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Title: United States Steel - A Corporation With A Soul
Author: Cotter, Arundel
Language: English
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Copyright Status: Not copyrighted in the United States. If you live elsewhere check the laws of your country before downloading this ebook. See comments about copyright issues at end of book.

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_A Corporation With a Soul_


_This book is planned as an open and aboveboard presentation of the
development of a great business. The story of the steel industry is
the story of the United States Steel Corporation; one cannot be told
without the other. It is hoped that this frank presentation of facts
about our greatest corporation gathered from the records of the company
will be of interest to the general reader._

[Illustration: ELBERT H. GARY

“_The story of United States Steel is the tale of how Gary made his
dream come true_”]











When, in 1914-1915, I wrote “The Authentic History of the United States
Steel Corporation,” which has been enlarged and brought up to date in
the present volume, the Government’s suit for the dissolution of the
Corporation had not been decided. In fact, the lower court handed down
its decision just about the time the book was going to press.

It was my good fortune to hear the testimony of the most important of
the more than 400 witnesses and argument of counsel in the suit and
to supplement the information so gained by conversations with steel
men, inside and outside the Corporation, with whom my work brings me
in constant contact. And all that I learned convinced me more and more
that the big company was not illegal, either technically or morally,
and that, in fact, its influence on industry was beneficent. It is
naturally a matter of personal gratification that the suit has resulted
in the complete vindication of the Corporation.

We live in a day of big corporations and the tendency seems to be to
concentrate still more capital and manufacturing facilities. It is
therefore important that we should know something of their activities,
not only economic but social.

I believe that the United States Steel Corporation is one enterprise
that endeavors always to live up fully to the responsibilities it must
perforce assume to its employees and to the public, as well as to its
stockholders. I believe that it has earned the title of “A Corporation
With A Soul”. And, so believing, I have not hesitated to tell the
story of United States Steel as I have learned it by years of personal
observation and contact.

            ARUNDEL COTTER.


  PROLOGUE. THE MAN AT THE HELM                                3

      I. THE WHY AND HOW OF THE BIG COMPANY                    6

     II. THE BIRTH OF THE BIG COMPANY                         22

    III. EARLY HISTORY AND GROWTH, 1901 TO 1907               42

     IV. THE TENNESSEE PURCHASE                               70

      V. MEN WHO MADE UNITED STATES STEEL                     87

     VI. DEVELOPING WORLD MARKETS                            111

    VII. THE SPIRIT OF THE CORPORATION                       132

   VIII. THE CORPORATION’S IMPLEMENTS                        142

     IX. THE STEEL TOWNS                                     160

      X. HUMANIZING INDUSTRY                                 174


    XII. QUESTIONS OF POLICY                                 217


    XIV. THE GREAT STEEL STRIKE                              246

     XV. HELPING UNCLE SAM WIN THE WAR                       269

    XVI. THE MIDDLE PERIOD, 1907 TO 1914                     283

   XVII. THE WAR AND AFTER                                   295

  APPENDIX                                                   308


  Elbert H. Gary                                  _Frontispiece_

      “_The story of United States Steel is the tale
          of how Gary made his dreams come true._”

                                                     FACING PAGE
  Andrew Carnegie                                             40

  J. Pierpont Morgan                                          41

  Down in a Coal Mine                                         56

  Open Pit Mining--Canisteo Mine                              57

  Mine Stables                                                72

  Modern Coal Mining by Machinery                             73

  Bee-hive Coke Ovens                                         88

  Mouth of Coal Mine--Coke Ovens in Background                89

  James A. Farrell                                           120

  Transporting 222 Tons of Bridge Material in China          121

  “Drawing” Bee-hive Coke Ovens                              136

  Two Views of Modern By-Product Oven                        137

  The Original Jones Mixer                                   152

  A Bessemer Blow                                            153

  Interior of Gary School                                    168

  Ore Cars at Proctor Yards                                  184

  General View of Duluth Ore Docks                           185

  Ore Boat and Train                                         200

  Ore Boats at Duluth Docks                                  201

  A Trainload of Ingots in Molds                             216

  Ingot on Way to Rolling Mill                               217

  Rails on Cooling Bed                                       232

  Pouring Ingots                                             233

  Part of the Duquesne Works--Detail of Unloading Ore--
    a Hulett Machine                                         248

  Making Wire Rods--Old Method                               249

  Coils of Red Hot Wire                                      264

  Annealing Wire                                             265

  Drawing Fine Wire                                          280

  Making Wire Fencing                                        281

  Making a Steel Tube                                        296

  Steel Transportation by Man Power in China                 297


  _A Corporation With a Soul_




Every business enterprise, however great, reflects in its dealings with
its competitors, customers, employees, and the public generally, the
individuality of some one man. Curious as it may seem at first glance,
this personal touch, far from being lost, is particularly evident in
the greatest of all business enterprises, the United States Steel

Many men, including some of the ablest financiers the country has
produced, have assisted in a measure in making the Corporation what it
is to-day. Morgan, Frick, Perkins, all these and others, have helped
with their counsel in bringing the Corporation to the pre-eminent place
it holds in the industrial world. But one man has stood out among all
these--Elbert H. Gary, its chairman and chief executive officer.

Throughout its ramifications the Steel Corporation is everywhere a
reflection of Gary’s spirit. His influence, from the time of its
incorporation nearly twenty years ago, has shaped its policies and,
almost from the beginning, has dominated its counsels. For what
the Corporation is, whether good or bad, Gary must accept full

Judge Gary himself would probably object to the use of the word
“dominated.” He would doubtless prefer “guided”, for his dominance
has never been autocratic. But his colleagues, except perhaps in the
earlier days, have confidently accepted his opinion on all matters
pertaining to the Corporation’s welfare. And the events of the last few
years have proven that they were right in so doing.

Not the Corporation alone but the entire steel trade, the most
important manufacturing industry in America, has benefited from Gary’s
wisdom. As the chief executive officer of the leading interest in the
industry his competitors have always looked to him for leadership in
periods of stress. And whenever occasion arose, as in the dark days of
the panic of 1907, he proved his right to lead.

There have been times when this leadership was in question if not
doubt. One such occasion was as recently as 1919 when the great steel
strike threatened.

Gary’s attitude toward labor was well known. He believed in “leaning
over backward” in the matter of giving justice to the worker. And when
union organizers and radical agitators attempted to force the closed
shop on the industry many of his competitors feared that he would yield
to the demands of the labor organizers.

But Gary had never flinched from responsibility, however great. Here
was a question of principle involved, concerning not the rights of
the employer alone but those of the very large number of unorganized
workers. Although pressure was brought to bear upon him from high
quarters to compromise and avoid a strike, and later to settle it once
begun, the head of the Corporation unswervingly stood his ground and
led the steel trade to a signal victory. He proved to those who doubted
him that, though he might usually adopt the attitude of “suaviter in
modo” he knew how to assume that of “fortiter in re” when occasion

On October 24, 1919, the annual meeting of the American Iron and Steel
Institute was held in New York City, at the Hotel Commodore. Some
sixteen hundred of its members, including the majority of the leading
figures in the steel trade, attended. The steel strike had been going
on for some weeks and the steel men were gathered to hear what Gary had
to say.

The entrance of the Judge into this gathering was the signal for a
most remarkable demonstration. For these staid, solid business men, on
catching sight of Gary, broke into a spontaneous salvo of cheers which
was enthusiastic and prolonged. It was a tribute to his generalship in
the struggle then being waged, an unequivocal admission of his right to
supreme command. In that storm of cheers were buried all doubts that
may ever have been entertained.

It is impossible to write of the Steel Corporation without writing
of its head. His influence on it is too direct, too personal, to be
ignored. The Corporation, in a sense, is Gary. He has infused it with
his spirit, a spirit which, it is to be hoped, will continue always to
animate it.



Mere size, to the majority of us, presents a certain fascination.
Especially is this the case when it is the result of human endeavor.
Hence, were the United States Steel Corporation nothing but the largest
business aggregation in the world its immensity alone might justify
placing upon record the facts connected with its formation and its
subsequent history.

The Corporation’s vast capitalization, a billion and a half of dollars,
its yearly turnover exceeding its capital, its payroll of 275,000
workers, or, with their families, enough to populate a large city, its
productive capacity of more than 16,000,000 tons of finished steel
annually--to say nothing of other products--the volume of freight
carried in its fleet of ore boats, several times the tonnage passing
through the Suez Canal, its foreign trade of two hundred million
dollars--these alone might make the Corporation’s history worth the

But size, properly considered, is of minor importance in itself. Its
importance lies in the power it bestows to influence its surroundings.
The greatest of all industrial enterprises could not fail to affect
industrial history generally. And the management of the Corporation
has recognized its responsibility in this regard and has endeavored
to use its strength not selfishly but for the good of all concerned.
It is not too much to say that the organization of the United States
Steel Corporation marked the beginning of a new and a better era in
industrial history.

That this assertion may be challenged goes without saying. But the
facts will be permitted to speak for themselves.

The United States Steel Corporation was, in a modified sense, an
experiment in popular ownership, the ownership of industry by the
worker; it substituted for the ownership by a few men of a number of
more or less important organizations one gigantic unit owned by a
multitude. To-day the Corporation’s stockholders number around 160,000,
and this figure includes only holders of record. Perhaps 75,000,
possibly more, of its employees either own stock outright or are buying
it on the instalment plan. Counting five to the family it is probable
that close to 1,000,000 people are financially interested in the
success or failure of the Corporation.

At the time of the big company’s birth corporate publicity was
practically unknown. Important developments affecting the interests
of security holders were announced, if announced at all, at the
convenience of the so-called insiders. Curiosity into corporate
affairs was discouraged. But the new business giant set the example
of publicity by giving out at stated and frequent intervals detailed
information regarding profits, business on hand, and other facts of
interest to stockholders and the investing public. This example was
later followed by other important steel companies and, with the passage
of the years, the practice has become fairly general among large
corporate enterprises. Thus the organization of the Steel Corporation
may be said to mark the beginning of the era of corporate publicity.

But the most marked effect of the Corporation’s organization was
probably that respecting competition. In the old days of the steel
trade competition had been ruthless. The big steel merger, if the sworn
statements of its competitors may be accepted, put an end to this and
substituted an era, of competition still, but of competition clean and
aboveboard, governed not solely by greed but by the spirit of fair
play between manufacturer and manufacturer. It brought the dawn of the
epoch of the square deal between industrial competitors.

In order to get a true perspective on the events immediately leading
up to the formation of the United States Steel Corporation, it is
necessary to review briefly the history of the steel industry in the
United States during the latter half of the nineteenth century, and
especially during its closing decade.

In a short half century steel making in America had grown from the age
of swaddling clothes to full manhood, or rather gianthood. It stood
supreme among industries. From being unimportant among the iron and
steel producing nations, the United States, in a comparatively few
years, had forged its way to the first place. Its steel mills turned
out nearly half of the hard metal used by the world. Steel, from being
an industry composed of a few scattered mills situated as nearly as
possible to ore deposits with little regard to markets, had become one
consisting of great corporate entities each made up of many plants,
and these had in their service railroads and steamships plying to and
from ore fields situated sometimes hundreds of miles from the plants,
bringing to the mills such quantities of the raw metal as but a short
time before had not been known to exist. It had bent to its use every
modern invention, the newest discoveries of science. Fortunes had
been spent, won, and lost in building up these great structures. It
had at the same time been an industry subject to the most amazing
fluctuations, periods of feast being followed closely by periods of

This half century, or the last two decades of it, was, as has been
suggested, a period of war to the hilt between manufacturer and
manufacturer, war in which no quarter was asked or given. The history
of the steel industry in America bristles thick with the names of
millionaires who worked their way to fortune from the slag pile. And
for every one of these there were many, whose names are forgotten,
who sacrificed health, strength, and fortune in the mad fight for the
wealth that poured in unstinted stream from the glowing furnaces of
molten iron. The law of steel was essentially that of the survival of
the fittest.

Perhaps there is no other great industry that has been so subject
to fierce and unrestrained competition as steel making once was.
To understand why this is so it is necessary to get an idea of the
conditions influencing it. The discovery of the Bessemer process--about
the middle of the nineteenth century--by which steel could be made
cheap enough to permit of its general use found a world more than ready
for it, and the demand for the metal grew by leaps and bounds. The Age
of Steel did not dawn; like the tropic day, it broke with fierce glare.
The sudden demand naturally opened up vistas of previously undreamed-of
wealth for those who could supply it, and, in the desire to secure
this wealth, production sprang forward so quickly as even to outstrip
demand, strong and increasing as it was. Then ensued the inevitable
battle for what business there was, a battle that lasted until
consumption took another spurt, which, in turn, resulted in quickening
output and a resumption of the battle.

At that time the country was just opening up. Railways were stretching
their lines into the golden regions of the West; manufacturers of
farm implements were calling for steel to be fashioned into tools to
reap the rich crops of the wide prairie lands; inventors were each
day evolving some new use for the metal. Was it any wonder then that
steel became a world necessity and that the blast furnace became a
philosopher’s stone that transmuted dull ore into precious gold? More
and larger fortunes, it has been truly said, were made out of steel
in the second half of last century than ever came out of the mines of
the West or the diamond deposits of South Africa. And in the insane
struggle for this so-freely-poured-out wealth men lost all sense of

It is inevitable that there should be a dark side to the picture.
The boom times of the steel trade were succeeded with disheartening
regularity by periods of dearth. One year steel manufacturers were
building themselves palaces and purchasing steam yachts, the next they
were mortgaging all they had to pay wages. One year the steel worker
was a man favored above all others of his class, the next he was
getting his meals on charity from the “soup houses.” To this day steel
veterans speak of the dull times of the trade as “soup-house days.”

At these times competition, always fierce, became more ruthless than
ever. The old adage regarding love and war was stretched to include
the steel industry, and everything was considered fair that might
help to keep the mills running full. Prices were cut--and wages with
them; steel was “dumped” on foreign markets at less than manufacturing
cost, and steel makers resorted to every means that offered to divert
orders from competitors to themselves. It was case of dog eat dog, and
failures, with their unavoidable accompaniment of unemployed labor,
were all too frequent.

These were the days when the steel “pools” flourished. These pools
were simply attempts on the part of the steel makers--who thoroughly
realized that the killing competition just described could benefit no
one--to protect themselves in times of stress by binding each other not
to sell below a certain price or more than a specified tonnage, and by
making it of no avail, from a viewpoint of profit, to do so. There were
rail pools and wire pools, shafting pools and plate pools, structural
pools, horseshoe pools, and in fact a separate and distinct pool for
nearly every steel product made. These pools were merely treaties,
but treaties in which no participant trusted the other and which
consequently were usually broken by each as soon as the opportunity to
get ahead of his fellow pool member presented itself--lest the other
should get a similar opportunity first and take advantage of it.

It is doubtful if a single pool agreement, and their number was
infinite, was ever honestly kept. Old steel makers chuckle to-day as
they relate how each representative of a company taking part in a pool
sought to gain an advantage over his competitors while the agreement
was yet a-borning. Listening to them one begins to wonder if these were
indeed men who bore high and honorable reputations in the business

According to the statements of men who themselves took part in pools it
was no uncommon thing for a manufacturer to station a salesman outside
the building where a conference was being held and, as soon as a price
settlement was reached, to stroll casually over to a window and by
pre-arranged signal indicate to him the level agreed on, whereupon the
salesman would proceed to undercut the price which his employer was
even then pledging himself to maintain.

“Every man’s hand was against his neighbor then; we were all
Ishmaelites, every one of us,” said John Stevenson, Jr., a veteran who
had worked under Carnegie, in his testimony in the Federal suit for the
dissolution of the Corporation. Mr. Stevenson then went on to relate
the story of a wire pool conference at which a price of $1.50 a keg
for nails had been agreed on. After the morning conference he went to
the telegraph office to wire his partner and found one of his fellow
conferees there. He waited until the other had handed in his message
and walked away. While Stevenson was writing his own wire the operator,
in mistake, handed him his competitor’s, asking him to decipher a word.
And Stevenson discovered that the message was an offer to a large
consumer to sell him 10,000 kegs of nails at $1.40! Whereupon he tore
up the paper and substituted a bid of his own at the same price and got
the order!

Another instance, related by a large consumer, shows how these
agreements were evaded. He said that the company from which he
purchased his supplies of steel pleaded the force of a pool agreement
as an excuse against giving him a discount from the market price.
He then suggested that he be appointed agent of the steel company in
his town at a commission of a dollar a ton and this solution of the
difficulty was agreed to. He was the only consumer of steel in the
town and the commission was only a round-about way of giving him the
discount asked.

In the fierce and bitter struggle that was the steel trade only the
most daring or the most unscrupulous manufacturer could survive, and
under the strain for production that it necessitated only the strongest
workers could live. No one, unless he has been through a steel plant,
can imagine the conditions under which the steel maker works. The
visitor, unaccustomed to the heat that is flung from blast furnace or
rolling mill as from the gates of hell, must perforce hold his hands
before his face at times to mitigate the frying sensation. True, much
has been done of recent years to make the lot of the man at the furnace
or rolling mill easier, his work less trying on his health. But at
the time of which this is written such was not the case. Under the
most favorable conditions the steel mill, as a well-known steel maker
said once, is far from being a drawing room. Under the conditions that
prevailed toward the end of the last century, when men were worked to
the breaking point in the mad fight for “tonnage,” it was no wonder
that the majority of steel workers collapsed early under the strain and
were thrown on the human scrap pile, their vitality sapped and their
youth gone.

The one slogan of the industry then was “tonnage.” Everything was
sacrificed by the manufacturer to this single end. Machinery,
comparatively new, was scrapped to make room for more modern equipment.
Waste of this kind was not considered. Production was everything, and
nothing was spared to obtain increased output. And it must be admitted
that to this attitude on the part of producers, as much perhaps as to
her immense natural advantages, the United States owed her rapid rise
to the front rank of steel nations.

In the middle of the nineteenth century American steel making was in
its infancy. In fact, this is also true of the steel industry of the
whole world, for it was about this time that William Kelly in America
and Henry Bessemer in England discovered what is known as the Bessemer
process, which made the metal available for the numberless commercial
uses to which it is now put. As late as the early sixties the idea
of using steel for railroad rails was scoffed at. In 1867 there were
only three Bessemer plants in this country and open-hearth, the steel
of to-day, was unknown. Great Britain supplied the world’s steel. But
shortly after the third quarter of the century was passed the United
States forged to the lead, and has held it ever since. In the year
1900 the steel production of this country was 10,188,329 tons, Germany
coming next with 6,645,869 tons, and Britain third with a production of
4,901,060 tons. In 1913 the United States produced 31,300,874 tons of
steel, or more than Britain and Germany combined. In 1917 production
was 45,060,607 tons, more than two thirds the world output. To-day the
rolling mills of the Pittsburgh district alone turn out more than one
third of the world’s steel.

The name of Andrew Carnegie is inextricably bound up with the history
of steel in the United States--and the world. “The Iron Master,” the
“Steel King”--by these names he was known, and he earned them. For
more than a quarter of a century Carnegie was the most important and
spectacular figure in the world of steel and his name will not be
forgotten so long as there is a rolling mill in Pittsburgh.

Carnegie’s rise from utter obscurity until he became the dominating
figure in the leading manufacturing industry of the world reads like
a page of fiction. Only the briefest sketch can be given here. Born
in Dumferline, Scotland, in 1835, the future Monarch of Steel came to
the United States with his father at the age of thirteen and began at
the bottom of the ladder, his first job being that of bobbin boy in a
cotton mill, for which he received a weekly wage of $1.20. Two years
later he became a telegraph messenger and later an operator for the
Pennsylvania Railroad.

The youthful Scot’s ability soon attracted the attention of Col. Thomas
A. Scott, head of that great railroad system, and he made Carnegie his
private secretary, thus giving him his first foothold on the ladder of

Industrious and saving Carnegie was soon in the investor class and
when an opportunity arose to invest in what, it seemed to him, was an
attractive business he was able to seize it, purchasing a one-sixth
interest in the Iron City Forge Co. and becoming his own man.

One of his partners in the enterprise was Henry Phipps, the playmate
of his boyhood and his friend through good fortune and through bad.
In every one of his subsequent ventures Phipps had a share, and
an important one, that of raising money to carry out Carnegie’s
manufacturing plans. In Pittsburgh they say that Phipps’ horse knew
every bank in town so often had his master stopped him before them when
seeking loans.

Those were the days of iron. Steel was still being made only “by the
spoonful.” But one day Carnegie saw in action one of the earlier
Bessemer converters, the implements that gave birth to the Age of
Steel, and this sight, impressive as it is even to the layman as a
mere spectacle, converted him from iron to steel. His keen mind saw
immediately the immense possibilities of the new process and he went
into the manufacture of steel on a large and growing scale.

And his success was phenomenal. Breaking down all obstacles in his path
to fortune he fought his way upward ruthlessly and became a terror to

In 1901 Carnegie sold out the steel business he had created to the
organizers of the United States Steel Corporation for $303,450,000 in 5
per cent. bonds and $188,556,160 in preferred and common stocks of the
new company, a total price of $492,006,160!

The mark that Carnegie left on the industry will never be wiped out.
In his late days he set the pace for all to follow, and it was a fast
one. Although pitiless to his competitors he had the gift of drawing to
him men of high ability; he was a wonderful judge of men, and to his
intimates he was generous and open. A born commander, a Napoleon of
industry, he built up an organization that had no equal in its day, one
that was at the same time extremely efficient and utterly loyal.

Whether Carnegie made the best use possible of his unquestioned
abilities is for posterity to decide. Beyond doubt America’s
pre-eminence in steel was due largely to him. But he was also at least
partly responsible for the unstable condition that existed in the trade
of his day. Production, tonnage, was his fetish, for in this he saw the
means of reaching and keeping his supremacy, and to get it he did not
spare himself, the men under him or, least of all, his competitors.
His one effort was to keep the mills running full, and everything was
subordinated to that.

It is not generally recognized that Carnegie was to some extent
responsible for the formation of the United States Steel Corporation.
The part he played was behind the scenes. He wanted to sell out and
retire, to devote the rest of his life to philanthropy, education, and
the promotion of world peace. Even for such a master salesman as he the
task of finding a customer was gigantic, but he succeeded as he usually

The frequent and prolonged periods of depression had forced upon steel
makers the conviction that some way of combining to prevent their
recurrence was desirable, even necessary, if the United States was to
keep and increase its lead in the manufacture of the metal most needed
by the age. Between the years 1890 and 1900 industrial combinations
were as thick as the leaves in autumn. And steel had not escaped this
tendency to amalgamate. The Federal Steel Company, with $100,000,000
issued capital, was the first large steel consolidation. The country’s
wire plants had been merged gradually into one company, the American
Steel and Wire Company of New Jersey, which controlled all but a small
number of mills. A somewhat similar situation existed in regard to tin
plate, tubes, and fabricated products. What might be called the steel
companies proper were themselves all mergers of small plants, the trade
being divided among several large competing units. A merger of these
units had been talked of time and again and its accomplishment was
considered inevitable, sooner or later, unless Carnegie first succeeded
in crushing all competition and establishing a virtual monopoly for
himself, as many thought he would. The time was ripe for a big steel

And the time being ripe, the man was provided, the man destined to take
Carnegie’s place as the central figure in the steel industry, not only
of this country but of the world. He was Elbert H. Gary, then president
of the Federal Steel Company, one of the Carnegie company’s largest and
most important competitors, whose operations centred in the Chicago

Born on a farm near Wheaton, Ill., and educated to the practice of
the law, Gary’s work brought him into connection with many large
corporations including the Consolidated Steel and Wire Company and the
Illinois Steel Company, for which he was general counsel. When the
Federal Steel Company was organized in 1898 as a merger of the Illinois
and other companies, Gary, then a director of the Illinois company,
took the principal part in the organization activities. The executive
ability he displayed so impressed his associates and the Morgan
interests, who financed the merger, that he was unanimously chosen
president of the new company. His selection for this post, coming as
a great surprise to himself, first gave him a prominent part on the
industrial stage, on which he has been the most striking figure almost
ever since.

Gary’s ambition, like Carnegie’s, knew no bounds; but where the little
Scotch ironmaster worked to make the steel industry an empire over
which he should reign supreme, Gary dreamed of an immense Republic of
Steel. Where Carnegie sought to unify the control of the steel trade
and bring it into his own hands, Gary sought to make the industry one
owned by the people, and particularly by the workers. Where Carnegie
stopped at the ocean and gave his attention to world business only at
times when overproduction at home compelled him to seek foreign markets
temporarily, Gary sought to establish a world-wide and permanent market
for the product of the blast furnaces and rolling mills of the United

And the history of the United States Steel Corporation is the story of
how Gary made his dream come true.

But the Federal Steel Company, its president soon found, was not an
instrument big enough or suitable for the carrying out of his plans.
In the first place, its plants were located at too great a distance
from the Atlantic seaboard to render an invasion of foreign markets
feasible. Freight rates to the ocean were prohibitive. And another
hindrance was encountered in the severe ups and downs to which the
steel trade in this country was subject. He saw that, if his dreams
were ever to be made realities, the Federal Steel Company must be
enlarged and expanded, must provide itself with plants able to export
steel in competition with Great Britain and Germany, the countries
which ruled the international markets, and must so strongly entrench
itself that it would not be too greatly affected by periods of stress.

One man there was who could provide the wherewithal for the expansion
which the head of the Federal Steel Company considered necessary. This
was the late J. Pierpont Morgan. To Morgan, then, Gary took his plans,
but the banker was not enthusiastic. Perhaps he saw that many steel
concerns were not making money and feared to put so large an amount
of capital as was required into the venture; perhaps other motives
governed him; but, whatever his reasons, the great financier hesitated,
would not permit himself to be convinced. Again and again Gary tried
to persuade Morgan, but in vain, and at length Gary, satisfied that he
must seek other means to his end, turned his attention toward raising
the necessary capital elsewhere. He had already prevailed upon his
fellow directors of the Federal Steel Company to pledge subscriptions
to a large sum for the purchase or erection of new plants when
circumstances played into his hands. Morgan decided to give his backing
to the formation of a giant steel merger on the lines Gary had proposed.

The story of how Morgan was won over is an interesting one. It has
already been suggested that Carnegie was anxious to sell out, and
Carnegie usually got what he wanted. After many attempts to conclude
a satisfactory deal with different syndicates Carnegie, like Gary,
arrived at the conclusion that Morgan, and Morgan alone, was able to
finance the purchase of his properties. Therefore, he decided Morgan
must be induced to buy.

At first Carnegie tried ordinary tactics. He had mutual acquaintances
suggest to the banker the advisability of a deal by which the Carnegie
company would be absorbed. Time and again this suggestion was made,
and on each occasion Morgan listened then sent for Gary. The latter,
seeing that this would be an excellent means of accomplishing what he
desired for the Federal company, as by absorbing the Carnegie company
it would not only secure a steel-making and steel-selling organization
without equal at the time but would also add to itself plants which
could and would give battle for world trade to Britain and Germany, did
all he could to induce the financier to accept the suggestions for the
purchase of these properties. But each time Morgan hesitated.

Then Carnegie resorted to coercion. Morgan was heavily interested
in the National Tube Company which was itself an amalgamation of a
number of smaller tube companies. Carnegie made no tubes. His entrance
into the business of manufacturing tubular products would undoubtedly
have brought the National Tube Company face to face with more serious
competition than it had ever encountered. And Carnegie threatened to
build a tube mill. This action had two purposes. It was apparently
intended to force Morgan to consider the purchase of the Carnegie
properties, and it was also a retaliatory measure against the decision
of the National Tube management to erect steel mills which would
render the company independent of the Carnegie Steel Company for its
supplies of raw material and would incidentally deprive Carnegie of
a large customer. Carnegie announced his plans for the proposed tube
mill publicly and bought a site for it at Conneaut, Ohio. But although
Morgan knew that the steel maker was able and ready to carry out his
project he gave no sign of having changed his mind.

Carnegie’s next step was more important and serious. He threatened
to build a railroad paralleling the Pennsylvania Railroad from
Pittsburgh to the coast, a project which, if carried through, would
without question have materially damaged the earning power of the
great railroad system and would have been a heavier blow to the Morgan
interests than the erection of a tube mill. But again Morgan paid no
attention. It is extremely doubtful if Carnegie, powerful as he was,
could have seriously intended to attempt such an undertaking, and
therein may have lain the reason for the banker’s seeming indifference.
On the other hand, those who knew Carnegie declared that he would have
found means to build the suggested road, even as he had in the past
done other things deemed to have been impossible.

That Carnegie had no desire to enter into a pitched battle with the
powerful Morgan interests seems to be fairly well established by his
next act. Coercion having failed, he again resorted to peaceful tactics
and fired what, possibly, was his last shot. And here it might be
interjected that, while the event that directly led up to the formation
of the Steel Corporation has been narrated scores, probably hundreds
of times, the part that Carnegie played therein has usually been

Among the Carnegie partners was a young man, Charles M. Schwab,
president of the Carnegie Steel Company. Schwab not only represented
the top notch of efficiency as a steel maker, a salesman, and an
executive, but he had a veritable tongue of gold. To listen to him was
to be converted to his views; he could talk the legs off the proverbial
brass pot. And Carnegie saw that if the man lived who could convince
Morgan to finance a purchase of the Carnegie Steel Company that man
was “Charlie” Schwab. Carnegie therefore decided to bring together the
financier and the president of the Carnegie Steel Company and to let
loose on Morgan the flood of Schwab’s eloquence.

On the night of December 12, 1900, Edward Simmons and Charles Stuart
Smith, both close friends of Carnegie, gave a dinner to which Morgan
was invited. And to Schwab was assigned the duty of making the speech
of the evening. Ostensibly the dinner was merely a social affair with
no ulterior motive, but in the light of subsequent events it may be
considered certain that it was arranged at the suggestion of Carnegie,
and that its purpose was the sale of his properties to Morgan.

Everything went off as planned. Schwab chose for his subject the steel
company of the future. He played upon this theme as upon a harp to an
attentive audience, not the least attentive of whom was the banker,
and, while he never referred directly to the Carnegie company, he made
it very clear that the concern which he described in glowing terms
would of necessity own and control the Carnegie plants.

Schwab foretold a future of wonderful brilliance for the steel
industry. He drew a word picture of a company big enough to insure
the greatest economies in the securing and distribution of its raw
material, but highly specialized by departments, each and every plant
confining its attention to one particular product so as to secure the
highest degree of efficiency. He described such an organization as able
to dominate the markets of the world and to set a pace that neither
England nor Germany could follow. The ideal structure he painted
was such an one as was well worthy the attention of the greatest of
bankers, an industrial enterprise for which even the great Morgan might
well be proud to stand sponsor.

And the youthful Carnegie president swept the financier off his feet
and along with him in the flood of his oratory. The United States
Steel Corporation was not actually incorporated for some months, as
an undertaking so immense naturally took a great deal of time to put
through, but it was by that speech that the idea of a vast steel
merger, sown in Morgan’s mind by Gary, was quickened into life. In
that half hour the United States Steel Corporation, to all intents and
purposes, became an actual fact.



A billion dollars!

During the past seven years the world has grown accustomed to big
figures. The enormous expenditures caused by the war and the growth
of the national debts of most countries, attributable to the same
cause, have made the mention of a sum expressed in ten or more figures
rather commonplace. But back in 1901 a billion dollars was an almost
unthinkable sum and it was hardly any wonder that the financial world
gasped when the plans for the new corporation, with an authorized
capitalization of $1,100,000,000 in stock and $304,000,000 in bonds,
were announced.

Wall Street had long been accustomed to treat millions with the dollar
sign before them as mere trifles and even tens of millions were more
or less commonplace. Hundreds of millions commanded respect. But a
billion, a thousand million--that seemed merely a row of figures,
something that could hardly be computed.

And, indeed, the mind cannot readily comprehend what a billion means.
Some concrete comparison is needed to give a faint idea of the
immensity of the capital of the “Steel Trust.” A king’s ransom? It
would have ransomed a hundred kings! The fabled wealth of Ormus and of
Ind, of Croesus, of Montezuma, all these fade into insignificance when
compared with this gigantic aggregate of money.

If the authorized capital of the United States Steel Corporation could
be turned into solid gold it would weigh 2,330 tons, or more than
5,200,000 pounds!

This gold would have a cubic content of 3,880 feet!

With it you could build a pillar six feet square and towering 108 feet
in the air; or a Cleopatra’s needle of virgin gold six feet square at
its base and tapering to a point at a height of more than 430 feet.

A train of fifty-eight railroad cars would be required for transporting
the precious metal, with two big engines, one at either end, to move
the train!

For storage room the gold would require a vault 8 feet high, 20 feet
wide, and 24½ feet long, and there wouldn’t be an inch of spare room!

Placed at one end of a scale the gold would need 34,666 men of average
weight to balance it!

If the Corporation’s capital were coined into five-dollar gold pieces
they would pave a road twenty-five feet wide for more than ten miles!

Stacked one on the other these coins would reach a height of more than
twenty miles!

If this huge sum were converted into pure silver it would weigh 87,500
tons, with a cubic content of 268,000 feet!

This silver would form a needle six feet square at the base and
piercing the skies to a height of 29,776 feet, or above the highest
crest of the Himalayas!

It would take 2,200 freight cars to load it, and about fifty-five
powerful locomotives to pull these cars!

This $1,404,000,000, changed into dollar bills, would measure 166,200
miles, forming a ribbon that would girdle the earth six times and leave
two streamers each 8,000 miles long floating behind! A ribbon that
would reach more than two thirds the distance to the moon!

These bills would cover an area of 228,317,433 square feet!

An expert bank teller working eight hours a day, Sundays and holidays
included, and counting one bill a second without rest, would take more
than 133 years to count them all. If he started to count on January
1, 1921, one of his descendants might count the last bill in the pile
about the end of June, 2054!

If the Corporation’s capital were divided evenly it would give every
man, woman, and child in the United States about $14!

The interest on this sum at 6 per cent. would keep some 35,000 American
families in comparative comfort without touching the capital!

From the date of the Simmons dinner to that on which the plans for the
new corporation were announced was a very short period. The birth of
the Corporation did not take long. Once convinced that a merger of a
number of large companies making various steel products was practicable
and desirable for the good of the industry and of the country--as well
as for the pockets of the consolidators--Morgan and his associates lost
no time in bringing it about. The dinner took place on December 12,
1900; United States Steel was formally chartered on February 25th of
the year following and began business as a corporate entity on April 1,

It is likely that Schwab himself did not foresee how far reaching would
be the effects of his speech. Morgan did not do things by halves. When
the young steel maker caught his attention and drew a picture of a
company big enough to manufacture all lines of steel and to specialize
on each one, powerful enough to enter and occupy foreign markets and
rich enough to expand to meet the growing demand for the metal without
danger of over-stretching its resources, he painted with his words
something which the banker thought it would be a proud thing to father.
Morgan saw before him unlimited possibilities, not of money making
alone--for this was by no means the ruling passion of his being--but
of creating an organization that should leave an indelible impress
for good on industrial history, a business so great that its actions
could not fail to force themselves upon the attention of the world
and to command imitation on the part of other industries. A business,
moreover, so powerful that it would not need to resort to the dubious
practices of the old days to succeed.

The great steel concern that Schwab discussed corresponded very closely
to the company that Gary had long been urging Morgan to assist in
creating by the expansion of the Federal Steel Co. Immediately after
the dinner Morgan drew Schwab aside and the latter then went more fully
into the subject of a vast steel merger than he had been able to in the
confines of an after-dinner oration. Finally the financier asked Schwab
if he thought Carnegie would sell, and upon receiving an affirmative
reply Morgan requested the terms. A few days later Schwab reported that
Carnegie’s price was $303,450,000 in bonds and $188,556,160 in stock of
the suggested new company. After a prolonged consultation with Gary,
Robert Bacon (one of his partners), and others, Morgan accepted these

As a nucleus of the proposed steel corporation, then, we have the
Carnegie and the Federal companies. But Gary’s plans had provided
for the manufacture of a number of products made by neither of these
two concerns, and Schwab, in his talk, had pictured an industrial
organization that would turn out from its mills every kind of steel
product, that would be able to supply its customers with everything
made of the metal from a nail to a railroad car. Morgan was not a man
of half measures. There was no need to make two bites of a cherry,
even though it was a mighty big cherry. Having once decided to finance
the formation of the new company he thought it might as well be
comprehensive in its products, and so negotiations were immediately set
on foot with the controlling interests in the leading concerns making
wire, tubes, tin plate, etc., with a view to bringing them all into the

The Morgan interests had financed the organization of the National Tube
Co., the principal figure in which was Edmund C. Converse, so the tube
company naturally was taken in. The other concerns and interests which
it was proposed to unify into the new corporation were the American
Steel & Wire Co., the chief figures in which were the late John
Warne Gates, Alfred Clifford, William Edenborn, and others; the four
companies forming the so-called Reid-Moore group, controlled by Daniel
G. Reid and William H. Moore--namely the National Steel Co., American
Tin Plate Co., American Sheet Steel Co., and American Steel Hoop Co.

By the early part of February, 1901, the negotiations were concluded
and the plans for the organization of the United States Steel
Corporation were announced. They provided for the amalgamation of
these eight companies, the smallest of which had a capitalization of
$33,000,000 and the largest of more than $300,000,000. Before the
plans were finally put through, however, two more units were added to
the list, the Lake Superior Consolidated Iron Mines, dominated by the
Rockefeller interests, and the American Bridge Co., at the head of
which was Percival Roberts, Jr. The absorption of the Lake Superior
Consolidated Co., with its vast ore holdings and steamship fleet,
was deemed necessary to ensure the Steel Corporation an adequate ore
reserve. The American Bridge Co., which secured most of its supplies of
steel from the Carnegie company, seemed to fit naturally into the plans
for the consolidation.

Thus there were ten large companies taken in, merged to form the
United States Steel Corporation. They had an aggregate capital of
$867,550,394, as follows:

                   COMPANY              |    COMMON    |    PREFERRED
                                        |     STOCK    |      STOCK
  American Bridge Co.                   |  $30,527,800 |    $30,527,800
  American Sheet Steel Co.              |   24,500,000 |     24,500,000
  American Steel Hoop Co.               |   19,000,000 |     14,000,000
  American Steel & Wire Co.             |   50,000,000 |     40,000,000
  American Tin Plate Co.                |   28,000,000 |     18,325,000
  Carnegie Steel Co.                    |  160,000,000 | [A]160,000,000
  Federal Steel Co.                     |   46,484,300 |     53,260,900
  Lake Superior Consolidated Iron Mines |   29,424,594 |    . . . . . .
  National Steel Co.                    |   32,000,000 |     27,000,000
  National Tube Co.                     |   40,000,000 |     40,000,000
      Total.                            | $459,936,694 |   $407,613,700

    [A] Bonds. All other figures in this column represent preferred

The American Bridge Co., as its name implies, was a fabricator of
bridge material and structural steel generally. It was not a steel
company in the strict sense. It obtained a large proportion of its
supplies of steel from the Carnegie company and fabricated this
material. It had a capacity of approximately 600,000 tons yearly. The
company was incorporated in May, 1900, as a consolidation of a number
of smaller concerns and had a surplus of $4,030,331. Holders of its
preferred stock received $110 in preferred stock of the new corporation
for each $100 of their holdings, while the common stockholders received
$105 in U. S. Steel common for each $100 of their holdings.

Four companies, as has been stated, formed the “Reid-Moore” group.
The American Tin Plate Co. was chartered in December, 1898. Like all
the concerns forming this group it was considerably over-capitalized.
Nevertheless, its earnings in the first year of its existence were
approximately $3,600,000 or 20 per cent. on its preferred capital,
and in 1900 they exceeded $5,750,000, or about 32 per cent. on the
preferred capital. At its formation it acquired thirty-nine different
plants, embracing 279 mills, manufacturing tin and terne plates. Its
preferred stockholders received $125 in U. S. Steel preferred stock
for each $100 of their holdings and its common stockholders $120 in
preferred and $125 in common stock of the new corporation for each $100
of their holdings.

The National Steel Co., another of the Reid-Moore concerns, was the
maker of raw material for the other three members of the group. Its
production was largely confined to semi-finished products and it had
a capacity of about 1,700,000 tons of steel a year. It had some ore
holdings in the Mesaba Range as well as a twenty-year contract for a
one-sixth interest in the ore production of the Oliver Iron Mining
Co. The company was chartered early in 1899 and in the first year of
its existence earned approximately $8,750,000, or more than 32 per
cent. on its preferred stock. Of this amount, however, $3,617,000 was
written off for depreciation. At the time it was merged into the Steel
Corporation it had surplus and undivided profits of $6,910,995. Holders
of both its common and preferred stock for each $100 of their holdings
got $125 in the corresponding stock of the new corporation.

The American Steel Hoop Co., third of the group, was formed a month or
two later than the National Steel Co. It was a consolidation of nine
concerns manufacturing chiefly bars, hoops, bands, cotton ties, and
skelp, and had an annual capacity of about 700,000 tons. Its earnings
were not as large as those of the others of the group, its first nine
months’ operations yielding a return at the annual rate of slightly
under 7 per cent. on the preferred capitalization. Its accumulated
surplus on April 1, 1901, was $1,660,311. The two classes of its stock
were exchanged at par for the same classes of U. S. Steel stock.

Last of the Reid-Moore companies to be organized was the American Sheet
Steel Co., chartered in February, 1900. This company acquired 164 sheet
mills, nineteen puddling furnaces, and a number of open-hearth furnaces
and bar mills. It had a capacity of about half a million tons. Its
earnings, from the time it began business to April 1, 1901, amounted to
$1,676,480 and its surplus on the latter date was $705,757. Its stock
was exchanged for Steel Corporation securities on the same basis as
those of the Steel Hoop Company.

The National Tube Co., organized in June, 1899, was a merger of
thirteen smaller concerns having an aggregate capacity of about 850,000
tons of steel-wrought tubing. Its principal plants were located in the
Pittsburgh district. In the year 1900 the company reported net profits
after depreciation of more than $14,600,000, or about 35 per cent. on
its preferred capital stock. National Tube preferred stockholders
exchanged their holdings at the rate of $100 for $125 of U. S. Steel
preferred, while the junior stockholders received $8.80 in preferred
and $125 in common stock of the corporation for each $100 they held.

The Federal Steel Co., second only in size and importance to the
Carnegie Steel Co., was chartered late in 1898, as a merger of the
Illinois Steel Co., Minnesota Iron Co., Minnesota Steamship Company,
Mount Pleasant Coke Company, Lorain Steel Co., Elgin, Joliet & Eastern
Railway Co., and the Johnson Co. of Pennsylvania. The steel companies
it controlled brought to it some of the best-equipped steel mills,
manufacturing various products, in the country, as well as a number
of ore vessels and the principal ownership of the Duluth & Iron Range
R. R. Its earnings in 1899 were approximately $9,100,000, or about 17
per cent. of its preferred stock, and in 1900, $11,722,000, or about 22
per cent. Federal Steel preferred stockholders received new preferred
stock at the rate of $110 for each $100, and the common stock was
exchanged at the rate of $100 of Federal common for $4.00 of preferred
and $107.50 of the common stock of the U. S. Steel Corporation.

The Lake Superior Iron Mines, dominated by the Standard Oil interests,
was formed in 1893. It was merely an ore company and had ore reserves,
owned or leased, estimated at nearly 400,000,000 tons. The company also
owned the Duluth, Missabe & Northern Railroad, and it was affiliated
with the Bessemer Steamship Co., afterward purchased by the Steel
Corporation. The earnings of the Lake Superior company were enormous,
having been nearly 58 per cent. on its capital in 1900. For each $100
of its stock--there was only one class--$135 each of preferred and
common stock of the U. S. Steel Corporation were exchanged.

The American Steel & Wire Co., of New Jersey, was a consolidation
effected in January, 1899, of the majority of the country’s wire mills.
It had a rod mill capacity of more than 1,100,000 tons and a wire nail
capacity of more than 10,000,000 kegs, or more than 500,000 tons. It
also owned extensive ore and coking coal properties. In the first year
of its operation the wire company earned nearly $19.00 a share on its
common stock after an allowance of $1,200,000 for depreciation, and in
1900 its earnings applicable to the common stock were $4,202,129, or
nearly 8½ per cent. on the issue. Its preferred stock was exchanged on
a basis of $117.50 U. S. Steel preferred for each $100, and its common
stock on the basis of $102.50 of Steel common for each $100 of Steel &

We come now to the largest and most important of the ten companies
originally merged into the monster Steel Corporation--the Carnegie
Steel Co., the great organization ruled by the Monarch of Steel and
turning out from its furnaces and mills practically one fifth of
all the steel made in the United States; and, incidentally, pouring
undreamed-of wealth into the pockets of Carnegie and his associates. A
company that realized profits in 1899 of nearly $24,000,000 and in 1900
of approximately $40,000,000!

The Carnegie Steel Co. was a merger of the Carnegie and Frick
interests. By its absorption the new corporation secured possession
of the greatest steel organization of its time, as well as of the
important coke holdings of the H. C. Frick Coke Co.--owning about
40,000 acres of coking coal lands, 11,000 coke ovens, and other
property--a controlling interest in the Oliver Mining Co. with its
large ore possessions, and the controlling interest in the Pittsburgh,
Bessemer & Lake Erie Railroad, not to mention a number of other
concerns and interests of less importance.

Unlike most of the other merged companies, the Carnegie Steel Co. had
all its steel-making plants concentrated in the Pittsburgh district.
It was in this locality that Carnegie had built up his great business
machine and his fortune. He had never attempted to build elsewhere,
with the exception of his threat to erect a tube plant at Conneaut.
Carnegie believed in the future of Pittsburgh. And he himself did more
than any one else to assure that future. Carnegie it was who had made
Pittsburgh the steel centre of the universe. And his plants there,
at the time they were taken over by the Corporation, had an annual
capacity of some 3,500,000 tons of steel ingots and more than 3,000,000
tons of finished products.

When the Carnegie company was reorganized in March, 1900--at which time
the merger with the Frick company took place--its capital was placed at
$160,000,000 in stock and a like amount in bonds. All the stock and all
but $50,000 of the bonds were taken over by the organizers of the Steel
Corporation and for these, as has been seen, a total of $492,006,160
was paid, as follows: for $159,450,000 Carnegie bonds an equal amount
of bonds of the new company was exchanged; another $144,000,000 in new
bonds was employed to take up $96,000,000 of the Carnegie stock while
$98,277,120 Steel preferred and $90,279,040 Steel common paid for the
remaining $64,000,000 Carnegie Steel stock.

In order to provide for the exchange of new stocks and bonds for
the securities of the constituent companies the new organization,
which it had been finally decided to name the United States Steel
Corporation, was given an authorized capitalization of $550,000,000
each in common and preferred stocks and $304,000,000 in bonds, a total
of $1,404,000,000. To ensure sufficient working capital at the start
a sum of $25,000,000 was put up in cash by the syndicate, headed
by the Morgan interests, which had financed the transaction. This
syndicate also turned over to the corporation $174,000 in securities
of the merged companies which had been acquired by means other than
exchange, and expended some $3,000,000 as syndicate expenses. For the
cash, stock, and its services the syndicate received 648,987 shares of
preferred stock and 648,988 shares of common stock.

Practically all the stockholders of the old companies, satisfied that
with the Morgan backing the new company its success was fairly well
assured, took advantage of the exchange offer, with the result that at
the end of the first nine months of its existence less than 1 per cent.
of the old securities were still held in the hands of the public and of
the Corporation’s capital as authorized $1,319,229,000 had been issued.
To-day only about three hundredths of one per cent. of the stock of the
ten companies is still held outside the Steel Corporation.

The steel-producing equipment controlled by this vast aggregation of
capital comprised 149 steel works of various kinds, having an annual
capacity of 9,400,000 tons of crude and about 7,700,000 tons of
finished steel; 78 blast furnaces with a pig iron capacity of 7,400,000
tons; more than 500,000 acres of coking coal lands; more than 1,000
miles of railroad and a fleet of 112 vessels engaged in traffic on the
Great Lakes, not to mention large areas of ore-bearing property with
uncounted millions of tons of developed and undeveloped ore, as well as
docks, natural gas, and limestone properties, etc.

Just as the Corporation’s capital, wealth, and resources had never
before been approached by any industrial organization so its board of
directors surpassed in aggregate wealth that of any other company.
The list of the men who guided the Corporation’s destinies included
J. P. Morgan, John D. Rockefeller, and a host of others whose gigantic
fortunes were exceeded only by those of the two kings of finance named.
The others were: Elbert H. Gary, H. H. Rogers, Charles M. Schwab,
Robert Bacon, Edmund C. Converse, Francis H. Peabody, Percival Roberts,
Jr., Charles Steele, William H. Moore, Norman B. Ream, Peter A. B.
Widener, James H. Reed, Henry Clay Frick, William Edenborn, Marshall
Field, Daniel G. Reid, John D. Rockefeller, Jr., Alfred Clifford,
Clement A. Griscom, William E. Dodge, Nathaniel Thayer, and Abram S.

Their fortunes, if it were possible to add them together, would amount
to a sum greater even than the huge capital of the “Steel Trust.”

Of the original directorate of the Corporation only seven still survive
and only two are still directors. These are Gary and Roberts.

Charles M. Schwab was chosen president of the Corporation, Arthur F.
Luke treasurer, and Richard Trimble secretary. Elbert H. Gary became
chairman of the Executive Committee, and with him were Charles Steele,
Percival Roberts, and Edmund C. Converse. A Finance Committee was also
appointed with Robert Bacon at its head, and H. H. Rogers, Norman
B. Ream, Elbert H. Gary, and P. A. B. Widener as the other members.
The salaries of the president and of the chairman of the Executive
Committee were placed at $100,000 each.

It is hardly to be wondered at that many prophets declared the new
company was foredoomed to failure. Its very size, they claimed, would
render it unwieldy, and it would collapse of its own weight. And there
was a matter of something like half a billion dollars of common stock
represented by no tangible assets, pure water it was claimed. It was
questioned if dividends could ever be paid on this.

How could Morgan ever have been induced to back so great and so
impracticable an enterprise? Many asked this question, and found no
satisfactory reply. Some thought the banker had over-reached himself
at last, but the majority were convinced that the organization of the
Steel Corporation was merely a prodigious stock-jobbing scheme to put
money into the pockets of Morgan and his associates--and that, as such,
it would prove eminently successful. Few there were who had faith in
the “Steel Trust” as a practical business proposition.

But incredible as it may have seemed to those accustomed to the
vagaries of high finance as it was often practised in 1901, the
promoters of the United States Steel Corporation did not regard it as
a mere venture in financial legerdemain. They had the greatest faith
in it as a straightforward business enterprise. They believed in its
future. Judge Gary, who took an active part in the organization,
has always insisted that it would be successful and the enterprise
justified. And the reader of the history of the big company must judge
for himself whether it has justified its organization, not only from an
economic, but more particularly from a sociological standpoint.

Morgan, it has been said, considered the financing of the Steel
Corporation the crowning achievement of his career. Was he mistaken?
Or did he, in making possible this giant Corporation, erect himself a
monument more lasting than brass?

It has been admitted that a large part of the Steel Corporation’s
original capital was water. Just how much will never be decided.
Herbert Knox Smith, Commissioner of Corporations under President
Roosevelt, estimated that substantially half of the Corporation’s total
issue of securities was not based on any tangible property assets.
Other critics have gone further, while some have placed the amount of
over-capitalization at a lower figure. Mr. Smith’s figures, so far as
they go, are probably approximately correct, except that they made
little or no allowance for the enormous value of the Corporation’s ore

But does the cost of tangible assets indicate actual value? Does the
cost of erecting a factory or a business indicate the value of that
business? Manhattan Island was originally purchased for twenty-four
dollars. A business that is losing money is seldom worth the investment
put into it, and conversely a money-making concern must be valued
on its earning power. Many of the companies merged into the United
States Steel Corporation were immensely profitable, and even though
they themselves may have been over-capitalized, their value to the
new corporation and to their stockholders was greater than their

The actual plant cost of the Carnegie Steel Co., to take one instance,
had been placed at about $75,000,000. That is, these plants in
1901 could have been duplicated for that sum. But the organizers
of the Steel Corporation bought not only the Carnegie plants; they
purchased an organization that was at the same time the most efficient
steel-making and steel-selling machine in the world, an organization
that the best-qualified witnesses have declared was worth anything from
$250,000,000 up. An organization, moreover, that had earned $40,000,000
in a single year. And what was true in the case of the Carnegie company
was, in part at least, applicable to most of the other concerns which
went to make the United States Steel Corporation.

Further, in organizing the big company, there were many conflicting
interests to be brought into harmony. It was necessary to secure
control of various enterprises in order to obtain the rounded-out
organization aimed at by Gary, Schwab, and the others. And each seller,
naturally, was holding out for all he thought it possible to get. It
was, therefore, a matter of bargaining and without doubt the result was
that in more than one case the final price was above the value of the
thing purchased.

In this connection it is related that shortly after the corporation had
been formed the old Iron Master and Morgan met on a steamship on their
way to Europe, and Carnegie in the course of conversation intimated
that he considered he had driven a shrewd bargain with the corporation
interests. To which the banker is said to have replied: “I would have
paid another hundred million if you had asked it.” The story, the
accuracy of which cannot be vouched for, concludes that Carnegie never
forgave himself for his too-modest demands.

The general consensus of opinion is that the Corporation’s bonds and
preferred stock were both amply protected by assets at the time of
its organization but that the junior stock had nothing behind it but
“blue sky.” Admitting the justice of this claim, which has never been
denied and probably cannot be, this state of things no longer exists.
Whatever water once permeated the capital of the Steel Corporation has
been squeezed out. Year by year the directors have voted large sums out
of earnings for the erection of new plants, the extension of old ones,
until approximately $900,000,000 has been expended in this manner, this
providing adequate--more than adequate--protection for the common stock
and putting the Corporation beyond reach of criticism to-day on the
charge of over-capitalization.

Not long ago Judge Gary, testifying at Washington before a Senate
committee, asserted that the Corporation’s properties then--October,
1919--were actually worth $2,200,000,000 in round figures, or well over
$700,000,000 more than its entire funded and stock capital. He asserted
they could not be replaced for that sum. And other steel men declare
his statement is justified.

When the Corporation began its existence the plants of its subsidiary
companies, as we have seen, had a capacity of more than 9,000,000
tons of steel ingots, while its furnace capacity was only 7,740,000
tons. It was compelled to purchase a large proportion of its pig iron
requirements in the open market. To-day its plants are capable, if
worked at full, of producing 22,350,000 tons of steel ingots and its
pig iron capacity is 18,400,000 tons. Practically all this gain in
production has been attained by “plowing” profits back into additions
and improvements with the object of putting actual plant value behind
every dollar of stock issued.

This consummation was arrived at about seven years ago and it was then
made known that the policy of using profits for building new mills and
furnaces or acquiring additional property had been abandoned and that
future expansion would be financed by the issuance of bonds, which
would permit stockholders to share more liberally in profits than they
had in previous years.

But although the Corporation, since the new policy was announced, has
put more than $400,000,000 into new plant, practically all expenditures
for extensions have been from earnings. The war, bringing about a
boom in steel, brought to the Corporation such large profits that
it was possible to use surplus earnings for extensions and yet pay
big dividends to stockholders, making new financing both unnecessary
and unwise. At present the Corporation is so strongly entrenched
financially that the possibility of borrowing for plant additions
becoming necessary has been put into the distant future, possibly
eliminated forever.

We have seen how the Corporation was formed as a consolidation of ten
of the most important steel-producing concerns in the United States,
with a combined capacity of nearly two thirds the country’s possible
output. So great an operation cannot be considered merely as a matter
of finance. The biggest of trusts must of necessity contain enormous
potentialities affecting the general welfare of industry and of the
State. Its organizers and managers, in consequence, cannot resent
fair-minded investigation into the use it makes of its powers. Has the
Steel Corporation’s existence been prejudicial to the interests of its
competitors, its customers, its employees, or the general public? These
questions will be treated in more or less detail in the course of this
history, but it might not be out of place to point out a few salient
facts on this subject at this point.

Since the Corporation began its existence a number of new steel
companies have sprung into being, grown and expanded, while the older
so-called independents have greatly increased their output. Although
the Corporation has added about 13,000,000 tons to its steel-making
capacity its competitors have added a still larger amount with the
result that the big company now controls less than half the steel
production of the United States.[B]

    [B] See Appendix, page 308.

Enjoying the confidence of a number of steel manufacturers competing
with the Steel Corporation the writer has been unable after patient
investigation to find any evidence of its having at any time used
its immense wealth to undersell a competitor, large or small, with
the purpose of driving it out of business, while he has discovered
more than one instance where it has actually assisted competitors. A
company, especially one whose very size exposes it to envy and attack,
could not fail to earn the enmity of its competitors if its methods
were not at all times fair and above suspicion. The “Steel Trust’s”
competitors have time and again, privately and publicly and under oath,
declared that they have no cause of complaint against it.

That this attitude on the part of the independent steel men was
inspired solely by the fear that criticism levelled against the big
corporation would involve a trade war directed against the critic and
his consequent ruin has been suggested in irresponsible quarters. This
is a poor compliment to the heads of some of the country’s leading
industrial organizations. No one who knows Charles M. Schwab, John A.
Topping, James A. Campbell, Willis King, E. A. S. Clarke, and other big
steel “independents” would regard the charge as worthy of consideration.

How has the customer, the steel consumer, fared? The Corporation has
always been slow to advance prices and equally slow to lower them. It
has usually endeavored to prevent prices from reaching an abnormally
high level in “boom” times, when overwhelming demand had placed the
steel seller in control of the market, by setting a maximum quotation
at a fair level permitting any manufacturer a fair profit, and has thus
protected the consumer whose urgent need of the metal at a particular
time made him a prey to profiteering. Such a course was followed in
1914 and in 1917, both periods of ascending prices. And it is being
pursued again at the time this is written. To-day the steel maker who
has material for immediate or early delivery can get enormous premiums,
abnormally high prices, for his output. But the Corporation is selling
at the levels agreed on in 1919 with the Industrial Board appointed at
that time by the President and refuses to advance its price although
the Government itself abrogated the arrangement. And whether for quick
or deferred delivery it charges one price. It refuses to give delivery
preferment for any consideration, saying in effect “first come, first

And by endeavoring to prevent wild price reductions in periods of
depression it has afforded protection to consumers who made their
purchases at the top of the market, or near it, and who would have
suffered heavy losses from a break in the steel market not only from
the reduction in the value of their inventories but because their
competitors might be able to buy steel at much lower prices and
undersell them.

