Thanks to a strange set of circumstances involving Twitter and a longstanding history of witty repartee with the Canadian Consulate's digital team, I was granted the chance to interview His Excellency, the Right Honourable David Johnston, Governor General of Canada, on Thursday, April 23.
The Governor General, constitutional head of the Canadian government as representative of the Queen, performs a series of diplomatic, ceremonial and cultural job duties. That's why, starting Sunday, April 26, he started a four-day tour of the Great Lakes region of the United States. I spoke to him before his trip began for a lovely chat about his childhood in the hockey-and-steel town of Sault Ste. Marie, Ontario, and the purpose of his trip to Minneapolis, St. Paul, Chicago and Detroit.
Johnston was a three-sport athlete at Sault Ste. Marie, playing hockey with Hall of Famers Lou Nanne, Phil and Tony Esposito and going on to become a two-time All American captain of the Harvard University hockey team. He would become a lawyer and respected law professor before Queen Elizabeth II granted him his current title in 2010.
The Governor General participates in a Canada-U.S. Forum Monday in Minneapolis before giving the keynote address at the Great Lakes Economic Forum Tuesday in Chicago, and then concluding his trip in Detroit later this week.
My interview with Johnston was broadcast as part of the Saturday, April 25 "Give and Take" program and again Monday morning on Northern Community Radio. You can listen to the interview now at my blog.
Some highlights from the interview with Governor General Johnston:
On his offices apolitical role
"It's delightful in the sense that as I visit communities and other nations that I'm not negotiating difficult matters or tensions but attempting to strengthen the people-to-people relationships and say, you know, when people get to know one another better and build on what they have in common, good things happen."
Our nations' special relationship
"We've enjoyed so much security, so much prosperity and so much exchange of ideas and innovation. In today's world where national boundaries are diminishing somewhat you look at regional ecosystems and what they have in common and how they enrich one another. First of all the Canada and U.S. trade relationship is by far the largest in the world. Canada is the largest customer for 35 U.S. states. That basin of the Great Lakes connecting towns and communities is one of the busiest in the world with a great deal of movement back and forth -- goods, services, ideas and education. Our challenge is to take that very special relationship of the Great Lakes and say how do we move it up another level or two and be very ambitious about it."
The Great Lakes states and provinces comprise the world'd fourth largest economy.
Isn't that impressive that a geographical region that circumscribes a lakes system is the fourth largest economy in the world. It's built yes, initially on natural resources. It began with the fur trade and then it became agriculture,
When you think of the cross border movement of intellectual property, and therefore goods and services, and where we have to go, it's really quite exciting. And it's all in this backdrop of really good friends who enjoy one another's company and contribute so much to the health of the communities on either side of the border.
How can we renew our industrial cities and natural resource-based regional economies?
We have to be innovative, don't we. We have to be resilient. We have seen economic cycles and industrial cycles throughout history. Those societies that manage those best are always looking ahead.
... What we must do to our natural resources based economy is add value to those resources, use ingenuity and great public education systems to trade not just with one another but with the world, and constantly reinvent ourselves.
... I believe that happens best if you are vigorous and aggressive in your competition, to take your trade directly to the world. Then build the collaborative networks and partnerships that develop from that."
One thing he wants Minnesotans to know
"We've been great neighbors and we face the challenge of reinventing ourselves. Let's do it and see the Great Lakes as something that brings us together as it has for 400 years."
Waiting for the Minnesota legislature to act on broadband infrastructure for rural Minnesota is a lot like trying to update your operating system on a rural computer. It takes forever and halfway through you have to start over because of some stupid error message.
One thing seems readily apparent from the last few days of Minnesota's legislative session: leadership of the GOP House and DFL Senate seem prepared to drop nearly $1 billion on concrete and rebar, but a drop in the bucket for broadband infrastructure.
The House has scraped together a plan to slide $10 million toward statewide broadband efforts, while the Senate has mustered $17 million. The governor's broadband task force had recommended $200 million in spending to connect rural communities to affordable high speed internet services currently unavailable to them, but even Gov. Mark Dayton only asked for $30 million. Most experts seem to acknowledge it would take an even bigger investment by state and private sources to fully connect all Minnesotans to broadband.
