One of the best examples of government overreach is located in our own backyard (or shipyard). The Wall Street Journal recently reported that the Philadelphia Shipyard is collapsing financially due to a little-known law called the Jones Act.
Enacted in 1920, The Jones Act requires all goods moving between US ports to be made using American-made ships. The predictable result has been the decimation of an industry that our country once excelled in. The local shipyard has laid off 800 workers and posted a $44M loss last year alone. This, after the US government paid $438M in 1997 to create the yard.
As The US becomes a powerhouse liquid natural gas (LNG) exporter there is a growing need for LNG vessels. The WSJ reports that these cost about $180M to build in Asia. In Philly the cost would be about $700M each. Our costs are about 4X our competitors. (Philly generally only assembles ships from Korean components at exorbitant costs). On top of that, only vessels moving from the USA to Hawaii, Guam, Puerto Rico and Alaska qualify in the law. We no longer can provide ships for commercial use.
Why have our ships become so expensive? When government outlaws competition the protected industry no longer needs to improve to retain business. This lack of competition reduces private investment and innovation. The result eventually destroys a manufacturing base that has no idea how to compete in world markets.
Local politicians will no doubt call for renewed investment of tax dollars to save a money-losing operation. These calls should be ignored, and the Jones Act, no longer relevant (if, indeed, it ever was) should be consigned to the region of another Jones – Davey Jones’s Locker.