THE INDUSTRIAL REVOLUTION : PART 2 The Ford car factory
Mere money getting has never been my goal,I had an ambition to build-John D rockefeller
The revolution in transportation and infrastructure
As manufacturing capacity increases there is a need for new markets. An efficient transport infrastructure allows transport of raw marerials for production as well as opening of new markets for the industrial core areas. In Britain the development of roads and waterways for shipping occured initially and these were expanded by digging canals and constructing roads. The investment was done initially by pooling of resources by local traders and later by joint stock companies.In 1807 Robert Fulton operated a steamboat on Hudson River from Newyork city to Albany. This was followed by extensive transportation of both goods and people along rivers and canals,and later ocean ships.In 1825 the first steam locomotive invented by Stephenson ran on iron railroad in Surrey in England. Thereafter the railroads expanded all over Europe and America with the help of joint stock companies.
Science and the second Industrial Revolution
The inventions which initiated the manufacturing revolution were done by craftsmen or laymen working in their shops and later factories. They applied their knowledge of practical engineering especially that of gears ,wheels and levers. However due to the printing revolution these practical inventions could spread rapidly in the country and others subsequently improved them further.
By 19th century however the nature of the inventor changed and they were scientists working in laboratories.In 1831 Michael faraday discovered electromagnetic induction. This was followed almost immediately by Hippolytes invention of dynamo the basis of electricity production . Again the invention of galvanometer was followed by the telegraph which used interruption of voltage to transmit information. It was perfected by Samuel morseand applied extensively in railroads for communication. The invention of internal combustion engine by Otto based on concept of using gas powered engines to replace steam power led to the rise of motor vehicles
Mass production and distribution
With the rise in factory production and mass transport there was an unprecedented rise in markets which now encompassed the entire world. To meet the demand the production and distribution of goods took a mass character. Earlier cars were manufactured in individual factories without standardisation of parts. This led to difficulty in mass production as well as repair . Henry Ford introduced standard processes and parts in an assembly line to mass produce identical cars. His cars were very cheap and most Americans could afford them. Similarly mass production techniques were later used to produce refrigerators ,washing machines and later television sets to make them affordable.
A large scale in production reduces the production costs. Thus industries like steel ,oil telephony where scale is important underwent consolidation to produce behemoths. Thus Andrew Carnegie in steel ,Rockefeller in oil ,J P Morgan in finance became tycoons due to their vast scales.Morever large industries went for vertical and horizontal integration so that they could control their inputs as well as marketing.This happened in steel, rubber and many other industries.
The managerial revolution
The assembly line of Ford was managed centrally with workers inputs ,schedule determined by the top management. Andrew Sloan of General Motors adopted a different decentralised management,He created subdivisions based on product lines which were independent as far as inputs ,schedules were concerned. The divisions were managed centrally through financial parameters. This allowed cars to be made for different sepments of consumers wheresas Ford produced only one variety of car concentrating on its low price. Morever Sloan allowed financial help to his car buyers and also coordinated production with the used car segment. The sale of GM outstripped Ford and almost led to its bankruptcy.
Another managerial innovation was branding introduction by Procter and gamble. Brands of famous firms are trusted by customers blindly and these are intangible products costing millions of dollars. Firms build brands over years by giving consistent quality and advertising.
M The sophisticated technical and managerial knowledge required to manage multidivision firms are inadequate for owner managers of small factories of first Industrial Revolution. Today it is the proffesional manager who runs these firms and the shareholder has a secondary role.
The demographic dividend
The commercial revolution of 17th century Britain led to a rise in per capita income ,However in 19th century though the Industrial Revolution had taken place the per capita income decreased. This was due to a demographic change of rise in population due to affluence and rising birth rates. Later in 19th century a fall in death rates occurred due to better public health measures. This was followed by rise in percentage of working population in Britain. .A rise in working population allows more individual savings as dependants like children and aged are less. This allows higher capital intensity and economic growth. Britain had a lowering in male working population after the world war. This was compensated by entry of women in working population. Britain and Europe had a long period of high working population and economic growth of 2to 3percent over a hundred years. The dividend has ended in 2012 and it faces a shrinking working population now.. Compounding over along period however has led to very high per capita income,
Developing countries like China has followed a one child policy. It had a rapid rise in demographic dividend from 1990 to 2020 and has led to double digit economic growth. India has a slower rise in working population from 1990 to 2047 and is likely to grow rapidly during this period
Ack: History of American business, The robber barons,The great demographic reversal
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