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Lost Decade (Pulacan)

The Lost Decade was a time of protracted economic recession in Pulacan. Beginning in 1992 with the collapse of the MAUN Steel industrial calpolleh conglomerate, the ensuing contraction spread to connected economic sectors and neighboring countries as a series of Pulatec governments were unable to provide long-term aid to affected workplaces and industries. The recovery was slow, and affected sectors of the economy of Pulacan only returned to pre-recession growth rates in 1999; repercussions continued until 2002.

The steel industry in Pulacan, already in decline before 1992, would never recover to pre-1992 levels of production. A lack of mass orders for cheap steel from Zilung Chen in the early 1990s caused over-leveraged steel plants to overproduce, flooding the market with so much steel that prices became unprofitable. The steel industry was forced to heavily downsize, and became a much smaller part of the Pulatec industrial economy from the 2000s onward. The Lost Decade prompted a dramatic shift in industry for much of the Pulatec industrial sector, with additional focus on manufacturing finished products such as automobiles and on emerging work in the digital sector in order to "future-proof." The Lost Decade forced a political reckoning, with many political parties either reshuffling, rebranding, or disbanding entirely. Pulatec political society polarized during this period as diverging methods for resolving the economic slump grew in popularity then came into conflict.

Background

A steel mill near Ghanzi, one of the main cities for steel production, 1948

For much of the twentieth century, Pulacan's industrializing economy was buoyed by the twin pillars of resource extraction and steel production. With the help of state aid and a rapid influx of urban workers after the Hanaki War, the Pulatec steel industry underwent a period of rapid expansion. By the 1940s it had become one of the dominant manufacturing sectors in Pulacan; peak steel production was reached in fiscal year 1965, when up to 28.9 million tons of steel were being manufactured annually by all Pulatec steel firms. This growth had been in part nurtured by the national government, which had aided in consolidating the steel calpolleh into various groupings based on region. In 1936, these firms then were placed under a quasi-governmental body, the MAUN Steel conglomerate, to regulate prices for the consumer and to promote sensible growth. This policy was kept in place for several decades during the peak decades of steel production. By the 1970s, however, the National Jubilee government under Coyolton Acolmiztli began a process of deregulating major industries, including the steel industry. The MAUN Steel conglomerate was almost fully privatized and heavily restructured into a private association of the Pulatec steel producers throughout the year 1973. During this process, several smaller calpolleh groups broke away from MAUN Steel, forming a smaller, rival business association. By 1973, the Pulatec steel industry had been past its peak by almost a full decade. The shock treatment meant to make the steel industry competitive again instead sank many firms, slowing the decline of some but hastening others'.

Zilung Chen derived much of its steel intake from the neighboring nation of Dzhuvenestan. While Dzhuvenestan was a convenient location for cheap steel, by the late 1970s, cracks were beginning to show in its political system that made the long-term stability of the state come into question. To resolve the risk this posed to Zilung industry, several Zilung firms reached out to newly-privatized MAUN Steel to secure a new import route. The prospect of supplying Zilung Chen's steel needs not only buoyed the hopes of MAUN Steel, but also surrounding industries. For the first time in decades, overall steel production rose and investments were made into reactivating downsized and mothballed plants to meet new demand. Critically, loans from both domestic and international sources were secured, backed by promises of future shares in the profits from steel exports. While some of the short-term loans and investments were made good, this only prompted further solicitation of investment by the steel cartel, eventually far outpacing the production capacity that could reasonably be generated from trade with Zilung Chen by the 1980s. This coincided with a general economic upswing in Pulacan that saw many more eager to invest, in hopes of replicating previous financial successes. Additionally, the 1980s saw turmoil within Dzhuvenestan reach a fever pitch, impacting its steel production significantly and opening a wider niche for Pulacan to fill. The sudden lack of cheap steel caused prices to rise substantially. Investments, combined with subsidies from the national government, were acquired by MAUN to fund long-term projects to expand production. However, by the end of the decade, Zilung firms and state agencies realized that the economy was spending far more on imports and services than it could hope to generate, especially to pay off its ballooning national debt. Several spending cuts were made in the early 1990s, inducing a sharp decline in steel orders from Pulacan. Though MAUN was developing a foothold in several major markets in competition with nations such as Dzhuvenestan, none were as large as in Zilung Chen; as such, the number of interested customers were now below predicted levels; production targets for the following fiscal year (1992) were now far in excess of predicted demand. MAUN directors were now left with a choice: either their calpolleh could produce as planned, producing a steel glut and flooding the market; the other option was to ask subsidiary calpolleh to slash production, potentially leaving many of these workplaces without enough money to provide services or pay their members. The problem was further compounded by a sudden lack of capital to reimburse or compensate investors. The sheer size of MAUN, as well as the number of industries interconnected with steel manufacturing, meant that a collapse or decline in MAUN would have high risk of contagion.

Political situation

The Secretariat of Finance building in Aachanecalco, site of M.T. Chabaya's suicide

The 1990s saw more general elections than in any other decade in Pulatec history.

Prime Minister Motlasi Themba (M.T.) Chabaya of the National Jubilee Party had built a political career off of the economic gains of the late 1980s. Additionally, under his government, the Pulatec central bank had offered several low-security loans to the MAUN Steel conglomerate from 1987 to 1990 in addition to subsidies ostensibly designed to fund expansion. As the conglomerate collapsed, Chabaya was left with no plan of action; public support for his regime collapsed as the situation spiraled faster than the government could feasibly act on it. The timing of several later financial injections also served to raise public suspicion that the Chabaya government was somehow aware of the imminent collapse in steel prices and failed to act accordingly to insulate the conglomerate. (Even if they had known beforehand, the potential effectiveness of preventative measures remains in dispute.) Facing an imminent vote of no confidence, on April 9th, 1993 M.T. Chabaya committed suicide via autodefenestration, the only Pulatec politician to successfully do so.