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Money Changes Everything

Jackson Lears is editor of Raritan and author, most recently, ofSomething for Nothing: Luck in America (Viking).

Andrew Carnegie

By David Nasaw

(Penguin Press, 878 pp., $35)

Mellon: An American Life

By David Cannadine

(Alfred A. Knopf, 779 pp., $35)


'You know, there are times when I think Karl Marx was on tosomething," an attorney friend of mine once remarked after handlingyet another eviction case for New Haven Legal Aid. In the trenchesof class warfare, one might be forgiven for occasionally growingimpatient with academic complaints about the crudities of thematerialist analysis of society. When the distribution of power isincreasingly divided between those who have capital and those whohave none, even "vulgar Marxism" can come to seem a useful tool ofinterpretation.

The very idea provokes derision--if not outright disbelief--in ourcontemporary public discourse. There are good historical reasons forthis. Though rumor has it that Marx himself insisted "Je ne suispas un marxiste," it has become nearly impossible to separate theman's thought from the crimes committed in his name. In commonparlance, Marxism is immediately--and correctly--associated withslave-labor camps, mass murder, and hopelessly inefficient commandeconomies. The collapse of the Soviet empire, in this view, markedthe death of Marxism as an intellectual tradition.

The problem with such a perspective is that it allows themillenarian vision of Marxist ideology, and its catastrophicconsequences, to obscure the glimmers of analytical insight in thework of Marx himself. Consider just his awareness of the relationbetween unregulated capital and unprotected labor. The chapter on"Machinery and Modern Industry" in Capital was the classic accountof "scientific management" before the term even existed. The readeris present on the shop floor, feeling the pace of toil quicken withthe managerial imperative to raise productivity by "filling up thepores of the working day" and merging the factory operatives withthe rest of the machinery for making money.

Marx's account of actually existing capitalism was a powerfulcounterpoint to the cant of Samuel Smiles, whose Self-Help waspublished at about the same time as Capital, and who insisted(against all the evidence) on the transformative powers of ploddingdiligence. Marx knew better. He recognized that capital, not labor,was the key to success. This was an insight that he shared with theleading capitalists of his day. Then, as now, moralists pennedpaeans to work, while the rich went about their business largelyoblivious to conventional pieties.

This was true in the New World as well as in the Old. Nearly all ofthe most successful Americans either had capital to start with orelse figured out how to acquire and increase it from an early age.This did not necessarily require hard work, but it did requireshrewd bargaining, inside dope, and friends in high places. Thespectacle was rarely edifying, but it could be wrapped inrespectability. A life of commercial chicanery could be repackagedas a noble assault on adversity. Even P.T. Barnum titled his lifestory Struggles and Triumphs.

We may be more cynical these days, but we are stillfascinated--almost pornographically so--by success stories. Ourbook publishers certainly are. With the resurgence of laissez-fairemythology in the last few decades, we have seen a bull market inbiographies of big shots. J.P. Morgan, John D. Rockefeller, WilliamRandolph Hearst: all have received massive reconsiderations inrecent years, books big enough to serve as doorstops in anyexecutive suite. Now there are two more: David Nasaw's AndrewCarnegie (following swiftly on his life of Hearst) and DavidCannadine's Mellon. Both biographies focus on men who made money inPittsburgh, the city that best embodied the brutal energies ofcapital unbound in late nineteenth-century America. Both booksstrive hard to be fair but not uncritical toward their subjects;both are exhaustively researched and clearly written; both arepacked with detail that often fascinates but sometimes fatigues.

Everything is here: every merger, every acquisition, every insidetrade, every purchase, every benefaction--not to mention everyavailable tidbit on family matters. There are moments when onewants to say to both authors: enough already. And yet these tomesdisplay the virtues of their defect. Their inclusiveness makes thema gold mine for anyone interested in how laissez-faire capitalismactually works. Both Cannadine and Nasaw reveal the tautology atthe heart of wealth creation: it takes capital to create morecapital. Hard work may (or may not) be ennobling, but only rarelyis it by itself enriching.

To be sure, Mellon epitomized the Protestant ethic in his drivenpersonal habits, but it was hardly the source of his phenomenalcapacity to accumulate capital. His father, Thomas Mellon, was asuccessful real estate developer who supplied his sons with asignificant stake to start out on; and Andrew increased it byshrewd lending and investing, revealing an uncanny ability to spotpromising enterprises. Carnegie, the son of an out-of-work weaver,was one of the few rich Americans who could claim to be a self-mademan. But, to his credit, he refused to do so, locating the sourceof his wealth--indeed, of any millionaire's wealth--in "thecommunity," by which he meant that he had been in the right placeat the right time: Pittsburgh in the 1870s, when the shift fromiron to steel was about to take off. And as Nasaw convincinglyshows, Carnegie also had a knack for insinuating himself withcorporate mentors and turning them into dependable cronies.

The ebullient Carnegie and the dour Mellon shared a tendency toconflate their own interests with those of society and indeedhumanity at large, as well as a talent for self-deception thatdissolved moral ambivalence in a warm bath of ideologicalcertitude. In this they were no different from other captains ofcommerce, then or now. Both publicly disdained speculation, and bothprivately profited from it. Both proclaimed their devotion tofree-market principles while simultaneously depending on governmentsupport, ranging from tariffs and other subsidies tostate-sponsored violence. Both distanced themselves from thedecisions of their subordinates; neither had a clue what life waslike for the employees in any of the enterprises they owned. Bothbelieved that they were promoting the public welfare, while theysanctioned labor policies aimed at squeezing every drop of surplusvalue out of the hides of the operatives. No wonder Marx and hissuccessors dismissed them as hypocritical plutocrats.


