Economic Influencer in the 1920s - A Look at Henry Ford and Ford Motor Company

 Introduction

        One need not think too hard about an influential figure of the 1920s and come to the conclusion that Henry Ford was one of the top names in that decade. After all, his father had built a massively successful automobile company, the Ford Motor Company. After his father's death, however, the next generation Henry Ford took over the company, which, many business historians argue, led to its eventual decline in later years.1 However, Henry Ford was able to run a massively successful business in the 1920s, using modern thinking to create things such as the standard 40-hour workweek, the demonstration of "charismatic leadership," and streamlining assembly and construction lines.2 The result was not only a revolution in business practices but a revolution in large businesses shaping the communities around them.3

Henry Ford's Forward Thinking in the 1920s 

       After taking control of the Ford Motor Company from his father, Henry Ford did something radical: he decided not to cow tow to investors and instead decided to run his company how he saw fit.4 His plan for success was relatively simple. He wanted to create a streamlined assembly with "interchangeable parts" that would fit any Ford vehicle so that production would be faster and easier, and so that customers would find repair parts faster and easier since they would be the same for all Ford vehicles.5 The decision to cut loose from investors and their opinions and run the company himself, including all aspects, was a recipe for initial success.6 Ford Motor Company saw massive growth in the 1920s due to Henry Ford's forward thinking. He turned his company into an idealist organization, driven by "charismatic leadership," "innovation," "entrepreneurial spirit," and "flexibility."7

     In addition to his use of streamlined assembly practices and leadership style, Henry Ford also began another revolutionary practice: massively raising wages for his employees "overnight."8 He began a practice of "doubling wages" as company profits rose.9 This went a bit against the norm as companies with investors usually wanted to keep wages low and profits high.10 Instead, Ford rose wages with rising profits, leading business analysts to commend him for his "efficiency wages."11 These practices led to an intensely loyal and huge pool of employees who stayed with the company, further maximizing profit as turnover rates in employment were low.12 Furthermore, Henry Ford's modern business model, according to modern business experts, resembles more of a Silicon Valley business than an early 20th century business.13

Overall Business Outlook of the Ford Motor Company in the 1920s

       The Ford Motor Company boomed from the early 1920s until just before the Great Depression. In 1929, however, as the Great Depression loomed over the United States, Henry Ford had a lot to say. President Hoover asked the great business leaders of the nation continue paying the same wages to their employees, asking those leaders to effectively absorb some of the impending economic shock of the Depression.14 Henry Ford spoke up, and agreed with the President, stating that he would continue to pay his employees their normal wages with normal raises based on productivity.15 Was this naive thinking on Ford's part? Ford did not think so. In fact, he declared in 1929 on the eve of a panicking time for the nation that he was going to raise his employees' wages by 15%, just to show the country that he was not just a man of talk but of action.16

      The Ford Motor Company and Racial Equity: A Note on African Americans and Ford's Views on the Jewish People

      One would not associate the 1920s with racial equality for African Americans. However, the Ford Motor Company was an exception. A study of the Ford Motor Company's records show that Henry Ford not only hired black workers, but he paid them the same as their white counterparts.17 This was a very rare practice in the teens and the 1920s. Despite the lack of national racial equality and prevailing attitudes of many white Americans, Ford did not hesitate to hire a large number of black workers.18 Unfortunately, Henry Ford's willingness to hire minorities did not extend to those of Jewish heritage. In fact, Ford claimed wildly that there was a secret Jewish cabal of sorts, seeking to "overthrow world governments" in the 1910s and 1920s.19 The Ford Motor Company's popularity and Henry Ford's notoriety clashed with his views on the Jewish people, eventually forcing him to publicly apologize for some of his remarks.20

Conclusion

    While studying Henry Ford and the rise of the Ford Motor Company in the 1920s decade, it becomes apparent that Ford was one of the first modern businessmen. He took on unorthodox methods, such as paying higher wages to his employees than other companies by a large margin, ejecting investors from his company to run it how he saw fit, and he hired minority groups such as African Americans who were paid the same wages as their white counterparts. He streamlined the assembly-line process through an idea of making parts interchangeable amongst different models of vehicles, increasing the assembly line speed and efficiency as well as making repairs less costly to customers who purchased Ford vehicles. He also knew that retaining employees was important so as to reduce training costs and further increase efficiency in the company. His business acumen in the 1920s seemed to have no limits, and the Ford Motor Company was a resounding success in that decade. However, the success did not last forever. Additionally, Ford was a man of odd opinions, accusing the Jewish people of attempting to take over the world. Despite this, many companies today are taking note of Ford's practices, and his influence on wages and business are still felt today.

Footnotes:

1. Stefan Link. "The Charismatic Corporation: Finance, Administration, and Shop Floor Management Under Henry Ford." Business History Review 92, No. 1. (2018): 85.

2. Ibid, 86. 

3. Ibid, 85. 

4. James M. Wilson. "Henry Ford's Just-in-Time System." International Journal of Operations and Production Management 15, No. 12, 59. 

5. Ibid, 60. 

6. Ibid, 59. 

7. Stefan Link. "The Charismatic Corporation: Finance, Administration, and Shop Floor Management Under Henry Ford," 88.

8. Jason E. Taylor. "Did Henry Ford Mean to Pay Efficiency Wages?" Journal of Labor Research 24, No 4, 683.

9. Ibid, 683.

10. Ibid, 683. 

11. Ibid, 683. 

12. Stefan Link. "The Charismatic Corporation: Finance, Administration, and Shop Floor Management Under Henry Ford," 89. 

13. Ibid, 89. 

14. Jason E. Taylor. "Did Henry Ford Mean to Pay Efficiency Wages?", 683.

15. Ibid, 683.

16. Ibid, 683. 

17. Christopher L. Foote, Warren C. Whatley, Gavin Wright. "Arbitraging a Discriminatory Labor Market: Black Workers at the Ford Motor Company, 1918-1947." Journal of Labor Economics 21, No. 3, 493.

18. Ibid, 493.

19. Saker Woeste Victoria. "Insecure Equality: Louis Marshall, Henry Ford, and the Problem of Defamatory Antisemitism, 1920-1929." The Journal of American History 91, No. 3, 877.

20. Ibid, 877. 

Sources:

Foote, Christopher L., Whatley, Warren C., Wright, Gavin. "Arbitraging a Discriminatory

         Labor Market: Black Workers at the Ford Motor Company, 1918-1947." Journal of

         Labor Economics 21, No. 3 (July 2003): 493-532. Arbitraging a Discriminatory Labor Market: Black Workers at the Ford Motor Company, 1918–1947 on JSTOR (liberty.edu)

Link, Stefan. “The Charismatic Corporation: Finance, Administration, and Shop Floor                        Management Under Henry Ford.” Business History Review, 92, No. 1. (2018): 85-                   115. http://dx.doi.org/10.1017/S0007680518000065.

Taylor, Jason E. "Did Henry Ford Mean to Pay Efficiency Wages?" Journal of Labor Research 24, No. 4 (2003): 683. Document Number: GALE|A106560965.

Wilson, James M. "Henry Ford's Just-in-Time System." International Journal of Operations and Production Management 15, No. 12 (December 1995): 59-75. Henry Ford′s just‐in‐time system | Emerald Insight (liberty.edu). 

Victoria, Saker Woeste. "Insecure Equality: Louis Marshall, Henry Ford, and the Problem of Defamatory Antisemitism, 1920-1929." The Journal of American History 91, No. 3 (12, 2004): 877-905.