Transition of Economic Systems: Fordism to Post-Fordism - Essay Example

?Running Header: Transition of Economic Systems: Fordism to Post-Fordism essay school Henry Ford was the initiator of mass production in his plant in Detroit. The year was 1914 and the concept of mass production was something very novel. This was basically an experiment conducted by Ford company to determine whether the cost of automobiles can be reduced using this method of production. The results were satisfying and it was discovered that this production method certainly had merits. The costs were reduced tremendously and the efficiency of workers was greatly improved. It was the beginning of a new era. However, there were certain drawbacks of using mass product. Workers were not necessarily very open to this change as it implied high turnover rates in the production line and massive job cuts. Henry Ford was an intelligent man and in order to make this change acceptable he raised the wages of workers and was able to retain his unhappy employees. Ford also discovered that higher wages will have accelerator affect in the economy and would increase the demand for his own product i-e automobiles. Thus, he was looking at a broader picture of an economy that runs a full circle. (Lipsey and Chrystal, 2003) Fordism was an era of rapid technological advancement. Many companies started producing on a large scale citing great economic benefits. They discovered that large scale production reduces operational costs massively. As a result in order to benefit from mass production many companies started using this approach. It was later discovered that this system of production and distribution of goods has certain drawback as well. First of all, there was unemployment of skilled works. Secondly, the goods produced using this system were too standardized and there was no place for the workers own craftsmanship and innovation. And last but not the least it was found that in order to retain the unskilled workers higher wages need to be given to them that could be an additional expense. (Sloman, 2005) The drawbacks in the Fordism lead to economic transition and the need for an improved economic production and consumption system was felt. The latter era is known as Post-Fordism era. The main characteristics of this era small batch production, economies of scope, specialized jobs, search for new and improved technology and addition of female members of the society to the work force. Post-Fordism started when the business community realized that Fordism is not the way to be and they shifted to Flexible Specialization. This was an end of Fordism and beginning of a new era. Flexible specialization recognized that people do not demand identical goods anymore. People demand variety and it was impossible in Fordism. This was a great shift and was seen after the World War II. It started when people started recognizing the importance of modern marketing trends. They realized that markets need to be segmented and divided into different groups of consumers. It was this time that the development of computer made the transition to Post-Fordism era. Two important inventions, numerical controller and CNC, one after another, made this transition possible. (McConnell and Brue, 2005) People started looking at the models of production and consumption differently in Post-Fordism era. It was realized that there is no mass market that is needed to be served with mass production. Instead market is filled with people having different needs or in other words there are different groups in the market that have different needs. This change was not just economic. It evolved from change of ideologies under which the whole global political system was revamped and the new system was evolved. There was an increase in internal marketing, franchising and contracting. Similarly, mass unions were devolved into localized bodies representing the rights of one set of people. There was also a decline in the class-based politics and it was replaced by ethnic social movement and reforms. People started viewing themselves as individualists and there was a rise in entrepreneurial activity. People also realized that moving towards new technology and hiring motivated and knowledgeable workforce is very important to serve the need of customers and to satisfy the business’s stakeholders. There were certain criticisms against the post-Fordism era as there were against Fordism. Many people believed that the society was evolving when there was a shift from Fordism to Post-Fordism and had this transition been gradual, it would have served the whole community more. Many critics of the system also claim that it is the mass producing firms who are doing bulk of the business in modern world and since ancient ages the society had a mix of firms with Fordist and Post-Fordist strategies. Hence it is not wise to classify the two into separate economic systems. (Pindyck and Rubinfield, 2004) The shift from Fordism to Post-Fordist strategies is something that pervades our history books. We have gone a long way since an ancient man had nothing and only means of his survival for hunting which was done using amateur equipment to the modern days where a man survives using IPAD, IPhone and other high-tech devices. This transition has a great history behind it and is not without wars, famines and other catastrophes. The World War II can be considered as a point in the history which initiated the process of change. Many businesses realized that Fordism was not good enough to yield them wealth and they decided that there was a need to shift to a new system that gives them much needed freedom. In simple the shrewd and cunning of the world wanted to move towards capitalism. This is because they knew that only way they are going to thrive in the world is going to be at the expense of other and Fordism was suffocating their genius. They realized that they are not making any headway in the current system which distinguished them from the hardworking and sincere of the society and hence the shift was inevitable. Many people make a mistake of linking the downfall of Post-Fordist strategies with economic crisis. It is true that over the years our economy has witnessed many such crisis and they are more spread out than ever before. Not one region in the world is safe these days from these crises. Many times economists make the right guess of linking these crises with Post-Fordist strategies that have been adopted by the rich, cunning and blessed of the world. They are not wrong when they do that because it is the aristocrats, rich politicians and entrepreneurs who are responsible for these crises. The reason why Post-Fordist strategies have not succeeded is not because of economic crises, but is because of the greedy nature of the aristocrats, politicians and entrepreneur. In fact they are responsible for creating an environment that results in economic catastrophes. It is the uncontrolled economic freedom that is given to them that leads to the problem. Capitalism is another name for deceit, deception and struggle against one’s own friends, family and accomplices. Post-Fordist era has put man on war against his own kind and this why these economic crises are hitting the world more frequently now. The role of the companies, banks and MNCs in the economic crises is very negative. In fact it is because that the