STEEL - 551 man led the way again, with a basic open hearth furnace, and this type was the one most favored in the end. Meanwhile the local iron industry had been growing steadily. In 1858, in addition to the Ford and Otis furnaces, !u. iron and iron products were being manufactured by the Cleveland Boiler Plate Company, the Cleveland & Erie Railway Works, the Railroad Iron Mill Company, Morrill & Bowers Car Factory, Sizer Car Wheel Manufacturing Company, Cleveland Agricultural Works, Chapman's Foundry, Boat Machine Shop and Cuyahoga Steam Furnaces. In 1860 came the Novelty Iron Works, started by Thomas A. Reeve, making iron bridges, frogs and crossings. The Federal census of that year enumerated five plants making iron castings, three making bar and sheet iron, one making iron stoves and one iron railing. The Lake Superior Iron Company and Jackson Iron Company were incorporated in 1861. In 1863, under the combined influence of the war boom, Superior ore and the city's healthy growth, which had passed 43,000 population in 1860, there were sixteen new incorporations for iron manufacture. There followed in the next few years the important Cleveland Foundry, the factory of Sherman, Damon & Company for pressed nuts, washers, chain links and rivets, and the Union Screw Company organized by Amasa Stone, Jr., William Chisholm, Henry Chisholm, A. B. Stone and H. B. Payne, with the unusually large capital of $1,000,000. Also the foundry of Hovey Taylor & Son, and the Cleveland Spring Company, which included E. H. Bourne, S. Bourne, William Corlett, John Corlett and H. M. Knowles, and made steel springs for locomotives, cars, wagons and carriages. In 1868 Zenas King founded a business which made the first iron arch and swing bridges in this part of the state, and which developed soon into the King Iron Bridge and Manufacturing Company, with such well known names as Henry Chisholm, Dan P. Eells, Thomas A. Reeve, A. B. Stone, Charles E. Barnard and Charles A. Crumb. By 1870 there were eight plants in the city for forged and rolled iron, three for iron nails and spikes, two for iron pipe, two for pig iron, twelve for iron castings, four for 552 - THIS CLEVELAND OF OURS stoves and one for steel springs. Steel had appeared at last in the record. By 1880 the Federal census-takers found here ten iron and steel plants, twelve factories dividing among them the bolt, nut, forging and railing market, and—fiftythree foundries and machine shops. Cleveland was discovering her manifest destiny as a community of many comparatively small industrial units instead of a few great ones. In 1889 along came an English concern, the Industrial and General Trust, Ltd., looking for a good American investment, and bought the Otis Steel Plant. It remained under British financial control for the next thirty years, its most successful Cleveland manager being George Bartol. Its impetus and opportunity carried it forward under American operation, regardless of ownership. In 1912, having outgrown its Lakeside plant, it bought a tract of 330 acres in the upper river valley adjoining the Cleveland Furnace Company, with its two blast furnaces, coke plants, docks and other modern equipment, and was thus able to utilize the latter's facilities along with its own. On the new Riverside site was built a thoroughly modern plant with a plate mill and four jobbing mills. The time was opportune. Starting production just at the beginning of the World war, it was able to turn out great quantities of war materials for the allied powers and, later, for the United States. With the post-bellum business slump, the foreign investors sold their controlling interest, which was acquired by a Cleveland group formed by John Sherwin. Further expansion began immediately. The purchase of the adjoining Cleveland Furnace Company insured a convenient and permanent supply of pig iron, coke, gas and ore. It continued operating the Lakeside plant for manufacturing plates, steel castings and other products, with its own converters. At one time it had the widest plate mill in the world. In 1920 and 1921, recognizing the demands of the soaring automotive industry, the Riverside plant added eight mills for rolling auto body and full finished sheets. Many enormous steel castings have been made in that plant. The new Riverside plant has been developed into a "com- STEEL - 553 pletely integrated steel works." Four open hearth furnaces, a 40-inch blooming mill and a sheet bar mill were built in 1922, followed by hot and cold rolled strip mills. A reorganization in 1925 placed E. J. Kulas at the head of the company as president. A new program of improvement and enlargement was started and has gone steadily forward. Four more open hearth furnaces were added in 1927 and 1928, supplementing the five basic and three acid open hearths at the Lakeside plant, and bringing capacity up to about 1,000,000 tons of steel a year, nearly four times as much as in 1924. Since the beginning of the great business depression in 1929, there has been further expansion. A continuous sheet mill costing $5,000,000 provides the most modern facilities to meet the competition expected to come with a resumption of general business prosperity. When Henry Chisholm began blowing Bessemer steel in Newburgh, though he was not aware of the fact, he was getting ready for a new and remarkable branch of the steel industry—the manufacture of wire. Into the story of wire comes the picturesque sporting figure of John W. Gates, of "bet-you-a-million" fame, who started from nothing and rose next in rank to Carnegie by the wire route. It is in its beginnings a story of fences. Fencing became important as railroads tapped the West and Southwest, providing an outlet for the cattle industry. On the plains there was no timber for rails. The older farming sections wearied of rail-splitting. Steel was