Some Aspects of the Tariff Question

Taussig, Frank William
(1859-1940)
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1915
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Cambridge, MA: Harvard University Press
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1915
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Part III
IRON AND STEEL


Part III, Chapter IX

A Survey of Growth

III.IX.1

The present Part will consider the iron and steel industry, its extraordinary advance since 1870, and the influence of the tariff on that growth. No phase of the country's economic development shows changes so striking. None raises questions more difficult to answer concerning the effects of protective duties. To understand the complexity of the factors which have been at work, and the nature of the special problems that arise, a survey must first be made of the growth of the industry and of the various influences which have affected it.

III.IX.2

In 1870 Great Britain was still the world's commanding producer of iron and steel. Notwithstanding half a century or more of almost continuous protection, the United States held but a distant second place. The output of pig-iron in the old country in 1870 was very nearly six millions of tons; that in the new country was but little over a million and a half. But, as the appended figures show,*1 the United States gained rapidly and surely on its rival. During each of the three decades from 1860 to 1890, the annual production of American pig-iron doubled. The figure for 1870 was twice that of 1860; 1880 doubled 1870; and 1890 again doubled 1880. The British output increased considerably during the same period, but could not meet the pace of its astounding rival. By 1890 the United States passed Great Britain and established her position as the leading iron making country of the world. In the decade from 1890 to 1900 the United States failed to maintain the remarkable geometric progression; yet the output of 1900 was again doubled in 1910. Germany alone showed an advance at all comparable; Great Britain did no more than maintain a steady plodding pace. In 1910 the United States production of pig-iron exceeded twenty-seven million of tons, a total larger than that of Great Britain and Germany combined, and nearly twenty times as large as the American product of forty years previous. If, as the extreme protectionists contend, the growth of domestic industry is in itself proof of the success of their policy, a degree of success was attained in this case that could admit of no cavil.

III.IX.3

This enormous increase, however, was by no means evenly distributed over the United States. Within the country a revolution took place, which was part and parcel of the changed relation to other countries, and which must be followed before the new situation can be understood.

III.IX.4

The first great impulse to the production of crude iron on a large scale came in the United States with the successful use of anthracite coal as fuel. During the twenty years preceding the civil war (1840-60) the site of the industry and its growth were governed by this fuel.*2 Hence eastern Pennsylvania was the main producing district. The supplies of ore near this region were smelted with its anthracite coal, and Philadelphia was the central market. Proximity to the seaboard made foreign competition easy, except so far as it was hampered by the tariff duties; and the very existence of the iron industry was felt to depend on the maintenance of protection. For some time after the close of the civil war this dominant position of anthracite iron was maintained. In 1872, when the systematic collection of detailed statistics began, out of a total production of 2,500,000 tons, one-half was smelted with anthracite coal, a third with bituminous coal or coke, the remainder with wood (charcoal). The use of soft coal, which had begun before 1860, became rapidly greater. Already in 1872 it was important; and from year to year it grew. In the periodic oscillations between activity and depression which mark the iron trade more than any other industry, anthracite iron shrank in the slack periods, and barely regained its own in the succeeding periods of expansion. Bituminous or coke iron, on the other hand, held its own during the hard times, and advanced by leaps and bounds with each revival of activity.*3 In 1875 for the first time its output exceeded that of the rival eastern fuel; after that date the huge advance in the iron product of the United States was dependent on the use of coke. Indeed, the use of anthracite alone began to shrink at a comparatively early date. It soon ceased to be used on any large scale as the sole fuel, coke being mixed with it for use in the blast-furnace. What is classed as "anthracite iron" is smelted with a mixture of coke and hard coal; and even with the aid of the coke, this means of reducing the ore came to be of less and less importance. Anthracite coal was completely displaced as an iron making fuel.*4

III.IX.5

This change is easy of explanation. It was the inevitable result of the greater plenty and effectiveness of coke; and it was powerfully promoted by the rapid development of the United States west of the Appalachian chain, and the nearness of the coke region to this growing market. Anthracite, at best, is an obdurate fuel. At the same time its strictly limited supply, and the cleanliness and freedom from smoke which make it an ideal domestic fuel, maintained its price at a comparatively high level. On the other hand, the vast supplies of bituminous coal and the feverish competition in opening coal lands and marketing their product caused an almost uninterrupted fall in its price. Coke proved, ton for ton, a better fuel than anthracite; and the supplies of bituminous coal available for coking proved almost limitless.

III.IX.6

Pittsburgh, whose destiny as a great iron center was perceived long ago, is situated in the heart of the region where coking coal is plentiful. To this point the iron industry converged, attracted first by cheap fuel, and soon by other geographical advantages of the region,—its easy access to the growing western country, and the added opportunities of securing super-abundant quantities of the best ore. Pennsylvania has remained the greatest iron-producing state in the Union; but since 1880 it has been western Pennsylvania, and no longer eastern, which has secured to the state its leading position. After 1890 this district alone yielded steadily forty per cent of the enormous iron product in the country; and it is here; and in the other western districts in which the same industrial forces have been at work, that we have to study the conditions on which the growth of the iron industry depended.


