Pittsburgh has been affectionately called “The Steel City” for its prominent role in the Industrial Revolution and its key contributions to America’s rise in global business. In many ways, the growth of the U.S. economy can be examined by focusing on the history of Pittsburgh business. Before, during and after the steel boom, Pittsburgh has been a great example of how a municipal economy works.
How did Pittsburgh’s economy grow to its heights during the late 19th century and early 20th century? What contributed to the city’s struggles and successes? What does Pittsburgh’s future look like?
Founding of Pittsburgh and Early Economy
Although Native Americans had inhabited southwestern Pennsylvania for hundreds of years, no European settlers arrived until the 18th century. The first description of the geographic area came from fur trader Michael Bezallion in 1717. After Bezallion’s report, more traders began to settle in the area.
Significance of the Three Rivers
The reasons for the founding of Pittsburgh are evident just by looking at a map. The point where the Allegheny and Monongahela rivers meet to become the Ohio River marks the place that would become Pittsburgh. The three rivers made the site ideal for a settlement, both as a place to stop before heading farther downstream and for military defense.
The location is also less than 50 miles away from the western end of the Allegheny Mountains. This opened the location to travelers heading west and to those returning to the Northeast. It was a perfect spot for traders, explorers and the military alike. The British built Fort Pitt there in the 1750s.
Early Focus on Agriculture
As with most areas during the time after the Revolutionary War, the primary economic focuses were on agriculture and trade. Pittsburgh was flush with farmers turning their corn harvests into whiskey. Because Pittsburgh stood on the edge between civilization and the frontier, whiskey was just as valuable as money. After Congress adopted a whiskey tax in 1791, many in western Pennsylvania were displeased. The result was the Whiskey Rebellion of 1794, which was quickly quelled by President George Washington and several militias. This was an example of how crucial agriculture was to the early Pittsburgh region.
Boat Building Tradition
As the settlement of Pittsburgh grew, merchants took advantage of the three rivers in more ways. Boat building became an important industry because traders and pioneers needed methods of shipping goods. By 1792, the boatyard was building larger ships that could carry goods as far as Europe. The boat building tradition continued throughout Pittsburgh’s early existence.
Shift From Commerce to Industry
As America expanded westward in the early 19th century, Pittsburgh was no longer as big a force in commerce. Other cities along the Ohio and Mississippi rivers like Cincinnati, Louisville and St. Louis grew, and Pittsburgh was no longer as important in the supply chain to the frontier. The 1825 completion of the Erie Canal effectively ended future trade growth in Pittsburgh. This economic vacuum allowed for new industries to thrive.
Refining of Natural Resources
In 1760, explorers discovered “Coal Hill” in what would become the Mount Washington neighborhood. It was believed to be one of the most valuable deposits of coal in the entire United States. The constant supply of coal became critical to the emergence of future business industries that Pittsburgh would be known for.
Soon enough, Pittsburgh became a national player in iron production. According to Pittsburgh Quarterly, Charles Dickens visited the city in 1842 and wrote that “Pittsburgh is like Birmingham in England … and is famous for its iron works.”
The mid-19th century saw Pittsburgh develop significant oil refining capabilities as well. Samuel M. Kier, one of the city’s early industrialists, began distilling crude oil in a massive facility downtown. His refined oils were meant to replace the oils used in lamps — a major advance, decades before John D. Rockefeller revolutionized the oil industry.
From 1870 to 1910, Pittsburgh’s population exploded. According to Pittsburgh Quarterly, the city’s population grew from 86,000 to more than 533,000. The region grew at a rate twice as fast as the entire nation. This gave Pittsburgh plenty of laborers to work in iron and steel production facilities. These laborers worked in the factories daily, and some worked seven days a week. Constant production fueled economic growth.
This time period was the golden age of industry, inspired by entrepreneurial minds. These innovators developed the biggest corporations the world had ever seen, and many of the companies remain crucial to America’s economy today.
Fresh from his meteoric rise at the Pennsylvania Railroad, Andrew Carnegie organized the construction of a massive steel plant in Pittsburgh in 1872. The plant had one purpose — to produce steel rails at a rapid pace. The plant became profitable in the first year of production and sold rail at the lowest cost in the nation. Carnegie was able to shift steel production in the city from rails to locomotives, rail cars, bridges and tunnels. His production fueled the westward expansion of American transportation lines. By 1900, Carnegie Steel was the country’s largest steel company with 3 million tons of capacity.
