Henry Ford, Socialist

Ford workers on the line assemble engines in a public domain photo from Henry Ford’s 1922 memoir, "My Life and Work." A caption reads, “Henry Ford turned the thinking of employers to reduction of unit costs—not wages—and helped them to see that it is bad business to destroy customers by reducing their purchasing power.”

Henry Ford, Socialist
By John Unger Zussman

Detroit was a great town for labor when I grew up there in the ‘50s and ‘60s. While I never worked on the assembly lines—my uncle’s steel warehouse had first dibs on my summer labor—I had friends who did. The work was stultifying, but the pay was good, and they socked away money for college.

The high pay was because of Henry Ford, and it was not an accident. Ford had no love of labor unions (or Jews, for that matter, but that’s another story)—quite the opposite. Yet in 1914, he stunned the business world by offering a wage of $5 a day—more than double the prevailing rate.

Ford’s bold move did more than attract skilled mechanics and workers to Detroit and reduce Ford Motor Company’s heavy employee turnover. It spearheaded the creation of a vast middle class, including blue- as well as white-collar workers. The canny Ford realized that, if he was going to sell his mass-produced cars, his own workers (and those of other companies) had to make enough money to afford them. “I believe in the first place,” he wrote in his memoir, “that, all other considerations aside, our own sales depend in a measure upon the wages we pay.” For seventy years, American industry and the American middle class grew in tandem.

That link has now been strained to the breaking point. For the last thirty years, the American middle class has been under assault. It started with the right’s beloved Saint Reagan, whose orgy of tax cuts and deregulation spawned not only the savings and loan crisis but also a massive transfer of wealth from workers to the rich. Real middle-class incomes have stagnated since Reagan. “Morning in America”—to the extent it was ever more than a campaign slogan—was confined to the wealthy.

Corporations—no longer American but global—can afford to underpay or lay off American workers because they are no longer dependent on them either as labor or as consumers. Automation and robotics have reduced the proportion of labor costs in manufacturing. Advances in telecommunications and transportation allow corporations to relocate operations to locations where wages are lowest. And a growing global middle class provides a market of eager customers with money to spend.

All this represents capitalism in the 21st century, as companies find new ways to compete and find their market. But satisfying the market becomes almost irrelevant when big corporations can lobby the government to keep themselves solvent. Automakers make SUVs that become impossible to sell when gas prices rise, so they run to the government for bailouts. Oil companies reap generous tax breaks even when they make record profits. Food conglomerates collect extravagant farm subsidies even when their factory farming practices endanger the environment and produce food that makes us obese and sick. This is corporate socialism, showering benefits on people who decry socialism.

Nowhere has the link between wealthy corporations and the struggling middle class been severed more completely than in the financial industry. In the wake of the financial meltdown, the big banks have eliminated the need to have markets at all. Matt Taibbi’s recent exposé of the financial bailouts in Rolling Stone describes the feeding frenzy of free money and guaranteed profits that followed the financial meltdown of 2008.

In one of Taibbi’s classic examples of corporate welfare to the financial industry—though by no means the most egregious—the Fed offered loans to banks at near-zero interest rates, intending to buoy up their balance sheets and encourage lending to businesses and consumers. But because the Bush (and later Obama) administrations attached few strings to those loans, the banks simply took the money and bought Treasury bills, realizing a 2% risk-free profit for essentially lending the government back its own—that is to say, our own—money!

The strained link between corporate and middle-class prosperity is why we have another jobless recovery, why corporate profits and GDP and the stock market have been on a tear for two years while the middle class struggles. It is class warfare and we ought to call it that. Unfortunately, right-wing politicians and media—who somehow still dominate political discourse in this country despite the debacle of the Bush administration—have co-opted the term, crying “class warfare” whenever someone proposes that tax rates be returned to those of the “oppressive” ‘90s. They have somehow convinced the American middle class that their interests, as Bill Maher likes to point out, are the same as Steve Forbes’.

We need to take the term back. Class warfare is what we need to wage, and it ought to be our battle cry as we tell the American people who’s been waging war on whom.

No, Henry Ford was not a socialist. But he felt a responsibility to American workers. If he were alive today, he just might be on our side.

Additional links:

It’s telling that some of the best reporting on the financial meltdown has come from Taibbi’s groundbreaking reports in Rolling Stone, Planet Money and Pulitzer Prize-winning ProPublica’s features on public radio’s This American Life, and Charles Ferguson’s Oscar-winning documentary, Inside Job. Why have their startling revelations found so little resonance in the supposedly liberal mainstream media? Because mainstream media are big corporations too.

Update 4/21/11:

Astute reader Robert Mayer, professor of consumer studies at the University of Utah, observes that former secretary of labor Robert Reich makes similar points in his recent book, Aftershock. Reich has spoken out strongly to decry the right’s attack on the middle class. “After 1980,” he writes, “the pendulum swung backward.” Indeed.

Update 4/27/11:

A new study by the Congressional Research Office now confirms the extent to which the big banks borrowed at low interest rates from the Fed and then, instead of lending to consumers or businesses, simply turned around and bought Treasury bills. The report was requested by Senator Bernie Sanders (I-VT), who has taken a lead role in exposing such practices.

Copyright © 2011, John Unger Zussman. All rights reserved.