Whose Steel?

Whose Steel?

Dead ends, new beginnings–the industry’s twenty-five-year crisis continues.


Youngstown is one of those places where talk turns easily to the used-to-be’s. What used to be one of the biggest steel cities–the mills laying claim to twenty-five miles of the Mahoning Valley–is now a place of naked ruins, junk heaps of indiscernible provenance or pint-sized industrial follow-ons, including a few steel processing plants and one “mini-mill,” which doesn’t make steel but simply melts scrap metal into reusable form. “Hungry Shredder Needs Scrap,” a handwritten sign declares from a fence enclosing part of what had been the mighty Brier Hill Works. Recycling! But the tired frame houses pitched along the streets up from the valley that once sustained them reflect none of the sparkling promise of that word.

About 10,000 people worked in the mills before first one, then another big steel company shut down, until US Steel struck the final blow in 1979. Now the mini-mill employs about 430. Newer landmarks throw different shadows across the future of the city’s working class: a steel and labor museum, a private prison, a Supermax prison, a bankruptcy court. Lawyers for many of the thirty-three steel companies that have filed for bankruptcy protection since 1998 have trooped through that court. LTV, which had been the nation’s third-largest steel producer, was sold off there amid considerable drama in February. Back then there were worker protests, out-of-town reporters and excited demands for tariffs on imported steel. The tariffs came, courtesy of President Bush, in March, and the press bus left. Attention shifted to the potential for international backlash and–once Bush signed the farm bill, with weighty subsidies of the kind denounced as unfair when applied to steel by other countries–to political opportunism in anticipation of November’s elections.

Now in nearby Cleveland the 5,200 people who toiled for LTV there await the outcome of negotiations between the United Steelworkers of America (USWA) and the new owner, W.L. Ross. They just buried their third suicide. Elsewhere, as at the bankrupt Republic Technologies mill in Lorain, Ohio, workers are shed without benefit of national headlines. Steel prices have shot up thanks to the tariffs and to stalled production, but no one is more secure. In Youngstown the uneasy peace of irrelevance has settled back in. Memories persist, however: not just of the high days but also of the decline, of the marches and last stands, of the nativist rhetoric and–most important for our story–of the moment in time when workers proposed a radical departure from the strategy of begging and foreigner-bashing; when they said, simply, Why don’t we control the mills that our labor has built?

It is a question that only a few ask today but that, given the dismal prospect of security-through-tariffs, deserves revival. Youngstown and LTV stand as mile markers in the twenty-five-year crisis of American steel. Along that route are other signposts, labeled Lackawanna, where my uncle spent his life in the mammoth Bethlehem mills, Hazelwood, Homestead, Duquesne, Midland, Warren… Farther ahead, other communities await the disposition of twenty-nine steelmakers currently in bankruptcy. In 2001, 14 percent of the country’s steel production was idled or silenced. The USWA reports that 50,600 workers have lost their jobs in the past five years, and the health and pension benefits of 600,000 retirees and family members are now at risk. Experts will point out that the past quarter-century in steel has not been a story of unbroken decline, and that the forces that doomed Youngstown’s open-hearth furnaces are different from those that landed LTV and its more modern facilities in bankruptcy court.

Among its several problems, the steel industry is the collateral victim of US superdominance, with its emblem the strong dollar. The same global system that makes the dollar the currency of choice among finance capitalists worldwide, that demands export-driven strategies of development abroad, that makes foreign assets and labor so desirable to US multinationals (and foreign imports as retailed through the Gap and Wal-Mart so affordable to US consumers) has driven up the price of American steel relative to that of every other country. The same domestic system that binds healthcare and old-age pensions to employment, and that for decades encouraged the steelworkers union to take wage concessions in exchange for retirement benefits, costs US steelmakers $3.7 billion a year, a competitive disadvantage against companies in Canada, Japan, Europe, Australia, anyplace where such costs are socialized.

