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THE AUTHENTIC HISTORY OF 
 
 The United States 
 Steel Corporation 
 
CHARLES M. SCHWAB 
 
HON. ELBERT H. GARY 
 
 "The History 0/ the United States Steel Corporation is the story of how Gary 
 carried out his dream." 
 
THE AUTHENTIC HISTORY OF 
 
 The United States 
 Steel Corporation 
 
 BY ARUNDEL COTTER 
 
 New York 
 
 The Moody Magazine and Book Company 
 
 1916 
 
Copyright, 1916, by 
 
 The Moody Magazine and Book Company 
 
 All Rights Reserved 
 
To The 
 HON. ELBERT H. GARY 
 
 CHIEF EXECUTIVE OFFICER 
 OF THE 
 
 United States Steel Corporation 
 
 This Work is Respectfully 
 Dedicated 
 
FOREWORD 
 
 It is not the intention of the author of this History of 
 the United States Steel Corporation to compile a work 
 of reference for the steel man. Such a task must properly 
 be left to the trade expert. His object merely is to narrate, 
 in as interesting a form as he is able, the principal events 
 leading up to the incorporation of the mighty company, 
 to tell its objects and its policies and the results therefrom 
 on labor, the corporation itself and industry generally. 
 
 The writer believes that these events contain a consider- 
 able amount of human interest, and it is in this form that 
 he has endeavored to relate them. If he succeeds in bring- 
 ing home to the steel stockholder, to " the man in the street," 
 what the Steel Corporation has stood for, what it still stands 
 for, his labor will not have been in vain. 
 
 A very large part of the facts narrated were obtained 
 from the sworn testimony in the Government suit for the 
 dissolution of the Corpoiration. The whole story of the 
 big company is contained in this mass of testimony, but 
 the form in which it is there told is too lengthy and com- 
 plicated, too full of repetition and technicalities, to interest 
 any but the leg^ mind. 
 
 Of necessity, in order to confine within the limits of a 
 single volume the history of the greatest industrial enter- 
 prise in the world, many facts and events, interesting of 
 themselves and worthy of record, have been omitted. Only 
 the most salient feattires have been touched on. 
 
 In conclusion, the author freely admits a prejudice in 
 favor of the corporation. He sincerely beUeves that its 
 organization marked the dawn of a new and better era 
 in industrial history, how and why the reader will discover 
 in the story itself. 
 
 Arukdel Cottbr. 
 New York, Jan. i, igi6. 
 
TABLE OF CONTENTS 
 
 Page 
 
 Chapter 1. Events Preceding the Organization 1 
 
 Progress of Steel Making in America. The 
 Soup House Days. Rail and Other Pools. 
 Andrew Carnegie, the Iron Master. Gary's 
 Dream of a Steel Republic. Carnegie's 
 Endeavors to Sell. Threat to Build Big 
 Railroad. The Simmons Dinner and 
 Schwab's Eloquence. 
 
 Chapter 2. The Birth of the Big Company 17 
 
 Its Immense Wealth. The Companies Merged. 
 Overcapitalization — and Its Remedy. In- 
 fluence on Industry; and on Labor. The 
 Higher Socialism. 
 
 Chapter 3. Early History— 1901 to 1907 35 
 
 Physical Organization. Profit Sharing Plans. 
 More Companies Absorbed. Expansion. 
 The Bond Conversion Plan. Laying the 
 Foundations of Gary, Indiana. The Hill Ore 
 Lease. 
 
 Chapter 4. The Tennessee Purchase 61 
 
 The_ Panic of 1907. Conferences in Morgan's 
 Library. Assistance to the Trust Company 
 of America. What the Tennessee Coal, Iron 
 & Railroad Co. Was. Difficulties of Moore & 
 Schley. Purchase of Tennessee Stock Only 
 Way Out. Interview with Roosevelt. Steel 
 Making Conditions in South. Benefits of 
 Corporation Ownership. 
 
 Chapter 5. The Men of the Corporation 77 
 
 Elbert H. Gary, J. P. Morgan, Charles M. 
 Schwab, George W. Perkins, and others. 
 
 Chapter 6. Development of Export Trade 99 
 
 The U. S. Steel Products Co. — ^James A. Farrell. 
 
 Chapter 7. The Spirit of the Corporation 117 
 
 The Square Deal a Foundation for Loyalty 
 and Efficiency. Making the Worker a Self- 
 Respecting Citizen. 
 
 Chapter 8. The Corporation's Implements 129 
 
 Vast Operations. The Ore Mines of the Lake 
 Region. Some Impressions^ of Steel Mills. 
 From the Ground to the Finished Product. 
 
Table of Contents 
 
 Page 
 
 Chapter 9. The Steel Towns 145 
 
 Gary — Making a Sand Lot a Thriving City. 
 Fairfield, Alabama. Other Steel Towns. 
 
 Chapter 10. Safety First. Sanitation. Welfare 157 
 
 Economic Aspects of Conserving the Worker. 
 How It Has Paid. The Humanitarian Side. 
 The Universal Safety Idea. 
 
 Chapter U. Questions of Policy 171 
 
 Its Attitude Towards Competitors. The Gary 
 Dinners. Publicity — a New Departure in 
 Corporation Management. Question of 
 Price Restraint. 
 
 Chapter 12. Investigations and the Dissolution Suit 187 
 
 Investigations by Industrial Commission, Cor- 
 poration Commissioner and Stanley Com- 
 mittee. The Steel Dissolution Suit. 
 
 Chapter 13. Later History— 1907 to 1915 203 
 
 Chapter 14. Statistics, Financial and Otherwise 219 
 
CHAPTER I 
 EVENTS PRECEDING THE ORGANIZATION 
 
 IF the United States Steel Corporation had been 
 nothing more than the biggest business in the 
 world, its enormous size and the immensity of its 
 operations would justify the historian in placing upon 
 record the details of its organization and the events con- 
 nected with its existence. 
 
 The "Steel Trust's" vast capitalization, a billion and a 
 half of dollars, or three-quarters of the gold coin in the 
 United States; its yearly turnover of three-quarters of 
 a billion dollars, or the annual value of the cotton crop 
 of the South; its payroll of a quarter of a million men, 
 enough to populate a good-sized city — or, with their 
 families, over a million souls, the population of a town 
 that would rank high among the cities of the world; 
 its annual production of over twelve million tons of fin- 
 ished steel, some 240 times the displacement of the big- 
 gest vessel ever built, the volume of freight carried on 
 its great fleet of ore boats, several times the freight ton- 
 nage passing through the Suez Canal; its foreign trade 
 amounting to over two million tons a year, and of a 
 value of nearly a hundred million dollars — ^these alone 
 would make the Steel Corporation's history worthy the 
 telling. But these things, properly considered, are only 
 secondary, and their importance lies largely in the bear- 
 ing they have on something of far greater consequence 
 — the big company's influence upon the industrial his- 
 tory of the world. For the organization of the Steel 
 Corporation marked the beginning of a new era in in- 
 dustry. 
 
 It was, in a modified sense, an experiment in popular 
 ownership, in the ownership of industry by labor, for it 
 
2 The United States Steel Corpofation 
 
 substituted for the limited ownership by a few men of a 
 number of more or less important industrial units, one 
 gigantic unit owned by a multitude. Today the Steel 
 stockholders number 150,000, in round figures, and of 
 these not less than 50,000 are employes of the corporation. 
 
 The organization of the Steel Corporation marked 
 the dawn of a new industrial era in another way, for 
 the big merger proved a potent influence in putting an 
 end to the period of cutthroat competition in steel that 
 existed in the later years of the nineteenth century — a 
 competition so ruthless that no means of getting busi- 
 ness from a competitor appeared to be considered too 
 unfair or too ignoble for employment — and substituted, 
 if the declarations of its competitors themselves may be 
 credited, the reign of a spirit of fair play, of competition 
 still, but competition clean and above-board and gov- 
 erned not solely by greed, as in the past, but by the new 
 principle of the square deal between one manufacturer 
 and another, and extended to the consumer and the 
 worker a recognition of the rights of all. 
 
 In order to get a true perspective on the events im- 
 mediately 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 steelmaking 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 near 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 
 
Events Preceding the Organization 3 
 
 and steamships plying to and from ore fields situated 
 sometimes hundreds of miles from the plants, but 
 capable of 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. But — and this is important — it had been an 
 industry subject to the most amazing fluctuations, 
 periods of feast being followed closely by periods of 
 famine. 
 
 It was a period, as has been suggested, of war to the 
 knife 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 
 are 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 glow- 
 ing furnaces of molten iron. The law of steel was essen- 
 tially 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. To understand why this is so it is necessary 
 to get an idea of the abnormal conditions influencing it. 
 The discovery of the Bessemer process — about the mid- 
 dle 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 pre- 
 viously undreamed-of wealth for those who could supply 
 it, and, in <re desire to secure this wealth, production 
 sprang forward so quickly as even to outstrip the de- 
 mand, strong as it was. Then ensued the inevitable 
 battle for the spoils, a battle that lasted until consump- 
 
4 The United States Steel Corporation 
 
 tion 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. Rail- 
 ways 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 the 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 mmes of the West or the diamond mines 
 of South Africa. And in the insane struggle for this 
 so-freely-poured-out wealth men lost all sense of pro- 
 portion. 
 
 It was inevitable that there should be a dark side to 
 the picture and that it should be particularly black in 
 obedience to the natural law that provides that the 
 severity of the fall shall be proportioned to the height of 
 the climb. The boom times of the steel trade were suc- 
 ceeded 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 vet- 
 erans 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 
 
Events Preceding the Organization 5 
 
 to every means that offered to divert orders from com- 
 petitors to themselves. It was a case of dog eat dog, and 
 failures, with their unavoidable accompaniment of un- 
 employed labor, were all too frequent. 
 
 There is hardly anyone who has not heard of the now 
 famous steel "pools." These 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 bind- 
 ing each other not to sell below a certain price or more 
 than a certain 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 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 today as they relate how each repre- 
 sentative of a company taking part in a pool sought to 
 gain an advantage over his competitors while the pool 
 was yet a-borning. Listening to them one begins to won- 
 der if these were indeed men who bore high and honor- 
 able reputations in the business world, to feel a growing 
 respect for the honor that is said to exist among thieves. 
 
 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 pool conference was being held and, as soon as 
 a price settlement was reached, to stroll casually over to 
 a window and by prearranged signal indicate to him the 
 level agreed on, whereupon the salesman would pro- 
 
6 The United States Steel Corporation 
 
 ceed 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 Car- 
 negie, in his testimony in the Federal suit for the dis- 
 solution 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 had been agreed on for nails. 
 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 handed in 
 his message and walked away. While Stevenson was 
 writing his own wire the operator, in mistake, handed 
 him his competitor's, with the question, "Is this al- 
 right?" And Stevenson discovered that the wire in 
 question was an offer to a large consumer to sell him 
 10,000 kegs of nails at $1,401 
 
 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 unscrupu- 
 lous 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 steelmaker 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 
 

 J. P. MORGAN 
 
Events Preceding the Organization 7 
 
 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 I am writing this was not the case. Under the 
 most favorable conditions the steel mill, as a well- 
 known steel maker said not long since, is far from being 
 a drawingroom. 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 in- 
 creased 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 
 has 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 avail- 
 able 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. 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 
 
8 The United States Steel Corporation 
 
 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 com- 
 bined. Today the rolling mills of Pittsburg alone turn 
 out one-quarter 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 deserved 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 Pittsburg. 
 
 Carnegie's rise from utter obscurity until he became 
 the dominating figure in the leading industry of the 
 world reads like a page out of fiction. Only a very brief 
 outline can be given here. Born in Dumferline, Scot- 
 land, in 1835, the future Monarch of Steel came to the 
 United States with his father at the age of thirteen and 
 started his career as a bobbin boy in a cotton mill at a 
 wage of $1.20 a week. At the age of fifteen he became 
 a telegraph messenger and later an operator for the 
 Pennsylvania Railroad, and his ability soon attracted the 
 attention of Col. Thomas A. Scott, head of that system, 
 who made Carnegie his private secretary. Thus the 
 young Scot got his first foothold on the ladder of for- 
 tune. He saved his money and in 1864 made his en- 
 trance in a quiet way on the stage of the iron industry, 
 purchasing a one-sixth interest in the Iron City Forge 
 Company. One of his partners in this enterprise was 
 Henry Phipps, the playmate of his boyhood. And 
 Phipps and Carnegie stuck together through good for- 
 tune and through bad until the latter's retirement from 
 active business. Later Carnegie saw a Bessemer con- 
 verter in operation, one of the most impressive sights 
 in the making of steel, and this converted him from an 
 iron man into a steel man. He began to manufacture 
 
Events Preceding the Organization 9 
 
 steel, and with phenomenal success. Breaking down 
 all obstacles in his way to fortune he became a terror 
 to competitors, but although he was probably well 
 hated, he was also respected. 
 
 In 1901 Carnegie sold out the steel business he 
 had built up to the organizers of the United 
 States Steel Corporation for $303,450,000 in 5 per 
 cent bonds and $188,556,160 in common and pre- 
 fpi ^ fgH ftprks of the new company, a total price «f 
 $492.006.160T11 
 
 The mark that Carnegie left on the industry will 
 never be wiped out. In his later days, as steel king, he 
 set the pace for all others to follow. And it was a fast 
 one. 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 friends he was generous and 
 open. He was a born commander, a Napoleon of in- 
 dustry. Having a wonderful ability for organization 
 and a passion for power he built up an organization 
 that has only once been surpassed in the world of trade, 
 an organization that was at the same time utterly loyal 
 and extremely efficient. 
 
 Whether or not Carnegie made the best use possible 
 of his undoubted abilities it is for posterity to decide. 
 Beyond question America's pre-eminence in steel is due 
 largely to him. But he was also at least partly respon- 
 sible for the situation that existed in the steel trade in 
 his day. Production, tonnage, was his fetish, for in 
 this he saw the only means of reaching and keeping his 
 supremacy, and to gain it he did not spare himself, the 
 men under him, or least of all his competitors. His one 
 eflfort was to keep his mills running full, and everything 
 was made subservient to that end. Where he led others 
 had to follow, and it was to this attempt to keep up full 
 operations at all times that the exaggerated competi- 
 tion and the "soup house" periods it caused was, to a 
 great extent, due. 
 
 It is not generally recognized that Carnegie was 
 
10 The United States Steel Corporation 
 
 largely responsible for the formation of the United 
 States Steel Corporation. The part he played was a 
 quiet one. He wanted to sell out and retire — to devote 
 his life to philanthropy, education and the cause of 
 peace. To sell out he must find a customer. And the 
 stars in their courses fought for him. The devil's luck 
 with which many of his competitors credited him stuck, 
 and he succeeded in accomplishing the sale. 
 
 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 in- 
 crease its lead in the manufacture of the metal most- 
 needed by the age. Between the years 1890 and 1900 
 combinations in industry were as thick as the leaves in 
 Vallambrosa. And steel had not escaped this tendency 
 to amalgamate. The country's wire plants had been 
 merged gradually into one company, the American Steel 
 and Wire Company of New Jersey, controlling all but 
 a small number of wire mills. A somewhat similar 
 situation existed in regard to tin plates, tubes and fabri- 
 cated products. What might be called the steel com- 
 panies proper were themselves all mergers of a number 
 of small plants, although there was nothing like central- 
 ized control and the trade was divided among several 
 large competing units. But a merger of these com- 
 panies had been talked of time and again, and its even- 
 tual accomplishment was generally considered in- 
 evitable, sooner or later, unless Carnegie 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 combine. 
 
 And the time being ripe, the man was provided, the 
 man destined to take Carnegie's place as the central 
 figure of the steel industry, not only of this country but 
 of the world. He was Elbert H. Gary, then president 
 of the Federal Steel Company, a New Jersey corporatioa 
 and one of the Carnegie Company's largest competitors. 
 
Events Preceding the Organization 11 
 
 Born on a farm near Wheaton, 111., and educated to 
 the practise 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. 
 Gary became a director of the Illinois Steel Company, 
 and when the Federal Steel Company was organized 
 in 1898 as a merger of the Illinois and other companies 
 he took a leading part in the work of organization. The 
 executive ability he displayed so impressed his asso- 
 ciates and the Morgan interests, who financed the 
 merger, that he was unanimously chosen president of 
 the new company, much to his surprise, he has since 
 declared. This first gave him a prominent part on the 
 stage of steel, on which he has been the most striking 
 figure 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, the former farmboy dreamed of an im- 
 mense 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 it an industry 
 owned by the peo"pre, and particularly by the_workers. 
 ■WKefe" Carnegie' stopped at the ocean and gave his 
 attention to world business only at times when over- 
 production at home compelled him to seek foreign mar- 
 kets temporarily, Gary sought to establish a world- 
 wide and permanent market for the product of the 
 blast furnaces and rolling mills of the United States. 
 And the history of the United States Steel Corporation 
 is the story of how Gary carried out his dream. 
 
 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 pro- 
 
12 The United States Steel Corporation 
 
 hjbitive. 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 come true, 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 en- 
 trench itself that it would not be too greatly affected 
 by periods of stress. 
 
 One man there was who could provide the where- 
 withal 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 few steel concerns were making money and 
 feared to put so large an amount of capital as was re- 
 quired into the venture; perhaps other motives gov- 
 erned him ; but, whatever his reasons, the great finan- 
 cier 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 al- 
 ready 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 cir- 
 cumstances 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 inter- 
 esting one. It has already been suggested that Car- 
 negie 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 he 
 alone, was able to engineer the purchase of his proper- 
 
Events Preceding the Organization 13 
 
 ties. Therefore, he decided, Morgan must be induced 
 to buy. 
 
 At first Carnegie tried ordinary tactics. He had 
 mutual acquaintances suggest to the banker the advisa- 
 bility of a deal by vrhich 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 de- 
 sired 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, after care- 
 ful consideration, decided not to act. 
 
 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 competi- 
 tion than it had ever encountered. And Carnegie threat- 
 ened to build a tube mill. This action had two pur- 
 poses. 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 ma- 
 terial 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. But although Morgan knew that the steel 
 
14 The United States Steel Corporation 
 
 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 Penn- 
 sylvania Railroad throughout its entire length, a project 
 which, if carried through, would without question have 
 materially damaged the earning power of the great rail- 
 road 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 seem- 
 ing 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 said 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 nar- 
 rated scores, probably hundreds of times, the part that 
 Carnegie played therein has never, so far as I have been 
 able to discover, been brought out. 
 
 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 ofif the proverbial brass pot. And Carnegie saw 
 that if the man lived who could convince Morgan to 
 engineer a purchase of the Carnegie Steel Company 
 that man was Charlie Schwab. Carnegie therefore 
 decided to bring together the financier and the president 
 
Events Preceding the Organization 15 
 
 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 R. Sim- 
 mons 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 Car- 
 negie, and that its purpose was the sale of his prop- 
 erties to Morgan. 
 
 Everything went off as planned. Schwab chose for 
 his subject the steel company of the future. He 
 played upon this theme as a harp to an attentive audi- 
 ence, 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 forecasted 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 struc- 
 ture he painted was such a one as was well worthy the 
 attention of the greatest of bankers, an industrial enter- 
 prise that even the great Morgan might well be proud 
 to stand sponsor for. 
 
 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 
 
16 The United States Steel Corporation 
 
 undertaking so immense naturally took a good 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 pur- 
 poses, became an actual fact. 
 
ORE TRAIN LEAVING CONNEAUT HARBOR, OHIO 
 
 DUQUESNE WORKS. CARNEGIE STEEL CO. BATTERY OF THE MOST 
 
 MODERN FURNACES OF THE CARNEGIE STEEL COMPANY 
 
 IN OPERATION 
 
CHAPTER II 
 THE BIRTH OF THE BIG COMPANY. 
 
 A billion dollars! 
 The financial world, accustomed to big figures, 
 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, a total of $1,404,000,000 
 were announced. Wall street had long been used to 
 treat millions, with the dollar sign before them, as 
 mere trifles, and even tens of millions were common- 
 place. Hundreds of millions commanded respect. But 
 a billion, a thousand millions, that was merely a fig- 
 ure, something that could not be computed, that sur- 
 passed imagination; just as much smaller sums are 
 mere rows of figures to most of us. 
 
 And, indeed, the mind cannot comprehend really 
 what a billion means. Some concrete form of compari- 
 son 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 thousand 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 over 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 over 430 feet ! 
 
 A train of fifty-eight railroad cars would be required 
 for transporting the precious metal, with two big en- 
 gines, one before and one behind, to move the train! 
 
18 The United States Steel Corporation 
 
 For storage room the gold would require a vault 
 eight feet high, twenty feet wide and 24j4 feet long — 
 and there wouldn't be an inch of spare room ! 
 
 Placed at one end of a scale the gold would need 
 30,000 men of average weight to balance it! 
 
 If the corporation's capital were coined into Five 
 Dollar gold pieces they would pave a road 17 feet wide 
 for more than 15j4 miles! 
 
 Stacked one on the other these coins would reach a 
 height of over 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 Hymalayas! 
 
 It would take 2,200 freight cars to load it, and about 
 55 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 ! 
 
 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 finish. If he started to count on January 1, 1915, 
 one of his descendants might count the last bill in the 
 pile about the end of June, 2048! 
 
 If the corporation's capital were divided evenly it 
 would give every man, woman and child in the United 
 States about $15.50! 
 
 The interest on this sum at 5% would keep some 
 35,000 American families in comparative comfort — 
 without touching the capital ! 
 
 The money represented by the big company's cap- 
 italization would buy the cotton crop of 1914, the larg- 
 
The Birth of the Big Company 19 
 
 est on record, at over 17c a lb, or some lYi times the 
 market price. 
 
 From the date of the Simmons dinner to that on 
 which the plans for the new corporation were an- 
 nounced was a very short period. The birth of the cor- 
 poration did not take long. Once convinced that a mer- 
 ger 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 asso- 
 ciates lost no time in bringing it about. The dinner 
 took place on December 12, 1900; the corporation was 
 formally chartered on February 25 of the year following 
 and began business as a corporate entity on April 1, 
 1901. 
 
 It is likely that Schwab himself did not foresee how 
 far-reaching would be the effects of his speech. Mor- 
 gan did not do things by halves. When the young 
 steelmaker 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 with- 
 out danger of overstretching 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 for money making 
 alone — for this was by no means the ruling passion of 
 his being — but of creating an industry 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. 
 
 For just as among individuals, trickery and deceit are 
 the weapons of the weak, so the really strong industry 
 
20 The United States Steel Corporation 
 
 should and can be fair and open in its dealings not only 
 with its customers but with its employees and its com- 
 petitors, and these last must of necessity adopt the same 
 course. 
 
 The great steel concern that Schwab discussed cor- 
 responded 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 
 other to find out definitely and inform him upon what 
 terms. A few days later Schwab reported that Car- 
 negie's price was $303,450,000 in bonds and $188,556,160 
 in stock of the suggested new company. After some 
 consultation with Gary, Robert Bacon and others, Mor- 
 gan accepted these terms. 
 
 The Nucleus of the Corporation. 
 
 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 con- 
 cerns, and Schwab, in his talk, had pictured an in- 
 dustrial organization that would turn out from its mills 
 every kind of steel product, that would be able to sup- 
 ply 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 at a cherry, ex^en 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. 
 
The Birth of the Big Company 21 
 
 etc., with a view to bringing them all into the consoli- 
 dation. 
 
 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 nat- 
 urally was taken in. The other concerns and interests 
 which it was proposed to unify into the new corpora- 
 tion were , the American Steel & Wire Co., the chief 
 figures in which were the late John Warne Gates, Al- 
 fred 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 over $300,000,000. Be- 
 fore 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 ab- 
 sorption of the Lake Superior Consolidated, with its 
 vast ore holdings and steamship fleet, was deemed nec- 
 essary 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 consolida- 
 tion. 
 
 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 ; 
 
33 The United States Steel Corporation 
 
 Common 
 
 Company. Stock. 
 
 American Bridge Co $30,527,800 
 
 American Sheet Steel Co.. 24,500,000 
 
 American Steel Hoop Co. . 19,000,000 
 
 American Steel & Wire Co. 50,000,000 
 
 American Tin Plate Co. . . 28,000,000 
 
 Carnegie Steel Co 160,000,000 
 
 Federal Steel Co. 46,484,300 
 
 Lake Superior Consolidated 
 
 Iron Mines 29,424,594 
 
 National Steel Co 32,000,000 
 
 National Tube Co 40,000,000 
 
 Preferred 
 Stock. 
 $30,527,800 
 24,500,000 
 
 Bonds. 
 
 
 14,000,000 
 
 
 40,000,000 
 
 
 18,325,000 
 
 
 
 $160,000,000 
 
 53.260,900 
 
 
 
 
 27,000,000 
 40000000 
 
 
 
 
 
 Total $459,936,694 $247,613,700 $160,000,(XX) 
 
 The American Bridge Co., as its name implies, was 
 a fabricator of bridge material and structural steel gen- 
 erally. 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 mate- 
 rial. 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 
 at the time of its absorption into the Steel Corporation 
 had a surplus of $4,030,331. Holders of its preferred 
 stock received $1 10 in preferred stock of the new corpo- 
 ration 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 char- 
 tered in December, 1898. Like all the concerns form- 
 ing this group it was considerably over-capitalized. 
 Nevertheless its earnings in the first year of its existence 
 were approximately $3,600,000 or 20% on its preferred 
 capital, and in 1900 they exceeded $5,750,000, or about 
 32% on the preferred capital. At its formation it ac- 
 quired 39 different plants, embracing 279 mills, manu- 
 facturing tin and terne plates. Its preferred stockhold- 
 ers received $125 in U. S. Steel preferred stock for each 
 $100 of their holdings and its common stockholders $120 
 
The Birth of the Big Company 23 
 
 in preferred and $125 in common stock of the new cor- 
 poration 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 large- 
 ly confined to semi-finished products and it had a capa- 
 city of about 1,700,000 tons of steel a year. It had 
 some ore holding 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 over 22% 
 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 stocks 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 man- 
 ufacturing 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% 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 Febru- 
 ary, 1900. This company acquired 164 sheet mills, 19 
 puddling furnaces and a number of open-hearth fur- 
 naces and bar mills. It had a capacity of about half a 
 million tons. Its earnings, from the time it began busi- 
 ness to April 1, 1901, amounted to $1,676,480, and its 
 
24 The United States Steel Corporation 
 
 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 Ca, organized in June, 1899, was 
 a merger of 13 smaller concerns having an aggregate 
 capacity of about 850,000 tons of steel wrought tubing. 
 Its principal plants were located in the Pittsburg dis- 
 trict. In the year 1900 the company reported net prof- 
 its after depreciation of over $14,600,000, or about 35% 
 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 new corporation for each $100 they 
 held. 
 
 The Federal Steel Co., second only in size and import- 
 ance to the Carnegie Steel Co., was chartered late in 
 1898, as a merger of the Illinois Steel Co., Minnesota 
 Iron Co., 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 prod- 
 ucts, in the country, as well as a number of ore vessels 
 and a large interest in the Duluth & Iron Range R. R. 
 Its earnings in 1899 were approximately $9,100,000, or 
 about 17% of its preferred stock and in 1900, $11,722,000, 
 or about 22%. Federal Steel preferred stockholders re- 
 ceived 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 of preferred and 
 $107.50 of the common stock of the U. S. Steel Corpo- 
 ration. 
 
 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 com- 
 pany also owned the Duluth, Missabe & Northern Rail- 
 road, and it was affiliated with the Bessemer Steamship 
 
The Birth of the Big Company 25 
 
 Co., afterwards purchased by the Steel Corporation. 
 The earnings of the Lake Superior company were enor- 
 mous, having been nearly 58% on its capital in 1900. 
 For each $100 of its stock — there was only one class — 
 $135 each of preferred and common stocks 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 over 1,100,000 tons and a wire nail capacity of more 
 than 10,000,000 kegs, or over 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% on its common stock after an allowance of 
 $1,200,000 for depreciation, and in 1900 its earnings ap- 
 plicable to the common stock were $4,202,129, or nearly 
 8j4% 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 & Wire. 
 
 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 Car- 
 negie and his associates. A company that realized 
 profits in 1899 of nearly $24,000,000 and in 1900 of ap- 
 proximately $40,000,000 ! 
 
 The Carnegie Steel Co. was a formal 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, the 
 
26 The United States Steel Corporation 
 
 controlling interest in the Pittsburg, Bessemer & Lake 
 Erie Railroad, not to mention a number of other con- 
 cerns and interests of less importance. 
 
 Unlike most of the other merged companies, the 
 Carnegie Steel Co. had all its steel making plants con- 
 centrated in the Pittsburg district. It was in this lo- 
 cality that Carnegie had built up his great business ma- 
 chine, and his fortune. He had never attempted to 
 build elsewhere, with the exception of his threat to erect 
 a tube plant at Conneaut. Carnegie beheved in the 
 future of Pittsburg. And he himself did more than 
 anyone else to assure that future. Carnegie it was that 
 had made Pittsburg the steel center 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 over 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 550,000 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 fol- 
 lows: for $159,450,000 Carnegie bonds an equal amount 
 of bonds of the new company was exchanged; another 
 $144,000,000 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 re- 
 maining $64,000,000 Carnegie Steel stock. 
 
 In order to provide for the exchange of new stocks 
 and bonds for the securities of the constituent compan- 
 ies the new organization, which it had been finally de- 
 cided 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 
 
The Birth of the Big Company 27 
 
 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,^88 shares of common 
 stock. Practically all the stockholders of the old com- 
 panies, satisfied that with Morgan backing the new com- 
 pany its success was fairly well assured, took advan- 
 tage of the exchange offer, with the result that, at the 
 end of the first nine months of its existence less than 1% 
 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. 
 
 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 ; over 50,000 acres of coking coal lands ; over 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 ag- 
 gregate 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. Pea- 
 body, Percival Roberts, Jr., Charles Steele, William H. 
 
28 The United States Steel Corporation 
 
 Moore, Norman B. Ream, Peter A. B. Widener, James 
 H. Reed, Henry Clay Frick, William Edenborn, Mar- 
 shal Field, Daniel G. Reid, John D. Rockfeller, Jr., Al- 
 fred Clifford, Clement A. Griscom, William E. Dodge, 
 Nathaniel Thayer and Abram S. Hewitt. 
 
 Their fortunes, if it were possible to add them to- 
 gether, would amount to a sum vastly greater even 
 than the huge capital of the "Steel Trust." 
 
 Charles M. Schwab was chosen president of the cor- 
 poration, Arthur F. Luke, treasurer, and Richard Trim- 
 ble, 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. 
 
 Prophecies of the Pessimists. 
 
 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 dol- 
 lars of common stock represented by no tangible as- 
 sets, in fact, pure water. It was questioned if profits 
 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 organiza- 
 tion 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 
 
The Birth of the Big Company 39 
 
 faith in the "Steel Trust" as a practical business propo- 
 sition. 
 
 But incredible as it may have seemed to those ac- 
 customed to the vagaries of high finance, 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 busi- 
 ness enterprise. They believed in its future. 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 monu- 
 ment more lasting than brass? 
 
 It has been admitted that a large part of the Steel 
 Corporation's original capital was water. Just how 
 much was water will never be decided. Herbert Knox 
 Smith, Commissioner of Corporations under President 
 Roosevelt, estimated that substantially half of the cor- 
 poration's total issue of securities was not based on any 
 tangible property assets. Other critics have gone fur- 
 ther, while some have placed the amount of overcapital- 
 ization at a lower figure. However, Mr. Smith's fig- 
 ures, so far as they go, are probably approximately 
 correct. 
 
 But does the value of tangible assets indicate actual 
 value? Does the cost of erecting a factory or a busi- 
 ness indicate the value of that business? Manhattan 
 Island, if the familiar story be correct, 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 
 
30 The United States Steel Corporation 
 
 may have been overcapitalized, their value to the new 
 corporation and to their stockholders was greater than 
 their capitalization. 
 
 Value of the Carnegie Co. 
 
