David Michael Miller
“A new day has dawned in Wisconsin.”
That’s what an exultant executive at Wisconsin Manufacturers & Commerce, the state’s pre-eminent business group, said when Gov. Scott Walker signed the auspiciously numbered Senate Bill #1 into law on March 11, 2013.
That measure, strongly opposed by Democrats and environmentalists, made it easier for an iron ore mine to open in the Penokee Hills in hard-pressed Iron County where unemployment sometimes reaches into double digits.
“Thousands of new jobs” would result from the rewriting of the state’s mining laws, the governor confidently predicted. Indeed, WMC detailed the expected creation of 700 mining jobs paying $60,000 a year with more than $20,000 in annual benefits. Plus another 2,100 spinoff jobs for the struggling “up north” economy.
Earlier, the powerful Wisconsin Club for Growth, in a fierce attack on Dale Schultz, the lone Republican state senator opposing the mining legislation, claimed he would kill “more than a billion dollars in private-sector investment and thousands of quality jobs in mining, manufacturing and ancillary businesses that would last for decades.”
All this, of course, was a pipe dream.
Adele, my neighbors’ preschooler, turned over more earth digging in her backyard than the Florida-based mining outfit called Gogebic Taconite did in Iron County. Adele probably found more iron ore, too. Blaming hostile federal regulators, Gogebic quietly dropped plans for the mine early this year without bothering to secure a permit under Wisconsin’s newly liberalized mining law.
Ouch!
Bluntly stated, Wisconsin’s political and business leaders had led us on a snipe hunt. For liberals, fearing ecological ruin in the north woods, it’s easy enough to find malevolence and bad faith in this episode. But self-delusion mixed with ineptitude — and some avarice — may better explain a fool’s errand disguised as economic development.
It was a costly waste of time when real action was needed.
The Wisconsin economy has been struggling since the start of the new century. Household income has been substantially reduced. The percentage of economically disadvantaged children has jumped. Job growth has been painfully slow. (It took nearly eight years for Wisconsin to recover the jobs lost in the Great Recession.) And poor Iron County recorded the second-highest unemployment rate in the state in September.
I’m dead wrong in making the anti-mining case.
That’s what Kurt Bauer, WMC’s president, argues. “[T]he largest untapped iron ore deposit in North America isn’t going anywhere,” he says in an email. “The legal and regulatory framework now exists should another mining company decide to apply for a permit in the future when it makes economic sense to do so.”
WMC is playing “long ball” on mining, he explains. People want instant gratification from the legislation, but “it’s like planting an apple tree: It takes years before it finally bears fruit.”
The governor’s office, in an email from the press secretary, wasn’t backing down either. Laurel Patrick faults the federal stance on wetland mediation for killing the project and touted Walker’s other pro-business policies. She made no mention of the mine’s underlying economics.
That was smart, because the numbers don’t add up.
Thomas Power, 75, an emeritus natural resources economist at the University of Montana, has studied mining for almost 50 years. He chuckled and said “certainly not” when I asked him in a phone interview if mining iron ore in northern Wisconsin was a good bet for producing jobs and wealth.
“Mining in the United States hasn’t been a growth center or a source of regional prosperity for at least a half century,” he says. “Just look across the country. When was the last time the Iron Range in Minnesota was prosperous? Or the last time when Butte, Montana, was prosperous? Or the Appalachian coal fields? Or the Ozark lead fields? Or the Arizona copper towns?”
The only contemporary success story he could cite was gold mining in the middle of nowhere Nevada, where the workers commute to work.
Reality is that mining operates on a recurring boom-and-bust cycle, he notes, and the bounce-backs are inevitably fueled, in part, by technological advances that reduce the workforce.
Mining jobs, as a result, has been greatly reduced. “It’s like agriculture,” Power says. “The rural Great Plains is losing people. Its not because we’re producing less and less wheat. It’s because we need almost no people to produce the wheat. It’s the same with mining.”
“It’s hard to imagine how some sort of sustainable prosperity can be built around an industry of that sort,” he adds. “That’s not badmouthing mining. That’s just the facts of the matter.”
