About the legend of Henry Ford and the middle class
Andy Kessler has a great op-ed in today’s Wall Street Journal explaining why President Obama’s policies regarding government handouts and tax rates on wealthy investors are wrong-headed. It’s worth reading in its entirety. But along the way, he dispenses with a popular myth about Henry Ford, wages and the middle class:
In his acceptance speech at the Democratic convention in Charlotte, N.C., this month, President Obama said, “We believe that when a CEO pays his auto workers enough to buy the cars that they build, the whole company does better.” …
This myth — that you can just give money to the middle class and good things happen — is widely shared and is at the basis of a lot of government policy. And it is why the recovery is stuck between lack and luster.
Let’s go back. Henry Ford is popularly credited with inventing the middle class by doubling his workers’ salaries to $5 per day in 1914. A multiplier for the economy, right? Wrong.
The year before, Ford revolutionized manufacturing with the moving assembly line, slashing automobile build times to just 90 minutes from 14 hours. That’s productivity. It allowed Ford to reduce the price over time of his Model T to $290 from $950. Demand took off because it was far cheaper than the cars made by his 88 competitors.
By 1927, 15 million Model Ts were sold to people (most of whom did not work for Ford) and businesses that retired their horses and used these new automobiles productively to lower their own costs, fueling a boom. Raising wages was a byproduct, not a cause. From Ford Motor’s corporate website about the wage increase: “While Henry’s primary objective was to reduce worker attrition — labor turnover from monotonous assembly line work was high — newspapers from all over the world reported the story as an extraordinary gesture of goodwill.”
As they say, read the whole thing. (Here is the page from Ford’s website to which he refers.)
Btw, one of Kessler’s other points is about the folly that food stamps represent a kind of economic stimulus. You’ll have to read his piece to see his treatment of that notion, but it brought to my mind a statement by state Sen. Charlie Bethel, R-Dalton, during the debate about state unemployment benefits in this year’s legislative session. Taking on the argument that unemployment checks boost economic growth, Bethel noted his town’s extraordinarily high number of people on unemployment and said, “If it were true that unemployment checks stimulated local economies, we’d be doing great in Northwest Georgia. We’ve cashed a lot.”
– By Kyle Wingfield
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339 comments Add your comment
David R. Boag, DDS
September 19th, 2012
8:10 pm
MarkV @ 6:12 pm
“Another stupidity of the same kind is the one Kyle likes so much, the statement by state Sen. Charlie Bethel, R-Dalton, “If it were true that unemployment checks stimulated local economies, we’d be doing great in Northwest Georgia. We’ve cashed a lot.” Again, nobody claims that unemployment checks are THE answer to the problem of economy.”
This “genius” seems to think unemployment checks create jobs, which I think we all agree is the key ingredient needed in improving the economy:
http://www.foxnews.com/politics/2010/07/01/pelosi-unemployment-checks-best-way-create-jobs/
Sucks to have her on your side, doesn’t it?
Lil' Barry Bailout - Vote American
September 19th, 2012
8:21 pm
Because they aren’t worth it.
It was a trick question.
In a free market, transactions happen when each side receives something of greater value to them than what they are giving up. If someone is willing to work for $7.25 an hour, they obviously value their time at sovarying less than that.
Duh.
David R. Boag, DDS
September 19th, 2012
8:23 pm
These Lying Eyes @ 6:33 pm
“OK….Righties out there ( Kyle, This includes you too)
Can any of you tell us anything…I mean ANYTHING in the history of mankind that has been sucessfully built from the top down??????”
Easy. My business. By definition, since the business is me (since according to the Board of Dentistry, that business cannot exist or run without me) and I am and always have been at the top, it was built top-down.
What do I win?
P.S. And I did build that.
Lil' Barry Bailout - Vote American
September 19th, 2012
8:23 pm
Dang, got fat fingers tonight. Meant to say “something less than that”.
Del
September 19th, 2012
8:28 pm
What it really gets down to is that around half the country just doesn’t see Obama as a very good president worthy of a second term and won’t be voting for him. About the same will be voting for him once again. The battle will be for the one to three percent undecided or for those who may change their decision during the final few days before the election. As the race stands now I feel it favors Obama, only because Romney has assumed for too long that the electorate will turn out against Obama because of the poor economy. His problem is that the electorate knows we have a poor economy but Romney hasn’t done a sufficient job in succinctly describing his plan for fixing it. Now I can understand what he would do and most of my fellow conservatives understand as well, but the majority of the total electorate probably does not. It’s not too late for Romney but it’s close to being too late. He must lay out a plan that people can understand and attack Obama aggressively on his lack of leadership not just on his failure to fix the economy. Additionally, he must significantly out perform Obama in the upcoming debates. He must rise to the challenge and get the job done because four more years of Obama would in all probability set this country back beyond recovery.
