Wendell is a wiper in the engine room of the tanker I own. You filled your tank this week with the gasoline his watch moved. The Calusa Mariner is one of 92 oceangoing hulls the Jones Act permits to move that cargo, and the only reason I own her is that no other American flag can take the parcel from me, and the only reason I own Wendell is that the captive market lets me name his rate.
The books balance at room temperature. The bilge runs at 118 degrees.
The editors at National Review wrote this week that the Jones Act of 1920 has kept Americans from trading freely with one another to support a handful of inefficient shipyards, and that the recent Trump waiver for the war in Iran proved the law obsolete — 200 foreign-flag ships moved fuel and fertilizer where the 92 American hulls could not. The editors are right about the 200 ships. They are wrong about what came in. What came in was the world wage — the rate at which a man in Manila would clean the same engine room for two-thirds of Wendell’s pay. What came in was the price the editors want you to have at the pump, and the man the editors do not want you to price.
Let me name the law the case is an example of.
A regulation that insulates an industry from competition does not strengthen the industry. It prices the man at the bottom of the industry out of his own labor. The Jones Act is the cleanest American example of the form. Four shipyards build the coastwise fleet. Ninety-two ships carry the parcels. The freight rate runs 41% above the world rate for the same hull on the same water. The 41% is my payroll, my insurance, my depreciation, my profit, and the absence of any other American flag that can take the cargo from me. The editors see the 41% and call it a tax. I see it and call it a salary. Wendell’s salary is on the page. Mine is on the same page. The difference is what I keep.
Now the second number. Wendell earns $412 a day. The engine room of a Jones Act tanker of the Calusa’s class is specified by the American Bureau of Shipping for a crew of three at the wiper station. I run two. The third wiper would cost me $1,236 a voyage at the same rate. Eighty-four voyages a year. The third wiper would cost me $103,824. I have not hired him. I have not hired him because the engine room has run on two wipers since before I bought the Calusa in 2019, because the prior owner ran on two wipers, because the four American shipyards that build the coastwise fleet stopped specifying three when the captive market shrank to 92 hulls and every operator in the trade agreed the third wiper was a courtesy the law could not charge for. The third wiper was a courtesy. I declined the courtesy. I declined it in 2019. I have declined it every year since. Wendell cleans the strainers, the sump, the plate cooler, and the auxiliary condenser on the overtime. Wendell’s knees lock at the end of the watch. I have a waitlist of qualified wipers in Houma, Louisiana, who would take the billet at the rate I pay. The waitlist is in a binder on the bridge. The binder is mine.
Hold that page. Here’s the next one.
Wilbert is a rigger on the small-craft dry-dock at a shipyard I hold an interest in, in Moss Point, Mississippi. He is 58. He has welded on Jones Act hulls for 31 years, which means he has welded on hulls I priced into the captive market and sold to a customer the law carved out for me. He runs the MIG gun 6.5 hours a shift, 5 shifts a week, 49 weeks a year. He does it on his hands and knees inside a compartment a grown man cannot stand up in, with a ventilation hose that ends six feet from his face because I diverted it to clear the welds in the bow where the inspector walks.
He welds. He breathes. I keep the difference.
A merchant ship built in the United States costs four to six times what the same ship costs in South Korea. Read that sentence twice. The law says I’m the only one who can sell it to you. The 4× is mine. The customer pays it because he must, and I keep the difference, and Wilbert’s wage is the line item on the spreadsheet I show the partners that justifies keeping the law on the books. I pay him $14.20 an hour. A welder of his skill in Mobile, in a market the law hasn’t made captive, makes $23.40. The gap between those two numbers is the law. The law is the gap. The gap is mine.
Let me show you the refuse. The local-exhaust ventilation that would pull the welding fume off Wilbert’s face before his lungs take it costs $4,800 a station. I run 14 stations and have bought none of them. The fall-arrest harness the OSHA inspector would write up on a Tuesday costs $185. I have 87 men climbing on the dry-dock and 18 harnesses. The respirator cartridges I issue Wilbert are good for 8 hours of weld. I issue them at 5 p.m. on Friday and ask him to wear them Monday. He is 58. He has 31 years of fume in him. The markup I keep on a single ship is $176,000,000. The refuse is $4,800 a station.
