By Anton Chaitkin
Editor’s note: This is Part II of a projected five-part series, which will tell the story of the rise of the U.S. steel industry as it has never been told before. (Part I is here.) The first two parts are excerpted from Anton Chaitkin’s Who We Are: America’s Fight for Universal Progress, from Franklin to Kennedy, Vol.II (2025). The last three parts–discussing how Americans helped build steel industries in Russia, Mexico, and India–will be taken from the draft of the forthcoming Volume III of the author’s work. Footnotes providing references and sources for the first two parts may be found in the complete Volume II, available as an e-book or print book on Amazon.com.
The Tariff, and Broader American Objectives
But in those first years of the nation’s steel industry, only two new companies joined the Pennsylvania Steel Company and the Troy enterprise as American steel producers.57 Newcomers to the industry were confronted with the brutal reality of international trade.
There was then a strong market for rails, as the U.S. was rapidly expanding its railroad network, including the first transcontinental line. But U.S. firms could not meet that demand with the commercial production of steel rails to replace iron, because – as beginners just learning the new production technology — they could not even come close to competing with steel imported from Britain.
There was a staggering price differential: American steel rails sold for about $158 per ton in 1868 and $132 in 1869; the British prices were $61 in 1868 and $55 in 1869.58
Even with the cost of ocean transport and existing U.S. tariffs added in, the British product would still be cheap enough to shut American producers out of the U.S. steel market.
An American steel industry could not be built without raising tariff rates so as to seriously impede British imports.
There was going to be a policy showdown, not only on the tariff, but on the broad question: Now that the Slave Power had been broken, how far would the United States rise?
The people dreamed of the limitless post-war progress that Lincoln and so many others had fought and died for.
Fulfilling this promise required industrial innovation and growth beyond all previous experience, with tens of millions of productive jobs, new cities and scientific family farms.
And for future national success, the former slave South, and the entire West, must not simply be conquered but must be transformed with intensive industry and cultivation. Only plentiful modern jobs could begin to bring opportunities, and justice, to the freed African-American slaves and the displaced Native Americans.
The whole world watched for signs that the victorious American Union might extend the hand of friendship to other nations, might aid their rise out of imperial servitude to the dignity of modern conditions.
Philadelphians organized this wide-ranging policy direction – in industry, in national politics, and in foreign affairs.
Their leadership apparatus, extending outward from Henry Carey and the Philadelphia industrialists, prepared for the coming battles with the imperial adversary.
The very center of history in that era was a certain round table in Henry Carey’s home. There on Sunday evenings, his close friends, and sometimes invited guests, discussed the world over excellent German white wine.
Philadelphia activists and opinion-makers were regulars at these “Carey Vespers,”59 including Pennsylvania Railroad executive Tom Scott and machine designer William Sellers, both founders of the Pennsylvania Steel Company; economist Stephen Colwell;60 civic leaders Morton McMichael,61 John W. Forney62 and George Boker;63 iron and steel producer Joseph Wharton;64 and Congressman William D. (“Pig-Iron”) Kelley.65 James G. Blaine66 and Ulysses S. Grant67 were occasional participants.68
The Iron and Steel Association made Carey an Honorary Member69 and the Association itself revolved around Carey’s ideas, from protectionism to monetary policy. The Association’s semi-official publication70 in New York, The Iron Age, devoted itself to Carey’s views and published his articles.71
In 1867, the Carey inner circle formed the American Industrial League which was
intended to be national in extent and to represent all protected industries. Its first president was Peter Cooper,72 and its executive committee was made up of the foremost manufacturers of the day … At once on its organization the League had become a power in Washington.73
The League directed its appeal to workers who knew protective tariffs promoted America’s relatively high wages. To carry on its campaigns,
the League … secured, after much careful selection, a body of correspondents in manufacturing [centers], chiefly laboring men [who] circulated the League’s literature and secured names to its petitions.74
The national apparatus of the Industrial League was actually run from Philadelphia:
From the beginning the Pennsylvania branch dominated in the League largely because of the energy of [the Pennsylvania group’s] president, the Hon. Daniel J. Morrell … and of the ability and far-sightedness of its Executive Council, including Mr. Joseph Wharton and Mr. Henry C. Lea …75
Backed by this force in the field, members of Congress closely aligned with Carey and with the Philadelphia industrialists advanced protective tariff legislation. Some of them, as we shall see in the next chapter, were the most militant fighters for civil rights and industrial progress in the South:
- Thaddeus Stevens of Lancaster, Pennsylvania (House member 1849-1853 and 1859-1868), wartime chair of the Pacific Railroad Committee, chaired the Appropriations Committee 1865-1868.
- William D. Kelley of Philadelphia (House member 1860-1890), called the “Father of the House” for his long service, was nicknamed “Pig-Iron Kelley” as the iconic Pennsylvania protectionist.
- John Covode from western Pennsylvania (House member 1867-1871), headed the Westmoreland Coal Company, a Pennsylvania Railroad affiliate.
