Wall Street History

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Wall Street History

02/27/2004

Ralph Nader

In light of this week’s announcement that Ralph Nader is once
again throwing his hat into the ring for president, I thought it was
a good time to resurrect a piece I did in November 2000, after
Democrats lit into Nader for his “spoiler” role in that election.
It’s too early to know his impact, if any, this time, and I won’t
make any predictions in this space, but nonetheless Mr. Nader
has had a real effect on American life and his story is an
interesting one. What follows is also a tale of how the U.S. auto
industry reacted to change in the 1950s and 60s, as well as its
shoddy treatment of Nader. Well, Ralph fought back and won.

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Born in 1934 in Winsted, CT., Ralph Nader was one of four
children of parents who immigrated from Lebanon. The Naders
were civic-minded individuals and the family restaurant was a
source of lots of talk about the authoritarian “they.”

At an early age, Nader was drawn to the writings of the classic
muckrakers, folks like Lincoln Steffens, Ida Tarbell, Upton
Sinclair, and George Seldes. He read them all before he was 14.
[During this time in my own life, I was playing Strat-o-Matic
Baseball.] What Nader picked up from these readings was that
they all stopped with exposure. None of the muckrakers turned
their feelings into political movements.

Ralph eventually found his way to Harvard Law School where
upon completion he hitchhiked down to Washington to
commence his career of public service. His first target was the
U.S. auto industry.

Going back to the 1920s, the auto makers began to break away
from Henry Ford’s philosophy of sticking with the same model,
in the same color, at the same price. Instead, manufacturers like
General Motors changed models every year to give the
impression that there was something unique that the American
consumer needed to buy. With each year, the cars were made
out to be better than the older ones. This principle would come
to be known as “planned obsolescence,” somewhat akin to
today’s popular philosophy of “creative destruction,” though the
latter is more a result of technological change while the former is
a result of marketing.

But changing models constantly required large investments of
capital for design and retooling. Detroit was planting the seeds
of its own destruction if it didn’t keep up with trends amongst the
buying public, and it was increasingly clear that the traditional
models were not built up to the standards that the people
demanded.

Populist Tennessee Senator Estes Kefauver said, “The dictates of
styling engineers take precedence over everything else. Even
safety of operation – not to speak of fuel economies and
problems involved in parking – are subordinated to the whims of
fashion experts.”

By the late 1950s, the Big Three auto makers were losing out to a
public that was demanding smaller, less expensive cars, and was
also increasingly attracted to imports, especially the Volkswagen
Beetle. Imports, in fact, accounted for 10 percent of all sales in
the U.S., exceeding 600,000 a year in 1958.

Plus, it was in the fall of 1958 that a wire story crossed reporting
that two heretofore unknown manufacturers, Toyota and Nissan,
were for the first time shipping cars to this country.

In the fall of 1959, the New York Times’ Richard Rutter wrote:

“If one single factor had to be cited for the public acceptance of
foreign models it would undoubtedly be price. Gasoline
economy, ease of handling, style and just plain novelty also have
been attractions. But a lower-than-expected American price has
furnished the major impetus to the expansion of the imported-car
market.”

[To give you an idea of how much the AMC Rambler, a compact
alternative to the staid Big Three models, meant to the bottom
line, consider this. The company was deep in the red in the mid-
50s and facing bankruptcy; then it introduced the Rambler and
by 1958 it was earning $26 million. Another example was
Studebaker-Packard, which lost $13 million in the first half of
’58, then earned $12 million for the comparable period in 1959
with the success of its own compacts.]

So in 1959 it came as no surprise that the Big Three introduced
3 smaller models to compete against the Rambler, Studebaker,
and the imports; the Ford Falcon, Chevrolet Corvair, and the
Plymouth Valiant. The European makers began to see their sales
drop for a spell, but the new cars were still more expensive than
the imports and the quality was equally suspect.

Enter Ralph Nader. In 1965 he published “Unsafe at Any Speed:
The designed-In Dangers of the American Automobile,” which
called for automobile redesign, specifically singling out General
Motors’ Corvair, which he labeled a death trap due to its poorly
designed suspension system that could cause the driver to lose
control during turns. And Nader wrote of manufacturers in
general, “Probably no other industry in this country devotes so
few of its resources to innovation of its basic product.”

[Foreign cars didn’t escape Nader’s microscope either as he later
published a separate report detailing VW’s safety problems.]

For its part General Motors was shocked that this young,
unknown attorney would attack one of the pillars of American
business. They decided to launch a secret investigation, delving
into Nader’s past, as well as to determine whether he would
receive any financial benefit from all of the lawsuits that would
be filed against GM by angry consumers.

GM also looked into whether or not this was some kind of a plot.
Nader couldn’t possibly be acting alone. Maybe he was a
Communist! They even tried to compromise him with attractive
women, but GM found nothing.

Yet the story of the automaker’s tactics didn’t break until one of
the private eyes mixed Nader up with a Washington Post
reporter. An embarrassed General Motors President James
Roche was forced to apologize before the Senate Subcommittee
on Traffic Safety for spying into Nader’s private life. Nader
ended up winning $425,000 for invasion of privacy, which he
plowed right back into his many public interest groups. GM
helped turned Ralph Nader into a star.

Federal auto safety legislation was introduced in 1966 and by
1969 sales of the Corvair had slumped some 95%, with GM then
forced to take it off the market.

Nader went on to tackle insurance companies, the Federal Trade
Commission, AT&T, cereal companies, meat processors, nuclear
power, you name it Ralph Nader went after it. He has been
called America’s Don Quixote, tilting at windmills, yes, but
sometimes knocking them down.

Nader is behind the Consumer Product Safety Act and the
Freedom of Information Act, as well as safety items now taken
for granted such as seat belts, airbags, and no-smoking sections;
all a result of his action or the work of his disciples.

Author Harold Evans perhaps best summed up Ralph Nader’s
impact on this nation.

“America owes more than it may ever realize to Nader and his
Johnny Appleseed research and advocacy groups: Safer cars,
Airbags. Medicines that are safe, effective and cheaper.
Tractors that don’t roll over. Scam-free hearing aids. Decent
nursing homes. Fairer credit and insurance. Cleaner water.
Safer factories Nader and his groups have played a critical role
in all these changes and thousands more. Nader is not
invulnerable to criticism; he might perhaps too readily assume all
producers are wrong, all consumers right. He has had his failures
and setbacks, and he certainly has critics, irritated by his piety,
and enemies, frightened by his effectiveness. Yet few have
achieved more for the American citizen than Ralph Nader and
his selfless crusade over the past 35 years.”

Sources:

“The New York Times Century of Business,” Floyd Norris and
Christine Bockelmann
“Monopolies in America,” Charles Geisst
“The American Century,” Harold Evans
“1,000 Years / 1,000 People,” Gottlieb and Bowers

Brian Trumbore

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