Economic Literacy The Bush Administration

Economic Literacy
The Bush Administration is considering slapping big tarriffs on imported steel in a vain attempt to save a dying industry — and a flagrant attempt to buy votes in northereastern states.

As described by the New York Times, the plan would spare the poorest steel exporters, harm some of our most important allies, and exempt Canada and Mexico. I guess that last part is a reluctant admission that we do, after all, have a little free trade agreement with those two nations.

The steel industry is dying in this country. Some minimills will survive to serve local needs, but the big boys are toast. Attempts to merge into even bigger boys is less about economies of scale than they are about scaling up political clout. My grandfather used to own and run Southwest Steel — a small steel service company — in St. Louis. Even he admits that he got out at “just the right time,” because “the margins were shot.”

That was ten years ago, and in the higher-margin steel service business, not steel making.

Labor union noises to the contrary, manufacturing jobs are usually low skill — which means they can be done anywhere and by anybody. In that situation, the country with the lowest labor costs will generally get the low skill jobs. That ain’t the US, kids. We won’t even pick our own lettuce — so it won’t be long before we won’t make our own steel.

If the Administration forges ahead with its plan, the price of steel could shoot up 10%. That’s a ten percent price hike in material cost for everything made from steel. The Administration buying votes in Pennsylvania and Ohio will be paid for out of the pockets of car buyers in Colorado and kitchen appliance salesmen in Minnesota. All for a temporary gain for a dying industry.

Writing about the damn war is less depressing.