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A billion dollars!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

From the date of the Simmons dinner to that on which the plans for the new corporation were announced was a very short period. The birth of the Corporation did not take long. Once convinced that a merger of a number of large companies making various steel products was practicable and desirable for the good of the industry and of the country—as well as for the pockets of the consolidators—Morgan and his associates lost no time in bringing it about. The dinner took place on December 12, 1900; United States Steel was formally chartered on February 25th of the year following and began business as a corporate entity on April 1, 1901.

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

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

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

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

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

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

COMPANY	COMMON STOCK	PREFERRED STOCK
American Bridge Co.	$30,527,800	$30,527,800
American Sheet Steel Co.	24,500,000	24,500,000
American Steel Hoop Co.	19,000,000	14,000,000
American Steel & Wire Co.	50,000,000	40,000,000
American Tin Plate Co.	28,000,000	18,325,000
Carnegie Steel Co.	160,000,000	A160,000,000
Federal Steel Co.	46,484,300	53,260,900
Lake Superior Consolidated Iron Mines	29,424,594	… …
National Steel Co.	32,000,000	27,000,000
National Tube Co.	40,000,000	40,000,000
Total.	$459,936,694	$407,613,700

A Bonds. All other figures in this column represent preferred stock.

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

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

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

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

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

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

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

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

The American Steel & Wire Co., of New Jersey, was a consolidation effected in January, 1899, of the majority of the country’s wire mills. It had a rod mill capacity of more than 1,100,000 tons and a wire nail capacity of more than 10,000,000 kegs, or more than 500,000 tons. It also owned extensive ore and coking coal properties. In the first year of its operation the wire company earned nearly $19.00 a share on its common stock after an allowance of $1,200,000 for depreciation, and in 1900 its earnings applicable to the common stock were $4,202,129, or nearly 8½ per cent. on the issue. Its preferred stock was exchanged on a basis of $117.50 U. S. Steel preferred for each $100, and its common stock on the basis of $102.50 of Steel common for each $100 of Steel & 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 Carnegie and his associates. A company that realized profits in 1899 of nearly $24,000,000 and in 1900 of approximately $40,000,000!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

B See Appendix, page 308.

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

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

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

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

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

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

YEAR	DUN’S INDEX NUMBER	CORPORATION’S PRICE RECEIVED	INDEX NO. BASED ON CORP. PRICE
1903	99.46			$37.56	100.00
1904	97.19			33.15	88.3
1905	98.31			32.89	87.6
1906	105.22			34.54	91.8
1907	113.66			36.59	97.3
1908	108.17			36.19	96.3
1909	119.02			32.52	86.5
1910	119.17			34.10	90.7
1911	118.13			31.88	84.8
1912	122.28			30.03	80.0
1913	116.32			33.25	88.5
1914	119.71			30.60	81.4
1915	124.96			30.67	81.6
1916	145.14			41.31	109.9
1917	211.95			60.08	60.0
1918	232.57			68.86	83.5
1919	233.71			62.66	167.0
1920	260.41	(nine	mos.)	62.67	167.0

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

Andrew Carnegie

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

J. Pierpont Morgan

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