- Daniel Morrell (House member 1867-1871), manager of the Cambria works, chaired the House Committee on Manufactures.
- John A. Griswold of Troy, NY (House member 1863-1869), builder of the Monitor, steel pioneer, partnered with Daniel Morrell as trustees of the Bessemer Association, which held the Bessemer, Kelly and Mushet patents. They licensed the Pennsylvania Steel Company and then all the other firms that began producing steel by the “pneumatic” process.
Consul Dudley’s Warning
Debating the tariff a year after the Civil War, Congressman John A. Griswold blasted free traders for obeying “the behests and dictation of British manufacturers and British capitalists.”76 He supported that assessment with a memo from America’s foremost foreign intelligence officer of that era.Griswold had the clerk read a letter from Thomas H. Dudley, the United States Consul in Liverpool, England:
United States Consulate, Liverpool, April 19, 1866.
They are making great efforts on this side to repeal our tariff and admit British goods free of duty … The work is to be done through the agents of foreign [merchant banking] houses in Boston and New York. Their plan is to agitate in the western States and to form free trade associations all over the country.
If the people were over here, and could see one half that I do, they would open their eyes. No stone will be left unturned to break down our manufacturers. Sir Morton Peto has written a book to show that we are only fit to grow produce, and that England should do our manufacturing. This book will be circulated by the thousands in the western states.77
Dudley was a master of political and military intelligence inside England.
Lincoln had appointed him in view of his pivotal role in Lincoln’s presidential nomination (see Chapter 3, above). Dudley’s understanding of the British empire’s adversary relationship to America uniquely fitted him for his post.
Since arriving in Liverpool in November 1861, he had recruited and worked his own network of American agents, exposing and attempting to foil Britain’s aid to the Southern Rebellion. Dudley focused on the Liverpool-based construction of Confederate warships, whose raids significantly prolonged the American Civil War.78
Dudley faced off against James D. Bulloch, Confederate secret service chief in Britain who procured ships and British crews to attack U.S. shipping.79 The U.S. Minister to the U.K, Charles Francis Adams, and the U.S. Consul in Paris, John Bigelow, worked to block British and French assistance to the Confederacy in tandem with Dudley.
But Adams and Bigelow were also high personages in the anglophile Boston-New York wing of the U.S. Republican Party, hostile to Lincoln and Carey’s American nationalism. When Lincoln was assassinated as the war ended, they and their northeastern faction joined in Britain’s new strategy – to prevent Lincoln’s nation-building agenda from surviving his presidency.
The above-cited 1866 letter from Dudley reported on this new phase in the struggle for American sovereignty and progress. The nationalist-sponsored rise of the great railroads, the new steel industry and other projects would be the central objects of this fierce contest.
London’s American Establishment
In the 1860s, Britain created a set of transatlantic organizations aiming to shape U.S. policymaking and public opinion.
These interlocking groups,80 founded in England and extended into the USA — the Cobden Club, with various Free Trade leagues and Social Science associations — plunged into the U.S. post-war debate, arguing for free trade and against greenback currency.
The U.S. financiers, academics, journalists and politicians who joined this fight against American economic sovereignty drove for power over American life in every field. It was this British policy initiative that gave birth to the modern form of the Anglo-American Establishment.
Economist John Stuart Mill (1806-1873) was the senior British strategist of this campaign.
A generation of aristocratic English liberals followed Mill’s lead.
They criticized British support for the slaveowners as wrong and futile – while supporting the Empire’s world dominance through trade, intrigue, and a smoother application of force. They reckoned that America would survive the Rebellion. But the USA must itself be remodeled into an ally and adjunct of the British Empire, until in time the whole world could be made to accept the permanent end of change that disturbed the rule of the “better people.”
These imperial ideas essentially repeated the strategy of Lord Shelburne, the chieftain of the East India Company who took power in Britain during the American Revolution. He recognized that the Americans could not be forcibly subdued. He negotiated an end to the Revolutionary War, and made Free Trade the British path toward reconquering the lost colonies.81
The British post-Civil War initiative had long been in the works, with John Stuart Mill at the center of the movement.
In 1857, when Mill cooperated in founding Social Science Association,82 he was considered the successor to Adam Smith and Thomas Malthus as the authority on economics and the “science” of government.
Mill was also, at that time, the senior political officer of the East India Company. For 33 years he had risen in the management of the Company’s operations in South Asia, which brought poverty, famine, opium addiction and near-constant war to hundreds of millions.83
In the later years of the American Civil War, with the Union gaining strength, imperial strategists saw the need for a sharply focused fight against the economic nationalism of the Lincoln administration.
The Cobden Club was an offshoot of the earlier Association. It is said to have originated in the proposal of wealthy Manchester textile merchant Thomas Potter
in correspondence with John Stuart Mill in 1864, for a political science association in imitation of the successful Social Science Association set up in 1857 . . . The club was formed in May 1866, devoted to the worldwide diffusion of the principles linked with [free trade crusader Richard] Cobden …84
The British movement had begun outreach into the USA during the Civil War, cultivating American “Social Science” and “Free Trade” grouplets.
