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The New Republic Online
Thursday, March 29th, 2007
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Andrew Carnegie

by David Nasaw

Money Changes Everything

A review by Jackson Lears

[Ed. Note. This review discusses the contents and context of two books: Andrew Carnegie and Mellon.]

I.

"You know, there are times when I think Karl Marx was on to something," an attorney friend of mine once remarked after handling yet another eviction case for New Haven Legal Aid. In the trenches of class warfare, one might be forgiven for occasionally growing impatient with academic complaints about the crudities of the materialist analysis of society. When the distribution of power is increasingly divided between those who have capital and those who have none, even "vulgar Marxism" can come to seem a useful tool of interpretation.

The very idea provokes derision -- if not outright disbelief -- in our contemporary public discourse. There are good historical reasons for this. Though rumor has it that Marx himself insisted "Je ne suis pas un marxiste," it has become nearly impossible to separate the man's thought from the crimes committed in his name. In common parlance, Marxism is immediately -- and correctly -- associated with slave-labor camps, mass murder, and hopelessly inefficient command economies. The collapse of the Soviet empire, in this view, marked the death of Marxism as an intellectual tradition.

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

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

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

We may be more cynical these days, but we are still fascinated -- almost pornographically so -- by success stories. Our book publishers certainly are. With the resurgence of laissez-faire mythology in the last few decades, we have seen a bull market in biographies of big shots. J.P. Morgan, John D. Rockefeller, William Randolph Hearst: all have received massive reconsiderations in recent years, books big enough to serve as doorstops in any executive suite. Now there are two more: David Nasaw's Andrew Carnegie (following swiftly on his life of Hearst) and David Cannadine's Mellon. Both biographies focus on men who made money in Pittsburgh, the city that best embodied the brutal energies of capital unbound in late nineteenth-century America. Both books strive hard to be fair but not uncritical toward their subjects; both are exhaustively researched and clearly written; both are packed with detail that often fascinates but sometimes fatigues.

Everything is here: every merger, every acquisition, every inside trade, every purchase, every benefaction -- not to mention every available tidbit on family matters. There are moments when one wants to say to both authors: enough already. And yet these tomes display the virtues of their defect. Their inclusiveness makes them a gold mine for anyone interested in how laissez-faire capitalism actually works. Both Cannadine and Nasaw reveal the tautology at the heart of wealth creation: it takes capital to create more capital. Hard work may (or may not) be ennobling, but only rarely is it by itself enriching.

To be sure, Mellon epitomized the Protestant ethic in his driven personal habits, but it was hardly the source of his phenomenal capacity to accumulate capital. His father, Thomas Mellon, was a successful real estate developer who supplied his sons with a significant stake to start out on; and Andrew increased it by shrewd lending and investing, revealing an uncanny ability to spot promising enterprises. Carnegie, the son of an out-of-work weaver, was one of the few rich Americans who could claim to be a self-made man. But, to his credit, he refused to do so, locating the source of his wealth -- indeed, of any millionaire's wealth -- in "the community," by which he meant that he had been in the right place at the right time: Pittsburgh in the 1870s, when the shift from iron to steel was about to take off. And as Nasaw convincingly shows, Carnegie also had a knack for insinuating himself with corporate mentors and turning them into dependable cronies.

The ebullient Carnegie and the dour Mellon shared a tendency to conflate their own interests with those of society and indeed humanity at large, as well as a talent for self-deception that dissolved moral ambivalence in a warm bath of ideological certitude. In this they were no different from other captains of commerce, then or now. Both publicly disdained speculation, and both privately profited from it. Both proclaimed their devotion to free-market principles while simultaneously depending on government support, ranging from tariffs and other subsidies to state-sponsored violence. Both distanced themselves from the decisions of their subordinates; neither had a clue what life was like for the employees in any of the enterprises they owned. Both believed that they were promoting the public welfare, while they sanctioned labor policies aimed at squeezing every drop of surplus value out of the hides of the operatives. No wonder Marx and his successors dismissed them as hypocritical plutocrats.

II.

