March 24, 2006 | Volume 3, Issue 1
A Conversation with Leo W. Gerard
Leo W. Gerard, the international president of the United Steelworkers, assumed the top leadership role of his union during an era of unprecedented upheaval in the American steel industry, which has struggled to survive in the global economy. Gerard sat down for an interview with Associate Editor Mary Hull Caballero on March 24, 2006, to discuss globalization’s affect on policies related to trade, industry, health, and immigration. Excerpts of that interview are included here.
The Steelworkers last year merged with the Paper, Allied-Industrial, Chemical and Energy Workers International Union (PACE), making it the largest industrial union in North America and the dominant union in paper, forestry products, steel, aluminum, tire and rubber, mining, glass, chemicals, petroleum and other basic resource industries. The union, which is based in Pittsburgh, has more than 850,000 active members in more than 8,000 bargaining units in the United States, Canada and the Caribbean.
Heinz School Review: What is the state of the U.S. steel industry today?
Leo Gerard: The industry itself is probably in the best condition it has been in in certainly the last 15 years for those companies that exist. I say that very deliberately, because the industry has not recovered from the crises of the 80s and the 90s and the crises that reached from the 90s to the new century. We went through a period of time where various import surges over the past 30 years have destroyed America’s steel-making capacity. And America is the only major industrialized nation on earth that can’t produce enough steel to meet its own domestic demand. So, what we’ve ended up with is a substantially smaller industry on a national level on a per-tons basis. Those companies that are surviving have gotten more efficient largely because of the work of the union and the companies’ investments in technology over the last number of years.
So the industry in the global economy is doing okay. But it’s a substantially smaller industry both by way of tons and by way of employment. And part of the union’s concern is that the main reason the industry is doing okay right now, is that China was a net importer of steel and it swallowed up a lot of what was the global oversupply from the end of the 1990s. In the period of the last five years, China has more than doubled the size of its steel industry. It’s now the largest steel industry in the world. It has now become, as they say, in-balance. It imports about as much as it exports, and the problem for us with that is that it is very, very clear that you cannot go from almost 130 million tons to almost 325 million tons of steel in less than ten years unless it has been done with huge government subsidies. The Chinese have been expanding their steel industry using rules that the rest of the world prohibits, and when the Chinese economy decides to become a net exporter of steel, it is going to be terrible for the North American steel industry. So at the current time, the industry is stable, but we’ve got greater import penetration now than we did in the last steel crisis, and those imports are continuing to be heavily subsidized by governments.
HSR: Do you see that as a national security issue that the United States cannot produce its own steel?
Gerard: Absolutely. It is national security issue in many ways. We have, for example, when the U.S.S. Cole got the side blown out of it, Bethlehem Steel was the last producer of armor plate in the country that had to go back into that ship. And Bethlehem Steel came close to being wiped out. You can go through a various number of product lines, for example, there is a lot of political maneuvering about creating a new pipeline from Alaska to some where in the American Midwest, and the way you would reduce the cost of that oil and gas is the size of the pipe. Well, America does not make that pipe anymore. That pipe would have to be imported from someplace. We would like to move to a high-speed rail system. Well, America does not make that kind of steel any more. You would have to import that rail from somewhere. I say quite often that President Bush talks like John Wayne but he acts like Winnie the Pooh. We’ve had four steel cases, called 421 under the trade law, against China at the International Trade Commission. We won all four cases at the Trade Commission, which then recommends to the President. In all four cases, the President sided with China against American industry and rejected the recommendations of his own commission. That is important to Southwestern Pennsylvania. We have a lot of tube manufacturers in Sharon and on the road to Sharon and the case we brought was on tube. We’ve got a case on flange and beam. We’ve got a case on coat hangers, and coat hangers, surprisingly, when you consider how many coat hangers there are, take a lot of steel. Well, they are now all being imported and dumped into the U.S. market from China. So we won all four cases but the administration chose to throw in with the Chinese as opposed to the American workforce. So we are pretty upset about that.
HSR: What is your next recourse when he does that: is the case over or do you have some sort of appellate process that you can follow?
