Andrew Carnegie's Rise to Wealth
In 1901, JP Morgan congratulated Andrew Carnegie on becoming the wealthiest man in the world. This came about as a result of the merger of various industrial firms into US Steel. The newly formed company was valued at $1.4 billion, making it the world's most valuable company at the time. To put this into perspective, the US federal budget in 1901 was $517 million.
Carnegie was born in Scotland in 1835 to an impoverished weaver mother whose livelihood was disrupted by mechanized weaving. They moved to Pennsylvania, and at the age of 13, Carnegie started working in a cotton mill, earning $1.20 for a 12-hour day. Morgan paid him $492 million.
Carnegie's Philanthropy
Carnegie dedicated the last two decades of his life to giving away 90% of his wealth. Starting in 1880, he built 2,500 libraries in the US, Canada, and Britain, thus nurturing young minds. The first of these libraries was built in his hometown of Dunfermline, Scotland. By the time of his death in 1919, Carnegie had built half of the public libraries in the US. He credited his love for literature to Colonel James Anderson, who allowed apprentices and working boys to borrow books from his personal library when Carnegie was a child.
The Legacy of US Steel
US Steel was so influential that it led to the creation of anti-trust laws. In 1943, it employed 340,000 workers, contributing to the war effort. In 1953, it produced 35.8 million tons of steel, while Europe and Japan were still rebuilding their productive capacity. However, the company was slow to innovate and relied heavily on outdated technology. Today, it produces 14.5 million tons and ranks as the world's 27th largest producer. In 1991, it was removed from the Dow Jones Industrial Average. Currently, Japan's Nippon Steel is attempting to purchase US Steel for $14.9 billion.
Draghi's Proposal for a New EU Industrial Strategy
Draghi has proposed a new EU industrial strategy that requires 800 billion euros of new annual investment spending. This amount, equivalent to 4.7% of GDP, is twice the scale of the Marshall Plan in relation to the size of the economy. However, it's worth questioning why Europe would look to a former central banker to draft plans for an economic renaissance.
In the 12 years since Draghi's "whatever it takes" speech, Europe's benchmark Euro Stoxx 50 index has increased by 108% excluding dividends (67% in real terms), while the S&P 500 has risen by 196% (126% on a real basis). However, manipulating money does not necessarily lead to real prosperity. The divergence in GDP growth between the EU and the US since 2012 is quite staggering. Now, only one of the globe's top 25 largest companies is European.
Bottom Line
The stories of Andrew Carnegie and US Steel offer a glimpse into the world of business and wealth in the past. They also provide a stark contrast to the current economic landscape, where the manipulation of money and the drafting of economic plans by former central bankers are prevalent. What are your thoughts on these historical and current economic events? Share this article with your friends and spark a conversation. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.