the obvious substitute, if it could be made cheap and effective. Plain drawn wire was inadequate. During the Civil war barbed wire and woven wire appeared. In 1866 a small wire mill had been started near the Cleveland Rolling Mill at Newburgh by Hoadley, Hamilton & Dunbar. It was premature. Two years later, when Chisholm installed the Bessemer process, his Cleveland Rolling Mill Company took over this little plant and proceeded to fulfill its manifest destiny. In a farming village in Illinois was this man Gates, an energetic young fellow about twenty, running a little hardware store. In a neighboring village was Isaac Ellwood, who 554 - THIS CLEVELAND OF OURS had bought from an inventive Missouri blacksmith the right to make barbed wire, and was making it faster than he could sell it. Cattle men laughed at it. Ellwood sized Gates up as a good salesman and persuaded him to go to Texas and sell wire at $25 a week. The cattlemen there were vastly amused by this genial northern salesman with his flimsy wire. "That stuff wouldn't hold a Texas steer a holy minute !" they said. Gates did not bet them, but showed them. He put on a show in the little cowboy capital of San Antonio. He hired a good-sized plaza, fenced it with his barbed wire and drove into it two dozen of the wildest steers he could find. The population came from everywhere within a radius of 50 to 100 miles, as it might have come to a rodeo or bull fight. The steers, which had agreed with the ranchers, charged that fence contemptuously and halted in painful surprise. They bellowed, went into a huddle and charged again, with the same result. After two or three more efforts they decided to remain where they were. Before the day was over, Gates had sold several hundred miles of barbed wire. Soon Gates was making barbed wire himself. When his factory burned down, he bought into another and went right on filling orders without waiting an hour. Every dollar he made he invested in wire production. He may not have foreseen that wire was to be "the nerve of civilization." He could hardly have foreseen the electrical age that was to develop out of the age of steel. But as much as anyone, he provided the stuff to equip civilization with a new nervous system. He himself was a dynamo and a perpetual optimist. Along with his spending and sporting activities, and his curiously contrasting collection of quiet landscapes and stately portraits, he acquired wire plants and merged wire companies until he was known as the "wire king of America." He created the American Steel and Wire Company, with which the Cleveland company was merged, and both his creations and Chisholm's finally found their place as a major branch of the United States Steel Corporation. The Cleveland part of this industrial romance has been STEEL - 555 told as follows by John W. Hill in The Clevelander, journal of the Cleveland Chamber of Commerce : "Under the intelligent management and inventive genius employed at Newburgh, the Cleveland Rolling Mill Company grew into one of the largest wire mills in the world. They were the first to solve the problem of converting their Bessemer scrap into good steel, of making improvements in the Bessemer process, of devising a removable bottom for the converter, a big time saver, of rolling a four-by-four billet from the ingot without reheating, and then rolling such a billet to a wire rod in one heat. "These and still other improvements made it possible in 1881, when the import duty on wire rods was reduced from 1.2 cents to 0.3 cents per pound, for the Cleveland Rolling Mill Company to compete with foreign rods while every other wire rod mill in the country was shut down. "Meanwhile the wire nail had been invented in France and was coming into great demand. Michael Baackes, representing the American Wire Nail Company of Covington, Kentucky, on one of his visits to Cleveland, interested Henry Chisholm in the manufacture of nails. As a result, in 1877, the H. P. ( Huggett Process) Horse Nail Company was organized with a capital of $5,000 for the manufacture of horseshoe nails, and a factory built at the foot of Case Avenue, (40th Street). By 1879 the Huggett Process nails proved to be impractical and their manufacture stopped, but the making of plain wire nails and staples was substituted. "To this company belongs no little credit for the gradual adoption of the wire nail in place of the cut nail. It was an undertaking that required courage, for general opinion and government tests were all in favor of the cut nail. "At the time of its purchase by the American Steel and Wire Company the H. P. Nail Company had the largest capacity for wire nails of any single concern in the world. Its name and reputation were world-wide and it was selling large quantities of nails abroad. "In 1882 the increasing demand for wire attracted the attention of a group who had previously been interested in 556 - THIS CLEVELAND OF OURS a different branch of the steel industry, and the American Wire Company was organized in Cleveland. A factory was built at the foot of Marquette Avenue, and in 1883 fence wire was produced from purchased rods. "It is interesting to note that most of the workmen for this new plant as well as the superintendent were recruited from Newburgh. Edward Brockman, first superintendent, was formerly foreman in the fine wire department of the Cleveland Rolling Mill Company. "In 1885 a rod mill was installed, and subsequently activities were broadened until they covered the field of wires required in the manufacturing trades, including weaving wire of various kinds and types utilized by wire cloth manufacturers. In 1898 this company was purchased by the American Steel and Wire Company of Illinois. "Michael Baackes had been general manager and a director of the H. P. Nail Company, but in 1889 he resigned to organize the Baackes Wire