The pace accelerated with the creation of the Cobden Club. It drew in wealthy, influential and socially prominent Americans, including former abolitionists who had dropped the cause of Black rights after the war.85 Pathetically, for citizens of a republic, they were all eager to associate themselves with the English gentry, whom they idolized as supremely well-bred.
This, then is the background to Consul Thomas Dudley’s April, 1866 warning that Britain planned to meddle aggressively in the United States. The Cobden Club’s official founding came a month later, in May, 1866.
John Stuart Mill, a founding member, was the Club’s guiding star. Mill had previously published a tortuous defence of Britain’s right to interfere in or conquer other nations. He wrote that
if other countries do not meddle with [Britain], it will not meddle with them. Any attempt it makes to exert influence over them, even by persuasion, is rather in the service of others, than of itself.86
As for imperial subjects abroad,
nations which are still barbarous have not got beyond the period during which it is likely to be for their own benefit that they should be conquered and held in subjection by foreigners.87
The Steel Industry Breaks Through: 1870-1873
The question of a tariff law to protect the new steel industry came before the Congress in 1870. At that time, the Carey-Pennsylvania Railroad forces wielded sufficient influence to prevail in that matter.
The growing London-affiliated array of American financiers, importers, newspaper publishers, professors and politicians had not consolidated sufficient power to defeat the tariff increase. But a degraded new “high society” of the “Gilded Age” was in the making, in New York, Boston, and points west. And the pro-imperialists’ money and positions of authority would soon permit them to strike crippling blows against the Philadelphia nationalists.
To help the new steel industry compete with the British, the tariff act of 1870 imposed a duty of $28 per ton on imported Bessemer rails. Importers also had to pay from $2 to $4 per ton to ship the rails from England.
But British manufacturers paid lower wages, and had more advanced technology, than in America, making British steel much cheaper to produce. Thus the tariff and the cost of transport did not bring the British product up to the price the American firms had to charge in the first years while they were struggling to master the technology.88
But the continuing expansion of U.S. railroad mileage89 created an assured strong demand for steel rails, beyond the capacity of the Pennsylvania Steel company and the pioneer firms to meet. They invited new producers to join the patent-holding Bessemer Association, and encouraged cooperation among all the firms to build up the industry.
Under these conditions, the 1870 increase in tariff protection immediately brought in new producers, who were confident they could readily learn to make cheap steel and outdo the British.
Five new firms joined the steel industry right away; three more would start up in the mid-1870s.90 Bessemer steel production quadrupled in two years, rising from 40,000 tons in 1871 to 152,000 in 1873.91 And the tariff-protected industry so increased efficiency that by 1874 domestic steel rail producers outbid British imports. Steel rail imports thereafter dropped to an insignificant proportion of American consumption.92
The steel industry grew by manufacturing rails. The industry developed under carefully controlled conditions, largely managed by the Pennsylvania Railroad.
Railroad companies
figured … their building and maintenance programs … once a year; they could thus present the Bessemer Association with a known and predictable demand for rails at known and predictable intervals.93
The Iron and Steel Association described how prices were set in this first period of modern steel production:
Representatives of the eleven Bessemer steelworks in the United States met in private session yesterday afternoon at the rooms of the American iron and steel association . . . for the purpose . . . of discussing … production and prices . . .
Among the representatives were . . . Mr. Felton, of the Pennsylvania Steel [Company]; Mr. Townsend, of the Cambria; Mr. Stone, of Cleveland; Mr. Leith, of Joliet; Mr. Hunt, of Troy; And Mr. Wharton, of Bethlehem.94
According to Elting Morison,
these men were [probably] assisted in their deliberations by representatives from the railroads.
[The] Pennsylvania Railroad was practically the fixer of the price of rails . . . [It] divided its tonnage between the three mills on its main line of Rd. … the Penn. [Steel] Works, the Cambria Works … and the J. Edgar Thompson works [built in 1875]. For a long period rails were not purchased by other roads until the Penn. RR led off with its order and after [that] the other roads would come in . . .
The eleven [steel] companies . . . used to talk largely with the President of the Penn. RR Co. as to what would be a fair price for rails . . . Prices changed from time to time. The railroads thought they should be lower and so they talked to the Bessemer people and down they’d come.95
With the protective tariff, and this cooperative price-fixing, production and profits rose — and prices came steadily down.
The PRR-satellite Pennsylvania Steel Company was an enduring example of American technological excellence.
The Pennsylvania firm built another steel center at Sparrow’s Point in Baltimore in the late 1880s. The Sparrows Point plant helped make Baltimore an urban industrial success, with several generations of a skilled and prosperous work force.
The Pennsylvania Steel Company built the Queensboro Bridge in New York (1903), the superstructure of the New York City Municipal Building (1910), and the towers of the Golden Gate Bridge (1933- 1937).96 Still in service today, in the post-industrial USA, “the Steelton site (operated by ArcelorMittal) is one of only three rail producers in the Americas.”97
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Tags: Henry C. Carey, Philadelphia