This dismissal is refreshingly clear, but it is inadequate to an understanding of the larger significance of these men. Carnegie and Mellon were plutocrats, but they were also philanthropists. They contributed to the common good even as they disregarded it in their business practices. Skeptics might suspect that these philanthropic gestures were mere p.r. ploys or guilt-ridden efforts to buy popular approval, but neither of these explanations accounts for the complexity of the two men's motives or for the long-term impact of their generosity.

There were major differences in their gift-giving. Mellon was by far the more cautious. This was in keeping with his secretive personal style. Nearly all his enterprises were private, closely held corporations; only a handful of them were ever publicly traded. The most enduring monument to his beneficence is the National Gallery of Art in Washington. Cannadine seems to think that Mellon's creation of the National Gallery, with his own extraordinary art collection at its core, marked a kind of apotheosis of "willful self-effacement" for the financier. The truth is grayer. Mellon remained anonymous because he wanted the National Gallery, like his other enterprises, to stay under the control of his family and his friends. As his son Paul observed with some asperity, the museum was "one more investment, one more Mellon Interest." That does not undermine its value as a public institution or affect the experience of the gallery's visitors, but it does put a different spin on Mellon's "willful self-effacement."

Carnegie was anything but self-effacing. Already rich in his early thirties, he was determined to be a professional wise man as well as a plutocrat. He preached a "gospel of wealth" that was a secular version of Rockefeller's Christian stewardship. It may have been "the community" rather than God that gave Carnegie his money, but the consequences were the same: he had to give it back. Celebrating "the advantages of poverty" as an aid to character formation, he declared it a sin to die rich and dismissed private inheritances as a moral disgrace. He lived like a feudal lord and left his family with ample access to luxury, but compared with his contemporaries or ours (including Rockefeller and Gates), he also gave astonishing amounts away. The contemporary cultural landscape is filled with his benefactions: libraries, concert halls, schools, research institutions, and teachers' pensions (his funds were the basis for TIAA-CREF), as well as foundations dedicated to advancing education and world peace.

The list is a revealing expression of Carnegie's worldview -- its largeness as well as its limitations. An energetic autodidact with servants at his beck and call, Carnegie could never grasp the numbing exhaustion resulting from twelve-hour days and seven-day weeks of shoveling coal and puddling steel. Worrying that workers would waste wage increases on what he called "things which pertain to the body and not to the spirit," he cut their pay and increased their hours while he built libraries and concert halls for them. It would be hard to find a more flagrant contradiction between the facts on the ground and the fictions of self-culture.

Still, this was not the end of the story. While Carnegie's early benefactions may have been shrouded in self-deceptions, his philanthropic vision cleared as he grew older and focused on long-range goals. As his giving became more systematic and more successfully invested in foundations, its benefits encircled wider portions of the population -- perhaps even his workers' children and grandchildren, if not the workers themselves. Philanthropically, he was in it for the long haul.

Whether his ideas have endured as successfully as his institutions is another matter. Carnegie ached to be taken seriously as a thinker on both sides of the Atlantic. His vivacity, generosity, and genius for friendship helped him to win the respect and affection of men as different from one another (and him) as Matthew Arnold and Mark Twain. But neither of these was as fundamental for Carnegie's development as Herbert Spencer. When Carnegie was a young man in search of a Theory of Everything, he embraced Spencer's lumbering sociological scheme, which distorted Darwinian evolution into an agenda of inevitable progress. For Carnegie, philanthropy became a way of underwriting the Spencerian maxim that material advance meant moral ascent as well.

But Spencer also led Carnegie in more interesting directions. The sociologist believed that modern society was progressing from a warlike "militant" stage to a pacific "industrial" stage. The demands of the global marketplace would soon make war obsolete. Stale as Spencer's formulation may sound to contemporary ears, to Carnegie it seemed fresh. The belief that war could be a thing of the past led him toward a nave faith in arbitration and international organization, but also toward a pointed critique of American imperialism and an illuminating dialogue with its chief progenitor, Theodore Roosevelt. Carnegie's doomed struggle for world peace left him, for all his maddening self-deceptions, a tragic figure in his final years -- enveloped in silence and sadness, watching his dream dissolve in the mud of Ypres and Passchendaele.

