all our firms. The new firm of Carnegie, Phipps & Co. was organized in 1886 to run the Homestead Mills. The firm of Wilson, Walker & Co. was embraced in the firm of Carnegie, Phipps & Co., Mr. Walker being elected chairman. My brother was chairman of Carnegie Brothers & Co. and at the head of all. A further extension of our business was the establishing of the Hartman Steel Works at Beaver Falls, designed to work into a hundred various forms the product of the Homestead Mills. So now we made almost everything in steel from a wire nail up to a twenty-inch steel girder, and it was then not thought probable that we should enter into any new field.

It may be interesting here to note the progress of our works during the decade 1888 to 1897. In 1888 we had twenty millions of dollars invested; in 1897 more than double or over forty-five millions. The 600,000 tons of pig iron we made per annum in 1888 was trebled; we made nearly 2,000,000. Our product of iron and steel was in 1888, say, 2000 tons per day; it grew to exceed 6000 tons. Our c.o.ke works then embraced about 5000 ovens; they were trebled in number, and our capacity, then 6000 tons, became 18,000 tons per day. Our Frick c.o.ke Company in 1897 had 42,000 acres of coal land, more than two thirds of the true Connellsville vein. Ten years hence increased production may be found to have been equally rapid. It may be accepted as an axiom that a manufacturing concern in a growing country like ours begins to decay when it stops extending.

To make a ton of steel one and a half tons of iron stone has to be mined, transported by rail a hundred miles to the Lakes, carried by boat hundreds of miles, transferred to cars, transported by rail one hundred and fifty miles to Pittsburgh; one and a half tons of coal must be mined and manufactured into c.o.ke and carried fifty-odd miles by rail; and one ton of limestone mined and carried one hundred and fifty miles to Pittsburgh. How then could steel be manufactured and sold without loss at three pounds for two cents? This, I confess, seemed to me incredible, and little less than miraculous, but it was so.

America is soon to change from being the dearest steel manufacturing country to the cheapest. Already the shipyards of Belfast are our customers. This is but the beginning. Under present conditions America can produce steel as cheaply as any other land, notwithstanding its higher-priced labor. There is no labor so cheap as the dearest in the mechanical field, provided it is free, contented, zealous, and reaping reward as it renders service. And here America leads.

One great advantage which America will have in competing in the markets of the world is that her manufacturers will have the best home market. Upon this they can depend for a return upon capital, and the surplus product can be exported with advantage, even when the prices received for it do not more than cover actual cost, provided the exports be charged with their proportion of all expenses. The nation that has the best home market, especially if products are standardized, as ours are, can soon outsell the foreign producer. The phrase I used in Britain in this connection was: "The Law of the Surplus." It afterward came into general use in commercial discussions.

CHAPTER XVII

THE HOMESTEAD STRIKE

While upon the subject of our manufacturing interests, I may record that on July 1, 1892, during my absence in the Highlands of Scotland, there occurred the one really serious quarrel with our workmen in our whole history. For twenty-six years I had been actively in charge of the relations between ourselves and our men, and it was the pride of my life to think how delightfully satisfactory these had been and were. I hope I fully deserved what my chief partner, Mr. Phipps, said in his letter to the "New York Herald," January 30, 1904, in reply to one who had declared I had remained abroad during the Homestead strike, instead of flying back to support my partners. It was to the effect that "I was always disposed to yield to the demands of the men, however unreasonable"; hence one or two of my partners did not wish me to return.[42] Taking no account of the reward that comes from feeling that you and your employees are friends and judging only from economical results, I believe that higher wages to men who respect their employers and are happy and contented are a good investment, yielding, indeed, big dividends.

[Footnote 42: The full statement of Mr. Phipps is as follows:

_Question:_ "It was stated that Mr. Carnegie acted in a cowardly manner in not returning to America from Scotland and being present when the strike was in progress at Homestead."

_Answer:_ "When Mr. Carnegie heard of the trouble at Homestead he immediately wired that he would take the first ship for America, but his partners begged him not to appear, as they were of the opinion that the welfare of the Company required that he should not be in this country at the time. They knew of his extreme disposition to always grant the demands of labor, however unreasonable.