Nail Company. This company built a factory at the foot of what is now East 67th Street, Cleveland. Eventually they operated a rod and wire mill, and converted the wire into wire nails, field fencing and barbed wire. In 1895, when this plant was purchased by the Consolidated Steel and Wire Company, it was given the name `Consolidated Works,' by which it is still known. "In 1892 the first combination of importance was effected in the wire industry, resulting in the formation of the Consolidated Steel and Wire Company. In 1895 the Baackes Wire Nail Company was purchased along with some other companies, and in 1898 the American Steel and Wire Company of Illinois was organized, which not only took over the mills of the Consolidated Steel and Wire Company, but included the H. P. Nail Company and the American Wire Company. The next year saw the formation of the American Steel and Wire Company of New Jersey, which absorbed the Illinois company of the same name, together with many other companies, including the Cleveland Rolling Mill Company. Thus the wire mills of Cleveland all became members of the larger organization. Two years later the United States Steel STEEL - 557 Corporation was formed, the American Steel and Wire Company becoming the wire-producing division of that corporation. It was then, and still remains, the largest producer of wire in the world." The old cut nail workers were an aristocracy. They used to come to work at Youngstown in white collars and fine broadcloth coats, almost disdaining to soil their hands. Their wages were high and they spent freely. Their arrogance led to their downfall and had much to do with the sudden extinction of their trade. While the new wire nail was struggling for acceptance, the nail-cutters of Youngstown, Pittsburgh and Wheeling, the three great centers of their industry, went on strike and refused to compromise. When they were ready to return to their jobs, the jobs were gone. The factories had turned to wire nails and the public accepted them. That opportunity gave Cleveland its start as a nail center. The Cuyahoga Works of this company, built in 1907 at Harvard Avenue and East 42nd Street, are one of the largest wire mills in the country and include the world's largest cold rolling plant. A coke plant was built in the valley near Harvard Avenue in 1916, to supply the Central Furnace Plant—the blast furnaces of the old Cleveland Rolling Mills Company. It has 180 coke ovens with an annual capacity of more than 800,000 tons of furnace coke and the usual by-products of coke ovens. The company bought the Cyclone Fence Company in 1924. Thus it now includes the three plants along the lake east of East 40th Street, the Newburgh Wire Works, the Newburgh Steel Works, the Central Furnaces, the Cuyahoga Works, the Coke Works, the Cyclone Fence Company and the Newburgh & South Shore Railroad, altogether employing in a normal year about as many workmen as there would have been in Cleveland at the beginning of the Civil war. The products of such a manufacturing establishment are fascinating in their scope and variety. To quote Mr. Hill again : "The uses to which wire is put are thousandfold, and the 558 - THIS CLEVELAND OF OURS different kinds of wire produced, with variations in chemical analysis and physical properties, are many. The mills of the Cleveland district produce almost all of the many kinds of wire used in industry. Newburgh Wire Works produces a great variety of miscellaneous wires going into the manufacturing trades. Cuyahoga Works manufactures cold rolled flat steel in widths up to 26 inches, spring wires, bale tie wire, bale ties, telephone and telegraph wire, and various grades of both low and high carbon wire. Consolidated Works produces nails, barbed wire, several kinds of woven wire fencing, woven wire concrete reinforcing, and plain galvanized wire. American Works is the largest works in the world devoted to the manufacture of weaving wires for wire cloth and welding wire. H. P. Works is strictly a nail mill, manufacturing several hundred different kinds of nails, spikes and tacks. Newburgh Steel Works produces most of the steel for the mills of the Cleveland district, while Central Blast Furnaces furnish the pig iron, and the Coke Works the coke. The Cyclone Fence Company produces its well known brands of chain-link fence, woven wire fencing and wire cloth. "To give an idea of the diversity of product of the American Steel and Wire Company, we have the following : wire rod, of open hearth and Bessemer steel ; wire of every description, round, flat, square and odd shaped ; of all sizes, finishes and chemical analyses in straight carbon and alloy steels; wire hoops, bale ties ; nails, staples, spikes and tacks; barb wire; woven wire fencing of all kinds ; woven and welded wire concrete reinforcement; poultry netting; wire rope; electrical wires and cables ; welding wire ; piano wire; telegraph and telephone wire; rail bonds, cold drawn steel for free cutting and cold heading purposes; cold rolled flat steel; in fact, everything in wire." "Out of every ten pounds of steel produced, one is manufactured into wire," said Casson in 1907. "Wire will soon require more steel than rails." His prophecy has been fulfilled, though a great deal of the wire produced is "manufacturer's wire," sold to go into other forms of manufacture. STEEL - 559 It is illuminating at this point to recall what the American steel industry in general had been doing, especially in Pittsburgh, long the country's steel capital. Never, even in the recent automotive age, has there been such an era of frenzied industrial production as there was in American steel between the Civil war and the end of the nineteenth century. The leading spirit in that production was Andrew Carnegie. He was the son of a poor weaver, who grew up with his brother Tom in a hovel