Every biographer is ultimately at the mercy of his subject, and Carnegie is a more forgiving one than Mellon. Cannadine tries to portray Mellon as a man whose aloofness may have been a mask for shyness. Occasionally he succeeds, especially in his account of the period after Mellon's divorce, when the financier was a lonely middle-aged man rattling about alone in the Victorian gloom of his mansion, fitfully striving to re-enter Pittsburgh social life. ("Go in 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 bad dancer," the picture is indeed pathetic. But most of the time Mellon defeats his biographer's efforts to present him in a sympathetic light. As Cannadine acknowledges, many people who knew Mellon well concluded that behind his cool exterior there was "either something unpleasant -- or nothing at all."

Carnegie was a different character altogether. For all his ruling-class narcissism and his stupefying ignorance of his workers' lives, he comes across in Nasaw's pages as a fascinating and ultimately likeable figure. Contrasted with Mellon, Carnegie has the extrovert's advantage. He was awash in his own self-importance, but he was an engaging conversationalist and an adept orchestrator of dinner parties. Yet his difference from Mellon was more than a matter of personal magnetism. Carnegie developed a more capacious conception of the public good.

Each man performed public service, according to his lights: Mellon as Secretary of the Treasury, Carnegie as a philanthropist and a peace activist. But Mellon remained involved with his private business interests while he was in the government, despite his denials. This was not only a departure from tradition, it was a violation of the law. As Cannadine observes, Mellon simply had no conception of conflict of interest. How could he, when he believed that the pursuit of his own firms' profits was in the entire society's interest? Carnegie claimed to believe this too, but after he retired from business he developed a more cosmopolitan perspective that is still worth consideration. Unlike Mellon, Carnegie succeeded, however fitfully, in transcending the worldview of his class. He became more than a mere capitalist.

III.

Carnegie was born in 1835, in the upstairs room of a weaver's cottage in Dunfermline, Scotland. His father was never ambitious, but his mother was headstrong, and when the linen trade collapsed in the late 1840s she packed the family off to Allegheny City, Pennsylvania (now part of Pittsburgh), where some Carnegie cousins had already settled. Her thirteen-year-old son began work as a bobbin boy and later a boiler attendant at a cotton mill. Eager to move from the factory floor to the office, he took a job as a telegraph messenger boy; filling in for an off-duty operator, he quickly 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 copying transatlantic dispatches. That money "I considered my own," Carnegie remembered. "It did not go to the family support. It was my first capital."

The way to increase one's capital was to become a company man. The Pennsylvania Railroad was discovering the importance of the telegraph to its operations, and Tom Scott, the Western Division superintendent, hired Carnegie as his personal operator. As Nasaw observes, Carnegie "tied himself to Tom Scott's coattails and never let go." The relationship soon began to pay off. Well-positioned in an industry that was about to take off, Scott could invest in companies that were poised to benefit from the railroad business. One of these was the Adams Express Company. Scott loaned Carnegie the money to buy ten shares at $50 each. Carnegie received guaranteed dividends of $10 a month: a 24 percent return on his investment.

The arrival of his first dividend check was a revelation. "I shall remember that check as long as I live," he wrote in his autobiography. "It gave me the first penny of revenue from capital -- something that I had not worked for with the sweat of my brow. Eureka!' I cried. Here's the goose that lays the golden eggs.'" He showed the check to his friends, all of whom were amazed by the magic of investment capital: "How money could make money, how, without any attention from me, this mysterious golden visitor should come, led to much speculation upon the part of the young fellows, and I was for the first time hailed as a capitalist.'" It was the first of a series of deals that made Carnegie a rich young man.

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

As a young man of means, Carnegie could not only avoid the Civil War draft by purchasing a substitute (for $850), he could also afford to take the first of many long vacations. The guns had barely fallen silent when he embarked on a year-long European sojourn with two friends, overpaying for everything and loving it, assuming that price was the measure of quality. While his brother and business partner Tom fretted at home about saving money, Andrew kept pushing new investments. He was, he told Tom, "made to be forever head and ears in debt and to crowd full sail, despising to bury in the ground any of the talents (silver talents, I mean) which might reach his coffers, or to lie long under the suspicion of having at the 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, Carnegie refined the arts of crony capitalism. He accumulated capital by trading shares in overcapitalized companies and skimming profits from inflated stock prices. He sold bonds to raise money for railroads 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 new direction.

