Reply to Schmid re Productivity: The New Shell Game

Steel

George P. Brockway’s “Productivity: The New Shell Game” (NL, February 8, 1982), which I have only recently come upon, makes more good than bad points. There is one instance where it strays from the facts, however, and I am sure you will welcome a correction. Being a metallurgist, I can assure you that U.S. Steel did not make the mistake of staying with the Bessemer process instead of switching to, as Brockway says, “whatever it was the Germans and Japanese switched to.” U.S. Steel has large blast furnaces and basic oxygen converters for making steel from iron, the same as the Japanese and the Germans.

The big difference is that the Americans are paying $24 an hour for labor, the highest in the world, while the Germans and Japanese are paying $5 an hour or less. Their workers are more literate, too. I urge Brockway to visit German and Japanese steel mills (as well as those in South Korea), where he will see how educated and productive the workers are compared with their American counterparts. Yet these countries spend far less for education than we do in the United States.

Brockway brings up steel mills in order to castigate American management. I would note that U.S. Steel has had good management for some time, and its current leaders are the best ever – probably the best in the industry.

As for the mergers Brockway takes exception to, why should U.S. Steel be restricted from going into some other lucrative business where it can make a profit and thus give its employees, suppliers,  stockholders, and all of its other constituents more security? U.S. Steel’s decision to take over Marathon Oil was wise, and one it should be allowed to pursue. After all, newspapers are not prevented from going into radio, television and other undertakings. Steel companies should not be hindered from doing the same – especially when the world market, for reasons beyond the industry’s control, renders it impossible to turn a profit by manufacturing steel. Foreign steel mills are government subsidized, they receive favorable loan rates from their bankers, and they are not persecuted by their governments, as our steel companies have frequently been in the past.

The present Administration at least has a better attitude,  although it still has not enforced the antidumping laws. Doing so would enable our steel companies to compete on a much fairer basis with subsidized foreign producers, who are dumping steel in the American market at prices far below those their own markets command.

I do not work for U.S. Steel or any big steel company, but fair is fair. I hope that in subsequent articles Brockway will bring out some of the facts I mention above.

President Reagan has done more than any other recent Chief Executive to encourage productivity. He deserves more credit than Brockway’s article gives him. Since productivity is such a big factor in our survival, we can all benefit from the President’s lectures about working harder. We badly need them to remind us of the necessity for more effort from everyone in our society who is working and doing something constructive.

Morristown, Pa.                                                                                                                DAVID M. SCHMID

 

George P. Brockway replies:

David Schmid may be right about the productivity of American steel mills. I was relying on the BusinessWeek series on reindustrializing America. Since I did not agree with the conclusions of the series, perhaps I should have questioned the premises.

I certainly agree that U.S. Steel should not be restricted from going into other lines of business. My position is that they should not be encouraged to do so, and that there are aspects of the tax law that give such encouragement. My main point, in any case, was that the venture into Marathon Oil merely rearranged the ownership of existing productive assets. It did not create any new ones.

On the question of the competition with the Japanese, I am probably closer to Schmid’s view than he thinks. Assuming his figures are correct, I am sure he does not believe that it would be either efficient or ethical to reduce the American wage scale to the Japanese level. I have, as a matter of fact, done a couple of columns on this very subject (“America’s Setting Sun,” NL, June 14, 1982, and “How Our Sun May Rise Again,” NL July 12-26, 1982). My general point about productivity, which I may have failed to state clearly, is that productivity per worker is a proper concern for the management of any enterprise, but productivity of the economy as a whole is the proper concern of the national government. This national productivity is obviously not improved by managing the economy in such a way that well over 12 million potential workers produce nothing at

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