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American capitalism: its democratic appeal abroad

CHINA'S political leaders have recently been affirming the role of private property, market competition, and individual initiative in their country's economic development. Spain's prime minister has just told his Socialist Party's congress that ''statism'' must be reduced and private initiative expanded if Spain's economy is to move ahead. All this craze for capitalism from circles that have historically seen their mission as one of eliminating capitalist ethos and organization must give many Americans just a bit of satisfaction. After all, commitment to a private-property-based economy has been a central element in the American ideology from this country's beginnings.

Since we can legitimately claim to be among the first, and the most wholehearted, of ''capitalist-roaders,'' we have some responsibility for advising new converts to the idea about what it is really like and why it has worked so well for so long in the United States. As I read pronouncements from Spain and China, I get the impression that much of capitalism's newfound appeal comes primarily from the belief that it can stimulate faster economic growth. Fair enough. But there is another side to the historic vitality and legitimacy of capitalism in the US which may get overlooked - indeed, which we may not remember clearly enough ourselves.

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The very best way to recall this second essential attribute is to think about the events of Sunday, Jan. 4, 1914. Automaker Henry Ford met with several of his company's executives in his Highland Park, Mich., office. The meeting had been called to discuss employee wages for the coming year. Ford Motors' minimum wage was then $2 a day, an amount generally in line with what American industry was paying. That rate is low compared with present-day wages, of course, but not nearly as much lower as it appears. A dollar would buy much more in those days - when a loaf of bread, a bar of Ivory soap, and a pound of sugar each cost about 8 cents, a bed sheet 35 cents, a pair of women's pumps $3.35, and a nine-day all-expense-paid cruise to Bermuda just $46!

Henry Ford told his colleagues that he wanted to raise the minimum significantly, and he had various calculations of what the company could afford posted on an old blackboard in the office. Charles Sorensen was one of those present with Ford that cold January morning, and years later he wrote a detailed account of what happened: ''Mr. Ford . . . had me transfer figures from profits column to labor costs - $2 million, $3 million, $4 million. With that daily wage figures rose from a minimum of $2 to $2.50 and $3.'' Two of the executives present began protesting and ridiculing Ford's attempt. ''This didn't sit well with Mr. Ford, who kept telling me to put more figures down - $3.50, $3.75, $4, four hours, Mr. Ford stepped up to the blackboard. 'Stop!' he said. 'Stop it, Charlie; it's all settled. $5 a day minimum pay and at once.' '

Thus were real wages at Ford increased 150 percent companywide. Henry Ford took this extraordinary action - arguably the most dramatic step in the history of US industry - without any pressure from workers; the company was not even unionized. He made his decision over the protests of his fellow executives, who thought it would bankrupt the company. And after word of the pay raise had reverberated across the country and around the world, he was denounced by many business leaders, who believed massive harm would result to all US business from this ''dangerous precedent.'' The action seems even more startling when we realize that as Ford raised wages, he lowered the price of his car, the Model T. Priced at $850 in 1908, the Model T was sold at steadily reduced rates until, in 1926, it cost $295!

What Ford did proved to be good business. As prices dropped and wages rose, American workers were able to buy many more cars - Ford cars included. Of course , it was the introduction of innovative assembly line procedures that made possible dramatic increases in productivity - without which Henry Ford's experiment really would have been folly, rather than genius. But the $5 day cannot be understood just as an imaginative economic calculation. Ford took that dramatic step on Jan. 4, 1914, because he believed it was the right thing to do. It was the responsibility of American business, he maintained, to ''abolish poverty.'' Whatever his faults, and surely Henry Ford had some, he believed in the idea of democratic capitalism. In this view, the country's private-property-based economy existed for something more than making businessmen rich; its moral claim lay in its capacity to deliver an ever higher standard of living to the population at large - capitalism committed to democratic and equalitarian ends.

''The idea that everybody can become a capitalist,'' wrote Leon Sampson, a brilliant young American socialist, in 1935, ''is an American conception of capitalism. . . . Who has ever heard a responsible spokesman of European capitalism announce that it is the aim of, let us say, the French or the English 'system' to 'abolish poverty.' ''

American capitalism hasn't always lived up to such high standards. But it often has and this, far more than the abstracted, technocratic idea that capitalism accords well with the requirements for economic growth, is the source of its force and legitimacy. We should stress to new admirers of capitalism that the system has a history of proud achievement - when it has been forcefully committed to an equalitarian and democratic mission.

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