Downsizing can pay dividends for those at the top, writes The Walrus
The way things have been going recently in cars and steel you wonder if mainstream economists are ever going to own up and give Karl Marx his due. Competitive rivalries force optimisation of capacity, leads to over-production, over-capacity and slump followed by plant closures and mass redundancies. You know the kind of thing.
The same basic pattern has become so commonplace over the last 150 years or so that another lurch on the big dipper should hardly come as much of a surprise. And yet, when the closure of the Llanwern steelworks was first announced, nobody had apparently been good enough either to have foreseen what might be on the cards, or to have let Tony Blair or other government ministers in on the secret.
If only the Secretary of State for Industry and former International Socialist Stephen Byers had bothered to turn up at those Newcastle Central branch educationals on Marxist economics all those years ago, he might not have been quite so taken aback at the news. More to the point, he might have been alert enough to the possibilities to end up looking a bit less like a stunned rabbit. After all, events of a not dissimilar nature appear to have become alarmingly commonplace in the last few months--first at Rover, then Ford, then Vauxhall and now Corus. Could a pattern possibly be emerging whereby mighty conglomerates figure out the best way a periodic, catastrophic and entirely predictable failure of market economics can be borne by the slaves to the system rather than its masters?
Not many people who actually work for Corus will be all that amazed at the villainous plan their chief executive, Sir Brian Moffat, has come up with. Long before the end of last year it had already become apparent that the merger which took place between British Steel and Hoogovens of the Netherlands as recently as 1999 was simply not working out.
By joining forces, the new Anglo-Dutch management had hoped to put itself in a better position to withstand the pressures of worldwide competition and to slug it out better with the other European steel giants like Thyssen Krupp, Arbed and Usinor. They got a shiny new name alright, apparently chosen because it means absolutely nothing in any language (not Fuckwit Inc, for example). From day one, though, workers at Corus had worked out right away that the new corporate identity was probably shorthand for 'corrosion and rust'.
By the beginning of December last year it was already becoming pretty clear that a major shake-out was imminent at Corus. The company had managed to clock up losses of £226 million in the carbon steels division and, despite the fact that it had already got rid of 4,500 steel workers in the previous 12 months, City analysts confidently predicted that the closure of Llanwern was beginning to look a 'racing certainty'. For the two men who had presided over the mismanagement of the company over the previous 18 months, things came out not too bad. Both the former British Steel executive, John Bryant, and his Dutch sidekick, Fokko van Duyne, who had been in charge of 'efficiency and cost cutting', were handed a mighty payoff, described in the Guardian as worth 'a hot rolled, stainless £1 million' (each). The finances did not appear to have been all that stretched for the shareholders either. During the year they came in for a windfall of £700 million and, according to the Labour MP for Blaenau Gwent, Llew Smith, a further £900 million was 'appropriated' from the workers' pension fund.
With Bryant and van Duyne out of the way, the board of Corus brought in Sir Brian Moffat, a more accomplished butcher, with the massacre at Ravenscraig already on his CV. Moffat also knows only too well that, in the wacky world of free enterprise, things that go up can also go down. Just before Xmas in 1992, for example, he was off to Brussels to speak to leaders of the EEC in an attempt to stave off losses of £150 million at British Steel. His familiar-sounding mission, according to newspaper reports at the time, was to 'sort out over-capacity in the steel industry'.
It did not appear to occur to many people at the time, any more than it does now, that one of the main reasons for this sudden 'over-capacity' was that in the previous ten years the productivity of steel workers in Britain had almost doubled. There was no problem with the quality of steel being produced in Britain's furnaces, nor was there any problem of supply. It was simply that the demand for steel, which had held up during the boom period of the late 1980s, immediately collapsed when the next dip came.
Given all this, it takes a pretty long stretch of the imagination to believe that Tony Blair and Stephen Byers were totally unaware of the prospects for Llanwern and other sites. Only a few days after the closure was announced, the Financial Times reported that 'it would would be deeply insensitive to say so, but Welsh officials are already sizing up the prospects for new business opportunities at Llanwern...confident that the site will make an attractive business park'. Even more telling is that, shortly after and with a great hullabaloo, Stephen Byers proudly unveiled a £250 million government handout to management at Rolls-Royce, to assist development of aero-engine production at the Derby plant. Plainly, no such assistance had been contemplated for the steel industry, nor did the government want anybody to start thinking along these lines, even though current losses could easily be over-ridden by raking off a slice from bingo profits in the oil industry.
According to Sir Brian Moffat, the real job of a company like Corus is not so much making steel as making money. But he should also know he will have a hard job making money without making steel, which is exactly what might happen--and hopefully will--if the entire industry goes on strike. He might also like to explain how over-capacity at Llanwern and other British sites has apparently put an unbearable strain on corporate finances--but not that much that it will stop them going ahead with plans to build a new steel plant in Newcastle, Australia, at a cost of 1.5 billion US dollars. They might have partly been attracted by the promise of a government subsidy, reported to be worth in the region of US$250 million.
Shareholders came in for a windfall of £700 million this year