This dismissal is refreshingly clear, but it is inadequate to anunderstanding of the larger significance of these men. Carnegie andMellon were plutocrats, but they were also philanthropists. Theycontributed to the common good even as they disregarded it in theirbusiness practices. Skeptics might suspect that these philanthropicgestures were mere p.r. ploys or guilt-ridden efforts to buypopular approval, but neither of these explanations accounts forthe complexity of the two men's motives or for the long-term impactof their generosity.

There were major differences in their gift-giving. Mellon was by farthe more cautious. This was in keeping with his secretive personalstyle. Nearly all his enterprises were private, closely heldcorporations; only a handful of them were ever publicly traded. Themost enduring monument to his beneficence is the National Galleryof Art in Washington. Cannadine seems to think that Mellon'screation of the National Gallery, with his own extraordinary artcollection at its core, marked a kind of apotheosis of "willfulself- effacement" for the financier. The truth is grayer. Mellonremained anonymous because he wanted the National Gallery, like hisother enterprises, to stay under the control of his family and hisfriends. As his son Paul observed with some asperity, the museumwas "one more investment, one more Mellon Interest." That does notundermine its value as a public institution or affect theexperience of the gallery's visitors, but it does put a differentspin on Mellon's "willful self-effacement."

Carnegie was anything but selfeffacing. Already rich in his earlythirties, he was determined to be a professional wise man as wellas a plutocrat. He preached a "gospel of wealth" that was a secularversion of Rockefeller's Christian stewardship. It may have been"the community" rather than God that gave Carnegie his money, butthe consequences were the same: he had to give it back. Celebrating"the advantages of poverty" as an aid to character formation, hedeclared it a sin to die rich and dismissed private inheritances asa moral disgrace. He lived like a feudal lord and left his familywith ample access to luxury, but compared with his contemporariesor ours (including Rockefeller and Gates), he also gave astonishingamounts away. The contemporary cultural landscape is filled withhis benefactions: libraries, concert halls, schools, researchinstitutions, and teachers' pensions (his funds were the basis forTIAA-CREF), as well as foundations dedicated to advancing educationand world peace.

The list is a revealing expression of Carnegie's worldview--itslargeness as well as its limitations. An energetic autodidact withservants at his beck and call, Carnegie could never grasp thenumbing exhaustion resulting from twelve- hour days and seven-dayweeks of shoveling coal and puddling steel. Worrying that workerswould waste wage increases on what he called "things which pertainto the body and not to the spirit," he cut their pay and increasedtheir hours while he built libraries and concert halls for them. Itwould be hard to find a more flagrant contradiction between thefacts on the ground and the fictions of self-culture.

Still, this was not the end of the story. While Carnegie's earlybenefactions may have been shrouded in self-deceptions, hisphilanthropic vision cleared as he grew older and focused onlong-range goals. As his giving became more systematic and moresuccessfully invested in foundations, its benefits encircled widerportions of the population--perhaps even his workers' children andgrandchildren, if not the workers themselves. Philanthropically, hewas in it for the long haul.

Whether his ideas have endured as successfully as his institutionsis another matter. Carnegie ached to be taken seriously as athinker on both sides of the Atlantic. His vivacity, generosity,and genius for friendship helped him to win the respect andaffection of men as different from one another (and him) as MatthewArnold and Mark Twain. But neither of these was as fundamental forCarnegie's development as Herbert Spencer. When Carnegie was a youngman in search of a Theory of Everything, he embraced Spencer'slumbering sociological scheme, which distorted Darwinian evolutioninto an agenda of inevitable progress. For Carnegie, philanthropybecame a way of underwriting the Spencerian maxim that materialadvance meant moral ascent as well.

But Spencer also led Carnegie in more interesting directions. Thesociologist believed that modern society was progressing from awarlike "militant" stage to a pacific "industrial" stage. Thedemands of the global marketplace would soon make war obsolete.Stale as Spencer's formulation may sound to contemporary ears, toCarnegie it seemed fresh. The belief that war could be a thing ofthe past led him toward a naive faith in arbitration andinternational organization, but also toward a pointed critique ofAmerican imperialism and an illuminating dialogue with its chiefprogenitor, Theodore Roosevelt. Carnegie's doomed struggle forworld peace left him, for all his maddening selfdeceptions, atragic figure in his final years-- enveloped in silence andsadness, watching his dream dissolve in the mud of Ypres andPasschendaele.

Every biographer is ultimately at the mercy of his subject, andCarnegie is a more forgiving one than Mellon. Cannadine tries toportray Mellon as a man whose aloofness may have been a mask forshyness. Occasionally he succeeds, especially in his account of theperiod after Mellon's divorce, when the financier was a lonelymiddle-aged man rattling about alone in the Victorian gloom of hismansion, fitfully striving to re-enter Pittsburgh social life. ("Goin Pierrot costume 9 p.m. to masked ball," one diary entry reads."Home 3:30 a.m.") When one later learns that Mellon "was a very baddancer," the picture is indeed pathetic. But most of the timeMellon defeats his biographer's efforts to present him in asympathetic light. As Cannadine acknowledges, many people who knewMellon well concluded that behind his cool exterior there was"either something unpleasant--or nothing at all."

Carnegie was a different character altogether. For all hisruling-class narcissism and his stupefying ignorance of hisworkers' lives, he comes across in Nasaw's pages as a fascinatingand ultimately likeable figure. Contrasted with Mellon, Carnegiehas the extrovert's advantage. He was awash in his ownself-importance, but he was an engaging conversationalist and anadept orchestrator of dinner parties. Yet his difference fromMellon was more than a matter of personal magnetism. Carnegiedeveloped a more capacious conception of the public good.

