CRISIS IN BRITISH STEEL
By Peter Dombi; cross-posted from Our Broken System
This week we have seen the Tory government slowly getting engulfed in the crisis caused by Indian company Tata’s threat to close steel works across the UK. As well as meaning that the UK would no longer have a viable steel industry, if this were to happen there would be the awful human cost of 15,000 direct job losses, and potentially 25,000 more in associated industries (with communities in Port Talbot and Scunthorpe being particularly badly affected). The government is desperately trying to get out of this mess, not because they care about the steel industry, or the lives of steel workers, but simply to avoid the political fallout for their own party. The reality is that their belief in ‘Free Markets‘, and their support for business and profit over the lives of ordinary people makes events such as this inevitable.
Britain’s steel industry was privatised by Margaret Thatcher in 1988, and after a succession of business deals was taken over by Indian conglomerate Tata in 2007. Tata, to be fair, haven’t done a bad job of running the company, and have generally retained the support of their workers. However the business environment has changed over the years, and the UK operations are now losing £1m a day, which is clearly unsustainable. Tata have tried to make it work but have now decided to give up.
There are two main reasons for the losses – Britains very high energy costs (partly as a result of Green levies on fossil fuels), and huge amounts of cheap Chinese steel undercutting the market. And this is where Tory (and Blairite Labour’s) belief in the Free Market falls to pieces. It is undoubtedly a good thing to regulate industry for the common good, and things such as employee rights, health and safety, anti-pollution legislation, and Green levies to tackle climate change should all be applauded. However if any company which is burdened with those extra costs then has to compete with companies which are not so tightly regulated, inevitably they will lose out. China has a dreadful record of employee rights, underpays its workers, doesn’t seem to care about pollution at all, certainly doesn’t use Green levies, and as 70% of its industry is nationalised has a very high level of state subsidy. Therefore it is hardly surprising their steel is cheap. The solution to this, even for those who believe in ‘Free Markets’, is to exclude their dirty industry from our free market until they clean their act up. This can easily be done through punitive tariffs.
Now the problem has been building for some time and the EU, recognising this, and in a bid to protect its steel manufacturers, has already tried to impose such tariffs on cheap Chinese steel imports. The irony is these tariffs were blocked by, among others, Sajid Javid the Tory business minister! The Tories’ belief in ‘Free Markets’ is so strong that they are prepared to sacrifice an entire industry, and ruin the lives of thousands of ordinary people, just to pursue their economic ideology. They try and justify it by saying cheap steel is good for other parts of the economy – but that shows, yet again, how they believe that profit for business is far more important than the devastating impact on the lives of 40,000 people. It also demonstrates how Free Market ideology leads to short-term thinking – at some point steel prices will rise, and the British steel industry will become financially viable again; however if in the meantime the industry has been completely destroyed, then it will not be able to return, and Britain will be at the mercy of (possibly very expensive) foreign imports. Tory Free Market policy shows a complete lack of strategic thinking, and as well as being awful for the workers directly affected is, in the longer term, awful for the whole country.
Tories (and other Free Market believers) just don’t get this, which is why they are now desperately trying to appear as if they are doing something, when in reality they are quite happy to do nothing at all and let the steel industry collapse.
From Peter Dombi’s website: http://ourbrokensystem.com/