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Reading: The Trouble in Steel City

Rusted Dreams breathes life into the numbing headlines of the southeast side--it offers a portrait of the people, a chronicle of the crisis, and a blueprint for reviving the industry.



The southeast side of Chicago is terra incognita for most Chicagoans, much as if somewhere around 79th Street and the lakeshore there were a drop-off, the outer edge of a flat world beyond which ships dared not travel. (More precisely, of course, there's a lift-up: motorists heading south and east on the Chicago Skyway bridges, far above the smokestacks and bungalows, can glimpse from afar this well-established blue-collar world.)

Yet the steel mills and steel fabricating shops in this part of town have formed the basis for a large chunk of the entire metropolitan region's economy. Public awareness of that dependence, however, is as low as familiarity with the Croatian churches, Mexican taquerias, union halls, and neighborhood social clubs of southeast Chicago. Recently the region has gained a higher profile, or at least one of its leading figures has done so, with the stormy career of former alderman Ed Vrdolyak, whose Tenth Ward is in the far southeast corner of the city. A decade ago it gained national attention as the home of a promising insurgent leader within the steelworkers' union, Ed Sadlowski. Now the public image is more of rust-belt victims, but the drama of the neighborhood -- and its significance -- is still underappreciated.

David Bensman, a Rutgers University labor studies professor, and Roberta Lynch, a Chicago organizer and writer who is now a union staff official, offer a remedy for this ignorance in their plaintive but analytical book, Rusted Dreams: Hard Times in a Steel Community. The setting is southeast Chicago, but the book, an erudite journalistic narrative, ranges widely. It offers a portrait of a community, a history of Machine politics, a chronicle of union struggle, detailed accounts of two steel mill closings, a snapshot of the human costs and community responses, and a blueprint for reviving the steel industry. At times the different threads threaten to fly apart as the narrative spins off on varied tangents, but by the end there is a complex sense of tragedy and a tiny glimmer of hope. The tragedy is not limited to individual lives and a community being disrupted but includes the shortcomings of local Machine politics, the union, steel management, government policy, and the overall course of the U.S. economy.

Even though it is part of a large metropolis, the southeast side developed a character much like that of small mill towns overwhelmingly dominated by the business of making steel. The work was hard. The pay, modest before the union came in, has been better than average, but jobs have been disappearing. Despite community divisions, mainly racial but occasionally between different waves of immigrants, the union and the camaraderie of work created a countervailing solidarity. And within certain neighborhoods there was a strong sense of rootedness in a community.

The closing of Wisconsin Steel and the decline of U.S. Steel South Works and what was once Republic Steel have shattered that world, although union-negotiated pensions and shutdown benefits temper the trauma for many older workers. The heart of Rusted Dreams is an account of the falls of Wisconsin Steel and South Works, each a victim of both general trends and very specific dramas.

Wisconsin Steel had long been owned by International Harvester, which used it to supply its huge truck and farm equipment divisions. But Harvester cut short its own modernization efforts, then began losing truck and tractor sales. Management wanted to dump the steel mill, but it didn't want to assume the huge pension and related costs that would come with a shutdown. After great effort, it arranged the sale of the mill to a tiny firm called Envirodyne, which had no previous experience with the steel industry. The deal was largely financed through federal government loans and grants that stretched the intentions of Congress. Then, just as the shaky enterprise was ready to start, Harvester's management made demands that provoked a long strike at its own manufacturing operations that not only greatly crippled Harvester but also dried up 40 percent of Wisconsin Steel's income. Chase Manhattan Bank and Harvester then suddenly foreclosed on the mill to collect their collateral.

The workers soon found that they were not going to receive many of the benefits they thought were due to them. Bensman and Lynch argue that this happened because the local independent union and their attorneys (from the law firm of Ed Vrdolyak) had done a bad job of representing workers' interests during the sale to Envirodyne. For months afterward then-Mayor Jane Byrne and Vrdolyak promised to save the mill, and a variety of entrepreneurs -- some at least sincere, others flaky or sleazy -- raised hopes that were soon dashed. Workers are still fighting in court to get Harvester to pay benefits they lost in the sale to Envirodyne, which they argue was invalid.