Gerard: No. As a technical matter under trade law, the President has the final determination. We intend to continue to raise hell in front of the House and Senate. I, in fact, had a meeting with the deputy trade ambassador in Washington a few weeks ago, and the rationale he gave us for dumping the tube case was very problematic. What he said was the reason they rejected it was imposing the sanctions against China would not solve the problem, because the Chinese would simply move that steel to another country and that steel would come in from another country. So I said to him, I want to make sure I understand what you are telling me. You are telling me that our trade laws are inadequate to protect the American workforce from illegally-moved steel, so that is circumventing our own trade laws. So don’t we need stronger trade laws? [He said], “No, that’s not the issue.” Well, bullshit. That is the issue.
The fact of the matter is that trade laws in the U.S. are not designed to protect workers; they are designed to protect investors. So, the steel industry is being continuously undermined by those kinds of illegal activities. Currently, the key culprit we are focusing on is China. But at any given time it could be anywhere else. We have steel that comes in from Russia that at one time took 22 man-hours per ton. We make steel in the United States at U.S. Steel, for example, under two man-hours per ton. So we have the most productive steel industry in the world, but we’re getting dumped on by China and Russia, as an example, who don’t use their steel industry to be productive. They use it as a job center. You get a steel mill in Russia that makes two million tons, and at 22 man-hours per ton, that mill might have 15,000 people working at it. You get a two-million-ton mill in the United States, and we probably have 1,500 people working versus 15,000. So, it’s a struggle because trade laws don’t work for industrial workers in America.
HSR: What do you see as the benefits of the global marketplace for your union? Are there any?
Gerard: I guess the answer is that under the current trade regime, I see very little overall advantage. There may be some circumstances in some narrow product line where there might be an opportunity to export. But we didn’t go from having a balanced trade regime with Mexico to having the largest trade deficit in the history of that relationship—because we are selling them stuff. They passed Permanent Normalized Trade Relations—PNTR—with China, [but] prior to this, every year China had to justify its special trading relationship based a number of factors having to do with human rights and other rights, so there was a reluctance to invest heavily in China for fear that they would lose their trade relationship. So when that was normalized permanently, there was a huge exodus of dollars and plants. So it wasn’t about trade, it was about job relocation. They literally moved plants from the United States to Mexico and plants from the United States to China. These so-called trade agreements—that are really investment agreements—facilitate the movement of plants, not the trade of products.
If you look at where there is a benefit from these trade regimes, I have not seen any. On every factor that you would measure as a worker, these trade regimes have made life harder, because if you are a unionized worker and you go in to negotiate with an employer, he’s saying, “Well, my competition is in China. If you are not prepared to work for less, if you are not prepared to pay more for you own healthcare, if you are not prepared to take your own risk on pensions, I can’t compete and I’ll have to move to China.” Under this trade regime, I haven’t seen any over the last 20 years, any advantage for industrial workers.
But that does not mean that this regime is the only one that exists. For example, if you look at what the EU [European Union] did, as they created the EU and expanded it, they developed a regime on trade within the EU that is much more in keeping with what John Kennedy said when he talked about “a rising tide lifts all boats.” So what they did in the EU to create the economic community was they said to a country like Portugal or Spain and now Turkey, if you want in, you can get in over the next five, eight, 10 years, so long as you meet these benchmarks, and we will help you do that. We’ll help you improve your school system. We’ll help you improve your infrastructure. We’ll all put some money in a pot from the other countries, and as you raise your standard of living, as you raise your democratic principles, as you raise your human rights principles, as you raise these accountability principles so that your banking system is real, you will get to trade with us more and more.
We’ve gone to the exact opposite. The so-called Washington consensus is to do an investment deal, don’t change anything in those other countries, so what you are actually doing is enticing the investments out of America to whatever that other country is. We represented at one time 2,000 people who made [bicycles] out of good steel, American steel. First our members took concessions and dropped their standard of living from $15 and $16 [per hour] down to $10 and $11. That went on for a couple of years. Then the company said, “We still cannot make it.” So, they moved to Mexico. Then after they were in Mexico for three or four years, they moved to China. And now that they are in China, they are saying, “We could make it cheaper in Vietnam.” So they are moving plants from China to Vietnam, because what they were paying in China is more than they pay in Vietnam. So this global economic system that is being foisted on us under the guise of trade, [but] is really not about trade. It is about investments and it has, if you follow it, a natural evolution to the lowest common denominator. And along the way it is wreaking havoc.
