The restructuring of Hamilton's economy, from smokestacks to knowledge-based industries
By Charles Wilkins
Just a generation ago, it seemed that steel would always be Hamilton's leading industry. The biggest steelmakers in the country had their biggest plants there, employing thousands and paying wages that fattened the local economy. Notions of cutbacks and cutthroat competition were as foreign as environmental concerns. But everything changed in the 1980s. A worldwide steel glut made competition keen and the steel mills lean. Automation became the order of the day. Work forces fell by half. Hamilton had to find other means of making a living.
The reorientation isn't over yet. But new industries, notably medical sciences and environmental remediation, have grown in economic importance, and today more Hamiltonians work in medical sciences than in the old stand-by, steel.
Leading the medical charge has been McMaster University's renowned Faculty of Health Sciences where, among other achievements, Dr. Adrian Upton heads a team that developed a "brain pacemaker," a device implanted in the chest that connects to the vagus nerve and helps prevent epileptic seizures.
Out on Hamilton Harbour, Russ Perry skippers his 30-foot sloop Magic over waters that a decade ago were seriously polluted. The clean-up around the steel mills not only brought trout and salmon back to the harbour, but it fostered the development of a brisk and exportable business in environmental improvement. Downsizing or not, steel will always be in the Hamilton picture. And looming in the background here is Stelco's renovated No. 5 blast furnace, built in 1968, rebuilt in 1990, and capable now, with a minimum of smoke, of turning shiploads of iron ore into 4,000 tonnes of hot metal a day.
IT IS A late afternoon in midspring, and there are hints of both winter and summer in the air. The sun behind Sam Lawrence Park throws a dusty pink glow across the city of Hamilton. A tour bus enters the park, stops, and 51 camera-toting Japanese tourists disembark. Like thousands before them, they take a few steps to the park's eastern extremity, absorb the view, and raise their lenses.
There is archival evidence that photographers have been drawn to Sam Lawrence Park since both the city and the art of photography were infants. And with good reason. The narrow, well-tended parkland perches on the edge of the Niagara Escarpment, a 90-metre-high ridge of dolomite and shale that bisects southern Ontario and flanks Hamilton's downtown core. The escarpment's local reaches are known as Hamilton Mountain, and its northeast prospect offers a dramatic view not only of the city and surroundings but of the hub of heavy industry in Canada.
Below and beyond the park, a panorama of office and apartment towers suggests utopian tranquillity, a sense that all is orderly and well in this city of 330,000. Farther east, the stippled surface of Lake Ontario stretches so far into the afternoon haze that it becomes indistinguishable from the sky.
But the area between these relative calms, the middle distance, is what most stirs the senses. There, the giant halls of the steel industry rise, silhouetted against the water and sky beyond. The vast structures of Canada's two major steel producers, Stelco and Dofasco, spread for kilometres along the waterfront, bolstered and besieged by storage sheds, conduits, oil tanks, mountains of ore and slag -- and by the clouds of smoke and occasional blasts of flame that spew from the forest of smokestacks. At either end of the waterfront, ore-bearing ships, enormous in their own right, lie dwarfed by the industrial megaplex they have travelled here to serve.
Suddenly, one of the Japanese tourists points eastward and exclaims excitedly. On the north shore of the lake, some 60 kilometres away, she has spotted the pride of postcard Toronto, the CN Tower, as tiny as a lapel pin in the pinkish light. A chain reaction of pointing and murmuring ensues, and again the lens caps come off.
It is appropriate that the essential view of Hamilton should include a snippet of Toronto, for no city has contributed more to Toronto's physical being than Hamilton. "Scratch the surface of one of those Toronto skyscrapers," says one-time Stelco employee Graham Wilson, "and you'll find high-grade steel produced right down here on Burlington Street." Wilson points out that the whole city of Toronto -- freeways, streets, sidewalks, bridges -- is held together with Hamilton steel in the humble form of reinforcing rods for concrete. "And every time somebody opens a car door or an oven or a dryer," he adds, "he's handling a little piece of Hamilton."
It is an ironic twist, then, that no city has done more than Toronto to over-shadow and diminish the sense of accomplishment and self-esteem in a city that has contributed so much to the prosperity of both the Ontario capital and the country at large. "Just by being there, 60 kilometres away," says Hamiltonian Lois O'Sullivan, "Toronto casts a huge shadow over everything that happens here: our arts, our sports, our politics, our whole individuality as a city."
