Fordism and the US Economy - Essay Example

The impact of Fordism in the US economy, society and culture is massive. Spanning for more than half a century, the Fordism era has abetted the advancement of the American mode of production which shifted from agricultural to a more efficient highly-technical industrial production. In its peak of popularity, Fordism proliferated across the globe and helped spur the economies of various countries in Europe and Asia. In the early 90's, however, Fordism had faced decline which marked the end of its period of domination- an era attributed to the metamorphosis of labor, production, capital and consumer culture. The decline of Fordism was not an abrupt one; rather it was a gradual but inevitable process which can be attributed to three major factors: Advancement in technology, particularly in information and communication, the emergence of a new capitalistic model and the rise of the globalized economy. In order to understand how the Fordism came to an end, it is necessary to evaluate its significant attributes. Fordism, considered by scholars as a second type of industrial revolution, as typified in reference to Henry Ford's system of production which delineated specialization in mechanical techniques in the assembly line (Nadesan 259). The era also brought forth the rise of corporations and speedy growth in consumer culture giving rise to American consumerism. In its abstraction, Fordism is mainly the mechanization of production. It is also marked by protectionist market policies, oligopolistic competition, integration of the banking and finance business with the state and considerable focus on capital (Amin 1-40). Hence, it is safe to refer to Fordism as the ideal type Western Capitalism which puts emphasis on production techniques and organizational process as these were deemed the most effectual and profitable (Mead-A 53-61). Fordism initially transformed simple production techniques to a more complex mass production system which spawned the economics of scale and scope. This in turn brought about the proliferation of massive industries and organizations' emphasis on advanced plant equipment, organized production lines and higher output of production which reduced unit costs of products. Fordism also introduced a 'more doable' organizational structure in industries composed of functional units such as accounting and personnel management schemes in order to reduce cost in manufacturing. It led the reformation of industrial systems and practices as well as helped effect public policies and institutional regulations to temper the effects of market failures (Polanyi, 73). These practices included careful division of labor and standardization of components, parts and processes of a product which were easy to produce and repair. Others refer to this as to 'Fordize' or to standardize certain goods and mass manufacture them so as to make them affordable to the common man (Abernathy, 57). The result of this was the total vertical integration of an industry as for instance the integration scheme of the leading car manufacturer of that period, Ford Motors, which manufactured parts needed for its own production (Chandler 77). This results to big number of employees and workers that were needed to be hired and included in the hierarchal system. This system of production, however, was not spared from criticism. Aglietta for instance, claimed that the rapid growth of production outpaced demand for consumption resulting to economic discrepancy (43). In the 60's productivity slowed down as the Fordist model of production reached its limitations as wages failed to increase and capital began to wane, worsened further by workers' fallout and union demand. Other scholars such as Gramsci argued that the crisis brought about by the Fordist form of production should be understood in its political and socio-cultural significance as this system of production was institutionalized by political legislations through which regulations with regards worker's union, wages and labor benefits were put into effect (110). This has been supported by Wallerstein (79) who asserts that Fordism can be apprehended in the global economic and international political perspective even though during the Fordist period globalization was temporarily hindered. In the early 70's, the growth of social production came to a halt and surplus reached its limits as a result of intensification of production and labor. What followed was an economic recession that forced forward a new type of economy. The novel economy which forced the Fordist era to conclusion was partly brought about by the advances in technology particularly the sectors of communications and information technology. Fordist equipment and mechanization could not cope with the fast growing discoveries in information and communication technology (ICT). The use of computers in manufacturing and production rendered the industrial machines obsolete as the new machines are more flexible. Indeed, flexibility in production was the major demand as the new millennium approaches. The new equipment could cope with the short runs, much more convenient for flexible and small-scale production as compared to the gigantic Fordist machines that required more labor resource (Freeman 5-24). Introduced by big Japanese companies in the 70's, computer aided production ranged from computer-aided designing and drafting to computerized assembly lines. This consequently gave rise to