In the popular telling, however, a simpler narrative has predominated. As industry and union proclaimed in the 1970s, “The threat is real from foreign steel,” a slogan that remains resilient in 2002. “While we have been playing by the rules, other countries have unfairly subsidized their industries, and we’re paying the price,” a Cleveland LTV worker said, reciting a common union argument in support of tariffs. Yet American steel has not been without government emoluments. In the time between the big shutdowns that began with Youngstown, numerous protections were applied to steel. Before Bush’s action, 120 countervailing tariffs were in place, with forty more on application. Since 1977, the jobs disappeared anyway, more than 350,000 of them.

Outside the LTV bankruptcy hearings before the tariffs came down, Kim Shaffer, the wife of an LTV worker, expressed a considered impatience. At a meeting early in the crisis while a union rep was going on about unfair competition from foreign steel, she recalled, she had nudged her husband and whispered: “It’s the same rhetoric we heard twenty years ago! What happened in all that time–did we get complacent? They’re the same words coming out of different mouths.” The same industry, the same union, the same region, the same scenario of shutdown, the same rhetoric. Where are the alternatives?

“We have no morality laws. Morality laws would say, Protect the American worker. All we have is trade laws.”
      –Larry Ientile, president, USWA Local 1104, Lorain

To grasp alternatives, it is necessary to review the real circumstances a community faces when confronted with shutdown. Even before the latest crisis, the 5,200-person steel work force in Cleveland was half what it was in the early 1980s, a quarter of what it was in the 1970s. The talk is that ultimately Ross will call back only 1,200. Those hoping to return are overwhelmingly older, with memories of a time when nothing seemed so powerful as steel. Simply because of the monumentality of the works–the stacks from the basic oxygen furnaces spouting forty-foot flames, the rickrack of railroad tracks and electrical towers, the mounds of ore and limestone, all of it ranging across a 1,200-acre gash in the heart of the city–it is easy to understand why the illusion might persist. But Cleveland doesn’t depend on steel. Although manufacturing still drives the economy, in the form of many hundreds of small, mostly family-owned companies, increasingly it is a city that Style Section writers like to say has “made the transition.” High-tech boosters tout the future of bioengineering and other “clean” pursuits. When LTV announced it was closing, the Plain Dealer took a times-change attitude only slightly more tempered than a message sprayed on the base of a bridge near the plant: “Get Over It.”

And yet a shutdown of the mills would have been devastating. For steelworkers, the bankruptcy already has been. Joe Calucchia, who worked twenty-three years in the mill, now counsels the jobless at an employment assistance organization called the United Labor Agency. They come in “deathly scared,” unaccustomed to interviews, to aptitude and physical tests, all of which they must undergo if they hope to be rehired to their old jobs by Ross. Right now about 800 workers have returned to the mill, but until there is a labor agreement, they are simply work-for-hire, their status uncertain. Health coverage ran out early in the year. Some families are going without; some workers have taken jobs they hate at half their old wage just for health coverage. If they are old enough to qualify for Medicare but have a younger spouse with chronic health problems, they may suddenly be facing thousand-dollar monthly medical costs. If they have a marketable skill, whether or not there’s a market for it in Cleveland, they are denied retraining under the federal Trade Adjustment Assistance program. If they have alcohol or drug problems, and mostly if they have family problems, Calucchia says, the violence and disarray and trouble with the kids have only got worse. “People become brittle.”

The Greater Cleveland Growth Association estimated that in addition to those directly affected, a complete shutdown of LTV would have negatively affected 13,000 workers in related industries, and their families. Some of LTV’s suppliers have already gone under. Over the years, as LTV’s work force dwindled, the social costs of displacement were ameliorated by union-negotiated health and pension protections for workers who took retirement. About 15,000 Cleveland-area retirees were getting such support when LTV collapsed. Ross has assumed no responsibility for them. Their pensions will be picked up by the federal Pension Benefit Guarantee Corporation, but they won’t know what they will receive until September. LTV’s pension fund was short $70 million, according to PBGC officials, who say the agency will make up only about $40 million; the rest will be borne by retirees in the form of pinched benefits. On the medical front, “it’ll be helter-skelter,” retiree Curtis Wilson predicted, as people decide which prescriptions to fill, where to roll the dice on treatment, at a time when hospitals are under financial pressures.

