The postwar years found the steel industry in a state of decline from its previous place of dominance in the world market.
For most of the 20th century, the American steel industry comprised a relatively small number of firms, the largest of which was the United States Steel Corporation, which carried the nickname “Big Steel.” The other steel companies, including Bethlehem Steel, Republic Steel, Inland Steel, Jones & Laughlin, and Armco, were known collectively as “Little Steel.” These firms historically dominated the steel market both nationally and internationally, but between 1945 and 1969 the industry fell from a position of undisputed supremacy to one of weakness. This decline resulted from a complex mix of forces that allowed foreign producers to supplant American steel to such an extent that many domestic manufacturers left the industry.
One important reason for the decline of the steel industry was its history of labor disputes in the postwar period. The steel industry was highly unionized after World War II, and over 500,000 of these workers belonged to the powerful United Steel Workers of America (USWA) union. Between 1946 and 1959, the USWA initiated five major strikes against the industry, the scale and scope of which were unprecedented in American labor history. The 1946 strike against the industry represented the largest single labor walkout ever, while the 1951 disruption constituted such a threat to the national economy that President Harry S. Truman tried to seize the steel industry, a move the Supreme Court later ruled unconstitutional. Similarly, the 116-day strike in 1959 was the longest industrial labor action at that time, and it was particularly damaging to the industry since it helped foreign steel producers gain greater access to American markets.
A second critical factor in the decline of American steel firms was the steady erosion of the traditional price advantage they held over foreign producers. Because the USWA demanded and often received wage and benefit increases during contract negotiations, management responded by consistently raising the price of steel. Between 1945 and 1959, the price of basic steel rose on average 11 percent per year, which was over three times the rate of increase for consumer prices. While higher prices generated large profits, they also allowed foreign steel companies to become more competitive, and, by 1965, imports accounted for over 10 percent of all steel consumed in America. By comparison, 1949 imports were just 0.5 percent of domestic steel consumption. The steady rise in steel prices also significantly reduced American exports over time.
A third cause of the decline involved shortsighted management decisions. Because American steel firms commanded nearly two-thirds of the world’s production capacity in 1945, many managers became complacent and often inattentive to developments outside their industry. This bureaucratic atmosphere also forestalled worker initiatives and contributed to wasteful and low-quality production methods. Similarly, while the industry did spend billions on new plant and equipment, these capital investments were usually made as incremental improvements to established mills and not allocated to the construction of new facilities that incorporated the latest steel production technologies. In contrast, foreign firms, many of whose plants were destroyed during World War II, built new and more efficient facilities that gave them another competitive advantage over their American counterparts.
The fourth element of the decline was the speed with which foreign steel producers recovered from the war, due in part to the American government’s help in financing the rebuilding of these companies through economic assistance tied to its COLD WAR policies. In particular, Japan and Germany were so successful in reestablishing their steel industries that by 1960 they accounted for 16 percent of world output, up from just 3 percent in 1945. With foreign countries producing more steel, the share of world steel production by American firms likewise fell from 64 percent to 26 percent between 1945 and 1960. This in turn reduced plant utilization, which further added to domestic production costs.
While American steel managers were aware of the changes in world steel markets, a number of factors prevented them from acting decisively to protect their interests. They included an underlying attitude of arrogance and indifference to competitors that was based on American dominance of the world steel market. Similarly, the federal government did not adopt a coherent industrial policy to encourage the growth and modernization of steel after the war, forcing the steel industry to fend for itself. Furthermore, because steel executives strongly supported free trade policies, they refused to seek import restrictions that would have protected their business and possibly stemmed the industry’s decline. Eventually, American steel firms petitioned legislators for assistance in dealing with foreign competition, and, in 1969, the federal government enacted the first import restrictions on steel.
Further reading: Paul A. Tiffany, The Decline of American Steel: How Management, Labor and Government Went Wrong (New York: Oxford University Press, 1988).
—Dave Mason
World History
