"ALCOA "

The prevalence of the aluminum beverage container in contemporary society constitutes an egregious failure of capitalism. This is true for two reasons, both of which fall under the heading of cost. The first reason is that PET beverage containers are way cheaper to manufacture than are aluminum beverage containers. The second reason is that the environmental impact of the smelting process of aluminum is not factored into the cost. It constitutes a classic example of an economic externality, as is pollution in general. It is exactly one hundred percent certain that the pricing mechanism is not allocating resources to their most efficient use here.

Nobody seriously questions the fact that global warming is real. The consensus amongst the scientific community is that the emission of carbons into the atmosphere is at least contributing to the temperature increase. America has a bigger carbon footprint than any other country in the world. One of the biggest reasons for the US having the biggest carbon footprint is the use of fossil fuels to generate electricity. If we used only nuclear energy, pollution from generating electricity with fossil fuels would be eliminated, and we would have, in the words of Lewis Strauss, chairman of the Atomic Commission in 1954, electricity “too cheap to meter.” However, nuclear power only generates about 20% of America’s electricity. Maybe the reason for not generating electricity with nuclear power is that the Three Mile Island incident in conjunction with movies such as The China Syndrome and Silkwood, as well as Chernobyl, frightened the general public into accepting dirty air and expensive electricity. If so, the fact that we generate electricity with nuclear power plants at all constitutes an anomaly. Another big reason for the US having the biggest carbon footprint is industry. The focus here is on one particular market for one particular industry engaged in by formerly one, and now two particular companies – namely, the market for aluminum beverage containers supplied by ALCOA and Kaiser Aluminum.

The environmental impact of beverage containers was at least somewhat controversial even before there was much talk about global warming. Most of the controversy involved biodegradability. The elderly will remember the days of glass bottles and tin cans, as well as the days of the deposit for glass soda bottles. What happened at the point of sale was that the purchaser bought the bottled soda, and paid not only for the soda, but also paid a deposit on the bottles containing it, which was refunded upon return of the empty bottles. Then came "No deposit, no return," accepted at the expense of the environment largely due to consumer conveniennce. Up until 1963, even though they were called tin cans, beverage cans were made of steel. In 1963, ALCOA’s chief executive, in the words of one author, “committed ALCOA to the greatest gamble of its postwar history by investing in the development and full-scale production of RCS for aluminum cans, well in advance of the market.” ¹ John Harper believed – correctly – that if aluminum could gain a large portion of the beverage container market, the aluminum smelting capacity of the entire world would be insufficient to meet the demand. ² Accordingly, Harper committed more than $100,000,000 to the installation of a light-gauge sheet facilities in Warrick County, IN. ³ To make a long story short once again, the aluminum beverage container eventually replaced the steel beverage container. This investment was made even though at the time it was made there was no demand for aluminum beverage containers, or even steel containers with aluminum pull tabs.

Aluminum’s victory over steel in the beverage container arena is remarkable for several reasons, but the primary one is cost. At the time of their entry into the market, aluminum tops (they’re called ends) with the pull-off tabs cost two dollars more per thousand than their steel counterparts.⁴ A secondary reason was the effect on the environment. Although the production of steel emitted greenhouse gases, the smelting of aluminum emitted way more. Even though people were aware that CO2 emissions resulted in a warmer planet as early as 1958, the issue back then was not air pollution. The environmental issue that did exist was twofold. The first one involved the pulled off tabs. At least four states required a deposit in order to attempt to ensure their return to the point of purchase rather than being strewn onto the landscape. This really just highlighted the second problem, namely biodegradability. It takes aluminum more than twice as long to biodegrade than steel.