Has the public, which always pays the bill in the long run and whose
interest is paramount, been injured? In the thirteen years from the
Corporation’s organization to the beginning of the European war the
tendency of steel prices has been downward, not only as compared with
those of other commodities, which ascended, but on a dollar-and-cents
basis. This tendency of prices will be discussed more fully in a later
chapter. The war, it is true, brought about a decided advance in steel
prices, but in comparison with other commodities they still show
favorably. And there is no question that quality has improved.

No better illustration of the Corporation’s price policy can be found
than that afforded by a comparison of the weighted average of actual
prices received by it for the past eighteen years on ten principal
products with Dun’s index number of all commodity prices indicating
the fluctuations in living cost for the same period. In this comparison
1903 is taken as the base because, in that year, Dun’s index number was
99.456, or as nearly as possible 100.

       |             |                  | CORP. PRICE
  1903 |    99.46    |       $37.56     |   100.00
  1904 |    97.19    |        33.15     |    88.3
  1905 |    98.31    |        32.89     |    87.6
  1906 |   105.22    |        34.54     |    91.8
  1907 |   113.66    |        36.59     |    97.3
  1908 |   108.17    |        36.19     |    96.3
  1909 |   119.02    |        32.52     |    86.5
  1910 |   119.17    |        34.10     |    90.7
  1911 |   118.13    |        31.88     |    84.8
  1912 |   122.28    |        30.03     |    80.0
  1913 |   116.32    |        33.25     |    88.5
  1914 |   119.71    |        30.60     |    81.4
  1915 |   124.96    |        30.67     |    81.6
  1916 |   145.14    |        41.31     |   109.9
  1917 |   211.95    |        60.08     |    60.0
  1918 |   232.57    |        68.86     |    83.5
  1919 |   233.71    |        62.66     |   167.0
  1920 |   260.41 (nine mos.) 62.67     |   167.0

The ten classes of products used in arriving at the weighted average
are: Heavy rails; blooms, billets, slabs and sheet and tin bars;
plates; heavy structural shapes; merchant bars; bright coarse wire;
wire nails; black sheets; merchant pipe and oil country goods; black

[Illustration: Andrew Carnegie]

Nor has the steel worker been lost sight of. It is admitted by
all familiar with the subject that the Steel Corporation has been
responsible for the steady and decided advance in wages in the industry
that has been witnessed in the past nineteen years. Wages have been
increased voluntarily and without demand from the men whenever trade
conditions made increases possible. At the same time the Corporation
has steadily set its face against reducing wages in times of stress.
And what is more important it has spent immense sums of money in
sanitation, education, and other ways of bettering the wage earner’s
lot, has helped him to save and invest his money by offering special
inducements for so doing, and has set an example in industry generally
that has done more for the cause of common labor than has been
accomplished by the labor unions themselves.

[Illustration: J. Pierpont Morgan]

It may seem absurd to accuse the management of the Steel Corporation
of socialistic leanings. But among the 160,000 stockholders of the big
enterprise more than one third are men who work in its furnaces, mines,
mills, and offices, and these have become stockholders under the plan
that permits employees to acquire stock on the instalment plan and
offers a premium as an inducement to hold it. Does the history of the
industrial world contain another so striking instance of a step toward
ownership of the product of labor by labor itself, toward the highest
and best socialism?



It was perhaps natural that the early years of the big new corporation
were not entirely without their troubles. The work of bringing together
and making into one harmonious whole a number of different companies,
with the smoothing out of mutual jealousies and dispelling of distrust,
was a far greater task than the actual financial organization. And
it was only with the passage of years that this was successfully

It will be remembered that Schwab, in his speech at the Simmons
dinner, had pointed to the advantages of integration which would be
possible in a big steel merger, and the fact that a concern like
the Steel Corporation, and such a concern alone, could successfully
invade foreign markets and develop, in competition with European
manufacturers, a permanent outlet for American steel. This was the same
thought held by Gary when he had previously urged Morgan to finance a
big steel combine. Briefly, these were the principal reasons for the
Corporation’s existence; and these were the objects which its founders
immediately set themselves to attain.

The early history of the Steel Corporation, therefore, will naturally
be found to have concerned itself largely with achieving these ends.
It is to a great extent the narrative of the various steps taken to
coördinate the more or less divergent units brought together in the
new Colossus of Steel, of the work that had to be accomplished, the
difficulties that had to be overcome, before it could fulfil its
_raison d’être_ and win the place it now occupies as the most important
business enterprise in the world.

Many dangers faced the new-born Corporation. Not the least of these,
although it was not realized at the time, was that, glorying in its
giant’s strength, it might use that strength mercilessly, like a giant.
Had it chosen so to do there is little doubt that it would have reaped
some immediate financial benefits, but events of later years proved
conclusively that it would have but laid the seeds for its own eventual
destruction. That the Corporation chose a different policy, and up to
that time one almost unknown in business, was due to the insistence of
Judge Gary.

And here it might be said that he did not have by any means an easy
time in convincing all of his co-directors that the policies he advised
should be adopted. For years he had a constant struggle, but gradually
he won over all of his opponents to this point of view.

Another of the dangers that beset the path of the new Corporation lay
in the fact that it was not an operating company with a number of
plants controlled by one central management, but a holding company
controlling by stock ownership a number of industrial units which had
previously been owned by utterly conflicting interests and each of
which continued necessarily to operate under a separate management.

The natural corollary of this state of affairs was that the management
of each constituent, or subsidiary company, troubled itself solely
about the success of its own particular unit and took little interest,
if any, in the affairs of the other subsidiaries or the success of the
Corporation as a whole. And had this condition continued the attainment
of the ends for which the Corporation was organized would have been
rendered impossible, its very existence made vain.

To illustrate: the Carnegie Steel Co. and the Illinois Steel Co., a
subsidiary of the Federal Steel Co., had widely separated plants, and,
because of the important item of freight rates, sold for the most part
in different territories. But the two companies competed in a middle
ground and each had succeeded in encroaching on the other’s natural
territory, in some instances had attached to itself certain customers
therein. To retain these customers each company was compelled to sell
in a locality adjacent to the other’s mill at the same price as its
competitor was willing to offer. The Carnegie company, for instance,
might have achieved the custom of a railroad whose Eastern terminus
was Chicago. To supply the orders of this road it would have to pay
freight tariffs from its mills near Pittsburgh and deliver the goods
to the road at Chicago at the same quotation the Illinois company was
naming for deliveries from its mills in the very suburbs of Chicago.
It is extremely doubtful if such a situation was really advantageous
to either company in the long run. It is certain that its continuance
would have been distinctly disadvantageous to the Corporation that
owned the stock of both concerns; it simply meant that the Corporation
would have to pay freight for carrying steel hundreds of miles when it
was able to deliver it from a mill practically at the customer’s door.

The officers of each company were naturally unwilling to hand over
custom they had built up by years of effort to a concern long regarded
as a competitor. Even from the standpoint of the then-existing
conditions each must have felt that it was his job to make a good
showing for the company he managed; he had no concern elsewhere. But,
for the good of the whole organization, it was absolutely necessary
that these officers should be brought to realize that they were
working first of all for the United States Steel Corporation, that
inter-company jealousies must be buried for the common good and the
interests of the party made subservient to the welfare of the state.
And the way to do this was to make the interests of the Corporation,
the controlled company, and the individual worker identical.

Andrew Carnegie had built up the greatest steel company of its time
by appealing to the loyalty of his men through self-interest. Like
Napoleon’s soldiers, each man under him carried a potential marshal’s
baton in his knapsack. The Napoleon of Steel held dangling before
the eyes of his subordinates the hope of a partnership in the great
Carnegie company as a reward for meritorious service, and most of his
later partners won their way upward from the ranks. And the scheme
worked out by the Corporation’s management to bring about the desired
harmony, to assure loyalty to the United States Steel Corporation first
and last, was modelled to some extent on Carnegie’s method. It became
known as the Stock Subscription and Profit-Sharing Plan.

Before going into the details of the plan an example of its effects may
be illuminating. Journeying over the Corporation’s plants and mines the
author was impressed by this very spirit of loyalty and coöperation on
the part of officers and workers alike, and commented on it to William
A. McGonagle, president of the Duluth, Missabe & Northern Railroad.
And Mr. McGonagle related the following instance of this spirit of

  When we were planning the big ore concentrator at Coleraine the
  engineers and other officers of the various companies concerned
  were called together in consultation and certain differences of
  opinion arose regarding the plans, each of the men present urging
  changes which he thought would be of benefit to the company he
  represented. While the discussion was at its height somebody rose
  and said, “Gentlemen, it is not a question of what is best for
  the Duluth, Missabe & Northern, the Oliver Iron Mining Co., or
  any other company; the whole question is, what is best for the
  interests of the United States Steel Corporation!” That settled it.
  All differences were smoothed out and a harmonious plan quickly
  agreed on.

This result was due to the plan referred to which was devised to
give each employee the stimulus of personal ownership, an incentive
not confined, as it had been formerly, to a few individuals, but
distributed throughout the organization.

The plan, as finally worked out and put into operation, was designed
to accomplish three main objects: first, to interest employees in the
Steel Corporation as a whole and not merely in the operations of the
subsidiary for which they worked; second, to give them an incentive
to do everything possible to reduce expenses and correspondingly
increase profits; third, to offer them an inducement to stay with the
Corporation and identify themselves with it.

It is with the first, or stock subscription part of the plan, that
the public is most familiar. The benefits of this are extended to all
employees of the Corporation who desire to take advantage of it. It
is simply an effort to increase their interest in the Corporation and
at the same time encourage thrift by enabling them to purchase stock
at an attractive price and to pay for it in small instalments, with
the additional incentive of a bonus for holding for a certain time the
stock purchased. Usually the offering price has been a point or two
below the market, but in 1920, for the first time, the subscription
price was set slightly above it.

In effect the stock subscription plan makes for a capital-labor
partnership. It benefits both the worker and the employing company.
It, in a small way, makes the worker a capitalist himself and enables
him to see something of both sides of the case in capital and labor
disputes. This plan, and others more or less similar adopted by other
companies, have done more to bring into accord the relations between
capital and labor than thousands of sermons and theses by theoretical
reformers. It is a hard-headed, practical solution of the great problem.

The late George W. Perkins has generally been credited with the
conception and perfection of this plan. And unquestionably he had much
to do with it, and took a leading part in its consummation. He always
took a keen interest in anything that tended to better the conditions
surrounding the worker or to reduce the friction that, unfortunately,
exists between capital and labor. But, as a matter of fact, the plan
was largely Judge Gary’s, as was brought out in the testimony in the
Steel dissolution suit, and--to quote Perkins himself:

“Two men have been my especial inspiration--one of them Judge Gary,
the actual operating developer of corporation progressiveness as we
have it at its best; but he has a positive passion for doing good
things and big things behind the screen of somebody else’s personality;
and credit that belongs to him--tremendous credit--lands elsewhere.
Over and over he has made me protest against his insistence that I or
another should accept applause for accomplishment directly belonging to
himself; for instance, in employees pensions and profit sharing.”

In its application the stock subscription plan has been an unqualified
success. Particularly in recent years employees of all classes from
common labor to executives have shown eagerness to avail themselves
of its terms to acquire a personal financial interest in the big
Corporation. Subscriptions for years have far exceeded the amounts
of stock offered and all over-subscriptions have been honored. The
figures of the annual subscriptions to stock under the plan speak for

       | PREFERRED |             |  COMMON   |          |   NO. OF
       |   TAKEN   |             |   TAKEN   |          | SUBSCRIBING
  1921 |   ----    |    ----     |  255,308  |  $81.00  |   81,710
  1920 |   ----    |    ----     |  161,298  |  106.00  |   63,324
  1919 |   ----    |    ----     |  155,098  |   92.00  |   59,792
  1918 |   ----    |    ----     |   93,488  |   92.00  |   41,991
  1917 |   ----    |    ----     |   66,519  |  107.00  |   38,326
  1916 |   ----    |    ----     |   49,538  |   85.00  |   24,631
  1915 |           | No offering |           |          |
  1914 |  42,687   |   105.00    |   47,346  |   57.00  |   45,928
  1913 |  34,418   |   109.00    |   25,583  |   66.00  |   35,687
  1912 |  30,613   |   110.00    |   30,528  |   65.00  |   36,575
  1911 |  19,324   |   114.00    |   29,072  |   70.00  |   26,305
  1910 |  24,679   |   124.00    |    ----   |   ----   |   17,381
  1909 |  17,953   |   110.00    |   15,380  |   50.00  |   19,116
  1908 |  30,398   |    87.50    |    ----   |   ----   |   24,527
  1907 |  27,150   |   102.00    |    ----   |   ----   |   14,163
  1906 |  24,001   |   100.00    |    ----   |   ----   |   12,192
  1905 |  18,180   |    87.50    |    ----   |   ----   |    8,494
  1904 |  31,644   |    55.00    |    ----   |   ----   |    9,912
  1903 |  47,551   |    82.50    |    ----   |   ----   |   26,399

  NOTE: Above figures differ slightly from those given in annual
  reports, a few employees having failed each year to go through
  with their subscriptions.

Besides being given as much as three years to pay for stock purchased
employees who hold their stock receive an annual bonus for five
years. At first, when only preferred stock was issued, the bonus
was $5.00 a year. Later, when the common stock began to have a real
investment value, this, too, was offered with an annual bonus of $3.50.
But in recent years the investment value of the common stock still
further increasing, and it having become impossible to purchase any
considerable amount of preferred stock at a reasonable price, only the
junior security has been offered employees and the bonus on the common
has been raised to $5.00 a year.

Latest figures show that there are now more than 66,000 employees and
their families interested in the plan, that is, that number are either
paying for stock or, having paid, are drawing their annual bonuses. As
it is likely that there are still more employees not now on these lists
but owning stock bought more than five years ago it seems fairly safe
to assume that the number of employees who, as stockholders, have an
interest as part owners in the great organization that they work for is
not less than 70,000.

And in this number are included employees from all ranks, including
workmen, so-called office boys, elevator operators, and executives. The
plan was designed to be, and is, catholic in its scope.

Naturally, the stock subscription plan has not been regarded with favor
by those whose interests lie in fomenting dissent between capital and
labor and the plan has been attacked in many ways. One of these is the
charge that it is a money-making scheme under which the Corporation
purchases its own stock cheap and sells to the workers at a profit. As
a matter of fact, the operation of the plan is a continual source of
expense to the Corporation which has so far spent on it an aggregate
of $9,160,000. It has, however, profited from the plan in one
way--increased loyalty, efficiency, and coöperation.

Only “the men who occupy official or semi-official positions and who
are engaged in directing and managing the affairs of the Corporation
and of its several subsidiary companies” were concerned in the
profit-sharing portion of the plan, generally designated as special
compensation. This was more or less an adaptation of Carnegie’s method
of rewarding his assistants for good service, with the difference
that it held out no allure of return for effort selfishly directed,
but only that done for the good of the entire organization. It was a
yearly distribution to the men above described of a small percentage
of the profits above $80,000,000, part of the bonus being paid in cash
and part in stock of the Corporation. At the time of the promulgation
of the plan it was made plain that there would be no increases in
salaries of officials. All additions to salary would come through these
bonuses, and in basing them on the profits of the Corporation and not
of the separate subsidiary companies a powerful motive for loyal and
harmonious effort for the good of the Corporation was created.

Why did not the workmen generally share in this bonus distribution?
It would have been impossible to make anything like an equitable
distribution among the employees of every class, especially in view of
the fluctuating character of a large mass of the labor employed in the
industry. But the worker with his hands did share in profits in a more
definite way. His wage was increased time and again and he received the
benefits of these increases whether profits were large or small. This
was more satisfactory to him. And in the stock subscription part of the
plan, with its attached automatic bonus, he had an equal opportunity
with the men above him in authority.

But long before the Stock Subscription-Profit-Sharing Plan was
perfected steps had been taken to coördinate the work of the
Corporation and to bring about economies. First of these was the
institution of a system of comparative cost sheets immediately after
the Corporation began its existence.

The earning of profits for stockholders was the first object of the
big company, as it is in every business, and its formation had been
undertaken largely with the idea that the magnitude of its operations
would make greater economies possible, with a gain rather than a
sacrifice of efficiency and quality.

In the old steel days the calculation of costs had been more or less
haphazard, at least in most instances. Too often the entire operating
expense of steel making, from mining to the turning out of the finished
product, had been “lumped” at the end of the year, and there was no
means of arriving at the knowledge of just where profits, if there were
any, were made, while if they were non-existent or unsatisfactory it
was equally out of the question to fix the blame on any one department.
Moreover, such secrets of economy as were discovered by those in charge
of a furnace or mill were rigidly guarded as giving an advantage over
competitors; all of which did not contribute to a general high average
of efficiency and economy.

The Corporation’s management first set to work to ascertain the exact
cost of running each and every mine, furnace, or other department, the
costs being tabulated for the information of the whole organization.
The cost tables were made up in the most minute detail, the blast
furnace cost sheets alone containing more than 8,000 different items,
and by their aid the several departmental superintendents could see at
a glance what item in their operations was below the average, was too
costly, and could take the necessary steps to remedy matters. These
tables also created a spirit of emulation, of friendly rivalry, between
the various departmental units, which alone was a potent incentive
toward economy.

So immediate and so marked was the result of this system of cost
checking that, according to Charles M. Schwab, a saving of $4,000,000
was effected in the blast furnace department alone in the first year of
the Corporation’s existence!

As this history does not pretend to be a technical treatise on the
manufacture of steel detailed discussion of the many ways and means
adopted by the Corporation to achieve economies would be out of place.
But some of them are particularly worthy of mention.

One example of economical methods, interesting because of the fact that
is was possible only to a company engaged in operations on a tremendous
scale, is concerned with distribution of iron ore to its furnaces.

Steel, although much alike to the uninitiated, differs greatly in
quality and suitability for different uses. The difference lies not
alone in treatment during manufacture but in the kind and character
of ore used. And a plant that has large orders for a particular kind,
or analysis, of the metal, would find itself handicapped greatly if
its receipts of ore included a mixture of the many grades often found
deposited in the earth in close juxtaposition. The right ore for the
right use at the right time means better and cheaper steel.

Hence the Corporation maintains in the regions from which it receives
its ores well-equipped chemical laboratories for testing and sorting
the several varieties of ore. Probably the most important of these is
at Hibbing, Minnesota, on the line of the Duluth, Missabe & Northern.

As the long ore trains run through Hibbing small samples of the ore are
taken out of the cars and subjected to careful analysis. The trains go
on their way to Proctor where the extensive yards of the railroad are
located, but before they reach that centre the chemical analysis of the
ore in different cars has been ascertained and wired ahead, so that
the cars composing the train can be sorted and distributed in sidings
in accordance with the classification of the ores they contain. At
Proctor new trains are then made up and proceed to the ore docks at
Duluth where vessels are waiting to convey the ore to Gary, Chicago,
or, by further trans-shipment, by rail to Pittsburgh. And each ship
gets the kind of ore needed at the furnace to which it is destined.

This means not only better and more uniform quality in the finished
product; it means a saving of several hundreds of thousands of dollars
annually to the Corporation.

The Proctor yards themselves are interesting. Stretching two miles with
seventy-five miles of track and capable of accommodating 5,400 cars at
one time, as many as 469,555 fifty-ton cars of ore have passed through
them in one season destined for the Corporation’s hungry furnaces all
over the country.

Not least among the economies following in the wake of the
Corporation’s organization were the conservation effected and
additional profits earned by manufacturing into merchantable products
what had formerly been waste. The manufacture of the so-called
by-products of the steel industry had been practised in Germany for
many years, and to a limited extent in this country as well. But
to get the best results not only was a considerable outlay for new
plant equipment required, but the services of a corps of trained
and experienced chemists had to be engaged. And this meant such
an expense that, especially as the whole by-product idea was in a
somewhat experimental stage, companies even of a moderate size as
steel companies go hesitated to undertake it. With the Corporation’s
vast resources, many subsidiaries, and large output the expense of
experimenting and investigating was spread out so as to be hardly felt,
a careful study of the subject was made, and necessary plants were
erected. This has borne fruit not alone in increasing profits for the
Corporation and its stockholders but in blazing a path for the steel
trade of the United States as a whole (all the larger steel companies
have by-product plants to-day), and finally in effecting an important
conservation of the natural resources of the country.

Nor, as events of the last few years have shown, have the benefits
of the developments of by-product manufacture been confined to the
Corporation, the steel trade, or even the United States. Chemicals
derived from coke by-products are necessary in modern warfare. They
form the basis of high explosives, gases, etc., and when the European
war broke out the world at large realized that Germany, in protecting
and fostering her by-product industry, had really been preparing for
war. The benzol, toluol, and other chemicals manufactured at the coke
by-product plants of the Steel Corporation and other companies in this
country played an important part in stopping the German hordes and in
saving civilization.

Coke, the fuel used to make steel, is obtained, as is probably
universally known, from coal. In the old days of the trade, and to a
great extent still, the coal was burned in brick ovens with open tops,
known as bee-hive ovens, which produced about sixty tons of coke from
each 100 tons of coal and blew out in smoke into the air the oils and
gas contained in the coal. Even to-day, in the great coal fields that
lie near Pittsburgh, may still be seen the dense smudge that arises
in the air from thousands of these ovens. But their day is surely,
if slowly, passing. In the modern by-product coke ovens sixty-five
to eighty tons of coke are obtained from 100 tons of coal, a gain of
nearly 25 per cent. in the case of low volatile and about 8 per cent.
with high volatile coals. Nor is this saving all. The gases with their
oil content instead of being blown out into the air and burned are
conducted through pipes to an intricate apparatus where coal tar,
ammonium sulphate, a valuable fertilizing agent, ammonia, and benzol,
an important base for high explosives and dyes and also usable as fuel
for motor cars, as well as other products are extracted, and the gas
itself is made available for use in motor engines or in illuminating.
More than one city to-day lights its street with the gas from
by-product coke plants.

As it requires more than one ton of coke to make a ton of steel it is
plain that the 25 per cent. saving in the amount of coke obtained from
coal by use of the modern by-product ovens means an enormous economy
to the Corporation which produces from seventeen to twenty millions of
tons of steel a year, and the saving of four to five millions of tons
of coal to the country. Nor are the profits derived from the sale of
the by-products themselves immaterial.

How profitable is the manufacture of coke by-products is indicated by
the fact that for years before the World War, and possibly even to-day,
the patentees of one by-product process were usually willing to erect a
plant in connection with a steel plant, at a cost of several millions,
and to take their pay for it from the profits of the by-products alone,
handing the plant over to the steel company at the end of a stated
period. They said in effect: “You give us the coal and we will hand you
over the coke produced from it; and in twenty years we will give you
the plant.” The Corporation, however, has always erected its by-product
coke plants at its own expense.

Another important economy in its saving of both labor and material is
found in the generation, from what were formerly the waste gases of
blast furnace operations, of electric power for running the entire
steel mill.

Still another by-product of the steel industry, and one that means
material profits from waste, is Portland cement. In this is utilized
blast furnace slag, formerly not merely a waste but a source of expense
as it had to be freighted away from the mills and “dumped.” The
manufacture of cement from slag had been carried on before the Steel
Corporation was formed by the Illinois Steel Co. but only in a small
way. The big company extended the cement industry as a side line to
steel and erected several new plants, the largest being at Buffington,
Indiana. It now has a capacity of about 45,000 barrels a day.

Greater earnings for the Corporation, larger profits for its
stockholders, are represented by the extension of the manufacture
of these by-products. But, beyond this, the cultivation of this
part of the industry means an appreciable reduction in the cost of
manufacturing steel, and consequently lower prices to the consumer
and the possibility of higher wages to the worker, as well as the
elimination of waste and the conservation of the natural resources of a

Besides integration and the achievement of economies the early history
of the United States Steel Corporation is largely a narrative of
expansion, the building of new plants, and the acquisition of other
companies. First of these acquisitions was the purchase, consummated
about a month after the Corporation was organized, of the Bessemer
Steamship Co., a Rockefeller concern engaged in traffic on the Great
Lakes and which had been closely affiliated with the Lake Superior
Iron Mines. This company had a fleet of 56 vessels (included in the
number of vessels given as taken over by the Corporation in a previous
chapter). The new organization paid $8,500,000 for the stock of the
company, or about $150,000 for each vessel of the fleet.

In the same year control of the Shelby Steel Tube Co., a New Jersey
company owning the principal basic patents for the manufacture of
seamless tubes, and having an outstanding capital of $5,000,000 of
preferred and $8,150,000 of common stock, was secured, the exchange
of securities being made on the basis of one share of U. S. Steel
preferred for 2⅔ shares of Shelby preferred, and one share of Steel
common for four shares of Shelby common stock. Practically all the
stock of the Shelby company--$4,776,100 preferred and $8,018,000
common--was acquired, giving the Corporation a substantial controlling

In 1901 also the Corporation purchased by exchange of stock one-sixth
interest in the Oliver Iron Mining Co. and the Pittsburgh Steamship
Co. The Carnegie Steel Co. already owned the other five sixths of
the securities of both these concerns and this gave the Corporation
complete ownership.

In December, 1902, an important deal for the absorption of the Union
Steel Co. was consummated. This company was a merger, effected only
a month or so previous to its absorption by the Steel Corporation,
of the Union Steel Co., a $1,000,000 concern owning a large plant
for the manufacture of wire rods, wire, and nails at Donora, Pa.,
and the Sharon Steel Co., a $6,000,000 company making a similar line
of products and located at Sharon, Pa. The merged company had an
authorized capitalization of $50,000,000 and a capacity of 750,000 tons
of pig iron and 850,000 tons of ingots yearly. The purchase was carried
out on the following basis: The Steel Corporation guaranteed an issue
of bonds on the Union-Sharon properties amounting to $45,000,000, of
which $29,113,500 were issued to pay for the properties, $8,512,500
were purchased by the interests controlling the properties, $3,500,000
were reserved to retire bonds outstanding on the property of the
Sharon company, and the balance was reserved to provide for future
construction and improvements. The actual cost to the Corporation
was fixed at $30,860,501, as follows: bonds guaranteed and issued,
$29,113,500; underlying bonds assumed, $3,591,000; cash $497,990;
total $33,202,490; less liquid assets taken over with the properties,
$2,341,989; net cost, $30,860,501.

[Illustration: Down in a Coal Mine]

By this transaction the Corporation acquired five blast and twenty-four
open-hearth furnaces, two blooming and slabbing mills, four rod mills,
two wire and nail mills, one skelp works, one tube works, one plate
mill, one tin plate plant, one sheet plant, a by-product coke plant of
212 ovens, two modern ore steamers, 4,750 acres of coking coal, 1,524
acres of steam coal, and the ownership of two mines and leases
on another two in the Mesaba Range with an estimated ore deposit of
40,000,000 tons.

[Illustration: Open Pit Mining--Canisteo Mine]

The absorption of this entirely solvent and “going” competitor has been
criticized on the allegation that its only purpose could have been to
strengthen the larger company’s supposed control of the industry, and
to eliminate competition. The reasons for the purchase, testified to
by Judge Gary, in the Government suit were twofold. The Union Steel
Co., he said, owned blast and open-hearth furnaces the securing of
which obviated the necessity of the Corporation building others in the
same territory, which it needed, and its wire mill was particularly
well located for export business, a prime consideration with the Steel
Corporation; and perhaps a more cogent reason was to be found in the
desire of the Corporation’s management to centre the interests of
H. C. Frick in the Corporation. Mr. Frick was heavily interested in
the Union-Sharon concern and on this account, although a director of
the Corporation, he did not take a prominent part in the big company’s
affairs. His experience and ability made his full coöperation in
the directorship desirable and this had a great deal to do with the

Seventeen months later, in May, 1904, the Clairton Steel Co., which
operated three blast and fifty open-hearth furnaces, a rolling mill,
billet mill, and blooming mill at Clairton, Pa., was absorbed. The
company, controlled by the Crucible Steel Co., was then in the hands
of a receiver and its stock was acquired by the payment to the owners
of $1,000,000 in U. S. Steel bonds (bought in the open market and
costing the Corporation $813,850), and the guaranteeing of bonds to
the amount of $10,230,000 outstanding against the Clairton company and
its subsidiaries. The purchase also brought to the Corporation a half
interest in one ore mine and a lease of another in the Mesaba Range,
about 20,000 acres of mineral lands in the Marquette Range, 2,644 acres
of coking coal lands, and working assets of nearly $3,000,000.

Smaller acquisitions by the Corporation in the early years of its
existence included the Troy Steel Products Co., which owned works at
Troy, N. Y., with a capacity of about 200,000 tons of slabs and skelp
a year, and the Trenton Iron Co., operating a rod mill with a capacity
of some 18,000 tons. The Troy company was bought in 1902 and operated a
very short time, it having proved unprofitable.

Hardly had the United States Steel Corporation commenced operations
than the directors found themselves faced with the necessity of
raising additional working capital. The $25,000,000 cash provided by
the under-writing syndicate proved insufficient for the needs of the
giant industry. Obligations entered into by the constituent companies
before the merger, it was discovered, called for the expenditure of
approximately $15,000,000, and fully $10,000,000 was needed to refund
what were classified as “purchase money obligations.” It was also
thought desirable that expenditures should be made for improvements and
additions which, it was estimated, would increase the big company’s
earning power at least $10,000,000 a year. Furthermore, it was deemed
advisable to add from $10,000,000 to $15,000,000 to the Corporation’s
fluid assets to provide for further expansion and to strengthen
reserves, as it was obvious that if the Corporation were to need ready
cash in a time of stress the amount wanted would not be a matter of a
million or so but of many millions and it would be impossible to obtain
a very large sum at such a time except at a great loss. By increasing
fluid assets the probability of the need for borrowing would be

The issuance of $15,000,000 new preferred stock or second mortgage
bonds was discussed at length, but these courses were not favored as
either, aside from initial expense in commissions to underwriters,
would have increased fixed charges against earnings--a stock issue
permanently and a bond issue for the term of its life--while an
increase in capital in either of these two ways so shortly after the
formation of the Corporation would almost certainly have attracted
unfavorable comment and might have severely affected the value of their
holdings to owners of its stock.

Eventually what was known as the Bond Conversion Plan was adopted and
promulgated. It provided for the issuance of $250,000,000 new second
mortgage bonds and the redemption of $200,000,000 of the outstanding
preferred stock, holders of the stock being given the opportunity
to subscribe for the bonds to the extent of 50 per cent. of their
holdings, 40 per cent. through deposits of stock and 10 per cent. in
cash. A syndicate, headed by the Morgan firm, was formed and guaranteed
to turn in not less than $80,000,000 in stock and $20,000,000 in cash
in exchange for $100,000,000 of the bonds to be issued. For its work
the syndicate was to receive 4 per cent. on the total value of the
bonds actually issued under the plan, the house of Morgan receiving one
fifth of the commission, or four fifths of one per cent.

An actual, though not immediate, money saving, it was pointed out,
would be effected under the plan. Although the commissions to be paid
the syndicate, $10,000,000, would be larger than in the case of either
of the two other ways suggested for raising the new capital required,
the net saving in annual interest charges would be $1,500,000, which
would not only refund the commission in a comparatively short time but
would be more than sufficient to meet sinking-fund requirements for
paying off the entire second mortgage issue when it became due, or in
sixty years. The actual gain in working capital, should the plan prove
a success, would be $40,000,000.

(Redeeming $200,000,000 of 7 per cent. preferred stock would save
dividend charges of $14,000,000 yearly, for which would be substituted
a charge of 5 per cent. on $250,000,000 bonds, or $12,500,000. The
amount required for the sinking fund would be slightly more than
$1,000,000 or less than the net annual saving. And a permanent capital
reduction would be effected at the end of sixty years.)

No other action of the Corporation’s management, it would be safe
to say, has met with such widespread disapproval as did the bond
conversion plan, much of the criticism coming from financial experts
who questioned the propriety of increasing the bonded debt of the
company to so great an extent with so small an actual gain in working
capital or resources. It was characterized as dangerous financing and
it is known that not all the Corporation’s directors were themselves in
full accord with the operation. At a meeting held on May 19, 1902, the
plan was submitted to a vote of the stockholders and here considerable
opposition developed which led later to the bringing of four suits to
prevent its consummation. One of these suits which attracted a good
deal of attention was brought by J. Aspinwall Hodge, a New York lawyer.
But the Court of Errors and Appeals of New Jersey eventually dismissed
these suits and the offer to exchange stock for the bonds--delayed by
the suits--was finally made to stockholders in the spring of 1903.

In view of the fact that its avowed object was the raising of
$40,000,000 new cash capital, said to be necessary, the plan can hardly
be said to have been an eminent success. Exclusive of the syndicate
operations only $45,200,000 of preferred stock was exchanged by
stockholders for the bonds and the cash subscriptions for the issue
from the same source amounted to the insignificant sum of $12,200.
The syndicate, at its dissolution, turned in a total of $150,000,000
in preferred stock and $20,000,000 in cash (this, of course, included
the $45,200,000 stock and $12,200 cash of the outside stockholders),
a total of $170,000,000, and instead of the desired $40,000,000,
the actual cash gain to the Corporation from the transaction was
$20,000,000 less a syndicate commission of $6,800,000, or $13,200,000

As the Corporation has been able to meet its full preferred dividend
requirements since its formation, however, it is obvious that as
matters turned out it has saved $2,000,000 a year in interest charges
or in eighteen years since elapsed $36,000,000, more than five
times the commission paid the syndicate. The yearly saving is also
approximately double the $1,010,000 which the sinking fund calls
for, so that the net gain to stockholders from the reduction of the
preferred capital is $990,000 a year. Looking into the distant future
the saving after the bonds are paid off in forty-two years will be
$10,500,000 annually.

One of the criticisms hurled at the plan was that its real object was
to enable the syndicate, and especially the banking house of J. P.
Morgan & Co., to make a profit at the expense of the stockholders.
The facts were that the syndicate took a big risk of the bonds
selling at less than par after issuance, which they did, and while it
is impossible to ascertain the exact gains or losses incurred, the
understanding is that Mr. Morgan and his associates in the syndicate
actually suffered a loss of something like $8,000,000 from the deal.

It was perhaps natural that the management of the Steel Corporation,
in its early existence, should have been more or less divided against
itself. This danger was one of the factors urged by its critics against
the possibility of its success. Among its directors were Phipps, Frick,
and Schwab, old Carnegie partners, and firm believers in the Iron
Master’s policy of getting your competitor before he got you. Gary
was the prominent figure in another faction that had the foresight to
perceive that a new day was dawning in industry, an era of coöperation
between manufacturer and manufacturer, to realize that the very size of
the Corporation rendered it subject to the enmity of smaller concerns
and to legal attack and public disapproval, and that the only way of
overcoming this danger was to gain the good will of all by an open and
straightforward policy. As the years passed these differences were
gradually smoothed out. The directors, as a whole, came to see that
Gary’s policy was right, in fact the only one to pursue, and harmony
was gradually brought out of the conflicting elements and opinions.

With the passing of the years Gary gained the ascendency in determining
the courses of action of the Corporation. Always its chief executive
officer he eventually became potential. And it is a high tribute to
his judgment and foresight that all of those who disagreed with him at
first have later admitted, as did Schwab, in a published speech, “He
was right and I was wrong.”

Charles M. Schwab did not long remain as president of the Corporation.
His health broke down shortly after its formation and, in 1903, he
resigned his position and sailed for a long rest abroad, later coming
back to America to purchase control of a small independent concern and
to build up an organization of his own that to-day ranks next to United
States Steel among the steel-making companies of the United States.

At the time of Schwab’s resignation the Executive Committee was
abolished, the position of chairman of the Board created, and Gary was
elected to that office. William Ellis Corey, President of the Carnegie
Steel Co., was chosen President of the Corporation to succeed Schwab,
on the latter’s recommendation, and continued in this capacity until
the end of 1910, when he resigned to be succeeded by James A. Farrell,
the man who had built up the Corporation’s export trade and who was
then president of the United States Steel Products Co.

Before the new-born Corporation had passed the first anniversary of its
birth Robert Bacon resigned as chairman of the Finance Committee and
was succeeded by George Walbridge Perkins, another Morgan partner. Mr.
Perkins continued in this office for several years, but later retired,
and since then Judge Gary has filled the offices of chairman of the
Finance Committee and chairman of the Board. He is by the Corporation’s
by-laws named “chief executive officer in general charge of the affairs
of the Corporation.”

In the first nine months of its operations the United States Steel
Corporation reported net profits of $84,779,298. After the payment of
sinking fund and interest charges on the bonded debt $61,420,304 was
left for distribution to stockholders. Dividends of 5¼ per cent. (at
the annual rate of 7 per cent.) on the preferred stock, and 3 per cent.
(at the annual rate of 4 per cent.) on the junior issue, were paid,
the balance after these disbursements, $19,414,497, being carried to
surplus account.

In 1902 a gross business of $560,510,479 was done and the net profits
therefrom were $133,308,764. The year was a fairly profitable one and
although a special appropriation of $10,000,000 for new construction
was made and more than $14,000,000 was put aside for depreciation and
extraordinary replacement, the big company was able to show the full
dividends earned on its stock of both classes and a surplus balance of

The following year was one of general business depression and the steel
industry, the barometer of trade, was seriously affected. The result
to the Corporation is shown best by the simple fact that on December
30, 1903, unfilled orders on the books of the subsidiary companies
aggregated 3,215,123 tons, against 5,347,253 tons a year previous.
This falling off in orders was accompanied by declining prices, and
the directors of the Corporation were impelled to reduce the quarterly
dividend on the common stock for the third quarter from 1 per cent. to
one half of 1 per cent. and to eliminate the junior dividend altogether
in the final quarter. Gross sales for the year were $536,572,871 and
net profits $109,171,152, the surplus for the period being $12,403,917.

Several changes in the make-up of the subsidiary companies occurred
in this year. The most important was the incorporation of the United
States Steel Products Export Co. (the “Export” was later dropped from
the title), headed by Farrell, to conduct the Corporation’s foreign
business. The Carnegie and National Steel companies and the American
Steel Hoop Co. were merged into one concern, known first as the
National Steel Co., the name being later changed back to the Carnegie
Steel Co. Lastly, the American Tin Plate Co. and the American Sheet
Steel Co. were consolidated as the American Sheet & Tin Plate Co.

The depression that began in 1903 lasted well into the year following
and affected earnings of the Corporation to such an extent that, for
the first and only time in its history, the wages of the men employed
in the plants were reduced. (Incidentally wages were quickly restored.)
Gross sales for the year were only $444,405,431, and net profits,
$73,176,522. No special appropriation for new construction was made
and, despite the small profits, the Corporation managed to show a
surplus after the payment of the full preferred dividend of $5,047,852.

But the wave of prosperity was returning. The first signs made
themselves felt in the late months of 1904 and the Corporation’s
earnings showed marked improvement in 1905. Gross sales amounted in
value to $585,331,736 and net profits of $119,787,658.

A surplus of $43,365,815 was reported after the preferred dividend
payment, but $26,300,000 was deducted for new construction in
contemplation so that the net amount added to surplus was $17,165,815.
In this year production reached the highest mark so far recorded by the
big company, the output of pig iron being 10,172,148 tons, of ingot
steel nearly 12,000,000 tons, and of rolled products 9,226,386 tons.

In the annual report for 1905 is found the following statement by Judge
Gary: “It has been decided to construct and put into operation a new
plant to be located on the south shore of Lake Michigan, in Calumet
Township, Lake County, Indiana, and a large acreage of land has been
purchased for that purpose. It is proposed to construct a plant of the
most modern standard....”

About the time those words were being written work on the new plant
was being started and the foundations of a new city, now having a
population of 56,000, were being laid. It is appropriate that the name
chosen for this town should have been Gary, although Judge Gary had
nothing to do with the selection of the name.

All previous records for production and profits were shattered in 1906.
The betterment in steel conditions that started in 1905 continued
throughout the ensuing year, and, indeed, until the latter part of
1907, when the disastrous panic occurred. The Corporation’s report for
1906 showed that it had increased its capacity for pig iron production
more than 63 per cent. and its steel capacity nearly 57 per cent.
between the date of its organization and January 1, 1907, and this
increase enabled it to take advantage of the business betterment and
to profit thereby. In 1906 the Corporation’s blast furnaces poured out
11,267,377 tons of pig iron, while its steel plants produced more than
13,500,000 tons of ingots and 10,578,000 tons of finished material. The
gross sales of the year amounted to $696,756,926, and the net profits
to $156,624,273.

These large earnings justified the resumption of dividends on the
junior stock and 2 per cent. on the issue was paid. The balance after
dividends was $62,742,860, but special appropriations for proposed
expenditures on the Gary plant and for other purposes were made,
calling for $50,000,000, this making the net carried to surplus account
only $12,742,860.

Another important event of the year in the Corporation’s history was
the incorporation of the Universal Portland Cement Co., which was
formed to take over the cement plants operated by the Illinois Steel
Co., and to erect new plants for the manufacture of this profitable
by-product. The production of cement had grown from 486,357 barrels in
1902 to 2,076,000 barrels in 1906. The Universal Company immediately
started work on the erection of two new plants, one at Buffington,
Indiana, within a few miles of the Gary plant, and the other at
Universal, Pa., near Pittsburgh. The results of this enterprise have
entirely justified the expectations of the Corporation’s management,
and the manufacture of the by-product has increased until an output of
11,197,000 barrels was reached in 1913.

But the most notable event of 1906 was the negotiation of a lease by
the Corporation on the ore properties owned by the Great Northern and
Northern Pacific Railway companies. This was commonly known as the Hill

That the Corporation would eventually make some arrangement to secure
control of the mining rights on the Hill ore properties had long been
believed in the steel trade. It was pointed out by trade authorities
that the big company did not have ore reserves commensurate with its
immense output, and the obvious conclusion was that it would not
fail to secure such reserves sooner or later. The vast properties in
the Mesaba Range owned by the railroad dominated by James J. Hill
constituted, it was claimed, the only commercially valuable supply of
importance which had not yet been appropriated by one steel company
or another, so the natural conclusion was that the Corporation must
eventually attach to itself these supplies of ore.

Negotiations leading up to the lease went on for several years before
the matter was finally brought to a head in December, 1906. The lease,
which was probably the most voluminous document of its kind ever
written, gave the Corporation the right to mine the Hill ores until
exhaustion, or, at the Corporation’s option, until January 1, 1915, the
exercise of this option being contingent upon a two-year notice to be
given before that date. The Corporation positively declined to enter
into the lease unless it contained provision for cancellation, and it
later exercised this right, the directors at the close of 1912 serving
notice of their intention to abandon the lease in two years.

Comprised in the Great Northern ore land were some of the richest
and best iron deposits in the country. Of a total area of more than
65,000 acres owned or leased by the Hill interests, 39,296 acres
with an estimated ore content of something like half a billion tons
were included in the lease to the Great Western Mining Co., a Steel
Corporation subsidiary and the nominal lessee.

The volume of ore to be mined and the royalties to be paid were
arranged on an ascending scale. In 1907 the Western company was to take
out 750,000 tons of ore and this tonnage was to be increased by as much
again every year the lease continued up to 1917, when the tonnage to
be mined was fixed at 8,250,000 tons, at which figure it was to remain
thenceforward until the contract expired by reason of ore exhaustion.

Royalties on the ore mined were based on a price of eighty-five cents
per ton of dried ore with a metallic content of 59 per cent. for the
first year of the lease, this base price being increased by 3.4 cents a
ton each year--i.e., to 88.4 cents in 1908, 91.8 cents in 1909, etc. To
this royalty was to be added transportation charges of 80 cents a ton
to the docks at Superior, Wis., the contract providing that all the ore
was to be shipped via the Great Northern Railway. For each variation of
1 per cent. above or below the 59 per cent. metallic content, it was
further stipulated, the base price was to be increased or diminished by
4.82 cents a ton.

Critics of the Corporation have charged that the Hill lease was entered
into with a view of giving the big company a practical monopoly of
the ore reserves of the country. Those responsible for the deal have
strongly asserted that their sole object was to ensure an adequate
ore reserve for the future. The question resolves itself into one of
motives and is therefore not susceptible of proof. But whatever were
the motives of the Steel Corporation’s management the fact remains
that, according to the opinions of the best-qualified experts outside
the Corporation itself, the big company, at the time the lease was
made, did not have a supply of ore such as its vast output demanded,
and probably does not now have such a necessary supply although it
has acquired large reserves in Cuba and elsewhere. Further, it is
doubtful if, outside of the Hill holdings, a large enough reserve of
commercially available ore is to be obtained in the United States.

The claim that the royalties paid under the Hill lease were too high
is supported by the undisputed fact that royalties paid on other
ore deposits in the same territory at the time of the signing of
the contract were much lower than those paid under the lease by the
Corporation. Unusual conditions governed this transaction, however. The
lessors were well aware of the Corporation’s need of ore and that they
were probably the only ones in a position to fill this need. They were
therefore able to drive a hard bargain. The price originally demanded
by Mr. Hill and his associates, it is understood, was one dollar a ton
and it took some years’ negotiations before a price which both parties
to the matter would accept could be arrived at.

What was the reason for the cancellation of the lease? It is generally
thought that the directors of the Corporation were impelled to their
decision by the report of Commissioner of Corporations Herbert Knox
Smith, who conducted a searching investigation into the Corporation’s
activities and severely criticized the lease, and by the fear that
it would be made much of by the Federal Government in its suit for
the dissolution of the “Steel Trust.” This suit, it is true, had
not actually been filed when the lease was abandoned; but it was so
imminent that the Corporation’s directors must have believed it was
about to be instigated. And these considerations did have weight in
bringing about the decision. But the more cogent reason was a purely
business one--the lease had not proved as profitable as had been hoped.
The iron content of the Hill ores had not measured up to expectations,
the cost of concentrating the ore proved too high, and on the whole the
deal had become rather a burden than otherwise to the lessee.

Up to the end of 1906 the United States Steel Corporation had spent
more than $200,000,000 in the acquisition of new properties, the
construction of new plants and the extension of old. Its productive
capacity had been increased enormously. Its plants were now in
excellent shape, its organization in perfect working order. Prices were
high and it had, at the close of the year, nearly 8,500,000 tons of
business on its books. Its early difficulties were past and it seemed
about to enter into the heyday of its prosperity.



On the events of the year 1907 the United States Steel Corporation
must, to a certain extent, stand or fall at the bar of public judgment.
This was the year of the panic and of the Tennessee Coal, Iron &
Railroad purchase.

The panic, enemies of the Corporation have asserted, was precipitated
by the big “trust” by the immoral use of its immense financial
resources to enable it to “gobble up” the properties of the Tennessee
company, a competitor said to have been making big inroads into the
business of the larger concern and which it had therefore become
necessary either to destroy or absorb.

The friends of the Corporation, on the other hand, are emphatic in
asseverating that the competition offered by the Tennessee company
was not such as to cause anxiety to the management of the Steel
Corporation, that it was not a very valuable property, and that the
Corporation purchased its stock only upon solicitation by the interests
controlling the company and their assurance that a refusal to do so
would result in the failure of an important security house, which
would add greatly to the severity and danger of the panic. They claim
further that the price paid was more than the actual value of the stock
and that, far from using any advantage it may have had to squeeze the
smaller concern, the “Steel Trust,” against the better judgment of
its management and with the single purpose of alleviating the panic
dangers, paid for the securities it took over something like 60 per
cent. more than good business practice seemed to warrant.

If the claims of the first are correct and the Corporation did use
its power to force a competitor to the wall, regardless of the fact
that in so doing it was bringing misery and calamity to the ninety
millions of people of the United States, this act alone must be more
than sufficient to convict it on a more serious charge than “monopoly
in restraint of trade”--of high treason and betrayal of the trust which
big business, willy nilly, undertakes. But if the Corporation, through
its directors, put the national welfare before all other considerations
this, conversely, should prejudice public opinion, properly informed,
in its favor. And this is why the year was by far the most important
epoch in the Corporation’s history and its events are worthy of careful

After a careful search made by the writer through all the evidence
submitted by the Government to this end in its suit against the big
company, he failed to find one iota of evidence which connected the
Corporation with the panic or upheld the charge that it conspired to
force the Tennessee stockholders to sell. A man who had been a member
of the syndicate that controlled the fortunes of the Tennessee company
before it was absorbed and who, if the allegations referred to are
correct, was one of those who suffered at the Corporation’s hands, in
reply to the question: “Did the Steel Corporation use its power to
create the panic of 1907 so as to gain possession of the Tennessee
stock?” replied: “Absurd. The charge is baseless--except in politics.
The sale of the Tennessee company was an incident arising in the course
of the panic, not a cause. The Corporation was offered a chance to get
what I consider a valuable property and seized it. But let me tell
you,” he added, “the Corporation did not get the property cheap.”

And the Supreme Court, in its opinion, said on this subject:

“There is, however, an important circumstance in connection with that
of the Tennessee Company which is worthy to be noted. It was submitted
to President Roosevelt and he gave it his approval. His approval, of
course, did not make it legal, but it gives assurance of its legality,
and we know from his earnestness in the public welfare he would have
approved of nothing that had even a tendency to its detriment. And he
testified he was not deceived and that he believed that ‘the Tennessee
Coal and Iron people had a property which was almost worthless in their
hands, nearly worthless to them, nearly worthless to the communities
in which it was situated, and entirely worthless to any financial
institution that had the securities the minute that any panic came, and
that the only way to give value to it was to put it in the hands of
people whose possession of it would be a guarantee that there was value
to it.’ Such being the emergency it seems like an extreme accusation to
say that the Corporation which relieved it, and, perhaps, rescued the
company and the communities dependent upon it from disaster, was urged
by unworthy motives.”

[Illustration: Mine Stables]

The Tennessee Coal, Iron & Railroad Co. was a reorganization of an
earlier concern of the same name located in Alabama. The reorganization
brought into control of the company new and powerful interests, and
these spent a good deal of money in improving the plants, so that,
about the beginning of 1907, it was pointed to as a probable important
competitor of the Corporation. It was also considered as the nucleus
for a possible merger of the steel-making concerns of the South such as
would be able to cut severely into the Corporation’s business. Not long
before the panic broke the company secured an order from the railroads
controlled by the late E. H. Harriman for 150,000 tons of steel rails
and it was supposed by some that the loss of this order had caused
considerable worriment to the heads of the Steel Corporation--which
doubtless it did. Then came the panic, and when its dust cleared
away the Tennessee company was a subsidiary of the “Steel Trust.” The
sequence has served to lend plausibility to the charges made against
the Corporation in connection with the purchase. But a full recital of
the events bearing on the deal tends to throw a different light on the
matter, and an attempt to set down the more important of these details
will be made here.

[Illustration: Modern Coal Mining by Machinery]

Emphasis has been laid on the Harriman order, particularly because the
Tennessee company had contracted to supply the lines controlled by the
great railroad magnate with the new open-hearth steel rail, then coming
into popular favor with the railroad experts and which to-day are
used almost exclusively by the larger transportation systems. It has
been alleged that the Corporation was very desirous of adding to its
properties the plants making this new kind of steel rail and getting
immediate control of their manufacture. The facts are that the southern
company did not make a pure open-hearth rail, its steel being made
by a combination of the Bessemer and open-hearth processes, and the
Corporation at the time was engaged in building its new plant at Gary,
a plant which was to include a large rail mill to make open-hearth
rails exclusively. When the Corporation took charge of the Tennessee
properties it was found that the company’s rail mill was being operated
at a loss of nearly $4 a ton. Further, a very large percentage of the
rails which had been supplied the Harriman roads before the transfer of
the properties proved defective and the new management had to bear the
loss of replacing these.

It is unnecessary and futile, in this brief chapter, to go fully
into the story of the panic of 1907, or of the events that preceded
it. Suffice it to say that the panic followed a period of enormous
expansion and of extension of credit eventually carried to a point
where business overreached itself and, in a country lacking an elastic
currency system, such as the United States then was, financial
stringency was bound to follow. The first rumblings of the coming
storm went unheeded, and it was not until late in the year that there
was any realization of the desperate state of affairs. Then one big
trust company closed its doors and was followed by others. Banks
stopped specie payments, stocks tumbled headlong on the exchanges of
the country, industry halted, throwing thousands out of employment, and
the financial hurricane swept over the country, leaving ruin in its
wake and making its effects felt over the whole world.

While the panic came like a thunderclap to the average citizen, without
warning, the big bankers had seen the danger threatening and had made
an effort to prevent any occurrence which might precipitate matters.
In the latter part of October rumors gained circulation that the
Knickerbocker Trust Co., one of the leading financial institutions of
New York City, was in trouble and the late J. Pierpont Morgan, who had
assumed the leadership of the country’s bankers in the crisis, and
others had an examination made of the company’s affairs with a view to
rendering it assistance. Apparently the result of this investigation
was unsatisfactory. Anyway, the Knickerbocker Trust Co. was abandoned
to its fate and, at fifteen minutes to one, on October 22nd, closed
its doors after a sensational run, many stock exchange firms being
overwhelmed in the crash.

Thus did the panic storm break. Rumors of trouble in connection with
other institutions then came thick and fast, and one concern, the
Trust Co. of America, was especially talked of. This institution
had a capital of $2,000,000 and resources of $74,000,000, including
$12,000,000 cash in its vaults at the time. Under normal conditions
it was perfectly solvent and able to meet its depositors’ claims, but
that it was not in a position to withstand a prolonged run was proved
by subsequent events. Realizing that the failure of the Trust Co.
of America would make the crisis far more acute Mr. Morgan and his
associates resolved to come to its assistance, provided it could prove
that its statements of condition were correct.

Meanwhile, George Cortelyou, Secretary of the United States Treasury,
had hurried on to New York from Washington and on the night of the
22nd he held a conference at the Hotel Manhattan with Morgan, George
W. Perkins, one of his partners, James Stillman, and Henry P. Davison
of the National City Bank, and others. After the conference, which
lasted over the greater part of the evening, Perkins and Davison
adjourned to the Union League Club, where they were met by Oakleigh
Thorne, president of the Trust Co. of America, who had been summoned by

These were strenuous days for bankers. No coming downtown late and
leaving early. The confab at the club started at nearly midnight and
lasted until long after. Thorne made a statement of the financial
condition of his company and the others promised that, if the facts
were as represented, he would be assisted. No time was to be lost.
Perkins immediately arranged for the examination and Thorne was at
his desk at half-past six on the morning of the 23rd. By seven the
examiners were at work.

But the newspapers were on the watch, and the fact that the Trust Co.
of America was in need of assistance was known and discussed over the
breakfast tables of New York, and, in fact, of the country. By the
time the company opened its doors that day there was a clamorous mob
outside, each individual seeking to save himself before the crash came,
and the crowd surged through the doors and up to the paying teller’s
window, demanding its money.

In vain did the officers of the company put seven tellers to work
instead of the usual one, in vain were all deposits paid promptly and
unhesitatingly. Denser and denser grew the crowd of depositors, and it
became obvious that the millions that had been passed over the counters
in the morning hours would not suffice to stem the tide. Thorne
hurried over to the Morgan offices and there succeeded in obtaining
$2,500,000 immediately. This loan was subsequently augmented by another
of $10,000,000 made a few days later, and a third of $15,000,000 made
early in November.

On this one day, October 23rd, $13,500,000 was paid out over the trust
company’s counters! But this was not enough to stem the run which
continued for more than a week and did not abate until, so far as can
be estimated, something between $30,000,000 and $35,000,000 was paid to

But the Trust Co. of America was saved. It has been claimed that the
price of its salvation was the surrender by its president of some 5,500
shares of Tennessee Coal, Iron & Railroad stock which he owned. It
seems plain, however, that the suggestion that the Steel Corporation
should take over the control of the Tennessee company came first from
the people who had the majority stock of the company and after the
beginning of November, before which time the bankers, headed by Morgan,
had loaned the trust company $12,500,000 without any mention of or
question regarding the stock. It also appears that the transfer of
Thorne’s stock to the Corporation had no connection whatsoever with the
trust company’s difficulties and its extrication therefrom, but was
part of a separate and distinct transaction.

Particular attention has been given here to the affairs of the Trust
Co. of America, because of the allegations connecting the help
rendered the company with the Tennessee purchase. But it really
constituted only a small part of the situation with which Morgan and
his fellow-bankers were faced. There were many others that needed help,
banking institutions, investment houses, brokers, and so on. The whole
financial community had turned to Morgan as its Joshua to lead it out
of the desert. Upon his shoulders fell the burden of saving the country
from financial ruin.

The Morgan library became as the headquarters of an army. Here were
congregated at all hours of the day and night bankers, brokers,
business men of all kinds, both those who needed help and those who
could assist the banker in the work he had thrust upon him and the
arduous duties which he had assumed. Men rushed in and out of that
library, pleaded for help, begged for information and, awaiting their
turn, slept in its luxurious chairs.

The task that Morgan and his associates had undertaken was one of
exceedingly great difficulty. Despite all that had been done to dam the
torrent of financial disruption and the fact that each weak spot was
strengthened as soon as discovered, the banker knew that his herculean
efforts might be brought to nothing by one big failure which would let
loose the panic fears it was sought to allay. Hence it may be imagined
with what consternation the financier received the news, brought to
him by Lewis Cass Ledyard, a prominent lawyer and a close friend of
his, that Moore & Schley, one of the leading brokerage firms in the
“Street,” was in serious difficulties and needed several millions of
dollars to save it from disaster.