III.IX.7

The westward movement was determined not only by the geographical distribution of the fuel. It was no less affected by the distribution of the ore supply; and the effect of this in turn rested for many years on the revolution wrought in the iron trade by the Bessemer process.

III.IX.8

The first inventions which made iron plentiful were Cort's processes for puddling and rolling. Through three-quarters of the nineteenth century this was the mode in which the world got its supply of the metal in tough form, usable where heavy strain must come on it. The processes involved at once a considerable plant, complex machinery, and strenuous exertion by skilled and powerful laborers,—conditions which during this period promoted the supremacy of the British iron trade. In the decade 1860-70 the process devised by Sir Henry Bessemer, to which his name attaches, began a second revolution in the iron trade. That process involved a still larger plant and still more elaborate machinery; and it applied machinery more fully to the elimination and subsequent replacing of the carbon on which the toughness of the iron depends. By the new methods the production of mild steel—that is, tough iron—became possible on a vastly greater scale. Bessemer steel displaced puddled iron in most of its uses. Not only this: the cheap and abundant supply, besides filling needs previously existing, made possible a much greater use of iron and steel for plant, machinery, durable instruments of all sorts. One of the first applications of the method was to rails, where the elastic and impact-sustaining steel enabled railway engines and cars to be doubled and quadrupled in size, and to become more efficient in even greater ratio. Gradually and steadily, new and wider uses were found for the cheap steel. From great ships down to the smallest nails, almost every instrument became cheaper and better. Wood was supplanted by steel for a variety of uses, and the slow-growing and easily exhausted stores of timber were re-enforced by the well-nigh limitless deposits of iron ore in the earth's crust. A new domain in nature's forces was opened to man.

III.IX.9

But the Bessemer process depended for its availability on special kinds of ore and pig-iron,—such as are nearly free from certain admixtures and especially from phosphorus. Ores adapted to it hence became doubly valuable, and the accessible parts of the earth were scoured to find them. The deposits of Great Britain in Cumberland and Lancashire contained important supplies, yet not in quantity adequate to the new demand; and the Spanish fields of Bilboa, on the Bay of Biscay, became an indispensable supplement for the British iron masters. In the United States, also, some of the sources previously used in the region east of the Appalachian chain proved to be available,—such as the famed deposits, once unique in their ease of working, in the Cornwall hills of eastern Pennsylvania. But the greater part of the eastern ores were too highly charged with phosphorus, or for other reasons unavailable. Here, as in Great Britain, a distant source of supply was turned to. The Lake Superior iron region, long known to explorers and geologists, suddenly sprang into commanding place. Here were abundant and superabundant supplies of rich and properly constituted ore. These and the equally abundant coal of Pennsylvania were brought together, the iron made from them was converted into steel by the Bessemer process; and thus became possible the astounding growth in the production of iron, and steel in the United States.

III.IX.10

The iron mines of the Lake Superior region stretch in widely separated fields along the lake, from the middle of its southern shore to its farthest northwestern end. At the extreme eastern end is the Menominee iron field, usually described in connection with the other Lake Superior fields, yet differing from them in important respects. The ore of the Menominee district is easily mined; and it is easily shipped, finding an outlet by the port of Escanaba on Lake Michigan, and thus traversing a much shorter journey to its eastern markets than that from the Lake Superior mines proper. But it is usually of non-Bessemer quality, and hence played no considerable part in the most characteristic effects of the new developments. The great Bessemer ore fields of Lake Superior are four in number: in geographical order from east to west, the Marquette, the Gogebic, and the neighboring Vermilion and Mesabi. As it happens, the geographical order has been also, in the main, the order of exploitation. The easternmost, the Marquette, finding its outlet by the port of that name, was the first to be worked on a great scale. Even before the civil war, mining and smelting had begun; and, as the Bessemer process was more and more largely used, especially after 1873, it was exploited on a larger and larger scale. Here began the digging of Bessemer ore on a great scale, and its transportation to a great distance. After a considerable interval the second field, the Gogebic, began to be worked, in 1884. Lying some two hundred miles further west, along the boundary line between Wisconsin and Michigan, and finding its outlet by Ashland, on the southern shore of Lake Superior, here was found perhaps the richest and purest Bessemer ore. At about the same time, in 1884, began the development of the most distant of the fields, the Vermilion, lying to the north of the extreme end of Lake Superior, in the state of Minnesota, close to the Canada frontier. Here, too, were great stores of rich Bessemer ore, shipped by the port of Two Harbors, on the northern shore of the lake.

