The Big Debate

Is the 91 million-ton capacity of the U.S. steel industry enough for an expanding economy? In the debate on this question, steel industry spokesmen, while conceding that there are now shortages in supply, maintain that their capacity is sufficient for the long pull. Assorted critics, ranging from Government economists to ideological warriors, insist that unless 10 to 20 million additional tons of capacity are built, depression may result.

The Charge. Henry J. Kaiser joined the fray. As owner of the $123 million, Government-financed Fontana (Calif.) steel plant and part owner of Portsmouth Steel Corp., he was nominally on the side of the industry. But in a nationwide broadcast, Kaiser, to no one's surprise, joined the industry's critics. Said he:

"It now becomes the duty of Congress ... to hold the greatest steel investigation that has ever been held in America. The steel situation has become so bad that it now jeopardizes the economy of our country . . . thousands of small manufacturers [are] dying for steel; for lack of steel, failures of small businesses are becoming a daily occurrence." Kaiser also managed to get in a plug for his old plea that RFC should wipe out the $85 million balance due on Fontana (TIME, June 2).

Last month, the C.I.O.'s Walter Reuther told a Senate committee that the steel industry had embarked on a program of "planned scarcity calculated to enhance profits and to fortify their monopoly." The charge was echoed by Henry Wallace's New Republic: "Despite the fact that other industries such as oil and container manufacturers are crying aloud that their work is hampered by a lack of steel, the steel industry has refused to expand . . . content with current high profits and fearful of another depression. . . ."

The Rebuttal. Industry's argument against the expansionists is based on the economics of production. Because of the scrap shortage, the industry cannot even maintain full use of its present capacity. But the current 85 million-ton production rate, industry points out, is 20 million tons greater than the 1929 "peak prosperity" year. The present steel shortage is largely due to demands that accumulated during the war and that, once satisfied, will slack off. Moreover, the shortage would be intensified by removing from present supply the five million tons of steel it would take to build plants to produce the new capacity of ten million tons.

It took $4.7 billion of private capital to build the industry's 80 million-ton prewar capacity. It cost $2.5 billion to add 15 million tons during the war. At present prices, it would probably cost another $2.5 billion to add another ten million tons. Such costs, argues the industry, would force the high price of steel still higher.

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