** automobile car United States America economic importance








The Automobile and America: Economic Importance


Figure 1.-- Here we see a very modest American about 1930 with their autmobile, in this case a Ford Model-A. The fact that they had a modest income can be deduced from their clothing and home in the background. It is ascinating that this modest family and their car illustrate one of the most important developments that not obly made the modrn world, but saved Western Civilization from the horific socialist totalitarian powers of the 20h century.

No mechanical device affected the American economy in the 20 century more than the automobile. Much of the growth in the American economy after the turn-of-the 20th century was centered on the new automobile. Americans did not invent the automobile. Here the Europeans led the way. The automobile was invented in German, but had only a limited impact on European economies. No so in America. What the Europeans y produced was a craft product a high-priced play thing for the wealthy. Workers ha to live near thevfactory where they worked. They purchased bikes to get to work. This was the situation in America as well at the turn of the century. A large number of companies made small numbers of autos--all high priced and beyond the purchasing power of workers--even American workers who earned more than European workers. The contribution to the economy was minimal. Bicylcles were more important. Henry Ford changed all of this. Ford produced eight versions of cars before the revolutionary Model T (1908). He started out making high-priced cars like the other companies. The Model-T was different. Ford got the price down to $260. It turned the automobile from a luxury item and plaything for the wealthy. Ford's Model-T became a necessity for the average Joe meaning workers amd farmers. It was inepensive, versatile, and simple, meaning easy to maintain. The United States by 1870s was exceeding economic production levels beyond the great European powers (Germany, France, and Italy) and equaling Britain. Maddison, Angus. Contours of the World Economy, 1–2030 AD. ] And before the turn-of-the 20th-century America a surpassing the great European powers just in manufacturing. The United States by 1910 was beginning to approach the economy of those powers combined and by 1940 (before massive war damage), the American economy reached that level. Much of that masive economic growth in the 20th century was due the automobile industry. And Ford's Model-T was an important factor in the phenoneal success of the Amerian automobile industry. Not only did the industry provide well-paying jobs with good benefits, but there important linkages with supplier industries. Jobs and production in the auto industry support many more jobs and production in supplier and service industries--giving it an oversized role in economy. Not only did the American automobile industry make cars that its wokers could afford, but in doing so dominatd car production aound the world. American subsidiaries led the industry in Britain, Germany, and the Soviet Union. And very importantantly, the United States was the only important automobile manufacturer that also had an important oil industry. As atomobile production increased, the American oil industry shifted from keroscene to gasoline. Amrican trucks played an important role in World War I, but it was the industry centered on the automobile and trucks that provided the back bone for the arsenal of democracy that helped smash the NAZIs and Japanese militarists in World War II. Interestingly, two evil men saw the impotance of the automobile industry--both Stalin and Hitler. Fortunately neither had an industry like America built on economic (capitalism) and political (democracy) freedom. American industry including the automoible industry would also provide the security umbrella that would allow free societies to flourish during the Cold War. It was always difficult for the Soviets to expalin while it was the 'exploited' workers and farmers in the West that had cars, refigerators, and working machines. An in the workers paradices not only could not afford such industrial marvels, but faced constant food shortages. It is not accident that the it was workers led by Solidarity in Poland that began the unraveling of the Soviet Union. Leading in short order to the implosion of the Soviet Union itself.

Early Automobiles

No mechanical device affected the American economy in the 20 century more than the automobile. Much of the growth in the American economy after the turn-of-the 20th century was centered on the new automobile. Americans did not invent the automobile. Here the Europeans led the way. The automobile was invented in German (1896). It had a very limitrd economic impact. What the Europeans y produced was a craft product a high-priced play thing for the wealthy. Workers had to live near the factory where they worked. They purchased bikes to get to work. This was the situation in America as well at the turn of the century. A large number of companies made small numbers of autos--all high priced and beyond the purchasing power of workers--even American workers who earned more than European workers. The contribution to the economy was minimal. Actual car pfroduction was minimal. Bicylcles were more important. This was also the pttern in America, until 1907-08.

