The Steel Crisis: The Economics and Politics of a Declining Industry

By William Scheuerman | Go to book overview

IV

By the late 1960s steel imports had begun to disrupt the tight grip U.S. steelmakers held on the domestic market. Domestic producers responded by seeking protection as a temporary palliative to provide time for modernization programs. The threat of a trade war combined with an inhospitable political atmosphere toward protectionsim ruled out the possibility of a legislative solution to steel's problems, but the sheer size of the industry made some form of protection politically necessary.

The two Voluntary Restraint Agreements represented a political compromise designed to give the steel industry time to reestablish its international productive hegemony. But steel did not take advantage of the VRAs. Indeed, absolute investment declined and it soon became clear that U.S. steel corporations were moving out of basic steel production. Diversification programs and overseas investments now characterized capital spending by the nation's steel producers. This grim scenario was further exacerbated by the tendency of conglomerates to swallow up large steel corporations. Higher levels of centralization through mergers, joint venture subsidiaries, and dual primary interlocks accompanied the trends toward diversification, conglomeration, and internationalization of production. In a word, the period between 1969 and 1974 provided a watershed for the industry, for it was during this time that many U.S. integrated steel firms decided that steel was a much too risky business. As steel's economic power waned, the industry sought political solutions against imports so that its power became more visible at the height of its decline.


NOTES
1.
Federal Trade Commission, The United States Steel Industry and Its International Rivals: Trends and Factors Increasing International Competitiveness, p. 73 ( Washington, D.C.: U.S. Government Printing Office, 1977).
2.
For a discussion see F. L. Molz, "The Political Economy of Steel Import Quotas", Journal of Economic Issues 4, no. 3 ( June-September, 1969), pp. 60- 76. Also, H. Houthaker, Report on the Intra-Agency Working Group on the Steel Industry ( Washington, D.C.: Mimeographed, July 13, 1970, updated January, 1971).
3.
Ira C. Magaziner and Robert B. Reich, Minding America's Business, pp. 155-68 ( New York: Vintage Books, 1982).
4.
According to Magaziner and Reich, average return on assets for Japan's five largest firms during the period 1961-72 ran 1.8 percent; between 1966 and 1973 the U.S.'s big eight returned 3.8 percent.Ibid., p. 160.
5.
Ibid.

-94-

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The Steel Crisis: The Economics and Politics of a Declining Industry
Table of contents

Table of contents

  • Title Page iii
  • Preface v
  • Acknowledgments ix
  • Contents xi
  • List of Tables and Figures xiii
  • 1 - Steel on the Slide 1
  • 2 - Law and Social Power 22
  • Notes 39
  • 3 - The Golden Years: From Dominance to Decline 45
  • Notes 61
  • 4 - Protectionism and Disinvestment 64
  • Notes 94
  • 5 - Instrumental Politics and the Trade Act 98
  • Notes 125
  • 6 - Recovery, Relapse, and Retrenchment: The Trigger Price Mechanism 129
  • 7 - Restructuring: The Politics of Disinvestment 151
  • Notes 182
  • 8 - Economic Decline and Democratic Demise: Prospects for the Future 185
  • Notes 206
  • Index 209
  • About the Author 221
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