large docks were built and ore-handling machinery installed, to the Carnegie mills at Duquesne. This railroad was reballasted with cinder from the blast-furnaces, and relaid with 100-pound rails. The equipment was replaced by the first steel cars used in the United States, and by the heaviest engines. Through these improvements, the cost of transportation was reduced to I mill per ton mile, the lowest cost, with one exception, of any railroad in the world. The ownership of an ore fleet made the Carnegie Company independent of the wide fluctuations in lake rates, and their control of the railroad gave them transportation at cost; for the Pittsburg, Bessemer and Lake Erie Railroad, until 1900, had paid no dividends. . . By the close of 1897, the Carnegie Company was almost completely self-sufficient in all the factors of production. The profits which competitors added to their costs were added to its earnings; and the possession of these advantages, along with the admirable equipment of its furnaces and mills, gave to the Carnegie Company the foremost position in the iron and steel trade of the United States, if not in the world. . . . ... The Carnegie Steel Company owned the most complete, the best-equipped, and the best-managed steel plant in the United States. . . . No one of its rivals was worthy to be compared with it in point of self-sufficiency of production. This equipment supplied ore and fuel to the mills which were grouped so closely about Pittsburg that the president of the company was able to visit some department of each mill on successive days. . . . All these plants were connected by the Union Railway, with thirty-nine miles of track, which in turn connected with the Pittsburg, Bessemer and Lake Erie Railroad to the north. This arrangement of mines, coke ovens, and mills was the most favorable that could have been devised for economical production. The mills of the Carnegie Steel Company were concentrated at the point of largest present advantage, where ma terials could be most easily assembled, and from which the largest markets could be most easily reached. It was this fact of concentration even more than their superior facilities which gave to the Carnegie Company their most pronounced advantage. The mills of their rivals were too widely scattered. Their location ante-dated the recognition of Pittsburg as the natural seat of the iron and steel industry. For example, the plants of the National Steel Company were at Youngstown, Columbus, Bellaire Mills, and Mingo Junction in Ohio, and at New Castle, Sharon, and Uniontown in Pennsylvania. All of these plants could not have equal advantages in obtaining materials, and no one of them was so well situated as the mills at Pittsburg. The plants of the National Tube Company were even more scattered, and those of the American Steel and Wire Company were distributed over the whole face of the land. A grant of land, a cash bonus, ten years' exemption from taxation, a local connection, any one of a number of causes entirely disconnected from considerations of economic production, had determined the original location of these plants. . . . The plan of concentration on Neville's Island, which the American Steel and Wire Company had already begun to execute, was an evident recognition, on their part, of the superior economy of concentrated production, in power, in labor, in superintendence, and in the provision of materials. Mr. Carnegie had anticipated his rivals by twenty years. All the benefits of centralization which they were striving for, he had long since achieved. The advantages of the Carnegie Company did not stop here. Their mechanical equipment was superior to that of any other mills, and their business was the best managed of any in the country. . . . The superior equipment of the Carnegie works was the result of a policy of large expenditure upon betterments persistently pursued for many years. Every new process and every new machine which would in any way increase the efficiency, reduce the cost, and improve the product of the Carnegie Company 66 has been adopted, until this great concern has raised the physical condition of its mills to a point which is unsurpassed." Dividends had never been considered by the management. Improvement had been the one thing thought of. During the years 1898 and 1899, the Carnegie Company expended out of earnings upon new construction and betterments no less a sum than $20,000,000. The nature of this policy of the investment of earnings in improvements may be illustrated by a comparative statement of the equipment of the Homestead mills in 1890 and 1898: 1890 I. Two 5-ton Bessemer converters. 2. Seven open-hearth furnaces-one 15-ton, four 20ton, two 35-ton. 3. One 28-inch blooming-mill. 4. One 23-inch and one 33-inch train for structural shapes. 5. One 10-inch mill. 6. One 32-inch slabbing-mill for rolling heavy ingots. 7. One 120-inch plate-mill. Annual capacity, 295,000 tons. 1898 I. Two IO-ton Bessemer converters, one 12-ton. 2. Thirty open-hearth furnaces-one 12-ton, six 25-ton, eight 35-ton and fifteen 40-ton. 3. One 28-inch and one 38-inch blooming-mill. 4. One 23-inch and one 33-inch train for structural shapes. 5. One 10-inch mill. 6. One 32-inch slabbing-mill. 7. One 40-inch cogging-mill. 8. One 35-inch beam-mill. 9. One 119-inch plate-mill. 10. One 3,000 ton and one 10,000-ton hydraulic press. II. Steel foundry, press shop, and machine shop. The management of the Carnegie Company represented the acme of productive efficiency. Every officer had risen from the ranks by dint of compelling merit. Every head of a department had an interest in the business apart from his salary. Trade unionism had been banished from the mills in 1892, and the workmen were spurred on by high wages and the promise of advancement. No visitor to the Carnegie mills could fail to be impressed with the intensity of the effort and the strained attention evident in every department. None but the strongest could stand the terrific pace. Breakdowns were frequent at thirty-five, men were old at forty-five. The famous "iron-clad agreement," it has been claimed, was designed to dispense peaceably with partners who had outlived their usefulness. Not only was money lavishly spent on salaries and wages, but large sums were paid for information. E. S. Meade: Trust Finance, pp. 198-211. D. Appleton and Co., New York, 1903. QUESTIONS At the time of the formation of the United States Steel Company (the "Steel Trust") what types of manufacture did the Carnegie Steel Company engage in? What lines of steel manufacture did it leave to other firms? How had the Carnegie Company provided for a sure supply of raw materials and for transportation facilities? What advantage had the Carnegie Company over competing concerns in the location of its plants? Was this the result of chance? How had the equipment and the employés of the Carnegie Company been organized with a view to their highest possible efficiency? Notice the increase in equipment and the great increase in output between 1890 and 1898. LX CAUSES OF TRUSTS The Industrial Commission was created by Act of Congress in 1898, its membership being composed of five Senators, five Congressmen, and nine other persons selected by the President and the Senate. Between 1900 and 1902, it published 19 volumes of reports on various industrial topics such as trusts, labor problems, agriculture, transportation and immigration. The extract below is taken from a report of the commission summarizing its conclusions as to the causes of the growth of trusts in the United States. Causes of Combination: It is clearly the opinion of most of those associated with industrial combinations that the chief cause of their formation has been excessive competition. Naturally all business men desire to make profits, and they find their profits falling off first through the pressure of lowering prices of their competitors. The desire to lessen too vigorous competition naturally brings them together. A second way of increasing profits is through the various economies which they think will come by consolidation. The special details of these savings will be given under another heading. One or two of the witnesses considered the protective tariff as the chief cause of the trusts. They urged that high tariff duties, by shutting out foreign competition, make it easier for our manufacturers to combine to control prices, and they think that the experience of the last few years justifies the assertion. Likewise, they say, through the high profits that come from the exclusion of foreign competition by the tariff, capital has been attracted into industries here to so great an extent and with the expectation of so high profits that home competition has been unduly stimulated, thereby leading to the formation of combinations. |