with an address that might have come out of a Charles Dickens story. It was Barefoot Square, Slabsides, Allegheny City. He went to school a little, then worked in a bobbin factory. Another poor lad named Harry Phipps, son of a shoemaker, lived next door. He had another friend near by named Henry Oliver. Andrew soon got an easier job as messenger boy, liked the life, learned telegraphy, made his living as an operator for a few years, became private secretary in a railroad office, saved money out of his salary and began buying stocks. He was charmed with his little dividends, and charmed still more by the discovery that now bankers would give him small loans. He became a railroad superintendent. He made some money in oil. As he could, he traveled and studied. At twenty-nine he retired from his salaried job and embarked definitely on a capitalist career. A boom had come in the iron industry. He bought for $8,825 a one-sixth interest in the Iron City Forge Company. Phipps had been getting ahead too; he was one of the leading stockholders. The company made axles and made money. About the same time Carnegie took another industrial flier, organizing the Keystone Bridge Company with the help of J. Edgar Thomson, president of the Pennsylvania Railroad, and other Pennsylvania officials who knew him. That company built some of the first steel bridges. In four years Carnegie paid for his stock out of the profits. With his railroad connections he could easily sell all the bridges he could make. In fact, Carnegie could always sell things. He succeeded not because he was a steelmaster, but because he was a master-salesman with a gift for gaining the confidence of the right 560 - THIS CLEVELAND OF OURS people. He continued traveling, studying, extending his acquaintance. The great railroad boom was beginning. In the six years after the end of the war, track mileage of the country doubled through western extensions to the Pacific. Carnegie was in at the start of that race. He had heard of the Bessemer process for making steel quickly and cheaply, but distrusted .it. "Wait till the process develops," he said. In 1866 he took a trip to England, inquired about its use there, and was interested. He also saw at Derby a crucible steel rail that had stood up for fifteen years in a piece of track where mere iron rails had been lasting only three months. He began to see new uses for steel and the growing demand for cheap steel. Still he waited. It was not until several years later, in 1872, that he saw in England for the first time a Bessemer converter in full blast, and the terrific, miraculously rapid process convinced him. In the zeal of his conversion he rushed home, overwhelmed his partners with his enthusiasm, organized the firm of Carnegie, McCandless & Company with a capital of $700,000, and built the Edgar Thomson Steel Works on the spot of General Braddock's defeat. Hitherto Carnegie had been a sort of financial dilettante merely playing with steel. Now he put all his heart into it. He had with him as shareholders and partners Andrew Kloman, Henry Phipps, David McCandless, William P. Shinn, John Scott, David A. Stewart and his brother Thomas Carnegie. A friend described the group thus : "Shinn bossed the show; McCandless lent it dignity and standing; Phipps took in the pennies at the gate and kept the pay-roll down; Tom Carnegie kept everybody in a good humor; and Andy looked after the advertising and drove the band-wagon." Kloman was an unbusinesslike metallurgist and mechanical genius from Prussia. Carnegie proceeded to sell steel to the world while his partners made it. He was always on the go, always enjoying life and never forgetting his life purpose. In that crucial year when Carnegie "went Bessemer," Pittsburgh had as yet little prestige as a steel center. "It was mainly an importing and distributing point," says Cas- STEEL - 561 son. "There were only seven small blast furnaces, producing in twelve months about as much as one first-class modern furnace can make in eight. Iron rails were made, but no steel ones. Pig iron was scarce at $40 a ton." He concludes that there was nothing in the location of Carnegie's mills, nor in his partners, to account for the ensuing success. It was Carnegie. It required two years to get a good start. A flood of pig iron was needed to feed the Bessemer converters. Two new blast furnaces were built in 1873, the Lucy and the Isabella, the former belonging to the Carnegie Company, the latter to another group. They were alike and their owners were rivals. They began a race, and that sporting event attracted the steel world's attention. In 1874 the Lucy turned out 100 tons of iron in one day. The news went over the world, and England would not believe it. Nobody could produce Si iron so rapidly as that! But when some English iron-makers visited Pittsburgh a little later, they changed their minds. Another Lucy furnace was built in 1877. By the year 1901 those two furnaces are said to have produced more than 3,000,000 tons of iron, for which the Carnegie company received $57,000,000, one-fifth of it profit. "There is nothing idyllic about the Lucy furnaces," wrote the romancer of steel. "They have received no honors, no medals, no monuments. They have inspired neither poet nor artist. Yet for thirty-three years, for every hour of the day and night, they have been untiringly making the useless into the useful, magically transforming the ore into a ceaseless stream of that metal which is immeasurably more precious to civilization than all the gold and silver and rubies and diamonds." Carnegie told his partners in 1877 that they would make 40 per cent the next year. They were incredulous, but when the year ended they had made 42 per cent. H. M. Curry was running the Lucy furnaces, and Capt. Bill Jones the Edgar Thomson plant. He was doing even better than