Empty shipyard and suicides as 'Hyundai Town' grapples with grim future | Hacker News Reader

Empty shipyard and suicides as 'Hyundai Town' grapples with grim future

reuters.com

59 pointsrectang63 comments

I think the grim reality is that mono-industry towns are not viable in the long run. The world seems to have a large supply of these and their future is never certain.

So what's the solution? If a big company opens a factory in an area, then the hire a bunch of people at that factory, people obviously want to move closer to where work is. It's not like those people can then say "Hey we need another company to open a factory here just in case." Even if there are other jobs created in the town, the loss of hundreds (or thousands) of jobs is always going to be devastating anywhere outside of a big city.

It's easy to say "Oh well those people shouldn't have bet everything on that factory." but that's not realistic or providing any kind of solution.

> So what's the solution? [...] the loss of hundreds (or thousands) of jobs is always going to be devastating anywhere outside of a big city.

It seems like the seeds of the solution are contained in your own post: don't live anywhere but a big city. Or, if you do, realise that you are making a risky bet with your entire family at stake.

Or don't buy a house where there isn't a diverse portfolio of companies around.

Because moving from one rental to another is not that hard.

A lot of mom and pop investors made incredibly poor decisions in Australia's mining boom, buying up properties in mining towns to rent for $800k+ and after the bottom fell out of the market only being able to sell at sub $200k. Often using equity in existing loans after appreciation to pick up three, four properties.

It seems insane to me to buy even one property in a mining town, let alone multiple.

That is capitalism doing its optimization work. It will punish the people that give credit in these risky cases and the people that make risky decisions like these because of greed.

If you buy property in more diversified regions you won't make as much money, but you have less risk and short term crises will usually pan out.

The people that gave credit in these risky situations are making record profits and their dubious banking practices have made them the subject of a royal commission.

Sure they’ve been theoretically ‘punished’ for lending too much by making a little bit less profit but it sure doesn’t seem like much of a corrective action to me.

That's because the government is corrupt. If the government actually let the banks fail and bailed out the citizens instead the bad banks would be gone, the citizens would have put the money into the economy again, and you'd have an economic miracle happening quickly, as it is common after such resets.

Government subsidized failure is one of the main reasons why communism never worked out. Bad companies need to fail and make way for more efficient or less stupid companies. Otherwise you end up with all your companies operating at roughly the same efficiency as the government (close to 0), because there's no incentive for them to avoid risk. They're rewarded either way.

A city doesn't have to be big to be diverse. It just has to be "not a mining town" or "not dominated by a single industry".

By this logic people shouldn't move to the Bay Area since it's dominated by tech.

I don't consider "tech" to be a single industry, and also it's not exactly a mono-company area like a mining town.

Buying property in Bay Area is a bet. I can imagine scenarios where it won't pay off.

The Bay Area economy is diversified. The weather is also great.

The problem is that the cities with thriving job markets tend to also have high housing costs.

Actually the solution was already tried and tested by American cities. It's called diversifying the economic base. Instead of relying on 1 mammoth company, try to develop and sustain multiple smaller ones.

All American cities that recovered from the '70s-'80s downturn, and even from the 2008 crisis were the ones with a higher number of smaller employers, startups, etc. The ones that diversified. Because they are more resilient to one company's failure.

I don't think we will see any industries with mass employment, and in eithet case, there's no reason why it won't be based near the largest cities. The prospect for remote areas is grim, and that includes even large-ish cities. Even if they are afloat you won't see much investment.

> If a big company opens a factory in an area, then the hire a bunch of people at that factory, people obviously want to move closer to where work is.

I'd be very very very hesitant to move to such a town for work. Granted, when you are unemployed you may not have a choice, but I'd definitely settle for a much worse job/worse pay in a non-mono-industry town.

> So what's the solution?

Some towns adapt after a while. For example Lille and its neighboring towns in France. It used to be big in textile/coal industry.

Many old abandoned factories got converted into modern offices for startups, into stores etc... One example (scroll down for pictures) : https://www.usineroubaix.fr/fr/

So what's the solution?

Reinventing itself?

That's essentially what the German "rust belt" (Ruhrgebiet) attempted to do (partially quite successfully) in the last couple decades.[1]

[1] https://theconversation.com/redesigning-the-rust-belt-an-old...

Some part of the solution could be with city planning government officials. They could work to lure other different or complementary industries to their city/area. If the base labor skill set is similar but the parent companies are different enough, a downturn in one doesn't mean the city turns into a ghost-town.

The American west is littered with ghost towns (usually mining towns).