We could talk about the environment. We have got companies who we believe as citizens – we want to have clean water and clean air for our kids—so we put these environmental costs on the system, which I think are legitimate. They ought to be there, and I believe they are the right thing to do. But then Company X wants to save those costs that could be Y, and they will move their company or plant across the Rio Grande where they don’t have that [environmental regulation]. They will put that same pollution in the air and that same crap in the water and guess what, it’s all shared stuff. The water makes its way to the ocean and the ocean is all shared. It makes its way into the clouds and the wind comes.
Right here in Pennsylvania, right here in this area, Allegheny County, we’ve got restrictions put on certain investments that employers would like to expand but because of prevailing winds, we suck in pollution from up the river in Ohio. So their stuff blows in and raises our [pollution levels], so we can’t invest here and expand operations here, although we’ve got some of the cleanest facilities in the country here. Well, the same shit happens globally now. So I don’t see where this model actually works in the interest of working families and industrial workers. Now, the fight for us is to change the model. I’ll never forget Bush portraying us as economic isolationists. He is not the most honest president we’ve ever had, but that is about the most dishonest thing.
HSR: Portraying the union that way?
Gerard: Any of us, not just the union, who were talking about a different trade regime. He will use the term that we want to be economic isolationists. Well, that is just not true. What we want to be is part of a system that develops a rationale for trade that benefits both sides. I will challenge people: You tell me, what is the most important thing you could have as a non-American business? Access to this market. This is the richest market in the world on a per-capita basis. So if I have access to this market, I have a gift. Now, from a trade union perspective, I live in the world of negotiation. I ain’t giving this away for free. Why would I give you access to this market and get nothing in return? In fact, why would I give you access to this market, and from a bargaining point of view, also give you the jobs of my citizens? That’s not very smart. So the rationale would be, if I want to do a deal with Mexico, I’d say, “We’ll provide you access to this market and this is what you are going to do to get it. And we are not going to let you ship auto parts from Juarez to here until you can afford to buy a car in Juarez.” Henry Ford was at least smart enough to know that if he did not pay workers enough to buy a car, he didn’t have anyone to sell them to.
HSR: When you were talking about those narrow lines of products that might [be exported], are any of those narrow lines in the Pittsburgh region?
Gerard: Let me say, I think Governor Rendell is onto something. The union is onto it with him and supports and is encouraging him to move in [this] direction. Where we have a definite advantage and can exploit and export that advantage, is to use the remaining industrial capacity of America to create a level of energy independence we have not seen in 50 years. To take, for example, clean coal technology and invest in that. And keep refining and making that cleaner and cleaner and cleaner. You could fund projects all through the education system in Southwestern Pennsylvania. We have got some of the best universities in the country. So research that and develop projects.
You could put together a program of using the best technology to retrofit buildings to spur on industrial innovation. For example, right here in this city we have one of the world’s leading glass producers, PPG. I know there are other companies that we represent, like Pilkington, that have designed energy-efficient glass. The way it is designed, it keeps the hot out in the summer and the cool in. And in the winter, it keeps the warm in and the cold out. [In the Steelworkers’ building] we are using energy like it is going out of style. But we don’t have any other choice. So, the governor is talking about using new technologies to design alternative forms of energy, [such as] wind technology—I think that’s where the future is.
We ought to be able to say things like “if you use my tax dollars to retrofit a building, you’ve got to retrofit that building with products that were made by other taxpayers. Don’t use my tax dollars to go buy products made in China and put me out of work.” So, I think the governor has been talking about that and he has got a program on those things. That is a sliver where we could use the global economy to get ahead of the curve, and then we could export that technology and those products. But to be blunt, I think unless we reform, the global trade structures that the so-called Washington consensus created, over the long-term, it is going to implode. And again, I tell people, “Don’t believe a word I’m telling you. Assume I’m trying to manipulate you. Go check for yourself.”