Curry. With ten companies having the start of them in the Bessemer business, these Carnegie works were now making one-seventh 562 - THIS CLEVELAND OF OURS of all the Bessemer steel in the United States. All were making money hand over fist. In 1880, when rails rose to $85 a ton, Captain Jones was producing them for $36, making $10,000 a day on rails alone. It was too good to be true. But Carnegie said they were just starting. Those were days when steel workers were driven as if they themselves were steel. Orders poured in. In eight months, during one of those strenuous years, Carnegie cleared the cost of his plant. In 1880 America passed England in production, though labor and materials were cheaper there, and capital more plentiful. In 1881 Carnegie, after only seven years in the steel game, had beaten everybody at home and abroad, and had done it mostly as an absentee boss gallivanting about the world and hobnobbing with the frivolous and the great. On an original investment of a quarter of a million dollars he made an average of a million a year. But that was nothing. More steel meant more coke. There was in the village of Mount Pleasant a bright young fellow named Henry Clay Frick, keeping books for his grandfather in a distillery. There were coke ovens near the distillery. Came the panic of 1873, and the bottom dropped out of coke prices. The stuff sold at 90 cents a ton. The coke-makers all wanted to sell out. Frick saw ahead. He went to a Pittsburgh banker named Mellon, the first of the Mellon dynasty, asking for a loan of $20,000, offering no security. Mellon investigated him, found him living in one room of a miner's home—and lent him the money. In two years Frick & Company were making 100 per cent and buying more land and ovens. In seven years Frick was Coke King, with 11,000 subjects, his $20,000 grown to $5,000,000, and there were 15,000 coke ovens around Connellsville, the beehive Coke Capital. Inevitably Carnegie took Frick in as a partner, one of the first of his new crop of "bright young men," and by 1889 had put him in supreme control of the large, rather loose Carnegie establishment. Frick put it in order. Expansion continued. Rivals had gone into steel rails at Homestead, offering Carnegie competition in his chosen STEEL - 563 field. There came a big strike. They lost courage, wanted to sell out, and Carnegie took them all in as partners. The plant had been considered a gold brick. Soon it turned into real gold. In 1890 the big Duquesne plant fell into his hands, and in twelve months it paid for itself. Charles M. Schwab by this time was in the organization, rising in ability and favor. An inventor wanted him to as finance a "non-nicotine, continuous tobacco pipe." "No," said Schwab, "but I'll back you if you'll invent a continuous steel mill." It was a joke. But Schwab started thinking, proposed such a mill to Carnegie, and the latter told him to go ahead and build one. He created the first modern "straight line production" plant, a steel mill that was practically one great machine, with ore piles at one end and freight trains hauling away the finished steel from the other end. The Carnegie interests now had everything but ore. The steelmaster had taken no interest in the mining branch of the business ; he could buy all the ore he wanted. But another boyhood friend of his from Barefoot Square, who had been a messenger boy with Andrew—Henry Oliver, now imaginative maker and loser of fortunes—had bought a big ore tract in the Mesabi Range and needed money to develop it. Frick, for the Carnegie company, offered to lend him half a million dollars in return for a gift of five-sixths of his holdings. Oliver, who had got his ore lands for almost nothing, accepted. Carnegie, appealed to on one of his perennial trips abroad, turned down the proposal. Frick went ahead with it nevertheless, in cooperation with John D. Rockefeller, who was now interested in Superior ore, mainly on the carrying side. Rockefeller leased his own mines to Frick and Oliver for the record low royalty of twenty-five cents a ton. When the panic of 1892 was over, the Carnegie company had about 100,000,000 tons of ore obtained virtually for nothing. Ore at one end, with steel works at the other, a thousand miles away, called for ships and trains. Carnegie bought a "streak of rust" from Pittsburgh to Lake Erie, with a terminal at Conneaut, a demonstrated failure, paying for it in bonds, and rebuilt and equipped it for heavy traffic. 564 - THIS CLEVELAND OF OURS The Rockefeller fleet brought the ore to Conneaut. That railroad soon paid for itself, as nearly everything did with Carnegie. The steel king now had everything but vessels; why not a fleet of his own? He started in 1899 with six ore ships, destined soon to become more than 100. Thus middlemen were eliminated, and the company owned all the means of production, from the ore in the ground to the finished rail and girder. It was making armor plate now, rivalling Krupp in Germany and Armstrong in England. In 1898, with rails down to $17.62 a ton, the Carnegie company made over $11,000,000. In 1899 it made $25,000,000. Everybody with Carnegie was rich. The company's profits in 25 years from 1875 to 1900 totalled $133,000,000. Here was a great, one-man realm of industry, rivalling that of Rockefeller in oil. The time was the upswing of McKinley prosperity, with everything expanding. The Illinois Steel Company, after a rail war, formed a syndicate and tried to buy out Carnegie, and failed. Then John D. Rockefeller asked for a price on the Carnegie Steel and Frick Coke companies. When Carnegie asked $250,000,000, half cash and half gold bonds, he withdrew. Carnegie grew eager now to sell. He saw it was a good selling time, and he was growing old. But he would bull his own property. He started another great expansion plan, aiming or pretending