Andrew Carnegie Develops Effective Ways to Reduce Poverty

The life story of Andrew Carnegie is not only amazing, but also reveals economic principles which society can use to help those who are at the bottom of the economic system. Andrew Carnegie had two disadvantages: he was an immigrant, and he had no money.

In 1848, he came to the United States with his family. His first job was working, at age 12, in a textile factory. He worked 12 hours a day, 6 days a week. He earned barely enough money to stay alive.

Yet he didn’t give up. He was determined to work as hard as he could, and he was determined to understand the economic system. He not only worked in various factories, but he thought about how they were organized, and about who paid for the factory to be built, and who paid for the raw materials that came to the factory. He learned how products were distributed and sold.

Andrew Carnegie worked his way up in business, and eventually could save enough money to buy part of a business. Later, he owned his own business. By the time he died in 1919, he was one of the wealthiest people in America.

Through his own experience, Andrew Carnegie learned that it was possible for an immigrant to rise from the lower class to the middle class, and eventually to the upper class. He received no special help, had no privilege, and his family was unable to help him. Yet he succeeded.

Later in life, he wanted to help others who were poor, or were immigrants. He began massive charitable efforts. He donated money to build hospitals, schools, universities, libraries, and museums. Poor children received better healthcare and better educations, and had a chance to work their way up from poverty.

Driven by moral and spiritual convictions, he believed that people with wealth had a responsibility to use that money to improve society for all people. Andrew Carnegie wrote:

Thus is the problem of the rich and poor to be solved. The laws of accumulation will be left free; the laws of distribution free. Individualism will continue, but the millionaire will be but a trustee for the poor; entrusted for a season with a part of the increased wealth of the community, but administering it for the community.

He believed that the hundreds of millions of dollars he had earned were not his to keep. Andrew Carnegie understood that this money was only his temporarily, and that he was obliged to help others with it.

The best minds will thus have reached a stage in the development of the race in which it is clearly seen that there is no mode of disposing of surplus wealth creditable to thoughtful and earnest men into whose hands it flows save by using it year by year for the general good. This day already dawns.

The word ‘philanthropy’ refers, in the words of a common dictionary, to “the desire to promote the welfare of others, expressed especially by the generous donation of money to good causes.” Andrew Carnegie helped people by giving away hundreds of millions of dollars.

That’s right: not millions of dollars, not tens of millions of dollars, but hundreds of millions of dollars. Hospitals, schools, universities, museums, and libraries in dozens of towns and cities exist still today because of Carnegie’s generosity more than a hundred years ago.

But he helped in other ways, too. His business activities were related primarily to steel. Steel was and is used to make everything from railroads to cars, from washing machines to airplanes.

Carnegie’s steel business provided thousands of well-paying jobs for working-class people. His steel company was a path out of poverty for many families.

The steel he produced also lowered the costs of consumer goods. Over the decades between 1870 and 1900, the price of many ordinary products sank. At the same time, wages were rising. Lower-class and middle-class families experienced an improvement in their standards of living.

To be sure, Carnegie didn’t do all this by himself. Other leaders were developing other industries during these same years. Notably, John Rockefeller developed the Standard Oil Company, which provided similar economic opportunities for workers. Many of these other business leaders, who created prosperity for families across America, were immigrants like Carnegie. Alexander Graham Bell, for example, who created the telephone industry, was also an immigrant who arrived in the United States with no money.

From Carnegie’s example, it is clear that America offers opportunities to poor immigrants. It is also clear that successful business leaders can help lower-class families rise up from poverty.

The Industrial Growth of the Late 19th Century: Caring for Society’s Vulnerable Members

Between the end of the Civil War in 1865 and the end of the 19th century in 1900, a dramatic expansion in the U.S. economy provided for four massive benefits: an increase in well-paying industrial jobs; a decrease in the price of consumer goods; more charitable contributions to help the poor; and philanthropy to grow educational and social institutions.

The word ‘philanthropy’ refers to voluntary donations.

The industrial growth involved industries like steel, railroads, coal, petroleum, and the new communication technology: the telephone. These businesses were created and led, in typical American fashion, by immigrants. Two examples stand out: Andrew Carnegie and Alexander Graham Bell. They came to the United States in poverty, having left their homes for opportunities.

