|
Wonderful to hear this about Henry Ford. Thanks
for posting this, Arthur. The reporter, Leonhardt, seems to written
something odd: “In the last few
years, however, the economy has kept growing in large part because high-income
families -- the top 20 percent, roughly -- have done so well and have been such
devoted spenders.” The very rich aren’t big-spenders, generally speaking.
They save and grow richer. (I am excluding the purchase of stocks and
companies from the concept of ‘big-spending’.) There are different measures of economic growth. Leonhardt
seems to be focusing not on real economic growth (measured by median income, or
infrastructural investment), but by investment indices (like stock market
prices). I don’t think these investment indices are suggestive of
economic growth, but of speculative optimism. Nor, I suppose, should the level
of economic activity in wasteful enterprise, like weapons purchases) be
included in the notion of economic growth (societies can go broke ‘buying’
such wasteful things, though a look at GDP would have suggested otherwise). Cheers, Lawry From:
[EMAIL PROTECTED]
[mailto:[EMAIL PROTECTED] On
Behalf Of Cordell, Arthur: ECOM Business/Financial Desk; SECTC The Economics Of Henry Ford May Be Passe By DAVID LEONHARDT 1087 words 5 April 2006 Late Edition - Final HENRY FORD was 50 years old, and not all that
different from a lot of other successful businessmen, when he summoned the
Detroit press corps to his company's offices on Jan. 5, 1914. What he did that
day made him a household name. Mr.
Ford announced that he was doubling the pay of thousands of his employees, to
at least $5 a day. With his company selling Model T's as fast as it could make
them, his workers deserved to share in the profits, he said. His rivals were horrified. The Wall Street Journal accused him of
injecting ''Biblical or spiritual principles into a field where they do not
belong.'' The New York Times correspondent who traveled to Detroit to interview
him that week asked him if he was a socialist. But
the public loved it. The country was then suffering a deep recession, and the
Ford news seemed to offer hope. Within 24 hours, 10,000 men were lined up
outside the Ford employment office in Michigan. The following year, Mr. Ford
was mentioned as a future presidential contender. The
mythology around this story holds that Mr. Ford wanted to pay his workers
enough so they could afford the products they were making. In fact, that wasn't his original reasoning. But others made the point,
and, in time, it became part of Mr. Ford's rationale as well. The idea became a
linchpin in an industrial philosophy known as Fordism. More production could lead to better wages, which in turn would lead to
more spending by the public, yet more production and eventually even higher
wages. ''One's own employees ought to be one's own best customers,'' Mr. Ford
said years later. ''Paying high wages,'' he concluded, ''is behind the
prosperity of this country.'' This
turned into a pillar of 20th-century economic wisdom. It's time to ask, though,
whether Mr. Ford's big idea is as ill suited to this century as his car company
seems to be. By
any reasonable standard, the last few years have been bad ones for most
people's paychecks. The average hourly wage of rank-and-file workers -- a group
that makes up 80 percent of the work force -- is slightly lower than it was
four years ago, once inflation is taken into account. That's right: Most
Americans have taken a pay cut since 2002. But
you would never know it by looking at the headline numbers on economic growth.
>From the standpoint of the broad national economy -- the value of the goods and
services the country produces -- the last few years have been stellar. Despite
two wars, soaring oil prices and business scandals, the economy has been
growing more than 3 percent a year. Henry
Ford would have no idea what to make of this. What
was so comforting about Fordism was that it suggested that the economy operated
on a virtuous, self-reinforcing cycle. Only when the middle class did well
could the country do well. And as the country grew ever richer, so would the
middle class. In
the last few years, however, the economy has kept growing in large part because
high-income families -- the top 20 percent, roughly -- have done so well and
have been such devoted spenders. Globalization and new technology have helped
many white-collar workers make more money, even as those same changes have
closed factories and depressed wages for others. Stock portfolios and houses on
the coasts, meanwhile, are much more valuable than they once were, making their
owners more willing to spend. In
fact, well-off families, not cash-short ones, have been the ones increasing
their borrowing and cutting their savings the most in recent years, according
to the Federal Reserve. In 1992, the top fifth of households, as ranked by
income, accounted for 42 percent of consumer spending. By 2000, the share had
grown to almost 46 percent, and it is probably not much different today. That
may sound like a small change, but it's an enormous amount of money, a shift of
$300 billion a year in spending from the poor and middle class to the affluent.
In
Michigan, Ford and General Motors have been cutting thousands of jobs, creating
the country's sickest local economy and hurting even well-to-do suburbs. Yet
the Suburban Collection, a car dealership north of Detroit, sold 90 Bentleys
last year, up from 70 in 2004. David Butler, a manager there, said he expected
to sell more than 100 Bentleys this year. The car costs at least $180,000. The
dealership also opened a Lamborghini showroom in January. It is true that
Rolls-Royces aren't selling very well, but the main reason seems to be that Mr.
Butler's customers don't feel comfortable being seen in a $300,000 car when the
state is suffering so badly. ''It's not that they can't afford it,'' he said.
''It's because of the image it would give.'' Wages
are likely to rise slightly in 2006, but stagnation seems to be the norm over
the long term. Except for a span of a few years in the late 1990's, the hourly
pay of most workers has done no better than inflation for the last 30 years.
Even some Democrats, who have long embraced Fordism, are coming to the
conclusion that Mr. Ford's reassuring cycle is not the only thing that can keep
the American economy humming. ''You don't need an equitable distribution to
have a sustainable recovery,'' said Jared Bernstein, a liberal economist in
Washington. Politically,
though, I am not so sure that the current trends are sustainable. Before the
1990's boom lifted wages, stagnating pay had helped cause a series of
upheavals: Bill Clinton's election, the Ross Perot and Pat Buchanan phenomena,
the Republican takeover of Congress. Today, with the boom fading from memory,
protectionism is on the rise, and President Bush's approval ratings are miserable.
So
it seems as if now would be a good time to start talking about what to do.
There has never been a shortage of ideas: helping more teenagers to finish
college, training middle-age workers to switch careers, embarking on public
projects like better highways and high-speed trains. Or we could pretend it's
still 1914. E-mail:
[EMAIL PROTECTED] |
_______________________________________________ Futurework mailing list [email protected] http://fes.uwaterloo.ca/mailman/listinfo/futurework
