Saturday, April 9, 2011

BBC on Krivoii Rih

I've written about Kryviy Rih (or Krivii Rog in Russian) a couple of times.  The long narrow iron ore and steel city 40 km south of us that is over 100 km long from one end of the city limits to the other but only 20 km wide.

BBC has a set of articles and videos on the city as part of their series on Ukraine.  http://news.bbc.co.uk/2/hi/programmes/direct/ukraine/9442123.stm .  The ArcelorMittal steel mill is huge.  It was originally privatized in the kind of shady deal that the FSU is famous for.  Pennies on the dollar to a local with connections.  However Yulia Timoshenko when she was Prime Minister had the deal quashed in court and sold it to an outside company for $4.8 billion dollars.

The original mill was built in the mid 1930's and when AM bought it, employed 55,000 people.  They are down to 37,000 with the modernization already carried out in the past 5 years and plan on taking the number down to 15,000 over the next 5 to 10 years.  You can watch the video of the CEO talking about world norms for steel production of 1 person per 1,000 tonnes, meaning the plant really only needs 6,000 people.  But they need another 9,000 to make up for services which are normally procured from outside sources which do not yet exist in Ukraine.

Wages will certainly go up but there are 40,0000 people who were under-employed and are now unemployed. Under-employment was a huge problem in the FSU as everyone had a job that wanted to work but the jobs were not necessarily productive.

I read somewhere (and can't find it now though it may have been Paul Kennedy in The Rise and Fall of the Great Powers) that the combined output of capital and labour in the Soviet Union FELL 1% per year for the last 30 years of its existence.  Countries run by on ideology alone, ANY ideology, cannot remain competitive in a manner that provides a decent lifestyle for their citizens. Which ought to be the raison d'etre of any country.

There is a story that Stalin, Khrushchev and Brezhnev are on a train. The train stops and will not move any more at all. Stalin condemns the entire crew as enemies of the people, has them rounded up and shot.  The train still doesn't move.  Khrushchev rehabilitates the entire crew posthumously.  The train still doesn't move. Brezhnev says "Let's just pull the blinds and pretend the train is moving".

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