A transplant from Schenectady, New York, George Westinghouse came to Pittsburgh because of the low steel costs and the abundance of skilled metalworkers. He developed the revolutionary Westinghouse air brake for trains in 1869 and became one of the country’s most important inventors. His 371 patents stand second only to Thomas Edison, and Westinghouse Electric Company remains today.
The Mellon Family
Investing in many of the successful corporations sprouting in Pittsburgh, T. Mellon and Sons was the driver of wealth for the ambitious Mellon family. Rivaling the financial acumen of J.P. Morgan, A.W. Mellon created the 13th-largest bank in the country. Members of the family founded Gulf Oil Company and were financiers of Alcoa, Standard Steel and several other companies.
From Industrial Powerhouse to Modern Economy
At the dawn of the 20th century, Pittsburgh’s overspecialization in steel became a weakness. Investors and business professionals chose other cities in which to begin new ventures. By 1930, the population of Pittsburgh was nearly 700,000.
Decline of Steel
The Great Depression and the reforms of President Franklin Roosevelt’s New Deal allowed labor unions to become powerful in Pittsburgh. The city’s economy was directly tied to the steel industry. An industrywide steel strike in 1959, which lasted 116 days, foreshadowed how depending on the steel industry would hinder the city.
The strike became the first opportunity for American companies to import steel. Over the next 40 years, 29 steel companies went bankrupt. Although some Pittsburgh steel companies grew thanks to appliances and automobiles, that production came from steel plants in the Midwest. By the 1980s, more than 75 percent of the steel-making capacity in the Pittsburgh region was shuttered.
Growth of Manufacturing and Health Care
As the steel industry declined, Pittsburgh’s economy adapted. Many laborers left the steel industry and took jobs in manufacturing. By 1970, one of every three Pittsburgh jobs was in the manufacturing sector. This helped absorb the losses from the steel industry.
The region has also played host to significant gains in the health care sector. With an abundance of medical research at area universities and hospitals, some companies have found a home in Pittsburgh. As of 2012, one in five private sector employees worked for a health services business.
The Current State of the Pittsburgh Economy
The Pittsburgh economy has grown and expanded beyond steel. Although the city still boasts inexpensive energy costs thanks to local natural gas deposits, successful companies have emerged in the technology, manufacturing and retail sectors.
A June 2015 study from the U.S. Conference of Mayors projects that Pittsburgh’s regional economy will grow at an average of 4 percent a year in gross metro product through 2021. The study ranks the region’s economy as 23rd in the country out of 381 metropolitan areas. In addition, the unemployment rate is expected to drop from 5.1 to 4.9 percent by 2017.
Companies Leading the Way
The Fortune 500 includes six Pittsburgh companies. They are:
- United States Steel (176)
- PNC Financial Services Group (192)
- PPG Industries (198)
- J. Heinz (272)
- WESCO International (360)
- Dick’s Sporting Goods (393)
These companies show the range of industries in Pittsburgh. Although U.S. Steel represents Pittsburgh’s historical roots, the other businesses show how the city has grown and evolved. Here are a few details on some of the big companies in the city.
The sixth-largest bank in the country, PNC is a regional banking institution that operates in 19 states. It began as the Pittsburgh Trust and Savings Company in 1845 and has remained a fixture in the city.
PPG’s roots come from Pittsburgh’s 18th-century glassworks. Founded as Pittsburgh Plate Glass Company, PPG has moved into fiberglass and is perhaps more well-known for paint. PPG is spread across the world in 70 countries.
Dick’s Sporting Goods
Founded in 1948 by young Richard “Dick” Stack, the national retailer began as a small bait-and-tackle shop in Binghamton, New York. The store expanded throughout the 20th century and moved its headquarters from Binghamton to Pittsburgh in 1994. It has grown to become one of the largest sporting goods retailers in the world.
Emerging Technology Scene
Like many cities, Pittsburgh is attracting new companies and businesses based on technology. Google, Apple and Intel have all set up campuses in the city and are helping to attract technology talent to the city. Pittsburgh is not Silicon Valley, but it has a healthy startup scene with growing Internet companies like Petrosoft, ModCloth and Guru.
The constant in the history of Pittsburgh’s economy has been the strength of numerous business professionals and leaders. Business in the Pittsburgh region is poised to continue to thrive as the American economy changes. Point Park University’s online business programs can prepare professionals for successful careers. The programs are flexible, convenient and ideal for working students.