Andrew Carnegie and The Gospel of Wealth

Andrew Carnegie, the steel magnate, is an example of the prototypical rags-to-riches story. Although such stories were far from the norm and were often sensationalized to promote a public image, they served to encourage many Americans to seek similar paths to fame and fortune. Born in Scotland, Carnegie immigrated with his family to Pennsylvania in 1848. Following a brief stint as a “bobbin boy,” changing spools of thread at a Pittsburgh clothing manufacturer at age thirteen, he subsequently became a telegram messenger. In this role, he spent much of his time around the Pennsylvania Railroad office and developed parallel interests in railroads, bridge building, and, eventually, the steel industry. One railroad contractor, Colonel James Anderson, would provide the young working boys of Pittsburgh with open access to his vast personal library every Saturday night. Carnegie took full advantage of the opportunity and much of his future philanthropy was inspired by Anderson’s kindness. Carnegie later wrote that he resolved “if ever wealth came to me, [to see to it] that other poor boys might receive opportunities similar to those for which we were indebted to the noble man.”^[1]

Figure 1. Andrew Carnegie made his fortune in steel at such factories as the Carnegie Steel Works located in Youngstown, Ohio, where new technologies allowed the strong metal to be used in far more applications than ever before. Carnegie’s empire grew to include iron ore mines, furnaces, mills, and steel works companies.

Ingratiating himself to his supervisor and the future president of the Pennsylvania Railroad, Tom Scott, Carnegie worked his way into a management position and subsequently began to invest some of his earnings, under Scott’s guidance. One particular investment, in the booming oil fields of northwest Pennsylvania in 1864, resulted in Carnegie earning over $1 million in cash dividends, thus providing him with the capital necessary to pursue his ambition to modernize the iron and steel industries. Having seen firsthand during the Civil War, when he served as Superintendent of Military Railways and telegraph coordinator for the Union forces, the importance of industry, particularly steel, to the future growth of the country, Carnegie was convinced of his strategy. His first company was the J. Edgar Thompson Steel Works, and, a decade later, he bought out the newly built Homestead Steel Works from the Pittsburgh Bessemer Steel Company. By the end of the century, his enterprise was running an annual profit of over $40 million.

Although not a scientific expert in steel, Carnegie was an excellent promoter and salesman, able to locate financial backing for his businesses. Always thrifty with the returns he earned, a trait owed to his modest upbringing, Carnegie saved his profits during prosperous times and used them to buy out other steel companies at low prices during the economic recessions of the 1870s and 1890s. He insisted on up-to-date machinery and equipment and urged the men who worked at and managed his steel mills to constantly think of innovative ways to increase productivity and reduce costs.

Carnegie, more than any other businessman of the era, championed the idea that America’s leading tycoons owed a debt to society. He believed that, given the circumstances of their successes, they should serve as benefactors to the less fortunate. For Carnegie, poverty was not an abstract concept, as his family had been a part of the struggling masses. He desired to set an example of philanthropy for all other prominent industrialists of the era. Carnegie’s famous essay, The Gospel of Wealth, featured below, expounded on his beliefs. In it, he borrowed from Herbert Spencer’s theory of Social Darwinism, which held that society developed much like plant or animal life through a process of evolution in which the fittest and most capable enjoyed the greatest material and social success.

Andrew Carnegie’s gifts to education, science, and the arts are undeniable. Below is only a partial list of his contributions and developments:

• The Carnegie Corporation of New York, a philanthropic fund that provides money for educational programs around the world
• The Carnegie Endowment for International Peace, an international affairs think tank dedicated to resolving conflicts through diplomacy and nonviolence
• The Carnegie Institution for Science, which funds and supports research into ecology, earth sciences, genetics, and astronomy
• Carnegie Mellon University, one of the foremost research universities in the nation
• The Carnegie Museums of Pittsburgh, which includes four separate museums dedicated to natural history, art, and science
• Funding of the Peace Palace, which houses the International Court of Justice in the Hague
• Over 2500 public libraries in the U.S. and around the world

Influential women of the gilded age

Louise Whitfield

Figure 2. Louise Whitfield Carnegie in 1920

As the wealth of the middle and upper classes grew during the Gilded Age and beliefs like Carnegie’s Gospel of Wealth became more popular, the wives and daughters of America’s prosperous businessmen became involved in their pursuits. Charity work had largely been the purview of middle-class women for several decades since it was associated with the type of moral, evangelical Christianity of the Second Great Awakening. However, now that the rich were getting richer and were giving much of their wealth away, affluent women began to direct their husbands’ fortunes toward causes that they adopted. Wealthy women became involved in charity in part because it was a socially acceptable way for them to participate in public life while also demonstrating “feminine virtues” like grace, charity, compassion, and selflessness. Charity work was also a social expectation among the middle- and upper-class women of America’s Gilded Age. It assisted families in making social and business connections through fundraising events, while still demonstrating their care for the working classes.

