During the Early 1900’s and late 1800’s a drastic shift from agrarian society to an industrial economy occured, bringing about new patterns of production. It created new class structure, clearly separating the wealthy and working class. Factory assembly lines replaced apprentice workshops and machines replaced skilled craftsmen. Entrepreneurs Like John D. Rockefeller and Andrew Carnegie brought about monopolies and used new tactics of vertical and horizontal integration to dominate steel and oil production. Mark Twain called this time period the “Gilded Age” by this, he meant that the era was glittering on the surface but corrupt underneath (Doc G) However, the domination of these companies and continuous use of vertical integration greatly impacted the upper and lower class, and benefited both sides of the economic spectrum positively.
Vertical integration was used by many thriving companies during the gilded age. This strategy decreased cost for customers by eliminating price markups associated with buying a product from a higher company. With the level of control Vertically integrated companies had, their supply chain efficiency and profit increased (Doc D). Andrew Carnegie first used this tactic in business practice and dominated the steel market with his company Carnegie Steel. John Davison Rockefeller was an American oil industry business magnate during the gilded age. He is widely considered the wealthiest American of all time, and the richest person in modern history. His company used a different spin off of vertical integration. (Doc B) Rockefeller’s strategy of establishing a monopoly over one aspect of the production process of oil refining was labeled as horizontal integration. To eliminate his competitors, Rockefeller used his firm’s superior size to negotiate rates from the railroads that transported both his and his competitors’ oil, making it nearly impossible for his competitors to stay in business.(Doc C) This economic success occurred with a handful of businesses during the time, and shows how the tactics of horizontal and vertical integration benefited the wealthy class by giving them opportunities to become top dogs in their fields of work.
Although it may seem like there are no possible benefits with vertical integration to anyone other than the entrepreneurs, a lot of the working class was impacted by this tactic as well. The rapid growth of the manufacturing industry created a great need for unskilled workers. This demand caused mass migration, farm workers moved from rural areas of the United States to find jobs in America’s rapidly growing cities. The increase in jobs was also a draw for people in foreign countries. (Doc E) Many people immigrated to the United States in search of work and the opportunity to live the American dream. They could use these new job opportunities as stepping stones into a new life of owning land or carrying out their life aspirations that their old country couldn’t fulfill. (Doc F) This was impactful because it created a large amount of jobs that required manual work, no one needed to be skilled or knowledgeable to get a job. Also due to vertical integration, our nation became industrialized and urban just like it continues to be today. It is clear to see how prospering entrepreneurs benefited in the gilded age, but the lower working class was impacted as well given unskilled labor and a chance to start a new life, aspiring for the “American Dream”.
Big business owners benefited tremendously from the economic changes in the United States and the use of vertical integration. Some people believe that these entrepreneurs were robber barons because they got rich through ruthless means. However, many called them captains of industry because they were greatly responsible for increasing productivity, expanding markets, providing jobs, and increasing the nation’s wealth. All in all both ends of the economic scale were impacted and benefited from vertical integration.
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