Moore & Schley was deeply mixed up with the affairs of the Tennessee
Coal, Iron & Railroad Co. One of the members of the firm was a member
of the syndicate that controlled the company, and Tennessee stock
constituted a considerable proportion of the collateral which it had
put up to secure loans for itself and its customers. This stock,
considered good collateral in normal times, failed to find favor with
the bankers to whom Moore & Schley was heavily committed in the time of
stress, and the brokers were called on to replace the securities with
others of a more approved character--which they were unable to do--or
to suffer the calling of their loans and consequent bankruptcy.

Only two courses were open to the brokers, either to borrow a sum large
enough to meet their loans or to negotiate an exchange of the Tennessee
stock for some other security which the banks would accept. They chose
the latter and, realizing that the United States Steel Corporation
was the only possible buyer of the Tennessee stock, approached Morgan
through Ledyard to that end.

Suggestions that the Steel Corporation should purchase control of the
Tennessee properties had been made in the past to the Corporation
interests by one or more of the directors of the southern company. It
does not appear, however, that these suggestions were authorized by the
Tennessee syndicate as a whole. Be that as it may, they came to naught,
as the directors in question seemed to have a very high idea of the
value of the Tennessee stock, and the divergence of opinion on this
question between them and the possible purchasers was so great that
no middle ground was possible. Never did the tentative offers to sell
reach a point where they were worthy of the term “negotiations.”

One of the reasons alleged for the Steel Corporation’s supposed fear
of the Tennessee company’s competition was that the company was the
potential basis for a merger of the steel concerns in the South which
would not only be strong enough to offer a stubborn fight to the
“trust” for business in the section below the Mason and Dixon line, but
would have a distinct advantage over it in exporting steel to Mexico
and Central and South America.

John A. Topping, head of the Tennessee Coal, Iron & Railroad Co. and
of the Republic Iron & Steel Co.--dominated by the same interests--had
actually taken steps for the establishment of a market on the Gulf
coast. In the Rivers and Harbors Act of 1899 the construction of locks
and dams and other improvements on the Warrior River so as to give
slack water communication between Birmingham, Ala., near which city the
mills of the Tennessee company were situated, and Mobile, was decided
on. But the matter rested there until Topping, by his efforts, secured
an appropriation to carry out the improvements, since completed. Not
only would the water route have been important to the Tennessee
company in regard to the markets mentioned, but it would have enabled
the company to enter the markets on the northern Atlantic coast of the
United States, from which it had been debarred by the high rail freight

Reports that a steel merger in the South was contemplated or actually
under way had been circulated from time to time. The three companies
mentioned as constituting the consolidation were the Tennessee Coal,
Iron & Railroad Co., the Republic Iron & Steel Co., and the Sloss
Sheffield Steel & Iron Co. Other less important concerns were also
suggested. The Sloss Sheffield company was engaged entirely in the
manufacture of iron and was a rather small concern as compared with
the steel giants of the day. But it was conservatively capitalized and
managed and had at the time an unbroken dividend record in respect to
its preferred stock. At its head was Colonel J. C. Maben, a veteran
iron maker and one of the best known and most respected figures in
the industry. Colonel Maben was approached by one of the Tennessee
directors with a merger proposition, but refused to consider it
because, as he has since said, he did not think the financial condition
of the Tennessee company sound. If there had ever been any possibility
of the merger going through Colonel Maben’s attitude would have
effectually stopped it.

From this it would appear that the proposal to merge all the larger
steel and iron companies of the South never developed beyond the
nebulous stage. However, a consolidation of the two largest of these
concerns, the Tennessee and the Republic companies, had been definitely
decided on. The two concerns were controlled by the same financial
interests and their managements were practically identical. While it
is not unlikely that some of the directors of the companies, among
whom were John Warne, or “Bet You a Million” Gates, looked upon their
investment therein first and foremost as a speculation and would, in
consequence, have regarded favorably the opportunity to sell out
at a fair figure, there were others who had implicit belief in the
possibilities for the expansion of the steel industry in that section
and considered that they had in their hands the opportunity to build
up a southern steel empire. The amalgamation of the two companies,
naturally, would have been the first step to this end, and, as has been
stated, it had been decided on and its consummation was being delayed
only until what seemed to be a favorable time should arrive. But their
dream of empire was doomed to disappointment.

Another reason advanced for the Steel Corporation’s supposed anxiety to
get its clutches on the Tennessee Coal, Iron & Railroad Co. was that
the latter concern owned ore mines estimated to contain some three
quarters of a billion tons of iron ore, besides coal resources placed
at two billion tons, as well as limestone and other raw materials
necessary in the manufacture of steel. The company also enjoyed the
undoubted advantage of having both its coal and iron in the ground
within a twenty-five-mile radius of its ovens and furnaces--it was
“sitting on its raw material”--whereas the steel mills in the North
were great distances from their raw supplies--Pittsburgh, for instance,
depending for its ore on the vast iron ranges of northern Minnesota.

The proximity of its mines is, of course, a material advantage to
the Southern company, as transportation charges on raw material play
a very important part in the cost of steel making. It is perhaps
not so generally known that this advantage is to a large extent
counterbalanced in other ways. Were it not for the saving thus gained
it is questionable whether it would be possible to manufacture steel
commercially in the South.

In the Hill lease the price which the Steel Corporation was to pay on
the ore taken out of the Great Northern holdings in the Mesaba region
was based on an iron content of 59 per cent. Northern ore averages well
over 50 per cent. metallic content and that yielding much under 50
per cent. is not considered commercially available, although some of
the lower grade ore is treated by a concentrating process and made so.
Moreover, much of the ore of the Great Lakes region lies in immense
bodies within a few feet of the earth’s surface and is mined by the
simple process of removing the top layer of soil--technically known as
stripping--and then putting a steam shovel to work.

But the ore beds from which the Tennessee company draws its raw
supplies average well under 40 per cent. in iron, actually from 36 per
cent. to 37 per cent.; nor does the ore lie near the surface, and the
process of making it into iron and steel is necessarily more tedious
and more costly than is the case with the richer and more easily
reached northern iron.

In the first place, more labor is required, particularly in winning the
raw materials, as the coal fields are badly disturbed geologically,
making the expense of mining very much higher. And the ore is nearly
all hard ore, requiring to be drilled, blasted, and crushed. Further,
the low iron content requires the use of about one and three quarter
times as much ore per ton of pig iron, and the poor quality of the
Alabama ore necessitates the use of about half as much again of coke to
make a ton of iron as compared with that coming from the Lake Superior

The high phosphorous content of southern pig iron prevents the use
of the cheaper Bessemer process which is used on the low phosphorous
pig iron of the northern district and the fact that no Bessemer steel
industry exists in the South to furnish the scrap required in the
straight open-hearth process prevents the economical use of this
process in the South, a disadvantage which does not exist in the North,
where scrap is available. Hence it is advisable in the Birmingham
district to use a combination of the two processes, the iron being
first bessemerized, then worked through the open-hearth furnace. And
this adds greatly to the cost of converting a ton of pig iron into

Another difficult problem with which the Tennessee company had to
contend was that of labor. The large majority of the common labor
supply in the South is made up of negro labor and, while the colored
man often makes a satisfactory worker if properly “bossed,” he is
unreliable and too often has as his motto “never do to-day what you can
put off until to-morrow.” Given assurance of enough to eat for a day or
two and a dollar in his pocket, he is likely to refuse to work until
again urged by the spur of necessity--childlike, his vision of the
future is limited. And this disposition to take life from day to day
is, to put it mildly, trying to the manufacturer who needs a full force
to get out tonnage.

And even when the negro is reliable he is seldom fitted to take
positions of responsibility, so that workmen must be brought from
the North to undertake the skilled work or that requiring managerial
ability. And as the opportunities for such men are greater in the
North, the keeping of an efficient organization together means
a constant struggle on the part of the manufacturer, becomes an
ever-present and pressing problem.

The expansion of the steel industry in the South is further limited
by the fact that it is an agricultural, not an industrial, section.
A steel mill does not, in the main, make products to be sold direct
to the ultimate consumer. Its output must be manufactured by other
companies into machinery, locomotives, and a thousand and one other
things. Its customers are other industries, and there are comparatively
few industries in the South. Thus it would seem that the formation of a
great southern steel merger or the expansion of the Tennessee company
to a size sufficiently large to cause apprehension to the “Steel Trust”
was a very remote contingency.

It might not be out of place here to point to the significance of the
fact that the Republic Iron & Steel Co., which owns important tracts
of ore and coal lands in the South just as conveniently situated to
its furnaces as are the Tennessee’s holdings, has not made marked
use of the supposed advantages which it obtained from its southern
properties. The company’s expansion since 1907, under John A. Topping’s
able management, has been great, but it has been almost entirely in the

These things, the conditions that surrounded and influenced steel
making in Alabama, were well known in the steel trade. Therefore it was
hardly to be wondered at that when Ledyard, through Morgan, suggested
to the directors of the Steel Corporation that the controlling interest
in the Tennessee company should be purchased by its bigger and richer
rival, the proposal was not enthusiastically received. The deal, for
any other reason than the saving of the financial situation, was
opposed by both Gary and Frick. The latter, in particular, seemed to
think that almost any other course was to be preferred to an absorption
of the Tennessee company, and it was he who suggested that a loan of
$5,000,000 be proffered Moore & Schley to save them from bankruptcy.
But the members of the firm rejected this offer.

It was not a time for delays, for dickering. The financial situation
was a seething volcano which might erupt at any minute. From Friday,
November 1st, when Ledyard first presented the matter to the banker,
meetings of the Steel Corporation’s finance committee and conferences
between Gary and Frick and representatives of Moore & Schley were held
almost continuously until Sunday, November 3rd, on which date the Steel
Corporation management finally yielded to the insistence of the brokers
and agreed to purchase the controlling stock of the Tennessee Coal,
Iron & Railroad Co. at par, or $100 a share, about twice the value that
had been set on the stock by Gary in his earlier talks with Ledyard.

Followed the now famous visit to Washington. The deal, though
practically completed on Sunday, was not formally closed. Gary insisted
that the President of the United States should be consulted and that
his attitude should be ascertained, and Frick demanded and received an
assurance from Morgan that every assistance possible would be rendered
other companies which were in difficulties before the purchase should
be consummated.

At midnight Sunday a special train left Jersey City bearing the two
Steel Corporation directors and they were delivered at the national
capital shortly after daybreak Monday. Theodore Roosevelt, then
President, was breakfasting when the two arrived at the White House,
but he gave them immediate audience and to him the steel men explained
the situation and asked whether the Government would be antagonistic
to the absorption of the southern company. Gary, who was spokesman,
told the President that he and his associates realized that the deal
might be used as a handle to attack the Corporation for attempted
monopoly--prophetic words--that they were only considering the purchase
because of the strained financial situation which it would tend to
alleviate, and finally that the taking over of the Tennessee properties
would still leave the big company with less than a 60 per cent.
control of the country’s steel trade. This percentage, Gary explained,
was the limit which the Corporation had set for itself and was one,
incidentally, from which it was gradually receding, its percentage
of the steel production of the United States having shown an almost
uninterrupted decrease from year to year.

With President Roosevelt at the interview were his private Secretary,
William Loeb, afterward Collector of Customs of New York, and Elihu
Root, Secretary of State. The President consulted with the head of
the State Department and decided that it was not in his province
to give formal approval to such a transaction. He nevertheless
gave satisfactory assurance to Gary and Frick that the Federal
Government would put no obstacle in the way of the completion of the
transaction. These views Mr. Roosevelt later repeated in a letter to
Attorney-General Bonaparte.

No sooner was Gary satisfied as to the President’s attitude than he
informed Morgan by long distance--a ’phone having been kept open in
readiness--of the course of the interview, and the banker announced
to the financial interests of New York that the Steel Corporation had
arranged to purchase control of the Tennessee Coal, Iron & Railroad Co.

That memorable morning, Monday, November 4th, had dawned dark and
gloomy for the financial world for which Wall Street is the nerve
centre, but no sooner had Morgan’s announcement become known than,
as Mr. Morgan often stated, a marked change toward a more optimistic
sentiment, a genuine improvement in the situation, became apparent.

Immediately on the return of the two steel directors to New York the
purchase was completed, Moore & Schley turning over to the Corporation
157,700 shares of common stock of the Tennessee Coal, Iron & Railroad
Co. and receiving therefor $18,774,000 in second mortgage bonds of the
Corporation, it having been agreed that the stock was to be paid for at
par, in bonds at a market value of 84. Other common stockholders of the
Tennessee company were offered the same terms, and the Corporation has
since acquired all but $68,092.50 of the outstanding common stock of
the southern company; $72,500 preferred stock and $123,100 guaranteed
preferred is still held outside the Corporation.

George G. Crawford, manager of the plants of the National Tube Co.
at McKeesport, was appointed president of the Tennessee Coal, Iron
& Railroad Co. under the new management. Crawford accepted somewhat
hesitatingly at first, knowing that a great deal of money was required
before it would be possible to put the company on a satisfactory
earning basis. Indeed, he had previously refused to consider an offer
of the position of manager under the former control. Under his guidance
the company did rather better than expected and by about the end of its
second year as a “Steel Trust” subsidiary was showing a small profit.
All earnings, however, were put back into extensions and betterments,
as was also a large amount of cash supplied by the controlling
Corporation, and it was not until the year 1914 that the first dividend
on the common stock, 1 per cent., was declared.

By that time the expenditures made by the Corporation in extending
the Tennessee properties and enhancing their earning power had begun
to show visible results, and when the enormous war demand for steel
started to make itself felt early in 1915, the southern company was
in a position to take full advantage of it and to reap large profits

The Corporation does not make public the operating results of its
separate subsidiaries, hence it is impossible to more than guess at the
probable earning power of the Tennessee company. But there is reason
to believe that its future operations will justify the expenditures of
the Corporation, both for purchasing and improving its plants--that the
investment will prove a paying one.




A year or so before these words were written the big office buildings
and apartment houses of New York City were tied up by a strike of
elevator operators. The Empire Building, at 71 Broadway, purchased
shortly before the strike by the Steel Corporation, however, was not
affected. Every man was at his post. And it was perhaps the only big
building in the city that showed no sign of the strike.

A newspaper man, visiting the building, asked one of the starters the
reason, and he was told:

“As soon as the Corporation bought this building our wages were raised.
We are getting as much as or more than the unions are demanding. Judge
Gary has treated us white. And you can just bet your life we are going
to stick by him, strike or no strike!”

This is only a little incident. But it serves to illustrate the most
important characteristic of the head of United States Steel: His sense
of justice, the supreme passion of his life. Judge Gary treats everyone

Judge Gary is not a “glad hand artist.” He is, if anything, too
reserved, and hence he does not win popularity quickly with chance
acquaintances. But those who know him intimately or have business
dealings with him admire, sometimes even reverence him, for they know
he not only preaches but practises in every relation of his life the
square deal, and when there is any question of what is fair between
himself and another, leans over backward and gives the other the

In the pages of this history the Steel Corporation’s policy of “the
square deal” to all has been emphasized time and again. It is the
Corporation’s policy because it was first Gary’s. He impressed it
on the Corporation, sometimes after a hard fight. To-day it is the
foremost policy of the big company as it is the guiding spirit of
Gary’s life.

Elbert H. Gary, chief executive officer of the United States Steel
Corporation, was born on his father’s farm near Wheaton, Illinois.
He was descended from old New England stock on one side, his father,
Erastus Gary, having sprung from the hardy Puritans who settled in
Massachusetts, while his mother, Abiah Vallette Gary, was a descendant
of one of the daring spirits who sailed from France as an officer
in the Army of LaFayette and fought with him for the freedom of the
American colonies.

The future head of the greatest industrial organization in the world
was brought up frugally. He was full of spirits and fond of play, but
his Puritan father was a believer in the discipline of hard work, and
the youthful Elbert had little time except for his lessons and for work
on the farm. “My father didn’t believe much in play,” he once remarked
to the writer; “we boys had our choice of working or studying, and
the time was divided about equally between the two during each year.”
But although Erastus Gary may have been stern and uncompromising he
was obviously also a fond and kindly parent. Asked what had been the
dominating influence of his life, Judge Gary replied: “My parents.
Whatever worth while I may have done I owe to their teaching and

[Illustration: Bee-hive Coke Ovens]

When Gary was fourteen the Civil War broke out. The story is told that
the news came to the farm one evening that the Union had been attacked
and Erastus Gary and his boys sat around the fire discussing
the situation and what their course of action should be. But their
mother had no such doubts. Walking to the fireplace the old lady took
therefrom a rifle and handed it without a word to her eldest son.

[Illustration: Mouth of Coal Mine--Coke Ovens in Background]

The Judge himself remembers nothing of the incident and it may be a
fabrication pure and simple. However this may be, the fact is that soon
after the young Elbert ran away from home and joined the Union ranks.
He never had the desired opportunity to fight for the Union as his
father discovered his whereabouts--this was probably not difficult as
he knew the boy’s spirit--and got him sent back home.

Among the friends of the elder Gary, and frequent visitors at the
Wheaton farm, were Col. Henry F. Vallette, an uncle, and Judge Hiram
H. Cody, members of the Illinois bar and of the firm of Vallette and
Cody, of Naperville, a neighboring town. They had both noticed Elbert
Gary’s ability and studious habits, and when the boy was about eighteen
years of age Vallette one day asked him: “Elbert, how would you like to
become a lawyer?”

Needless to say Gary did not wait to be asked twice. He entered the
firm’s office in 1865 and while working there began to read law. Later
he took a regular course in a law school at Chicago and was soon
admitted to the bar of his state, where his success was rapid and
pronounced. In course of time he became Judge of Du Page County and was
admitted to the bar of the Supreme Court of the United States.

Meanwhile, he had formed, with his brother Noah and one of his former
chiefs, the firm of Gary, Cody & Gary.

Gary became one of the leaders of the Chicago bar, and his ability in
handling difficult cases soon attracted to him a number of wealthy
clients, among whom were several large corporations, and it was through
his connections with one of these corporations that he eventually
connected himself exclusively with the steel industry, in which he has
since risen to be the most important figure.

In 1898 Gary, as general counsel for and a director of the Illinois
Steel Co., was called on to take charge of the organization of the
Federal Steel Co., a merger of the Illinois and other companies. It was
he who first suggested this amalgamation. Here he was for the first
time brought in touch with the late J. Pierpont Morgan, whose financial
assistance in the formation of the new company was being sought. The
business ability of the lawyer so impressed the New York banker that
he and others interested with him insisted that Gary should head
Federal Steel. The future head of United States Steel hesitated, for
his practice was lucrative and he had become financially independent,
but he finally yielded and gave up his legal business, then located at
Chicago, and moved to New York, devoting himself thenceforward entirely
to steel.

Speaking of the reasons for Morgan’s choice in this matter an old
business associate of the Judge’s said: “Legal judgment and business
acumen are seldom found in combination. Gary had both these qualities
and a higher degree than any man I have ever known. And it was this
happy combination that impressed the great banker.”

But more than this, Gary was, and is, a statesman in business. He
has the broad vision that distinguishes the statesman from the mere
politician and the really great business leader from the average run of
executives. He saw beyond immediate effects into the distant future and
based his course on this vision.

In writing of the vast majority of men who have achieved success in
one line or another it is easy to select some prominent characteristic
which particularly distinguishes them. But there are a few who owe
their eminence to a variety of well-blended attributes, and Gary is one
of these chosen few. This renders it difficult for the chronicler to
decide where the heaviest stress should be laid.

A prominent Chicago lawyer who in his youth had worked for years under
Gary was appealed to in this regard. And this is what he said:

“Judge Gary had the ability and courage to, whenever necessary, abandon
the old precedents which, by reason of changed times and conditions,
had been relegated to the scrap heap of progress. He was one of the few
attorneys who could, with almost prophetic vision, see the positions
which the courts of appeal must eventually be obliged to take with
reference to questions of public policy and the great industrial
organizations just then in their infancy.”

The lawyer then went on to tell an anecdote illustrating the fact that
the Judge though a member of the legal profession did not believe in
recourse to litigation when it could be avoided. He said:

“I recall that on one occasion a client called on the Judge in an irate
mood and asserted his intention of prosecuting a neighbor for slander.
He told Gary what the neighbor had said and asked his opinion and
advice. And this was the reply he received: ‘If you are guilty of what
he charges perhaps you had better sue; but if you are not--why, go home
and forget it.’”

Nor did Gary’s prophetic vision “extend only as regards the position
which the courts must take” but to the trend of human events generally.
There is nothing uncanny about this foresight or sixth sense. It is due
entirely to the fact that its possessor has a mind peculiarly capable
of estimating and sizing up the relative values of known causes and
deducting from them the natural, in fact, the inevitable results.

No better exemplification of this can be given than is afforded
by the policies which he advocated for the Corporation, and which
were gradually adopted and put into practice. He saw plainly, long
before any one else did, how subject to criticism was the gigantic
organization which he had helped to form, and of which he was the
head; he realized that its very size contained an element of weakness
in that it attracted enmity, and made it the subject of attack.

And in the face of powerful opposition, not only from some of his
fellow directors at first--an opposition that gradually diminished
and eventually vanished, or was converted into admiration and hearty
coöperation--but from subordinate executives of the subsidiary
companies who could not accustom themselves immediately to new business
methods, he insisted that the big company should so deal with all with
whom it came in contact, its competitors, its customers, its workmen,
as to make all of these its friends.

Such a consummation was regarded in the beginning as an impracticable
dream by nearly everyone of his colleagues, who could not realize that
a new industrial era was dawning, but Gary persisted and won out.

The good will he gained for the Corporation from those who otherwise
would have been its enemies proved a strong bulwark of defence in the
Government’s suit for the dissolution of the “Steel Trust.” Had Gary’s
early recommendations on questions of policy been overruled by his
associates it is a moral certainty that the Corporation would have been
dissolved instead of emerging victorious from the suit. It is difficult
to see how any one who had the opportunity to listen to or read the
evidence presented in this litigation could fail to have been impressed
with the fact that Gary seemed to have anticipated every possible
point of attack and to have taken steps to eliminate, or at least to
minimize, the danger therefrom. Whatever may have been the differences
of opinion in the beginning, for many years the policies advocated by
Judge Gary have been endorsed by all of his fellow-directors on the
Steel Corporation’s Board; particularly by the members of the Finance
Committee, who were more closely associated with him, had a better
opportunity of absorbing his viewpoint, and who stood behind him
solidly in carrying out his ideas. Gary himself was emphatic on this
point in his testimony in the Government suit.

The part played by Gary in bringing about the formation of the U. S.
Steel Corporation and in guiding its policies was clearly brought out
by the late Robert Bacon, one of the partners in the firm of J. P.
Morgan & Co., in his testimony in the suit in question. Mr. Bacon,
speaking of the organization of the big company, said: “Judge Gary, of
course, directed it all.” And later, in discussing the policies of the

“The facts are that the policy of the company from the beginning has
been to change the old methods of dealing with competitors. Judge Gary,
who has done more for the U. S. Steel Corporation in its development
and the benefits it has brought all hands than any one man since its
formation, has made it a cardinal point of his policy, and has tried
his best to inculcate it upon all the sub-companies, that there was
a new order of things come, that there were new rules of the game
dealing with competitors, as well as in other human relations. Judge
Gary has talked from the very first and has tried to compel the
actions of all the others in the Corporation toward dealing fairly and
decently with competitors, as being the only way in which any kind
of stability of prices or of conditions could be maintained. He has
from the beginning preached and practised the fairest kind of dealing
with his competitors, keeping them informed, as far as he legitimately
could, of all the conditions of the Steel Corporation, and by doing
so has gradually acquired a degree of confidence that, in my opinion,
has never existed before amongst competitors. The old conditions have
changed; the old destructive and ruinous and ruthless warfare of the
early days of the iron and steel industry has disappeared, and in its
place, by reason of the attitude of Judge Gary, more than any one else,
a condition has been produced among competitors in the iron and steel
business, and I believe in many other industries, that never before

Judge Gary’s intense desire for doing justice to all, and his sincere
interest in the well-being of the worker, have already been referred
to. He is not a reformer in the ordinarily accepted sense of the term.
He does not prate about helping the working man, but in guiding the
big Corporation he has always seen to it that the man who labors shall
be given an opportunity for clean living and self-respect. And it is
significant that in arranging wage increases the Corporation has always
provided more generously for the lower-paid employee. As a mass, the
men who work for the Corporation recognize Judge Gary’s attitude and
appreciate it fully. And he sets a higher valuation on this recognition
and appreciation than on all the honors that have come to him.

Some years ago Gary, in urging on the subsidiary companies the
promotion of safety and welfare work for the Corporation’s employees,
said to the casualty managers of the different subsidiary companies:
“We (the Finance Committee) shall not hesitate to make the necessary
appropriations of money to carry into effect every suggestion that
seems to be practicable for the improvement of conditions at our
mills.” Later he wrote, repeating his former promise that all needed
money would be forthcoming and saying: “The safety and welfare of the
workmen is of the greatest concern.”

This promise has been kept sacredly. The writer has visited at one
time or another practically all the Corporation’s plants--some of
them several times. At each one he has always asked those who devote
themselves to welfare work this question: “Have you any difficulty
in getting appropriations from the Corporation for welfare work you
consider advisable?” And the reply has invariably been the same: “We
are never refused.”

In the vast organization that is the United States Steel Corporation
there are perhaps hundreds of thousands of men who have never set eyes
upon its head, who have no idea what he is like to look upon. But there
is probably hardly a man who does not feel his influence, and there are
few who do not look up to him with respect and often with something
like reverence. His personality has permeated this huge mass of men.

Another attribute of this great business leader is a broad and real
tolerance of the opinions of those who do not agree with him. He has
built up a vast and wonderfully efficient organization founded on what
he conceives to be principles of justice and fair dealing, but his
attitude toward those who criticize the structure he has erected is not
one of irritation, as might be expected, or of impatience. Rather he
endeavors, sincerely and patiently, to disarm criticism by a policy of
open dealing.

On one occasion, when certain acts of his had been criticized as
constituting a possible violation of the law, he, although believing
implicitly that he had not offended, forthwith abandoned the
continuance of these acts, so as to leave no shadow of doubt of his
intent to obey the law. He explained at the time that though every
citizen had the right to criticize legislation, and should seek to have
changed such laws as he deemed unjust or uneconomic, he was bound to
obey these laws so long as they remained on the statute books.

In physical stature Judge Gary is of medium height. He carries his
years well and appears yet in his prime. The impression he gives the
observer is that of a statesman rather than a man of affairs, an
impression heightened by his deliberate speech and his appreciation
of the finer meanings of words. Most of his portraits represent him
sitting straight up, just a little stiffly, but when interested in a
conversation, the Judge invariably stands, or rather paces deliberately
back and forth, his hands stuck in the waistband of his trousers, and
his head bent forward at an angle of deep thought. And as he warms to
his subject, he now and then gesticulates slightly, or, turning to his
listener, drives home some argument with pointed forefinger. At the
remembrance of some amusing incident his twinkling eyes light up what
is usually a decidedly serious countenance.

All those who during the World War were in touch with what was being
done by the Government to meet the enormous new manufacturing needs
created by the war know that the Steel Corporation, in the great
emergency, invariably put patriotism above profits and that its hearty
coöperation helped materially in bringing about the desired end. Judge
Gary was responsible for the Corporation’s attitude in this as in other

Honors have been showered upon the head of the Steel Corporation by
universities and colleges, and the American, French, Belgian, and
Italian governments, and the late Pope Pius X presented a gold medal
containing his profile portrait to Judge Gary in recognition of his
efforts for improving working conditions. But beyond all these honors
he values the esteem of the men under him, and the good will of his

It would be hard to find a more suitable ending for this brief study of
the leading figure in the industrial world than the quotation applied
to him by the principal steel makers of the United States and Canada
on the occasion of a dinner given in his honor in October, 1909. Here
were men who had fought with him and against him, who had had every
opportunity to estimate him both as friend and foe, and who, after the
trying times of the 1907 panic, declared that he had “played the game
and played it fair”:

“Moderate, resolute, whole in himself, a common good.”


“The greatest banker the world has ever seen.” Thus the head of the
Deutsche Bank called the late J. P. Morgan during his lifetime, and as
the years pass students of finance are becoming more and more satisfied
that the German, himself a banker of no mean repute or ability, spoke

Without J. Pierpont Morgan the organization of the United States Steel
Corporation would, in all probability, have been an impossibility.
The carrying through of so vast a project required a financier of his
prestige and of his financial courage. There was no other banker big
enough or bold enough to undertake such a task, and no history of the
Corporation would be complete unless it contained a résumé of the work
of the former money wizard.

So large did Morgan loom in the public eye during his lifetime and so
much has been said and written of him since that it would be difficult
to say anything of him with which the reader is not already familiar.
But it has perhaps not been generally realized that Morgan was a
patriot of the right type. He was, to use a financial term, “a bull on
America.” His confidence in his country’s future was unbounded, and he
had the courage of his convictions to put his great fortune into the
development of American enterprises.

John Pierpont Morgan was the son of Junius Spencer and Juliet Morgan.
He was born on April 17, 1837, and educated at the English High School
of Boston and the University of Gottingen. He entered the banking
business at the age of twenty, with the firm of Duncan, Sherman & Co.,
and later, from 1864 to 1871, was a member of the banking house of
Dabney, Morgan & Co. Still later he helped to form the firm of Morgan,
Drexel & Co., which afterward became J. P. Morgan & Co. He died in Rome
within a few weeks of the close of his 76th year, on March 31, 1913.

Having a peculiar genius for financial organization and arriving at the
heyday of his power at the period when vast consolidations of capital
and industry were the order of the day it was natural that he should
have figured prominently in the carrying through of many of these.
Among the large concerns with the organization of which he was closely
identified was the International Harvester Co., and he took a prominent
part in the reorganization and refinancing of several large railroad
enterprises, notably the Erie, Reading, Santa Fe, and Northern Pacific.
He has generally been blamed for the New Haven débâcle and there is no
doubt that he occupied an important position in managing its affairs;
in fact, according to the former president of that system, he dictated
its policies and actions.

But the financing of the United States Steel Corporation was beyond all
question his _magnum opus_.

So great was Morgan’s influence in the management of most of the
companies with which he was connected that it was said of him, as of
the McGregor, that “where he sat was the head of the table.”

But so far as the Steel Corporation was concerned at least, it seems
to be fairly well established that, keen as was his interest and great
as was his pride in the big company, he never assumed an attitude in
the least dictatorial. He was the Corporation’s banker--nothing more.
Questions of operation and policy he left entirely to those having
direct charge of them. This was particularly true in the last six
or eight years of his life, by which time, other directors of the
Corporation have stated, he had come to place such implicit reliance on
the judgment of Judge Gary that he always accepted the latter’s ideas
upon all matters connected with the welfare of the great enterprise.

Morgan himself regarded the amalgamation of many of the country’s
leading steel concerns into United States Steel as the crowning
achievement of his career. He took a personal pride in his connection
with the Corporation’s organization--and who shall say it was not a
worthy pride? He lived to see it firmly established and exerting an
influence for good on the steel trade and on industry generally; to
see it gain the confidence of the public as evidenced by the growth
that was, even before his death, taking place in the number of its
stockholders, many of whom held only a share or two and regarded them
almost as gold bonds; to see it earn the good will of its competitors
and the loyalty of its--at the time--two hundred thousand odd employees.

But unfortunately he also lived to see it attacked by the Government.
No doubt this was a sore grief to the great financier. And its
vindication did not come until several years after his death.

To those who knew him by sight only Morgan appeared a solitary, stern
figure, perhaps a little too much inclined toward impressing his own
will on others. Those who enjoyed intimacy with him declare that under
his cold exterior beat a heart as tender as a woman’s, that he took the
keenest interest in all things human and that, while never figuring
publicly as a philanthropist, the list of his private benefactions was

Newspaper men, who perforce had often to seek an interview with the
great banker, found him rather unapproachable. But when he consented
to talk his statements could be relied on absolutely. And he was not
without a subtle sense of humor. On one occasion a financial writer who
had been assigned to get Morgan to talk by hook or by crook invaded
his private yacht and was only saved from being ejected by the banker
himself who invited his visitor to the saloon and treated him like an
honored guest.

He discussed in the fullest detail the subject on which the writer
wished to interview him but--at the end, when his self-invited guest
was taking his leave, Morgan said with a shadow of a smile:

“Of course, you understand all I have told you is in confidence. You
have been my guest and I rely on you not to violate that confidence.”

Needless to say the interview was never printed. The scribe reported
to his office that the banker refused to be interviewed.

When Morgan died the leading business men of the country united in
testifying to his ability and character. Judge Gary, who had been
closely associated with him for years, said:

“As a constructive force in financial matters he had no equal. With
keenest perception, with indomitable courage, and with unbounded
confidence in the future he was a natural leader and as such was called
upon in times of financial stress to lend his influence to avert a
threatened storm or to overcome an existing difficulty. And he never
failed. His character was such that the greatest men of this country
and of other countries trusted him and followed his lead.”

Shortly before he last sailed from his home shores Morgan remarked
to a friend that his work was done. The utterance was prophetic. And
posterity is beginning to realize how great that work was. In these
difficult days of world reconstruction, more than ever before, is his
financial genius and particularly his faith and courage missed.


Perhaps of no other man in industry are as many anecdotes related as
of Charles M. Schwab, the first president of the United States Steel
Corporation, and now head of the Bethlehem Steel Corporation, the
second largest steel organization in America.

Schwab is the Peter Pan of American industry. His is the spirit of
perennial youth, his the philosophy of laughter.

“I try,” he says, “to be like Schulz. He was a foreman under me during
the Homestead strike. He stuck by the company and one day came into my
office dripping mud and water. To my inquiries he replied that some
strikers had thrown him into the creek.

“‘What did you do then, Schulz?’ I asked.

“‘Oh, I shust laff.’”

One of the old Carnegie “boys,” Schwab is like the former iron master
in his wonderful ability to infuse into those who work with him some of
the enthusiasm with which he is so richly endowed, and to get from them
loyalty and devotion. To this attribute, as much as to anything else,
Schwab owes his great success.

It is impossible to get an accurate concept of Schwab’s personality
without coming directly into contact with him. Many men have declared
that “C. M.,” as he is known to his friends, is “the best salesman
that ever stepped in shoe leather.” And this is not an exaggeration.
There is something about him--fascination, personal magnetism, call
it what you will--that captivates almost everyone with whom he comes
in contact. His infectious laugh disarms hostility and criticism. His
great ability compels admiration.

Numerous anecdotes illustrating Schwab’s magnetism are told in the
steel trade; the following is typical:

Several years ago, when Bethlehem Steel was a little known company, its
head visited a prominent New York banker to seek his aid in putting out
a bond issue. He told the banker all about the great future in store
for Bethlehem as he saw it--prophetically, as it has turned out--and
his hearer was fired with enthusiasm regarding the proposed issue. He
asked Schwab to go back to his office and dictate to a stenographer the
statements he had made regarding the security behind the bonds and the
future of Bethlehem Steel for the purpose of making up a prospectus.
With that, he declared, the bonds would sell like hot cakes.

When the banker received the typewritten prospectus he was dissatisfied
and rang Schwab up on the ’phone. The steel man’s arguments were not
nearly so convincing in black and white as when given in his inimitable
style, and the money magnate declared that the other had not included
in the written statement the facts related in the conversation. So
Schwab paid him another visit and went all over the matter again. The
banker said:

“Yes. You’ve got it all down here. But it doesn’t sound the same. I
tell you what we’ll do. You talk the bonds into a phonograph and we’ll
use the records to sell them.”

And here is another Schwab anecdote told by himself:

“On one occasion, when Bethlehem was still a struggling company, I
went to see a Philadelphia banker whom I knew very well and told him I
needed a great deal of money. He said:

“‘I can let you have half a million.’

“‘Why,’ I replied, ‘I can get at least a million from bankers in New
York who don’t even know me!’

“‘That’s the reason they lend you,’ he gravely returned.”

Charles M. Schwab was born at Williamsburg, Pa., on February 18, 1862,
and educated at St. Francis College at Loretto in the same state. His
father owned a livery stable at Cresson Springs, where Carnegie had a
summer bungalow.

One day the little Scotsman, who loved music, heard the boy singing,
and told Schwab, Senior, to bring the lad to him when he was ready to
go to work. At the age of eighteen Schwab entered the employment of the
Carnegie Company as a junior in the drafting room.

Schwab attributes his success largely to the interest which Carnegie
took in him. Carnegie, on the other hand, declared that Schwab was one
of the two men to whom he owed the bulk of his fortune, the other being
Captain William R. Jones, who was superintendent of the big Braddock
plant when Schwab enlisted in the steel army.

At the age of twenty-four Schwab was appointed superintendent of the
Homestead plant, which had just been acquired by Carnegie. When he
arrived there, the organization was in a terrible condition. The long
series of strikes which the original owners had had to contend with had
not only caused them to give up the plant in despair and to accept
Carnegie’s offer, but had resulted in bitter feeling on the part of the
workmen. But Schwab’s smile and good nature soon won them over, and
in a few months the organization had been restored and Homestead was
making money for Carnegie.

In 1889 Schwab returned to Braddock on the death of Captain Jones,
as his successor. Three years later occurred the bloody strike at
Homestead, and Schwab was again sent back there to take charge. When
the strike was over he was put in charge of both plants. He was the
only man that ever managed two plants for Carnegie.

One day Carnegie told Schwab that it had been decided to make him
vice-president of the Carnegie Company. But the young man replied:

“No, Mr. Carnegie, I am no good at carrying out another man’s orders,
and that’s about all a vice-president has to do. As superintendent I am
boss of the plants I manage; I prefer to remain that way.”

Next day Carnegie again sought out his superintendent. “Well, if you
won’t be vice-president, I suppose we’ll have to make you president,”
he said, and so he did.

Like Gary, Schwab was satisfied that the next step in steel making, one
that must come sooner or later, was the integration of the different
departments of steel making into one big, harmonious whole. How he
assisted in making this possible we have already seen. In 1901, on the
organization of the United States Steel Corporation, Schwab became its
president, with a salary of $100,000 a year and about $15,000,000 of
its stock.

After the Corporation had taken over Carnegie Steel, Morgan, the story
goes, found a contract among its papers pledging Schwab a salary of
$1,000,000 a year. He had not been aware of the existence of this
contract and asked Schwab what could be arranged on the matter. Schwab
replied: “Let me have that paper a second, Mr. Morgan,” and taking it
from the banker, he tore it into small pieces and threw them into the

But Schwab did not long remain president of the great steel merger.
Long accustomed to being “boss” he found the new conditions
disagreeable. Bred in the old steel school he was out of sympathy with
the policies of the Corporation as inaugurated by Gary. There was no
open breach between them, but the situation was obviously galling to
the younger man and so he resigned, his resignation probably being
hastened by the fact that he had been for some time in poor health, a
victim of neuritis.

It was in 1903 that Schwab severed his connection with the Steel
Corporation and sailed for Europe intending, at the time, to give up
business permanently. But this was not to be.

Although he returned from Europe in 1904 Schwab did not actively
engage in business again until 1907. He was, in a sense, pitchforked
back into the manufacturing arena by the failure of the United States
Shipbuilding Co. a year or two before and its reorganization as the
Bethlehem Steel Corporation. Schwab, who had been the principal
bondholder of the shipbuilding company, became the controlling interest
in the reorganization and eventually assumed personal charge of its
activities to protect his own investment as well as that of others.

Once in harness again Schwab threw himself heart and soul into the
steel battle. He found Bethlehem Steel in a rundown condition and for
years he poured into it his personal fortune and all the money he
could borrow. Although himself the largest stockholder he steadfastly
refused to consider dividends until the company was firmly established
financially and the result was that, before the European war broke out,
Bethlehem was solidly on its feet and showing large earnings. These
were enormously enhanced during the war years, when the stock sold
as high as $700 a share. To-day Bethlehem is the second biggest steel
company in the world, its plants having a capacity of 3,250,000 tons of
steel annually.

Although for many years a competitor of the Corporation of which he was
once president Schwab is still a firm believer in the future of United
States Steel and the value of its securities. On one occasion he told
the writer:

“It is a wonderful concern. There isn’t anything like it in the world,
nor could its plants and organization be duplicated at any cost. The
future will show how well, how securely, its foundations were laid.”


George Walbridge Perkins, chairman of the Finance Committee of the
United States Steel Corporation from November, 1901, to February,
1907, and an active member of that committee and of the Corporation’s
directorate till the day of his death, June 18, 1920, was an unusual
figure in American business--a man who, working his way from the bottom
of the ladder to an eminent position while still comparatively young,
gave up active money making while still under fifty and devoted his
life to the betterment of social conditions.

The world does not know how to judge Perkins. There are many
who believed that his withdrawal from active business and his
self-submergence in social work was a cloak, and this belief was
undoubtedly strengthened by the fact that Perkins, in appearance, was
a typical, cold-blooded financier. His was neither the look nor the
manner of an idealist, a reformer. But the record of his life from
1911, when he resigned from a partnership in the great House of Morgan,
is ample answer to all doubts of his sincerity. Perkins’ friends and
admirers can point with confidence to this record in the impartial
court of history.

Perkins was born at Chicago in January, 1862. He began his business
career in the humblest capacity, that of office boy, in the branch
of the New York Life Insurance Co. in his home town. Later he became
bookkeeper, then solicitor, manager of agencies and, still later,
vice-president. Finally, when only thirty-eight, he was elected
chairman of the Finance Committee of the company.

Perkins was one of the first exponents of corporate publicity. He saw
its virtues when publicity to most corporation men was anathema. When
vice-president of New York Life he urged that the best way to earn the
confidence of the public was to give it your own, and he prevailed upon
the trustees of the New York Life to publish annually a full list of
the securities in which the policyholders’ money was invested. This
innovation was heralded with a storm of ridicule by the managements of
competing concerns. But so powerful a means of getting new business
did these security lists prove, so great was the increase of insurance
written by the agents armed with them, that other insurance companies
were soon forced to follow, and the practice became general in the
insurance world.

Perkins’ next step was to extend the business of his company to
European fields previously closed to all American insurance concerns,
which, in fact, were not permitted to operate in many European
countries because of the unenviable reputation they bore. Perkins was
determined that New York Life should lift these legislative handicaps
and do business anywhere and everywhere it wanted to and so he made
one trip after the other to Europe, each time extending his company’s
field of operations. What he said in effect to the various European
governments was: “The New York Life is ready to meet any reasonable
demand for the safeguarding of the interests of its policyholders,” and
he backed up his assertion. The result was not only to give the company
a bigger field abroad but to strengthen the arguments of its agents at

This achievement and the fact that he was instrumental in bringing
to America the first Russian loan ever placed here, brought Perkins
to the notice of New York financiers. Early in 1901 he called on the
elder Morgan seeking a subscription to the Palisades Park project, one
of Perkins’ pet hobbies until the day of his death and a project that
has enabled thousands of poor children from the New York slums to get
a chance for fresh air and outdoor enjoyment. Morgan, on his second
meeting with the insurance man, pointed in his usual abrupt manner to a
desk near his own:

“How would you like to occupy that?” he asked.

At first Perkins refused, but later accepted, and he became a partner
in Morgan’s in 1901, continuing with the great banking house until 1911.

Soon after the Steel Corporation was organized Perkins was elected a
member of the Board of Directors, and later, on the resignation of
Robert Bacon, became chairman of the Finance Committee. His experience
with the New York Life had peculiarly fitted him for the position he
now held, for Perkins was first and last an organizer--a worker with
men, not with money. Although a member of the largest private banking
house of the country he was not a banker. “In the ten years I was
with Morgan’s I never went behind the counter or examined into the
bookkeeping end of the business,” he declared; “my job was to assist in
the physical organization of the great industrial combines which Mr.
Morgan was then engaged in financing.”

Like Gary, head of the Steel Corporation, Perkins looked rather to
the ultimate results of an action or a policy than to its immediate
effects. Like Gary, moreover, he was a believer in corporation
publicity and in the square deal to the worker, so it was natural that
he should have favored these ideas in the Corporation. Perkins at the
beginning, it is true, did not fully endorse all Gary’s policies but
he early became an ardent supporter of them, and his assistance in the
turbulent early years was a great help to the Judge in his efforts to
have his policies endorsed by the Corporation’s board.

Perkins was particularly identified with the Corporation’s bond
conversion plan, explained in an earlier chapter. It was largely his
idea. When the subject of raising more working capital came up after
the organization of the big company it was he who suggested the scheme
by which the cost of securing the new capital needed would be paid
back in a few years by savings in interest charges, one which would
also eventually reduce the Corporation’s fixed charges materially. He
believed that the Corporation should build for the future and that
it was a matter of small moment if the immediate cost of a course of
action was high if the ultimate results were toward economy. And when
the plan was opposed in the courts by some of the stockholders it was
an affidavit presented by Perkins that did more than anything else to
induce a favorable decision and to make it possible to proceed with the

In 1911 Perkins retired from the Morgan firm, at the same time retiring
from all active business except his directorship in various companies,
chief among which were the Steel Corporation and the International
Harvester Co., of which latter he was chairman of the Finance
Committee. After that time he devoted his energies until his death to
semi-public work.

Especially did he devote himself to the solution of the problems
growing out of the relationship between capital and labor. He was
prominent in the profit-sharing plan which is now in vogue in the
Steel Corporation and which has been so largely followed by many other
industrial concerns in the past seventeen years. He also gave much
of his time to spreading the gospel of coöperation in the business
world. As long ago as February, 1908, he began making public addresses
on the necessity for such coöperation, claiming that the many modern
improvements in inter-communication and the enlightenment of the
people through our broad system of education had brought us to a point
where the old destructive, competitive methods in business had to be
abandoned and a more humane and enlightened order of things take their
place. He delivered many addresses throughout the country on these two
favorite themes, profit-sharing and coöperation.

As already suggested Perkins’ course in breaking off his business
career apparently at its zenith and devoting the prime of his life to
the betterment of the lot of the worker with his hands and the general
welfare of the community was regarded with suspicion by many, and his
motives were questioned. Of the influence that guided his course let
him speak for himself.

“My father,” he said, “was deeply interested in social service and
settlement work, and, as a boy, my Sundays were spent not in merely
going to Sunday-school but in rounding up the poor boys of the
neighborhood for classes, etc. Later, my experience selling life
insurance brought me closely in touch with the needs of the people,
and even when I became affiliated with the Morgan firm my work as an
organizer was the human end of the job. My inheritance from my father
and my own life work both kept me in touch with “all things human.”
Isn’t it only natural that I should take a deep interest in what you
might call human work?

“I don’t claim credit for this. In fact, I don’t see how, with my
experience, it could have been otherwise. It became, if you will, my
hobby which I gratified as soon as I was able to.

“When a man approaches fifty years of age and finds he has enough money
to meet his wants for the rest of his life and to take care of those
for whom he should naturally provide, the question that presents itself
is: what am I going to do with the remainder of my life? Whatever I do
in the way of work will have to be left behind me in the world. Shall
I work to accumulate more money and leave that, or shall I work for
certain definite objects that I believe are worth while, and leave the
results of that work behind me? I simply chose the latter course.”


Many other men, of course, have done their share in making the
Corporation what it is to-day. In the success of the great company
men like Richard Trimble, its secretary, and William J. Filbert, its
comptroller, who have been with it since incorporation and seem almost
as integral parts of its structure as Judge Gary himself, have done
their part, as have the presidents of the various subsidiary companies.
All these are men of unusually high ability, nearly all of whom have
worked their way to their present positions from the bottom of the
ladder. They have for years devoted all their energies to building up,
each in his own sphere, the business and resources of the big company
and may justly and proudly claim the right to be reckoned with Gary,
Morgan, and the others, as “Men who made United States Steel.”



Until the year 1914 American industry had been self-sufficient. Our
manufacturers made goods for home consumption, our bankers concerned
themselves only, or almost so, with American finance, and, broadly
speaking, the world outside was of comparatively small importance in
our business affairs. With the war this situation changed. The British
navy stood as an impassable barrier between Germany and her customers
abroad. England and France were devoting the mass of their man power
to fighting or the production of the wherewithal for fighting, and the
neutral, non-producing nations had only one market to turn to. They
came to the United States for all their wants of manufactured goods,
and in so doing brought home to the American manufacturer the real
importance of these vast markets he had previously neglected.

Some of our more far-sighted manufacturers, however, had long sensed
the value of this foreign commerce. They realized that the day would
come, sooner or later, when this country would produce a surplus of
manufactured goods above her own needs, and that if she was to be
prosperous she must find customers outside for this over-production.
They realized, too, that these markets must be assiduously cultivated
against the time when they would be necessary for the continuation of
our prosperity.

And among those who took this far-sighted view was the management of
the United States Steel Corporation.

In the office of James A. Farrell, president of the Corporation, at
71 Broadway, New York, stands a pedestal supporting a great globe. It
is a fitting ornament for that office, for the business of the great
steel company extends to practically every part of the known world,
literally “from China to Peru”; fitting, also, because Farrell’s name
is indissolubly connected with the development and extension of that
business in the markets of the world.

When the idea of a big steel combine was first conceived by Judge
Gary, one of the chief considerations in his mind was that such a
vast organization, and such an organization alone, would be able to
offer battle to the manufacturers of the other great steel-producing
nations--Great Britain, Germany, and Belgium--which were then
practically without let or hindrance, dividing between them the markets
of the world. The same thought was forcibly brought out by Charles M.
Schwab at the Simmons dinner, and was one of the most powerful factors
in influencing J. Pierpont Morgan to undertake the financing of the
giant steel merger.

Properly speaking, the development of the Corporation’s export trade
did not begin until about two years after the big company was formed.
Questions of internal organization were naturally paramount in the
Corporation’s infancy, and the first few years were taken up with
problems nearer home--physical organization, coördination, integration,
efficiency, economies, in a word, the welding into a harmonious whole
of the corporate organization and properties merged. Therefore, it
was not until the early part of 1903, when internal problems had been
gotten out of the way, that the question of securing export business
on a more systematic and profitable basis was actively considered and
steps taken toward the formation of an organization with a definite
export plan and policy. To do this, it was necessary to bring together,
to consolidate, the export offices and organizations of the several
subsidiary companies which had until that time been maintained on
a practically independent basis. This was done by creating a new
company, the United States Steel Products Export Co. (the “Export”
was later dropped from the title), late in 1903. The first organized
efforts of the Corporation to obtain export business may thus be said
to have begun with the calendar year 1904.

How beneficial was the coördination of the export trade of the various
constituent companies into one selling agency is forcibly illustrated
by the fact that the cost of doing export business has been reduced
from about 8 per cent. of gross, which it was when each company sold
independently, to something under 1 per cent. in recent years. As
the Corporation’s foreign sales in the past few years have averaged
more than $160,000,000, this has meant an annual saving of between
$11,000,000 and $12,000,000, or nearly a half year’s dividends on its
preferred stock. The lower selling cost also meant that the position of
the Corporation bidding against foreign competition has been improved,
and to that factor must be attributed largely the increase in the
Corporation’s export business.

The choice for the presidency of a new export organization fell upon
James A. Farrell. He was suggested and his appointment advocated by
the chairman. He was the man fitted preëminently for the job and his
selection was more or less inevitable. It is generally recognized that
no individual in the steel industry possessed so wide a knowledge of
the extent, character, and requirements of world markets as he does.
In 1903, when he became president of the Corporation’s new export
subsidiary, the country’s foreign trade in iron and steel was a little
more than 300,000 tons. In 1917 it was 6,268,514 tons.

For many years, during which there had been little disposition on the
part of American steel makers seriously to cultivate markets abroad,
Farrell’s entire time and energy had been devoted to that end. A man
with the genius that is “an infinite capacity for taking pains,” he had
developed a thorough knowledge of competitive conditions affecting
steel in every part of the world where the metal was used. He had
become, and still is, a walking encyclopedia on all matters relating
to the exportation of steel, carrying in his head details of freight
rates, steamship facilities, duties, and so on, at and between all
important and many unimportant points. His facility in reeling off from
memory these facts and figures, as displayed when he was called as a
witness for the defence in the Federal suit since dismissed by the
Supreme Court for the dissolution of the Steel Corporation, earned him
the soubriquet of “the man with a head full of figures,” a not inept

And indeed, no more striking exposition of the wide scope of the export
market for steel made in America which has been developed within
the past sixteen years has ever been given than was embraced in his
testimony on the occasion mentioned. His statement which, incidentally,
consumed nine days, was a remarkable story of business achievement.
He showed that the exports of the Corporation were of a variety as
miscellaneously wide as was their distribution, ranging from cotton
ties for Egypt to highway bridges for Iceland; from wire products
for the Holy Land to light rails and pipes for the diamond mines of
the Transvaal; from galvanized sheets for the houses of the Borneo
natives to the steel skeleton work for some of Buenos Aires’ large and
beautiful buildings; in fact, everything made of steel was shipped
“from Greenland’s icy mountains to India’s coral strand.”

Farrell is one of the men of which the steel trade furnishes so many
examples, men who have worked their way up from the foot of the ladder
to the highest places in the industrial and commercial world. Born at
New Haven, Conn., on February 15, 1863, he started his working career
as a laborer in a wire mill in his home town while yet in his teens--at
the age of fifteen and a half. But it was not long before he was doing
skilled work, and from this it was, for Farrell, an easy step to a more
responsible position.

While he had made good in the shops Farrell’s ability ran rather to
the selling than to the manufacturing end of the industry. He was
a merchant, a salesman, above all things, and he was soon given an
opportunity to prove his ability in this line when he was sent on the
road for the Pittsburgh Wire Co., with which concern he had become
connected. Later, when that company was absorbed by the American Steel
& Wire Co., Farrell won his way to the sales managership. His success
there was pronounced, and when the company decided to enter the foreign
field, he was offered, and accepted, leadership in the new venture.
When the Steel Corporation later took over the American Steel & Wire
Co., Farrell acted as foreign sales agent for the big merger, and
finally, as already stated, became the first president of the Steel
Products Co.

How satisfactorily he filled this position was shown by his selection
by Judge Gary later as president of the parent corporation. Farrell’s
elevation to the presidency of the United States Steel Corporation took
place in January, 1911.

Farrell deserves to be reckoned, along with Gary, Morgan, Perkins, and
Schwab, as one of “the men who made United States Steel.” Although
occupying a comparatively unimportant position at the time of the birth
of the Corporation his connection with it has lasted throughout its
history and for the past ten years he has had general oversight of the
manufacturing and selling operations.

Although no longer in direct charge of the management of the Steel
Products Co., Farrell still takes a keen and personal interest in all
that concerns the structure of the foreign business which he helped
so materially to erect. He is in close and constant touch with all
its export activities, and keeps himself as thoroughly informed of
developments affecting world trade in steel as he did when his whole
time was devoted to that end of the business.

Quiet and unassuming, Farrell bears a name for thoroughness and
efficiency. He throws himself wholeheartedly into his work, giving it
absolute loyalty and untiring energy. He was at one time characterized
as “the man who never rested” and there was some reason for the
characterization. In times of stress his working day is fourteen hours
or longer. But he has a splendid physique and a constitution apparently
of the steel in which he deals.

At first glance Farrell impresses the observer as “pure business.”
His manner suggests impatience of waste of time or language, and he
seldom makes even an unnecessary gesture. In appearance he typifies the
cold, unsentimental, even hard, business man. But his looks do him an
injustice for he is, if one is fortunate enough to pierce beneath the
surface, a man of broad sympathies and rare delicacy and tact.

Farrell was succeeded as head of the Steel Products Co. by Eugene P.
Thomas, who since 1906 had assisted him in building up that company’s
world business. Thomas was born in Atlanta, Ga., on May 11, 1876.
He began as a newspaperman, but after a brief experience in that
profession entered the steel trade. He was one of the pioneers of
foreign trade in steel, having gone to England as a salesman for the
company with which he was then connected, Lorain Steel, in 1899. Before
he had attained his thirty-fifth year he was head of the greatest
export organization in the United States.

As already explained, American steel manufacturers had made little
systematic or sustained effort to capture foreign trade prior to the
organization of United States Steel. Such campaigns for world business
as had been undertaken had not been conducted, as a rule, in such a
manner as to give the steel maker of this country a good name abroad.
The people of the steel-consuming countries--as distinct from those
producing their own steel--preferred to deal with German, British, or
Belgian mills, and for obvious reasons.

The great steel-producing countries of the old world, under normal
peace conditions, are unable to consume more than a comparatively small
proportion of the output of their mills; internal or home consumption
is small. Hence, the exportation of the greater part of the steel
these countries make is a pressing necessity and no effort is spared
to secure foreign outlets for their product, to cultivate a world-wide
good will.

The steel maker of the United States, on the other hand, has always
had, except in times of severe depression, an excellent market at home,
one ready to hand and able to absorb all the steel he turned out. The
country had been building up and expanding. Steel has been and is
still needed for railroads, skyscrapers, bridges, factory buildings,
agricultural machinery, automobiles, and a thousand and one other
purposes. The result of this has been that our manufacturers have had
no particular desire in normal times to seek foreign business with
its attendant risks and expenses and the long-term credit it demands.
They were, until recent years, content to leave the foreign markets
to European exploitation and only to enter these markets when dull
business at home forced them to seek new outlets for their product. In
the earlier days of the industry American steel, at such periods, was
thrown on foreign markets at prices often below cost of production,
the loss being considered preferable to unemployment at home or the
disruption of company organizations which a continuous decline in sales
would have brought about. This process was commonly known as “dumping,”
and it was calculated to earn the bitter hostility of foreign
competitors who saw their carefully cultivated markets taken away from
them by cut-throat competition. A wave of returning prosperity at home
would cause indifference to, and independence of, foreign trade on the
part of our steel producers, an attitude that naturally did not create
good will among foreign consumers. One of the results of this state
of affairs was uneven and sporadic exports; another was that American
steel had no friends abroad.

It has often been charged against our manufacturers that, although
professing to be anxious to sell their goods in all markets, they
were unwilling to meet the requirements of the foreign buyer, taking
the “if they don’t like our goods, let them go elsewhere” attitude.
Fortunately, this is not nearly so much the case to-day as it was a
few brief years ago, but this disposition is still visible in many
quarters. And it gives the European competitor, who goes on the
principle that the buyer is always in the right, an incalculable
advantage. The basis for this attitude on the part of our manufacturers
lies in his assurance of vast home markets. His competitor abroad,
having perforce to sell half or more of his output in other than home
markets, naturally works to find out the needs of possible buyers
everywhere, and sets out to meet these needs. And he gets the business.