Bigguy
September 19th, 2012
8:30 pm
I could rob a bank and use ’stimulating the economy’ as my excuse
td
September 19th, 2012
8:30 pm
mike
September 19th, 2012
8:08 pm
“If they’re worth more than $7.25 an hour, why aren’t they getting it?” -Lil Barry
Because a Chinaman will do the same job for $200/month.
Since you know why, I would love to hear it. This has to be good.
How much are you willing to pay for your goods and services?
mike
September 19th, 2012
8:37 pm
“How much are you willing to pay for your goods and services?” –td
Well, td, since the labor portion of most goods produced only accounts for about 10% of their wholesale cost (using American workers), I would be willing to pay extra for prosperity to return to America again.
How about you?
mike
September 19th, 2012
8:39 pm
I think it’s important to note that multinational corporations DO NOT pass along the savings they realize from using foreign labor to the consumer.
They pocket the difference.
Hillbilly D
September 19th, 2012
8:43 pm
How much are you willing to pay for your goods and services?
We can pay more for goods and services or we can pay taxes for the safety net for people who are out of work or underemployed. I’d rather keep my neighbors working.
David R. Boag, DDS
September 19th, 2012
8:47 pm
Mike @ 9:39,
“I think it’s important to note that multinational corporations DO NOT pass along the savings they realize from using foreign labor to the consumer.
They pocket the difference.”
Uh, they do until a competitor sees the opportunity to do the same thing with a smaller margin but make it up in volume.
And if you’re right, why is WalMart known for it’s high prices on all those items made in China? Isn’t that why nobody shops at WalMart and their parking lots are always empty?
They BOTH suck
September 19th, 2012
8:48 pm
HillBilly
Agreed. It isn’t all a “win win” as the jobs went bye bye.
It appears so on the surface, but there is a price to pay long term.
mike
September 19th, 2012
8:51 pm
“why is WalMart known for it’s high prices on all those items made in China? Isn’t that why nobody shops at WalMart and their parking lots are always empty?”–Dr Boag
I read an article today that said that an any given time, over 78% of the shoppers at Wal-Mart are shopping for food in the food section.
You can’t spend those EBT on Chinese crap. Just food.
mike
September 19th, 2012
8:58 pm
Dr. Boag: let me ask you a question. And I want you to answer honestly. Did you work your way through dental school? Did you pay your own tuition? Did someone support you during this time?
Why, oh, why can’t everyone be rich like me? What a wonderful world this would be.
I’ll tell you why, because they made Bad Choices like being born poor. Or they were born without the obvious intelligence you have.
No matter what, they’re parasites, moochers on the productive class. If they had any sense they would’ve become dentists like me.
That’s it! A world full of dentists.
Del
September 19th, 2012
9:01 pm
What many don’t seem to understand is the global market playing field. As it began it wasn’t level for American based multinationals because of labor costs and because, while we opened up our markets wide our trading partners opened theirs narrowly. The multinational corporations had to wheel and deal internationally on their own because of the ineptitude of our politicians to do so in a manner that ensured parity much less trade advantage. Our corporations had to learn to negotiate with foreign governments to open up their markets for goods and services. The bargaining chips became access to our technologies and best practices and unfortunately jobs outside of the United States. Before anyone castigates American corporations for being ruthless profiteers filled with greed depriving American workers they should consider what the politicians from both parties created for our place in the so called global economy.
They BOTH suck
September 19th, 2012
9:05 pm
Del
agreed 100%
They BOTH suck
September 19th, 2012
9:07 pm
but there is a price to pay
mike
September 19th, 2012
9:07 pm
Dr. Boag: you have to be slowest typist ever! I bet I couldn’t even read your prescriptions, either!
I guess it’s time to call it a night. Let me know if anything new comes up, OK?