III.IX.11

In all these fields the ore was secured by what we commonly think of as "mining,"—by digging far into the earth, and bringing the material up from a greater or less depth. But the latest and now the most important of the fields gave opportunity for the simplest and cheapest form of mining. Great bodies of ore are lying close under the ground, and, when once the surface glacial drift has been removed, are obtainable by simple digging and shovelling, as from a clay pit.*5 Along the Mesabi*6 range of hills, lying about one hundred miles northwest of the end of Lake Superior, distant not many miles from the Vermilion range, vast tracts of rich iron ore, finely comminuted and easily worked, lie close to the surface. Here a new source of supply was added, offering unique opportunities for exploitation on a great scale. These opportunities were availed of with astounding quickness. The Mesabi field at once sprang into the front rank among the Lake Superior fields, and, indeed, among all the iron ore fields of the world. In 1890 the region was a trackless waste. In 1892 it was opened by railway. Towns sprang up, huge steam-shovels attacked the precious ore, and long trains carried it to the newly constructed docks at the port of Duluth. Even during the depression that followed the crisis of 1893 the output from this field mounted year by year. In 1893, virtually the first year of operation, 600,000 tons were shipped from it; in 1894, thrice that amount; and in 1895 it became, what it has since remained, the most productive of the iron mining districts. A little less than half of the ore is of Bessemer grade. Its physical constitution, moreover, is such that, for advantageous use in the furnace, other ore needs to be mixed with it. Were it all of Bessemer quality, and in the best form, the other fields might have been entirely displaced. With the limitations in the quality of the Mesabi ore, the other fields still found themselves able to hold their own in the market, though their supremacy was ended by the favored rival.

III.IX.12

For many years the Lake Superior mines have been the main sources of supply for the iron ore of the American iron industry. A steadily increasing share of a steadily increasing total has come from them. In 1910 the total iron ore product of the country exceeded 50 million tons; and over four-fifths of this enormous mass came from the Lake Superior region.*7

III.IX.13

In this brief description of the Lake Superior iron region, reference has been made to the ports by which the ore is shipped,—Escanaba, Marquette, Ashland, Duluth, Two Harbors. To each of these the ore must be carried by rail from the mines,—sometimes a few miles, sometimes, as with a large part of the Minnesota supplies, a hundred miles and more. And, with this first movement, only the beginning is made on a long journey. From the shipping port the ore is carried eastward by water to meet the coal. Some goes down Lake Michigan to Chicago and Gary, where it meets the Pennsylvania coal about half-way. Some goes farther, through Lakes Huron and Erie, and meets the coal at Toledo, Ashtabula, Cleveland, and other ports on Lake Erie. The largest part is unloaded from the vessels at lake ports, and carried by rail to the heart of the Pittsburgh coal district, there to be smelted by the coal on its own ground. No small amount goes even beyond,—to the eastward in Pennsylvania, beyond the Pittsburgh district, even into New Jersey and New York, almost to the seaboard itself. Hence the cities of Erie and Buffalo have become important ore-receiving ports on Lake Erie; the ore, if not smelted there, going thence by rail on its journey to the smelter. This last and farthest invasion of distant regions by the Lake Superior ore was promoted for many years by the import duty on the competing foreign ore which sought to find an entrance by the Atlantic seaboard,—an aspect of the iron trade of which more will be said presently.

III.IX.14

The iron producing region which depends on the Lake Superior ores thus stretches over a wide district, the extreme ends being separated more than a thousand miles. Close by the iron mines are a number of charcoal-using furnaces in Wisconsin and Michigan. The still unexhausted forests of these states supply this fuel in abundance; and charcoal iron, though long supplanted for most uses by its coke-smelted rival, has qualities which enable a limited supply to find a market, even at a relatively high price. Next in order come Chicago (South Chicago) and its suburb (this it virtually is) the new-created city of Gary; with which must be classed some neighboring cities, such as Milwaukee in Wisconsin and Joliet in Illinois. It is one of the surprises of American industry that iron manufacturing on a huge scale should be undertaken at such points, distant alike from ore and from coal. The coke is moved hundreds of miles by rail from Pennsylvania, and meets the ore which has travelled no less a distance from Lake Superior. Ease of access to the western market gives these sites an advantage, or at least goes to offset the disadvantage of the longer railway haul of the fuel. Other iron producing points of the same sort are scattered along Lake Erie. At each of the ports of Toledo, Lorain, Ashtabula, Erie, Buffalo, especially Cleveland, ore is smelted, and iron and steel making is carried on. But the coal region itself—Pittsburgh and its environs—remains the heart and center of the iron industry. Hither most of the ore is carried; and here the operations of smelting, converting into steel, fashioning the steel into rails, bridges, plates, wire, nails, structural forms for building, are performed on the greatest scale. For some years the natural gas of this region added to its advantages and aided in its exceptionally rapid growth. But each supply of gas exhausted itself before long, and new discoveries did not maintain the inflowing volume at its first level. It was the abundant and excellent coal which formed the sure basis of the manufacturing industries, and the permanent foundation of iron and steel making.

III.IX.15

Whether the ore goes to the coal or the coal meets the ore halfway, one or both must travel a long journey, by land as well as by water. One or both must be laden and unladen several times. A carriage of 800, 900, over 1,000 miles must be achieved, with two separate hauls by rail. Fifty years ago, even thirty years ago, it would have seemed impossible to accomplish this on a great scale and with great cheapness. The geographical conditions on which a large iron industry must rest were supposed by Jevons in 1866 to be the contiguity of iron and coal.*8 But here are supplies of the two minerals separated by a thousand miles of land and water, and combined for iron making on the largest scale known in the world's history. One of the most sagacious of American students of economics, Albert Gallatin, early predicted that the coal area of western Pennsylvania would become the foundation of a great iron industry, and that only with its development would the American iron manufacture attain a large independent growth.*9 But he could not dream that his prophecy would be fulfilled by the utilization of ores distant fifteen hundred miles from the seaboard, transported from a region which was in his day, and remained for half a century after his day, an unexplored wilderness.

