Cameron on Stelco

The following column by Duncan Cameron is from rabble.ca:

With the takeover of Stelco by U.S. Steel, Canada loses its last domestically owned steel producer. Despite urgings from the Steelworkers, the Canadian Autoworkers, and the Canadian Labour Congress, our provincial and federal governments have been unwilling to adopt a strategy to provide national direction to natural resource companies, and key industries. As union leadership has warned, this government inaction is short sighted, and will prove costly. By allowing foreign control over the main sources of domestic prosperity, Canada has decided to entrust its future to others. This makes a mockery of democratic government.

Come the next recession, U.S. Steel is sure to play off workers in Canada against those in the U.S. on benefits and pensions, and eliminate jobs in Canada, and probably the U.S. as well. In a foreign dominated economy, economic security, which depends on governments protecting jobs and incomes, becomes difficult, and governments plead impossibility when called upon to act.

Political pressures by absentee owners have exerted tremendous influence over our governments over the years. Much of the neo-liberal turn in economic and social policy came about as a result of lobbying by U.S. firms, and their bought and paid for domestic allies in think tanks, business associations and academia. Urged on by U.S. interests, Canada has imported U.S. style market driven privatization, de-regulation, and free trade.

Despite meeting with trade union economists, the Bank of Canada has remained indifferent to the economic effects of the loss of manufacturing employment, which are hardest felt in Ontario and Quebec. Yet credit conditions, which are purview of the Bank of Canada, permit the takeovers, which have been financed through the expansion of commercial bank credit. Scotia Bank is funding the sell-out of Stelco for example.

The so-called international consolidation, taking place in steel and other industries is about staving off competition, and acquiring monopoly powers over pricing. The Bank of Canada, despite its pre-occupation with controlling price increases, cannot seem to connect the dots between mergers and takeovers financed by bank credit, and the failure of import prices to fall, despite a 40 per cent increase in the value of the U.S. dollar. It should not be hard to see that companies (many U.S. owned) selling U.S. goods in Canada, prefer to increase their profit margins, rather than give the Canadian consumer a break.

Canadian political economists have been pointing out for decades, that markets in Canada have their own structures. Unlike textbook models of competitive markets derived from large populations concentrated in small areas, Canada’s geography and infrastructure (energy, transport, and services) favour concentration of economic power, and quasi-monopoly pricing. Protecting against consumer price increases requires oversight from regulatory bodies. Central bank intervention through hikes in short term interest rates are ineffective, without slowing the entire economy, even when the price increases are only regionally centred, say in Alberta, as is the case today.

In recent years, the U.S. has been the constant recipient of large flows of global finance. The world’s biggest and richest economy borrows from the rest of the world. Interestingly much of the inflows are outflow from emerging economies such as China, and other Asian nations.

In the strange world of central banking, the global prerogatives that accrue to the U.S. because its domestic currency has become the world monetary unit go unnoticed. Instead, the main argument, developed by U.S. Federal Reserve Chief Ben Bernanke is that a “global savings glut” is responsible for the “global imbalances” whereby the U.S. consumers, and the U.S. government spend on credit generated abroad. We are supposed to believe that ordinary Asians are savings too much; when, in fact, Americans, and their military are over-spending because, unlike every other nation in the world, the U.S. has no foreign balance of payments constraint on its spending. It simply funds its foreign spending deficit through the accumulation of U.S. dollar paper assets by others.

While the Bank of Canada stands by and watches, the Canadian banks re-cycle Canadian export earnings into loans to U.S. companies, so they can accumulate real assets, and resource wealth.

The Stelco takeover, like the disappearance of so many other company names in resources and manufacturing, is attributable to a failure of Canadian public policy. When our governments are unwilling to protect the interests of Canadian citizens, it is time to build some that will.

Duncan Cameron is associate publisher of rabble.ca. He writes from Vancouver.