When the tariff of 1870 placed a duty of $28 per ton on imported steel, the federal government opened unprecedented opportunities for 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 eggs in one basket": Bessemer steel. He built a plant in Braddock, Pennsylvania, outside Pittsburgh, and with a born crony's talent for flattery named it the Edgar Thomson Works, after his old boss at Pennsylvania. When the Panic of 1873 hit, Carnegie sold all his interests 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 railroad boom to underscore Carnegie's accuracy regarding the source of his wealth: "the community." Pittsburgh had everything a budding steel magnate could want. It had rivers and railroads for transporting raw materials and finished goods, an abundant supply of skilled and unskilled labor, and easy access to tons of coal, which could be turned into coke to heat Carnegie's blast furnaces. The big coke man in Pittsburgh was short in stature and mean as hell. Carnegie early on recognized Henry Clay Frick as a potential rival and sought to form alliances with him, eventually making him a partner in the enlarging firm of Carnegie Steel. Throughout the 1880s, despite dips in the business cycle, Carnegie's steel business was riding high, increasing its productivity by more than 800 percent.

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

Judging by the available evidence, the marriage was a remarkable success. The Carnegies remained devoted to each other, and eventually the wary Andrew consented to Louise's desire for a child. (She gave birth to a daughter, Margaret, in 1897.) On public occasions, they played complementary roles. Entertaining guests extravagantly, Andrew loved to show off his young bride, to combine the parts of perfect host and perfect husband. Louise learned to be the submissive wife who could signal the patriarch to pipe down when he talked too much. This was not an easy task. Hobnobbing with the great and near-great, Carnegie strained to magnify his own greatness, too. His spreading steelworks, he believed, were more than mere machines for making money: they were evidence of the progress of civilization.

Whether his workers would have agreed is another question. Carnegie never referred to them as individuals, only as the mass of men who made up that significant entry on the books, "labor costs." And he was obsessed with minimizing costs, even as he allowed the Amalgamated Association of Iron and Steel Workers to organize at Edgar Thomson, defended unions in public, and declared himself (with preposterous self-deception) a "fellow workman." He believed that he had come up with the key to labor peace: a sliding scale of wages based on the price of steel. When steel prices fell, wages would be cut. Since capital and labor were part of the same social organism, workers would willingly share in the travails of management. Individual suffering during stormy economic weather was unavoidable and indeed necessary to advance what Spencer called "the interests of universal humanity." Spencerian platitudes reassured Carnegie that his narrow interests were actually the interests of all, but labor leaders no doubt took a more skeptical view. Yet there were times when they accepted wage cuts as part of the logic of the marketplace: better lowered pay than layoffs.

IV.

The real problem for workers, and the reason that labor strife intensified throughout the 1880s and early 1890s, was that wage cuts were part of a comprehensive managerial strategy aimed at more efficient productivity (the strategy that Marx dissected in Capital). Carnegie and Frick wanted to put workers on two twelve-hour shifts rather than three eight-hour shifts. This would throw hundreds of employees out of work and reduce the remaining ones to beasts of burden. As Nasaw notes, Carnegie displayed "astounding insensitivity" to the deadening impact of the twelve-hour day. Management kept trying to impose it, workers kept resisting it; and in flush times, when steel prices were rising, the resistance sometimes succeeded. Like other unions, the Amalgamated wanted workers to be recognized as partners with capital, to share profits and to exercise some control over the pace 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, declaring in 1890 that they represented narrow interests, while he embodied, as always, the interests of the broader community: by keeping labor costs down, he kept prices down for all. This pigheaded self-regard could hardly promote harmony between labor and capital.

