Factory Closures

There was an article in The Guardian recently about Tata Steel cutting 1,200 jobs from their factories in the United Kingdom.

About 900 jobs will be lost at Scunthorpe and 270 in Scotland with the rest going at other UK sites. Plate mills will be mothballed in Scunthorpe, Dalzell in Motherwell, and Clydebridge in Cambuslang, near Glasgow.

One of two coke ovens at the Scunthorpe works will also be closed. Workers have been waiting for official news of the cuts as speculation mounted about Tata’s plans.

Karl Köhler, chief executive of Tata Steel’s European operations, said: “I realise how distressing this news will be for all those affected. We have looked at all other options before proposing these changes.

According to The Guardian, this isn’t an isolated event. There has been a slew of job cuts across steel plants in the United Kingdom recently.

The job losses at Tata, which employs 17,000 people in the UK, follow the announcement this month that SSI, the Thai owner of the Redcar steelworks on Teesside, had gone into liquidation with the loss of 2,200 jobs. On Monday, Caparo Industries went into administration, putting up to 1,700 jobs on the line.

In total, about 5,100 jobs are threatened out of just under 30,000 employed in the steel industry. Tata has already said more than 1,000 jobs would go at Llanwern and Port Talbot in south Wales and Rotherham, South Yorkshire.

On their website, Tata Steel Europe blamed cheap Chinese imports and an unfavourable exchange rate.

In the past two years, imports of steel plate into Europe have doubled and imports from China have quadrupled, causing steel prices to fall steeply. At the same time, a stronger pound has undermined the competitiveness of the business’s Europe-bound exports, and encouraged more imports.

This is an old, old story in the history of globalisation. In the early 2000s, critics had accused the United States of damaging local food production in Africa by disguising subsidised American produce as food aid and dumping it abroad. An even older story is Dadabhai Naroji’s famous assertion in the 1900s that the British Empire was draining India of its wealth by (among other things) dumping an excess supply of finished goods in Indian markets at low prices.

At the same time, note the complex nature of globalisation today – the European subsidiaries of Indian and Thai firms cut jobs based in British factories, partly because of competition from Chinese manufacturers and partly because of exchange rates between the United Kingdom and the European union. Globalisation is no longer (even if it had ever been) a straightforward story of East versus West, North versus South, or Developed versus Developing. To make the story more complicated, consider that episodes of factory closures by foreign firms are not restricted to a particular region – Microsoft’s acquisition of Nokia (an American firm taking over a Finnish manufacturer) resulted, last year, in the shutdown of a major factory in Sriperumbudur in India.

There are two additional points I want to make. First, in our eagerness to see this as a story of nations and continents, we miss out the smaller things. The shutdown of a factory can often be disastrous for small towns, regardless of whether they are in Scotland or Tamil Nadu. Often, one or two large factories in such towns employ a majority of the workforce and shutdowns can throw the entire town into long-term crisis. Sriperumbudur went through such a crisis last year and right now, it’s hoping that the entry of Lenovo and Foxconn will reverse this.

Second,  all these workers, whether in British steel plants or Indian cellphone factories, are members of a tiny fraction of the global workforce that constitutes the formal economy. We know little to nothing about that vast number of workers, located mostly in developing countries, who constitute the ‘informal economy’. So, while it’s important to not ignore the formally employed factory workers, we should remind ourselves there are other workers out there, in conditions just as bad or even worse than the formally employed. Finding long-term, sustainable, employment for all of them is going to become a bigger and bigger challenge in coming years.

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