LTV’s bankruptcy has cost Cleveland more than $7 million in tax revenue. Permanent abandonment of the site would have deprived the city of its biggest source of property taxes ($3 million a year when the company was paying) and $4.5 million in employee income taxes. Even those costs shrivel beside the environmental toll. The end of production would have made the works a “temporarily obsolete, abandoned and distressed site,” a k a TOAD–a ruin within view of almost every approach to the city, a poisoned ground whose cleanup has been estimated at anywhere from hundreds of millions to more than a billion dollars.

“We had an imminent catastrophe with huge implications for the health and livelihood of the community,” said Chris Warren, the city’s director of economic development when the crisis was at its most intense. “LTV was broke. Without a buyer, who would put out the fires, deal with the toxins, the security, the rapes, the structural collapse, the vandalism? We were looking at an ongoing liability, a situation in which the actions of the federal [bankruptcy] court would have been to transfer the care and feeding of the TOAD to the Cleveland taxpayer, who is disproportionately poor, disproportionately minority.”

So the costs of not making steel would be socialized in a way the benefits of making it never were. This is not the first time LTV has gone bankrupt. In 1986 the union conceded on wages, benefits, holidays and vacation time to help the company out. Later, the city granted tax breaks and other allowances. Back in solvency, LTV spent $250 million for part ownership of a mini-mill called Trico; it lost millions. It lost another $84 million on a failed venture in a Trinidadian iron-pellet plant. It spent $650 million to acquire Copperweld, a price twice what it was worth, according to a Wall Street steel-watcher, and $450 million on an unnecessarily extravagant computer system, according to the union. In December 2000, when LTV filed for bankruptcy a second time, it gave new CEO William Bricker a signing bonus of $200,000 and a base salary of $700,000; in March 2001, it awarded him a retention bonus of $1 million. Ten days before LTV was acquired by Ross its top management was guaranteed $6.6 million in bonuses.

“Integrated steel in the US is run by some of the stupidest people on earth,” the Wall Street analyst told me. “LTV was the worst.” Three years ago, he said, it seemed clear that the company was not committed to making steel, that its strategy was to sell off plants and become a manufacturer of steel parts. Or, as one LTV retiree put it more colorfully, “liquidate, terminate, vacate–they lived up to their name.”

“As a nation we have made an ad hoc policy to pay for sports stadiums, but we’re not willing to have the same policy to pay for our industrial base.”
      –John Ryan, executive secretary, Cleveland AFL-CIO

Early in the crisis, while top USWA officials were welding their interests to the company’s, pushing for federal money, loan guarantees from private banks and public entities, tax breaks and tariffs, others were raising a qualitatively different question, about the possibility of public ownership. After all, over the past decade Cuyahoga County has put up more than $120 million to build homes for the Cleveland Indians and the Cleveland Cavaliers, as well as a small office building for the Indians’ management and two condo units for the Cavaliers’ owners, the billionaire Gund family, to use when in town for games. At the same time, the city has put up $150 million to build a football stadium, which the Cleveland Browns use eight times a year.

Financing sports stadiums and declaring eminent domain to take over steel mills are not exactly analogous, but they issue from the same proposition: that to protect a public interest, the state will intervene economically. Cleveland, which defied the banks in the 1970s to save Muny Light as a public entity, and which threatened the use of eminent domain just last year to prevent the closure of an inner-city hospital, is not new to such ideas. In February 2001, at a Steel Summit called by Representative Dennis Kucinich to convene community, union, political people, creditors and other business types, City Councilman Nelson Cintron proposed a set of goals for the group–keeping the mills open, keeping them union, protecting the environment, protecting retirees–and suggested that public ownership ought to be investigated as a means of meeting those objectives. While the goals were agreed upon, the public ownership idea went nowhere. The union, then embarking on its own negotiations with potential corporate buyers, was “clearly ambivalent,” according to one high-level participant in the summits. Besides, as Councilman Roosevelt Coats, a former steelworker, put it, the prospect of eminent domain over basic industry “would challenge the political world in this city, and the political world doesn’t like to be challenged.”