 The actual plant value of the Carnegie Steel Co., to 
 take one instance, has been placed at about $75,000,000. 
 That is, these plants 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 not less than $250,000,000. 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 enter- 
 prises 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 bar- 
 gaining and without doubt the result was that in more 
 than one case the final price was well 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, for which I 
 will not vouch, concludes that Carnegie never forgave 
 himself for his too modest demands. 
 
The Birth of the Big Company 31 
 
 "Blue Sky" Behind Common Stock. 
 
 The genferal consensus of opinion is that the corpo- 
 ration's bonds and preferred stock were both amply 
 protected at the time of its organization, but that the 
 junior stock had been left nothing but the "blue sky" 
 behind it. Even admitting the justice of this claim — 
 at the time in question — such a state of things no longer 
 exists. Whatever water once permeated the capital 
 of the United States Steel Corporation has been 
 squeezed out. Year by year the directors have voted 
 large sums out of earnings for the building of new 
 plants, the extension of old ones, until approximately 
 $500,000,000 has been expended in this manner, thus 
 providing adequate protection for the common stock 
 and putting the company today beyond reach of criti- 
 cism on the charge of overcapitalization. 
 
 When the corporation began its existence the plants 
 of its subsidiary companies, as we have seen, had a 
 capacity of over 9,000,000 tons of steel, while its fur- 
 nace capacity was considerably less. The corporation 
 was compelled to purchase a large proportion of its 
 pig iron requirements in the open market. Today its 
 plants are capable, working full, of producing nearly 
 20,000,000 tons of steel ingots and nearly all the pig iron 
 it needs. In other words, its steel capacity has been 
 doubled and its resources for making its own raw ma- 
 terial more than doubled. And practically all this 
 gain in production has been attained by devoting profits 
 to additions and expansion with the object of putting 
 actual plant value behind every dollar of stock issued. 
 
 Today the directors of the Steel Corporation are satis- 
 fied that its' entire capital is amply protected by assets. 
 Evidence of this is found in the fact that the policy of 
 using profits for building new mills and furnaces, or 
 to acquire additional property, has been abandoned 
 and it is planned to finance future expansion by the 
 issuance of bonds, which will permit stockholders to 
 
32 The United States Steel Corporation 
 
 share more liberally in profits than they have in the 
 past. 
 
 We have seen how the Steel Corporation vsras formed 
 as a consolidation of ten of the leading steel producing 
 concerns of the United States, w^ith a combined capacity 
 of very nearly two-thirds of the country's total 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 af- 
 fecting the general welfare of industry and of the coun- 
 try and its organizers and managers, in consequence, 
 cannot resent any fairminded investigation into the use 
 it has made of its powers. Has the Steel Corporation's 
 existence been prejudicial to the interests of its com- 
 petitors, its customers, its employees, or through these, 
 of 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 the subject at this point. 
 
 Since the Steel Corporation began its existence a 
 number of new steel companies have sprung into being, 
 while the older so-called independents have greatly 
 increased their output. While the corporation has 
 added possibly 7,000,000 tons to its capacity, its com- 
 petitors have added a still larger amount, so that the 
 big company at present controls less than half the fin- 
 ished steel production of the United States. 
 
 I have been unable, after painstaking investigation, 
 to find any evidence of the Steel Corporation's having at 
 any time used its immense wealth to undersell a com- 
 petitor, large or small, with the purpose of driving it out 
 of business, while I have discovered more than one 
 instance where it has assisted competitors. A com- 
 pany, 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 always square and 
 above suspicion, and it is a noteworthy fact that the 
 
The Birth of the Big Company 33 
 
 "Steel Trust's" competitors have time and again de- 
 clared 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 some quarters. This is a 
 poor compliment to the heads of some of the country's 
 leading industries and no one who knows men like 
 Charles M. Schwab, John A. Topping, James A. Camp- 
 bell, Willis King and the other big "independents" would 
 consider the charge for an instant. 
 
 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 
 acted to prevent prices reaching an abnormally high 
 level in boom times, when overwhelming demand had 
 placed the market in control of the seller of steel, by 
 setting a maximum quotation at what it considered a 
 fair profit level, and has thus protected the customer 
 whose urgent need of steel at a particular time might 
 have forced him to buy at a figure which would have 
 been unprofitable for him. Such a course was pursued 
 no later than 1912-1913 when the corporation fixed $1.40 
 per 100 lbs. as its price for bars and accepted all busi- 
 ness offered at this price, although it was possible to 
 obtain much more, and its competitors were actually 
 getting from $2 to $10 a ton higher as a premium for 
 quick or "preferred" delivery. The corporation refused 
 to give such preferment. "First come, first served" it 
 said, in eflfect. 
 
 And by endeavoring to hold prices in periods of de- 
 pression it has afforded protection to customers who 
 had made big purchases at top prices and who would 
 have suffered heavy losses if their competitors, com- 
 ing into the market later, could have bought their sup- 
 plies of steel at lower quotations than they had. I have 
 asked one big steel consumer after another — not all 
 
34 The United States Steel Corporation 
 
 customers of the Steel Corporation — what he thought 
 would be the effect of the disintegration of the big 
 company, and have invariably received the reply that 
 it would be the worst thing that could possibly happen 
 for the interest of the consumer. 
 
 Has the public, which always pays the bill in a long 
 run, been injured? In the fourteen years that have 
 elapsed since the Steel Corporation began to operate 
 the tendency of steel prices, as compared with those of 
 other commodities, has been almost constantly down- 
 ward. There is no question that quality has advanced. 
 
 Nor has the employee been lost sight of. It is ad- 
 mitted by all familiar with the subject that the Steel 
 Corporation has been the prime factor in the gradual 
 advance of steel workers' wages that has been wit- 
 nessed since the opening of the present century. On 
 several occasions the corporation has increased wages 
 and always without solicitation from the men them- 
 selves. It has refused to reduce wages in times of stress 
 and the worker has always shared in the profits of 
 "boom" times. And what is more important, it has spent 
 immense sums of money in sanitation and other meth- 
 ods of bettering the working man's lot, has helped him 
 to save and invest his money, offering a premium for 
 doing so, and has set an example in industry generally 
 that has done more for the cause of common labor than 
 has been accomplished even by the labor unions. 
 
 Does it seem absurd to accuse the management of the 
 corporation of socialistic leanings? Among the 150,000 
 stockholders of the big company nearly one-third are 
 men who work in its furnaces, mines, mills or offices, 
 and these have become stockholders under the plan that 
 permits employes to acquire stock on the instalment 
 plan and offers a premium as an inducement to hold it. 
 I question whether the history of the industrial world 
 contains such another instance of a step toward owner- 
 ship of the product of labor by labor itself, toward the 
 highest and best socialism. 
 
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 STRAIGHTENING PIPE 
 
CHAPTER III 
 EARLY HISTORY. 1901-1907. 
 
 ECONOMY brought about by integration and in- 
 creased efficiency, and the development of a per- 
 manent and well cultivated export market for 
 American made steel: these, briefly, were the objects 
 for which, its organizers claimed, the United States 
 Steel Corporation was formed. 
 
 Hence it is but hatural that the corporation's early 
 history should concern itself chiefly with the attainment 
 of these results, that it should be a narrative of the steps 
 taken to co-ordinate and harmonize the various units 
 brought together in the new Colossus of Industry, of the 
 work that had to be accomplished, the difficulties that 
 had to be overcome to fulfill its raison d'etre and to 
 bring it to the place it now occupies as the most im- 
 portant business enterprise in the world. 
 
 For it must not be supposed that the mere merging 
 of a number of corporations of different sizes and de- 
 grees of importance by the acquisition of their securities 
 meant that the consolidated company was organized in 
 the true sense. Indeed, the financial organization was 
 the smallest part of the work to be done. As we have 
 seen, the financial transaction that brought together 
 the ten large steel companies forming the United States 
 Steel Corporation was carried through within a few 
 months and with comparatively little effort. Morgan 
 waved his magic wand, lent his power and his name, 
 and the thing was virtually done. But what might be 
 called the physical organization was a bigger task, and 
 it took years to accomplish. And it would not be too 
 much to say that the success of this physical organiza- 
 
36 The United States Steel Corporation 
 
 tion has been the measure of the success of the Steel 
 Corporation. 
 
 Of all the dangers that beset the path of the new 
 corporation the greatest was the fact that it was not 
 an operating company, with so many scattered plants 
 under one central management, but a holding company 
 controlling by stock ownership a number of large indus- 
 trial parts which had previously been controlled by va- 
 rious conflicting interests and each of which continued 
 to operate necessarily under a separate management. 
 
 The corollary of such a state of affairs was that the 
 management of each constituent company troubled it- 
 self solely about the success of its own particular unit 
 and took no interest in the success of the other sub- 
 sidiaries or of the corporation as a whole. And the 
 continuance of such a condition would have made im- 
 possible the attainment of the ends for which the Steel 
 Corporation was formed. 
 
 To illustrate: The Carnegie Steel Co. and the Illi- 
 nois Steel Co., a subsidiary of the Federal Steel Co., 
 had widely separated plants, and, because of the im- 
 portant 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 encroach- 
 ing on the other's territory in some instances, had at- 
 tached 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 a price the same 
 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 Pittsburg and deliver 
 the goods to the road at Chicago at the same quota- 
 tion the Illinois company was making for deliveries 
 from its mills in the very suburbs of Chicago. It is 
 extremely doubtful if such a situation was really ad- 
 vantageous to either company in the long run. It is 
 
Early History. 1901-1907 37 
 
 certain that its continuance would have been distinctly 
 disadvantageous to the corporation that owned the 
 stock of both concerns; it simply meant that the cor- 
 poration would have to pay freight for carrying steel 
 hundreds of miles when it was able to deliver it from 
 a mill practically at the point of delivery. 
 
 The officers of each company were naturally unwill- 
 ing to hand over custom they had built up by their ef- 
 forts 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 or- 
 ganization, it was absolutely necessary that these of- 
 ficers should be brought to realize that they were work- 
 ing first of all for the United States Steel Corporation, 
 that intercompany jealousies must be buried for the 
 common good and the interests of the party made sub- 
 servient 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 iden- 
 tical. 
 
 Andrew Carnegie had built up the greatest steel com- 
 pany 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 part- 
 nership in the great Carnegie company as a reward for 
 meritorious service, and most of his later partners be- 
 came so in just this way. 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 
 
38 The United States Steel Corporation 
 
 the corporation's plants and mines I was impressed by 
 this very spirit of loyalty and co-operation on the part 
 of officers and workers alike, and remarked it to William 
 A. McGonagle, president of the Duluth, Missabe & 
 Northern Railroad. And Mr. McGonagle related the 
 following instance of this spirit of co-operation: 
 
 "When we were planning the big ore concentrator at 
 Coleraine the engineers and other officers of the va- 
 rious companies concerned were called together in con- 
 sultation and certain differences of opinion arose re- 
 garding 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 har- 
 monious 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 for- 
 merly, 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 corpora- 
 tion and identify themselves with it. 
 
 All employees of the corporation were entitled to 
 avail themselves of the benefits of the first, or stock sub- 
 scription, part of the plan. Each year the directors 
 allotted a certain amount of stock to be offered to em- 
 ployees at a price slightly below the prevailing market 
 
Early History. 1901-1907 39 
 
 quotation, with the privilege of payment on the instal- 
 ment plan in small monthly amounts. In addition to 
 whatever dividends were declared on the stock so pur- 
 chased, stockholding employees remaining with the 
 corporation for five years were entitled to a bonus of 
 $5 a year on each share of preferred and $3.50 a year 
 on each share of common stock held. Thus not only 
 were the interests of employer and employed made the 
 same but the worker was enabled to make a profitable 
 investment on the instalment plan, below the market 
 level, besides receiving a handsome bonus on his pur- 
 chase. In the first few years of the operation of the plan 
 only preferred stock was offered, but the appreciation 
 which the plan received led the management to offer 
 both issues in more recent years, and in nearly every 
 case the amount allotted has been liberally oversub- 
 scribed. In the twelve years since the first offering of 
 stock was made (there was none in 1915, the unsatis- 
 factory condition of the steel trade in the later part 
 of 1914 rendering it inadvisable), a total of 505,957 
 shares have been subscribed for under the plan, an 
 average of 42,163 a year. The average number of em- 
 ployees subscribing each year was 23,527. In 1914 the 
 largest subscriptions were recorded, 46,498 employees 
 taking over 90,600 shares of stock. 
 
 In December, 1914, there were 42,300 employees in- 
 terested in the plan, that is, that number were either 
 paying for stock or drawing bonuses under the five 
 years clause. As it is likely that there are many em- 
 ployees holding stock which they acquired in the early 
 years of the plan's operation it would be fairly safe 
 to place the number of the big company's employees 
 who, as stockholders, are interested in its welfare, at 
 50,000 in round figures. It has cost the corporation 
 to maintain the plan since its inception approximately 
 $800,000, but this expense has been more than offset by 
 increased efficiency, loyalty and co-operation. 
 
 Only "the men who occupy official and semi-official 
 
40 The United States Steel Corporation 
 
 positions and who are engaged in directing and manag- 
 ing the affairs of the corporation and of its several sub- 
 sidiary companies" were concerned in the profit shar- 
 ing portion of the plan. This was largely an adapta- 
 tion 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 laborer share in this bonus distribu- 
 tion? It would have been impossible to make anything 
 like an equitable distribution among the employees of 
 every class, especially in view of the fluctuating char- 
 acter of a large mass of the labor employed in the in- 
 dustry. 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 in- 
 creases whether profits were large or small. 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 Shar- 
 ing Plan was perfected steps had been taken to co-ordi- 
 nate the work of the corporation and to bring about 
 economies. First of these was the institution of a sys- 
 tem of comparative cost sheets, immediately after the 
 corporation began its existence. 
 
 The earning of profits for stockholders was the first 
 
Early History. 1901-1907 41 
 
 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 haphaz- 
 ard, 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 arriv- 
 ing 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 of any one department. Moreover, such se- 
 crets 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 con- 
 tribute 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 over 8,000 
 different items, and by their aid the several department 
 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 towards 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 cor- 
 poration's existence! 
 
 This history does not pretend to be a technical trea- 
 
43 The United States Steel Corporation 
 
 tise on the manufacture of steel, hence details of the 
 many ways and means adopted by the corporation to 
 achieve economy would be superfluous. The corpora- 
 tion's method of distributing the ore from the Great 
 Lake region to its various plants, however, is particu- 
 larly worthy of mention as it is a system that could 
 only be employed by a very large concern, such as the 
 corporation, and therefore serves to bear out the claim 
 of the organizers of the big company that immense op- 
 erations were necessary for the manufacture of steel 
 at the lowest cost and highest efficiency. 
 
 Within a few miles of the celebrated Hull-Rust mine, 
 the largest of the great open pit ore deposits of North- 
 ern Minnesota, lies the little town of Hibbing. At this 
 town, which is situated on the line of the Duluth, Mis- 
 sabe & Northern Railroad, the corporation maintains a 
 chemical laboratory well equipped for the analyzing of 
 iron ore, and as each car of ore passes through Hibbing 
 on its way to the docks a small sample is taken out and 
 an immediate analysis made. 
 
 Nor far from the docks are the extensive yards of the 
 D., M. & N., at Proctor, two miles long, with 55 miles 
 of track and capable of accommodating 4,000 cars. 
 About 2,500 cars have been handled in these yards in 
 one day and in one season, that of 1907, some 14,000,000 
 tons of ore passed through them en route to the hun- 
 gry furnaces of the different constituent companies of 
 the corporation. 
 
 Before the trains reach Proctor the chemical content 
 of every car has been ascertained at Hibbing, and the 
 results are telegraphed on, so that the cars composing 
 the train can be distributed on the sidings in accord- 
 ance with the classification of their contents as shown 
 by the chemical tests. Thus, if any company wants a 
 certain grade or mixture of grades of ore, a trainload 
 of that grade or grades is made up at Proctor and sent 
 to the docks for transfer to that company. This means 
 that each furnace gets exactly the kind of ore it needs 
 
Early History. 1901-1907 43 
 
 to fill its orders; it means better and more uniform 
 quality in the finished product It also means a saving 
 to the corporation of several hundreds of thousands of 
 dollars yearly. And this method of assorting and class- 
 ifying ores would be impossible in a small organiza- 
 tion. 
 
 Not least among the economies follovping 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 practiced 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 con- 
 siderable outlay for new plant equipment required, but 
 the services of a corps of trained and experienced chem- 
 ists had to be engaged. And this meant an expense 
 that, especially as the whole by-product idea was in 
 somewhat of an experimental stage, companies even of 
 moderate size as steel companies go hesitated to under- 
 take it. With the corporation's vast resources, many 
 subsidiaries and large output the expense of investigat- 
 ing and experimenting was spread out so as to be 
 hardly felt, a careful study of the subject was made 
 and 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 com- 
 panies have by-product plants to-day) , and finally in ef- 
 fecting an important conservation of the natural re- 
 sources of the country. 
 
 Coke, the fuel used to make steel, is made, as is prob- 
 ably universally known, from coal. In the old days of 
 the trade, and to a great extent still, the coal was 
 burned in big brick ovens with open tops, known as bee- 
 hive ovens, which produced about 60 tons of coke from 
 100 tons of coal and blew out in smoke into the air the 
 oils and gas contained in the coal. In the modern by- 
 
44 The United States Steel Corporation 
 
 product coke ovens about 80 tons of coke are obtained 
 from 100 tons of coal, a gain of 25 per cent. Nor is 
 this saving all. The gases, 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 ben- 
 zol, practically the same as gasoline, as well as other 
 minor products, are extracted, and the gas itself is made 
 available for use in motor engines or in illuminating. 
 More than one large city today lights its streets with 
 the gas from by-product coke plants. 
 
 As it takes over a ton of coke to make a ton of steel 
 it is obvious that the saving of 25 per cent, in the coke 
 yield from coke is an important item to a corporation 
 that produces from ten to fourteen millions of tons of 
 steel a year. And it means just that saving of the 
 natural resources of the country in accomplishing the 
 same result. The profits from the by-products are also 
 material, how much so may be imagined from the fact 
 that the patentees of one process are usually willing 
 to build a by-product plant in connection with a steel 
 works at a cost of several millions of dollars and to take 
 their pay for it from the profits on the by-products 
 alone, handing over the plant itself at the end of twenty 
 years. "You give us the coal and we'll give you the 
 coke — and in twenty years the plant is yours," they 
 say to the steel maker. Needless to say the Steel Cor- 
 poration erects its own plants and derives the full prof- 
 its therefrom. 
 
 Another economy of importance in its saving of both 
 labor and material is found in the generation, from what 
 were once the waste gases of the blast furnace opera- 
 tion, of electric power for running the entire steel mill. 
 
 A very important by-product of the steel industry is 
 Portland cement. This is made from blast furnace slag, 
 not only a waste previously, but a nuisance, as it accu- 
 mulated and had to be freighted away from the mills 
 and "dumped." The Illinois Steel Co. had cement 
 
Early History. 1901-1907 45 
 
 plants at South Chicago for years before the corpora- 
 tion was formed, but the big company extended the 
 manufacture of cement by the erection of new plants, 
 notably the one at Buffington, Indiana, and today its 
 plants have a capacity of some 27,000 barrels of cement 
 daily, worth, say, a little over a dollar a barrel. 
 
 Another new by-product, made from open-hearth 
 slag, is a phosphate fertilizer which has only recently 
 been put on the market. Large quantities of phosphate 
 for fertilizer have been imported in the past and it is 
 hoped by the introduction of this new product to do 
 away, in part, with the necessity for importations. 
 
 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 continent. 
 
 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 (in- 
 cluded in the number of vessels given as taken over by 
 the corporation in a previous chapter). The new or- 
 ganization paid $8,500,000 for the stock of the com- 
 pany, 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 
 
46 The United States Steel Corporation 
 
 having an outstanding capital of $5,000,000 of preferred 
 and $8,150,000 of common stock, was secured, the ex- 
 change of securities being made on the basis of one 
 share of U. S. Steel preferred for 2 2-3 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 corpora- 
 tion a substantial controlling interest. 
 
 In 1901 also the corporation purchased by exchange 
 of stock one-sixth interest in the Oliver Iron Mining 
 Co. and the Pittsburg Steamship Co. The Carnegie 
 Steel Co. already owned the other five-sixths of the 
 securities of both these concerns and this gave the cor- 
 poration complete ownership. 
 
 In December, 1902, an important deal for the absorb- 
 tion of the Union Steel Co. was consummated. This 
 company was a merger, effected only a month or so 
 previous to its absorbtion 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 inter- 
 ests 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 pro- 
 vide 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; 
 
Early History. 1901-1907 47 
 
 total $33,202,490; less liquid assets taken over with 
 the properties, $2,341,989; net cost $30,860,501. 
 
 By this transaction the corporation acquired five 
 blast and 24 open-hearth furnaces, 2 blooming and slab- 
 bing mills, 4 rod mills, 2 vi^ire 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, 4,740 acres of coking 
 coal, 1,524 acres of steam coal, and the ownership of 
 two mines and leases on another two in the Mesabi 
 Range with an estimated ore deposit of 40,000,000 tons. 
 
 The absorbtion 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, 
 as given by Judge Gary, were twofold. The Union 
 Steel Co., he said, owned blast and open-hearth furnaces 
 the securing of which obviated the necessity of the cor- 
 poration 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. Perhaps a more cogent reason was to be 
 found in the desire of the corporation's management 
 to center 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 its 
 affairs. His experience and ability made his full co- 
 operation in the directorship of the big company desir- 
 able and this had a great deal to do with the purchase. 
 
 Seventeen months later, in May, 1904, the Qairton 
 Steel Co., which operated three blast and 50 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 
 
48 The United States Steel Corporation 
 
 bonds (bought in the open market and costing the cor- 
 poration $813,850), and the guaranteeing of bonds to 
 the amount of $10,230,000 outstanding against the Clair- 
 ton 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 Mesabi 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 capac- 
 ity 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 hav- 
 ing proved unprofitable. 
 
 Hardly had the United States Steel Corporation com- 
 menced 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 con- 
 stituent 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 ob- 
 vious that if the corporation were to need ready cash in 
 a time of stress the amount wanted would not be a mat- 
 ter of a million or so but of many millions and it would 
 be impossible to obtain a very large sum at such a time 
 
Early History. 1901-1907 49 
 
 except at a great loss. By increasing fluid assets the 
 probability of the need for borrowing would be min- 
 imized. 
 
 The issuance of $50,000,000 new preferred stock or 
 second mortgage bonds was discussed at length, but 
 these courses were not favored as either, aside from the 
 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 the stock of the corpora- 
 tion. 
 
 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 syndi- 
 cate, headed by the Morgan firm, was formed which 
 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 re- 
 
50 The United States Steel Corporation 
 
 fund the commission in a comparatively short time 
 but would be more than suflficient to meet sinking fund 
 requirements for paying off the entire second mort- 
 gage 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 
 over $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 ques- 
 tioned 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 doubt- 
 ful if 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 the consummation of the plan. 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 ex- 
 change 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 neces- 
 sary, the plan can hardly be said to have been an emi- 
 nent success. Exclusive of the syndicate operations 
 
Early History. 1901-1907 51 
 
 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 dis- 
 solution, 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 in3tead of the 
 desired $40,000,000, the actual cash gain to the corpora- 
 tion from the transaction was $20,000,000, less a syndi- 
 cate commission of $6,800,000, or $13,200,000 net. 
 
 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 the 
 twelve years since elapsed $24,000,000, nearly four 
 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 48 
 years, will be nearly $9,500,000 annually. 
 
 One of the criticisms hurled at the plan was that 
 its real object was to enable the syndicate, and espe- 
 cially 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 best opinions of 
 financial authorities is that Mr. Morgan and his asso- 
 ciates in the syndicate actually suffered a loss of some- 
 thing 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 
 
52 Thk United States Steel Corporation 
 
 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 dom- 
 inant figure in another faction that had the foresight, 
 to perceive that a new day was dawning in industry, 
 an era of co-operation between manufacturer and manu- 
 facturer, 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 a 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 the 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 ascend- 
 ency in determining the courses of action of the cor- 
 poration. Always its chief executive officer he eventu- 
 ally became, to all intents and purposes, the corpora- 
 tion. 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 today ranks high among the steel making com- 
 panies 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 of- 
 fice. William Ellis Corey, President of the Carnegie 
 Steel Co., was chosen President of the corporation to 
 
Early History. 1901-1907 53 
 
 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 Chair- 
 man 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, since when Judge Gary has filled the 
 offices of Chairman of the Finance Committee and 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 5j4 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 disburse- 
 ments, $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 over $14,000,000 was put aside for deprecia- 
 tion 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 $34,253,657. 
 
 The following year was one of general business de- 
 pression 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 
 31, 1903, unfilled orders on the books of the subsidiary 
 
54 The United States Steel Corporation 
 
 companies aggregated 3,215,123 tons, against 5,347,253 
 tons a year previous. This falling oflf in orders was ac- 
 companied by declining prices and the directors of the 
 corporation were impelled to reduce the quarterly divi- 
 dend on the common stock for the third quarter from 
 1 per cent to one-half of 1 per cent, and to pass 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 $12,304,- 
 917. 
 
 Several changes in the make-up of the subsidiary com- 
 panies 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 com- 
 panies and the American Steel Hoop Co. were merged 
 into one concern, known first as the National Steel Co., 
 the name being later changed 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. Gross sales for the year were only $444,- 
 405,431, and net profits $73,176,522. No special appro- 
 priation for new construction was made and, despite the 
 small profits, the corporation managed to show a sur- 
 plus 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 improve- 
 ment in 1905. Gross sales amounted in value to $585,- 
 331,736, and net profits to $119,787,658. 
 
 A surplus of $43,365,815 was reported after the pre- 
 
Early History. 1901-1907 55 
 
 ferred dividend payment, but $26,300,000 was deducted 
 for new construction in contemplation, so that the net 
 amount added to surplus was $17,065,815. 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 con- 
 struct and put into operation a new plant to be located 
 on the south shore of Lake Michigan, in Calumet Town- 
 • ship. 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 stand- 
 ard. * * *" 
 
 About the time these words were being written work 
 on the new plant was being started and the foundations 
 of a new city, now having a population of 40,000, 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 over 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 pro- 
 duced over 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 divi- 
 
56 The United States Steel Corporation 
 
 dends 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 expendi- 
 tures on the Gary plant and for other purposes were 
 made, calling for $50,000,000, this reducing the net car- 
 ried to surplus account to $12,742,860. 
 
 Another important event of the year in the corpora- 
 tion'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 prof- 
 itable 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 BufHngton, 
 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 negotia- 
 tion of a lease by the corporation on the ore properties 
 owned by the Great Northern and Northern Pacific 
 railway companies, commonly known as the Hill Lease. 
 
 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 com^ 
 mensurate with its immense output and the obvious 
 conclusion was that it would not fail to secure such re- 
 serves sooner or later. The vast properties in the Mes- 
 abi Range owned by the railroads dominated by James 
 J. Hill constituted, it was claimed, the only commer- 
 cially 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. 
 
Early History. 1901-1907 57 
 
 Negotiations leading up to the lease went on for sev- 
 eral years before the matter was finally brought to a 
 head in December, 1906. The lease, which was prob- 
 ably 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 declined to enter into the 
 lease unless it should contain a provision for cancella- 
 tion, and it later exercised this right, the directors at the 
 close of 1912 serving notice of their intention to aban- 
 don the lease in two years. 
 
 Comprised in the Great Northern ore lands were 
 some of the richest and best iron deposits in the coun- 
 try. Of a total area of over 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 in- 
 cluded 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 Great 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 was expired by reason of ore ex- 
 haustion. 
 
 Royalties on the ore mined were based on a price 
 of 85 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 con- 
 tract providing that all the ore was to be shipped via 
 the Great Northern Railway. For each variation of 1 
 
58 The United States Steel Corporation 
 
 per cent, above or below the 59 per cent, metallic con- 
 tent, 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 into one of motives and is therefore not sus- 
 ceptible 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 ex- 
 perts 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 does not 
 now have such a necessary supply. Further, it is doubt- 
 ful if, outside of the Hill holdings, a large enough re- 
 serve 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 borne out 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 trans- 
 action, 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 orig- 
 inally demanded by Mr. Hill and his associates, it is 
 understood, was one dollar a ton and it took some three 
 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 corpora- 
 tion were impelled to their decision by the report of 
 Commissioner of Corporations, Herbert Knox Smith, 
 
Early History. 1901-1907 59 
 
 who conducted a searching investigation into the cor- 
 poration'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" which was pending at the time of the 
 cancellation. 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 con- 
 tent of the Hill ores, it is understood, 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 Cor- 
 poration had spent over $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 diffi- 
 culties were past and it seemed about to enter into the 
 heyday of its prosperity, 
 
en 
 H 
 O 
 
 O 
 g 
 
 o 
 g 
 5 
 o 
 
CHAPTER IV 
 THE TENNESSEE PURCHASE 
 
 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 assert, 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 Ten- 
 nessee company, a competitor said to have been mak- 
 ing 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 equally 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 controUing 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 war- 
 rant 
 
62 The United States Steel Corporation 
 
 If the claims of the first are correct and the corpora- 
 tion 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 di- 
 rectors, put the national welfare before all other con- 
 siderations 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 consideration. 
 
 And here let me state that although I have made a 
 careful search through all the evidence submitted by 
 the Government to this end in its pending suit against 
 the big company, I have failed to find one iota of evi- 
 dence which, so far as I can see, connects the corpora- 
 tion with the panic or upholds the charge that it con- 
 spired to force the Tennessee stockholders to sell. Not 
 long ago I put the question bluntly to a man who had 
 been a member of the syndicate that controlled the for- 
 tunes 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: 
 "Did the Steel Corporation use its power to create the 
 panic of 1907 so as to gain possession of the Tennessee 
 stock?" He replied: "Absurd. The charge is baseless 
 — except in politics. The sale of the Tennessee com- 
 pany 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." 
 
 The Tennessee Coal, Iron & Railroad Co. was a re- 
 organization of an earlier concern of the same name 
 
The Tennessee Purchase 63 
 
 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 plausi- 
 bility 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. 
 
 Emphasis has been laid on the Harriman order, par- 
 ticularly because the Tennessee company had con- 
 tracted to supply the lines controlled by the great rail- 
 road magnate with the new open hearth steel rail, then 
 coming into popular favor with the railroad experts 
 and which today 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 com- 
 bination of the bessemer and open hearth processes, 
 and the corporation at the time was engaged in build- 
 ing its new plant at Gary, a plant which was to include 
 a large rail mill to make open hearth rails exclusively. 
 
64 The United States Steel Corporation 
 
 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 wljich had been sup- 
 plied 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 exten- 
 sion of credit eventually carried to a point where busi- 
 ness 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, in- 
 dustry 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 aver- 
 age citizen, without warning, the big bankers had seen 
 the danger threatening and had made an effort to pre- 
 vent 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 af- 
 fairs with a view to rendering it assistance. Apparently 
 the result of this investigation was unsatisfactory. Any- 
 way, the Knickerbocker Trust Co. was abandoned to its 
 
The Tennessee Purchase 65 
 
 fate and, at fifteen minutes to one, on October 22, 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 nor- 
 mal conditions it was perfectly solvent and able to 
 meet its depositors' claims, but that it was not in a posi- 
 tion to withstand a prolonged run was proved by sub- 
 sequent 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 22d he held a con- 
 ference 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 telephone. 
 
 These were strenuous days for bankers. No com- 
 ing 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 23d. By seven the ex- 
 aminers were at work. 
 
66 The United States Steel Corporation 
 
 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 im- 
 mediately. 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 23d, $13,500,000 was paid 
 out over the trust company's counters ! But this was 
 not enough to stem the run which continued for over 
 a week and did not abate until, so far as can be esti- 
 mated, something between $30,000,000 and $35,000,000 
 was paid to depositors. 
 
 But the Trust Co. of America was saved. It has been 
 claimed that the price of its salvation was the sur- 
 render by its president of some 5,500 shares of Ten- 
 nessee 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 bank- 
 ers, headed by Morgan, had loaned the trust company 
 $12,500,000 without any mention of or question regard- 
 ing the stock. It also appears that the transfer of 
 
The Tennessee Purchase 67 
 
 Thome'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 com- 
 munity 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, even 
 slept in its luxurious chairs. 
 