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

The plan worked, but it was a messy business. The workers were not the free-floating, free-bargaining individuals of capitalist fantasy. They believed that they were part of a particular community in a particular place. When the Pinkertons invaded, arriving on barges one July morning, they were not allowed to disembark. Led by such figures as Billy Foy, an Englishman and former head of the local Salvation Army, and Mother Finch, a white-haired saloonkeeper and veteran of forty strikes, the residents 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. The Pinkertons finally surrendered at 5 p.m. and were forced to run a gauntlet of angry workers and their wives to the opera house, from which they were rescued the next day by sheriff's deputies. The workers held the plant until Frick persuaded the governor of Pennsylvania to send in the National Guard, who recaptured the factory and ended the battle of Homestead. Several strikers had been killed, but no Pinkertons or Guardsmen.

Carnegie and Frick succeeded in crushing the union, but in the process they provoked an outpouring of public anger, including an attempt on Frick's life by the anarchist Alexander Berkman. Frick had been on the premises, serving as field general and focus for popular outrage. Carnegie, who had approved Frick's strategy, kept his distance and tried to strike an Olympian pose. Sojourning at Loch Rannoch hunting lodge in Scotland during the summer of 1892, he was surrounded by stags' heads and servants in livery. He refused to discuss Homestead with reporters; instead he created his own fantasy version of events, insisting that the Homestead workers had cabled him in July: "Kind Master, tell us what you wish us to do and we shall do it for you." Nasaw, an indefatigable researcher, politely notes that "no cable from the workers to Carnegie was ever found, nor was any Homestead veteran located who could corroborate that one had been sent." Safe in his own delusions, Carnegie still could not keep Homestead from becoming a symbol of the exploitation of labor by capital.

Yet Homestead was also an economic triumph for Carnegie Steel. The Amalgamated was driven out of the steel industry; twelve-hour shifts became the norm; workers were denied grievance rights and even occasional breaks. The pores in the working day were filled. Even during the hard times of the 1890s, profits rose steadily, while wages fell and machines replaced men. Between 1892 and 1897, the workforce at Homestead declined by 25 percent. Carnegie Steel was in high gear, dominating the market. And the key to its dominance was its victory over labor.

Throughout the 1890s, managerial strategies intertwined with structural changes in the steel industry. When the first great merger wave swept through the American economy in the late 1890s, Frick was eager to ride it, to consolidate Frick Coke and Carnegie Steel. Eventually he succeeded, but not until he and Carnegie had fought in public over the value of Frick's company. Legal testimony produced embarrassing revelations, notably the outrageous profits of a tariff-protected steel company. Ultimately Frick settled for what he thought was his due, and the result was a huge holding company, valued at $320 million. Carnegie then took on J.P. Morgan's National Tube Company by building a rival, the Conneaut Works, on the shores of Lake Erie. Charles Schwab, Frick's successor as president of Carnegie Steel, served as a mediator between the titans. He persuaded Morgan to buy out Carnegie and create United States Steel. Closing redundant mills, especially unionized ones, would be the first order of business for the world's first billion-dollar corporation.

V.

Carnegie had finally delivered on his promise to retire, which he had been making for thirty years. He had become "the richest man in the world," at least according to Morgan (who spoke with some authority on such subjects). The sale allowed him to distance himself from business at a time when public anger at monopolies was on the rise. It also meant that he could shift his philanthropic pursuits from retail to wholesale. The results ranged from the Carnegie Institute in Washington (devoted to pure research) to a people's park in Dunfermline (devoted to bringing sweetness and light to a drab industrial town). There were also organs for churches, pensions for disabled steelworkers (but only those judged to be "deserving" by their supervisors), and, everywhere, more libraries.

In 1911, realizing that he could never give all his money away himself, Carnegie created the Carnegie Corporation, the largest philanthropic trust in history up to that time. But huge as it was, philanthropy was only part of Carnegie's public role. He had long sought to shape the zeitgeist, producing ponderous axioms in articles for the North American Review and interviews with the New York Times. By the 1890s, most literate Americans knew what Carnegie thought about money. They were about to learn what he thought about war and peace.

