The People's Tycoon: Henry Ford and the American Century (Vintage) (85 page)

Ford's failure to grasp Depression-era problems became evident in a rash of public statements made throughout the first years of this economic disaster. Beginning in 1930, with a series of articles in
The Saturday Evening Post,
he offered a simplistic analysis of the massively complex issues of shrinking capital investment, endemic unemployment, and evaporating markets facing the American economy. This critique betrayed an equally
limited appreciation of the problems facing ordinary Americans as jobs vanished, bankruptcies mounted, savings accounts disappeared, and mortgages were called in. Ford's bromides soon grew tiresome. But he would state them repeatedly in the following years.
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His analysis of the causes of the Depression showed his limitations. This economic disaster, he insisted, could be traced to one source: “speculation” in the stock market. A mania for making money by trading stocks had swept through American business in the 1920s, he argued, and diverted attention from the honest production of commodities. Sound business practice had given way to greed, producing “orgies” in the stock market and an epidemic of “extravagance, debt, and speculation.” American prosperity, Ford contended, had encouraged bad habits, as businessmen “quit making goods and went to making money…. Their real business, for the time, was playing the stocks.” This problem also infected ordinary citizens, Ford believed, who had been attracted by stories of “easy money and no work” in the stock market. They had accepted a delusion: that one “can get something for nothing—invest in stocks and get rich.”
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Ford certainly put his finger on part of the explanation for the crash. Many observers, both at the time and in decades since, agree that excessive speculation encouraged the collapse of the stock market in 1929. But it was only one piece in a much larger mosaic of problems that included pyramid structures of corporations holding one another's stocks, growing poverty in the nation's agricultural sector, serious maldistribution of income, and a destabilization of the international debt structure by the late 1920s. Ford demonstrated little, if any, grasp of these larger, systemic problems in the American economy. In his view, business failure stemmed solely from an entrepreneur's or investor's own deficiencies. Ford believed that when his business dipped it was always “due to some defect in our own company, and whenever we located and repaired that defect our business became good again.” When each entrepreneur put his own house in order, he preached, the Depression would lift.
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Ford's commentary moved from the simplistic to the trite in his reflections on the most pressing problem facing the United States—unemploy-ment. He remained convinced that work was available if people would only take the initiative to look for it. “I found very early that being out of hire was not necessarily being out of work,” he informed readers of
Business Week.
He blamed unemployment on slothful habits. “I have often thought that if the jobless … would set to work at work they see everywhere waiting to be done, they would quickly find that they had made good jobs for themselves,” he declared in
The Saturday Evening Post.
For Ford, there was simply no excuse for poverty in modern America, since people only needed “to
extract, convert, and distribute those things that nature has provided.” This message, of course, offered scant comfort to the millions of people for whom jobs did not exist.
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Ford also blamed economic paralysis on a faulty understanding of money and its proper function in the economy. He relentlessly insisted that Americans confused money with wealth. Though money needed to circulate freely in order to facilitate the buying and selling of goods, he admitted, it had no intrinsic value. “Money … may represent wealth, but it is not wealth itself,” Ford wrote. In the 1920s, however, businessmen had sought profits rather than producing solid products. The result had been disastrous, because “wealth consists of useful goods, and money which is made out of thin air does not add to the stock of goods and therefore does not add to wealth.” This trend also increased the power of financiers and bankers, the old ideological bogeymen in Ford's populist worldview. For Ford, the economic crash had demonstrated that a “system of business in which the money lender too conspicuously thrives is not a truly prosperous system.”
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His solution for the social and economic devastation of the Depression lay in a simplistic formula. He began with a one-word article of faith: production. Making tangible goods to meet the demand of consumers provided the bedrock of American prosperity. In Ford's words, “Plenty means production and still more production; production means wealth, and scarcity means poverty, and the entire social problem is poverty…. Production and the effects of production give the answer to practically all the things that trouble us.”
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Ford followed the homily on production with praise for the necessity of work. Labor not only enriched society but bound it together, creating social respectability as well as banishing poverty. “Without it there is nothing,” he wrote in 1930.”Work determines a man's place in the world; it indicates the caliber of his mind and character, and expresses the measure of his usefulness to his fellow men.” In the best tradition of the American work ethic, Ford believed that the significance of labor lay in the moral realm as well as the economic. Any solution to the Great Depression must use this resource.
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He also contended that businessmen needed to refocus on the “fundamentals” of business, which consisted of three principles that he had promoted tirelessly since the 1910s: efficient mass manufacturing, low prices, and high wages. In 1934, Ford reiterated these fundamentals for
Elks Magazine
: “(1) Make or sell the best possible product at the lowest possible price. (2) The best possible product (or service) is one that best fills a real humanneed. (3) In the course of making or selling, pay the highest possible wages for the shortest possible number of hours.” If sound business practices were
revived, entrepreneurs would create ”a system of normal, continuous and progressive supply and consumption, which will replace the periodically collapsing system under which we have been working.”
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Finally, Ford lobbied throughout the 1930s for the decentralization of American manufacturing. His “village industries” were small factories built in rural areas or small towns where the workforce was drawn part-time from local farms. This attempt to “industrialize agriculture and agriculturalize industry,” as Ford put it, employed people who owned small farms or truck gardens who worked shifts at the factory, which specialized in manufacturing a particular part. Workers would grow their own food and take time off during the warm months to plant, tend, and harvest their crops. The Ford Motor Company had opened seven such village industries by the mid-1930s in rural areas far outside Detroit, and their success seemed to point to a solution to larger economic problems. “Up through these country plants there has not been a person who needed help,” Ford wrote. “They have raised so much of their own food that out of their wages they have always had a surplus.” This project for integrating the country and the city, the farmer and the worker, not only appealed to his growing respect for American tradition but suggested a way for citizens to work and feed their families. That such a plan had little realistic application for urban industrial centers seems not to have disturbed Ford's utopian vision.
