Neoliberalism and the Jones Act

Let's talk about the Jones Act. This is the law, passed in 1920, that requires cargoes shipped between US ports to be carried on US-built, US-owned ships with US crews. Many other nations have laws limiting trade by foreign vessels so there is nothing strange about it. It has long been somewhat controversial in the US because some of the cost differences sound extreme: it costs 4 to 5 times as much to build a cargo ship in the US as in Korea or China, and wages for crews are as much as five times higher than on international vessels. As a result, it is more expensive to ship goods between US ports. Shipping between coastal ports on the mainland has all but disappeared, since railroads are cheaper and trucks more convenient. The main markets within which Jones Act vessels operate are 1) river traffic in bulk goods like grain and gravel, 2) carrying crude oil from Alaska to the lower 48, and 3) carrying goods of all sorts from the mainland to Hawaii and Puerto Rico.

Since Puerto Rico was devastated by Hurricane Maria, various news outlets have been calling for the law to be repealed. This includes liberal bastions like Vox: "Protectionism and exploitation at its worst. . . . a century-old man-made disaster" and conservative organs like Forbes: "this pernicious and archaic protectionist law." HuffPost mocked Trump for hesitating over granting the waiver that devastated areas usually get after natural disasters, because of pushback from the shipping industry; they called this "considering an industry’s profits over aid to 3.5 million Americans facing a humanitarian crisis."

The journalistic elite seems united in its distaste for the law; I haven't seen a single piece in any of the news source I follow defending the law, and I follow everything from Mother Jones to Reason. Which makes it a perfect, paradigmatic case where neoliberal demands for efficiency conflict with the desires of working class Americans to keep their well-paid jobs.

I've been trying to track down some reliable numbers on the effects of the Jones Act, but this is harder than you might think. For one thing serious analyses have found it hard to document extreme claims of price discrepancy in shipping or damage to the Puerto Rican economy. This GAO study found, first, that most of the ships in Puerto Rico's harbors are foreign; after all the Jones Act only applies to cargoes coming from the rest of the US, and Puerto Rico is just as free as the rest of us to trade directly with China, or with all the numerous Caribbean and Latin countries that are closer than Florida. Nor did they find it easy to document a big impact on shipping costs even directly from the mainland US:

Freight rates are set based on a host of supply and demand factors in the market, some of which are affected directly or indirectly by Jones Act requirements. However, because so many other factors besides the Jones Act affect rates, it is difficult to isolate the exact extent to which freight rates between the United States and Puerto Rico are affected by the Jones Act.

I don't doubt that there is some impact; after all, foreign firms have driven US shippers out of business everywhere they can compete. But I cannot find any serious backing for those "shipping costs are twice as high" statements that are all over the news.

Then there is the issue of American jobs. Liberal news outlets that attack the Jones Act conveniently ignore this part of the equation by focusing on the ship owners, e.g., Vox complains that the law "enriches a small number of American shipowners." The only numbers I can find on the jobs involved come from the industry, so they are of course suspect, but here is one:

In 2006, an estimated 73,787 jobs were directly attributable to the Jones Act fleet.

Let's assume that the industry doubled the number of jobs; what the heck, the argument is the same anyway. It pits some number of jobs – 37,000 or 74,000 or whatever – many of them the kind of union, blue-collar but well-paid jobs we have lost so many of, against a modest gain in efficiency for the rest of us. What benefit to the nation as a whole is worth throwing 37,000 people out of work?

In the case of Puerto Rico there is the additional argument that Puerto Rico is poor. So the subsidy to US workers and shippers is extracted from people who are already worse off than the American average. This is the argument made by many liberals, who thereby take the side of comparatively poor, non-white people against rich white ship-owners. Ignoring the people who work on the ships, who are otherwise employed by the shipping companies.

I don't have an answer here. I was just struck that after a whole year of liberals talking about needing to change their economic thinking and stand up for the working class, a whole year of complaining that Hillary was too much of a neoliberal not enough on the side of the workers, when a real issue comes up the entire liberal intelligentsia leaps to the side of free markets and free trade, actual workers be damned. Maybe that's right. But it shows that whatever they say about jobs and helping workers, the liberal elite has been captured by the logic of capitalism just as surely as the conservative elite. We all believe that competition leads to efficiency, and efficiency benefits everyone; indeed most of us would be hard placed even to describe what another sort of logic might be.