But the Steel Corporation, once having determined to build up a
permanent export business, accepted and adopted the attitude of its
European competitors that the consumer, no matter where he is, must
get his goods as he wants them, and not as the manufacturer sees fit
to make them. To do this, it became necessary to begin to manufacture
a number of new lines of steel for which there was no call in the
domestic markets, to adopt the weights and measures of each country in
dealings with buyers there, and in every way to make it convenient for
the purchaser abroad to order from the Corporation with the certainty
that his business would get the same welcome as it would if placed with
a British, German, or Belgian mill, and the same care and attention. To
suit the needs of the various foreign buyers catered to it was found
necessary, in some instances, to devote entire mills to making nothing
but export products.

Wire goods constitute an important item of export and of the eleven
thousand and more varieties of wire products made by the American Steel
& Wire Co., some 1,800 are manufactured principally for foreign trade,
many of these lines not being sold in the United States at all.

For instance, the countries in South America lying below the equator
demand what is known as “varnished” wire; certain of the tropical
countries, because of climatic conditions, require a wire heavily
coated with spelter to withstand rust; and so on. The Australian
carpenter is accustomed to fasten his woodwork with a nail of oval
section. No argument can convince him that the round nail, favored in
America, is just as good. He knows what he wants and knows also that if
the United States won’t supply it, Europe will. In other parts of the
world a square nail is popular. So the Corporation makes oval nails,
square nails, nails, in fact, to suit every clime and country. It does
not attempt to argue about tastes, it merely accepts them as they are
and endeavors to satisfy them--and this is the royal road to sales and

Even in the question of packing, local usage must be considered. In the
United States, the standard package for nails is the 100 lb. keg. For
the Japanese trade, picul kegs, holding approximately 133 lbs., are
demanded, while the Hindu trader, sitting bare legged and beturbaned
before his booth in the bazaars of Bombay or Calcutta, offers the
passer-by small packages of nails weighing seven pounds--put up by the
American Steel & Wire Co.

It was a big job that Farrell had handed to him when he was put
in charge of the exploitation of foreign markets for the Steel
Corporation. For not only did the varying conditions affecting sales in
the different parts of the world have to be studied and plans laid to
adopt manufacturing methods to meet these conditions, but there were
other obstacles to contend with, handicaps, by the way, which it would
hardly have been possible to overcome without the backing of the power
and prestige of the greatest of corporations.

One was the question of prices. The high wages paid to American
labor as compared with labor compensation in Great Britain, Germany,
or Belgium, combined with the fact that these countries lent
every assistance to their manufacturers in increasing their world
business--particularly Germany, which encouraged the artificial keeping
up of home prices and the reduction of export prices, with the object
of extending the nation’s foreign commerce--rendered it impossible for
American manufacturers to obtain as profitable a price in competition
with Europe as they did in the domestic field. Further, as the
Corporation entered many markets to find foreign competitors already
firmly established therein, it was necessary to offer buyers material
price concessions to get business at all in the first place.

Such price cuts were nearly always essential to give the Steel
Products Company its first foothold in the desired markets, to force
the entering wedge. The fact that the Corporation has at times sold
abroad cheaper than at home has been used as a weapon against it by its
critics. Apart from the fact that its doing so afforded labor to many
American workers and thus reduced unemployment, it seems plain that a
seller must make his price to suit the market in which he is operating,
that had such price concessions not been made the Steel Corporation’s
export business would never have shown the remarkable growth it has.
Europe would have undersold it in all markets. However, the Corporation
refused to follow anything like the old dumping policy, often refusing
otherwise very desirable business on the single issue of price.

[Illustration: James A. Farrell]

Besides the preference, natural on the part of the buyers, for
well-known and long-established goods and the close connection of
foreign manufacturers antagonistic to a new competitor in the field,
the Corporation had other difficulties to overcome. These included
banking facilities in the various countries opposed to business
with America; cheaper freights and better steamship accommodations in
foreign ports than were available from the United States; preferential
duties, and so on.

[Illustration: Transporting 222 Tons of Bridge Material in China]

For years the Steel Products Co. consistently contended against these
obstacles, gradually introducing its products into one market after
the other, until it eventually attained the point where the quality of
the goods it sold was recognized and business could be secured without
concessions in price from the levels charged by European competitors.

Although in its effort to gain a foothold in foreign markets the
Corporation was compelled to offer steel, at first, below domestic
prices, this condition did not continue as long as is generally
believed. For many years prior to the outbreak of the war prices
secured on foreign business were practically the same as those obtained
on domestic, more in the case of some products, less in others. In
1911, for instance, the average mill price received by the Corporation
on rails exported was $27.32 compared with $28.00 in the home trade.
Rail exports for the year were valued at $11,377,000. A concession of
68 cents a ton does not seem extravagant in view of the large volume of
business obtained. In 1918 average price realized for nails for export
were $17.49 a ton, and in 1919 $10.02 a ton, higher than the average
received on domestic shipments.

The European war, of course, changed the export situation for the time
being completely. The British navy stood between Germany, the largest
exporter, and her foreign markets. Belgium’s mills were seized and in
some cases destroyed by the invading Hun. England, of necessity, had
to turn the mass of her steel output into shells, guns, and other war
materials. There was but one country that could supply the hungry world
with steel--the United States. And to it every consumer turned.

From almost complete indifference the American steel trade turned to
enthusiasm regarding foreign business. Steel export companies sprung
up like mushrooms anywhere and everywhere. So great was the need of
foreign buyers of steel, that any one, with or without capital, could
become a broker in the metal, and was sure of getting all the buying
business he could handle. The trouble was to get the steel.

Most of the export firms and corporations that sprung up at this period
will eventually disappear. Many of them have already done so. But there
are a number, backed by conservative and financially strong interests,
that are in the business to stay, and practically every American steel
manufacturer, either directly or through one of these agencies, to-day
exports part of his product and expects to continue to do so. The
steel trade at large now realizes, what the Corporation did from the
beginning, that a permanent export business is of major importance in
assuring stability in trade conditions.

How much of the export trade secured during the war years can be held
permanently is entirely a question of opinion. Undoubtedly, Great
Britain and Germany will strain every effort, when they get over their
present difficulties, to regain the business they lost to us between
1914 and 1918. They are already starting to compete. And France,
having recovered the vast ore deposits of Lorraine, may become a steel
exporter, too. On the other hand, some authorities are of the opinion
that manufacturing costs of steel in England and Germany at the time
this is written are higher than in the United States, and that the
European producer will never regain the advantage of low labor costs
he once enjoyed. Time alone will settle these questions. But with the
steel trade of the United States as a whole devoting its energies to
cultivating and holding foreign markets the probabilities are that at
least a substantial portion of the gain in exports shown in the war
period will be maintained indefinitely.

The Steel Products Company has not sought merely to increase the gross
tonnage of its business. In the years preceding the organization of
the Steel Corporation the steel exports of this country consisted very
largely of the cruder and less profitable materials, particularly iron
ore, pig iron, billets, and steel bars. It will readily be seen that
the most important business is that which shows the greatest profit,
that in finished rather than in raw or semi-finished material, the
finished product meaning not alone larger profits to the shipper,
but more employment and a higher rate of remuneration to labor. The
higher degree of finish to the products manufactured the greater the
wages paid to the worker. In exporting iron ore, pig iron, scrap and
cast iron, only the cheapest materials are involved, the lowest paid
labor engaged. It is a question whether such exports, particularly
those of iron ore and pig iron, are of any real benefit to the country
as they involve the sacrifice of natural resources usually at such
unremunerative prices that from the standpoint of conservation it might
appear wiser, to economists, to withhold these reserves for domestic
rather than foreign consumption. And the policy of the Corporation in
developing its world trade has been in harmony with this thought; its
efforts have been consistently to decrease the volume of its foreign
sales of the less-worked-up materials and to increase sales of the more
highly finished products.

As may be supposed, conditions brought about by the war changed the
situation materially, hence, figures illustrating the policy of
the Corporation to develop exports more along the line of finished
materials must be sought in the pre-war period. In 1912, the record
pre-war export year, the Corporation shipped abroad 2,223,536 tons of
finished steel products and only 42,031 tons of pig iron, ingots, and
scrap. In the year 1904, immediately following the organization of
the export company, foreign shipments were 1,002,967 tons of a gross
value of $31,388,139, an average of $31.30 a ton. These figures are f.
o. b. on the seaboard. In 1912 the tonnage exported was 2,265,567 of
an average value of $40.60 a ton or a total value of $91,984,239. In
the period indicated there had been an increase of 125.9 per cent. in
tonnage, of 193.1 per cent. in total value, and of 29.7 per cent. in
the average price, more than $9.00 a ton. Incidentally, the average
price received on domestic business by the Corporation declined from
$41.34 a ton in 1904 to $36.53 a ton in 1912, or nearly $5.00 a ton.

Part of the gain in export prices during the period in question was due
to the increasing percentage of more highly finished goods in total
export shipments and part to the fact that the Corporation’s products
were becoming more established in world markets and were getting the
confidence of buyers therein.

How important has been the part played by the U. S. Steel Corporation,
through the Steel Products Co., in developing the iron and steel
exports of this country, is shown in the table below. Tonnages given
for the United States include only iron and steel exports proper, and
not machinery and other articles not manufactured by the Corporation,
or scrap sheet and iron:

       |  UNITED STATES   | U. S. STEEL
       |                  | GROSS TONS
  1904 | 1,139,519        |  1,002,967
  1905 | 1,002,289        |    939,517
  1906 | 1,314,444        |  1,123,545
  1907 | 1,276,292        |    982,084
  1908 |   942,409        |    765,947
  1909 | 1,218,225        |  1,000,395
  1910 | 1,509,864        |  1,270,599
  1911 | 2,102,014        |  1,712,877
  1912 | 2,826,576        |  2,265,567
  1913 | 2,640,142        |  1,797,948
  1914 | 1,512,848        |  1,108,483
  1915 | 3,450,783        |  2,355,858
  1916 | 5,885,948        |  2,463,922
  1917 | 6,268,514        |  2,229,747
  1918 | 5,341,360        |  1,648,160
  1919 | 4,354,086        |  2,004,190
  1920 | 4,925,000 (est.) |  1,645,192

Between 1904 and 1912 the Corporation’s exports increased 1,262,600
tons, and the exports of the country 1,687,057 tons, the Corporation’s
increase in shipments accounting for approximately 75 per cent. of the
total gain shown by the United States.

During the years of the World War the country’s annual exportations
of iron and steel products were greatly increased as compared with
the largest pre-war year. During the same period the Corporation’s
exports were only slightly increased. The reason for this was that the
Corporation’s operations were largely confined to commercial products
and not to war munitions. Large quantities of steel were, however,
produced and delivered to the government and to government agencies for
use in the manufacture of munitions and for other purposes in carrying
on the war.

Government records show that the exports of the United States in 1900,
the year before the Corporation was organized, were 1,154,284 tons, and
in 1901, 942,689 tons, these figures falling to 372,399 tons in 1902,
and 326,590 tons in 1903. Hence, it has been urged that the immediate
effect of the Corporation’s organization was adverse to exports.
But the government figures include a large number of items such as
subsidiaries of the Corporation do not manufacture, or such as they
do not now export--for instance, many articles manufactured of steel,
and steel scrap. As a matter of fact, the companies merged into the
Corporation exported 291,000 tons of steel products in 1901. In the
following year, the big company shipped more than 300,000 net tons.

To-day the Corporation’s products and agents penetrate into almost
every part of the known globe. Its ships plow nearly every sea. The
goods it sells to the world range all the way from wire nails and watch
springs to the steel frames for great buildings. In Buenos Aires, for
instance, the Corporation maintains its own force of erectors, and
nearly all the big modern buildings of the Argentine capital have had
their skeletons put together by the “Steel Trust” riggers, the men
whom Farrell once described as working with one hand for their job and
holding their lives in the other. The bulk of the steel used in the
construction of the Panama Canal, about 175,000 tons, was supplied by
subsidiaries of the great company.

Some of the principal markets for United States Steel’s surplus output,
with the products they take are: Iceland, wire products and structural
steel; Java, Sumatra, and Borneo, oil piping and galvanized sheets;
India, sheets and wire products; Argentina, structural and merchant
products; South Africa, pipe and light rails for use in diamond
mines; Pacific coast countries of South America, roofing material,
wire, rails, etc.; Patagonia, railway material; Canada and Mexico,
practically every product made; Northern Africa, wire and sheets;
Egypt, wire and cotton ties; Australia, a general line; the countries
formerly comprising the Austrian empire, wire goods and pipe; Syria
and the Holy Land, wire fence, pipe, and small nails used in putting
together date boxes; Rangoon, pipe, nails, fence, and sheets; West
Indies, a general line; Rumania, oil pipe; Central America, a general
line; Greece, pipe, wire, sheets, etc.

China has for years been an important consumer of American steel. Her
takings cover many lines and include bridge material, pipe, sheets for
roofing as well as for making stove-pipes; tin plate used in making
containers of egg yolk, which she ships principally to the United
States, wire goods of various kinds, nails, including an extremely
small type used in making bamboo furniture. In addition, owing to
her low labor costs, China is a great market for scrap steel, such
as defective wire rods, wire shorts and seconds, bar ends and plate
cuttings, which are worked by hand into all sorts of implements. The
patient and industrious Celestial even finds use for old horseshoes,
which he makes into razors.

The Corporation has thirty-six foreign offices, located in Argentina,
Australia, Belgium, Brazil, British India, Canada, Chile, China, Cuba,
France, Holland, Italy, Japan, Java, Mexico, Norway, Peru, Russia,
Spain, South Africa, and the United Kingdom. In addition to these,
it has one hundred and thirty-six distributors located in forty-four
foreign countries.

Although the Steel Products Co. avails itself of the facilities for
shipping offered by the many steamship lines plying between America and
foreign ports, the enormous expansion of its export trade has forced
it to establish and maintain a large ocean-going fleet of its own.
Formerly, the greater part of this fleet was chartered, but now the
Corporation owns twenty vessels, and has only a few others chartered.
These vessels carry its products all over the world, touching at
many little-known ports and harbors, the waters of which are never
disturbed by the prows of regular liners. At these places they put
off loads of rails, tools, and diversified products, instruments with
which pioneers, like railway builders, are extending the marts of
civilization into untrodden lands.

All of the owned vessels fly the Stars and Stripes, those built
in foreign countries having been transferred to American registry
immediately upon the passage of the Ship Registry Bill, in 1914.

Most of the ships owned by the Corporation were built at its own
plants in New Jersey and Alabama. The Federal Shipbuilding Co., the
Corporation’s shipbuilding subsidiary near New York, has supplied it,
so far, with nine vessels, each ranging from 3,450 to 3,821 tons net
register. The Chickasaw Shipbuilding & Car Co. is responsible for the
construction of four others, the largest of which, and the largest boat
owned by the Corporation, is 4,045 tons net register on about 10,000
dead weight. The other seven vessels were purchased. At the time of
writing the Corporation has under construction fourteen other vessels,
all of which will be added to its fleet when finished.

Two of the Corporation’s boats were lost during the war, one a victim
to a German submarine and the other running aground off the Chilean
coast early in 1918.

No less than fourteen different steamship lines are operated by the
Steel Products Co., which through them handles its fleet. These lines
are: Isthmian Steamship Line; New York and South America Line (to
Chile and Peru); Pacific Coast Service (to Pacific coast, United
States, and Canada); New York-Far East; New York-Rotterdam Service; New
York-Mediterranean Service; Gulf-Rotterdam Service; Gulf-River Plate
Service; Gulf-India Service; Gulf-Scandinavia Service; Pacific Coast,
United Kingdom & Continent Service; Norton Line (New York to River
Plate); United States and Brazil Steamship Line; Panama-Far East Line.

The shipping of steel to certain points lacking a regular service often
makes necessary the employment of expedients to reduce the attendant
costs. For instance, prior to the opening of the Panama Canal, a fleet
of six vessels was engaged in the trade with the east and west coasts
of South America. These vessels sailing from the Atlantic seaboard
made calls at various points in Argentina, Chile, Peru, and thence
to British Columbia, where they found themselves empty and without
opportunity for picking up a cargo for the return trip. The expense
of the long journey in ballast round the Strait of Magellan home was
prohibitive, so these vessels usually made trips to French or English
ports, carrying general merchandise, making the shorter trip across the
Atlantic to their home port under ballast, or with a cargo if it was
possible to get one. Such a voyage would cover 35,000 to 40,000 miles
and take about nine months. The opening of the Panama Canal, however,
has changed the conditions that made this necessary.

The shipping of steel to the less-known parts of the world involves
difficulties never encountered in the home market. The men in charge of
exports must be men of initiative, accustomed to overcoming handicaps
as they arise and to deliver the goods without the aid of the efficient
methods of civilization.

On one occasion a special order for a number of boilers took one of
the Corporation’s vessels to a harbor on the west coast of South
America where the arrival of a steamer was a rarity, and facilities for
landing cargo were conspicuous by their absence. The lack of hoists or
any other method for lifting the boilers ashore was easily overcome,
however. The crew of the ship was ordered to plug up the boilers at
both ends and hoist them overboard, floating them on the waves to the
sandy beach.

But this novel method of delivery created a dearth of labor in the
vicinity. The natives, at the sight of the huge steel cylinders leaping
from the waves and rushing ashore on the tide, decided that they were
strange and fearsome monsters of the deep and they fled in panic to the
woods where they remained for several days before they could be induced
to return and carry the boilers to their destination.

On another occasion similar difficulties were encountered, but the
cargo in this case was one of steel rails for the first line ever built
to Buenaventura, Colombia. The rails had to be unloaded separately
and sent ashore one by one on the little native dugout canoes. It was
only the skill of the natives in handling their frail barks with such
unwieldy cargoes that prevented a large part of the shipment finding a
resting place at the bottom of the harbor.

The American Bridge Co. has erected a number of bridges in the Far
East. Some of these have been in the interior of China, where the
rivers, subject to seasonal floods and periods of absolute dryness,
provide the main highways for freight traffic. In such instances the
steel for the bridges was hauled up the river beds during the dry
seasons, and if the rains arrived before the destination was reached,
the steel was simply left on the river bed until the subsidence of the
flood permitted the resumption of the journey up-stream.

In developing its export trade the Steel Corporation has performed a
real and important service to American commerce generally. To a great
extent, shipping depends on the trend of “weight cargo,” and exports of
other goods classed as “measured cargo” depend similarly on shipping
facilities. By supplying the heavy cargo for numerous markets where
American goods had never sold before the Corporation made it possible
for manufacturers of many lighter products to develop business for
themselves in these new markets. In other words, it blazed the way
for American commerce as a whole. How great is the debt that American
business generally owes to the Corporation, and to a less extent to the
Standard Oil and International Harvester companies, is plain when it is
realized that these three companies shipped for many years more than
half the “weight cargo” leaving the shores of the United States.

One of the principal benefits of large exports is its effect on labor
in the producing country. The Corporation’s effort has been to find
a regular market in foreign countries for 20 per cent. of its total
output. This level was never actually reached under normal conditions,
although during the war exports did, at one period, run about 33 per
cent. of total production for a time. Taking the year 1912, the record
pre-war year for exports, as a representative period, we find that
shipments to customers abroad represented nearly 18 per cent. of total
finished steel delivered by the Corporation’s mills. As the “Steel
Trust” in that year employed an average of 221,000 men, this meant that
about 39,000 workers were busy on material destined for export and that
$34,000,000, of the Corporation’s payroll of $190,000,000 was being
paid to American labor by foreign consumers. In 1919, 16.5 per cent. of
the total business was export and by the same analysis, foreign buyers
paid American workmen in the Corporation’s plants more than $79,000,000
in wages.

In the final analysis, this figure will be increased, as the
Corporation under normal conditions encourages and assists companies
manufacturing its products into machinery, cars, locomotives, etc., to
expand their exports, by giving price concessions on steel purchased
for that purpose. This re-export business gives work to a substantial
number of the Corporation’s employees.

The building up of the vast export sales organization maintained by the
Corporation has been a Herculean task, but it has been well worth the
effort. By establishing its name and its product all over the world
the Corporation has not only added to its profits and to its markets
but it has helped to relieve the pressure of over-production which
the industry feels from time to time, and thus it has conferred a
substantial benefit on the steel trade as a whole.



To one interested in social and industrial questions a tour over the
vast properties and plants of the United States Steel Corporation can
hardly fail to be of great educational value. It has been the writer’s
good fortune to be able to make such a tour on more than one occasion.
He had expected to be, and was, impressed by the various processes
whereby iron ore is converted into steel ingots and then into rails,
tubes, structural shapes, plates, bars, wire, nails, tin plate, and
other products; by the monster machines used for loading and unloading
ore; the blowing furnaces, pools of molten metal; the great rolls
through which the red-hot steel is passed on its way to becoming a
finished article of commerce; the mining of coal from the bowels of the
earth, and the thousand and one other sights of what is probably the
most spectacular of all industries.

But the more lasting impression was made not by the mechanical
apparatus but by the human factor, the manner in which the vast human
machinery that makes the Corporation was handled; the organization that
made it possible for an army of more than a quarter of a million men to
work in complete harmony and to a single end. In a word, the spirit of
the Corporation.

As one becomes more and more familiar with the great company’s
activities at first hand, more and more does it become plain that
the entire organization is permeated with this spirit. From Judge
Gary, its chairman and chief executive, and James A. Farrell, its
president, who directs the manufacturing and commercial operations,
down through the heads of the various constituent companies, and so
through the subordinate officials, through those whom we may call the
non-commissioned officers of the steel army, the foremen and mine
captains, and finally among the men, both skilled workers and common
laborers, there is evidence nearly everywhere of a universal sentiment
of loyalty, of personal interest in the fortunes of the big company and
of the will, on the part of each man, to give the best in him for the
general result.

The above statement was originally penned six or seven years ago,
after the writer’s first tour of the Corporation’s plants. Since that
time the world has seen a general upheaval of labor. The Corporation
itself has had to fight a great strike, and it would therefore be
natural to suppose that the spirit of the Corporation had been
adversely influenced during these trying years, but a recent visit to
the Corporation’s plants did not bear out such a presumption. Rather,
it left the impression that in spite of general labor unrest and
notwithstanding the efforts of labor leaders to destroy it, the spirit
of loyalty and coöperation is still strong in the great mass of the

What is the reason for this spirit? How had it been possible to leaven
with it so great a mass of men of different nationalities and varying
degrees of intelligence? An excellent answer to these questions was
furnished by one of the men, not one of the executives or operating
heads, but one of the rank and file. He said:

“In the Steel Corporation the man who gives gets. Question those who
are in the higher positions, who are drawing big salaries, and you will
find that they all worked their own way from the bottom. Several of the
men holding important jobs, now my bosses, I knew when they held little
ones, and in every case I was satisfied that the advancement they got
they fully deserved. I don’t believe that there is a single official
of the Corporation, or of any of its subsidiary companies, who got his
job through pull. Hard work is the only key to success with us, and it
is a sure one. In brief, I feel bound to give this Corporation a square
deal because I know that it will give me a square deal.”

A square deal--that is the secret of the Corporation’s spirit. The
desire for justice, for fair and full recognition of fair and full
service, is deep grounded in every man, and the management of United
States Steel, by giving each worker the assurance that he will get just
what is his due, has secured for itself the entire coöperation of most
of its employees and has, as a result, an organization that probably
could not be equalled elsewhere in the industrial world.

The Steel Corporation is a true democracy. No position in it, however
high or responsible, is beyond the reach of any employee who proves
his ability to handle the job. Farrell, now president, started as a
laborer in a wire mill. The late Thomas Lynch, for many years head of
the Frick Coke Co., handled a pick in the coal mines of that concern.
Charles M. Schwab and William Ellis Corey, two former presidents of
the Corporation, both started from the very bottom, as did Alvah C.
Dinkey, one-time head of the Carnegie company, and a number of others.
Even Gary, although he did not become connected with the steel industry
until in middle life and after he had made a marked success in the
legal field, was not the son of a wealthy man, and won his way to
fortune by hard work combined with unusual business ability. There is
no open sesame to honor and advancement in the big company, nor for
that matter in the steel trade as a whole; the keys to success are
ability plus energy.

“Nor could it be otherwise,” said one of the men who had himself
climbed the ladder; “in steel making harmonious team work is essential
to good results, and the natural leader rises to the top by the general
recognition of his fellows.”

Efficiency, that supreme factor in large output and big profits, has
become a fetish in industry in recent years. In its final analysis,
“The Spirit of the United States Steel Corporation” is efficiency, not
applied merely to the mechanical processes of manufacturing, but to the
human element behind these processes; the efficiency that abides in a
healthy, well-housed, and contented workman.

The Corporation has always taken a keen interest in matters affecting
conditions of labor. It has lent its influence, its money, and the time
of its officials to better these conditions, to provide more attractive
homes and more sanitary and healthful conditions for its men, better
educational facilities for their children, and wholesome amusement for
all. For itself, the big company expects the benefit from the resultant
increased efficiency and loyalty. For the worker, the most important
gain is added self-respect.

George G. Crawford, president of the Tennessee Coal, Iron & Railroad
Co., says on this point: “Summed up, the end of all social betterment
work is the inculcation of self-respect. The worker possessing this
attribute is worth more to himself, to his employer, and to society
generally, than the man lacking it. Without self-respect, he remains a
common drudge, his value at best stationary, but more likely receding.
With it comes ambition and energy, and it is only the short-sighted
employer who does not set high store on these qualities and encourage
their growth. The lowest kind of labor is always to be had, but the men
with ambition and the will to make good that ambition, the men of real
value to themselves, are not so easy to find--and they are many times
more necessary!”

Mr. Crawford pointed out that many young men who might be marked out
for advancement in the steel industry, where their energy and ability
would be quickly recognized and rewarded, prefer to go into offices
or stores as clerks, although the field of advancement there is much
smaller because natural conditions in a steel mill or coal mine, unless
mitigated by the efforts of the employer, were such as to injure their
self-respect. By surrounding living conditions in the industry with
those things that make for clean, decent manhood such men would be
attracted and the employing corporation would thereby open to itself
new fields for recruiting to its organization the highest type of men.

The work done by the Corporation in making conditions at its plants
more safe and sanitary, in endeavoring to improve home conditions among
its workers, in providing better educational facilities for their
children, and so on, will be detailed in another chapter. Any official
of the Corporation or of such concerns as have worked along similar
lines will tell you that the installation of these helps to better
living is plain, practical business. That the gain in efficiency pays
many times over the outlay involved. They studiously deny altruistic
motives. But the observer who has an opportunity to become familiar
with their activities can hardly help arriving at the conclusion
that the men who engage in this work for the improvement of working
conditions usually become engrossed in it for its own sake. That the
human side of the work, deny it as they will, eventually and inevitably
comes to occupy the chief place in their minds.

[Illustration: “Drawing” Bee-hive Coke Ovens]

Under the Corporation’s stock subscription plan many thousands of
employees have become stockholders of the great company. It has been
suggested by those who see nothing but menace to the workers in every
action of a big corporate enterprise, by those to whom the very word
“corporation” is anathema, that this plan had for its real object the
subjugation of the worker by inducing him to invest part of his wages
in the securities of the employing company and then demanding from
him unswerving obedience; enslaving him by holding over his head the
fear of the loss of his investment. It has been claimed that the plan
was a master stroke to give the Corporation the whip hand in the event
of a strike. It is, of course, impossible to argue motives, but the
plain facts are that the plan has not worked out this way.

[Illustration: “Pushing” Coke in By-Product Oven]

[Illustration: The Other Side--Coke Falling into Car

Two Views of Modern By-Product Oven]

Far from instilling the spirit of fear into the men, it is noticeable
that stockholding employees regard themselves, and rightly, as owners
in the vast enterprise of which they are a part, that they feel a
genuine interest in its welfare and work wholeheartedly to further
its interests. They take a pride in the Corporation that is very
real and apparent and it is not strange that this should be so. If
the Corporation designs to make its workers subservient it is ipso
facto defeating another great end it is unquestionably striving
for--efficiency. Because self-respect and servility are implacable
enemies and cannot exist together.

The offering of stock to employees on attractive terms is merely
another efficiency measure. Each employee who is a part owner in the
business works for more than his wage. “His heart is in his work and
the heart giveth grace to every task.” Moreover, the plan encourages
thrift, and every employer knows that a thrifty worker is more reliable
than his spendthrift brother, less prone to the inefficiency induced
by financial worries. Finally, the having of a stake in industry and
through it, in the country’s prosperity, makes a man a better citizen
and increases his independence and self-respect.

If the subject of self-respect appears to be harped on to some extent,
it is because it is of paramount importance, its influence affecting
not only the worker and his employer, but the whole community. If the
writer were asked to sum up in a few words what the Steel Corporation
has done for industry, these words would be: It has exerted an enormous
influence in helping the worker, the common laborer, to become a
self-respecting citizen.

The tangible gain to the Corporation has been enormous. The intangible
gain, although it cannot be measured, has almost certainly been many
times as great. The management of the big company realized that the
workers’ rights to a decent life were fully as important as the rights
of capital, and that more, both in mental satisfaction and in profit,
was to be gained from a recognition of these rights than from their
denial. Perhaps, too, it saw that sooner or later the day would dawn
when the worker with his hands would demand fair treatment, and it had
the foresight and the courage to hasten the dawn of that day.

In the matter of wages the Corporation’s course has been in entire
harmony with its general policy toward the worker. Since its
organization in 1901 it has many times, and always voluntarily,
increased wage rates, and in doing so it has set a lead which other
steel companies have found themselves forced to follow. Only once has
it ever reduced wages and then but a small amount and only after the
dividend on the common stock had been eliminated. The wages were soon
restored and frequently thereafter advanced. Its principle has been
that capital and labor both have important rights in the financial
results of industry, but that labor is perhaps more directly concerned
and should therefore be the last to suffer in times of stress.

Since 1901 the average wage rate of the steel worker has been increased
approximately 237 per cent. and this increase has been due almost
entirely to the Corporation’s stand on this question. Any one who
doubts this has but to ask the competitors of the big company to be
convinced. In 1911, when steel prices were at an unprofitable level
and business was slack, the heads of more than one independent company
expressed the opinion that a reduction in wages, what they called
the liquidation of labor, was necessary, even imperative, but that
they were restrained from attempting this liquidation while the Steel
Corporation continued to pay its men the old rate. They said in effect:
“The United States Steel Corporation boosted wages to the present high
level. Let it take the lead in lowering them.” But the Corporation
refused. Instead, with the first signs of an improvement in business,
it gave wages another boost. Again in 1914, in the face of the worst
period of depression in years, and with world industry demoralized
as a result of the outbreak of the European war, and in spite of the
fact that the Corporation had been compelled to forego the payment
of the dividend on its junior stock and was not fully earning its
preferred dividend, its management refused to let the worker suffer.
So strong was the sentiment throughout the trade at this time in favor
of the liquidation of labor that a wage cut was looked on as not only
justified, but inevitable, and it is generally understood that even in
the Corporation it was only the insistence of Judge Gary that prevented
its occurrence.

At the present writing, world industry is going through a process of
deflation from the high prices induced by the war. In some instances
the effect is already visible on labor. Cotton mill workers in some
parts of New England have themselves suggested a decrease in pay to
keep the wheels of industry running. In the steel trade costs are
admittedly high and wages constitute the chief factor in costs. But if
one may conclude from Judge Gary’s public utterances in recent months
the thought of reducing wages at present is far from the mind of the
Corporation’s management. A liquidation of labor may occur later, but
if it does, it is a reasonable assumption that, so far as the Steel
Corporation is concerned, it will not take place until living costs
have been at least sufficiently deflated to make the new real wage of
the worker as distinct from his money wage, at least as high as it is

Average wages paid by the Steel Corporation to its employees during the
past eighteen years have been as follows:

  1902                        $716.88
  1903                         720.08
  1904                         677.18
  1905                         710.78
  1906                         729.86
  1907                         765.18
  1908                         729.44
  1909                         775.77
  1910                         800.95
  1911                         819.85
  1912                         856.70
  1913                         909.50
  1914                         905.36
  1915                         925.06
  1916                       1,042.41
  1917                       1,295.87
  1918                       1,684.58
  1919                       1,902.13
  1920 (partly estimated)    2,169.00

Although the average wage in 1914 was some four dollars less than
in 1913, the average day wage to the worker, exclusive of the
administrative and selling cost, was $2.88, compared with $2.85 the
previous year. This is significant as indicating the policy of the
Corporation to equalize as much as possible the amounts paid to
different classes of workers. In instituting advances, it has always
been the lowest classes of labor that have benefited most. The workers
themselves have testified to satisfaction with this policy and their
recognition of its essential justice.

The Steel Corporation has been subjected to occasional attacks because
of its attitude toward labor unions. It neither encourages nor approves
unionism. It does not contract with unions as such. It stands for the
open shop. As it is plain that this biggest of all employers has not
sought to crush the worker, that it has, in fact, done much to make his
lot better and brighter, the question may fairly be asked why it is
opposed to dealing with organized labor.

The reason is not far to seek. Unionism is opposed to efficiency, it
destroys the _esprit de corps_ that is so important in getting the
best results from a large body of men. It prevents promotion according
to merit. In its very essence it is antagonistic to the employer; it
sets labor and capital into two distinct and constantly armed camps;
it would make war between capital and labor. And the management of
the Corporation believes that the only workable solution of the
whole industrial problem is to bring labor and capital into friendly
coöperation, to give labor a part in the earnings of industry, making
the interests common.

This cannot be accomplished in a hurry. A movement of so vast a
magnitude must necessarily take time. But had the Corporation’s
employees been organized it is doubtful if the betterment of conditions
of its workers, and consequently of the steel workers of the country,
would have progressed as rapidly as it has.

The labor union, if used to help the oppressed worker, is
unquestionably a beneficial factor in industry. Used as it too
often is, to promote the selfish interests of its leaders, and to
impinge upon the rights of the public at large, it is just as surely
a great evil. The logical result of union labor as preached by its
principal exponents is to cripple initiative, and to oppress the
worker who prefers to stand on his own feet. And, in America at
least, the majority of the workers are of this independent type. And
in maintaining its policy of the open shop the Corporation has been
fighting the battles of this class of workers.

The writer has tried to show that loyalty and coöperation permeate the
United States Steel Corporation. That it is the result of the endeavor
on the part of the big company to give to the men who make up its
organization absolute justice, the square deal; its effort to make the
worker, even the poorest, an independent, self-respecting citizen, and
to give to every man in its mines, mills, offices, etc., an opportunity
to share in the profit derived partly from his efforts. All this to
promote efficiency, the “spirit of the Corporation,” to increase the
value of the worker to himself, to his employer, and to the community.
He believes that the facts justify the statement made in an earlier
chapter that the organization of the United States Steel Corporation
was the greatest step that has ever been made toward the highest form
of socialism.



We live to-day in the “Age of Steel.” The metal probably plays a more
important part in our civilization than any other product made by the
hands of man. Our big buildings, our navies (both war and merchant),
our trains and the rails they run on, machinery of all kinds, tools for
every trade--all steel. Furniture, watch springs, even wire hair for
stuffing mattresses and other uses--steel again. And new uses for the
metal are being discovered almost every day.

It is difficult to realize that the age of steel is hardly more than
half a century old. But fifty years ago steel, commercially, was still
something of an experiment, struggling against iron for its place in
the sun. At that time the head of one of the greatest railroad systems
of America dismissed a persistent salesman who had been trying to
secure his order for steel rails, with the exclamation: “Steel rails?
Bosh! Stuff! Nonsense!” To-day that line has many thousand miles of
track and every rail in it is steel. Not two generations ago engineers
viewed askance the plans of the designer of the first skyscraper. They
regarded as absurd the proposal to build “a steel bridge up into the
air.” To-day the Woolworth Building towers nearly eight hundred feet
above the pavement of Broadway.

From the day when steel was made “by the spoonful” to the present, when
the great “Steel Trust,” with its thirty-eight Bessemer converters and
334 open-hearth furnaces, is capable of producing some 65,000 tons
every twenty-four hours, is a far cry reckoned in terms of industrial
development short as the reckoning may be in years. The pioneers of
steel never dreamed of the enormous proportions to which the industry
would grow, the innumerable uses to which the metal would be put.

What is steel? Iron that has been refined and hardened by processes in
which heat plays the most important part.

Iron ore is found in large quantities in many parts of the world.
Sometimes it is loose, like earth, and again it is a rocky formation.
Its color also varies, some ores being red, others yellow, and so on
through various shades and tints. But the pure metal is white and,
strange as it may seem, quite soft. Cleansed of its impurities, and
hardened by a mixture of carbon and other ingredients, it becomes one
of the hardest of metals.

Iron, apparently, is common to all the planets. Meteorites usually
contain a large percentage of it. So general is its distribution on
this planet that a theory has been advanced that the globe on which
we live is nothing but a vast mass of iron thinly incrusted with rock
and earth, and that the deposits found near the surface are merely the
outcropping of this inexhaustible mine.

The Western Hemisphere is particularly favored in regard to deposits of
iron. Immense ore bodies exist in the United States and Canada, Chile,
Brazil, Cuba, and other parts. Of the known ore beds in this country,
the most important lie around Lake Superior. Near this great inland sea
there are no less than six different ore ranges, the Mesaba, Vermilion,
Marquette, Gogebic, Menominee, and Cuyuna. Of these the Mesaba is
the largest, richest, and most easily worked and from it is taken a
material portion of all the ore mined in the United States. There are
ore bodies of considerable size in Alabama, New York, New Jersey,
Pennsylvania, Colorado, Wyoming, New Mexico, and Utah, and another
large deposit is now reported to have been discovered in Oregon.

Some American steel makers import part of the ore they use from Sweden,
Cuba, Spain, and Chile. But the Steel Corporation’s subsidiaries have
depended so far upon the Lake regions for their ore supplies, except
the Tennessee Coal, Iron & Railroad Co., which uses Alabama ores.

Although iron had been made in America long before the War of
Independence nothing was known of the immense deposits in the region of
the Great Lakes until 1845, in which year Philo M. Everett was guided
by Indians to “a mountain of solid iron,” to which he gave the name of
the great missionary explorer, Marquette. Shortly afterward a surveyor
named Stunz set out to seek gold in the wild region north of Superior,
and came back to civilization with a tale of vast iron deposits in what
is now known as the Vermilion range. But so far and hard to reach were
these deposits that it was not until the early seventies that capital,
as represented by the late Charlemagne Tower, could be interested in
the exploitation of these deposits.

Still another gold seeker was responsible for the discovery of the
greatest of all the ranges, the Mesaba. Some years before the Civil War
Louis H. Merritt, a prospector, struck out into the woods in quest of
the yellow metal, but brought back with him nothing but a few samples
of iron ore. Little did he dream that he had found what would one day
prove more precious than gold.

Merritt told of his discovery only to his four sons, and it was
not until 1885 that these young men staked out their first mine in
the desolate region. The Merritts were lumbermen, and the mining
fraternity, having proved to its own complete satisfaction that iron
deposits in the Mesaba section were geologically impossible, scoffed at
their enterprise, but in one single year since the Steel Corporation
alone has taken 24,928,039 tons of ore from this range, a single mine
yielding 3,500,000 tons.

There is a legend told in Minnesota, the story of a practical joke
which had a different end from that expected by its perpetrators, and
the result of which has been a great boon to the cause of education
in that state. The story had its beginnings before the Civil War. At
that time, it goes, the public school system of Minnesota, neglected in
State appropriations and impoverished, clamored long and loud at the
door of the legislature for a share in public lands, and eventually
gathered enough popular support to wring from the law-makers a promise
of ten sections. The promise was kept, but to the discomfiture of the
educators and the amusement of everyone else it was found that the
sections lay beyond the pale of civilization far in the northeastern
corner of the state, an uninhabited, unexplored territory.

And then Merritt discovered the Mesaba range, and the implements of the
steel companies began to shovel gold to the credit of the Minnesota
school system.

The story is of doubtful authenticity, but it is nevertheless a fact
that the Minnesota schools own large acreages of ore land, and their
enormous receipts of royalties on ore shipped therefrom make them
probably the richest in the world.

A mine, in the commonly accepted sense of the word, is a deep shaft in
the ground from which tunnels, or “drifts,” radiate through the ore
bodies. But nature, in the Mesaba region, has saved the steel maker the
trouble of burrowing under the earth’s surface to get at her riches.
The majority of the mines here are not mines in the accepted sense at
all. They are what a veteran of pick-and-shovel methods called them
when he first saw one in operation. “Mine?” he exclaimed. “Why, that
isn’t a mine, it’s an ore farm.”

Imagine a vast amphitheatre hollowed out of the ground half a mile wide
and a mile and a half, or more, long--these are the dimensions of the
Hull-Rust mine at Hibbing--and descending in a series of deep terraces
to 120 feet or more from the surface, every terrace, save the first,
being dug out of iron ore, and you will get a vague idea of what one
of these Mesaba “ore farms” is. The mines are graded toward one end
to permit the entrance of trains, and big steam shovels burrow into
the soft ore, scooping up, some of them, seventeen tons of ore at each
lift, and dumping it into the waiting cars.

Under these conditions mining becomes principally a matter of speeding
up steam shovels and of transportation. At the beginning of the century
no mine had ever shipped 500,000 tons of ore in a season. The Hull-Rust
mine has shipped more than that a month, a ton of ore every two
seconds, allowing for a ten-hour working day.

Exclusive of the mines covered by the now abandoned Hill lease the
Corporation has developed more than seventy mines in the Mesaba range.
In the Vermilion range it has three; in the Menominee, seven; in the
Marquette, twelve; in the Gogebic, thirteen, and in the Baraboo range
in southern Wisconsin, one. This does not include twenty-one mines
of the Tennessee Coal, Iron & Railroad Co. in the South. In a single
year, 1916, the Corporation mined 33,355,169 tons of ore, of which
30,255,616 came from the northern regions. Some idea of the immensity
of the Corporation’s mining operations may be obtained from the fact
that the excavations involved in “stripping,” or removing the surface
earth overburden from the open pit mines, aggregates about a quarter
of a billion cubic yards of earth, or more than the excavation made in
digging the Panama Canal, in the Mesaba range alone. Total excavation
in this range, including mining operations, amounts to about a half a
billion cubic yards.

The vast Hull-Rust mine, the greatest of the Mesaba deposits, is
perhaps the largest single body of ore in the world. Its exact extent
is not known. Only recently it was discovered that the ore body led
under the town of Hibbing, a fair-sized municipality, whereupon it was
decided to move the town to get at the ore. So in the summer of 1920
houses and other buildings forming the town were lifted bodily from
their foundations and moved to a new location near by. This enormous
undertaking seemed to be considered quite part of the day’s work by
officials of the Oliver Iron Mining Co., which subsidiary has charge
of the Corporation’s ore operations. An official of that company,
questioned about the expense of moving the town, said: “Oh, it will
cost a million or more, but there’s at least $40,000,000 in ore under
the old site.”

Ores obtained from the Mesaba and other Lake ranges usually average
slightly more than 50 per cent. in iron. There is an enormous amount
of ore in this region, however, which runs less than 40 per cent. in
metallic content, and further, is too rich in silicon, which factors
make it unavailable for steel making without previous treatment, but
this ore is too valuable and too much needed to be allowed to go to
waste. The Corporation solved the problem by erecting at Coleraine a
“concentrator,” which is really nothing but a great washing plant for
ore, and by this means crude ore containing 37 per cent. or thereabout,
in iron, after treatment in which water and gravity are the principal
factors, is brought up to an average of about 56 per cent. metal.
In one day this concentrator has treated 50,000 tons of crude ore,
producing 32,000 tons of concentrates.

Let us leave the mining regions and follow the ore on its journey
to the furnaces. The journey is begun in either of the two railroad
systems owned by the Corporation, and radiating over the ranges--the
Duluth, Missabe & Northern, at the head of which is William A.
McGonagle, which serves the Mesaba range principally, and the Duluth
& Iron Range, of which F. E. House is president, which serves the
Vermilion section.

We shall soon arrive at Duluth, or near-by Two Harbors, where these
roads terminate. Here the ore trains run out on the huge Corporation
docks, some of which project half a mile into the lake, and dump their
cargo into enormous pockets in these docks. This ends the first stage
of the journey.

But our travels have hardly begun. The next stage of the journey is
made by boat. The Corporation, through the Pittsburgh Steamship Co.,
owns no less than seventy-eight large steamers, many of them capable
of carrying 12,000 tons of cargo, and all built specially for ore
transportation. To and fro between Duluth and Two Harbors on Lake
Superior, and Gary, Chicago, Cleveland, Ashtabula, Conneaut, Fairport,
and other points in the lower Lake, this great fleet goes constantly
except when winter freezes up transportation.

Arrived at the ore docks, the boat makes fast alongside, and the
work of putting in its ore cargo begins immediately. This is a
rapid-fire operation. A touch of an electric lever and from each of the
three-hundred-ton “pockets” on the dock descends a great chute into the
maw of the ship, and through these chutes the ore, impelled by gravity,
comes cascading.

In a few hours at most the work is done, and the ship is ready for her
return trip. The average time taken to load a thousand tons of ore is
half an hour, but on one occasion 12,817 tons were put into a vessel
in thirty-five minutes. In one day twenty-four boats were loaded with
211,887 tons. From a single dock 10,921,107 tons have been put on
ship-board in one season.

A sail of three or four days and we arrive at one of the lower Lake
ports. Here the boats are unloaded by methods even more impressive than
those connected with the loading operation, and so efficient that a
twelve-thousand-ton steamer has been emptied to the last spadeful in
three short hours.

Of the various unloading devices employed the Hulett machines are the
most modern and impressive. Notwithstanding their weight, which runs
into hundreds of tons, these gigantic affairs are moved up and down the
dock and perform all their operations by the touch of a light lever.
Almost “a child can handle them.” The mighty arms of these machines
give them somewhat the appearance of gargantuan grasshoppers. The
operator sits in comfort in what corresponds to the wrist of one of
these great arms, and, at his will, the clamshell bucket hand dips down
into the bowels of the vessel and, opening its metal fingers wide, to a
span of 22 feet in the largest sizes, closes with irresistible might on
everything within its grasp.

The Hulett machine is the very embodiment of power, power chained and
subservient to the will of man. The incalculable force of those mighty
fingers would crush a steel railroad car as one might squeeze a sponge.
A miscalculation by the operator, and the steel ribs of the unloading
steamer would be torn away, gnarled and twisted. And each lift of that
hand brings with it a load worthy of its might, some seventeen tons of

Before following the ore farther on its trip to the furnaces we can
find time to devote a minute to a related operation, the shipment of
coal to the mining regions to supply the power for the operations
there. This is marked by the same big-scale, time-saving methods.
Arriving at the docks at the lower Lakes, the coal train is run out
beside the now empty vessel, and another great machine picks up car
after car, and swinging it out over the hold of the ship, overturns it
and empties it in a few seconds.

To Pittsburgh, centre of the steel industry, comes a large portion of
the ore shipped from the Great Lakes. Ore destined for the Pittsburgh
furnaces is brought from the Lake ports by the Bessemer Lake Erie,
another Corporation subsidiary, with its two hundred and five miles of
main line, the third longest and perhaps the best known of the Steel
Corporation roads. The Duluth, Missabe & Northern holds first place
among these roads in respect to mileage, two hundred and forty-seven
miles, with the Elgin, Joliet & Eastern second, two hundred and eleven
miles, and the Duluth & Iron Range fourth, one hundred and ninety-seven
miles. The total trackage of the U. S. Steel roads, including sidings,
branches, switches, and yard track, is 3,774 miles, every yard of it
maintained in prime condition and absolutely modern.

A line drawn from New Orleans to St. Louis, thence to Kewanee, Ill.,
through Minneapolis and north to the Canadian border would about form
the western boundary of the big Corporation’s manufacturing and mining
activities. The northern boundary would be the Canadian border (except
for one plant at Hamilton, Ont.) with the Atlantic and the Gulf of
Mexico forming the east and south boundaries. Half the United States!
And another plant is started in Canada.

All over this vast area are scattered the Corporation’s plants, but
nowhere are they so thickly clustered as around Pittsburgh, the steel
city of the world. Here the biggest of the subsidiary companies,
Carnegie Steel, has its headquarters, and here, too, is the home of
the National Tube, American Sheet and Tin Plate, and American Bridge
companies. All the Carnegie plants are in or near Pittsburgh, as are
the major part of the plants of the National Tube Co., but the Tin
Plate and Bridge companies reach out in many directions. The Chicago
territory provides a home and a market for the Illinois Steel Co. with
its “South Works” plant at South Chicago and the Indiana Steel Co.,
which operates the great Gary plant at Gary. The American Steel & Wire
Co. has its head office at Cleveland, but its plants are scattered over
a great many states from Illinois to Massachusetts and down to Alabama,
and it has a plant at Hamilton, Ont.

All over Pittsburgh and its environs are to be seen the stacks of
the blast furnaces of the Corporation and other steel companies in
which the ore is transformed into pig iron, the first step in the
manufacture of steel. These furnaces, usually built in “batteries”
several together, are immense ovens of steel and firebrick in which
a temperature of more than 3,000 degrees is generated and in this
terrific heat the ore, fluxed with limestone, is melted and converted
into iron. From the ground to the tops of the furnaces run “skips” or
buckets on inclined tracks, which carry the ore to their mouths, where,
with a mixture of coke and limestone, it is dumped.

Soon the ore, coke, and limestone become one liquid mass of fire and
the oven, after a sufficient time, is “tapped” by breaking open a small
mud-sealed cavity at the bottom and letting the molten contents run out
through gutters into receiving ladles. The iron, being heavy, runs out
first. The rest, following, is diverted into other gutters and cooled,
when it is used for making cement, ballasting railroad tracks, and
other purposes. This material is known as slag.

Meanwhile, the iron is carried in the ladles to the mixers, huge
cradles holding 250 tons or more each of molten metal, and rocking
slowly but continuously to and fro. Into these mixers different heats
of iron are poured, and the constant motion of the mixer gradually
brings them to a homogeneous mixture, insuring uniformity in the metal.

William R. Jones, or Captain Bill as he was generally and
affectionately known in the steel trade, was for many years in charge
of the Braddock plant of the old Carnegie company and was one of the
most picturesque figures that ever flitted across the pages of the
history of the industry. Big, with a temper as hot as the metal with
which he worked, but with a heart of gold, he was an ideal leader for
a steel mill army. Gifted with unquenchable energy and enthusiasm,
he acquired a habit of breaking world’s steel-making records, and in
the earlier days of his management of the Braddock works he time and
time again set the steel world agog by his feats in the matter of
production. He continued to do so until the steel makers of Europe and
America became so used to “Jones breaking another record” that his
feats went unheeded. And the mixer, which still bears his name, was one
of his many inventions.

In a letter to the writer, Andrew Carnegie said of Jones:

“Jones volunteered in the Civil War as a private and returned at its
close a Captain. You can’t keep a good man down. I wished to make Jones
a partner along with many of our pioneers, and informed him of this
one morning. His reply was: ‘I don’t want to be troubled with business
matters. You just give me a ---- of a salary.’

“‘All right Captain,’ I said, ‘hereafter the salary of the President of
the United States is yours.’ And so it was.”

From the mixer the iron is taken to the converter to be turned into
steel. And now we come to the most spectacular, the most impressive
sight that is to be witnessed in the steel industry, the theme for the
poet who may one day be born to sing the Song of Steel.

A Bessemer blow, a converter in action, is a small-sized Vesuvius in
eruption, a volcano tamed and chained by man. From its great steel
crater shoot forth flames to the height of perhaps 100 feet, showering
sparks in every direction and creating a pyrotechnic display of
unequalled splendor. Its glare lights up the countryside for miles
around, and the hissing and roaring of the molten iron, or rather of
the steel groaning in its birth throes, forms a fitting accompaniment.
It is a sight that once seen will never be forgotten.

[Illustration: The Original Jones Mixer]

Both England and America claim the invention of the Bessemer converter,
the most epoch-making of all the discoveries in the steel trade and one
that has influenced all industries, civilization itself, immeasurably.
For before it existed steel could only be made by a slow and expensive
process in small quantities, and was not available for the varied
uses for which it is employed to-day. Had it not been for the Bessemer
converter, there would have been no skyscrapers, no steel railroad
cars, no steel ocean liners, no “Steel Trust.”

[Illustration: A Bessemer Blow]

Shortly before the middle of the nineteenth century William Kelly in
America and Henry Bessemer in England were struck by the same idea,
that air could be used as fuel, that the oxygen in air, blown through
a mass of molten iron, would burn out its impurities and would at the
same time blow them away. The records are slightly in favor of Kelly
as the earlier discoverer, although Bessemer got all the credit and a
knighthood for his work, while the American got nothing. A Bessemer
converter is actually a big retort with air holes at the bottom where
molten iron is purified into steel with air.

The first attempts at “making steel with air” met with scant success.
The pioneers of the new process encountered the same sort of opposition
as later confronted George Westinghouse when his fertile brain gave
birth to the air-brake. The youthful inventor secured an interview with
Commodore Vanderbilt, then head of the New York Central System, and
endeavored to interest him in his invention.

“Do you mean to tell me,” Vanderbilt asked, “that you propose to stop a
railroad train running at full speed with nothing but air?”

“Just that,” replied Westinghouse.

Vanderbilt turned to his secretary: “Show this lunatic out and never
let him trouble me again,” he said.

Kelly’s first attempt at purifying iron with oxygen was a failure.
The blast was too strong and the iron, along with the impurities,
was blown away in one gorgeous display of fireworks. But he was not
to be discouraged, and after many experiments got the blast right,
only to find that the metal which resulted was too soft, as the small
percentage of carbon and other alloys needed to give the steel its
hardness had been taken out.

To Robert F. Mushet, a Scotch ironmaker, belongs the credit for
overcoming this difficulty. He came forward with a practical
suggestion: “Burn out all your carbon and then put back what you need
to make the metal hard.” Simple enough, but the others had not thought
of it. And the thing was done.

The hissing, roaring volcano is easily handled by one man. As he
watches the flame that pours from its mouth change from red to yellow
and finally burn white, he touches a lever which turns the huge caldron
on its axis, while workmen quickly shovel into it the required amount
of carbon, silicon, etc. The converter is then further tilted and its
contents emptied into a ladle which swings away with its load while the
converter is charged afresh with iron.

Open-hearth steel, more popularly used nowadays than the Bessemer
product, is made by a different process. As the name implies, the
iron is changed into steel in large ovens, where it is mixed with the
necessary alloys and purifying ingredients and a considerable amount of
scrap. The proper melt being arrived at, the metal, now steel, is run
off into ladles.

The open-hearth method has many obvious advantages. In the first place,
it gives the steel a greater tensile strength. In the second, using as
it does about 60 per cent. of iron and 40 per cent. of old metal, it
is an important factor in conserving the natural ore resources of the
country and of the world for future generations.

Times change and steel making with them. Open-hearth is fast
supplanting Bessemer steel in all markets, and the day may not be far
distant when Bessemer will be practically a thing of the past. But it
must not be forgotten that the discovery of Kelly and Bessemer--to
whose names should be linked that of Mushet--gave birth to the modern
steel industry and made possible the age of steel. Open-hearth itself
may one day yield to another process. In fact, a prominent steel
manufacturer has suggested that electric steel will be the steel of the

All the newer steel plants are equipped with open-hearth furnaces. At
Gary, Bessemer is not produced at all, and even the Carnegie Steel Co.,
which probably did more than any other concern to develop the Bessemer
process, now has 133 open-hearth furnaces to 14 Bessemer converters.
The Corporation altogether has 335 open-hearth furnaces and 38

The manner in which the newer process is displacing the older is best
illustrated by some production comparisons. In 1901, the first year
of the Corporation’s existence, the subsidiary companies produced
6,109,306 tons of Bessemer steel to 2,745,514 tons of open-hearth. It
was not until 1909 that open-hearth production forged ahead, going to
7,508,889 tons against 5,846,300 tons of the other. But since that year
its gain has been progressive and continuous. In 1919, open-hearth
production was 12,412,131 tons compared with 4,788,242 tons of Bessemer.

After the iron is converted into steel by either process it is poured
into moulds some eight feet high and two feet or more in width. In a
surprisingly short time the surface of the metal becomes sufficiently
solidified to permit “stripping,” or removing of the mould, and we have
an ingot, which is steel in its first form.

If the ingot is not to be used for some time, it is permitted to
harden, but usually it is taken to what is known as a soaking pit,
where, for several days, it swelters in a high but even temperature
until the entire mass of metal attains an even heat. If used
immediately after stripping, the semi-solidified outer crust would
crush and the still fluid inner portion would run out.

From the soaking pit the ingot is lifted by immense cranes and carried
to the rolling mills, where it undergoes the various processes
transforming it into steel as we know it commercially.

So many and various are these processes that no attempt will be made
to describe them in detail. They vary from the rolling of a railroad
rail or a fourteen-inch plate of battleship armor to a wire rod about a
fifth of an inch in diameter or a sheet of tin plate such as is used in
making food containers.

To the spectator all these different processes are interesting and
fascinating. Entering the mill at one end the red-hot ingot is
gradually reduced in size as it passes through roll after roll and
brought to the required shape before being allowed to cool. In one
mill we may see the mass of steel lengthened and moulded to the shape
of a rail. In another, it is brought to the form of a big “I” beam for
bridge or skyscraper. In another, to a slender roll of wire rod, and so

The more highly finished forms of steel naturally involve a further
series of operations. Wire rods, for instance, are drawn through dies
to smaller and still smaller sizes, and sometimes to shapes far from
circular, until they become fence wire, piano wire, watch springs, and
a thousand and one other products. Much of it goes to the nail mill,
probably the noisiest place in the world, where it is cut, sharpened,
and given a head. As stated elsewhere in this volume, the Corporation
manufactures something like eleven thousand different varieties of wire
products alone.