Andrew Carnegie’s wife, Louise Whitfield, was much more prolific in her charitable giving. While she signed a pre-nuptial agreement that she had no claim to Carnegie’s fortune, he transferred stocks to her which gave her an independent income of around $20,000 per year (almost $600,000 in today’s money). She also sat on the board of the Carnegie Corporation and advised him in his mission to build public libraries. Louise was almost 20 years younger than her husband and when he passed away in 1919, she continued his legacy of charity, giving generously to the Red Cross, the YMCA, and many World War II relief funds. 

Figure 3. Laura Spelman Rockefeller

Laura Spelman

John D. Rockefeller met his wife, Laura Spelman, when they were both in their late teens and taking accounting classes in Cleveland, Ohio. She returned to New England to become a school teacher but later moved back to Ohio and she and Rockefeller married in 1864. Rockefeller had built his first oil refinery the previous year and by 1870 he had founded Standard Oil, the company that made him one of the richest men in American history. Laura supported him in his business while raising their five children, but always ensured that they donated 10% of their income to charity and focused most of her time on philanthropy.

In 1884, Laura and John were approached by two women who had founded the Atlanta Baptist Female Seminary, a college for Black freedwomen. The couple were so impressed with the school’s mission that they settled the debt on the property and donated more money for buildings. The school was renamed Spelman College in honor of Laura and her family, who were long-time abolitionists. Laura died in 1915 of a heart attack, leaving a personal estate of around $1.5 million. She bequeathed $450,000 to relatives, but the rest (around $310 million in today’s money) was to be distributed between several missionary societies, churches, and Spelman College.

Click here to read about how wealthy women’s charity work sometimes put them at odds with working-class women.

Figure 4. Based on a book by Horatio Alger, District Messenger Boy was a board game where players could achieve the ultimate goal of material success. Alger wrote hundreds of books on a common theme: A poor but hardworking boy can get ahead and make his fortune through a combination of “luck and pluck.”

J. Pierpont Morgan

Unlike Carnegie and Rockefeller, J. P. Morgan was no rags-to-riches hero. He was born to wealth and became much wealthier as an investment banker, making wise financial decisions in support of the hard-working entrepreneurs building their fortunes. Morgan’s father was a London banker, and Morgan himself moved to New York in 1857 to look after the family’s business interests there. Once in America, he separated from the London bank and created the J. Pierpont Morgan and Company financial firm. The firm bought and sold stock in growing companies, investing the family’s wealth in those that showed great promise, turning an enormous profit as a result. Investments from firms such as his were the key to the success stories of up-and-coming businessmen like Carnegie and Rockefeller. In return for his investment, Morgan and other investment bankers demanded seats on the companies’ boards, which gave them even greater control over policies and decisions than just investment alone. There were many critics of Morgan and these other bankers, particularly among members of a U.S. congressional subcommittee that investigated the control financiers maintained over key industries in the country. The subcommittee referred to Morgan’s enterprise as a form of “money trust” that was even more powerful than the trusts operated by Rockefeller and others. Morgan argued that his firm, and others like it, brought stability and organization to a hypercompetitive capitalist economy, and likened his role to a kind of public service.

Ultimately, Morgan’s most notable investment, and greatest consolidation, was in the steel industry, when he bought out Andrew Carnegie in 1901. Initially, Carnegie was reluctant to sell, but after repeated badgering by Morgan, Carnegie named his price: an outrageously inflated sum of $500 million. Morgan agreed without hesitation, and then consolidated Carnegie’s holdings with several smaller steel firms to create the U.S. Steel Corporation. U.S. Steel was subsequently capitalized at $1.4 billion. It was the country’s first billion-dollar firm. Lauded by admirers for the efficiency and modernization he brought to investment banking practices, as well as for his philanthropy and support of the arts, Morgan was also criticized by reformers who would later blame his (and other bankers’) efforts for contributing to the artificial bubble of prosperity that eventually burst in the Great Depression of the 1930s. However, Morgan’s financial aptitude and savvy business dealings kept him in good stead. A subsequent U.S. congressional committee, in 1912, reported that his firm held 341 directorships in 112 corporations that controlled over $22 billion in assets. In comparison, that amount of wealth was greater than the assessed value of all the land in the United States west of the Mississippi River.

In 1895, Morgan almost single-handedly saved the U.S. government from financial ruin. Until 1933, the U.S. economy was run on the Gold Standard, which meant that every dollar had an equivalent value in gold. The U.S. Treasury kept a reserve of gold to pay back the creditors that it owed and to stabilize the value of its currency. However, during a period of financial instability in the early 1890s, the U.S. gold reserves were running dangerously low. Morgan met with President Cleveland personally and offered to loan the government $65 million in gold in exchange for a 30-year bond. Cleveland, desperate for a solution, accepted the offer, which saved the Treasury but ended up losing the president his bid for reelection due to a pervasive mistrust of large banks.