Each man performed public service, according to his lights: Mellonas Secretary of the Treasury, Carnegie as a philanthropist and apeace activist. But Mellon remained involved with his privatebusiness interests while he was in the government, despite hisdenials. This was not only a departure from tradition, it was aviolation of the law. As Cannadine observes, Mellon simply had noconception of conflict of interest. How could he, when he believedthat the pursuit of his own firms' profits was in the entiresociety's interest? Carnegie claimed to believe this too, but afterhe retired from business he developed a more cosmopolitanperspective that is still worth consideration. Unlike Mellon,Carnegie succeeded, however fitfully, in transcending the worldviewof his class. He became more than a mere capitalist.


Carnegie was born in 1835, in the upstairs room of a weaver'scottage in Dunfermline, Scotland. His father was never ambitious,but his mother was headstrong, and when the linen trade collapsedin the late 1840s she packed the family off to Allegheny City,Pennsylvania (now part of Pittsburgh), where some Carnegie cousinshad already settled. Her thirteen-year-old son began work as abobbin boy and later a boiler attendant at a cotton mill. Eager tomove from the factory floor to the office, he took a job as atelegraph messenger boy; filling in for an off-duty operator, hequickly demonstrated his good ear. He won a job as a full-time"smooth operator" when he was still only fifteen, receiving a$1-per-week bonus from six Pittsburgh newspapers for copyingtransatlantic dispatches. That money "I considered my own," Carnegieremembered. "It did not go to the family support. It was my firstcapital."

The way to increase one's capital was to become a company man. ThePennsylvania Railroad was discovering the importance of thetelegraph to its operations, and Tom Scott, the Western Divisionsuperintendent, hired Carnegie as his personal operator. As Nasawobserves, Carnegie "tied himself to Tom Scott's coattails and neverlet go." The relationship soon began to pay off. Well-positioned inan industry that was about to take off, Scott could invest incompanies that were poised to benefit from the railroad business.One of these was the Adams Express Company. Scott loaned Carnegiethe money to buy ten shares at $50 each. Carnegie receivedguaranteed dividends of $10 a month: a 24 percent return on hisinvestment.

The arrival of his first dividend check was a revelation. "I shallremember that check as long as I live," he wrote in hisautobiography. "It gave me the first penny of revenue fromcapital--something that I had not worked for with the sweat of mybrow. 'Eureka!' I cried. 'Here's the goose that lays the goldeneggs.'" He showed the check to his friends, all of whom were amazedby the magic of investment capital: "How money could make money,how, without any attention from me, this mysterious golden visitorshould come, led to much speculation upon the part of the youngfellows, and I was for the first time hailed as a 'capitalist.'" Itwas the first of a series of deals that made Carnegie a rich youngman.

Still in his twenties, Carnegie learned that he was better atmanipulating money than managing men. When Scott was promoted,Carnegie became Western Division superintendent and soon revealedhis ignorance of his men's limits, provoking their hostility byimposing impossible demands. Claiming to have learned his lesson,he never directly supervised employees again. What he learned bestwas the art of insider trading. With Scott and Scott's boss J.Edgar Thomson, he bought shares in the Woodruff Sleeping Car Companyjust before it was enriched by a contract with the PennsylvaniaRailroad. The pattern was in place: Carnegie avoided risky railroadstocks and instead invested in companies that supplied therailroads' needs: coal, wood, iron, oil. His big break came when hevisited Oil Creek, Pennsylvania and with "high glee" glimpsed theprofits to be made from buying into William Coleman's Columbia OilCompany. He and Coleman stored their oil in a man-made lake untilthe wells ran dry and the price of oil soared. From June 1863 toJune 1864, Coleman Oil dividends rose from 25 percent to 160percent. Carnegie was flush and ready to move into the Pittsburghiron business.

As a young man of means, Carnegie could not only avoid the Civil Wardraft by purchasing a substitute (for $850), he could also affordto take the first of many long vacations. The guns had barelyfallen silent when he embarked on a year-long European sojourn withtwo friends, overpaying for everything and loving it, assuming thatprice was the measure of quality. While his brother and businesspartner Tom fretted at home about saving money, Andrew kept pushingnew investments. He was, he told Tom, "made to be forever head andears in debt and to crowd full sail, despising to bury in theground any of the talents (silver talents, I mean) which mightreach his coffers, or to lie long under the suspicion of having atthe bank even a moderate balance on the right side of the ledger."It was a rare moment of self-knowledge.

As the railroad frenzy accelerated after Appomattox, Carnegierefined the arts of crony capitalism. He accumulated capital bytrading shares in overcapitalized companies and skimming profitsfrom inflated stock prices. He sold bonds to raise money forrailroads that were unbuilt and unnecessary, acquiring a reputation(as Nasaw writes) "not as a builder but as a financial middleman."But technology and public policy combined to turn Carnegie in a newdirection.

When the tariff of 1870 placed a duty of $28 per ton on importedsteel, the federal government opened unprecedented opportunitiesfor American steelmakers to sell in a protected market. In 1872,Carnegie toured Henry Bessemer's steel plant in Sheffield, England.That was enough for him. He was, he said, ready to put "all my eggsin one basket": Bessemer steel. He built a plant in Braddock,Pennsylvania, outside Pittsburgh, and with a born crony's talent forflattery named it the Edgar Thomson Works, after his old boss atPennsylvania. When the Panic of 1873 hit, Carnegie sold all hisinterests in other businesses and focused on the steel plant.Demand for steel rebounded and then soared.