global economic recovery hits a speed breaker. It is their action that has given bad name not only to certain nations but to the entire system. It is not that the transition to the Post-Fordist strategies has hampered by the economic recessions. In fact, Post-Fordist strategies (Capitalism) are to blame for these recession and economic lows. These do not originate from any rigidly in the system, but they occur because of the uncontrollable power that the system has given to some men. Most of the times, bad decisions are taken by these people because they put their own self motive above the societal motives and hence economic recessions are triggered. Therefore one can safely say that the problem behind the transition is not the economic environment or any other factor, but it is the people who are controlling the system. They are not sincere to their people and the society. Many people argue that creative industries cannot survive without Post-Fordist approach. There is no chance a modern business can succeed without adopting Post-Fordist strategy and that the transition to Post-Fordist way of conducting business is inevitable. However, one must not forget that the definition of success for modern businesses is different. These businesses associate success with personal gains and not the societal gains. Hence they think that if they over price their product and make large amount of profits it is a success for them. However this leads to conflicts and transition to this new system becomes more difficult. Society sees less happiness in moving to the new system. As a result they oppose this change. It believes that transition to the new system will haunt them in terms of lost jobs, less employment opportunities and wealth accumulation in few hands. This creates a friction between the two stakeholders and divides the society. As a result of this friction, reluctance and lack of willingness and with other group pressurizing toward the transition, this becomes a conflict. This conflict divides the society further and smooth running of the economic system is hampered. As a result of this more conflicts are creates and economic booms turn into troughs. This results in economic recession and situation of uncertainty where the people in power cannot decide which group to support. If they go with the society then the entrepreneurs hate them and if they go with the businessmen then the entire society hates them and they lose out on public votes. This creates a hurdle in the way of successful transition toward the new system. For example, it was the banking system that resulted in the economic crisis of 2008. The entire banking system crumbled under the freedom that was given to them. Lehmann Brothers and other big banking names started issuing mortgages to people on the basis of their credit score. There was no need for these people to pay collateral as a security for their loans. This resulted in many people coming forward and applying for home mortgages that created huge demand in the homes market. As a result of such a huge demand, house price started increasing at a dramatic rate. For example, a house that was worth $100 million started selling at $200 million. The banks started giving out sub-prime mortgages thinking that house prices are already increasing so they do not need to worry about much as they can recover their money easily in case of a bankruptcy. However, there was a chain reaction and many people who were not very financially strong filed for bankruptcy declaring that they cannot pay for home mortgages any more. This was a bad new, but the banking system of the United States of America took it very lightly. They did not look at it seriously until there were more people who filed for bankruptcy and the banking system’s cash stream declined. It was the time when banking people decided to redeem their mortgages by selling the properties of defaulters. Much to their surprise the increase in the house supply in the market resulted in reduction in property prices back to normal i-e $100 million. Banks soon found out that that their $200 million worth of investment is $100 million now. They lost half of their money without actually doing much wrong (Healy, 2009). This resulted in collapse of the entire banking system and as more and more banks declared bankruptcy, a vicious cycle of economic recession appeared and the entire world suffered really badly. Many people blame the Post-Fordist strategies used by the modern businesses as the reason for this economic recession. It also created doubts in the mind of many whether such an unstable system can replace Fordism which was a robust economic model. This entire scenario has created serious hurdles in the path of economic transition from Fordism to Post-Fordist era. (Amadeo, 2010) It also believed that social networking industry has done a lot in a very short span of time. It has grown a lot in the past few years and the future looks even brighter for this industry (Nielsen Research, 2009). Many companies like Facebook, Twitter and MySpace are earning large revenue from the services they offer. Many people believe that it has made the communication between people easier and now people are more well-informed than ever before. Everything that happens becomes news these thanks to the extensive growth of social media in the past few years. (Joinson, 2003) People now understand that Post-Fordism era could be very dangerous for them. They have been part of this on social media since long time now and understand this topic as well as any expert. Many wrong actions of aristocrats have been widely criticized on social media. This has reduced the level of freedom that Post-Fordist entrepreneurs, businessmen and aristocrats previously enjoying. Public is now more aware these days and they openly exchange opinion about what is happening around the world. Hence the transition towards freedom or towards Post-Fordist era has become more difficult because the exponents and supporters Post-Fordist approach know that they cannot enjoy as much freedom as they wished for and the chance of perfect transition from Fordism to Post-Fordism era have diminished greatly with the growth and boom in the social media industry. References: Amadeo, Kimberly. (2010). US ECONOMY: RECESSIONARY PERIODS. Retrieved on 6 May 2010. http://useconomy.about.com/od/grossdomesticproduct/a/recession_histo.htm Council on Foreign Relations: A Timeline of Global Economic Crisis. (2009). Retrieved on 7 May 2010 http://www.cfr.org/publication/18709/ Healy, Jack. (2009). US home sales remain sluggish. NY TIMES. Retrieved on 5 May, 2010 http://www.nytimes.com/2009/05/28/business/economy/28econ.html?_r=1&emc=eta Joinson, Adam (2003). Understanding the psychology of Internet behavior. Palgrave Macmillan. Lisey,R and Chrystal, A. (2003). Economics. 10th Edition. Oxford City: Oxford University Press McConnell, C and Brue,S. (2005). Economics. New York City: McGraw-Hill Nielsen Research. (2009). Social Networking’s New Global Footprints. Retrieved on March 2010 http://en-us.nielsen.com/main/news/news_releases/2009/march/social_networks__ Pindyck,R and Rubinfield,D. (2004). Microeconomics. New Jersey: Prentice Hall Sloman, John. (2005). Economics New Jersey: Prentice Hall Social Networking Website Reviews. (2009). Retrieved on March 2010. social-networking- websites-review.toptenreviews.com Read More