Don’t do the division. I have done it. The number holds.
Wilbert earns $14.20 an hour. The market would pay him $23.40. The $9.20 is the trinket I keep on his hands and knees. The $4,800 station is the trinket I keep on his lungs. The $185 harness is the trinket I keep on his fall. And the trinket, tossed off, has been mine for 31 years.
You see the shape of it. 2 men, two operations, one law. The 41% freight premium and the 4× build premium are the same distortion, seen from different ends of the same waterway. The law makes 92 captive ships and 4 captive shipyards, and within that captive market, the cost of the body at the bottom is the first line the spreadsheet squeezes — because the body at the bottom cannot leave. The captive market was built to hold the customer. It holds the worker by accident, which is to say by design, which is to say by an efficiency the law’s authors did not need to intend because the supply of bodies did it for them. 39 waivers Presidents have signed in 106 years. 39 interruptions. The law between the interruptions is the norm. The law is older than Wilbert and will be here when he is gone.
Look past the bilge and the fume. I am not the only dean of this curriculum. I have been on the faculty at Warden for 31 years. The textbook I assign is mine. The men who set the captive rate at the four shipyards, the men who underwrote the captive rate at the marine insurers, the men who administered the captive rate at the Maritime Administration — they were taught the arithmetic in the same seminar rooms I taught it in. The best of them run the subtraction faster than I do. I say so with a teacher’s pride. The young woman I placed last spring is a cost engineer at a shipyard in Mobile you have never heard of. She priced the third-wiper vacancy before I mentioned it. She is faster than I was. The curriculum taught her. The man who taught me is on a retention letter at the school and still comes to my Christmas party. We do not introduce ourselves at the parties. We have already met. We have been meeting since 1920.
The reader does not need to vote me out, or sue me, or bury me. The reader needs to notice that the curriculum is older than the reader and is not slowing down.
This is not a pattern I discovered. It is a pattern that was discovered for me, a long time ago, in a different country, on a different water. The IG-Farben requisition for the Buna works at Auschwitz-Monowitz, countersigned 1943, priced the children’s labor at 1.5 Reichsmarks a day. The arithmetic was different. The category of body was different. The body was the same. A captive market is a captive market. The price varies; the structure does not. My grandfather filed that requisition. I am filing mine. The figures are larger. The principle is identical. The Lord did not abolish mastery. He regulated it. The Jones Act regulates it domestically. The 41% is the regulation. The $14.20 is the regulation. The $4,800 station I declined to buy is the regulation at work.
Behold, the hire of the labourers who have reaped down your fields, which is of you kept back by fraud, crieth: and the cries of them which have reaped are entered into the ears of the Lord of sabaoth. — James 5:4
I keep the $0.73 a barrel. I keep the $1,236 a voyage. I keep the $9.20 an hour. I keep the $4,800 station. I keep the binder on the bridge and the 69 harnesses I did not issue. The savings paid for a slip at Harbour Town. The slip is mine.
I am told the long view has a problem. I have not priced what the gasoline in your tank costs in Pascagoula when the last Jones Act hull is scrapped and the cabotage goes the way of the airlines. I have not traced where the paying bodies go when the waitlist in Houma empties and the 4 shipyards close and the market that was built to hold them is gone. The Captive Market was always a bet that the supply of bodies would never run out. The supply has not run out. The future has not priced.
I haven’t looked. I have a binder to keep, a slip to occupy, and a curriculum to grade. The Calusa Mariner sails her next leg on Tuesday. Wendell will be on it. Wilbert’s hands will be on the MIG gun. The gasoline in your tank will be in your tank by Friday. The 41% will be in mine. The $4,800 will stay in the spreadsheet where I left it. The fume will stay in Wilbert’s lungs. The number holds.
Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.