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Mechanics and Financiers: How Political Economy and Political Ideology Helped Make Detroit the Global Leader of the Automotive Industry

Henry Ford with Model T, 1921 Car, via Wikimedia Commons [CC0]

The history of automotive mass production begins with a puzzle: Why did Detroit, of all places, pioneer the industry that would shape the twentieth century like no other? In an excerpt from his book Forging Global Fordism, Stefan J. Link offers one possible explanation.

Editor’s note: The current debate in economics seems to lack a historical perspective. To try to address this deficiency, we decided to launch a Sunday column on ProMarket focusing on the historical dimension of economic ideas. You can read all of the pieces in the series here.

The rise of automotive mass production in America at the turn of the twentieth century, then, was without doubt a major watershed in economic history. It paved the way for a consumption-based pattern of growth, and it created new imbalances in the international economic order. From a global perspective, this was unexpected: The automobile, after all, was an invention of French and German tinkerers, and the United States was a copycat adopter.

Yet by the eve of World War I, the factories of southeastern Michigan were spewing out tens of thousands of automobiles, while European carmakers continued to build expensive and stodgy models by hand. Seen from another angle, the automobile industry decisively set apart the United States from development patterns elsewhere in the Americas. Argentina and Brazil, for example, had expanded into their Western hinterlands over the course of the nineteenth century, just like the United States. But the economic patterns of these countries remained tied to raw materials, resource extraction, and transatlantic commerce. The automobile industry, in short, marked a pivotal shift in the “second great divergence”—the move of the United States away from its Atlantic orientation toward domestically anchored industrial preponderance in the twentieth century.

And yet the annals of American economic history barely register that mass production was a momentous departure. Rather, they assimilate mass production into what might be called narratives of natural emergence: halfway between the end of the Civil War and the rise of the New Deal, automotive mass production issues as though by necessity from the forward momentum of capitalist transformation. The two opposing modes in which the history of this era is generally told fully coincide in this regard. One is a sanguine narrative of progress: technological and organizational innovations converged to form large corporations whose professional managers came to preside over a more efficient, more rational, and less rapacious capitalism.

The second variant is told in a minor key: here the very same processes of corporate consolidation and rationalization are seen to defeat more emancipatory alternatives of grassroots populism and labor self-organization. In these latter narratives, mechanized mass production—Fordism— often features as a weaponized strain of Taylorism, as a tool used by management to conquer shop floors and to usher in the bleak open-shop industrial landscape of the 1920s. Both versions are overdetermined: In the first vein, mass production results from the imperatives of modernization. In the second, mass production results from the iron mandate of capital accumulation. To be sure, this second mode narrated the transformation as one of intense conflict. Strikingly, however, these narratives, too, seem unable to imagine the story as ending in anything other than corporate hegemony: struggle there was, but doomed it was too.

What is lost in these perspectives is an idea that contemporaries of the Thirties would have regarded as self-evident: that mass production could be the engine for creating political economies very different from the corporate capitalism that emerged in the American interwar years. The shape that automotive mass production took in America in the first decades of the twentieth century was not preordained: it was the outcome of concrete struggles over the terms of economic development.

The economies of scale unleashed by mass production harbored immense potential for growth. What did this imply for the social and economic order at large? Whose norms and values would govern the distribution of material rewards? What was the proper way to run that momentous new institution—the mass-producing corporation? Buried under the familiar narratives, then, is a political history of mass production—one that includes, but goes beyond, the familiar analytic of capital and labor. To be sure, mass production occasioned fierce and consequential conflicts between workers and management. Yet the shop floor was only one site of contestation, and there is no reason to overburden it with an ontological primacy that relegates all other conflicts to a secondary or epiphenomenal status. Doing so would mean missing what was a much larger arena of political struggle and class conflict surrounding the rise of mass production, in which skilled mechanics and unskilled migrants, middling proprietors and privileged investors, a new managerial class and old financial elites battled out the terms of a new economic order.