Over the last 25 years, each year in America, we reached a larger trade deficit with last year being a record year of a trade deficit of $720 billion for the year. With China alone, if you go back to the so-called pre-PNTR phase, the United States and China had a pretty near-balanced trading regime. There was maybe one year where we’d be a few billion ahead and there would be another year where they were a few billion ahead. If you look at the [seven-year] period of time [since PNTR] we went from about a balanced trade regime to a deficit last year of $220 billion.
Let’s look at what happened in Pittsburgh with U.S. Airways. U.S. Air literally got ratcheted down, because what happened is all of U.S. Air’s money-making gates got sold off through deregulation. You can walk in with an airline that was leasing airplanes, contracting out pilots, having the person who sold you the ticket also being the person who loaded you on the plane and picked up your bag. When I go to the airport, I get really pissed off when I see the gate agent who has got to go and unload my bags. It’s stupid. You look at all those things, and it sounds like I’m rambling, but it’s really a part of an integrated system, including immigration, that has been used to ratchet down the middle-class standard of living at the expense of profits and at the expense of upper management and CEO salaries. How do you justify in this country having gone during this time of expanded so-called free trade to a CEO on average making 300 to 400 times what an average worker makes, when prior to the trade deals it was 100 times? I thought 100 times was obscene. Four hundred times is incomprehensible. Society shouldn’t tolerate that. So we are ripping ourselves apart. We’ve got record profits in industry. We’ve got record CEO and upper management compensation, and we have a declining standard of living for the middle class.
That’s part of this regime of economic structures that have been put in place that include, as I say, consolidation. Clear Channel Communication, in addition to owning…television stations, owns 1,200 radio stations, so they control the message. And if there are limited voices to get the message out, then you are manipulating democracy. So I worry about that. I worry about the fact that we’ve got a trade debt that is just since 1994 approaching $4 trillion. If you take the last quarter of 2005 and extrapolate that to the first, second, and third quarters of 2006, and assume that last quarter reflects what will happen in all of 2006, for 2006 we will end up with a trade deficit for that year of $900 billion. When the trade deficit hits a trillion a year, how long can you sustain that? I have a very simple view of this. If you believe that this is sustainable forever, on this kind of an upward trajectory, then God bless you. If you believe it is not sustainable forever, then the question is, what do you do to change it? And if you do nothing, which is what too many are advocating, it will continue that way.
We watched with, I guess, horror and shock when we approved the sale of key ports to a country—not a company—that had let terrorists exist. We approved that sale. We ended up with the senior financial person of the country, the Secretary of the Treasury, saying, “Now, now, now, we have to behave because we can’t be looking like we are hostile to foreign investment.” People didn’t really grasp what he was saying. If you’ve got countries that own so much of your currency, if they don’t find some place to put that currency, then the value of that currency is going to decline. And if the value of the currency declines, then we’ll have to prop it up by raising interest rates, so that the owners of the currency don’t think they own junk bonds. So how do we do that? We sell off our assets. If you look at what we are doing as a country, Japan owns a goddamned toll road in Chicago. We’ve got all kinds of our assets that we have sold off. We are selling airwaves to foreigners. We’ve sold the trans-Atlantic cable system that goes under the Atlantic to move—God knows what information goes through there—we’ve sold that to foreigners. And that’s all being done to find some sort of way to make concessions, I guess, so we don’t have the folks who own all these Treasury bills with U.S. dollars feel they own worthless stuff. So Dubai is a symptom of what is wrong with the trade deal.
HSR: How have free-trade policies changed your priorities in terms of organizing and issues in the past decade?
Gerard: First, one of our priorities has to be to defend manufacturing in America. There are those who live in a very economically sheltered world who think you can have a strong nation by producing nothing but services. I think that is virtually impossible in a nation of America’s size. To deal with this trend line that I talked about with the continually escalating trade deficits, there are not that many ways out of that. You have to get out of it by devaluing your currency, which is one way. That will happen either willingly or unwillingly. It will happen as a result of thinking about public policy to do it gradually or it will happen when the Chinese and others who hold this huge amount of economic sway over us decide, “Hey, this is too risky. Let’s move to Euros.” That will happen unwillingly.
