“Sorrowful Stories About Our Sector”

“Sorrowful Stories About Our Sector”

Photos by
Haukur Herbertsson/Creative Commons

Published January 27, 2016

Iceland’s relationship with heavy industry has finally come full circle. Just over ten years ago, the same two parties who are currently ruling the government pushed the idea that the construction of aluminium smelters in Iceland would be great for the economy. It would bring in jobs, we were told, generate revenue for the treasury, and most of all would be environmentally friendly on account of using hydropower instead of fossil fuels for the tremendous amount of power such smelters use (never mind the fossil fuels burned to ship in the raw materials needed for making aluminium, of which Iceland has none).

Few people believe Icelandic smelters are environmentally friendly anymore, what with the extensive flooding of the Highlands, the destruction of once thriving freshwater, and flouride emissions that have angered farmers in east Iceland. And now the rhetoric that aluminium smelters – in particular, Rio Tinto Alcan’s facility in Straumsvík – are economically any good for its workers or Iceland as a whole is beginning to unravel.

There’s been some coverage of the fact that workers at the smelter have been employed without any collective bargaining agreement for over a year now. Management has refused to offer anything close to a satisfactory deal when it comes to wage increases, and a general strike seems all but imminent. In the midst of this is the repeated contention that Rio Tinto Alcan just doesn’t have the funds to give their employees a raise.

The truth of the matter is a bit different than this. In fact, this company has demonstrated its first lines of defense for corporate leadership are evading taxes and firing workers, with branch companies around the world pressured to continuously kick money upstairs.

Stundinn recently brought to light that Rio Tinto Alcan – much like other aluminium companies in Iceland – try their best to find loopholes in Icelandic tax law to avoid paying them, which doesn’t do much to support the idea that your company is good for the country’s economy. Especially when it’s brought to light that, despite operating at a regional loss, you’re shipping off payments in the billions of krónur to Alcan Holdings in Switzerland. Billions which could have, of course, gone towards paying its workers better wages, as the company has had numerous chances to do over the past year.

Iceland’s Rio Tinto Alcan smelter does have plenty to answer for, but we should have in mind that the greater offender in this affair is the international corporate leadership. CEO Sam Walsh recently sent out a letter to company employees that pay raises were not in the cards this year. Is this because the company as a whole is operating at a loss? Quite the contrary: last August, the company released a statement asserting “sound operating capability have delivered stable margins with underlying earnings of $2.9 billion during the half. Post-tax operating cash flows of $4.4 billion more than covered our sustaining capital expenditure of $1.2 billion and dividend payments of $2.2 billion.”

In fact, Sam Walsh also released an internal memo to Rio Tinto Alcan employees, bragging about how the company’s continued growth and expansion will make it difficult “for pundits to tell sorrowful stories about our sector”. He further exhorts employees to rally under the banner of management; to work harder, and press for increasing profit margins.

The name of the game here is re-investment in the company’s own projects and cutting its losses. This is not a new strategy in capitalism, and Rio Tinto Alcan’s application of this principle – to lay off workers and dodge taxes while freezing pay rises and pushing employees to make their bosses even richer – is pretty much par for the course when it comes to capitalism in action. But just because a practice is common and widespread does not make it good; market manipulation and embezzlement are both fairly common and widespread, too, and these practices helped destroy the Icelandic economy in 2008.

The fact is, Rio Tinto Alcan doesn’t need Iceland. The company’s Pilabra iron ore business accounts for about 80% of its revenue. The company will not honour Icelandic workers’ rights to bargain collectively, it sure isn’t paying its share into the treasury, and it continues to be both a polluter and an eyesore. Why do we need them? What are they for? Would we even miss them if they closed altogether?

Heavy industry used to be the basket for all of Iceland’s financial eggs; the promise of a stronger, more diverse economy. That myth is now unravelling before our eyes, but the lesson here isn’t just that Rio Tinto Alcan was and is a terrible company for Iceland. Rather, what we should learn from this experience is that capital will always flow upwards, in greater quantities and into fewer hands. Rio Tinto Alcan is no exception.


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