Only Protected Producers Can Operate So Inefficiently

by Don Boudreaux on April 17, 2021

in Crony Capitalism, Trade

After I posted my praise of Juliette Sellgren’s recent podcast on the Jones Act with Colin Grabow – a post in which I mention my long-ago summer job at Avondale Shipyards – Colin alerted me to this November 2008 paper by William Gray in the Journal of Ship Production. (Who knew such a publication existed?!) Here’s part of the abstract:

Since WW II, major US shipbuilders have been unable to compete in price with shipyards in other parts of the world, and often the quality from US yards has been inferior to world standards. Furthermore, the mistaken US government assumption that shipyards and ship owners have a common interest has led to laws to protect American yards from competition. It has also caused commercial shipping to lose out to alternative forms of transportation such as trains, trucks, pipelines, and tug/barge rigs from more efficient smaller yards and crews. The “US built” requirement of the 1920 Jones Act for domestic cargo has been a prime reason for this modal shift. Tragically for coastal shipping, most large US shipyards have failed to adopt the efficient manufacturing lessons of pioneers such as Admiral “Jerry” Land and Henry Kaiser that led to the “WW II shipbuilding miracle,” that built nearly 6,000 merchant ships in 5 years, a feat that Winston Churchill said “saved Europe.” After WW II, while foreign yards adopted these efficiency measures, that did not happen here, and our yards suffered from few repeat orders because of their high prices.

Colin highlighted this passage on page 209 of the paper:

Avondale shipyard in New Orleans, LA, also used IHI in some of its projects in late 1970s into the 1980s. Interestingly, this yard was then, and still is, interspersing Navy and commercial work. For the Navy, they have usually built fleet oilers or auxiliaries apparently successfully. Avondale also built at that time three LNG tankers for El Paso Gas, probably with a cargo membrane containment system provided by one of two French companies Gaz de France or Technigaz, or the British Conch system of independent prismatic aluminum tanks. In any case, all three completed ships failed their gas trials and were declared constructive total losses at delivery because of insulation failure, a catastrophe technically and financially. Two were eventually converted in Asia to coal-burning main engine and bulk carriers for cargo, but hardly ever traded. The third one broke its tow at sea and became an actual total loss off Nova Scotia, a sad chapter.

I was unaware of the fate of those LNG tankers that were built by Avondale in the 1970s, but I’m not surprised to learn that it was unhappy. Even as a teenager working during the summers in that shipyard, I was struck by how haphazard were the operations that I observed from my small perch.

I worked in the “Steel Storage” office. As parts of the ships were prefabricated, they had to be stored until the time came to weld or bolt them onto the final product. There was no systematic method of storage. Each piece was simply deposited into any space that would accommodate it. Prefabricated ship parts were literally scattered all across the shipyard, which was quite a large place.

Workers called “expediters” would make hand-written notes of where each of the particular pieces was stored. These notes were brought to the office where I worked and then I and a few other clerks would record this information, by hand, into “log books.” The log books were then consulted weeks or even months later when the time came to locate the pieces to be welded onto the ship.

But the information proved, with surprising frequency, to be faulty. During my final two summers working at Avondale, being over 18, I was often sent out on a mo-ped to physically search for missing pieces. (It was during one of these search-for-missing-steel expeditions that I ran into my father and saw, for the first time, just how incredibly hard he worked.)

Sometimes I never found what I was looking for, and so replacements had to be constructed. And when I did find what I was looking for, the pieces were often nowhere near where our official records said they would be.

It was a mess that only a protected producer could afford to get away with.


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