The unfolding crisis in Port Talbot is depressingly familiar. It is a story that has played out over and over again in recent years, from Grangemouth in Scotland to Redcar on Teesside and now once more in South Wales: the devastating impact of plant closures on local economies and communities heavily dependent upon single industries and long battered by deindustrialisation, with no plan to counteract successive waves of disinvestment, displacement, and disempowerment.
The Indian-owned multinational Tata Steel has just announced the closure of the two blast furnaces at the Port Talbot steelworks, with the potential loss of around 2,800 jobs in a town of 32,000, where steelmaking has been the major local employer for more than a century.
‘It will absolutely ruin the community,’ Andrew Gutteridge, chairman of the Multi Unions Llanwern works, told PA Media. ‘Your local newsagents, your chip shops, your supermarkets – everything in this area will be affected. And not just here in this area, in Bridgend, Neath, up in the Valleys which are already decimated from the mines years ago. This is a massive, massive kick for the whole of South Wales really.’
Evidence from elsewhere shows that he is likely correct. The direct headline loss of 2,800 jobs probably conceals many more, once supply chains and multiplier effects are taken into account. Studies of plant closures in other areas have found that for every direct job loss there is often an additional one-half to one job lost indirectly, via loss of wages recirculating through the regional economy.
At the same time there are value-added and other costs to be borne in mind, including higher costs to the state in terms of unemployment, re-training, and social services, not to mention consequences further downstream including mental health and depression, drug and alcohol abuse.
Tata’s rationalisation of its Port Talbot operations also means the dismantling of critical manufacturing capacity and the severing of a vital link in Britain’s industrial supply chain. By any account, this must be considered a colossal failure of planning, aforethought, and anything claiming to be an industrial strategy for the British economy.
In most other advanced economies, the preservation of virgin steel production capacity would be considered an issue of vital national security and resilience, falling within the scope of measures such as the Defense Production Act in the United States or resulting in emergency nationalisation of a kind regularly employed by France (where even the ownership of a large yogurt company was considered a matter of strategic national importance).
Only in Britain is there such total disregard for long-term economic outcomes, a symptom of an outdated but persistent ideological dogma which views serious intervention in industry as anti-free market.
A Broken Economic Model
The tragedy of Port Talbot, then, is part of a wider malaise, in which financialisation and extraction dominate a rentier economy oriented toward capital gains and asset price inflation.
The British economy is plagued by short-termism, whereby state contracts go to corporate cronies, trumping long-term economic strategy, and where lobbying by the wealthy and powerful is heard above the common-sense views of communities, devolved and local governments, and workers and their trade unions.
One result is that Britain’s manufacturing production has been mostly flat since the late 1990s and has still not recovered fully from the 2008 financial crisis, let alone from more recent shocks, leaving a yawning trade deficit in industrial goods.
Addressing this gap has been a repeated promise of British governments in recent years, as the political unsustainability of the extractive economy has taken its toll. Theresa May set up the Department for Business, Energy, and Industrial Strategy (BEIS) in the wake of Brexit – itself a ‘Revolt of the Rust Belt’ – recognising the need for regional rebalancing in a country which boasts the greatest regional inequality in Europe.
Boris Johnson continued this rhetorical emphasis on ‘active government within a market economy,’ approving so many government bailouts and rescues of railway operators and energy companies that former Shadow Chancellor John McDonnell quipped ironically that Johnson ‘carried out more nationalisations than any Labour prime minister since Harold Wilson.’
Taken together, there has been much talk but little action on proactive industrial strategy, with the focus being entirely on temporary assistance to stricken private companies rather than anything more structural or transformative. The opportunity for Britain to craft a new set of post-Brexit state aid rules has been an oft-cited but – as of yet – never-utilised benefit of leaving behind the competition policies and single market strictures of the European Union.
In keeping with such policy lassitude, and contrary to warm words from government ministers, state support to Tata Steel in Port Talbot has effectively been a corporate subsidy not an industrial strategy. It has served to benefit the company bottom line, not the preservation of jobs or productive capacity — as is now laid bare for all to see.
What workers and communities need is an actual industrial strategy, anchored in public benefit and local collective democratic ownership of vital economic assets.
Corporate Locational Extortion
Tata’s decision in Port Talbot underscores the grotesque power that private corporations continue to wield over workers and communities through their locational decisions.
Under neoliberalism, cities and regions are encouraged to compete fiercely with one another for jobs and investment in a context of corporate locational blackmail or extortion. Billions are wasted on this form of ‘smokestack chasing’ economic development through tax incentives, outsourcing, and public-private partnerships, which subsidise the extraction of profit by footloose multinational corporations that have no loyalty to local communities.
This plays out as a zero-sum – sometimes even negative-sum – game hugely beneficial to corporations but far less so for localities and ordinary people.
The conventional development model usually requires huge sums in publicly-funded inducements per job created. Of course, these supposedly ‘new’ jobs are often not really new jobs at all, but jobs that were formerly elsewhere. When the subsidies expire, the game is often played out all over again, with a new location as victim of the corporate shakedown.
This dynamic can clearly be seen in Port Talbot, where union officials dismiss Tata’s claim that the closures are about greening their operations globally. ‘It’s nothing to do with green,’ says Gary Keogh, vice-chair of the Port Talbot multi unions. ‘This is about pounds, shilling and pence … They want to make their steel in Jamshedpur [in India] … bring it thousands of miles across the ocean on ships with diesel engines, and call it green. It’s time people were honest.’
Viewed from the perspective of the economy as a whole, the fickle behaviour of mobile international corporate capital and its peripatetic ‘investment’ produces short-term shareholder value at the expense of ‘throw-away cities’ in which entire communities and regions are tossed on the rubbish heap. As firms pick up and move their production elsewhere – usually in pursuit of cheaper labour for their bottom line – they leave behind empty factories and houses, and half-empty schools and hospitals, with all that implies in terms of associated capital and carbon costs and wasted lives.
