This morning I am puzzling over the UK steel industry. Our Indian overlords, Tata, are selling up British Steel (making plans for Nigel!) because it is losing £1 million per day. That's not a viable business.
But there are many calls from the left to "save our steel industry". Petitions and so forth. How does one save an industry that is losing £1 million per day? At the very least this means spending £1 million per day.
The alternative is that about 40,000 jobs will be lost and a massive blow to manufacturing in the UK at a time when we're teetering on the verge of recession again. When the Tories came into power they were promising to rebalance the economy and create a "northern powerhouse" that would produce "export-led growth" (merchantilism 101). Now it looks like the North is going to be gutted, again. And Wales too.
The global economic slow down is not going to go away. Steel consumption will continue to be at much lower levels than the peaks of the last few years. China is not going to boom again any time soon. China subsidise steel production and sell it on the world market at below cost. It keeps Chinese steel workers in jobs.
So is this what we need to do? Basically this would be a different kind of welfare payment. Instead of paying the dole to unemployed steep workers, we subsidise a failing, unprofitable business to keep them employed. Keeping the steel industy costs about £350 million per year. Average welfare payments would be about £20,000 per year, times 40,000 = £800 million. So it would be much cheaper to keep the steel industry going - though I've plucked that figure out of the air.
And of course 40,000 people in work is probably better than 40,000 people on the dole. The spinoffs are hard to calculate. In some places whole towns would more or less cease to be economically viable if we lost these jobs.
But will EU laws allow govt to act to prevent the closure? Are we allowed to subsidise steel production? I'm not sure. Will government ideology allow them to even consider it? Loads of unknowns.
