Posts Tagged Henry Ford
When Capitalists Cared
By HEDRICK SMITH
Published: September 2, 2012
IN the rancorous debate over how to get the sluggish economy moving, we have forgotten the wisdom of Henry Ford. In 1914, not long after the Ford Motor Company came out with the Model T, Ford made the startling announcement that he would pay his workers the unheard-of wage of $5 a day.
Not only was it a matter of social justice, Ford wrote, but paying high wages was also smart business. When wages are low, uncertainty dogs the marketplace and growth is weak. But when pay is high and steady, Ford asserted, business is more secure because workers earn enough to become good customers. They can afford to buy Model Ts.
This is not to suggest that Ford single-handedly created the American middle class. But he was one of the first business leaders to articulate what economists call “the virtuous circle of growth”: well-paid workers generating consumer demand that in turn promotes business expansion and hiring. Other executives bought his logic, and just as important, strong unions fought for rising pay and good benefits in contracts like the 1950 “Treaty of Detroit” between General Motors and the United Auto Workers.
Riding the dynamics of the virtuous circle, America enjoyed its best period of sustained growth in the decades after World War II, from 1945 to 1973, even though income tax rates were far higher than today. It created not only unprecedented middle-class prosperity but also far greater economic equality than today.
The chief executives of the long postwar boom believed that business success and workers’ well-being ran in tandem.
Frank W. Abrams, chairman of Standard Oil of New Jersey, voiced the corporate mantra of “stakeholder capitalism”: the need to balance the interests of all the stakeholders in the corporate family. “The job of management,” he wrote, “is to maintain an equitable and working balance among the claims of the various directly affected interest groups,” which he defined as “stockholders, employees, customers and the public at large.”
Earl S. Willis, a manager of employee benefits at General Electric, declared that “the employee who can plan his economic future with reasonable certainty is an employer’s most productive asset.”
From 1948 to 1973, the productivity of all nonfarm workers nearly doubled, as did average hourly compensation. But things changed dramatically starting in the late 1970s. Although productivity increased by 80.1 percent from 1973 to 2011, average wages rose only 4.2 percent and hourly compensation (wages plus benefits) rose only 10 percent over that time, according to government data analyzed by the Economic Policy Institute.
At the same time, corporate profits were booming. In 2006, the year before the Great Recession began, corporate profits garnered the largest share of national income since 1942, while the share going to wages and salaries sank to the lowest level since 1929. In the recession’s aftermath, corporate profits have bounced back while middle-class incomes have stagnated.
Today the prevailing cut-to-the-bone business ethos means that a company like Caterpillar demands a wage freeze and lower health benefits from its workers, while posting record profits.
Globalization, including the rise of Asia, and technological innovation can’t explain all or even most of today’s gaping inequality; if they did, we would see in other advanced economies the same hyperconcentration of wealth and the same stagnation of middle-class wages as in the United States. But we don’t.
In Germany, still a manufacturing and export powerhouse, average hourly pay has risen five times faster since 1985 than in the United States. The secret of Germany’s success, says Klaus Kleinfeld, who ran the German electrical giant Siemens before taking over the American aluminum company Alcoa in 2008, is “the social contract: the willingness of business, labor and political leaders to put aside some of their differences and make agreements in the national interests.”
In short, German leaders have practiced stakeholder capitalism and followed the century-old wisdom of Henry Ford, while American business and political leaders have dismantled the dynamics of the “virtuous circle” in pursuit of downsizing, offshoring and short-term profit and big dividends for their investors.
Today, we are all paying the price for this shift. As Ford recognized, if average Americans do not have secure jobs with steady and rising pay, the economy will be sluggish. Since the early 1990s, we have been mired three times in “jobless recoveries.” It’s time for America’s business elites to step beyond political rhetoric about protecting wealthy “job creators” and grasp Ford’s insight: Give the middle class a better share of the nation’s economic gains, and the economy will grow faster. Our history shows that.
- When Capitalists Cared (nytimes.com)
- DEAR AMERICAN COMPANIES: Here’s How To Fix The Economy – Business Insider (tribuneofthepeople.com)
- Abbreviated pundit round-up: The war on workers doesn’t stop to catch its breath on Labor Day (dailykos.com)
- Dear American Companies: Here’s How to Fix the Economy (dailyfinance.com)
- Bloomingdale: Work connects us all (goerie.com)
- Ford Seeks Relief From Most Expensive Workers – Bloomberg (bloomberg.com)
- Wages, pensions top Ford’s cost-cutting list (windsorstar.com)
- Ford Ranger: The End Of An Era (newcarquotesonline.com)
- GM Unfriends Facebook, Ford Changes Status to Engaged (keystoneautoloans.com)
- CAW, Detroit Three remain far apart: Lewenza (blogs.windsorstar.com)
On No Competitive Americans In The Tour De France | The Onion – America’s Finest News Source | American Voices
On No Competitive Americans In The Tour De France
JUNE 29, 2012
And they say you never forget how.
No, no, it says here there’s a 5-foot-6 guy named Levi Leipheimer. He sounds like a serious athlete.
It’s about time we stopped urinating on the grave of Henry Ford.
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Will Low Tech Solve the Jobs Crisis?
APR 20 2012
Just as Henry Ford may not have predicted the rise of drive-in movie theaters, the Internet Age will produce changes to our physical landscape we can’t yet envision.
In my last post, I suggested that the recent dip in jobs numbers might signal a long-term trend, as the Second Economy — characterized by computers working among themselves — continues to grow.