III.IX.16

For the iron trade the most important section of the Pittsburgh coal district is the famed Connellsville coke region, lying some fifty miles south of Pittsburgh, along the banks of the Youghiogheny river. Here is a level and uniform outcrop of the best coking coal; and from this has come most of the coke used in smelting Lake Superior ores, and, indeed, the greater part of that used in the United States. Considerable supplies have come also from other near-by regions in Pennsylvania and West Virginia; and Alabama has made from her own coal the coke for smelting her iron. But the Connellsville coke is by far the most important as regards both quantity and quality, and it alone has steadily furnished more than half of the total. Whether used near the mines, in the Pittsburgh district, or carried hundreds of miles to meet the ore, this unexampled supply of the best fuel has been the basis of the whole iron and steel manufacture.*10

III.IX.17

The price of coke to the iron masters went down during the period here under consideration (1870-1910), partly because of cheaper production at the mines, partly because of cheaper carriage from mines to works. In the earlier years (about 1870) coke at the ovens was sold for $3.00 a ton. Its price, while fluctuating greatly, was usually below $2.00 in later years, even falling as low as $1.00 in periods of depression. On the whole, fuel was provided for the American iron master at prices less than those paid by his rivals in any part of the world; while low rates of transportation enabled it to be carried to the furnaces without sacrifice of this cardinal advantage.

III.IX.18

The history of the American iron trade after 1870 thus came to be in no small part a history of transportation. The cheap carriage of the ore and coal was the indispensable condition of the smelting of the one by the other.*11 Clearly, this factor was not peculiar to the iron industry. The perfecting of transportation has been almost the most remarkable of the mechanical triumphs of the United States. Great as have been the evils of our railway methods, disheartening as have been some of the results of unfettered competition, the efficiency of the railways has been brought to a point not approached elsewhere, largely in consequence of that very competition whose ill effects have been so often and so justly dwelt on. In the carriage of iron ore and of coal the methods of railway transportation which had been developed under the stress of eager competition were utilized to the utmost; and the same was true of the transfer from rail to ship and from ship to rail again, of the carriage in the ship itself, and of the handling of accumulated piles of the two materials. The ore is loaded on cars at the mines by mechanical appliances. At the Mesabi mines the very steam-shovel that digs the ore from the ground deposits it in the adjacent car. At the lake, high ore-docks protrude hundreds of yards into the water. On top of them run the trains, the ore dropping by gravity from openings in the car-bottoms into the pockets of the docks. Thence it drops again through long ducts into the waiting vessels, ranged below alongside the dock. At every step direct manual labor is avoided, and machines and machine-like devices enable huge quantities of ore to be moved at a cost astonishingly low.*12 The vessels themselves, constructed for the service, carry the maximum of cargo for the minimum of expense; while the machinery for rapid loading and unloading reduces to the shortest the non-earning time of lying at the docks. At the other end of the water carriage, especially on Lake Erie, similar highly developed mechanical appliances transfer from boat to railway car again, or, at will, to the piles where stocks are accumulated for the winter months of closed navigation. At either end the railway has been raised to the maximum of efficiency for the rapid and economical carriage of bulky freight. What has been done for grain, for cotton, for lumber, for all the great staples, has been done here also, and here perhaps more effectively than anywhere else: the plant has been made larger and stronger, the paying weight increased in proportion to the dead weight, the ton-mile expense lessened by heavier rails, larger engines, longer trains, and easier grades, the mechanism for loading, unloading, transhipping perfected to the last degree, or to what seems the last degree until yet another stage towards perfection is invented. And evidently here, as elsewhere, the process has been powerfully promoted by unhampered trade over a vast territory, and the consequent certainty that costly apparatus for lengthened transportation will never be shorn of its effectiveness by a restriction in the distant market.

III.IX.19

Still another factor has been at work in the iron trade, as in other great industries,—the march of production to a greater and greater scale, and the combination of connected industries into great single-managed systems. The iron trade showed more markedly than any of the great industries the manifestations of the new conditions. Both vertical and horizontal combination proceeded apace.

III.IX.20

Of these two forms of combination, the former—single management of successive stages in production, the "integration" of industry,—developed first, and contributed most surely and most largely to the effectiveness of production. Iron mines, coal mines, coke ovens, railways, steamers, docks, smelting works, converting works, rolling mills, steel works, machine shops,—these were combined into imposing complexes. The great iron and steel companies operated iron mines on Lake Superior, coal mines and coke establishments in Pennsylvania, docks and railways, as well as iron and steel works proper. The largest of them, the Carnegie Company, built as early as 1897 a railway of its own, specially equipped for the massive and cheap carriage of ore and fuel, from the shore of Lake Erie to the Pittsburgh coal district. At its terminus on Lake Erie (Conneaut) a new harbor and a new city were created. The economy in production from such widely ramifying organizations is not merely or chiefly in dispensing with the services and saving the gains of so many independent middlemen: it arises mainly from consistent planning of every stage, the nice intercalation of operations, the sweeping introduction from end to end of expensive and rapid-working machinery, continuously supplied under homogeneous administration with the huge quantities of material which alone make possible the effective and economical utilization of the great plant.