I grew up in a single-company town; 30 years after the factory closed it hasn’t really recovered. Whole families used to work there, occasionally even 3 generations simultaneously! Loads of cases too of a father who worked on the factory floor and their kid was the first graduate in the family and in the graduate programme.

My intuition wants to say, "If a town can spring up around a company, can't the town wind down if the company shuts down?"

Two reasons why that's wrong come to mind (maybe one reason, they're closely related):

- The people who made the town chose to move there. The people who close up shop are "forced" to leave.

- The kinds of people who move to a town are "special" -- they probably take more initiative than most, they probably have smaller direct families, they're younger. Existing town occupants better reflect wider society.

That second point makes me think about cults :-). I can't remember where I heard it, but someone told me that cults have a lot of trouble with the second generation. Their parents are obviously the sorts of people who join cults, but their kids revert back to the mean and have some common sense.

If one in ten is the sort of person who might pick up and settle elsewhere, well, you can make a town with that if there's something to draw people there. If that draw dies down, though, maybe one in ten will have no trouble leaving and the rest will have more difficulty.

I wonder, though -- US internal migration is trending downward pretty steadily. You'd think it'd go up as barriers to moving have come down... Maybe this is America slowly reverting to the global mean after being a bunch of adventurous immigrants who picked up and left somewhere else.

The factory had been the mainstay of the town for 60-odd years, that would be an awful lot to wind down overnight. It was also that that kind of work was evaporating everywhere with the wind-down of manufacturing in the West in general; if the people did move where would they go?

Those shipyards used to be in my country until South Korea and other Asian countries took over in the 70s. Succesful countries adapt and survive.I hope the Korean government isn't stupid enough to try to save them. That simply won't work.

The Korean government is democratically elected as recently noted in the news. Aren't you saying "I hope the Korean people aren't stupid enough to try and save themselves?"

I've been to that region of South Korea a few times. The DSME (Daewoo) shipyard is in nearby Geoje-do. It's not far from the Samsung Heavy Industries shipyard. Geoje is home to some incredibly rugged and beautiful coastlines, a small city and other than the two shipyards, not much else except some fishing villages. Together, those three shipyards (including the Hyundai one in Ulsan) used to, and maybe still do, account for the three largest shipyards on the planet.

Gyeongju, another nearby city is mostly known for historical tourism and home to some incredible living UNESCO sites. But not much else since it was the capital of a now defunct nation in the 900s. Busan is the second largest city in South Korea and one of the few cities that made it through the Korean War without being flattened into rubble and who's principal industry is port logistics and fishing -- it's basically Singapore or Hong Kong of South Korea without all the financial business.

Ulsan is very much a company town on who's fate rests Hyundai's successes -- and Hyundai hasn't been killing it recently. The city is also home to the world's largest auto factory and number of other Hyundai conglomerate sites. As Hyundai's fate twists and turns in the global winds, so does the entire city. It doesn't have much to do with the other nearby cities, and it's on the northern edge of an isolated region that's politically aligned with the ruling party, while the rest of the region it and Busan exist within voted for the other guy.

The relationship with China has been rockier than I think anybody has let on to and historic relations with Japan have never been exactly "warm". The recent THAAD anti-missile situation really rattled the Korean-Chinese relationship and between turning the Chinese public away from obviously South Korean goods in bulk numbers, China has also seriously ramped up ship manufacturing and I believe now leads in total tonnage.

In addition, new shipyards are coming online in India and Vietnam putting additional downwards economic pressure on these three shipyards that used to enjoy a near monopoly. Even worse, global shipping hasn't recovered, and movement of energy products (oil and gas) is geographically shifting (less oil needing to move from Saudi to the U.S. for example) so demand for ships is down, AND several large shipping companies went out of business putting more ships up on the secondary market AND it turns out very very very large ships didn't work out as well as was hoped, so orders for that equipment never materialized.

As for the other major business there, Korea's auto manufacturing business has also been consolidating and changing. Hyundai is the major manufacturer, but Hyundai-Kia has moved much of their manufacturing overseas from Korea into the domestic markets they sell into and the rest of the auto industry in Korea is in disarray and succumbing to foreign manufacturers finally clearing various import hurdles and selling in larger and larger numbers. Among the "basically defunct": Daewoo Motors (now GM), Samsung Motors (now majority owned by Renault), SsangYong Motors (now owned by Mahindra). Some of these are still large, but dying giants.

It looks pretty bad to be honest and my guess is that Ulsan may soon turn into South Korea's Detroit.

