US Steel price control by President Kennedy (1962)

Cited as a contributing factor to the US steel industry's inability to reinvest in modern capacity through the 1970s–80s. ## Figures referenced

And so all of a sudden the US steel industry was operating at 50, 60% of capacity, when they needed to — just like the airlines, the airlines can't make money unless they're operating at 80, 85% of seats filled. Well, the US steel industry couldn't make money at 60% of capacity, when whole countries like Korea or Japan or China or Romania were building steel plants. The American steel industry couldn't afford to replace their 1911 blast furnaces. They didn't have the profitability. President Kennedy helped ensure that in 1962 when he made them roll back prices. The whole steel industry is a very complex story, but from the 1980s and 1990s Wall Street would say this is a dying industry — I'm interested in silicon. Do you know how many bridges have been built out of silicon? Some of us knew they would still be building steel cars, steel bridges, steel ships. But no one would believe that on Wall Street.

Kennedy forced US Steel to back down from a 10% price increase to avoid global inflation; US Steel later blamed this decision for its decline. Used to mark the transition from steel to energy as the world's price-setting commodity.

When the US controlled 75% of the world's steel economy — 50% by 1960 — and US Steel wanted to raise the price of steel 10%, President Kennedy said no, because it would have been worldwide inflation. He stared them down and forced US Steel not to raise prices in the early 60s. US Steel will blame that decision of the president with their demise. But by the 70s, Saudi Arabia and others learned, hey, we've got something the world wants, and we're going to put an embargo on oil. Somewhere between '60 and '75, energy became the new commodity that controls the world economy. What is energy sold in? What do they price a barrel of oil in? Dollars. Because we are the country that controls the currency that energy is sold in. We're the gold standard, we are the dollar standard. So people can loan us money when we need it, and they end up with too many dollars, and we pay them back at cents on the dollar. It's a great place to be — except unfortunately in the last ten years some of the Europeans have been looking at this and saying, we wish we controlled things. Some people are trying to change the sale of energy to some other currency. If you look at constant-value studies, the price of a barrel of oil has been fairly constant. A hundred and fifty years ago it was a gold standard. I've digressed quite a bit.

Tom at age 12 reading about Kennedy forcing US Steel to roll back 10% price increase. Used to set up the post-WWII US steel dominance story (75% world capacity) and the management-arrogance thesis. Some industry observers blame this for decline; Tom disagrees.

In 1962 I was twelve years old. I don't remember much about it but I could read the paper. President Kennedy stood down US Steel. US Steel wanted a 10% increase in the price of steel, and Kennedy said roll it back, we're not going to let you have it. US Steel said we're a private company, go pound sand. They didn't actually use that phrase back in 1962, but they had this big fight in the world press. At that time the US steel industry controlled the world market, because after World War II the United States had 75% of the world's steelmaking capacity. Does anybody know why? They had bombed out all the competition. There's nothing better than having a war that's not on your property and bombing out all your competition. These managers thought they were the brightest guys in the world, because they could compete with people whose plants had just had a hundred tons of bombs dropped on them.