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Why globalisation is actually the least of their worries
In North America, the back end of an eighteen-wheeler heading for Mexico, workers weeping at the factory gate, the boarded-up windows of a hollowed-out factory town and people sleeping in doorways and on side-walks have been among the most powerful economic images of our time: metaphors, seared into the collective consciousness, for an economy that consistently and unapologetically puts profits before people. Naomi Klein, No Logo
Having declared free trade and open borders to be America's policy, why are we surprised that corporate executives padlocked their plants in the Rust Belt and moved overseas? Why keep your plant here when you can manufacture at a fraction of the cost abroad, ship your goods back, and pocket the windfall profits that come from firing twenty-dollar-an-hour Americans and hiring fifty-cent-an-hour Asians? Patrick Buchanan, The Great Betrayal
Those days are gone when we deplored the underpayment of exploited labour in poverty-stricken countries.., what we are now deploring is the underemployment it causes in our countries. Vwiane Forrester, The Economic Horror
The overall effect of unregulated global free trade is still to drive down the wages of workers - most particularly unskilled manufacturing workers - in advanced countries. John Gray, False Dawn
The free trade liberals hope that a high-wage, high-skill America need fear nothing from a low-wage, low-skill Third World. They have no answer, however to the prospect - indeed, the probability - of ever-increasing low-wage, high-skill competition from abroad. In these circumstances, neither better worker training nor investment in US infrastructure will suffice. Michael Lind, The Next American Nation
Chuck Swearingen is a mountain of a man. His green-and-white checked shirt is bursting at the seams over his enormous belly. As he reaches out his huge hand to shake mine, I feel small and vulnerable - and he is just one of the five giant American steelworkers I have come to have pizza with. But he breaks into a big smile - 'Nice to meet you, Philippe' - and my unease is gone.
Amid all the hoopla about Silicon Valley, Wall Street and the new Internet economy, it is easy to forget that there is still an older America too. A less glamorous America that makes ordinary things that you can drop on your foot. Like steel. America's steelworkers fear that their jobs and their way of life are under threat. They blame foreign trade. 'We know globalisation is here,' Chuck explains. 'But we want an equal and level playing field, instead of whoever has the cheapest labour or can do it cheapest no matter what rules they play by. We have to monitor the environment, control pollution. We have safety laws, pensions and healthcare to pay for.' His views are echoed by many other manufacturing workers in the old industrial heartlands of Europe and North America.
Whether you sympathise with them or not, America's steelworkers cannot be ignored. They are in the vanguard of the backlash against globalisation. Unlike the inveterate anti-capitalists, confused college kids or woolly-minded hippies who oppose globalisation in the abstract, they feel they are fighting for their livelihoods. They have so much political clout that even a professed free-trader like George Bush is listening. When I finished writing this book, in early March 2002, the American president had just slapped punitive customs duties on foreign steel - a move that could spark a global trade war.
Where Chuck works is only an hour's drive from Washington DC, but it feels light years away. Sparrows Point is in Maryland, just outside Baltimore, overlooking Chesapeake Bay. Chuck has spent thirty-two of his fifty-two years there, working for Bethlehem Steel, America's second-biggest integrated steel producer. He remembers when Sparrows Point was still a company town. Beth Steel bought the plant in 1916 and around it built a model town that was renowned for its well-kept homes, small-town atmosphere and self-sufficiency. They had their own churches, police and cemetery. The town boomed during the Second World War, when it cranked out steel and ships for the fight against fascism. At its peak, Sparrows Point, which was once America's biggest steel plant, employed 35,000 people. 'We were the highest-paid workers in the area,' says Chuck's colleague, Phil Pack. Now fifty-three, Phil started as an iron-worker apprentice thirty-five years ago - one of the first blacks to break into a then notoriously racist industry. Gordon Jakubowski concurs: 'We were the employment of choice.'