The post generated quite a few readers’ comments. “We must ourselves become the computers” was one of my favorites. Another reader suggested “a Marxist redistribution of the proceeds of the economy.” Yet another said he would be surprised if I found a solution “outside of an unrealistic Luddite proposal.”
The solution I see for helping to reverse the trend isn’t very Marxist, nor will it mark me a Luddite. And no, humans will not become computers.
Here’s the idea: construction will be the engine for a much larger fraction of job growth in the Internet Age than we are currently anticipating. I call it a repurposing construction boom.
As a society, we organize our physical infrastructure to take advantage of interconnection technology. In grade school, we learned that early cities were located near harbors, on rivers, and at major road crossings. The railroad shaped much of the 19th and early 20th century urban infrastructure. Cities of that era were walking cities: people lived, worked, and shopped within walking distance of where they lived. Large cities depended on the railroads to carry raw materials to factories. Railroads carried food and coal to the cities, as well as manufactured products to customers. When people attempted to escape the unhealthy living conditions created by sewage and industrial pollution, they fled to the suburbs that grew up along railroad tracks.
Next came automobile interconnection technology, which created a very different infrastructure. Businesses no longer had to locate in the urban core. People no longer had to live within a mile of where they worked and shopped. Homes could be anywhere. People could drive to shopping centers with large parking lots. The automobile set them free — and gave rise to a national wave of urban flight.
Think of the construction that came in the wake of the automobile — roads, the interstate highway system, urban sprawl, shopping centers, parking facilities, gas stations, office buildings and factories outside the city, second homes within driving distance.
Physical presence is now competing with inexpensive virtual presence, and it is losing. It costs a lot to get from where you live to where you work or shop. Office and retail space are expensive to build, rent, and maintain. Keeping space cool in the summer and warm in the winter is expensive as well.
Much of our current physical infrastructure is really an information proxy. We go to the office to communicate with others and facilitate the interaction between customers and business operations. We go to retail stores to find out what is available, check prices, and see how merchandise looks. We go to the movies to watch information on the screen. But if we can move information cheaply enough, there is less need for these locations or our physical presence.
Many business transactions have moved to the Web, and take up almost no physical space. Electric utilities will ultimately end up with human-free billing processes. The home meter will send your usage to the billing computer, which will bill your bank’s computer. There goes the office space needed to house hundreds of administrative workers. Similar displacements are happening at airlines, newspapers, and media companies — just computers talking with computers.
The implication of all of this is clear. The faster and cheaper we can move information , the less retail, factory, and office space will be required on a per capita basis.
This means that much of the existing space will eventually be repurposed. Office buildings and shopping centers will be torn down and become locations for apartment buildings, possibly even parks. This is already happening in edge cities like Tysons Corner, Va. But I suspect that is only a minor portion of the repurposing construction boom.
In his 1995 book, City of Bits, then e-topia, published in 2000, William J. Mitchell, the late dean of MIT’s School of Architecture, described his vision for the city of the future. This vision included smart buildings with “artificial nervous systems, sensors, displays, and computerized appliances — a chassis for the sophisticated electronic systems” that play a growing role in our lives. Mitchell believed future urban centers would be “characterized by live/work dwellings, twenty-four-hour neighborhoods” rich in social relationships, complemented by “electronically mediated meeting places, decentralized production,” and other Internet-driven services.
In Mitchell’s scenario — and mine — there will be less need to travel and public transportation will become both more valued and more practical, especially if it allows people to give up an expensive car. If I go to the office only twice a week, why not trade in my car and use a Zipcar, or ride a train with a good wireless connection? This will increase the demand for public transportation, and will lead to more construction of train and light-rail lines.
On a major scale, there is a good chance that the Internet Age will make walking-friendly cities more appealing. Creating walking cities from our current ones would require a great deal of urban transformation. The walking city of the future would probably take the form suggested by the late urban theorist Jane Jacobs, with mixed neighborhoods where people can live, work, shop for the essentials, eat out, and entertain themselves all within walking distance of their homes and apartments. With the Internet supplying us with so many work, shopping, and entertainment options, the city structure Jacobs celebrated becomes very appealing. So our cities might be repurposed for the Internet Age just as the railroads repurposed cities in the Industrial Age.
This trend appears to be well under way. A recent article in The Atlantic pointed out that fewer than half of the potential drivers under the age of 19 have licenses, compared with two-thirds a decade ago. A recent survey found that 88 percent of Millennials want to live in urban environments, where they can walk to restaurants, stores, and public transportation. Jim Lentz, President of Toyota Motor Sales, USA, has remarked that “many young people care more about buying the latest smart phone or gaming console than getting their driver’s license.”
Just as Henry Ford may not have predicted the rise of drive-in movie theaters when he invented the Model T, the Internet Age will produce changes to our physical landscape we can’t yet envision. And other changes that we do expect might never happen, or happen in a different way. The urban transformation may not take the form that I have suggested. But what I am certain will happen is that the Internet will drive the physical restructuring of society.
In the 1920, General Motors, Standard Oil of California, Firestone Tire, and Phillips Petroleum set up National City Lines, conspiring to eventually replace trolley lines with buses, and buses with cars. General Motors itself disposed of more than 100 urban trolley operations. The success of this strategy is one of the reasons for today’s car-centric physical infrastructure.
So if I wanted to create the jobs of the Internet Age, I would employ the reverse General Motors/Standard Oil strategy: I would substantially raise the taxes on gasoline, to encourage the building of a physical infrastructure compatible with the Internet Age. In and of itself, construction won’t solve the job problem, but it’s the best way to create new jobs in the Internet Age.
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