We have now followed the ore all through its journey from the mine
to the finished product. But the mining of coal and its conversion
into coke plays as important a part in the manufacture of steel as
the mining and refining of iron. And the Corporation’s coal and coke
operations are carried on a scale in harmony with the general immensity
of its steel operations. In 1916 the Corporation mined 32,768,381 tons
of coal and produced 18,901,962 tons of coke.

In the early years of the steel industry the iron master did not
produce his own coke. He bought it. But as the industry became more and
more integrated it became obvious that the two operations must go hand
in hand if costs were to be kept down, and to-day most of the larger
manufacturers produce all the coke they need in their steel operations.

One of the first and certainly the most important mergers combining
steel and coke interests was that which brought together Andrew
Carnegie and Henry Clay Frick, and later resulted in giving to the
Steel Corporation, when it absorbed the Carnegie Steel Co., control of
the vast coal mines and numerous coke ovens originally owned by Frick
and his associates.

Long before his death, which took place December 2, 1919, Frick had
earned the right to be reckoned as one of the outstanding figures
in American industrial history. Like many other Americans who have
achieved great success he began life without advantages, starting his
business career as an errand boy and later occupying the position of a
clerk in a distillery at Mount Pleasant, Pa., in the middle of what is
now the big Connellsville coke-producing district.

At that time the American coke industry was in its infancy. The young
clerk perceived its possibilities and out of a very slender salary,
by frugal living and many privations, saved enough to make some small
investments in coal properties. Later, when the coke industry was
in the dumps, and most of those connected with it could see nothing
but disaster, Frick, convinced of a great future for coke, managed
to enlist the aid of a Pittsburgh banker and purchased a number of
properties at bargain prices, organizing H. C. Frick & Co., which later
became the H. C. Frick Coke Co. In a few years the clerk had risen to
be the dominating figure in the coke trade.

When Carnegie decided that economical manufacture of steel implied
the acquisition of coke properties he secured control of the Frick
Company and later negotiated a partnership with Frick, merging the two
companies. Eventually, after a lawsuit and much bitterness between the
two men, Frick and Carnegie separated. But when the Steel Corporation
took over the Carnegie Company, Frick was induced to become a member
of the Finance Committee, and it is generally recognized that his
financial acumen was of enormous assistance to the big Corporation in
the days before it had established itself firmly. Frick remained a
director of the Corporation and one of the most influential members of
its Finance Committee until the day of his death.

Frick left an enormous fortune. Although he left substantial legacies
to his children and others, the mass of fortune was distributed among
public institutions for the good of the community.

The H. C. Frick Coke Co. is still the most important by far of the
Steel Corporation’s coke-making subsidiaries. It owns vast areas of
land in the Connellsville and surrounding regions near Pittsburgh, but
already the writing on the wall may be discerned. The time is coming,
slowly but surely, when the great company organized by Frick will
produce nothing but coal, when its more than 21,000 coke ovens will be
cold, and will no longer light up with their flares the blackness of
the night around Connellsville.

At the Frick coke plants coke is made by the old beehive process,
in great open ovens, row upon row, where millions of tons of coal a
year are turned into coke. But as explained elsewhere, the primitive
beehive oven process is wasteful, both as to the amount of coal needed
to produce a ton of coke and because the by-products of the coal, tar,
ammonia, benzol, toluol, etc., are blown into the air. And gradually
the modern coke by-product oven is replacing the old beehive. The
Frick Company will be able to hold its own for a long time against the
process of modernization. But it must eventually yield.

The operations of the Steel Corporation are not confined to the
manufacture of steel. They include a number of auxiliary and incidental
activities, including the production of coke by-products, named in the
preceding paragraph, a considerable volume of gasoline, all absorbed
by the Corporation itself, the operation of steamship lines, the tale
of which is told in the chapter on “Exports,” the building of ships,
the control of a number of public utilities, and so on.

And the tale of the expansion of the Corporation’s activities is not
yet told. Already it is going into the manufacture of railroad cars.
Land was acquired several years ago for a large steel plant across the
Canadian border, at Ojibway, and it is probable that the building of
this plant will not now be long deferred. In fact, it is a fairly safe
assumption that the only reason for delay in erecting it is that of
present inflated costs.

While the growth of the Corporation will not be too rapid, if for no
other reason than that its management is averse to achieving anything
that might savor of monopoly, there is no question that its future
development in regard to expansion of its steel-making facilities and
allied activities will keep pace with the development of American
commerce both at home and abroad.



Pittsburgh, preëminent in steel, the home of the company with which
for many years Andrew Carnegie set the pace for the rest of the world
to follow in steel making; Pittsburgh, her skies blackened with the
smoke of hundreds of furnaces that produce more than one quarter of the
world’s supply of its most necessary metal, naturally comes to mind
when one mentions steel cities--she is easily the greatest of them all.

Situated in the extreme west of the state of Pennsylvania, on the
border of the great coal deposits of that state, with excellent
facilities for getting her ore and coal at comparatively low cost, and
having an unsurpassed location in respect to markets for her finished
products, Pittsburgh is likely to keep for a long time her commanding
position among the steel towns.

And yet Pittsburgh is not among the towns included in the title of this
chapter. She is the world’s steel city. And this is the story of some
of the communities that owe their existence to the United States Steel
Corporation, that have sprung up as a result of the extension of its
manufacturing facilities, and in the building and management of which
the forward-looking influence of the biggest of all businesses has been

Among such cities Gary, Indiana, holds the foremost place.

Bearing, appropriately, the name of the head of the Corporation, the
man who more than any other was responsible for its organization,
and beyond peradventure, responsible for its policies, Gary may
be said to represent, so far as a town may, the spirit of the

Gary’s history, to the date when this is written, covers only fourteen
years. The site of the city, on the borders of Lake Michigan, in the
northwest corner of Indiana and about twenty-five miles from Chicago,
consisted of sand dunes on which scrub oak and sage brush grew less
than fifteen short years ago. Its inhabitants were wild birds and a few
hardy hunters and fishermen, and on one memorable occasion a cave in
the dunes gave refuge to the car-barn bandits of Chicago until their
surrender was forced by the police. In 1906 the Steel Corporation’s
management decided that another steel plant was needed in the Middle
West, bigger than any then existing, and selected a desolate spot on
the shore of Lake Michigan for its location. Thus was the plant and
city of Gary conceived.

The magnitude of the project and the difficulties which had to be
overcome would have appalled any but so large a corporation. The
proposed steel plant could not be operated successfully unless it had
a town to house its many thousands of employees, and the site of Gary
offered not even the ordinary facilities for town building. It had no
harbor, nothing could grow on its arid soil--these were only two of the
handicaps. But the Corporation set to work to build a city literally
from the ground up, and Gary, with a population of 56,000 to-day, and
rapidly growing, was the result.

The Corporation’s management has always shown its realization of the
fact that “not by bread alone does man live”; that the mere paying of
employees a living wage is not sufficient, and that even the least
educated worker has an aesthetic sense, even though often uncultivated,
that should be developed and pandered to within reasonable limits if
the best good of the worker and the employer is to be achieved. To
make the big Indiana sand dune attractive seemed an impossible task,
but it was accomplished. The Corporation’s engineers apparently took
for their guidance the motto that hangs in the office of the big
company’s chief executive, “It can be done,” and made Gary at least
an attractive, if not a beautiful, residential town. To do this,
nearly two million cubic yards of fertile soil was brought into the
town, superimposed on the sand, and used for the laying out of parks,
boulevards, and lawns. Many thousands of trees were planted on the soil
with gratifying results.

The lack of a harbor was compensated for, and safe haven provided
for the ore boats which had to bring raw material to the proposed
big plant, by the cutting of a harbor slip five thousand feet long,
twenty-two feet deep, and two hundred and fifty feet wide, affording
draft and anchorage for the largest lake steamers afloat, and
terminating in a basin of ample size to permit these vessels to turn
around. In the calm waters of this artificial harbor, protected by
a breakwater, the ore boats are unloaded at the rate of 1,250 tons
an hour, the ore being conveyed from their holds to a storage yard
parallel to the slip until needed to feed the hungry furnaces.

Work on the building of the steel plant and city was started April,
1906. To the Indiana Steel Co., a subsidiary of the Illinois Steel
Co., and especially organized for the purpose, was given the task of
erecting the steel plant, while the Gary Land Co. was organized and put
in charge of the creation of the city.

How gigantic was the task of building Gary may be gathered from its
cost to the Corporation. The construction of the steel plant and the
creation of the town has involved an expenditure of over $100,000,000,
and work is yet to do. Of the fifty-six open-hearth and other steel
furnaces contemplated in the original plan, forty-seven have been
completed so far. The first heat of pig iron was produced on December
21, 1908, and the first steel ingots early the following year.

The Gary plant is probably the largest single steel plant in the
world. It consists of twelve blast furnaces, forty-seven steel
furnaces, a rail mill, billet mill, plate mill, five merchant mills,
slab mills, an axle plant, and a by-product coke plant of ten
batteries, each of seventy ovens. With these are auxiliary shops,
machine shop, roll shop, electric repair shop, boiler shop, blacksmith
shop, etc., and the necessary electrical equipment.

Sixteen gas engines of 2,000 H. P. each, supplemented by four 3,000
H. P. steam engines, are used to operate the blast furnaces. The power
required to run the open-hearth furnaces and steel mills is supplied by
seventeen 3,000 H. P. gas engines, driving an equal number of electric
generators, the gas for these engines and for the blowing engines being
supplied from the blast furnaces. In this way the power required for
the entire plant is supplied by blast furnace by-product gas. Part of
the power generated is transmitted to Buffington, five miles away,
where it is used to run the machinery of the Universal Portland Cement
Works. The rail mill is driven by three electric motors, each of 6,000
H. P.

The annual capacity of the big plant is as follows:

  Pig iron                         2,173,200
  Coke                             3,360,000
  Ingots                           3,030,000
  Billets, blooms and slabs        1,544,600
  Sheet bars                         104,000
  Rails                              750,000
  Finished steel, including rails  1,997,900

During the construction of the plant, over 10,000,000 cubic yards of
material were excavated and over 1,200,000 cubic yards of concrete
placed. More than 150,000 tons of fabricated steel were used in its
construction. The plant covers an area of 1,250 acres, and a plot of
land of approximately the same size and adjoining the existing plant is
being reserved for possible further extensions.

Gary, the town, was incorporated in June, 1906, only a few months after
the foundations for the first buildings were excavated. At the first
election for town officials, only 33 votes were cast. Seven years
later, in 1913, over 9,000 voters marked the ballots.

When the Steel Corporation decided to build Gary it determined to make
it both a modern and a model city. The town was carefully laid out by
competent engineers and ample provision allowed for growth. It now
covers several square miles. Its principal thoroughfares are Broadway,
100 feet wide, and Fifth Avenue, 80 feet wide. These are paved with
concrete block and the other streets with macadam.

Citizens of New York and other big cities, accustomed to seeing
their important thoroughfares constantly torn up for the laying of
sewers, electric wires, etc., would find a pleasant change from these
conditions in Gary, where it is never necessary to do such work in the
principal streets. All gas and water mains and sewer pipes are laid in
wide alleys between the streets and thus all repairs and improvements
can be carried on without any obstruction to traffic.

Many pretty homes, a number of them owned by steel workers, make
attractive the residential section of the town. The Gary Land Co. has
erected a great number of these houses--1,000 or more--and these are
offered for sale at prices representing approximately the cost of the
land and improvements, with a special discount to plant employees.
The prices of these houses range from $1,500 to $25,000. The company
also offers for rent, at exceedingly nominal rates, houses built for
the most part of concrete and equipped with electricity and all other
modern conveniences. All these dwellings are attractively finished and
each has its plot of green in front.

The visitor to Gary is never allowed to leave the town without seeing
the Y. M. C. A., the finest building in the city, erected at a cost
of $260,000 and the gift to the town of the man whose name it bears.
The building contains a gymnasium, swimming pools, class rooms,
club rooms, dormitories, and so on. Opposite the Y. M. C. A. is the
beautiful Carnegie Library, and not far off, the Federal Building. The
Gary Hospital, built and maintained by the Corporation, is absolutely
modern, both in equipment and management, and bears favorable
comparison with similar institutions in the largest cities.

But the town, Gary, is known first and foremost as the birthplace of
the most modern and efficient educational system. The Gary plan of
training youth, with modifications, has been extensively copied in many
large cities. Unfortunately, after a rather inadequate try-out in New
York City, it was abandoned; apparently, however, chiefly because local
politics made it impossible for those in charge of the work there to
get full results from the Gary methods.

Professor William Wirt, an enthusiast on the training of youth and an
iconoclast so far as old methods are concerned, is at the head of the
Gary school system. In fact, he originated it. When the town officials
and those of the Steel Corporation took up the matter of education,
they went at it in a thorough manner and looked around for the best
school principal to be obtained. Wirt’s plans were approved, he was
chosen for the post, and given a free hand in modeling the entire
system. The Emerson and Frœbel schools were the result.

Wirt proceeded to turn topsy turvy many of the old ideas in education.
He started off with one big advantage over other reformers--he was able
to arrange all details from the beginning, even the building of the
schools, in accordance with his plan, and he worked out a scheme under
which the youth of the town enjoys a vocational training completely
equipping graduates of the school for entering practically any chosen
walk in life.

But Prof. Wirt has done more than this. He has succeeded in making
education attractive for the young people of Gary.

One of Wirt’s pet theories, not one new or exclusively his by any
means, is that play is as essential to the growing boy or girl as
study, and in the schools work and play are so alternated as to double
the number of children which the school buildings would ordinarily
accommodate, one class working while another uses the playgrounds.
Thus, with three school buildings, well over 3,000 children are fully
provided for on full time.

The curriculum includes all the regular school subjects, as well
as many others, including music and a number of sciences. A large
auditorium is devoted to the study of history and geography, which are
combined into one subject and inculcated with the assistance of lantern
slides or moving pictures, visualization of scenes and events being
made use of to attract interest and assist memorization. The same idea
is employed in other studies, the room devoted to natural history, for
instance, being equipped with a wide variety of stuffed animals and
even with small live ones.

The range of vocational subjects taught runs from painting, carpentry,
and iron work to accountancy and architectural draughtsmanship. Each
subject is taught in a room with the proper equipment, there being a
carpenter shop, paint shop, foundry, draughting room, etc., and each
trade or profession is taught, not theoretically, but by practice.
Teachers for these subjects are not chosen from college faculties,
but are skilled workers in the different lines, and the students or
apprentices to each trade make articles used in the school itself. This
serves not only to reduce the cost of maintenance of the school but to
give the pupils the interest in their work that comes from seeing the
product of their skill in actual use.

Thus, the youthful carpenters make tables, chairs, desks, etc., that
can bear comparison with high-grade factory products; the painters keep
the schoolrooms and buildings spick and span; the draughtsmen plan
additions or improvements; the accountants keep the school books. In
every case a concrete end is served to the benefit of the school and
the pupil.

Nor is the female of the species forgotten vocationally. A kitchen and
lunch room are run by the girls. Here they prepare palatable dishes
and sell them to their fellow-students. Thus the young housewife
gains actual experience in the most essential department of good
housekeeping. Laundry work, sewing, and other feminine industries are
similarly taught, besides stenography, bookkeeping, etc.

In that part of the school buildings and grounds devoted to recreation
are to be found swimming pools, one for each sex, tennis courts,
baseball diamonds, swings, slides, and other aids to enjoyment loved by
and suitable to the young of all ages and both sexes. Instruction in
play is just as thorough as in study. The recreation teachers devote
their entire time to this work.

An excellent illustration of how the Gary educational system appeals to
boys and girls is afforded by the story told the writer by a foreman
in the mills of the American Sheet & Tin Plate Co., which has a large
plant on the outskirts of the town. His story, told as nearly as
possible in his own words, is as follows:

  About two years ago, my nephew, left an orphan by the death of his
  mother, came from Pittsburgh to my care. I had been told that the
  boy was incorrigible, and would pay no attention to his studies;
  in fact, that he flatly refused to go to school. And it proved the
  information was correct. Arriving at Gary he would not even make a
  pretense at studying, and I practically had to use force to induce
  him to visit Prof. Wirt with me.

  Arriving at the school the boy explained to Mr. Wirt that he did
  not consider himself in need of an education as his only ambition
  was to become a house painter. The Professor thereupon suggested
  that he come to school and learn how to paint, assuring him that
  he would not be asked to do anything he objected to. Naturally the
  boy, who was never so happy as when pottering around with a paint
  brush, accepted the suggestion.

  The first day he was given a pot of paint and a brush and put under
  the care of a painter. In a short time he was fairly adept at
  laying on color. Then, one day, Mr. Wirt called him in and informed
  him that some of the classrooms were to be redecorated in several
  colors and that, in view of his progress, he would be put in charge
  of the job provided he could make a satisfactory estimate of its

  That was a stumper. The boy confessed his inability to estimate,
  and the necessity for a knowledge of mathematics being thus forced
  upon him, took up the study enthusiastically. Gradually he was
  brought to appreciate the advantage of other studies.

  To-day that boy would miss his breakfast rather than be late for
  school. It would take a padlock and chain to keep him away from his
  studies. And so far as I can find out, he is taking pretty nearly
  the whole curriculum.

Prof. Wirt has been strongly supported in his methods by the Steel
Corporation officials.

Gary is growing rapidly. Two Corporation subsidiaries, besides the
Indiana Steel Co., already have plants there. These are the American
Sheet & Tin Plate Co. and the American Bridge Co. The American
Locomotive and American Car & Foundry companies both big railway
equipment manufacturers, not connected with the Steel Corporation, are
said to be planning the erection of plants in that vicinity. The Gary
Screw & Bolt Co., one of several local enterprises, has a plant for
making bolts, nuts, and screws, and employs 800 men.

No less than six trunk lines, the Lake Shore & Michigan Southern,
Baltimore & Ohio, Wabash, Michigan Central, Pennsylvania, and Nickel
Plate, connect with Gary. Smaller roads entering the town are the Lake
Shore & South Bend Ry.; Gary & Southern; Gary, Valparaiso & Eastern;
and Gary, Hobart & Eastern. The Elgin, Joliet & Eastern, a Steel
Corporation road, has a large freight yard near the steel works.

A village in 1906, Gary is now a city of the second class, having
attained that rank in April, 1915.

[Illustration: Interior of Gary School]

Citizens of Gary have always been ashamed of one thing about their
town. This, appropriately known as the “patch” is a small section
thrusting itself wedge-like into the heart of the city, and being full
of saloons and dives. The site of the patch was not acquired by the
Corporation, because of some question as to validity of title, so the
big company has no power of restriction over its development. Gary men
have long hoped that some means of cleaning up the section would be
found. Prohibition seems to be doing it.

Away up in the northeast corner of Minnesota, on the shore of Lake
Superior, is Morgan Park, another steel city, named after the great
banker who financed the organization of the Steel Corporation. This
town is one of the latest developments and contains many new and
interesting features.

The engineers who laid out Morgan Park were able to use Gary as a model
and to improve on that city in many respects, particularly as the
demands on the new settlement in the matter of population would be much
smaller than was the case at Gary and it was possible to develop the
town along suburban residential lines.

Perhaps the most interesting feature of Morgan Park is the provision
made for children. In no other town in the world are there as many
playgrounds per capita. Each block has its own playground for small
children, provided with swings, slides, sand piles, and so on, and
thus the little ones in every part of the city are able to enjoy the
advantages of outdoor play under the eyes of their parents and without
their having to cross a street.

For older children and for such adults as still keep up personal
interest in athletics there are many places where they may indulge
in tennis and other sports, and these give the workers in the mills
and their families greater and more varied opportunities for physical
recreation than are enjoyed by the inhabitants of most larger and more
pretentious cities.

To the visitor Morgan Park presents an unusually attractive aspect.
The streets are all laid out in curves, beautifully parked, and the
effect of this to the eye is entirely pleasing. Altogether, the
physical aspect of the settlement is more that of the exclusive suburbs
of some big city than what one ordinarily conceives to be a steel town
usually associated with grime and smoke.

Like all the other Steel Corporation developments Morgan Park has a
modern, thoroughly equipped hospital, Y. M. C. A. and other advantages
above those which a city suburb usually boasts.

Morgan Park is really a suburb of Duluth and is part of that
municipality. But while it is under the city government it enjoys
the various advantages mentioned because of the direct influence of
the Corporation which spends a large amount in beautifying the town,
providing playgrounds, etc., and which keeps a corps of trained
workers to promote welfare work of various kinds within its confines.
Just as in Gary which, though a self-governing city, displays in all
its activities the influence of the big corporation. J. P. Morgan,
Jr., paid the total cost of the beautiful and commodious Y. M. C. A.

And throughout the State of Minnesota are a number of small towns
which, in somewhat the same sense, may be classed among the Steel
Corporation towns. That is, although self-governing municipalities
they owe the majority of their improvements, such as hospitals, to the
munificence of the Corporation which employs most of their inhabitants
and sees to it that its employees shall have all possible opportunity
for comfort and social betterment. Hibbing, Coleraine, Eveleth--all
these are, in the true sense, steel towns.

One of the great problems that has faced the Corporation in building
the towns or settlements to house its mill workers has been that
of the bachelor, or the man who has come to this country to work
leaving his family in Europe or elsewhere. A large percentage of steel
workers belong to one or other of these two classes, and it has been
a difficult matter to devise a means of giving these men decent and
respectable living accommodations with as many of the comforts of home
as possible at a price within the means of the worker with his hands.
In different communities different plans have been tried. In Morgan
Park the Corporation erected large boarding houses with some of the
advantages of a club but the success of these has not been as great as
was hoped for.

Ellwood City, near Pittsburgh, where the National Tube Co. has one of
its big seamless tube plants, probably comes nearer to solving this
difficult problem than any other point. Here the Tube Company maintains
what is really a men’s hotel, with excellently kept bedrooms, club
rooms, etc., rented at a cost of a few dollars weekly to the workers.
The hotel, boarding house, or club, call it what you will, is located
but a few steps from the big restaurant maintained by the company. Thus
the boarding-house menu is avoided while the worker, tired out with his
day’s toil, is spared the necessity of a long walk for his evening meal.

Down below the Mason and Dixon Line conditions are considerably
different from what they are in the North. In dealing with the
white worker of Minnesota, Ohio, Pennsylvania, and other states the
Corporation has sought to avoid anything that smacks of paternalism. It
has simply provided the worker with certain advantages, leaving as much
as possible to him the management of these. But in the South, with a
large percentage of the workers colored, it has been necessary for the
Tennessee Coal & Iron Co., the Corporation’s southern subsidiary, to
manage directly the affairs of the settlements of its workers.

Although among the smallest of the steel towns Westfield, Ala., is
one of the most important from the sociological standpoint. It is a
development devoted exclusively to the negro, its entire population
being black, and it seeks to give the colored worker who resides
there advantages identical with those which his white brother enjoys

Situated in a little valley, amid rolling hills, the town slopes down
from all sides to a big common, the most noticeable feature of which is
a large and well-kept baseball park. Around this centre are grouped two
excellent schools, community houses, and other buildings used as social
centres, while, divided by winding roads, the well-built houses of the
town straggle in all directions, half-hidden by the southern foliage,
along the sides of the hills.

It need hardly be pointed out that a development of this character
has a broad and important economic aspect. The negro constitutes a
substantial percentage of the American population. In the South he
predominates. But until now the negro has never enjoyed any advantages
or the opportunity for social betterment. In Westfield he has such an
opportunity and while, temporarily, the town must be managed by white
brains it is almost certain that, in time, the negro residents of this
delightful village will learn to manage their own affairs and will
do so. And unless the writer misunderstands the spirit of the Steel
Corporation, it will put every encouragement in their way to that very

Fairfield, Ala., but a short distance from Westfield, has been called
the South’s model industrial city, and also the “city of homes.”
Situated like the negro village, on softly undulating ground amid the
luxurious southern foliage, the site chosen for Fairfield offered its
builders an excellent field for achieving artistic effects in its
layout, and they did not fail to make use of the opportunity. Like
Morgan Park, although almost within a stone’s throw of the steel mills,
it presents the appearance of an exclusive suburb. Its well-paved
streets are shaded by green trees through the leaves of which peep out
the fronts of cosy-looking modern houses. Even the trolley cars running
through its principal streets fail to disturb its peaceful charm.

To describe the many “steel towns” scattered all over the eastern
half of the American continent would be impossible, as it would be
to discuss the problems presented by local conditions in each case.
Broadly speaking, the Corporation, wherever it has built to house its
employees, has sought first of all the comfort and happiness of these
workers and not its own gain. And it has always borne in mind that
comfort and happiness are æsthetic as well as physical, and built
accordingly. In the older steel centres the Corporation, as it has not
built from the ground up, has naturally not been able to introduce into
the communities as many basic improvements as has been possible in the
newer developments. But it has in every case sought to improve existing
conditions, always with the workers’ comfort, health, and happiness as
its goal.

The H. C. Frick Coke Co. has set itself the task of making attractive
the coal-mining towns of the Connellsville region. By the usual
corporation methods of sanitation, of making personal and community
cleanliness easily attainable, it has raised very materially the
standard of living in the coal towns, and the standard of management of
the towns themselves. It has even managed to make many of these towns
attractive--if the reader has ever been through coal-mining regions he
will appreciate the size of this achievement--by encouraging gardening
by means of prizes and so on, and by fostering community pride. It has
set new community standards in the coal districts.

To the late George G. McMurtry must be given much credit for the
movement for bettering conditions in industrial centres. Over 30 years
ago Mr. McMurtry conceived and laid out a model city in the environs
of Pittsburgh for the workers of the American Sheet Steel Co. The town
laid out by the former head of the Sheet Steel Company will stand as a
lasting monument to him, though it does not bear his name--Vandergrift,
Pa., the first of the steel towns.



Of all the problems with which industry is confronted none is more
important or more difficult of solution than that of establishing
proper and harmonious relations between the man who works with his
hands and the individual or corporation who pays him his wage. Upon its
solution depends to a large extent the settlement of the whole vast
problem of capital and labor. And the proper treatment of the worker
has been a question to which the management of the Steel Corporation
has applied itself with energy almost since the organization of the big

To claim for the Corporation complete success would be an exaggeration.
The problem is one that has been growing ever since the dawn of the
industrial era and obviously cannot be settled, if at all, without many
years of effort and of mutual give and take. To expect any employer,
or group of employers, to achieve immediate success in solving the
difficulties that naturally arise between capital and labor would be

No one questions the right of the man who works with his hands to
decent living conditions, a wage that will give him the opportunity
to live with a certain degree of comfort and permit him to bring up
his children decently. Most, if not all, modern employers recognize
this right and are willing, even anxious, to accord it to the men in
their employ. But it has been by no means easy to decide just what are
the best steps to be taken to attain the desired ends. And, it must
be stated regretfully, the necessary coöperation on the part of the
workers themselves is often lacking. There is often a tendency on the
part of wage earners to regard with suspicion any steps taken for their
betterment by employers.

It must be remembered that the industrial era is practically in its
infancy still. It was naturally some time after the birth of the era
that the evils it brought in its wake came to be recognized and steps
could be taken to combat them. To-day every sound thinker on economics
realizes that the welfare of the industrial worker and of industry
itself are inseparably associated, and that industry cannot attain its
highest development unless the worker gets a fair share in its profits
and an opportunity for self-development.

It is comparatively easy for the successful employer--that is,
successful from a financial viewpoint--be he individual or corporation,
to spend money with a view to improving the living conditions of his
workmen. It is not an easy matter to do this in a manner that will
preserve the self-respect of the worker. And it is of the utmost
importance that this self-respect should not be injured in any way.
Paternalism, or anything that looks like it, must be studiously avoided.

About the year 1906, the Steel Corporation initiated a campaign of
Safety, Sanitation, and Welfare. The enormous success that it has
attained in preventing accidents and deaths in its plants is easily
demonstrable statistically. The benefits resulting from its sanitation
campaign are also obvious to any one visiting the steel districts. It
is not so easy to point definitely to the good results from the welfare
campaign, but there is no question that they are more far reaching than
either of the others. The greatest of the three is welfare.

The term “welfare” is used to include practically every activity
designed to make life more livable for the worker and his wife and
children. It includes education, housing, club activities, and a host
of other things.

While the policy of the Steel Corporation in regard to improving
the living conditions of its employees is the same wherever the big
company’s subsidiaries operate, the methods adopted differ in each
locality with the varying conditions presented. It would be impossible
in the scope of this work to give details of the multitudes of courses
adopted in the name of “welfare,” but a few examples will serve to give
a general idea of the work that is being attempted.

The greatest enemy of mankind is ignorance; hence the work that the
Corporation is doing along educational lines may justly be regarded as
the most important of its operations for ameliorating the workers’ lot.
It is not always possible for the Corporation to take direct charge of
the education of the young, the children of its employees, nor does
it wish to do this directly. But in those localities where municipal,
county, or state educational facilities are poor, it has gladly assumed
the burden. The most striking instance is the work conducted along
these lines by its southern subsidiary, the Tennessee Coal, Iron &
Railroad Co.

In fact, the work of the Tennessee Co. along all lines of welfare is
particularly worthy of description. This does not imply any invidious
comparison; it simply means that the southern company had a more
virgin field to work on and therefore has been able to lay out a more
comprehensive and definite programme.

But to return to the question of education of the workers’ children.
When the Steel Corporation, in 1907, purchased control of the Tennessee
Coal, Iron & Railroad Co., it found conditions decidedly unfavorable,
especially in two respects: education, and the treatment of the colored
worker who constituted the major part of the common labor supply of
that section.

The schools in Jefferson County, Alabama, where the mines and mills
of the Tennessee Company are located, were in an exceedingly poor
condition in every respect. The buildings in many instances were
dilapidated and the inadequate pay offered teachers failed to attract
men and women competent to train the youthful mind.

After a thorough study of the situation, President George G. Crawford,
of the Tennessee Company, took up the question with the county
authorities and an arrangement was finally arrived at by which the
company was to build and equip a sufficient number of schoolhouses in
the neighborhood of its plants and mines. The county agreed to turn
over to the company the annual appropriations for teachers’ salaries
in the neighborhoods affected, these sums to be supplemented by the
company with an amount sufficient to pay the type of teacher which the
company’s officials desired to obtain.

As a result of this agreement there are to-day, in every place
where the Tennessee Company operates, well-constructed, thoroughly
ventilated, modern, and attractive schoolhouses for white and colored
children, combined with the most modern equipment for teaching. The
instructors in charge are of a high average type and the schools are
recognized as having no equals in the South.

How successful the Tennessee Company’s management of these schools has
been is evidenced by the fact that when the Steel Corporation, through
the southern company, began the erection of its big shipbuilding plant
at Chickasaw on Mobile Bay, in the neighboring county of Mobile, the
authorities of that county proposed to the company’s officials that
they enter into a similar agreement in respect to education in that
section and a plan, in all essential respects the same, was drawn up
and agreed to.

The educational work in the South is not confined only to children,
whom it takes from kindergarten to the end of the grammar school period.

The schoolhouses are made centres for general community activities,
or in some cases special buildings are erected for this purpose. The
community work includes cooking, sewing, housekeeping, and similar
classes for the wives of employees, club and social activities,
athletics, etc. An important function is the maintenance of libraries
for workers and their families. The popularity of these libraries is
growing rapidly and the type of literature demanded by those who use
them indicates not only a desire on their part for self-instruction
but an unexpectedly broad and intelligent interest in the problems and
events of the period.

Before passing on from the South, let us take a brief glance at what is
being done for the colored people of that section by the Corporation.

The negro has not heretofore had a fair chance in the South for
bettering himself. The Tennessee Company has endeavored and is still
strenuously endeavoring to give its colored employees an equal
opportunity with their white brethren. Although separated, as desired
by both whites and colored, the educational facilities it offers the
children of the negro workers are identical with those afforded the
youthful whites. The community activities are in all respects similar,
and in fact, in every way the colored worker at the Tennessee plants
and his family have just as much opportunity to live decently and to
develop as the white.

At Fairfield, Alabama, the Tennessee Company maintains a hospital,
recently erected, which, except in mere size, compares favorably with
any institution of its kind in the world. The building, costing over
$1,000,000, has accommodation for 334 patients, one half being for
white and one half colored. The surgical equipment is the last word in
modernity, and the wards and private rooms are splendid examples of
good lighting and ventilation and the other factors that go to make a
sick room comfortable. The roof of the hospital is a large esplanade
where convalescent patients may in fair weather enjoy the southern air
and sunlight and a view of miles of beautiful rolling country in every

It is a far jump from Alabama to Minnesota geographically. The
educational and general welfare problems that confront the Corporation
in the Northwest are essentially different from those it faces in
the South. In fact, in the Northwest the Corporation’s subsidiaries
have nothing to do directly with education, which is in charge of the
local authorities. The steel companies merely meet the bills through
paying at least 85 per cent. of the taxes in the sections in which they
operate. But their managements take a keen interest in the educational
work being done, and though the taxes are heavy and the local
authorities seem over-extravagant in their expenditures for education,
the steel interests do not grumble. They take the attitude that even if
taxation is heavy, it could not be for a better cause.

The small mining towns of northern Minnesota, which, as already stated,
depend almost entirely on the Steel Corporation and other steel
companies for their revenues, are profligate in regard to education.
Their school buildings are imposing. It is not uncommon for a town of
1,000 or so inhabitants to spend three or four hundred thousand dollars
for the erection of schools. In one instance at least a splendid garage
is attached to the school building, and buses are maintained, giving
the children free motor transportation, morning and afternoon, between
their homes and the school. And teachers’ salaries are high.

The Corporation’s welfare activities are naturally restricted in this
territory, due to the fact that the section is prosperous, and the
workers there of a more independent, self-reliant type than those of
the South. But the Corporation does all it can in the way of promoting
healthful recreation and other similar social work such as club houses,
the maintenance of hospitals, etc.

In another chapter of this volume the city of Gary, Indiana, and its
scheme of education has been discussed at some length, and therefore it
need not be taken up here. The Gary educational plan has been adopted
in all essentials at Morgan Park, where the Minnesota Steel Co. has
its big plant.

In the older steel sections, such as Pittsburgh, Chicago, and
Youngstown, the Corporation’s subsidiaries coöperate as far as they may
with the local authorities, in improving educational conditions. In all
these sections a somewhat similar plan of welfare is carried out. In
some locations, visiting nurses or domestic instructors are maintained
at the expense of the company. In others, the Corporation maintains
schools for teaching foreign workers the English language and American
ideas and ideals. In every part of the country where any of the
Corporation’s subsidiaries has a plant no expense is spared to improve
living conditions generally and to make up any local deficiencies for
education and social betterment.

Housing of workers is another great problem that confronts industry.
The Corporation, wherever its subsidiaries operate, has always
endeavored to provide its workers with comfortable and sanitary houses
at moderate rentals. So far has it gone in this respect that it is
seriously open to question whether it has not overshot its mark and
created new evils.

In the South, in the Connellsville region of Pennsylvania, where it
gets the mass of its coal supplies, in Youngstown, Gary, Morgan Park,
and other sections, it has built thousands of houses--the figure given
as of January 1, 1920, is 17,553 dwellings and boarding houses--for
rental at low rate to employees. The rents on these dwellings are so
low that the average rental receipts are only about 1½ per cent. of
the actual cost of construction. This is not enough to cover taxes
and upkeep, let alone depreciation and a reasonable return on the
investment. These low rentals are in effect tantamount to an addition
to wages. The adverse side of them, however, is that they discourage
private construction enterprise, which cannot hope to compete with the
Corporation’s rentals, and also remove all incentive to the worker to
own his own home.

For years the subsidiary companies have constructed houses and sold
them to employees on an easy-payment plan, but it was only recently
that a general comprehensive plan was developed along these lines for
all subsidiaries.

The housing plan varies slightly with the conditions of each case, but
generally it permits employees to purchase or build a home on small
initial payments, with installments running from ten to fifteen years,
and with an interest rate of 5 per cent. on the unpaid balance.

How varied are the activities of the Corporation in regard to welfare
work is illustrated by a list of the facilities constructed or
installed for various purposes, as presented by Charles L. Close,
manager of the Corporation’s Bureau of Safety, Sanitation, and Welfare,
at a meeting of the American Iron & Steel Institute in New York in
May, 1920. The list was made up as of January 1st of that year. The
following are some of the principal items: Number of dwelling and
boarding houses constructed and leased to employees at low rentals,
27,553; churches, 25; schools, 45; clubs, 19; restaurants and lunch
rooms, 64; rest and waiting rooms, 210; playgrounds, 131; swimming
pools, 11; athletic fields, 96; tennis courts, 107; sanitary drinking
fountains, 3,077; pipe systems for drinking water, 369; protected wells
and springs, 647; comfort stations (complete units, either bath or dry
houses, closets, wash or locker rooms) 1,495; showers, 2,672; clothes
lockers, 116,749; base hospitals, 25; emergency stations, 286; company
surgeons, physicians and internes, 167; outside surgeons on salary,
107; nurses, 189; visiting nurses, 68; teachers and instructors, 222;
safety inspectors (spending entire time on safety work) 101; employees
who have served on safety committees, 25,948; employees now serving on
safety committees, 5,500; employees who have been trained in first-aid
or rescue work, 16,801; employees now in training, 801.

Many of the above statistics are concerned principally with strictly
sanitation and welfare work. While on the topic of statistics, however,
it might be well to give Mr. Close’s figures of the Corporation’s
expenditures on those activities that come under the operation of the
bureau which he heads. These expenditures, from 1912 up to the end of
1919, are: Welfare, $11,751,429; Sanitation, $11,732,666; Accident
prevention, $6,530,706; Relief for injured men and families of men
killed, $22,652,238; cost of employees’ stock subscription plan,
$9,160,000; pension fund payments in excess of income, provided by
permanent fund, $1,824,693; for creation of permanent fund, $8,000,000;
total, $71,651,732.

A sum of $5,113,570 paid in pensions to employees, but derived from the
fund originally established by Andrew Carnegie, is not included in the
above total.

In organizing welfare activities the Corporation’s officials work
on the theory that it is infinitely better to help people to help
themselves than to give them something that savors more or less of

One department of the work that has met with encouraging success is the
development of home and community gardens. Practically every worker has
in the front or rear of his home a small amount of vacant land, but
unless he is offered some incentive to cultivate this, he is apt to let
it remain bare and serve for the accumulation of rubbish.

Realizing that such a state of affairs was not only a waste
economically, but was inimical to the physical and mental welfare of
the worker, a plan was evolved to induce him to cultivate these vacant
areas. The offering of small cash prizes was found sufficient to give
the necessary impetus to this work, and the result is that a great
many of the workers’ homes are now surrounded with flower or vegetable
gardens to the cultivation of which the men and their families give
much of their spare time. From a financial viewpoint these gardens are
profitable to their cultivators, regardless of the prizes offered for
the best-kept ones. The mental and spiritual benefit derived from them
cannot be measured, but there is little question that it far exceeds
the financial gain.

In many localities, where housing conditions do not permit gardens,
the Corporation’s subsidiaries utilize unoccupied land in the mill
district, plow the ground, plot it out, and then hand it over to the
employees to cultivate, again with the incentive of cash prizes for the
most successful results. Last summer more than 3,000 acres of land were
thus utilized.

Many of these community gardens are made the especial care of the
children, who take a great interest in the work and who often achieve
results of which their elders might well be proud.

Children, in fact, occupy an important place in the welfare scheme.
They are the workers of to-morrow, and every effort is made to permit
them to develop healthy minds and sound bodies. Children’s playgrounds
are equipped and maintained in a great many mill centres, and
instructors are employed to devote their whole time to assisting the
children to get the best possible benefits from these. Many of these
playgrounds have swimming pools, in some cases one for the older and
one for very small children, with swimming instructors in charge, and a
visitor in the summer needs only the evidence of his eyes to convince
him that the little ones make regular and excellent use of them.

The care of the worker’s health is one of the most important
considerations of the Bureau of Safety, Sanitation, and Welfare.
Sanitary measures are general in every mill. There is not a single
plant of the Corporation but is equipped with modern facilities for
washing, and experts in sanitation give their time to improving these
methods whenever possible. Every suggestion that tends to diminish
the risk of contagion or of diseases caused by unsanitary conditions,
occupational conditions, etc., is adopted and there is a keen rivalry
among the different plants to establish some new improvement which the
others lack. In almost every plant the visitor is shown some idea or
contrivance in the way of sanitation with the boast that this was first
used at that plant. All of which makes for a constant improvement in
the health of the worker.

Drinking water generally is thoroughly purified and piped through the
mills so as to be at all times easily obtained by the men. Cups, with
their possibility of contagion, are eliminated. Fountains, with guards
to make it impossible for the drinker’s lips to touch the outlet, are

Most, if not all, of the comfort rooms maintained at the plants are
equipped with shower baths and every workman has his private locker
where he keeps soap, towels, and a change of clothes.

The results of these measures are not reflected only on the health
of the men. The worker who is able at the end of a strenuous day’s
endeavor in a hot mill or a coal mine to enjoy a cool shower and leave
the plant clean and comfortably dressed must necessarily be a more
self-respecting member of the community than he who has to return to
the bosom of his family grimed with the sweat and dirt of his day’s
toil, and his family also benefits, both in self-respect and comfort.
It was a difficult job for the wife to maintain a pride in her home
under the conditions that once existed in the steel districts.

Cleanliness is far-reaching in its results. It benefits not only those
directly affected but the entire community.

[Illustration: Ore Cars at Proctor Yards]

There is one aspect of the sanitation work that is hardly obvious, but
nevertheless important. America is the great melting pot of the races.
History has shown that it normally takes several generations in the
crucible to produce the out-and-out American. And cleanliness, probably
more than anything else, is the birthright and symbol of the American.
Many of the foreign races that flock to our shores are regrettably
lacking in this respect, but they learn quickly. And the more
quickly we can accustom them to the idea of the necessity of personal
cleanliness the more speedily will they become real Americans and good

[Illustration: General View of Duluth Ore Docks]

Which all harks back to the question of self-respect. The American
is naturally self-respecting and independent. And his accustomed
use of soap and water is no small factor in making him so. And the
Corporation’s welfare workers see to it that its employees shall never
lack soap and water.

Incidentally, among the many activities of the Welfare Bureau is that
of instruction for citizenship. This includes the teaching of the
English language to foreign workers, instructing them in American ideas
and institutions, and assisting them in obtaining their naturalization
papers. Foreign workers’ wives are instructed in American standards of
housekeeping and in the proper care of their children, and every effort
is made to encourage and assist the foreign-born worker to realize the
opportunities that this country offers to all and to enable him to take
advantage of them.

As the world grows older and wiser and civilization progresses,
old ideas are being discarded one by one, and nowhere is this more
noticeable than in the realms of business and industry. Principles of
doing business, once held as cardinal, have in many cases later been
recognized as immoral, not only from the human, but from the economic

The old trading doctrine of _caveat emptor_, or “let the buyer beware,”
is no longer relied on by reputable merchants. They realize that the
man who hopes to build up a sound, steady business must take upon his
own shoulders the responsibility for what he sells both as a question
of honesty and policy. Another principle which may be called “let
the worker beware,” one which laid down the law that the industrial
worker was supposed to be cognizant of whatever risks were involved in
his employment and to assume these risks himself, is gradually being
legislated out of existence, compensation laws of recent years taking
the burden of the dangers of industrial employment off the shoulders
of the worker and placing it where it rightly belongs, on the industry.

But the United States Steel Corporation did not wait for the law-makers
to force upon it the assumption of this liability. Cheerfully and
voluntarily, it accepted for itself the onus of accidents in its plants
before a single state of the Union had passed a Workmen’s Compensation

More, the compensation relief plan for injured workmen, adopted by the
Corporation in 1910, has served as a model for a number of states in
drawing up liability legislation, and is more liberal in some respects
than the plans of most, if not all, states.

Yet though the Steel Corporation, as evidenced by its action in putting
its compensation plan in force, heartily approves of the theory of
industrial liability legislation, the big company’s management is
strenuously opposed to certain forms that state legislation sometimes
takes. One of these is state insurance, the objection being that this
takes away from the employer all incentive to adopting measures for
accident prevention. For compensation, after all, is not a cure but a
palliative. It does not strike at the root of the disease; and in the
final analysis, the important thing is the prevention of accidents
rather than payment for them after their occurrence.

In this respect the up-to-date employer has gone much further than
legislators. He has gone to the very heart of the industrial accident
question by taking what means he could to eliminate, or at least to
minimize, the risks incidental to the industry in which he is engaged.
He subscribes to the slogan “safety first,” safety even before profit,
for he is beginning to realize that accidents are uneconomic and
unprofitable, and that their prevention, even if apparently costly at
the beginning, must pay in dollars and cents in the final showing.
In other words, the modern employer of labor is becoming convinced
that safety methods, or insurance before accident, are as necessary as
are measures to prevent fire instead of relying upon fire insurance
companies to make good losses from conflagration.

Although individual effort to minimize industrial hazards had been
made by some companies before the Steel Corporation existed--notably
in the case of some of the very companies merged into the “Steel
Trust”--the Corporation may with reason claim the distinction of being
the real pioneer of the safety movement. For not only did it organize,
systematize, and enormously expand the work of the several companies,
but it championed the cause of safety, and trumpeted it to the
industrial world.

Through its example, as well as by means of a vigorous campaign
carried on by the Safety, Sanitation, and Welfare Bureau, it preached
the doctrine of “safety first,” a slogan originated by the Illinois
Street Co., to all. The largest employer of labor in the world, by its
adoption of such a policy, forced the recognition of this policy upon
industry generally, and as a result of the safety campaign inaugurated
by the Corporation in 1906, safety-first methods and appliances are
generally employed in every steel mill in the United States to-day,
and, in fact, by a vast number of plants devoted to other industries,
and they have spread and are still spreading to other countries.

The results of the work of the Corporation’s Safety committees are at
the disposal of whoever cares to avail himself of them. A Safety Museum
is maintained at 71 Broadway, New York, the Corporation’s executive
headquarters, and from this centre the work of promoting safety
radiates to every part of the industrial world.

Further, the efforts of the Corporation have resulted to a great extent
in educating the worker to expect and demand that every reasonable
precaution be taken to protect him from pain and injury, his family
from the loss of its head and wage-earner, in teaching him to seek
safety for himself and to recognize the right of his fellow-workmen to

From the aspect of liability, accidents may be divided into two
broad classes as recognized by law--injuries due to the worker’s
own carelessness, and those attributable to the negligence of his
employer. But the Steel Corporation, in its accident relief plan, which
supplements its safety work, makes no such distinction. It recognizes
only that the worker has been temporarily or permanently prevented
from earning a livelihood, or that his family has suffered, and it
compensates for the loss without question as to where the blame lies.

In order to secure the best results, economically and otherwise,
from its safety campaign, it was obvious that the mere setting up of
safety guards, warnings of danger, etc., was not sufficient. It is
just as necessary that the worker should be taught to take advantage
of the safeguards provided him, to regard the seeking of safety as a
duty he owes to himself, his family, and his fellow-workmen. In its
campaign for the prevention of accidents the Corporation has sought to
accomplish both these ends, and the educational work has been by far
the most difficult.

How much so may be gathered from the fact that after many years of
instilling the doctrine of safety into the workmen, investigation
showed that nearly 50 per cent. of all accidents occurring in
the Corporation’s mines or plants were indisputably traceable to
indifference or thoughtlessness on the part of the men themselves.
The worker is inclined to regard with something of disdain the risks
incidental to his occupation. Often he deems it rather cowardly to seek
to avoid these risks. Indifference to danger is too often accepted by
the thoughtless as a hallmark of personal courage, and indifference to
the dangers of one’s employment as a sign of experience and skill. Just
as a small boy will jump on a moving car to “show off,” the worker will
often incur unnecessary risks for the same reason. A railroad man will
board a moving engine from the middle of the track simply because to
do so seems to indicate that he is past the apprentice stage. It is to
such causes that a large percentage of industrial accidents are due,
and the employer of labor, in instituting a safety campaign, generally
finds that the greatest problem he faces is to persuade the worker
that such indifference to danger is childish, and that real skill and
efficiency lie in doing things in the correct, which is synonymous with
the safe, way.

The Corporation’s safety work may be divided into three parts:
organization, safety devices and danger warnings, education.

It goes without saying that to get the best results in any campaign,
efficient organization is essential. The Corporation has organized
a central Safety Committee under whose charge the general work
of prevention of accidents falls. Each subsidiary company has
its own Committee on Safety, and there are further sub-divisions
into sub-committees at each mill or mine. It is the duty of the
sub-committees to see that all safety rules are obeyed, and to make
suggestions for furthering the cause of accident prevention, while the
main committees receive and act upon these suggestions and attend to
the financial and other aspects of the campaign. For the prevention
of accidents costs a good deal of money, the Corporation having
expended, from 1906 to 1919, about $11,000,000 in this work alone.
But the necessary funds are never stinted. Judge Gary’s promise that
the Finance Committee would recognize any practical step undertaken
for reducing the risk of injury to the workmen, and would vote the
wherewithal to pay for it, has been scrupulously kept.

So as to bring home to every worker the safety idea, the personnel
of the sub- or mill-committees is constantly changed with the view
that each worker will sooner or later take part in the promulgation
of safety. Figures already quoted show that 101 inspectors spend
their entire time on this work, 25,948 employees have served on safety
committees, and 5,500 were thus serving at the end of 1919. This
practice of changing the members of the mill committees, more than
anything else, educates the men to think safety for themselves and for

Installation of devices designed to make accidents impossible, or
at least extremely improbable, on machines that had previously been
prolific causes of injuries to workmen, was naturally the first work
of the Safety Committee. It was the obvious step. The educational
campaign came later, as it became evident to those engaged in the
work that the saving of the worker from injury lay largely in his
own hands. Once this was recognized, the educational work was taken
up enthusiastically, and to-day forms the most important side of the
“boost-for-safety” campaign.

Print and paint are used liberally to keep the idea of caution before
the mind of the worker at all times. Safety warnings are painted here
and there in conspicuous places in the mills and mines, and at the
entrance to many plants there are big display signs, electrically
illuminated at night, on which changing mottoes serve constantly to
impress the idea on all and sundry. Blank walls, pay envelopes, and all
available spaces that may be printed or painted on are impressed into
the work.

A million dollars, in round figures, is spent annually by the
Corporation in the erection of safety appliances. The men are
encouraged to suggest ideas for the prevention of accidents of however
trivial a nature and these are all given careful consideration, and
the records show that something like nine out of ten of them are used.
The safety workers have adopted this motto: “Not only is an ounce of
prevention worth a pound of cure, but it is better to have a pound of
prevention than an ounce of cure.”

So numerous and varied are the safety devices that have been developed
over the course of years that it would be impossible to describe
them in detail. They run from guards on the handles of wheelbarrows,
to prevent fingers being crushed in passing through a doorway, to
appliances for derailing cars in danger of collision; guards over
exposed flywheels, belts, and other moving parts of machinery; enclosed
ladders to prevent falls; goggles to safeguard workers’ eyes from
explosion of metal or flying chips, and subways under railway tracks to
eliminate the danger of crossing the rails in a busy yard.

Although a workman who invents a marketable safety device may secure a
patent on it if he desires, the Corporation itself never patents, being
only too glad to put at the disposal of other employers every means it
can to assist them in eliminating accidents. Its management holds that
the safety campaign, while good economy, is largely humanitarian, and
should not be commercialized.

For several years past the Safety Committee of the Steel Corporation
has been trying to make the safety idea universal, and it has put into
use a danger signal which has been adopted by a number of industrial
organizations in this country. This signal is a plain red ball,
innocent of lettering. It is pointed out that this sign, speaking no
language and therefore speaking all tongues, can, by educating the
worker of the world, be made understandable everywhere and at all
times, and will therefore be especially serviceable in promoting safety
among foreign workers. The adoption of the red ball of safety was urged
upon the International Convention for the Prevention of Industrial
Accidents which was held at Milan some years ago, and it has been
accepted and put into use by such organizations as the American Iron
& Steel Institute, the National Metal Trades Association, National
Association of Manufacturers, as well as by a large number of railroads
and manufacturing concerns of one kind or another.

The satisfactory results of the safety-first campaign are demonstrable
statistically. Taking 1906 as a basis, this being the year of its
inception, the number of serious or fatal accidents in 1918 and 1919
was reduced 46.84 per cent. notwithstanding the fact that the figures
for recent years include a number of accidents that were classed as
minor injuries in 1906. The following chart speaks for itself.

[Illustration: ACCIDENTS

1906-1919 INCLUSIVE

                      PER 1,000 EMPLOYES                  SERIOUS INJURY
  |1907|■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ 10.40%|    832  1907
  |1908|■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■     18.21%|    783  1908
  |1909|■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■        25.28%|  1,236  1909
  |1910|■■■■■■■■■■■■■■■■■■■■■■■■                  43.49%|  2,215  1910
  |1911|■■■■■■■■■■■■■■■■■■■■■■■■■                 41.26%|  2,012  1911
  |1912|■■■■■■■■■■■■■■■■■■■■■■■■■■■■              35.05%|  2,023  1912
  |1913|■■■■■■■■■■■■■■■■■■■■■■■■■■                38.29%|  2,273  1913
  |1914|■■■■■■■■■■■■■■■■■■■■■■■■■                 40.52%|  1,748  1914
  |1915|■■■■■■■■■■■■■■■■■■■■■■■■                  43.54%|  2,145  1915
  |1916|■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■            31.60%|  1,957  1916
  |1917|■■■■■■■■■■■■■■■■■■■■■■■■■■                41.63%|  2,891  1917
  |1918|■■■■■■■■■■■■■■■■■■■■■■                    46.84%|  3,094  1918
  |1919|■■■■■■■■■■■■■■■■■■■■■■                    46.84%|  2,944  1919
  +----+------------------------------------------------+ ------
                                                  TOTAL   25,853



In fourteen years a total of 25,853 men saved, by educational work and
by the taking of precautions, from serious injury, many of them from
death. Probably two-thirds of the number had wives and children, and so
some seventeen thousand families were saved from sorrow, from the loss
of or injury to their heads. But this is not all. The figures represent
the saving accomplished in the mines, mills, and so on, of the Steel
Corporation itself. No account can be obtained of the number of men
employed by other steel companies, or in other industries, who, by
reason of the example set by the Corporation, were saved from death or
loss of limb. And the safety campaign is yet in its infancy. The men
who are devoting themselves to it look forward to the day when the only
accidents that shall occur will be those that may be said truly to be
unavoidable, and the number of men killed or injured in industry will
have been reduced to a minimum.

A concrete example of the results of the safety programme is afforded
by comparing the figures for accidents in the coal-mining industry in
the United States and other countries with those in the Corporation’s


                               1915     1916     1917     1918     1919
  Scotland                     3.35     4.32     4.03     4.55
  South Wales                  5.84     5.51     6.72     6.48
  Great Britain                4.38     4.39     4.70     5.24
  United States                4.27     3.77     4.14     3.80     4.24
  H. C. Frick Coke Company     1.75     1.89     2.20     2.38     2.81


  Scotland                  298,342  231,627  248,266  219,870
  South Wales               171,174  181,634  148,822  154,312
  Great Britain             228,402  227,807  212,652  190,998
  United States             234,297  265,094  241,618  262,873  235,918
  H. C. Frick Coke Company  567,098  528,735  493,188  419,758  363,844

  N.B. Figures for Frick Coke Co. (United States Steel) and for
  United States apply only to underground workers. Figures for other
  countries include workers above ground where casualties are lower.

Has the Steel Corporation really gained from its large expenditures
for safety work? That it has secured returns in the way of loyalty and
increased efficiency can hardly be doubted; but has there been any
tangible monetary saving? The economy in the matter of compensation
payments saved is sufficient to answer this question. A careful
calculation made several years ago by the Safety Bureau showed that had
the same number of accidents occurred in the three years, 1911-1913,
as occurred in 1906, when the safety campaign was organized, the big
company’s disbursements, as a result, to the injured workmen and their
families would have been several millions of dollars more than the
entire amount expended in safety work. The aggregate saving to date
would probably run well into the tens of millions.

The gain in production that is derived from increased safety in
manufacturing processes is also an important financial consideration.
In the first place, every accident means a more or less prolonged
interruption, possibly a complete though temporary cessation of
operations, with a consequent loss. Next, it means that a new man must
be trained to fill the place vacated by the injured worker. It will be
a happy day for industry when every employer realizes that the injury
of a workman is as harmful, from the viewpoint of profits alone, as
a breakdown of a piece of machinery. The human machine is no less
important than that made of steel or wood. And safety appliances are
insurance against the breakdown of that machinery.

It is the first step that counts. Once started on the job of saving
the employees of the Corporation itself from injury and mutilation the
ambition of the men in charge of this work extended and reached out
through the steel trade, then to other industries and finally to other

Strictly speaking, safety should be classified under the general head
of “Welfare.” But in practice a distinction must be drawn between what
may be considered the plain duty of the employer to prevent needless
accidents--a duty to the workmen and a duty to himself--and the work
that reaches out and, by bettering the worker’s lot generally, benefits
his family and the community in which he lives.

Work of this character grows of its own impetus. It is doubtful if the
Corporation’s management, when it first outlined its propaganda for
helping employees to lead happier and healthier lives, realized how
far afield it would be carried, how many different activities the work
would come to include.

Each step accomplished suggests another and often a bigger. As the
welfare campaign progresses its workers become imbued with enthusiasm,
make more demands upon the Corporation’s finances to carry out their
ideas. And so the welfare programme has taken on a broad scope, has a
wide horizon, and will have a still wider one as the years roll by.

Those in charge of the welfare and safety work, whether at the mills or
at the Corporation’s headquarters, do not claim, nor for that matter
do any of the Corporation’s officials claim, that the work is entirely
altruistic. They are perhaps rather too inclined to emphasize its
importance purely from the efficiency standpoint. It is impossible to
judge motives, and generally those behind any course of action are more
or less mixed. The outside observer, however, studying the operation of
the Safety and Welfare movement, and noticing the enthusiasm of those
engaged in it, cannot but be convinced that the deeper motive behind
it is an unselfish one. The consideration that the employer benefits
financially from the health and happiness of his employees is there,
but it occupies a decidedly secondary place.