 The task that Morgan and his associates had under- 
 taken 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. 
 
68 The United States Steel Corporation 
 
 Moore & Schley was deeply mixed up with the af- 
 fairs of the Tennessee Coal, Iron & Railroad Co. One 
 of the members of the firm was a member of the syndi- 
 cate 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 charac- 
 ter — 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 pur- 
 chase 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 pos- 
 sible 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 Corpora- 
 tion's supposed fear of the Tennessee company's com- 
 petition was that the company was the potential basis 
 
The Tennessee Purchase 69 
 
 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 ad- 
 vantage over in exporting steel to Mexico and Cen- 
 tral 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 con- 
 struction of locks and dams and other improvements on 
 the Warrior River so as to give slack water communica- 
 tion between Birmingham, Ala., near which city the 
 mills of the Tennessee company were situated, and Mo- 
 bile, was decided on. But the matter rested there un- 
 til Topping, by his efforts, secured an appropriation 
 to carry out the improvements, which, it happens, 
 should be completed about the time this is published. 
 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 rates. 
 
 Reports that a steel merger in the South was con- 
 templated 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 manu- 
 facture of iron and was a rather small concern as com- 
 pared with the steel giants of the day. But it was con- 
 servatively capitalized and managed and had — and 
 still has — an unbroken dividend record in respect to 
 its preferred stock. At its head was, and is, Colonel 
 
70 The United States Steel Corporation 
 
 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 Ten- 
 nessee directors with a merger proposition, but refused 
 to consider it because, as he has since Sciid, 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 defi- 
 nitely 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 Werne, or "Bet You a Million" Gates, 
 looked upon their investment therein first and foremost 
 as a speculation and would, in consequence, have re- 
 garded 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 em- 
 pire. The amalgamation of the two companies, nat- 
 urally, would have been the first step to this end, and, 
 as has been stated, it had been decided on and its con- 
 summation 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-quar- 
 ters of a billion tons of iron ore, besides coal resources 
 placed at two billion tons, as well as limestone and 
 
NEAR VIEW OF 15-TON ELECTRIC UNLOADER ENTERING HATCH 
 OF VESSEL 
 
 ORE CARRYING STEAMER. ELBERT H. GARY. SHOWING HULETT 
 UNLOADING MACHINE AT THE STERN 
 
The Tennessee Purchase 71 
 
 other raw materials necessary in the manufacture of 
 steel. The company also enjoyed the undoubted ad- 
 vantage of having both its coal and iron in the ground 
 within a twenty-five mile radius of its ovens and fur- 
 naces — it was "sitting on its raw material" — whereas 
 the steel mills in the North were great distances from 
 their raw supplies — Pittsburgh, for instance, depend- 
 ing 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 gener- 
 ally 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 Corpora- 
 tion was to pay on the ore taken out of the Great North- 
 ern holdings in the Mesabi region was based on an iron 
 content of 59%. Northern ore averages well over SO^J) 
 metallic content and that yielding much under 50% 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 Lake region lies in immense bodies within a 
 few feet of the earth's surface and is mined by the sim- 
 ple process of removing the top layer of soil — ^tech- 
 nically known as stripping — and then putting a steam 
 shovel to work. 
 
 But the ore beds from which the Tennessee com- 
 pany draws its raw supplies average well under 40% 
 in iron, actually from 36% to 37%, nor does it 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. 
 
73 The United States Steel Corporation 
 
 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 neces- 
 sitates 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 district. 
 
 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 re- 
 quired in the straight open hearth process, prevents the 
 economical use of this process in the South, a disadvan- 
 tage 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 steel. 
 
 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 today what you can put off until tomorrow." 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 manu- 
 facturer who needs a full force to get out tonnage. 
 
 And even if the negro is reliable he is seldom fitted 
 
The Tennessee Purchase 73 
 
 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 manu- 
 facturer, 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 indus- 
 tries, and there are comparatively few industries in 
 the South. Thus it would seem that the formation of 
 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 sig- 
 nificance of the fact that the Republic Iron & Steel Co., 
 which owns important tracts of ore and coai' 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 
 North. 
 
 These things, the conditions that surrounded and in- 
 fluenced steel making in Alabama, were well known in 
 the steel trade. Therefore it was hardly to be won- 
 dered at that when Ledyard, through Morgan, sug- 
 gested 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. 
 
74 The United States Steel Corporation 
 
 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, Nov. 1, when Led- 
 yard first presented the matter to the banker, meetings 
 of the Steel Corporation's finance committee and con- 
 ferences between Gary and Frick and representatives of 
 Moore & Schley were held almost continuously until 
 Sunday, Nov. 3, 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 and Railroad Company 
 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 atti- 
 tude should be ascertained, and Frick demanded and 
 received an assurance from Morgan that every assist- 
 ance possible would be rendered other companies which 
 were in difficulties before the purchase should be con- 
 summated. 
 
 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 day- 
 break 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 
 
The Tennessee Purchase 75 
 
 whether the Government would be antagonistic to the 
 absorb tion of the Southern company. Gary, who was 
 spokesman, told the President that he and his associ- 
 ates realized that the deal might be used as a handle to 
 attack the corporation for attempted monopoly — pro- 
 phetic words — that they were only considering the pur- 
 chase 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, afterwards Collec- 
 tor of Customs of New York, and Elihu Root, Secre- 
 tary of State. Then 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 trans- 
 action. 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 trans- 
 action. 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 memora- 
 ble morning, Monday, Nov. 4, had dawned dark and 
 gloomy for the financial world for which Wall Street 
 is the nerve center, but no sooner had Morgan's an- 
 nouncement become known than a marked change 
 
76 The United States Steel Corporation 
 
 towards a more optimistic sentiment, a genuine im- 
 provement in the situation, become apparent. This 
 the banker repeatedly and emphatically declared before 
 his death. 
 
 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 mort- 
 gage 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 ofifered the same terms 
 and the corporation has since acquired all the outstand- 
 ing common stock of the southern company except 872 
 shares. The $124,500 preferred and $178,600 guaran- 
 teed preferred stock of the company is all held outside 
 of the Steel 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 some- 
 what 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 ex- 
 pected 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 com- 
 mon stock, 1 per cent., was declared. But the value of 
 the properties and their earning power has been enorm- 
 ously enhanced and this will show its effect on future 
 profits. 
 
J. p. MORGAN 
 
 GEORGE W. PERKINS 
 
CHAPTER V 
 THE MEN OF THE CORPORATION. 
 
 ELBERT HENRY GARY, chief executive officer of 
 the United States Steel Corporation, was born on 
 a farm near Wheaton, Illinois, on October 8, 1846. 
 He was a descendant of old New England stock on one 
 side and of French on the other, the forebears of his 
 father, Erastus Gary, having been among the early 
 Puritan settlers in Massachusetts, while his mother, 
 Abiah Vallette Gary, was sprung from one of the daring 
 spirits who sailed from France in the train of Lafayette 
 and fought with him for the freedom of the American 
 colonies. 
 
 The future head of the Steel Corporation was brought 
 up frugally. Full of spirits and fond of play, he was 
 more or less repressed by his Puritan father, who was 
 a believer in the discipline of hard work. His days were 
 spent at school, his mornings and evenings doing chores 
 around the farm or studying. "My father didn't be- 
 lieve much in play," he once told me. But though Eras- 
 tus Gary may have been stern and uncompromising he 
 was at the same time a fond and kindly father. When 
 I asked his son what had been the dominating influence 
 in his life, to what he attributed his success, he replied 
 with deep feeling : "My parents. Whatever worth while 
 I may have done I owe to their teaching and example." 
 
 Among the friends of the older Gary were Col. Henry 
 F. Vallette and Judge Hiram H. Cody, members of the 
 Illinois bar and the firm of Vallette & Cody, of Naper- 
 ville, a neighboring town. Both were often at the Gary 
 farm and were impressed with the signs of ability El- 
 bert displayed. When young Gary was about eighteen 
 
78 The United States Steel Corporation 
 
 Vallette asked him: "Elbert, how would you like to 
 become a lawyer?" 
 
 Thus was Gary's entrance upon the legal stage ef- 
 fected. He entered Vallette's office, and in 1865 began 
 to read law. After spending a year and a half in the 
 law office he took a regular course in a law school, and 
 was soon admitted to the bar of his State, where his 
 success was rapid and pronounced. Later he became 
 Judge of Du Page County and was admitted to the 
 bar of the Supreme Court of the United States. Mean- 
 while he had formed, with his brother Noah and his 
 former chief the firm of Gary, Cody & Gary. His suc- 
 cess attracted to him a number of wealthy clients, among 
 whom were many large corporations, and it was through 
 his connection with one of these corporations that he 
 eventually connected himself exclusively with the steel 
 trade, in which he has since risen to be the most com- 
 manding 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. Here Gary was for 
 the first time brought into close touch with the late 
 J. Pierpont Morgan, whose financial aid in the forma- 
 tion of the company was being sought, and the busi- 
 ness ability of the lawyer so impressed the banker that 
 he and others interested in the new company insisted 
 that Gary should be its president. This brought Gary 
 to New York and made him a steel man. 
 
 Speaking of this incident an old friend of Judge Gary's 
 said: "Legal judgment and business acumen are sel- 
 dom found in combination. Gary had both these quali- 
 ties, and in a higher degree than in any other man I 
 have ever known." 
 
 In writing of the great majority of men it is easy to 
 select some one prominent characteristic which particu- 
 larly distinguishes them. But there are some who owe 
 their eminence, we find, to a variety of well blended 
 
The Men of the Corporation 79 
 
 attributes, and Gary is one of these. This renders it 
 difficult for the chronicler to decide where the heaviest 
 stress should be laid. 
 
 A prominent Chicago lawyer, one who in his youth had 
 worked for years under Judge Gary, was appealed to in 
 this regard. 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." 
 
 This lawyer went on to tell an anecdote illustrating that 
 the Judge, although a member of the legal profession, did 
 not believe in recourse to litigation when it could be 
 avoided. He said: 
 
 "I recall on one occasion a client called on him in 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 the reply he received was 'If 
 you are guilty of what he charges perhaps you had better 
 sue ; but if you are not — why, go home and forget it.' " 
 
 Perhaps the most striking characteristic of Judge 
 Gary is his "prophetic vision," not only as regards "the 
 positions which the courts must take," but of the trend 
 of human events. There is nothing in the least uncanny 
 about this foresight, this "sixth sense" as he himself 
 calls it. It is due entirely to the fact that its possessor 
 has a mind peculiarly capable of estimating, sizing up, 
 the relative value of causes, of known things and occur- 
 rences, and of deducing therefrom the natural, the inevi- 
 table results. 
 
 No better exemplification of this can be g^ven than 
 is afforded by the policies which he advocated for the 
 corporation, and which were gradually adopted and 
 practiced. He saw plainly how subject to criticism was 
 
80 The United States Steel Corporation 
 
 the gigantic organization which he had helped to form 
 and of which he was the head ; he realized that its very 
 size was its weakness, as attracting enmity and making 
 it a subject for attack. And in the face of powerful 
 opposition from many of his fellow directors at first — 
 an opposition that gradually grew less and eventually 
 vanished, or was converted into hearty co-operation — 
 he insisted that the corporation should so deal with all 
 with whom it came in contact, its competitors, its cus- 
 tomers, its workmen, as to make all these its friends. 
 Such a consummation was regarded as an impractica- 
 ble dream by men who were unable to divorce them- 
 selves from the old ideas of doing business, who could 
 not realize that a new industrial era had dawned, but 
 Gary persisted and won out. The good will he gained 
 for the corporation of those who otherwise would have 
 been its enemies has proved a strong bulwark of de- 
 fense, as was shown during the trial of the Federal suit 
 for the dissolution of the "Steel Trust." It is difficult 
 to see how any one who had the opportunity to listen 
 to the evidence presented at this trial could have failed 
 to be impressed with the fact that Gary seemed to 
 have seen in advance every point of attack and to have 
 taken steps to minimize or eliminate the danger there- 
 from. 
 
 Whatever may have been the differences of opinion at 
 first, for many years the policies advocated by Gary .have 
 been endorsed by his fellow directors on the board of 
 the Steel Corporation, and particularly by the members 
 of the Finance Committee who have stood behind him 
 solidly in carrying them out. Gary himself was emphatic 
 on this point in his testimony in the Government suit. 
 
 The part Gary played in bringing about the forma- 
 tion of the U. S. Steel Corporation and in guiding its 
 policies was strongly brought out by Robert Bacon 
 in his testimony in the Federal suit against the cor- 
 poration. Bacon, speaking of the organization, said: 
 
The Men of the Corporation 81 
 
 "Judge Gary, of course, directed it all." And later, in 
 discussing the policies of the big company : 
 
 "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 develop- 
 ment 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 towards dealing fairly 
 and decently with competitors, as being the only way 
 in which any kind of stability of prices or of condi- 
 tions 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 rea- 
 son 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 existed." 
 
 Other marked attributes of Judge Gary are his in- 
 tense desire for justice to all and his sincere in- 
 terest in the well being of the worker. He is not a 
 reformer in the ordinarily accepted sense of the term. 
 He does not prate about helping the workingman, but 
 in guiding the big corporation he has always seen to 
 it that the man who labors shall be given a chance for 
 
82 The United States Steel Corporation 
 
 clean living and self respect. And the men who work 
 for the corporation recognize and appreciate this fully. 
 
 Judge Gary, I think, sets a higher value on this rec- 
 ognition and appreciation than on all the other honors 
 that have come to him. I remember an incident told me 
 by one of the officers of the corporation in this regard. 
 
 "Some time ago," he said, "two men from the mining 
 regions were in New York to see me in connection with 
 their work and they asked whether it would be possi- 
 ble to meet the Judge, whom they had never seen. I 
 took them to his office and Judge Gary received them 
 immediately, rising to greet them with outstretched 
 hand. And one of the two, as he shook hands said: 
 'Judge, I could not have gone back to my fellow work- 
 ers without being able to tell them that I had expressed 
 to you in behalf of all of us the loyalty and apprecia- 
 tion we feel towards you personally, our knowledge of 
 the interest you take in us.' " 
 
 And here is what, to me, is a remarkable thing. In 
 the vast organization that is the Steel Corporation there 
 are thousands upon thousands of men who have never 
 seen its head, who have no idea what he is like to look 
 at. But I doubt if there is one man who does not know 
 and feel his influence, who does not look up to him 
 with respect and something like reverence. His person- 
 ality 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. Judge Gary has built up a 
 vast organization founded on what he conceives to be 
 principles of justice and fair dealing, but his attitude 
 towards those who criticize the structure he has erected 
 is not one of impatience, as might be expected, or of 
 irritation. 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 utterly that he had not 
 
The Men of the Corporation 83 
 
 offended, forthwith abandoned the continuance of these 
 acts so as to leave no shadow of doubt as to his intent 
 to obey the law. He explained at the time that though 
 every citizen had the right to criticize legislation, and 
 to 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. 
 
 It is perhaps only right to state here in correction of 
 a general but erroneous impression that Judge Gary 
 never speculates, never "plays the market." The aver- 
 age man is inclined to believe that the officials of large 
 corporations almost invariably make use of special 
 knowledge that comes to them through their work to go 
 "short" or "long" on margin. No doubt this is true of 
 many, although not nearly to so great an extent as is 
 supposed. And it is not true of Judge Gary. 
 
 In stature Judge Gary is of medium height. He car- 
 ries his years well and appears still in the prime of his 
 vigor. The impression he gives the observer is more 
 that of a diplomat than of the man of affairs, an im- 
 pression that is heightened by his slow and 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 Judge Gary invariably stands, or rather, 
 paces slowly back and forth, his hands sunk deep in his 
 trouser pockets and his head bent 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 
 beaming eyes light up the rest of his decidedly serious 
 face. 
 
 Honors have been showered upon Judge Gary by uni- 
 versities, rulers, even by the Pope, the late Pius X, 
 having presented him with a gold medal in recognition 
 of his efforts for the bettering of working conditions, 
 but I think he values above all else the esteem of the 
 
84 The United States Steel Corporation 
 
 men under him and the good will of his competitors. In 
 closing this brief study of the head of the Steel Cor- 
 poration it would be hard to find a more suitable end- 
 ing than in repeating the quotation used regarding him 
 by the leading steel makers of the United States and 
 Canada on the occasion of a dinner given in his honor 
 in October, 1909. These were men who had fought 
 with him and against him, who had had every oppor- 
 tunity to estimate his value 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." 
 
 J. P. MORGAN. 
 
 Without J. P. Morgan the organization of the United 
 States Steel Corporation would, in all probability, have 
 been impossible. The carrying through of so immense 
 a project required the prestige of the man whom the 
 bead of the great Deutsche Bank has called "the great- 
 est financier the world has ever seen." There was no 
 other banker big enough or, perhaps, bold enough, to 
 undertake the task, and this is why no history of the 
 Steel Corporation would be complete unless it con- 
 tained a brief resume of the life of Morgan, brief, 
 necessarily, because he loomed so large in the public 
 eye during his lifetime and so much has been said and 
 written about his personality that it would probably 
 be impossible to say anything of Morgan with which 
 the reader is not already familiar. 
 
 John Pierpont Morgan, son of Junius Spencer and 
 Juliet Morgan, was born on April 17, 1837, and received 
 his education at the English High School of Boston 
 and at the University of Gottingen. He entered the 
 banking business with the firm of Duncan, Sherman & 
 Co. at the age of twenty, and later, from 1864 to 1871, 
 was a member of the banking house of Dabney, Mor- 
 
The Men of the Corporation 85 
 
 gan & Co. Still later Mr. Morgan helped to form the 
 firm of Morgan, Drexel & Co., which afterwards be- 
 came J. P. Morgan & Co. He died at Rome within a 
 few weeks of the close of his 76th year, on March 31, 
 1913. 
 
 Morgan had a peculiar genius for financial organiza- 
 tion, and, being in the heyday of his power at the time 
 when vast organizations and combinations of industry 
 and capital were the order of the day it was natural 
 that he should have figured prominently in carrying 
 through the largest of these. The financing of the U. S. 
 Steel Corporation was, without doubt, his magnum 
 opus. Another large manufacturing concern with the 
 organization of which he was closely identified was 
 the International Harvester Co., while he also took a 
 prominent part in the reorganization and refinancing 
 of several large railroad enterprises, notably the Erie, 
 Reading, Santa Fe, Southern and Northern Pacific. He 
 played an important part in managing the afifairs of the 
 New York, New Haven & Hartford; in fact, according 
 to the former president of the line, he dictated its pol- 
 icies and actions. 
 
 So great was Morgan's influence in the managements 
 of most of the companies with which he was connected 
 that it has been 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 have been fairly well established 
 that, keen as his interest was in the big company and 
 great as was his pride in it, he never assumed an atti- 
 tude in the least dictatorial. He was the corporation's 
 banker. Questions of operation and of policy he left 
 entirely to those having direct charge of them. This 
 was particularly true in the last five or six years of 
 his life, by which time, so I have been told by directors 
 of the corporation, the banker had come to place such 
 implicit reliance on the judgment of Judge Gary, chief 
 executive officer of the corporation, that he always ac- 
 
86 The United States Steel Corporation 
 
 cepted Gary's ideas as the best thought upon all matters 
 connected with the corporation. 
 
 The part that Morgan took in bringing about the 
 existence of the Steel Corporation has already been told 
 in these pages. There is good reason to believe that he 
 regarded this work as the crowning achievement of his 
 career, that he took a particular pride in his connec- 
 tion with the corporation's organization — and who shall 
 say his was not a worthy pride? He lived to see it 
 firmly established and exerting an influence for good not 
 on the steel trade alone but on industry as a whole; to 
 see it gain the confidence of the public, as evidenced 
 by its growing list of stockholders, many of whom hold 
 only a share or two and regarded these almost as 
 bonds, the good will of its competitors and the loyalty 
 of its two hundred thousand odd employees. But un- 
 fortunately, and there is little doubt that this was a 
 matter of great grief to the banker, he also lived to 
 see it attacked by the law department of the govern- 
 ment, entirely without justification as he firmly be- 
 lieved. 
 
 To those who knew him only by sight Morgan ap- 
 peared a solitary stern figure, perhaps inclined a little 
 too much towards impressing his own will on others. 
 Those who enjoyed his friendship declare that under 
 his stern 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 philanthro- 
 pist, the list of his private benefactions was enor- 
 mous. When he died the leading business men of the 
 country all united in testifying to his ability and char- 
 acter. Judge Gary, who had been closely associated 
 with him for several 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 he was called upon 
 in time of financial stress to lend his influence to avert 
 
The Men of the Corporation 87 
 
 a threatened storm or to overcome an existing diffi- 
 culty. And he never failed. His character was such 
 that the greatest men of this country and of other coun- 
 tries, 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 words were prophetic. And posterity is beginning 
 to realize how great was this work. 
 
 CHARLES M. SCHWAB. 
 
 Charles M. Schwab, first president of the U. S. Steel 
 Corporation and now head of the company that runs the 
 largest armament plant in the world, is probably the 
 most interesting figure in the realm of business to-day. 
 One of the old Carnegie "Boys" Schwab is in many 
 respects like the former Iron Master, particularly in his 
 wonderful ability to infuse into those who work with 
 him some of the enthusiasm with which he is himself 
 so richly endowed, and to get from them utter loyalty 
 and devotion and the best of their ability. To this 
 attribute, as much as to anything else, Schwab owes 
 his great success. 
 
 It is impossible to form an accurate conception of 
 Schwab's personality without coming into actual con- 
 tact with the man. I have repeatedly heard it said, 
 often by competitors, 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. Earlier 
 in this work I referred to Schwab's tongue of gold. 
 There is something about him — fascination, personal 
 magnetism, call it what you will — that captivates al- 
 most everyone with whom he comes into contact. His 
 infectious laugh disarms hostility and criticism; his 
 winning manner, backed up by great ability and genu- 
 ine honesty of purpose, compels admiration and con- 
 fidence. 
 
88 The United States Steel Corporation 
 
 Countless anecdotes are current in the steel trade of 
 Schwab and his philosophy of good nature. I suggested 
 to him that I had been struck by this and he said: 
 
 "I try to be like Schmidt. He was a foreman under 
 me during the Homestead strike, and one day he came 
 into my office dripping mud and water. To my inquir- 
 ies he said that some strikers had thrown him into the 
 creek. 
 
 " 'What did you do then, Schmidt,' I asked. 
 
 " 'Oh, I shust laff.' " 
 
 Here is another Schwab anecdote. Several years ago, 
 before Bethlehem Steel had earned its present reputa- 
 tion financially, he visited a well-known New York 
 banker to seek to interest him in a proposed bond issue. 
 He told the banker all about the great future of Bethle- 
 hem Steel, as he saw it and, parenthetically, as it has 
 since proved, and the banker was enthusiastic regarding 
 the issue. The Schwab eloquence had carried him away. 
 
 "We'll underwrite the bonds," he said. "Go back to 
 your office and dictate to a stenographer what you have 
 just told me and I'll use it for a prospectus. The bonds 
 will sell like hot cakes." 
 
 So the steel man did. But the banker was not satis- 
 fied, and rang him up on the 'phone. Schwab's argu- 
 ments were not nearly so convincing in cold type as 
 when given in his inimitable style, and the banker de- 
 clared that the other had not included in the written 
 statement the facts given in the conversation. So 
 Schwab paid him another visit and talked the matter 
 all over again. Then the banker said: 
 
 "Yes. You've got it all down here, but it doesn't 
 sound the same. I tell you what. You talk the bonds 
 into a phonograph and we'll use the records to sell the 
 securities." 
 
 When I asked Schwab if this story were true he 
 laughingly admitted it, and then, to show that he was 
 not averse to a joke on himself, related another con- 
 cerning his efforts to raise money for Bethlehem Steel 
 in its early days. He said : 
 
The Men of the Corporation 89 
 
 "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 more than that from 
 bankers in New York who don't even know me!' 
 
 " 'That's the reason,' he gravely returned." 
 
 Charles M. Schwab was born at Williamsburg, Pa., 
 on February 18, 1862. He was educated at St. Francis 
 College, Loretto, Pennsylvania, where he spent his boy- 
 hood. His entrance into the steel trade was the result 
 of Andrew Carnegie's love of music. Schwab's father 
 owned a livery stable at Cresson Springs and some- 
 times Carnegie, who had a bungalow there, hired horses 
 from him. One day the little Scotchman heard a boy's 
 voice singing and was struck with the youth's gift of 
 music. 
 
 "When that boy of yours is ready to look for a job, 
 you bring him to me," he told Schwab senior. And so 
 it happened. At the age of eighteen Schwab entered 
 the employment of the Carnegie company as a junior 
 in the drafting room. 
 
 Not for Schwab alone was the musical incident lucky. 
 It was fortunate for Carnegie, who himself declares that 
 Schwab was one of the two men to whom he owes his 
 success, the other being Captain William R. Jones. 
 
 Jones was superintendent of the big plant at Brad- 
 dock when Schwab entered the steel trade, and the lat- 
 ter got his education in steel making from Captain Bill, 
 as Jones was called. In 1880 a steel plant was built 
 at Homestead by a new competitor of the Steel King 
 and, getting into difficulties on account of labor trouble, 
 was bought out by Carnegie a few years later. Schwab 
 was selected for the job of superintendent of the newly 
 acquired Homestead plant, a signal honor for a man 
 of only twenty-four. 
 
 Schwab went to Homestead and the plant soon be- 
 came the most paying of all the Carnegie properties. 
 
90 The United States Steel Corporation 
 
 When he arrived there the organization was in a de- 
 plorable condition. The long series of strikes that had 
 caused the original owners to give up in despair had 
 also resulted in ill feeling on the part of the workmen. 
 But Schwab tackled the job with a smile and in a 
 few months every man in Homestead swore by him. 
 His sympathetic understanding, his personal charm 
 had won them over. 
 
 Given a free hand by the "big boss" Schwab ex- 
 panded the plant and rapidly increased its efficiency 
 and earning power. In 1889, on the death of Jones, 
 he returned to Braddock as the captain's successor and 
 continued there until the breaking out of the great 
 Homestead strike in 1892. Had Schwab still been 
 in command at Homestead it is doubtful if the strike 
 would have occurred. As it was Carnegie, as soon as 
 he heard of the trouble, cabled that Schwab should take 
 the helm at Homestead to steer the plant through the 
 troubled seas and he remained there for some time after 
 the strike. Then he was put in charge of both the Brad- 
 dock and Homestead plants, the only time that one man 
 ever managed two plants for Carnegie. 
 
 Then one day Carnegie told Schwab that it had been 
 decided to make him vice-president of the Carnegie 
 company, but Schwab replied: 
 
 "No, Mr. Carnegie, I am no good at carrying out an- 
 other man's orders, and I should have to do that as 
 vice-president. As superintendent I am boss of the 
 plants I manage. I prefer to remain that way." 
 
 Next day Carnegie again sought out the young man : 
 "Well, if you won't be vice-president, I suppose we'll 
 have to make you president," he said ; and so he did. 
 
 Once established in the highest position in the steel 
 world, with the exception of the particular niche occu- 
 pied by Carnegie, Schwab looked around for new worlds 
 to conquer. He was satisfied that the mechanical end 
 of the steel trade had been highly developed and sys- 
 tematized, department by department, but recognized 
 
The Men of the CorporatioiI 91 
 
 that the next step, one that must come sooner or later, 
 was the integration of the different departments of 
 steel making into one harmonious whole. His ideas for 
 the development of the trade were along much the 
 same lines as Gary's, and we have seen how they were 
 carried out. In 1901, on the organization of the U. S. 
 Steel Corporation, Schwab became its president, with 
 a hundred thousand dollar salary and about fifteen 
 millions of dollars of its stock. 
 
 But Schwab did not long remain president of the 
 corporation. He had too long been accustomed to auto- 
 cratic control, to being absolute boss, and he found a 
 different state of affairs now. Bred in the old steel 
 school he was out of sympathy with the new policies 
 of the corporation as inaugurated by Gary and his ad- 
 herents. While there was never any open breach he 
 felt restricted and, to a man of his nature there was 
 only one thing to do, resign, which he did. Another 
 reason for his resignation was the fact that, almost 
 from the time the big company was formed, he had 
 been in poor l*ealth. So, in 1903, Schwab sailed for 
 Europe intent on a long holiday and resolved to give 
 up all business activities permanently. But this was 
 not to be. 
 
 Some time before his actual resignation from the 
 presidency of the Steel Corporation, Schwab, contem- 
 plating resignation, had purchased control of the Beth- 
 lehem Steel Co., a small concern located at a town of 
 the same name in Pennsylvania, his intention being to 
 develop this company. But he was persuaded to change 
 his mind and sold out his Bethlehem stock, continuing 
 for some time after with the Steel Corporation. Upon 
 his return from Europe in 1904 he was asked by the 
 organizers of a new shipbuilding company to subscribe 
 to the stock of this concern and he suggested that the 
 proposition would be much stronger if it controlled a 
 steel company to ensure an economical steel supply. 
 Eventually he himself for the second time bought the 
 
92 The United States Steel Corporation 
 
 entire capital issue of the Bethlehem company and 
 turned it over to the shipbuilding company in exchange 
 for bonds. Schwab did not take any part in the man- 
 agement of the company; he was merely a bondholder. 
 Later the venture failed and Schwab, as largest bond- 
 holder, found himself a third time in control of the 
 Bethlehem company. Even now, still determined not 
 to return to an active business life, he left the manage- 
 ment of the company in the hands of the old organiza- 
 tion, and it was not until about 1907 that he finally 
 determined to assume direct charge of its affairs. He 
 explains his resolution by saying that he felt that the 
 step was absolutely necessary to conserve his invest- 
 ment and that of others, but it is not unlikely that a 
 cogent reason was that he was tired of an inactive 
 life and wanted to be in harness again. 
 
 When the shipbuilding company failed it was claimed 
 that many of those who had invested in the securities 
 of the company had done so because they thought that 
 Schwab was personally the power behind its manage- 
 ment, that they had relied on his reputation and ability 
 for a return. It was easy for Schwab to prove that 
 he was merely a bondholder of the company, but this 
 did not satisfy him. He offered to pay to every stock- 
 holder who had invested after he, Schwab, had become 
 interested in the company as a bondholder, every cent 
 he had lost from his investment; and he did. "This 
 cost me nearly five millions," he said. 
 
 When Schwab decided to go back into the battle of 
 steel making he went at it in his usual enthusiastic way. 
 He found the Bethlehem Steel Co. in a run down con- 
 dition and he poured his personal wealth and all the 
 money he could borrow into it. In about eight years 
 he has spent some $50,000,000 in extensions and im- 
 provements and the success of his work can be meas- 
 ured best by the simple statement that in the past two 
 years the company's earnings on its common stock have 
 averaged nearly 30 per cent. The company now em- 
 
The Men of the Corporation 93 
 
 ploys 17,000 workmen, or half as many again as was 
 the population of Bethlehem when Schwab assumed 
 command there; the town's population has grown to 
 60,000 now. Schwab brought to America the contracts 
 for the first battleships to be built in this country for 
 a foreign nation. 
 
 Although he severed his connection with the Steel 
 Corporation many years ago Schwab is still an ardent 
 believer in the value of its securities and in its future. 
 "It is a wonderful concern," he told me. "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 W. PERKINS. 
 
 George Walbridge Perkins, chairman of the Finance 
 Committee of the U. S. Steel Corporation from shortly 
 after its organization, or from November, 1901, to 
 February, 1907, and still an active member of that 
 committee and of its board of directors, was born in 
 Chicago in January, 1862. Like many other men who 
 have come out of the Middle West Perkins' advance- 
 ment was the result of push and not of pull. He began 
 life in a humble capacity, leaving common school at 
 the age of fifteen to take a job as office boy at the 
 Chicago office of the New York Life Insurance Co. 
 
 Later he became a bookkeeper, then solicitor, then 
 manager of agencies and still later vice-president; 
 finally he was elected chairman of the Finance Com- 
 mittee of the company at the comparatively youthful 
 age of thirty-eight. 
 