III.IX.21

The horizontal form of combination,—what has come to be known as the trust,—appeared later; and the extent of its contribution to industrial effectiveness is not so certain. The extraordinary burst of consolidation and combination at the opening of the present century is familiar. The most momentous and conspicuous single episode was the formation of the United States Steel Corporation in 1901. Sundry other horizontal combinations in the iron industry had preceded it, such as the steel and wire combination, and others for steel hoop and tin plate. The giant Steel Corporation gathered them into one fold. Not that the whole of the iron and steel trade was absorbed: perhaps one-half of the output of the crude materials (coal, ore, and pig-iron) came under its control, with a larger share for some of the finished products. A considerable number of enterprises remained independent. Each of these was on a large scale, compared with the units of the previous generation. Each carried on vertical combination, operating its own mines of ore and coal, and carrying the iron to the stage of steel and its semi-finished products. The Steel Corporation itself carried this form of industrial organization to a greater degree than any, more particularly in its conduct of transportation by land and water. It has never been doubted that well-managed vertical combination conduced to efficiency in the iron trade. Whether the other form,—single management of all the establishments doing the like things,—conduced also to efficiency, is more open to question. The motive for it was beyond question double: in part an expectation that consolidation would lead to economies; but, no less, a wish to put an end to competition, to secure gains from monopoly or quasi-monopoly, or at all events to avoid the paring of profits under competition. That the huge iron and steel enterprises produce more cheaply than their smaller predecessors is beyond question; but how far that cheapening has been further promoted by the combination of parallel and competing enterprises is among the economic problems still unsolved.*13

III.IX.22

While the Lake Superior ores, utilized under the conditions just described, constituted by far the most important source of supply for the iron industry, a large contribution came from another source, also,—from the southern states.

III.IX.23

In the region where the states of Tennessee, Alabama, and Georgia adjoin, the conditions once thought indispensable for a flourishing iron industry exist in perfection. Here are great deposits of ore, easy of working; and close by them great deposits of coking coal, no less easily worked. Before the civil war, these natural advantages were not utilized: the régime of slavery and the lack of means of transportation prevented any resort to them. But with the quickening of the industrial life of the south when once the civil war and reconstruction were passed, the mineral resources of this region were developed on a rapidly enlarging scale. Alabama, where the best deposits of coal occur, became a great iron producing state: here again, though for a less distance and on a smaller scale, the ore made its journey to the coal. The rate of growth was most rapid between 1880 and 1890: the pig-iron output of Alabama rose from 69,000 tons in 1880 to 915,000 in 1890. In 1900, it was 1,200,000 tons; in 1910, near 2,000,000 tons. The large supply of labor at low wages contributed to the easy and profitable utilization of this source of supply. The free negro turned miner, and proved not only a docile laborer but also,—paid, as miners are, according to the tonnage brought to the pit's mouth,—on the whole an efficient one.

III.IX.24

The southern ore contains phosphorus in too large amounts to make it available for the Bessemer process; and this for some time gave it a place somewhat apart in the iron industry of the country. The iron made from it did not compete with that from the Lake Superior ore, and was used chiefly for general foundry purposes. Marketed at a very low price, the increasing supplies made their way to places farther and farther removed. Pittsburgh itself soon used Alabama iron for foundry purposes; the western states and the eastern alike were supplied; in New England it displaced Scotch pig, previously imported in considerable quantity.

III.IX.25

With the opening of the twentieth century, the technical development of the industry took in some respects a new direction; but the changes were of no considerable significance for the tariff problems. Bessemer ore and Bessemer steel, which had dominated before 1900, were in part supplanted. For some time (since about 1880) Germany had been making steel from phosphoric ores by the basic (Thomas-Gilchrist) process; indeed, that process had influenced the growth of the German iron industry as profoundly as did the Bessemer process the growth in the United States. Bessemer ores, though the deposits were by no means exhausted in the United States, became less plentiful, and hence somewhat higher in price; a growing proportion of steel came to be made from basic ore and iron. In addition, a steadily increasing amount of steel was made by the open-hearth process, which is available both for Bessemer and non-Bessemer iron. Open-hearth steel is supposed to be tougher than Bessemer steel, and has been in demand for rails and other purposes. By 1910 the output of open-hearth steel (preponderantly from basic iron) exceeded that of Bessemer steel. One consequence was a facilitation of competition, since control of the Bessemer ores, so greatly prized before, was of lessened importance. These changes, however, had no appreciable effect on the geographical distribution of the industry or on its relation to possible imports. Lake ore and Pittsburgh iron remained the dominant factors, and the industry continued to be unaffected by foreign competition both because of its technical strength and because its main seats were far inland.

