20.12.08

CREATIVE DESTRUCTION INVOLVES DESTRUCTION. King Banaian contemplates the oxymoron that is "orderly bankruptcy."

The Bethlehem bankruptcy was also blamed on "complacency and high labor contracts" that left it less competitive. Its bankruptcy did not kill the U.S. steel industry: US Steel is still in the Fortune 500, just not a top 20 company any more. In 2008 American steel producers will make about 76 million metric tons of crude steel according to Stratfor. That's half of what we produced in 1970, as imports have replaced the use of steel, and as we have found substitutes for the product. (Those CAFE standards could be one reason for that.) Maybe we don't do steel as well as we did in 1970; maybe we don't do cars as well as we did then either. But we do many other things better now than we did then, some things we didn't even see.

But make no mistake: Bethlehem Steel's bankruptcy was only 'orderly' in the sense that it didn't cause riots in the streets of Pittsburgh. A great wailing and gnashing of teeth in the papers happened then. For those in the steel industry, it was very disorderly. Lives were turned upside down. As they will be in the auto industry.

The late Hendrik Houthakker observed at an American Economic Association session in the late 1980s that steel was "no longer basic in any way." As for Bethlehem, headquarters commissioned its engineers to identify all the ways the thin slab caster (which permitted minimills to compete for the sheet business) would not work. Oops.

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