Did you happen to notice the other day that U.S. Steel reported a profit for 1980 of $504.5 million? That followed a net loss for 1979 of $293 million.
That was the year during which U.S. Steel closed down 15 of its older and long ago obsolete plants. At the time we heard a great deal about the plant closings and people being thrown out of work. There were 12,500 jobs in those 15 plants that were closed. That many persons were put out of work by the closing.
But the headline implications of 1979 were only one side of the story. Another side of the same story is that 12,500 workers were released from uneconomic employment and made available for work in modern and economic plants.
It is a miserable experience for any person to be out of a job, even temporarily. But no economy is on a sound basis in which a lot of people are employed wastefully in obsolete plants. The modernization of the American industrial structure calls for precisely what has happened at U.S. Steel. It calls for the closing down of all obsolete and uneconomic plants. It calls for replacement by modern, economical plants. Sometimes it means the closing down of a whole segment of industry and its replacement by more modern industries.
And this is happening.
Right now, in February of 1981, we are reading about huge losses incurred during 1980 by General Motors, Ford, and Chrysler. Those are the same kind of losses which U.S. Steel had during the previous year. The difference is that the Pittsburgh steel managers were a year ahead of Detroit in realizing that to get back into profitable business they had to close down obsolete plants and stop building things no one wants.
General Motors, Ford, and even Chrysler can get back to the plus side of the ledger once they give up building out-of-date cars in obsolete and labor-inefficient plants. Chrysler, for example, makes money on its Omni-Horizon line of small cars. It also makes money, of course, in the factory which builds battle tanks for the US Army.
President Reagan has launched his great "renewal of America" program. If that were the only thing happening to the American economy during this first quarter of 1981 that program would have pitifully poor chances of success. But it is not the only thing happening to the US economy.
The Federal Reserve Board's tight money policy, launched long ago, is in part responsible for the closing of those 15 antique steel plants and the various vintage relics from early Detroit that have long since been closed down and are now being replaced. The renewal of American industry, and the transition from old to new activities, has been under way for several years. It does not date automatically from the day J. Carter of Plains, Georgia, turned over the White House in Washington to R. Reagan of Pacific Palisades, California.
In New England the transition started a half century ago when textile mills and shoe factories moved south. Today New England is leading in modern industries, and in record low unemployment. It has made the transition from old to new, and is doing extremely well, thank you.
Mr. Reagan has problems with the Congress and he has enemies in the form of every lobby whose handouts from the federal treasury are being challenged. But he also has allies. The Federal Reserve Board is one of the best. If it hangs on with high-interest money and, if Mr. Reagan can implement that with budget restraint, then there is a fair chance that he and his countrymen can get inflation down to manageable levels by 1984.
And the encouraging fact is that there is already some signs of slowing down in prices.
Chrysler did not raise the price of its cars for 1981. It did offer rebates. General Motors and Ford raised the prices of their new cars, and refused rebates. So Chrysler began selling faster than its two big competitors. And now General Motors and Ford have both cut back on prices and indulged in rebates which means that competition has revived, and some Americans are beginning to feel the tight money squeeze and be wary about buying.
In other words, Mr. Reagan may be riding a wave which had already started to roll in before he became President. And he is trying to steer with that wave, which means that his prospects of success are better than they would be if he had to do it all alone. Happily, that is not the case.