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Macroeconomics

Overview

 

Macroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole. This includes regional, national, and global economies.

In this section we will try to cover topics in the history of macroeconomics to be taken as lessons learned of what to do and what not to do.

Fordland

 

The Guardian coined this history as "Lost cities of Fordlandia – The failure of Henry Ford's utopian city in the Amazon"

In the 1920s the US industrialist, Henry Ford, wanted to found a city based on the values that made his company a success – while, of course, producing cheap rubber.

Spoiler alert: The jungle city that bore his name ended up one of his biggest failures.

Location

 

Fordlândia (in Portuguese) is a district and adjacent area of 14,268 square kilometres in the city of Aveiro, in the Brazilian state of Pará. It is located on the east banks of the Tapajós river roughly 300 kilometres south of the city of Santarém.

 

Period / Purpose

 

It was established in the Amazon Rainforest in 1928 as a prefabricated industrial town intended to be inhabited by 10,000 people to secure a source of cultivated rubber for the automobile manufacturing operations of the Ford Motor Company.

 

Background

 

Negotiations with the Brazilian government started during the visit by then-governor of the State of Pará, Dionísio Bentes, to the United States to meet Ford. An agreement was signed and the American industrialist received an area of about 10,000 km2. The agreement exempted Ford from taxes on the exportation of goods produced in Brazil in exchange for 9% of the profits (7% going to the Brazilian government and 2% of profits to local municipalities).

Investments / Infrastructure

With an investment of around US$2 million at the time, 2,000 people moved to the region. According to historian Greg Grandin, author of studies on Fordlândia, the place imitated all the nuances of a typically North American city, with a main shopping street, lined up houses designed in the city of Michigan, USA, sidewalks and a square central.

There were also hospitals, schools, mechanical workshops, ice chambers for storing food, among other benefits that were previously rare in the region.

Rules / Cultural Distance

Ford, who was against drinking alcohol, wanted a perfect utopian city in the middle of the Amazon. The town had a strict set of rules imposed by the managers. Alcohol, women, tobacco and even football were forbidden within the town, including inside the workers' own homes. Inspectors (American managers) would go from house to house to check how organized the houses were and to enforce these rules. while promoting gardening, square dances and poetry readings to the site’s workers.

According to sources, a menu with balanced meals was chosen by Ford himself, with oatmeal and canned peaches, imported from Michigan, for breakfast, and brown rice and whole wheat bread for dinner.

Time clocks and sirens marked the working hours and the search for productivity was a trademark, which brought a certain strangeness to Brazilians at the time.

The legendary businessman, however, did not count on the cultural differences between the American engineers, called upon to run the new venture, and the Brazilian rubber tappers (A cultural distance that would become the beginning of the end of the North American utopian city in the country).

Riots / Revolts

In 20 December 1930, at the workers’ cafe, in which skilled workers were separated from manual labourers, an argument quickly escalated and violence broke out. Workers vandalised the city, destroying generators, manufacturing equipment, and even their own homes.

Fordland's managerial staff managed to escape by ship, they were eventually able to subdue the violence, but only by appealing to Pan Am air magnate to assist them by flying in Brazilian military personnel on one of his planes.

According to sources, despite some agreements were made on the type of food the workers would be served, Ford did not agree to further negotiations and chose to fire the majority of the plant's workers.

Downfall

Even after the riots, Fordland faced some turning points:

​​

  • Labor Treatment

    • Workers having to work in the middle of the day under the tropical sun, with fear of succumbing to the heat and humidity of the Amazon Rainforest

  • Cultural differences

    • Unfamiliar food

    • American-style housing

  • Lack of Tropical Agriculture Knowledge​

    • ​Hilly and rocky terrains/lands
    • Protection mechanism against plagues and diseases (the rubber trees must grow apart from each other to avoid plagues)

  • Logistical problems​​

    • No roads were available in the area

    • The area was only accessible by the Tapajos River

  • Biological Risks​

    • Workers were affected by diseases such as yellow fever and malaria

    • A fungus has made rubber tree plantations unusable for industry

  • Competition

    • New synthetic rubber made from petroleum derivatives

    • Asian rubber plantations freed from Japanese rule with the end of World War II

In the following decades, attempts were made such as relocation, opening of new factories in other regions, Autolatina creation, a joint venture with Volkswagen, but all in vain. Adding to an unfavorable economy, numerous crises and catastrophic events such as pandemics, after a hundred years, Ford left Brazil for good.

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