Peter C. Earle
– October 2, 2021 @ American Institute for Economic Research
Despite numerous personal shortcomings, Jim Morrison of The Doors regularly evinced considerable writing talents. In the poem-song Horse Latitudes, he describes the conditions under which stalled galleons would, drifting listlessly at certain latitudes, jettison cargo so as to make their craft more susceptible to the slightest winds............Cargo vessels no longer raise sails or require wind to fill them, but doldrum-like conditions are rapidly manifesting near ports all over the world. Last week,
[s]ixty-one vessels were anchored offshore on Thursday [September 23rd] waiting to unload cargo as the Port of Los Angeles and the Port of Long Beach…In addition to the anchored ships, 29 were adrift up to 20 miles offshore, meaning they were so far from the coast that their anchors could not reach the ocean floor.
And in the east on Sunday, September 26th,
[The] Port of New York and New Jersey appears to be facing similar issues as West coast ports…Around 24 cargo ships and oil tankers [were] stuck waiting to dock off the coast of Long Island, New York…As of 9pm local time Saturday, the ships appeared to have been stuck in place for hours.
Explanations for the increasing delays include slow loading/unloading times, rising costs of shipping, and capital shortages. All of those explanations are correct but incomplete and insufficiently descriptive. To uncover the root causes and trace their evolution, we must go back to the very beginning.
Nominal Rigidities
First, the foundations. While bottlenecks are occurring everywhere, at present US ports are disproportionately affected. Docking locations along US coasts are among the slowest in the world: not because of size or technological capacity but collective bargaining hindrances. As Dominic Pino recently wrote,
Why are our ports so far behind? Not because we don’t spend enough on infrastructure, as the Biden administration would have you believe. The federal government could spend a quadrillion dollars on ports, and it wouldn’t change the contracts with the longshoreman unions that prevent ports from operating 24/7 (as they do in Asia) and send labor costs through the roof. (Lincicome finds that union dockworkers on the West Coast make an average of $171,000 a year plus free healthcare.) The unions also fight automation at American ports today, “just as they fought containerized shipping and computers decades before that.”
Before the public hysterics, lockdowns, and stay-at-home orders, and even before the first offloading was delayed, nominal rigidities had ossified US port operations and made them particularly vulnerable to even the slightest kinks in supply chains.
Where It Began
As is well documented by now, the effects of nonpharmaceutical interventions sent measures of economic activity plummeting throughout the second quarter of 2020. Unemployment skyrocketed to levels not seen since the Great Depression. The US government countered with stimulus payments via the CARES Act (March 2020), the Consolidated Appropriations Act (December 2020), and the American Rescue Plan (March 2021). Although state governors adopted independent pandemic postures, the spectrum of stringency ran a gambit from less to more binding as exemplified by Florida and North Dakota versus Hawaii and California.
The sudden strangulation of in-person commercial activity, coupled
with weeks to months of veritable isolation at home, with trillions of
dollars being mailed out led to a consumption binge. This was both well
documented and empirically verifiable. Where in normal circumstances
modern US consumers tend to purchase services more than goods, the
circumstances arising of isolation at home for prolonged periods led to a
decisive shift toward purchasing goods: electronics, furniture,
exercise equipment, home improvement items, and so on...........To Read More.....
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