Today's Opinions, Tomorrow's Reality
By David G. Young
Washington, DC, May 21, 2019 --
The decline of the American steel industry coincided with the rise of Silicon Valley. Nobody should regret which sector came out on top.
The twisted wreckage sticking out of a pile of rubble in Pennsylvania is all that is left of the former Bethlehem Steel Headquarters after Sunday's demolition. The ugly early 1970s glass skyscraper had looked out over adjacent surface parking lots and open fields, a testament to the excessive spending and bad planning that epitomized the final years of the corporation it once housed.
Bethlehem was America's number two steelmaker after U.S. Steel when the tower went up. The corporate overlords had gotten fat and happy supplying massive quantities of steel for World War II and post-war reconstruction. The same war that made America's steel companies rich also destroyed their overseas competitors, making it easy for Bethlehem and U.S. Steel to become complacent. When Bethlehem Steel's Martin Tower headquarters went up at the end of this era, it was a palace of excess. Hand-woven carpets, monogrammed doorknobs and expensive executive office furniture filled a building whose cross shape was designed to double the number of corner offices on each floor.1
Steel is no longer an important driver of the American economy. Giant steel structures like battleships and skyscrapers are well beyond their heyday. As a mature economy, America recycles nearly as much steel as it needs for new steel products. This has led to the growth of hundreds of small steel mini mills that start with scrap rather than iron ore like the giant mills of Bethlehem's heyday. Simply put, America doesn't really need those steel behemoths anymore.
But don't tell that to oldsters like America's President Donald Trump. He somehow thinks that coal and steel, the 19th century technologies that drove American success through the Second World War, are still relevant. How else can you explain the president's support for the coal industry, and the bizarre year-long tariff war on Canadian and Mexican steel imports that just ended last week?2
The reality is that even at the 1969 groundbreaking of Bethlehem Steel's new Martin Tower headquarters -- when Donald Trump was just 23 years old -- steel's days were almost at an end. By then, Europe and Japan had completed their post World War II reconstruction, and their own steel industries had recovered. Nippon Steel became the world's largest producer in 1975, just three years after the tower's opening. Nippon Steel had newer post-war plants that were far more efficient than America's steel infrastructure, some of which dated to the 1870s.
Before the end of the 1970s, Bethlehem Steel had hit hard times, and that fancy office tower started emptying out. At the very same time, new companies like Microsoft and Apple were being founded on the opposite side of the country. As the American economy became more high-tech, those companies grew more important and steel less so. Growing Microsoft and Apple joined the Dow Jones Industrial average in 1999 and 2015, respectively. Declining U.S. Steel and Bethlehem Steel were dropped in 1991 and 1997.
Whatever the trade practices of foreign competitors, the steel industry's economic decline relative to Silicon Valley would have happened anyway -- it's just a question of how quickly. And would anyone really wish it to be otherwise? That America's trade policy caters to antiquated industries instead of ones of actual importance is puzzling to say the least.
Steel remains a useful material to be sure. It is a key input to construction, auto and defense industries and in smaller volumes for makers of consumer products. And that's exactly why America's mini-mills have innovated to produce smaller volumes of new steel at lower prices using recycled materials. When the twisted I-beams are pulled out of the ground at the old Bethlehem Steel headquarters, you can be sure that's exactly where they will go.
1. WFMZ-TV News, History's Headlines: Martin Tower to Come a Tumblin' Down, March 23, 2019
2. US Lifts Steel and Aluminum Tariffs on Canada and Mexico, May 17, 2019