It is difficult, perhaps impossible, to demonstrate statistically that
welfare work, as distinct from safety work, is financially beneficial
to the employer; that the Corporation has received any tangible
return for the large sums it spends yearly to give its workers the
opportunity to lead cleaner, healthier, happier, and broader lives. But
no work thus done can fail to give the doer a return, full measure and

The stock subscription plan, discussed in the early part of this work,
is in reality a part of the welfare programme. It has a two-fold
object: that of creating a direct personal interest on the part of the
worker in the Corporation’s affairs, and that of encouraging thrift
among the men and women employees, setting their feet on the first rung
of the ladder of success.

All welfare work, in the end, whether it be the salvation of the worker
from accidents, the teaching of individual or community hygiene, the
care of the sick, financial compensation for the injured, the teaching
of languages, trades, sciences, or the inculcation of thrift, has
for its object the making of better men and women, the giving to the
worker born under unfavorable social conditions the opportunity to lift
himself above these conditions. And from this both the employer and
employed must benefit together.

But every other consideration aside, welfare work had paid in the
satisfaction that the management and the stockholders of the great
industrial enterprise feel in the knowledge that they have given
the man who works with his hands, not in the Corporation alone, but
industry generally--for where U. S. Steel leads, others follow--better
working conditions, cleaner homes and communities, and better
educational facilities for their children. In the satisfaction of
knowing that, by this work, better citizens are being made, and
finally, in the realization that it has helped to bridge the chasm that
separates capital from labor.

Sooner or later the time must come when it will be recognized that
what is known as “welfare work” is a simple duty that industry owes to
labor. If it is not freely accorded, the working man will eventually
demand that his work and his home be surrounded with those conditions,
tangible and intangible, that make for decent citizenship, for
self-respecting manhood.

If industry as a whole, as the Steel Corporation has already done, will
recognize without compulsion these rights it will go a far way toward
smoothing out the differences that exist between capital and labor,
toward eliminating radical agitation and Bolshevism. It must offer this
practical recognition of the workers’ rights as evidence of its claim
that the real interests of the man who works with his hands and of him
who pays him his wage are identical.

Welfare work is the humanizing of industry. It may prove the salvation
of industry.



On March 1, 1920, the Supreme Court of the United States handed down a
decision acquitting the United States Steel Corporation from the charge
of the Government that it was a combination in restraint of trade,
bringing to an end litigation that had cost both the Corporation and
the Government many millions in cash and had for nearly nine years
thrown a threatening shadow on the steel industry and on American
business as a whole.

The decision, moreover, wrote the final chapter to a record of
investigations of and political attacks against the Corporation that
had lasted almost since its organization.

An immensity from its conception, an undertaking so vast that its
actions and policies, good or ill, reflected their results for the
industrial weal or woe, not of a single community but of the whole
American people; conceived and born, further, at a period when
the thoughts of the nation were directed toward the menace that
was believed to exist in trusts against the body politic and when
politicians and economists were bending their energies toward a study
of the question of big business, it was but natural that investigations
of one kind or another, but all directed toward the one end of finding
out whether the big company’s existence was a danger to the country or
not, should have played an important part in the history of the United
States Steel Corporation.

While United States Steel, its actions and its policies, have earned
the commendation of thoughtful students--perhaps even the majority
of the public, and many public speakers and writers have expressed
this, probably no other organization has enjoyed or been subjected to
so much--and generally such unconsidered--criticism as has the Steel
Corporation. Even the Standard Oil and the American Tobacco companies,
big and prominent as they were and as much as they have been attacked
for their methods of eliminating competition, have failed to strike the
public imagination as forcibly as the so-called Steel Trust. There were
two main reasons for this. To the mind of the student of economics the
activities of the Steel Corporation bore more importance to the public
welfare because of the part that steel plays in making or unmaking
the prosperity of the country, the importance of iron as one of the
resources of the nation. The steel trade is the industrial barometer
of the country and this is because steel enters into almost every line
of activity. So far as the public was concerned the very size of the
Corporation constituted its weakness. Its billion-dollar capitalization
captivated the imagination, compelled attention. What men do not
understand they are apt to fear, and how many can understand the import
of such a vast sum? As the majority opinion of the U. S. Supreme Court
says:--“The Corporation undoubtedly is of impressive size and it takes
an effort of resolution not to be affected by it or to exaggerate its

And because it was so easy to inflame the public imagination with the
very mention of the “Steel Trust,” the Corporation became a shining
mark for the attacks of demagogues who recognized in it an excellent
net for snaring votes.

This does not mean that all the attacks on the big Corporation have
been the work of demagogues. Some have been originated by men entirely
sincere in their conviction that so great an enterprise was inherently
dangerous to the well being of the country at large. But it was
generally overlooked that the power to do harm implies an equal power
to work good, and the question resolves itself in the final analysis
to an individual one. What were the powers of the Steel Corporation
and how were they used? The investigations, ending in the suit for the
dissolution of the “Steel Trust” and its absolution by the Supreme
Court, have brought to the light of day all the actions of the big
company, have submitted them to the glare of pitiless publicity, and
the vast industry has been judged not alone in the courts but at the
bar of public opinion. What have been these investigations, why were
they instituted and in what have they resulted?

On June 18, 1898, an investigation into the question of trusts and
their relation to labor and, in fact, their effect on the country
generally, was decided on by resolution of Congress. A committee, known
as the Industrial Commission, was appointed to make the investigation.
This commission was composed of five members of the Senate, five
members of the House of Representatives, and nine others, assisted by
a large corps of experts in economics. The committee did not finish
its work until the later part of 1901, its report being presented on
December 5th of that year. So that the Corporation began its existence
during the life of the commission and came in for a certain amount of
study on its part. As the report, generally speaking, was an academic
one and as it dealt very little with the Corporation, it may be passed
over here.

The first investigation bearing directly upon the methods or practices
of the Steel Corporation was begun during the administration of
President Roosevelt. James R. Garfield, appointed Commissioner
of Corporations in the Department of Commerce and Labor when the
department was instituted early in 1903, was instructed by the
President to investigate various large corporations and in the course
of this work he directed his attention to the steel trade. About 1905
Mr. Garfield began an investigation of the Corporation and the work was
carried on until some years after he had resigned his post and become
a member of the Roosevelt cabinet.

The report of the Commissioner of Corporations on the steel industry
was made by Herbert Knox Smith, who held the post under President Taft.

Approximately two years were spent by Mr. Garfield in this
investigation. Some years later, testifying under oath, he stated that
the management of the Corporation had put no obstacle in the path of
the investigation, but that on the contrary Judge Gary had ordered that
all information he demanded be given. Further, Mr. Garfield said that
the head of the big company had asked him to inform him if anything
contrary to law was discovered during the investigation as it was the
desire and intention of the management to meet the law fully and to
correct any abuses if they existed. Mr. Garfield, apparently, could
find no cause of complaint, for he reported to the President that he
had discovered nothing that necessitated that the Department of Justice
be informed with a view to instituting proceedings.

Further, Mr. Garfield declared, in questioning competitors of the
Corporation, steel consumers, and railroad traffic managers, he had
found no indication of the crushing of competition which would have
been revealed by complaints of competitors as they had been in the
case of other “trusts,” no signs of discontent among consumers, and no
evidence of rebating, used by some big concerns as a powerful weapon in
eliminating competition.

On July 1, 1911, the report of Mr. Smith was submitted, through
Secretary of Commerce and Labor Charles Nagel, to President Taft. Mr.
Smith’s report was an exhaustive and complete study of the Corporation.
One may find fault with his conclusions, but the work is without equal
as a compendium of facts and statistics regarding the Corporation.

[Illustration: (_Upper_) Ore Boat Unloading]

[Illustration: (_Lower_) An Ore Train]

In some respects the Smith report was unfavorable to the Corporation,
although the Commissioner made no claim of suppressed competition.
His criticisms were leveled principally at the big company on the two
points of over-capitalization and the matter of the Hill ore lease.

[Illustration: Ore Boats at Duluth Docks]

Mr. Smith claimed that the tangible assets of the Corporation at the
time of its organization were $682,000,000 against which $1,400,000,000
of securities were issued. At the end of 1910, he said, tangible
assets had increased to $1,187,000,000 and securities issued to
$1,468,000,000. As already pointed out Mr. Smith’s calculations did not
allow fully for ore property values, worth hundreds of millions.

The reader will remember that, in an earlier chapter, it was pointed
out that the over-capitalization of the Corporation did not admit
of doubt, an assertion proven by its practical admission by the
management of the Corporation who put $500,000,000 of earnings into
new construction for no other apparent reason than to equalize
capitalization and property values. Yet Mr. Smith’s figures appear
somewhat too drastic. Some of the reasons for this belief have been
stated before, but it is pertinent to point out that, in the 1910
valuation, Mr. Smith indicates that the main point of divergence is
that of ore reserve values, and on this point it would be safe to
say that the mass of opinion in the steel trade, that is the mass of
competent observers, would support the Corporation’s figures.

That Mr. Smith’s criticism of the Hill lease was well taken seems to be
proven by the decision of the directors to abandon the lease, although
another reason for this action was to be found in the gradual decline
in the metallic content of the ore as operations proceeded. Yet the
question as to whether the undertaking of the lease was intended,
as Mr. Smith thinks, to keep out competitors, or merely to secure a
safe ore reserve for the Corporation, must always remain a matter of
opinion. As the Corporation’s entire history fails to indicate a desire
to crush or to keep out competitors, it appears only fair to give it
the benefit of the doubt in this instance. On one point, however, the
lease is open to criticism; it seems to have been an error of business

But the work of the Commissioner of Corporations was being done
quietly, and in the meanwhile the public were being kept keenly
interested in the trust question and politicians were waging active
war against the trusts. The evidence brought out in the Standard Oil
and Tobacco suits served to inflame public indignation against big
business generally and “Hit the trusts!” became almost a shibboleth for
political advancement. It was no wonder, then, that the “Steel Trust”
should be criticized and it should be questioned why no action had been
taken against it, the obvious answer that it had not violated the law
being one which would hardly have satisfied the masses and certainly
one that politicians were not going to advance under the circumstances.
Public sentiment on the trust question, moreover, was being kept at
fever heat by a certain class of publication, and it was small wonder
that so rich an opportunity was seized upon by politicians. On May 4,
1911, a resolution, proposed by Representative Augustus O. Stanley,
of Kentucky, calling for an investigation of the United States Steel
Corporation, was introduced into the House and passed, and a committee
of congressmen headed by Mr. Stanley was appointed to undertake the
work. The other members of the committee, which became known as the
Stanley Committee, were:

Charles L. Bartlett, of Georgia, Democrat; Jack Beall, of
Texas, Democrat; Martin W. Littleton, of New York, Democrat;
D. J. McGillicuddy, of Maine, Democrat; Augustus P. Gardner, of
Massachusetts, Republican; Henry G. Danforth, of New York, Republican;
H. O. Young, of Michigan, Republican; John A. Sterling, of Illinois,

The committee shortly began its work and in the course of its
investigation summoned as witnesses the heads of the Corporation and of
various independent steel companies, experts in economics, consumers,
and a host of other witnesses. The greatest publicity was given to
these hearings, but the Corporation, although practically put on trial,
could not avail itself of the usual recourse of a defendant, could not
call witnesses on its own behalf.

On August 2, 1912, the Stanley Committee presented its report, or
rather reports, for there were several. The majority report, signed
by Messrs. Stanley, Bartlett, Beall, and McGillicuddy, was a sweeping
condemnation of the Corporation, its organization and its methods. This
was a matter of little surprise as the entire method of conducting the
investigation was sufficient to convince the unprejudiced mind that the
effort of the investigators was not so much to find out whether the
Corporation had been influential for good or evil but to prove that it
was actually a violator of the law.

Practically everything the Corporation ever did was condemned in
this report. Among the items that came for particular criticism were
over-capitalization, the bond conversion plan, the Hill ore lease, the
Union-Sharon purchase, the Gary dinners, the Tennessee purchase, the
Corporation’s attitude toward labor unions and toward labor generally,
and interlocking directorates.

According to the report the Corporation played an important and
dangerous part in influencing legislation, particularly in helping to
disseminate literature in favor of a high tariff. The letters produced
in support of this charge, however, do not seem to be very convincing
proof, indicating that no means other than perfectly legitimate ones
were used to assist in maintaining the tariff on steel products, the
necessity for which all steel men were agreed on.

In regard to the purchase of the Tennessee Coal, Iron & Railroad Co.,
the Stanley Committee asserted unequivocally that George W. Perkins,
a Morgan partner and a member of the board of directors of the Steel
Corporation, deliberately attempted to precipitate a run on the Trust
Co. of America with the purpose of forcing the interests in control of
the Tennessee company to sell. The details of the deal and the events
connected with the run on the trust company have been discussed in the
chapter devoted to the Tennessee purchase.

On the question of interlocking directorates the majority of the
Stanley Committee expressed their grave apprehension of its menace
to the country and pointed out that the Corporation, through its
directors, had representation on the boards of railroads capitalized
at $10,265,000,000; banks and trust companies whose capital, surplus,
and undivided profits aggregated $3,315,000,000; industrial concerns
capitalized at $2,803,509,000; and express, steamship, and terminal
companies capitalized at $2,272,000,000.

Finally, the committee demanded that the railroads owned by the Steel
Corporation be segregated from it as a matter of public necessity, the
ownership of these roads giving the Corporation a great advantage over

A minority report, signed by Augustus P. Gardner, Henry G. Danforth,
and H. O. Young, concurred with the main report in some particulars but
suggested that the majority had singled out incidents to bolster up its
arguments without regard to their relative unimportance, the result
being an overdrawn picture of the iniquities claimed to have been
perpetrated by the Corporation. While the second report unequivocally
condemned the organization of the Corporation as an attempt by the
Morgan interests to eliminate competition against the steel companies
in which they were concerned and to do away with the ever-present
menace that Andrew Carnegie was supposed to be, it said that the actual
control of the actions of the great combine had been put into the hands
of “exceedingly competent, although perhaps not altruistic, managers
who have subsequently made it a success.”

The minority report also pointed out that significant fact that the
price of steel, as based on a representative list of products, had
declined from $38.80 a ton before the Corporation was formed to $36.11
in 1911.

Finally, the minority members did not favor the dissolution of the
Corporation, merely contenting themselves with the suggestion that
it be put under Federal control. Incidentally, such control over all
corporate activities has been frequently urged by Judge Gary, head of
the Corporation.

This did not end the list or reports as Representatives Young and
Littleton each appended his personal views, both of which were
favorable to the Steel Corporation in many respects.

A year or more after the presentation of the Stanley Committee reports
some interesting events calculated to throw a new light on the causes
that led to the inception of the investigation transpired. A man known
as David Lamar (an assumed name on his own confession), one who bore so
unsavory a reputation in financial circles that he was styled “The Wolf
of Wall Street,” came forward with the assertion that he himself had
written the Stanley resolution for investigation and had used it, or
attempted to do so, as a club over the heads of the Morgan interests.
This failing, he had sent the resolution to Stanley through Henry B.
Martin, secretary of an association called the Anti-Trust League, and
the Kentucky congressman had introduced it into the House.

Lamar’s story was confirmed by Martin and by Edward Lauterbach, a New
York lawyer. It was followed by a denial on the part of Stanley who
pointed out that the resolution was offered originally by him in 1910,
a year before the time of its passage upon its second introduction,
whereas Lauterbach had said that Lamar showed him the resolution
in 1911. The record of the Senate committee which heard the Lamar
evidence, however, shows that Lauterbach stated he had seen the
resolution as early as 1908, or thereabouts, and that he thought it had
been offered to the House in 1910. Upon a suggestion from a senator,
who apparently was not cognizant of the fact that the resolution had
been presented unsuccessfully a year before its passage, that it did
not come before the House until 1911, Lauterbach corrected his date.
Under the circumstances this correction was natural, although the
original testimony was the more reliable.

However ignorant Stanley might have been of knowledge of Lamar’s
authorship of the resolution, and however sincere his motives in
bringing it before Congress, the connection of “The Wolf of Wall
Street” with the matter, which seems fairly conclusively proven, was in
itself sufficient to give a sinister aspect to the whole investigation,
to suggest that its inception was the result of base motives.

Following the Stanley investigation came the Government’s Steel
dissolution suit. That the one grew out of the other is easy to
believe. In fact, it would be difficult to think otherwise. The United
States Steel Corporation had been organized, had done business, and
prospered under successive Republican administrations. It had been
investigated by the governmental departments charged with such work but
these had failed to find sufficient evidence to warrant the bringing of
a suit against the big company. The Stanley resolution was passed by
a House controlled by a Democratic majority and the measure had been
applauded by a large body of voters who had been taught to believe by
their political advisors that all big business was necessarily evil.
The Republican Party was facing grave danger of defeat in the coming
elections of 1912 and the advantage the investigation had gained
for the Democrats among the class of voters referred to could only
be offset, it seemed, by a political “grand-stand play” of the same
nature. Here, again, we come to a question of motives, but all the
evidence obtainable seems to show that this was at least one of the
reasons why, on October 26, 1911, the Attorney-General for the United
States, George W. Wickersham, caused to be filed at Trenton a suit for
the dissolution of the United States Steel Corporation.

It cannot be said that the suit surprised any one. The country at
large had long wondered why no action had been taken against the Steel
Corporation; why this great combine alone seemed to be immune from
attack by the Federal authorities. Those unfamiliar with its conduct
and policies and knowing it only as the biggest of the “trusts” could
attribute the immunity only to political influence, while those better
informed, although believing that the Corporation’s entire history
had been such as to render attack futile, all violations of the law
having been carefully avoided by it, and that the Corporation was not a
monopoly in restraint of trade, felt that the force of popular opinion
must sooner or later result in a suit.

In the Government’s charges were reiterated practically the same
complaints found against the Corporation in the Stanley report; and a
complete dissolution was asked for. The Corporation replied denying in
toto all the charges and asserting its innocence of any violation of
the Sherman Anti-Trust Act.

Jacob M. Dickinson, former Secretary of War in the Roosevelt cabinet,
was put in charge of the prosecution, assisted by Henry E. Colton. An
imposing array of legal talent was lined up on the Corporation side,
its counsel including Joseph H. Choate, John G. Johnson, Francis Lynde
Stetson, Richard V. Lindabury, Cordenio A. Severance, David A. Reed,
and Raynal C. Bolling. The actual conduct of the case was principally
in the hands of Messrs. Lindabury, Severance, and Reed.

Hearings before a Special Examiner were ordered and these began in
New York early in 1912. Many months were consumed in the hearing of
testimony on either side, and it was not until the spring of 1914
that the last of the witnesses was examined. Among those called to
testify were former President Roosevelt; prominent steel men like John
A. Topping, E. C. Felton, Joseph G. Butler, Willis L. King, Charles
M. Schwab, James R. Bowron, Frank S. Witherbee, W. H. Donner, A. F.
Huston, Edwin R. Crawford, A. W. Thompson, Karl G. Roebling, James A.
Campbell, C. W. Bray, W. W. Lukens, John Stevenson, Jr., and a host
of others; prominent economists like Professor Jeremiah Jenks and Dr.
Francis Walker; financiers like Oakleigh Thorne, of the Trust Co. of
America, George M. Reynolds, and others; directors of the Corporation
including Judge Gary, James A. Farrell, J. H. Reed, Percival Roberts,
Jr., Daniel Reid, and so on, not to mention a vast array of railroad
purchasing agents, heads of large steel-consuming companies, and many
others among whom may be mentioned James R. Garfield and Lewis Cass

A large part of the testimony was devoted to events far preceding the
organization of the Corporation, it being the intent of the government
counsel to show that not only was the Corporation restraining trade but
that the very elements of which it was composed, the companies absorbed
by the great merger, were themselves organized in violation of the
law. As the hearings progressed the conviction that the Corporation
would emerge from the ordeal of prosecution successfully became more
prevalent, the evidence, to the lay mind, all supporting its denial of
any violation of the law. The witnesses called for the defence were
unanimous in declaring that the big company, far from restraining
competition, had fostered it, and this point, in effect, was the very
nub of the matter. Even the witnesses for the prosecution, many of
them, took the same attitude.

It was in listening to this testimony, or the greater part of it, that
the writer conceived the idea of recording the history of the great
Corporation. Here was a mass of data, the sworn statements of prominent
and reliable business men, a foundation that could not be excelled for
a work of this character. From this mass of evidence, in large part,
have been taken the facts stated in this history. The records in the
dissolution suit, in fact, contain the whole story of the Corporation
up to the year 1911. Hence it would be vain to review in detail all the
testimony here.

The arguments of counsel for both sides were presented to the U. S.
District Court, and for months the business world waited anxiously for
its decision, one that would have a very far-reaching effect not on the
Corporation or the steel trade alone, but on business generally. For it
was felt that a decision adverse to the defendant would mean that mere
bigness was considered illegal and that no large corporate enterprise
would be allowed to exist, however free from evil its course of action
might be. If the Steel Corporation was adjudged a monopoly in restraint
of trade, it was thought, then all big business was doomed, for the
Corporation, certainly, had sought in every way to meet fully the
requirements of the law.

It was not until June 3, 1915, that the Court rendered its decision,
the most favorable to big business ever handed down in an anti-trust
suit, denying the petition of the Government and completely absolving
the Steel Corporation from the charge of monopoly. The decision
was unanimous, all the judges being in entire agreement that the
Corporation was not, and never had been, a monopoly in restraint of

All four of the judges concurred on the main point at issue--that of
trade restraint. A minority opinion, signed by Justices Woolley and
Hunt, expressed some divergence of thought on minor points, which we
shall come to. In the meantime, let us examine some extracts from
the main opinion, signed by Judge Buffington, presiding, and Judge

“As trade is a contest for it between persons and the gain of that
trade by one means the loss of it to another, it follows that the
person who best knows whether the man who gained it gained it fairly,
is the man who lost it. If there is monopoly we can find proof of it
from business competitors.”

“For of the conduct of the Steel Corporation, the views of its
competitors are the best gauge. Monopoly and unreasonable restraint
of trade are, after all, not questions of law, but questions of
hard-headed business rivalry, and whether there is monopoly of an
industry, whether trade is subjected to unreasonable restraint, whether
there is unfair competition, are facts about which business competitors
best know and are best qualified to speak. And it may be accepted as a
fact that where no competitor complains, and much more so, where they
unite in testifying that the business conduct of the Steel Corporation
has been fair, we can rest assured there has been neither monopoly
nor restraint. Indeed, the significant fact should be noted that no
such testimony of acts of oppression is found in this record as was
given by the competitors of the Tobacco or Standard Oil companies in
the suits against those companies. We have carefully examined all the
evidence given by competitors of the Steel Corporation. We have read
the testimony of customers who purchased both from it and from its
competitors. Its length precludes its recital here, but we may say its
volume, the wide range of location from which such witnesses came, and
their evidently substantial character in their several communities,
make an inevitable conclusion that the field of business enterprise in
the steel business is as open to, and is being as fully filled up by
the competitors of the Steel Corporation, as it is by that company.”

Next the Court turns to “that most injurious feature of monopoly’s
wrong to the public, to wit, increase in the price of its product or a
deterioration in quality.” It disposes of the question of quality first

“No dispute arises under the proofs. They are simply uniform that, both
with independents and the Steel Corporation, there has been a steady
bettering of quality in steel products.”

The question of prices it discussed at some length and intimated that
there had been no evidence presented to show that the Corporation
had unduly raised prices, while a large number of steel consumers
had agreed in testifying that active competition in prices for steel
existed between the Corporation and the independent companies, which
would alone indicate that prices had been only such as ordinary
business practice warranted. The Court added: “The Steel Corporation
has adopted a policy of price publicity and adherence, somewhat
analogous to the freight-rate stability followed by the railroads under
the directions of the Interstate Commerce Commission.”

Next the Court considered the subject of restraint of trade in the
export or international field and found that: “we are warranted in
holding that the foreign trade of the Steel Corporation, its mode of
building it up, and its retention when built up, are not contrary
to the Sherman Law. To hold otherwise would be practically and
commercially to enjoin the steel trade of the United States from using
the business methods which are necessary in order to build up and
maintain a dependable business abroad, and if the Sherman Law were so
construed, it would itself be a restraint of trade and unduly prejudice
the public by restraining foreign trade.”

On the charge that the inherent nature of the Corporation was
monopolistic, that the object of its organizers in bringing it together
was for restraining trade the Court says, in part:

“In view of the fact that the proportionate volume of competitive
business has increased since the Steel Company was formed and that
the proofs show no attempt by it to monopolize it to the exclusion of
its competitors, to now attribute to those who formed the Corporation
an intended monopolization would be to say that, having formed the
Corporation for the purpose of monopoly, they immediately abandoned
such purpose and made no effort to accomplish it.”

The Court disposes of the matter of the purchase of the Tennessee
Coal, Iron & Railroad Co., and of other purchases of steel properties
criticized by the Government, by saying: “We cannot but feel, in the
light of the proofs, that they were made in fair business course and
were, to use the language of the Supreme Court in the Standard Oil
case, ‘the honest exertion of one’s right to contract for his own
benefit unaccompanied by a wrongful motive to injure others.’”

Perhaps the most important point of divergence between the two
opinions lies in the fact that Justice Woolley, with whom Justice Hunt
concurred, held that it was the original purpose of the organizers of
the Corporation to restrain trade. These judges found, however, that
the big company did not attempt to exert a power, if it possessed
it, to destroy its competitors; they say: “Upon the finding that the
Corporation, in and of itself, is not now and has never been a monopoly
or a combination in restraint of trade, a decree of dissolution should
not be entered against it.”

In denying the petition for a dissolution of the Corporation the Court
stated that it would, if requested by the Government, retain the bill
of complaint to restrain further action of this sort by the defendant

Metaphorically, business drew a sigh of relief when the decision of
the lower court was made public, a relief, however, chastened by the
expectation that an appeal to the Supreme Court was certain. But so
clear and unmistakeable were the findings of the District Court, so
little question seemed there to be in the minds of the judges, that no
evidence of monopoly or restraint of trade existed that the final issue
was awaited with confidence.

An appeal was filed in course of time--October 28, 1915. And for long
thereafter both sides girded their loins for the final effort. The
case was eventually argued before the Supreme Court on March 7-14,
1917, and later the Court ordered a re-argument, the date for the
re-argument being set for May of that year.

Meanwhile, the war that had been devastating Europe for three years had
at last reached out to the United States and this country had become
engaged in a conflict in which the industrial resources and financial
strength, to say nothing of the patriotism of the Steel Corporation,
were of enormous value and assistance.

Doubtless the Government’s attorneys realized this fully. Doubtless
they were aware that, if the Court should grant their plea and the
Corporation be dissolved, the breaking up of the great organization
would so disorganize its activities that it could not continue, during
the dissolution process, the tower of strength it was in carrying
on the war. So, on the ground, well taken, that the conclusion of
the suit might disrupt the financial situation, the Government asked
for and obtained a postponement, although opposed in its plea by the
Corporation which was anxious to clear itself before the world as early
as might be.

And so it was not until after the return of peace, eight years after
the suit was initiated, that final arguments were presented (October
7-10, 1919) and not until March 1, 1920, that a final decision was
rendered, absolving the Corporation and dismissing the suit, as already

The Corporation’s victory in the Court of Last Resort was a rather
narrow one, four of the judges agreeing on dismissal of the
Government’s appeal, while three favored the Government’s side. Two
members of the Court did not sit in the case and took no part in the
decision, Justice McReynolds, who had been Attorney-General of the
United States during the progress of the litigation, and Justice Louis

The judges voting for affirmance of the judgment of the lower court
dismissing the bill were Justice McKenna, who delivered the opinion,
and Justices Holmes, Van Deventer, and Chief Justice White, while
the minority opinion was written by Justice Day and concurred in by
Justices Pitney and Clarke.

On the question of the close division of the Court it might be pointed
out that, of eleven (excluding Justices McReynolds and Brandeis who
took no part in the matter) judges who sat on the case, four in the
District Court and seven in the Supreme Court, a total of eight were in
favor of the Corporation.

Compared to the opinion of the lower court that of the Supreme Court,
considered either as a literary effort or a comprehensive summing up of
the issues involved, is somewhat disappointing. A few pertinent facts
were emphasized by Judge McKenna, however, and these are well worth
alluding to.

Referring to unanimous testimony of both competitors and customers that
the Corporation’s trade methods had been not only legal but essentially
fair and, if the word may be used, sportsmanlike, as contrasted with
the Government’s claim that competitors were oppressed, Justice McKenna

“The situation is indeed singular, and we may wonder at it, wonder
that the despotism of the Corporation, so baneful to the world in the
representation of the Government, did not produce protesting victims.”

So obviously beneficial to American industry had been the Corporation’s
activities in the export trade that even the Government’s attorneys did
not attack it on this score, in fact, they suggested that the export
organization should be preserved. On this point the Supreme Court
majority opinion said:

  We do not see how the Steel Corporation can be such a beneficial
  instrumentality in the trade of the world and its beneficence
  preserved, and yet be such an evil instrumentality in the trade of
  the United States that it must be destroyed.

And in concluding the opinion:

  We are unable to see that the public interest will be served
  by yielding to the contention of the Government respecting the
  dissolution of the company or the separation from it of some of
  its subsidiaries; and we do see in a contrary conclusion a risk of
  injury to the public interest, including a material disturbance
  of, and, it may be serious detriment to, the foreign trade. And in
  submission to the policy of the law and its fortifying prohibitions
  the public interest is of paramount importance.

In the final paragraph we have the nub of the whole matter. The
dissolution of the Corporation would have been contrary to the public
interest. Its preservation distinctly was in the public interest not
only from a foreign trade or other economic standpoint but on purely
sociological grounds.

Not satisfied with the decision the Government’s attorneys shortly
afterward moved for the reopening and rehearing of the case, but
this appeal was promptly and unequivocally denied by the Court, thus
definitely and finally settling the matter.

To the management of the Corporation, and particularly to Judge Gary,
who was responsible for, and had accepted the responsibility for,
its actions good or bad, the decision was more than gratifying. Its
effect was not merely sentimental, however. The decision, freeing the
Corporation from the stigma of illegality and, by inference, endorsing
its policies, left the big company at liberty to develop and expand
within the legitimate lines it had always followed.

For nine years the Corporation had been hampered by the shadow that was
hanging over it. It was prevented from engaging in new enterprises that
might have been favorably considered by its directors as any plans for
future development might at any time have been brought to nothing by
an adverse decision. It is yet too early to see any direct result of
the new freedom, but it is a safe presumption that, now enjoying it,
the Corporation will not fail to make use of it for the financial gain
of its stockholders and for the economic good of the United States.

[Illustration: A Trainload of Ingots in Molds]



Almost since the date of its organization the activities of the
Steel Corporation have been guided by a definite set of policies. At
the beginning, when the Corporation was going through what might be
described as its “tooth-cutting” period, this was, perhaps, not the
case, as there was, as suggested elsewhere in these pages, a lack of
concordance on its Board on many questions, particularly in regard to
relations with competitors, with employees, and the general public.
But the policies advocated from the very beginning by the chairman
eventually were accepted in full by all concerned, and they have for
many years ruled the Corporation’s actions.

[Illustration: Ingot on Way to Rolling Mill]

Broadly speaking, the Corporation’s policies might be divided under
five heads--relations with competitors, prices, publicity, relations
with employees and, finally, with stockholders.

No better proof can be offered of the wisdom and success of the big
company’s methods of treating its competitors than the fact that, in
its hour of trial, when the Government of the United States was seeking
to disintegrate it, its competitors, the men who met and fought it for
industrial success, came forward practically in a body to its defense
and testified that its dealings with them and with the public had
always been fair and honorable.

The era that preceded the birth of the Corporation was one of
unrestrained, bitter, and often unfair, competition in the steel trade.
Too many manufacturers then worked, to paraphrase a well-known piece
of advice, on the principle of: “Sell steel, honestly if you can, but
sell steel.”

But the management of the big company had the foresight to realize that
a new day was dawning and, to help to make the morning of that day
brighter, it adopted the policy of candid treatment of competitors,
the principle of coöperation. Possibly its motives were not entirely
altruistic. The Corporation itself benefited, as appeared later, from
its course of action. However this may be, it sought to make friends
rather than enemies of its competitors.

In this it had no easy task, for the trade had too long been used to
fear gift-bringing Greeks, to view with suspicion every unhostile
act of a competitor, to believe that business could possibly be done
on the higher plane adopted by the new consolidation. “Live and let
live” was then unknown in business, or, at least, in the steel trade.
But gradually the fears alluded to were overcome and the steel trade
changed, or its methods did.

The Steel Corporation was an evolution, the natural result of the
integration in the industry that had been going on for many years. In
it were concentrated into a single organization all the processes of
steel making from ore mining to the manufacture of the most highly
finished products of all kinds, including transportation. And the
evolution was not merely a physical one. The new company stood for
development along the lines of modern thought of business methods and

It was a fortunate thing that the Corporation from its organization had
as its chief executive officer a man far-sighted enough to see that so
vast an enterprise must avoid unfair practices and methods that, even
if fair legally, were hardly so morally, if it would live itself; a man
with sufficient acumen to realize that the Corporation’s very strength
contained the germ of weakness, and to guide it clear of the dangers to
which it might otherwise easily have fallen prey.

In formulating its policies governing competition the Corporation had
a difficult course to steer. The laws governing the actions of big
business in the United States were by no means clear and for that
matter, are not so to-day. On one side was Scylla and on the other
Charybdis. To obey the law, the Corporation was bound to engage in
active and sustained competition with other steel makers; at the same
time, it had equally to refrain from any act which might be interpreted
as an attempt to take advantage of its great size and resources and to
overdo this competition.

In endeavoring to avoid the legal rocks, the Corporation, perhaps
naturally, did not meet with the most complete success. Indeed, to
do so would have been impossible, as there is no true middle course
between competition and coöperation--the best that can be hoped for is
a compromise.

It is interesting to note that the Government, in attacking the great
company, charged it with doing both the apparently forbidden things,
drawing from the Supreme Court the suggestion that these charges were
paradoxical and presented contradictions. Said the Court: “In one,
competitors (the independents) are represented as oppressed by the
superior power of the Corporation; in the other, they are represented
as ascending to opulence by imitating that power’s prices, which
they could not do if at disadvantage from the other conditions of
competition.” And the Court naturally asks, respecting competition:
“Are the activities to be encouraged when militant and suppressed or
regulated when triumphant, because of the dominance attained?”

This same idea was suggested by Judge Gary in his testimony before the
Stanley Committee, where he said:

  It has seemed to me that the Sherman Law, so-called, has two
  different provisions that, in their application, are more or less
  antagonistic one to the other. One provision is against monopoly
  and the other is against restraint of trade. If one manufacturer
  should undertake to enter into any combination or agreement,
  expressed or implied, to fix prices, to restrict output, to divide
  territory, it would be considered an arrangement in restraint of
  trade and inimical to that provision. On the other hand, except
  for some basis whereby destructive competition could be avoided,
  whereby the old methods of doing business under which, as you
  probably know, a few only of the steel companies were allowed to
  survive and do business, and a large majority were wrecked; if we
  should enter into that kind of competition, it would mean that a
  large percentage at least of the manufacturers of steel would be
  wrecked; and that would secure to the survivors, to a greater or
  less extent, a monopoly; and our effort was to find a position
  between those two extremes and what we have done has been open
  and aboveboard, whether right or wrong. We have met and laid our
  business on the table, so to speak, telling one another frankly and
  freely just what we were doing, and while that has not maintained
  prices, that has not prevented a good deal of cutting by different
  ones at different places and times; while it has not controlled the
  business in any sense of the word, yet it has had a very steadying
  influence, and has prevented the destructive competition to which
  I have adverted. That is the frank and honest statement of facts,
  whether they are justified or not.

In its answer to the Government’s charges, the Corporation claimed
that, far from restraining competition, it had fostered it, and the
majority of its competitors themselves swore to the truth of this
defense. The United States District Court, before which the suit was
first tried, pointed, in summing up, to facts and figures of the
growth of competitors which fully and completely substantiated the
Corporation’s claims. These figures showed that the Corporation’s
business from 1901 to 1911, in which year the suit was brought, had
increased over 40 per cent., but that in the same time the Bethlehem
Steel Co. had shown a gain of 3,780 per cent. in business, the La Belle
Iron Works of 463 per cent., Jones & Laughlin Steel Co. of 206 per
cent., the Cambria Steel Co. of 155 per cent., the Colorado Fuel & Iron
Co. of 153 per cent., the Republic Iron & Steel Co. of 91 per cent.,
and the Lackawanna Steel Co. of 63 per cent., to say nothing of the
rise and expansion of entirely new companies, such as the Youngstown
Sheet & Tube Co., during the same period.

For many years, ever since the period of consolidation in manufacturing
and other industries began, big business had been viewed with suspicion
and something of hatred by the mass of the people--and by no means
without cause, in many instances. There was no question that the powers
that controlled more than one great industry used their resources
to crush competition and, too often, their money and influence for
political ends. No argument is necessary to convince the unprejudiced
mind that such acts were inimical to the good of the nation. It was
perhaps natural that the stigma that attached to some as a result of
this was used by demagogues and others, often sincerely enough, against
big business in general as an aid to themselves politically. In short,
“Smash the trusts” was for years the great vote-getting slogan, and
unfortunately, is so still to some extent.

Small wonder then that the Steel Corporation, the largest and most
powerful of all the so-called “trusts,” was a shining mark for these
attacks. Small wonder that the man in the street, looking to his
leaders for guidance in such matters, was easily persuaded that the
giant company was necessarily a menace to the body politic.

Apparently this it was that Judge Gary foresaw when he insisted that
the organization at whose helm he stood must so conduct itself in all
its dealings with competitors and the public that it could at any
time show clean hands; could prove that its power had been used not
destructively but constructively for the good of all affected by its
actions--and this means the entire population of the United States.
He has said publicly either in a public address or when testifying
that these policies were justified on two grounds either of which
is sufficient, namely: first, because they are right, and secondly,
because they will pay in the end.

He evidently saw that the very life of the Corporation depended upon
this; and time has proved the accuracy of his judgment. It is safe to
say that had the Corporation misused its power it would have been
picked out many years before it was for legal attack, and the attack
would have been successful. The Corporation would not have been in
existence to-day.

To the lay mind, it is passing strange that the so-called “Gary
dinners,” which provided the principal example of the Corporation’s
attitude toward its competitors and the public, should have been
made the subject for special attack by the Stanley Committee and the
Government’s attorneys, and should have been criticized by the Lower
Court. However, the Court’s criticism appears to have been based
largely upon a technicality, as the judges in their opinion practically
admitted that there was no intent shown on the part of Judge Gary or
his associates to restrain trade by these functions. In fact, the
criticism seems rather to have been based on certain meetings held in
Pittsburgh as a result of these dinners, but at which meetings the head
of the Corporation was not present.

Judge Woolley, who rendered a separate opinion, said of these dinners:

  The first Gary dinner was given on November 20, 1907, to meet an
  unquestioned exigency arising out of the panic then existing....
  The dinner was given in order to devise ways and means to prevent
  calamity to the [steel] industry. Ways and means were found which,
  no doubt, contributed greatly in preventing disaster not alone for
  the producers of steel but also to those intermediate consumers
  who were carrying large and costly supplies. The ways and means
  consisted then of nothing more than the urgent request of a strong
  man that in the stress of panic all should keep their heads, and
  avoid the consequence of reckless cutting of prices. In this the
  others acquiesced, and in the light of the emergency then existing
  and of the disaster averted, I am of opinion that the purpose and
  conduct of those who participated in the first Gary dinner were not
  unlawful, improper, or questionable.

In view of the notoriety that these functions had received and of the
use that had been made of them against the Corporation, it may be
worth while to devote a little time to them here.

The Gary dinners! Feasts that will rank in the business history of
the United States as did the feasts of Lucullus in epicureanism or
Cleopatra’s dinners to Antony in romance. Occasions where the heads
of the steel companies of the United States gathered at the festive
board with amity and good will, to consider and discuss a situation
that threatened not themselves alone, but the country at large; where
these Titans of industry, only a few years before mortal enemies, met
as friends and openly and without fear discussed with one another the
intimate details of their businesses.

It was right after the first great shock of the panic of 1907. The
country was still trembling from the effects of the great financial
disaster, and no man knew surely whether the worst had been passed,
whether financial and industrial chaos had been staved off, or not. The
storm clouds had not passed away, and the men engaged in the steel and
iron business, truly called the barometer of trade, having on more than
one previous occasion--many of them, at least--seen a similar situation
lead to years of distress and of prolonged industrial depression and
unemployment, in a word to what the trade knew as soup-house days, had
especial reason to be fearful of what the immediate future held for
them and the concerns with which they were associated.

Nor were these panic fears confined to the steel giants alone. In
fact, the smaller manufacturers, the jobbers and the retailers,
having generally smaller resources, were in much worse case. Most of
these latter were piled up with heavy stocks of steel which they had
purchased during the boom in the earlier part of the year, and a sudden
drop in steel prices would have meant not alone the wiping out of all
hope of profit, but certain bankruptcy for a large percentage of them.

To the head of the biggest of the steel producers, then, all eyes were
turned. Judge Gary was deluged with letters from all quarters asking
him to use all his power and influence to help weather the financial
tempest. Naturally, it was very much to the interest of the Steel
Corporation, as well as of other steel manufacturers, to do all that
was possible to prevent the failure of the steel middlemen. Not only
would bankruptcies have meant the drastic cutting down of accounts due,
perhaps their total loss in some cases, but each failure would have
meant the loss of a customer. These things the steel men knew from past

One thing above all others seemed to be needed, the great essential
in panic of every kind--that those concerned should keep their heads,
should remain cool and face the danger steadily, and with the strength
of unity. A leader was needed, and a strong one, and Judge Gary, head
of the Steel Corporation, was looked upon to assume the post, which
he did. To Judge Gary it seemed that the first and essential step was
to bring the steel producers together and to explain the situation to
them, pointing out that the only hope of salvation was in coolness and

So he wrote a letter to practically all the large steel producers
inviting them to a dinner at the Waldorf-Astoria, in New York, on
November 20, 1907. The response was unanimous, and on the evening of
that day there gathered around the table in the ballroom of that hotel
the representatives of concerns producing more than 90 per cent. of all
steel made in America, as well as the representatives of some Canadian

At the proper time the host explained the object of the meeting. What
he said can best be related in his own words:

  I stated the purpose and object of the meeting were if possible
  to prevent the demoralization of business. I stated that the
  first object of the meeting was to secure a better acquaintance
  with each other, and come into close contact in order to know one
  another, hoping that we might deal with and toward one another as
  gentlemen and not as enemies. That the purpose was, if possible, to
  prevent demoralization of business, to secure as far as practicable
  stability of business conditions, as opposed to wide and sudden
  fluctuations; to prevent, if possible, failures on the part of
  our customers and to comply with their wishes in every respect;
  to prevent, if we could, a long continuance of the panic, which
  meant failures to a great many people and manufacturers themselves,
  because of their debts at the banks or because of their commitments
  for extensions, and to customers because of the large stocks they
  had on hand, the sudden change in the prices of which might be
  very damaging; and so far as we properly could, to maintain, or to
  assist in maintaining, business conditions generally, the opposite
  of which should be deplored.

       *       *       *       *       *

  I stated distinctly ... at that time that, as they all understood,
  we could not make any agreement, expressed or implied, directly or
  indirectly, which bound us to maintain prices or restrict territory
  or output; it must leave us free to do as we pleased, and must rely
  upon a disposition of all others to do what they considered fair
  and right, and for the best interests, not only of themselves, but
  all others who had any interest in that or any other work. I made
  that perfectly plain.

Judge Gary’s remarks made a profound impression, and his hearers
unanimously agreed to adopt the means he suggested for obviating the
worst of the panic dangers. Resolutions creating a general and several
sub-committees were made and passed and the meeting adjourned, subject
to call.

Following this dinner similar sessions were held in January, April,
May, and December of 1908. The December feast was the last of the Gary
dinners proper, although some meetings were held subsequent to that

Were prices fixed at the Gary dinners? Let us settle this point as it
was one of the chief things charged against the Corporation in the
Government suit, and is the question on which the ethical morality of
the holding of these dinners rests.

At the first of the Gary dinners the host explained that the fixing of
prices was forbidden by the laws concerning restraint of trade, and
that nothing could or should be done which would not conform in all
ways to the law. Yet it is plain that the effect of these dinners was
to stabilize prices for steel. It does not appear that there was any
definite agreement between the different interests represented as to
what quotation they should ask for their products, but it is obvious
that the mere statement, between gentlemen, that one intended to adopt
a certain course in regard to prices tended to influence his colleagues
to follow a similar course. It must be suggested, nevertheless, that
there was never any question of restraint, as all were free to act
as they saw fit, and it seems that on some occasions there was not
even absolute agreement. At the worst the participants at the Gary
dinners stretched the interpretation of the law a little to do a great
right--the financial salvation of the steel industry, which, remember,
was, and still is, the leading industry of the country.

What was the result of the Gary dinners? Simply that, whereas in
previous panics gravestones of steel producer and middlemen had been
numerous, not one important failure in the trade was recorded as a
result of the 1907 panic. There is no question that this was due to the
leadership of the head of the Steel Corporation.

Early in 1909--on February 18th--another meeting of the steel leaders
was held, this time taking the shape of a luncheon. This occasion, in a
sense, was the formal breaking up of the Gary dinner programme, as it
was then that Judge Gary, satisfied that several of his competitors had
departed from their intention to maintain for themselves respectively
stability of business and prices, announced that the Steel Corporation
would in future “go it alone.” That it would get what business it could
and would not divulge its affairs to competitors. This was followed by
the so-called open market in steel which sent prices down to a very low

And here might be inserted an interesting fact. Orders were sent out
to the various sales managers of the different Corporation subsidiaries
that they were to go after business and get all they could, orders
particularly welcome to those who had longed for the flesh pots of
Egypt, the old Carnegie methods, and who believed that the big company
could force its competitors to the wall by such a course. A vigorous
campaign for orders followed, both on the part of the Corporation
subsidiaries and the independent companies, but the result went largely
to prove that the big company did not have the power which its enemies
claimed it had, of crushing competition. In the words of Colonel H. P.
Bope, vice-president and sales manager of the Carnegie Steel Co., and
a graduate of the Carnegie steel school, the result of the 1909 sales
campaign was a disappointment to him, the Corporation failed to cut
into its competitors’ business, losing a little to them in some lines
as a matter of fact.

There was yet another dinner to come. On October 15, 1909, the steel
makers of the United States and Canada joined together to honor the man
who had first called them together during the stirring and dangerous
panic times two years previous. The leader of the movement was Charles
M. Schwab, and many of the most prominent men in the trade made
speeches in honor of the guest of the evening. It was, as Mr. Schwab
said, “the first time when the heads of all the big concerns in the
United States and Canada had gathered to do honor to a man who has
introduced a new and successful principle in our great industry.”

T. J. Drummond, vice-president of the Algomah Steel Corporation, in his
address defined this principle as the doctrine that “what is good for
my competitors is good for me.”

Referring to the Judge Gary leadership in the trying times the trade
had passed through Mr. Drummond said: “Always the voice of our leader
rang strong and clear, ‘Steady, boys, and play the game.’ And by the
Lord, you played, and played it fair.”

A beautiful cup of gold was presented to the Judge by his steel
colleagues at this, the very last of the Gary dinners.

The question of price restraint, or the Corporation’s influence in
maintaining or depressing the price of steel, is suggested naturally
by that of price fixing at the Gary dinners. This question is one
seriously affecting the Corporation’s existence, being interwoven
closely in that of the treatment of competitors. Getting down to basic
facts the principal objection of the man in the street to trusts or
monopolies is that the securing of unchallengeable power by one concern
in any industry is likely to lead to higher prices or lower quality,
either of which would swell the profits of the monopolistic corporation
and would harm the public. It is therefore important to consider the
Corporation’s general policy in the matter of prices.

During the Steel dissolution suit a number of competitors and of steel
consumers testified that the big company had always endeavored to
“steady” prices, a fact evidenced by the very holding of the celebrated
dinners. That it had always been the last to advance, and was equally
loath to reduce. They agreed, however, that the steadying influence was
brought to bear, not to keep prices at levels where enormous profits
could be reaped, but rather at such quotations as gave the manufacturer
only a fair and equable profit on his investment, evidenced by the
fact that the Corporation, unlike many of its competitors, fixed an
approximate high-water mark for prices in boom times, and made no
attempt, in fact refused to sell above these, although they were much
lower, to use a phrase made familiar in the old days of railroading
“than the traffic could bear.” These witnesses also asserted that the
tendency of prices since the birth of the Steel Corporation had been
downward and finally that the quality of the product, and these were
men qualified to know whereof they spoke, had been appreciably bettered.

In its decision the U. S. District Court pronounced itself as
satisfied that the Corporation did not have the power, even if it
wanted to, to force prices to an abnormal level. The Court found it
proven that steel prices could not be advanced arbitrarily above
the level quoted by any important competitor in the field, and that
the so-called independent companies were themselves too large and
too powerful to be forced to the wall by the methods that have been
employed by some “trusts” to secure monopoly.

Regarding the question of the course or tendency of prices the
testimony of Professor Jeremiah Jenks is particularly illuminating.
Professor Jenks, whose reputation as an economist is world-wide,
verified and explained charts previously put in evidence showing that
the purchasing power of steel, the real price obtained by what is
known as the index system, recognized by economists as the best test
of price fluctuations, had decreased decidedly between the date of the
organization of the Corporation and the time of the steel suit, as
compared with a similar period before the birth of the Corporation. The
same table showed that apart from the economic test and merely on the
basis of actual prices received the average prices of steel and iron in
the same period had declined slightly between the same periods.

From all of this evidence the observer must conclude that the policy of
the Steel Corporation has not been to inflate prices or to depreciate
quality, and that it has been its endeavor to give the consumer the
best steel possible for the smallest amount of money compatible with
decent profits. Incidentally, the lower prices of steel shown by
Professor Jenks’s charts were made in the face of advancing wages
amounting altogether to more than 27 per cent. And labor forms the
most important item of expense in steel making. The chart on opposite
page 230, a copy of one of those testified to by Professor Jenks, is
illuminating and needs no explanation.



Conditions in the steel trade at the time this is written, October,
1920, provide a striking commentary on the Corporation’s attitude
respecting prices. But to understand them one must go back about
eighteen months.

In March, 1919, the President of the United States, desiring to bring
about a deflation of the high prices for all commodities that had
prevailed during the war, created an Industrial Board to take charge
of the matter and urged manufacturers in all industries to coöperate.
Because of the immense importance of steel in the country’s economic
life the steel trade was selected to set the example of deflation, and
it responded loyally. As a result, on March 20th of that year, a scale
of prices was agreed on at a level which it was calculated would give
the lower-cost producers a reasonable profit, and those prices were
immediately put into effect generally.

Shortly afterward the Government itself, through one of its agencies,
the Railroad Administration, refused to abide by this agreement. The
immediate effect was injurious to the industry, but shortly afterward
the demand for steel became so strong that prices, beginning in the
late fall of the year, advanced rapidly till they were, in some cases,
$50.00 a ton or more above the quotations agreed on between the
manufacturers and the Industrial Board.

But the Corporation, holding that public policy demanded that living
costs and all factors entering into living costs should be held down
as low as possible, continued and still continues to sell steel at the
prices fixed the previous March. This, notwithstanding the fact that
it has since advanced wages and that its costs have been materially
increased by the advance in railroad rates on its raw materials, put
into effect on August 26, 1920.

The Corporation could easily have obtained the same prices as did its
competitors and would have reaped enormous profits as a result, but it
contented itself with a reasonable return and the consumer and the
public at large have benefited from its course.

Important among the policies of the Corporation, in its dealings with
the public, has always been publicity. The organization of the big
company was marked by open dealing, all details of the proposed merger
being published widespread before the deal was carried through. And
ever since the Corporation began its existence the policy of keeping
the public and its stockholders informed as to its actions and business
has been adhered to. The results of the Gary dinners were promptly
given to the public press; and there is testimony in the record in the
Government case that the Department of Justice of Washington was always
kept fully informed. Moreover, no complaint was ever made by any one of
the “Gary dinners” until the Stanley Committee intimated an illegality,
after which it has never been claimed there was any such dinner or

Almost since the date of incorporation it has been the custom to issue
quarterly a report of earnings showing the results of the operations
of the three months covered. These reports are issued on the last
Tuesday of the month following the quarter covered in the report. On
the tenth of each month a statement of the unfilled tonnage on the
Corporation’s books is issued from the head office, and in other ways
the stockholders are kept informed as to what is going on in their

[Illustration: Rails on Cooling Bed]

Annual meetings of the Steel stockholders form a decided contrast to
those of many other companies. One is accustomed to look upon the
annual meetings of corporations as mere formalities attended by a few
officials with perhaps a lone stockholder not holding office; and
reticence in discussing the company’s business or policies is the
general thing. But the Steel meetings are always well attended, and
stockholders are encouraged to discuss fully the affairs of their
company, and to criticize to their heart’s content. Chairman Gary
is ready and willing to explain at length on any issue raised, and the
whole effect of these meetings is one of openness, of candor.

[Illustration: Pouring Ingots]

How ready the management of the big company is to meet criticism
half-way is illustrated by the events at the annual meeting in 1911
when a stockholder moved that a committee be appointed to investigate
the condition of the steel workers in the Corporation’s mills and to
report thereon, suggesting such remedies for evils they might find as
seemed wise. The mover particularly criticized the twelve-hour day and
the seven-day-a-week schedule of labor. It was questionable whether the
mass of stockholders present, having absolute confidence in the desire
of Judge Gary to give at all times the fairest possible treatment to
the worker, would have carried such a motion, but Judge Gary himself,
holding proxies for the majority of the stock, voted all this stock
in favor of an investigation, and a committee was appointed. Thus
did the management of the Corporation give proof of its readiness to
face investigation and to answer fully and satisfactorily any honest
criticism, just or unjust.

The attitude of the Corporation’s management in the matter of
publicity, it seems to the writer, is simply that the company’s vast
size and the number of its stockholders, as well as the army of men it
employs and its influence upon industrial conditions generally, render
it in a sense a public institution, one in which there is an enormous
amount of warranted public interest, and that this interest should
be satisfied. That so great a company must work in the open, all its
actions being able to bear the full glare of daylight.

Up to the time of the Corporation’s organization publicity on the part
of big industrial enterprises was almost unknown. Certainly steel
makers did not show any desire to take the public, or even the small
stockholder, into their confidence in regard to details of their
business. The immense profits made by the Carnegie company were not
revealed until the Carnegie-Frick quarrel caused their revelation.
But all this has been changed and the necessity for full reports
to stockholders and to the public at large is recognized by the
corporations themselves. Steel companies, in particular, give detailed
information of their earnings, operations, etc., at least once a year,
and in some cases every quarter. And this is doubtless due to the
example of the Corporation.

Sooner or later all big business must fall into line in the matter of
publicity. For the leaders of business thought are coming to recognize
that secrecy breeds suspicion and enmity, while openness makes friends.
And they will all follow--as many have already done--the example of the
Steel Corporation of doing business in the full glare of daylight.

In the chapter on Welfare Work and in that on the Steel Strike two
aspects of the Corporation’s policies regarding its relations with
employees are discussed at considerable length. Broadly speaking, the
Corporation’s attitude is that every worker is entitled to as large a
wage as conditions in the industry and justice to investors warrant,
decent living conditions, and the right to work when, where, and for
whom he pleases. By encouraging the worker to invest in its stock it
seeks to make sure his full coöperation in its activities and to bring
home to him the realization that the interests of labor and capital are

Finally, we come to the Corporation’s relations with stockholders, its
financial policy. For twenty years the big company has been steadily
building up its assets with a view to making its common stock the
safest investment of its kind in the world. It is not too much to say
that it has now attained that eminence, and if its stockholders in the
past have not always shared in profits as liberally as they may have
considered their due, there is no question that their loss in the past
has been much more than made up for by the security which the future



Although throughout the chapters of this history stress has been
constantly laid upon the activities of the United States Steel
Corporation in promoting better relations between capital and labor, in
improving the working conditions of its employees, in introducing new
and more honorable methods into competition, and in blazing the pathway
for corporate publicity, it must be recollected that the Corporation
has been a business enterprise first and last.

In the final analysis it was and is a money-making institution. The
paying of dividends to stockholders was the basic reason for its

United States Steel, both in capitalization and output, was the largest
business in the world. But its management was not satisfied with this.
It has always been the ambition of Judge Gary and his associates to
make its stock the premier industrial security in the United States
and, for that matter, in any country.

Final decision as to the measure of their success rests with the
investor; and he has decided and made his decision evident. To-day
United States Steel common stock sells in the market at an investment
yield lower than most, if not all, other industrial and railroad
securities, a yield, in fact, that compares not unfavorably with that
on securities of the Government of the United States itself.

Nor is the reason far to seek. As the Corporation has earned and enjoys
the confidence of its competitors, customers, and most of its workers,
so it has earned the confidence of the great mass of the investing
public which regards it, not without justification, as the principal
bulwark of the country’s business.

The investor knows that the big company has great earning power and
enormous assets behind every dollar of its securities. He knows,
moreover, that its activities have always been open to the light of
day. They have undergone the most rigid scrutiny by various public
investigating bodies and by the U. S. Department of Justice. And every
revelation made has but served to convince the public more and more of
the ability of the Corporation’s management, its financial strength,
and the justice of its policies.

In an earlier chapter it was suggested that United States Steel common
stock at the time of organization in 1901 had no actual investment
behind it, that in a sense it represented pure water or “blue sky.” An
enormous amount in securities had been paid for good will, the value
of which was, at best, a matter of personal opinion. The Corporation’s
earning power, despite the sanguine hopes of its organizers, was
uncertain or, at least, not proven.