Del
September 19th, 2012
9:11 pm
I should have included not only jobs created outside the United States but also jobs within the United States filled by foreign workers who come here on H1B visas and L1’s. No their not here because they’re cheaper they’re here as payoff to the governments of their respective countries to be trained as professionals and as managers. They then return to their home countries with knowledge that they gained here, talk about brain drains out from this country.
td
September 19th, 2012
9:11 pm
mike
September 19th, 2012
8:37 pm
“How much are you willing to pay for your goods and services?” –td
Well, td, since the labor portion of most goods produced only accounts for about 10% of their wholesale cost (using American workers), I would be willing to pay extra for prosperity to return to America again.
How about you?
If labor cost $2 per hour in China and cost $10 per hour in the US then it can not be a 10% cost of the product. If a TV takes 10 hours to build then it will cost $80 dollars or 80% more in the US to build.
Now if you have the exact same TV’s sitting side by side at best buys and one is made in China and sales for $1000 and the other made in the US and sales for $1800 then which one are you going to buy?
Hillbilly D
September 19th, 2012
9:12 pm
Del @ 9:01
I think both get an ample share of the blame. No clean hands when it comes to globalism, in my mind.
Hillbilly D
September 19th, 2012
9:13 pm
Now if you have the exact same TV’s sitting side by side at best buys and one is made in China and sales for $1000 and the other made in the US and sales for $1800 then which one are you going to buy?
I’m not buying either one. That’s too damn much for a TV.
Hillbilly D
September 19th, 2012
9:14 pm
Of course, that’s a moot point because as far as I know, there are no U.S made TVs. If there is, I’m unaware of it.
mike
September 19th, 2012
9:18 pm
“Now if you have the exact same TV’s sitting side by side at best buys and one is made in China and sales for $1000 and the other made in the US and sales for $1800 then which one are you going to buy?” –td
td: I know now that you were flirting with the pretty girl in arithmetic class.
The one made in China would be $1,000 and the one made in the U.S.A. would be $1,080.
If it had a PROUDLY MADE IN THE U.S.A. sticker on it, there wouldn’t be any choice for me!
Del
September 19th, 2012
9:21 pm
H.D.
Oh I don’t think that all in corporate America are goody two shoes by any stretch but their job is to turn profits for their shareholders. They’ve had to learn to compete and survive internationally because our politicians once again in both parties have been and continue to be inept.
td
September 19th, 2012
9:22 pm
mike
September 19th, 2012
9:18 pm
I know I am going to regret this but I have want to understand the logic. When labor cost are 80% more in the US and material cost are the same then how in the world can the same product be the cost the same amount?
Hillbilly D
September 19th, 2012
9:25 pm
their job is to turn profits for their shareholders.
That’s a good point but it does bring up another question. How many stocks pay dividends any more? I don’t follow it but seems it’s not many from what I hear from people who are into that stuff. They’ve pretty well got things now where the shareholders have very little voice in what goes on. They all sit on each other’s board and the game is rigged, in my opinion. That’s one reason I choose not to play.
mike
September 19th, 2012
9:29 pm
td: let me break it down for you (and I’m going to write this real slow so you can get it)
If a television takes 10 hours to build, then it would cost $20 (10 x $2/hr) to build it in China. It would cost $100 (10 x $10/hr) to build it in the U.S.A. (Assuming, of course, that the multinational corporations pass that savings on to consumers).
Savings per television set = $80 ($100 – $20)
Therefore a television set built in China that cost $1,000 would cost $1,080 if built in the U.S.A.
Get it? Please say yes.
RC--(R--apoi)
September 19th, 2012
9:31 pm
Well, it’s good to see someone put the lie to that Henry Ford thing. Everyone knows Ford was so stingy the pennies he spent were squeezed so much they looked like a fried egg. He wouldn’t of paid a penny more than he had to.
I hope Wingfield takes up this George Washington lie pretty soon. Everybody knows he done it. He cut down that cherry tree and then lied like a cheap rug to try and get out of the Death Penalty he deserved.
Anyhow, I’m going to get off of here now. Alot of the people on this blog are crazier than Betty Mae Boggess ever was. I don’t want to catch nothing.
yuzeyurbrane
September 19th, 2012
9:35 pm
Kyle, ask all those merchants in Athens who cashed the checks or took the credit cards of all those students at Athens whose source of funds were either student loans or the heavily govt. subsidized UGA budget, including yourself. Oh, you are different. You are not a parasite because that money was an investment in you, not a handout.