the emergence of the internet and advanced communication devices (Freeman 5-24). The effect of this new technology is massive in that, it provided new models of internal organization in which company staff members work together from the initial stages of the job to its culmination. These changes have been brought forth by the advancement in information systems which required the exercise of judgment from the higher level organizational hierarchy down to the organization's lowest level. In the Age of the Smart Machine by Shoshana Zuboff, the author contends that modern workplaces, in order to reach high level of efficiency, must promulgate equal stratification of knowledge, responsibility and authority. This implies that the Fordist managerial hierarchy 'that once brought greatness' must be dismantled (Zuboff 23). In addition, the organizational hierarchy presented by Fordism failed to cope with these advancements as the Fordist model require much bigger number of workers and staff. On the other hand, the growth of ICT made it possible for companies at one location to manage a production line or a business activity in another part of the world. This contemporary technology has made financial transactions more efficient, fast and easy (Tobin 1101). Technological advancements in ICT came with the speedy changes in the concept of capitalism. This new perception of capitalism has brought about the overturning of Fordist ideals with regards economic regulation and deregulation but these are not its only features. The new model of capitalistic thought that does not adhere to compromise and concession (Nadesan 261). On the other hand, the Fordist concept of capitalism viewed the market as a threat and thus, it had to be restricted. Moreover, ordinary people should be protected from the whims of the market economy and regulation was seen as the only solution. In the new type of capitalism, markets are regulated and secured to defend its efficiency and existence. This protection will allow a more extensive access to the advantages that free markets present. In contrast, the Fordist principles provided for the protection of consumers in monopolistic industries which controlled such utility businesses as water and electricity. Through precautionary regulations, Fordism aimed to thwart abuse of consumers of these industries. Russell Mead argues that the new type of capitalism purports the same goal but through more competition (55-56) and adds that there is a great disparity between a flexible regulation that the new capitalism proposes and the Fordist regulatory systems. The current concept of capitalism allowed for the emergence of a new structure of international regulation that did not subsist during the Fordism era. For instance, free-trade agreement shaped new systems of transnational justice and regulations. The shaping of the present institutions also brought forth new forms of assessment schemes for foreign investments and subsidies. Moreover, the demographic shift all across the globe helped displaced the Fordist economic and production model. With the shrinking of the population, various social and economic principles the baby-boomers used to adhere could not cope with the changing times. For instance, pension and health insurance must switch from state subsidized market driven investments as state allocations have become less doable in various economies. This shift has considerable consequences on political and financial system around the world and in turn, abetted the economic shift. Nevertheless, it is important to note that the new form of capitalism logically spawned from the Fordist system itself. As the Fordist society is a consumer driven society, they brought about transformations, as for instance, through their purchase of cultural products until this reshaping of the society no longer fitted the Fordist model of society (Nadesan 56-57). In short, the social system advanced by Fordism has reshaped the foundations of the Fordist individual and his society causing its gradual demise. The modern concept of capitalism as well as the advancement in ICT has massive implications on the emergence of globalization which not only totally transformed the world we live in but also primarily caused the end of the Fordism era. The economic recession during the height of the era of Fordism in 1970's spurred a new form of globalization abetted by the development in technology in communications, information and transportation. The period also observed the decline of workers' unions and the emergence of neo-liberal trade and political policies. Globalization has brought forth global deregulation of financial markets, unsurpassed liquidity of capital and the speedy proliferation of off-shore financial markets. The popularity of market integration is in its record high as a result of the lifting of foreign trade restrictions made possible by progress in communication and transportation (Charles, Sassen 1996). The globalization of production as a consequence of the growth of multinational corporations likewise helped in the decline of the Fordist era (Stark, 503-533). The goals and efforts of developing countries to take part in international trade resulted to 'export-led industrialization and the liberalization of trade policies.' The UN notes that countries which failed to participate in global trade has led to economic stagnation (Nadesan 61). Moreover, the shift towards globalization and away from Fordism has