The shift from iron to steel combined with the resurgent railroadboom to underscore Carnegie's accuracy regarding the source of hiswealth: "the community." Pittsburgh had everything a budding steelmagnate could want. It had rivers and railroads for transportingraw materials and finished goods, an abundant supply of skilled andunskilled labor, and easy access to tons of coal, which could beturned into coke to heat Carnegie's blast furnaces. The big cokeman in Pittsburgh was short in stature and mean as hell. Carnegieearly on recognized Henry Clay Frick as a potential rival andsought to form alliances with him, eventually making him a partnerin the enlarging firm of Carnegie Steel. Throughout the 1880s,despite dips in the business cycle, Carnegie's steel business wasriding high, increasing its productivity by more than 800 percent.

During this same period, Carnegie wooed Louise Whitfield. Twenty-oneyears younger than he, she was the daughter of a successfulmerchant, from an old, respected, but not especially wealthy NewYork family. The courtship was characterized by long separationsthat produced anxious longings on both sides. Carnegie feared thathe would be displaced by a younger suitor; Louise worried that hewould become a London swell, forgetting her while he cavorted withactresses and professional beauties. For several years they engagedin a protracted and fitfully erotic correspondence (Carnegieimagined her at one point to be "like Pittsburgh Iron--it is veryhard to heat at first, but once hot, it is very, very hot indeed,and retains its heat extraordinarily!") until they were finallymarried in 1887.

Judging by the available evidence, the marriage was a remarkablesuccess. The Carnegies remained devoted to each other, andeventually the wary Andrew consented to Louise's desire for achild. (She gave birth to a daughter, Margaret, in 1897.) On publicoccasions, they played complementary roles. Entertaining guestsextravagantly, Andrew loved to show off his young bride, to combinethe parts of perfect host and perfect husband. Louise learned to bethe submissive wife who could signal the patriarch to pipe downwhen he talked too much. This was not an easy task. Hobnobbing withthe great and near-great, Carnegie strained to magnify his owngreatness, too. His spreading steelworks, he believed, were morethan mere machines for making money: they were evidence of theprogress of civilization.

Whether his workers would have agreed is another question. Carnegienever referred to them as individuals, only as the mass of men whomade up that significant entry on the books, "labor costs." And hewas obsessed with minimizing costs, even as he allowed theAmalgamated Association of Iron and Steel Workers to organize atEdgar Thomson, defended unions in public, and declared himself(with preposterous self-deception) a "fellow workman." He believedthat he had come up with the key to labor peace: a sliding scale ofwages based on the price of steel. When steel prices fell, wageswould be cut. Since capital and labor were part of the same socialorganism, workers would willingly share in the travails ofmanagement. Individual suffering during stormy economic weather wasunavoidable and indeed necessary to advance what Spencer called"the interests of universal humanity." Spencerian platitudesreassured Carnegie that his narrow interests were actually theinterests of all, but labor leaders no doubt took a more skepticalview. Yet there were times when they accepted wage cuts as part ofthe logic of the marketplace: better lowered pay than layoffs.


The real problem for workers, and the reason that labor strifeintensified throughout the 1880s and early 1890s, was that wagecuts were part of a comprehensive managerial strategy aimed at moreefficient productivity (the strategy that Marx dissected inCapital). Carnegie and Frick wanted to put workers on twotwelve-hour shifts rather than three eight-hour shifts. This wouldthrow hundreds of employees out of work and reduce the remainingones to beasts of burden. As Nasaw notes, Carnegie displayed"astounding insensitivity" to the deadening impact of thetwelve-hour day. Management kept trying to impose it, workers keptresisting it; and in flush times, when steel prices were rising,the resistance sometimes succeeded. Like other unions, theAmalgamated wanted workers to be recognized as partners withcapital, to share profits and to exercise some control over thepace and process of their labor. From the viewpoint of management,this was simply out of the question. As conflict intensified,Carnegie abandoned his earlier support for labor unions, declaringin 1890 that they represented narrow interests, while he embodied,as always, the interests of the broader community: by keeping laborcosts down, he kept prices down for all. This pigheaded self-regardcould hardly promote harmony between labor and capital.

And that was just fine with Carnegie and Frick. They were determinedto lower wage costs per capita as well as the number of workers.When the Homestead plant contract expired in 1892, the managementproposed draconian wage cuts of 15 to 18 percent, and for someworkers as much as 35 percent. The union-busting strategy wasalready in place. Management would begin by making impossibledemands; when the union refused, the managers would lock out theworkers and bring in the sheriff's deputies or the hired guns of thePinkerton Detective Agency (or both). After a brief pause, themanagers would re-open the plant under armed guard and inviteworkers to return as individuals. Those who refused would bereplaced by scabs.

The plan worked, but it was a messy business. The workers were notthe free- floating, free-bargaining individuals of capitalistfantasy. They believed that they were part of a particularcommunity in a particular place. When the Pinkertons invaded,arriving on barges one July morning, they were not allowed todisembark. Led by such figures as Billy Foy, an Englishman andformer head of the local Salvation Army, and Mother Finch, awhite-haired saloonkeeper and veteran of forty strikes, theresidents of Homestead met the Pinkertons with muskets, pistols,fireworks left over from Independence Day, and a Civil War cannon.The Pinkertons fired into the crowd, and the crowd fired back. ThePinkertons finally surrendered at 5 p.m. and were forced to run agauntlet of angry workers and their wives to the opera house, fromwhich they were rescued the next day by sheriff's deputies. Theworkers held the plant until Frick persuaded the governor ofPennsylvania to send in the National Guard, who recaptured thefactory and ended the battle of Homestead. Several strikers hadbeen killed, but no Pinkertons or Guardsmen.