 As manager of agencies and vice-president he had 
 reorganized the company's selling methods entirely, 
 this resulting in an enormous increase in business, and 
 had inaugurated new and, until then unheard of, poli- 
 
94 The United States Steel Corporation 
 
 cies, chief of which was publicity, which had proved 
 immensely profitable. These were the days when the 
 managers of big business enterprises thought that the 
 public had no right to know the intimate affairs of these 
 companies. Perkins held that the best way to get 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 — an innovation 
 that was heralded with a storm of ridicule by the man- 
 agements of competing companies. But these same re- 
 ports proved powerful weapons for business getting in 
 the hands of the agents of the company and so great 
 was the increase in the amount of insurance written 
 by the New York Life following their publication that 
 the practice of making these statements soon became 
 general in the life insurance world. 
 
 During the later part of last century the life 
 insurance companies of the United States bore 
 a fai from enviable reputation abroad and many coun- 
 tries had legislated against them. Perkins was deter- 
 mined that the New York Life should enjoy the priv- 
 ilege of doing business in Europe, and he journeyed 
 to Europe three successive years, returning from each 
 trip to report that the company had obtained the right 
 to do business in a new field. What Perkins said to 
 the European governments was, in effect: "The New 
 York Life is ready to meet any fair demand for safe- 
 guarding the interests of its policyholders," and then 
 he backed up that assertion. And by this he not only 
 extended the company's field of operations but provided 
 the company's agents with another strong selling ar- 
 gument. 
 
 This work, and the fact that he was instrumental 
 in bringing to this country the first Russian loan ever 
 placed here, brought the young insurance man to the 
 notice of the financial world, and when, early in 1901, 
 he had occasion to call on the late J. Pierpont Morgan 
 
The Men of the Corporation 95 
 
 in connection with the great Palisade Park project, the 
 banker pointed to a desk near his own and asked: 
 "How would you like to sit at that desk?" 
 Perkins refused at first to accept the offer of a part- 
 nership which almost any man would have considered 
 a high honor. And it was some time after before Mor- 
 gan persuaded him to become one of his partners. He 
 was admitted to the firm of J. P. Morgan & Co. in 
 1901 and continued with the house of Morgan until 
 1911. 
 
 When the Steel Corporation was organized Perkins 
 was elected a member of the board of directors, and 
 shortly afterwards, on the resignation of Robert Ba- 
 con, 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 book- 
 keeping end of the business," he told me ; "my job was 
 to assist in the physical organization of the great indus- 
 trial 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 efifects. Like Gary, more- 
 over, he was a firm 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 corpora- 
 tion. 
 
 Perkins was particularly identified with the corpora- 
 tion's bond conversion plan, explained in an earlier 
 chapter. It was his idea. When the subject of raising 
 more working capital came up after the organization 
 of the big company it was he who suggested a scheme 
 by which the cost of securing the new capital needed 
 
96 The United States Steel Corporation 
 
 would be paid back in a few years by savings in inter- 
 est 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 were high if the ultimate re- 
 sults were towards 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 conversion. 
 
 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. Since that time he has devoted 
 the greater part of his energies to semi-public work. 
 
 He has been especially interested in the problems 
 growing out of the relationship between capital and 
 labor. He was prominent in the profit sharing plan 
 that is now in vogue in the Steel Corporation and 
 which has been so largely followed by many other in- 
 dustrial concerns in the last ten years. He has also 
 given much of his time to spreading the gospel of co- 
 operation in the business world. As long ago as Feb- 
 ruary, 1908, he began making public addresses on the 
 necessity for such co-operation, claiming that the many 
 modern improvements in intercommunication and the 
 enlightenment of the people through our broad system 
 of education have brought us to a point where the 
 old destructive competitive methods in business must 
 be abandoned and a more humane and enlightened or- 
 der of things take their place. He has delivered many 
 addresses throughout the country on these two favor- 
 ite themes, profit sharing and co-operation. 
 
 Perkins is not a philanthropist, in the ordinarily 
 accepted use of the word. Presumably he gives a por- 
 
The Men of the Corporation 97 
 
 tion of his large income to charitable societies and 
 works. But if he does it is quietly. But to work for 
 the betterment of the lot of the laborer or the welfare 
 of the community he gives himself, his time and his 
 energy. 
 
 It is not unnatural that his course in this respect 
 should be viewed with suspicion by many ; that his mo- 
 tives should be called into question. For the specta- 
 cle of a successful business man breaking off apparently 
 at the zenith of his career and in the prime of his life 
 to give himself to pursuits in which money making 
 had no part is unusual. I do not pretend to judge his 
 motives. Let him speak for himself: 
 
 "My father," he told me, "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 neigh- 
 borhood 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 rriy work as an organizer was 
 the human end of the job. My inheritance from my 
 father and my own life work has 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 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 
 
98 The United States Steel Corporation 
 
 for certain definite objects that I believe are worth 
 while, and leave the results of that work when I die?' 
 I simply chose the latter course." 
 
 The reader may form his own judgment. Person- 
 ally, I believe that Perkins is entirely sincere in his 
 interest in the work he has undertaken. 
 
JAMES A. FARRELL 
 
CHAPTER VI 
 DEVELOPMENT OF THE EXPORT TRADE. 
 
 IN the office of James A. Farrell, president of the 
 United States Steel Corporation, at 71 Broadway, 
 New York, stands a pedestal supporting a great 
 globe. It is a fitting place, for the business of the great 
 steel company extends to practically every part of the 
 known world, "from China to Peru;" still more fitting 
 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 con- 
 ceived by Judge Gary, one of the chief considerations 
 in his mind was that such a vast organization, and 
 such an organization alone, would have immense po- 
 tentialities for successful world competition with the 
 manufacturers of the other great steel producing na- 
 tions — Great Britain, Germany and Belgium. The same 
 thought was forcibly brought out by Chas. M. Schwab 
 at the historic Simmons dinner, and it was one of the 
 most powerful factors in influencing J. Pierpont Mor- 
 gan to undertake the financing of the giant steel mer- 
 ger. In the following pages an effort will be made to 
 show how this end was accomplished, how this hoped 
 for world trade was built up in the face of many ob- 
 stacles. 
 
 Properly speaking, the story of the development of 
 the corporation's export business did not begin until 
 about three years after the big company was formed. 
 Questions of internal organization were naturally para- 
 mount in the early part of the Steel Corporation's ex- 
 istence, and these first three years were taken up with 
 
100 Thk United States Steel Corporation 
 
 problems near home — physical organization, co-ordi- 
 nation, integration, economy, efficiency, in a word the 
 welding into a harmonious whole of the corporate or- 
 ganizations 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 prof- 
 itable basis was actively considered and steps were 
 taken towards the formation of an organization with a 
 definite export policy. To do this it was necessary to 
 bring together, to consolidate, the export offices and 
 organizations of the several subsidiary companies which 
 had till that time been maintained on a practically inde- 
 pendent basis. This was done by creating a new com- 
 pany, 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 this co-ordination of the ex- 
 port trade of the various constituent companies under 
 one selling agency or company is best illustrated by 
 the fact that the cost of doing export business has been 
 reduced from about 8 per cent., which it was when each 
 company sold independently, to slightly under 1 per 
 cent., the average of recent years. As the corpora- 
 tion's foreign sales have exceeded $90,000,000 in one 
 year this meant an annual saving of over $6,000,000 in 
 the year's business, or about enough to pay a quarterly 
 dividend on the preferred stock. The lower selling 
 cost also meant that the position of the corporation 
 in bidding against foreign competition was that much 
 improved, and to it must be attributed largely the great 
 increase in the "Steel Trust's" export business of recent 
 years. 
 
 The choice for the presidency of the new export or- 
 ganization fell upon James A. Farrell. He was the man 
 fitted pre-eminently for the job, and his selection was 
 
Development of the Export Trade 101 
 
 more or less inevitable. It is generally recognized that 
 no individual in the steel industry possesses so wide a 
 knowledge of the extent, character and requirements of 
 the foreign export trade as he does; no individual has 
 done more to further that trade than he. In 1903, when 
 he became president of the United States Steel Prod- 
 ucts Export Co. the country's foreign trade in iron 
 and steel had dropped to a little over 300,000 tons; 
 in 1912 they were nearly 3,000,000 tons. 
 
 For many years, during which there had been little 
 disposition on the part of the American steel makers to 
 seriously cultivate markets abroad, Farrell's entire time 
 and energy had been devoted to this end. Being .a man 
 with that genius that is "an infinite capacity for taking 
 pains," he had developed a thorough knowledge of com- 
 petitive conditions affecting steel in every part of the 
 earth's surface where the metal was sold. He had be- 
 come, what he 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 
 these facts and figures, as displayed when he was called 
 as a witness for the defense in the Federal suit, now 
 pending, for the dissolution of the Steel Corporation, 
 earned him the soubriquet of "the man with the head 
 full of figures," a not inept title. 
 
 And indeed, no more striking exposition of the wide 
 scope of the export market for American steel which 
 has been developed within the past decade has ever 
 been given than that embraced in his testimony on the 
 occasion mentioned. His statement, which, incidentally, 
 consumed nine days, was a remarkable story of busi- 
 ness achievement. He showed that the exports of 
 the Steel Corporation were of a widely miscellaneous 
 character and equally wide distribution, ranging from 
 cotton ties for Egypt to highway bridges for Iceland; 
 from wire products for the Holy Land to light rails and 
 
102 The United States Steel Corporation 
 
 pipe for the diamond mines of the Transvaal; from 
 galvanized sheets for the houses of the Borneo natives 
 to the Steel skeleton work for the large and beautiful 
 buildings of Buenos Ayres. "From Greenland's icy- 
 mountains to India's coral strand." 
 
 Farrell is one of the men of which the steel trade 
 furnishes so many and so striking 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 career as a laborer in a wire mill 
 in his home town while he was 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 an easy 
 step to a more responsible position. 
 
 While he had made good in the shops Farrell's abil- 
 ity 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 oppor- 
 tunity to show what he could do 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 manager- 
 ship, with such pronounced success that when the com- 
 pany decided to enter the foreign field he was offered 
 and accepted the post of foreign sales agent. When 
 the Steel Corporation later took over the American 
 Steel Sz Wire Co. he acted in the same capacity for the 
 big merger and finally, upon the organization of the 
 Steel Products Company, he was made president of that 
 concern. How satisfactorily he filled the position was 
 shown by his election to the presidency of the parent 
 corporation upon the resignation of William Ellis Corey. 
 Farrell's elevation to the presidency of the Steel Cor- 
 poration took place in January, 1911. 
 
 Although no longer in direct charge of the manage- 
 ment of the Steel Products Co. Farrell still takes a keen 
 
PLAZA HOTEL AT BUENOS AYRES, FIRST STEEL SKELETON BUILDING IN THAT CITY. 
 MADE OF l,6oo TONS OF UNITED STATES STEEL 
 
Development of the Export Trade 103 
 
 personal interest in all that concerns the structure of 
 foreign business which he helped so materially to erect. 
 Quiet and unassuming, he yet bears a name for thor- 
 oughness and efficiency. He throws himself whole- 
 heartedly into his work, giving to it absolute loyalty 
 and untiring energy. He might, indeed, be called the 
 man who never rests. His usual working day is four- 
 teen hours long. A few years ago he took a well 
 deserved vacation in Europe, but brought back with 
 him a big sheaf of new orders which he had spent his 
 holiday in securing. At first glance Farrell impresses 
 one as "pure business." His manner suggests impa- 
 tience of waste of time or language, and he seldom 
 makes even an unnecessary gesture. His appearance is 
 that of the cold, unsentimental 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 
 and deep sympathies and rare delicacy and tact. 
 
 Eugene P. Thomas, who had assisted Farrell since 
 1906 in the building up of a world trade for the corpora- 
 tion, succeeded him as head of the Steel Products Com- 
 pany in 1911. Thomas was born at Atlanta, Ga., May 
 11, 1876, and after a brief experience in the newspaper 
 field entered the steel trade, starting with the Lorain 
 Steel Co. (then the Johnson Co.) in 1892. 
 
 Thomas was another of the pioneers of the foreign 
 trade in steel, having been sent to England in 1899. Two 
 years later he became Assistant Foreign Sales Manager 
 of the Lorain Company, and on the formation of the 
 U. S. Steel Products Export Co. he headed one of the de- 
 partments of that company. Before he had attained his 
 thirty-fifth year he was at the head of the greatest ex- 
 port organization of the United States. 
 
 Up to the time of the formation of the United States 
 Steel Corporation — indeed, until the export company was 
 formed — there had been little systematic or sustained effort 
 on the part of the American steel manufacturers to cap- 
 ture foreign trade. Such campaigns for world business as 
 
104 The United States Steel Corporation 
 
 had been undertaken were nearly always spasmodic in 
 their nature and had not been conducted in such a 
 manner as to give the steel maker of this country a good 
 name abroad. The people of the steel consuming coun- 
 tries — as distinct from those producing their own steel 
 — preferred to deal with German, British or Belgian 
 mills, and the reasons for this were obvious. The 
 great steel producing countries of the old world are un- 
 able to consume more than a comparatively small pro- 
 portion 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 press- 
 ing necessity and every effort is bent on securing 
 foreign outlets for their product, on cultivating world 
 trade. 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, ready to hand, 
 one that can absorb all the steel he turns out. The 
 country has been building up and expanding. Steel 
 has been and is needed for railroads, skyscrapers, fac- 
 tory buildings, farm implements, automobiles, and a 
 thousand and one other purposes. The result of this 
 has been that our steel manufacturers have had no 
 particular desire to seek foreign business in normal 
 times, with its attendant risks and expenses, long cred- 
 its and other drawbacks. They were at one time con- 
 tent to leave the foreign markets to European exploi- 
 tation and only to enter these markets when dull busi- 
 ness at home forced them to seek some new outlet. In the 
 earlier days of the industry American steel, at such pe- 
 riods, was thrown on foreign markets at prices often 
 below productive costs, the loss being considered pref- 
 erable to the disruption of the company organization 
 which a continuous decline in sales would have brought 
 about. This process was commonly known as "dump- 
 ing," 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 competi- 
 
Development of the Export Trade 105 
 
 tion. A wave of returning' prosperity at home would 
 again cause indifference to and independence of foreign 
 trade on the part of our steel producers, an attitude 
 that naturally did not work to 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 are unwilling to meet the 
 requirements of the foreign buyer, taking the "if they 
 don't like our goods let them go elsewhere" attitude. 
 This gives the European competitor, who goes on the 
 principle that the buyer is always in the right, an in- 
 calculable advantage. The basis for this disposition on 
 the part of American manufacturers lies in the same 
 factors as his indifference to foreign trade generally, 
 namely the vast home markets. His competitor abroad, 
 having perforce to sell half or more of his output in 
 other than home markets, works to find out the needs 
 of possible buyers everywhere, and then sets out to 
 meet these needs. And he gets the business. 
 
 But the Steel Corporation, having taken up the ex- 
 port trade as a permanent part of its business, has ac- 
 cepted and adopted the attitude of its European com- 
 petitors that the consumer, no matter where he is, must 
 get his goods as he wants them and not as the manu- 
 facturer sees fit to give them to him. To do this it 
 has become necessary to manufacture a number of arti- 
 cles, or types of product, for which there is no call at 
 home, to adopt the weights and measures of each coun- 
 try in dealings with that country and in other ways 
 to make it convenient for the purchaser abroad to 
 order his requirements from the corporation in the 
 certainty that his order will be just as welcome as it 
 would be to a British or German mill, and that it will 
 get the same care and attention. The corporation has 
 
106 The United States Steel Corporation 
 
 even found it necessary, in some instances, to devote 
 mills to making nothing but export products. 
 
 Wire goods constitute an important export item, and 
 of the 11,000 and more different wire products made by 
 the American Steel & Wire Co. some 1,800 are manu- 
 factured for foreign trade, many of these lines not being 
 sold in the United States at all. For the countries in 
 South America lying below the Equator what is known 
 as varnished wire is made; for certain other tropical 
 countries wire and fencing must be extra heavily coated 
 with spelter to withstand rust; and so forth. 
 
 The carpenter in Australia will not use the ordinary 
 round wire nail so commonly employed here. He de- 
 mands a nail of oval section, and gets it. In another 
 part of the world a square nail is favored. You might 
 argue with the Australian workman till Doomsday that 
 the round nail is "just as good" as the oval, but he is 
 prejudiced in favor of the oval and will buy the nails 
 he wants from Europe if America won't supply them. 
 So the corporation makes oval nails, nails to suit every 
 taste and fancy. 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 
 profits. 
 
 Nails, in the United States, are put up in kegs each 
 containing 100 lbs. For the Japanese trade picul kegs, 
 holding 133 lbs. of nails are demanded, while the Hin- 
 doo trader, sitting bare-legged and beturbanned before 
 his booth in the bazaars of Bombay or Calcutta, offers 
 the passerby small packages each of seven pounds of 
 nails — 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 building up of foreign 
 markets for the big corporation. For not only did the 
 varying conditions affecting sales in the different parts 
 of the world have to be studied, but there were other 
 obstacles to contend with, handicaps, by the way, which 
 it would hardly have been possible to overcome with- 
 
Development of the Export Trade 107 
 
 out the backing of the power and prestige of the great- 
 est 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 the 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 Tor- 
 eign commerce — rendered it impossible for American 
 manufacturers to obtain as profitable a price in competi- 
 tion 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 de- 
 sired markets, to force the entering wedge. The fact 
 that the corporation has 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 unemploy- 
 ment, 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 Cor- 
 poration's export business would never have shown the 
 remarkable growth it has. Europe would have under- 
 sold it in all markets. However, the corporation re- 
 fused to follow anything like the old dumping policy, 
 often refusing otherwise very desirable business on the 
 single issue of price. 
 
 Besides the preference, natural on the part of the buy- 
 ers, 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 
 
108 The United States Steel Corporation 
 
 facilities in the various countries opposed to business 
 with America; cheaper freights and better steamer ac- 
 commodation from foreign ports than were available 
 from the United States; preferential duties, and so on. 
 For years the big company has persistently contended 
 against these obstacles, gradually working up to its 
 present position where its products have been intro- 
 duced and their quality recognized and business can 
 be secured without concessions in price under those 
 of older competitors. For several years past the prices 
 secured on foreign sales have been practically the same 
 as those obtained on domestic business, more in some 
 products, less in others. They average a little higher at 
 present. In 1911, for instance, the average price at the 
 mill on rails exported was $27.32, compared with $28 in 
 the home trade. Rail exports for the year were valued 
 at $11,377,000. The concession of 68c. a ton seems a 
 small one to pay for so large a volume of business. 
 
 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 Corpora- 
 tion the steel exports of this country consisted very 
 largely of the cruder and less profitable materials, par- 
 ticularly 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 
 
Development of the Export Trade 109 
 
 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. 
 
 In many years no sales of pig iron at all were made. 
 In 1912, the record export period, the corporation ship- 
 ped abroad 2,223,570 tons of finished steel products and 
 only 46,503 tons of pig iron, ingots and scrap. In the 
 following year the comparison was 1,756,328 tons fin- 
 ished to 56,104 tons of semi-finished products. In the 
 year 1904, immediately following the organization of 
 the export company, foreign shipments were 1,001,716 
 tons, of a gross value of $27,263,915, an average of 
 $27.22 per ton, f.o.b. In 1912 the tonnage exported was 
 2,243,138, of an average value of $34.24 a ton, or a total 
 value of $76,812,253. In the period indicated there had 
 been an increase of 123.8 per cent, in tonnage, an in- 
 crease of 181.7 per cent, in total value and a gain of 
 25.8 per cent, in the average price, or over $7 a ton. 
 Incidentally, the average price received on the big com- 
 pany's domestic business in 1904 was $41.34 a ton, 
 against $36.53 a ton in 1912, or a decrease of 11.6 per 
 cent, or nearly $5 a ton for the period. Part of this 
 gain in export prices was due to the higher classes of 
 goods shipped and part to the gradual establishment of 
 the corporation's products in the world markets and in 
 the confidence of consumers in those markets. 
 
 How important has been the part played by the U. S. 
 Steel Corporation, through the U. S. Steel Products Co., 
 in developing the iron and steel exports of this country 
 is shown by the following comparison. The tonnages 
 given for the United States include only iron and steel 
 exports proper, and not machinery, etc., not manufac- 
 tured by the corporation: 
 
110 The United States Steel Corporation 
 
 U. S. Steel 
 
 United States. Corporation. 
 
 Year. Tons. Tons. 
 
 1904 1,167,710 1,123,322 
 
 ♦1905 1,010,255 1,052,259 
 
 1906 1,325,740 1,258,370 
 
 1907 1,301,979 1,099,934 
 
 1908 964,242 857,860 
 
 1909 1,243,584 1,120,443 
 
 1910 1,535,689 1,423,070 
 
 1911 2,183,662 1,918,387 
 
 1912 2,941,684 2,537,436 
 
 1913 2,737,571 1,813,072 
 
 1914 2,097,549 1,103,483 
 
 Between 1904 and 1912 the corporation's exports in- 
 creased 1,414,113 tons, and the exports of the country 
 1,773,974 tons, the corporation's increase in shipments 
 accounting for approximately 80 per cent, of the total 
 gain shown by the United States. 
 
 It is only fair to point out that the exports of the 
 United States for 1900, the year before the corporation 
 was organized, are given as 1,154,284 tons, and in 1901 
 942,689 tons, while a marked decrease was reported in 
 1902 and 1903, the shipments abroad for the two years 
 being respectively 372,399 and 326,590 tons respectively. 
 These figures include a vast number of items such 
 as the subsidiaries of the corporation do not manufac- 
 ture or such as they do not now export. Exact reports of 
 the companies now in the Steel Corporation in 1901 are 
 not available, but it can be stated that the iron and steel 
 exports for the year of such products as they make 
 and ship abroad were only 291,000 tons. In 1902 the 
 corporation's shipments were slightly over 300,000 net 
 tons. 
 
 There is hardly a part of the known globe where the 
 agents and products of the Steel Corporation do not 
 penetrate. In some countries a staff of skilled work- 
 men is maintained. In Buenos Ayres, for instance, the 
 corporation has its own force of erectors and the steel 
 frames of nearly if not all the handsome and modem 
 buildings of the Argentine Capital have been put to- 
 gether by the "Steel Trust's" riggers, the men whom 
 
 ♦Apparent discrepancy probably due to the fact that shipments 
 from the mill in December did not leave the country until 
 January of 1906. 
 
Development of the Export Trade 111 
 
 Farrell has described as working "with one hand for 
 their lives and the other for their jobs.'' 
 
 The bulk of the steel used in the construction of the 
 Panama Canal was supplied by the Steel Corporation, 
 about 175,000 tons in all. 
 
 Some of the principal points of export, with the prod- 
 ucts they demand chiefly, are: Iceland, wire products 
 and fabricated steel; Java, Sumatra and Borneo, oil 
 piping and galvanized sheets; Bombay, angles, sheets, 
 wire products; Argentina, fabricated steel and a gen- 
 eral line. 
 
 To South Africa the corporation sends pipe and light 
 rails for the diamond mines; to the countries on the 
 Pacific coast of South America, sheets for roofing, wire 
 and railway material; to Patagonia, railway material; 
 to Mexico, practically every product made; to Canada, 
 the same; to Northern Africa, wire and sheets; to 
 Egypt, wire and cotton ties. 
 
 China is a great market for defective material. The 
 careful celestial, abhorrent of waste, takes wire rods 
 and sheets of poor quality, even old horseshoes, and 
 makes these over into razors and a number of other arti- 
 cles, many of which, no doubt, are sent back to Amer- 
 ica. 
 
 To Australia are shipped rails and bridge material, 
 pipe and general lines; to Austria, wire products and 
 pipe ; to Syria and the Holy Land, small nails for fas- 
 tening date boxes, wire fence and pipe ; to Rangoon, 
 pipe, nails, fence and sheets ; to the West Indies, a gen- 
 eral line ; to Roumania, pipe ; to Central America, wire, 
 galvanized iron, tin plate, light rails, pipe and bridge 
 material ; to Formosa, light rails ; to Greece, pipe, wire 
 sheets, etc. 
 
 In German South West Africa, where the high pro- 
 tective tariff in favor of Germany puts it at an immense 
 disadvantage, the corporation has managed to find a 
 market for some of its output. This country is a great 
 producer of palm oil, much used in the tin plate in- 
 
113 The United States Steel Corporation 
 
 dustry, and the corporation does a trading business 
 here, exchanging steel products for the oil, of which 
 it uses enormous quantities. 
 
 Altogether the Steel Corporation has 268 agencies in 
 over 60 different countries. These countries are: Ar- 
 gentina, Austria, Australia, Belgium, Brazil, British In- 
 dia, Grenada, Bulgaria, Canada, Salvador, Panama, 
 British Honduras, Guatemala, Honduras, Costa Rica, 
 Chile, China, Colombia, Cuba, Cyprus, Denmark, Dutch 
 East Indies, Dominican Republic, England, Ecuador, 
 Egypt, Formosa, France, German South West Africa, 
 Greece, Haiti, Hawaiian Islands, Holland, India, Italy, 
 Jamaica, Japan, Korea, Mauritius, Mexico, Newfound- 
 land, New Zealand, Nicaragua, Norway, Nova Scotia, 
 Peru, Philippine Islands, Paraguay, Porto Rico, Portu- 
 gal, Roumania, South Africa, South Pacific Islands, 
 Spain, Sweden, Scotland, Tasmania, Turkey in Asia, 
 Turkey in Europe, Trinidad, Uruguay and Venezuela. 
 
 Although the Steel Products company avails itself of 
 the facilities for shipping offered by the many steam- 
 ship lines plying between American and foreign ports, 
 the enormous expansion of its export trade has forced 
 it to maintain a fair sized ocean going fleet of its own. 
 The corporation owns nine vessels and usually has 
 from 35 to 40 ships under charter carrying its products 
 all over the world. These vessels, owned or chartered, 
 touch at many little known ports, harbors the waters 
 of which are never disturbed by the prows of the regu- 
 lar liners, and at these places they put off loads of rails, 
 tools and so on, instruments with which the pioneers of 
 civilization, like railway builders, are extending its 
 march into untrodden lands. 
 
 All the ships owned by the corporation fly the Stars 
 and Stripes, having been transferred to American regis- 
 try immediately upon the passage of the Ship Registry 
 Bill last year. These vessels, all steamers, are : 
 
Development of the Export Trade 113 
 
 Tons, Net 
 Steamer. Register. 
 
 Buenaventura 3,064 
 
 Bantu 2,661 
 
 San Francisco 3,164 
 
 Craster Hall 2,758 
 
 Howick Hall 3,094 
 
 Santa Rosalia 3,488 
 
 Kentra 3,021 
 
 Crofton Hall 3,661 
 
 Charlton Hall 2,999 
 
 Total 30,910 
 
 The shipping of steel to certain points lacking a regu- 
 lar service forces the employment of expedients to re- 
 duce the attendant costs in many cases. To give one 
 instance: a fleet of six vessels is kept working espe- 
 cially for trade writh the East and West coast of South 
 America and Western Canada. These vessels, sailing 
 from the Atlantic seaboard, make calls at various ports 
 in Argentina, Chile, Peru and up to British Columbia, 
 where they find themselves empty and without oppor- 
 tunity for picking up a cargo for the return trip. To 
 save the expense of bringing them back in ballast car- 
 goes are taken for France or, maybe, for Wales, and 
 either the shorter trip across the Atlantic is made under 
 ballast or another cargo is taken on for a home port. 
 The total trip covers some 35,000 to 40,000 miles and 
 takes about nine months. This time and mileage has 
 been materially reduced in some instances through the 
 opening of the Panama Canal, saving the long journey 
 through Magellan Straits. 
 
 It is interesting to note that on one occasion one of 
 these vessels, looking for a return cargo at Swansea, re- 
 ceived a big shipment of tin plate which the Welsh mills 
 had sold to American consumers in competition with the 
 Steel Corporation. 
 
 The shipping of steel to the less known parts of the 
 world involves difficulties never encountered in doing 
 business at home. The export men have become accus- 
 tomed to fighting these handicaps and, unusual as they 
 
114 The United States Steel Corporation 
 
 may seem to one accustomed to doing business with the 
 aid of the efficient methods of civilization, they regard 
 them as being all in the day's work, seldom worthy even 
 of mention. 
 
 On one occasion the Steel Products Co. shipped a 
 number of boilers 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. In the absence of any better means 
 of getting the boilers ashore they were plugged up at 
 both ends and hoisted overboard, floating on the waves 
 to the sandy beach. This novel method of delivery 
 caused a dearth of labor in the vicinity, as the natives, 
 at the sight of the huge steel cylinders leaping from 
 the waves after their dive and rushing ashore on the 
 tide, decided that they were strange and fearsome mon- 
 sters of the deep and made for the woods, where they 
 remained for several days before they could be induced 
 to return and carry the boilers to the point of destina- 
 tion. 
 
 When, some two years ago, the Steel Corporation 
 supplied the rails for the first line ever built to Buena- 
 ventura, Colombia, a similar situation in regard to un- 
 loading facilities was encountered. So each rail had to 
 be sent ashore separately on the little native dugout 
 canoes, and it was only the skill of the natives in hand- 
 ling their frail barks with their unwieldy cargoes that 
 prevented a large part of the shipment finding a rest- 
 ing place at the bottom of the harbor. 
 
 The American Bridge Co. has erected a number of 
 bridges in the Far East. In China the steel for these 
 bridges is hauled or rafted up the rivers in the dry sea- 
 son and, if the rains arrive before the final destination 
 is reached, the steel is left on the river bed and the 
 journey upstream resumed months after on the sub- 
 sidence of the flood. 
 
 Besides the large fleet owned or chartered by the 
 Steel Products Company, at least two steamship lines. 
 
Development of the Export Trade 115 
 
 one to the Far East and the other to the Levant, have 
 been started by independent interests as a result of the 
 trade which the Steel Corporation has built up in these 
 parts. Yet all these carry only a comparatively small 
 amount of the total tonnage shipped abroad by the big 
 company. How vital to American commerce is the 
 corporation's development of foreign business is shown 
 by the fact that its cargoes constitute an important 
 percentage of all the heavy cargo leaving American 
 ports. More than half this "weight cargo," it is claimed, 
 is shipped by the Steel Products Co., the Standard Oil 
 Co., and the International Harvester Co. 
 
 The benefit of large exports lies largely in its effects 
 on labor in the exporting country. The corporation's 
 effort has been to find a regular market in foreign coun- 
 tries for 20 per cent, of its output. This level has never 
 actually been reached in normal times (on account of 
 the European war exports are running about 33 per 
 cent, of the output at the time of writing), but in 1912, 
 the record year, shipments to customers abroad were 
 nearly 18 per cent, of the total shipments of finished 
 steel made by the corporation's mills. As the "Steel 
 Trust" gave employment to an average of 221,000 men 
 during that year this meant that some 39,000 workers 
 were being employed on material destined for export, 
 or that 18 per cent, of the corporation's payroll of 
 $190,000,000, or $34,000,000, was being paid in wages to 
 American labor by foreign consumers. 
 
 In the final analysis this figure would be increased, 
 as the corporation encourages and assists companies 
 manufacturing its products into such lines as machin- 
 ery, cars, etc., to expand their export business by 
 quoting them lower prices on steel to be exported after 
 manufacture. This re-export business, as it is called, 
 gives work to perhaps 10 per cent, more of the United 
 States Steel Corporation's total employees. 
 
 The building up of the vast export sales organization 
 maintained by the corporation has been a Herculean 
 
116 The United States Steel Corporation 
 
 task, but if the volume of sales and the steady gain in 
 prices is any indication, the work has been well worth 
 while. 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 by providing these 
 markets it has helped to relieve the pressure of over- 
 production which always accompanies times of depres- 
 sion in the industry, and by so doing has conferred a 
 great benefit on the steel trade as a whole. Every ton 
 of steel sent abroad, said a steel man, means just that 
 much relief to the trade at home in dull times. 
 
BESSEMER TNGOTS 
 
CHAPTER VII 
 THE SPIRIT OF THE CORPORATION. 
 