III.IX.26

The outcome of the great changes in the geographical distribution of the iron industry is shown in the following tabular statement: —

PRODUCTION OF PIG-IRON IN THE UNITED STATES*14
(In thousands of gross tons: 1,217 = 1,217,000 tons)
1872 1880 1890 1900 1910

Eastern District (eastern Pennsylvania, New York, New Jersey) 1,217 1,610 2,342 1,903 2,868*15
Western Pennsylvania alone 387 772 2,561 4,922 10,621
Central District (western Pennsylvania, Ohio, Indiana, Illinois) 849 1,502 4,517 8,756 20,301
Southern District (Alabama, Tennessee, Virginia, Maryland) 127 238 1,554 2,356 3,107
Total for United States 2,549 3,835 9,203 13,789 27,303

III.IX.27

In the eastern district proper the output barely held its own. The total production in 1910 was not greater than in 1872. On the other hand, the central district increased its production steadily and enormously, whether in western Pennsylvania itself or in the neighboring states of Ohio, Indiana, Illinois. This is the region where Lake Superior ore is smelted with Pittsburgh coal: in and about Pittsburgh itself, in the immediately adjacent parts of Ohio, and at the various lake cities where the ore meets the coal, Chicago, Cleveland, Toledo, and the rest. Almost as striking is the rate of growth in the southern district, of which Alabama is the most important state. While the total production here was far outweighed by that in the central district, it exceeded after the opening of the present century that of the eastern district.


III.IX.28

Another aspect of the subject appears in the labor situation. The power of the labor unions among the iron workers has been less in the United States than in Great Britain. The Amalgamated Association of Iron and Steel Workers had been in 1870-90 a powerful organization, modelled on the British unions and strong in its bargaining with the employers. But the Carnegie Company cut loose from it a decade before the formation of the Steel Corporation. The great Homestead strike of 1892, almost a pitched battle, resulted in the defeat of the Amalgamated Association. Shortly after the great consolidation, the Steel Corporation itself faced (in 1902) a strike from the Association. Again the union suffered a defeat. The Carnegie works had been put on a non-union basis after the Homestead strike; most of the other works of the Steel Corporation were similarly made non-union after the strike of 1902. The Amalgamated Association retained a hold in a few of the Steel Corporation's works, and in some independent establishments. But it was shorn of its former considerable power, and the course of the iron industry was little affected by trade union complications.

III.IX.29

In consequence the American iron and steel master was free to push on with new processes, to remodel and improve organization, to readjust his labor force. In this respect he had an advantage over his British rival. Whatever be one's sympathy with labor organizations, it is not to be denied that a well-entrenched union tends to oppose the introduction of labor saving devices. This attitude is the inevitable consequence of the dependence of laborers on hire by capitalist employers. The first effect of a new machine or a better rearrangement is to displace some laborers or to lower their pay. Moreover, the belief in "making work" is too deep-rooted to permit the installation of improved processes without strong even though silent opposition. The mere existence of a powerful union,—one not to be fought without heavy loss,—has a benumbing influence, checking the very consideration of radical changes and tending to keep industry in its established grooves. Such was and is the influence of the strong organization of the British iron workers (the engineers); it led to struggles and strikes, in which the union, though sometimes beaten, retained a strong position. The American iron makers, themselves men of overmastering temperament, and engaged in an industry where changes were rapid, shook loose from this sort of control. Beyond doubt, they were also induced to adopt a drastic non-union policy by another circumstance; infraction of discipline by the union men and their opposition to discharge of the insubordinate and incompetent. This phase of unionism has shown itself in the United States more than in other countries, the impulse to domination among the employers being matched by the same propensity among their employees. The most friendly observer of the trade-union movement in the American iron trade was compelled to confess the faults of the unionists in this regard.*16 All in all, the defeat of the union movement served to make the iron industry more free and more vigorous, so far as concerns the advance of productive power and the cheapening of the products.

III.IX.30

It need not be said that this by no means tells the whole story, or makes a conclusive case for the policy of the iron masters on unionism. The bargaining of the unorganized workmen with a powerful employer resulted in evil conditions, or at least delayed the abolition of evil conditions, more especially as regards the long hours of work. The twelve-hour day and the seven-day week—ugly blots on any industry—were more easily maintained than could have been the case if a strong union had been in the field. No doubt the much-attacked Steel Corporation was not the worst offender. As regards wages, hours, safety, sanitary conditions, it was not usually behind its competitors; more often it was in advance of them; but it set the example of trying to stamp out unionism, and so preventing the men from pressing their claims.

III.IX.31

Even more dubious in its social consequences was another phase of the labor situation,—the condition of the unskilled workers. The very great numbers of these employed in the iron industry were recruited almost exclusively from the newly arrived immigrants. The same is the case in the coal mines and at the coke ovens. Such nationalities as the Italians, the Bohemians, the so-called Huns and Polaks from the Slavonian parts of Austro-Hungary, supplied the men for heavy and dirty work. Needless to say, the iron industry was not peculiar in this regard. All manufacturing industries were profoundly affected by the abundant supply of unskilled laborers willing to work at comparatively low rates of pay.

