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Comment of the Day

January 05 2012

Commentary by David Fuller

Email of the day

On Henry Ford economics (in response to Tuesday's lead item):
"The reign of capitalism unabated: bringing down western wages and living standards to those in Asia. The question then remains: where are the buyers of the products going to come from if the workers can't afford to buy them? Henry Ford already understood 90 years ago that he had to pay his workers the best wages anybody paid, so they could afford to buy his cars:

"There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible."
Henry Ford

David Fuller's view A famous quote, it may have been appropriate when Ford dominated the automobile business and all the cars were sold domestically. Also, long after Henry Ford it became a policy driven by union demands which almost bankrupted US automobile manufacturers in recent decades.

Globalisation does lead to a narrowing of cost differentials between countries via a scissors effect. Consequently US manufacturing wages (including entitlements) are either static or coming down in many industries while they rise in faster-growing emerging economies.

My answer to your question is that Ford and most other automobile manufacturers recognise that their fastest growing markets are now outside their home countries. Selling to the world, often by sourcing and manufacturing in many countries, is obviously a superior business plan to selling only to your fellow citizens. This has given rise to what I call the Autonomies - successful multinational companies which are able to flourish as never before.

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