Requiem for a Paper Mill

The Federal Government wants to spend our money. I am not generally in favor of government handouts or government efforts to keep particular businesses in operations for a number of reasons, not least of which is that they have been, since the dawn of recorded history, so terrible at it. Nevertheless, there are times when some good might come of such efforts.

On 22 October International Paper announced that it would close its mill outside Franklin VA in the spring of 2010. The reason is simply that the mill represents an overcapacity in light of the combination of the global recession and the decrease in demand of paper. So, the mill is closing.

In Franklin that means 1100 people will lose their jobs, some as early as November. The simple question is: what can be done about this? Obviously, economics works best when we let the ‘laws’ of economics play out as they are meant to. If demand is down, over-capacity needs to be trimmed. As such, International Paper should have closed the plant, assuming that that plant was the least profitable or had the poorest margins or some other such figure relative to their efforts to remain profitable.

Nevertheless, there is an opportunity here, one that certainly merits at least some consideration, particularly when compared to some of the other projects the US government has funded over the past 9 or 10 months with the hundreds of billions of dollars in stimulus money.

Consider a big ‘what if?’ (But certainly no bigger or more far-fetched than the idea that GM can be made profitable.) And actually, there are two ‘what ifs?’

What you have now is a paper mill and 1100 skilled workers. Instead of shutting it down and losing all that expertise, what if the workers, in concert with the state and federal governments providing certain key support, and using a government loan (the often mentioned stimulus money), were to buy the plant and convert it to a state-of-the-art paper mill, one demonstrating cutting edge paper production technology, as well as greater efficiency and low energy usage, use of recycled paper, and a zero waste foot-print, while increasing productivity per worker? Use this mill as a technology demonstrator to show what paper mills can become in the 21st century.

Nor would this necessarily be at the expense of International Paper: per the government backing, technologies and processes developed at the plant would be made available (at cost, or perhaps below cost, in as much as the advancements would have come from an investment of taxpayers’ dollars) to US paper firms. International Paper and other US paper companies would benefit from the new technology, Franklin would benefit from the new jobs and a plant that would be likely to operate well into and even through the 21st century, and the plant would presumably be then able to pay back the loan. The Federal Government would also – eventually – benefit from the creation of these new and, in the end productive jobs, ones that would return real tax revenues well into the future.

Secondly, as a state-of-the-art paper mill would certainly not require as many workers as the current mill, use the rest of this facility as a site for a technology training/retraining facility. Virginia could lead the way in establishing a job re-training program that anticipates changes in various industries and provides for retraining so that workers can retrain and move into newer but equally productive careers.

Would this be difficult? Yes, but not impossible. The limitation is that it would cost a good deal of money (though nothing like the amount spent on GM, Chrysler or any of the banks to which the government loaned money), and there are elements of the technology that would need to be further developed. But the technology could and would be sought by other paper mills as it became mature. And there is real value in such an endeavor. Let this mill become the leading technology demonstrator for an entire global industry, and let these workers become the lead technologists in the paper industry of the future.

And it would represent an opportunity by the people in Washington, who have literally hundreds of billions of dollars to spend, to spend the money on a project that would represent a real opportunity to establish meaningful capabilities well into the 21st century, ones that would provide real returns on investment to the American people and to the private sector.