 SOME months ago I had the opportunity to visit the 
 mines and plants of the various companies making 
 up the great Steel Corporation. I had expected to 
 be, and was, impressed by the various processes whereby 
 iron ore is converted into steel rails, wire, nails, tin- 
 plate, and a vast number of other products; by the mon- 
 ster machines used for loading and unloading ore, the tall 
 furnaces, pools of molten iron, the great rolls through 
 which the glowing metal is passed on its way to becoming 
 a finished merchantable article and the thousand and one 
 other sights of the steel-making industry. 
 
 But after two weeks spent in the tour the one impres- 
 sion that printed itself ineradicably on my mind above all 
 others concerned the manner in which the vast human 
 machinery that is the corporation was handled, the or- 
 ganization that made it possible for an army of a quarter 
 of a million men to work in absolute harmony and to one 
 end. In a word, the spirit of the corporation. 
 
 The entire organization is permeated w'th "the Steel 
 Corporation spirit." From Judge Gary, Chairman and 
 head of the corporation, and James A. Farrell, its presi- 
 dent, who directs the manufacturing and commercial 
 operations, down through the heads of the various con- 
 stituent companies and so further through the other offi- 
 cials, through those whom we may call the non-commis- 
 sioned officers, the foremen and mine captains, and 
 finally among the men, the skilled workers and common 
 laborers, there is to be found that one universal senti- 
 ment of loyalty, of personal interest in the fortunes of 
 the big company and the will on the part of each man to 
 give the best in him for the general result. 
 
118 The United States Steel Corporation 
 
 Naturally, I was anxious to discover the why of this 
 spirit, how it was possible to leaven so great a mass of 
 men of different nationalities and degrees of intelligence 
 with it. And I believe I have found the answer. And 
 I did not get it from the men higher up, although they 
 all tried to explain and furnish reasons. N», I got it from 
 the rank and file, the men burrowing in the mines or 
 handling the hot steel. 
 
 "Why is it," I asked them, "that you, who seem to be 
 only so many cogs in a vast machine helping to turn some 
 one particular wheel, appear to feel yourselves an in- 
 tegral part of that machine? Why is it that you seem to 
 consider the corporation's welfare your own, its difficulties 
 your difficulties?" 
 
 And the answer of all, though variously expressed, can 
 be summed up in the reply of one man, who said: 
 
 "Because, in the work of the Steel Corporation, the man 
 who gives gets. The men who are in the higher posi- 
 tions, who are drawing big salaries, all worked their own 
 way to the top. Several of the men holding important jobs 
 1 knew when they held little ones, and in every case I was 
 satisfied that the advancement they got they deserved. I 
 don't believe there is a single official of the corporation, 
 or 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 short, I feel bound to give the corpora- 
 tion a square deal because I know it will give me a square 
 deal." 
 
 The square deal — that is the secret of the corporation 
 spirit. The desire for justice, for recognition of full 
 and fair service, is deep grounded in every man, and the 
 Steel Corporation management, by giving each worker 
 the assurance that he will get just what is his due, has 
 secured for itself the entire co-operation of its workers 
 and a resultant organization that probably could not be 
 equalled elsewhere in the industrial world. 
 
 No position in the corporation, however high or respon- 
 sible, is beyond the reach of any employee who proves 
 
The Spirit of the Cokporation 119 
 
 himself big enough for it. Farrell, now president, started 
 as a laborer in a wire mill. The late Thomas Lynch, long 
 head of the H. C. Frick Coke Co., handled a pick in the 
 coal mines of that company. Schwab and Corey, the two 
 former presidents of the corporation, both started at the 
 bottom, as did Alvah C. Dinkey*, now head of the Carnegie 
 Steel Co., and many others. Even Gary, although he did 
 not become connected with the steel industry until middle 
 life and after he had made his success, was the son of 
 a farmer and got to the top by hard work combined 
 with unusual ability. There is no Open Sesame to 
 honor in the big company — nor for that matter, in 
 the steel trade as a whole — ^the keys to success are 
 ability and energy. 
 
 Says Alvah C. Dinkey: "In steel making harmonious 
 team work is essential to the best results and the natural 
 leader therefore rises to the top by the general recognition 
 of his fellows." 
 
 Efficiency, that supreme aid to increased output and 
 large 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 close interest in 
 matters affecting conditions of labor. It has lent its in- 
 fluence, its money and the time of its officials to better 
 these conditions, to provide better homes and more sani- 
 tary and healthy conditions for its men, better educational 
 facilities for their children and wholesome amusement for 
 both. For itself, the big company expects to benefit by 
 reason of increased efficiency; for the worker its final 
 aim is increased 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 quality is 
 
 *Mr. Dinkey resigned in October, 1915. 
 
120 The United States Steel Corporation 
 
 worth more to himself, to his employer and to society than 
 the man lacking it. Without self-respect he remains a 
 common drudge, his value stationary or perhaps receding. 
 With it comes ambition and energy, and the employer 
 who does not set a high value on these qualities is short- 
 sighted. 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 neces- 
 sary." 
 
 Mr. Crawford pointed out that many young men who 
 would be marked out for advancement in the steel industry, 
 where their energy and ability would be gladly recognized, 
 prefer to go into offices or stores as clerks with a much 
 smaller opportunity for advancement, rather than work 
 in a steel mill or mine, because the conditions natural 
 in the work, unless mitigated by the efforts of the em^- 
 ployer, were such as to injure their self-respect. By sur- 
 rounding 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 up to itself new fields for recruiting the 
 highest type of men for its organization. 
 
 Cleanliness, the proverb tells us, is next to Godliness. 
 Undoubtedly it is the foundation, the very backbone of 
 self-respect. The man who is clean, who is surrounded 
 with cleanly living conditions, holds up his head among 
 his fellows. And this is why, to my mind, the efforts 
 of the Steel Corporation to introduce sanitation into the 
 steel industry — the first principle of sanitation being clean- 
 liness — constitute the greatest step taken towards improv- 
 ing the standard of living of the industrial worker. 
 
 Let us take one single sanitary measure and see its ef- 
 fects on the life of the worker. If the reader has ever 
 been in the coal mining regions in the days before the 
 light of sanitation began to flood industry, or indeed, in 
 some districts where that light shines not at all or very 
 dimly even today, he has seen miners returning from the 
 
The Spirit of the Corporation 121 
 
 day's work, their faces, clothes and hands black with the 
 grime of burrowing all day in the deep coal pits — the 
 grime usually is the accumulation of many days, perhaps 
 weeks, of such work. Is it hard to surmise the conditions 
 in the home of these men ? The home, unprovided in most 
 instances with adequate facilities for washing, must 
 sooner or later take on the aspect of its head, for what 
 woman could continue a struggle to keep herself, her 
 house or her children clean against such odds ? Untidiness, 
 slovenliness and the attendant diseases follow as a mat- 
 ter of course. The family standard of living cannot 
 progress, rather must it go backward. 
 
 Practically every mine or mill operated by the various 
 subsidiary companies of the Steel Corporation has as 
 an adjunct a large washroom, appropriately known as 
 a "comfort room." These comfort rooms are equipped 
 with long rows of washbowls and a number of shower 
 baths, as well as a locker for each man. The worker, 
 reporting in the morning, changes to his working clothes 
 and after the day's labor he is able to enjoy a nice re- 
 freshing shower, and changing back to his street clothes, 
 returns home leaving behind him all the dust and dirt 
 of the day. There can be no comparison between the con- 
 ditions in his home and those in the one pictured above. 
 
 Any official of the corporation, or of such concerns as 
 have followed its example in this respect, will tell you that 
 the installation of these helps to better living is just 
 plain, practical business. That the gain in efficiency pays 
 many times for the cost of their construction and main- 
 tenance. 
 
 Steel mill conditions and surroundings are not naturally 
 attractive — quite the contrary. As a well-known Pitts- 
 burgh man said once, a steel mill is far from being a draw- 
 ing room. But the corporation has set itself to making 
 these surroundings just as nearly attractive as possible. 
 It is now the rule rather than the exception to see garden 
 patches, with flowers in Summer, here and there through 
 steel plants. And these are not purely ornamental. It 
 
123 The United States Steel Corporation 
 
 has been proven by experience that the workman who 
 can rest his eyes during his lunch hour on even a tiny 
 bit of "God's green earth" instead of being compelled to 
 contemplate dirty brick walls or piles of rusty scrap iron, 
 begins the second half of his day's labor less fatigued. 
 And here again we see the fetish of efficiency lifting up 
 its head. 
 
 I have visited boiler rooms and other work places in 
 corporation plants, the tiled floors of which are kept spot- 
 lessly clean. I have seen the machinery hidden from sight 
 just as much as proper operation would possibly permit 
 and, in place of the strewn tools, cotton waste and other 
 litter usually associated with such places, I have seen hand- 
 some oak tables arranged in orderly disorder here and 
 there with brass gardiniers, flowers and so on that one 
 would ordinarily expect to find only in a home. Upon 
 asking the reason for this adornment, I was informed that 
 it meant greater comfort to the worker and better work 
 to the employer. It was further explained that a good 
 deal of Sunday or night work was often necessary, work, 
 however, which gave the men a considerable amount of 
 spare time, while necessitating their presence on the job, 
 and that they liked to have their friends or families come 
 and keep them company. The company found that by 
 giving the worker a place where he need not be ashamed 
 to invite his wife or children his self-respect was in- 
 creased and his value to the company added to. 
 
 Again, a practical business reason. But was that all? 
 I do not think so. For I came to find out that the men 
 who were engaged in this work for the improvement of 
 conditions usually became engrossed in it for its own 
 sake, that the human side of it eventually and inevitably 
 came to occupy the chief place in their minds, although I 
 never found one to admit this. 
 
 In a previous chapter the inauguration and operation 
 of the Stock Subscription Plan, designed to perfect the 
 physical organization of the corporation, was explained. 
 As a result of this plan some 50,000 steel workers have 
 
POURING INGOTS 
 
The Spirit of the Corporation 133 
 
 become stockholders of the great company, or more than 
 one-third of the total number of stockholders. It has 
 been suggested by some who see nothing but menace to 
 the worker in every action of a big corporate enterprise 
 that this plan had for its real object the subjugation of the 
 worker by inducing him to invest part of his wages in stock 
 of the employing company and then demanding 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. 
 
 True, the big company has had very little trouble with 
 labor, either before or after the promulgation of the 
 plan. But far from instilling a spirit of fear into the 
 men, it is noticeable that the stockholding employees re- 
 gard themselves, and rightly, as part owners in the vast 
 enterprise, the organization of which they are parts, that 
 they feel a genuine interest in its welfare and work whole- 
 heartedly to further that welfare. 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 had 
 designed to make its workers subservient it would be de- 
 feating the other great efficiency end it has striven for, 
 because self-respect and subservience are deadly enemies 
 and cannot exist together. 
 
 The offering of stock at attractive prices to employees 
 is just another efficiency measure. Each worker 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." Besides the plan encourages thrift 
 and it is a recognized fact that the thrifty worker is more 
 reliable than his spendthrift brother, and more efficient 
 as the knowledge that he has something put by for 
 the rainy day takes a burden of worry, a great handicap 
 to efficiency, off his shoulders. Finally this knowledge 
 helps to increase a man's independence, his self-respect. 
 
124 The United States Steel Corporation 
 
 If I seem to hark back continually to self-respect it is 
 because I consider this quality paramount, its influence 
 affecting not only the worker and his employer, but the 
 whole community. If I were asked to sum up in a few 
 words what the United States 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 not reflected in profits, has 
 been even greater. The management of the big company 
 realized that the worker's rights to a decent life were 
 just as important as the rights of capital and that more, 
 both in mental satisfaction and in profits, was to be gained 
 from a recognition of these rights than their denial. Per- 
 haps, too, it saw that sooner or later the day would dawn 
 when the worker with his hands would demand fair treat- 
 ment, and it had the foresight and courage to hasten the 
 approach of that day. 
 
 In the matter of wages the corporation's course has been 
 in entire harmony with its general policy towards the 
 worker. Since its organization in 1901 it has several 
 times, and always voluntarily, increased wage rates, and 
 in so doing has set a lead which other steel companies 
 have found themselves forced to follow. It has only 
 once reduced wages, and then not until the dividend 
 on the common stock had been passed. Its principle 
 has been that capital and labor both have important 
 rights in the earnings of industry, but that labor is 
 perhaps more directly concerned in its fortunes 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 27 per cent., and this 
 gain has been due almost entirely to the corporation's 
 stand on this question. If any one doubts this, let him 
 ask the competitors of the big company. In 1911, when 
 steel prices were at an unprofitable level and orders 
 were slack, the heads of more than one independent 
 
The Spirit of the Corporation 126 
 
 company told me that a reduction in wages, what they 
 called the liquidation of labor, was necessary, even im- 
 perative, but that they were restrained from resorting 
 to it 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 did not. Instead, just as soon as there 
 seemed to be fair promise of good business, it gave 
 wages another boost of about 7 per cent. Not a year 
 ago, in the face of the worst trade depression in years, 
 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 earning its preferred divi- 
 dend, its management refused to let the worker suffer. 
 So strong was the sentiment throughout the trade at 
 that time in favor of the liquidation of labor that a wage 
 cut was looked on as not only justified, but certain, and 
 it is generally understood that it was only the insistence 
 of Judge Gary that prevented its occurrence. 
 
 Average wages paid by the Steel Corporation to its employees 
 during the past thirteen years have been as follows: 
 1902 $716.88 1909 $775.77 
 
 1903 720.08 1910 800.95 
 
 1904 677.18 1911 819.85 
 
 1905 710.78 1912 856.70 
 
 1906 729.86 1913 909.50 
 
 1907 765.18 1914 905.36 
 
 1908 729.44 
 
 Although the annual wage in 1914 was some four dol- 
 lars less than in 1913, the average day wage to the work- 
 ers, exclusive of the administrative and selling employees, 
 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 the 
 different classes of workers. In instituting advances it 
 has always been the lowest classes of labor that have been 
 benefited most. The result of this, as has been testified 
 by the workers themselves, is beter team work with re- 
 sultant greater efficiency and increased satisfaction on the 
 
126 The United States Steel Corporation 
 
 part of the men who recognize the essential justice of 
 the policy. 
 
 The Steel Corporation has been subjected to repeated 
 attacks because of its attitude towards labor unions. It 
 neither encourages nor approves unionism and it does not 
 contract with unions as such. It stands for the open 
 shop. As it is plain that the 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 ques- 
 tion 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. In its very essence it is antagonistic to the em- 
 ployer, it sets labor and capital into two distinct and 
 inimical 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 co- 
 operation, to give labor a part in the ownership of in- 
 dustry, making the interests of both common. This is 
 accomplished in part by the Stock Subscription Plan. 
 
 This, of course, cannot be accomplished in a hurry. A 
 movement of so vast a magnitude must necessarily take 
 time. But it is safe to say that had the corporation's 
 employees been organized, the betterment of the condi- 
 tions of its workers — and, consequently, of the steel 
 workers of the country — ^would not have progressed 
 nearly so rapidly as it has. 
 
 I have endeavored to outline broadly the corporation 
 spirit of efficiency, it being impossible in the limits of this 
 chapter to give details of the many methods adopted, both 
 by the corporation as a whole or by the various subsidiary 
 companies, all directed to this one end. And with this effi- 
 ciency comes loyalty and co-operation, which, I am con- 
 vinced, makes the United States Steel Corporation the 
 
The Spirit of the Corporation 137 
 
 most wonderful industrial organization the world has ever 
 seen. 
 
 No large employer of labor can escape from the charge 
 of injustice to its men, of seeking to grind down labor, 
 and the Steel Corporation has not been immune from such 
 attacks. The best answer to that charge was made by 
 one of the workers themselves. At the annual meeting of 
 the corporation in April, 1913, several of the men from 
 the mills were present and one, E. R. Smith, a tin plate 
 roller, declared that in view of the fact that the mass of 
 the corporation's employees had time and again given 
 proof of their satisfaction with the relations between them 
 and the corporation and of their loyalty to it, the charge 
 that these men were oppressed, a charge implying the most 
 degrading servility on their part, was an insult to the dig- 
 nity of labor. 
 
 I have tried to show loyalty and co-operation exists 
 throughout 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-respect- 
 ing citizen, and to give every man in its mines, mills, 
 oflSces and so on an opportunity to share in the profits 
 derived from his efforts. All this to promote efficiency, 
 the "Spirit of the Corporation," to increase the value 
 of the worker to himself, to the community and to his 
 employer. Have I justified my statement made in an 
 earlier chapter that the organization of the United 
 States Steel Corporation was the greatest step that 
 has ever been made towards the highest form of 
 socialism? 
 
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CHAPTER VIII 
 THE CORPORATION'S IMPLEMENTS. 
 
 FROM the days when steel was made "by the spoon- 
 ful" to the present when the great "Steel Trust," 
 with its 33 Bessemer converters and more than 
 300 open hearth furnaces, is capable of producing some 
 55,000 tons every twenty-four hours, is a far cry reck- 
 oned in terms of industrial development, although the 
 time covered is less than three-quarters of a century. The 
 pioneers of steel could hardly have dreamed of the enor- 
 mous proportions which the industry would assume, the 
 innumerable uses to which the metal would be put. 
 
 Fifty short years ago steel, commercially, was still in 
 the experimental stage, struggling against iron for its 
 "place in the sun." At that time the head of a great rail- 
 road system dismissed a persistent salesman who had been 
 trying to secure his order for steel rails with the exclama- 
 tion : "Steel rails ! Bosh ! Stuff ! Nonsense !" That line 
 has thousands of miles of track to-day and, of course, 
 they are all steel. Engineers viewed askance the plans 
 of the first designer of a skyscraper who proposed to erect 
 a steel bridge up into the air. To-day the Woolworth 
 Building towers 750 feet above the pavement of Broad- 
 way. 
 
 With good reason has the present era been called the 
 "Age of Steel." What field has steel not invaded, in what 
 line of human activity does it not play a prominent part? 
 Our big buildings, our navies, both of war and commerce, 
 our trains and the rails that carry them, machinery, tools 
 of every trade — all steel. Furniture, watch springs, even 
 wire hair for stuffing mattresses — steel again. And new 
 uses are being discovered for the metal almost every day. 
 
 What is steel ? Iron that has been refined and hardened 
 
130 The United States Steel Corporation 
 
 by processes in which heat plays the most important part. 
 Iron ore is found in large quantities in this and other parts 
 of the world. Sometimes it is loose like dirt, 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 — steel. 
 
 Iron, apparently, is common to all the planets, analysis 
 having proved that meteorites often contain a large per- 
 centage of the metal. So general is its distribution that a 
 theory has been advanced that the earth is nothing but a 
 vast mass of iron thinly encrusted with rock and dirt and 
 the deposits found near the surface are merely the out- 
 croppings of this inexhaustible mine. 
 
 The Western Hemisphere is particularly favored in re- 
 gard to its deposits of iron. Immense ore bodies exist 
 in the United States and Canada, as well as in Chile, 
 Brazil and Cuba. Of the ore beds in this country the most 
 important lie around Lake Superior. Near this great in- 
 land sea there are no less than six different so-called 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 proportion of all the ore mined in the 
 United States. There are ore bodies of considerable size 
 being worked in Alabama, New York, Pennsylvania, 
 Colorado, Wyoming, New Mexico and Utah, and some 
 American iron and steel makers import iron ore from 
 Sweden, Cuba, Spain and Chile. But the Steel Cor- 
 poration's subsidiaries depend upon the Lake region for 
 their raw supplies, with the exception of the Tennessee 
 Coal, Iron & Railroad Co., which uses Alabama ores. 
 
 First of the Lake ore deposits to be opened was the 
 Marquette Range. In 1845 Philo M. Everett was guided 
 by Indians to "a mountain of solid iron" to which he gave 
 the name of the missionary explorer. Shortly afterwards 
 
The Corporation's Implements 131 
 
 a surveyor named Stunz set out to seek gold in the wild 
 region north of the Lake and came back to civilization 
 with the tale of vast iron deposits in the Vermilion Range. 
 But it was not until the early seventies that capital, in the 
 person of the late Charlemagne Tower, could be interested 
 in the exploitation of the deposits. 
 
 The discovery of Mesaba, the greatest of the ranges, 
 was also due to accident. Some years before the Civil 
 War, Lewis H. Merritt, a prospector, struck out into the 
 woods in quest of gold and came back empty-handed, ex- 
 cept for a few samples of iron ore. Little did he dream 
 that he had found what would eventually prove far more 
 precious than gold. He told of his discovery only to his 
 four sons and it was not until 1885 that the Merritt broth- 
 ers staked out their first mine in the desolate region. The 
 Merritts were lumbermen and their claims that ore ex- 
 isted on the range was scoffed at for some time, the 
 mining fraternity proving to its own satisfaction that 
 no iron could be obtained from the Mesaba mines. In 
 1913, the Steel Corporation alone took 21,635,000 tons of 
 ore from this range, a single mine yielding 3,500,000 tons ! 
 
 The finding of iron in this region, incidentally, proved 
 a great boon to the cause of education in Minnesota. The 
 story has been told but is worth repeating. It is the tale 
 of a joke that reacted on its perpetrators, and has its be- 
 ginnings before the Civil War. At that time the public 
 school system of Minnesota was badly in need of aid and 
 the educators clamored long and loud at the door of the 
 legislature for a share in the public lands, eventually 
 wringing from the lawmakers a promise of ten sections. 
 This 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 part of the State. But the joke 
 reacted when the development of the Mesaba Range be- 
 gan to shovel gold to the credit of the school system. 
 To-day the Minnesota schools have millions to their credit 
 
132 The United States Steel Corporation 
 
 and are constantly adding to the amount through royalties 
 on shipments of ore from the aforesaid ten sections. 
 
 A mine, in the commonly accepted meaning of the word, 
 is a deep pit or shaft in the ground, from which tunnels, 
 or drifts, radiate through the ore bodies. But in the 
 Mesaba region nature has been kind to the steel maker. 
 She has saved him the trouble of delving 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 ex- 
 claimed ; "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 long — 
 these are the dimensions of the Hull-Rust mine at Hib- 
 bing — and descending in a series of deep terraces to 120 
 feet below the surface, with every terrace, save the first, 
 dug out of solid iron ore, and you will have an idea of 
 what one of these Mesaba "ore farms" is. One end of 
 the mine is graded to permit the entrance of trains, and 
 big steam shovels burrow into the soft ore, scooping up 
 a ton of ore at each lift and dumping it into the waiting 
 cars. 
 
 Under these conditions mining becomes largely a mat- 
 ter 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; in 1913 the Hull-Rust 
 averaged that each month — a ton of ore every two sec- 
 onds, allowing for a ten-hour working day. 
 
 Exclusive of the mines covered by the Hill lease, now 
 abandoned, the Steel Corporation has developed some 
 seventy-five mines in the Mesaba Range. The number 
 worked at any particular time depends on steel trade con- 
 ditions. In one year it has taken from these mines more 
 than 21,630,000 tons of ore. In the Vermilion Range it 
 has five mines, in the Menominee seven, in the Marquette 
 twelve, in the Gogebic thirteen, and in the Baraboo 
 Range, in southern Wisconsin, one. Its developed 
 
The Corporation's Implements 133 
 
 mines in the South number twenty-two, of which four 
 were inactive at last report. The total yield of these 
 mines in 1913 was 28,738,451 tons. 
 
 Perhaps the immensity of the corporation's mining 
 operations can best be illustrated by the statement that 
 the excavation involved in "stripping," or removing the 
 surface earth overburden from the open pit mines, has 
 aggregated 234,000,CX)0 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 approxi- 
 mately 410,000,000 cubic yards. 
 
 All the corporation's mining operations in the North 
 are handled through one subsidiary, the Oliver Iron Min- 
 ing Company, at the head of which is William J. Olcott. 
 
 Some of the western Mesaba ores are too low in iron 
 content and too high in silica to be immediately available 
 for steel making. For this reason a concentrator, or ore 
 washing plant, the biggest in the world, has been erected 
 at Coleraine, and here ore as low as Z7fo in iron is treated 
 by water and gravity and brought up to an average of 
 about 56% iron. This concentrator, capable of handling 
 about 3,000,000 tons of crude ore a year, is operated en- 
 tirely by electricity. 
 
 Two well equipped railroads, both Steel Corporation 
 owned, carry the ore from the mines North of Lake Su- 
 perior to tidewater on that lake. The Duluth, Missabe 
 & Northern, at the head of which is William A. McGon- 
 agle, transports the Mesaba ores to the port of Duluth, 
 while the Duluth & Iron Range, of which F. E. House is 
 president, runs between points in the Vermilion Range 
 and the eastern part of the Mesaba Range to Two Har- 
 bors. The mines of the other lake ranges are served by 
 independent roads, the ports being Marquette and Ash- 
 land, on Lake Superior, and Escanaba, on Lake Michigan. 
 
 From these ports the ore is taken on the vessels of the 
 Pittsburg Steamship Company to Gary, South Chicago, 
 Cleveland, Ashtabula, Conneaut, Fairport and other Lake 
 
134 The United States Steel Corporation 
 
 Erie points for distribution to the furnaces. The Pitts- 
 burg company operates seventy-two steamers and a num- 
 ber of other vessels on the Great Lakes. Many of these 
 vessels are over six hundred feet long, with a carrying 
 capacity of 12,000 tons of ore, for the freightage of which 
 they are specially built. 
 
 The boats are loaded with their cargoes from the cor- 
 poration's ore docks, the largest of which are located at 
 Duluth. The newest of these docks, only recently com- 
 pleted, has a total length of a mile and a quarter, half a 
 mile of which juts out over St. Louis Bay, its steel and 
 concrete structure towering eighty feet above water level. 
 
 Loading is done by rapid-fire methods. The trains 
 from the mines dump their contents into huge pockets in 
 the docks — the new dock has some four hundred pockets, 
 each holding 300 tons — and from these the ore is allowed 
 to slip into the vessels by way of long chutes let down 
 into their holds. No labor is required for the operation, 
 the whole being accomplished by the natural force of 
 gravity. By this method a twelve thousand ton ship 
 has been filled in less than half an hour, although the 
 average time is a good deal longer than this record. 
 
 At the other end of their trips these vessels are un- 
 loaded, down to the last spadeful, within three hours. 
 Of the various unloading devices employed the Hulett 
 machines are the most modern and impressive. Weigh- 
 ing hundreds of tons, these huge affairs are moved up 
 and down the docks by the touch of a lever. Almost "a 
 child can handle them." From them project mighty arms, 
 which, somehow remind one of gargantuan grasshoppers. 
 Seated comfortably in the wrist of one of these great 
 arms is the operator and, at his will, the clam-shell 
 bucket hands dip down into the bowels of the vessel and, 
 opening their metal fingers wide, to a span of twenty-two 
 feet in the largest sizes, close with irresistible might 
 on everything within that span. 
 
 The Hulett machine is the very embodiment of power. 
 The incalculable force of those mighty fingers would crush 
 
The Corporation's Implements 135 
 
 a railroad car like a sponge. A mistake by the operator 
 and the steel ribs of the unloading steamer would be torn 
 away, gnarled and twisted. And when that hand comes 
 up, it brings a load worthy of its strength, full fifteen 
 tons of ore ! 
 
 Another spectacular time-saving method is to be wit- 
 nessed at Conneaut, where coal destined for the ore 
 mining regions is loaded into returning ore boats by the 
 carfull, fifty tons at a clip. Each car is seized, lifted 
 and swung out and over the vessel, and its entire con- 
 tents emptied into the hold in a matter of seconds. 
 
 To Pittsburg, center of the steel industry, comes the 
 bulk of the ore shipped from the Great Lakes. Ore des- 
 tined for Pittsburg furnaces is brought from the lake 
 ports by the Bessemer & Lake Erie Railroad, another 
 corporation subsidiary, with its 200 miles of main line, 
 the fourth longest, but probably the best known of the 
 Steel Corporation lines. The Duluth, Missabe & Northern 
 holds first place among these roads in respect to mileage, 
 224 miles, with the Elgin, Joliet & Eastern second, 210 
 miles, and the Duluth & Iron Range third, 204 miles. 
 The total trackage of the Steel roads, including sidings, 
 branches, switches and yard track, is 3,380 miles, all main- 
 tained in excellent condition and absolutely modem. 
 
 A line drawn from New Orleans to St. Louis, thence 
 to Kewanee, 111., and so on through Minneapolis north 
 would about form the western boundary of the Steel Cor- 
 poration's manufacturing and mining activities. The 
 northern boundary would be the Canadian border, with 
 the Atlantic and Gulf of Mexico bounding the east and 
 south. Half the United States! The extreme north- 
 west of this area is now devoted to mining alone, but a 
 steel plant with a capacity of nearly five hundred thousand 
 tons of steel ingots will be in operation at Duluth before 
 the end of the current year*. 
 
 All over the remainder of this vast area are scattered the 
 plants of the big company, but nowhere are they so thickly 
 
 ♦This plant is now in operation. 
 
136 The United States Steel Corporation 
 
 clustered as around Pittsburg, the steel city of the world. 
 Here the biggest of the subsidiary companies, the Carnegie 
 Steel Company, has its headquarters, and here too is the 
 home of the National Tube, American Sheet & Tin Plate 
 and American Bridge companies. All the Carnegie plants 
 are in or near Pittsburg, as are the principal plants of the 
 National Tube Company — this company has an important 
 establishment at Kewanee — ^but the Tin Plate and Bridge 
 companies have their plants very widely scattered. The 
 Chicago territory provides a home and a market for the 
 Illinois Steel Company and the Indiana Steel Company, 
 which it controls and which operates the big Gary plant. 
 The American Steel & Wire Company has its head office 
 at Cleveland, but its plants are scattered over a great 
 many States, from Illinois to Massachusetts, and it also 
 has a plant at Hamilton, Ont. 
 
 All over Pittsburg 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 are usually built in "batteries," several together. 
 They are immense ovens of steel and fire brick, in which 
 a temperature of over three thousand degrees can be gen- 
 erated, and in this heat the ore is melted into iron. From 
 the ground to the tops of the furnaces run skips or buck- 
 ets on inclined tracks to carry the ore to their mouths, 
 where, with a mixture of coke and limestone, it is dumped. 
 The ore, coke and limestone soon become one liquid mass 
 of fire, and the oven, after a sufficient time, is "tapped" 
 by breaking open a small opening at the bottom sealed 
 with mud and letting the molten contents run out through 
 gutters into receiving ladles. The iron, being heaviest, 
 runs out first. The rest, following, is diverted into an- 
 other gutter and cooled, when it is used in making cement, 
 or in ballasting railroad tracks; this is known as slag. 
 
 Meanwhile the iron is carried in the ladles to the 
 mixers, huge cradles holding 250 tons of molten metal 
 and rocking slowly but continuously, into which different 
 
The Corporation's Implements 137 
 
 heats of iron are poured and brought to a homogenous 
 mixture. This is done to ensure uniformity in the iron. 
 
 William R. Jones, or Captain Bill, as he was more gen- 
 erally known, was for many years in charge of the Brad- 
 dock 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 steel industry. Big, hot-tem- 
 pered, but with a heart of gold, he was an ideal leader 
 for a steel mill army. Gifted with unquenchable energy 
 and enthusiasm, he acquired the habit of breaking world 
 steel making records, and in the earlier days of his man- 
 agement of the Braddock works, he time and time again 
 set the steel world agog by his feats in the matter of pro- 
 duction. He continued to do so until the steel makers of 
 Europe and America became so used to "Jones breaking 
 another record" that it went unheeded. The Jones mixer 
 was one of his many inventions. 
 
 In a letter to me, Mr. 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 morn- 
 ing, his reply was : 
 
 " T 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 wit- 
 nessed 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 to do the 
 will of man. From its great steel crater shoot forth 
 frames to a height of perhaps a hundred feet, showering 
 sparks around and creating a pyrotechnic display of un- 
 equalled splendor. The glare lights up the countryside 
 
138 The United States Steel Corporation 
 
 for miles around, while the hissing and roaring of the 
 molten iron, or rather of the steel groaning in its birth 
 throes, forms a fitting sound accompaniment. It is a 
 sight that once seen is never forgotten. 
 
