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[edit] Fordism

Fordism is a term used in the study of the political economy of the advanced economies in the middle to latter part of the twentieth century. Its name derives from the production process and social model employed at the Ford Motor Company but it is generally used to describe an economy dominated by the production of mass, standardized goods for mass markets which are created and regulated by an interventionist state.

[edit] Meanings of Fordism

Different writers have used the term in various different ways (Sayer, 1989) described below.

[edit] Fordist Labour Process

This is the manufacturing proces pioneered by Ford, involving moving assembly lines in the mass production of goods. This process is characterized by the use of semi-skilled labour carrying out a limited technology set of tasks at a pace dictated by the standardized speed of the production line. Management exercises control over all details of production through a hierarchical system of authority. Mass Production

[edit] Fordist Sectors of the Economy

After 1945

Lead growth, Fordist growth, motor of the economy

[edit] Fordist Organization

...of a company - hierarchy, influence outside manufacturing

[edit] Fordist Mode of Regulation

Balance between profit, regulation, cyclical crises pre-Fordism - depression, underconsumption Mass-production/consumption... Fordist industrial era

[edit] Criticisms of Fordism

  • Actual extent - e.g. flawed Fordism of UK
  • Capital goods economies (e.g. West Germany)
  • Industry v services, discourse of industry
  • 'National' v inter/transnational economy

[edit] After Fordism

Post-Fordism, Toyota, ...

[edit] References

  • Sayer, A. (1989) 'Post-Fordism in question', The International Journal of Urban an Regional Research, vol.13, no.4, pp.666-95

[edit] Fordism: Original Article

The expression Fordism goes back to Henry Ford, who significantly improved mass production methods and developed (with several employees) the assembly line method of manufacturing early in the 20th century. Ford Motor Company taught English and skills to the workers who immigrated from South or East Europe based on this idea.

The term may refer to the methods of running the plant, but also may refer to some of Ford's idiosyncratic social views.

It refers to the idea of paying workers enough to enable them to purchase the product they create.

[edit] Other meanings

The term may also be applied the fictional religion-like ideology described in Aldous Huxley's novel Brave New World.

[[Category:Production and manufacturing]] [[de:Fordismus]] [[fr:fordisme]] [[he:פורדיזם]] [[pt:Fordismo]] {{econ-stub}}

[edit] Comparative advantage

Ricardo's explanation of the theory depended on the labour theory of value, but Gottfried Haberler showed in the 1930s that it could also be expressed in terms of opportunity cost. The following worked example explains the reasoning behind the theory. All assumptions are italicized for easy reference, and some are explained at the end of the example.

[edit] References

  • Hardwick, Khan and Langmead (1990) An introduction to modern economics - 3rd Edn

[edit] Example 3

Suppose for example we have two countries of equal size, Northland and Southland, that both produce and consume two goods, Food and Clothes. The productive capacities and efficiencies of the countries are such that if both countries devoted all their resources to Food production, output would be as follows:

  • Northland: 100 tonnes
  • Southland: 200 tonnes

Conversely if all of the resources of the countries were allocated to the production of Clothes, output would be:

  • Northland: 100 tonnes
  • Southland: 100 tonnes

We need to assume the each of the countries has constant opportunity costs of production between the two products, and that both economies have full employment at all times. Also all factors of production are perfectly mobile within the countries between clothing and food industries, but are immobile between the countries. Finally the price mechanism must be working to provide perfect competition.

So Southland has an absolute advantage over Northland in the production of Food, and both countries are equally efficient in the production of Clothes. Intuitively it would seem that there is no mutual benefit in trade between the economies. But an examination of the opportunity costs shows something different. For Northland the opportunity cost of producing one tonne of Food is one tonne of Clothes and vice versa. But for Southland the opportunity cost of one tonne of Food is 0.5 tonne of Clothes; and the opportunity cost of one tonne of Clothes is 2 tonnes of Food. Looked at this way, Southland has a comparative advantage in Food production because of its lower opportunity cost of production with respect to Food. And Northland also has a comparative advantage over Southland in the production of Clothes, the opportunity cost of which is lower in Southland with respect to Food than in Northland.

To show that these different opportunity costs can lead to mutual benefit if the countries specialise production and trade, consider the following starting position. Both countries produce and consume only domestically. The volumes are:

Production and consumption before trade
Food Clothes
Northland 50 50
Southland 100 50
World total 150 100

We now examine the consequences of trade between the two countries. This example has includes no formulation of the preferences of consumers in the two economies which would allow the determination of the international exchange rate of Clothes and Food. But given the production capabilities of each country, in order for trade to be worthwhile Northland requires a price of at least one tonne of Food in exchange for one tonne of Clothes; and Southland requires at least one tonne of Clothes for two tonnes of Food. It follows that the actual exchange price will be somewhere between the two. The remainder of the example works with an international trading price of one tonne of Food for 2/3 tonne of Clothes.

If both countries specialise completely in the goods in which they have comparative advantage, their outputs will be:

Production after trade
Food Clothes
Northland 0 100
Southland 200 0
World total 200 100

Note that world production of Food had increased and Clothing production has remained the same. Using the exchange rate of one tonne of Food for 2/3 tonne of Clothes, Northland and Southland are able to trade to yield the following level of consumption:

Consumption after trade
Food Clothes
Northland 75 50
Southland 125 50
World total 200 100

Northland has traded 50 tonnes of Clothing for 75 tonnes of Food. Both countries have benefited. In fact, both countries are now consuming at points outside their production possibility frontiers.

[edit] Assumptions in Example 3

  • Two countries, two goods - the theory is no different for larger numbers of countries and goods, but the principles are clearer and the argument easier to follow in this simpler case.
  • Equal size economies - again, this is a simplification to produce a clearer example.
  • Full employment - if one or other of the economies has less than full employment of factors of production, then this excess capacity must usually be used up before the comparative advantage reasoning can be applied.
  • Constant opportunity costs - a more realistic treatment of opportunity costs the reasoning is broadly the same, but specialisation of productin can only be taken to the point at which the opportunity costs in the two countries become equal. This does not invalidate the principles of comparative advantage, but it does limit the magnitude of the benefit.
  • Perfect mobility of factors of production within countries - this is necessary to allow production to be switched without cost. In real economies this cost will be incurred: capital will be tied up in plant (sewing machines are not sowing machines) and labour will need to be retrained and relocated. This is why it is sometimes argued that 'nascent industries' should be protected from fully liberalised international trade during the period in which a high cost of entry into the market (capital equipment, training) is being paid for.
  • Immobility of factors of production between countries - why are there different rates of productivity? Capital includes production technology and know-how. If it can be moved between countries then the production capabilities of the countries will change. Similarly the movement of labour will change that factor cost and productivity. Perfect transnational mobility of factors of production would invalidate comparative advantage. Imperfect transnational mobility reduces the mutual benefit of trade.
  • Perfect competition - this is a standard assumption that allows perfectly efficient allocation of productive resources in an idealized free market.

Gottfried Haberler, opportunity cost, production possibility frontier

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