Henry Ford versus Henry Royce
By David Henderson
Last weekend, I was at a conference in Ogden, Utah co-sponsored by Liberty Fund and the Charles Koch Foundation. One of my favorite readings for the conference is the Introduction to the book How the West Grew Rich by Nathan Rosenberg and L.E. Birdzell, Jr. and one of the passages I had forgotten was this:
It is an oddity of Western economic growth that, while it made some individuals extremely rich, it benefited the life-style of the very rich much less than it benefited the life-style of the less well-off. The reason is to be found in the nature of the innovations that the West most conspicuously rewarded. Innovations that reduced the cost of producing goods did not appreciably change the life-style of people who were abundantly able to pay pre-innovation prices, and the most lucrative new products were those with a market among the many, rather than among the few. Thus the first textile factories produced fabrics of inferior quality, which the rich did not want, and a century later, the great automobile fortune was Henry Ford’s, not Henry Royce’s.
And later in the paragraph:
It is much easier to think of innovations which benefited only the less well-off than it is to think of innovations which have benefited only the rich.
I would have altered this last slightly. Almost every innovation I can think of benefited the less well-off a lot, percentage-wise, and the rich a little, percentage-wise, but not zero.