"I have never known of any one interested in the business to make any complaint about Mr. Carnegie's absence at that time, but all the partners rejoiced that they were permitted to manage the affair in their own way." (Henry Phipps in the _New York Herald_, January 30, 1904.)]

The manufacture of steel was revolutionized by the Bessemer open-hearth and basic inventions. The machinery hitherto employed had become obsolete, and our firm, recognizing this, spent several millions at Homestead reconstructing and enlarging the works. The new machinery made about sixty per cent more steel than the old. Two hundred and eighteen tonnage men (that is, men who were paid by the ton of steel produced) were working under a three years' contract, part of the last year being with the new machinery. Thus their earnings had increased almost sixty per cent before the end of the contract.

The firm offered to divide this sixty per cent with them in the new scale to be made thereafter. That is to say, the earnings of the men would have been thirty per cent greater than under the old scale and the other thirty per cent would have gone to the firm to recompense it for its outlay. The work of the men would not have been much harder than it had been hitherto, as the improved machinery did the work.

This was not only fair and liberal, it was generous, and under ordinary circ.u.mstances would have been accepted by the men with thanks. But the firm was then engaged in making armor for the United States Government, which we had declined twice to manufacture and which was urgently needed. It had also the contract to furnish material for the Chicago Exhibition. Some of the leaders of the men, knowing these conditions, insisted upon demanding the whole sixty per cent, thinking the firm would be compelled to give it. The firm could not agree, nor should it have agreed to such an attempt as this to take it by the throat and say, "Stand and deliver." It very rightly declined. Had I been at home nothing would have induced me to yield to this unfair attempt to extort.

Up to this point all had been right enough. The policy I had pursued in cases of difference with our men was that of patiently waiting, reasoning with them, and showing them that their demands were unfair; but never attempting to employ new men in their places--never. The superintendent of Homestead, however, was a.s.sured by the three thousand men who were not concerned in the dispute that they could run the works, and were anxious to rid themselves of the two hundred and eighteen men who had banded themselves into a union and into which they had hitherto refused to admit those in other departments--only the "heaters" and "rollers" of steel being eligible.

My partners were misled by this superintendent, who was himself misled. He had not had great experience in such affairs, having recently been promoted from a subordinate position. The unjust demands of the few union men, and the opinion of the three thousand non-union men that they were unjust, very naturally led him into thinking there would be no trouble and that the workmen would do as they had promised. There were many men among the three thousand who could take, and wished to take, the places of the two hundred and eighteen--at least so it was reported to me.

It is easy to look back and say that the vital step of opening the works should never have been taken. All the firm had to do was to say to the men: "There is a labor dispute here and you must settle it between yourselves. The firm has made you a most liberal offer. The works will run when the dispute is adjusted, and not till then.

Meanwhile your places remain open to you." Or, it might have been well if the superintendent had said to the three thousand men, "All right, if you will come and run the works without protection," thus throwing upon them the responsibility of protecting themselves--three thousand men as against two hundred and eighteen. Instead of this it was thought advisable (as an additional precaution by the state officials, I understand) to have the sheriff with guards to protect the thousands against the hundreds. The leaders of the latter were violent and aggressive men; they had guns and pistols, and, as was soon proved, were able to intimidate the thousands.

I quote what I once laid down in writing as our rule: "My idea is that the Company should be known as determined to let the men at any works stop work; that it will confer freely with them and wait patiently until they decide to return to work, never thinking of trying new men--never." The best men as men, and the best workmen, are not walking the streets looking for work. Only the inferior cla.s.s as a rule is idle. The kind of men we desired are rarely allowed to lose their jobs, even in dull times. It is impossible to get new men to run successfully the complicated machinery of a modern steel plant. The attempt to put in new men converted the thousands of old men who desired to work, into lukewarm supporters of our policy, for workmen can always be relied upon to resent the employment of new men. Who can blame them?

If I had been at home, however, I might have been persuaded to open the works, as the superintendent desired, to test whether our old men would go to work as they had promised. But it should be noted that the works were not opened at first by my partners for new men. On the contrary, it was, as I was informed upon my return, at the wish of the thousands of our old men that they were opened. This is a vital point.