Turning Point

Modst of the early work on automobiles occurred in Europe, but Americans were interested and several small companies were interested. The compnies involved had virtually no economic impact. The Europeand did not take the Americn companies seriously. (The samecwas true of th grouos working on viatriion at avout the same time. In fsct American zand uropoean companoes were at about the same level. And the cars in many ways were comprable. Akl large, powerful expensive products of craft shops. What would make a najor ipact would be Henry Ford and his Model-T that workers coukld purchase.

The Great New York to Paris Auto Race (1907-08)

The autmobile was in infancy at the turn of the 20th century. It was not even clear what firm of propulsion would be adopyed. And there was no infrastrucgture. Inside big cities there ws no problem, but beyonf th cities there was no infrastruture, incvuding gas stations and improvd roads. Yjios was asn espcially serious proiblemsd ouside of the more irbanized Northeast. othrer issues were roadside reasturants, rioadmos, road signs, motels and much else. Outside of the big cities few people had seen car, even in Western Europe and Amderica. Onn Asia there was no understanding that uch contrption exist. The idea of automobilr races had begun, but were still verry new. We enjoyed the Tony Curtis movie -- "The Great Race" (1965) about an early around the World automobile race, but had no idea tht there actully was such a race. The Paris newspaper Le Matin and the New York Times announced that they were sponsoring 'The Great Race: New York to Paris by Automobile' (1907). The prize was a 1,400‐pound trophy and proving that the winning company built reaslly impressive cars. The race began in Nre York's Times Square (February 12, 1908). There wre six cars entrbts from four countyries. (Americ, France, Germbny, and Italy). It would become a 169-day test for first place winner nd much longer fof the others that ctuly finished. The comanies particioating no longer existed. Apparently the better estblished compnies did not wanbt to oiy up tgheir cars aginsrt sych an absurd race. Apparently there wre no Amrerican entrants until President Roosoveklt intervend bd got the Tomas Aiymobile Compny to enter a car. across the United States, through areas with very few improved roads, and then north to Alaska (by boat) and then across the frozen Bering Strait into Siberia. Then across Siberia to Moscow and then on to Paris. The proposed route wasactually basically that of the movie, although thy crossed the Pcific in ship rather than an iceberg. Crossing the still rther Wold West was a chllrnge, crossing Manchuria abnd Siberia was a ninumental adventure. The winner was the American entant (Julkyu 30, 1908). The German tean arrived 4 days earlirr , but had cheated. The Italins Italians reached Paris in September. YThe Frencvh had to drop out because of mechanical proivlms.

Henry Ford and the Assembly Line (1907)

The autombile was invented in Germany. But it was seen as a novelty for well-to-do people. America changed that. Henry Ford changed all of this. Ford produced eight versions of cars before the revolutionary Model T (1908). He started out making high-priced cars like the other companies. The Model-T was different. Ford got the price down to $260. It turned the automobile from a luxury item and plaything for the wealthy. Ford's Model-T was within the price range of the average worker. This was accomplished not only by the design of the Model-T, affectionately called the 'Tin Lizzy', but by manufacturing techniques--princupally the assembly line. Instead of the workers moving, the car was amoved as it was assembled in theolant. These techniques were not widely adopted in Europoe. In fact the tradition of European craftsmanship, especially in Germany, rejected the very idea. Assembly line efficent manufacturing became standard in America. The Europeans continued to manufacture cars in small quantities for high-income consumers. The result was an even wider industrial disparity between America and Europe. Cars and trucks began crowding American streets while horse carts were more common in Europe. Ford's Model-T became a necessity for the average Joe meaning workers amd farmers. It was inepensive, versatile, and simple, meaning easy and innepensive to maintain.

