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Wednesday, September 12, 2012

The Golden Goose Drives a Model T

     Everyone knows Aesop’s story of the goose that laid the golden eggs. Eventually, assuming that the goose must have a stomach filled with gold, the owners killed the goose to get all the gold at once. As one writer put it, “Greed loses all by striving all to gain.”
     I came across a wonderful article a few weeks ago in the New York Times titled, “When Capitalists Cared.” You can find it here: http://www.nytimes.com/2012/09/03/opinion/henry-ford-when-capitalists-cared.html  The article talks a lot about Henry Ford and how, in 1914, shortly after he began producing the Model T, he raised the salaries of his workers to the unheard of amount of $5 per day. The article doesn’t mention it, but $5 was double the previous daily rate, and at the same time Ford also lowered the daily working hours from 9 to 8. Was he mad? Surely, his company would go broke from such generosity. Or stockholders would flee. Or workers would be spoiled and start feeling entitled and work less. I’m sure at $2.50 per nine hour day he was paying a fair and just wage by prevailing standards. Nevertheless, he doubled his workers’ wages and shortened their work hours.
    Again, I ask, was he mad? Apparently not. Confirmed capitalist though he was, he improved the life of his workers for three reasons. First, the Model T assembly line jobs were so boring that Ford couldn’t hang onto his workers – they were constantly quitting. When he raised the salary to $5 per day, the story goes, the wives pressured their husbands into staying. Second, by shortening the workday to 8 hours, he could run three shifts a day and increase production. But third, he reasoned that if workers were paid enough, they could own a Model T themselves, and his business would grow and all would prosper. And he was right. If he had crushed his workers under his heel, he might have made stronger short-term profits but surely his company, and probably the entire industry, never would have seen the dramatic growth it eventually achieved.   
    I believe the stories of the goose and the Model T are related. Capitalism unregulated can be a most vicious enterprise and quite capable of killing the goose that lays the golden eggs, i.e., crushing the middle class that it needs to buy its goods and services. Think of the industrial age in Britain and America, the stories of Charles Dickens, the sweatshops, the workers tossed out when injured, the child labor – all justified under the banner of freedom, capitalism, and the law of supply and demand. And it never would have changed if the progressive Teddy Roosevelt hadn’t been vice-president when William McKinley was assassinated. Roosevelt promised Americans a ‘square deal.’ He regulated businesses and busted the trusts. One of his first speeches to congress after becoming president was to ask their help in limiting the power of large corporations. He also proposed common sense regulations for the food industry.    
     A healthy society can only occur when the symbiotic relationship between capitalists, stockholders, employees, and customers is clearly understood. There was a time when I thought that capitalists could be trusted to maintain that balance, trusted not to kill the golden goose. Certainly, capitalists like Bill Hewlett and Dave Packard who founded computer company HP, were men who understood their responsibility to society. They built a company that built an industry that built a powerful middle class – who then bought HP products and other companies’ products and cars, and homes, and appliances, and sent their children to colleges and trade schools, and so the next generation prospered too.
     But now, I sense the capitalists of old are returning and for massive, obscene personal profits would risk destabilizing society, heartlessly driving up unemployment, and squeezing the very middle class that would buy its products. Aesop’s fables have stood the test of time because they’ve never stopped being relevant.  

Best regards,

Jim
Zurich

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