The other way is to start demanding that you don’t get access to this market for free. When I think back to a trade deal between the United States and Canada 40 years ago—it was called the Auto Pact—it was a trade deal that said trading in auto parts and vehicles between the U.S. and Canada had to be in balance. So [Canada] imported cars from the U.S. and America had to import stuff from Canada or vice versa. We need to have a debate about what kind of a trade regime there will be and [whether there] will be an industrial base for America. That’s part of our priority. That is both a public relations and a political fight. We have to be in that fight for the well-being of our existing and potential future membership. That’s part of our daily struggle. Part of that is to deal with the issues that the rotten trade deals create to put American industrial manufacturers at a disadvantage.
This is the only country of the OECD [Organization for Economic Cooperation and Development] that relies on employers to provide healthcare. For us, that is also a daily struggle. We are not going to walk away from our members and say [to employers], “Oh, you don’t want to provide healthcare? Well, that’s okay. We’ll go beg for it on the street.” So we have fights with employers about providing healthcare at the same time recognizing that while we are doing that, they are an at economic disadvantage, because they are the only sort of employers in the OECD that have to do that. That takes you back to saying that the right fight for employers and us is not with each other, but it is in the public policy arena.
HSR: Do you believe that American healthcare policy will be influenced by the struggle of labor and management to resolve the financial pressure brought on by rising medical insurance?
Gerard: ...Winston Churchill was right when he said, “You can always count on America to do the right thing after it has tried everything else.” The fact of the matter is, the most economically efficient method of delivering healthcare is through a universal single-payer system. American spends the most per live human being on healthcare in the world. Its spending is also the most inefficient in the world. I’m not sure how much more economic dislocation and confusion will have to happen before the country says enough is enough. We currently have 45 to 48 million people with no healthcare and we have an amount equal to that with what we would call inadequate healthcare, because it only covers minimal care, not if they have catastrophic accidents. It is just inadequate. Yet at the same time, the average American corporation that wants to export who is providing healthcare, has about a 15 to 17 percent disadvantage. That’s before you factor in all the other things we’ve talked about. So, again, that is a public policy fight.
If there is going to be a manufacturing cornerstone in the American economy in the next 25 years, not only are we going to have to fix this rotten trade regime, but we are going to have deal with the issue of national healthcare. The fights between us and employers are employers wanting to eliminate [insurance] or shift costs. So they will say, “Okay, healthcare was costing me $100. It went up to $110. You were paying $20. Now I want you to pay $30.” Workers are saying, “Look, I never got a raise, and now you want me to pay $30. I want to send my kid to college and I want to put something away for my retirement. No, I’m not going to do that.” We end up in a fight. Well, we have not solved the healthcare problem. Healthcare still went up and it still is the most expensive in the world. It’s inefficient.
I was just talking with someone who was working on a healthcare presentation. I now get four pieces of information after I go to the doctor and before I get my bill. I even get one stupid piece of information that lays everything out and says “this isn’t a bill.” Let’s think about this as insurance. And what’s the most efficient way to deal with insurance? The most efficient way is to broaden the pool. So you put everybody in the pool. So what is the most efficient way of paying for it? You pay for it one way. Let’s pay for it so that every employer, regardless of size, has to put 3 percent of payroll into a pot. And how much does that generate?
The two most efficient methods currently for delivering healthcare in the U.S. are the Veteran’s Administration hospitals—by far the most efficient hospitals in the country—and Medicare.
HSR: They have very low administrative costs.
Gerard: And what do we do? We do the exact opposite. If you talk about people working against the national interest, this stupid, confusing, irresponsible Medicare Drug Bill—that is not a Medicare Drug Bill—that was passed by the Republican House and Senate in this last round that kicked into effect this year. If you scratch your head and think, “What could I do to really screw up the country? Well, I’m going to negotiate legislation that is going to have a drug bill that gives seniors a choice between 45 different plans, and I’m going to insist that we do not bargain for the lowest price. You’ve got to pay what the drug company says. Period.” Now you scratch your head and you say, “Tell me how that is in the national interest?” I want to hear the answer. You hear the yelling and screaming, because some governors are passing laws to import drugs for their Medicaid and CHIP [Children’s Health Insurance Program] programs from Canada. You hear the yelling and screaming by Bush and the Republican administration [asking,] “How do we know it is safe?” Do you know where most of the drugs come from?