Carnegie and Frick succeeded in crushing the union, but in theprocess they provoked an outpouring of public anger, including anattempt on Frick's life by the anarchist Alexander Berkman. Frickhad been on the premises, serving as field general and focus forpopular outrage. Carnegie, who had approved Frick's strategy, kepthis distance and tried to strike an Olympian pose. Sojourning atLoch Rannoch hunting lodge in Scotland during the summer of 1892, hewas surrounded by stags' heads and servants in livery. He refusedto discuss Homestead with reporters; instead he created his ownfantasy version of events, insisting that the Homestead workers hadcabled him in July: "Kind Master, tell us what you wish us to doand we shall do it for you." Nasaw, an indefatigable researcher,politely notes that "no cable from the workers to Carnegie was everfound, nor was any Homestead veteran located who could corroboratethat one had been sent." Safe in his own delusions, Carnegie stillcould not keep Homestead from becoming a symbol of the exploitationof labor by capital.

Yet Homestead was also an economic triumph for Carnegie Steel. TheAmalgamated was driven out of the steel industry; twelve-hour shiftsbecame the norm; workers were denied grievance rights and evenoccasional breaks. The pores in the working day were filled. Evenduring the hard times of the 1890s, profits rose steadily, whilewages fell and machines replaced men. Between 1892 and 1897, theworkforce at Homestead declined by 25 percent. Carnegie Steel wasin high gear, dominating the market. And the key to its dominancewas its victory over labor.

Throughout the 1890s, managerial strategies intertwined withstructural changes in the steel industry. When the first greatmerger wave swept through the American economy in the late 1890s,Frick was eager to ride it, to consolidate Frick Coke and CarnegieSteel. Eventually he succeeded, but not until he and Carnegie hadfought in public over the value of Frick's company. Legal testimonyproduced embarrassing revelations, notably the outrageous profitsof a tariffprotected steel company. Ultimately Frick settled forwhat he thought was his due, and the result was a huge holdingcompany, valued at $320 million. Carnegie then took on J.P.Morgan's National Tube Company by building a rival, the ConneautWorks, on the shores of Lake Erie. Charles Schwab, Frick'ssuccessor as president of Carnegie Steel, served as a mediatorbetween the titans. He persuaded Morgan to buy out Carnegie andcreate United States Steel. Closing redundant mills, especiallyunionized ones, would be the first order of business for theworld's first billion-dollar corporation.


Carnegie had finally delivered on his promise to retire, which hehad been making for thirty years. He had become "the richest man inthe world," at least according to Morgan (who spoke with someauthority on such subjects). The sale allowed him to distancehimself from business at a time when public anger at monopolies wason the rise. It also meant that he could shift his philanthropicpursuits from retail to wholesale. The results ranged from theCarnegie Institute in Washington (devoted to pure research) to apeople's park in Dunfermline (devoted to bringing sweetness andlight to a drab industrial town). There were also organs forchurches, pensions for disabled steelworkers (but only those judgedto be "deserving" by their supervisors), and, everywhere, morelibraries.

In 1911, realizing that he could never give all his money awayhimself, Carnegie created the Carnegie Corporation, the largestphilanthropic trust in history up to that time. But huge as it was,philanthropy was only part of Carnegie's public role. He had longsought to shape the zeitgeist, producing ponderous axioms inarticles for the North American Review and interviews with The NewYork Times. By the 1890s, most literate Americans knew whatCarnegie thought about money. They were about to learn what hethought about war and peace.

In 1898, Carnegie had supported the war to free the Cubans fromSpanish domination, but like many other Americans, he was appalledby the McKinley administration's drive to acquire the PhilippineIslands. His arguments against empire were political and economicas well as moral. Trade, he insisted, does not follow the flag,colonies do not mean new markets, and money spent on militaryadventures abroad would come out of funds needed for internalimprovements at home. But what most outraged him was theimperialists' indifference to the Filipinos' desire forself-determination. The advocates of empire, prating of freedom anddemocracy, were perfectly willing to crush the Filipinoindependence movement--even if it took years of guerrilla warfare,which it did. Unlike other anti-imperialists at the time, Carnegiedid not dismiss the Filipinos as savages who should be allowed tostew in their own juices. On the contrary, he wrote in 1899, "Theyhave just the same feelings as we have, not excluding love ofcountry, for which, like ourselves, as we see, they are willing todie."

Carnegie's cri de coeur went largely unheard in the corridors ofpower, but his faith in his own capacity to influence the powerfulremained undiminished. He cultivated Theodore Roosevelt withunabashed sycophancy, declaring him "a prince in the republic ofletters" and remaining convinced--against all the evidence--thatRoosevelt was a champion of world peace. Between the imperialistwars at the turn of the century and the outbreak of World War I,Carnegie badgered Roosevelt and his successor, William Howard Taft,with unending schemes for international organization and mandatoryarbitration--the only alternatives, in Carnegie's prescient view,to the war he was sure was coming if they were not adopted. Bothpresidents tolerated him in public and dismissed him in private asa "peace crank."

The developing disagreement between Carnegie and Roosevelt revealedmoral ambiguities on both sides. Roosevelt the progressive wasannoyed by Carnegie's hypocrisy: for all his talk of peace, whatabout the workers worn out by his labor policies and the smallinvestors he ran out of business? The questions were well-placed,but the hostility behind them was mired in a mass of confusion.When Roosevelt asserted that "righteousness and justice" were moreimportant than peace, and that those goals sometimes required war,Carnegie reminded the president that since each side in wardeclared that it was in pursuit of righteousness and justice, thequestion was: who was to decide where the moral right lay? "No one,according to you," he told Roosevelt. "They must go to war todecide not what is 'right' but who is strong."