Lil' Barry Bailout - Vote American
September 19th, 2012
9:39 pm
They pocket the difference.
———–
It’s not a charity, Einstein.
BADA BING
September 19th, 2012
9:41 pm
Since it doesn’t matter where the money comes from ( in the “food stamp that stimulates the economy” scenario) why don’t we all just pay 10 times the normal price of all purchases? That would really stimulate the economy.
Linda
September 19th, 2012
9:51 pm
mike@8;37, 8;39, 8;31, 8;51, 9;07, 9;15, 9:29, etc. You are so misguided & the epitome of the reason that the states & the local governments need to take back our educational system from the federal government.
David R. Boag, DDS
September 19th, 2012
9:52 pm
Mike @ 8:58,
“Dr. Boag: let me ask you a question. And I want you to answer honestly. Did you work your way through dental school? Did you pay your own tuition? Did someone support you during this time?”
Honest answers: My parents paid for our college educations. However, my brother, who was valedictorian of his class in HS took 5 years to finish college. I did it in 3, so to be fair, my parents paid for year one of dental school, which was roughly equal to 2 yrs of college. The rest was up to me, all six figures of it. And I’m STILL paying the loans, thank you very much. Otherwise, I was married with a wife who worked as a nurse while I finished school. I also worked, but part-time.
“Why, oh, why can’t everyone be rich like me? What a wonderful world this would be.”
Why do you assume I’m rich? We are middle class, just now starting to see the higher part of that middle class, but it hasn’t always been that way, let me tell you! Ramen noodles remain in my cupboards and a semi-regular menu choice even now. Who is stereotyping whom here?!
“I’ll tell you why, because they made Bad Choices like being born poor. Or they were born without the obvious intelligence you have.”
My dad never made six figures in his life. He worked for Ford for 37 1/2 years, and they saved their money. We didn’t vacation except for going camping. My parents still live in the same house I grew up in literally 1.5 miles from the city line of Detroit. Nothing exceptional about their house. Except when I was an infant, I have NEVER even had my own bedroom. And now that I’m married 20 years, I hope it stays that way the rest of my life. Some of us actually build our lives because we choose to reach for our potentials, but that doesn’t make us all “rich” whatever that means.
“No matter what, they’re parasites, moochers on the productive class. If they had any sense they would’ve become dentists like me.”
It’s a great profession. I highly recommend it to anyone who wants to do it, but I’ll tell you that whoever does it better like it, because there are WAY easier ways to make money than dentistry! I do it because I love it! But the truth is that it is not for everyone. And it’s not even close to being all about smarts. I’m an intelligent guy. I recognize openly that God has given me my ability to think, but I also say that I have made more good choices than bad ones in committing to my education and working hard to be the best husband, dentist, and father I can be, and I don’t apologize for now beginning to see some of the fruits of those years of study and labor. Dental school SUCKS, and it is not cheap. Like I said, I am still paying off my student loans and will be for probably 10 more years. But I made the choice to study my butt off and not party in college. That’s how I finished in 3 years. A lot of my friends had a lot more fun than I did. Now, I get to have some, and it feels really good. I’m not going to apologize for what I make today. We literally lived paycheck to paycheck for the first 17-18 years of my marriage.
The truth is there are a LOT more guys and gals just like me than there are Mitt Romney’s in this world, but even though I don’t look down my nose at people, I still believe in the potential of the individual. I’m walking proof.
mike
September 19th, 2012
9:52 pm
Thanks, Linda.
Coming from you, that’s a real compliment!
mike
September 19th, 2012
9:57 pm
Dr. Boag: thanks for that heartfelt reply.
David R. Boag, DDS
September 19th, 2012
10:01 pm
You’re welcome, mike. Hope it gave you something to consider a different perspective.
Have a great night.
Linda
September 19th, 2012
10:03 pm
mike@9:52, I apologize if I interrupted your back & forth with Dr.Boag. Just ignore me as you usually do & read Dr. Boag’s comments. It will do you a whirl of good.
Also, read the article that Kyle referenced today on the WSJ. That might give you just a little bit of insight of the economics that are playing into to 2012.
David R. Boag, DDS
September 19th, 2012
10:05 pm
Something to consider related to these lines, and NOT from a conservative source. For your consideration:
http://www.ted.com/talks/lang/en/joachim_de_posada_says_don_t_eat_the_marshmallow_yet.html
Hope it stimulates some thought.