 Both Britain and America claim the invention of the 
 Bessemer converter, the most epoch-making of all the dis- 
 coveries in the steel trade and one that has influenced all 
 industry, civilization itself, immeasurably. For before its 
 use steel could only be made in small quantities by a slow 
 and expensive process 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 "Steel 
 Trust." 
 
 Shortly before the middle of the nineteenth century Wil- 
 liam Kelly, in America, and Henry Bessemer, in England, 
 were struck by the idea that air could be used as fuel, 
 that the oxygen in air would serve to bum out the im- 
 purities in iron and would at the same time blow these im- 
 purities away. The records seem to be slightly in favor of 
 Kelly as the original discoverer, although Bessemer got 
 all the credit, and 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 encount- 
 ered 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 inter- 
 view with Commodore Vanderbilt, head of the New York 
 Central system, and endeavored to interest him in his in- 
 vention. 
 
 "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," Westinghouse replied. 
 
 Vanderbilt turned to his secretary: "Show this lunatic 
 out and never let him trouble me again," he said. 
 
SIR HENRY BESSEMER 
 
 From "The Romance of Steel," by H. A. Casson, published by the A. S. Barnes Co., 
 
 New York 
 
The Corporation's Implements 139 
 
 Kelly's first attempt at purifying iron with oxygen was 
 a failure. The blast was too strong, and the iron was 
 blown away along with the impurities. But he was not 
 to be discouraged, and at length got the blast right, only 
 to find that the metal that resulted was too soft, for a 
 small percentage of carbon and other alloys must be re- 
 tained in the steel to give it hardness. 
 
 Then a Scotch ironmaker, Robert F. Mushet, came for- 
 ward with the practical suggestion: "Bum out all the 
 carbon, then add the amount required for hardness," and 
 the thing was done. 
 
 This 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 and the huge caldron turns on its axis, 
 while workmen quickly shovel into it carbon, silicon, etc. 
 Then it is further tilted and the contents spilled 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 its name implies, the iron is changed into steel in 
 large ovens, into which are put the iron and the different 
 alloys as well as an amount of scrap necessary in the 
 process. When the proper melt is arrived at the metal, 
 now steel, is run off into the ladles. 
 
 Times change and steel-making with them. Open 
 hearth is fast supplanting Bessemer steel in all markets, 
 and the day does not appear to be far distant when Bes- 
 semer steel will be practically a thing of the past. Greater 
 strength is claimed for the newer process. But it must 
 not be forgotten that the discovery of Kelly and Bessemer 
 gave birth to the modern steel industry and made pos- 
 sible the Age of Steel. No doubt open hearth will later 
 yield to another process. A prominent steel maker recently 
 suggested that electric steel would be the steel of the 
 future. 
 
140 The United States Steel Corporation 
 
 All the newer steel plants are equipped with open 
 hearth furnaces. At Gary, this is the only product made, 
 and even the Carnegie Steel Company now has 129 open 
 hearth furnaces to fourteen Bessemer converters. Al- 
 together the Steel Corporation's converters number thirty- 
 three, and its open hearth furnaces 298. 
 
 From the ladles the steel is poured into molds of cast 
 iron some eight feet high and of various thicknesses and 
 widths, where it is allowed to cool until semi-solidified. 
 The molded metal is known as an ingot, which is steel in 
 its first form, as distinct from iron. If not for immediate 
 use the ingot is left to cool and harden completely. Other- 
 wise it is taken to the soaking pit as, when taken from the 
 mold, its outer surface is comparatively hard, while the 
 inside is still soft, and the metal could not be rolled in 
 this state. In the soaking pit the ingot is slowly brought 
 to a uniform heat throughout and is then ready for the 
 rolling mill, where it is to be transformed into steel as 
 we know it commercially. 
 
 The various processes by which the ingot is transformed 
 into rails, wire, tubes, plates, and the wide diversity of 
 shapes made by the corporation cannot be detailed here. 
 In one mill may be seen the rolling of the ingot into the 
 form of a railroad rail, or large plate or beam. In an- 
 other the ingot is reduced to billets, square bars of steel, 
 some four inches thick and several feet long, and later 
 follows the processes of rolling the billet to wire rods, 
 long, sinuous snakes of red hot metal, to be cooled and 
 drawn through dies to still smaller sizes of wire, or to 
 other described shapes. Here are the nail mills — prob- 
 ably the noisiest places in the world — and there the tube 
 works, where thin plates of steel are shaped and welded 
 into tubes and pipes for uses of all kinds. Altogether 
 the corporation has 146 works scattered over the eastern 
 half of the United States, these works comprising 125 
 blast furnaces, 33 Bessemer converters, 298 open hearth 
 furnaces, 68 warehouses, 711 mills for rolling billets, slabs, 
 bloomsj sheet bars, rails, plates, shapes, wire rods, skelp, 
 
The Corporation's Implements 141 
 
 sheets, merchant steel and so on; 61 mills for drawing 
 and making the various kinds of wire and wire nails ; 55 
 tube works and furnaces; 14 tin plate mills; 20 bridge 
 and structural plants; 38 galvanizing and tinning de- 
 partments, and 37 other steel mills of one kind or an- 
 other, besides an armor plate plant, axle works, horse- 
 shoe mill, etc., and twelve plants for making iron sul- 
 phate and five cement works. It has a total capacity of 
 over twenty million tons of ingots and some fifteen 
 million tons of finished steel. 
 
 But the mining of coal and its conversion into coke is 
 almost as important a part of the steel industry as the 
 mining and refining of iron, for iron and steel cannot be 
 made without coke. The Steel Corporation's coke opera- 
 tions are carried on a scale in harmony with the general 
 immensity of its steel making. In 1913 the big company 
 mined 30,786,573 tons of coal, and manufactured 
 16,663,480 tons of coke. 
 
 During the earlier periods of the history of the steel 
 trade the steel and iron maker did not produce his own 
 coke, but bought it. With the gradual integration of the 
 industry steel companies began to go into the coke busi- 
 ness, and this is the rule to-day, although many important 
 concerns lack facilities for making the coke they need. 
 The most important merger of steel and coke interests was 
 that which brought together Andrew Carnegie and Henry 
 Clay Frick, and later resulted in giving to the Steel Cor- 
 poration, when it absorbed the Carnegie Steel Company, 
 control of the vast coal mines owned by the Frick in- 
 terests. 
 
 Frick, who has a right to a high place among the in- 
 teresting figures of American industrial history, was bom 
 on December 19, 1849. He began his business life as an 
 errand boy and later became a clerk in a distillery at 
 Mount Pleasant, Pa., in the middle of the coke producing 
 district. The young man grew to be a firm believer in the 
 future of the coke industry, and out of a slender salary 
 saved enough to make some small investments in coke 
 
143 The United States Steel Corporation 
 
 lands. Eventually, with the aid of a Pittsburg banker, 
 he organized H. C. Frick & Company, later the H. C. 
 Frick Coke Company, and within a few years be became 
 the leading figure in the coke trade. 
 
 When Carnegie decided that integration demanded the 
 acquisition of coke properties, he secured control of the 
 Frick company, and Frick not long after was made a 
 partner in the Carnegie company. To-day Frick is a di- 
 rector and a member of the Finance Committee of the 
 Steel Corporation and, incidentally, he is reckoned as 
 one of the richest of American millionaires. 
 
 The H. C. Frick Coke Company is still the most im- 
 portant by far of the corporation's coke making subsi- 
 diaries. It owns vast areas of land in the Connellsville 
 district, near Pittsburg and supplies the greater portion of 
 the coke used by the big company. At its head for many 
 years was Thomas Lynch, a man who worked his way up 
 under Frick from the job of common laborer to the presi- 
 dency of the big coke company. Lynch was one of the 
 most esteemed men in the steel trade, his popularity being 
 due to his genial disposition. At his death on December 
 29, 1914, he was succeeded by Walter H. Clingerman. 
 
 At the Frick coke works coke is made by the old bee- 
 hive process, in great open ovens, long rows of hundreds 
 of such ovens where millions of tons of coal are turned 
 into coke in the course of a year. The modem coke mak- 
 ing process is leading away from these ovens on account 
 of the waste of coal and of its by-products and steel plants 
 now being built are equipped with the modem by-product 
 ovens. But the Frick company is able to hold its own, 
 and will for a long time, even against the rapid progress 
 of the modernization of the industry. Will it be obliged 
 to abandon the old ovens and replace them with the 
 newer type ? That remains to be seen ; it is not highly 
 improbable that the development of steel making vnW 
 make necessary such a course. 
 
 Operations of the Steel Corporation in the South are 
 carried on almost exclusively by its subsidiary, the Ten- 
 
The Corporation's Implements 143 
 
 nessee Coal, Iron & Railroad Company. The Tennessee 
 company is altogether self contained, having coal, lime- 
 stone and ore supplies within a few miles of its mills. It 
 is "sitting on its raw supplies" as one man aptly phrased 
 it. Thus far the Tennessee company has been the least 
 profitable of the corporation's subsidiaries, the amount of 
 money taken out being absurdly small as compared with 
 that put into it, but the condition of the company and its 
 marketing possibilities are improving and the outlook for 
 the future is by no means lacking in promise. 
 
 The tale of the expansion of the corporation's activities 
 is not yet told. This is indicated by the building of a large 
 steel mill at Duluth and the plans for another mill across 
 the Canadian border. That its growth will not be too 
 rapid may be considered certain, if for no other reason 
 than that its management is averse to achieving any- 
 thing that might savor of monopoly. But it would be 
 safe to say that the future development of the Steel Cor- 
 poration in regard to the extension of its steel making 
 facilities will keep pace with the development of the 
 American Continent. 
 
CHAPTER IX 
 THE STEEL TOWNS. 
 
 PITTSBURGH, preeminent 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 produces 
 one-quarter of the world's supply of the hard metal, nat- 
 urally comes to mind at the mention of the steel cities — 
 she is first of them all. 
 
 Situated in the extreme West of the State of Pennsyl- 
 vania, on the border of the great coal deposits of that 
 State, and with excellent facilities for getting all her 
 ore at low costs, having moreover an unsurpassed lo- 
 cation in respect to markets for her finished products, 
 Pittsburgh Is likely to keep for a long time her com- 
 manding position among the steel towns. And yet, I 
 do not propose to include Pittsburgh among the steel 
 towns to be discussed in this chapter. 
 
 Pittsburgh is the world's steel town. And this is the 
 story of some of the cities that owe their existence to 
 the United States Steel Corporation, which have sprung 
 up as a result of its manufacturing activities, and in the 
 building and management of which the influence of the 
 biggest of all businesses has been reflected. 
 
 To Gary, Indiana, then, belongs first place. 
 
 Bearing, appropriately, the name of the head of the 
 corporation, the man who was more than any other re- 
 sponsible for its organization, and beyond peradventure 
 responsible for its policies, Gary may be said to repre- 
 sent, as far as a town may, the spirit of the corporation 
 — efficiency. 
 
146 The United States Steel Corporation 
 
 Gary's history is less than ten years old. The site 
 of the city, in the northwest corner of Indiana, twenty- 
 five miles from Chicago, was a sand dune on which 
 grew only scrub oak and sage brush a decade ago. Its 
 inhabitants were wild fowl and a few hardy hunters 
 and fishermen, and on one memorable occasion a cave 
 among the dunes gave refuge to the car bar bandits of 
 Chicago until their surrender was forced by the police. 
 In 1906 the Steel Corporation's management decided to 
 build a big steel plant in the middle West and selected 
 the sand waste on the shore of Lake Michigan, and thus 
 was the city of Gary born. 
 
 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 had 
 to have a town to house its employees and the site of 
 Gary offered not even the Ordinary facilities for the 
 building of such a town. It had no harbor, nothing 
 could grow on its arid soil, these were only two of the 
 handicaps to be overcome. But the corporation set to 
 work to build Gary literally "from the ground up" and 
 the present city, with a population of 40,000 was the 
 result. 
 
 Work on the building of the steel plant and city was 
 started in April, 1906. To the Indiana Steel Co, a sub- 
 sidiary of the Illinois Steel Co. specially organized for 
 the purpose, was given the task of erecting the steel 
 mills, while the Gary Land Co. was organized and put 
 in charge of the creation of the city. To make the new 
 town inhabitable and attractive nearly two million cubic 
 yards of earth was brought into Gary and used for the 
 laying out of parks, boulevards and lawns. So far some 
 12,000 trees have been planted with the same object 
 and with satisfactory success. 
 
 Safe haven for the corporation's vessels was provided 
 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 
 
The Steel Towns 147 
 
 steamers afloat and terminating in a basin large enough 
 for these vessels to turn around with room to spare. 
 In the calm waters of this harbor, protected by a break- 
 water, the ore vessels 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 furnaces. 
 
 How great was the task of building Gary may be 
 gathered from its cost to the Steel Corporation. The 
 construction of the steel plant and the creation of the 
 town has involved an expenditure of nearly $100,000,000 
 so far, and not all the work called for in the original 
 plans has been completed. Of the 56 open hearth fur- 
 naces contemplated 43 have been built and are operating 
 at present. The first heat of pig iron was produced at 
 Gary on December 21, 1908, and the first steel ingot 
 made early in the following year. 
 
 The Gary steel plant is probably the largest single 
 steel plant in the world. It consists of eight blast fur- 
 naces, forty-two open hearth steel furnaces, a rail mill, 
 billet mill, plate mill, five merchant mills, slab mill, axle 
 plant, and a by-product coke plant of eight batteries, 
 each of 70 ovens. With these are the auxiliary shops, 
 machine shop, roll shop, electric repair shop, roll 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 operate the 
 open hearth furnaces and steel mills is supplied by sev- 
 enteen 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 fur- 
 naces. 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 
 
148 The United States Steel Corporation 
 
 of the Universal Portland Cement Co. The rail mill is 
 driven by three electric motors of 6,000 H.P. each. 
 The estimated capacity of this big plant is as follows : 
 
 Pig iron 13X),000 tons 
 
 Coke 3,000,000 " 
 
 Ingots 2,160,000 " 
 
 Billets, blooms and slabs 1,480,000 " 
 
 Sheet bar 600,000 " 
 
 Rails 1,000,000 " 
 
 Merchant bars 600,0(X) " 
 
 Plates 200,000 " 
 
 Axles 175,000 " 
 
 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 future ex- 
 tensions. 
 
 Gary, the town, was incorporated in June, 1906, only 
 a few months after it began building. At the first elec- 
 tion for town officials, thiry-three votes were cast. 
 Seven years later, in 1913, over 9,000 voters cast bal- 
 lots ! Gary's population is placed at 40,000 to-day. 
 
 When the Steel Corporation decided to build Gary it 
 determined to make a modern city. The town was care- 
 fully laid out by competent engineers and ample provi- 
 sion allowed for growth. The town now covers thirty- 
 one square miles, and contains 120 miles of paved streets 
 — the two principal thoroughfares, Broadway, 100 feet 
 wide, and Fifth Avenue, 80 feet wide, being paved with 
 concrete block and the other streets with macadam. Be- 
 tween the streets are alleys under which the gas, water 
 and sewer pipes are laid, this obviating the necessity of 
 tearing up the street paving for repairs to service pipes. 
 There are over 60 miles of these pipes laid in Gary. 
 
 In the residential section of Gary are many pretty 
 homes owned by steel workers and others. The Gary 
 Land Co, has erected a number of these houses — over 
 
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The Steel Towns 149 
 
 nine hundred — and these are offered for sale at prices 
 representing 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 com- 
 pany also offers for rent at exceedingly nominal rates 
 houses usually built of concrete and equipped with elec- 
 tricity and other modern conveniences. All these dwell- 
 ings are attractively finished and each has its plot of 
 green, large or small. 
 
 Perhaps the finest building in Gary is the home of the 
 Y. M. C. A. given to the city by Judge Gary and cost- 
 ing $260,000. This building contains a gymnasium, 
 swimming pools, class rooms, dormitories and so on. 
 Its equipment was the gift of the Steel Corporation. 
 Opposite the Y. M. C. A. is the Library, erected by 
 Andrew Carnegie, and not far off is now being con- 
 structed a Federal Building at a cost estimated at $150,- 
 000. The Gary Hospital, built and maintained by the 
 Steel Corporation, is absolutely modern in its equipment 
 and management and compares favorably with similar 
 institutions in the largest cities. 
 
 In all things Gary stands for modernity and effi- 
 ciency. Nowhere is this illustrated as it is in the school 
 system, for the city is likely to go down to fame as the 
 home of the modern system of education. As the Gary 
 educational plan is now being extensively copied in 
 many large cities, among them New York, the metrop- 
 olis of the Western Hemisphere, it is well worth de- 
 voting a little space to the consideration of the Gary 
 schools. 
 
 At the head of the Gary school system is Professor 
 William Wirt, an enthusiast on the training of 
 youth. When the town officials and Steel Corpora- 
 tion officials took up the matter of education, they 
 went at it in their usual thorough manner and looked 
 around for the best school head to be obtained. Wirt 
 was chosen for the post and he was given practically a 
 
150 The United States Steel Corporation 
 
 free hand in modelling the entire system, the result of 
 which was Emerson and Froebel schools. 
 
 Wirt proceeded to turn topsy-turvy many of the old 
 ideas of education. He had the big advantage of being 
 able to arrange all details of the school system, even 
 to the building of the schools, in accordance with his 
 plan, and evolved a scheme under which the young of 
 both sexes enjoy a vocational training completely equip- 
 ping graduates from the schools to enter practically 
 any chosen walk of life. But he has accomplished 
 something bigger than this — he has made education at- 
 tractive to the boys and girls who have the good for- 
 tune to come under his care. 
 
 The three school buildings together offer educational 
 facilities to over 3,000 children. They are surrounded 
 by spacious playgrounds, it being one of Wirt's theories 
 that play is absolutely essential to the young, and work 
 and play are so alternated as to double the number of 
 children which the schools would ordinarily accommo- 
 date, one class working while another uses the play- 
 grounds. 
 
 All the regular school subjects are taught in the Gary 
 schools, 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 in- 
 culcated together with the aid of lantern slides, visual- 
 ization of scenes and events being made use of to at- 
 tract interest and assist memorization. The same i-dea 
 is employed in other studies, the room devoted to nat- 
 ural history, for instance, being equipped with stuffed 
 animals and even with small live ones. 
 
 The range of vocational subjects taught ranges from 
 painting and carpentry to accountancy and architectural 
 draftsmanship. The school is equipped with a carpenter 
 shop, paint shop, foundry, draughting room, etc., and 
 each trade or profession is inculcated not by theory but 
 practically. The teachers of these subjects are not col- 
 lege professors but skilled workers in the different lines 
 
The Steel Towns 151 
 
 and the students or apprentices to each trade make 
 articles used in the school itself, this serving not only to 
 reduce the cost of maintenance of the schools 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., and very creditable ones; the painters keep 
 the school rooms and buildings spic and span; the 
 draftsmen plan additions or improvements ; the account- 
 ants keep the school accounts. In every case a concrete 
 end is served, to the benefit of the school and pupil. 
 
 Nor is the female of the species forgotten. A kitchen 
 and lunch room, run by the girls, and seUing lunches to 
 their fellow students, gives the small housewife actual 
 experience in the essentials of good housekeeping. 
 Laundry work, sewing and other feminine industries are 
 inculcated similarly. 
 
 In that part of the school buildings and grounds de- 
 voted to play are to be found swimming pools — one for 
 boys and another for girls — tennis courts, baseball dia- 
 monds, swings and other aids to enjoyment loved by 
 the young of all ages and sexes. Play is supervised by 
 teachers who devote all their time to it, Mr. Wirt hold- 
 ing that competent instruction is needed in this as in 
 history, geography or other studies. 
 
 How the Gary educational system appeals to the boys 
 and girls is perhaps best illustrated by the following 
 example, related to me by a foreman of the mills of 
 the American Sheet & Tin Plate Co., which has a large 
 plant on the outskirts of the town. I will tell the story 
 in his own words, as nearly as I can remember them : 
 
 "Some 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, and it proved I 
 was correctly informed. Upon his arrival in Gary he 
 flatly refused to make any pretense of studying and it 
 
152 The United States Steel Corporation 
 
 was some weeks before I could even induce him to visit 
 Mr. Wirt with me. 
 
 "Upon the boy's explaining to Mr. Wirt that he did 
 not consider himself in need of an education as he in- 
 tended to be a painter, the professor suggested that he 
 come to school and learn how to paint, assuring him 
 that he would not be forced to do anything he objected 
 to. Naturally, the boy, who was never so happy as 
 when dabbling with a paint brush, accepted the sug- 
 gestion. 
 
 "The first day he was given a pot of paint and a 
 brush and put under the care of the painter, and in a 
 short time he was fairly adept at laying on color. Then, 
 one day, he was informed that some of the classrooms 
 were to be re-decorated in several colors and that he 
 was to have the job, provided he could make a satis- 
 factory bid for the contract. 
 
 "That was a stumper. The boy confessed his inabil- 
 ity 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 to get to 
 school. It would take a padlock and chain to keep him 
 away from his studies." 
 
 Gary is growing rapidly. Two corporation sub- 
 sidiaries, besides the Indiana Steel Co., already have 
 plants there. There are the American Sheet & Tin Plate 
 Co., and the American Bridge Co., and the American 
 Locomotive and American Car & Foundry companies 
 plan to erect plants in its suburbs in the near future. 
 The Gary Screw & Bolt Co., a local enterprise, has 
 already constructed a plant for the making of bolts, 
 nuts and screws. 
 
 No less than five trunk lines connect with Gary. 
 These are the Lake Shore & Michigan Southern, Balti- 
 more & Ohio, Wabash, Michigan Central, Pennsylvania 
 and Nickel Plate. Smaller roads entering Gary are the 
 
The Steel Towns 153 
 
 Lake Shore & South Bend Ry., Gary & Southern, Gary, 
 Valparaiso & Eastern and the Gary, Hobart & Eastern. 
 The Elgin, Joliet & Eastern, the corporation road, has 
 a large freight yard near the steel works, designed to 
 accommodate 15,000 cars. 
 
 A village in 1906 Gary is now a city of the second 
 class, having attained this rank in April, 1915. 
 
 Citizens of Gary are ashamed of only one thing about 
 their town. This, appropriately known as the "Patch" 
 is a small section thrusting itself like a wedge into the 
 business part of the city and giving housing to nearly 
 200 saloons and a number of dives. The site of the 
 Patch was not acquired by the corporation because of 
 some question regarding validity of title, so the big com- 
 pany had no power of restriction over its development. 
 Gary men say that a means will be found soon to clean 
 up the section, and for the good of the town it is to be 
 hoped that it will. 
 
 Built on the Gary model, Morgan Park, a suburb of 
 Duluth, is now being erected to house the workers at 
 the corporation's new mill near that city. The plant, 
 which will be operated by the Minnesota Steel Co., will 
 give work to from 3,000 to 5,000 men so that a fair 
 sized town is necessary for their accommodation and 
 that of their families. The section now being completed 
 has 170 houses and 350 apartments built by the corpora- 
 tion and there is ample space provided for as many addi- 
 tional dwellings. 
 
 As the settlement is within the city limits of Duluth 
 the educators of that town will have some say on mat- 
 ters relating to the organization of schools there, but it 
 is planned to erect a school accommodating 1,000 chil- 
 dren and to model its method of teaching on the Gary 
 system. 
 
 At Morgan Park the mill worker will be able to rent 
 a modern apartment, with every convenience including 
 electricity, at $3.75 per room a month. 
 
154 The United States Steel Corporation 
 
 One of the difficulties in industrial towns has always 
 been to adequately provide for unmarried men, who 
 form, roughly, 40 per cent, of all the workers. An inno- 
 vation is to be tried at Morgan Park where large houses 
 with many club conveniences, but run on the boarding 
 house system, will be constructed. It is hoped by these 
 to give the single men the combined advantages of a 
 club and the domestic atmosphere of a home. 
 
 Scattered all over the iron mining regions are a num- 
 ber of small towns which might rightly be categoried as 
 steel towns as the influence of the Steel Corporation 
 is distinctly perceptible in their management, and their 
 leading citizens are, for the greater part, minor corpora- 
 tion officials. In all these towns a note of sanitation, 
 of modern community management is struck and the 
 visitor is pleasantly impressed with clean streets, excel- 
 lent lighting, neat well kept houses and other things 
 that go towards making a "good" town, notably the 
 scarcity of saloons and other objectionable features. 
 
 Nowhere is the contrast between the towns under 
 Steel Corporation influence and others so obvious as in 
 the South. The Tennessee Coal & Iron Co. is responsi- 
 ble for the foundation of a number of small towns and 
 mining camps and these are all exceptionally well man- 
 aged. In some places are to be seen towns part of 
 which have been built up by the corporation, while part 
 "just grew," and one may recognize without being told 
 just when the line of Steel Corporation influence is 
 passed. A feature of these towns is always the com- 
 missary where food, clothes, etc., are sold to residents. 
 These commissaries are in keeping with the corporation 
 spirit of efficiency, which includes sanitation and might 
 well serve as models for stores and markets in larger 
 cities. The Tennessee company has also co-operated 
 with the State of Alabama in providing excellent educa- 
 tional facilities, which include not alone the ordinary 
 school curriculum, but courses in domestic science, etc., 
 both for children and adults. 
 
The Steel Towns 155 
 
 The problems that confront the corporation in the 
 South are different from those it faces in the North, and 
 must be handled differently. Not the least of these is 
 the color question, which itself is largely responsible 
 for the poorer educational average below the Mason and 
 Dixon line. The management of the corporation's 
 Southern subsidiary, with the full co-operation of the 
 New York management, has set itself seriously to the 
 task of settling these problems and has made wonderful 
 headway, to the lasting benefit of the communities 
 wherein the Tennessee company operates. 
 
 Fairfield, Alabama, has been called the South's model 
 industrial city. This town was erected to house the 
 workers at the by-product plant of the Tennessee Coal, 
 Iron & Railroad Co., and the American Steel & Wire 
 Co.'s wire mill, not far from Birmingham. 
 
 A more beautiful site could scarcely have been se- 
 lected for such a purpose than that chosen for the laying 
 out of Fairfield. The work was done by a realty com- 
 pany, independent of the corporation, but acting in 
 entire harmony with it and its ideas, and as a result the 
 town is one of which its inhabitants may justly be 
 proud. 
 
 Situated on softly undulating ground, amid the lux- 
 uriant foliage of the South, Fairfield offered exceptional 
 opportunities to its builders for achieving artistic effects 
 in its layout, opportunities of which they availed them- 
 selves to the full. The town, not far from the heat and 
 dirt of the coke ovens and steel mills, looks more like 
 an exclusive suburb of some large city than a town 
 planned for industrial workers. Its well-paved streets 
 are shaded by green trees, through the leaves of which 
 peep out the fronts of modern houses. Even the modern 
 trolley car running through its main streets, and its 
 equally modern public utility arrangements fail to dis- 
 turb the peaceful charm. Fairfield has rightly been 
 called "the city of homes." 
 
156 The United States Steel Corporation 
 
 The H. C. Frick Coke Co. has set itself the task of 
 making attractive the coal-mining towns of the Con- 
 nellsville region. By the usual corporation methods of 
 sanitation, of making personal and community cleanli- 
 ness 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 even been through coal-mining regions 
 he will appreciate the size of this achievement — ^by en- 
 couraging gardening by means of prizes and so on, and 
 by fostering community pride. It has set new com- 
 munity standards in the coal districts. 
 
 To the late George G. McMurtry must be given much 
 credit for the movement for bettering conditions in 
 industrial centers. 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 monu- 
 ment to him, though it does not bear his name — Van- 
 dergrift, Pa., the first of the Steel Towns, 
 
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 SAME AS ABOVE. " SAFETY FIRST 
 
CHAPTER X ' 
 
 SAFETY FIRST— SANITATION— WELFARE. 
 
 AS the world grows older and wiser and civilization 
 progresses, one by one, old ideas are being thrown 
 into the discard, and nowhere is this more notice- 
 ably so than in the realms of business and industry. 
 Principles of doing business, one held as cardinal, are 
 now coming to be recognized as immoral, not alone 
 from the human, but from the economic standpoint. 
 
 One of these is the old doctrine of "caveat emptor," 
 let the buyer beware. The far-seeing merchant of the 
 present day recognizes that as a matter of policy as well 
 as of honesty he must take upon his own shoulders the 
 responsibility for what he sells. Another principle, 
 which might be styled "let the worker beware," one 
 which laid down the law that the industrial worker was 
 supposed to be fully cognizant of whatever risks were 
 involved in his trade, and to assume these risks himself, 
 is gradually being legislated out of existence, compensa- 
 tion laws of recent years taking the liability oflf the 
 shoulders of the worker and placing it where it rightly 
 belongs, on the industry. 
 
 , The United States Steel Corporation's stockholders 
 may justly take pride in the fact that the big company 
 which they own did not wait for the lawmakers to forcfc 
 upon it the assumption of this liability, but accepted it 
 voluntarily before a single State had passed a work- 
 men's compensation act. Prouder, perhaps, that the 
 compensation and relief plan for injured workmen pro- 
 mulgated by the corporation in 1910 has served as a 
 model for a number of States in drafting such legisla- 
 tion and is an exceedingly fair and liberal one. 
 
158 The United States Steel Corporation 
 
 Although the Steel Corporation, as evidenced by its 
 action in putting into force its compensation plan, gave 
 evidence of its hearty approval of the theory of indus- 
 trial compensation legislation, the management of the 
 big company is distinctly opposed to certain forms of 
 such legislation, notably State insurance, grounding its 
 objection on the claim that this takes away from the 
 employer all incentive to adopting measures for the pre- 
 vention of accidents. For compensation, after all, is 
 merely a palliative, not a cure, it does not strike at the 
 root of the disease, and in the final analysis, the im- 
 portant thing is the prevention of accidents so far as 
 possible. 
 
 In this the up-to-date employer has gone much fur- 
 ther than the legislators. He has gone to the very heart 
 of the industrial accident question by taking vyhat means 
 he might 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 be- 
 fore profits, for he is beginning to realize that accidents 
 are uneconomic and that their prevention, even if ap- 
 parently costly at the beginning, must pay in dollars 
 and cents in the long run. In other words, the modern 
 employer of labor is becoming convinced that safety 
 methods, or insurance before accidents, are as necessary 
 as are measures to prevent fire instead of relying upon 
 fire insurance companies to make good a loss from this 
 cause. 
 
 Although individual efiforts to minimize industrial 
 hazards had been made by some companies before the 
 Steel Corporation existed — notably in the case of some 
 of the companies merged into the "Steel Trust" — the 
 corporation may with reason claim the distinction of be- 
 ing 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 before the industrial world. 
 
 Through its example, as well as by means of a vigor- 
 
Safety First — Sanitation — Welfare 159 
 
 ous campaign carried on by its safety committee, it 
 preached the doctrine of safety first. The largest em- 
 ployer of labor in the world in its adoption of such a 
 policy forced the recognition of the policy upon industry 
 generally, and as a result of the safety campaign started 
 by the corporation in 1906, safety first methods are to be 
 seen in every steel mill in the United States to-day, and, 
 in fact, in a vast number of plants devoted to other in- 
 dustries. The results of the work of the corporation's 
 safety committee are at the disposal of whoever cares 
 to avail himself of them. At its safety museum at 71 
 Broadway, New York, are received daily letters from 
 concerns in every line of industry, and in every instance 
 an answer is sent giving all the assistance possible for 
 the general cause of safety. 
 
 But more than this, 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, and his fam- 
 ily from the loss of a wage-earner, to seek safety for 
 himself, and to recognize the right of his fellow work- 
 men to it. 
 
 From the aspect of liability accidents may be divided 
 into two broad classes. The law recognizes a difference 
 between an injury to a worker due to his own careless- 
 ness, or one attributable to his own negligence. But the 
 Steel Corporation, in its accident relief plan, makes no 
 such distinction. It recognizes only that the worker has 
 been temporarily or permanently prevented from earn- 
 ing a livelihood, or that his family has suffered, and 
 it compensates without question for the loss. 
 
