Between the mid-19th Century and the late 20th Century, the country's fate was intrinsically linked to the steel industry. It brought fortune to the country and its population, and left a significant mark on Luxembourg's economy, society and landscapes. From 1975, its decline forced the country to diversify itself, but especially contributed to the creation of a 'Luxembourgish social model'.
Initially, Luxembourg was an agricultural country with outdated structures. It was home to a handful of small industries – tanneries, textile plants, potteries, traditional forges, paper mills, breweries – but these were scattered and not large in scale.
In 1842, the Grand Duchy became a member of the Zollverein, the German Customs Union. This union, which provided access to the market across the Rhine, proved to be beneficial for Luxembourg. In fact, Germany supplied it with the capital and labour required to develop its heavy industry.
But in order for economic trade to take place, good communication routes were necessary. The construction of the railway lines – the first connection from Luxembourg to Thionville was inaugurated in 1859 – was a national event that was made immortal in the song De Feierwon (the fiery chariot).
A steel industry giant
Membership in the Zollverein and the construction of the railway network created favourable conditions for economic takeoff. But it was the discovery of iron ore deposits in the south of the country during the early 1840s that allowed Luxembourg to launch its industrial revolution.
Large industrial complexes were built around the city of Luxembourg, but especially in the South, some remains of which can still be admired today. Esch-sur-Alzette, Schifflange, Dudelange and other villages of the pre-industrial era saw a real population boom.
On the eve of the First World War, Luxembourg ranked among the world’s six largest producers. In 1911, several companies fused to create ARBED (Aciéries réunies de Burbach, Eich et Dudelange / Integrated steelworks of Burbach, Eich and Dudelange), which became the main player of the Luxembourg steel industry
A country of immigration
Industrialisation changes the demographic and social structures of the country. The farmers of the Oesling, the northern part of the country, abandoned their land to work in the mines and factories.
Local labour, however, was not sufficient. From 1890 onwards, emigration practically stopped and Luxembourg became a country of immigration. There are several waves of immigration: first the Germans, then the Italians and more recently, starting from the 1960s, the Portuguese. In 1910, immigrants already represented 15.3% of the total population. Today, they account for nearly 50%.
The economic sector's dominion
However, the prevalence of the steel industry was dangerous for a small country like Luxembourg. In 1970, this sector represented 27.9% of the sum of added values in Luxembourg. In other words, over a quarter of Luxembourg's wealth was derived from these steelworks.
From the late 1950s onwards, Luxembourg made major efforts to diversify its economy. Thanks to promotion missions abroad, other industries were attracted to Luxembourg, such as Goodyear or DuPont de Nemours. At the same time, the tertiary sector considerably gained in importance. While the sum of added values in the tertiary sector accounted for 38% in 1958, it went up to 77% in 1995. Today, 88% of Luxembourg's wealth comes from the service sector, including almost a third in financial services.
A consensual social model against the crisis
But no one could have prepared the country for the events that unfolded in the period between 1975 and 1985. The full force of the global economic crisis was felt by the Luxembourg economy. At the same time, the steel industry faced overproduction around the world. Given the collapse of demand and the drop in prices, reducing production seemed to be the only solution. In 1985, only 13,400 people worked in the steel industry - half as many as in 1974.
In the face of thousands of dismissals and in order to avoid social conflict, the Luxembourg government established the Tripartite Coordination Committee. The committee made employers, employees and public authorities gather around the same table. In 1979, it reached an agreement through which the steel industry was restructured and modernised.
The Tripartite - as this model for consultation is known in Luxembourg - was perpetuated and is currently at the heart of 'Luxembourg's social model'. With this model, partners commit to respond to social and economic problems by seeking consensual solutions together.
What about today?
In 2002, ARBED merged with Aceralia and Usinor to form the largest steel industry conglomerate in the world: Arcelor. In 2006, the group merged with giant Mittal Steel, creating Arcelor Mittal. The group's headquarters remained in Luxembourg and several production sites continue to supply the global market with steel products. From Doha to Copenhagen and from Sicily's vineyards to New York's One World Trade Center, Luxembourgish products are used across the whole world.
Since the early 20th Century and after a long-term decline, the weight of the steel industry in Luxembourg's economy has become stable. Now only approximately 2% of the sum of added values is created by the steel sector.