Iron Augury

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In the last quarter-century the American steel industry—once the very symbol of American economic power—has undergone wrenching change. While steel production has declined somewhat (from 131.5 million tons in 1970 to 105.3 million in 1996), employment in the steel industry has declined much more. There were 457,000 workers in the industry in 1975. Thirteen years later there were only 169,000. Today there are 162,000.

This painful example of the “creative destruction” of capitalism resulted from two factors. The first was that lower shipping costs (and, often, disguised government subsidies) made it increasingly possible for foreign-manufactured steel to compete with domestic steel in the open American market. Even more important was the spread of “mini-mills,” which process scrap steel instead of iron ore and use electricity to power their furnaces. They were able to produce many kinds of steel far more cheaply than the oldline steel mills dating from the Carnegie era.

While brutal for both the steel-workers who lost their jobs and the stockholders who had to write off billions in assets, the result has been an American steel industry that is once again as efficient, and profitable, as any in the world.

But if it’s difficult to restructure a great industry, it is, at the least, equally hard to start one from scratch.

Metal has been used by human beings since at least 7000 B.C. But the metal was copper, not iron. Iron is almost never found in the pure state because it is highly reactive (the reason it rusts). Further, it has a high melting point. So separating pure iron from other elements requires both very high temperatures for melting the ore and massive hammering techniques for expelling the other elements. While artisan-ready copper can be obtained with technology available to any Boy Scout troop, iron requires an industrial enterprise.

But once the techniques were developed, by about 1400 B.C. , iron’s superiority as a material was decisive, and it quickly became indispensable to civilization.

When the first settlers arrived in what is now the United States, they had no choice but to import all the iron goods necessary to carry on life as they knew it. This made iron and the things necessarily made from it—horseshoes, pots, nails, weapons, plows—extremely expensive. The New World, after all, was a full two months’ upwind sailing from the nearest iron foundry.

That state of affairs did not continue for long. Indeed, what is perhaps most remarkable about the early days of the American iron industry is just how very early they were. Only eleven years after the Arbella had sailed into what would become Boston Harbor, John Winthrop the younger headed back to England to arrange for the creation of an ironworks in his adopted land.

The elder John Winthrop, a Puritan lawyer as well as a landowner, had agreed to become the first governor of Massachusetts and sailed on the Arbella . It was aboard her that he coined one of the great enduring phrases of the American lexicon, when he wrote in his Modell of Christian Charity that “wee shall be as a Citty upon a hill, the eyes of all people … upon us.”

The son, also trained as a lawyer, was deeply interested in both science and commerce. Having arrived in Massachusetts the year after his father, he soon set up a saltworks to manufacture another indispensable commodity that was very expensive to import.

But to make iron, he needed something America did not then have at all, capital, and he sailed to England in 1641 to get it. Why, one might well wonder, would any capitalist be so foolhardy as to invest in a major industrial enterprise three thousand miles away in a wilderness? The answer lay in something that America did have in indescribable abundance and that was in short supply in England: wood. Charcoal was as indispensable to iron smelting as ore, but England’s forests were being rapidly cut down. America, however, had well over a million square miles of forest.

So Winthrop was able to argue that combining America’s cheap raw materials with England’s capital would produce a product that could be sold at a profit not only in Massachusetts but in England as well. By all accounts he was a most engaging and persuasive man. Certainly he was able to persuade many people to invest. He initially received a thousand pounds from investors, but before all was said and done, they would put up no less than fifteen thousand pounds. To get a sense of how much money these sums represented in the Massachusetts of the 164Os, consider that the highest salary in the colony in 1648 was the ninety pounds paid to the Reverend Zechariah Symmes of Charlestown.

Winthrop returned to Massachusetts in the fall of 1643, after a nightmarish fourteen-week voyage. He brought with him tools and materials for the ironworks as well as some skilled workmen and spent the winter scouting sites from Maine to Cape Cod. The government granted the Company of Undertakers, as the enterprise was known, a monopoly on iron production for twenty-one years, an exemption from taxation, and the right to export iron once local demand was met. Obviously, cozy relations between government and industry is not a twentiethcentury phenomenon in this country.