 So to secure the best results, economically, from its 
 safety campaign, it is obvious that it is not enough for 
 the big company to set up safety guards, warnings of 
 danger and similar contrivances. It is just as necessary 
 that the worker must 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 
 
160 The United States Steel Corporation 
 
 fellow workmen. In its campaign for the prevention 
 of accidents the corporation has sought to accomplish 
 both these ends, and the educational side of the work 
 has been by far the most difficult. 
 
 How much so may be gathered from the fact that, in 
 1914, after eight years of safety education, nearly SO^i? 
 of all the accidents occurring in the corporation's mines 
 or plants were distinctly traceable to indifference or 
 thoughtlessness on the part of the men themselves. For 
 the worker is inclined to regard with something of dis- 
 dain the risks incidental to his work and often regards 
 it as rather cowardly to seek to avoid these risks. In- 
 difference to danger is too often accepted as a hallmark 
 of personal courage, and to the dangers of one's employ- 
 ment as a sign of skill and experience. Just as a small 
 toy will jump on a moving car to "show off," the worker 
 "will often incur risks for the same reason. A railroad 
 man will board a moving engine from the middle of 
 the track solely because to do so seems to be accepted as 
 proof of his skill and experience. It is to such causes that 
 a large percentage of industrial accidents are due, and 
 the employer of labor generally finds that the greatest 
 problem to be met in instituting a safety campaign is 
 to persuade the worker that such indifference to danger 
 is childish, and that real skill and efficiency lies in the 
 doing of things in the correct, which is the safe, way. 
 
 Safety work may be divided into three parts; organi- 
 zation ; safety appliances and devices ; education. 
 
 It goes without saying that to get the best results in 
 any campaign efficient organization is essential. The 
 Steel Corporation has organized a central safety com- 
 mittee, under whose charge the general work of the 
 prevention of accidents fall. Each subsidiary company 
 also has its own committee on safety, and there are fur- 
 ther subdivisions 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, while the other committees re- 
 
Safety First — Sanitation — Welfare 161 
 
 ceive and act upon these suggestions and attend to the 
 financial and other aspects of the campaign. For the 
 prevention of accidents costs a great deal of money, the 
 corporation having expended in ten years something 
 like $6,000,000 in this work alone. But the necessary 
 funds are never stinted. At the first meeting of the 
 safety committee Judge Gary stated that the corpora- 
 tion would recognize any practical step undertaken for 
 obviating injuries to its workers, and would vote the 
 wherewithal for it. 
 
 So as to bring home to every worker the safety idea 
 the personnel of the sub-, or mill committees, is con- 
 stantly changed, with the view that each worker will 
 take part in the work sooner or later. In 1914 alone, 
 8,400 men served on the several committees. 
 
 The first work of the safety committees, naturally, 
 was to instal devices on machines that had been the 
 cause of accidents with the object of preventing the 
 recurrence of these accidents. The educational cam- 
 paign came later as it was forced upon the safety work- 
 ers that the saving of the worker eventually lay 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" cam- 
 paign. 
 
 Print and paint are used liberally to keep the idea of 
 caution ever before the mind of the worker. Safety 
 warnings are posted here and there all over the mills, 
 etc., and at the entrance to many plants there are dis- 
 played big signs, electrically lighted at night, on which 
 changing mottoes constantly impress the safety first 
 idea. Blank walls, pay envelopes and other available 
 spaces are all impressed into the work and are used for 
 printing of safety warnings. 
 
 In erecting safety appliances the corporation spends 
 yearly approximately $700,000. Any idea suggested by 
 a workman for the prevention of accidents of however 
 trivial a nature is given a careful hearing, and acted 
 
162 The United States Steel Corporation 
 
 upon in nine cases out of ten. For the safety committee 
 takes for itself the following motto: "Not only is an 
 ounce of prevention worth a pound of cure, but rather 
 let us have a pound of prevention than an ounce of 
 cure." 
 
 These safety devices are too numerous to mention in 
 detail. They run from guards on the handles of wheel- 
 barrows to prevent the crushing of fingers in passing 
 through a doorway, to appliances for derailing a car 
 when there is danger of collision, guards over exposed 
 flywheels or other moving machinery, enclosed ladders 
 to prevent falls, goggles to safeguard the eyes of work- 
 ers from explosion of metal or flying chips, and sub- 
 ways under railway tracks to eliminate the danger of 
 crossing the tracks of a busy yard. 
 
 Although a workman who invents a marketable 
 safety device m^iy 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 manage- 
 ment holds that the safety campaign, while good econ- 
 omy, is largely humanitarian, and should not be com- 
 mercialized. 
 
 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 or- 
 ganizations 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 Conven- 
 tion for the Prevention of Industrial Accidents which 
 was held at Milan some three years ago, and it has been 
 accepted and put into use by such organizations as the 
 

 
 
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Safety First — Sanitation — Welfare 163 
 
 American Iron & Steel Institute, the National Metal 
 Trades Association, National Association of Manufac- 
 turers, 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 1914 was reduced 40.52%, not- 
 withstanding the fact that the figures for 1914 include a 
 number of accidents that were classed as minor injuries 
 in 1906. The table on page 164 speaks -for itself. 
 
 In eight years a total of 12,822 men saved, by educa- 
 tional 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 eight thou- 
 sand 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 the loss of a 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 unavoid- 
 able — 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 pro- 
 gram 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 mines. 
 
 DEATHS PER MILLION TONS PRODUCED 
 
 1912 1913 1914 
 
 Scotland 3.S0 3.68 3.17 
 
 South Wales 6.S3 11.53 6.24 
 
 Great Britain 4.52 4.91 3.81 
 
 United States 4.29 4.89 4.81 
 
 H. C. Frick Coke Company 1.88 1.99 1.02 
 
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Safety First — Sanitation — Welfare 165 
 
 TONS OF COAL PRODUCED PER DEATH 
 
 Scotland 285,000 271,722 315,283 
 
 South Wales 153,000 85,207 160,067 
 
 Great Britain 248,000 203,735 262,736 
 
 United States 233,000 204,685 208,078 
 
 H. C. Frick Coke Company 531,328 502.695 975,454 
 
 In the three years shown the Frick company produced 
 about 667,000 tons of coal for each man killed, the 
 United States production per death was approximately 
 215,000, and that of Great Britain 298,000 tons. 
 
 Has the Steel Corporation really gained from the 
 enormous expenditures for safety work? That it has 
 got returns in the way of loyalty and increased efiSciency 
 can hardly be doubted, but has there been any tangible 
 saving? 
 
 The economy in the matter of compensation payments 
 alone satisfies this point. Every injury prevented 
 means so much less compensation paid. A computa- 
 tion made by the Safety Bureau recently, and covering 
 the three years from 1911 to 1913 inclusive, showed 
 that had the same number of accidents occurred annu- 
 ally as in 1906 when the safety campaign was organized, 
 the cost to the big company would have been several 
 millions of dollars more than was spent in erecting, 
 safety appliances and for safety educational work in 
 the period. 
 
 Nor must one fail to make allowances for the gain 
 in production that is derived from increased safety. In 
 the first place every accident means a more or less 
 lengthened stoppage of work, with a consequent loss. It 
 means the training of a new man to fill the place vacated 
 by the injured worker. In fact, and this will sooner or 
 later be realized by every employer, the injury of a 
 workman is as harmful to the employer as the break- 
 down of a machine. The human machine is no less 
 important than that made of steel or wood. 
 
 It is the first step that counts. Once started on the 
 job of saving the employees of the corporation itself 
 from injury the ambition of the men in charge of the 
 
166 The United States Steel Cokporation 
 
 work extended and reached out through the steel trade, 
 then to other industries, and finally to other countries. 
 A traveler in the United States who keeps his eyes open 
 will see frequent evidence of the results of this on rail- 
 roads, and in various manufacturing establishments, 
 and, as has been told already, the work is being spread 
 beyond the seas. 
 
 Nor was this all. The safety workers entered the 
 field of welfare work and systematized what had already 
 been done to better the lot of the worker, not only in 
 the mill, but in his home and community. 
 
 Strictly speaking safety and everything else that 
 affects the living conditions of labor is classifiable under 
 the head of welfare. But in practice a distinction is to 
 be drawn between what may be considered the mere 
 duty of the employer to prevent needless accidents — 
 incidentally for his own benefit financially in the long 
 run — and the work that reaches out and by bettering 
 the worker's lot generally benefits his family and the 
 community in which he lives. 
 
 And it is a peculiar thing about such work that it 
 grows of its own impetus. Improving the lot of the in- 
 dividual must eventually improve the community condi- 
 tions surrounding him. It is doubtful if the manage- 
 ment of the corporation, when it outlined its propaganda 
 for helping its 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 a big- 
 ger. 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 program has taken on a broad scope, 
 has a wide horizon, and will have a wider one as time 
 goes on. 
 
 Different subsidiary companies handle details of the 
 welfare work in various ways. Local conditions render 
 
Safety First — Sanitation — ^Welfare 167 
 
 this necessary, but the basic idea is the same. What 
 might be done in modern, built to order, Gary, might 
 be impossible of accomplishment in Homestead. Again, 
 the Tennessee Coal, Iron & Railroad Co., having the 
 question of mixed color to consider, must adopt different 
 measures to meet the peculiar conditions with which it 
 has to contend. 
 
 In some sections, for instance, community visitors are 
 appointed to investigate cases of destitution or illness, 
 and to instruct the wives of workmen in hygiene, cook- 
 ing, and the general care of their homes and families. 
 In others schools are maintained for the same object. 
 
 A very promising forward step was taken not long 
 ago by the Oliver Iron Mining Co., which built at Ish- 
 peming, Mich., a "rest house," where the wives of work- 
 ers, if broken down in health, might enjoy a vacation 
 in healthy and congenial surroundings without cost. 
 
 The modern educational methods of the newer steel 
 towns was told in a previous chapter. But educational 
 work is everywhere considered one of the most, if not 
 the most, important of safety measures, and wherever 
 the Steel Corporation establishes itself, there it either 
 establishes schools or, if schools already exist, endeav- 
 ors to assist in the work of education by starting special 
 classes for adult, such as classes in English for foreign 
 workmen, and classes for technical or even scientific 
 instruction. In some plants there are buildings entirely 
 devoted to such studies. 
 
 All work and no play makes Jack a dull boy. Recrea- 
 tion, the necessity for exercise of mind and body, is 
 given an important place in the welfare propaganda. 
 In many steel communities the corporation has erected 
 club houses, libraries and gymnasia, and has provided 
 swimming pools, and even baseball grounds. Many of 
 the mills have their baseball teams and private grounds 
 for them. 
 
 Work among the children is given a very prominent 
 place. In 1910 Taylor Alderyce, first vice-president of 
 
168 The United States Steel Corporation 
 
 the National Tube Co., was struck with the happy 
 thought that a small area of waste land in one of the 
 plants could be given over to the children so that they 
 could play in safety and out of the streets. The idea 
 was seized upon avidly by the officials of the other com- 
 panies and the welfare committee, and was soon in 
 general use. There are now 128 of these playgrounds, 
 and an average of 16,619 children made use of them 
 daily during 1914! These playgrounds are equipped 
 with swings, slides, and other devices dear to the young. 
 In some cases they are situated in the plant proper, in 
 others, where more room is available, big open spaces 
 outside the plants are devoted to the amusement of the 
 children. And in every one of the newer steel towns 
 one of the first matters taken care of has always been 
 the location of a suitable playground for the youth of 
 the community. 
 
 Welfare work in the mill proper includes sanitary 
 measures such as "comfort rooms," bath houses, sani- 
 tary drinking fountains, electric fans at points where 
 there is great heat, and other measures of a similar 
 character. Broadly speaking the effort is to minimize 
 all the risks of the industry, not only to the safety, but 
 to the health of the employee. 
 
 The H. C. Frick Coke Co. encourages its employees 
 by prizes, etc., to cultivate vegetable and flower gar- 
 dens, for economy and beauty. Out of 7.477 employees 
 of the company having homes, 92% cultivated gardens 
 in 1914. The vegetable gardens numbered 6.633 and 
 their average value was $21.48, a total of $142,536. 
 
 It might be difficult, perhaps impossible, to demon- 
 strate statistically that welfare work, as distinct from 
 safety work has paid ; that the corporation has received 
 a tangible return for the millions it spends yearly to 
 give its employees an opportunity to live cleaner, heal- 
 thier, happier and broader lives. Nevertheless, I believe 
 that no work that has been done for this object has 
 failed to give a return, full measure and overflowing. 
 
Safety First — Sanitation — ^Welfare 169 
 
 In the end, all welfare work, whether it be in the salva- 
 tion of the worker from accidents, the teaching of indi- 
 vidual or community hygiene, the care of the sick, the 
 financial care of the injured, the teaching of language, 
 trades, sciences, has for its object the making of better 
 men and women, the giving to the worker bom under un- 
 favorable social conditions the opportunity to raise himself 
 above those conditions. And in the using of this oppor- 
 tunity by the worker the employer is bound to benefit. 
 
 But, every other consideration aside, the work has 
 paid in the satisfaction that the management and the 
 stockholders of the great industrial enterprise feel in 
 it, in the knowledge that by setting the lead in advanc- 
 ing the interests of the man who works with his hands, 
 they have given millions of men, not in the corporation 
 alone, but in industry generally — for the lead has been 
 followed — better working conditions, cleaner homes and 
 communities, and better educational facilities for their 
 children. In the satisfaction of knowing that, by the 
 welfare work, better citizens are being made, and finally 
 in the knowledge that the work has helped to a great 
 extent 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 things, 
 tangible and intangible, that make for decent citizenship, 
 for self-respecting manhood. 
 
 By following the lead of the United States Steel Cor- 
 poration in recognizing without compulsion these rights, 
 industry as a whole will go a very far way towards 
 smoothing away the differences that now exist between 
 capital and labor. This is one of the things it must offer 
 as an evidence of the claim it has so often made that the 
 real interests of the man who works with his hands and 
 
170 The United States Steel Corporation 
 
 of those for whom he gives his strength and his energy 
 are identical. 
 
 Welfare work is the humanizing of industry. By its 
 aid the employer can do much towards eliminating labor 
 unrest and bringing about an era of good will between 
 employer and employed. 
 
CHAPTER XI 
 QUESTIONS OF POLICY. 
 
 WHEN Bertrand du Guesclin, the great French 
 hero of the. Hundred Years War, was captured 
 by the British and brought to England a prisoner 
 and his ransom set at one million crowns, a princely 
 sum in those early days, more than half the amount was 
 immediately subscribed by his natural enemies, the 
 English who had fought against him. It was intended 
 as a great tribute to Bertrand's character, and it is un- 
 likely that another such instance can be found in history. 
 
 And no better proof can be offered of the essential 
 fairness of the U. S. Steel Corporation's methods of 
 doing business 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 practic- 
 ally in a body to its defense and testified that its deal- 
 ings with them and with the public had always been fair 
 and honorable. 
 
 The organization of the U. S. Steel Corporation 
 marked the end of an era in the steel trade, and was also 
 the beginning of a new epoch in industrial history. 
 This era was that wherein each man's hand was against 
 his brother. When the principle on which each steel 
 maker worked, to paraphrase a well known piece of 
 advice, was "Sell steel, honest if you can, but sell steel." 
 
 It was the beginning of a period of square and open 
 dealing. 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 co-operation. It sought to make friends 
 rather than enemies of its competitors. The task was 
 a hard one, for the trade had too long been used to fear 
 
172 The United States Steel Corporation 
 
 gift-bringing Greeks, to view with suspicion every un- 
 hostile action 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 un- 
 known in business. But gradually these fears were 
 overcome, and the steel trade changed, or its methods 
 did. 
 
 The Steel Corporation was an evolution. It was the 
 natural result of the integration in industry that had 
 been going on for years. In it was concentrated into a 
 single organization all the processes of steel making 
 from ore mining to the most highly finished products 
 of all kinds, including transportation. The evolution, 
 however, was not merely a physical one. The big com- 
 pany stood for the development along lines of modem 
 thought, of business methods and practices. 
 
 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 modern and especially 
 so vast an enterprise must abandon unfair practices, 
 and methods that, even if fair legally, were hardly so 
 morally, if it would live itself; a man big enough to 
 realize that with corporations as well as men it was 
 "glorious to have a giant's strength, but tyrannous to 
 use it like a giant." 
 
 Indeed, Judge Gary found it no easy task to persuade 
 some of his colleagues on the board of the big corpora- 
 tion to consent to the course he advised in dealing with 
 competitors, a course which, incidentally, he himself 
 follows in his dealings with individuals — if there is any 
 question of what is fair and just ^ve the other fellow 
 the advantage. 
 
 And his advice was the harder to follow in that the 
 laws of the United States made it exceedingly difficult 
 to steer a middle course between the shallows they 
 themselves create. The corporation, to obey the law, 
 was bound to engage in active and sustained competi- 
 tion with other steel makers, and at the same time was 
 
Questions of Policy 173 
 
 bound to refrain from any act which might be inter- 
 preted as an attempt to take advantage of its great size 
 and resources to overdo this competition. 
 
 In its answer to the Government suit the corporation 
 claimed that, far from restraining competition, it had 
 fostered it, and many of its competitors themselves 
 swore to the truth of this claim. But it remained for 
 the court, in summing up, to give facts and figures of 
 the growth of competitors which fully and completely 
 substantiated the claim. The court declared that the 
 proofs showed that the corporation's business from 1901 
 to 1911 had increased over 40%, but that in about the 
 same time the Bethlehem Steel Co. had shown a gain 
 of 3,780% in business, the La Belle Iron Works of 
 463%, the Jones & Laughlin Steel Co. of 206%, the 
 Cambria Steel Co. of 155%, the Colorado Fuel & Iron 
 Co. of 153%, the Republic Iron & Steel Co. of 91%, 
 and the Lackawanna Steel Co. of 63%, to say nothing 
 of the rise and expansion of entirely new companies 
 during the same period. 
 
 For many years, ever since the period of consolida- 
 tion in manufacturing and other industries began, big 
 business has been viewed with suspicion and something 
 of hatred by the mass of the people — and by no means 
 without cause in many instances. There is no question 
 but that the powers that controlled more than one great 
 industry used their resources to crush their competitors 
 and even used their money and influence for political 
 purposes. It does not require any argument to convince 
 the unprejudiced mind that the effects of such acts were 
 inimical to the good of the nation, and it was perhaps 
 natural that the stigma that attached to some for this 
 cause was used by demagogues and others, often sincere 
 enough, against all big business, and as an aid to them- 
 selves politically. In short, "smash the trusts," became 
 the great vote catching slogan. 
 
 No wonder, then, that the Steel Corporation, the 
 largest and most powerful of all so called trusts, was a 
 
174 The United States Steel Corporation 
 
 shining mark for such attacks. No wonder that the 
 man in the street, looking to his leaders for guidance in 
 such matters, was easily persuaded that the giant com- 
 pany was necessarily a menace to the body politic. 
 
 Apparently this it was that Judge Gary foresaw when 
 he insisted that the corporation at whose helm he stood 
 must so conduct itself in all dealings with its competi- 
 tors and with the public that it could at any time prove 
 that its hands were clean; that it used its power not 
 destructively, but constructively, for the good of all 
 affected by its actions — and this means the good of the 
 whole people. 
 
 The very life of the corporation depended upon this. 
 So Judge Gary evidently saw. And time has proven 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 vast 
 weight of public opinion, thrown in its favor in the suit 
 recently decided in the lower court, would have been 
 massed against it, and the suit itself, so far eminently 
 satisfactory to the corporation management and the 
 stockholders, would have been instituted earlier. The 
 corporation would not have been in existence to-day. 
 
 To the lay mind it is strange that the so-called Gary 
 Dinners, the principal example of the corporation's atti- 
 tude toward its competitors, should have been criticized 
 by the courts. The criticism, however, appears to have 
 been based largely upon a technicality, as the court 
 practically admitted that there was no intent on the 
 part of Judge Gary or his associates to restrain trade 
 at these functions. In fact, the cause of complaint 
 seems rather to have been certain meetings held in Pitts- 
 burg that grew out of the dinners, meetings at which the 
 Judge was not present, than the dinners themselves and 
 what occurred there. ' 
 
 In its opinion the court said on this subject: 
 
 "We think it likely that if this first meeting (the first 
 
Questions of Policy 175 
 
 of the Gary Dinners) had not been followed by others 
 and by the appointment of committees to continue the 
 association (loose as it was), that resulted from that 
 meeting, no complaint would have been heard from the 
 Government." 
 
 And again) "It is only fair to add that in our opinion 
 the participants in this movement did not intend to act 
 illegally. No doubt they intended to exercise their full 
 legal rights ; but, of course, such exercise could not be 
 wrong, and they believed they had succeeded in keeping 
 within the proper limits. /^ For the reasons given, we 
 think they were mistaken, |5Ut we aquit them of tricki- 
 ness or attempted evasion.'/ 
 
 And the minority opinion: "The first Gary Dinner 
 was given on November 20th, 1907, to meet an unques- 
 tioned 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, con- 
 tributed greatly in preventing disaster not alone tO' the 
 producers of steel, but also to those intermediate con- 
 sumers 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 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." 
 
 The Gary Dinners ! Feasts that will rank in the busi- 
 ness history of the United States as did the feasts of 
 Lucullus in epicurianism or Cleopatra's dinner to An- 
 thony in romance. Occasions where the heads of the 
 steel companies of the United States gathered at the fes- 
 tive board in amity and good will to consider and dis- 
 cuss a situation that threatened not themselves alone, 
 
176 The United States Steel Corporation 
 
 but the country at large. Where these titans of indus- 
 try, 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 pre- 
 vious occasion — many of them at least — seen a similar 
 situation lead to years of distress and of prolonged in- 
 dustrial 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 asso- 
 ciated. 
 
 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 eye.= 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 tem- 
 pest. Naturally, it was very much to the interest of 
 the Steel Corporation, as well as of other steel manu- 
 facturers, to do all that was possible to prevent the fail- 
 ure of the steel middlemen. Not only would bankrupt- 
 cies have meant the drastic cutting down of accounts 
 due, perhaps their total loss in some cases, but each fail- 
 
a 
 f- 
 a 
 w 
 > 
 z 
 o 
 o 
 
 w 
 
 1^ 
 
Questions of Policy 177 
 
 ure meant the loss of a customer. These things the 
 steel men knew from past experience. 
 
 One thing above all others seemed to be needed, the 
 great essential in panic of every kind — that those con- 
 cerned 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 unity. 
 
 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 re- 
 sponse was very nearly unanimous, and on the evening 
 of that day there gathered around the table in the ball 
 room of that hotel the representatives of concerns pro- 
 ducing more than 90 per cent of all the steel made in 
 America, as well as the representatives of some Cana- 
 dian companies. 
 
 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 se- 
 cure a better acquaintance with each other, and come 
 into close contact in order to know one another, hoping 
 that we might deal with and towards 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 condi- 
 tions, as opposed to wide and sudden fluctuations, to 
 prevent, if possible, failures on the part of our custom- 
 ers, and to comply with their wishes in every respect, 
 to prevent, if we could, a long continuance of the panic, 
 
178 The United States Steel Corporation 
 
 which meant failures to a great many people and manu- 
 facturers 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 * * * ^t that time that, as 
 they all understood, we could not make any agreement, 
 express or implied, directly or indirectly, which bound 
 up 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 consid- 
 ered 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 dan- 
 gers. Resolutions creating a general and several sub- 
 committees were made and passed and the meeting ad- 
 journed, subject to call. 
 
 Following this dinner similar sessions were held in 
 January, April, May and December of 1908. The De- 
 cember feast was the last of the Gary dinners proper, 
 although some meetings were held subsequent to that 
 time. 
 
 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 hold- 
 ing of these dinners rests. 
 
 At the first of the Gaiy Dinners the host explained 
 that the fixing of prices was forbidden by the laws con- 
 cerning restraint of trade, and that nothing could or 
 should be done which would not conform in all ways 
 
Questions of Policy 179 
 
 to the law. Yet it is plain that the effect of these din- 
 ners was to stabilize price for steel. It does not appear 
 that there was any definite agreement between the dif- 
 ferent interests represented as to what question 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 in- 
 fluence 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 partici- 
 pants at the Gary Dinners stretched the interpretation 
 of the law a little to do a great right — the financial sal- 
 vation 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 
 producers 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 Corpora- 
 tion. 
 
 Early in 1909 — on February 18 — 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 program, as it was 
 then that Judge Gary, satisfied that several of his com- 
 petitors 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 level. 1 
 
 And here might be inserted an interesting fact. Or- 
 ders were sent out to the various sales managers of the 
 
180 The United States Steel Corporation 
 
 different corporation subsidiaries that they were to go 
 after business and get all they could, orders particu- 
 larly 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 subsid- 
 iaries 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 disappoint- 
 ment to him, the corporation failed to cut into its com- 
 petitors' 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 Can- 
 ada 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 gath- 
 ered 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." 
 
Questions of Policy 181 
 
 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 cor- 
 poration 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 com- 
 petitors 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 din- 
 ners. 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 in- 
 vestment, 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. 
 
182 The United States Steel Corporation 
 
 In its decision the U. S. Circuit Court of Appeals, 
 which a few months ago absolved the corporation from 
 the charge of attempted monopoly in restraint of trade, 
 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 par- 
 ticularly illuminating. Professor Jenks, whose reputa- 
 tion as an economist is world-wide, verified and ex- 
 plained 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 eco- 
 nomists at the best test of price fluctuations, had de- 
 creased decidedly between the date of the organization 
 of the corporation and the time of the steel suit, as com- 
 pared with a similar period before the birth of the cor- 
 poration. 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' charts were made in the 
 face of advancing wages amounting altogether to over 
 27%. And labor forms the most important item of ex- 
 pense in steel making. The chart on opposite page, a 
 copy of one of those testified to by Professor Jenks, is 
 illuminating and needs no explanation. 
 
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184 The United States Steel Corporation 
 
 Important among the policies of the corporation, in 
 its deahngs with the pubUc, 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 exist- 
 ence the policy of keeping the public and its stockhold- 
 ers 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 testi- 
 mony 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 meet- 
 ing. 
 
 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 cov- 
 ered. 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 company. 
 
 Annual meetings of the Steel stockholders form a de- 
 cided contrast to those of many other companies. One is 
 accustomed to look upon the annual meetings of cor- 
 porations 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 poli- 
 cies 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 criti- 
 cize to their hearts' content. Chairman Gary is ready 
 and willing to explain at length on any issue raised, and 
 
Questions of Policy 185 
 
 the whole effect of these meetings is one of openness, 
 of candor. 
 
 How ready the management of the big company is 
 to meet criticism halfway is illustrated by the events at 
 the annual meeting in 1911 when a stockholder moved 
 that a committee be appointed to investigate the condi- 
 tion 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 particu- 
 larly criticized the twelve-hour day and the geven-day-a- 
 week schedule of labor. It was questionable whether 
 the mass of stockholders present, having absolute con- 
 fidence 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 ap- 
 pointed. 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 me, 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 in- 
 terest 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 pub- 
 licity 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 busi- 
 ness. The immense profits made by the Carnegie com- 
 pany were not revealed until the Carnegie-Frick quar- 
 
186 The United States Steel Corporation 
 
 rel caused their revelation. But all thia has been 
 changed and the necessity for full reports to stock- 
 holders and to the public at large is recognized by the 
 corporations themselves. Steel companies, in particu- 
 lar, give detailed information of their earnings, opera- 
 tions, 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. 
 
CHAPTER XII 
 INVESTIGATIONS AND THE DISSOLUTION SUIT. 
 
 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 Ameri- 
 can 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 towards a study of the 
 question of big business, it was but natural that investi- 
 gations of one kind or another, but all directed towards 
 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. 
 
 Perhaps 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 imagina- 
 tion 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 Cor- 
 poration bore more importance to the public welfare 
 because of the part that steel plays in making or un- 
 making 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 
 
188 The United States Steel Corporation 
 
 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 ? 
 
 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" 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 what have they resulted in? 
 
 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 in- 
 vestigation. 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 
 
Investigations and the Dissolution Suit 189 
 
 finish its work until the later part of 1901, its report 
 being presented on December 5 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 be- 
 gun during the administration of President Roosevelt. 
 James R. Garfield, appointed Commissioner of Cor- 
 porations in the Department of Commerce & 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. Gar- 
 field began an investigation of the corporation and the 
 work was carried on until some years after he had re- 
 signed his post and become a member of the Roosevelt 
 cabinet. The report of the Commissioner of Corpora- 
 tions 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 com- 
 
190 The United States Steel Corporation 
 
 petitors of the corporation, steel consumers and railroad 
 traffic managers, he had found no indication of the 
 crushing of competition which would have been re- 
 vealed 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 eliminat- 
 ing competition. 
 
 On July 1, 1911, the report of Mr. Smith was sub- 
 mitted, through Secretary of Commerce and Labor 
 Charles Nagel, to President Taft. Mr. Smith's report 
 was an exhaustive and complete study of the corpora- 
 tion. One may find fault with his conclusions, but the 
 work is without equal as a compendium of facts and 
 statistics regarding the corporation. 
 
 On the whole 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 overcapitalization and the matter of the Hill ore lease. 
 
 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. 
 
 The reader will remember that, in an earlier chapter, 
 it was pointed out that the overcapitalization 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 equal- 
 ize capitalization and property values. Yet I believe 
 that Mr. Smith's figures are 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 valua- 
 tion, Mr. Smith indicates the main point of divergence 
 is that of ore reserve values and on this point it would 
 
Investigations and the Dissolution Suit 191 
 
 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. 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 al- 
 ways 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, how- 
 ever, the lease is open to criticism ; it seems to have 
 been an error of business judgment. 
 
 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 
 ana Tobacco suits served to inflame public indignation 
 against big business generally and "hit the trusts" be- 
 came almost a slogan for political advancement. It 
 was no wonder, then, that the "Steel Trust" should be 
 criticised 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 politi- 
 cians were not going to advance under the circum- 
 stances. Public sentiment on the trust question, more- 
 over, 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 
 
193 The United States Steel Corporation 
 
 into the House and passed and a committee of congress- 
 men 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, Republican. 
 
 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 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, Littleton and McGillicuddy, was a sweeping con- 
 demnation of the corporation, its organization and its 
 methods. This was a matter of little surprise as the 
 entire method of conducting the investigation was suffi- 
 cient 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 overcapitalization, the bond 
 conversion plan, the Hill ore lease, the Union-Sharon 
 purchase, the Gary dinners, the Tennessee purchase. 
 
Investigations and the Dissolution Suit 193 
 
 the corporation's attitude toward labor unions and 
 towards labor generally, and interlocking directorates. 
 
 According to the report the corporation played an im- 
 portant 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 one were used to assist in maintaining the 
 tariff on steel products, the necessity for which all steel 
 men are agreed on. 
 
 In regard to the purchase of the Tennessee Coal, Iron 
 & Railroad Co., the Stanley Committee asserted unequi- 
 vocally that George W. Perkins, a Morgan partner and 
 a member of the board of directors of the Steel Cor- 
 poration, deliberately attempted to precipitate a run on 
 the Trust Co. of North America with the purpose of 
 forcing the interests in control of the Tennessee com- 
 pany 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 pur- 
 chase. 
 
 On the question of interlocking directorates the ma- 
 jority 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 capital- 
 ized 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 ovef 
 competitors. 
 
 A minority report, signed by Augustus P. Gardner, 
 
194 The United States Steel Corporation 
 
 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 unimport- 
 ance, the result being an overdrawn picture of the 
 iniquities claimed to have been perpetrated by the cor- 
 poration. While the second report unequivocally con- 
 demned the organization of the corporation as an at- 
 tempt by the Morgan interests to eliminate competition 
 against the steel companies in which they were con- 
 cerned and to do away with the ever present menace 
 that Andrew Carnegie was supposed to be, it said the 
 actual control of the actions of the great combine had 
 been put into the hands of "exceedingly competent, al- 
 though perhaps not altruistic, managers who have sub- 
 sequently 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 disso- 
 lution 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 their personal 
 views, both of which were favorable to the Steel Cor- 
 poration 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 in- 
 ception of the investigation transpired. A man known 
 as David Lamar (an assumed name on his own con- 
 fession), 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 
 
Investigations and the Dissolution Suit 195 
 
 had written the Stanley resolution and had used it, or 
 attempted to do so, as a club over the heads of the 
 llorgan interests. This failing, he had sent the resolu- 
 tion 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 Ed- 
 ward 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 intro- 
 duction, 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, Lauter- 
 bach corrected his date. Under the circumstances this 
 correction was natural, although the original testimony 
 was the more reliable. 
 