Roosevelt's obsession with strength was a part of his own melodramaof beset manhood. Deriding peace advocates as the "male shriekingsisterhood of Carnegies and the like," he confused physical couragewith moral courage, and nations with individuals. Nowhere was thisclearer than in his critique of arbitration treaties. The nationpledged to arbitration, Roosevelt wrote, would end up "dishonoredand impotent, like the man who, when his wife was assaulted by aruffian, took the ruffian to court instead of attacking him on thespot." This was the sort of thinking (or not thinking) that ledSenator Chauncey Depew to dismiss the anti-imperialist critique ofthe Philippines War as a "scuttle and run" strategy. The same sortof category mistake continues to plague public discourse today.

Carnegie attacked this confusion head-on. Rather than promotingmanly virtue, Carnegie charged, war only enhances man's capacityfor "physical courage, which some animals and the lower order ofsavage men possess in the highest degree. According to this idea,the more man resembles the bulldog the higher he is developed as aman." Pruned of its pseudo-evolutionary arrogance, the statementstands as a rebuke to the silly verbal swaggering that still sooften substitutes for actual policy debate.

The coming of World War I ended the argument between Roosevelt andCarnegie. It also ended Carnegie's hopes that men might be morethan bulldogs. "All my air castles have crashed about me like ahouse of cards," he wrote in August 1914. While Roosevelt grewincreasingly bellicose, Carnegie fell silent. All his exuberancedrained away. The puckish multimillionaire became an old manovernight. He lost weight and visibly shriveled. He lived longenough to see his daughter Margaret married in April 1919, and dieda few months later.


At the moment when Carnegie left the public stage, Mellon was on theverge of entering it. He and Frick--chums since their twenties andfellow members of the Duquesne Club in Pittsburgh--had justcontributed $10,000 each to support the Irreconcilables, a group ofRepublican senators who were determined to block American entryinto the League of Nations. Republicans sensed that they were aboutto bring down the stricken Woodrow Wilson, and they were right.When the small-town crony capitalist Warren Harding was elected in1920, he needed a secretary of the treasury who was acceptable toWall Street but not of it. Andrew Mellon, by then a fabulouslysuccessful Pittsburgh financier, was the perfect choice.Reluctantly accepting the appointment, he was thrust into aspotlight that he had shunned for more than six decades.

From his earliest days, he was a shy and sensitive child in ajoyless household. His father, Thomas Mellon, was the son of amiddling prosperous Pennsylvania farmer who had emigrated fromUlster in 1818. Young Thomas liked farming less than money, whichhe declared in a youthful essay was "to society what the element offire is to matter, diffusing warmth and vigor through all itsparts." He read law, married a local daughter of affluence with asizable dowry in land, and soon became a successful real estatedeveloper. While Andrew Carnegie was networking with Pennsylvaniarailroad executives, Thomas Mellon (still in his forties) wasbecoming one of the founding patriarchs of the Pittsburgh businesscommunity, and a particularly rigid example of Presbyterianself-made manhood. After he was elected to the post of associatejudge of the Court of Common Pleas, he was ever after known aroundtown as the Judge.

His influence on his sons, especially Andrew, was incalculable andenormous. Cannadine suggests as much by heading all his chapterswith epigraphs from the father's didactic autobiography. Thomasbrooked no rebellion and treated his sons as extensions of himself.In 1869 he resigned from the bench and opened a bank, T. Mellon &Sons, to create business opportunities for his boys. Forinspiration, he placed a statue of Benjamin Franklin over the door.It would be hard to imagine a more enveloping atmosphere ofpaternal expectations.

Young Andrew was close to his father, especially after his brother(and best friend) Selwyn died young. Andrew was eager to learnbanking, and Thomas was eager to trust him: he allowed his son soleaccess to the padlock on the safe. Absorbing his father's solitarydrivenness, Andrew seemed a loner even in the Mellons' taciturnhousehold. "The air was heavy with the imperative to acquire, " onein-law said. "They had absolutely no fun." "It was work, work, allthe time.... The one thing they understood, the end of all theirefforts, was money. " Installed at T. Mellon & Sons and already enroute to financial success, Andrew had nonetheless paid a price, asCannadine perceptively observes: "There may have been color andwarmth in his life, sometime and somewhere, but if so, hesuppressed them so much that no one later knew where to find them orhow to draw them out. In more ways than one, he was growing into asad man."

Meanwhile, he took on more responsibility at the bank. In 1876, theJudge gave him power of attorney for T. Mellon & Sons, and alsointroduced him to a rising business star (to whom the bank had madea timely loan) named Henry Clay Frick. Unlike Carnegie, who by thattime had fled to New York, Frick and his new friend Andy werecontent to remain members of the Pittsburgh ruling class, secure intheir provincial superiority, comfortably smoking cigars andsipping whiskey at the Duquesne Club. It was probably on one ofthose nights that Frick persuaded Andy to buy an interest in theOverholt Distillery, the first of many investments that Mellon madein Pittsburgh-area companies.

Andy and his brother Dick perfected what became known as the MellonSystem. They invested in vertically integrated enterprises, whichthey financed but allowed their partners and collaborators to run.The prototype of these was the Pittsburgh Reduction Company, whichreduced aluminum from bauxite. It was started by some bright youngchemists in need of cash who came to Mellon's bank for financing.With Mellon backing and eventually under Mellon ownership,Pittsburgh Reduction evolved into Alcoa.

Such were the success stories that the Pittsburgh ruling class toldthemselves at the Duquesne Club bar. But most of the city livedalongside polluted rivers, breathing poisonous air, surrounded byacres of pestilential slums. Few working-class men lived to beolder than forty. It was a town of millionaires and paupers, as theHomestead strike made clear.

