It’s a long way from Moscow to McCook.
But so fast are the world’s economies merging that we need to spot unlikely connections, such as the one between last week’s Kremlin summit and recent events in the little factory town off the Stevenson Expressway.
This particular linkage involves big stuff, such as the merits of free trade, the pain of unemployment and even the prevention of nuclear war. But the best way to see the thread is by recalling a not-so-big story that appeared in these pages 12 days ago.
Reynolds Metals Co. announced it was laying off 800 of the 1,200 employees at its big McCook aluminum works. Industry analysts explained that there’s a glut on the world market and that the price of raw aluminum has tumbled to 47 cents a pound from $1.
It turns out that Russia and the other former states of the Soviet Union-all of them desperate for hard currency-are flooding the market with aluminum ingots. It’s one of the few things they produce that the rest of the world wants to buy. So they’ve stepped up production and raised exports sixfold since 1989, chasing the price down, down, down.
Reynolds and the other big U.S. and European producers have cried foul. The Europeans have slapped on import quotas. American producers are about to petition the Commerce Department to do the same. Unless, of course, the Clinton administration can talk Moscow and the other ex-Soviet governments into agreeing voluntarily to cut shipments to the U.S.
And, indeed, that’s what the Clinton administration, no doubt worried about layoffs in McCook and elsewhere, has set out to do.
This led to a very curious situation last week at the Moscow summit. President Bill Clinton huddled with President Boris Yeltsin, and the two agonized over how the U.S. can help Russia speed economic reforms while averting economic and social chaos. Clinton then reportedly asked Yeltsin to curb shipments of aluminum, even though the metal now accounts for 30 percent of Russia’s income-earning exports.
Free markets are what you need, our president seemed to be saying, but when it comes to aluminum, you had better re-regulate your market or we’ll have to protect ours.
To which I say, there has to be a better way.
With inflation in Russia running 12 percent a month and the ruble at an all-time low, the U.S. ought to be doing whatever it takes to help Russia export as much as possible. Instead of promising another $1 billion in cash (raising our aid to more than $4 billion since the Soviet Union collapsed), we ought to be combing through the wreckage of the Russian economy looking for ways to help them help themselves. More trade, that is, and less aid.
Cash assistance is largely wasted on an economy that lacks such basics as a banking system, a commercial code and wholesale distribution networks. Too much of the money ends up in the pockets of grafting former commissars, adding to the popular resentment fanned by Vladimir Zhirinovsky, that loudmouthed Joe Stalin wannabe.
Technical assistance is what Russia needs, help in producing oil and gas, gold and diamonds, fish and timber, vodka and caviar, and yes, processed metals such as steel and aluminum.
Instead of writing checks, we ought to be asking companies such as Chicago’s Amoco Corp. to step up efforts to form joint ventures with privatized Russian and Azeri oil companies.
Instead of pushing for export quotas, we ought to be pushing the U.S. aluminum industry toward joint ventures with Russian producers, helping them install more sophisticated and environmentally responsible production methods.
But how, you ask, is that going to help laid-off aluminum workers in McCook?
That’s the tough part. It won’t, at least not in the short run.
Cheap Russian imports-like imports from anywhere-will put some of them out of work. Our consumers, though, will benefit from lower prices. And so will our manufacturers, who can use the savings to expand and create more jobs. If we plan it right, those laid-off aluminum workers could be retrained for those jobs.
Such are the long-term benefits of free trade.
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Oh, and there would be one other benefit in this case: By helping Russia avoid economic collapse, we could prevent Zhirinovsky and his comrades from taking control of the government . . . and of the thermonuclear trigger.
That ought to be worth a few layoffs in McCook.