to aim at complete domination of the steel industry in America. He ordered more ships to fight Rockefeller on the Lakes. He planned a railroad of his own to the seaboard to fight the Pennsylvania. He planned to build a great tube works at Conneaut and make that the leading Lake Erie port. He threatened the American Steel and Wire Company with new competition. He was already producing one-fourth of the Bessemer steel in the United States, half the structural steel and armor plate, nearly one-third of the ore and 3,000,000 tons of pig iron a year. He could undersell, at a big profit, all his competitors at home and abroad. This autocrat was a growing menace to all competitors. He began to seem a menace to American industry and finance STEEL - 565 in general. Industry and finance determined to get rid of Carnegie. And Carnegie was willing to be got rid of—at his own price. Schwab, probably the brightest of those bright young partners, could see both sides. At a University Club dinner in New York, in 1900, he made an eloquent speech in favor of consolidating the steel industry for the good of all. J. Pierpont Morgan, who had received a similar suggestion from Rockefeller, listened attentively and talked to him afterward until late in the night. He came again, with "BetYou-a-Million" Gates, and they talked all night. "Go to Mr. Carnegie and ask him how much he wants," said Morgan. Schwab and Carnegie figured it out, allowing amply for everything they could think of. Their computation footed up to $447,416,640, plus the current year's profits—say $40,000,000 more. All this for one corporation employing 45,000 men. Morgan took the figures and summoned Judge Elbert H. Gary, who favored a merger. Morgan always saw things in the large. He was said to be "careless, and a poor bargainer." He had determined to steady the country's biggest industry by federalizing it, so to speak, placing the bulk of its investment and operation under representative rule through a large board of directors. It was a question of combining the Carnegie company, the biggest and most profitable steel unit, with enough of the other important manufacturing, shipping and mining concerns to guarantee economy, peace and order in the steel business. Morgan talked it over with a few big financiers, manufacturers, merchants, lawyers and transportation men, and they agreed. Carnegie got his price, making him the richest private citizen in the world, with about $14,000,000 a year to spend, and giving his forty partners the wealth that created the type known since as "Pittsburgh millionaires." It was now in order to gather in the other units required. The first plan had been to combine only four concerns—the Carnegie, Federal Steel, National 'rube and American 566 - THIS CLEVELAND OF OURS Steel and Wire. It grew more expansive as the promoters foresaw troublesome competition in other quarters. They turned their attention to four other important units—National Steel, American Tin Plate ( a promising infant), American Steel Hoop and American Sheet Steel. Frick tried to corral the big Jones and Laughlin plant in Pittsburgh, and failed. But he succeeded in buying the Rockefeller lake interests, thus providing the new combination with two-fifths of its ore and nearly half its ore fleet. There were added American Bridge, Keystone, Clairton Steel, Union Steel, Shelby Steel Tube, National Tube at Lorain and odds and ends in various parts of the country. In February, 1901, the vast, complex project had taken shape. It was to be called the United States Steel Corporation. It obtained a New Jersey charter, in accordance with the quaint American system of state incorporation, empowering it "practically to manage the business of the human race —to own and operate the whole world, with the sole exception of the railroads and canals of New Jersey," on a declared capital of $3,000, which could be increased if necessary. The leading men involved were J. Pierpont Morgan and his partners; H. H. Rogers and Daniel O'Day of Standard Oil; Marshall Field, John W. Gates, H. H. Porter, John A. Drake, E. H. Gary, William H. Moore, J. H. Moore and Norman B. Ream of Chicago; P. A. B. Widener and Thomas Dolan of Philadelphia; Nathaniel Thayer of Boston; Samuel Mather of Cleveland ; D. 0. Mills, Samuel Spencer, William Nelson Cromwell and A. R. Flower of New York. with various others. Actual capital was fixed at a little over $1,000,000,000, then an unheard-of amount for private enterprise, with $366,000,000 bonded and mortgage debt. The stock was to be half seven per cent preferred and half common. Thus 70 per cent of the American iron and steel industry had been organized on the basis of "community of interest." It was no longer to be dominated by one man, one small group or one locality, but a fabric of many ore and coal mines, furnaces, coke plants, limestone quarries, docks, mills and transportation lines, linked with many banks. It was a STEEL - 567 financial rather than a manufacturing corporation. The various manufacturing units were to proceed very much as usual, as the American colonies did after they became states in a Federal system. They were not to interfere with each other, but to cooperate in a general way for their common advantage. The creators of this many-headed giant were concerned with assuring their own prosperity and progress on a reasonable basis, through stabilization of the industry, rather than the crushing of outside competition. Steel was to be more liberal in this respect than oil had been. It speaks well for both sides that the "Steel Trust" and the "Independents," for the most part, have lived in peace. Cleveland was represented in this merger by its biggest steel industry, the American Steel and Wire Company, and on the corporation's directorate by Samuel Mather, its foremost industrialist. It became the