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But all of his prescriptions for recovery depended on a single, overarching dictum. The real need—and on this point he preached fervently—was for a resurgence of individual self-help and initiative. In pronouncements appearing regularly in venues such as
Business Week, The Saturday Evening Post,
and the New York
Times,
he urged Americans to help themselves in these trying times. Opportunities existed, Ford believed, and people “need not depend on employers to find work for them—they can find work for themselves.” Self-reliance bolstered personal pride as well as economic well-being. “The great trouble today is that there are too many people looking for some one else to do something for them,” he claimed in 1935. “The solution to most of our problems is to be found in every one doing something for himself.” By marshaling their own talents to overcome adversity, people would “discover what is worth while and what is not worth while” and realize “there are no tricks which will take the place of work.”
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In 1933, Henry Ford demonstrated his convictions about the Depression in confronting a local crisis. The Detroit banking structure was tottering, and many observers feared its total collapse. Early in the year, the Union Guardian Trust Company, a holding company that controlled the lion's share of the city's banking resources, lost its liquidity. The reckless speculation of Detroit banks, like many others around the country, had created
this situation. The Reconstruction Finance Corporation (RFC) agreed to step in and provide a large loan to Union Guardian Trust to keep its banks operating if large investors, including Ford, would agree to guarantee an additional advancement of funds. After initially considering such support, Ford decided not to cooperate. The governor of Michigan declared an eight-day bank holiday to forestall collapse of most banking in Detroit. Ford then agreed to provide some $11million in capital to create two new banks, whose managers he would select. Detroit's bankers refused this offer, and in March, General Motors, along with the RFC, established the National Bank of Detroit to stanch the financial bleeding. A few months later, Ford opened its own bank as well. Both of these new institutions did well. Throughout the controversy, Ford presented himself as a foe of reckless financiers and a friend of ordinary bank depositors, a position that he emphasized in a published pamphlet entitled
The Truth About Henry Ford and the Banking Situation.
The episode reinforced his view of banks as unproductive institutions that represented the interests of wealthy financiers. Rather than solutions, they appeared to him as part of the larger problem during the Great Depression.
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As the economic conditions deteriorated and banks began collapsing in smaller towns in Michigan, some of them also appealed to Ford for aid. Again, he refused. For example, a committee from L'Anse, a small town of four thousand where Ford operated two sawmills employing seven hundred people, requested a donation of $75,000from Ford to reopen the Baraga County National Bank. He not only refused but issued a scathing public attack. Banks were part of “a system that has so lamentably failed in protecting the savings which working people have entrusted to it,” he declared. “We have studied several communities in these matters and find that they do very well without banks as at present managed. A prosperous bank too often means a mortgaged community and such prosperity is the forerunner of depression.”
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Ford pursued his formula for economic recovery—work and production, self-help, reconnection with the land—with several local projects. Observing growing privation among Detroit's working people, he urged them to plant gardens for sustenance and made some land available on Ford farms. “No unemployment insurance can be compared to an alliance between a man and a plot of land,” he declared. Farmers, he assured readers, would be glad to lend small plots of land for such endeavors. As most city dwellers shook their heads in disbelief at this far-fetched plan, Will Rogers cracked that, since “most people got no room for a garden, what Mr. Ford will do is put out a car with a garden in it. Then you can hoe as you go.”
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Ford also embarked on an extensive rehabilitation project in the community
of Inkster. Incorporated in 1927, this African American town to the west of Dearborn had been devastated by the Great Depression as unemployment soared and its resources shriveled. Police protection, garbage collection, and utility service disappeared. Ford set up a community kitchen to provide meals and paid townspeople to clean up neighborhoods, drain stagnant water, and repair roads. He also opened a commissary to sell food and clothing at cheap prices or on credit, organized a medical clinic with doctors from the Rouge plant, and built a new high school. This initiative saved Inkster from some of the worst ravages of the Depression, and illustrated Ford's preference for private investment over public-welfare programs. But, like his garden plan, it repaired a few small tears in the social fabric of Detroit while doing little to stop its systematic unraveling.
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At the national level, Ford practiced his recovery preaching by releasing a new automobile. By 1931, the Depression had overtaken the company; sales of its Model A slumped significantly, and it had lost ground to General Motors and Chrysler. The founder responded by shutting down production of the Model A and offering a new model the following year, with an eight-cylinder, V-shaped engine. The Ford V-8, with its powerful engine and quick acceleration, gained legions of fans, including the outlaws John Dillinger and Clyde Barrow, who wrote Ford that his new car greatly aided their getaways. But it burned excessive amounts of oil, dampening enthusiasm among some consumers. The car sold only modestly, as did the Model B, an updated version of the Model A, and the company continued to lose money and position to its competitors. The failure of these moves revealed the threadbare quality of Ford's assertions about production and recovery. Making a good car revived neither the fortunes of the company nor the general state of the American economy.
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In late 1934, Ford demonstrated the bankruptcy of his position on the Great Depression. The United States lingered at a low point of economic activity, with unemployment hovering at around 22 percent, bankruptcies multiplying, investment standing some 88 percent below 1929 levels, soup lines in towns and cities all over the country, the gross national product and the consumer price index remaining about 25 percent below 1929 figures, and an atmosphere of despair settling over America. Ford's popular audience must have been amazed to read his assessment of the situation. In an essay entitled “Henry Ford Says This Is the Day of Opportunity,” published in
Collier's,
Ford offered a view of the American scene so rosy it bordered on the hallucinatory.
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