Automotive mass production spawned widely diverging normative views of social order and economic development. These clashes decisively shaped how the industry matured. We need to understand these conflicts if we want to fully appreciate what attracted interwar modernizers like William Werner to Ford, Detroit, and the American Midwest, what they found there, and what they took back home across the Atlantic.

Mechanics and Financiers

The history of automotive mass production begins with a puzzle. Why did Detroit, of all places, pioneer the industry that would shape the twentieth century like no other? Historians and geographers have long picked at this question without pulling out fully satisfactory answers. The question matters because, initially, it seemed that an arc of carmakers from southern Germany to northern France to New England would dominate the new industry. In 1900, European manufacturers as well as those in Connecticut, Massachusetts, and New York were building stately horseless carriages for the leisure class. Yet only five years later, Detroit turned out the greatest number of cars and boasted the greatest number of automotive factories on the globe, with the Ford Motor Company notably among them. 

Was this coincidence, as automotive historians blithely maintain? Was Detroit simply lucky, as it were, to count a Henry Ford and a Ransom Olds among its citizens—incarnations of the American genius for innovation and entrepreneurship? Such notions remove the early tinkerers from the historical context that produced them. Figures like Ford and Olds acted within the political economy of the Midwest and shared the characteristic populist commitments that suffused the region. These two factors—political economy and political ideology—go a long way toward explaining why, at the turn of the twentieth century, southeastern Michigan was in an auspicious position to get ahead of rapid technological developments and to spread its fruits widely.

First, the automobile industry benefited from the Midwest’s distinctive pattern of industrialization. The larger Great Lakes basin had seen an “agro-industrial revolution” since the mid-nineteenth century, in which the machine shops and foundries of middling cities connected with commercially oriented farms. In such an environment, industry and agriculture were not seen as belonging to successive stages of development; rather, they were regarded as complementary, indeed symbiotic. Midwestern growth, in short, did not conform to the spatial logic by which the global “great specialization” separated agricultural surpluses from industrial production by vast distances. That meant that farmers had the resources and mechanical savvy to buy a moderately priced gadget such as the runabout—“a horseless carriage with an engine mounted underneath”—turned out by Detroit car builders in the early years.

Second, the economic geography of the Midwest occasioned distinctive political sensibilities. Populist farmers famously rallied against the increasing integration of independent producers into the circuits of money and capital dominated by the East. Less well known is the equally pervasive populism espoused by the middling manufacturers and machine-shop proprietors so characteristic of the Midwest. Less concerned with agricultural prices and railroad freight rates than the farmers, the manufacturers nevertheless shared their producerism. That is, they insisted that the ultimate source of the nation’s increasing wealth, and of the civilizational progress it engendered, was productive labor. Material affluence was held to be a prerogative of the productively working, whether they be farmers, laborers, or proprietor-mechanics—closely aligned occupations in the worldview of Midwestern producer populists. As Henry Ford said of his profession: “Machinist and engineer—farmer first.”

Experts with machines and metal, Midwestern mechanics gave their producerism a characteristic technological spin. Advances in technology, they argued, served as the motor of increasing prosperity. Through technological progress, productive workers would expand the nation’s wealth, in turn furnishing them with increasing time and means for self-cultivation. Because it emerged from collaborative work, technology was a collective good. The technical innovations of the era—electricity, gasoline engines, automobiles—did not belong to the privileged few but rightfully should be available to enhance the lives of the producing classes.

This kind of producer populism permeated Detroit politics. Hazen Pingree, Detroit mayor in the 1890s, exemplified a certain type of Midwestern manufacturer—his shoemaking business employed seven hundred workers—whose relative wealth did not prevent him from fiercely contesting financial elites and the powerful corporations they dominated. This pitted Pingree not only against price-gouging railroads. Pingree also alienated the elites of Detroit by bringing the local gas and power utilities into public ownership. The goal was to offer “cheap gas for the masses” and to “take electric lighting out of the luxuries of life, only to be used by the wealthy, and place it within reach of the humblest citizen.” When confronted with the charge that he was dragging politics into the market sphere, Pingree countered pithily: “Corporations are in politics.”

