Editorial

Stop Paying the Rich!

On January 29, 2004 Stelco, Canada’s largest steel manufacturer, filed for bankruptcy protection under the Companies Creditors Arrangement Act (CCAA), citing a $1.3 billion debt to the workers’ pension fund as the cause of its insolvency. Despite the fact that Stelco was still able to meet its other debt payments, the courts granted it protection, accepting Stelco’s assurances that the company would be out of money by the fall of 2004. During 2004 several companies vied to buy Stelco, including Deutsche Bank, Sheritt International and Severstal, a Russian steel manufacturer. However, soaring steel prices put Stelco into a highly profitable position and it rejected all of the buyout bids. By March 2005 steel prices had dropped by 50 percent, Stelco’s profits had fallen and it was once again looking for a saviour.

This spring Brascan Corporation made a proposal through its restructuring branch Tricap Management to bail out Stelco. It proposed to put $500 million into Stelco’s pension fund. This proposal was rejected by Stelco management, its bondholders and the union representing the workers at Stelco’s Hilton works in Hamilton. A mediator was appointed, but talks broke down on June 24 and a stalemate has existed ever since.

The workers at Stelco have been waging a determined struggle in defence of their jobs and their pensions, including demanding protection of workers’ pension funds in the event of corporate bankruptcies. As a result of their struggle the Ontario government has rescinded the right of large companies like Stelco to defer payments to employee pension funds. The threat by Stelco to slash existing and future pensions by over 50 percent has also been withdrawn. This struggle by the Stelco workers in defence of their rights has made an important contribution to the struggle for the rights of all Canadian workers.

Recently, a proposal to solve the company’s problems was made by the union representing Stelco’s Hamilton workers which suggests that Brascan’s offer be rejected in favour of a joint federal-provincial solution. The proposal asks the federal and Ontario governments to invest $1 billion in Stelco with the same interest and fee structure as contained in the Brascan offer. The proposal adds a further proviso: that “all interest and fees paid to the government should be invested in social programs, acting as new social funding not supplanting previously committed funding for social programs.” The proposal suggests that the $1 billion in government loans would pay in full all of Stelco’s creditors and stabilize the company. It also suggests that, in the event that Stelco once again slides into financial difficulties, the federal and provincial governments should declare a moratorium on interest payments.

There are a number of problems with this proposal. Everyone is aware of the record of the McGuinty, Harris and Rae governments of Ontario, as well as successive federal governments, in regard to cutting spending on social programs. To suggest that the Martin or McGuinty government will use the Stelco crisis to reverse that policy does not make sense. If the Ontario and federal governments were interested in increasing funding for social programs, would it not make more sense for them to spend the entire $1 billion on social programs, rather than just the interest?

Furthermore, where would the federal and provincial governments get the $1 billion in the first place? If they take the money out of existing social programs there will be a net negative effect as far as the Canadian people are concerned. If they borrow the money from the capitalist financiers, whatever interest they receive from Stelco will go directly to those financiers and will, therefore, not be available to fund social programs. The other option, of course, would be for the federal government to take the money out of its budgetary surplus, a surplus which was achieved by cutbacks to social programs during the 1990s, the expropriation of billions of dollars from the Employment Insurance (EI) fund and the slashing of EI benefits to unemployed workers. However, handing over a portion of that surplus to the finance capitalists holding Stelco’s debt would actually undermine the struggle of the Canadian people for the restoration of funding to social programs. No matter how one looks at the matter, it is impossible to see how bailing out the Stelco capitalists can have anything but a negative effect on the funding of social programs.

It is being suggested that a government bailout of Stelco is justified because steelmaking is a core industry which is essential for a modern, independent economy and for nation-building. Apart from the obvious flaw in this reasoning – that Canada has never had an independent economy – this argument could be applied equally to many other sectors of industry. Transportation, communications, airlines and the petroleum industry are also core industries essential to a modern, independent economy and all of those industries are owned outright or controlled by foreign capital. Furthermore, there are many more companies which are or will be facing bankruptcy in the face of fierce international competition. In those cases, too, the unions are calling for government bailouts, insisting that their industry is crucial to the Canadian economy and that the jobs of their members are crucial to the economic wellbeing of their communities. Apart from the fact that every bailout of a failing company represents the transfer of money out of the pockets of working people and into the pockets of the rich, the history of government bailouts proves that they are not effective in protecting workers’ jobs. Far from it, the government grants and loans have invariably been used to modernize technology and eliminate jobs.

It is also not clear how an influx of government money will actually solve Stelco’s basic problem, which is that it is facing intense competitive pressure from rival steelmakers in Asia and the United States. There is a suggestion that Stelco should forget about international markets and concentrate on the domestic market for steel. It is even being claimed that this would be an exercise in nation-building. But this ignores the fact that those steel companies which are driving Stelco out of foreign markets are also competing for business within Canada, because there is no such thing as an exclusively "domestic market" in the global economy. If Stelco cannot compete in U.S. markets, how can it compete in Canadian markets?

The problem is that as long as the Canadian economy is based on competing in the global market there will be winners and losers in this competition. Some of Canada's industries will be winners and some will be losers. The workers in the industries that are "winners" will retain their jobs but they will continue to be pressured to make one concession after another in their wages and working conditions to keep their capitalists competitive in the world market. The workers in the industries that are "losers" will lose their jobs, with the result that the competition for jobs with the "winners" will increase,  and this competition among the workers will contribute to the further downward pressure on the wages and working conditions of the entire working class

Making Stelco or any other of these large corporations competitive in the domestic or global markets is not the way forward for the Canadian working class. It may appear like a "quick fix" but it only perpetuates the same problem. The Canadian working class cannot accept this old arrangement as the be-all and end-all for themselves or for the rest of the Canadian people. The proposals to turn one or many industries from being "losers" into "winners" without eliminating the old arrangements will not change the status quo or build an economy that serves the interests of the Canadian working class and people.

There is no question that the working class must fight to defend their jobs and pensions. However, in waging these struggles the working class cannot lose sight of its strategic aim of eliminating wage slavery and building a socialist society.  It must also lead the society to solve the immediate economic, political and social problems that face the entire Canadian people such as their political marginalization, the denial of human rights, the attacks on social programs, and the dangers of war. This is the alternative to the old arrangements. This task may be difficult, but it is not impossible.

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