In an era in which such waste is simply no longer affordable (in planetary biophysical as well as social terms), it is past time we returned to the possibilities inherent in a proactive industrial strategy, both locally and nationally.
Building Community Wealth
Whenever there are plant closures, there are common sense counterproposals from trade unions and local elected officials – as is the case in Port Talbot, where moves to address energy costs and institute new ‘Buy British’ procurement rules could create industrial and social resilience and rebalance the competitiveness of local steel production. Such proposals should be examined and, where feasible, supported and implemented as a means of retaining jobs and vital industrial capacity.
Eventually, however, workers and communities are going to have to move from a reactive to a proactive position on such economic restructuring — as a matter of climate necessity if nothing else.
This is where we need new Community Wealth Building approaches that protect workers and communities, increase productivity, and recirculate profits to anchor jobs, build local multipliers, and accelerate the green transition.
A true community-sustaining industrial strategy would consist of the deliberate direction of capital to sectors, localities, and regions so as to balance out market trends and prevent communities from falling into decay, while also ensuring the investment in research and development necessary to maintain a highly productive economy.
In some cases, this might mean state assistance and resources to allow workers to buy up facilities and keep them running. In other cases, it might involve re-training workers for new skills and re-fitting facilities for work in a different industry. In either case, affected localities and populations should be active participants in planning, able to draw upon public resources whose aim is to help secure the long-term stability of community and, overall, to sustain national production in key sectors and industries.
Community-sustaining policy to preserve particular places should be married to sector-based approaches. Green manufacturing strategies and services (such as home and business energy retrofits) can support the building and sustaining of demand and production capacities for ecologically sustainable forms of energy and technology. An industrial strategy designed to underpin such a Green New Deal could help Britain overcome multiple economic challenges, providing high-wage jobs, generating revenue, expanding exports, and reducing trade deficits — all while reducing greenhouse gas emissions and improving air quality and public health.
A key principle underlying a community-supporting industrial strategy must be the preservation of existing communities and their productive capacities on a long-term basis. Deals like that last year with Tata that keep facilities open for a time but allow private owners to scale back or close them at their convenience do not merit the public subsidies and support they currently receive.
A democratic, participatory industrial strategy would help ensure that productive capacities stay in use in such circumstances and provide guidance on how to organise conversion when a shift to a different product is required.
Depending on the needs and desires of the community, as well as economic considerations, this may mean adopting some form of community, public, or worker ownership. In the medium-term, it should also entail the conversion of certain anti-social industries, such as armaments, to socially beneficial purposes.
Such approaches begin to offer the local building blocks by which we can set about a transformation of our economy. Instead of the ongoing concentration of wealth in the hands of a narrow elite, the broad dispersal of the ownership of assets. Instead of icily indifferent global markets, the rooted participatory democratic local economy. Instead of the extractive multinational corporation, the recirculatory economy, mobilising the purchasing power of the public sector and of large place-based anchor institutions – local government, hospitals, educational institutions – in support of socially oriented firms that are often democratically owned and controlled by their workers or the community. And on and on. Viewed in this way, Community Wealth Building approaches are economic system change, starting at the local level.
Social cost-benefit analysis
Port Talbot reveals the failure of politicians to escape the confines of neoliberal thinking regarding economic costs and benefits, which are viewed solely through the overly narrow prism of corporate balance sheets. ‘This plant isn’t part of the community, it is the community,’ Port Talbot’s Gary Keogh told one reporter. ‘We’re now fighting for a way of life.’
Viewing the future simply from the vantage point of Tata’s books is to ignore the embedded costs of place, both physical and human, and the above-mentioned huge sunk public and private investments in public goods and common assets that now risk being abandoned to fall into disuse and decay.
Moreover, there are also the stark political costs arising from decades of neglect that must be factored in — including the advance of a dangerously radicalised right-wing populism that is once again on the march.
To meet the challenges of both economic and climate change we need a new conceptual framework for thinking about true value in our local and regional economies.
This should measure the real-world costs and benefits of different forms of intervention and non-intervention using a total local public balance sheet — one that fully weighs all aspects of economic activity, including its impact socially, environmentally, and politically.
Such a ‘social cost-benefit analysis’ would look at everything from increased taxes, reduced welfare, and the cost of unemployment, social services, and other ‘externalities’ on a given locality to create a more comprehensive guide for evaluating public action or inaction than conventional considerations of profit and loss based only on the books of private firms — a narrow and anti-social view.
Wave of the future
We must also rally to the workers and community in Port Talbot, and demand that the government act to prevent such vandalism to the social fabric and industrial base.
This is in keeping with the wave of the future, already evident in shifts in the economic strategies of the major global powers. The political ground internationally has already shifted away from neoliberal anti-interventionist approaches and in favour of a debate about how rather than whether to intervene. We need to accelerate this very different national conversation to the one we have grown used to.
The needs and opportunities are obvious — and well within our grasp. What we lack are politicians with the vision and commitment to deliver such beneficial outcomes, who seem instead to be entirely in the pockets of extractive corporate capital and neoliberal finance.
As deglobalisation takes hold still further in a new era of active state intervention and strategic competition, a different model is needed, one based upon democratic autonomy, locally embedded economies, and the policy space required for a new approach to regional and national development.
Such an approach would open up the prospect of reindustrialisation, improved economic and job security, and community stability — a means by which people could genuinely take back control over their lives and the fortunes of their communities in a meaningful way that would give renewed relevance to democratic politics. For it is rebuilding the economic basis for democratic politics, in the final analysis, that is now at stake in the sea of challenges that lie ahead for us all.