The fetish of Fordism - Henry Ford's economic ideas

Monthly Review, March, 1988 by Bellamy Foster

The Ford Motor Company's experiment in what is sometimes referred to as "welfare capitalism" was gradually undermined by increasing competition from other Detroit manufacturers, by growing labor unrest, and by an economy that after the First World War showed signs of becoming more and more unstable. During the First World War, the Ford Sociological Department became the base of operations within the Ford Motor Company for the national spy network associated with the American Protective League (APL). This was a patriotic "citizen's group" which had as its object the discovery of IWW and socialist opponents of the war effort, and the enforcement of the Espionage and Sedition Acts of the federal government. Ford Sociological Department investigators working for the APL examined the files on the home lives of Ford workers for evidence of disloyalty, and used these as a basis for coercing or firin"wrong elements."

In the depression of 1920-21 that came after the war the Ford Motor Co. was especially hard hit. Total sales of vehicles dropped from 998,029 in 1919 to 530,780 in 1920. In the drastic reorganization that followed, which included massive layoffs and an enormous speed-up on the production line, the strategy of the Ford Motor Co. turned from one of "welfare capitalism" to more ruthless forms of exploitation. Explaining the general atmosphere at this time, one Ford executive stated, "We were driving them, of course. We were driving them in those days. . . . Ford was one of the worst shops for driving the men." As part of this reorganization, the Sociological Department was disbanded in 1921. Yet, its more repressive function, associated with what Leo Huberman was to call "the labor spy racket," was retained and given a new home in the notorious Service Department, which became the headquarters for Ford's struggles against unions throughout the 1920s and 1930s.

Nevertheless, the folk myth of Ford as an enlightened employer who sought to promote general prosperity by high wages and high consumption became firmly entrenched in the economic literature during the fabled "New Era" of the 1920s. This tendency to see Ford as "the worker's best friend" was bolstered somewhat by his introduction of the five-day week in his company in 1926--a move that was paid for by more layoffs, a further speed-up, and by reducing the weekly earnings of the workers. The five-day week was, as Ford later admitted, a"cold business proposition." "In the purchase of labor as of any other commodity, you must be sure you are getting your money's worth."(8)

Still, such realities behind the newly rationalized managerial methods were little understood at the time. Thus it comes as no surprise that New Era economists-particularly those associated with what is known as th"institutionalist" tradition-came to think of U.S. capitalism as a qualitatively new, regulated system in which business had finally learned to provide, through higher wages to its workers, the basis for almost permanent prosperity. Such views were expounded not only by influential economic publicists like Rexford Tugwell who wrote Industry's Coming Of Age (1927), but also by thinkers like Wesley Mitchell, one of the most respected U.S. economists of his generation, and the leading force behind the National Bureau of Economic Research. In his concluding essay to the report on Recent Economic Changes in the United States (1929) of the President's Conference on Unemployment (Herbert Hoover, chairman), Mitchell explained that "belief in the economy of high wages has become prevalent among the abler business executives, much as belief in increasing productivity has become prevalent among the abler trade union representatives."Intelligent management" had done much to stabilize the economy. By promoting consumption as well as production, far-seeing business executives might be able to "iron out" the worst aspects of the business cycle, and ensure continuing prosperity.