This is Part 2 of a three-part series about rent-seeking, a phenemonon in which rich businessmen maintain their wealth by legally bribing politicians to pass absurdly inefficient laws protecting their industries. The series relies on the NPR show Planet Money, a sometimes quietly subversive show which undermines the bases for liberal tinkering with the economy by showing how such interference creates inefficiencies.
Part 1 of the series dealt with state-created monopolies for car dealerships, a situation that has contributed to the ouster from New Jersey of the popular Tesla car. New Jersey was the perp in Part 1 — but today, in Part 2, New Jersey is the victim, as we discuss The Jones Act.
Here’s the story told in the episode. The state of New Jersey ran out of rock salt to melt ice and snow — which was a problem, because they were in the middle of a giant winter storm. But all was well: Maine had a mountain of rock salt. Even better, there was a giant ship in Maine that could easily transport 40,000 tons of rock salt in a single trip. Best of all, the ship was already on its way to Newark.
Problem solved, right?
Wrong. You see, using that particular ship was illegal.
Was the ship not seaworthy? Had the captain neglected to file necessary paperwork? Had the company that owned the ship failed to pay taxes?
No, none of that was the problem. The problem was: the ship was not made in America and did not fly an American flag. And under a law passed decades ago called the Jones Act (aka the Merchant Marine Act of 1920), any ship that carries material from one U.S. port to another must be made in America, staffed by an American crew, and must fly an American flag.
The law was passed, as laws like this often are, to protect American businessmen who couldn’t hack it in the marketplace. We wanted to keep a strong marine industry, so we hurt the consumer by passing protections for business. Thing is, it didn’t work out so well. The U.S. doesn’t build that many ships any more. (We barely build anything anymore.)
So it’s not like an equally capacious American-built ship was standing by to haul the rock salt to Newark.
No, instead everyone waited for a little barge to come to the dock. It was filled with rock salt to melt the New Jersey snow and ice. The barge then took off with its load of salt — leaving a mountain of it sitting on the dock. Because, you see, the 40,000 tons could not begin to fit on the small barge. So the barge took some salt down to Newark, dropped it off, went back to Maine, got another “fraction” of the mountain of salt, and went back to Jersey.
The reporter does not say how many trips were required to transport the whole load, but it’s clear it would be at least three.
Well. Serves New Jersey right for banning the direct sales of Tesla.
This rock salt example is just one of many examples of inefficiencies and expense created by the Jones Act. If you miss your cruise ship in a U.S. port, you’ll have to pay a giant fee to catch it in another port. A cattle rancher in Hawaii seeking to avoid the extra expense of using American-made ships has gotten his cows to the U.S. mainland in two ways. Formerly, he shipped them to Canada so they could travel over the border to the U.S. Now, he sends the cows by plane when they are younger and weigh less.
Absurd, right? You bet. Economists hate the law. Yet the chances of repeal appear to be zero.
You see, politicians don’t pay attention to what works. They pay attention to the almighty dollar.
Coming in Part 3: government-sponsored cartels in raisins, and the Stalinist-sounding “Raisin Administrative Committee.”