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Dying Steel Towns

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The steel industry in the United States declined for reasons a bit more complicated than a lot of other industries. It wasn’t so much that steel manufacturers moved overseas so much as the U.S. decided to encourage the importation of cheaper foreign steel from Asian factories to undermine the United Steelworkers of America strikes of the 1940s and 1950s that inconvenienced employers. But the U.S. had no plan at all to deal with the steel towns and it never has. For those designing the American economy, planning for the messiness of what to do with these old sites of industrialization is simply not important because it’s hard. Better to throw tiny amounts of money at the towns and stay planning from 30,000 feet. And there is some value of course in large-scale planning. But the government must have plans for these communities if it going to encourage industry to move. It never has. That leads to the slow death of cities like Aliquippa, Pennsylvania, detailed here in the photographs of Pete Marovich, whose mother is from there. The photographs are not only sad but infuriating because this fate was not inevitable. Yet for the cities around Pittsburgh, which has recovered, there is just nothing.

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  • J. Otto Pohl

    The US economy has very little central planning even compared to other capitalist countries. I don’t think the steel industry is all that unique in this regards. The US is very different from countries like Japan or South Korea or even Germany in regards to economic planning.

    • shah8

      Germany? As in the sort of Germany that treats former E. Germany as a red-headed stepchild, and with its own set of jobless satellite residential areas?

      • J. Otto Pohl

        They have a more centrally coordinated economy than the US with a larger degree of cooperation between the government, businesses, and labor unions, yes. The measurement is relative not absolute.

        • shah8

          But it’s kind of relative between German regions, never mind Germany and the US. Post-industrial cities in the US Northeast do tend to have a real plan, if only a gentrification attempt.

          Also, I think the US does have considerable central planning efforts, such as military industrial industry locations, pulling in car industries with low taxes and cheap labor, regional transportation initiatives, etc. Issue is that the US is much bigger than Germany and there are more bad places to look at.

          Bottom line, where similar amounts of institutional apathy exists, Germany isn’t superior to the US, I don’t think.

  • guthrie

    There’s some sort of design in the US economy? I thought the market was beyond designing and would take care of all that.

    But more seriously, by designing do you mean the financial setup that pushes for short termism, maximised the wall street take and opresses workers?

  • DrDick

    There is also the fact that US steel companies chose not to upgrade their 19th century infrastructure, despite fully modernize, more efficient, and cheaper competition from the rebuilt economise of Asia and Europe.

    • cpinva

      the same would have been true of both Germany & Japan, had not those factories been bombed into dust during ww2. when those plants were rebuilt, they were new, modern plants, able to operate much more efficiently than the older plants in the US. the best part of all, the US taxpayers paid for it, with such as the Marshall Plan.

      so yes, US steel companies didn’t upgrade as they should have, but they didn’t have the benefit of taxpayer dollars to do so either.

      • Brett

        They did have a long period of profitability with little outside competition, though. The steel companies probably should have asked the federal government for assistance in re-configuring their plants back in the 1960s and 1970s, but it wouldn’t have been surprising if the federal government had in turn asked what they were doing with their profits (this was before the massive financialization of the 1980s onwards too).

        • Hogan

          In the late ’70s US Steel, in negotiations with the United Steelworkers, expressed a desire to upgrade their plants, but showed that they lacked the available capital. The union agreed to givebacks in order to provide the necessary capital. US Steel then used the money to buy Marathon Oil.

          Of course, this was in the days when “Diversify!” was the big idea, as opposed to “Concentrate on your core business! Outsource! Lay off!” being the big idea, so such a thing could never happen again, thank goodness.

          • Not to defend what US Steel did in this case for sure, but probably if US Steel doesn’t diversify it doesn’t exist as a corporation any longer.

          • Brett

            The union agreed to givebacks in order to provide the necessary capital. US Steel then used the money to buy Marathon Oil.

            Was the USWA pissed off about that? I mean, sure, they did get petroleum related union jobs in addition to the steel ones, but that didn’t exactly help the steel business jobs or anyone working in a steel plant town unless they migrated.

            • Hogan

              I mean, sure, they did get petroleum related union jobs in addition to the steel ones,

              That’s not how it works. USWA’s contracts don’t automatically extend to any company US Steel acquires.

              And yes, they were pissed, but had no recourse.

              • Xenos

                Should have done what an external lender would have insisted on, the issuance of preferred shares in return for the financing.

                But then, management probably would have let the business fail before they would let Bolsheviks in the door.

        • DrDick

          Exactly, but they would rather funnel that excess profit into shareholder returns.