As I wrote recently, failure to invest in broadband at this juncture in our economic and political history would be a historically epic mistake. Some skeptics argue that physical wires aren't the future of broadband, but that seems more an excuse than anything. Cellular data and satellites can deliver internet to millions, but at great expense and not at the universal download and upload speeds necessary for modern commerce. Ask my wife and I; we deal with these issues daily with home-based business, freelance work and online teaching that actually pay our taxes and enroll our boys in a Greater Minnesota public school. Or don't, I guess. We're actually used to that.
The political roadblock to rural broadband is, pure and simple, control issues. Some simply refuse to acknowledge that the people, by way of their government, have an important interest in fostering access to the modern internet. These slow actors will have lots to talk about with the politicians who opposed rural electrification 100 years ago when they get to Heaven for Dummies. Meantime, the campaign continues and I know who's going to win ... eventually. The question is how much damage will be done to the economy of rural Minnesota on the way to happy victory.
The Star Tribune reports that the Iron Range Resources and Rehabilitation Board agency will face a review by Minnesota's Legislative Auditor after months of scrutiny by the state's largest newspaper.
The April 18 story seems to indicate that Legislative Auditor Jim Nobles would focus on a widely reported deal to help relocate a Democratic-leaning call center in Eveleth. From the report:
As for the IRRRB, [Legislative Auditor Jim] Nobles said that his office is gathering information on the loans the agency made and details about the political and commercial work Meyer Associates did and that he would use the information to decide any further action. “That action could include a full audit of the IRRRB or a special review focused just on the call center issues,” Nobles said.
The Jennifer Bjorhus investigative series about the IRRRB has been relentless, highlighting some of the agency's enduring challenges and failures for a statewide audience. That said, I don't think the stories have drawn blood yet, so to speak. The fact that Giants Ridge hasn't been a moneymaker, or that the agency has a history of backing projects even through initial failures to keep people working, isn't news and isn't illegal or inherently nefarious. Politics at the IRRRB? Color me unsurprised.
What could really affect change, however, is a thorough report from the Legislative Auditor investigating the agency's entire process of risk assessment and comprehensive planning. Commissioner Mark Phillips and others at the agency are quoted saying they welcome the review. That's good to hear. I happen to agree. This agency needs a thorough audit and self-analysis as we enter a new period in the Iron Range's economic history. The IRRRB's unique ability to marshal Iron Range taconite revenue for the purpose of economic diversification will be crucial to the next decade.
We know that Minnesota's iron mines must modernize to survive, for instance, and even that won't fundamentally change the economic and demographic reality of our situation. Even a healthy mining industry on the Iron Range won't recover the glory of the 1970s or the high water mark of the early 1950s.
When the history of this time on the Iron Range is written, it will either be said that the IRRRB ultimately stood as a means of diversifying our economy, or that it steadfastly protected self-serving agents of the status quo. These are harsh extremes, to be sure, but we need such clarity when we make policy for the future of the Iron Range. There is simply no time left to be passive.
Here on the Iron Range one cannot escape the talk of impending layoffs at area iron mines. You also can't mistake who company officials and unions alike blame for this situation: foreign steel dumping.
"Dumping" means foreign companies, sometimes as extensions of foreign governments, sell steel for less than it costs to produce, just to move it off their shores. Usually their motivation in doing this is to keep their own people working during periods of low demand, an option not afforded American mines and steelmakers. The U.S. steel industry rightly describes this as unfair.
Uh-oh! This blog post just got hit by a terrible storm. Right now all the insight, analysis and facts that were going to be part of this post are strewn about the street. Windows are busted out, doors swing open. Alas, things were going so well! No one expected this!
Worse yet, here come the looters. The looters are stealing my insight, analysis, and facts. Why, they're even taking the copper from the wires of my laptop as we speak.
SO WHAT CAUSED THIS DISASTER?
Who says looters? Well, that would be wrong. Looters don't *cause* disasters. Looting is a crime of opportunity. When a disaster strikes, looters use their base instincts to seize opportunity, often out of a perceived notion of survival.
