Business: Europe's Slumping Industries

On the surface, European life seems glossier than ever. The roads leading to Rome are crammed with shiny new cars, the pricey restaurants of Paris are crowded with smartly dressed diners, and shops from Stockholm to Seville do a brisk pre-Christmas business in luxury items. But there is a dark underside to this bright picture. Unlike the U.S., the industrial nations of Europe never really recovered from the 1974-75 recession, in part because they avoided rapid-growth policies for fear of aggravating inflation. A consequence, as well as a continuing cause, of the sluggishness is the decline of three basic industries—steel, textiles and shipbuilding—that provide 4.3 million European jobs. Many companies in these ailing sectors have grown too unwieldy and inefficient to compete in a changing world. To survive, they must shrink, evolve and innovate. Says West German Economics Minister Count Otto Lambsdorff: "There is no reason for losing our heads, but the seriousness of the situation is not to be underrated."

The wrenching industrial changes are stirring worker protest. Last week, their jobs in jeopardy, West German steelworkers were threatening to strike to back up their demands for shorter hours. Meanwhile, the Belgian government took over a large part of that country's steel industry. In September, French steelworkers called a one-day strike against a government plan to rescue their industry from bankruptcy by, among other means, eliminating up to 30,000 jobs over the next five years. Textile workers in France's Vosges region earlier staged an angry march through factory towns to protest the downfall of the once mighty Boussac textile empire. In Toulon and Hamburg, shipyard workers held demonstrations for government action to prevent further closures.

The main cause of European concern is the aggressive entry into world markets of South Korea, Singapore, Brazil and Mexico, which have mastered the basic technology in some relatively unsophisticated industries.

Last year 43% of the cotton products bought by Europeans were made abroad, in many cases by firms set up by European manufacturers. The most prominent suppliers were Hong Kong and South Korea. All these countries were simply taking advantage of the high wages earned by European textile workers. In Belgium the average hourly wage is $9.17; in West Germany, $8.80; in Italy, $5.78. Textile workers get 98¢ an hour in Hong Kong and 62¢ in South Korea.

The Third World is also moving into steelmaking. Brazil and Mexico have already become exporters. Argentina and Chile are increasing their capacity. By the early 1980s some of the oil-producing Arab countries will be turning out steel. In shipbuilding, South Korea and Brazil have some yards that are more modern than Western Europe's. Along with Poland and Taiwan, they can produce bulk carriers even more cheaply than Japan can.