In 1898, Carnegie had supported the war to free the Cubans from Spanish domination, but like many other Americans, he was appalled by the McKinley administration's drive to acquire the Philippine Islands. His arguments against empire were political and economic as well as moral. Trade, he insisted, does not follow the flag, colonies do not mean new markets, and money spent on military adventures abroad would come out of funds needed for internal improvements at home. But what most outraged him was the imperialists' indifference to the Filipinos' desire for self-determination. The advocates of empire, prating of freedom and democracy, were perfectly willing to crush the Filipino independence movement -- even if it took years of guerrilla warfare, which it did. Unlike other anti-imperialists at the time, Carnegie did not dismiss the Filipinos as savages who should be allowed to stew in their own juices. On the contrary, he wrote in 1899, "They have just the same feelings as we have, not excluding love of country, for which, like ourselves, as we see, they are willing to die."

Carnegie's cri de coeur went largely unheard in the corridors of power, but his faith in his own capacity to influence the powerful remained undiminished. He cultivated Theodore Roosevelt with unabashed sycophancy, declaring him "a prince in the republic of letters" and remaining convinced -- against all the evidence -- that Roosevelt was a champion of world peace. Between the imperialist wars 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 mandatory arbitration -- the only alternatives, in Carnegie's prescient view, to the war he was sure was coming if they were not adopted. Both presidents tolerated him in public and dismissed him in private as a "peace crank."

The developing disagreement between Carnegie and Roosevelt revealed moral ambiguities on both sides. Roosevelt the progressive was annoyed by Carnegie's hypocrisy: for all his talk of peace, what about the workers worn out by his labor policies and the small investors 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 more important than peace, and that those goals sometimes required war, Carnegie reminded the president that since each side in war declared that it was in pursuit of righteousness and justice, the question was: who was to decide where the moral right lay? "No one, according to you," he told Roosevelt. "They must go to war to decide not what is right' but who is strong."

Roosevelt's obsession with strength was a part of his own melodrama of beset manhood. Deriding peace advocates as the "male shrieking sisterhood of Carnegies and the like," he confused physical courage with moral courage, and nations with individuals. Nowhere was this clearer than in his critique of arbitration treaties. The nation pledged to arbitration, Roosevelt wrote, would end up "dishonored and impotent, like the man who, when his wife was assaulted by a ruffian, took the ruffian to court instead of attacking him on the spot." This was the sort of thinking (or not thinking) that led Senator Chauncey Depew to dismiss the anti-imperialist critique of the Philippines War as a "scuttle and run" strategy. The same sort of category mistake continues to plague public discourse today.

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

The coming of World War I ended the argument between Roosevelt and Carnegie. It also ended Carnegie's hopes that men might be more than bulldogs. "All my air castles have crashed about me like a house of cards," he wrote in August 1914. While Roosevelt grew increasingly bellicose, Carnegie fell silent. All his exuberance drained away. The puckish multimillionaire became an old man overnight. He lost weight and visibly shriveled. He lived long enough to see his daughter Margaret married in April 1919, and died a few months later.

VI.

At the moment when Carnegie left the public stage, Mellon was on the verge of entering it. He and Frick -- chums since their twenties and fellow members of the Duquesne Club in Pittsburgh -- had just contributed $10,000 each to support the Irreconcilables, a group of Republican senators who were determined to block American entry into the League of Nations. Republicans sensed that they were about to bring down the stricken Woodrow Wilson, and they were right. When the small-town crony capitalist Warren Harding was elected in 1920, he needed a secretary of the treasury who was acceptable to Wall Street but not of it. Andrew Mellon, by then a fabulously successful Pittsburgh financier, was the perfect choice. Reluctantly accepting the appointment, he was thrust into a spotlight that he had shunned for more than six decades.

From his earliest days, he was a shy and sensitive child in a joyless household. His father, Thomas Mellon, was the son of a middling prosperous Pennsylvania farmer who had emigrated from Ulster in 1818. Young Thomas liked farming less than money, which he declared in a youthful essay was "to society what the element of fire is to matter, diffusing warmth and vigor through all its parts." He read law, married a local daughter of affluence with a sizable dowry in land, and soon became a successful real estate developer. While Andrew Carnegie was networking with Pennsylvania railroad executives, Thomas Mellon (still in his forties) was becoming one of the founding patriarchs of the Pittsburgh business community, and a particularly rigid example of Presbyterian self-made manhood. After he was elected to the post of associate judge of the Court of Common Pleas, he was ever after known around town as the Judge.