Economic Trends

The United States by 1870s was exceeding economic production levels beyond the great European powers (Germany, Britain, France, and Italy). And before the turn-of-the 20th-century America a surpassing the great European powers just in manufacturing. The United States by 1910 was beginning to approach the econmy of those powers combined and by 1940 (before massive war damage), the American economy reached that level. Much of that masive economic growth in the 20th century was due the automobile industry. And Ford's Model-T was an important factor in the phenoneal success of the American automobile industry. As an historian put it, 'America arrives". [Roberts] American economic growth did not taper off after the turn of the 20th century. Nor did European immigration. After the turn of the 20th century, the automobile became a major part of the American economy. The American economy was not just larger than that of Euroran countries, it was now twice the size of the British and German economies and much larger than all the other countries. [Maddison] And this was just when the American automobile industry was at an early stage of development just before World War I. In adittion, Amnerica unlike Britain and Germany and other industrail viuntries was selff suffucebtbin fooid production as well as many rawe materials, especially oil which was becoming important.

Linkages

Not only did the industry provide well-paying jobs with good benefits, but there important linkages with supplier industries. Jobs and production in the auto industry support many more jobs and production in supplier and service industries--giving it an oversized role in economy. Not only did the American automobile industry make cars that its wokers could afford, but in doing so dominated car production around the world. American subsidiaries led the industry in Britain, Germany, and the Soviet Union.

Oil

And very importantantly, the United States was the only important automobile manufacturer that also had an important oil industry. . A black gold rush began in Pennsylvania (1850s). It was part of a series of developments that would make America the most important industrial power by the turn of the 20th century. One of the titans of indudtry was John D. Rockefeller who created a vast mononoly--the Standard Oil Company. The United States controlled most (85 percent) of the world production and refining of oil. Much of this came to be controlled by Rockefeller's Standard Oil monopoly. Rockefeller's monopoly was not to sell gassoline, but primarily kerosene (paraffin) which became the primary home lighting fuel with the decline of the whaling fleet. As atomobile production increased, the American oil indutry shifted from keroscent to gasoline. Oil drilling and petro-chemicals became a part of the American mining complex (mid-19th century). At the time, there was only a limited market for oil, but this changed as kerosene began to become an important home lighting product and then with the perfection of the internal combustion engine, creating a demand for gasoline and diesel. America and Russia were the only industrial countries with domestic oil resources. This would have a major inpact on the 20th century.

Impact

Amrican trucks played an important role in World War I, but it was the industry centered on the automobile and trucks that provided the back bone for the arsenal of democracy that helped smash the NAZIs and Japanese militarists in World War II. Interestingly, two evil men saw the impotance of the automobile industry--both Stalin and Hitler. Fortunately neither had an industry like America built on economic (capitalism) and political (democracy) freedom. American industry including the automoible industry would also provide the security umbrella that would allow free societies to flourish during the Cold War. It was always difficult for the Soviets to expalin while it was the 'exploited' workers and farmers in the West that had cars, refigerators, and working machines. An in the workers paradices not only could not afford such industrial marvels, but faced constant food shortages. It is not accident that the it was workers led by Solidarity in Poland that began the unraveling of the Soviet Union. Leading in short order to the implosion of the Soviet Union itself.