But the perceived diminishment is not just a matter of location. "Toronto has always thought of Hamilton as a lowbrow cousin," says Hamilton native Jack Blum. "Lunch buckets, work boots, beer. When somebody from Hamilton calls his city 'Steeltown,' there's pride in the word. When somebody from Toronto says it, it sounds like an insult."
"What you have to understand," says Toronto book publisher Dan Diamond, "is that an insecure city like Toronto, with its 'world-class' pretensions, needs a foil. And Hamilton is the only city nearby that's worthy of the job. If Hamilton didn't exist, Toronto would have had to invent it -- in fact, they have invented their own cliched version of it: the one-note, one-industry town." Through a curious inversion, Hamilton has in many ways drawn strength from its relationship with its mega-neighbour. "A significant part of this city's identity," says Hamilton Spectator business columnist Paul Mitchell, "has always been that it's not Toronto. And around here, that's a positive thing, just as it's a positive thing for Canada not to be the U.S. It's a question of values -- they're big, slick, self-superior, and we're not. We take pride in our humility," he laughs.
Many Hamiltonians also take pride in the resilience, the combative edge, that accrues to them partly out of civic contention, partly from industrial muscularity. Their moniker for Toronto, for example, has long been "Hogtown," a reference to Toronto's tendency to gobble up investment, government contracts and national attention, some of which might otherwise fall to Hamilton. The attitude is more subtly embodied in the occasional "Toronto joke," such as the one that emerged from the National Hockey League's refusal in 1991 to grant Hamilton a much-desired franchise. At the time, Toronto's team, the Maple Leafs, remained perennial losers, and the question was asked: Why won't the NHL give Hamilton a professional hockey team? Because then Toronto will want one, too.
Hamilton's resilience and combative spirit have been composite parts of the city's character. In the years to come, however, they will almost certainly acquire increased significance as the city mobilizes for wrenching adjustments to its economic foundations.
To understand why, let us return to Sam Lawrence Park. Twenty-five years ago, the view from there revealed an established social and economic order: the steel mills and their attendant industries produced the wealth that paid for the office buildings and the institutions. The people who worked in those mills and buildings, "blue collars" and "white collars," lived with their families in corresponding homes: executives in fancy houses, labourers in plain ones.
"At the time, there were assumptions about Hamilton by which the people of the city measured out their lives," says city resident Denis O'Sullivan. Foremost among them was that the steel mills would always be there -- beneficent, durable and vital to the functioning both of the city and the country. Jobs were plentiful, wages generous, mortgages easy to come by. "The smell of money was indistinguishable from the air pollution," says O'Sullivan. And the toxic sludge at the bottom of Hamilton Harbour was the tolerable cost of business and prosperity.
For most Hamiltonians, the bounty of life grew from the pay cheques that rolled in biweekly from Stelco, Dofasco, Westinghouse and the other manufacturers that crowded the north end of the city. If an appropriate symbol could be found for the Hamilton of the 1950s and '60s, it might well be the city's professional football team, the Tiger-Cats, a club legendary for its rugged, workmanlike spirit. In those days, the team reflected not only Hamilton's best hopes for itself but the toughness and heart by which it thrived.
Today, the view from the park is more telling for what you can't see. Superficially, you can still see things as they were; the trappings and housings of the steel industry and other manufacturers are still in place. But the old smokestacks have given up smoking, and the once crowded parking lots at Stelco and Dofasco are half empty. The downtown office buildings are running a 27-percent vacancy rate, and the Stelco tower, a 25-storey lightning rod for the fortunes of the region, has 10 vacant floors. The real estate market is soft, the unemployment and welfare lines long.
The most devastating blow to the local economy has been that, since 1981, Stelco, the nation's leading steel producer, has reduced its work force from 19,000 to 6,000, with further reductions expected. At Dofasco, where the local payroll peaked at just over 12,000 in the late 1980s, some 4,000 jobs have been eliminated. "The painful thing about job losses in steel," says Michael Schuster, the Hamilton-Wentworth Commissioner of Social Services, "is that for every one of them that goes, as many as five more jobs in service and spinoff industries are lost, too."