considerable impact on world politics. As other economically powerful countries have built up resentment against America's hegemony, countries used the Fordist model of allocating credit towards selected industries and companies. Asian countries such as Japan utilized this chance to create a strong exporting economy. Countries in Western Europe, with the aid of the state, achieved prosperity in manufacturing as well as brought forward a novel welfare system (Nadesan 55-58). This has applied pressure on the Fordist regulations as innovation in technology posed a threat to its machines that were becoming obsolete. As national and multinational corporations sought new markets as a consequence of surplus in production and lack of consumer demand, the shift from Fordism to globalization has become more apparent. Corporations which had the ability to globalize started the growth of international trade with the aid of the state. The emergence of regional trade bloc and agreements have also posed threats and later on caused the decline of Fordism. The initiation of regional trade agreements after WW2 had the aim of creating less trade barriers among member states. Initially, it purported to impose more restrictions from non-member states. It is interesting to note however that the US, championed multilateralism in the 80's, a time when Fordism faced a decline and the economy slowed down as a result of recession. The US's purpose in initiating trade blocs was mainly to encourage free trade. In the mid-eighties, the world was facing a transformation in the structure of international economy as a result of growth and improvement of regional trading groups in various part of the world. The World Trade Organization, at that period of time, observed that its 134 member states signed trade agreements with their neighboring states or other states. These agreements have paved the way for the formation of the European Union and NAFTA. In the following years that ensued, subsequent debates had been put forward on the benefits of trade agreements and regional blocks. During the mid-80's, experts contend that incentives and benefits can be acquired from this cooperation (Keohan 65). More recent empirical studies have shown that regionalism is a major force in international trade and beneficially contributes to the welfare of the state (Frankel, Stein, Wei, 61). Hence, multilateralism was a big factor that affected the shift from Fordism to a global economy where trade is less restricted. As the US and countries in Europe observed the benefits that global cooperation offered, they aimed to strengthen further regional cooperation. This is supported by Gilipin who asserts that the probability of cooperation can only be realized through regional regime rather than through global cooperation (70). He observes that interregional trading is moving from bilateral relationships towards multilateral relations and trading network. It is clear therefore that the emergence of regional trading blocs for the purposed of globalization, have curtailed the era of Fordism. Moreover, countries who are members of regional trade bloc developed a more efficient system of standardization as compared to the system of standards that Fordism provided. These regional agreements have not only lifted restriction on trade but also stabilized pricing and quality and with the EU's introduction of ISO9000 regulations, standardization of products has reached a new limit. In addition, regional agreements as a result of globalization allowed multinational corporations to penetrate markets which used to be difficult to penetrate in the past. Manufacturing sites and employment could shift from one location to another as companies take advantage of competitive wages and labor skills. This benefits the company by giving them competitive advantage over their competitors. Foreign investments as a result of these trade agreements could benefit the economy as a whole. In contrast, it should be remembered that Fordism brought about adverse effects not only to the economy but also to the workers. Fordism caused segmentation and offered poor working conditions, meager wages, and lack of job security. It also augmented class polarization, accelerated the decline of the middle class in the US and supported the stratification of workers based on race, residence and consumption patterns. The last few decades of the Fordism era also marked the beginning of its end - the beginning of transition to the modern system of global economy. The development of computer technology which contributed to the sophistication of the financial markets, the development of international trade and regional trade agreements, became the major factors of change. The economic regulations and practices which used to be the foundation of a successful economy have been deemed hindrance to development and economic progress (Mead 56). It is apparent that decline and the demise of Fordism has been the result of globalization of production. The decline of labor unions and public ownership of corporations as well state controlled investment schemes is proof that Fordism is not seen as beneficial as it used to be. The utilization of capital in a globalized structure and setting has broken down the foundations of Fordism and the social, cultural and political institutions that developed with it - and in the coming more years, we will see it vanish from our memory. 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