As these companies grew, thousands of jobs were created, giving new chances both to the urban poor and the rural poor. Many workers were able to move up from poverty.

At the same time, new manufacturing technologies reduced the prices on many ordinary products, allowing families to experience a higher standard of living, being able to afford better and more goods.

Industrialists like Andrew Carnegie earned millions of dollars, but refused to live an extravagant lifestyle of wealth. Instead, he donated millions of dollars to schools, museums, hospitals, universities, and libraries. He wrote:

This, then, is held to be the duty of the man of wealth: First, to set an example of modest, unostentatious living, shunning display; to provide moderately for the legitimate wants of those dependent upon him; and after doing so to consider all surplus revenues which come to him simply as trust funds, which he is strictly bound as a matter of duty to administer in the manner which, in his judgment, is best calculated to produce the most beneficial results for the community – the man of wealth thus becoming the mere trustee and agent for his poorer brethren, bringing to their service his superior wisdom, experience and ability to administer.

Carnegie understood an important economic principle. Voluntary donations by individuals are the most effective way to address poverty. Government programs, which were almost nonexistent during the late 1800s anyway, are inefficient and unproductive.

So it was, then, that charitable efforts to help the poor grew during this era, fueled in part by spiritual motives. Three major social institutions were religious organizations which were effective in addressing poverty: The International Red Cross was founded in 1863 and the American Red Cross in 1881; the British YMCA in 1844 and the American YMCA in 1851; and the British Salvation Army in 1865 and the American Salvation Army in 1880. All of these organizations proclaimed that they operated on the Christian principle of offering help to all people, regardless of race or religion.

Industrial growth made society more humane and more able to offer help to those in need.

What kind of economic expansion made such charity possible? Historian Wilfred McClay explains:

Hundreds of thousands of patents were granted during this dynamic economic period of American history. There were too many important advances in technology in this era to be able to enumerate them all here, but a few deserve mention. An advance that occupies a category by itself involved the manufacture of steel, which is iron with 1–2 percent carbon added, a material that combines the hardness of cast iron with the toughness of wrought iron. Steel is superior to iron for most purposes, particularly railroad tracks, girders for tall buildings and bridges, and machine tools, but was too expensive to manufacture until the 1855 invention in Great Britain of the Bessemer process, which revolutionized steel production. The numbers tell the story; from 77,000 tons of steel produced in 1870, the number had made an astronomical leap to 11.4 million tons in 1900. By then, Pittsburgh had become the iron and steel capital of the United States, mostly due to the abundant coal deposits in the western Pennsylvania area. Its most prominent entrepreneurial figure was Andrew Carnegie, a poor Scottish immigrant who rose from working as a bobbin boy in a textile mill to becoming the titan of the steel industry.

Science and technology led the way for this economic expansion. The development of new manufacturing techniques did more than increase the amount of iron and steel produced. Industrial development funded schools for children who otherwise would have no education. It funded hospitals for those who otherwise would receive substandard care.

The Growth of the West: Its Relationship with the Industrial Northeast

After the U.S. Civil War ended in 1865, and after Reconstruction ended in 1877, the nation, with the glaring exception of the South, found itself in a time of growth, of economic expansion, and of opportunity. In the Northeast, this took the form of industrial development and the development of retailing and wholesaling businesses.

In the West, this took the form of land.

People who wanted to work their way up from the lower classes to the middle classes found opportunities in ranching and farming. Farming meant growing crops like corn, wheat, and beans, and having farm animals that lived on relatively small fields. These animals were fed with some of the corn that the farmers grew.

Ranching, on the other hand, meant not growing any crops, and having animals roam over huge amounts of land, grazing on the grass and other plants which grew there.

The difference between ranching and farming would lead to social tensions. The livestock belonging to the ranchers would sometimes trample across farm fields, causing great damage to the crops.

Farmers and cowboys often clashed. The word ‘cowboy’ had originally a negative connotation. The cowboys were supposed to guide the cattle from place to place, and the farmers held the cowboys responsible for damage done to farm crops. The image of the ‘cowboy’ at that time was one of an irresponsible troublemaker.

A big change came with the invention of barbed wire. Fences built around farm fields kept the plants safe, and kept the animals where they were supposed to be. Barbed wire brought peace to the conflict between ranchers and farmers.