Still, the question was raised, and the issue became part of the discussion, though only as a last resort. So as not to clash with union higher-ups, a rank-and-file group circulated petitions that got about 1,200 signatories advocating this last-resort position. In the end, that’s exactly what it was. While union and government officials were scurrying to line up financing to save the company, LTV was cutting the floor out from under them, quietly telling its customers that it could not guarantee steel delivery. General Motors canceled its orders, as did others, and on November 20, LTV shocked its community/labor supporters by filing to liquidate its assets. A week later Kucinich got a call from workers at the mill saying there was not enough coke on hand to operate beyond November 30. Without coke, the blast furnaces would go cold and self-destruct. There followed a series of legal motions, court hearings and mass rallies that culminated in the decision to keep LTV’s blast furnaces in Cleveland and Indiana on “hot idle” (warm but producing nothing) until an auction could be held this year. The city, meanwhile, prepared to use its power to expropriate the property–as Warren put it, “to assert its right as the only entity able to act in last resort to protect the public from an abandoned plant.”

Ross’s purchase on February 27 rendered such intervention moot, but given the persistent uncertainties of steel, some in city government continue to discuss the what-would-it-take of public ownership. At the height of the LTV crisis the plan never was for the city to get into the steelmaking business; rather it would hold the property until it could find a suitable operator. Acquiring the Cleveland works and getting it back to full capacity would have required a huge outlay in the first year. “It would have been very difficult for the city in forty-five days–because that’s all the time we had–to demonstrate it had the wherewithal to buy the mill and operate it,” Warren said. “Operating costs of the plant for one year would equal about two-thirds of the city’s general fund. So if we wanted to lay off the entire police and fire departments and get rid of compulsory education, then we could do it.”

Such is the straitjacket of limited options in which communities and workers find themselves in the world as it is, at the point of crisis. The space for action is always forty-five days or six months, maybe a year or more, but always in an atmosphere of imminent ruin. No wonder workers seize on the illusion of tariff relief and corporate saviors. It needn’t have been so. A quarter-century ago, between 1977 and 1986, steelworkers and their allies began laying the road not taken, organizing for community/worker control of the mills. They formed the Ecumenical Coalition of the Mahoning Valley in Youngstown and the TriState Conference on Steel in Pittsburgh. In Youngstown, according to the activist and attorney Staughton Lynd, who argued in court for a community property right to industrial sites marked for abandonment, people were at the beginning of a learning curve, “and the USWA was to the right of the Catholic Church and the [conservative] Youngstown Vindicator…actively bad-talking what we were trying to do.” In Pittsburgh, according to Charlie McCollester and Mike Stout, who were leaders in the TriState Conference, organizing communities around the possibilities of eminent domain, the USWA International softened its attitude but didn’t make their work a priority. It gave lip service to universal healthcare–a natural issue, considering that health insurance is a major operating cost, with each active steelworker producing to support health and pension benefits of four retirees–but retreated from the demand along with the rest of organized labor in 1992-93. It has experimented piecemeal with employee stock ownership plans, or ESOPs, with varying degrees of success (for an interesting assessment of the record in Ohio, see The Real World of Employee Ownership, by John Logue and Jacquelyn Yates). But there has been no comprehensive vision, no long-range coordinated strategy.

Lynd points out that eminent domain efforts ground to a halt in the mid-1980s because while communities could demonstrate a public interest, they could never meet the other requirement of the law: to pay a fair market price for the property. But there is an argument, he says, for not paying compensation. “One can calculate that the corporation owes so many kinds of debt to so many people and entities that you’re doing it a favor by taking the plant for free. In seeking to acquire a plant without compensation, the taker of course expresses, on other grounds, the deep feeling of workers that those are ‘our’ jobs, in ‘our’ plant, which the company never owned outright in the first place.” Of course, Lynd cautions, “this strategy would only get you to second base,” because operating capital would still be necessary.