World War II

American and European companies made small numbers of luxury autombiles (early-1900s). There was a very large number of small manufactuerers. Henry Ford revolitionized the infudtry with the Model-T Tin Lizzy. Rather than making small numbers of luxury cars, Ford took the vital step of applying assembly line manufacturing techniques to motor vehicle contruction. The result was the Model-T--a vehicle for the average man. It was inmexpensive and American workers were paid enought to aford one. He result was a huge new industry for America's already expanding industry. At the time, the United States was the largest industrial economy in the world. The automobile industry enabled it to grow far beyond the capacity of the European countrues. The reulting economic boom resulting from the automobile industry created an industrial juggernaut far beyond the potential of the Eurpeamn powers. American motor vehicle production was something like 80 percent of world production. American motor vehicle production would be an important factor in World War I--primrily the trucks. When World War I began, transportation was just beginning to make the move from horse carts to trucks. In this trasition, Europe was far behind Anerica, in large part thanks to Ford's Model-T. World War I proved to be a major turning point in transportation. Before the War, goods wre mostly delivered to cities by rail and then horse-drawn waggons to wholesalers and reyailers. This shift began in America with the introduction of the Model-T Ford. Soon small trucks began to be built by Ford in large numbers. And the advantages of motorized vehicles soon became apparent. The Germans asked for an armistice before American industry had fully covered to war production. The automobile sector was of huge economic importance. The automible industry continued to grow in the Roariung Twnties, but production declined some 75 perceny after the Wall Street Crash (1929-32). The industry began to grow again as the economy began to revive (late-1930s). World War II wouild be very different than in World War I. The American automotive industry would play a crucially important role. And it was far larger than in World War I. In fact the American automotive industry had an economic footprint larger than the entire economies of most countries. The American automobile industry washard hit by the Depression. Curiosly many of the unemployed owned cars. Will Rogers quipped, "America was the first country to go to the poor house in the auromobile." The mass production of cars was still largely an American phenomenon, but Europe was beginning to change. In contrast to the Germans, the American automobile industry was fully capable, but American did not have a substantial army to equip. Instead American automobile companies in 1939 were having their first good year since the onset of the Depression, chuning out sleek new cars using large uany\tuies of steel, copper, and chrome. After Pearl Harbor (December 1941), President Roosevelt after nearly a decade of lambasting businessmen, he called then 'economic royalists.' he turned to them in a desperate effort to save America. And he understood the importance of the automotive industry. World War II was an industrial war and industry would be America's route to victory. In fact, the President called the leading and hugest paid businessman (Outside Hollywood) in the country--the chairman of General Motors--William Knudsen. His job became to mobilize the Arsenal of Democracy for war and the automobile industry would be a major part of it. America would not only arm it's own military, but help arm it's fighting allies. And at the heart of the production miracle that followed would be Knudsen and the American automotive industry. America had dominated the sector before the War. Unlike other countries, it was not only the well-to-do who owned cars in America. Henry Ford had brought the automobile within the purchasing power of the average worker. And a huge industry had grown up to fill that demand.

Cold War

The American autmobile industry played a different role in the Cold War than World War II. The Americans and the Soviets won the battle of production. Here it was not only what the Americns abnd Soviets did right, but what the Germans did wrong. The Cold War returned to more normal economic terms. And thus the outcome would turn on the effincency of Soviet socialism and Western capitalism. The Soviet Government had some advantages in war. They could reduce consumer cinsumptguon to virtually starvation levels. The Americans had to operate as more of a command economy. In peace time the Soviet advantage narrowed. They had to increase deliveries to the civilian consumer sector, at least to some extent. And now they were something against Western economies and not the NAZI economy. And as America and Western Europe returned to a civilan ecoinmy the effiencies of the free market began to operate. This mant that cpitalism generated wealth and prosperity. Sociazlist command economies destroyed wealth. Commonly the inputs to Soviet factories were worth hmore than the manufactured output. Soviet manufactured goods were not competive on world markets. This could be hidden by Soviet authorities. But it is clear that it was the case because when the Soviet Union imploded (1991), Soviet manufacturing companies soon went bankrupt. In World War II, the automotive industry was central because of the weapons that were needed to wage the War. This changed during the Cold War. The automotive industry was still important. The utimotiv industries in Western Euopean was central to the Economic Miracle that occurrd there. The Soviet Union devloped only a very small automobile industry. In addition the Western ecomomies diversified with all kinds of new industries. Something that occurrd to a much lesser extent than in the West. The Soviets could build military weaponry, but never mastering blue jeans or other products consumrs wanted. And than the Siviet economy began to stagnate. It continued to be inefficent and proiduction increases ware no longer being achiuved.

Sources

Maddison, Angus. Contours of the World Economy, 1-2030 AD

Roberts, Andrew. A History of the English Speaking People--Simce 1900






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Created: 7:39 PM 5/17/2019
Last updated: 6:38 AM 5/13/2021