My partners were in no way blamable for making the trial so recommended by the superintendent. Our rule never to employ new men, but to wait for the old to return, had not been violated so far. In regard to the second opening of the works, after the strikers had shot the sheriff's officers, it is also easy to look back and say, "How much better had the works been closed until the old men voted to return"; but the Governor of Pennsylvania, with eight thousand troops, had meanwhile taken charge of the situation.

I was traveling in the Highlands of Scotland when the trouble arose, and did not hear of it until two days after. Nothing I have ever had to meet in all my life, before or since, wounded me so deeply. No pangs remain of any wound received in my business career save that of Homestead. It was so unnecessary. The men were outrageously wrong. The strikers, with the new machinery, would have made from four to nine dollars a day under the new scale--thirty per cent more than they were making with the old machinery. While in Scotland I received the following cable from the officers of the union of our workmen:

"Kind master, tell us what you wish us to do and we shall do it for you."

This was most touching, but, alas, too late. The mischief was done, the works were in the hands of the Governor; it was too late.

I received, while abroad, numerous kind messages from friends conversant with the circ.u.mstances, who imagined my unhappiness. The following from Mr. Gladstone was greatly appreciated:

MY DEAR MR. CARNEGIE,

My wife has long ago offered her thanks, with my own, for your most kind congratulations. But I do not forget that you have been suffering yourself from anxieties, and have been exposed to imputations in connection with your gallant efforts to direct rich men into a course of action more enlightened than that which they usually follow. I wish I could relieve you from these imputations of journalists, too often rash, conceited or censorious, rancorous, ill-natured.

I wish to do the little, the very little, that is in my power, which is simply to say how sure I am that no one who knows you will be prompted by the unfortunate occurrences across the water (of which manifestly we cannot know the exact merits) to qualify in the slightest degree either his confidence in your generous views or his admiration of the good and great work you have already done.

Wealth is at present like a monster threatening to swallow up the moral life of man; you by precept and by example have been teaching him to disgorge. I for one thank you.

Believe me

Very faithfully yours

(Signed) W.E. GLADSTONE

I insert this as giving proof, if proof were needed, of Mr.

Gladstone's large, sympathetic nature, alive and sensitive to everything transpiring of a nature to arouse sympathy--Neapolitans, Greeks, and Bulgarians one day, or a stricken friend the next.

The general public, of course, did not know that I was in Scotland and knew nothing of the initial trouble at Homestead. Workmen had been killed at the Carnegie Works, of which I was the controlling owner.

That was sufficient to make my name a by-word for years. But at last some satisfaction came. Senator Hanna was president of the National Civic Federation, a body composed of capitalists and workmen which exerted a benign influence over both employers and employed, and the Honorable Oscar Straus, who was then vice-president, invited me to dine at his house and meet the officials of the Federation. Before the date appointed Mark Hanna, its president, my lifelong friend and former agent at Cleveland, had suddenly pa.s.sed away. I attended the dinner. At its close Mr. Straus arose and said that the question of a successor to Mr. Hanna had been considered, and he had to report that every labor organization heard from had favored me for the position.

There were present several of the labor leaders who, one after another, arose and corroborated Mr. Straus.

I do not remember so complete a surprise and, I shall confess, one so grateful to me. That I deserved well from labor I felt. I knew myself to be warmly sympathetic with the working-man, and also that I had the regard of our own workmen; but throughout the country it was naturally the reverse, owing to the Homestead riot. The Carnegie Works meant to the public Mr. Carnegie's war upon labor's just earnings.

I arose to explain to the officials at the Straus dinner that I could not possibly accept the great honor, because I had to escape the heat of summer and the head of the Federation must be on hand at all seasons ready to grapple with an outbreak, should one occur. My embarra.s.sment was great, but I managed to let all understand that this was felt to be the most welcome tribute I could have received--a balm to the hurt mind. I closed by saying that if elected to my lamented friend's place upon the Executive Committee I should esteem it an honor to serve. To this position I was elected by unanimous vote. I was thus relieved from the feeling that I was considered responsible by labor generally, for the Homestead riot and the killing of workmen.