CORRESPONDENCErnLetter FromrnMichiganrnby Greg KazarnDownriver BluesrnI’he paint is peeling on the exterior wallrnof the United Steelworkers Hall inrnSouthgate, Michigan, a symbolic reminderrnof the dangerous times fiiced byrnAmerica’s 700,000 steelworkers. Workforcerndownsizing; the emergence of mini-rnmills to complement the old integrated,rnhot- and cold-roll production process;rnand price deflation and mnltilateral tradernagreements like NAITA have combinedrnto make the steelworkers’ world a very differentrnplace from what it was a generationrnago. Generally ignored b’ the mainstreamrnnews media, the radical changesrnthat have oecnrred within the LI.S. steelrnindustry are readily apparent in cihes likernWeirton, West Virginia; Gar)’, Indiana;rnand Southgate, located at the center ofrndownriver Detroit, which at one time wasrnperhaps the most heavily industrializedrnregion in the United States. (This wasrnderisively termed the “Rust Belt” by mediarnelites who have never known a day ofrnhard labor.) The uncertain economic futurernfaced by American steelworkers is arngrim reminder of the revolutionary naturernof the global economy and a foreshadowingrnof the even more radicalrnchanges already under way in the automobilernindustry.rnP’or two generations in the early tornmid-20th century, the steel industry wasrnthe backbone of America’s industrialrnmight, employing millions of workers.rnThe twin titans of steel and auto, symbolizedrnin the 1940’s by Detroit, the Arsenalrnof Democracy, were crucial to the triumphrnof the Allies in World War II.rnSteel produced the materials necessaryrnfor armaments, while auto built motorizedrnvehicles powered by the internalrncombustion engine, one of the greatestrnmass-produced precision instruments ofrnthe 20th century. Even today, memoriesrnof World War II are strong among bluecollarrnseniors Downriver, many of whomrnfought in the war or worked in the Arsenalrnof Democracy. In Wyandotte, adjacentrnto Southgate, there was for manyrnyears a mural, painted on a garage by itsrnowner, depicting the horrors of thernJapanese sneak attack on Pearl Harbor.rnToday, the mural would be interpreted asrna slap in the face by non-native global istsrnwho would sooner forget.rnSurveying Downriver from atop thernRouge River bridge, it is difficult to forgetrnthe area’s former industrial might. Nearrnthe north end stands the Ford MotorrnCompany’s Rouge complex, the brainchildrnof Henry Ford and for decades onernof the largest industrial complexes in thernworld. Nearby, along the Detroit Riverrnsouth of the city, is a nearly 15-niilernstretch of integrated steel mills from ZugrnIsland to Gibraltar, near Lake Erie’srnshore. Several of the mills were operatedrnafter World War 11 by Donald B.rnMcLouth, a local businessman whose visionrnextended beyond his stock options.rnTrenton, my hometown and a Downriverrncommunit)’, included a McLouth millrnand one of the finest parks and recreahonrnsystems in metropolitan Detroit. At thernurging of men like McLouth, the suburbrnwas laid out in the 1950’s with plenty ofrngreen space for the sons and daughters ofrnauto and steelworkers to play, as theyrnshould, and not work in sweatshops, asrnthey might if they lived in another part ofrnthe global economy. In the summer, wernwould play baseball in leagues sponsoredrnby McLouth, wearing T-shirts emblazonedrn”McLouth Steel,” in parks namedrnafter the businessman with a vision.rnCoiue evening, the glow from McLouthrnSteel’s Trenton plant would fascinate us,rnlighting up Downriver in what we used torncall the Orange Sky at Midnight. To thernmedia elite, the picture painted here appearsrnmore that of a company town; to arnglobalist, evidence of non-productivityrn(idle hands make idle minds). But tornthose of us living in it, this was a semiidyllicrnworld where a high-school graduaterncould land a blue-collar job that paidrnwell enough to support a family, buy arnmodest, 1,500-square-foot brick homernand even a cottage “up north,” and generallyrnenjoy a middle-class American life.rnThis world no longer exists, althoughrnU.S. steel production has increased, accordingrnto a recent Wall Street journal report.rnThe labor-intensive productionrnprocess used by McLouth Steel and otherrnintegrated mills gave way to newer.rnmore efficient systems that rely on fewer,rnmore highly skilled workers. Mini-millsrnemerged as a niche in the steel market.rnMen like McLouth passed from thernscene, and by the recession of the latern1970’s—more of a depression Downriverrn— steel companies and their workersrnwere suffering horribly. Operating in arncapital-intensive environment and dependentrnon long-term financing, theyrnwere beset by the huge debt loads and risingrninterest rates that accompanied therndecade’s inflahon, itself the result of massiverngrowth in the U.S. money supply tornpay for government wars on domesticrnpoverty and Southeast Asian communists.rnIronically, the tax dollars of bluecollarrnsteelworkers were used to build uprnthe U.S. militar)’ and keep Japan demilitarizedrnand non-nuclear; this was, in effect,rna cross-subsidy that allowed thernJapanese to spend a far higher percentagernof their Gross Domestic Product on capitalrninvestment than on defense. By dierntime inflation subsided in the earlyrnI980’s, the deindustrialization of the domesticrnsteel industry was well under way.rnIn that decade, Michigan attempted tornrescue McLouth through a taxpayer-subsidizedrnemployee stock ownership planrn(ESOP), which makes it possible forrnworkers to become shareholder-ownersrnof the company that employs them. Therntheory behind ESOPs is that productivityrnimproves and labor-management relationsrnget better when workers becomernowners. Of course, this issue was not asrnsignificant when Mr. McLouth ledrnMcLouth Steel. According to New Steelrnmagazine, however, ESOPs have notrnhelped labor-management relations atrnWeirton Steel, and, in McLouth’s case,rnthey ultimately failed.rnThe U.S. steel industry learned fromrnthe recessionary inflation of the latern1970’s, a supposed impossibility. Manyrnsteel firms reduced their debt loads andrnimproved their financials. They changedrntheir capital-labor alloeafion, increasingrnproductivit)’. But even more powerfulrneconomic forces were emerging. As freemarketrneconomics suggests it would,rndeindustrialization sent capital investmentrnabroad, into steel mills in emerging-rnmarket nations where wages are arnfraction of what they are here and wherernreturns on equit)’ are higher. NAFTA acceleratedrnthis process of Factor PricernEqualization (FPE), one of the most im-rn34/CHRONlCLESrnrnrn