But then decline set in. From 1970 on, wave after wave of layoffs culled the workforce. As early as 1974, the last houses were torn down to make way for a new blast furnace, the largest in the Americas. The raw materials that used to be sourced locally - coal from Bethlehem Steel mines, coke made on site - now come from abroad: iron ore from Canada, coal from Australia, coke from China and Japan, and limestone from Argentina and Venezuela. Sparrows Point now employs only 3,500 people. Even these few remaining jobs may soon be gone: in October 2001, Bethlehem Steel declared bankruptcy, blaming foreign competition. It is now on life-support, awaiting a rescue plan in the legal limbo of Chapter 11 - America's insolvency procedures, which, unlike Europe's, give a company a breathing space to get back on its feet.
Sparrows Point is not a pleasant place. Vast smokestacks puncture the skyline and pollute the air. The scrubland is scarred by the iron ore, coal, coke and limestone that are blasted to make steel and by the slag heaps that are its by-products. Even the chunky steelworkers with blackened faces who toil amid the searing heat and choking dust seem slight set against the outsize building and machinery. It is a desolate wasteland - but working there provides good money.
Very good money, in fact, for work that does not require a college degree. On average, a steelworker at Sparrows Point makes $55,000 a year for a forty-hour week. But many earn as much as $70,000 to $80,000 a year by putting in a further twenty hours or more overtime. For $80,000 a year, you can live like a king in Maryland. 'We are privileged,' concedes Doc Iler, who is fifty and has been with Beth Steel for thirty years. 'When we see our way of life threatened, we're going to resist it.' Steelworkers drive huge SUVs (sport-utility vehicles), like the Ford Expedition, a macho cross between a van and a truck. They live in big houses with lots of land. Some have boats. Their pensions are generous, as are their healthcare benefits: big pluses in a country where so many fear that old age or illness spell destitution. Perhaps most importantly, they can afford to pay to put their kids through university. Chuck has a twenty-one-year-old son in college who wants to go into computers. What if his son wanted to work in steel? 'I would discourage him. There's no future.'
He is probably right. America's steel industry is shrivelling up. A global glut of steel is driving prices down to levels where American producers, with their bloated costs, can no longer compete with their foreign rivals. Phil thinks this competition is unfair: 'We can't go sell steel in Europe, Japan or China 'cause their markets are closed. There's overcapacity so people are selling below cost.' Chuck agrees: 'We can't export 'cause they put up barriers. If we put up barriers they go nuts.'
The truth is a bit more complicated. America's steel industry has long sheltered behind import barriers, yet it has still declined. Trade is clearly only part of Bethlehem Steel's problem. Even Chuck admits: 'We would still be losing jobs if there were no imports. We don't only have foreign competition; we also have domestic competition from [lower-cost] mini-mills. We've got very good contracts from when we were living high on the hog in the sixties.' You can say that again: although steel is a capital-intensive industry (remember all that gigantic machinery), employment costs account for around 40 per cent of Beth Steel's total costs. In a typical manufacturing firm, the figure is around 10 to 15 per cent. The company is hobbled by the huge pension and healthcare costs of its many former employees.
Technological change is also taking its toll. 'Back in the sixties, we used to produce 4 million tons [of steel] with 30,000 people. Now we produce three and a half to four with 3,500 people,' explains Doc. Since Sparrows Point produces almost as much steel as thirty years ago, but with less than an eighth of the workers, most of the job losses are due to cost-saving technology rather than dastardly foreigners. Even so, America's steelworkers are certainly among the losers from globalisation. If America's steel market was thrown open to foreign competition, many more jobs would undoubtedly go.
Whatever the cause is, losing your job can be terrible. 'It is devastating,' says Doc. 'Some of my good friends killed themselves. Families are torn apart. Steelworkers go from making good money to being homeless.' He has worked as a co-ordinator for the United Steelworkers of America (USWA) on its dislocated-worker programme. 'Sometimes we helped find them jobs that only pay $4 to $5 an hour with no benefits, when they were earning $17 to $18 an hour plus benefits. But they're happy to get them. They need somewhere to hang their hat.' In 1989 the USWA started a career-development programme. 'It didn't make sense to wait until workers are in the street to prepare them for changes.' But finding another job can be very tough. 'Lots of workers have jobs that are unique to the steel industry,' says Chuck. 'They feel totally lost when they lose their job. They have no skills to market themselves for other jobs. They're middle-aged, not skilled to find other work, or too fat and too lazy to find other work. But we've worked hard to get to the positions we've got to. People are protected here. They don't often appreciate that.' Chuck points out that General Electric and Western Electric have recently shut down their local operations. 'Jobs in IT are limited. Jobs in industry were unlimited. Only 20 per cent go to college, 80 per cent don't. Where do they go now? They used to go here. There are lots of working poor.' Jerry Ernest, an even bigger man than Chuck, interjects: 'Unemployment benefit is $280 for twenty-six weeks. I just checked it out. Two hundred and eighty dollars is only a little over a day's wages. We're all worried about layoffs because of Chapter 11. We're teetering.' Thankfully, the USWA has also negotiated a supplementary unemployment benefit for members who are laid off.
