Ford Motor Is a True Industrial Revolution Success Story

The Industrial Revolution began in Britain. The cotton industry led the first Industrial Revolution. Steam power was used as a source of energy and applied to mechanized factory production. This industrialization naturally fostered the development of iron, needed to make machines, and coal, the source of energy. As it spread into related industries, industrialization advanced further.

The Industrial Revolution was a process of technological innovation. By incorporating new technologies and making use of science, it gradually expanded into broader fields. By finding and utilizing new materials and raw resources, it created new products and industrialized them.

The material civilization humanity enjoys in abundance today grew out of technological innovation in automobiles, electricity, and the chemical industry that followed the steam-powered industrialization era. The countries that led this were Germany and the United States. After the internal combustion engine first appeared in 1867, the diesel engine was invented in Germany in 1876. In 1896, the first four-cylinder automobile was sold. The man behind it was 32-year-old Henry Ford.

Henry Ford, the king of the American automobile industry, later devised a highly innovative production method that came to be known as “Fordism,” named after him. Put simply, Fordism was a large-scale automobile assembly and production line connected by a long conveyor belt. Ford, who had long sought to build an efficient production system, is said to have drawn ideas for logistics from the largest postal company in the United States at the time and for line production from the massive slaughterhouses of Chicago.

Fordism dramatically increased labor productivity at Ford’s factories. Finished automobiles quite literally flowed out of the factory like water. Ford’s signature product, the Model T, originally took 750 minutes to build, but once it was put on the conveyor belt, production time was drastically reduced to 93 minutes. The conveyor belt that brought about this remarkable change can now be easily found in factories all over the world, but at the time it was a truly groundbreaking device.

Economies of scale were achieved in parts production as well. Precision was improved in order to standardize parts and ensure interchangeability. This was made possible through precision machinery.

As automobiles began to be mass-produced, their prices fell accordingly. Around the time Ford introduced the first Model T to the world in 1908, automobiles made by other companies cost an average of $2,000. Ford offered the Model T at just $825. Thereafter, as productivity rose, the price of the Model T kept falling, selling for $550 in 1913 and $255 in 1920. Needless to say, inexpensive, high-quality cars sold in the market at a tremendous pace.

Ford did not stop there. While lowering the price of cars, he raised wages. In the 1910s, steelworkers in the United States worked an average of 12 hours a day and earned $1, but Ford had his workers work 8 hours a day and paid them $5. The productivity gains from the new production method translated into wage increases. In the 1910s, an 8-hour workday was something no one could have imagined.

With their higher wages, workers at Ford’s factories were able to save money and buy the very cars they produced. At the time, automobiles were products only the wealthy could afford. Yet workers came to be able to purchase these expensive cars.

The innovation brought about by Ford’s mass-production method transformed the automobile from a symbol of the wealthy into an everyday necessity for the masses. This can truly be called an achievement of the Industrial Revolution that dramatically increased consumer welfare.

In our society, there are growing calls for a Fourth Industrial Revolution. Ford automobiles clearly show that the success of innovation is ultimately determined by how much it improves consumer welfare.

Sung-no Choi, Vice President, Center for Free Enterprise (CFE)

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Original title: 포드 자동차는 진정한 산업혁명의 성공 사례

Author: Sung-no Choi

Date: 2017-12-29

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=27&idx=10793