Here's a pretty good article that outlines some of these problems in terms of raw tonnage https://wolfstreet.com/2018/07/07/big-three-korean-shipbuild...

South Korea needs to go upmarket and specialize. Shipyards in Finland and France, the very opposite of low-cost manufacturing destinations, survive because they build things like the world's largest cruise ships now:

https://en.wikipedia.org/wiki/MS_Symphony_of_the_Seas

https://en.wikipedia.org/wiki/MS_Oasis_of_the_Seas

Also, while Busan has a thriving port, having been to all three you'd have to down a few shots of soju and squint pretty hard until it starts looking like Singapore or Hong Kong...

One other option, and one that does occur from time to time, is contract defense manufacturing. When I was at the DSME yards, a contract diesel submarine was being built for a large European country. However, there's obvious difficulties for that route as a general one.

> Also, while Busan has a thriving port, having been to all three you'd have to down a few shots of soju and squint pretty hard until it starts looking like Singapore or Hong Kong...

Well, I definitely wouldn't compare the look and feel of the cities. But their raison d'être is similar.

Thank you so much for this valuable post. Did you mean that China leads the usa in tonnage? And did you mean that large liquid natural gas ships aren't planning out when you said very very large ship orders aren't materializing? Isn't there a large effort underway to put natural gas on ships, therefore undermining Russia's pipelines and also bolstering large ship production?

> Did you mean that China leads the usa in tonnage?

I'm not sure. I believe China is now #2 in terms of raw tonnage, just edging out Korea.

> And did you mean that large liquid natural gas ships aren't planning out when you said very very large ship orders aren't materializing?

The container ship business was upsizing the ships to unbelievable sizes and capacity. But it's a little like the A380 aircraft, it wasn't the right bet as local port handling capacity in many older ports isn't sized for ships and carrying capacity above some load. It turns out the overall satisfaction with those super large ships isn't there and some of the shipyards that were retrofitted to be able to build those monsters simply aren't getting the orders for those class of ships.

> Isn't there a large effort underway to put natural gas on ships, therefore undermining Russia's pipelines and also bolstering large ship production?

There are ships that can move LNG and similar fuel types. But for intra-continental shipment, nothing beats pipelines. The wikipedia article on LNG ships even mentions the DSME shipyard and some capacity and future order infomation. https://en.wikipedia.org/wiki/LNG_carrier

This could work out. The US Navy needs to expand but the US lacks sufficient shipbuilding capacity.

The US Navy needs to expand but the US lacks sufficient shipbuilding capacity

The UK did this https://www.bbc.co.uk/news/business-17127488

They got delivery, too. The last of the four Korean-built tankers entered British waters yesterday.

I’ll wager they work in warm waters too, unlike the Type 45s...

The article doesn't state it, so what does the gender distribution look like for the suicide rates? An age group of 25 to 29 and strongly connected with job loss gives a rather strong hint that the numbers are not evenly spread. If the total number has doubled then I suspect the increase for that gender and age group has increased far more than double.

Its much harder to compete now, even originally Chinese-based jobs are being outsourced too.

I have heard the phrase that "Africa is China's China". I don't know how much quantitatively, offshoring has happened from China.

I would say Africa isn't the biggest. Vietnam (mentioned in article) and Bangladesh already produce a lot and are overtaking certain industries like textiles and shoes. For example, Nike's biggest amount of contract factories are Vietnamese and they earn roughly one to two dollars per day per Vietnamese worker.

For now, Western companies are still choosing countries in Asia. Maybe Chinese companies are choosing African countries because minimum wage has increased in China and many factories have gone bankrupt and other Asian countries only cater to Western countries for their factory needs.

He might not have a job now and at 52 maybe never again, but he needs to look at the positive side; likely due to labor offshoring a new Hyndai vehicle might end up being 30% cheaper.

…that he might actually be able to buy without having a job once korean regulators give the green light for would-be investors to pour their and their friends/families life savings into making unsecured p2p loan platforms popular.

Exactly! and with all those physics and math phds in finance Im sure we can make sure that loan to a middle aged unemployed man mathematically seem rigorous and there is no way that a bailout will ever be required.

While I share your sentiments with regards to the plight of individuals left behind, I can't go with you on bailouts. That's socializing the losses while privatizing the profits, and it leads to crony capitalism and dyspeptic behemoths like the chaebols.

The analogues in the USA are the too-big-to-fail financial institutions that almost wrecked us in 2007-2008, yet who remain as untouchable as the chaebols. Few of our congressional representatives actually believe in capitalism for the financial industry.

Im sure your familiar with how banks get the money they loan out to people (Hint it has nothing to do with deposits). There is nothing capitalist about that system to begin with...