The Northeast was being transformed by modernization, urbanization, and industrialization. Those ideas seem to be the very opposite of the popular image of the West, as historian Wilfred McClay writes:

But what of the great American West, that other mythic land of dreams? Had it been affected by these forces? With its great open spaces, its magnificent mountains and craggy canyons, its mighty rivers and verdant timberlands, surely it was majestically unconquerable, still resolutely the land of individualism and personal freedom so central to the American identity and way of life?

Yet the barbed wire which brought progress to the West was a product of the Northeastern industrial establishment, as were many of the tools and firearms needed to build and feed the West’s growing population.

The West consumed a large share of the Northeast’s industrial output, providing customers for manufactured goods. The West also provided the raw materials for the Northeast’s factories.

But aside from this economic relationship, maybe the West could maintain its unique character. The West was and is associated, in the popular imagination, with fierce independence. Maybe the West could retain its peculiar sense of liberty?

Maybe, but maybe not. The flow of migrants into the region after the Civil War was just as relentless as it was elsewhere, and the growing importance of the mining and cattle industries combined with the reach of the railroads was bringing the West into the more general range of the nation’s consolidating forces. The heyday of the romantic cowboy, riding the open range and steering cattle drives of three thousand head or more northward to cow towns like Sedalia and Abilene, looms large in our imaginations. But it was actually quite brief, only a couple of decades between the end of the Civil War and the late 1880s, as farmers and ranchers began butting up against one another and settled property lines became a necessity. Ironically, the heavy involvement of the federal government in the western states, and federal ownership of roughly half the land of the West, would soon make the West the region least free of federal influence.

More enduring was the impact of mining. The California Gold Rush brought adventurers and speculators to the West in the late 1840s, but more serious mining trends began: in 1858, gold was discovered near Pikes Peak in Colorado.

In 1859, silver was discovered near Virginia City, Nevada. This discovery was called ‘The Comstock Lode,’ although Henry Comstock had sold the land before the silver was discovered.

In the 1870s, silver was discovered at Leadville, Colorado, and gold was discovered in the Black Hills of South Dakota. In the same decade, copper was discovered in Montana.

Miners had already come to Arizona in the 1860s and 1870s to work in the copper mines there, but in 1877, silver was discovered near Tombstone Arizona.

Each of these mining discoveries brought a sudden increase in population. Tiny towns suddenly had hundreds or thousands of new residents. Towns appeared and grew quickly where there had been no towns before. These fast-growing places were called ‘boomtowns.’

Although economically vibrant, boomtowns had problems of their own. The vast majority of their population was made up of men between the ages of 17 and 40. There were few women, and even fewer children and old people.

When a town lacks a balanced population, social problems arise. When there are few women, children, and old people, there is more crime. The boomtowns in the mining areas of the West were often dangerous places to be.

As the mining industry developed, however, the boomtowns matured into healthy communities, with families balancing the population. With a full range of ages — from small children to the elderly — and with an even distribution of men and women in the population, the boomtowns became prosperous cities with less crime.

Preserving Black Freedom in the Postwar South: The Struggle for Liberty Continues after 1865

When the United States Civil War ended in early 1865, the questions could be asked: What was accomplished? What remained to be accomplished? The Republicans had achieved two goals: First, they had ended slavery and freed the enslaved African-Americans. Second, they had preserved the Union.

A third goal had not been addressed during the war. It would be addressed in the postwar years, during an era called the ‘Reconstruction.’

The Confederacy had failed to preserve its “peculiar institution,” as it called slavery. It had also failed to destroy the Union, as historians Allan Millett and Peter Maslowski write:

Although war involves killing, killing is not the object of war. Men fight for vital reasons, as defined by their country’s political leadership. The North fought for the preservation of the Union and the destruction of slavery, while the South fought for independence and the preservation of its “peculiar institution.” In saving the Union and freeing the slaves, Lincoln believed the North would be achieving goals of cosmic significance, transcending national boundaries into the infinite future. Like many of America’s leaders, he thought the United States had a special destiny to safeguard and foster its democratic institutions as an example for the world. The North, he said in December 1862, “shall nobly save, or meanly lose, the last best, hope of earth.” And in the Gettysburg Address he urged his fellow citizens to take increased resolve from the northern soldiers who had given “the last full measure of devotion” on the battlefield. Let us ensure “that these dead shall not have died in vain — that this nation, under God, shall have a new birth of freedom — and that government of the people, by the people, for the people, shall not perish from the earth.”

