Showing posts with label pump priming. Show all posts
Showing posts with label pump priming. Show all posts

Monday, July 9, 2012

Was Henry Ford a Socialist?



I recently read an interesting piece about Henry Ford, the person who almost singlehandedly put America on wheels and introduced manufacturing to the "moving assembly line".  He was an innovative thinker for sure.  

Consider this:  In 1914 the average daily wage for a blue collar worker (in high-wage Detroit) was $2.34.  Henry Ford was having difficulty with employee turnover at his car factory (300% annually) so he addressed it by raising the wages of (almost all) his workers to $5.00 a day.  In other words, he took money out of his pocket (and his investor's pockets) and put it in his employee's pockets.  WHAT?  Without being coerced by government or a union?  Was he NUTS?   Some might call that a massive transfer of wealth.  I wonder what his Board of Directors had to say about it at the time?  Was Henry a closet Socialist?

But in reality here's what happened:  His Model T sales went from 250,000 cars in 1914 to 472,000 in 1916.  How?  All those now-well-paid employees could afford to buy the cars they were building.  Plus increases in productivity dropped the price of his basic Model T by approx. 50% to $360.  And to keep their employees motivated other automakers had to follow Ford's lead, and most of them (both the workers and the owners) prospered greatly also.  But it was Henry Ford and his company and his family who prospered the most.  Well-to-do before, the Ford's became wealthy beyond their wildest dreams when his workers prospered, too. 

Well....was he a Socialist?*  Was Henry a "re-distributor of wealth" or just a "pump primer"?  Is there a difference?  Could his example have any relevance for us today?  That's a tough one.  A policy to tax the rich like that being carried out today by Socialist French President Francois Hollande (with a top tax rate of 75%!) seems to be more vindictive than based on business logic.  But as Henry Ford demonstrated, a more balanced income distribution across the board can yield huge positives for workers and entrepreneurs alike.  It's all just a numbers game....unless a thriving middle class can afford to buy what entrepreneurs are offering, businesses stagnate or fail.  

It seems to me the trick is walking the fine line between a vindictive Socialist "share the wealth" money grab and finding that ideal "pump priming " point.  Do the ends ever justify the means?  Semantics aside, was Henry Ford's social experiment a good idea or not?

Thoughts anyone?  

S

*Henry was NOT a "card-carrying" Socialist.  In fact he was outspokenly anti-Socialist, anti-Communist, anti-union, and unfortunately anti-Semitic, too.



Monday, July 18, 2011

We need to think this through a little more....

Lemme see if I have this right:  The Republicans say no new taxes on the rich because they (the rich) are the ones who are the "job creators", and taxes on them would kill off the new jobs we desperately need right now.  


Sounds good on the surface, but it doesn't seem to hold up under scrutiny.  When the economy imploded in 2008 it was estimated that over two TRILLION dollars was moved out of various investment vehicles (stocks, mutual funds, corporate bonds, etc).  Just today CNBC (business news channel) said again that roughly a TRILLION dollars was still on the sidelines not invested.  In other words the rich are NOT using their money right now to create new jobs.  They're sitting on their wealth waiting for lucrative investments to come along, but there are too many unknowns right now to make them feel comfortable parting with their cash.


So if a little less of rich folks money was sitting idle on the sidelines not creating jobs, how would that hurt the economy?  Seems to me if it were part of an agreement (along with cutting tons of waste, fraud, and bloat from government programs) to dramatically reduce the deficit, THAT would eliminate some uncertainty and help create jobs.  Think of it as a bit of "pump priming".  


Make sense?


S