The Henry Ford Matrix

And the Twilight of Disparity

Henry Ford was a smart fellow. As a matter of fact, he was much smarter than the current ruling junta of the much-envied and much-maligned 1%, because they still haven’t yet figured out what Henry realized in the early Twenties. In addition to inventing the assembly line, he shrewdly calculated the ratio of the worker-wage-purchaser cycle, such that he determined precisely the minimum hourly wage he could pay his workers, vis-a-vis the maximum price tag he could put on his Model T, in order for his workers to be able to buy their own product, i.e. his cars.

Take a simple graph – with the vertical axis representing the range of hourly wage rates for a typical auto worker, while the horizontal axis represents ascending possible retail prices for the basic black Model T Ford. (We’re talking maybe 1926, so forget the likes of Rockefeller and Al Capone, who were driving Hupmobiles. We’re dealing with the huddled masses here.) Now, draw a tangent from lower left to upper right. Somewhere about where 50 cents an hour on the vertical axis intersects the tangent, corresponding with $250 on the horizontal price continuum, (suggested manufacturer’s retail price, SMRP, as the dealer johnnies say nowadays), you reach equilibrium. That is, Henry does, or did, perhaps with killer entrepreneurial instinct. It was the magic intercept or inflection point which, circa 1926, might be called the Henry Ford Matrix, which he must have sat up nights figuring out. But it’s simple: You pay the guy with a lug wrench on the assembly line like five bucks for a ten-hour day to tighten the same nut 500 times, and he can afford to buy one of your Tin Lizzies.

Today, believe it or not, the Kochs and the Roves haven’t progressed that far yet. They think the rich can indulge in unbridled greed without recourse or repercussions. But the bottom line is that, the Dow Jones Index these days to the contrary, unimpeded income disparity at some point may not be all good news for the disparate ones.

This is no Trotskyite rant; nor yet a mild academic plea for redistributing income, even the mention of which strikes terror into the hearts of Larry Kudlow, Bill O’Reilly and the ordained Republican prelates at Fox News. Over time, common sense demonstrates that unbridled greed, accepted holus-bolus by the American way of life, shoots itself in the foot. The socio-political system that Bill Maher has analogized as one guy taking 99 pieces of pizzas, leaving 1/99th each for the other 99 guys, and declaring any alternative to be socialism, at some point becomes anything but a good deal for the super-rich. Professor Reich has pointed out as much in the introductory quote above.

As if we needed it, the latest figures are even more ridiculous than heretofore (possibly heretofive):

Sasha Abramsky, tentatively writing in The Nation, points out, “Almost all the additional wealth being generated by a growing economy is going to those who already have the most. Median income has stagnated, and for young people, it is continuing to go down.”

As a society, we’ve apparently learned to accept that trend as normal, but Abramsky points out that there’s been a sort of ratchet effect going on ever since the mid-1970’s, following a decade of LBJ’s proactive war on poverty. During the 12 years, from Reagan’s trickle-down administration to the exodus of Daddy Bush, the numbers for the population living in poverty were roughly as bad as they are today. Whereas, at the end of Clinton’s eight years — as had been the case in the aftermath of old Lyndon’s WOP — “poverty rates fell significantly.”

Not to draw too long a political bow, the political will is all that ‘s needed to change the seeming unchangeable – enacting war on poverty, dealing with earned income-tax credit and driving down unemployment figures.

In the face of this reality, the right-wing solution is to slash the food stamp giveaway that keeps four million people only knee-deep in poverty, and to impose stricter limits on unemployment hand-outs. The solution on the other side – the Democratic side – is largely to do nothing. They – and the nation, if not The Nation – continue to tolerate a system whereby a $17 trillion economy enriches a country that, with the single exception of Romania, has the highest level of child poverty of any developed country in the world.

How does political will get generated? Forget the obscene immorality of the situation. Forget the outright crime, forget the abomination and the utter nonsense of a clutch of billionaires in one family (yes, the Wal-Mart dynasty) owning a retail chain in which their entry-level employees working full time don’t make enough to avoid social assistance, or as the Republicans call it, Big Government..

Legislation won’t result from political will, because the 1% own the legislators. Morality won’t change our national disgrace, because the super-rich have no visible morality. And armed revolution won’t be a possibility because mercenary troops are a dime a dozen, the 1% own the arms manufacturers and most weapons, while the NRA is shaping up right there in the front rank, with their little AK-47’s at Slope Arms.

One seismic shift that’s taken place, probably beginning with extreme financial de-regulation in the early 1990’s, is the change from the financial sector ceasing to be merely a service, a lubricant for the economy, to become the largest, most powerful and assertive sector in the economy. Banking is no longer a service but owns things. It no longer simply spread-lends and service-fees us to death – as it has ever since the Rothschilds and the Fuggers (so aptly named), but instead takes bail-out money from the tax-payers, and latterly even proselytizes Mom-and-Pop deposits as bail-ins, enabling it – the banking oligopoly – to buy up distressed assets all over the world.

“The biggest banks in the country,” writes Rana Foroohar in Time some time ago, “are larger and more powerful than they were before the crisis…” partly because of the development of weapons of mass financial destruction — the metaphor is not exaggerated — such as credit default swaps and other derivatives, which enable small risks to multiply and overwhelm financial markets around the global financial system.

In a nation of which even the Supreme Court values corporate rights above individuals’ rights, there is only one way to overcome, to subjugate corporate power, or those super-rich players who control and wield it. Money. Sooner or later, like Midas, their golden touch will turn them to stone.

Much more practically, when the Ford Matrix principal gets through to the 1%, when it becomes apparent that the economy that feeds their snowballing wealth is contracting and declining because the poor and the mid-poor can no longer buy the products the economy produces, the shuffle will change for the better.

You can bet your food stamps on it.

Bill Annett writes four newsletters: The Canadian Shield, American Logo, Beating the Street, and The Oyster World. He can be reached at: Read other articles by Bill.