Other companies have shut down their Hamilton plants entirely, occasioning more than 5,000 additional job losses. Some have abandoned the area for the southern United States or Mexico, where wages and taxes are low, environmental standards flexible, and profits high. One of the most debilitating local defections was that of Tridon Industries in 1991. Located just east of Hamilton, the family-run firm had been supplying windshield wipers and electronic flashers to the auto industry for 58 years. Tridon's move put 550 people out of work, and prompted company president Don Green to say, "We're one of the most efficient manufacturers of our products in the world. But one by one our competitors have all moved south, and we're no longer able to compete."
Tridon relocated to Nashville, Tenn., where serviced land adjacent to major highways is available for $25,000 an acre, compared to $150,000 an acre and up in the Hamilton area. Wages are correspondingly lower in Tennessee, too, with only 13 percent of the work force unionized, compared to 30 percent in Canada. The Tennessee Department of Economic and Community Development has a full-time employee devoted to attracting Canadian business, particularly the struggling manufacturers of Ontario.
In late April, Dofasco announced that, in partnership with Co-Steel of Toronto, it would soon open a 400-employee mini-steel mill -- in Kentucky, where the economic environment is similar to Tennessee's.
"Hamilton is by no means the only loser in all this," says the Spectator's Paul Mitchell. "In fact, you might say we're a bellwether for manufacturing cities right across the country, especially in southern Ontario. Toronto and Kitchener and Windsor are all in this with us. If Hamilton's economy has drawn more attention than those in some other cities, it's because of the high profile of the steel industry and the radical changes it's undergoing."
Contrary to what might be assumed, the erosion of Hamilton's manufacturing base began not with the advent of free trade or the current recession. It commenced a dozen years ago, when the Canadian steel industry first felt the pinch of growing competition from cheaper and, in some cases, highly automated international steel producers. To compensate, Stelco began trimming staff and reducing expenses as early as 1981. As competition mounted, Hamilton steelmakers gradually abandoned outdated production methods in favour of high-tech automation, and improved their products. Automation, however, further reduced manpower requirements.
"On top of everything, the need for steel has been reduced in this country," says Scott Galbraith of the Hamilton-Wentworth Economic Development Department. "With the recession, there just aren't many construction mega-projects going on out there." Plastics and aluminum have also eaten into the traditional markets for steel, particularly in automobile manufacturing.
And the start of the Canada-U.S. Free Trade Agreement in 1990 added what Hamilton economist Dr. William Scammell calls "yet another enormous burden" to the Canadian steel industry. "The protection came down," he says, "and the market was awash with U.S. steel." In 1990 and 1991, Stelco suffered losses totalling $333 million. Despite the Free Trade Agreement, however, charges of dumping flat-rolled steel products (at prices lower than the cost of production) continue to fly across the Canada-U.S. border. Each country has hit the other with provisional dumping duties, and no quick solution is foreseen.
Despite such problems, "it would be unrealistic to expect that there's going to be a broad return to the old protectionism," says Paul Mitchell. "Our manufacturers know that it's a global economy out there, and that they have to adjust to it. As tough as it's going to be during the transition phase, Canadian industry simply has to re-invent itself to take advantage of new opportunities."
While resistance to free trade persists in the country, there is agreement among many economists that, without it, Canada risks becoming an economic backwater, with no one to sell to but itself. "The world is dividing into great trading blocks," says economist Scammell. "And if you're not in one, God help you. You simply won't have enough buyers to keep your unit costs down and stay competitive. The domestic market just isn't robust enough anymore to sustain Canadian manufacturing."
Scammell expresses concern that, even if free trade fulfils its long-term promise, many of Canada's labour-intensive manufacturing firms will give way to capital intensive, "knowledge-based" industries requiring fewer employees. "These new industries will produce income," he says. "But it will be concentrated in relatively few hands. I certainly don't see current unemployment figures coming down much in the foreseeable future."
In the meantime, difficulties multiply for U.S. branch plants that have relied exclusively on Canadian markets. Many such plants, the so-called "tariff factories," have, since the Free Trade Agreement, closed down or departed for the U.S., while others are considering doing so. "Take Procter & Gamble here in Hamilton," says the Spectator's Mitchell. "They're producing a whole range of products in relatively small amounts and at a relatively high cost for the domestic market. In the U.S., the parent company has huge plants producing perhaps one product -- say a soap powder -- and doing it at a fraction of the cost to make the same product here. It is not likely that, in the long run, the company will keep its Hamilton plant operating, at least at full scale, if it can send in cheaper products from its plants in the U.S."