The enormous South Works of U.S. Steel, which once employed more than 15,000 people, is now down to less than 1,000. As Bensman and Lynch recount, it was sloppily managed and haphazardly modernized: parts of the shuttered mill are obsolete, others state-of-the-art. South Works, like the rest of the U.S. steel industry, suffered from increased competition from foreign firms and domestic "minimills" -- small producers of lower-grade steel products that used efficient electric furnaces to melt scrap rather than producing steel from raw ore. In 1982 the corporation offered hope for South Works with its proposal to build a new rail mill. But it wanted work-rule concessions from the local union on top of wage cuts it had won as part of industry-wide negotiations. And it demanded city and state assistance in meeting environmental standards.

U.S. Steel got what it wanted on both counts. The next year it came back demanding more concessions from the union, more aid from the federal government, and more tax breaks from the city. The union resisted, arguing that the demands endangered workers' safety, eliminated steady jobs in favor of outside contractors, and violated the national labor agreement on such matters as pay and overtime. U.S. Steel then announced that it would not build the rail mill after all. But widespread public opinion held that the company had been overly greedy and may not have intended to build the mill even with the concessions but simply wanted to place the blame on workers.

Despite some protest, nothing in South Chicago was comparable to the inspiring and innovative -- albeit ultimately not very successful -- effort to save the steel industry in Youngstown, Ohio, and the Pittsburgh area. In those communities, churches and community groups played a vital role, and local unions often fought militantly against closings. There were efforts to establish community/worker-owned steel mills and demands for local authorities to use the right of eminent domain to take over mills and create a Steel Valley Authority to run the mills as a public enterprise. (Bensman and Lynch note that Washington's administration considered using the right of eminent domain at South Works then dropped the idea, but they do not explain why.)

Why has there been such a spotty, ineffective response in South Chicago? Bensman and Lynch suggest a few reasons, but they don't completely answer this question. They do note that the tough struggles for steel unions in the 30s -- marked by the Memorial Day 1937 massacre by Chicago police of ten striking steelworkers at Republic Steel -- left steelworkers divided between a militant tradition and a legacy of acquiescence mixed with fear.

The strength of the Democratic Machine, which from the 50s on was deeply intertwined with the leadership of the district steelworkers' union, suppressed any independent community organizing and much of the union militancy. The dominant pattern was set by the Machine: people dealt one by one with a patron or boss (at work or in the community), trying to win favors, jobs, or security. The class-oriented perspective of industrial unionism remained a weak minority tradition, upheld by leaders like Sadlowski or the Balanoff family, which continues to do battle with Vrdolyak.

Some community struggles in recent years, such as the battles against toxic-waste dumps in the region, represent first efforts at bringing a sense of popular power through self-organization to the neighborhood. But why were the politically savvy, anti-Machine leaders in the union and the community not able to mount a battle to save the mills in addition to fighting concessions? And what could they have done? Recently a city-sponsored Steel Task Force has offered a set of proposals for more basic steel research, reducing costs of production (such as energy), improving marketing, and upgrading infrastructure (such as the port and a new cargo airport), among other kinds of assistance. Most of it is wise but modest. It's doubtful whether any combination of these proposals could have saved South Works or Wisconsin Steel. But then no previous administration has even bothered to worry about the steel industry in the city.

Bensman and Lynch offer a plan for "saving steel," but it relies on strong federal support. Indeed, their analysis implies that, outside such a context, local efforts might have been futile anyway. They deny, however, that the steel industry in the United States is necessarily doomed, a rusted giant past its prime. They also make the case that preserving steel is important. It is primarily an argument for preserving manufacturing generally and the sector's decent-paying jobs, as well as for protecting the individuals and communities hurt by closings.

Although sympathetic to such considerations, I would have liked to see them tackle the question of the need for a domestic steel industry on the more hard-hearted terms of most economists. Does it really make a difference to the health of the national economy that steel be produced in this country -- except for the understandable goal of preserving U.S. steelworker jobs? At this point in such discussions, the national security rationale is usually offered. Yet true as it is that in case of war it would be critical to have domestic steel supplies, it is a last-resort argument. I think a case can be made for domestic steel production on various grounds: recycling of scrap, for one, and being able to closely coordinate high-technology development of new materials and their manufacturing uses, for another. The argument for local steel production is that, without it, much of the steel-fabricating-and-using business might eventually be lost as well. But much of the answer to the domestic steel production question hinges on a further question: can U.S. industry manage to turn out the raw commodity of steel more efficiently than it does now?

