Monday, August 14, 2017

Why it's important to know history

Last night I saw an interesting show on TV about the origins of the American auto industry.  I pretty much knew the story, but a couple of things that were pointed out brought into focus for me how we got to where we are today.

Before cars, city streets were largely dirt, horses and buggies were common, and cleaning the streets and disposing of the constant horse excrement was an industry in itself.  Then came the Model T.  People now had wheels!  Roads needed paving, which required concrete, creating two new industries. And gas stations, and much more oil refining capacity.  And dramatically more steel production, and lots of tires, too.  Everything was inter-connected.  New industries and jobs were appearing everywhere.

Henry Ford was a visionary.*  He was the first to adopt the modern assembly line (from the meat packing industry) for industrial use.  The repetitive work was boring, but wow, could they pump out cars!  So fast, the unit cost to produce a "T" was cut in half.  

Here's were it got interesting:

Instead of just pocketing the savings for himself (and his rich shareholders), Ford DOUBLED the pay of his assembly line workers, to $5 a day.   Henry Ford shared this improved productivity windfall with his employees, and this was the birth of America's middle classAll of a sudden the repetitive work seemed more bearable.

People were literally walking off other jobs to go stand in line for a position with Ford.  Other employers eventually were forced to increase their pay to match Ford's or lose all their workers.  It was a ripple that became a tidal wave.

More people making more money bought more "stuff", which created even more jobs.  America's middle class / consumer driven economy became a juggernaut the likes the world had never seen, all because Henry Ford shared with his employees the savings realized from his more efficient assembly line.  Ford's workers could now afford to buy the cars they were making.  By "sharing the wealth" with his employees, Henry Ford didn't lose money (as his shareholders and Board of Directors feared) but made even more money for them all. 

Sometime after WWII things changed.  Companies began seeing great savings thanks to technology developed during the war.  But unlike Henry Ford, they kept their productivity  windfall for themselves.  By the 1980's the rich were just getting richer, while the middle class began to stagnate.  The wealthy business owning class obviously didn't recognize the problems they were creating.  All they cared about was maximizing today's profits.  This marked the beginning of the long decline of the American middle class.

Factories began moving out, cities went into decline, workers lost benefits such as health insurance, etc.  It was the exact opposite of the economy Henry Ford created.  This trend, too, began as a ripple, but grew into a tidal wave.

An increasingly fragile and unstable middle class has now turned mean, blaming "others" for their difficult situations, and are voting for candidates who promise to "get even" for them.  We've developed an "us vs them" mentality.  The number of hate groups is rapidly increasing, resulting in confrontations such as what we saw in Charlottesville, VA over the weekend.

Any student of history should have learned from Henry Ford that spreading the wealth is a net money-maker, not a money-loser.  My personal corporate hero, Southwest Airline's Herb Kelleher, saw this and shared SWA's wealth with his employees, and they've been on 40-year profit roll!  

But most of the rest in industry didn't, and their greed is directly responsible for the currently declining American middle class.  If it wasn't for cheap foreign labor, "creative" accounting, a rigged tax system, and easy credit, most would already be underwater.

Contrary to what Gordon Gekko (Michael Douglas) said in the movie Wall Street, greed is NOT good.  It's taking the middle class down, and will eventually precipitate a revolution (in some form) that will take down the upper class, too.  Of course it's much more complex than what these few paragraphs might suggest, but still, greed is at the core of it all.

Capitalism is great.  But capitalism corrupted by greed can eventually ruin it for us all. 

I myself may not live long enough to see how it all plays out, but things can't go on the way they are now.  The shrinking middle class will eventually stand their ground. 


* He was also an asshole, an anti-Semite, and more, but that's for another blog post.



  1. Sometimes I wonder if America has lost the ability to think big and do great things.

  2. There are companies where the management takes reasonable salaries and treat their employees with respect, but those are few and far between anymore. What we're seeing right now is not only are factories losing jobs but now we're getting a ripple effect that along with ecommerce is taking down department stores, mid-level restaurants like Applebees, and even movie theaters as Hollywood has had its worst summer in a while. The more the 1% hoards, the less that's available for everyone else to spend. That's really how it works, not that trickle-down nonsense.

  3. Excellent post. Your words reminded me so much of a 20-year old movie I've watched many times called "Mindwalk". The movie was about systems theory and how interconnected everything is and it's done as a conversation between three people, a scientist, a politician and a poet. The theory seems to be one lesson that mankind has not been learned very well at all.
    I really do enjoy reading your posts.

    1. Thank you Sharon. Please, feel free to leave comments, even...especially...if you disagree. I love the discourse as it makes me hear other sides of an issue and think. :)

  4. I have a feeling that those big, greedy corporations will fail sooner or later, to be replaced more and more by mom-and-pop type businesses. The circle will end where it began.