There is a stock listed on the NYSE which has one of those most coveted of all ticker symbols – a single letter. In this case the symbol is “X” and it represents the United States Steel Corporation. It has maintained that distinctive symbol for a century.
There was a time in America when economists and investors waited anxiously for U. S. Steel to report its earnings. A good report could mean a surge in the general stock market. A bad report could mean a nasty selloff. Of course, this was at a time when America owned a large share of the global steel industry. Those times have passed.
In the decade beginning in 1910, the amount of steel that was manufactured in the United States gradually increased as a percentage of worldwide steel production to the point where we consistently produced between 30% – 50% of all the steel made in the world. Cities like Gary, IN became boom towns – welcoming workers to the state of the art mills that had been built. Good jobs were plentiful and the steel industry was the backbone of American prosperity.
But things changed. Other countries learned how to manufacture steel of equal quality to our American product – and they learned to make it less expensively than we could. One of those countries was Japan.
If you know anything about that island nation you know that Japan, unlike America, is blessed with few natural resources. The raw materials to manufacture steel have to be shipped in from other countries where they abound. Despite that additional cost, Japan has still been able to manufacture a quality product at a fraction of the cost of its American counterpart.
How is that possible? Perhaps the answer lies, at least in part, in the demands and entitlements which American unions have been able to extract from U. S. steel companies. The cost of labor is an essential component of the way that any product is priced. And if your costs are significantly higher than your competitors’ you simply will not be able to offer your product at a price that is going to be attractive to buyers.
Recently I’ve been covering the flap about “outsourcing” as it pertains to the presidential race. Although I think this should have about the same level of importance as getting a peek at President Obama’s college transcripts, allow me to play devil’s advocate and assume that there is something that is actually material in this conversation.
Let me further assume that Gov. Romney’s Bain Capital outsourced some jobs to countries overseas. How many jobs? Well, considering the nature of the companies that Bain owned I am going to take a stab at estimating that number. I’m going to suggest that number is between a few hundred and a few thousand.
By contrast, the number of American workers employed in the steel industry shrank from 500,000 to 224,000 in the period between 1980 – 2000 – a loss of 276,000 jobs that were essentially outsourced to countries overseas. Thank you union leaders for your excellent work. You certainly deserve to be recognized for your achievements.
By 1980 the United States’ share of global steel production had declined to 12%. By 2000 our market share had declined further to 8%. Today it stands at 2%. And that once great boom town of Gary, IN has an unemployment rate of 13.1% which is more than half again as much as the national average.
Given these statistics, even if Gov. Romney is an “outsourcer”, he is a veritable neophyte at it. He needs to sit in on a few AFL-CIO leadership meetings to see how it really is done.
If we want to make outsourcing an issue in the November election, let’s look at the real causes and perpetrators of it. Our unions which demand that their members earn wages and benefits which make our products globally uncompetitive; our politicians who enact onerous rules and regulations which detract from productivity and add significantly to cost; and ourselves, for being willing purchasers of products manufactured overseas because they are less expensive and we can save money.
Harry Truman said, “The buck stops here.” I guess that was back in the days when “X” marked the spot.