The Civil War permanently changed the way Americans thought and spoke about the nation. Until 1861, the United States was viewed as a collection of sovereign and largely independent governments that cooperated on a few common tasks.

After the Civil War, the United States was understood as a single entity, and the individual states as having limited autonomy within the federal system.

Those northerners who fell at Gettysburg and elsewhere did not die in vain, since the North achieved its dual war aims. The conflict delivered a deathblow to the doctrine of secession and considerably weakened (though it did not destroy) the idea of states’ rights. Within the American federal system, the balance of power shifted from the states to the national government. People no longer said “the United States are” but instead “the United States is.” In the process of saving the Union, the North also destroyed slavery. Advancing Union armies and the Emancipation Proclamation undermined the institution, and the Thirteenth Amendment killed it.

The Thirteenth Amendment ensured that the gains made during the war — i.e., the end of slavery — would be permanent and irreversable. It finalized the achievement of the Republicans: the abolitionist movement had won.

Southerners had seemingly died in vain, since the Confederacy achieved neither of its war aims. And yet merely saying that the Union lived and slavery died left several crucial questions unanswered. What was the status of the defeated states? How and when were they to return to “their proper practical relation with the Union”? Who would control the restored states, former secessionists or southern Unionists, perhaps in league with the freedmen? And what was the status of the former slaves?

The Fourteenth and Fifteenth Amendments would do much to answer those questions. While the Civil War, Lincoln’s Emancipation Proclamation, and the Thirteenth Amendment had decisively ended slavery, the Fourteenth and Fifteenth Amendments would go further: The goal was now full legal citizenship, not only for the former slaves, but also for the millions of free African-Americans who had never been slaves.

Legal equality was a radical change, as radical as ending slavery. Gaining this legal status for African-Americans could only be achieved by the presence of large numbers of Republicans in the South after the war’s end, during the time called the “Reconstruction” Era.

When the war ended in 1865, many of the Confederate states attempted to return to their prewar systems. The local political leaders were almost exclusively members of the Democratic Party, and they moved swiftly to enact many “Black Codes” – laws designed to prevent former slaves from enjoying their civil rights.

Even though the Republicans had won the war, they realized that there was a danger of losing the gains they had made. They had fought so hard to end slavery, but now the political leaders in the Confederate states were trying to take away the liberties which had been won for the former slaves.

The Republicans took several steps to protect the civil rights of the African-Americans. They adopted the Fourteenth and Fifteenth Amendments, they created the Freedmen’s Bureau, and they wrote the Civil Rights Act of 1866.

Life in the postwar South was an up-and-down experience for the newly freed African-Americans. The immediate postwar year of 1865 and 1866 were grim, as the Democratic Party reasserted itself. The next decade was better, as the Republicans worked to guarantee civil rights during the Reconstruction Era.

When Reconstruction came to an end around 1877, many of the Republican leaders were forced out of the South, and the ex-slaves again experienced an erosion of their liberties, as Allan Millett and Peter Maslowski explain:

As solutions to these perplexing problems emerged during Reconstruction, southerners salvaged much that looked like victory from their apparent defeat. Former secessionists regained effective control over the former Confederate States and maintained unquestioned white supremacy. Furthermore, southerners soon took as much pride in the legend of the Lost Cause as northerners did in the fact of Appomattox. Ironically, even perversely, by 1877 both North and South could proclaim success. How and why the North lost so many of the fruits of victory is a complex story in which the Army played a central role.

Although the war had ended with surrender of the Confederate military forces at Appomattox, the North found it necessary to keep a substantial military presence in the South, because groups of former Confederate soldiers terrorized the freed Blacks using guerilla-style tactics.

The Republicans in Congress authorized the Army to keep troops in the South as one of several measures necessary to protect the lives, properties, and freedoms of the former slaves.

A System Designed to Undermine Slavery: The Electoral College

When the United States began, there was a flurry of events within a few years: In 1775, the American Revolution began when the war broke out at Lexington and Concord; in 1776, the country was created by the Declaration of Independence; in 1777, a provisional government was designed under The Articles of Confederation, and those articles went into effect in 1781; the war ended in 1781; the treaty officially ending the war was signed in 1783; finally, the Constitution was written in 1787, and by 1790, all thirteen original states had ratified it.