HSR: The United States.
Gerard: Yeah. They ship them from the U.S. to Canada and they sell them in Canada. So the guys buy the drugs that were shipped from the U.S., and they ship them back, and they can buy them cheaper than they could have down the street. It is very simple. Canada has a very simple system. If you are going to put a drug on the market in Canada, you are going to be able to charge the average of five OECD countries. There is a drug monitoring board that any new drug or old drug—it is so easy to do with computers—they enter the prices from the five OECD countries and there is the average price. So if the average price is $1 per pill, that is what you pay. They don’t let you gouge.
HSR: To clarify one thing, is there still a lot of tension between management and labor on the issue of healthcare toward each other. Do you see a time in your tenure with the Steelworkers where there will be a joining of forces to create a more national or global change?
Gerard: The answer is yes. There is tremendous tension, because of what employers try to do at the workplace and collective-bargaining level, and there is an obligation on the part of the union to resist. Morally, we have to resist and be half-wise about it. One of the many problems with that is when you get to the collective-bargaining table and you are trying to reach an accommodation on—pick some key issue—on workplace organization, on putting something away for your retirement, having enough to live day to day, how you are going to put your kids through school and buy clothes for them, and then, how do you take care of the health issues? Now you put those things in a pot, and you go to bargain with your employer, and healthcare has gone from $100 to $160, what do you do? The employer says, “I can’t afford that $60, and even if I can, if that is all you want I’ll do that. But, there is no money left for your retirement, and there is no money left to improve your standard of living even though inflation has gone up three and a half percent. And, by the way, if I’m going to do that, I have to do it with less people, so I’m going to take the workforce down from 100 people to 75.”
How do you deal with that? So forget that it is me as the president of the union or our staff, how does the nation deal with that? We have 8,000 collective-bargaining agreements, compound that 8,000 times. And if you do that across the nation, do that 800,000 times. How does the nation deal with that? In Washington, and in this group of right-wing extremists, you deal with it by punishing workers and working families. And you pass laws to allow the companies to [move] off-shore and set up a haven in Bermuda. When does a company quit being an American company? Black and Decker imports its tools from China, markets them in America, and sets up its home base in Bermuda. Is that an American company? Why should we give them tax breaks, which we give them left, right, and center? So am I pissed? You’re damn right, I’m pissed. Is there tension? Yeah. But at the same time, certain more enlightened employers are joining with the union.
I can tell you right now that the steel industry and the Steelworkers have a program of going out and talking and raising awareness about this healthcare crisis and trying to figure out what the national solution is. General Motors is in terrible circumstance and the Auto Workers are dealing with it as best they can, but you want to talk about corporate suicide, I have not heard General Motors utter a word. They can build a car in Europe or Canada—same car, using the same people, paying the same money, doing the same thing—for about $1,200 cheaper, because of the way healthcare is funded. They can teach working families a lot about class solidarity. Don’t tell me this isn’t a class issue. When General Motors is prepared to say that we are in financial distress, but not have the guts to break with their class and say that we know a universal single-payer healthcare system everywhere else in the world works.
HSR: I wanted to end with a question about immigration policy. There are two issues—in preparing for this interview—that came up that affect labor that have been in the mainstream press, and that is the special status of foreign workers with specialized skills, such as those in the technology field, and the flip side of that is the influx of unskilled foreign workers who enter the country to find work. What is the view of the union on current immigration policy?
Gerard: I am an immigrant.
HSR: Where are you from?