headquarters of the Steel Corporation's Great Lakes subsidiary, the Pittsburgh Steamship Company, dominating lake traffic. There were at the immediate disposal of the corporation an army of 180,000 workmen, a navy of 112 ore ships with 19 ports, 1,000 miles of railroads with 700 locomotives and 30,000 cars, 93 blast furnaces making nearly half of the nation's pig iron, 50 mines producing one-sixth of the world's ore. There were plants making three-fifths of the American Bessemer and open hearth steel and more than either Great Britain or Germany, two-thirds of the steel rails and wire rods, three-fourths of the steel beams, nearly all the wire, wire nails and fencing, steel tubing, tin plate and steel bridges, burning 10,000,000 tons of coal and 11,000,000 tons of coke a year, plus 15,000,000,000 cubic feet of natural gas. And that was only a beginning. The iron works were mainly in and around Pittsburgh, the Mahoning Valley and the Cleveland district, with large plants also in Chicago, Milwaukee, Joliet, Muncie, Elmira, Philadelphia, Troy, Hartford, Worcester and other places. The capitalization was liberal. In the rush of buying, almost any desired property was snapped up at any price. 568 - THIS CLEVELAND OF OURS The whole doubtless could have been bought piecemeal, in normal circumstances, for hundreds of millions less. The stock issues were accordingly inflated. The common stock was mostly "water," selling at first for eight dollars a share. It was the first great instance of that industrial product, setting a pernicious example in financiering. The promoters have always defended it on the ground that the properties acquired new value when joined, and justified the valuation by subsequent earning power. It may be that the philosophy of "Holism," preached so eloquently today by Jan Smuts, which maintains that "the whole is greater than any of its parts," applies to business institutions as it does to physical organisms. The social philosophy that some of the founders applied to the mighty corporation in its infancy may be taken more seriously now than it was then. To the argument that it was a plutocratic enterprise which threatened economic liberty, it was replied that control was representative rather than concentrated and arbitrary, and that with the open sale and wide distribution of the stock, ownership grew democratic. The head of one of the merged companies went further. "It was the longest step ever taken in the direction of socialism," he said. George W. Perkins, chairman of the finance committee, declared : "You ought to call it 'How the People of the United States Bought the Steel Business.' What is the difference between the United States Steel Corporation as it was organized by Mr. Morgan, and a Department of Steel as it might have been organized by the government?" The government, he explained, would have had to buy out the owners and issue bonds, as the new corporation did, and the people would have bought them in the same fashion. Recent developments may make thoughtful persons wonder whether that statement was prophetic of the fate of some of the biggest American industries. Carnegie talked of a national, non-governmental, cooperative steel business, "with every workingman a capital- STEEL - 569 ist and every capitalist a workingman," as the only safe system. The first president was Charles M. Schwab, aged thirty-nine, who less than twenty years before had started in the steel business driving stakes for a dollar a day at the Edgar Thomson works, and six months later was superintendent of the plant. His salary was now a million dollars a year. The first annual report of the Steel Corporation showed a revenue of $560,000,000 and net profits of over $133,000,000. The great experiment was succeeding. Its success bred a horde of mergers and new incorporations. There was a plague of high finance. The market was flooded with watered stocks. New capitalization exceeded $8,000,000,000 in two years. Financial indigestion followed inevitably. United States Steel Preferred dropped below fifty, Common below ten. The world of steel was plunged into the depths of despair. But such was the vitality of the industry and the country that in two years more Preferred was above par again and times were good. Combination, division of territory and standardized products and prices apparently were sound principles after all. Steel-making was now made scientific. Steel plants became laboratories. There were no more hit-or-miss methods. The industry as a whole moved on, the independent concerns improving their methods along with the pace-setter, and frequently setting the pace themselves. In spite of fears and competitive odds, the outside interests survived and thrived. The big corporation has grown bigger in three decades, with many new subsidiaries, new groupings, new names and new products. Notable developments have been the steel city of Gary, Indiana, and the Tennessee Coal, Iron and Railroad Company, operating in Alabama. By 1916 the number of its steel works had diminished from 149 to 146, while expansion in size and equipment doubled their productive capacity. Yet the percentage of production, originally about 70 per cent of the national output, had shrunk to 45 per cent, because of the growth of independent plants. 