So here's what you need to know. Steel dumping is like looting -- a crime of opportunity that benefits some players in the global economy at the expense of others. But the *cause* of the steel industry disaster is bigger, more complex and harder to predict than just saying "foreign steel."
In this increasingly strained metaphor, the disaster is the unabated collapse of global iron ore prices, which hit $46.70 heading into Easter weekend. We are just $10/ton away from the bottom of the glut that shut down all the mines on the Mesabi Iron Range in 2009.
Last week, I wrote about how the iron and steel crisis was not caused by environmental regulations, but those very plummeting iron ore prices. Since then, iron ore has dropped another $9 per ton, further worsening market conditions. Steel dumping has been a flashpoint before -- in the '00s, '90s, '80s. But what these times all have in common with today is the low cost of iron ore.
The iron ore and steel woes are so bad that some financial experts are saying they might prompt government banks to explore more rate cuts, something that runs afoul of the normal strategy in an otherwise recovering economy. The great fear is that an extended collapse in steel could detonate the whole recovery. Again, however, nothing gets better for Iron Range mines until prices improve. This could take a year, possibly more.
Why are the prices so low? It's complicated, but in essence you have too much supply, slackening demand in Asia, the strong U.S. dollar that puts our exports at a disadvantage, low oil prices bottoming out the demand for tubular steel. Pray tell, who do you petition about these problems? I will sign that petition. I fear, however, it will be more of a prayer than a petition. For those with unflinching faith in markets, this is what you can expect.
There will be hard days ahead. Some of the hardest will be in realizing that most of the world, nay, most of our own country doesn't care about our hard days. They've got their own problems. Wishing and hoping won't change this. Complaining and screaming won't change this. Our unbalanced economy will suffer the disproportionate pain it's built to deliver. Only our own attitudes and actions can change.
When a terrible natural disaster strikes, there are two instincts:
1) the cold, calculating planning to avoid the same amount of damage next time.
2) the warm embrace of human beings willing to work, sweat, laugh, cry and hold each other through hard times.
The Iron Range will need both this year. Iron ore will be back, but might employ fewer people. What else can we do? No community dies if we continue to breath life into that community. Beauty, art, and humanity supply all demand, if we nurture the gardens.
The truth is sometimes uncomfortable. This fact is about the only thing on earth that doesn't change. You can attack the messenger if you wish, but know that in our economic system the price of iron ore will determine when Iron Range mines reopen, and when steel dumping ends. Nothing more, nothing less.
This morning, U.S. Steel announced 700 impending layoffs at MinnTac, the Iron Range's largest taconite plant. U.S. Steel U.S. Steel to idle Keewatin Taconite, affecting 400 workers the idling of its Keewatin Taconite property on the western Mesabi. The MinnTac layoffs are slated to begin June 1.
I had a conversation with a construction worker who was on a crew at MinnTac recently. He was amazed at how much ore was stockpiled on site and told me that it didn't look good. You can't always believe what a company says, but you'd better believe their supply and demand issues.
If you've read much about mines this spring, it's probably been in context of the debate over wild rice sulfate rules and new legislation drafted to help mines like MinnTac. My Sunday commentary explained that this focus overlooks a much bigger problem in North American mining and the economy of Northern Minnesota.
Meantime, the grim news from U.S. Steel's website:
PITTSBURGH, March 31, 2015 -- United States Steel Corporation (NYSE: X) announced today it will adjust operations and temporarily idle a portion of its Minnesota Ore Operations – Minntac plant in Mt. Iron, Minn., effective June 1. This action is due to the company's current inventory levels and ongoing adjustment of its steelmaking operations throughout North America. The company will continue to operate Minntac at reduced capacity in order to meet customer demand.
The company routinely adjusts production at its operating facilities to reflect market fluctuations. These ongoing operational adjustments are a result of challenging market conditions that reflect the cyclical nature of the industry. Global influences in the market, including a high level of imports, unfairly traded products and reduced steel prices, continue to have an impact. As part of the temporary idling, all employees at Minntac have been advised of the upcoming temporary idling and are being issued notices under the Worker Adjustment and Retraining Notification (WARN) Act. The number of employees impacted will be based upon operational and, or maintenance needs.