Often, debates about economics are dry and lifeless; the concepts are important, but the human side of things seems detached.
That’s not the case with the obsolete and misguided Jones Act. People in Puerto Rico are suffering, and the Jones Act stands in the way of them getting much of the help they need.
“The island was devastated by Hurricane Maria,” writes Michael Tanner in National Review. “Tens of thousands have been left homeless. Basic goods and services, such as food, water, and fuel, are in short supply. Electricity is out for virtually the entire island, and may not be restored in some places for months. Nearly 85 percent of the island has no cell-phone coverage. Much of the country’s already-shaky economic base, including tourism and agriculture, has been all but wiped out. Yet vital aid to the island is being slowed by the Jones Act, a 100-year-old example of protectionism and corporate welfare.”
It’s a case of good intentions gone bad.
“The Jones Act requires that all cargo shipped to Puerto Rico is carried on ships built entirely in the United States, owned by a U.S. citizen, flying a U.S. flag, and staffed by a majority-American crew,” Tanner explains. “Relatively few ships meet those requirements. And at a time when even a brief delay in getting assistance to suffering islanders could cost lives, the Jones Act is an unneeded impediment to that aid.”
The Jones Act has been a problem for Puerto Ricans for years.
“Economists estimate that the law has driven up consumer prices for islanders by 15 to 20 percent, and reduces economic growth there by more than $500 million annually,” Tanner notes. “One study showed that the Jones Act cost the island as much as $17 billion in economic growth between 1990 and 2010. (Hawaii and Alaska also take big hits from this law. Some estimates suggest that the Jones Act costs Alaska, Hawaii, and Puerto Rico a combined total of nearly $10 billion annually in lost growth.)
Why is the law even in place?
“Over the years, the Jones Act has been larded with all sorts of national-security justifications, but its real purpose is to protect jobs in the U.S. shipbuilding and merchant-marine industries,” Tanner says. “No doubt those are good jobs, though the number of people employed in shipbuilding has fallen by 40 percent since 1980. But like most protectionist measures, this law ends up doing far more harm than good. And those most likely to be hurt are those who can least afford it.”
That what protectionism does. It drives up prices, which affects the poor to a higher degree. At the same time, free trade benefits the poor more than anyone else.
“For example, economists estimate that trade and the availability of low-cost imported goods improves the purchasing power of middle- and upper-income Americans by roughly 29 percent,” Tanner notes. “But trade increases the purchasing power of the poor by more than 62 percent.”
It’s high time to repeal the Jones Act, and not just for Puerto Rico.