Not that it mattered to the millionaires. Andy and Dick continued toplay their cards close to the vest, refusing information even toDun&Bradstreet, always plowing earnings back into the firm,rarely distributing dividends. Andy earned a reputation as "thebest listener in Pittsburgh." He kept a poker face and turned downmore loans than any other banker in town. Aloof and inscrutable, hewas always dapper, well-manicured, and well-turned-out. He lived athome with his mother and father. Acquaintances recalled the horrorsof Sunday dinner at the Mellons': "roast beef, watery peas, andlumpy mashed potatoes, all washed down with iced water." Onweekdays, the Judge still refused to pay more than twenty-fivecents for lunch at the Henry Hotel, so Andrew quietly picked up therest of the tab.

As the father faded, the son kept up with the times. He learned howto buy streetcar franchises and the votes to support them. He alsorode the merger wave, creating new banks that combined investmentand commercial services, increasing their capital stock andgenerating new resources for investing in steel, shipbuilding,coal, and oil. Capital begat more capital. Federal bankingregulations (or the lack of them) allowed him to underwritesecurities and subscribe to the stock of corporations he intendedto bring within the boundaries of his industrial empire. Most ofhis companies were closely held, such as Union Steel, formed in1899 with only himself, his brother Dick, the ubiquitous Frick, anda steel man named William Donner as partners. In 1902 he sold UnionSteel to the newly formed United States Steel at a price based oninflated stock values--the sort of paper-based profits that a goodPresbyterian like his father abhorred. But by this time the old manwas going blind, and Andrew was becoming an Episcopalian.

Around the turn of the century, Frick introduced Mellon to thepleasures of art collecting. His first purchase, appropriately, wasa portrait of the Judge. Soon he began to buy mediocre genrepaintings. Before long he would be consorting with a faster crowd,returning his old canvases for new, driving hard bargains with thelegendary art dealer Joseph Duveen. In Cannadine's account, art isprimarily a commodity, like oil or coal. He implicitly accepts thearbitrary formulations of art-world connoisseurship, which tend toassert without argument that some canvases (usually the moreexpensive ones) are "better" than others. Mellon appears as tough acustomer in this realm as in every other. Purchases and prices arerecorded in numbing detail, with next to no attention to thepaintings themselves and only a few boilerplate discussions ofpersonal motives or aesthetic tastes. "Pictures," a friend said,"took the place of friends." That may be the closest one can cometo understanding a collector as close-mouthed as Mellon.

In portraiture at least, Mellon preferred "English beauties" to menof power. Frick introduced him to an actual English beauty on boardthe White Star liner Germanic in the summer of 1898. She was NoraMcMullen, the daughter of an English brewer and gentlemancapitalist who cut quite a public figure in his hometown ofHertford. Nora was nineteen; Andrew was forty-three and captivated.She found him easy to talk to and listen to, an impressive man ofthe world. But when he pressed his suit she resisted, sensing theprofound incompatibility between them. Her family was given toextravagant spending and frivolity; he would never have extended aloan to any of them. Her interests were rural and recreational; hewas an urban workaholic. Yet he insisted, and she relented.

The mismatch was apparent from the start, though Mellon himselfremained preternaturally oblivious to it. When they arrived inPittsburgh after their wedding journey, she was appalled at thegrim industrial landscape of the place that would be her home. "Youdon't live here?" she cried. Mellon's easy talk devolved into stonysilence; he had little time for talk, or for tenderness. She tookto bed much of the time, especially after the birth of theirdaughter Ailsa in 1901. The stage was set for Alfred Curphey, amustache-twirling bounder from Victorian melodrama who preyed onrich and restless women. Nora met the charming deceiver on atransatlantic voyage to see her dying father. Soon she and Curpheybecame lovers, and in 1904 she demanded a divorce.

Mellon was shocked and horrified. He tried, with apparent success,to buy Curphey off; and husband and wife were temporarilyreconciled, and even conceived another child, a son named Paul. Butwithin a few years Nora was once more simmering with resentment atAndrew's neglect. Curphey, still waiting in the wings, re-appearedin Paris and followed her back to Pittsburgh. Nora again demanded adivorce. Andrew fought back, and Nora gave as good as she got. Tothe newspapers, she struck the pose of the injured wife, winning thepublic relations battle but losing the war, as Andrew was declaredthe officially injured party and awarded custody of the childrenfor eight months a year. Everyone was "terribly scarred," asCannadine observes, but especially the children. Ailsa became aneurasthenic invalid like her mother, Paul a lonely andself-doubtful young man. Years later their parents reconciled andresumed a distant but cordial relationship. The scars, of course,remained.

Wounded as he was, Mellon continued to prosper. Even as Pittsburghlost its economic supremacy, he found ways to keep profits high atAlcoa and his newer acquisition Gulf Oil; these included pools,cartels, and other violations of federal antitrust law, enough toprovoke a complaint from the Justice Department in 1911. Like otherself-proclaimed individualists, Mellon only favored competitionwhen it suited his interests. Otherwise he aimed for monopoly. Bythe 1910s, this was not a popular position. Progressive reform wasin the air; even labor unions were acquiring government sanction.Mellon kept his head down and weathered the storm. When World War Ibegan, he broke into the explosives industry, investing in acompany that made benzene and other chemical byproducts from cokingcoal. Just about anything could be turned into capital, if you hadthe right touch.

