(Editor's note: This commentary is being republished to mark the 100th anniversary of the Model T.)
Anyone strolling by 58 Bagley Street in Detroit early in the morning of June 4, 1896, would have seen a strange sight: Henry Ford, ax in hand, smashing open the brick wall on his rented garage. He had just started his first gas-powered car and it was too big to fit through the door. In this centenary year of Ford's achievement, we ought to pause to remember what he did, and marvel at how it changed the world.
In 1896, Grover Cleveland was just finishing his second term as president of the United States. The automobile was such a novelty that few people other than a handful of tinkerers had even set foot in one. In 1903, the year the Ford Motor Company went into business, the city of Detroit fixed a speed limit of eight miles per hour for almost a mile around city hall. Convicted speeders paid $100, which was about two months' wages for an average American worker. But the "average American worker" was not driving America's first cars. They were, as Ford observed, "a rich man's toy" or, as Woodrow Wilson claimed, a "new symbol of wealth's arrogance."
Henry Ford changed all that. He didn't invent either the auto or the mass production scheme he so brilliantly employed to churn out cars by the millions. But he did, in his own words, "build a car for the great multitude." When he built the Model T, he "put America on wheels" and made Michigan the car capital of the world.
Ford was an entrepreneur and, as are most entrepreneurs, a visionary as well. His all-American car had to be "large enough for the family." It had to be "constructed of the best materials by the best men to be hired." And it had to be "so low in price that no man making a good salary [would] be unable to own one."
When Ford cranked out his first Model Ts in 1909, he was well on his way to fulfilling his vision. Sales that year were a modest 18,000; by 1913, he almost reached 250,000; in 1920, he sold over one million Model Ts. Prices fell as fast as sales rose. The first Model Ts were barely under $1,000 each, but by 1920 Ford had cut the price to a mere $355-roughly $3,500 today. With all of their manufactured steel, vulcanized rubber, and processed plate glass, Model Ts were selling for less than 30 cents a pound-perhaps the best bargain in the industrialized world.
How could Ford repeatedly cut prices and boost quality at the same time? His ingenuity took the assembly line method of production to new heights of productivity and efficiency, but he shook the industrial world to its foundations with an amazing gamble: he doubled wages and reduced working hours. "The payment of five dollars a day for an eight-hour day was one of the finest cost-cutting moves we ever made," Ford wrote in the early 1920s. The five-dollar-a-day wage policy reduced turnover, improved morale, and brought some of the best workers to his plants in Michigan. Ford even hired thousands of handicapped but capable workers, including bedridden patients who happily screwed nuts and bolts together on mini-assembly lines in their rooms.
To Ford, the issues of minimum wages, maximum working hours, the hiring of workers, and the pace of industrial productivity should be resolved by the market, not the government. "Our help does not come from Washington, but from ourselves," he wrote. "The government is a servant and never should be anything but a servant."
Henry Ford made the best car at the lowest price and earned a billion dollars. Only when he became complacent with the Model T and refused to innovate did he fall from the top. "It is strange," he wrote in 1926, "how, just as soon as an article becomes successful, somebody starts to think that it would be more successful if only it were different. There is a tendency to keep monkeying with styles and to spoil a good thing by changing it." He purportedly once said that customers could have any color of car they wanted, so long as it was black.
That kind of thinking had made history out of the horse and buggy makers. In 1927, it would do the same to the Model T. By then, the new Chevrolet from General Motors had a water-pump cooling system, an oil gauge on the dash, a reliable ignition system, a foot accelerator, and a gas tank in the rear for safety and convenience. And, the new Chevys came in a variety of colors. The era of Ford's dominance was over.
Henry Ford didn't always get it right, but he got it right enough times to rank as one of the greatest business geniuses this country has ever produced. His century-old story is an eternal tribute to the free enterprise system--a system which allowed his talents to blossom right here in Michigan and benefit untold millions of people the world over.
Dr. Burton. W. Folsom is a history professor at Hillsdale College and senior fellow in economic education at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.