III.IX.32

Nowhere was this influence of a cheap labor force more striking than in the fuel supply. The nature of the operations caused cheapness to be attained at the coal mines and coke ovens, partly indeed by machinery and organization, but largely by cheap labor. The mining of coal is mainly pick-and-shovel work, requiring little handicraft skill or trained intelligence; and this is still more true of the work at the coke ovens. The coal mines of the United States drew to themselves the lowest and poorest kinds of manual labor; except, indeed, where machines for cutting the coal proved applicable, and skilled and intelligent mechanics were consequently called on to work them. The miners in England seem to have maintained a better relative position. Their trade organization has been strong, the standard of living and of efficiency comparatively high. In the United States multitudes of newly arrived immigrants have been drawn to the mines, partly through deliberate arrangement by the employers, partly through the silent adjustment of supply to demand. There they have huddled,—inert, stolid, half-enslaved. The nationalities that have contributed of late years so heavily to our immigration have here found employment such as they could at once turn to. In times of activity their condition is passable. In the periods of depression which recur in the iron trade, the price of coke sinks, production is restricted, wages fall, and the barest living is all that the miners and coke workers can secure,—sometimes not even this. The American or Americanized laborers met a disheartening situation and tried in vain to stem the tide of falling wages and half-employment, with its attendant misery, strikes, bloodshed.

III.IX.33

So far as concerns the relation of domestic producers to foreign, the effect of this cheapness of unskilled labor was the same as if labor-saving devices had been introduced for cheapening the heavy work. Not a few mechanical devices were introduced, in the iron trade and elsewhere, for work of this kind, such as steam-shovels, and loading and unloading machinery for vessels. But an immense amount of brute muscular work remained. This would normally be dear in a country of high wages and free opportunities. In such a country one would not expect men to turn to it unless attracted by good pay; and to the employer, as has been already set forth, good pay always presents itself as an obstacle. It might be expected, therefore, that industries in which coarse manual labor is called for would be at a comparative disadvantage in the United States. But the anomalous labor conditions resulting from the influx of immigrants largely removed the employers' obstacle: the labor was and is cheap. Not that it has been as cheap, in terms of money, as in European countries. Humanitarian persons who are shocked by the low wages and evil conditions of our congested immigrant districts sometimes declare that these people are no more prosperous than at home. This is going too far: the fact that they continue to pour in by the hundred thousand, still more that those on the ground steadily send for their relatives and friends, proves that some gain is secured. But only a sort of half-way position is attained,—higher than the European, not so high as the normal American. Whether the well-being of the American people as a whole, or that of humanity as a whole, has been promoted by this social and industrial revolution, is a most intricate question, which need not here be considered. It suffices for the purposes of the present inquiry to point out that common labor has been cheap, measured by American standards, and that the employer needing much of it has not been compelled to bid very high. The result is the same for him, to repeat, as if he had devised effective machinery for doing the work and had in this way secured a comparative advantage.


Notes for this chapter


1.
The figures of production, at quinquennial intervals, are (in 1,000 tons of 2,240 lbs.):

Great Britain United States Germany
1860 .... .... 545
1865 .... .... 988
1870 5,963 1,665 1,391
1875 6,365 2,024 2,029
1880 7,749 3,835 2,729
1885 7,415 4,044 3,687
1890 7,904 9,203 4,658
1895 7,703 9,446 5,464
1900 8,960 13,789 8,384
1905 9,608 22,882 10,700
1910 10,012 27,304 14,556

2.
For an account of the industry during this period I refer to my Tariff History of the United States, pp. 123-125.
3.
During the earlier years, bituminous coal was much used in the blast-furnaces without being first coked. But soon this crude procedure was given up, and the coal was used in the form of coke.
4.
The production of pig-iron by fuel at quinquennial intervals is given below. By way of illustrating the trend over a long period, the year 1855 has been taken as the starting-point. The figures, as in the previous table, indicate thousands of gross tons:

PIG-IRON SMELTED WITH
Anthracite Bituminous Charcoal
1855 341 56 303
1860 464 109 248
1865 428 169 234
1870 830 508 326
1875 811 846 367
1880 1,614 1,741 480

Anthracite
alone
Anthracite
and Coke
1885 250 1,059 2,389 357
1890 249 1,937 6,388 628
1885 56 1,214 7,950 225
1900 40 1,677 11,727 384
1905 ... 1,674 20,965 352
1910 20 629 26,528 396

Charcoal iron has qualities that make it advantageous for certain uses, and hence it continues to be produced in small quantities.

5.
It should be noted that in the Marquette region, also, iron ore was secured at the first working and for many years thereafter by open cuts. But the extraction of ore on a great scale has proceeded by underground operations.
6.
Variously spelled: Mesabi, Mesaba, Messabi, Messaba.
7.
The United States Geological Survey, in its successive admirable Reports on the Mineral Resources of the United States, has followed the history of the iron fields of Lake Superior, as, indeed, of all the mineral resources of the country. In the issue for 1895-96 (forming vol. iii of the Seventeenth Annual Report of the Survey) a summary description is given, with convenient sketch maps showing the location of the several fields.

