The need to reindustrialize America finds overwhelming support in the massive shutdowns announced by U.S. Steel the other day. For steel is a basic business -- a business the United States cannot abandon without changing the internal tone of the country and adversely affecting national security.
Reviving the steel industry, however, involves massive changes in the tax system. To be effective, those changes need to be set in the context of a comprehensive indusrrial policy.
By itself, the news from Big Steel is bad enough. The company will close 16 plants and drop 13,000 workers by 1981. The closings will be particularly hard on towns with large minority populations that are already in bad straits -- for example, Youngstown, Ohio.
In moving to close down plants, U.S. Steel is only following a well-worn path. Bethlehem and Jones & Laughlin have already shut down major installions on a grand scale. Efficient producers of specialty steel such as ARMCO and Inland are diversifying into other fields. Kaiser has been trying -- in vain, so far -- to lay off its relatively new works at Fontana, Calif., on Japanese management.
Total American steel production has been nearly level for a couple of decades. Foreign competitors -- notably the Jananese and the Germans -- are beating American firms in sales here and abroad. If the trends continue, the American steel industry will liquidate itself.
Some people assume it would by okay for this country to go out of the steel industry as long as arrangements were made for unemployed workers. But a huge number of jobs -- at least half a million for the industry as a whole -- are involved.
The jobs aren't just anywhere, either. They are mainly located in declining parts of the country -- notably around the Great Lakes and the Mahoming Valley in southern Ohio and Pennsylvania -- with large minority populations. Moreover, steel is critical to such basic industries as autos and construction, and it is a condition of military power -- an indipensible element in the country's national security.
So one way or another, the United States is going to stay in the steel business. The question is how, and thebeginning of an answer lies in identifying the industry's troubles.
High labor costs are a big part of the problem. Though labor costs in Japan and Germany have been rising rapidly and though the effect is magnified on international markets by changes in currency rates, the cost of labor in this country still outrums the cost in Japan by far and in Germany by at least a little. The reason seems to be a contract between American producers and steelworkers that regularly yields wage increases that outrun gains in output per man-hour.
Output her man-hour, or productiveity, in the United States runs about 20 percent behind Japan and a little behind Germany. A main reason is that the Japanese and the Germans have relatively new plants that are built along waterways with access to the seas and that therefore benefit from reduced transport costs. A large part of the American industry, especially that located in the Mahoning Valley, is centered on old-fashioned plants built near the source of coal.
Then there is the environmental factor. The standards for clean air and water seem not to figure directly in most of the recent plant closings. But undoubtedly the need to make large investments in environmental equipment is a factor causing management to scrutinize old plants more rigorously and to pull back from building new plants.
The remedy, in these conditions, has to center around incentives to invest in new plants and equipment. Even if such incentives were desirable in themselves, which they are not, tariff measures and a suspenions of environmental rules could not do the trick. The only good spur to modernization arises from tax write-offs.
But Congress will not, and should not, give steel a break on taxes unless assured of performance in other matters. Wage increase have to be held to a figure that does not spur inflation. At least some of the benefits ought to go to retrain workers for other, more rapidly growing industries. New plants need to be directed toward regions that serve the national interest with respect to pollution of air and water and concentration of population.
Decisions about wages, worker retraining and plant location, however, cannot be made out of the blue. Somebody has to develop notions about which industries are winners and which are losers, about which regions are ripe for expansion and which in need of contraction. Though nobody likes to say so, that amounts to a comprehensive policy -- a long-term strategy for the rein dustrialization of America.