That's a confusing response. Are you advocating for government bailouts for chaebols and US banks?

Of course not! But im saying even without bailouts the banking system already is a collusion with government. Private banks take loans of money from the central bank at very low rates then add 2+% on top and provide those loans to consumers.

Not exactly, the reality will sound even more annoying to you: banks don't need even need to get a central bank loan for most dollars they loan to customers. Only a fraction needs to be covered by central bank money.

Well if those math and physics phd's approach the problem like economists, I'm sure they'll make it such that after year or more without being employed, they'll be classified as no longer looking or in need of a job and thus can be safely excluded from any economic equations.

Won't be too long now before iShares gets the go ahead for a new ETF: EP2PM, where everyone from retail investors to central banks all over the world can buy shares in emerging market p2p securities, we need everyone all over the world to be able to afford the $2k iPhones that will come out in the next 3 years.

And also other, poorer 52 year old men will have jobs.

Which doesn't mean it doesn't suck for him.

Exactly! This reporter should have explained the details of comparative advantage to these recently unemployed individuals to help them see how much better they are off economically.

While it's obvious why this guy would prioritize his own job over someone else's, it's pretty unclear to me why you would expect the reader to care.

Why should I care if a South Korean person has a particular job versus a Chinese person or whatever? I don't know any of them. Even if I did prefer jobs to go to my own culture or country or ethnic group or whatever (I largely don't), these are all third parties to me and probably the vast majority of people reading this article.

I can understand people who are opposed to globalization to the extent that it causes job loses in their own country -- even though I don't agree with them. But the logic of anti-globalization goes out the window when it's comparing two different third-party countries.

To me, the article’s main point wasn’t about one person losing a job, but about cities that are built around one industry.

The simple answer is that you care because of empathy.

> it's pretty unclear to me why you would expect the reader to care.

Because even if the universe is indifferent and the problems of globalization are vexing we can see even people of other cultures as fellow humans and feel empathy for them?

Sure. Globalization produces losers. Real ones. This guy's life is worse than it was, likely persistently so. We can recognize that, and say it sucks.

But someone else's life is better, likely persistently so. That job didn't vanish, it relocated.

That doesn't erase the suffering. But it does suggest that the kind of snotty performative anti-globalism that started this thread is, at best, shortsighted.

That job didn't vanish, it relocated.

That's subtly not true; the very nature of the job changed. It started off as a job-for-life type job, supposedly secure, didn't quite work out that way, but that was the original intent. Now it's a mobile offshore job, that is fully intended to keep moving every few years chasing whatever location is cheaper and less regulated.

Sure, right now it doesn't affect you. It's not snotty or short sighted though.

Eventually we can recognise the pattern, and see it's the raison d'être of globalisation. Separate commerce from state, community and people. One day you'll have seen this happen so many times, to so many people, that you decide the cost is probably too high. Perhaps by then you've done so OK that you still don't care.

The next town over that never recovered from losing it's steel mill, mine or shipyard, and the fifty and sixty year olds that can't have a comfortable retirement or pay the last 25% of the mortgage. Sure, they may retrain - if the courses are available. No chance of even 25% of their former highly skilled wage, maybe end up in an unskilled role in a store or call centre. No way to make another degree pay at that stage of life. A life of no opportunity and possibly anti-depressants. The damage to everyone who lives in the same town even if they worked elsewhere.

It's a constant. One day it'll be your industry or skill that relocated or ceased to be. Or of those you care for. Just for another dollar for the shareholder. But hey, someone's life is better.

With all that GDP real-terms growth we should be able to find a variation on the theme that ruins fewer lives.

Yep, it (probably) will be my industry or skill at one point, and I'll probably be pissed about it then.

But it'll still be the case that if someone does my job for cheaper than I do, it'll be because they're poorer than I am, and if I had a neutral perspective on my own situation (which of course I won't), I'd have a hard time making the case that I deserved to be paid more while that guy struggled in poverty.

And incidentally also whatever product or service I'm producing now costs less to the people who consume it, making them de facto wealthier.

He likely had the job in the first place because Hyundai exports to foreign markets, like the US.

Unlikely; all products are sold at what the market will bear, irrespective of the cost of making them. So in fact Hyundai will be 30% more profitable and the managers who took his job away will get bigger bonuses which will in turn create jobs in the Rolex factory and also with luxury yacht makers, golf courses, and so on

Please do not deploy demagoguery here

Yes I agree I went to far. Such Sardonicism belongs elsewhere online.

Reply on news.ycombinator.com