Steel Titan: The Life of Charles M. Schwab, by Robert Hessen, New York: Oxford University Press, 1975, 350 pp. + appendices, notes, index, $14.95.
Charles M. Schwab, one of a generation of outstanding American industrial leaders, was second only to Andrew Carnegie as organizer of the steel industry. Like his patron and mentor, Schwab's biography is a story of rags to riches. Yet, at the close of his life in 1939 most of his fortune had been dissipated, not by philanthropy, but through the effects of the Great Depression and in what Thorstein Veblen termed "conspicuous consumption." Schwab, like so many self-made men, enjoyed high living, and his flamboyant lifestyle was related to his methods in business. Although Schwab always sought to cut costs and increase efficiency, he was also a daring operator who was willing to take carefully calculated risks.
Robert Hessen, author of this first scholarly life of Schwab, has had access to the steelman's papers as well as to the Carnegie collection and other related documents. Trained as a historian, Hessen has taught in the Columbia University Graduate School of Business and is now a research fellow at the Hoover Institution on War, Revolution, and Peace at Stanford University. His point of view is both conservative and sympathetic to his subject. Thus he joins the now-orthodox opinion that is critical of the old Veblenian "Robber Baron" theses attacking the competence and role of American business leaders. Great industrial enterprises, Hessen writes, are not spontaneous affairs. They require direction—"the entrepreneur, the man who defines the firm's fundamental nature, goals, and operating methods and directs its response to unforeseen problems and challenges."
In his career, which carried him to the top in three major steel companies, Schwab was the entrepreneur par excellence. His family circumstances in western Pennsylvania, though not as poverty-stricken as Carnegie's, were still very modest, "an unlikely background," as Hessen points out, for the achievement of great success in the new world of steel. Schwab, however, was talented and ambitious. Like Carnegie, whose career his own closely parallels, Schwab had a keen eye for the main chance and an inordinate ability to work tremendously hard toward that end. When an acquaintance of Captain Bill Jones, the legendary practical genius of Carnegie Steel, gave Schwab a job in 1879 as a day laborer, he parlayed the opportunity into a succession of quick promotions that made him, in less than 20 years, superintendent of the Homestead Steel Works and then a partner and president of the Carnegie Steel Company. Along the way he managed to survive such potentially damaging affairs as the Homestead Strike and the armor plate battleship scandal. The latter, as many historians have uncritically assumed, was not a scheme to sell the government defective steel. The issues were much more complex, involving such technical matters as cost calculations and insuring proper methods of inspection. In any event, neither the United States Navy nor Schwab and the Carnegie Company seems to have been without fault.
Schwab meanwhile continued to enjoy Carnegie's support. Their only significant difference in business stemmed from Schwab's desire to replace Carnegie's old-fashioned, cut-throat competition with a new ethic of compromise and conciliation. (This he proposed to achieve within the industry via price and pooling agreements.) When Henry Clay Frick, long Carnegie's principal partner, incurred the steelmaster's vindictive wrath, Schwab became the heir apparent, chosen by J.P. Morgan and Carnegie to head the new United States Steel Corporation. In April 1901, at the age of 39, Schwab accordingly assumed the presidency of the billion-dollar holding company created to take over the now-retired Carnegie interests.
In some ways U.S. Steel marked the peak of Schwab's career, for in a little more than two years personal and business scandals forced him to resign his office, though not his financial interests, in the company. Schwab, however, was far from finished. As a side venture, he had already acquired control of the moribund Bethlehem Steel Corporation, which he promptly proceeded to rebuild into an eventual major competitor with his former company. In World War I he merited the high praise of President Wilson and Congress for his highly successful work as director-general of the Emergency Fleet Corporation. As Hessen points out, if Schwab had died late in 1918, at the close of his war service, "he probably would have been given an official state funeral." Instead, a postwar Congressional investigation of the tremendous wartime rise in the Bethlehem Steel Corporation's stock and profits, as well as the revived memories of Schwab's equivocal position on labor and tariff policies, clouded his reputation and marred his semiretirement from business. In any case, Schwab had now grown old, his later years unhappily marked by illness and marital troubles plus the loss of much of his fortune after the stockmarket crash of 1929.
Within the steel industry, and in his own time, Schwab had no equal as a super salesman, negotiator, and conciliator. Labor, as well as business associates, though not certain minority stockholders, responded to his beguiling arguments for profit sharing and bonuses. Hessen is on sound ground in his criticism of the more extreme of the "Robber Baron" school of historians. But one may still argue that the pace of America's post-Civil War industrialism was too swift. A wiser public policy, divorced from the tariffs and subsidies that helped to fuel industrial progress, might have slowed the exhaustion of natural resources and the filling up of the land. Business enterprise, more than any single endeavor, has made America the modern world's colossus. And business leaders such as Schwab, Carnegie, and Rockefeller were more than Robber Barons. But the age they helped to fashion was still, in Ray Ginger's words, "An Age of Excess." And is there not something also to be said for the Brandeisian conception of the "curse of bigness"?
Free enterprise, if it is to be truly free and individualistic, means strict laissez faire. It does not entail paternalism or the government's helping hand. Few Americans, however, have been willing to espouse so rigorous and abstemious a program, and Schwab in his amazing career probably fulfilled, perhaps all too well, popular American expectations and stereotypes of success.
Arthur Ekirch is professor of history at the State University of New York at Albany. He received his M.A. and Ph.D. from Columbia University. His many books include The Decline of American Liberalism and Ideologies and Utopias: The Impact of the New Deal on American Thought.
This article originally appeared in print under the headline "Steel Titan: The Life of Charles M. Schwab".