It was during these years that the “thirteen colonies” became the “thirteen states.”

The writing of the U.S. constitution was a group effort. Approximately 55 delegates from the thirteen colonies gathered in Philadelphia from May to September in 1787. A broad spectrum of different political philosophies was represented in the intense exchanges of views. They debated and discussed the various details of a national government: one of the most complex political projects ever undertaken.

One of the many topics considered was the process by which the new country would choose its presidents.

The simple and obvious choice of direct popular election was quickly rejected and had few supporters. Such a system would mean that the votes of individuals who lived in smaller states would have little or no impact on selecting presidents. A candidate would need to win only a few of the larger states — far less than half of the states — in order to win the election.

If not a direct election, then how? One proposal was to let either the House of Representatives, or the Senate, or both elect the president. Another proposal was to let the thirteen state legislatures choose the president, as historian Sean Wilentz writes:

How, then, would the president be elected, if not directly by the people at large? Some delegates had proposed that Congress have the privilege, a serious proposal that died out of concern the executive branch would be too subservient to the legislative. Other delegates floated making the state governors the electors. Still others favored the state legislatures.

The method finally chosen, and the method which has been in effect for over 230 years, is the famous Electoral College.

Why was this process chosen? What were its real or perceived benefits?

One advantage of the Electoral College is that the formula bridged the gap between the large states and the small states, as Wilentz reports:

Instead of election by direct popular vote, each state would name electors (chosen however each state legislature approved), who would actually do the electing. The number of each state’s electoral votes would be the same as its combined representation in the House and the Senate.

By including the number of senators, two from each state, the formula leaned to making the apportionment fairer to the smaller states. Including the number of House members leaned in favor of the larger states.

Although the Electoral College was a step toward justice, ensuring that all thirteen states would have a meaningful role in selecting the president, not everyone was happy with the idea. Slave owners opposed the Electoral College.

In the initial vote over having electors select the president, the only states voting “nay” were North Carolina, South Carolina and Georgia — the three most ardently proslavery states in the convention.

Why did the pro-slavery states oppose the Electoral College? At first, some people thought that the Electoral College would actually promote slavery, because the slave-owning states had more representatives in Congress. But upon closer examination, it was clear that the Electoral College would ultimately undermine slavery.

Sean Wilentz continues:

When it first took shape at the convention, the Electoral College would not have significantly helped the slaveowning states. Under the initial apportionment of the House approved by the framers, the slaveholding states would have held 39 out of 92 electoral votes, or about 42 percent. Based on the 1790 census, about 41 percent of the nation’s total white population lived in those same states, a minuscule difference. Moreover, the convention did not arrive at the formula of combining each state’s House and Senate numbers until very late in its proceedings, and there is no evidence to suggest that slavery had anything to do with it.

Here’s where it gets complicated: some media reports alleged “that the slaveholding states” had “extra electoral votes” and “unfairly handed Thomas Jefferson the presidency in 1800-01.” But such reports “ignore anti-Jefferson manipulation of the electoral vote in heavily pro-Jefferson Pennsylvania that offset the Southerners’ electoral advantage. Take away that manipulation, and Jefferson would have won with or without the extra Southern votes.”

Whether or not the machinations of the election of 1800 are understood in their intricate detail, it became clear that the Electoral College favored the abolitionist cause. The fears of the slaveholders were realized: the Electoral College supported justice and supported the end of slavery.

The Electoral College helped anti-slavery President John Quincy Adams obtain the presidency. For this reason, pro-slavery President Andrew Jackson bitterly fought against the Electoral College.

The early president most helped by the Constitution’s rejection of direct popular election was John Quincy Adams, later an antislavery hero, who won the White House in 1824-25 despite losing both the popular and electoral votes to Andrew Jackson. (The House decided that election.) As president, the slaveholder Jackson became one of American history’s most prominent critics of the Electoral College, which he blasted for disallowing the people “to express their own will.” The Electoral College system made no difference in deciding the presidency during the 36 years before the Civil War.

While the Electoral College was an obstacle to the rabidly pro-slavery Andrew Jackson, the Electoral College proved a congenial route for Abraham Lincoln and Barack Obama.