Industry Grows Bigger
Andrew Carnegie was largely responsible for the great advances in steel production. Coming to America from Scotland as a child of 12, Carnegie progressed from bobbin boy in a cotton factory to a job in a telegraph office, then to one on the Pennsylvania Railroad. Before he was 30 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 largest in the country.
Carnegie acquired commanding control not only of new mills, but also of 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, allied with a dozen others, could command favorable terms from railroads and shipping lines. His resources sufficed amply for a vast expansion of plants and labor. Nothing comparable in industrial growth had ever been seen in America before.
Yet though Carnegie long dominated the industry, he never achieved a complete monopoly over the natural resources, transportation, and industrial plants involved in the making of steel. In the 1890s, new companies challenged his pre-eminence, and at first, stung by competition, Carnegie threatened to build an even more powerful business complex. But now, a tired old man, he was persuaded to merge his holdings with an organization that eventually 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 under way for 30 years: the combination of independent industrial enterprises into federated or centralized companies. Begun during the Civil War, the trend gathered momentum after the 1870s, as businessmen realized that if they could bring competing firms into a single organization, they could control both production and markets. The "corporation" and the "trust" were developed to achieve these ends.
Corporations, making available a deep reservoir of capital and giving business enterprises permanent life and continuity of control, attracted investors both by the profits anticipated and by the limited liability in case of business failure. In their turn, the trusts, which were in effect combinations of corporations whereby the stockholders of each placed their stocks in the hands of trustees who managed the business of all, made possible large-scale combinations, centralized control and administration, and the pooling of patents. Their larger capital resources provided greater power to expand, to compete with foreign business organizations, and to drive hard bargains with labor, which was 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 combinations - in cottonseed oil, lead, sugar, tobacco, and rubber. Soon aggressive individual 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 achieved preeminence in the reaper business. A 1904 survey showed that more than 5,000 previously independent concerns had been consolidated into some 300 industrial trusts.
The trend toward amalgamation was manifest in other fields, particularly in transportation and communications. Western Union, earliest of the large communications combinations, was followed by the Bell Telephone System and eventually by the American Telephone and Telegraph Company. Cornelius Vanderbilt, who had seen that efficient railroading required unification, in the 1860s consolidated some 13 separate railroads into a single line connecting New York City and Buffalo, nearly 380 kilometers 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 a handful of men.