Agreement of People website

Sign here if you support the campaign for a real democracy

Our blogs


AWTW FacebookAWTW Twitter

Your Say

Tata Scunthorpe


Steel’s collapse is the crisis of the capitalist system itself

Tata's threat to end steel making comes as a huge shock for communities throughout the UK, but for the global conglomerate the decision to terminate its loss-making operations in Britain was surely a no-brainer.

Gerry Gold reports

And despite loud protestations from the Cameron government neither should it have been a surprise. According to the OECD club of rich capitalist countries, in a policy paper published early in 2015, “excess capacity is one of the main challenges facing the global steel sector today”.  

Whilst severe for the tens of thousands of families directly threatened, the shocks in Port Talbot, Rotherham, Corby, Scunthorpe and Shotton are early warnings of something much more widespread. The gap between rising capacity – mostly in the Asia-Pacific region including China, Japan, India, South Korea, where costs are low – and falling demand worldwide has been widening since the 2007 crash.

world crude steel

steel price

In line with most commodities, including oil, the world price of steel has fallen off a cliff. It reached an all time high of $1,265 per metric tonne in June of 2008 and fell – by almost 93% – to a record low of $90 in March of 2016, dropping more than 70% in the last 12 months.
Now the stranglehold of a downward deflationary spiral tightening its grip on the world economy brings a new and decisive moment in the global capitalist crisis. Holding on for the fabled recovery has given way to retrenchment and closures.

According to many measures, the global economy, whilst not exactly as dead as the proverbial parrot, has gone into reverse, turned on its head or perhaps inside out. Because profit rates dropped to critical levels, investment in the real economy followed. So demand for cash bombed and interest rates at the base of the pyramid turned negative.

Those previously dependent on borrowing from the financial system now have to pay to park their spare cash in the central banks, where its value declines further the longer it stays unused, out of circulation.

Introducing the World Economic Outlook for 2016 in early April, International Monetary Fund Managing Director Christine Lagarde euphemistically warned of the danger of becoming trapped in what she called a “new mediocre”. She warned: “Persistent low growth can be self-reinforcing through negative effects on potential output that can be hard to reverse.”

Her solution? Reduced regulation and “structural reforms”. In a nutshell, she proposed a new round of greater freedoms for corporate employers large and small – like Liberty's Sanjeev Gupta, prospective new owner of UK steel – to do away with employee protection altogether. These are far from being new strategies, but in the new conditions require a far more brutal force for their implementation. Any potential buyer for Tata’s plants will, for example, be looking to shed responsibility for the £15 billion British Steel pension scheme.

These “labour market reforms” – longer hours, lower wages, reduced pensions, easier sackings – are exactly the Loi El-Komri measures that triggered the Nuit Debout wave of protests, occupations and strikes in France, turning the frustration of 30 years of mass unemployment, where the number of young people without work approaches 30%, into fury. Worsening objective conditions now predominate over subjective hopes. The stresses and strains have their inevitable effect on individual and collective consciousness and action.

The IMF's gloomy outlook was immediately followed by an even more downbeat, sombre assessment from Kaushik Basu, the World Bank's chief economist. Like Lagarde he called for co-ordinated action to tackle the global slowdown, but admitted that beyond massive job losses worldwide and years of painful adjustment “I don't quite see an obvious solution”.

From the warnings of a new recession from the IMF, we can understand that even the slightest volatility in China’s slowing economy has the potential to cause shocks on an unprecedented level. Which perhaps helps to explain the Tory government’s desperate efforts to keep China onside even at the expense of the UK steel industry.

Tata's decision on its UK production was not the only shock for steel workers. Arrium, Australia's second-biggest producer, with debts of $2.8 billion, and 10,000 workers went into administration – a short step before bankruptcy – in early April. Many other producers, in a whole range of industries are sure to follow in the wake of plummeting global commodity prices.

Those appealing for government action should pay attention to the OECD's hard-nosed textbook advice:

In competitive economies, it is the responsibility of the steel companies themselves to identify ways to adapt to changing market conditions. The role of governments should be to allow market mechanisms to work properly and avoid measures that artificially support steel-making capacity. Of particular importance for governments will be to work towards removing market-distorting policies such as subsidies that promote the emergence of new capacity or delay the closure of failing companies, eliminating trade and investment barriers that slow the restructuring that is needed for the industry.

move beyond capitalism

In other words, nothing can be allowed to stand in the way of capital's urgent need to eliminate surplus capacity – and that must include the elimination of surplus labour. The only way forward, therefore, is to move beyond capitalism and its destructive essence.

Union demands to “Save our Steel” are not only nationalist in sentiment but patently ignore the fact that the industry is privately owned and is not “ours”. In practice, the union leaders connive with the conditions of ownership by a transnational corporation whether that turns out to be the Gupta's Liberty, the asset-stripping vulture fund Greybull, or some other focussed on the bottom line.

The SNP in Scotland have helped the process along, handing Tata's mothballed plants in Motherwell and Cambuslang to Liberty and cutting the number of jobs in half. The leaders of Community, Unite and the GMB are offering to negotiate wage cuts, lost jobs and slashed pensions, as they try to sustain the exploitation of fewer and fewer of their members' labour.

Calls from for a temporary nationalisation before an asset-stripped business is returned to the private sector ignores the reality of capital in recession. The failure of credit-led attempts at engineering a recovery nationally and globally has given way to wild talk of helicopter money drops to stimulate consumer demand. Already mountainous and rising government debt rules out the hopeless dreams of Keynes-style infrastructure spending. Demands for protectionist trade barriers lead only toward tit-for-tat trade war, and China has already responded with its own tariffs. That way leads to a deepening of the slump.

the way forward

So how should steelworkers and all the communities that depend upon their incomes respond? The only defensive strategy that has a chance of working is to extend the occupation of the streets and the squares to include workplaces as preparation for a transition to co-operative, mutual, not-for-profit ownership and control. The foundations already exist in a multitude of not-for-profit and co-operative organisations spread throughout the world.

Inspired by the sudden appearance of a mass Nuit Debout movement taking to the streets and squares in France and beyond, and by the growing rejection of anti-democratic capitalist formations including the EU in Holland and elsewhere, citizens’ assemblies should be launched in every area. Initially they can organise and mobilise support to defend the occupations. Whilst defending the occupiers, they can begin to formulate the way forward, building a replacement for the corrupt partnership which operates between the hollowed-out shell of parliamentary democracy and the legions of lobbyists for private and corporate interests.

11 April 2016

Bookmark and Share

Have your say

We do not store your name or email details, but may inform you if someone responds to your comment.

If you want weekly update messages please indicate and we will store your details in a secure database which is not shared with any other organisation.

Your name

Your E-mail
(we will not publish your E-mail)

Do you want Updates?

Anti-spam validation:compare< Please enter these letters>

Note: To counter spammers, all comments are moderated.