Thus, there were some serious obstacles involving both cost of manufacture and environmental impact. The fact that ALCOA was somehow able to overcome these obstacles defies capitalistic logic. Somehow, the most expensive process of manufacturing the least environmentally friendly product succeeded. The question is how. Some of the blame rests with the consumer. Consumers did not want to be bothered with the burden of first storing and then returning the empty bottles to the store. Neither did retailers. (One huge irony in the current beverage container situation is that ALCO is currently trumpeting a superior recycling rate to that of PET notwithstanding the fact that recycling is inconvenient, while at the same time citing convenience as justification for putting beverages in more expensive, less environmentally friendly aluminum containers.) Maybe some of the elderly will remember the introduction of the no-deposit, no-return bottle. Add billions of non-biodegradable glass bottles to the landfills of the world. Consumers did not like having to use a tool to open the tin cans. Again, some of the elderly may remember making two triangular holes on opposite sides of the top of the can in order to drink from it with a tool called a can opener. I’m guessing that there are many in the younger generation who have never even seen one, much less used one. Once more, the convenience of the aluminum pop top supposedly won out (and again we have the irony of aluminum winning out due to convenience and less environmental unfriendliness due to the inconvenient task of recycling).

Another reason aluminum was able to prevail over steel becomes apparent when the government’s stockpile of aluminum is taken into consideration. (It’s also why I don’t think ALCOA’s chief executive gambled at all.) The U.S. government stockpiles certain materials to ensure their availability in the event of war. One of these materials is aluminum. In 1962, JFK proclaimed that he was “astonished to find that the stockpiling program had accumulated $7.7 billion worth of materials, an amount nearly $3.4 billion greater than estimated wartime needs” ⁵ As of 1965, the government had stockpiled 1.8 million tons more of aluminum than was required. ⁶To make a long story short, ALCOA (along with the rest of the aluminum industry) agreed in 1965 to repurchase the stockpiled excess over a period of seven to fourteen years. ⁷ The agreement was regarded not to be “a present threat to production.” ⁸

The anomalous situation of aluminum containers vis-à-vis steel containers graduated to full-scale bizarreness with the advent of the PET container. Nobody disputes that plastic material costs less and goes farther than aluminum, not even the pro-aluminum people. Nobody disputes that smelting aluminum results in releasing way, way more carbon dioxide into the air than does the production of PET. There are three basic reasons why. One arises from the fact that electrolysis is used to separate the aluminum from other elements, so it requires enormous amounts of electricity. If the enormous amount of electricity is generated from the burning of fossil fuel , then enormous amounts of carbon dioxide are released into the atmosphere. Another basic reason is that the “bath” containing the aluminum must be heated to a much higher temperature than is necessary to manufacture plastic. The third basic reason is that the electrolysis process ultimately results in the release of carbon dioxide at the anode.

Those in favor of aluminum beverage containers have sought to minimize the environmental impact by asserting that a significant portion of the energy required to produce aluminum can come from renewable sources. This begs the question of why we cannot use the same amount of renewable energy to produce way more PET than aluminum. Those in favor of aluminum beverage containers have also adopted the concept of the best defense being a good offense and pointed to the amount of plastic that is not recycled as a reason not to require that beverage containers be plastic. Assuming that the pro-aluminum forces are accurate about the magnitude of the plastic problem, the solution is obviously not to damage the environment further by manufacturing aluminum beverage containers, but rather to do much better recycling plastic.

The history of ALCOA begins with the patenting of what is known as the Hall-Heroult process for smelting aluminum. The patenting of this process, when juxtaposed with the early history of steelmaking, reeks of contrivance. Here is a barebones sketch of the patenting of the Bessemer Process. In 1856, British inventor Henry Bessemer received an American patent for making steel. In January 1857, William Kelly applied for a patent for a process that was identical, and received it in July of that year. He did not apply until after an article by Bessemer entitled "The Manufacture of Malleable Iron and Steel without Fuel" was published in The Times in August of 1856. There is little question that Kelly – or at least those behind him – falsely claimed that Kelly was the true inventor in order to avoid paying royalties to Bessemer. Kelly, however, claimed that he discovered the process as much as five years earlier, and that two Englishmen in his employ fled back to Britain with the secret. He discovered it in secret in his woodshed, where he worked covertly to avoid the jeers of his neighbors.⁹ Indeed, he claims to have been required by his father-in-law to see a physician (a Dr. Huggins) to have his head examined. ¹⁰ The examination was conducted, and the good doctor opined that both Kelly’s mind and his process were sound. Thus was the testimony of what passed for a mental health professional acquired. (Why does that not surprise me?) He did not file for a patent, either because he was open and good-hearted and wanted to share (note that he was a slave owner and employed Chinese labor, but this was okay because he found it obnoxious ¹¹ or because he wanted to perfect it further. ¹² When he demonstrated the process to the public, the two Englishmen absconded. ¹³