Power says those facts are grim both worldwide and in the United States.
To begin with, the U.S. is a bit player in iron ore mining, responsible for only 1% to 2% of worldwide production, he says.
The good stuff, once mined in upper Michigan and northern Minnesota, is long gone.
The Penokee Hills deposit, known for 150 years, has never been dug because of its projected high cost and low quality. Steel mills in the Southern U.S., Power notes, find it more economical to import high-quality iron ore from Brazil than to look northward to the upper Midwest.
It gets worse.
Power says the price of iron ore has plunged from almost $200 per ton to almost $50 a ton.
This reflects, in part, the cooling of the massive Chinese economy and its once insatiable hunger for steel. “Almost nothing is going to survive with three-quarters of the price disappearing,” he says.
This news is doubly bad for Wisconsin. The market plunge didn’t just cause Gogebic to drop its lease on the Penokee Hills. It’s also damaged Wisconsin’s critical but struggling manufacturing industry, which makes mining equipment for the world. Two big equipment concerns, Joy Manufacturing in Milwaukee and Caterpillar (which bought South Milwaukee’s storied Bucyrus-Erie firm in 2010) have laid off hundreds of Wisconsin workers because of the global slowdown in mining.
Even the state’s scrap metal industry has crashed. Loeb-Lorman Metals, which rode the industry’s boom-and-bust cycles for a century, was forced into financial receivership in July.
Bad news for small-town Wisconsin. The company’s assets — it had processing sites in Fort Atkinson, Watertown and Reedsburg – were sold to a St. Louis firm whose plans will probably include plant closings.
One can only pause and ask: Our best minds thought mining was a good bet for Wisconsin’s future? These are the people you would think would have the greatest insight into business dynamics — free-market Republicans and their corporate supporters.
And they took us on a snipe hunt.
Embarrassment may partially explain why the mining issue quickly fell into the memory hole and — whoosh — disappeared. This despite the fact that mining was deeply entwined in the Capitol’s gnarly political crusades. The much-vilified John Doe probe uncovered that Gogebic contributed $700,000 to the Wisconsin Club For Growth’s anti-recall defense of Walker and Republican lawmakers. WMC’s political arm spent nearly $900,000 on TV ads to oust an anti-mine Democrat from the state Senate in 2012, according to the Wisconsin Democracy Campaign.
Old news!
The Capitol’s ruling political class quickly moved on to “right to work,” “prevailing wage, and assorted “free speech” issues aimed at defanging campaign regulation and shrouding political bankrollers in protective secrecy. Mine? What mine? The issue was seemingly scrubbed from the collective memory.
“What could they say?” shrugs former state Sen. Tim Cullen (D-Janesville). “They passed the law. They sold the public a bill of goods. The mining company walked out on them.”
Here’s the kicker. Bad policy exacts a cost. It’s the opportunity cost of not pursuing more productive strategies. Efforts that might actually put people to work and fatten their wallets.
It’s fair to ask, as Bauer did of me: If not mining, what else do you do to help the struggling north country? Hey, there are no easy answers! But here’s a start.
George Meyer of the Wisconsin Wildlife Federation suggests a federal protective designation for the Penokee Hills’ (and Bad River) watershed akin to the tourist-friendly Apostle Islands’. Business columnist John Torinus makes a convincing case for regional economic strategizing anchored in the tech schools and UW campuses. Tech advocate Tom Still argues we need to focus on startups to replace Wisconsin’s fading legacy industries. Cullen sounds the familiar refrain that Wisconsin needs more venture capital to help those startups.
And Laura Dresser of the Center on Wisconsin Strategy offers a common-sense suggestion for overall strategy: Government usually does best by not targeting a specific company for help but by focusing on broader-impact infrastructure improvements like K-12 education, college and tech training, modernized transportation networks, and expansive broadband and digital services.
It’s Thomas Power who neatly sums up the lesson of our mining escapade: Prosperity in the modern age “isn’t based on what’s buried in the ground but primarily on what’s buried in our head.”
“As an economist, I’m always appalled at the incredible fascination with that particular fairy tale,” he says. “That, like pirates, we should dig into the earth to find treasure.”