At the time, Henry Ford was chief engineer of the city’s largest electricity provider, Detroit Edison, so he was surely well familiar with the political fights over urban utilities. Was it a coincidence that Ford applied for the position of chief engineer at Pingree’s newly inaugurated, municipally owned City Electric Lighting Plant? We cannot know; Ford did not get the job. But it is evident that his milieu—the city’s tinkerers, machine builders, and skilled mechanics who soon piled into the fledgling auto industry—were steeped in the kind of populist sentiment expressed by Pingree. Soon Detroit’s early carmakers—with Henry Ford in the vanguard—decided to abandon the narrow market of elite purchasers and make, in Ransom Olds’s words, “the automobile, the child of luxury, instead the child of necessity.”

Such sentiments put the mechanics, who had the know-how, at odds with the local elite, who had the capital. The copper magnates, stove manufacturers, and city bankers who formed the Michigan upper crust were very keen on nurturing an automobile industry. They hoped to rival the Northeast with its pricey, handcrafted luxury vehicles. While Olds and Ford sought out investors so they could build sturdy runabouts, the local elites hoped to fund outfits that would flatter their own sense of social standing. Displaying a penchant for what one automotive historian has cleverly called “conspicuous production,” the urban elites of Michigan pressured the mechanics they financed to build status symbols, not utility vehicles. They hoped for, in the words of Detroit patrician Henry Joy, “a gentlemen’s car, built by gentlemen.” Ransom Olds was soon fired by his investors. Henry Ford’s early ventures, too, failed amid conflicts between the tinkerer and his backers. After Ford quit, the investors recapitalized the Henry Ford Company and changed its name, in honor of Detroit’s founder, to Cadillac.

“Experts with machines and metal, Midwestern mechanics gave their producerism a characteristic technological spin. Advances in technology, they argued, served as the motor of increasing prosperity.”

With access to local capital now blocked, Ford had to pull together a “rag-tag band of investors”—a group of middling merchants and wheeler-dealers who were willing to back his next venture. The significance of this new outfit, the Ford Motor Company, was this: it was the single Detroit startup that managed to survive on a shaky initial capitalization and generate enough profits to perpetually refinance itself. Ford therefore gained independence from the city’s elites, which allowed him to realize the vision of populist motorization that other builders, like Olds, had tried but failed to push against the will of their investors. For more than fifty years, the Ford Motor Company remained closely held and free of bonded debt. The company only went public in 1956, almost a decade after Henry Ford’s death.

Given the class politics and populist groundswell of the Midwest, imagining a car for commoners was more than a business proposition. It was a social provocation, whose bite only sharpened with the Ford Motor Company’s increasing success. Ford exploited the social distance that separated the thin economic elite from the farmers and manufacturers populating the Midwest. In private, as his associates recalled, Ford scoffed at the notion that the automobile should be reserved for “the moneyed people.” Instead, he insisted, “the workingman should have some pleasure out of it.” In public, the Ford Motor Company cultivated the image of a manufacturer engaged in feisty opposition to corporations and the wealthy. When the Model T was introduced in October 1908, an ad announced: “This car sounds the death knell of high prices and big profits.” In 1913, another ad quipped: “If there were no Fords, automobiling would be like yachting—the sport of rich men.”

These clashes suggest that we should be careful to ascribe automotive mass production to intrinsic economic necessity or technological imperative. Building luxury vehicles, as the elites wanted, could be solid business. In 1905, for example, Henry Joy’s Packard sold 503 vehicles profitably. Northeastern carmakers would continue to build high-priced models well into the 1920s. Neither modernization nor capital accumulation compelled the rise of automotive mass production; it took deep-rooted producerist commitments and the sting of mutual class resentments to launch the mass production era. By 1913, riding the success of the Model T, the industrial district of southeastern Michigan commanded 80 percent of American automotive production.

Excerpted from Forging Global Fordism: Nazi Germany, Soviet Russia, and the Contest over the Industrial Order by Stefan J. Link. Copyright © 2020 by Princeton University Press. Reprinted by permission.