Over the past decade, the proportion of manufacturing jobs in the Hamilton area work force has fallen from 33 to 25 percent. Union jobs have dropped correspondingly. Yet the news is by no means all bad. Hamilton's official unemployment rate is marginally lower than the Canadian average of 12.3 percent. And its per capita income is more than 10 percent above the national average, suggesting there is more wealth in the community than is commonly acknowledged. The office vacancy rate is only marginally different from Toronto's, and hotel occupancy is higher, due in part to a modern convention centre that draws thousands of Canadians and foreigners to the city.
In recent years, the city has gained a major downtown art gallery, a concert hall (home to the Hamilton Philharmonic Orchestra), and a commodious new library. It has also gained an international airport and one of the finest sports arenas on the continent, the Copps Coliseum.
Inasmuch as the Hamilton Tiger-Cats symbolized the city as it was in the 1950s and '60s, the airport and Copps Coliseum are fitting symbols of contemporary and future Hamilton. The former, a $50-million facility opened in 1986 just south of the city, has spent much of its young life attempting to get airborne. Although two major courier companies, Federal Express and United Parcel Service, use it daily (in part to avoid curfew restrictions at Toronto's Pearson International), it has never enjoyed anywhere near the passenger traffic it was built for. At the moment, largely due to recessionary spending cuts, there is not even public transit or a major highway linking it to the city.
Likewise, the Copps Coliseum is significantly underused, lacking the full time major-league tenant that it was built for. "We've got the last untapped, fabulously wealthy market for big league hockey in North America," claims Mayor Bob Morrow. "We got turned down by the NHL in '91, but our long-range goal is still the NHL, and my guess is they'll be here before long. There's too much potential here to ignore."
Hamilton as a whole may be a vast object lesson in untapped potential. There is a sense among regional officials that if the city could improve and expand its expressway system, if the airport could be infused with life, if the economy could be guided toward high-tech, computerized industries, the so-called "knowledge-based" industries that are being touted as a replacement for manufacturing...that if all these things, and more, come to pass, there could be a return to halcyon prosperity.
"We've got an energetic work force, tremendous educational facilities, and we're ideally located for new development," says Galbraith of the economic development office. "There's a market of a hundred million people within a day's drive of Hamilton."
If there is hope that the city's significant potential will blossom, it lies surely in the knowledge that some of that potential has already become fuel for progress. Hamilton's health care industry, for example, is the envy of cities throughout North America. It is also the region's leading employer, with a total staff of some 15,000 people.
At the heart of the industry is McMaster University's Faculty of Health Sciences, a colossal teaching, research and clinical facility that, since its founding in 1971, has been a world-wide model of innovation. The Philadelphia-based Institute for Scientific Information has consistently ranked it, on the basis of scientific paper citations, as the leading institute in Canada for clinical medicine. In 1992, the ISI judged it tops in Canada in biological sciences and immunology research as well, and second in the world in heart and lung research, ahead of such U.S. scientific giants as Stanford, Harvard and Johns Hopkins universities.
The institution, with nearly 2,900 students and a faculty and staff of 1,850, attracts more than $44 million annually in Canadian and foreign research grants. It draws many millions more in hospitalization, clinical and tuition fees. "With the downsizing of the steel industry," says George McLauchlin, public relations officer for the Faculty of Health Sciences, "people are beginning to realize that there's enormous potential for growth in the field of health and health technology."
As examples of innovative work being done at the institution, McLauchlin cites advances in immunology and drug therapy, as well as the development of a "brain pacemaker" for people with epilepsy. "From the point of view of economics," he says, "we feel that what we're doing will eventually play a role in attracting private business to the area, for work that dovetails with ours. And of course, much of our research is exportable." The university's other faculties -- engineering, business, science, social sciences and humanities -- are also a major boon to the local economy, employing several thousand people, and providing expertise to business and industry.
It is somewhat ironic that, beyond health care and education, the area's other potentially significant growth industry is environmental remediation. "We got rich wrecking the environment," smiles the Spectator's Mitchell. "Now we may get rich cleaning it up." The recent focus of environmental clean-up has been Hamilton Harbour which, 10 years ago, was a chemical soup, almost devoid of life. Today, thanks to heavy infusions of government funding, the harbour hosts more than 60 species of fish and will soon be safe for public swimming. The soil around the harbour has been decontaminated, and the air pollution that once ballooned from adjacent mills has been vastly reduced.