Gravy Train
September 19th, 2012
10:08 pm
Look at this idiot “David Boag” your customers built your business, doof. Without them, you would be sitting on top of an old refrigerator box trying to find a way to repay your education bills. (Since you did it yourself, I’ll assume Mommy and Daddy didn’t bankroll your six year education plan.) Thanks to your infinite wisdom of putting your name on this blog connected with your ill informed bloviations, I suggest you prepare for that customer base to shrink. Build on that, sucker.
Linda
September 19th, 2012
10:10 pm
mike@9:57, mike without a capital, That’s it? You only thank Dr. Boag for a “heartfelt reply?” Evidently you did not even read his comment. Even if you read his comment, it is evident that you could not even comprehend his comment. Don’t you wish your parents, assuming you had such, had home-schooled you?
They BOTH suck
September 19th, 2012
10:15 pm
Gravy
While not adhering to much of how David views political issues, at least based on what I have read, why would you be knocking him?
Yes he must have customers to succedd and he said his parents paid a portion of his education, however he still must be able to service those customers and he did earn that DDS based on his efforts.
Again, he and I probably would probably have many political differences, but I see no need to demean his efforts to get where he is at.
No matter the help he received, he still had to put in the work.
Yes, one can argue that others do not have same same “leg up” or argue that some had more opportunity, but knocking David’s efforts seems petty to say the least.
RW-(the original)
September 19th, 2012
10:17 pm
Of course, that’s a moot point because as far as I know, there are no U.S made TVs. If there is, I’m unaware of it.
There’s a company named Element that was supposed to start making TV’s in Michigan this year. I have no idea if they did but it might be worth looking in to if you’re looking for a set.
Gravy Train
September 19th, 2012
10:18 pm
Boag, why don’t you share with the rest of us what health insurance companies do to your price scale. I can already hear it now: “…blah,blah…sliding scale…negotiating with insurance companies is tough…no, I don’t inflate my prices when billing an insurer…no, the whole transaction between doctors (even quasi-doctors), insurers and pharmaceutical companies is not a racket…”
Linda
September 19th, 2012
10:19 pm
Gravy Train@10:08, What did you think of the I-Economics vs. the G-Economics that the article by Kessler that Kyle referenced today? Let me guess. You did not even read the article. Democrats/ liberals are not interested in the economy, just junk propaganda from the corrupt media.
Gravy Train
September 19th, 2012
10:20 pm
“Built it myself” seems most petty of all
Gravy Train
September 19th, 2012
10:26 pm
It’s the opinion of a douche bag, Linda. It takes place in the GOP land of make believe. Henry Ford was an antisemitic Nazi and he spent much of his fortune promoting those views. I’m still waiting for Kyle to take on the plutocrats that are wrecking the GOP. I wont even mention the “brain drain” epidemic of the last 12 years within those same ranks. How about the fact that there are still a few logical R’s left, but they are allowing plutocrats and the morons who follow them to lead the party straight into the jaws of another crushing defeat.
Old Timer
September 19th, 2012
10:27 pm
When the taxpayers become less than the government money recipents the end is near. Keep your powder dry. Obama thinks he is Santa Claus,
David R. Boag, DDS
September 19th, 2012
10:29 pm
Gravy,
You don’t get it. I live what I believe. I don’t hide who I am, because I don’t NEED to hide who I am. My patients choose me because of me and how I have chosen to run my office.
Guess which came first: My decisions for how to run the office to attract patients in order to build the business or the patients themselves? Your response assumes they walked in my door by default. Nothing could be further from the truth. But you go on going to all those businesses who are holding guns to your head in your world to make you go there.
I’m not trying to be everyone’s dentist, and apparently, I’ll never be yours. I’ll live. So will you. No hard feelings, at least not from my side.
To my knowledge, I’ve never held a gun to anyone’s head to make them come to see me. They choose to do so, because they want what I have to offer, and I don’t hide who I am, because I live my life honestly and in the open. Funny, my business is just now getting up to speed. The slow, but steady, road to success. There’s a big price to pay up front, but the reward on the back end looks like it’ll be really good.
Thanks for your concern.
Linda
September 19th, 2012
10:32 pm
Gravy Train@10:08 The only way that the rising costs of health insurance will be curbed is when health insurance will be treated like hazard insurance & vehicle insurance. When health insurance is used during a crisis, then health insurance is actually health insurance.