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

Young Andrew was close to his father, especially after his brother (and best friend) Selwyn died young. Andrew was eager to learn banking, and Thomas was eager to trust him: he allowed his son sole access to the padlock on the safe. Absorbing his father's solitary drivenness, Andrew seemed a loner even in the Mellons' taciturn household. "The air was heavy with the imperative to acquire," one in-law said. "They had absolutely no fun." "It was work, work, all the time.... The one thing they understood, the end of all their efforts, was money." Installed at T. Mellon %amp% Sons and already en route to financial success, Andrew had nonetheless paid a price, as Cannadine perceptively observes: "There may have been color and warmth in his life, sometime and somewhere, but if so, he suppressed them so much that no one later knew where to find them or how to draw them out. In more ways than one, he was growing into a sad man."

Meanwhile, he took on more responsibility at the bank. In 1876, the Judge gave him power of attorney for T. Mellon & Sons, and also introduced him to a rising business star (to whom the bank had made a timely loan) named Henry Clay Frick. Unlike Carnegie, who by that time had fled to New York, Frick and his new friend Andy were content to remain members of the Pittsburgh ruling class, secure in their provincial superiority, comfortably smoking cigars and sipping whiskey at the Duquesne Club. It was probably on one of those nights that Frick persuaded Andy to buy an interest in the Overholt Distillery, the first of many investments that Mellon made in Pittsburgh-area companies.

Andy and his brother Dick perfected what became known as the Mellon System. They invested in vertically integrated enterprises, which they financed but allowed their partners and collaborators to run. The prototype of these was the Pittsburgh Reduction Company, which reduced aluminum from bauxite. It was started by some bright young chemists 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 told themselves at the Duquesne Club bar. But most of the city lived alongside polluted rivers, breathing poisonous air, surrounded by acres of pestilential slums. Few working-class men lived to be older than forty. It was a town of millionaires and paupers, as the Homestead strike made clear.

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

As the father faded, the son kept up with the times. He learned how to buy streetcar franchises and the votes to support them. He also rode the merger wave, creating new banks that combined investment and commercial services, increasing their capital stock and generating new resources for investing in steel, shipbuilding, coal, and oil. Capital begat more capital. Federal banking regulations (or the lack of them) allowed him to underwrite securities and subscribe to the stock of corporations he intended to bring within the boundaries of his industrial empire. Most of his companies were closely held, such as Union Steel, formed in 1899 with only himself, his brother Dick, the ubiquitous Frick, and a steel man named William Donner as partners. In 1902 he sold Union Steel to the newly formed United States Steel at a price based on inflated stock values -- the sort of paper-based profits that a good Presbyterian like his father abhorred. But by this time the old man was going blind, and Andrew was becoming an Episcopalian.

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

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

The mismatch was apparent from the start, though Mellon himself remained preternaturally oblivious to it. When they arrived in Pittsburgh after their wedding journey, she was appalled at the grim industrial landscape of the place that would be her home. "You don't live here?" she cried. Mellon's easy talk devolved into stony silence; he had little time for talk, or for tenderness. She took to bed much of the time, especially after the birth of their daughter Ailsa in 1901. The stage was set for Alfred Curphey, a mustache-twirling bounder from Victorian melodrama who preyed on rich and restless women. Nora met the charming deceiver on a trans- atlantic voyage to see her dying father. Soon she and Curphey became 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 temporarily reconciled, and even conceived another child, a son named Paul. But within a few years Nora was once more simmering with resentment at Andrew's neglect. Curphey, still waiting in the wings, re-appeared in Paris and followed her back to Pittsburgh. Nora again demanded a divorce. Andrew fought back, and Nora gave as good as she got. To the newspapers, she struck the pose of the injured wife, winning the public relations battle but losing the war, as Andrew was declared the officially injured party and awarded custody of the children for eight months a year. Everyone was "terribly scarred," as Cannadine observes, but especially the children. Ailsa became a neurasthenic invalid like her mother, Paul a lonely and self-doubtful young man. Years later their parents reconciled and resumed a distant but cordial relationship. The scars, of course, remained.