So when the ideological winds shifted after World War I, Mellonbecame the Midas of the U.S. Treasury. With respect to revenue, heanticipated the trickle- down model of recent years, but with asignificantly different rationale. Reducing tax rates on the rich,he believed, would persuade them to move their money fromtax-exempt government bonds to taxable stocks. That meant higherreturns for the rich, but also higher revenues for the government.It also meant low or no taxes for most Americans, as Mellon favoredtaxing investment income more heavily than earned income. It seemeda sensible and humane plan, and for a while it worked; governmentsurpluses soared, and few taxpayers paid anything at all.

There was only one catch. Mellon had no use for public investment;the tax- free bonds he disdained were issued by state and localgovernments, for ostensibly civic purposes. Mellon trusted only theprivate sector, the issuers of taxable stock certificates. Not allof them were trustworthy; nor did their interests necessarilypromote the national interest. This was the same inability to seeany distinction between private profit and public purpose thatallowed Mellon to keep supervising his business interests throughouthis tenure as secretary of the treasury. He insisted he hadwithdrawn from involvement in business "as if I had died," but eventhe sympathetic Cannadine, after examining Mellon's memoranda anddiaries, concludes that Mellon's claim was "a lie." The bigger lie,though, lay at the core of the laissez-faire creed: the belief thatthe public good was best served by the pursuit of private gain.

When the stock market crashed, that creed did, too--though Mellonclung to its shreds and tatters, confusing public and privateinterests even at the depths of the crisis. Confronting adisastrous wave of bank failures in 1931, Mellon refused to bailout the Bank of Pittsburgh unless his family received a controllinginterest in it. He was still playing by the Judge's rules: adepression was just another name for a business opportunity.Meanwhile the old verities had to be honored, including thebalancing of the budget--which the Revenue Act of 1932 attempted todo by raising taxes at the same time the Federal Reserve wasraising interest rates. The result was catastrophic deflation.

Like his boss Herbert Hoover, Mellon became the target of popularoutrage. When the House Banking Committee began impeachmenthearings against him, Mellon was hauled before Congress and forcedto admit that, on assuming his Cabinet office, he had divestedhimself of his bank stock by selling it to his brother. ThoseMellons stuck together. He resigned in disgrace. Hoover appointedhim ambassador to the Court of St. James, where he used hisposition to try to persuade the British government to provide GulfOil with a concession in Kuwait. He simply could not get the hangof the public-private divide.

The New Deal marked the nadir of Mellon's public reputation. He waswidely-- and unfairly--blamed for the Depression. He was also thetarget of a baseless and politically motivated federal prosecutionfor tax fraud. But Cannadine strains so hard to portray Mellon as asacrificial lamb and Franklin Roosevelt as a vindictive predatorthat one yearns for a corrective dose of skepticism. Roosevelt'srevenue policies hardly reflected a "savage, soak-the-richatmosphere." As Cannadine acknowledges, New Deal taxation ultimatelydid little to redistribute wealth. The rich were sprinkled, notsoaked. Mellon's assets shrank, but so did everyone else's.

Cannadine's focus on Mellon's New Deal ordeal is perhaps a way tomake his gift of the National Gallery seem transcendently heroic.It certainly was a generous gift, and a nation's gratitude is inorder. But Vice President John Nance Garner put Mellon's generositynicely into perspective: "While Mellon was Secretary of theTreasury, he made several millions of dollars which no Secretary ofthe Treasury could properly have made ... the government would begetting back something at any rate if we took this art collection."Anyway, the gift long outlived the giver. Maybe the NationalGallery is a kind of belated homage to the public sector, the civicideal that Mellon so steadfastly ignored throughout his longcareer. Maybe it is a reminder that while capital invariably begetsmore capital, it can produce more enduring progeny as well. Nodoubt old Andrew Carnegie would have seen it that way.

Whether Marx would also have seen it that way is another matter. Heand other critics of laissez-faire, whatever their differences,shared the fundamental insight that private philanthropy alonecould not sustain the public good. The well-being of the citizenrywas too important to be dependent on the wisdom (or unwisdom) of afew rich men. The commonweal could not be left to the caprices ofcrony capitalism--no matter how generous the capitalists themselvesturned out to be.

Today these convictions have come to seem almost quaint. Thecritique of unregulated markets has been drowned out by the din ofpraise for "wealth creation." Those who worry about its socialcosts are dismissed with a nod toward Joseph Schumpeter, whofamously observed (though this was hardly all that he had to say onthe subject) that capitalism progresses by way of "creativedestruction." Since the rise of Reagan, the love feast for laissez-faire has continued uninterrupted, on a scale not seen since theheyday of Carnegie and Mellon. The successors of Samuel Smiles haveretaken center stage, preaching a pepped-up version of free-marketfundamentalism and recoining the catchphrases of self-help as iffor the first time.

What is lost among the upbeat pieties and the culture of Wall Streetbonuses is the awareness of loss itself--the realization thatcapitalism creates scarcity as well as wealth, and that "creativedestruction" is still destruction: of irreplaceable resources, ofcraft skills and communities, of the means of livelihood for manymillions, of the spirits of honorable and hardworking people. Inthe twenty-first century, as in the nineteenth, productivity oftencomes at a price that is not discussed in polite company. Whatought to be at stake in public debate is the definition of wealthitself, which is invariably (and tautologically) assumed to meanthe accumulation of capital. Yet more capacious definitions exist,stretching back to the movement for the eight-hour day, andsurfacing in the aphorism articulated by Marx's contemporary JohnRuskin: "There is no wealth but life." This, too, makes economicand social sense. If recent events are any guide, vernaculardiscontent with plutocracy may be on the rise, and Americans mayonce again be ready to take Ruskin's words seriously. Only someonebesotted by money could dismiss them as mere sentiment.

By Jackson Lears