This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
Here is another story about Wall Street’s war on the real economy.
US Steel was planning to invest $1 billion in building an environmentally-friendly new “coke battery” plant in Clairton, PA. The new battery would dramatically reduce the emissions used in the process, and use the gases to produce electricity. According to the Pittsburgh Post-Gazette,
The strategic investment would build two new coke batteries at Clairton, install top-flight environmental controls and add a cogeneration plant that would make electricity from gas produced by coke-making, which will help power all three U.S. Steel sites.
Another Post-gazette story explains,
Coke is a baked coal that is used to fuel blast furnaces at the company’s Edgar Thomson plant in Braddock and U.S. Steel’s other North American operations. The Clairton plant can produce 4.7 million tons of coke annually and just under 1 million tons are consumed at the Braddock plant.
U.S. Steel broke ground on the project on October 22, 2008. Along came the financial crisis, and financing for the plant dried up. They had to suspend work in April, 2009. U.S. Steel puts hold on $1B Clairton project.
U.S. Steel is suspending indefinitely the $1 billion modernization of its Clairton coke plant, a massive, multi-year project that was expected to create more than 600 construction jobs.
The Pittsburgh steel producer said it was forced to make the “difficult but necessary decision” because of the economic slowdown that has prompted it to lay off about 7,000 union workers in recent months.
When the financial crisis hit, George W. Bush and Henry Paulson came up with – and Congress approved – the massive bailout scheme that has rewarded Wall Street for the actions that collapsed the economy. We gave the financial sector of the economy – commonly called “Wall Street” – hundreds of billions of direct dollars and trillions in guarantees, supposedly to fix the credit crisis and get the financial sector working again as the sector of the economy that provides financing for projects like the US Steel Clairton Coke Battery.
This is November and US Steel still has not found financing at reasonable rates to get back to work building this plant. They need $1 billion and this project is good for America’s industrial capability, workers and environment. But, apparently, Wall Street needs to pay out $140 billion in bonuses this year, speculate on life insurance plans, do “flash trading” on stocks, etc. instead.
What Wall Street Is Supposed To Be Doing
Wall Street and the financial economy are supposed to be to supporting the real economy by playing the role of middleman, connecting sources of money with companies needing that money to allocate capital where it is needed. This is supposed to be a constructive process that helps We, the People fund innovative startup companies, build factories and schools,allocate capital for company expansion and fund other large-scale projects that require a pooling of resources and dilution of risk. That is their essential role in the economy.
But there is a problem with the way Wall Street has been and is operating. Instead of playing a background role supporting the real economy Wall Street has been dominating the economy, influencing the government and running quick-buck schemes, creating bubbles, speculating up prices on commodities and generally running wild. Before the financial meltdown Wall Street was not allocating capital productively, it was allocating capital destructively. In the companies-as-buy/sell-commodities posts I have been exploring how Wall Street’s practices has been destroying companies, eliminating jobs and generally wrecking our economy while making a very few vastly wealthy. The company-buyout game turns good companies into debt-ridden, job-shedding shells. The greed-based drive for ever-higher returns tries to destroy companies like Costco because they are “overly generous” to their customers and employees. Wall Street has turned into a machine that grinds up jobs and communities, forcing wage cuts, dehumanization of workplaces, and corruption of our democracy.
When the financial sector broke down as a result of quick-buck risky investments (that didn’t allocate capital), massive leveraging (that didn’t allocate capital), Ponzi-like scams (that didn’t allocate capital), outright but not-yet-prosecuted fraud (that didn’t allocate capital), etc., our government stepped in to rescue the sector. But instead of fixing the system, Wall Street still is not allocating capital where it is needed. They are, however, taking huge profits and giving out huge bonuses.
Let’s make finance the servant of the real economy again, rather than its master. Let’s invest our money in our industry, not bailouts and bonuses for a few. There are so many incentives for Wall Street to destroy factories, etc, and so few incentives to build the economy. Let’s develop a strategy to build a new, sustainable economy that respects the environment and us as workers, customers and citizens. Let’s develop a national economic/industrial strategy/policy — call it what you want — so our country has a plan to create jobs, invest in research and development and solve our problems. Other countries do this but our policy and strategy is to not have a policy and strategy and just let things continue in the wrong directions. I’m tired of that. What about you?