In principle, capitalism is based on healthy competition, which forces producers to offer higher-quality products and services at cheaper rates.
Everyone benefits from competition, even producers. After all, if your rivals continue to knock you down, the market is recommending you do something else.
While most company executives claim that free markets are inherently fair, in fact, many prefer to avoid competition.
That’s fine — until such enterprises want government assistance. Government exists to promote the general good, not to benefit a single firm or sector. Many past maritime disasters and storms reveal a century-old statute that requires a close examination.
A Naval Monopoly?
Wesley Jones was a United States senator from Washington from 1909 until his death in 1932, just days after losing re-election. His most famous work is the Merchant Marine Act of 1920, often known as the Jones Act.
According to a Jones Act injury attorney, the Jones Act mandates that cargo between two U.S. seaports be transported only on U.S.-flagged boats constructed in U.S. shipyards and crewed by Americans. The aim of this was to guarantee that the United States maintained a viable commercial shipping sector in the event of a conflict. Because World War I had recently finished, this necessity was obvious at the time. Furthermore, the legislation aided Seattle-based shipping companies in gaining Alaskan freight business.
Today, the Jones Act grants a small number of U.S. firms a monopoly on the transportation of freight between the mainland United States and Alaska, Hawaii, Puerto Rico, and Guam. This monopoly is legally enforced.
According to research conducted by the New York Federal Reserve in 2012, the cost of transporting a cargo container from the East Coast of the United States to Puerto Rico is two times more than the cost of transporting the same container to the neighboring country of Haiti.
This is the result when there is little or no rivalry in a certain market. And this is reflected in the much higher costs that Puerto Ricans have to pay for everyday items.
The Jones Act is sometimes ignored, like when the Trump administration allowed foreign-owned tankers to carry gasoline to Florida ports during Hurricane Irma. When Hurricane Maria hit Puerto Rico, many asked why the island territory had not received the same favorable treatment. The DHS stated it wasn’t required since thousands of containers were already blocking San Juan’s ports due to a shortage of vehicles, drivers, and acceptable roads.
Nonetheless, requests for a Jones Act waiver persist.
Proponents of the Jones Act believe that the United States needs shipyards and experienced employees in order to strengthen its fleet during wartime.
That sounds logical, but the assumption that future conflicts would resemble World War II is likely incorrect. Not Rosie the Riveter, but Robbie the Robot.
Whether there is a war or not, the United States Navy, Coast Guard, and other government agencies will continue to use American shipyards. That component of the industrial foundation will not vanish.
On the other hand, inhabitants of Alaska, Hawaii, Puerto Rico, and Guam pay a specific “tax” in the form of increased costs whenever they purchase goods from the mainland United States. It’s a direct transfer from their wallets to the shipping and shipbuilding industries in the United States.
Is that correct? Maybe. All of those regions are home to low-income Americans who need every dollar they can get, and the Jones Act isn’t helping.
A Killer of Efficiency?
The Jones Act is a prime example of well-intended legislation that has outlived its purpose.
Businesses come to rely on them when they should be moving on. Instead, they lobby Congress and often succeed.
When this occurs, the economy becomes less efficient for everyone. As in a garden, you must sometimes pluck out dead weeds to create a place for fresh growth.
The Jones Act is now closer to repeal than it has been in decades. We’ll find out during the Biden administration whether that occurs. The President himself has yet to voice a definite opinion about the Jones Act, one way or the other. He’s been too caught up with the aftermath of the pandemic and, now, the war in Ukraine. But give him time — this is an issue that won’t be going away.