One of the biggest challenges to the survival of the steel industry has been competition -- first from the Japanese, and then the Koreans, Brazilians, and other third-world suppliers, as well as from the domestic minimills. Another very important, but often neglected, source of competition is the indirect import of steel through products, such as automobiles. Some of that competition has been unfair (products have been "dumped" here below cost to earn dollars or market shares), and much of it has been subsidized by foreign governments (although the amount of subsidy is greatly disputed and the use of subsidy, or public ownership, is hardly unfair).

Bensman and Lynch quite rightly recognize that the current international marketplace does not resemble the textbook free market. And they note that the U.S. steel industry in recent years was burdened by extremely high interest rates and then by a strong dollar. Thus they propose a weaker dollar (such as we now have), easier credit, and much stricter control over imports. They advocate an import tax or tariff that would be "based on the differential between what American workers need to live decently and what third world workers are paid." That would give other countries the choice of paying a tax or higher wages. If they raise their own workers' pay, that would boost domestic demand in the producer country, creating new markets for their own steel products.

Despite the merits of their approach, there are some tough questions they do not adequately answer. For example, they correctly trace much of the U.S. industry's problems to its oligopolistic, uncompetitive structure throughout the 20th century. But then they hold up an equally oligopolistic Japanese industry as a model. They say Japan's protected steel industry has continued to increase efficiency and ask, why can't America's? But if oligopoly is sometimes benign and sometimes harmful, what makes the difference? And what substitutes for the spur of competition?

Also, they note that U.S. steel industry profits have been higher than those of most international competitors. But they are lower than the U.S. manufacturing average and, the authors argue, too low for modernization here. So Bensman and Lynch prescribe higher prices. Yet higher prices will make U.S. steel-using products less competitive, both with imports and on the export market. Then, of course, we have the inspiring example of U.S. Steel, now USX, buying oil companies with its tax breaks and profits rather than investing them in steel. Bensman and Lynch are rightly critical of that and argue for public participation in corporate decision making as part of a comprehensive plan to save steel. But why not simply have the public own the industry? Such an alternative may seem politically difficult. But would it be preferable?

Parts of the steel industry, of course, already are profitable, and some investors -- notably Japanese firms -- are putting money into the U.S. steel industry even at today's prices and profits. There are special conditions in these cases; the minimills in particular operate in a different universe. But perhaps they suggest that the problem is not entirely low prices but bad management.

Also, there is the big question of what kind of technologies should be bought with new public or private investment. A number of experimental techniques could greatly reduce the cost of making steel. Perhaps the government should be funding these more heavily and establishing more pilot projects rather than working to push up prices.

Corporate steel makers argue that there is simply too much capacity in the United States and the world, and that more mills must close before prices can be raised adequately and new investments made wisely. Bensman and Lynch argue, however, that if the government redirected much of its current spending away from military ventures like Star Wars, it could direct it instead into rebuilding roads, bridges, sewers, railroads, mass transit, and other projects, and steel demand would increase. The current "overcapacity" is merely a function of a very peculiar market that can and should be changed.

Ultimately any government action must not be piecemeal but comprehensive, and it must involve strong and varied public participation, Bensman and Lynch argue. A little protection here, a tax break there, and some union concessions over yonder, all within the context of a boom-and-bust business cycle, simply will not work. Their argument for strong public intervention to strengthen the industry is a welcome alternative to the usual laissez-faire approach or to timid political sops regularly thrown the industry's way.

Rusted Dreams breathes life into the numbing headlines of continuing crisis in the steel industry. Sympathetic to workers and their communities, it offers a balanced analysis and some first steps toward a public policy that will not simply write off an industry that is important to Chicago and to the country.

Rusted Dreams: Hard Times in a Steel Community, by David Bensman and Roberta Lynch, McGraw-Hill, $17.95.

Art accompanying story in printed newspaper (not available in this archive): illustration/Peter Hannan.

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