Henry Ford’s Unconventional Approach
Henry Ford is an obvious figure in the early days of America’s rise to a global super charged economy. Still to this day, his aphorisms and character is referenced often by businesspersons and society alike.
Corporations in the early 20th century were undergoing rapid transformation. Newly installed president Roosevelt was a populist who took the Standard Act and wielded it to break up the Trusts and monopolies that were putting strain on the American worker and the way of life. Unions formed to push back on capitalistic methods that made company founders wealthy at the expense of workers. Productivity is matched with acceptable pay. Prior to this, we would sees lags and anchors to economic growth from low pay. The economy needs transactions to grow. This one of the reasons slave labor stifles a chance for a robust economy. Without pay, there are little participants in the economy.
As corporations were transitioning to a more beloved figure in American culture, so was their legal identity. For many years, the government didn’t have a sure way on how to challenge or view corporations. The Constitution was written with the individual in mind, and not entities conducting business. Until the government identified corporations as having a legal status and accountability (not being absolved from wrong doing), corporations got away with a lot of mistreatment and abuse. This dates back to Roman times, where corporations were backed by the government and gave reason to invade other nations to exploit resources. This is known as a moral hazard. In fact, the word “corporation” is rooted in Latin from the word “corpus” which means “body”.
Henry Ford’s innovative strategy at the time, was upending the modern way of doing business. At the same time, he created a self fulfilling structure that created a whole new leg of business and opportunity (Much like Steve Jobs’ introduction of the iPhone in 2007). Ford focused on the assembly line. An efficient and cost reducing way to bring auto mobiles to the market quickly and affordable to the common man. By reducing the costs and making cars more affordable, this created its own demand (think how the iPhone created a demand for apps, which thus created the need to own an iPhone. Circular approach).
Due to the rising demand in automobiles, Henry Ford decided to do something unprecedented, he announced a broad wage raise to $5 per day (this was double pay for most workers at Ford). The company was trying to attract new workers to the growing enterprise. This announcement was soon followed by thousands pouring in from all over the country to work at Ford.
Henry Ford’s behavior deviated away from most large corporation owners approach to the workplace at the time. His vision saw that more men working, meant more men who could afford his product. This also meant more men who were ambassadors to his vehicle as they stood enamored by the brand and loyal to Ford.
“We believe in making 20,000 men prosperous and contented rather than follow the plan of making a few slave drivers in our establishment multi-millionaires” — Henry Ford
More men working means a more productive economy. Even in those days, fears of stomping on mom and pop shops spread throughout the country. But like then, just like now, that is a superfluous worry. Even in the late 18th century, economic studies and models proved that better technology that increased productivity, minimized costs, and required fewer labor inputs to generate total output benefited society on the aggregate. You can’t think of it as zero sum, in order for one to win, one must lose. No, it’s a collective benefit and growth for all. Resourcefulness in business allows for products to be more affordable. This allows for greater velocity of transactions, meaning more economic opportunity. Once efficiency is ceded, there is a reallocation of labor which makes the body of the economy stronger.