Gerard: Canada. I got here legally, so I have a strong view that we need to have…well, it is really not a simple question. Part of why you have got this huge influx of illegal immigration takes you back to the same place we started, which is this global trade regime. Since the passage of NAFTA, Mexican—and I’ve lost track the last six months so I could be a bit off—up until the middle of 2005, [the] Mexican standard of living had declined by 26 percent. So people who were already destitute are even more destitute. As they come off the farms, as the peasants leave looking for industrial work and are moving north and find they really can’t survive, they are already away from home, so they get somewhere where they think they can survive. So we are not going to solve the illegal immigration thing by simply saying we are going to build a bigger fence. The way we are going to solve illegal immigration is by helping Mexico raise its standard of living, which means we’ve got to go back and change the trade regime.
We’ve got to be able to say that if you want to export those products from Mexico to the United States, you have got to take steps to find ways to increase the standard of living. Why should an Alcoa worker who lives two miles across the border in Mexico from Texas get paid 50 cents an hour, when the Alcoa worker 10 miles away from the border makes 16 bucks [in the U.S.]?. There is a level of exploitation that we should say is unacceptable. So maybe you don’t want to pay them 16 bucks; pay them 10, and at 10, maybe they will be able to survive. We need to change those rules to deal with that immigration issue. I think that has to be part of that immigration discussion. I can almost guarantee you that in the current Washington environment, it won’t come up. The reason it won’t come up is that both Democrats and Republicans would have to admit that the trade regime they built is not working. That is what is driving illegal immigration.
Go back to 1990, and see what the public was saying about the average annual level of illegal immigration into the U.S. and then track it every year up to 2004. I think what you will find is that every year the level of illegal immigration went up. Then track it against the standard of living in Mexico, and you will find that every year it went down. So you build all the big fences you want. Unless you fix that, people are going to try to feed their families. I think we have to deal with the illegal immigration issue. I think there is a level of hypocrisy and dishonesty in the national immigration policy that, as one of my friends says, “Enforcement stops at the plant gate.” The other way to stop illegal immigration is to say to an employer, “For every illegal immigrant that we find you having hired, we are going to charge you $100,000.” I can guarantee you they will find a way to find out if that person is legal or not. And the ones that obviously aren’t, won’t have jobs. God help us, they will have to make their way back or they will make their way to something to get legal. You will find that the enforcement of immigration policy stops at the Border Patrol.
[As for] the visa thing for the so-called high-tech workers, in workforce terms, that’s just bullshit, to be blunt. The reason we are providing those is they were a tool to drive down the standard of living of high-tech workers and to deal with the inadequacy of our education system. If you pay people decent wages and you train them for those jobs, they will take them. If there is a shortage, then ramp up your training. You don’t have to do all the training in the university; do it in the workplace. If you take a 48-year-old man who has been working in a mill and is pretty smart, and you start teaching him or a woman, they will learn that computer stuff. It is not all that hard. Even I have been able to teach myself. So I think that whole issue around those visas originally was used as a tool to inefficiently deal with the inadequacy of the education system and a way to deal with the supply and demand of labor, because if there is a shortage of supply and higher demand, you have got to pay more. So that was a way of suppressing wages.
I think one of the tools that is at work with that is the huge exodus of so-called high tech jobs to places that have a very, very sophisticated education system. We could learn a lot by looking at the way the Indian economy has dealt with its higher education system. They have got a system where they are graduating more engineers per capita, more doctors per capita, more computer engineers per capita, more programmers per capita. The fact is, they have decided they want to be in that field and they have designed their education system to do it and they have designed their education system to operate at the very high end. We have done the opposite. And we have made education so expensive, so expensive. Yesterday I was talking with Governor Vilsack [of Iowa] about education and we kicked around that [somebody’s kid] came out of university owing $70,000 and he would like to buy a house. He can’t buy a house until he pays down the 70 grand. No one is going to lend you money for a house when you’ve got another $70,000 mortgage. So they calculated that the rate that he could pay that down with the entry level job he got after finishing university, he would not be able to afford to buy a house for at least 10 years. That is without factoring in what will happen to cost of housing over the next 10 years that might go up 40 percent.
That whole piece is of some worry for me around the issue of immigration and how that plays out. I think it is a dilemma and I haven’t really thought through or had the kind of discussion with our board and local leadership that I want to have about what we do about the people that are already here. If you believe that the system is broken, and people are really here to try to survive and feed their family, then you need a way to figure out who they are. And at what point do you let them stay legally or ship them home? I don’t have that answer. It is an issue that I clearly don’t have a good enough grasp of, but I have a pretty decent grasp of how that fits in with the Wall Street economic model.