Compare the patenting of the Bessemer Process with that of the Hall-Heroult Process. Once again, here is a barebones sketch. While working in his woodshed, ¹⁴ Charles Martin Hall discovered a new method to smelt aluminum on Feb. 23, 1886. ¹⁵ However, although he read about patent applications while he was a student at Oberlin, ¹⁶ he did not file for a patent until five months later (July 9, 1886). ¹⁷ Meanwhile, Paul L. T. Heroult received a patent for a similar process in France on April 23, 1886, and then applied for an American patent more than a month before Hall filed for his. The two claims were held to be in interference in June, 1987. ¹⁸ The similarities are readily apparent. Both Hall and Kelly are purported to have made their discoveries while working privately in a woodshed. Both Hall and Kelly applied for their patents after patents for their respective processes had already been issued. Yet, while Kelly’s claims were hotly disputed (and given the United State’s history of patent law combined with relations with Great Britain as they existed at that time, rightfully so), neither Heroult nor the French government disputed that Hall made his discovery independently.

The Pittsburg Reduction Company, later to be renamed ALCOA, was formed by a group of investors who met the home of Alfred Hunt on July 31, 1888. ¹⁹ Remarkably, even though there had been no ruling on who owned the an important smelting patent at that point in time, six of the investors were nonetheless willing to invest $20,000.00. It is impossible to avoid the conclusion that they were all aspiring war profiteers. Wartime uses had already been envisioned - in the earlier days of the history of aluminum, Napoleon III helped finance researches into its development with the hope of producing lighter helmets and armor for his soldiers. Moreover, there was no concrete demand for aluminum at the time the initial investment was made. At the time of the meeting, WWI, or at least something very much like it, was eminently foreseeable. Even before Kaiser Wilhelm II assumed power, , it was clear that Germany was not overly impressed with the Monroe Doctrine. By 1884, German Chancellor Otto von Bismarck became convinced that the benefits of colonization were worth the risks, and Germany leapt “outwards into the world” in 1884, both in Africa and South America. ²⁰ Kaiser Wilhelm I died on March 9, 1988. One hundred days later Wilhelm II became emperor, and it was clear that he would “leap outward” more robustly . ²¹ By this time, Germany was openly disdaining the Monroe doctrine. Most importantly, it was clear that Germany still maintained an interest in a canal through Central America. Look at the adjacent map. Two elements of the American strategy to undermine British ability to raise an army in what could have been a war to establish the boundary between the U.S and Canada, both of which pertained to the use of Christianity to help ensure obedience to the authorities, were laying around and in the process of being picked up, ²² One is communism – the fact that the first apostles lived communally and Americans did not both creates an inference that the authorities didn’t feel bound by Biblical precepts and begs the question of why those being urged to fight a war should. (It also makes those living under a communist regime more willing to fight – see Napoleon’s Grand Army.) Note that the second addition of the English version of the Communist Manifest appeared in 1888. The second is Zionism. Moses Hess authored a book in 1862 entitled Rome and Jerusalem, the overriding theme of which is a Jewish return to Palestine, which, of course, is the essence of Zionism. ²³ In sum, at the time of the meeting at Alfred E. Hunts home, the prospect of WWI loomed large, the usefulness of aluminum in war was known, and no other apparent demand for aluminum existed. These aspiring war profiteers were to make a killing off WWI.

In 1888, it was not at all clear which side Britain would support in the event of war. Even a cursory skimming of eighteenth and nineteenth century history shows a century of conflict, and not only on the battlefield. In addition to the Revolutionary War, the War of 1812, the Canadian boundary dispute (54-40 or fight), and the Alabama cases, there was also a threat not to repay a huge loan deployed to leverage yet another loan, as well as the previously mentioned theft of the Bessemer Process accompanied by a false accusation that Bessemer was the one who was a thief. Furthermore, relations between England and France had long been strained. Note that the process of restoring good relations between the U.S. and Britain - what historians refer to as The Great Rapprochement” - did not begin until 1895. The similarity between the patenting of the two processes tended to show that it was indeed possible that the Bessemer Process was discovered independently by both Bessemer and Kelly, and constituted implicit backpedaling by the U.S. from its claim that Bessemer was a thief. It also constituted implicit confirmation that neither was Kelly.

