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Schreiber letter to the NYT
From: David Farber <farber () central cis upenn edu>
Date: Thu, 6 Jul 1995 21:50:38 -0400
New York Times Sunday July 2, 1995 What Ford Discovered When He Paid His Workers $5 a Day To the Editor: "Bad News for Workers" (editorial, June 24) will also prove to be bad news for capital owners. In today's pressure for higher productivity and improved international competitiveness, reducing the number of employees and their wages has become a widespread and socially acceptable practice. As a result, demand drops, inventories build up, cutbacks increase, and we head into the classic spiral toward depression. While the effects can be staved off temporarily by emphasizing overseas developing markets, domestic personal spending still accounts for two-thirds of our economy. It is not possible to take money out of the pockets of consumers without noticing the effect at the cash register. Today's managers have apparently forgotten the lesson taught by Henry Ford, dean of American capitalism. He discovered that by paying his auto workers the princely sum of $5 a day (to the dismay of the rest of the industry), it became possible for them to buy Ford cars. High wages, in the end, produce high profits. It should be kept in mind that the recession that cost George Bush his office was due to falling demand. This resulted from the fact that wages of American workers had been falling during most of the Reagan-Bush years. Jobs today are harder to get, easier to lose, have lower security and pay less than they did 20 years ago. None of the dramatic productivity gains of this period have gone to workers. Aside from the purely economic consequences, this represents a repudiation of the American social contract. This unwritten contract has generally resulted in a steadily increasing standard of living and an aura of optimism that has gone far to promote domestic tranquillity. As money tightens at every level of government and at many non government organizations such as schools, hospitals and social-service agencies, we are seeing that tranquillity, much valued by our Founding Fathers, disappear as we fight over the remaining funds. This problem cannot and will not be solved by the free market. On the contrary, it has been produced by a form of free market in which each enterprise takes actions that produce the highest profits in the short term. Since that is what managers are now paid to do, we ought not to be surprised at the results. If we want some other result, we shall have to open our eyes to other possibilities. WILLIAM F. SCHREIBER Cambridge, Mass., June 24,1995 The writer is a former professor of electrical engineering at the Massachusetts Institute of Technology
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