CHAPTER VI
DEVELOPING WORLD MARKETS
Until the year 1914 American industry had been self-sufficient. Our manufacturers made goods for home consumption, our bankers concerned themselves only, or almost so, with American finance, and, broadly speaking, the world outside was of comparatively small importance in our business affairs. With the war this situation changed. The British navy stood as an impassable barrier between Germany and her customers abroad. England and France were devoting the mass of their man power to fighting or the production of the wherewithal for fighting, and the neutral, non-producing nations had only one market to turn to. They came to the United States for all their wants of manufactured goods, and in so doing brought home to the American manufacturer the real importance of these vast markets he had previously neglected.
Some of our more far-sighted manufacturers, however, had long sensed the value of this foreign commerce. They realized that the day would come, sooner or later, when this country would produce a surplus of manufactured goods above her own needs, and that if she was to be prosperous she must find customers outside for this over-production. They realized, too, that these markets must be assiduously cultivated against the time when they would be necessary for the continuation of our prosperity.
And among those who took this far-sighted view was the management of the United States Steel Corporation.
In the office of James A. Farrell, president of the Corporation, at 71 Broadway, New York, stands a pedestal supporting a great globe. It is a fitting ornament for that office, for the business of the great steel company extends to practically every part of the known world, literally “from China to Peru”; fitting, also, because Farrell’s name is indissolubly connected with the development and extension of that business in the markets of the world.
When the idea of a big steel combine was first conceived by Judge Gary, one of the chief considerations in his mind was that such a vast organization, and such an organization alone, would be able to offer battle to the manufacturers of the other great steel-producing nations—Great Britain, Germany, and Belgium—which were then practically without let or hindrance, dividing between them the markets of the world. The same thought was forcibly brought out by Charles M. Schwab at the Simmons dinner, and was one of the most powerful factors in influencing J. Pierpont Morgan to undertake the financing of the giant steel merger.
Properly speaking, the development of the Corporation’s export trade did not begin until about two years after the big company was formed. Questions of internal organization were naturally paramount in the Corporation’s infancy, and the first few years were taken up with problems nearer home—physical organization, coördination, integration, efficiency, economies, in a word, the welding into a harmonious whole of the corporate organization and properties merged. Therefore, it was not until the early part of 1903, when internal problems had been gotten out of the way, that the question of securing export business on a more systematic and profitable basis was actively considered and steps taken toward the formation of an organization with a definite export plan and policy. To do this, it was necessary to bring together, to consolidate, the export offices and organizations of the several subsidiary companies which had until that time been maintained on a practically independent basis. This was done by creating a new company, the United States Steel Products Export Co. (the “Export” was later dropped from the title), late in 1903. The first organized efforts of the Corporation to obtain export business may thus be said to have begun with the calendar year 1904.
How beneficial was the coördination of the export trade of the various constituent companies into one selling agency is forcibly illustrated by the fact that the cost of doing export business has been reduced from about 8 per cent. of gross, which it was when each company sold independently, to something under 1 per cent. in recent years. As the Corporation’s foreign sales in the past few years have averaged more than $160,000,000, this has meant an annual saving of between $11,000,000 and $12,000,000, or nearly a half year’s dividends on its preferred stock. The lower selling cost also meant that the position of the Corporation bidding against foreign competition has been improved, and to that factor must be attributed largely the increase in the Corporation’s export business.
The choice for the presidency of a new export organization fell upon James A. Farrell. He was suggested and his appointment advocated by the chairman. He was the man fitted preëminently for the job and his selection was more or less inevitable. It is generally recognized that no individual in the steel industry possessed so wide a knowledge of the extent, character, and requirements of world markets as he does. In 1903, when he became president of the Corporation’s new export subsidiary, the country’s foreign trade in iron and steel was a little more than 300,000 tons. In 1917 it was 6,268,514 tons.
For many years, during which there had been little disposition on the part of American steel makers seriously to cultivate markets abroad, Farrell’s entire time and energy had been devoted to that end. A man with the genius that is “an infinite capacity for taking pains,” he had developed a thorough knowledge of competitive conditions affecting steel in every part of the world where the metal was used. He had become, and still is, a walking encyclopedia on all matters relating to the exportation of steel, carrying in his head details of freight rates, steamship facilities, duties, and so on, at and between all important and many unimportant points. His facility in reeling off from memory these facts and figures, as displayed when he was called as a witness for the defence in the Federal suit since dismissed by the Supreme Court for the dissolution of the Steel Corporation, earned him the soubriquet of “the man with a head full of figures,” a not inept title.