“There’s got to be the possibility of a radical alternative,” Stout says. “Look at the history: In the absence of doing something radical, nothing radical happens.” What would it mean, as William Greider has written, “to imagine an economy in which labor hires capital” and “claims ownership of the final product”? Might the story of steel be different today if over the past two decades, in addition to organizing for universal healthcare, labor and communities had devised a coherent strategy for capitalizing public ownership of basic industry where the private sector was failing the people? If for every concession the union granted over the years, it had demanded some ownership? If it had mobilized for specialized regional or national lending institutions to support worker/public ownership? If it had pushed for legislation giving worker-community cooperatives preferential bidding on government contracts? If organized labor collectively had invested some of its $400 billion in pension funds not on Wall Street but in establishing its own “bank” to support communities and workers who wish to exercise their right of eminent domain as something other than a default strategy?

Such actions by themselves might not have “Saved Our Steel,” to borrow the chant that USWA members were raising for tariffs, but it’s hard to imagine they would have been more of a dead end than the decades-long fight against foreign competition. As John Logue of the Ohio Employee Ownership Center points out, even with the strong dollar and the retiree costs, “if American steel producers could borrow at Japanese interest rates [0.1 percent, compared with the US prime rate of 4.75 percent], none of them would be filing for bankruptcy.” If the government’s Emergency Steel Loan Guarantee Board actually lived up to its mission and used its $1 billion fund to support private loans; if there was a federally backed industrial bank, akin to existing agricultural lending institutions, there would be more room, not just for companies but crucially for communities and workers, to maneuver. If right now retiree benefits were funded by a small excise tax on every ton of steel regardless of its point of origin, operating costs would drop significantly. Alternatives would emerge, and that is the point.

In the great might-have-been, one other question emerges. What if the workers in Cleveland had refused to leave the mills? USWA president Leo Gerard threatened as much at the AFL-CIO convention last December. On November 28 Cleveland’s then-Mayor, Michael White, had sent an extraordinary letter to LTV CEO Bricker, warning him that the city would hold him and his staff “personally accountable in both criminal and civil proceedings” if anyone in management were to “take any precipitous action likely to result in civil unrest, disobedience or violence” at the mills. The word among workers was that if they occupied the works, the police would not intervene for the company. By then, however, LTV had already destroyed its customer base and supplier relationships. But what if workers had seized the operations before things became so desperate?

When city planners were considering a takeover of the property, it was unthinkable that they could hold it “for more than a nanosecond,” in Warren’s phrase, partly because once furnaces are idling and customers have scattered, it requires huge amounts of working capital–tens of millions of dollars–just to restart, with no hope of collecting any payment for at least three months. Timing matters enormously. “Cleveland could have been different,” a person who preferred not to be named but has long experience of steel crises told me. “If the workers had said, ‘We’re not leaving.’ If they had been willing to live in the plants for two months or however long it took, I think it could have been different. Someday, some group of workers at some point in the United States are going to do that, and people will rally to them.”

“Our message [to international steelworkers] is ‘Go ahead, compete with me. And if you win, you win. But if you can’t compete, don’t export your unemployment.'”
      –Dave McCall, director, USWA District 1, Ohio

Rhetoric notwithstanding, Bush’s steel tariffs coupled with the recent farm bill exemplifies what this country’s trade policy has always been: for free trade in all the areas where it is strong, and against it in all those where it is weak. Although steelworkers said they just wanted “a level playing field,” US-subsidized agribusiness has not defeated Filipino chicken farmers, Mexican corn growers and Jamaican dairymen on such a field. It is a mark of confusion among so-called globalization forces that when some union people, like McCall, spoke of tariffs, it was in the syntax of competition, whereas others identified with those Filipinos, Mexicans, Jamaicans–as if the line on globalization did not admit of differences between the imperial center and the margins, or between one kind of oppression and another. One worker spoke passionately about the ratcheting down of wages and then said, apropos LTV’s bankruptcy, “This is about the Salvadoran woman sewing T-shirts for $3 a day.”