          • Brett

            This was pre-1980s, though – back when companies usually just funneled a steady dividend toward shareholders and the stock market was “boring”.

            • DrDick

              I remember. I was in my 30s.

  • tonycpsu

    Good SI.com piece on Aliquippa. Focuses on the football history, but also touches on the poverty and crime that have resulted from the decline of the steel industry.

    • I’m sure an increased Earned Income Tax Credit will solve these problems!

      • Phil Perspective

        Hillary 2016!!

    • jon98101

      Their Wikipedia page shows nine pro football players, including Ditka and Dorsett. All from a town that never had more than 30,000 people.

      • Murc

        Also the hometown of CIA officer Gust Avrakatos, one of those intelligent souls who thought giving billions of dollars in weapons to mountain-dwelling psychopaths in Afghanistan was a grand idea and who along with Charlie Wilson is one of the five or six people most responsible for making that happen.

  • efgoldman

    As Erik knows well, this is the history of industries that grew up in the industrial revolution all across the country: fabric mills and paper mills in New England, autos and their suppliers in the upper Midwest, coal mining in the Appalachians, cotton in South, salt water fishing everywhere…..

  • Dr. Ronnie James, DO

    1) Capital sets up shop
    2) People flock to Capital
    3) Capital goes out for cigarettes

  • Derelict

    I’m not sure any sort of planning went into either the closure of the plants or the response to those closures. The reactions always seem to be the same: You unemployed types just need training and a boot in the ass! That’s not planning–that’s kneejerkism.

    I’m sure there must have been programs in places like Allentown to retrain the workforce for the hot new industries like keypunch operator or maybe learning how to program BASIC or COBOL. Unfortunately, there were not and still aren’t any businesses in the former steel towns that needed those skills. And for someone who is, say, fourth generation from Allentown (and reduced to surviving on unemployment or welfare), moving to New York or even Trenton is not realistic.

  • Brett

    It sounds like they do have a distressed municipality program in Pennsylvania designed to help these towns, but it’s not enough or too indirect. Which figures – the US always seems to half-ass recovery programs ever since the Great Depression, at all levels of government.

    What would have really helped the town would be if the state (or city government with assistance) had identified a bunch of projects that need doing – such as cleaning up the detritus and damage from industrial production, as well as updating infrastructure – and committed to hiring a bunch of locals to do it. It wouldn’t be unpopular “make-work” either, since it’s stuff that does need doing.

    Some towns could also probably do a bond issue and buy out the plant from the owners before closure, if they were allowed to do it (or the owners were required to offer it for sale first before closure). It can be of rather mixed success, and it won’t save a plant that is fundamentally unprofitable in the face of economic change, but it will slow down the disruption.

    • koolhand21

      Act 47 where an outside “expert” is appointed to help manage the finances of the entity.

      Edgar Thompson Works, the USS plant produces as much steel today with 5500 employees as all 13 mills in the Mon Valley produced in the 1970s with 55,000 employees. ET is located partly in Braddock (33,000 residents in 1970, 3,000 today) partly in North Braddock same relative story. Clairton, Aliquippa, West Miflin, pick any municipality in Allegheny County (there are 109 in the county) where there was a steel plant and the issues of decline, poverty, education etc.

      • Brett

        That’s why I prefer the “direct federal/state hiring for projects” approach. It performs useful work, gives income directly to workers, and doesn’t require anyone to operate an inefficient plant.

        It does maintain employment in towns where the main economic basis is gone, but a fair number of larger towns and cities can reinvent themselves after a period of time – or more cynically, anyone who was willing to leave after the plant closed has already left, so you’re basically deciding whether you want those remaining for various reasons to live in poverty and bad conditions or not.

  • A movie that paints a pretty grim picture of towns like these is, of all things, Slap Shot.

  • Rugosa

    That could almost be a picture of the neighborhood I grew up in, the East Side of Buffalo. Buffalo is apparently re-inventing itself, but it took a long time to get going. There still aren’t enough jobs to sustain the city anything like in the past, and probably won’t ever be. It breaks my heart.

  • BiloSagdiyev

    I’m not seeing any discussion of the move south. Before NAFTA, there was the US south. There are still steel mills, they’re just not unionized. I know of Charlotte, Columbia, Jacksonville, FL, and one in TN, and that’s just one company. This was a postwar trend, and I think one thing that made it possible was a move towards electric arc furnaces, which could operate on less-than-mammoth scales. Not the coal furnaces of PA fame.

    • BiloSagdiyev

      P.S. But in general, yeah, industrial policy is BAD. If it costs industry money and does something they don’t want. When it gets them things it want? That’s called lobbying.

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