Aug. 10 (Bloomberg) -- Andrew Carnegie, who died 93 years ago tomorrow, remains a polarizing figure. He has been labeled a great industrialist by some, a robber baron by others. Some argue that his impoverished childhood and work in a cotton mill enhanced his sympathy for workers, while others contend the conditions in his steel mills were inhumane.
Even his unparalleled philanthropy -- which continues to shape the American educational and cultural worlds to a remarkable degree -- has sparked its share of criticism.
After immigrating to the U.S. from Scotland at age 12, Carnegie worked a series of low-wage jobs until landing a position as personal assistant and secretary to Thomas A. Scott, superintendent of the Pittsburgh division of the Pennsylvania Railroad.
Scott, along with Pennsylvania Railroad President J. Edgar Thomson, taught Carnegie several valuable investing lessons. Among the most significant was how to exploit inside information whenever possible, which was legal at the time. Carnegie’s first investment was for 10 shares in Adams Express, to which the Pennsylvania Railroad had recently given an exclusive contract for rail use. Carnegie rose through the ranks and eventually became superintendent of the railroad’s western division.
He left in 1865 to focus on his own enterprises, primarily in the steel business. His success in that industry stemmed largely from innovations he pioneered, including a new steel production process called Bessemer conversion and a business method known as vertical integration, whereby his parent company owned the source of raw materials, the method of production and the means of distribution.
‘Gospel of Wealth’
In the late 19th century, the U.S. was embroiled in a series of labor disputes over wages, hours and working conditions. From 1881 to 1900, almost 3 million workers were involved in roughly 12,000 strikes and lockouts nationwide.
Carnegie portrayed himself as a progressive employer who could pave the way toward labor harmony on a national scale. He published a series of essays advocating for arbitration over strikes and lockouts and declared his support for unions.
“The right of the working-men to combine and to form trades-unions is no less sacred than the right of the manufacturer to enter into associations and conferences with his fellows,” Carnegie wrote in his 1889 essay “The Gospel of Wealth.”
His words, however, often clashed with his actions. One of the period’s most infamous labor confrontations occurred at Carnegie’s Homestead Steel Works. The strike and lockout lasted about six months and resulted in the death of nine workers and three Pinkerton investigators.
At 65, Carnegie sold Carnegie Steel and many of his other enterprises to J.P. Morgan for $480 million, netting $225,639,000 (about $6.5 billion today) for himself. The transaction created U.S. Steel, the first billion-dollar corporation, a behemoth that accounted for 7 percent of the country’s economic output and had twice the capital stock of all U.S. national banks combined.
According to Martyn Evans, the chief executive of the Carnegie U.K. Trust, Carnegie’s deal with Morgan would eventually make him the world’s richest man -- significantly wealthier than anyone alive today. Carnegie “would be richer than the top six richest people in the world at the moment,” Evans says. “And he chose to give that away.”
Before his death in 1919, Carnegie donated $350 million to hundreds of organizations and individuals around the world. He funded universities, donated $60 million to establish more than 2,800 libraries and established pensions for professors and the workers in his mills. He poured more than $25 million into peace efforts and demonstrated his love for music by constructing New York’s Carnegie Hall and donating more than 7,000 organs to churches.
Still, not everyone agreed with the way he distributed his wealth. Contemporary articles and cartoons called into question his focus on higher education, which at the time was considered a luxury of the rich, as well as the extent of his international giving.
Puck magazine published a satirical cartoon in 1901 criticizing his founding of the Carnegie Trust for the Universities of Scotland. Featuring Carnegie and Charles M. Schwab, the president of Carnegie Steel, the caption reads: “This is the school most people must go to, and the one that has always turned out the biggest men. That other school is for the few and is already turning out too many doctors, ministers, lawyers and clerks. Don’t you think we ought to improve conditions in our school rather than in that other one?”
According to Carnegie biographer Peter Krass, the grand scale of Carnegie’s philanthropy also frightened many people, who thought it was anti-democratic.
“There was a fear within the proletarian ranks that it amounted to social control: Carnegie and others like him were forcing their ideas and values on the masses in an attempt to control their thoughts and actions, to control their behavior by instituting strict conditions for how their far-reaching benefactions could be used,” Krass wrote.
Despite the divergence of opinion about Carnegie’s methods, the scale of his charity remains unrivaled. According to Anthony Marx, the president of the New York Public Library -- which was founded with a gift from Carnegie -- his legacy of giving is without equal, even compared with today’s most generous philanthropists.
“Andrew Carnegie was, as far as I can tell, the greatest philanthropist in history,” Marx says. “The New York Public Library system was created by a gift of $5.2 million, which in today’s dollars is equivalent to $2.7 billion.”
Ultimately, perhaps Carnegie’s greatest achievement was that he lived up to his own philosophy of distributing wealth within one’s lifetime. As he put it, “He who dies rich, dies disgraced.”
This philosophy has inspired today’s most generous philanthropists, notably Warren Buffett and Bill and Melinda Gates, who in 2010 initiated the Giving Pledge to encourage billionaires to donate half their wealth. In a nod to Carnegie, Buffett described the letters submitted by the initial 81 signers of the pledge as the “81 Gospels of Wealth.”
(Kristin Aguilera is the deputy director of the Museum of American Finance and the editor of Financial History magazine. “Andrew Carnegie: Forging Philanthropy” will be on view at the museum through October. The opinions expressed are her own.)