And these facts were fully realized by Judge Gary and his colleagues.
While probably believing that full value in earning power had been
received for the hundreds of millions paid for good will, they were
not satisfied to let matters remain in that state, and bent their
energies, at the sacrifice of immediate dividends to stockholders,
toward squeezing out every possible drop of water behind the stock,
and putting at least one hundred cents of tangible assets behind every
dollar of securities of any kind in the hands of the public.

In this they have more than succeeded. The bonds and preferred stock
of the Steel Corporation are to-day recognized as being absolutely
gilt-edged, and even the most captious critics do not attempt to deny
that every share of common stock is backed up by assets far exceeding
its face value.

Reference has already been made to Judge Gary’s statement, in October,
1919, before the Senate Committee on Education and Labor, then
investigating the steel strike, that the Corporation’s properties
were worth at least $2,200,000,000. Competent steel men, outside
the Corporation, express the opinion that this valuation was ultra
conservative. They point to the fact that the Judge’s valuation was
obviously based upon expenditures of approximately $900,000,000 for new
plants between 1901 and 1919, and assert that it will never be possible
to replace these plants for less than $1,250,000,000. But accepting
Judge Gary’s valuation as accurate, Steel common has between $260 and
$270 in assets behind it.

Just as the investment behind the stock has been increased and
accumulated, so has earning power been strengthened. So great is the
Corporation’s capacity to-day and so strong is it financially that
it is almost inconceivable that it will at any time in the future be
unable to maintain its present dividend rate of $5.00 a share annually
on the junior stock.

From the date of its incorporation in 1901, to December, 1919, the
big company expended for new construction, increasing its capacity
and modernizing its plants, $888,301,355, or the equivalent of $159
on every share of its common stock, and $19,717,755 more than its
entire stock capitalization, common and preferred. Nor did this include
approximately $108,000,000 spent for plants for producing war materials
and written off as operating expenses.

Construction expenditures in 1920 were, approximately, $102,000,000,
making a total on this account since incorporation of a billion dollars
in round figures.

Appropriations for depreciation, sinking funds, and repairs to plants
have been enormous, aggregating in nineteen years $1,424,415,590, or
almost as great a sum as that at which the property account is now
carried, $1,573,661,547.

The Corporation has expended, for ordinary repairs alone, $835,900,568,
or about the actual investment value of the properties acquired at

As a result of these enormous expenditures, it has:

Increased its pig-iron manufacturing capacity from 7,440,000 tons in
April, 1901, to 18,400,000 tons in December, 1919, a gain of 147 per

Increased its steel ingot capacity in the same time from 9,425,000 tons
to 22,350,000 tons, or 137 per cent.;

Increased its finished steel capacity from 7,719,000 tons to 16,200,000
tons, or 110 per cent.;

Increased its cement capacity from 500,000 to 13,500,000 barrels, or
2,600 per cent.;

Created from zero a by-product coke capacity of about 45,000,000
gallons of benzol, toluol, and other light oils, as well as built
up enormous capacity for other coke by-products including ammonia
sulphate, tar, fertilizers, etc.;

Increased the railroad mileage it owns and operates from 2,007 to 3,775
miles or 88 per cent.; the number of cars owned from 27,481 to 62,258,
and of locomotives from 593 to 1,445.

Increased the number of steamers, barges, and other marine units owned
from 112 to 371.

Increased its working capital from $138,110,545 to $569,988,259, or 313
per cent.;

Its iron-ore holdings, estimated at 700,000,000 tons in 1901, are now
placed at 1,600,000,000 tons.

A better grasp of the Corporation’s expansion between 1901 and the
beginning of 1920 is obtained by comparing capacity at the date of
incorporation with what has been added since:

                                1901          ADDED SINCE
  Pig iron                 7,440,000 tons    10,960,000 tons
  Steel ingots             9,425,000   ”     12,925,000   ”
  Finished steel           7,719,000   ”      8,481,000   ”
  Cement                     500,000 bbls.   13,000,000 bbls.
  Benzol                     ----------      45,000,000 gals.
  Railroad mileage owned       2,007 miles        1,768 miles
  Railroad cars owned         27,481             34,767
  Locomotives owned              593                852
  Steamers, etc.                 112                259
  Iron ore deposits      700,000,000 tons   900,000,000 tons
  Working capital       $138,110,545       $431,877,714

As these figures show, additions since 1901 would constitute a new
company larger in practically every respect than was the Steel
Corporation at its birth. And this expansion has been achieved with
little addition to the book value of the properties, which at the end
of 1901 was carried at $1,437,494,863 and in 1919 at $1,573,661,547.

And, of course, there have been further additions during 1920. Complete
figures for that year are not available at the time of writing but
property account as of December 31st, is estimated at $1,620,140,000
and working capital at $595,952,000.

Nor has this expansion been accompanied by the addition of a single
penny to stock capitalization. In fact, the amount of preferred stock
has been reduced, as has the annual charge on earnings for bond
interest and preferred stock dividends.

When formed the Steel Corporation had a total bonded debt, including
funded indebtedness of subsidiaries, of $364,735,900, and its
bond-interest charges were at the rate of $23,964,175. Its preferred
stock was $510,281,100 with an annual dividend charge of $35,719,677,
or a total of $59,683,852, which had to be deducted from earnings
before there could be any distribution made on the junior security
issue. At the end of 1919 total bonds of the Corporation itself and
its subsidiaries amounted to $568,727,932. Interest charges thereon
were $29,210,898. But preferred stock has been reduced to $360,281,100
and the dividend requirements thereon to $25,219,677, making total
deductions from earnings before arriving at the balance available for
distribution to common stockholders of $54,430,575, or $5,253,277 less
than in 1901. This saving in interest on preferred dividend charges
is equal to a little over a dollar a share on the common stock, which
has remained at the same figure throughout the twenty years of the
Corporation’s existence.

In discussing the investment value of Steel common, it is necessary
to lay considerable emphasis on the actual tangible assets, at cost,
behind the stock. Tangible investment is of particular importance
because earning power is based largely on it, and on earning power
depend dividends.

Although Judge Gary’s estimate of the worth of the Corporation’s
properties is considered by experts very conservative, the writer
proposes to disregard it for a moment and to discuss the value behind
U. S. Steel stock on the most conservative basis--that of tangible
assets in 1901 plus tangible additions since. Even on this basis, which
is certainly a bed-rock computation, it will be seen that the assets
behind “Little Steel” are considerably larger than its par value.

Eliminating from the balance sheet $508,302,500 common stock under
the plea that it represents nothing but good will, we still have
$741,019,795 surplus accumulated in nineteen years, or sufficient to
restore with tangible value the common stock item wiped out and still
leave a surplus of about $233,000,000. Or, deducting from present book
capital and liabilities, plus surplus and reserves which may fairly
be regarded as surplus, the common stock item, leaves a balance,
representing tangible investment of $1,670,028,825.

On this basis the assets behind the common stock are not far from $150
a share.

There is still another way of calculating values, and here again let us
eliminate the original common stock for reasons already given and place
the value of the investment in the Corporation in 1901 at $815,000,000
in round figures, or approximately the aggregate of the bond- and
preferred-stock issue. The ingot capacity based on this investment was
9,425,000 tons. The ingot capacity on December 31, 1919, was 22,350,000
tons. Presuming that investment has increased proportionately with
its capacity, the value behind the Corporation’s securities is now
$1,930,000,000 and this makes no allowance for values represented
by coke by-product plants, cement plants, increased ore reserves,
shipyards, etc. Ingots alone are taken as the base of the calculation
since this product is generally regarded as the measure of a steel
company’s capacity.

In studying the Corporation’s annual reports, the analytical investor
will find certain indications that appear discouraging at first glance.
They must be examined in the light of other facts and particularly in
the light of comparative tangible investments.

Reference is here made to the increasing tendency shown in the
operating ratio of the big company. Normally, an increasing operating
ratio, a tendency toward diminution of the margin between operating
expenses and gross receipts, is not a healthy sign in any business, and
the Corporation undoubtedly shows just such a diminution.

But in the case of United States Steel this usually unfavorable factor
is really a tower of strength. It is, in fact, deliberate. It is part
and parcel of the Corporation’s policy of giving the wage earner as
large a share as possible in the proceeds of operations. And it has
been possible to increase the worker’s share of gross sales in recent
years without injustice to stockholders only because of the ploughing
back of profits of previous years into new plants, increasing the
investment, and enlarging capacity.

Because of this policy, it has been possible for the Corporation to
show increasingly large earnings on its shares, although capital’s
percentage in gross receipts has declined. It is hardly necessary
to say that there is no intention of letting the decline go beyond
just limits. Although the Corporation’s management has always shown
recognition of the rights of the worker in this as in other ways it has
never lost sight of the equally important rights of the investor and
the latter has no cause to fear that it will ever do so.

In 1901 on a net investment of approximately $815,000,000 the
Corporation, to pay bond interest, preferred dividends and 5 per cent.
on its common stock, had to earn approximately $85,000,000. To-day,
to pay the $80,000,000 required for the same purposes, it has a net
tangible investment of between $1,700,000,000 and $2,000,000,000.

The following table illustrates how increased investment and capacity
permit the big company to show large earnings on its stock with a much
smaller return on its investment or capacity to-day than was possible
in 1901.

                                      |      1920      |     1901
                                      |                |
  Actual investment                   | $1,800,000,000 | $815,000,000
  Interest and dividends at 5 per     |                |
    cent. on common stock.            |     80,000,000 |   85,000,000
  Per cent. on investment.            |            4.4 |         10.5
  Per ton earnings needed on iron     |                |
    capacity to earn interest and     |                |
    dividends                         |          $4.34 |       $11.42
  Per ton earnings needed on ingot    |                |
    capacity to earn interest and     |                |
    dividends                         |           3.58 |         9.02
  Per ton earnings needed on finished |                |
    steel capacity to earn interest   |                |
    and dividends                     |           4.94 |        11.01

Thus it is both good business and good policy for the Corporation to
give the wage earner a larger share in gross receipts, and its enormous
investment and great capacity enable it to do this without prejudicing
interests of stockholders.

Further, the very fact that so small a margin of net profit is needed,
whether calculated on investment or capacity, to pay dividends, is of
itself satisfactory assurance of the safety of the dividend rate.

A great steel maker said, some years ago, that the demand for steel,
the most important metal of the present age, doubles every twenty
years. Experience educates that the actual rate of the growth of demand
for the metal is even faster. The needs of the world for steel, as
they expand, can only be met by the putting of new capital into the
production of more steel, and this capital, to be attracted, must
be allowed an earning power of at least 6 per cent. The Corporation,
as shown, needs to earn less than 4½ per cent. on its investment to
continue the present dividend rate on its common stock. Obviously it
has nothing to fear from possible future competition. It can hold its
own and be generous to stockholders in the face of any competition that
can occur.

Another factor of the highest importance in considering United States
Steel stock as an investment is that of production costs. Here again
the Corporation is in an enviable position. That its production costs
are lower than those of most, probably all other manufacturers, is
not challenged even by competitors themselves. It is indisputable.
Presuming the possibility of a bitter trade war, the Corporation would
unquestionably emerge the victor. But a trade war seems out of the
question. The Corporation could not, for politic reasons, initiate it,
and its competitors could not afford to. It stands in the position
of a strong man armed, keeping his house, and, it may be added, its
stockholders may be at peace.

The immense spread of the Corporation’s activities, the wide
diversification of its products, the enormous area over which its
plants are scattered, all these are further elements of strength. A
company making only a limited line of goods is subject to adverse or
favorable influences arising out of the changing demands for these
lines. But the law of averages protects the company making a wide
variety. A loss here is made up by a gain there, and the general
tendency is toward greater stability. Influences that affect one
section of the country unfavorably often do not extend to other
sections, and the Corporation operates in all sections.

In the foregoing discussion of the value of United States Steel stock
as an investment the factor of good will has been deliberately ignored,
eliminated. Nevertheless, good will is probably the Corporation’s most
valuable asset.

During twenty years its management, under the able leadership of Judge
Gary, has been steadily building up good will. It has endeavored
to gain the favorable opinion, not of its customers alone, but of
its competitors, its employees, and the public at large; and it has

Its policy of a square deal to all is as old as the Corporation itself;
the events of the past year afford an illustration of one phase of this
policy and its effect on good will that has a direct bearing on the
present discussion.

Throughout the year, during which a great advance in the price of steel
occurred, the big company steadfastly refused to depart from the prices
it had agreed on in March, 1919, with the Industrial Board appointed by
the President of the United States. The fact that the Government itself
had abrogated this agreement gave it ample warrant to do as other
manufacturers were doing and to sell steel at prices from $10 to $50 a
ton above those it charged. But in order to help deflate living costs
to the public and to assist in the readjustment of business, which its
management saw was inevitable, it rejected with open eyes the enormous
profit it might have made and contented itself with moderate earnings.

In addressing the stockholders of the Steel Corporation at the annual
meeting of April 19, 1920, the chairman said:

  Inquiry has been made by some of our stockholders as to why, in
  view of the great demand, the cost of production, and the prices
  received by other manufacturers, we hold the selling prices of our
  commodities down to those which were fixed by agreement between the
  Industrial Board and steel manufacturers at Washington, March 21,

  It seems to us the problem of high cost of living is of convincing
  importance. When the increasing tendency is to insist upon payment
  of unreasonable sums for every commodity and for every service,
  so that the vicious whirl of advancement seems to be unending,
  we think there is a moral obligation on the part of everyone to
  use all reasonable efforts to check this carnival of greed and
  imposition, even at some sacrifice.... It should be the effort
  of all to establish and maintain a reasonable basis of prices;
  certainly to prevent further advances.

By this policy it has built up in a single year good will of
incalculable value which will show on future earnings.

And even though good will may be eliminated in discussing the
investment value of steel, if for no other reason than that it is too
immense to permit of computation, the steel stockholder knows that it
is behind his investment all the time.



During the World War, there began to gather on the industrial horizon
a cloud no bigger at first than a man’s hand, but one that grew fast
in size until it broke in a storm the effects of which made themselves
felt in every corner of the globe.

This was a general feeling of unrest and dissatisfaction, by no means
confined to one country or one class of people, but having its most
virulent manifestations among the laboring classes, the proletariat.
This unrest was fostered and seized upon by radical leaders everywhere
to further their own ambitions, their object being the overthrow of
capital, the nationalization of industry, and their own aggrandizement.

Nor were they without considerable success in some countries. Russia,
of course, provided the most notable example, and England to-day
is suffering by reason of the same forces; but the United States,
notwithstanding its aloofness from the centre of disturbance, its
prosperity, and the general high average of common sense among its
inhabitants, did not entirely escape.

Here the radical manifestations took the form of industrial strikes
which broke out sporadically in all quarters. It was natural that the
steel industry should not be immune. In fact, it was inevitable that
steel, more than any other industry, should be selected for especial
attention by those who hoped to do away with private ownership and to
establish mob rule.

Among the reasons that may be cited for the selection of the steel
industry, and the United States Steel Corporation in particular, for a
grand attack by the radical forces were the following:

Steel was “open shop.” Since 1892, when the Carnegie Steel Co., in one
of the bloodiest and bitterest industrial conflicts in history, crushed
the Homestead strike, the labor leaders unions had never succeeded in
regaining a foothold in the trade, and it was looked upon as a lost
province by labor leaders who never abandoned the hope of some day
organizing the steel workers. This fact gave the radicals in the labor
ranks confidence that they could count upon the support of the usually
conservative heads of organized labor in America to further their plans
if steel were chosen as a battle-ground. And the events proved that
their confidence was not misplaced.

Further, the physical necessities of steel making are hard on the
worker. Although employers have done much to ameliorate conditions in
the mills and mines, it is impossible to make the work really pleasant
and it was therefore comparatively easy to give verisimilitude to
distorted statements regarding the hard lot of the steel worker.

Again, a large percentage of the common labor in the steel plants was
of alien birth, usually lacking in education and easily influenced by
inflammatory doctrines.

Labor leaders, doubtless, also believed that the long litigation which
the Government had conducted against the Steel Corporation had turned
public sentiment against the big company. If this was a factor in their
calculations they were sadly deceived.

So, briefly, we have the genesis of the steel strike--the determination
of organized labor to absorb steel workers and the seizing upon this by
the radicals as the tool to further their own anarchistic ends.

The strike, when it came, was inaugurated ostensibly to compel the
manufacturers to grant recognition to union “representatives” of the
workers. Steel company officials claimed that its real object was
twofold--to force upon the industry the “closed shop,” and to overthrow
the social scheme upon which the American Republic was grounded.

Labor leaders throughout the struggle consistently denied any intention
of forcing a closed shop. And it is true that they at no time demanded
this in so many words; but the closed shop would have resulted
inevitably had they won. One has only to examine their demands to
realize this.

And the lust for power on the part of the leaders of organized labor
was used by the radicals as a tool with which they hoped to gain a much
greater goal than the closed shop--the nationalization of the steel
industry and, using that as a wedge, of all American industry.

In fighting and smashing the strike the Steel Corporation performed an
invaluable service, not alone to its stockholders or to capital, but to
the vast majority of workers who claimed the right to work at their own
volition and not the dictates of self-appointed leaders; a service to
the American public at large.

Says Mr. Charles Piez, one-time head of the Emergency Fleet
Corporation, in a recent article in _The Independent_:

  The real or imaginary wrongs of the workers played not the
  slightest part in the decision to organize the steel industry.

  It was a citadel of the open shop that was the subject of attack,
  it was the last barrier against complete and final unionization of
  American industry, against which Foster and Fitzpatrick combined
  their wits and resources.

  And it is to the everlasting credit of Judge Gary that he
  successfully resisted this attack, for it is to the interests of
  the public that the principle of the open shop be sustained.

[Illustration: (_Upper_) Part of the Duquesne Works]

[Illustration: (_Lower_) Detail of Unloading Ore--a Hulett Machine]

How important to the labor unions was the hope for organization of
the Steel Corporation is obvious. Between 500,000 and 600,000 workers
are engaged in the industry, the Corporation alone employing about
275,000. Possibly another half million are employed in closely allied
industries. And the steel trade, as well as these allied industries,
has for years looked to the Corporation for guidance on important
questions of public polity. Hence, United States Steel’s adherence to
the open-shop principle was a deep and rankling wound in the side of
the labor unions.

[Illustration: Making Wire Rods--Old Method]

So long as the big enterprise of which Judge Gary is head remained
outside of the union’s fold there was small hope of herding into it any
material number of workers in other plants. U. S. Steel was a citadel
of the open shop, the bulwark between free and union labor. If it could
be converted from “open” to “closed” shop, the early unionization, not
of the steel trade merely, but of all American industry, would follow,
and the power of the union leaders would be expanded to an almost
illimitable extent.

It is doubtful if the older and wiser among the union chieftains would
have forced the issue at the time they did had they been left to their
own decisions. But they were not. They had the radical element to
reckon with.

It is perhaps unnecessary to explain that organized labor in the
United States is divided into two parts: On the one hand, there is the
American Federation of Labor, headed by Samuel Gompers, and including
the great majority of unionized workers. This organization recognizes
property rights and is loyal to the principles of American government.
But its leaders, being only human, are apparently determined to bring
all industry under its sway and are impatient of the ideas of those
workers who prefer to stand on their own feet.

On the other hand, there is a smaller organization, the Industrial
Workers of the World, better known as the I. W. W. or, sometimes, the
“I Won’t Works.” “The wobblies,” as they prefer to call themselves, are
as bitterly opposed to the principles of the larger Federation as they
are to capital. Chief among their tenets is the Marxian fallacy that
labor produces all and capital nothing and that, therefore, capital
must be abolished.

Some years ago there arose to prominence in the councils of the
I. W. W. one William Z. Foster, a man of unquestioned ability but of
principles dangerous and subversive to government. These principles
he set forth in a book on “Syndicalism,” a book which constitutes
one of the most extreme examples of anarchistical literature. Foster
characterizes the wage system as “the most brazen and gigantic robbery
ever perpetrated since the world began.”

Although advocating the most drastic measures for the overthrow of
capital, Foster was apparently sufficiently astute to realize that a
vast majority of the American people, and even of organized labor,
would not and could not accept his views, and that the I. W. W. which
did was not a powerful enough weapon with which to achieve his ends.

He believed, however, and events proved that he was not mistaken, that
the American Federation of Labor could be inoculated with radicalism if
the poison were spread from the inside. He therefore publicly advocated
what he described as the process of “boring from within,” urging that
the radicals join the more conservative Federation and, once inside
that body, disseminate their vicious doctrines from within.

Not long after this we find Foster a member of the Federation,
ostensibly converted from his I. W. W. leanings, enjoying the
confidence of Gompers and his co-workers, and high in their councils.
His “boring” process had met with eminent success.

Meanwhile, the World War was approaching its end, leaving in its wake a
world-wide wave of industrial unrest. Russia was being misgoverned by
its most radical element, who held their power in the midst of a sea of
blood. Communistic doctrines were being preached, openly or _sub rosa_,
in every land and clime. American labor was restless, and the foreign
element, particularly, showed that it had been infected with the fever
of anarchism that was rampant in parts of Europe. The time had come
for the radicals to strike, for the “boring-from-within” process to
bear fruit.

In the early summer of 1918, only a few months before the war ended,
the American Federation of Labor held its annual convention at St.
Paul, Minn., and there passed a resolution offered by Foster for the
organization of the steel industry. A committee was appointed to take
charge of the work and the converted radical, Foster, was made a member
of this committee.

For a full year the committee’s work was carried on quietly. At the
next annual convention of the Federation, this time at Atlantic City,
N. J., John Fitzpatrick, one of Foster’s associates, reporting to
the Federation, claimed that 100,000 steel workers had affiliated
themselves with one or other of the unions belonging to the Federation.

Fitzpatrick was a man of an entirely different type from Foster. Mr.
Piez thus describes him: “He has in the ten years I have known him
never to my knowledge advanced or even advocated any constructive
piece of legislation, and he has held his position with the Chicago
Federation (Fitzpatrick is president of this Federation) because he is
honest and because he is a skilled labor politician. John Fitzpatrick
hasn’t the slightest idea of the problems of industry, he can’t
conceive of overhead expense as anything more than graft, and lacks all
knowledge of the problems of production, distribution, and the sale of
the products of industry. His horizon begins and ends with the wrongs
that labor has suffered, and he usually refers to wrongs that wise
legislation and a changed relationship have remedied years ago.”

But while the labor leaders had been busy collecting dues from and
enlisting sympathy for the “oppressed” steel workers there had, strange
to say, come no call for help from the steel workers themselves. They
made no claim of being down-trodden; rather did many of them resent,
as a slur on their manhood, the insinuation that they were. The union
chiefs have since claimed that they were appealed to by the workers,
but not one iota of evidence has ever been adduced to support this

Whether or not Fitzpatrick’s report of 100,000 enlistments
was correct--subsequent events indicate that it was grossly
exaggerated--the ruling powers in the American Federation evidently
believed that they now had sufficient strength in the field to attempt
an issue, and events consequently moved forward quickly after the
Atlantic City convention.

Their first move was the sending of a letter by Samuel Gompers to
Judge Gary, asking the head of the Steel Corporation to meet a union
deputation to discuss question affecting the welfare of the workers.
This letter was never answered.

Judge Gary’s refusal to reply to Gompers has been severely criticized
by union sympathizers and others. For example, by some of the members
of the Senate Committee that later investigated the strike. Gompers,
who, in the past, had seen legislatures bow to labor’s mandate, was not
unnaturally shocked at the “discourtesy.” But Judge Gary had enjoyed
a previous experience in corresponding with union representatives. A
courteous reply to a letter on somewhat similar lines from Michael F.
Tighe, president of the Amalgamated Association of Iron, Steel and
Tin Workers, in which the Judge had said that the Corporation did not
negotiate with labor unions as such, had been used as a basis for a
report that the big company was “in communication” _ergo_, negotiating,
with the unions, and the Judge did not want this experience repeated.

Whether it might not have been wiser had Judge Gary answered Mr.
Gompers’ letter and obviated the possibility of any misunderstanding
by giving the correspondence to the press is an open question. But he
was probably averse to being drawn into what would likely prove the
beginning of a long epistolatory controversy with the head of the
Labor Federation. This could not but have had an unsettling effect
on the more easily influenced among the steel workers, playing into
Gompers’ hands.

It is also not unlikely that Judge Gary believed the labor unions were
resolved on forcing the issue of organizing the steel industry and that
any verbal preliminaries to the conflict would be worse than useless.

After this abortive attempt on the part of the union to start
negotiations with the steel industry through Judge Gary, and, _ipso
facto_, to gain recognition from the leaders of the industry, events
moved quickly to a climax. Early in July, 1919, the steel-trade
organizers announced that they were taking a vote of the workers, and
not long after made the claim that 98 per cent. of the men employed in
steel making had approved a strike unless the Corporation yielded to a
set of twelve demands drawn up by Foster and his associates. As soon as
these demands were made public it became plain that a steel strike was
inevitable unless the labor organizers receded from their position. The
demands were:

  1. Right of collective bargaining.

  2. Reinstatement of men discharged for union activities.

  3. An eight-hour day.

  4. One day’s rest in seven.

  5. Abolition of twenty-four-hour shifts.

  6. Increase in wages sufficient to guarantee American standard of

  7. Standard scales of wages in all trades and classifications of

  8. Double rate of pay for all overtime, holiday, and Sunday work.

  9. Check-off system of collecting union dues and assessments.

  10. Principles of seniority to apply in maintenance, reduction, and
        increase of working force.

  11. Abolition of company unions.

  12. Abolition of physical examination of applicants for employment.

Some of these demands were merely camouflage, inserted to give the
public an idea of imaginary wrongs against the steel worker. The
steel companies generally have been trying for years to institute a
real eight-hour day and have made the eight-hour day the basis of
wage payments. Practically all steel workers work only six days a
week. The twenty-four-hour shift is borne by a very small percentage
of the workers and by these only on widely separated occasions. The
Corporation and its competitors as well, following its lead, have
repeatedly advanced wages without solicitation from the men, and
the claim that the wage they pay is insufficient to permit American
standards of living has not borne investigation.

But the acceptance of such demands as the recognition of the right of
collective bargaining, coupled with the check-off system of collecting
union dues and assessments, would have handed over the companies,
bound hand and foot, to the unions. The application of the seniority
principle in maintaining, reducing, and increasing working forces
would have obviously made for inefficiency and destroyed the incentive
to effort and good work on the part of the men. Finally, physical
examination of applicants for employment in an industry where sound
health, active muscles, and keen eye-sight are necessary not only for
the safety of the worker himself, but for that of his associates, was
a precaution which the companies could not dispense with in fairness
either to themselves or to their employees.

It is hardly necessary to discuss these demands in further detail. All
the circumstances indicated that they were merely a gauge of battle,
hardly intended for discussion.

These demands were announced by E. J. Evans, who in an interview with
press representatives was quoted as declaring that either they would
be accepted in toto by the Corporation or the steel workers would
strike within a week, shutting down the entire industry. This was about
the middle of August, 1919.

Nothing actually happened, however, until the 26th of that month. On
that day a committee of union leaders composed of the five gentlemen
whom Gompers had previously asked Judge Gary to meet arrived in New
York City and called at the offices of the Corporation seeking an
interview, only to meet with another polite refusal. Returning to
their hotel, the members of the committee thereupon sent the head of
the Steel Corporation a letter stating that they represented a “vast
majority” of the workers of the steel industry, and on this basis for
the third time asked a hearing. To this letter Judge Gary sent the
following reply:

  August 27th, 1919.

  Messrs John Fitzpatrick, David J. Davis, William Hannon, William Z.
  Foster, Edward J. Evans, Committee.


  Receipt of your communication of August 26th is acknowledged.

  We do not think you are authorized to represent the sentiment of a
  majority of the employees of the United States Steel Corporation
  and its subsidiaries. We express no opinion concerning any other
  members of the iron and steel industry.

  As heretofore publicly stated and repeated, our Corporation
  and subsidiaries, although they do not combat labor unions as
  such, decline to discuss business with them. The Corporation
  and subsidiaries are opposed to the “closed shop.” They stand
  for the “open shop,” which permits one to engage in any line of
  employment whether one does or does not belong to a labor union.
  This best promotes the welfare of both employees and employers. In
  view of the well-known attitude as above expressed, the officers
  of the Corporation respectfully decline to discuss with you,
  as representatives of a labor union, any matters relating to
  employees. In doing so, no personal discourtesy is intended.

  In all decisions and acts of the Corporation and subsidiaries
  pertaining to employees and employment their interests are of
  highest importance. In wage rates, living and working conditions,
  conservation of life and health, care and comfort in times of
  sickness or old age, and providing facilities for the general
  welfare and happiness of employees and their families, the
  Corporation and subsidiaries have endeavored to occupy a leading
  and advanced position amongst employers.

  It will be the object of the Corporation and subsidiaries to give
  such consideration to employees as to show them their loyal and
  efficient service in the past is appreciated, and that they may
  expect in the future fair treatment.

            Respectfully yours,
                E. H. GARY,

Upon receipt of this letter the members of the Union Committee returned
to the steel centres and set on foot preparations for the strike.

Shortly before this the President of the United States had announced
his intention of calling an “Industrial Conference” at Washington,
beginning October 6th, to consider the grave industrial questions
facing the country in the wake of the World War, and particularly
the relations between capital and labor. It was obvious that one of
the President’s reasons for calling the conference at this time was
to forestall the threatened steel strike, which had been brewing for
months, and to bring about, if possible, harmonious relations between
the steel companies and organized labor.

But the President did not stop there. He used the power of his
great office in every legitimate way to ward off the blow that was
threatening the country’s industry. Bernard M. Baruch, former head of
the War Industries Board, was commissioned by Mr. Wilson to endeavor
to persuade Judge Gary to confer with the unions, but Mr. Baruch was
unable to change the attitude of the head of the Corporation, who saw
plainly what few others realized at the time, that the issue was not
merely that of a strike, but that the very foundations of the country’s
liberty were threatened, and that it was no time for compromising. On
the 10th of September, when all hope of averting the strike seemed
gone, the President made still another effort and dispatched a
telegram to Samuel Gompers, urging that action be postponed until after
the Industrial Conference.

At this time the situation stood thus: The organized portion of the
steel trade had voted to strike, leaving details and the decision as
to the date in the hands of the committee already named. Mr. Gompers
referred the President’s letter to the committee, which had full power
to comply with the request of the nation’s Chief Executive, but the
committee declared that postponement was out of the question. The
strike date was set for September 22nd, on which day, the union leaders
confidently asserted, there would not be a wheel turning or fire
burning in any steel mill west of the Alleghanies.

Thus was the fatal die cast. From that time both sides girded up their
loins and prepared for the conflict.

The steel companies expressed quiet confidence in the outcome, while
their opponents loudly boasted of certain victory. The officials of
the Steel Corporation and of the other companies threatened must have
known that a considerable element among their foreign-born employees
had been led astray by the radical preachings of labor organizers,
but they believed that the best element among their men was satisfied
with conditions and would continue at work. And this confidence proved

The steel trade, outside the Corporation, had been watching the
issue with some misgiving, but as it became plain that Judge Gary
was standing firm in his attitude, general satisfaction was evident
and confidence in the final result increased. For the trade was not
unduly worried as to the outcome in the event of a showdown. The
opinion generally expressed was that the issue must be forced sooner or
later, and that it was probably best to have it settled as speedily as
possible by a decisive conflict. But in many quarters apprehension was
felt that the Judge, realizing his immense responsibility, might allow
himself to be persuaded into a compromise.

However, Judge Gary was firm, as those who knew him best were sure
he would be. For there was a matter of principle involved, the right
of the independent worker to work when, where, and with whom he
desired and could obtain employment. And for Judge Gary, compromise
on questions of principle was out of the question. As this became
realized, all misgivings vanished. Judge Gary’s already recognized
position as leader of the steel industry was made more secure than
ever before. The trade left the issue in his hands, assured as to the
result, and this assurance was not abused.

It is not too much to say that the entire country waited with bated
breath for the events of September 22nd. It was recognized that this
was not a mere skirmish between employer and employee, but a gigantic
struggle between capital and radical labor. As time wore on it
developed that there was another and stronger party to the conflict,
the vast mass of unorganized workers; and this threw its strength on
the side of the Corporation, dooming the hopes of the strike leaders.

At first the strike organizers unquestionably struck hard and with
considerable result. Between the conflicting claims from all sides it
is impossible to say just how many men went out in the steel mills,
voluntarily or through intimidation, but it is certain that at many
centres, such as Youngstown, where the Corporation and some of the
larger independents--Republic Iron & Steel, Youngstown Sheet & Tube
and Brier Hill Steel--have big plants, operations were practically
suspended in toto. At Gary, the Corporation’s largest plant, operations
were reduced to a low point, and at many other centres, the results, at
the outset, were apparently in favor of the strikers.

But Pittsburgh, the world’s steel centre, was almost unaffected. At
Homestead, Braddock, Duquesne, and other big Corporation plants the
workers unequivocally proved their loyalty by sticking to their jobs,
and the strike leaders failed utterly to make headway. Day after day
the smoke ascending in volumes from the stacks of these plants gave
assurance that the steel companies were far from crippled and sent
to the union chiefs the message of certain defeat unless they could
succeed in quenching these furnaces.

Although, ostensibly, the strike was directed against the Steel
Corporation and no attempt had been made to negotiate with the heads
of other concerns, all steel companies west of the Alleghanies were
affected by the walk-out as much as or more than was the Corporation.
So far as the big company was concerned the greatest number of men
out when the strike was at its worst, or within a few days of its
inception, was 28 per cent. of its total of employees or 40 per cent.
of its manufacturing force. These were the figures given by Judge Gary
in his testimony at Washington in October, and undoubtedly they are as
nearly accurate as possible. And of the men out there is no question
that many were kept from work not by persuasion but by intimidation,
the strikers having used threats freely to keep the loyal workers from
the mills.

Such tactics are not at all a new thing in similar conditions. Steel
workers who sought to report for duty were sent letters threatening
them with injury or death to themselves or families. In some cases the
threats were sent to the men’s wives or other dependents where their
effect was perhaps greater.

The strike had not been in progress two days before its genesis became
patent. The American public soon realized that probably 98 per cent.
of the strikers were alien-born and that the native worker, with few
exceptions, and large numbers of naturalized foreigners, were sticking
to the steel companies. This, together with the inflammatory utterances
of the strikers themselves, convinced the public that the strike was
not what it claimed to be, an effort to get fair wages and improved
living conditions for the workers--the American workers who remained
at their posts insisted that they already had these and the evidence
adduced by the steel companies verified the statement--but an attempt
to deliver the steel mills and factories into the hands of the radical
foreign element among our industrial workers. It was, in a word, but
the first step toward the seizure of the means of production by labor.

And the public, with the example of Russia before it, could not and did
not sympathize with the strikers.

With some notable exceptions the strike was a bloodless one. This
was due principally to the prompt action taken by the local public
authorities at the various points affected to prevent trouble and
to the refusal of the steel companies generally to attempt to bring
in strike breakers. Because of this passive attitude on the part of
the employers the strikers were robbed of the opportunity to make
sufficient trouble to force intervention by the Government.

In no previous conflict between capital and labor, it is likely, has
the public had as excellent an opportunity of judging the rights and
wrongs as in the steel strike. One day after the struggle eventually
began the Senate of the United States passed a resolution instructing
the Committee on Education and Labor to investigate the strike and
report on its causes. The committee conducted public hearings in
Washington where Judge Gary and a number of loyal workers were heard on
the side of the Steel Corporation, while Foster, Fitzpatrick, Gompers,
and other union leaders had equal opportunity, which they availed
themselves of, to present their case. The committee also visited the
affected districts to secure first-hand evidence on conditions there.

In an essentially fair and complete report, submitted to the Senate
on November 8, 1919, the committee reviewed the claims of the strike
leaders and of the Corporation. While criticizing the steel companies
on the question of too long work hours and suggesting that the six-day
week could be extended to include all workers the report characterized
some of the statements of the strike organizers as false and dismissed
their claim of pauper wages, expressing the opinion that the employees
of the steel industry were fairly well satisfied with wages received
and that the question of wages was not persuasive at all in the
consideration of a strike. The committee, in fact, in its own language
found little to complain of as to conditions in general outside of long
work hours.

On the other hand, the committee reported the underlying cause of
the strike to be “the determination of the American Federation of
Labor to organize the steel workers in opposition to the known and
long-established policy of the industry against organization,” and “the
seizing upon this cause by some radicals who are seeking to elevate
themselves to power in the A. F. of L.”

On this point the committee further found that “behind this strike
there is massed a considerable element of I. W. W.’s anarchists,
revolutionists, and Russian Soviets,” and expressed the opinion
that the American Federation of Labor had “made a serious mistake
by permitting the leadership of this strike movement to pass into
the hands of some who have entertained most radical and dangerous

Still further pursuing this point the committee reported: “There may
be, in view of the radical utterances and actions of certain strike
leaders, some warrant for the belief that the strike in the steel
industry is a part of a general scheme and purpose on the part of
radical leaders to bring about a general industrial revolution. The
committee, however, do not go to that extent because they feel there
were some real grievances.” This, of course, is just what steel men and
the greater part of the public believe.

While this report served to prove that the conclusions arrived at long
before by the great mass of the public were correct the strike was
dying out before it was presented. In fact, the majority of the steel
mills of the country had resumed nearly full operations by early in
November. The strike gradually lessened in importance from the end of
September and, although it was not actually called off by its leaders
until nearly the middle of January it was to all practical purposes
dead long before the end of the year.

The story of the Industrial Conference called by President Wilson in
an effort to bring together the conflicting forces of capital and
organized labor and to work out a new industrial scheme rightly belongs
with that of the steel strike. The decision of the President was
unquestionably due, to some extent at least, to the imminence of the
strike, his plans for the Conference having been announced at the time
when the union organizers were attempting to get recognition from Judge
Gary. While the conference was not called, ostensibly, to deal with the
particular situation it is obvious that Mr. Wilson, realizing what a
danger the strike would be to the country’s prosperity if it occurred,
sought to avert it and at the same time to reduce to a minimum the
danger of other conflicts between the two great opposing industrial
forces. That he had the steel situation in mind was further indicated
by his request to the labor leaders to postpone action until after the
Conference--a request that was refused.

To the Industrial Conference the President invited a number of men
supposed to represent the three great groups concerned in industrial
disputes--labor, capital, and the public. The country’s workers were
represented officially only by the leaders of organized labor, Samuel
Gompers, Matthew Woll, Frank Morrison and other prominent members of
the American Federation, with some representatives of the railroad
unions. The interests of capital were in the hands of the so-called
employers’ group which included representatives of various commercial
bodies, of the railroads, and of farmers’ organizations. The so-called
public group also included a number of employers, among whom were Judge
Gary; the late Henry B. Endicott, the Massachusetts shoe manufacturer
who had gained a reputation for the interest he took in the welfare of
his employees, and others; social workers and writers such as Ida M.
Tarbell and Gertrude Barnum; two prominent Socialists, Charles Edmund
Russell and John Spargo. To these were added Dr. Charles W. Eliot,
educator; Thomas M. Chadbourne and Gaven McNab, lawyers; Bernard M.
Baruch, erstwhile stockmarket operator but lately head of the War
Industries Board, and several others.

Sincere as was the desire of the President to create amicable relations
between capital and labour and equally sincere as was the attitude
of the majority of the participants to the Conference to reach an
understanding that would reduce to a minimum the danger of industrial
disputes and establish a satisfactory method of settling them when they
did arise, it was obvious from the outset that the Conference would be
abortive; that a panacea for industrial ills would not be discovered by

It was unfortunate that illness prevented Mr. Wilson from taking
personal charge of the proceedings. The influence of his high office
might have prevented the disagreements that occurred and held the
Conference together long enough to enable the participants to arrive at
some basic points of agreement. But this was not to be.

It was also unfortunate that the Conference took place during a big
industrial dispute, probably the greatest the country had ever faced.
For although it was obviously convened to deal with industrial problems
in the abstract rather than in the concrete, Samuel Gompers and the
other union representatives at the very beginning demanded that one of
its first actions should be the settlement of the steel strike.

This might readily have been foreseen. The labor leaders undoubtedly,
by the time the Conference came together on October 6th, realized that
in their conflict with the Steel Corporation and the steel companies
generally they had engaged in a losing fight. At the very time strikers
in large numbers were going back to the mills and the operations of the
steel companies were steadily increasing. The continuation of the fight
meant a total loss to the unions while arbitration would have permitted
them to gain some of their points, or at least to yield gracefully and
save their faces. They saw, or thought they saw, in the Industrial
Conference, a means to force the Corporation to accept arbitration.

Defeated in their efforts to end the steel strike without sacrificing
prestige among their followers with the assistance of the Industrial
Conference, the labor leaders then made another demand--that the
Conference, before proceeding further, recognize the principle of
collective bargaining and the right of workers to be represented by
men of their own choosing. This demand, fair as it seemed on the
face of it, was so presented as to make it clear that by “collective
bargaining” was meant bargaining through unions, and that by
“representatives of their own choosing” was meant union leaders
selected not by the men but by unions, and the employers insisted
that, while the right of collective bargaining could not be gainsaid,
the unions must recognize the exercise of this right through shop
committees, a form of collective bargaining which has proved successful
in many instances but to which unionism is firmly and irrevocably

[Illustration: Coils of Red Hot Wire]

And it was upon this rock that the Conference eventually split after
several weeks of argument, notwithstanding the strenuous efforts of
Franklin K. Lane, Secretary of the Interior, who acted as chairman.
In justice to the unions, however, it must be said that, on the last
day, before organized labor withdrew from the Conference, giving it
its death-blow, Mr. Gompers presented a final resolution for the
recognition of the right of collective bargaining without restriction.
Had the employers’ group accepted this resolution or had the union
representatives given their opponents time to consider it, as the
latter with good reason asked, even this difficulty might have been

[Illustration: Annealing Wire]

And here it might be pointed out that John Spargo, Socialist and
writer, offered a compromise resolution that was intended to satisfy
all parties to the controversy. But unfortunately this resolution
was presented while the Conference was in the death throes and never
received the consideration it deserved. Mr. Spargo’s resolution read:

“That the Conference proceed to develop and formulate a general
programme which will clearly define and establish the right of
organization and collective bargaining and furnish the basis for a
constructive policy to direct the relations of employers and employees
during the days immediately ahead.”

Both sides, capital and labor, had agreed to collective bargaining in
theory. They could not agree on its definition. Mr. Spargo’s suggestion
that the Conference “define” the phrase, it seems to the writer who
was present through the entire proceedings, provided a basis on which
both sides might have come together with some hope of establishing an
amicable basis of agreement--if such a basis were humanly possible.
It was the only resolution offered that at all tended to harmonize
conflicting ideas.

While the labor leaders were battling for the immediate settlement
of the steel strike by the Industrial Conference, Judge Gary, who it
will be remembered was a member of the “public” group, read a prepared
statement giving the Steel Corporation’s attitude on this point. Judge
Gary said:

  I desire to make a brief statement in relation to the question
  under discussion as well as others submitted to this Conference.
  Further explanation of any vote I may register will probably be

  Like other members of the Conference, I recognize that the public
  interest must always be considered as of the first importance; that
  all private interests must be subordinated.

  I am heartily in accord with the desire of the President firmly to
  establish proper and satisfactory relations between all groups of
  citizens connected with industry, including of course what has been
  designated as capital and labor.

  I believe in conciliation, coöperation, and arbitration whenever
  practicable without sacrificing principle.

  I am of the fixed opinion that the pending strike against the steel
  industry of this country should not be arbitrated or compromised,
  nor any action taken by the Conference which bears upon that

  Also that there should be maintained in actual practice, without
  interruption, the open shop as I understand it--namely, that every
  man, whether he does or does not belong to a labor union, shall
  have the opportunity to engage in any line of legitimate employment
  on terms and conditions agreed upon between employee and employer.

  I am opposed to a policy or practice which unnecessarily limits
  production, increases costs, deprives the workman from receiving
  the highest wage rates resulting from voluntary and reasonable
  effort, hinders promotion or advancement in accordance with merit,
  or otherwise interferes with the freedom of individual action.

  As unorganized labor, which embraces the vast majority of working
  people, has no special representation in this Conference, I deem it
  appropriate to say that all labor should receive due consideration,
  and that it is the obligation and ought to be the pleasure of
  employers at all times and in every respect to treat justly and
  liberally all employees, whether unorganized or organized.

Thus, without accomplishing a single constructive result, the
Industrial Conference ended. Labor, or rather the union heads, had
endeavored to subvert it to promote their own ends and, failing in this
effort, withdrew dramatically.

President Wilson did not abandon his hope of formulating a basis for
the settlement of industrial disputes, however. He immediately called a
new conference consisting of only one group, supposed to represent the
public, which did not include any of the participants to the former
conference, and this met and drew up a rather innocuous report. But as
a factor in the steel strike the second conference might never have
occurred and need not be considered here.

The strike dragged more or less wearily throughout the fall of 1919
and the early winter. Long before the end of the year it ceased to be
an important factor in mill operations, and its final official calling
off on January 10, 1920, was merely a formal procedure. Long before
that date the whole country had realized that the labor leaders had
over-played their hands and had met their Waterloo. To all intents and
purposes the steel strike was ended before the middle of November.

As it proved, the method adopted by Judge Gary in fighting the strike
was the best. It consisted principally of permitting the public every
opportunity of judging all aspects of the case and of standing pat on
the fairness of the steel companies in dealing with their men. Had the
Judge yielded one iota to the demands of the labor organizers this
would but have convinced the radical element in labor that they held
the whip hand over capital and would have encouraged them to further
excessive demands. Had the Judge, on the other hand, attempted to fight
the strike by meeting violence with violence this would have alienated
public sympathy. And in the final analysis public opinion is the most
important factor in settling industrial disputes.

As an aftermath to the strike came the “investigation” by the
Interchurch World Movement, an organization at the head of which were a
number of bishops and other churchmen. A committee of this organization
visited Pittsburgh and other points and presented a statement, but
it was of a character entirely biassed against the Corporation, its
members, in their investigation, having apparently given heed only to
the arguments of Messrs. Foster and Fitzpatrick.

In the report of this committee stress is laid on the long working
hours of the man in the steel mill, ignoring the fact that steel
companies generally have made great effort to reduce the average of
daily work and that only a comparatively small percentage of the men
work twelve hours. Further, the committee attacked the Corporation on
the question of wages which it declared to be below the sum required
for American standards of living, its statements failing to harmonize
with the findings of other obviously unprejudiced investigators
including the Senate Committee on Education and Labor, which found

In standing on a just basis and refusing to follow the easier way of
compromise the Steel Corporation performed a service not to itself or
to the steel trade alone. It performed a service to the whole country
and even to the world. It gave the first decided check to the growing
strength of radicalism which was then threatening to overwhelm America
and prevented a situation which would have thrown the country into the
same condition that has for some time prevailed in Russia.

The evil of unchecked growth of unionism is illustrated by what is
happening in England at the present writing. The Corporation saved this
country from similar evils. By its stand it established the right of
every worker to earn a livelihood whether or not he belongs to a union.



When Uncle Sam, in the stirring days of 1917, was drawn into the vortex
of the Great War he mobilized his industrial and financial strength
just as truly as he mobilized the flower of his young manhood and
called upon it to spare no effort or sacrifice to ensure that his
standard should be carried, as it always had been in the past, to

And corporations, manufacturing and other, responded loyally for the
most part. A few, a very few, put profit above patriotism and haggled
over prices and percentages, but the great mass of American business
men showed by their actions that they regarded themselves as soldiers
of the United States and put their resources and their organizations
without question at the service of the Government. They were the men
behind the men behind the guns.

From among so many who did their duty, and more than their duty, it
would be invidious to pick out for particular praise or commendation
a single one. The war work done by such concerns as American Can,
American Car & Foundry, American Brake Shoe & Foundry, Dodge Bros.
Manufacturing Co., T. H. Symington Co., and many others must be a
matter of deep satisfaction not only to their managements but to all
who believe that American business men are not swayed solely by the
desire to gather in dollars. And among those concerns whose managements
asked themselves in regard to war activities not what profit there
was in them but how best they could serve their country and help win
the war, none was more ready and loyal than the United States Steel

From the date of the entrance of the United States into the war until
the armistice the Steel Corporation spent more than $200,000,000
for war plant, and from the beginning of the war in 1914 more than
$300,000,000 for plant and other properties for war purposes. Most of
these expenditures were made at the request of representatives of the
Government at a time when business caution would have advised against
them and at a cost estimated at about $103,000,000 above pre-war cost.
Some of the plants erected during the conflict will never be profitable
in peace times and others will not be for a long time. But profit was
not in question.

And the Corporation shipped for war purposes nearly 18,500,000 tons of
steel, nearly 28,000,000 gallons of benzol, and more than 21,000,000
pounds of ammonia sulphate and liquor intended directly for war uses.
Much of its other output unquestionably went into war material in one
shape or another, but indirectly, and so cannot be checked up.

Perhaps the most interesting single feature of the Corporation’s war
activities was the contract which it undertook early in May, 1918, to
erect for the Government the largest big gun plant in the world on
Neville Island, in the Ohio River, near Pittsburgh. This plant was
to have a capacity to forge fifteen 14-inch guns, and to machine and
finish twelve a month. Part of its capacity was to be devoted to the
manufacture of even larger cannon--up to 18-inch.

The estimated cost of the plant and equipment was $150,000,000, this
figure not including the cost of the guns.

To the fulfillment of this enormous contract the Corporation bent
a great part of its energies. And for its work and the work of
its officers it agreed to accept an annual remuneration of one
dollar--since neither individual nor corporation can make Uncle Sam a
present of his services. So the United States Steel Corporation was
one of a few, a very few, companies which may be reckoned among the
dollar-a-year war workers of the United States.

The Neville Island plant was, as has been said, to have been the
largest big-gun plant in the United States. The plans called for a
complete integration of operations including the erection of a big
steel plant to supply the necessary raw material. The site chosen was
an excellent one for the purpose, being located well toward the centre
of the country with all-water transportation to the Gulf of Mexico and
rail connections with every part of the United States. Besides the
manufacture of big guns the Neville Island plant was to be equipped to
make 40,000 shells, of 8-inch and larger sizes, a month.

Immediately upon the signing of the contract the Steel Corporation set
about the erection of the plant. Ground was broken and a number of
buildings of various kinds erected. But the construction of the giant
plant was necessarily a question of time. It is doubtful if, under
the most favorable conditions, it would have been possible to begin
operations until well into 1919 or to turn out a single gun until the
beginning of 1920, and the armistice intervened on November 11, 1918,
this causing the cessation of the work. The huge project, it might be
said, died before it was fully born. Such equipment as had already been
placed was moved to government arsenals elsewhere and the buildings
dismantled. And the war history of Neville Island came to an end. What
work was done, and property purchased on the final settlement, cost the
Government something like $11,000,000.

The abandonment of the project seems a pity. True, the winning of the
war seemed to make the plant unnecessary, but, in view of the excellent
location of the island for an arsenal, its position in juxtaposition
to Pittsburgh, the great steel centre, and the work actually done
and expenditures already made, it might be held that it would have
been better to continue the work at least sufficiently to give the
Government a small plant which could be expanded if need ever arose
again, a nucleus for a great-gun factory in the event of another war.
This could have been done at a comparatively small additional cost.
But, as Kipling says, that’s another story.

Of all the needs of the Allies and the United States in the summer of
1917 none was quite as urgent as ocean tonnage. The Hun U-boats at that
time were sinking ships and cargoes at a rate that the governments
concerned did not even dare to make public. The number of bottoms
operated by the Allies was being sadly depleted, and without ships
England faced something very like starvation; men, munitions, and food
supplies could not have been sent to the front. On the speed with which
the shipyards of this country and Great Britain could turn out steamers
depended, more than upon any other factor at the time, the victory or
defeat of the Allied arms.

How the United States met the emergency is a matter of history. The
fabricated ship was evolved and made a success. To secure vessels,
the Government placed contracts under which it stood the entire
expense of plant construction with payment for the vessels on a
cost-and-percentage basis. But the Steel Corporation, although it
probably could have secured similar terms, chose rather to build and
equip yards at its own expense, relieving the Government of this
expense. Two shipyards were started, one at Kearny, N. J., and the
other at Chickasaw, near Mobile, Ala.

Shipbuilding, of course, may be regarded largely as a commercial
venture on the part of the Corporation. But it is certain that it is a
venture that it would never have undertaken at the time, because of the
immense building cost then obtaining and the future uncertainties, had
it not been for the urgency of the need of the country and, indeed, of
civilization. As Judge Gary truly said in his report to stockholders
for the year 1918: “these plants were conceived and undertaken solely
as war measures.”

Both the Kearny plant, operated by the Federal Shipbuilding Co.,
a subsidiary of the American Bridge Co., and the Chickasaw plant,
operated by the Chickasaw Shipbuilding & Car Co., a subsidiary of the
Tennessee Coal, Iron & Railroad Co., were designed to build 10,000-ton
vessels. The Federal plant has twelve ways and the Alabama yard six,
with a combined capacity of thirty-six ships a year.

Once having decided on its shipbuilding venture the Corporation did not
lose time in setting about the work. The New Jersey plant was the first
one decided on and ground was broken for the plant on August 1, 1917.
By November 15th the first keel was laid and the first vessel, the
_Liberty_, was launched on June 19, 1918, and finished and turned over
to the Shipping Board, which had charge of all American shipping during
the war, on October 5th of the same year.

Chickasaw came later. This yard was started in November, 1917, and the
first ship to leave its ways did not do so until December 29, 1919, or
some time after the armistice. The vessel, the _Chickasaw City_, was
purchased by the United States Steel Products Co., the Corporation’s
export subsidiary, and put into service carrying steel products to
different parts of the world.

At the time of writing six vessels have been launched from the southern
yard, all for the Products Co., while the Federal yard has launched and
delivered a total of forty-four. Of these thirty have been delivered to
the Shipping Board and nine of the remainder have been taken over by
the Products Company, the other five having been sold to other concerns.

Although it is dubious whether, as a commercial undertaking, the two
shipyards will prove very profitable immediately, there is little
reason to doubt that they will eventually justify the expenditures on
them, occasioned by the war, from the purely business standpoint. They
are both favorably located for cheap manufacture and, making fabricated
ships, can naturally build at satisfactory costs in comparison with
yards constructing steamers under the old methods.

For there is every reason to believe that the fabricated ship has come
to stay. It has fully proven its right to existence in competition with
other vessels. Its methods of construction are standardized, which
is what made the cheap Ford car possible, and standardization should
eventually mean as much saving in ship as in motor-car building.

Whether the war had come or not the erection of shipyards by the
Corporation was a natural development sooner or later. It was in line
with the plans laid down by the Corporation’s founders. And it was also
part and parcel of the big company’s export programme. With its exports
mounting up to the two-million-ton mark annually the Corporation
had necessarily either to own or charter a large number of vessels.
Ownership, of course, was better in the long run and it was, for a
concern like U. S. Steel, with its big steel plants and experienced
organization, cheaper to build than to buy the vessels.

The Steel Products Company’s need of a large number of vessels--before
the war it owned nine and chartered constantly from thirty to
forty--itself assures a steady demand, at least for a time.

If the future of the fabricated ship is assured the Corporation, in its
shipbuilding programme, starts with an advantage over most competitors.
Now that it appears the great Hog Island yards, with their fifty ways,
will be abandoned, the Federal and Chickasaw plants will be the largest
fabricated shipyards in the world--and they should be among the lowest
cost of all yards.

But the assistance which the Corporation rendered the Government in
respect to providing ships to meet the war emergency was not confined
to the erection of the two yards and the fabrication of ships there.
Long before the yards were built, or even conceived, the American
Bridge Co. was pioneering in the production of fabricated ship parts
and the great part of the steel that went into the vessels built at
Hog Island and other plants was supplied by that company and by the
Tennessee Coal, Iron & Railroad Co., which put up plants specially for
the purpose. Before the close of 1918 these two subsidiaries of the big
company had shipped the steel for seventy complete hulls to various

No other metal plays such an all-important part in modern warfare as
does steel. Warships, transports, big and field guns, small arms,
shells, gun mounts, and other munitions are made entirely or almost
entirely of the metal. And when Germany first threw down her gauntlet
to the civilized world the Allies found it necessary to depend to a
great extent on American mills for a supply of this vital war metal.
And the manufacturers of the United States responded, among them the
Steel Corporation.

The Corporation did not go into the manufacture of munitions directly.
It supplied the raw material for them to other manufacturers, and it
did turn out a large number of shell forging, mortars, and later, gun
forgings. From August 1, 1914, to April 1, 1917, or just before this
country allied herself with the European enemies of Germanism, the
Corporation supplied a total of 6,057,640 tons of steel intended for
the manufacture of munitions of one kind or another. Part of this went
to manufacturers here who were making shells, but most of it was sent
directly abroad.

As soon as the United States became herself engaged in the great
conflict the authorities at Washington, realizing that steel supply
was of paramount importance, requested Judge Gary, in his capacity
of president of the American Iron & Steel Institute, to form a
committee to mobilize the iron and steel industry of the country
on a war footing and to take general charge of the supply of the
metal. This Judge Gary did with the hearty coöperation of other steel
manufacturers. Practically the entire steel production of the country
was put unreservedly at the disposition of the Government and no effort
was spared to secure and maintain maximum production.

And here it might not be out of place to remark that the situation
as it then existed presented the peculiar spectacle of a government
depending to a large extent upon the loyalty and coöperation of a
business organization, and availing itself of the use of its resources,
financial and other, while this very government was attempting in the
courts to destroy this same corporation. We also saw the Government’s
attorneys demanding that the Court which had to make the final decision
in the matter put the proceedings over until after the war. In a sense
the Government did not dare go ahead with the case as, had the Court
granted its petition and ordered the Corporation dissolved, the result
would have been a disaster greater than the loss of a battle to the
Allied arms.