The most prominent local participant in the harbour clean-up has been the Canada Centre for Inland Waters, a federal agency committed to environmental research and remediation, among other things. The centre's scientists and technicians brought a wealth of expertise to every stage of the work. The sprawling institution, with a staff of about 800, sits across the harbour from the steel mills and typifies the region's developing sense of environmental enterprise.
Philip Environmental, a Hamilton based company with some 400 local employees (and 600 in other parts of the country), is also battling pollution. Founded in 1980, the fast-expanding firm removed and decontaminated harbour-area soil for re-use, and is rapidly gaining a reputation as an innovative recycler of industrial waste. Philip recently took over an abandoned Stelco building and turned it into a mammoth recycling centre for such industrial by-products as lime from sugar manufacturing, used oil, foundry sands and iron oxide.
"A decade from now," says Galbraith of the local economic development office, "l think you'll see this region firmly positioned as a centre for environmental technology and leadership, both at home and abroad. We want to be seen as the place to go for solutions."
Galbraith would like to see progress in other "knowledge- based" fields as well, but movement in that direction has been slow so far. A notable exception (and perhaps a model for the future) is Wescam Inc., a manufacturer of computerized mobile camera mounts that eliminate the vibration that normally occurs in filming or videotaping from aircraft, boats or moving vehicles. The devices are used around the world for military and police surveillance (they allow a camera to read a license plate from an aircraft flying at 1,000 metres), and have been used to televise sporting events including the World Series, the '92 Olympics and the Superbowl. Wescam has also been discovered by Hollywood, which has used its equipment in making dozens of movies including Back to the Future III and Indiana Jones: the Last Crusade.
To encourage "high-tech" industry, the regional government has built what it calls the Greater Hamilton Technology Enterprise Centre in nearby Clappison's Corners. The facility will provide operating space and expertise for companies wishing to establish themselves in advanced technological fields.
"We're also doing everything we can to re-educate our work force," says Galbraith. "We're determined to find ways of accommodating dislocated workers." One such worker is 54-year-old Denis O'Sullivan. Two years ago, the married father of six was laid off after 17 years of making transformers for Westinghouse Canada. Four months later, he got word that his union was offering a two-week course on retraining. He took the course.
"A lot of fellas got a whiff of what was involved in re-education and said, 'No, it's not for me,'" says O'Sullivan. "Some went up to Mohawk College to see what was being offered, saw that they had to pay for parking, and said, 'I gotta pay three bucks a day just to park? I'm outta here!' They weren't going in for retraining if it was going to cost them three bucks a day .... People had grown to believe that everything was going to be done for them. And up to a point, I was part of that syndrome. I had to adjust my thinking."
This spring, O'Sullivan graduated from Mohawk College's program in micro-computer service and support. "I'm feeling fairly positive about the future," he says. "I think there are good opportunities, and a good chance that I'll fit in. But I feel apprehensive, too."
Like O'Sullivan, Hamilton itself has been forced to look long and hard at its future, and is feeling apprehensive. "We're either going in a new direction or we're going down the tubes," says Paul Mitchell. "But that's true of every industrial city in Ontario and the northeastern U.S." It is generally perceived in the business community that local industry must focus on exports and research, and make highly efficient use of its work force.
Some of the area's leading specialists and thinkers --industrialists, professionals, city planners -- were recently moulded into a task force that produced a report on the sort of development that will be required if the region is to be fully on is feet by the year 2020. Entitled Vision 2020, the document lays out progressive strategies for environmental harmony, land use, transportation, health, economics and agriculture. The future, as projected, looks rosy. Significantly, the photo of Hamilton on the document's cover shows no trace of the steel mills.
"When you walk through Hamilton today, it's hard to equate what you see with what's projected in Vision 2020," says city planner Mark Bekkering, one of the authors of the study. "But it's a long-range plan, a direction. We have 27 years to implement it. I'm very hopeful, very optimistic for it." Most Hamiltonians are not prepared to wait 27 years for a total turn-around. But the more people share Bekkering's optimism, the better things look for the recovery that has already begun.