570 - THIS CLEVELAND OF OURS The World war was a period of great expansion for the entire industry, because it was primarily a war of steel, and the burden of production for the allied forces fell to America. Production jumped from 23,000,000 tons in 1914 to 45,000,000 in 1917. By the time of the Armistice it had reached a rate of 47,000,000 tons. Here was a new opportunity for small independents, though many of them faced lean years afterward. The nation's average steel output for the ten years from 1922 to 1931 inclusive was 43,000,000 tons. In 1929 it rose to the record height of 56,443,000 tons, then in 1931 slumped to 26,000,000. The American share of the world's steel output is now almost one-half. In recent years United States Steel has produced only a little over 40 per cent of our national output. Its individual supremacy is still great, although it is considered short in some lines of manufacture, especially sheet steel and strips. Its assets at the end of 1931, after considerable loss from the depression, were figured at $2,280,000,000, with inventories of more than $300,000,000 and cash $150,000,000. There has been far more change and growth in the independent steel field since 1901 than in the big combination itself. Industrial opportunity, with a reasonable degree of tolerance, backed by government surveillance, has resulted in a great and varied expansion, in which northern Ohio has had its full share.. Some of the companies existing when the merger was organized were not wanted by it. Others Mr. Morgan and his assistants were unable to buy. One of the latter was the Jones & Laughlin Steel Corporation, the biggest competitor left in the Pittsburgh district, a family corporation run on the monarchic Carnegie plan. Its senior partner, Benjamin Franklin Jones, was regarded as Carnegie's successor to the title of Steel King, and is said to have been considered by Carnegie himself as the ideal steelmaster. "No steel concern," said a junior partner of this firm after the great consolidation, "can compete with the United States Steel Corporation unless it owns its raw materials STEEL - 573 and can make from 2,000 to 2,500 tons a day—a plant that would cost from $20,000,000 to $30,000,000." The Jones and Laughlin unit fulfilled these conditions, and is still one of the substantial steel firms of the country. Other important outsiders were the veteran Cambria Steel Plant at Johnstown, survivor of the famous flood, which "always tried to beat the last batch of rails," and the Pennsylvania Company of Steelton, both controlled for a time by the Pennsylvania Railroad and both destined to absorption by a new and larger independent. There were sturdy plants controlled at Philadelphia—Alan Wood Iron and Steel, and Phoenix Iron, still maintaining their identity. At Reading there was the Reading Iron Company, which likewise holds its own. There was of course the Otis Steel Company of Cleveland, which steadfastly went its way under foreign and local ownership. There was the Lackawanna, built confidently just after the formation of United States Steel, in a swamp near Buffalo, to roll rails for the New York Central Railroad, better equipped at the start than any other plant had ever been. And there was the Bethlehem Steel Company, incorporated in 1899, an old concern but really a glorified machine shop, facing the mighty Steel Trust. One of the most remarkable episodes in American industry is Charles M. Schwab's departure from United States Steel in 1903, his leadership of the newly organized Bethlehem Steel Corporation, and the gradual assembling of the Cambria, Steelton, Lackawanna, Lebanon, Maryland, Midvale and various other iron and steel works, with a full complement of ore and coal mines, limestone properties, railroads, docks, ships, etc., making a system so powerful as almost to constitute a second United States Steel Corporation. Another lusty infant at the time of the Morgan merger was the Youngstown Sheet and Tube Company, organized in 1900. Eventually it acquired the Brier Hill Steel Company and the Steel and Tube Company of America, with many other subsidiaries, having works and water connections at Indiana Harbor and East Chicago, and becoming the country's fourth 574 - THIS CLEVELAND OF OURS largest producer of steel, apparently destined to be merged with Bethlehem. The Republic Iron and Steel Company, another Mahoning Valley institution, organized just before United States Steel, has prospered and waxed great, to become also a bone of contention among the modern steel-trust builders. At Warren, Ohio, too, there was Trumbull Steel, since absorbed by Republic, and at Sharon, Youngstown and Lowellville is Sharon Steel Hoop, another lusty independent. A more recent creation is the Wheeling Steel Corporation, formed in 1920, whose most important works are in Ohio and West Virginia. A second important West Virginia enterprise was the Weirton Steel Company, now part of another lusty youngster, the National Steel Corporation. The latter is renamed from the Great Lakes Steel Corporation formed in 1929, which built a modern plant on the Detroit River, in association with the Michigan Steel Corporation. The independent Gulf States Steel Company at Birmingham arose to challenge Tennessee Coal and Iron. In Birmingham, too, is the important blast furnace concern, Sloss-Sheffield Steel and Iron Company. The Crucible Steel Company of America, an eastern concern, but now well settled around Pittsburgh, has become a leader in its field, producing fine steel in electric crucibles. The Colorado Fuel and Iron Company, with its plant in Pueblo, "the most beautiful steel city in America," has had its independence preserved by John D. Rockefeller, Jr. In San Francisco is the Columbia Steel Corporation, now a subsidiary of United States Steel. In Illinois and adjacent states, is the Inland Steel Company, at the Soo on the Canadian side the Algoma Steel Corporation. Middletown, Ohio, has the American Rolling Mills Company. Cleveland as a steel city is essentially independent in spite of the fact that its largest unit, the American Steel and Wire Company, is a branch of United States Steel. Cleveland brains and money have gone freely into steel, at home and in adjacent territory, in the last three decades. A list of concerns situated or largely controlled in this city, in addition to the Otis Steel Company, must include the following: