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The Foul Jones Act

Juliette Sellgren’s podcast with the Cato Institute’s Colin Grabow is a gem. It’s on the 1920 Jones Act, a particularly nasty piece of still-existing legislation that protects a very small number of U.S. ship owners, ship builders, and maritime workers at the larger expense of the American public.

Under the Jones Act, each vessel carrying goods by water between U.S. ports must be:

– owned by U.S. companies that are controlled by American citizens with at least 75 percent U.S. percent ownership;
– at least 75 percent crewed by American citizens;
– built (or rebuilt) in the United States;
– registered in the United States.

Anyone searching for an unalloyed real-world example of the realities of cronyism and interest-group politics can do no better than to listen to this podcast. If you listen, you’ll also learn about how government-granted special privileges produce consequences that, while foreseen by economists and other knowledgeable people, are the opposite of the consequences that are publicly promised. Further, you’ll learn about negative consequences that almost no one foresaw.

Among the latter consequences is the Jones Act’s negative impact on the environment. Here’s just one example: Because the Jones Act artificially raises the cost of coastal shipping in the U.S., Puerto Ricans buy no liquified natural gas (LNG) – which they use to generate electricity – from the U.S. mainland, but they do buy much of it from locations much further away, including Russia. (Those who wring their hands over the environmental consequences of cryptocurrencies should take a look at the Jones Act. It would be interesting to compare the amount of energy used by cryptocurrencies to the amount of energy used because of the Jones Act.)

My first job with a firm was in the summer of 1975, just before my senior year of high school. It was with my parents’ employer, Avondale Shipyards near New Orleans. Being not yet even 17, I worked in an office rather than out in the yard itself, which was an unusually dangerous workplace. One of my chief tasks was to record – by hand on paper – the reported storage location of prefabricated parts of ships under construction. That summer, the shipyard – “Avondale,” as we simply called it – was building a few LNG tankers (which I gather from Colin’s podcast with Juliette must have been among the last such tankers built in the U.S.).

One day that summer someone walked into the office in which I worked with a petition to sign. The person explained that the petition is meant to strengthen U.S. shipbuilding by protecting it from foreign competition. Being still 16 and not yet knowing any better, I signed (although, as I think about it now, I doubt that a minor’s signature was permissible on such a document).

I’m sure that both of my parents also signed it. Sounds good. Protect our jobs. Make America strong.

Protectionism is bunk.