 However innocent 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 mat- 
 ter, which seems fairly conclusively proven, was in it- 
 self sufficient to give a sinister aspect to the whole 
 investigation, to suggest that its inception was the re- 
 sult of base motives. 
 
 Following the Stanley investigation came the Federal 
 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, done business and prospered under 
 
196 The United States Steel Corporation 
 
 successive Republican administrations. It had been in- 
 vestigated 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 ad- 
 visors 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 in- 
 vestigation 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 anyone. 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 cor- 
 poration 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 practic- 
 ally the same complaints found against the corporation 
 in the Stanley report; and a complete dissolution was 
 
Investigations and the Dissolution Suit 197 
 
 asked for. The corporation replied denying in total 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, w^as put in charge of the prosecution, 
 assisted by Henry E. C'olton. 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, Cor- 
 denio A. Severance, David A. Reed and Raynal C. Boil- 
 ing. 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 Thome, 
 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 con- 
 suming companies, and many others among whom may 
 be mentioned James R. Garfield and Lewis Cass Led- 
 yard. 
 
 A large part of the testimony was devoted to events 
 far preceeding the organization of the corporation, it 
 being the intent of the government counsel to show 
 that not only was the corporation restraining trade but 
 
198 The United States Steel Corporation 
 
 that the very elements of which it was composed, the 
 companies absorbed by the great merger, were them- 
 selves organized in violation of the law. As the hear- 
 ings progressed the conviction that the corporation 
 would emerge from the ordeal of prosecution successful 
 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 de- 
 claring that the big company, far from restraining com- 
 petition, 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 record- 
 ing 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 corpora- 
 tion. Hence it would be vain to review in detail all 
 the testimony here. 
 
 The arguments of counsel for both sides were pre- 
 sented to the U. S. District Court of Appeals, and for 
 months the business world waited anxiously for its de- 
 cision, 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 enter- 
 prise 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 
 
Investigations and the Dissolution Suit 199 
 
 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 trade. 
 
 All four of the judges concurred on the main point 
 at issue — that of trade restraint. A minority opinion, 
 signed by Justices WooUey 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 Bufifington, 
 presiding, and Judge McPherson. 
 
 "As trade is a contest for it between persons and the 
 gain of that trade by one means the loss of it to an- 
 other, 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." (Page 10, Opinions of 
 the Court.) 
 
 "For of the conduct of the Steel Corporation, the 
 views of its competitors is 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 Companies in the suits against those com- 
 
200 The United States Steel Corporation 
 
 panics. 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 pre- 
 cludes 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 competi- 
 tors of the Steel Corporation, as it is by that company." 
 (Page 28.) 
 
 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 thus : 
 
 "No dispute arises under the proofs. They are simply 
 uniform that, both with independents and the Steel Cor- 
 poration, 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 Com- 
 merce 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 
 
Investigations and the Dissolution Suit 201 
 
 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 neces- 
 sary in order to build up and maintain a dependable 
 business abroad, and if the Sherman Law were so con- 
 strued, 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 cor^ 
 poration was monopolistic, that the object of its or- 
 ganizers 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 at- 
 tempt 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 Govern- 
 ment, 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 be- 
 tween the two opinions lies in the fact that Justice 
 Woolley, with whom Justice Hunt concurred, held that 
 it was the 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. 
 
202 The United States Steel Corporation 
 
 is not now and has never been a monopoly or a com- 
 bination in restraint of trade, a decree of dissolution 
 should not be entered against it." 
 
 "Reference has already been made to the opinions of 
 the judges on the matter of the Gary Dinners and of 
 the meetings that grew out of them. 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 corporation. 
 
 Metaphorically, business breathed a sigh of relief 
 when the decision was made public, a relief only miti- 
 gated by the fact that an appeal to the U. S. Supreme 
 Court was to be expected — and will doubtless come 
 before these lines are in print.* But so clear and unmis- 
 takeable were the findings of the court, so little question 
 did there seem to be in the minds of the judges that 
 any evidence of monopoly or restraint of trade existed, 
 that the final issue will be awaited with confidence. 
 
 When I began to write this history of the Steel Cor- 
 poration the case was still being fought out before an 
 examiner. I tried to give the reader as concisely as 
 possible the impressions I gathered from listening to 
 the testimony, supplemented with knowledge gathered 
 through associations with the steel trade. At times, I 
 feared, my readers would accuse me of undue prejudice 
 in favor of the corporation. Hence the opinion of the 
 U. S. Circuit Court of Appeals, bearing out my state- 
 ments on the main facts connected with the corpora- 
 tion's history, is a matter of peculiar gratification. 
 
 ♦The appeal was filed Oct. 28, 1915. 
 
CHAPTER XIII 
 LATER HISTORY. 1907-1915. 
 
 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 re- 
 port the largest earnings it had ever 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%, 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 appro- 
 priated 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 $19,316.55 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 prof- 
 its 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. 
 
204 The United States Steel Corporation 
 
 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 J3}^ 
 
 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 suffi- 
 cient size to continue the work for several months. 
 
 During the year 1908 the bonded debt of the corpora- 
 tion, 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 ac- 
 quired 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 approxi- 
 mately $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 itself. 
 
 To what extent the acquisition of the Tennessee com- 
 pany aflFected 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. 
 
Later History. 1907-1915. 205 
 
 Blast 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. aftter 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 illus- 
 trate 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 afiforded 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 bes- 
 semer 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: 
 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 
 
306 The United States Steel Corporation 
 
 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 months. 
 
 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 subsid- 
 iary 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 re- 
 ported 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 De- 
 cember 31, 1909, $53,878,597.37. Gary was now a steel 
 producing center. 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 fin- 
 ishing mills had been placed in operation. About this 
 time it was decided that two of the other constituent 
 companies of the corporation, the Sheet and Tinplate 
 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 
 
Later History. 1907-1915. 207 
 
 ever experienced by the corporation. Earnings reached 
 a total of $141,054,754.51, the next best twelvemonths 
 business ever reported, but a fall in quarterly profits 
 from $40,170,960.83 in the quarter ending June 30, to 
 $25,901,729.87 was sufficient to show the downward ten- 
 dency in conditions affecting the trade. 
 
 Gross business aggregated $703,961,424.41, and pro- 
 duction 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 Corporation. 
 
 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 
 were 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 bal- 
 ance by various subsidiary companies, including the 
 Bridge and Wire companies, which began the construc- 
 tion 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 favor- 
 able 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 work- 
 ers to share in the better earnings resulting from im- 
 proved business conditions the corporation, in 1910, an- 
 
308 The United States Steel Corporation 
 
 nounced another advance in wages, aifecting the greater 
 number of its employees who, throughout the year, ave- 
 raged 218,435. The increase averaged something over 
 6%. 
 
 Several factors operated adversely against the cor- 
 poration, from a financial standpoint, in 1911. The de- 
 cline in business noted in the late months of the preced- 
 ing 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 hesi- 
 tancy was still in evidence, something ominous seemed 
 to hang over the world of business and finance. And, I 
 believe, that even then some of the leaders of finance 
 foresaw, even though dimly and uncertainly, the trouble 
 that was brewing. 
 
 Earnings of the Steel Corporation in 191 1 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 require- 
 ments, however, were considerably larger than they had 
 been in previous years. The rate of disbursement on 
 the common issue had been increased to 4% in 1909, and 
 to 5% in 1910, at which rate it continued until the latter 
 part of 1914. 
 
 Production in 1911 fell o& 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. 
 
Later History. 1907-1915. 2Q9 
 
 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 $621,054,- 
 299.62. 
 
 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 acqui- 
 sition 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 Sher- 
 man anti-trust law. Both of these events took place on 
 the same day, October 26. 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. 
 
 Towards 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 earn- 
 ings, however, did not immediately reflect this better- 
 ment, 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. 
 
210 The United States Steel Corporation 
 
 For the year net earnings of $108,174,673.12 were 
 made and a balance of $3,605,247.37 was carried to sur- 
 plus. 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 intercompany sales, and the balance earn- 
 ings from transportation and other sources. 
 
 The main items in capital expenditures were as fol- 
 lows: 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 condi- 
 tions 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. This scheme was 
 never carried out as later events made it advisable to 
 postpone the matter for a more favorable time, which 
 does not seem yet to have arrived. 
 
 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 move- 
 
Later History. 1907-1915. 211 
 
 ment met with considerable opposition from the men 
 themselves. 
 
 In the first nine months of 1913 generally satisfac- 
 tory 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 1 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 de- 
 cline 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 busi- 
 ness from 1912 and to the comparatively high average 
 of prices received. For perhaps the first time in the his- 
 tory 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 effect- 
 ing the results shown. 
 
 After a special $15,000,000 appropriation the corpora- 
 tion 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 $16,- 
 170,499.18. 
 
 The total volume of business amounted to $796,894.- 
 299, of which $518,999,605 represented sales to outside 
 customers; $211,910,441 intercompany 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 prin- 
 cipal 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 pre- 
 viously 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. 
 
212 The United States Steel Corporation 
 
 We now come to 1914, the year which saw the begin- 
 ning 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 later half of 1913 when the sudden clash 
 of arms paralyzed world money markets, closed the 
 stock and other exchanges, closed or restricted opera- 
 tions 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 de- 
 clined 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% to 2% annually in the third quar- 
 ter, and the dividend for the last quarter was passed, 
 earnings were not sufficient to meet charges, and a de- 
 ficit 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 man- 
 agement of the big company and, naturally, by its stock- 
 holders. 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 hard- 
 ship to many. But thert 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 
 
Later History. 1907-1915. 213 
 
 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 ; intercompany sales $129,565,729, and other re- 
 ceipts 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% of the gross capacity. 
 Practically no change was shown in the bonded debt, 
 which on December 31 stood at $627,238,417.26. The 
 number of employees averaged 179,353. 
 
 So acute was the depression that it was decided to 
 stop construction work at the new Duluth plant in the 
 Fall of the year. Expenditures for this account for 1914 
 amounted to $4,094,363.97. 
 
 In December, 1914, production at the corporation's 
 plants fell to the lowest point ever recorded. The gen- 
 eral average of operations was reported to have been 
 about 25%, but this is probably somewhat overstated, 
 as two of the largest subsidiaries reduced operations as 
 low as 15% in one case, and 18% in the other, during 
 the last fortnight of the year. 
 
 Never did year dawn blacker for the steel trade than 
 did 1915. The financial upset that followed the outbreak 
 of the great war paralyzed industry, and the effect was 
 felt in steel, the barometer of trade. Closing 1914 with 
 operations at the lowest point in years — ^perhaps on 
 record — and with no actual sign of early betterment it 
 was small wonder that all except the perpetual opti- 
 mists faced the future with some dread. 
 
 And the events of the early part of the year seemed 
 to justify this dread. In the month of January the Steel 
 Corporation's earnings fell to the lowest point on rec- 
 ord $1,687,150. There was a gradual picking up both 
 
214 The United States Steel Corporation 
 
 in the rate of operations and in earnings throughout 
 the quarter, and by the end of March the big company's 
 plants were running over 60% of capacity, while earn- 
 ings for March were $7,132,081 and for the quarter 
 $12,457,809. 
 
 But the war was destined to bring an immense 
 amount of business to the steel mills of the United 
 States, and of Canada as well. As the struggle de- 
 veloped the Allied powers had brought home to them 
 their shortage of war material, in which steel plays an 
 important part. It was necessary for them to purchase 
 guns, shells, automolibes, aeroplanes and hosts of other 
 articles in all made wholly or partially of steel. It had 
 become a war of machines, and there was nowhere but 
 America to supply these machines. First the war de- 
 mand made itself felt for wire. This was natural, as 
 England, although an important steel producing coun- 
 try, makes little wire and has been in the custom of 
 importing a large part of her needs of this commodity 
 from the United States. Many, many miles of barbed 
 wire were needed for trench entanglements, and the 
 wire mills of the Steel Corporation and the other wire 
 producers here began to increase output and to show 
 better earnings. 
 
 Then France and England began to buy shrapnel steel 
 and Russia asked for a large number of locomotives and 
 cars, as well as a very heavy tonnage of rails. All this 
 meant more work for the steel mills. The export steel 
 trade of the country grew to unprecedented proportions. 
 The corporation, before the middle of the year, was 
 sending abroad one-third of all the steel it made. It will 
 be remembered that in the best previous year of export 
 trade foreign shipments had amounted to only 18% of 
 the total production of the corporation's mills. 
 
 Domestic trade, due partly to the increasing shipments 
 of food, clothing and other goods to the belligerents, 
 began to pick up. Industry generally was reviving un- 
 
Later History. 1907-1915. 215 
 
 der the stimulus of war buying. And the steel trade 
 was benefited in this way also. Gradually a spirit of 
 optimism began to make itself felt. As the trade bal- 
 ance of the United States reached and passed the bil- 
 lion-dollar mark the gloom that had settled on the 
 minds of all was dispelled and hope took its place. 
 Steel operations were increased, and by the end of the 
 second quarter of this year were nearly 90% of capacity 
 for the corporation, while several of the independent 
 companies were turning out ev«ry ton of steel they 
 could produce. A "boom" was on. 
 
 Earnings, naturally, reflected the change. In the sec- 
 ond quarter the corporation more than doubled its 
 profits for the preceding three months, its report for the 
 period showing a net of $27,950,055. In the third 
 quarter further progress was made and earnings again 
 improved, being $38,710,644. 
 
 One important effect of the war, one that should mean 
 more lasting good not to the steel trade alone, but to 
 American industries generally, was the impetus it gave 
 to the development of the coke by-product end of the 
 industry. In one of the earlier chapters I gave a brief 
 resume of the work of the corporation in developing 
 coke by-products. The value of this work came to be 
 appreciated only when the war shut off supplies of Ger- 
 man dyes and other chemicals derived from coal. 
 
 The by-products obtained from coal in the making of 
 coke have many and varied uses. Cheap candy manu- 
 facturers owe their profits largely to a judicious em- 
 ployment of certain of them, but their destructive 
 powers do not end there, for benzol, toluol, xylol and 
 other by-products form the bases of the most powerful 
 explosives, and the steel companies, already equipped 
 with coke by-product plants, found it a simple thing to 
 add the necessary plant for the manufacture of these 
 special derivations from coal. To-day they are produc- 
 ing at the rate of many millions of gallons of such by- 
 products, and are making large profits from their sale 
 
816 The United States Steel Corporation 
 
 to the manufacturers of explosives, but they are doing 
 at the same time something of far more lasting im- 
 portance. 
 
 For aniline dyes, the fast colors in general use to-day, 
 are made from these same by-products. These dyes 
 were previously obtained from Germany, but the stop- 
 page of imports caused by the war made plain the ur- 
 gency for the building up of an American dye industry. 
 It will take time to establish, but this will not be for 
 want of raw material. By developing the coke by- 
 product industry the steel makers have made possible 
 a dye industry in this country. 
 
 Great expectations were entertained during the late 
 Summer of this year that the corporation's directors, 
 at their meeting in October, would resume the pay- 
 ment of dividends on the common stock. These hopes 
 were doomed to disappointment, although earnings for 
 the September quarter, nearly $39,000,000, were more 
 than sufficient to warrant the payment. The directors, 
 however, were in favor of the more conservative course. 
 
 Yet the stockholders of the big company have every 
 reason to view the immediate future with entire satis- 
 faction. The corporation's plants are running full ca- 
 pacity with output booked up many months ahead, and 
 there is every prospect that the demand will increase 
 rather than diminish during the next six months or 
 more. Prices for some time have been on the upturn; 
 the steel trade is experiencing a period of prosperity 
 such as it has never before enjoyed. Earnings of the 
 corporation, as well as of independent companies, are 
 approaching record figures, if indeed, they have not 
 already passed them, and new high earnings should be 
 recorded in the early months of 1916. 
 
 The corporation is in an exceedingly strong financial 
 position, thanks to the attitude of its management in 
 putting so large a percentage of profits back into new 
 
Later History. 1907-1915. 217 
 
 construction over the years, its works are all in excel- 
 lent shape, new plants are being buih — the Duluth plant 
 will probably be running before these lines are in print 
 — ^and the outlook for the future, both as to earnings 
 and dividends, is brighter than it has ever been before. 
 
 One result of the Great War has been that no longer 
 must the steel mills of the United States compete at a 
 disadvantage with European manufacturers for world 
 trade. The world today is looking to America for its 
 steel needs and never before has so overwhelming a 
 foreign demand been known. The foothold that cir- 
 cumstances have given our manufacturers on foreign 
 markets, it is to be hoped, will not be relinquished when 
 peace shall once more permit our foreign competitors 
 to reenter the field, and in the new field of business it 
 may be considered certain that the big corporation will 
 secure its fair share. 
 
 With a large domestic demand, with capacity opera- 
 tions and rising prices, and finally, with a new and 
 promising export business opening up, the year 1916 
 should dawn with particular brightness for stockholders 
 of the United States Steel Corporation. 
 
APPENDIX 
 
 STATISTICS 
 FINANCIAL AND OTHERWISE 
 
 PAST AND PRESENT 
 
 PRESIDENTS OF PRINCIPAL CONSTITUENT 
 
 COMPANIES 
 
 A. C. Dinkey, succeeded Oct. 1, 1915, by H. D. Williams, 
 Carnegie Steel Company. 
 
 E. J. BUFFINGTON, 
 
 Illinois Steel Company 
 
 E. M. Hagar, succeeded by B. F. Affleck, 
 Universal Portland Cement Company 
 
 W. B. Schiller, 
 
 National Tube Company 
 
 E. W. Pargny, 
 
 American Sheet & Tin Plate Company 
 
 W. P. Palmer> 
 
 American Steel & Wire Company 
 
 August Ziesing, 
 
 American Bridge Company 
 
 Daniel Coolidge, 
 
 The Lorain Steel Company 
 
 G. G. Crawfobp, 
 
 Tennessee Coal, Iron & Railroad Company 
 
220 Appendix 
 
 E. P. Thomas, 
 
 United States Steel Products Company 
 
 Thomas Lynch, died Dec, 1913, W. H. Clingerman, 
 H. C. Frick Coke Company 
 
 J. W. Ana WALT, 
 
 United Supply Company 
 Union Supply Company 
 
 W. J. Olcott, 
 
 Oliver Iron Mining Company 
 
 J. H. Reed, 
 
 Bessemer & Lake Erie Railroad Company 
 Union Railroad Company 
 Pittsburgh & Conneaut Dock Co. 
 
 A. F. Banks, 
 
 Elgin, Joliet & Eastern Railway Company 
 
 F. E. House, 
 
 The Duluth & Iron Range Railroad Company 
 
 W. A. McGonagle, 
 
 Duluth, Missabe & Northern Railway Company 
 
 H. COULBY, 
 
 Pittsburgh Steamship Company 
 
 D. M. Clemson, 
 
 Carnegie Natural Gas Company 
 
Appendix 
 
 221 
 
 DIRECTORS, WITH 
 
 J.P.Morgan, 1901-13 1 
 John D. Rockefeller, 1901-04 
 Henry H. Rogers, 1901-09 f 
 Charles M. Schwab, 1901-04 
 •Elbert H. Gary, 1901 
 •George W. Perkins, 1901 
 •Edmund C. Converse, 1901 
 •Percival Roberts, Jr., 1901-02. 
 
 1909 
 Francis H. Peabody, 1901-04t 
 Charles Steele, 1901-15 
 William H. Moore, 1901-lS 
 Norman B. Ream, 1901-lSt 
 P. A. B. Widener, 1901-15t 
 •James H. Reed, 1901 
 •Henry C. Frick, 1901 
 William Edenborn, 1901-09 
 Marshal Field, 1901-05 1 
 •Daniel G. Reid, 1901 
 John D. Rockefeller, Jr., 1901-10 
 •Alfred Clififord, 1901-03. 1938 
 
 YEARS OF SERVICE 
 William E. Dodge, 1901-02 1 
 Nathaniel Thayer, 1901-1 If 
 Abram S. Hewitt, 1901-02 f 
 Clement A. Griscom, 1901-12 1 
 
 •Robert Bacon, Apr. to Nov., 
 1901. June, 1902-05. 1912 
 James Gayley, 1902-08 
 Henry Phipps, 1904-14 
 W. E. Corey, 1903-14 
 John F. Dryden, 1903-1 If 
 
 •Robert Winsor, 1904 
 
 •Thomas Morrison, 1904-11. 1914 
 
 •George F. Baker, 1905 
 Marvin Hughitt, 1906-09 
 
 •J. P. Morgan, Jr., 1909 
 
 •Samuel Mather, 1909 
 
 •Henry Walters, 1910 
 
 •James A. Farrell, 1911 
 Gardiner M. Lane, 1911-14t 
 
 •Thomas Murray, 1913 
 
 •John S. Phipps, 1914 
 
 t Died. 
 
 • Present Director. 
 
?32 Appendix 
 
 PROPERTIES OWNED 
 
 The subsidiary companies of the United States Steel 
 Corporation together own a total of 146 works, comprisiag 
 the following plants: 
 
 STEEL WORKS FURNACES 
 
 33 Bessemer Converters. 125 blast furnaces. 
 
 298 open hearth furnaces. 
 
 ROLLING MILLS 
 
 45 bloom, large billet and 221 hot mills. 
 
 slabbing mills. 14 small billet and sheet bar 
 
 9 rail miUs. mills. 
 
 13 structural shape mills. 1 1 sheared plate mills. 
 77 merchant miUs. 15 skelp mills. 
 
 9 Universal plate mills. 173 sheet, jobbing and plate 
 
 24 wire rod mills. nulls. 
 
 10 piercing and rolling nulls for seamless tubing. 
 
 WIRE MILLS. 
 
 22 wire drawing mills. 15 nail mills. 
 
 3 spring works. 5 rope and electrical works. 
 
 16 barbed and woven fence departments. 
 
 PIPE AND TUBE WORKS. 
 
 52 welding pipe furnaces. 3 seamless tube mills. 
 
 GALVANIZING AND TINNING. 
 
 30 galvanizing departments. 8 tinning departments. 
 
 GT'hER MILLS AND PLANTS. 
 
 14 tin plate mills. 20 bridge and structural 
 
 4 splice bar and rail joint plants. 
 
 shops. 5 spike, bolt and nut works. 
 
 23 iron,steelandbrassfound- 12 sulphate of iron plants. 
 
 ries. 68 warehouses. 
 
 5 cement plants. 5 departments for cold rolled 
 
 products. 
 
Appendix 
 PROPERTIES OWNED 
 
 323 
 
 MISCEI^LANEOUS. 
 
 2 axle works. 
 
 5 forge departments. 
 
 1 paint factory. 
 
 1 shafting department. 
 
 2 puddling nulls. 
 
 1 sulphuric acid plant. 
 1 general repair shop. 
 1 armor plate plant. 
 1 fabricating dept. for power 
 transmission towers. 
 
 1 frog and switch works. 
 
 2 zinc smelting works. 
 2 job works. 
 
 1 eye bar works. 
 
 2 steel car wheel plants. 
 1 horse shoe department. 
 
 3 post and gate departments. 
 1 thread protector works. 
 
 1 steel barge yard. 
 
 Trackage operated (standard gauge) by Steel Corpora- 
 tion roads: 
 
 Line owned 993.30 miles. 
 
 Branches and spur to mines and industries . . . 602.68 " 
 
 Operated under trackage rights 365. 12 " 
 
 Second tracks 403.98 " 
 
 Yard tracks and sidings 1,215.20 " 
 
 Marine Equipment Owned by U. S. Steel Subsidiary 
 Companies. 
 
 Steamers 
 
 Steel barges 
 
 Wooden barges . . 
 
 Tugboats 
 
 Fire tugs 
 
 Keg boats 
 
 Scows 
 
 Ocean. 
 
 Great Lakes 
 
 72 
 21 
 
 1 
 2 
 
 Ohio River. 
 
 2 
 71 
 40 
 
234 
 
 Appendix 
 
 COMPARATIVE PRODUCTION 
 
 TaHe showing percentage . of total steel and iron out- 
 put of the United States produced by the U. S. Steel Corpora- 
 tion, for 1901, 1911 and 1913. The figures for 1901 and 
 1911 are taken from the exhibits in the dissolution suit and 
 those for 1913 from the report of the American Iron & Steel 
 Institute for that year. 
 
 1901 
 
 1911 
 
 1913 
 
 Iron ore from Lake Superior ranges . . . 
 Total iron ore produced 
 
 Bessemer and low phosphorous pig iron 
 
 Basic pig iron 
 
 Total basic and bessemer iron 
 
 61.6 
 45.1 
 
 54.3 
 45.8 
 
 50.46* 
 46.37 
 
 61.7 
 40.3 
 58.9 
 
 61.1 
 53.4 
 57.5 
 
 
 Foimdry and other grades . . . 
 Ferromanganese and spiegel . 
 
 Total blast furnace products . 
 
 Steel ingots and castings 
 
 3.4 
 65.4 
 
 5.4 
 76.3 
 
 80.38 
 
 43.2 
 
 45.4 
 
 45.47 
 
 65.7 
 
 53.9 
 
 53.21 
 
 Steel rails 
 
 Heavy structural shapes . 
 
 Plates and sheets 
 
 Wire rods 
 
 Other roUed products: 
 Merchant bars 
 
 59.8 
 
 62.2 
 
 64.6 
 
 77.6 
 
 Details 
 
 not 
 
 available 
 
 Skdp ; 
 
 Hoops, bands and ties 
 
 SpUce bars 
 
 RoUed forging blooms and biUets . 
 
 Concrete bars, sheet piling, railroad 
 ties, spikes, chains, bolt and nut 
 rods, horseshoe bars, strips and 
 
 miscellaneous 
 
 Total other roUed products. . . . 
 
 Grand total finished iron and steel. . 
 
 27.3 
 50.1 
 
 56.1 
 47.0 
 45.7 
 64.7 
 
 21.5 
 
 49.0 
 64.6 
 48.0 
 17.8 
 
 35.6 
 35.1 
 
 45.7 
 
 55.51 
 54.03 
 49.13 
 58.44 
 
 O 
 
 47.81 
 
 Wire Nails 
 
 Tin and teme plates . 
 
 65.8 
 73.0 
 
 51.4 
 60.7 
 
 44.55 
 58.64 
 
 •Shipments — Production not given. 
 
Appendix 
 
 225 
 
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226 
 
 APPENDIX 
 
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Appendix 237 
 
 EARNINGS AND DISTRIBUTION THEREOF 
 SINCE ORGANIZATION. 
 
 Profits from April 1, 1901, to November 31, 1914 $ 949,473,971 
 
 Deductions, special reserves, etc 27,475,031 
 
 Preferred dividends paid (96^) 370,293,337 
 
 Common dividends paid (42^%) 216,006,707 
 
 Total dividends paid 586,300,044 
 
 Surplus profits 335,698,895 
 
 Appropriated for new property and payment of 
 
 capital expenditures 218,694,423 
 
 Charged off for expense of conversion of preferred 
 
 stock and issue of 10-60 bonds 6,800,000 
 
 Balance of profits $ 110,204,472 
 
 STATEMENT OF UNDIVIDED SURPLUS 
 since organization on April 1, 1901, and as of Dec. 31, 1914. 
 
 Working capital at organization $ 25,000,000 
 
 Balance of surplus accumulated by all companiesto Dec, 
 
 1914 110,204,472 
 
 Total undivided surplus $135,204,472 
 
 Total bond, debenture and mortgage debt in hands of public at end of 
 each year since organization: 
 
 1901 $381,909,475 
 
 1902 363,655,459 
 
 1903 553,447,257 
 
 1904 575,146,147 
 
 1905 570,472,264 
 
 1906 564,670,876 
 
 1907 602,320,511 
 
 1908 594,865,534 
 
 1909 607,584,174 
 
 1910 597,136,659 
 
 1911 621,054,300 
 
 1912 643,537,181 
 
 1913 627,366,681 
 
 1914 627,238,417 
 
 UNFILLED TONNAGES BY QUARTERS. 
 
 Year March 31. June 30. Sept. 30 Dec. 31 
 
 1902 4,791,993 4,843,007 5,347,523 
 
 1903 5,410,719 4,666,578 3,278,742 3,215,123 
 
 1904 4,136,961 3,192,277 3,027,436 4,696,203 
 
 1905 5,579,560 4,829,655 3,865,377 7,605,086 
 
 1906 7,018,712 6,809,589 7,936,884 8,489,718 
 
 1907 8,043,058 7,603,878 6,425,000 4,624,553 
 
 1908 3,765,343 3,313.876 3,421,977 3,603,527 
 
 1909 3,542,595 4,057,939 4,796,833 5,927,031 
 
 1910 5,402,514 4,257,794 3,158,106 2,674,757 
 
 1911 3,447,301 3,361,058 3,611,317 5,084,761 
 
 1912 5,304,841 5,807,346 6,551,507 7,932,160 
 
 1913 7,468,956 5,807,317 5,003,785 4,282,148 
 
 1914 4,653,825 4,032,857 3,787,667 3,836,643 
 
 1915 4,255,749 4,678,196 5,317,618 7,806,220 
 
228 
 
 Appendix 
 
 EXPORTS OF THE U. S. STEEL CORPORATION. 
 Year Gross Tons 
 
 1902 275,833 
 
 1903 350,824 
 
 1904 1,001,716 
 
 1905 928,899 
 
 1906 1,049,717 
 
 1907 985,041 
 
 1908 775,345 
 
 1909 985,474 
 
 1910 1,195,465 
 
 1911 1,708,487 
 
 1912 2,243,138 
 
 1913 1,813,072 
 
 1914 1,144,214 
 
 RANGE OF STOCK PRICES. 
 Preferred 
 
 High Low 
 
 1901 107^ 69 
 
 1902 91H 79 
 
 1903 89J< 49^ 
 
 1904 9S>| 51^ 
 
 1905 107 90K 
 
 1906 113^ 98K 
 
 1907 107j< 19'^ 
 
 1908 114H 78;^ 
 
 1909 131 107 
 
 1910 12Sf^ 110>^ 
 
 1911 120^ 103 
 
 1912 117 107 
 
 1913 110J< 102 >^ 
 
 1914 112J< 103X 
 
 1915 117 102 
 
 EMPLOYES AND PAYROLL. 
 
 Year ending Number Total 
 
 December 31st Employes Pay Rolls 
 
 1902 168,127 $120,528,343 
 
 1903 167,709 120,763,896 
 
 1904 147,343 99,778,276 
 
 1905 180,158 128,052,955 
 
 1906 202,457 147,765,540 
 
 1907 210,180 160,825,822 
 
 1908 165,211 120,510,829 
 
 1909 195,500 151,663,394 
 
 1910 218,435 174,955,139 
 
 1911 196,888 161,419,031 
 
 1912 221,025 189,351,602 
 
 1913 228,906 207,206,176 
 
 1914 179,353 162,376,907 
 
 Common 
 
 High 
 
 Low 
 
 55 
 
 24 
 
 46?< 
 
 29K 
 
 39 i^^ 
 
 10 
 
 33H 
 
 &H 
 
 43 J< 
 
 24H 
 
 505^ 
 
 32^ 
 
 50H 
 
 21H 
 
 SSH 
 
 25H 
 
 9m 
 
 41>< 
 
 91 
 
 61J^ 
 
 82 H 
 
 50 
 
 80K 
 
 S8X 
 
 69 yi 
 
 49>^ 
 
 b1% 
 
 48 
 
 89^ 
 
 38 
 
 
 Average 
 
 Yearly Wage 
 
 $716.88 
 
 
 720.08 
 
 
 677.18 
 
 
 710.78 
 
 
 729.86 
 
 
 765.18 
 
 
 729.44 
 
 
 775.77 
 
 
 800.95 
 
 
 819.85 
 
 
 856.70 
 
 
 905.20 
 
 
 905.36 
 
Appendix 
 
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