Wednesday, September 28, 2011

The Heart of Australia

Its huge. A steel mill in Wollongong, touted as the largest manufacturing factory in the Southern Hemisphere. Bluescope. It has to be huge. This is the economic heart of Australia. It drives all the other economic parts and its heartbeat is the health of the economy. From it comes one of the most adaptable products on earth, steel. It takes iron ore, coke/coal, limestone and other elements--in most cases, from all parts of Australia--and in an enormous cauldron fuses them together to produce this commodity that drives the real economy. This is not the Wall Street smoke and mirror money, this is production. This is the basis of all economy. Not google, not facebook, not twitter. We have moved so far away from the means of production that we forget that all of the derivates, futures, all the stock market empires are based on this simple outcome...production. It is an inverted pyramid built on production. And you cannot get more basic production than steel (perhaps agriculture.) Standing 30 feet above the hot slabs coming off the line (picture) , even at that height, the intensity of the heat is unbearable. The shear size and the constant production (24/7) is a true analogy of the heart. The rhythm, the heat, the flow. How small seemingly inconsequential event have big impacts. Smoking and heart disease, and in the economy, exchange rates and the export of steel.

So it came as a surprise last week when talking with one of their workers at a BBQ that the local steel mill is closing one of its two furnaces. The exchange rate is so high that it is making steel too expensive to buy. SO they are shutting down their export side of production. Although Switzerland who faced similar export issues (not with steel) devalued their currency so that they stayed competitive, Australia remains with a very high exchange rate. But visiting the mill yesterday and seeing this enterprise in such a scale, I felt for the first time while being here, a sign of arrhythmia in the economy of Australia.

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