Wounded as he was, Mellon continued to prosper. Even as Pittsburgh lost its economic supremacy, he found ways to keep profits high at Alcoa and his newer acquisition Gulf Oil; these included pools, cartels, and other violations of federal antitrust law, enough to provoke a complaint from the Justice Department in 1911. Like other self-proclaimed individualists, Mellon only favored competition when it suited his interests. Otherwise he aimed for monopoly. By the 1910s, this was not a popular position. Progressive reform was in the air; even labor unions were acquiring government sanction. Mellon kept his head down and weathered the storm. When World War I began, he broke into the explosives industry, investing in a company that made benzene and other chemical byproducts from coking coal. Just about anything could be turned into capital, if you had the right touch.

So when the ideological winds shifted after World War I, Mellon became the Midas of the U.S. Treasury. With respect to revenue, he anticipated the trickle-down model of recent years, but with a significantly different rationale. Reducing tax rates on the rich, he believed, would persuade them to move their money from tax-exempt government bonds to taxable stocks. That meant higher returns for the rich, but also higher revenues for the government. It also meant low or no taxes for most Americans, as Mellon favored taxing investment income more heavily than earned income. It seemed a sensible and humane plan, and for a while it worked; government surpluses 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 local governments, for ostensibly civic purposes. Mellon trusted only the private sector, the issuers of taxable stock certificates. Not all of them were trustworthy; nor did their interests necessarily promote the national interest. This was the same inability to see any distinction between private profit and public purpose that allowed Mellon to keep supervising his business interests throughout his tenure as secretary of the treasury. He insisted he had withdrawn from involvement in business "as if I had died," but even the sympathetic Cannadine, after examining Mellon's memoranda and diaries, concludes that Mellon's claim was "a lie." The bigger lie, though, lay at the core of the laissez-faire creed: the belief that the public good was best served by the pursuit of private gain.

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

Like his boss Herbert Hoover, Mellon became the target of popular outrage. When the House Banking Committee began impeachment hearings against him, Mellon was hauled before Congress and forced to admit that, on assuming his Cabinet office, he had divested himself of his bank stock by selling it to his brother. Those Mellons stuck together. He resigned in disgrace. Hoover appointed him ambassador to the Court of St. James, where he used his position to try to persuade the British government to provide Gulf Oil with a concession in Kuwait. He simply could not get the hang of the public-private divide.

The New Deal marked the nadir of Mellon's public reputation. He was widely -- and unfairly -- blamed for the Depression. He was also the target of a baseless and politically motivated federal prosecution for tax fraud. But Cannadine strains so hard to portray Mellon as a sacrificial lamb and Franklin Roosevelt as a vindictive predator that one yearns for a corrective dose of skepticism. Roosevelt's revenue policies hardly reflected a "savage, soak-the-rich atmosphere." As Cannadine acknowledges, New Deal taxation ultimately did little to redistribute wealth. The rich were sprinkled, not soaked. Mellon's assets shrank, but so did everyone else's.

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

Whether Marx would also have seen it that way is another matter. He and other critics of laissez-faire, whatever their differences, shared the fundamental insight that private philanthropy alone could not sustain the public good. The well-being of the citizenry was too important to be dependent on the wisdom (or unwisdom) of a few rich men. The commonweal could not be left to the caprices of crony capitalism -- no matter how generous the capitalists themselves turned out to be.

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

What is lost among the upbeat pieties and the culture of Wall Street bonuses is the awareness of loss itself -- the realization that capitalism creates scarcity as well as wealth, and that "creative destruction" is still destruction: of irreplaceable resources, of craft skills and communities, of the means of livelihood for many millions, of the spirits of honorable and hardworking people. In the twenty-first century, as in the nineteenth, productivity often comes at a price that is not discussed in polite company. What ought to be at stake in public debate is the definition of wealth itself, which is invariably (and tautologically) assumed to mean the accumulation of capital. Yet more capacious definitions exist, stretching back to the movement for the eight-hour day, and surfacing in the aphorism articulated by Marx's contemporary John Ruskin: "There is no wealth but life." This, too, makes economic and social sense. If recent events are any guide, vernacular discontent with plutocracy may be on the rise, and Americans may once again be ready to take Ruskin's words seriously. Only someone besotted by money could dismiss them as mere sentiment.


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