Sunday, 3 April 2016

The Tories (not China) are the real villains in the steel crisis


It's clear to anyone who understands rudimentary economics that the root cause of the ongoing UK steel industry crisis is the glut of artificially cheap state-subsidised steel flowing out of China.

Given this fact it would be easy to paint the Chinese as the villains, but actually they're not. The Chinese are only actually doing what's in their own national interest. The Tories are the villains because they're blatantly not working towards Britain's national interests.

China's national interest

The Chinese economy has been booming for decades, but in recent years their astonishing rate of economic growth has slowed significantly. Of course annual GDP
 growth of 6% plus is inconceivable in the UK (2% growth mainly built on the back of mass immigration is enough to get Tories gleefully slapping themselves on the back), but it represents a big slowdown from the 10% they were averaging between the late 1980s and the global financial sector insolvency crisis.

This slowdown means that the largely state-planned Chinese economy has been left with an a much higher steel production capacity than their economy has demand for, which leaves them with a choice. They can either significantly reduce their steel output, or they can subsidise their steel industry then flood the global market with under-priced steel.

To put this choice into perspective it's important to get an idea of the size of Chinese steel production. In the 1960s and '70s the UK steel industry was bigger than China's, but since then Chinese steel production has grown 63 fold to produce almost half of the entire world output of steel (882 million metric tonnes) while UK steel production has gradually declined. The UK steel industry now produces just 1.3% of the steel that China's does.

If the Chinese government were to immediately slow down steel production it would clearly come at the cost of tens of thousands of Chinese jobs, which makes the alternative of continuing production and flooding the global market look like a better option.

An additional benefit to the Chinese is that by over-producing steel and dumping it at below cost price on the global market, they can cripple foreign steel producers in any areas that fail to impose import tariffs out of adherence to radical free-market dogma.

It's obviously in China's best interests to keep their factories churning out steel and actively increasing their dominance in the global steel market by eliminating competition, because once the competition is gone, the Chinese will be able to jack up the price, and the countries that let their steel industries die will just have to pay the price that China dictate.


What the Chinese are doing is obviously not good for the UK steel industry, but who can blame the Chinese government for adopting an industrial strategy that is beneficial to China?

Tory treachery

At the back end of 2015 the Tories were busy sucking up to China and bribing them to build our energy infrastructure for us, while the UK steel industry was in crisis. 3,000 jobs were lost in Redcar in the north east, which has been a massive blow to the local community with severely detrimental knock on effects in all kinds of other sectors of the economy too (the supply chain, transport, catering, childcare, the leisure industry ...).

Since then the Tories have only made things worse. In February 2016 the Tories successfully torpedoed an EU plan to increase tariffs on dumped Chinese steel. Now they are flat out refusing to consider nationalisation of the strategically vital UK steel industry (which would cost a fraction of 1% of the cost of the bankers' bailouts).

Even if such an ideological no-nationalisation stance comes at the cost of destroying tens of thousands of British jobs, the Tories are determined to stick to it because they value their radical right-wing ideology way above things like British workers, British communities and having some kind of coherent long-term British industrial strategy.

There are two potential reasons that the Tories are actively working against the interests of the UK steel industry. One is that they are so wedded to their radical right-wing free market dogma that they'll gladly sacrifice the UK steel industry on the altar of Laissez-faire capitalism. The other is even worse: It's the theory that they're so desperate to suck up to the Chinese that they're prepared to allow the ruination of the British steel industry in order to seek favours from the Communist Chinese government (like continued backing for their absurd nuclear price-fixing shenanigans at Hinkley Point C for example)

Adherence to radical free-market dogma at the expense of British industry, or making a sacrifice of the UK steel industry in order to curry favour with the Chinese - whatever the case it's clearly disgustingly treacherous stuff from the Tories.

Protectionism

While the Tories were shooting down EU measures to impose import tariffs on dumped Chinese steel, the Americans have been putting big import tariffs up in order to protect their own steel industry from artificially cheap Chinese imports. A lot of British people tend to think of America as being far more right-wing than the UK, but the Tories really are the most fanatically right-wing bunch of all because they'd rather have the UK steel industry ruined under a tide of cheap Chinese steel than ever consider policies like protectionism or nationalisation.

To the Tories "protectionism" is a dirty word because it conflicts with their radical free-market ideology, but a cursory look at the economic history books reveal that the most successful countries in terms of GDP growth have usually been the most protectionist.

From the early industrial revolution until the mid-19th Century the UK was a deeply protectionist economy and they built the biggest trade empire in the history of the World. From the mid-19th Century to the mid-20th Century the US was deeply protectionist while the UK embraced free-market economics. The Americans rose to become the richest and most powerful nation on Earth while Britain dropped several rungs down the global pecking order. From the late 20th Century to the present China has risen from a backwards agrarian economy to become an economic superpower that is indisputably the workshop of the world. And guess what ... China is currently one of the most protectionist economies in the world.

The idea that protectionism is harmful is one of the most backward bits of right-wing economic dogma of all.


Cameron's payback

Since the Tories took sole power in 2015 it's been one scandal, PR disaster or U-turn after another, but the way Cameron and Osborne's so-called special relationship with the Communist Party of China has unravelled is perhaps the biggest embarrassment of all.

After doing everything in their power to prevent the EU from raising import tariffs on artificially cheap Chinese steel in order to curry favour with their Communist "special partners", the Chinese repaid this Tory loyalty to China's economic interests by ... erm ... imposing a 46% import tariff on Welsh steel just as the UK steel industry crisis was coming to boiling point with the Indian company Tata announcing their decision to abandon all of their UK operations!

If it wasn't such a serious issue with so many tens of thousands of jobs at stake, this sheer level of Tory ineptitude would be laughable.

Conclusion

It's irrational to blame China for acting in their own economic interest. What is completely unacceptable though is that the Tories have allowed this steel industry crisis to go from bad to worse. They sacrificed 3,000 jobs in Redcar in the winter of 2015 and then continued fighting against the interests of the UK steel industry by torpedoing the EU move to increase tariffs on Chinese steel dumping in February 2016.

Even when the entire UK steel industry has gone into meltdown, top Tories had to be shamed into giving up their jollies in Lanzarote and Australia to come back and pretend that they give a damn about the UK steel industry.

Their response is absolutely pathetic, and the 11 million people (24% of registered voters) who voted the Tory party into absolute power in 2015 really should be ashamed of supporting such a bunch of hopeless charlatans.

   
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MORE ARTICLES FROM
 ANOTHER ANGRY VOICE 
                 
David Cameron's surrender to the Chinese
                                       
The Tory nuclear price-fixing deal
                
The Tory "economic recovery" mantra is a lie
                         
The pathetic Tory response to the steel industry crisis
                        
Austerity is a con
           
The Tory ideological mission
                     
Asset stripping "bankrupt Britain"
                                
Margaret Thatcher's toxic neoliberal legacies
  




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