The Undercover Economist Strikes Back by Tim Harford

Author:Tim Harford
Language: eng
Format: epub
Publisher: Penguin Group, USA
Published: 2014-01-15T16:00:00+00:00

Hmm. Maybe Ford was trying to get a reputation as a philanthropist?

It’s another plausible-sounding theory. He was a rich man, after all, and his five-dollar working day made him famous—Ford was frequently on the front page of The New York Times in the months following its introduction.

But there are several reasons to be suspicious of this explanation. While the five-dollar workday was announced in grandiose terms to the local press in Detroit, it wasn’t trumpeted any further than that, and the national and international attention seems to have come as a surprise. And Ford’s company was only a few years into its prime: if Ford really wanted to devote himself to philanthropy, this would have been like Bill Gates turning his gaze to global poverty around 1985, before Microsoft had really established itself as the software powerhouse it would later become. Given that the five-dollar workday came so early in Ford’s career, it would have been an extraordinarily large philanthropic giveaway: the pay increase was about half the company’s expected profits. And Henry Ford didn’t own Ford outright; he was merely the majority shareholder. Had he really decided to funnel half the company’s cash into some gigantic self-aggrandizing project, he could have been sued by minority shareholders. (This did in fact happen, when the Dodge brothers took him to court—but not until years later.) In short, had Ford really wanted to be a philanthropist, we would have expected him to do his good works later in life, after seeking more publicity, and using his own money rather than the resources of his company.

Most tellingly, Ford himself repeatedly claimed that his aim with the five-dollar day was not philanthropic, it was to make money. This would have been an odd claim to make if he was trying to burnish his reputation as a do-gooder. Instead, Ford called the five-dollar day “one of the finest cost-cutting moves we ever made.”

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