For the most part, it’s not even about foreign steelworkers making $3 a day. The biggest exporter to the United States by product value is Canada, which is exempt from the tariffs under NAFTA. The tariffs come down hardest on Europe, South Korea and Japan. Although tariffs could be justified as a sanction against Russia and Ukraine for “subsidizing” steel by allowing workers to toil without pay for six months or longer, the political context of the crisis does not seem to have been part of the union’s education efforts. How Russia got into its situation was not a subject among most workers I met. Nor was the origin of the 1997 Asian financial collapse, which resulted in currency devaluations throughout the region and aggressive steel production, even amid excess, to amass dollars. Nor even was America’s failure to guarantee healthcare for all of its people, or the necessity, simply because steelmaking requires fewer and fewer workers, to imagine a shorter workweek without loss of pay, transitional income supports or guaranteed income, education and retraining that have a future, or occupations not yet dreamed of.

Most tariff opponents, from left to right, have been no more inspiring. Those who argue that America doesn’t really “need” steel, like the editorialists who said Cleveland had grown out of it, discount all the complicated ways that need is constructed in towns and cities whose landscape and culture have grown up around the mills. Beyond that, like the steelworkers but in a different way, they trust in trade solutions. One leftish journalist who writes on these matters told me casually that it’s nonsense for America to produce steel, that so long as there was some means of protecting the jobless, trade could insure a ready supply of the product and provide a redistributive benefit to poor exporters at the same time.

The problem is that the world is not a sodality of equal trading nations. Greater US dependence on steel imports, which currently account for about 20 percent of the market, would no more make it so than tinkering with the terms of trade. Among all the arguments I heard either to save steel or let it die, the clearest summation of the dialectic of power and production came from Charlie McCollester, who worked at Union Switch and Signal in Pittsburgh until its plant closed in 1986. “If you’re a superpower and you don’t produce things,” he said, “then you need to control production. You need to control the market. Basically, you need to control the world, or try to. It comes down to imperialism.”

For anyone who agrees with him but, like him, rejects the nativist position, the question, then, is produce for what? The world already has a glut of steel. “It’s not so complicated really,” says Kjeld Jakobsen, international relations secretary of the CUT, the Brazilian labor federation. “You need an industrial policy, and we need an industrial policy. We have a tremendous need for housing. We have almost no railroad. There is a big need for public transport. All of these things require steel. And you have similar needs. There is a market for everyone. The question is how can we help each other press our respective governments to develop national policies, which could involve a subsidy or not, to invest in social needs, local needs?”

Dennis Kucinich was sounding a similar note back in Cleveland. Although keen to political opportunity–the Congressman had stumped vigorously for tariffs–he said a long-term solution lay in changing the market for steel, creating a different kind of demand via a national industrial policy. “What you’d need,” he said, pulling out paper and pen, “is a series of acts. First, let’s call it the National Industrial Maintenance Act, which declares it the policy of the United States to maintain steel, automotive, aerospace, machine tools. Basically, it says if the private sector does not maintain investment in manufacturing capability, the public sector will have to. So you look at manufacturing almost as a utility. That addresses the ownership question.” The rest of his list included an infrastructure act, already introduced as HR 1564, establishing a federal bank for financing rebuilding projects to the tune of $50 billion a year; a full-employment act; a national healthcare act; an act repealing sections of NAFTA and GATT that limit state economic interventions; an act to foster the development of new industries aimed at rebuilding the environment (“you could call it the National Employment and Ecology Sustainability Act”); an act to guarantee free college education and another to inspire creativity and the arts; a work-hour and living-wage act.

When he finished Kucinich said, “What does all of this get back to?” and on the page he wrote NATION in large capitals, “one for all and all for one.” From Brazil, Jakobsen looked past frontiers. Worldwide, the steel industry is restructuring, and jobs are being lost. Worldwide, old patterns of production are unsustainable socially and environmentally, and global trade or financial regimes limit a people’s options. Worldwide, there is talk of solidarity, but a model of global unionism–as revolutionary a shift in labor organizing as industrial unionism was from the craft guilds–has yet to be developed. Worldwide, people need alternatives, better work, less work, better services, more leisure, more say. “Obviously,” he concluded, “there is room for the big idea.”

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