The Depression of 1873

The works were well advanced when the financial panic of September, 1873, came upon us.

Continuing The Age of Steel Begins,
our selection from Autobiography by Andrew Carnegie published in 1920. The selection is presented in five easy 5-minute installments. For works benefiting from the latest research see the “More information” section at the bottom of these pages.

Previously in The Age of Steel Begins.

Time: 1872
Place: Braddock, Pennsylvania

We did so that day, and the next morning Mr. Coleman was at work trying to secure the property. Mr. McKinney, the owner, had a high idea of the value of his farm. What we had expected to purchase for five or six hundred dollars an acre cost us two thousand. But since then we have been compelled to add to our original purchase at a cost of five thousand dollars per acre.

There, on the very field of Braddock’s defeat, we began the erection of our steel-rail mills. In excavating for the foundations many relics of the battle were found — bayonets, swords, and the like. It was there that the then provost of Dunfermline, Sir Arthur Halkett, and his son were slain. How did they come to be there will very naturally be asked. It must not be forgotten that, in those days, the provosts of the cities of Britain were members of the aristocracy — the great men of the district who condescended to enjoy the honor of the position without performing the duties. No one in trade was considered good enough for the provostship. We have remnants of this aristocratic notion throughout Britain to-day. There is scarcely any life assurance or railway company, or in some cases manufacturing company but must have at its head, to enjoy the honors of the presidency, some titled person totally ignorant of the duties of the position. So it was that Sir Arthur Halkett, as a gentleman, was Provost of Dunfermline, but by calling he followed the profession of arms and was killed on this spot. It was a coincidence that what had been the field of death to two native-born citizens of Dunfermline should be turned into an industrial hive by two others.

Another curious fact has recently been discovered. Mr. John Morley’s address, in 1904 on Founder’s Day at the Carnegie Institute, Pittsburgh, referred to the capture of Fort Duquesne by General Forbes and his writing Prime Minister Pitt that he had rechristened it “Pittsburgh” for him. This General Forbes was then Laird of Pittencrieff and was born in the Glen which I purchased in 1902 and presented to Dunfermline for a public park. So that two Dunfermline men have been Lairds of Pittencrieff whose chief work was in Pittsburgh. One named Pittsburgh and the other labored for its development.

In naming the steel mills as we did the desire was to honor my friend Edgar Thomson, but when I asked permission to use his name his reply was significant. He said that as far as American steel rails were concerned, he did not feel that he wished to connect his name with them, for they had proved to be far from creditable. Uncertainty was, of course, inseparable from the experimental stage; but, when I assured him that it was now possible to make steel rails in America as good in every particular as the foreign article, and that we intended to obtain for our rails the reputation enjoyed by the Keystone bridges and the Kloman axles, he consented.

He was very anxious to have us purchase land upon the Pennsylvania Railroad, as his first thought was always for that company. This would have given the Pennsylvania a monopoly of our traffic. When he visited Pittsburgh a few months later and Mr. Robert Pitcairn, my successor as superintendent of the Pittsburgh Division of the Pennsylvania, pointed out to him the situation of the new works at Braddock’s Station, which gave us not only a connection with his own line, but also with the rival Baltimore and Ohio line, and with a rival in one respect greater than either — the Ohio River — he said, with a twinkle of his eye to Robert, as Robert told me:

“Andy should have located his works a few miles farther east.” But Mr. Thomson knew the good and sufficient reasons which determined the selection of the unrivaled site.

The works were well advanced when the financial panic of September, 1873, came upon us. I then entered upon the most anxious period of my business life. All was going well when one morning in our summer cottage, in the Allegheny Mountains at Cresson, a telegram came announcing the failure of Jay Cooke & Co. Almost every hour after brought news of some fresh disaster. House after house failed. The question every morning was which would go next. Every failure depleted the resources of other concerns. Loss after loss ensued, until a total paralysis of business set in. Every weak spot was discovered and houses that otherwise would have been strong were borne down largely because our country lacked a proper banking system.

We had not much reason to be anxious about our debts. Not what we had to pay of our own debts could give us much trouble, but rather what we might have to pay for our debtors. It was not our bills payable but our bills receivable which required attention, for we soon had to begin meeting both. Even our own banks had to beg us not to draw upon our balances. One incident will shed some light upon the currency situation. One of our pay-days was approaching. One hundred thousand dollars in small notes were absolutely necessary, and to obtain these we paid a premium of twenty-four hundred dollars in New York and had them expressed to Pittsburgh. It was impossible to borrow money, even upon the best collaterals; but by selling securities, which I had in reserve, considerable sums were realized—the company undertaking to replace them later.

It happened that some of the railway companies whose lines centered in Pittsburgh owed us large sums for material furnished — the Fort Wayne Road being the largest debtor. I remember calling upon Mr. Thaw, the vice-president of the Fort Wayne, and telling him we must have our money. He replied:

“You ought to have your money, but we are not paying anything these days that is not protestable.”

“Very good,” I said, “your freight bills are in that category and we shall follow your excellent example. Now I am going to order that we do not pay you one dollar for freight.”

“Well, if you do that,” he said, “we will stop your freight.”

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