Bethlehem Steel

 

What you see above you is the great Bethlehem Steel plant in Bethlehem, Pennsylvania.

Or at least it was.

It can be again.

But now it sits vacant.

Just to the side of it, out of the camera’s sight, sits the Sands Casino.

That’s the story of America in the latter half of the 20th century.

Replacing meat with cotton candy was what our leaders gave us.

Replacing muscle with flab is what happened to America.

Free trade was the philosophical  bullshit that was sold to us.

With free trade and open markets everyone would prosper.

That’s what they said.

Sure.

The people who prospered were the people at the top.

They shut down the factories in America and transferred their operations to China.

Why?

Cheap labor, baby.

As one executive told me many years ago, one US worker was equal to 10 Mexican workers or 25 Chinese workers when it came to cost overhead.

Cheap labor boosts profits, and increased profits boosts stock share value.

Viola!

Do the math.

Free trade is a winner if you’re a CEO.

If you’re a worker at Bethlehem Steel, well, look at the picture above you.

Now, of course it wasn’t just free trade that did in Bethlehem Steel.

It’s a nice narrative to believe such, but Bethlehem Steel went a long way to doing itself in.

In a nutshell what also contributed to the demise of Bethlehem Steel was its own failure to adopt new technologies that were introduced into steelmaking.

One such technology was continuous casting which made steel production cheaper and more efficient.

But who ultimately is responsible for failure to adapt?

Is it the 9 to 5 worker?

Or is it the CEO?

It was failed leadership that doomed Bethlehem Steel and not just at the company level.

The blame must be shared by the leadership in Washington, who are entrusted to protect the general welfare of the people of the United States.

It’s the captain who runs the ship.

It’s the captain who goes down with the ship – except in this case.

In this case the captain made a secret deal with his lieutenants and abandoned a debilitated ship in the middle of the night when no one was looking.

He and his buddies took a sweet, shiny new yacht to safety while the passengers took a one-way trip to the bottom of the sea.

Why fix an old ship when a new one with a luxury cabin suits the captain just fine?

Maybe the captain wasn’t all that motivated to fix the old ship, do you think?

Ironically, after Bethlehem Steel closed and was sold to make way for the new casino, a problem arose.

When building the new casino, steel was difficult to find due to a global shortage of steel.

It figures.

Now the rationale for closing these plants is that they can’t compete on price.  Well, of course, they can’t compete.  Why would they be able to compete when Chinese workers get paid a few dollars a day?

Free traders argue as if the American worker is somehow inefficient or being a cheat by demanding a fair wage.  But even if we accept that flawed conclusion for the purpose of this argument, the cost of Chinese steel far exceeds the cost of manufacturing steel here in America when we add in the costs of unemployment and the social ills – increased crime and drug addiction – that functional unemployment yields.  Further factor in the absent ripple effect to the local economy that ensues when well-paid steel workers purchase goods from strong local retailers rather than multinational big box retailers who siphon money out of the local economy into their one-way piggy bank in New York, and you will see that Chinese steel is not cheap at all.

 

www.the jfklie.com

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