Almost everything that we have talked about has really benefited the financial communities of America as opposed to the industrial community. There was a guy who worked here for many, many years. He was our chief economist. He has since retired and passed away. His name was Jim Smith. When I got elected to the board in the early 80s, at some meeting where we were talking about stuff, Jim said to me, “Leo,” he said, “What’s going on right now in this country is a fight between the people that make money by moving capital and the people that make money by making things. If the people that make money by moving capital win, we are in trouble.” If you go look at financial institutions, Citibank is the world’s biggest bank. It has banking operations now, and it is the largest bank in about 25 countries, but it has banking operations in about 120 countries. So if you are Citibank, to use them as an example, you make money by having Company Y make its products in the lowest-wage place, and you will lend them money there and you will charge them American rates.
The mistake that we have made as citizens—and the mistake we’ve made as observers—is that we’ve looked at these things as a series of separate stove pipes. They are not separate individual problems; they are interrelated problems, and one plays off against the other. As companies are getting squeezed because of healthcare, more and more people are falling out…and workers have to make difficult choices, sometimes having to withdraw their labor and not having any income for a while, while they fight on this principle. We are collectively changing the economic balance of the nation. There is just an overwhelming amount of statistical information—maybe too much—that proves that the economic model that has been brought about since 1980, the last 25 years, is working against the concept of having a strong industrial economy, and it is working against having a healthy and growing middle class. And, in fact, the middle class is shrinking. Probably what Bush will do about that, if he can, is change the definition of middle class, so he can say it is growing. The middle class is shrinking. The rich are getting richer. The rest of us are getting poorer. The disparity between the middle and the top and the middle and bottom is growing. That just isn’t good for the country. It is not just about the Steelworkers or our members. It is about the country.
Think about this. The four largest auto parts producers in the country filed for bankruptcy. Where did they file? Delphi filed for bankruptcy in the U.S., yet it has operations in about 30 countries. It did not file in China, Japan, Bulgaria, Brazil. It filed in America. General Motors is losing its shirt in America, but it is making a ton of money in China and in Europe. Why is that happening? It is happening because the economic model that is built for America is working against the interest of America. You don’t have to be very smart to figure this out. You have got to be patriotic to a degree. And you have got to believe that country is better if it has a bigger, healthier middle class. I will close by saying this to you: I ask people pretty regularly now when I go to give a speech. Tell me on any single point, as an industrial worker or a middle-class family—because a lot of our members do not work in steel mills—as a middle-class family, tell me one thing this government has done that has made your life better. Tell me. You are going to have a hard time thinking of one thing this government has done in the last X years that has made your life better. If a government can’t tell its middle class what it has done to make its life better, why do we keep voting for these dumb bastards?
HSR: Wouldn’t the administration say, “We have cut your taxes, so you have more choice to do things with the money?”
Gerard: And that made your life better? I got a choice. You cut my taxes by 600 bucks. I got a choice about paying my kids’ tuition that went up by $2,000 or eating another $1,100 on my healthcare bill or driving on roads and bridges that are collapsing, because there are not enough—I have not even touched on the goddamned war. The war is now at a $1 trillion. Somebody needs to tell me why we went. And guess what? We don’t figure that $1 trillion into the budget. That is an off-line item. One of my staff today said we had to speak out about this, because if this continues for another five years, it will be a $3 trillion or $4 trillion war and that will suck up so much capital, that we won’t have the ability to do anything. You have got a budget deficit of—hell I don’t know what it is—$500 billion a year. You have got a trade deficit of $1 trillion coming—$700 billion last year. And you have got this off-line item that we pretend does not exist. Somebody needs to tell me how I got to be better off here. I’ll debate—whatever they call themselves that little group from Pittsburgh here—that thinks we are going to survive in the high-tech world. What are we going to export? Where are we going to generate the revenue from? Who is going to get the money to go to Nordstrom? So, yeah, I worry about this stuff a lot.