Ironically, Bethlehem may yet be saved by a foreign white knight. Robert Stevens, the company's new boss, who took over less than a month before it went into Chapter 11, is adamant that the industry must 'consolidate'. That means mergers, with US or foreign rivals. Even an all-American merger would rankle with some people. 'We are who we are. We'll manage on our own' is a common refrain. Many more would resent a foreign takeover. 'There is still a patriotic pride associated with the company. During the Second World War, Sparrows Point used to produce a ship a day for the war effort,' explains Bette Kovach, Bethlehem's PR woman, who has worked for the company for twenty-five years. But most would swallow their pride if it meant their company survived. 'I love steel. I love Bethlehem. I've worked my whole life here and I'd like to see it continue. If it continues as the US arm of a foreign company, I wouldn't say it's welcome, but it's still worthwhile if it could give our employees security and a livelihood,' she says. 'We're not opposed to foreign ownership,' says Chuck, 'but we'd rather preserve it for ourselves.' What if the choice were between a foreign takeover and taking a pay cut in order to keep the company independent? Chuck laughs. 'We're all capitalist here.' Besides, he adds, 'If they cut wages, no one would work here. Who wants to come work in a filthy place when you could be making the same money for Verizon [a telecoms company]?'
In the old redbrick block that serves as Sparrows Point's headquarters, the facility's boss, Van Reiner, echoes that mixture of pride and realism. 'The process of making things does more than just make things. It provides people with the opportunity to buy a house, raise a family, pay for college education. That is important enough that whose name is on the door doesn't matter. It would be a tragedy if this facility closed. The effect on this area would be catastrophic.' Bethlehem Steel has already shut many facilities, including in 1995 the plant in its home town of Bethlehem, Pennsylvania. Van, a wiry, excitable man, is passionate about steel. 'It's fascinating: making something out of dirt.' Indeed. Like computer chips, which are made out of sand. Would it be a tragedy if the steel plant closed and was replaced by a semiconductor plant? 'Yes. The dislocation would be terrible. And it [the semiconductor plant] just wouldn't open.' The evidence suggests otherwise: despite all the job losses in manufacturing, US unemployment was, until the economy turned down in 2001, at a thirty-year low. Even so, Van exclaims: 'A whole generation would be severely affected. The people who have the new jobs are not the same as the people who lost them. It creates an underclass.' He has a point. Adjusting to change can be painful. But thankfully, the future may be brighter for the next generation. Van's son, who was born in 1975, works as an architectural-graphics-software consultant in Japan, speaks Japanese and set up a dot-com during the Internet boom. He does not share Van's passion for steel: 'He doesn't look at making things like I do.'
Protectionism doesn't work
Some people argue that salvation lies in keeping out imports. Meet Curtis Barnette, who likes to be known as Hank. Hank looks like an old-fashioned gentleman. He is deliberately charming. He holds the door open, pours me a drink, enquires earnestly about my background. His suit is perfectly tailored, his greying hair gelled wet. He sports a Stars-and-Stripes badge and blue braces to boot. His smooth voice sounds measured and reasonable, his glasses lend his words weight and wisdom. He has an impeccable pedigree: chairman emeritus of Bethlehem Steel (chief executive and chairman proper from 1992 to 2000), chair of the American Iron and Steel Institute (and the International one too), member of the US president's advisory committee on trade, and so on. America's steel industry may be ailing, but Hank himself doesn't seem to be doing too badly.
Excerpted from OPEN WORLD by PHILIPPE LEGRAIN Copyright © 2004 by Philippe Legrain. Excerpted by permission.
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