The Next Shift by Gabriel Winant

Author:Gabriel Winant [Winant, Gabriel]
Language: eng
Format: epub
ISBN: 9780674259836
Publisher: Harvard University Press
Published: 2021-03-23T04:00:00+00:00

The Bottom Falls Out, 1978–1985

At the end of the 1970s, steel’s long, slow decline accelerated. Steel mills were operating at 78 percent capacity in 1977, the year of Sadlowski’s defeat; imports had risen to 20 percent of the domestic market. On “Black Monday,” September 19, 1977, Youngstown Sheet and Tube closed and laid off five thousand workers—the first major plant closure in basic steel. When Paul Volcker’s Federal Reserve began deflating the economy in 1979, credit-sensitive sectors like real estate and the automotive industry absorbed the immediate shock, which they passed up the supply chain to steel. That year, LTV Steel, which had acquired Jones & Laughlin Steel, shut down the Eliza Furnaces—huge blast furnaces in the heart of Pittsburgh. By 1980, American steel was running at only 50 percent capacity.18

The severe downturn that closed out the 1970s ended the cycle known as “stagflation.” Manufacturers feeling the sting of declining profitability, driven by the resurgence of global competition in manufacturing and inflating input costs, had delayed a major conflict with labor by assenting to wage increases and passing along the cost to customers as price hikes. Although the two phenomena had been believed to work at odds, a simultaneous increase of unemployment and inflation—stagflation—ensued. This dynamic was the target of new Federal Reserve chairman Paul Volcker when he observed that, for some number of Americans, living standards would have to fall. Steelworkers were just the kind of Americans he had in mind.19

At the level of macroeconomic governance, the phenomenon often called neoliberalism arose in immediate response to the structural crisis of stagflation. Its most dramatic manifestation came in the action of the Federal Reserve in 1979 to contract the money supply—the so-called “Volcker shock.” Because the old industrial centers lay at the heart of the stagflationary dynamic—kept afloat amid sinking profitability by inflation—they were dealt the harshest blow by the Fed’s action. The ensuing recession was most acute for blue-collar workers. In the Pittsburgh area, most of the big mills entered the final phases of their shutdown cycles, zeroing out employment within a few years. A member of the Federal Reserve Open Markets Committee warned Volcker in June 1980, “The steel industry is very much in a state of panic.”20 In Pittsburgh, the downturn was ruinous.

It was thus at the end of the 1970s that the working-class communities of southwestern Pennsylvania tipped from cyclical, gradually worsening distress into general social crisis. Investigating the situation in the steelmaking areas, a group of scholars noted that unemployment had run between 16 and 25 percent above the Allegheny County average before the 1979–1980 recession. Once the downturn began in the middle of 1979, the regional labor market lost more than half of the jobs in the steel industry, with unemployment rates rising in some mill towns almost half again higher than in the county at large. “Until 1980 the decline of the milltowns had been a gradual process marked by a steady out-migration of steelworkers to worker suburbs and by shrinking employment in the mills,” wrote the authors.

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