In 1889, Andrew Mellon of the T. Mellon & Sons banking house and future Secretary of the Treasury loaned the Pittsburg Reduction Company the money to expand dramatically. ²⁴ The most remarkable thing about Mellon & Sons initial investments required to produce aluminum is that there was still no real demand for it. In 1891, Hall would write, “The mention of $2 in 1,000 pound lots didn’t seem to interest anyone. I know a good many people look at it as a big buy, and they have reason to do so, as they know the total consumption in the U.S. has hardly been 1,000 pounds a year. People said we didn’t have 1,000 pounds. They were wrong, but they might have said, that so far as the users of aluminum were concerned, practically no one wanted 1,000 pounds.” ²⁵ As of 1904, the uses that were developed consisted primarily of wire, cable, cooking utensils, and automobile parts ²⁶ The Pittsburg Reduction Company became the Aluminum Company of America in 1907. Until 1913, the company did benefit from protective tariffs even though domestic demand was relatively small. ²⁷ Then, with the start of WWI in 1914, ALCOA became an exporter in a very major way. Production grew from less than 30,000,000 pounds per year to 152,000,000 in 1918. ²⁸ By the time of US entry into the war, approximately 90% of ALCOA’s production was for military purposes. (mess kits, canteens, helmets, gas masks, ID tags, and “other light equipment.” ²⁹ Obviously, ALCOA profited hugely from the war, and emerged virtually unchallenged in the American domestic aluminum market. Indeed, in 1918 In 1918, Arthur Vining Davis, president of ALCOA, admitted to the War Industries Board that ALCOA was a monopoly. ³⁰ However, no action was taken to divest it. Finally, in 1944, the judiciary per Learned Hand determined that ALCOA was a monopoly and remanded the case back to the trial court to determine the appropriate remedy. Due to the entry of two new competitors (one of which was Kaiser Aluminum) in the interim, the trial court essentially found that the problem had resolved itself, but retained jurisdiction for five years to serve in the capacity of watchdog.

The bottom line is that ALCOA was conceived by individuals who planned to profit hugely from a war that was easily foreseen, that it was a monopoly from its inception until WWII but never incurred any penalty for so being, and that that it has such a large share of the beverage container market notwithstanding higher cost and negative environmental impact . It is clear that ALCOA has led a charmed existence from its inception. The fact that it has such a large share of the beverage container market notwithstanding higher cost and negative environmental impact is simply a continuation of its most-favored status with the U.S. government and its corporate cronies. It is also one of the bigger ironies of today’s world – we use oil when we shouldn’t resulting in global warming and don’t use what once was its waste product when we should to avoid still more global warming.

We need to stop manufacturing aluminum beverage containers.

1. George David Smith, From Monopoly to Competition: The Transformations of Alcoa, 1888 - 1986, Cambridge Univeristy Press, 1988, at p. 310.
2. Id., at p. 342.
3. Ibid.
4. Id.. at 341.
5. The Ohio State Lantern, Vol. LXXXI No. 85, https://osupublicationarchives.osu.edu/?a=d&d=LTN19620201-01.2.7&e=-------en-20--1--txt-txIN-------
6. Smith, at p. 318.
7. Id. at p. 319.
8. Ibid.
9. John Newton Boucher, William Kelly: A True History of the So-Called Bessemer Process, Published by Author, 1924, at p. 17.
10. Id. at p. 17-18.
11. Id. at p. 24.
12. Id. at p. 18.
13. Id. at p. 22.
14. Smith, at p. 14.
15. Id. at p. 1.
16. Id. at p. 12.
17. Id. at p. 21.
18. Id. at p. 15.
19. Id. at p. 1.
20. Gordon A. Craig, Germany, 1866–1945, Oxford University Press (1978), at p. 117.
21. Id. at p. 227-30.
22. See Romans 13:1.
23. See the Christian Association of Washington's Declaration and Address, 1809.
24. Smith, at p. 32.
25. Id. at p. 33.
26. Id. at p. 88.
27. Id. at p. 107.
28. Id. at p.126.
29. Id. at p.127.
30. Id. at p.113.