The Government, it has been suggested, availed itself of the strength
and resources of the Steel Corporation. Two instances of this will
illustrate how. Tin plate, the steel product used to make cans for food
and other perishable goods, needs in its manufacture a large supply of
pig tin and of palm oil, neither of which products is obtainable in the
home markets. Tin plate was declared a war essential and supervision
of its output taken over by the Government which found itself promptly
faced with the necessity of securing a steady supply of both pig tin
and oil. But the difficulty was met by putting the matter in the hands
of the Corporation which, subject to arrangements with the British
Government which controlled the output of these two products, took full
charge of importations, arranged a steady supply, and financed the
operations out of its own exchequer, distributing the oil and tin to
other manufacturers at actual cost.

And then there was Neville Island.

After the United States entered the war the Corporation’s output of
war steel increased enormously. From April 1, 1917, to the end of
December of the following year it had exported to the Allies 7,292,950
tons of steel and supplied the United States Government and munition
manufacturers here with 9,104,440 tons, making its total of war steel
16,397,390 tons.

So many and so varied were the Corporation’s activities in the war that
only the briefest synopsis of them can be given here.

Of equal importance with steel, as a necessary adjunct to modern
warfare, are the chemicals that go into the manufacture of
trinitrotoluol and other explosives, gases, etc. And the Corporation’s
contribution toward the winning of the war was no less important in
this particular than was its output of steel products.

These explosive bases are derived from benzol and toluol, which in turn
are derivatives of coal extracted in the manufacture of coke. And long
before the war cloud had arisen the Corporation had been pioneering in
the coke by-products industry. It had for years been building plants to
convert into valuable chemicals the gases and oils formerly wasted in
the manufacture of coke. And the work it did in these early years along
these lines formed a foundation on which could be erected rapidly a
great explosive industry.

Prior to the war, the big company had made no effort to produce
benzol and the other bases for dyes and explosives. It had confined
its activities, in respect to coke by-products, to saving surplus gas
which was used for the operation of its own plants and to producing tar
and ammonia sulphate. But with the plants already equipped for these
purposes, it was a simple matter to make the necessary installations
for the extraction of benzol and other light oils and the experience
gained at those plants was of invaluable assistance in constructing and
operating complete new equipment at others.

Of the Corporation’s total coke by-products capacity to-day, consisting
of 2,992 ovens with an annual capacity of 11,960,200 net tons of coke,
131,805,500 gallons of tar, 174,960 net tons of ammonia sulphate,
99,550,900 cubic feet of gas, and 45,785,000 gallons of benzol and
other light oils, 53.6 per cent., or more than half, was installed
under war pressure, much of it at inflated cost, for patriotic rather
than for commercial reasons.

Actual expenditures by the big company in this field subsequent to
the commencement of the World War aggregated $62,000,000 as compared
with about $16,000,000 prior to August 1, 1914. These figures reflect
the increased cost of construction due to war conditions, and make it
easy to believe the assertion that much of the work done would never
have been undertaken had it not been for the urgent need of the United
States and the Allies.

When the war started, the Steel Corporation owned 1,452 by-product coke
ovens, of which 120, at the Benwood, W. Va., plant were operated under
a lease with the Semet-Solvay Co., this lease having been operative
when the Corporation was formed. Another 212 ovens were acquired when
the Corporation purchased the Union Sharon Steel Co., and the remaining
1,120 were constructed by the Corporation itself at its Joliet, Ill.,
Gary, Ind., and Fairfield, Ala., plants. These ovens had an annual
capacity of 5,545,500 tons of coke, 44,888,400 gallons of tar, 66,750
tons of sulphate of ammonia, and 45,472,900 cubic feet of gas.

Between August 1, 1914, and April 6, 1917, the Corporation installed an
additional 1,118 ovens, of which 90 were at its Duluth plant, 640 at
Clairton, Pa., 208 at Lorain, Ohio, and 180 at Cleveland, Ohio. These
new plants were equipped to produce benzol, and at the same time, the
plants existing prior to the war were similarly equipped.

Since April 6, 1917, an additional 140 ovens have been installed at
Gary, bringing the capacity of that plant to 700 ovens, an additional
128 at Clairton, and 154 at Fairfield, Ala. In the last two instances,
the construction of the plants was made in response to direct requests
of the Government, although the Corporation bore the entire expense. At
the end of the war the big company had a capacity of about 40,000,000
gallons of benzol, etc., since increased to the figure already given,

The Corporation’s by-products ovens constitute 25.2 per cent. of all
such ovens in the United States. Its actual production is somewhat
higher than this percentage, which indicates how valuable were its
activities along these lines in the prosecution of the war.

Although constructed largely to meet the then-existing emergency,
this capacity serves a valuable end under peace conditions. In fact,
as suggested elsewhere in these pages, it is only a question of time
when the old wasteful beehive coke process shall have been consigned
to oblivion and the newer by-product method used exclusively. Benzol,
one of the principal war products, is used commercially as a motor
fuel, in the manufacture of dyes, in the rubber industry, and for the
purpose of enriching illuminating gas. Ammonia is used as a fertilizer
(in the form of sulphate), in refrigeration, and in the chemical
industry. Tar is used for heating purposes in the manufacture of steel,
and for distillation by which are recovered carbolic oils, used for
disinfecting; creosote oil, used as a wood preservative; anthracine
oil, used in making certain dyes; and pitch, for road making, roofing,
etc. The surplus gas generated in the process is used, as stated
already, for heating purposes in the manufacture of steel and for
municipal gas uses.

Further, if the day comes when the United States will have to draw the
sword again, the big company’s capacity of coke by-products will be of
immense military importance.

The work done by the Corporation in extending its capacity for war
purposes covers too wide a range to be detailed here. Besides the
activities already outlined, it included the erection at Gary of a
gun-forging plant for field guns and howitzers and, at the same plant
of new mills for rolling projectile steel. At Chicago, four electric
furnaces were installed to produce special steel for gun forgings and
other military uses; at Homestead, the armor-plate department already
in existence was enlarged and new facilities installed to make forgings
for gun carriages. At the Homestead and Schoen plants of the Carnegie
Steel Co., and the Ellwood and Christy Park plants of the National Tube
Co., shell-forging equipment, giving an annual capacity of 4,000,000
shells, was constructed, and at the last-named plant machinery was also
put in for making torpedo and submarine air flasks, gas bombs, trench
mortars, and other war material. At various plants of the American
Steel & Wire Co. machines were installed to make special barbed wire
for trench use and some of these plants were equipped to manufacture
rope for submarine nets and mines, and a number of other Allied uses.
These are only a few of the more important of its war-manufacturing

[Illustration: Drawing Fine Wire]

But the great Corporation’s war work was by no means confined to
manufacturing of military material. In no case was it called on to
assist the Government in any way without prompt and generous response.
Its ships on the Great Lakes were used in training naval reservists. It
took charge of the work of delivering at Montreal and Quebec vessels
commandeered by the Shipping Board on the Great Lakes. These vessels
had to be cut in two to enable them to pass through the locks. It
coöperated with the United States Food Administration in the movement
of grain and other commodities vital to the successful prosecution
of the war. It turned over to the Government seven ocean-going steamers
and five vessels of its Great Lakes fleet. It gave leave of absence to
over two hundred of its officials and experienced employees, to enable
them to devote themselves to governmental, Red Cross, and other work
during the conflict. And, incidentally, its service flag carried 34,407

[Illustration: Making Wire Fencing]

Financially, it responded to the Government’s call with the same
enthusiasm it displayed in meeting war-production needs. How generous
were its subscriptions to the various loans is indicated by the
fact that although they were reduced materially on allotment, the
Corporation and its subsidiaries, at the end of the war, held bonds
of the first four loans aggregating $97,134,900. In addition to this
amount, it was carrying, for account of employees on partially paid
subscriptions, another $24,171,000 and had turned over, on fully-paid
subscriptions, to employees, $6,645,000. Its allotment of the Victory
Loan was $25,682,300.

In the annual report for 1918 it was stated that the Corporation’s
subsidiaries had purchased a total (not counting exchanges and
re-issues) of $352,340,500 of United States Treasury certificates.

Finally, it subscribed to various war funds, raised by the Red Cross,
Y. M. C. A., Salvation Army, Knights of Columbus, and United War Work
Campaign, a total of $7,375,662, and declared a dividend of 1 per cent.
on its common stock, amounting to $5,083,025, in July, 1917, for the
particular purpose of aiding stockholders to contribute to the Red

Since the close of the war the Corporation, early in 1919, gave
evidence of its desire to coöperate with the Government in deflating
the high cost of living, even although this meant the sacrifice of a
substantial part of its possible profits. For more than a year past it
has played a lone hand in this respect, maintaining a scale of reduced
prices in the face of a strong market. Yet it is questionable whether
this policy will not eventually prove a profitable one. In fact,
indications are not lacking at present that such is likely to be the

Of course, United States Steel made large profits out of the war, both
while the United States was a spectator and while we participated in
the struggle. But always its officials put patriotism before profits.
And if ever again the need arises, it is a safe prediction that the
immense capacity and financial strength of the Steel Corporation will
be all the time and unrestrictedly at the service of Uncle Sam.



Although the business depression consequent on the panic of 1907
seriously affected earnings of the Steel Corporation in the closing
months of the year, the big company was able, as a result of the
boom conditions that preceded the financial catastrophe, to report
the largest earnings it had till that time shown. Total earnings
were $160,964,673.72, and a net balance was left for dividends of
$104,565,563.76. After the payment of the dividends, the common
being maintained at the established rate of 2 per cent., and the
appropriation of $54,000,000 for property additions, a net surplus of
$15,179,836.76 remained.

In the appropriations for additions was included a sum of $18,500,000
for the continuation of the work being done at Gary, making the total
amount appropriated for this purpose to the end of 1907, $50,000,000.
During the year the work of building the new steel city progressed
rapidly and $19,316,555 was added to the $4,632,202 expended the
previous year.

The last two months of the year showed the effects of the business
depression, earnings of the last quarter, net for dividends, being
only $18,614,416, compared to $28,758,142 the three months preceding.
But it was not until 1908 that the full force of the storm was to be
seen. In the first quarter of this year net profits applicable to
dividends dwindled to $8,854,297.37, compared with $27,031,008.20 a
year previous, and second-quarter profits were $9,042,027.55 against
$30,843,512.61 in the same period in 1907. A striking comparison of
the difference in trade conditions that occurred in the twelvemonth is
afforded by the following statistics.

                                     1908              1907

  Gross sales                   $482,307,840.34   $757,014,767.68
  Steel ingot production         7,838,713 tons        13,342,992 tons
  Finished steel production      6,206,932 tons        10,564,537 tons
  Number of employees (avg.)       165,211                210,180
  Net earnings                   $91,847,710.57   $160,964,673.72
  Net for dividends              $45,728,713.70   $104,565,563.76

No special appropriations were made out of 1908 profits and a surplus
of $10,342,986.70 was thus shown for the year after the dividend
payments. However, such an appropriation appeared to be unnecessary as
the Corporation already had a large reserve fund for the most important
work underway, the building of the city and plant at Gary. On January
1, 1908, the balance on hand for this purpose was $26,051,242.62, and
there was spent on the work $18,848,472.19 during the year, so that at
the start of 1909 there was a balance of sufficient size to continue
the work for several months.

During the year 1908 the bonded debt of the Corporation, which had
been increased from $564,670,876 at the end of 1906 to $602,320,511 a
twelvemonth later, chiefly on account of the issuance of securities for
exchange for Tennessee Coal & Iron stock, was reduced to $594,865,534.

Among the important items of expenditure for 1908 is found a sum
of $3,460,993 which was employed in modernizing the plants of the
Tennessee company acquired the previous year. This was the beginning
of a series of large expenditures extending over many years, and all
for this purpose. Up to the end of 1914 approximately $20,180,092 had
been spent on this work, most of it coming from the general funds of
the Corporation and not from the earnings of the southern subsidiary

To what extent the acquisition of the Tennessee company affected the
Steel Corporation’s capacity is shown in a table submitted in the
report to stockholders for 1908, the figures given being as of the end
of the year:

                                       FURNACE     STEEL    FINISHED
                                       PRODUCTS    INGOTS     STEEL
                                        _Tons_     _Tons_     _Tons_

  Capacity April 1, 1901              7,440,000  9,425,000  7,719,000
  Purchase of Union and Sharon Cos.   1,228,000  1,258,000  1,103,000
  Tennessee purchase                  1,000,000    500,000    400,000
  Additions made by different Cos.
      after acquisition               5,322,000  5,887,000  3,678,000
  Capacity January 1, 1909           14,990,000 17,070,000 12,900,000

This report also states that although the total steel capacity of
the Corporation had been increased by 2,306,000 tons during 1908
its capacity for the making of Bessemer steel had decreased 746,000
tons, open-hearth capacity increasing 3,052,000 tons. These figures
illustrate sufficiently the change then occurring in the steel trade
from the old Bessemer to the new open-hearth process.

An even more striking illustration of the manner in which open-hearth
steel has been displacing the older Bessemer process in recent years
is afforded by the figures of the American Iron & Steel Institute. In
1880 open-hearth production was only 100,851 tons against 1,064,262
tons of Bessemer. A decade after Bessemer production was 3,688,871
tons compared with 513,232 tons of open-hearth, and in 1900, 6,684,770
tons of Bessemer were turned out by the steel mills of this country
for 3,398,135 tons of open-hearth. By 1907 the two processes of steel
making were running a close race for popularity with consumers,
open-hearth production being 11,549,736 tons in that year, and Bessemer
11,667,549 tons. In every subsequent year open-hearth production has
been the larger, as shown by the following figures of the country’s

  YEAR             BESSEMER              OPEN-HEARTH

  1908             6,166,755              7,836,729
  1909             9,330,783             14,493,936
  1910             9,412,772             16,504,509
  1911             7,947,854             15,598,650
  1912            10,327,901             20,780,723
  1913             9,545,706             21,599,931
  1914             6,220,846             17,174,684
  1915            23,679,102              8,287,213
  1916            31,415,427             11,059,039
  1917            34,148,893             10,479,960
  1918            34,459,391              9,376,236
  1919            26,948,694              7,271,562

Business conditions gradually bettered throughout 1909, although the
so-called open market that existed in the steel trade resulted in
an average of prices during the year somewhat lower than in 1908.
Nevertheless, increased production caused a marked and gradual gain
in the earnings of the big Corporation, which from $22,921,268.75
in the first quarter grew to $29,340,491.62 in the second quarter,
$38,246,907.43 in the third, and $40,982,746.14 in the closing three

Total earnings in 1909 were $131,491,413.94, and after all fixed
charges had been met, dividends paid, and a special appropriation
of $18,200,000 set aside for new construction, etc., a surplus of
$15,321,918.04 was carried to profit and loss. The bonded debt of the
Corporation in 1909 was increased by $12,718,639.43 to a total of
$607,584,173.72, there having been issued by the subsidiary companies
bonds to a total of $21,976,500, and bonds totalling $9,257,860.57
having been redeemed.

The year’s operations resulted in a production of 13,355,189 tons of
steel ingots and 9,859,660 tons of finished steel products. The total
volume of business was reported at $646,382,251.29.

On the steel plant and city of Gary $11,081,367.80 was spent, making
the total expended on the project to December 31, 1909, $53,878,597.37.
Gary was now a steel-producing centre. Early in the year steel rails
were turned out there and shortly after the close of 1908 and later in
1909 several of the steel furnaces and other finishing mills had been
placed in operation. About this time it was decided that two of the
other constituent companies of the corporation, the Sheet Tin Plate and
Bridge companies, should erect plants at Gary, which plants are now in
operation and have been for some time.

About the middle of 1910 the wave of improvement that had brought
better business and profits to the steel companies began to slacken.
The effect was not very immediate and the year, as a whole, was one of
the best experienced by the Corporation prior to the war boom. Earnings
reached a total of $141,054,754.51, but a fall in quarterly profits
from $40,170,960.83 in the quarter ending June 30th, to $25,901,729.87
was sufficient to show the downward tendency in conditions affecting
the trade.

Gross business aggregated $703,961,424.41, and production reached its
high-water mark, 14,179,369 tons of ingots and 10,733,995 tons of
finished steel being turned out by the plants controlled by the Steel

Bonds to a total of $17,392,752.14 were redeemed and $6,945,237.50
issued making the outstanding bonded debt of the Corporation and its
subsidiary companies on December 31, 1910, $597,136,659.08. Some
$16,000,000 was expended in further work at Gary bringing the total
outlay on the plant, city, and terminals there to $69,978,695.15,
of which $60,203,189.22 was financed from the funds of the parent
corporation and the balance by various subsidiary companies, including
the Bridge and Wire companies, which began the construction of their
new plants during the year.

Several important purchases of coal properties in the states of
Illinois and Indiana were made in the years 1909-1910. These gave the
Corporation 742 acres of land and 55,624 acres of coal rights. The most
important new development recorded at this period, however, was the
beginning of work on the construction of another steel plant and city
near Duluth, Minn. The site for this plant had been purchased as early
as 1907, but the events of the year and the dullness that followed made
it seem wise to postpone the project. The more favorable conditions at
the beginning of 1910 warranted its being proceeded with, and so the
matter was put in hand, and at the end of the year $1,715,517.70 had
been spent on the new plant.

In accordance with its policy of permitting its workers to share in
the better earnings resulting from improved business conditions the
Corporation, in 1910, announced another advance in wages, affecting
the greater number of its employees who, throughout the year, averaged
218,435. The increase averaged something over 6 per cent.

Several factors operated adversely against the Corporation, from a
financial standpoint, in 1911. The decline in business noted in the
late months of the preceding year continued through and well into 1912,
tonnage fell off and prices dropped with it. In May, 1911, the Republic
Iron & Steel Co. precipitated matters by announcing a drastic reduction
in the price of bars, the most important steel product, and this led
to general price cutting, affecting every steel maker. It is worthy of
note, however, that the conditions that now prevailed had nothing of
panic in them. The business world seemed merely to be hesitating, to be
timorous about making new ventures, to question the future. Perhaps the
real reason was the world situation ripening for the Great War, for it
is noticeable that, although conditions over the end of 1912 and into
1913 were good, this hesitancy was still in evidence, something ominous
seemed to hang over the world of business and finance. It is likely
that some of the leaders of finance foresaw, even though dimly and
uncertainly, the trouble that was brewing.

Earnings of the Steel Corporation in 1911 were $104,305,465.87, the
four quarters making a comparatively even showing. After the payment
of dividends only $4,665,494.78 was left for surplus. Dividend
requirements, however, were considerably larger than they had been in
previous years. The rate of disbursement on the common issue had been
increased to 4 per cent. in 1909, and to 5 per cent. in 1910, at which
rate it continued until the latter part of 1914.

Production in 1911 fell off to 12,753,370 tons of ingots and 9,476,248
tons of finished steel products, and the gross volume of business
declined to $615,148,839.79. The number of employees also grew less,
the average number employed in the period being 196,888.

Another increase in the bonded debt was reported, new securities
totalling $33,416,000 being issued, and $9,498,359.46 being redeemed.
The bonded debt of the big company on December 31, 1911, stood at

Capital expenditures reported for the year included $7,939,813.46
at Gary, bringing the total for this project to $78,258,508.61;
$17,707,280.79 expended for the acquisition of new coal properties in
the Connellsville region of Pennsylvania; $5,069,983.65 spent on the
Tennessee properties, and $1,437,518 spent on the new Duluth plant.

The two most important events of the year were the decision of the
directors of the Corporation to cancel the Hill Ore lease and the
inception of the Federal suit for the dissolution of the big company
under the Sherman Anti-Trust Law. Both of these events took place
on the same day, October 26th. As the Hill lease has been discussed
at length in a previous chapter, and the facts connected with the
dissolution suit have already been told, they will not now be gone into.

Toward the close of the year just reviewed there was a gradual
increase in the volume of steel buying. The railroads, which had been
consuming very little of the metal--and the roads are the largest
customers of the steel companies--began to buy in something like normal
proportion and continued to do so until the spring of 1913. Other
consumption also showed more activity, and under the impetus of this
buying prices for steel products gradually advanced. The Corporation’s
earnings, however, did not immediately reflect this betterment, the
first quarter of 1912 showing net profits from operations of only
$17,826,973.28, but a steady advance was recorded until $35,191,921.82
was reported for the last three months of the period.

For the year net earnings of $108,174,673.12 were made and a balance
of $3,605,247.37 was carried to surplus. The bonded debt of the
Corporation on December 31, 1912, showed an increase of $22,482,881
from a year previous, bonds and mortgages totalling $32,428,246.50
having been issued and $9,906,365.47 in funded debt having been
redeemed. The bonded debt of the big company and its subsidiaries at
the end of the year stood at $643,537,180.65.

Production in 1912 amounted to 16,901,223 tons of ingots and 12,506,619
tons of finished steel. The total volume of business amounted to
$745,505,515.48. Of this sum $494,637,808 represented sales of steel
and other products to customers outside the Corporation, $189,257,318
inter-company sales, and the balance earnings from transportation and
other sources.

The main items in capital expenditures were as follows: Work at Gary,
$1,725,052; Duluth plant, $2,676,066; Tennessee Coal, Iron & Railroad
extensions, $1,833,094. The construction of the Gary plant was now
practically finished and the plant produced 1,093,578 tons of pig iron,
1,669,389 tons of steel, and over 1,186,000 tons of finished products
in the course of the year.

In view of the general betterment in business conditions it was
decided by the directors of the Corporation to erect a big plant across
the Canadian border. A site for this plant had already been acquired
at Ojibway, Ontario, opposite the city of Detroit. Work has proceeded
and is proceeding slowly. The plant has not been completed but several
millions have been expended in laying foundations and otherwise making
general preparation for the big plant that will one day stand at

An attempt was made about this time to reduce the working hours of
some of the employees from the twelve-hour to an eight-hour day. Such
a course had been recommended by a special committee of stockholders
appointed at the annual meeting in 1911, but the attempt was by no
means an unqualified success, as the movement met with considerable
opposition from the men themselves.

In the first nine months of 1913 generally satisfactory conditions
prevailed in the trade, and earnings were consequently improved,
although operating costs had again been increased by a general
wage increase put into effect on February 1st of that year. The
first quarter showed net earnings of $34,426,801.54; the second,
$41,219,813.42; and the third, $38,450,400.03. A pronounced decline was
reported in the final three months when profits fell to $23,084,329.84.
The good results of the earlier months were largely due to the big
carry-over of business from 1912 and to the comparatively high average
of prices received. For perhaps the first time in the history of the
steel trade the railroads placed their orders for rails for 1913
delivery as early as the summer of the preceding year, and this went a
far way toward effecting the results shown.

After a special $15,000,000 appropriation the Corporation showed a
net surplus of $15,582,183.62 for 1913. No important bond issues
were made in the period, and with $16,660,866.76 in bonds redeemed
the total bonded debt was reduced to $627,366,681.47, a decrease of

The total volume of business amounted to $796,894,299, of which
$518,999,605 represented sales to outside customers; $211,910,441
inter-company sales, and the balance transportation and other business.
The average number of employees was 228,906, the highest recorded so
far, and production totalled 16,656,361 tons of ingots and 12,374,838
tons of finished steel products. The principal expenditures for capital
account included $2,960,124.92 spent at Gary, $5,912,027.44 at Duluth,
and $1,274,440.84 on the Tennessee plants. Fee title was also acquired
during the year to certain ore properties previously worked on a
royalty basis. This cost $11,670,181.87, of which $2,283,677.63 was
paid in cash, and the remainder in notes of the Oliver Iron Mining Co.

We now come to 1914, the year which saw the beginning of the Great
War, with its disastrous results on business generally, and on no line
of activity more than the steel trade. The events of this year are
too recent and too well known, too vitally important to all, to need
repetition. Industry, in the middle of the year, was just beginning
to struggle out from the depression that had begun in the latter half
of 1913 when the sudden clash of arms paralyzed world money markets,
closed the stock and other exchanges, closed or restricted operations
at hundreds of plants of one kind or another, and threw thousands of
workers out of employment.

The demand for steel, never very active at any time since about July,
1913, fell almost to a vanishing point, and earnings of the Corporation
in the last quarter declined to the lowest point in its history,
$10,935,635.36. Total earnings for the year were only $71,663,615.17,
and, although the dividend rate on the common stock was reduced from
5 per cent. to 2 per cent. annually in the third quarter, and the
dividend for the last quarter was passed, earnings were not sufficient
to meet charges, and a deficit of $16,971,983.83 was reported.

The necessity for passing the dividend--and it was a pressing
one--was keenly deplored both by the management of the big company
and, naturally, by its stockholders. That payments would have been
maintained had there seemed the slightest warrant for such a course
seems to be beyond question as the directors realized that the wide
distribution of the stock, and the fact that many of its shareholders
were people of small incomes who looked to their Steel dividends
almost with the feeling of security they would have reposed in good
bonds, would make their action necessarily a great hardship to many.
But there was no way out. Even had wages been reduced there did not,
at the time, appear to be any hope that profits for a long time would
meet requirements, and the conservation of resources was paramount. But
wages were not cut. In the early part of 1915, with earnings running
even lower than in the last quarter of 1912, the matter was considered,
but a slight increase in business was seized upon as a warrant for the
continuance of the old wage scale. The steel worker was saved, although
the steel stockholder suffered.

Sales to outside customers in 1914 totalled only $380,228,143,
inter-company sales $129,565,729, and other receipts made a total of
$558,414,933--a decrease of over $238,000,000 from the previous year.
Ingot production fell to 11,826,476 tons, and finished steel output
to 9,014,512 tons, equal to about 62 per cent. of the gross capacity.
Practically no change was shown in the bonded debt, which on December
31st stood at $627,238,417.26. The number of employees averaged 179,353.

So acute was the depression that the construction of the new Duluth
plant was temporarily stopped in the fall of the year, and work was not
resumed until well along in 1915.

In December, 1914, production of the Corporation’s plants fell to the
lowest point ever recorded. One of its largest subsidiaries operated
through most of the month at only about 15 per cent. capacity and
another at 18 per cent. The general average of operations for the month
was probably hardly over 20.

Thus we come to the close of the second or middle period of the
Corporation’s existence. The years which made it up were generally
trying ones. At no time between 1907 and 1915, except to some extent
in 1910, was there anything like real prosperity. And the close of
the period saw industry practically suspended, aghast at the conflict
that was shaking Europe to its very foundations, and threatening world

But while these seven years, 1908-1914 inclusive, were not, on the
average, prosperous for the Steel Corporation, neither were they years
of stress. Industrial affairs over the greater part of the period
proceeded along a rather monotonous level, but this was possibly
an advantage. So far as United States Steel was concerned, these
conditions gave it an opportunity to perfect its organization, work out
economies, and extend its operations along carefully considered lines.
So that when industry revived under the urge of war times the big
company was able to take advantage of the situation and to reap large
profits and pay big dividends to its stockholders.

For the Steel Corporation and for American industry generally
conditions at the end of 1914 were as dark as could be imagined, but it
was the darkness that comes before brilliant dawn.



Never did year dawn so black for American industry as did 1915. The
financial world, stunned by Germany’s unexpected attempt at world
conquest, could see only the immense economic waste that war is. That
the conflict in Europe could have a stimulating effect on American
industry seemed unthinkable at that dark period, and industry as a
whole seemed shaken to its foundations. Steel, the barometer of trade,
naturally reflected this situation sharply.

At the close of 1914, as we have seen, operations of the Corporation’s
subsidiaries reached the lowest point on record and the new year
brought with it no sign of early betterment. Hence it was natural that
all except the most confirmed optimists faced the future with doubt if
not with dread.

This situation reflected itself plainly in the big company’s profits,
which that January fell to $1,687,150. This proved to be the low point,
however, a slight revivification of business beginning to make itself
felt the following month, and being even more pronounced in March, when
operations reached 60 per cent. capacity. But even then conditions were
far from being satisfactory, earnings for the last month of the quarter
aggregating only $7,132,081, and for the three months, $12,457,809.

But, difficult as it was to realize it at the time, the war was
destined to bring to American business the biggest boom it had ever
experienced. As the struggle developed the Allied powers had brought
home to them sharply their great shortage of war materials. Germany,
preparing years before for the struggle, had at the start an immense
preponderance of guns, shells, automobiles, airplanes, and other
articles, and there was no hope of crushing the Kaiser’s hordes unless
and until the Entente could meet its foe on equal terms measured in

It had become a war of machines, a war largely of steel. And the
Allies’ production of steel and machines could not be brought up to
the point necessary to make victory certain. There was no country but
America to turn to for the needed supplies.

Wire was the first product which felt the stimulus of the new demand.
Before the beginning of 1915 both sides had settled down to the slow
warfare of the trenches, and for the protection of these hundreds
of thousands of miles of barbed wire were necessary. England,
although until the beginning of the twentieth century the principal
steel-manufacturing country in the world, had never devoted much of
her capacity to wire products, and even before the war had been in the
custom of importing a large part of her need of this commodity from the
United States. And in their extremity both England and France looked
across the Atlantic for more and more of this particular product, and
the wire mills of the Steel Corporation and other producers here began
to increase output and to show improving earnings.

Then came the demand for shrapnel bars, steel for explosive shells,
guns, automobiles, trucks, and almost every article used in modern
warfare. Russia, attempting to move immense armies with inadequate
railroad transportation facilities, began to ask for locomotives and
steel cars in large numbers, as well as steel rails to run them on,
and the export steel trade of this country grew to unprecedented

[Illustration: Making a Steel Tube]

Before the middle of the year the Corporation was operating on 90 per
cent. capacity and was sending abroad one third of all the steel it
produced. In the best pre-war year foreign shipments had amounted to
only 18 per cent. of the output of the big company’s plants.

[Illustration: Steel Transportation by Man Power in China]

With the revival of the steel and Allied industries caused by the war
demand domestic trade began to pick up, industry generally revived,
and a spirit of optimism replaced the gloom that had been casting
its shadow over the business world. As the trade balance of the
United States for the first time in history reached and passed the
billion-dollar mark it became plain that the war, great evil as it was,
was making America rich. A boom was on.

How marked was the trade revival in 1915 is indicated by a comparison
of the Corporation’s earnings for the four quarters of the year: First
quarter, $12,457,809; second, $27,950,055; third, $38,710,644; fourth,

Keener and keener grew the war demand as the months rolled on. The
Allies, calling more and yet more on their man power to fill up the
gaps in the fighting line, found it increasingly difficult to meet the
ever-growing need for war materials and leaned more and more heavily on
our manufacturers. The price of steel, under the enormous buying power
from abroad and the increased demand at home, advanced rapidly, nor did
this advance let up until the latter part of 1917, when, the United
States having at length united her fortunes with England, France,
and the other countries defending civilization, prices were fixed by
agreement with the Government.

Germany’s submarine warfare tended still further to aggravate the
world’s shortage of steel. The enormous tonnage of vessels sunk by
the undersea raiders necessitated replacement by new ships, and in
the summer of 1917 purchases of ship plate became so heavy that this
particular product sold in some instances at twelve cents a pound or
more, compared to an average price of around one and a quarter cents
before the war.

United States Steel’s management, however, notwithstanding its desire
to show large profits to stockholders, could not, consistently with
the price policy it had followed for many years, countenance these
extravagant prices. Its quotations at no time were as high as 50 per
cent. of these levels. It steadfastly set its face against taking
advantage of the world’s need to exact the highest prices the market
could bear. Nevertheless, it showed enormous profits and paid large
dividends to stockholders during the period.

One branch of the steel industry that was immensely stimulated by the
war was by-product coke production. In this particular field Germany
had led the world for years, although it was not until the war started
that the other nations realized her secret object in fostering the
development of these by-products and had brought home to them the cost
of their neglect in this respect.

Coke by-products, benzol, toluol, xylol, etc., form the bases of
practically all modern explosives. They also form the bases for modern
dyes. And Germany for years had studiously cultivated the color markets
of the world, and encouraged her manufacturers and scientists to
increase production of these bases and to refine processes until she
had practically eliminated competition in dyes.

Other countries, lacking in militarism as well as in foresight, did
nothing to assist the development of this industry. They failed to see
that in eliminating competition in dyes in peace time Germany left her
intended victims without the means of making explosives in wartime. She
could well afford, her intentions being what they were, to sell the
world dyes even at a loss, believing as she did that the result was to
give her a death grip on the throats of all possible enemies.

Fortunately, Germany was not able to achieve complete success. And
it was the United States Steel Corporation that, more than any other
single factor in this country, stood in her way.

Many years before the war, the Corporation’s management, realizing the
value of saving the by-products of coal, had itself started to develop
this field, and it was therefore a comparatively simple thing for it to
make necessary additions to by-product plants to turn out the benzol,
toluol, and other products which go into high explosives. Within a
comparatively short time after the conflict started the Corporation was
producing these materials at the rate of 10,000,000 gallons a year,
and by the time the war closed it had increased its capacity to around
40,000,000 gallons.

Hand in hand with the development of this branch of the steel industry
the American dye industry grew. In this respect, at least, Germany
benefited the world. But, it might be stated parenthetically, our
dye industry is not yet strong enough to stand of itself against the
German competition that will most certainly be renewed. It is to be
hoped that the Government of the United States will never forget the
lesson learned in the war, and will lend American dye manufacturers
encouragement at least sufficient to make it certain that no possible
future attack will find us unready in the matter of explosive

The years 1916 and 1917 were by far the most profitable ever enjoyed
by the Steel Corporation. In the final quarter of 1916 net earnings
reached the unprecedented figure of $105,917,438 while earnings for the
year were $333,574,177.

And that earnings for 1917 did not exceed those of the previous year
was due only to the imposition in that year of excess profits taxes. In
1917 the Corporation, after deducting over $233,000,000 from earnings
to cover these taxes, showed a balance of $295,292,180. In other words,
its earnings before taxes were close to $530,000,000.

On April 6, 1917, the United States became a participant in the
struggle which had now come to be called the “World War.” And shortly
after this occurred American steel manufacturers were called upon to
sacrifice to patriotism part of their profits and to sell steel to the
Government, its Allies, and the public at prices considerably lower
than those which would otherwise have been obtainable in the open

J. Leonard Replogle was appointed Director of Steel Supplies, and he,
in conjunction with the War Industries Board appointed by the President
to regulate and coördinate for war purposes the supply of industrial
products generally, met with the steel manufacturers early in September
of that year and agreed on a scale of prices for steel which, in the
case of some products at least, were less than half those quoted in the
open market.

It is a matter of gratification that our steel manufacturers, nearly
all of them, responded freely and patriotically to the Government’s
request. And of them all there was none that showed more willingness
to assist Mr. Replogle in his difficult task of fixing a fair scale of
steel prices than United States Steel. As a matter of fact, the prices
eventually agreed on were not very far away from those being charged by
the big company, which had for many months been consistently below the
market established by its competitors.

Throughout 1918 this scale of prices was maintained with no important
change. On several occasions increases or adjustments were requested by
various manufacturers, but never by the Steel Corporation. And there is
ground for the belief that it was the assistance of this company that
enabled the representatives of the Government to resist the pressure
sometimes brought to bear to secure an adjustment upward. In any event,
the profits of all producers during the period in which prices were
fixed proved clearly that no such increases were necessary to permit
the manufacturers substantial profits.

In fact, all steel companies enjoyed large earnings in 1918. United
States Steel showed net profits for the year, after an appropriation
for taxes of $274,277,835, of $199,350,680.

The immense war profits piled up by the big company in the three
years, 1916 to 1918, permitted more liberal distribution to
shareholders, and for some time extra dividends were paid, making total
disbursements 8¾ per cent. in 1916, 18 per cent. in 1917, and 14 per
cent. in 1918. Throughout the whole period, however, the regular rate
of dividends did not change from 5 per cent. which it still is.

In 1918 the Steel Corporation’s sales grew to the largest volume
on record, $1,288,029,255 or, including inter-company sales,

During the war boom the rights of the worker had not been forgotten.
Early in 1916, as soon as the improvement in industry became evident, a
wage advance of 10 per cent. was put into effect. Since the beginning
of the war, and up to the date of writing, wages of common labor have
been advanced as follows:

                                           PERCENTAGE AS
                          INCREASE           1915 WAGE

  Feb. 1, 1916               10                 10
  May 1, 1916                13.6               25
  Dec. 15, 1916              10               37.5
  May 1, 1917                 9                 50
  Oct. 1, 1917               10                 65
  April 16, 1918             15                 90
  Aug. 1, 1918               10.5              110
  Oct. 1, 1918[C]            10                131
  Feb. 1, 1920               10                153

    [C] This figure based on ten-hour day. At this time basic day
        was changed to eight hours and time and a half paid for

With the signing of armistice on November 11, 1918, new problems were
presented to American industry generally and the steel trade was not
exempt. Not even the most far-sighted could tell with any assurance
what would be the effect of the letting up in war demand. It was
realized that capacity had been greatly increased to meet war needs
for steel and it was questioned whether a normal peace demand would be
sufficient to keep the mills employed. Moreover, the trade, recognizing
that a readjustment from a war to a peace basis was inevitable, asked
when it would occur and how long it would last.

In view of these uncertainties many steel manufacturers felt that
Governmental regulation of prices should be continued temporarily,
and at a meeting in Washington with the War Industries Board and the
Director of Steel Supplies, Judge Gary representing the trade, offered
to submit a new scale of prices to replace those in effect during the
war. The Government’s representatives, however, took the viewpoint that
it would be better to let prices be regulated only by the law of supply
and demand, and left the manufacturers free to sell steel at whatever
levels they could obtain.

Nevertheless, the trade put into effect the suggested new scale and
this continued to operate for about four months. This scale averaged
about $7.00 a ton lower than the prices obtaining under Government

But peace was to bring yet another reduction in prices. About the
beginning of March, 1919, President Wilson, taking the stand that
deflation of prices generally was necessary before business could
return to normal, and that this deflation could be regulated and made
orderly if the Government assisted, appointed an Industrial Board
at the head of which was George N. Peek, to bring about the desired
results. The steel manufacturers were called upon first to coöperate
with this Board, and they responded readily. On March 20th a new scale
of prices, about $5.00 a ton below the levels existing in the first
part of the year, and about $12.00 a ton below the War Industries Board
prices, was agreed to.

But the settlement of steel prices was the only thing ever accomplished
by the Board. The President’s plans for regulated deflation came to

Prior to their conferences with Mr. Peek the steel men had been given
to understand that if a price scale satisfactory to both sides could be
reached the Railroad Administration, then operating all the country’s
transportation systems, would place necessary orders for steel, and
this understanding accounted in large part for their readiness to meet
the Government representatives halfway.

The railroads, it was generally recognized, needed steel badly for
rails, cars, locomotives, and other equipment. For years their
purchases had been entirely inadequate to meet the growing needs of
the country’s commerce, and their potential demand was therefore
very large. In the then period of uncertainty it was felt that the
purchasing of these railroad supplies would steady business and
stimulate other demands, acting as a safety valve against a possible

But the Railroad Administration declined to honor the promise,
expressed or implied, of the Government. Director-General Walker D.
Hines claimed that the prices agreed on for rails were unreasonably
high and the three-cornered dispute that followed between Mr.
Hines, Mr. Peek, and the railmakers resulted in the dissolution of
the Industrial Board and the withdrawing by the Government from
any attempt to regulate the price of steel or other commodities.
Followed a period of general business uncertainty, a let-up in buying
activities felt keenly by the steel mills. The responsibility for
this situation must be placed largely at the door of the Railroad
Administration. The roads, with the possible exception of the farmers,
are the largest consumers of steel and of many other products in the
country. Prosperity was hardly possible in steel trade without railroad
buying, that is, under normal conditions. There was no question that
the railroads were exceedingly short of supplies and the practically
unanimous opinion was that if they began to place orders covering their
requirements it would have a stimulating effect on business generally
and would dissolve the doubt and hesitation that hung over the
financial world during the period of transition from war to peace.

But the Railroad Administration declined to make any move. One of its
highest officials informed the writer, who pointed out to him the
importance of some definite action to help restore business balance,
that he did not consider it the Railroad Administration’s duty to in
any way “hold the bag” for business.

Ostensibly, the Railroad Director based his refusal to place orders
for rails and other material required by the roads on the ground
that prices were too high. There is little question that he and his
associates believed that, by holding off, the steel companies would
be forced to reduce prices further to induce railroad buying. The
result must have been a severe disappointment, for when the roads did
begin to buy, they had to pay, for a substantial part of the tonnage
purchased, prices $10.00 a ton or more higher than those agreed on by
the Industrial Board, though the Steel Corporation has consistently
maintained the Industrial Board prices.

As a matter of fact, the end of the war found the whole world starving
for steel. For five years steel needed for a million uses of commerce
had been diverted to the terrible business of war. And it did not take
long for this dammed-up demand to begin to make itself felt. By the
early part of October pulses of business were again beating firmly, and
by the beginning of 1920 a peace boom had taken the place of the war
boom that ended at the close of 1918.

For the year 1919 the Corporation, despite the brief depression the
steel trade went through, reported earnings of $143,589,062 (after
deducting interest and obligations of subsidiary companies), and a
balance available for dividends of $76,794,582. Earnings on the common
stock were $51,574,905, or the equivalent of $10.20 per share.

In the early part of 1920 the steel trade enjoyed a boom that
approached that experienced during the war. The world was filling its
most pressing requirements of material of which it had been starved
while the products of industry were going into munitions and other
war needs. Steel prices ascended to the highest levels attained since
1917, although the Corporation maintained the lower levels fixed by
the Industrial Board in March, 1919. The closing months of the year,
however, witnessed a sharp depression, and at the close of the period
the so-called independent companies were operating at a very low rate
of capacity with practically no forward orders. The Corporation,
because of its price policy earlier in the year, went into 1921 with
its order books filled and with operations at fully 90 per cent. of

Earnings of the Corporation for 1920 were $177,126,126 and the net
for the junior stock was equivalent to $16.70 a share. Production of
steel ingots was approximately 19,278,000 tons and of finished steel
14,233,000 tons.

The events of the closing months of 1920 completely vindicated the
judgment of Judge Gary and his associates, both on the matter of prices
and in their preparation for the inevitable reaction of the earlier
boom period. During the previous three years the Corporation had been
steadily creating a reserve for anticipated inventory losses, this
reserve amounting to $90,000,000 at the end of 1919. Thus, when the
reaction did arrive the Corporation was not faced with the necessity,
as others were, of scaling down inventories with consequent losses of

Within the past few weeks the independents, who for a year or more
had been quoting prices greatly in excess of those charged by the big
company, reduced their prices to an average several dollars a ton below
the Corporation’s, with an accompanying, and substantial, cut in wages
(20% to 30%). The Corporation at the time this is written (February
18, 1921) is “still doing business at the old stand” both as regards
prices and wages and is thus safeguarding the interests of both its
customers and its employees.

We have now followed the Corporation’s fortunes through practically
twenty years, seeing it grow stronger and more firmly established both
as a manufacturing entity and financially, as well as with the public
and particularly with the investor, from year to year. What of the

There are, of course, uncertainties at present, and there will be from
time to time as the years go by. The history of business has been one
of prosperity and depression periodically, and the Corporation is not
exempt from the effect of these. But its immense accumulated financial
strength, its huge working capital, the good will it has erected
among consumers, employees, and the public generally, combined with
the fact that it has come scatheless and with increased honor through
a bitter attack by the Government, give ample justification for the
belief that it will grow and expand along healthy lines and to the
increasing financial benefit of stockholders as the years roll on. The
Corporation, in the past, has proven itself strong enough to weather
business depressions and it is now many times as strong financially and
in every other respect as it has ever been.

Conditions in the steel trade are not encouraging for the immediate
future. The industry is apparently going through the period of
deflation from a war to a peace basis just as are other industries all
over the world, but while the immediate future is somewhat cloudy, the
outlook for steel, if one looks ahead several years, is unquestionably
bright. The world shortage of the metal caused by the war was by no
means filled during the period of activity that lasted from October,
1919, to September, 1920. There is every reason to believe that the
world still needs steel in immense quantities for the myriad uses in
which the metal is employed, not only for future expansion but for
replacement which should have occurred during the war years. As soon as
the economic and financial difficulties from which the world is now
suffering have been overcome--and the signs on the sky are that these
clouds are already being dissipated--a great demand for steel can be

And United States Steel with its twenty-two million odd tons of
capacity, its great resources, its good will, and its wonderful
organization, will undoubtedly share generously in this anticipated
trade revival. For it and for its stockholders the future holds a
bright and glowing promise.

Perhaps no better conclusion for this volume can be found than the
remark recently made to the writer by one of the leading independent
steel makers. He said:

“United States Steel is a remarkable organization. Nothing like it
exists or ever existed. It is in a class by itself.”



Table showing percentage of total steel and iron output of the United
States produced by the U. S. Steel Corporation in the years 1901, 1911,
1913, and 1919. Figures for 1901 and 1911 are from the exhibit in the
dissolution suit and for 1913 and 1919 from the reports of the American
Iron & Steel Institute.

                                        1901    1911     1913     1919
  Iron ore from Lake Superior Ranges    61.6    54.3    50.46    45.94
  Total iron ore                        45.1    45.8    46.37    42.05
  Total blast furnace products          43.2    45.4    45.47    43.97
  Steel ingots and castings             65.7    53.9    53.21    49.61
  Steel rails                           59.8    56.1    55.51    61.96
  Heavy structural shapes               62.2    47.0    54.03    43.77
  Plates and sheets                     64.6    45.7    49.13    44.30
  Wire rods                             77.6    64.7    58.44    55.42
  Total finished products               50.1    45.7    47.81    44.60
  Wire nails                            65.8    51.4    44.55    51.86
  Tin and terne plates                  73.0    60.7    58.64    48.44

Summary of earnings and distribution thereof since organization:

  Net profits from April 1, 1901 to December 31, 1919   $1,732,070,796
  Deductions; special reserves, etc.                        32,227,566
  Balance of profits                                     1,699,843,230
  Preferred dividends paid (131¼ per cent.)                496,391,722
  Common dividends paid (89½ per cent.)                    454,908,882
  Total dividends paid                                     951,300,604
  Surplus profits                                          748,542,626
  Appropriations for capital expenditures, etc.            280,494,424
  Balance of profits carried to surplus account            468,048,202

Summary of undivided surplus:

  Surplus or working capital provided at organization     $ 25,000,000
  Balance of surplus accumulated to Dec., 1919             468,048,202
  Total undivided surplus                                  493,048,202
  Appropriated surplus                                     280,494,424
  Total appropriated and undivided surplus                 773,542,626

Table of number of common stockholders as shown by the Corporation’s
books each quarter since organization in 1901. These figures indicate
how the Corporation’s junior stock has been widely distributed and how
it has grown in favor with investors in recent years particularly.

  YEAR     4TH QTR.     3D QTR.     2D QTR.     1ST QTR.

  1920      95,776      90,952      87,229       83,583
  1919      73,318      73,456      74,071       78,018
  1918      72,779      65,862      63,507       61,044
  1917      51,689      44,789      43,482       42,564
  1916      37,720      40,430      41,156       41,910
  1915      45,767      51,169      55,907       56,825
  1914      52,785      50,195      47,695       47,221
  1913      46,460      44,398      41,324       38,679
  1912      34,213      34,645      35,106       36,555
  1911      35,011      31,472      29,853       29,235
  1910      28,850      28,910      24,435       22,033
  1909      18,615      16,861      17,342       21,522
  1908      21,093      24,804      27,439       29,563
  1907      28,435      20,513      18,539       15,975
  1906      14,723      14,879    [D]----        17,525
  1905      20,075    [D]----     [D]----        24,531
  1904      33,395      35,706    [D]----        36,980
  1903      37,237      34,997      28,987       26,830
  1902      24,636      21,321      19,640       17,723
  1901      15,887      13,318       ----         ----

    [D] No figures available.


                                        |    1902    |    1903    |
  Ore mined                             | 16,063,179 | 15,363,355 |
  Coal mined--not for making coke       |    709,367 |  1,120,733 |
  Limestone                             |  1,313,120 |  1,268,930 |
  Coke                                  |  9,521,567 |  8,658,391 |
  Pig Iron, Spiegel and Ferro-Manganese |  7,975,530 |  7,279,241 |
  Bessemer Steel                        |  6,759,210 |  6,191,660 |
  Open-hearth Steel                     |  2,984,708 |  2,976,300 |
  Finished Steel                        |  8,197,232 |  7,635,690 |
  Cement (bbls.)                        |    486,357 |    644,286 |

                                        |    1904    |    1905    |
  Ore mined                             | 10,503,087 | 18,486,556 |
  Coal mined--not for making coke       |  1,998,000 |  2,204,950 |
  Limestone                             |  1,393,149 |  1,967,355 |
  Coke                                  |  8,652,293 | 12,242,909 |
  Pig Iron, Spiegel and Ferro-Manganese |  7,369,421 | 10,172,148 |
  Bessemer Steel                        |  5,427,979 |  7,379,188 |
  Open-hearth Steel                     |  2,978,399 |  4,616,015 |
  Finished Steel                        |  6,792,780 |  9,226,386 |
  Cement (bbls.)                        |    539,951 |  1,735,343 |

                                        |    1906    |    1907
  Ore mined                             | 20,645,148 | 22,403,801
  Coal mined--not for making coke       |  1,912,444 |  3,550,510
  Limestone                             |  2,227,436 |  2,957,163
  Coke                                  | 13,295,075 | 12,373,938
  Pig Iron, Spiegel and Ferro-Manganese | 11,058,526 | 10,631,620
  Bessemer Steel                        |  8,072,655 |  7,556,460
  Open-hearth Steel                     |  5,438,494 |  5,543,088
  Finished Steel                        | 10,578,433 | 10,376,742
  Cement (bbls.)                        |  2,076,000 |  2,129,700

                                        |    1908    |    1909    |
  Ore mined                             | 16,662,715 | 23,431,047 |
  Coal mined--not for coke making       |  3,008,810 |  3,089,021 |
  Limestone                             |  2,186,007 |  3,496,071 |
  Coke Manufactured--Beehive            |  7,591,062 | 11,896,211 |
  Coke Manufactured--By-product         |    578,869 |  1,693,901 |
  Pig Iron, Spiegel, etc.               |  6,934,408 | 11,618,350 |
  Bessemer Steel                        |  4,055,275 |  5,846,300 |
  Open-hearth Steel                     |  3,783,438 |  7,508,889 |
  Finished Steel                        |  6,206,932 |  9,859,660 |
  Cement (bbls.)                        |  4,535,300 |  5,786,000 |

                                        |    1910    |    1911    |
  Ore mined                             | 25,245,816 | 19,933,631 |
  Coal mined--not for coke making       |  4,850,111 |  5,290,671 |
  Limestone                             |  5,005,087 |  4,835,703 |
  Coke Manufactured--Beehive            | 11,641,105 |  9,491,206 |
  Coke Manufactured--By-product         |  2,008,473 |  2,629,006 |
  Pig Iron, Spiegel, etc.               | 11,831,398 | 10,744,897 |
  Bessemer Steel                        |  5,796,223 |  5,055,696 |
  Open-hearth Steel                     |  8,383,146 |  7,697,674 |
  Finished Steel                        | 10,733,995 |  9,476,248 |
  Cement (bbls.)                        |  7,001,500 |  7,737,500 |

                                        |    1912    |    1913    |
  Ore mined                             | 26,428,449 | 28,738,451 |
  Coal mined--not for coke making       |  5,905,153 |  6,705,381 |
  Limestone                             |  6,124,541 |  6,338,509 |
  Coke Manufactured--Beehive            | 11,544,840 | 11,062,138 |
  Coke Manufactured--By-product         |  5,164,547 |  5,601,342 |
  Pig Iron, Spiegel, etc.               | 14,186,164 | 14,080,730 |
  Bessemer Steel                        |  6,643,147 |  6,131,809 |
  Open-hearth Steel                     | 10,258,076 | 10,524,552 |
  Finished Steel                        | 12,506,619 | 12,374,838 |
  Cement (bbls.)                        | 10,114,500 | 11,197,000 |

                                        |    1914
  Ore mined                             | 17,034,981
  Coal mined--not for coke making       |  5,271,911
  Limestone                             |  4,676,479
  Coke Manufactured--Beehive            |  7,092,792
  Coke Manufactured--By-product         |  4,081,122
  Pig Iron, Spiegel, etc.               | 10,052,457
  Bessemer Steel                        |  4,151,510
  Open-hearth Steel                     |  7,674,966
  Finished Steel                        |  9,014,512
  Cement (bbls.)                        |  9,116,000

                                  |    1915    |    1916    |
  Ore mined                       | 23,669,676 | 33,355,169 |
  Coal mined--not for making coke |  5,828,278 |  6,162,430 |
  Limestone                       |  5,795,925 |  7,023,474 |
  Coke--Beehive                   |  9,701,692 | 12,479,160 |
  Coke--By-product                |  4,799,126 |  6,422,802 |
  Pig iron, Spiegel, etc.         | 13,641,508 | 17,607,637 |
  Bessemer Steel                  |  5,584,198 |  7,273,766 |
  Open-hearth Steel               | 10,792,294 | 13,636,823 |
  Finished steel                  | 11,762,639 | 15,460,792 |
  Cement (bbls.)                  |  7,648,658 | 10,425,600 |

                                  |    1917    |    1918    |    1919
  Ore mined                       | 31,781,769 | 28,332,939 | 25,423,093
  Coal mined--not for making coke |  6,942,298 |  6,354,980 |  5,937,487
  Limestone                       |  6,494,917 |  5,141,365 |  5,835,289
  Coke--Beehive                   | 11,177,247 |  9,962,403 |  5,933,056
  Coke--By-product                |  6,284,428 |  7,795,233 |  9,530,593
  Pig iron, Spiegel, etc.         | 15,652,928 | 15,940,954 | 13,637,504
  Bessemer Steel                  |  6,405,390 |  5,630,246 |  4,788,242
  Open-hearth Steel               | 13,879,671 | 13,953,247 | 12,412,131
  Finished steel                  | 14,942,911 | 13,849,483 | 11,997,935
  Cement (bbls.)                  | 10,917,000 |  7,287,000 |  9,112,000


                |             |             |             |
                |             |             |             |
                | NET INCOME  |   NET FOR   |    PFD.     |
                |             |    STOCK    |  DIVIDEND   |
  1901 (9 mos.) | $84,779,298 | $61,395,203 | $26,752,894 |
  1902          | 133,308,764 |  90,306,524 |  35,720,177 |
  1903          | 109,171,152 |  55,416,653 |  30,404,173 |
  1904          |  73,176,522 |  30,267,529 |  25,219,677 |
  1905          | 119,787,658 |  68,585,492 |  25,219,677 |
  1906          | 156,624,273 |  98,128,587 |  25,219,677 |
  1907          | 160,964,674 | 104,565,564 |  25,219,677 |
  1908          |  91,847,710 |  45,728,714 |  25,219,677 |
  1909          | 131,491,414 |  79,073,695 |  25,219,677 |
  1910          | 141,054,755 |  87,407,186 |  25,219,677 |
  1911          | 104,305,466 |  55,300,296 |  25,219,677 |
  1912          | 108,174,673 |  54,240,049 |  25,219,677 |
  1913          | 137,181,345 |  81,216,985 |  25,219,677 |
  1914          |  71,663,615 |  23,496,768 |  25,219,677 |
  1915          | 130,396,012 |  75,833,833 |  25,219,677 |
  1916          | 333,674,177 | 271,531,730 |  25,219,677 |
  1917          | 295,292,180 | 224,219,565 |  25,219,677 |
  1918          | 199,350,680 | 137,532,377 |  25,219,677 |
  1919          | 143,589,062 |  76,794,582 |  25,219,677 |
  1920[G]       | 177,174,126 | 110,136,105 |  25,219,677 |

                |   COMMON DIVIDEND  |            |
                +------+-------------+            |
                | RATE |   AMOUNT    | APPRORPRI- |   SURPLUS
                |  %   |             |   ATIONS   |
  1901 (9 mos.) |  3   | $15,227,812 |    ----    | $19,414,497
  1902          |  4   |  20,332,690 |    ----    |  34,253,657
  1903          |  2½  |  12,707,563 |    ----    |  12,304,917
  1904          |  --  |     ----    |    ----    |   5,047,852
  1905          |  --  |     ----    | 26,300,000 |  17,065,815
  1906          |  2   |  10,166,050 | 50,000,000 |  12,742,860
  1907          |  2   |  10,166,050 | 54,000,000 |  15,179,837
  1908          |  2   |  10,166,050 |    ----    |  10,342,987
  1909          |  4   |  20,332,100 | 18,200,000 |  15,321,918
  1910          |  5   |  25,415,125 | 26,000,000 |  10,772,384
  1911          |  5   |  25,415,125 |    ----    |   4,665,495
  1912          |  5   |  25,415,125 |    ----    |   3,605,247
  1913          |  5   |  25,415,125 | 15,000,000 |  15,582,184
  1914          |  3   |  15,249,075 |    ----    |  16,971,984[E]
  1915          |  1¼  |   6,353,781 |    ----    |  44,260,374
  1916          |  8¾  |  44,476,469 |    ----    | 201,835,585
  1917          |  18  |  91,949,450 | 55,000,000 |  52,505,438
  1918          |  14  |  71,162,350 |    ----    |  28,935,350[F]
  1919          |  5   |  25,415,125 |    ----    |  26,159,780
  1920[G]       |  5   |  25,415,125 |    ----    |  59,501,303

    [E] Deficit.

    [F] After deducting $12,215,000 special allowance for
        amortization of war plants.

    [G] Figures subject to adjustment.


Transcriber’s Notes

Punctuation, hyphenation, and spelling were made consistent when a
predominant preference was found in this book; otherwise they were not

Simple typographical errors were corrected.

Ambiguous hyphens at the ends of lines were retained.

Most of the photographs were printed back-to-back, but in this eBook,
they appear on the pages given in the List of Illustrations.

Some footnote anchors in tables were moved to the other side of the

Devices that cannot display characters used in this eBook may substitute
question marks or hollow squares.

Pages 310-311: Each of the three “Production (Gross Tons)” tables
(1902-1907, 1908-1914, and 1915-1919) was printed as a single wide
table, but have been split here to meet width restrictions.

Page 312: Table of “Income and Disbursements” was printed as a single
table with eight columns, but has been split here to meet width

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