The relative importance of the fields, the order in which they were developed, and their relation to the iron ore production of the whole country, are shown by the following figures:

Iron Ore Production (in millions of gross tons)
1880 1890 1900 1910
Menominee .6 2.3 3.3 4.2
Marquette 1.4 3.0 3.5 4.4
Gogebic . . 2.8 2.9 4.3
Vermilion . . .9 1.6 1.2
Mesabi .. .. 7.8 29.2
Total Lake Superior 2.0 2.5 19.1 43.4
Total United States 7.1 7.6 27.6 51.2

8.
Jevons, The Coal Question, second edition, chap. xv. Jevons in that chapter looked for important changes in the United States, chiefly from the wider use of anthracite in iron making. The fact that "the Americans are, of all people in the world, the most forward in driving canals, river navigations, and railways," was noted by him as sure to affect the American iron trade; but even his keen imagination and wide knowledge could not foresee how much and in what directions this "driving" would operate.
9.
"A happy application of anthracite coal to the manufacture of iron, the discovery of new beds of bituminous coal, the erection of iron works in the vicinity of the most easterly beds now existing, and the improved means of transportation which may bring this at a reasonable rate to the sea-border, may hereafter enable the American iron master to compete in cheapness with the foreign rolled iron in the Atlantic district.... The ultimate reduction of the price of American to that of British rolled iron can only, and ultimately will, be accomplished in that western region which abounds with ore, and in which is found the most extensive formation of bituminous coal that has yet been discovered in any part of the globe, and this also lying so near the surface of the earth as to render the extraction of the mineral less expensive than anywhere else." Albert Gallatin, "Memorial to the Free Trade Convention" (1832), as reprinted in State Papers and Speeches on the Tariff, pp. 179, 180.
10.
The production of coke was (in tons of 2,000 lbs.)

United States Connellsville region
1880 3.3 millions 2.2 millions
1890 11.5 " 6.5 "
1900 20.5 " 10.4 "
1910 41.7 " 19.7 "

In the second column I have combined in a single figure the production of the older Connellsville region and that of the "lower district" which came to be of importance after 1900. See Mineral Resources of the United States, 1911, Part II, pp. 215, 256, 259.

11.
"Few people who have not actually run a blast-furnace realize what it means to fill the capacious maw of one of these monsters with raw material. A stack of 200 tons' daily capacity, running on 50 per cent ore, must have delivered to it each day something more than 400 tons of ore, 250 to 300 tons of coke, according to the character of the metal required, and over 100 tons of limestone,—say 900 tons of raw materials. Add the 200 tons of pig-iron shipped out, and we have a daily freight movement of 1,100 tons, taking no note of the disposition of the slag. This is 55 carloads of 20 tons each [A modern ore car will carry 50 to 60 tons; and coal cars have been introduced carrying 90 tons.—F. W. T.].... Starting up a furnace of ordinary capacity calls immediately for the labor, from first to last, of nearly a thousand men; for the use of at least a thousand railway cars, and many locomotives; for perhaps several steamers and vessels on the lakes." A. Brown. "The Outlook in the American Iron Industry," in the Engineering Magazine, October, 1899, p. 88.—By 1910, the daily capacity of a "modern" iron furnace had again been doubled, reaching 400 tons a day, and bringing a corresponding increase in the ore and fuel required.
12.
"Every extra handling means more cost.... Formerly it was necessary to trim the cargoes; and this had to be done by hand, and gave employment to a great many men at exceedingly high wages. The work, however, was killing while it lasted. Now trimming is in most cases done away with, because the immense size of the freighters renders them stable in any weather; and, if there is any great inequality in the trim of the boat, it is rectified by shifting the water ballast from one compartment to another." Peter White, The Mining Industry of Northern Michigan, in Publ. Mich. Pol. Sci. Assoc., iii, p. 153.
13.
Of the enterprises merged in the Steel Corporation, the two largest, before 1900, were the Carnegie Company, and the Federal Steel Company, the latter dominated by the firm of J. P. Morgan & Co. Both carried on vertical combination on a great scale,—mining the coal and ore, transporting them on railways and vessels of their own, and operating great iron and steel works. The Carnegie works centered about Pittsburgh, the Federal about Chicago. The American Steel & Wire Co. illustrated both vertical and horizontal combination. The same was the case with the so-called "Moore properties": the National Steel Company with its affiliations, the Sheet Steel, Tin Plate, and Steel Hoop companies. The Bridge (structural steel) and Tube companies had no raw-material supplies of their own, and so represented horizontal combination only.

The history of the great consolidation has often been told. The authoritative account is in the Report of the Commission of Corporations on the Steel Industry, Part I (1911). An excellent summary is in Berglund, The United States Steel Corporation, in Columbia University Studies (1907).

14.
In this table the figure for eastern Pennsylvania is for the iron smelted in the state with anthracite, or anthracite and coke mixed, while that for western Pennsylvania is for the bituminous (coke) iron. The separation by fuels, it is true, does not indicate with complete accuracy the geographical distribution. But the iron smelted in Pennsylvania east of the Appalachian chain was formerly smelted almost entirely with anthracite, and is still smelted mainly with a mixture of anthracite and coke; and, at all events, this was the only mode in which the statistics at hand made it possible to separate the eastern and western parts of Pennsylvania.

In the southern district, Virginia and Maryland are near the seaboard, and might be constituted a group apart from the other states there included. But the iron industry in them, as in the others, is of recent growth, and depends both for ore and fuel on different sources of supply from those of the northern seaboard region. By far the most important iron producing state in the southern district of the table is Alabama.

15.
The increase in this district is due entirely to the development of great steel plants in Buffalo, N. Y., using Lake ore and Pennsylvania coal, and therefore belonging industrially rather to the central district than to the eastern.
16.
See Fitch, The Steel Workers, pp. 102-103.

End of Notes


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