Many of you have read about the “International Longshoremen’s Association (ILA)” strike that kicked off on Monday, September 30.  I am not going to give you some of my opinions on what the union is requesting, outside of the “automation” component that they are fighting against.  I will touch on that at the end.  But first, a quick summary.

This union represents 45,000 people from Maine to Texas that are tasked with operating the docks, cranes, etc. to remove the container boxes from the ships and move them to the back of a semi, and vice versa.  Ultimately,  the contents of those boxes end up on a grocery store shelf, or on an Auto Dealer’s lot. 

This strike is significant as much of our Country’s imports (cars, electronics, bananas, chocolate, whiskey, etc.) come by ship through the East coast and Gulf area ports.  More than 56% of shipping IMPORTS flow through these impacted ports.  Furthermore, what about the EXPORTS that our US businesses (farmers, etc.) sell to other countries?  More than 68% of our shipping EXPORTS  flow through these impacted ports.  If you are a farmer that produces things like poultry, soybeans, hay, beef, vegetables, you will likely be impacted, either directly or indirectly. If you are a supplier to those farmers, you can be impacted either directly or indirectly!

Again, on Monday the ILA went on Strike because their demands of a 77% pay increase over the next 6 years as well as commitments to not “automate” their jobs was not being agreed to.  If this strike persists, we could be looking at supply shortages similar to what we saw with the Covid Pandemic.  This “strike” is unbelievably bad timing (or maybe good timing if you are negotiating for the union) on top of the biblical-level flooding brought about by Hurricane Helene. Horrible images coming out of the Southeast US!!!

Have family or friends in Puerto Rico?  Over 85% of PR’s food comes from the mainland US!!!  If nobody is able to load the ships to PR, then the shortages may be very severe for them.  

Now, as a student of history, finance, and economics, here is my biggest beef with what the union is requesting, NO AUTOMATION. 

“No Automation”

Requesting that the dock employers do not innovate with the times is crazy to me.  Obviously, the ILA does not want their jobs replaced by computers, which is understandable.  However, by trying to stymie innovation is similar to trying to halt or reverse aging.  Eventually, innovation will find a way to the place where it is needed, and many would argue that it is needed in this area.  Afterall, these folks are making well into the six figures and asking for a 77% increase!!!  Machines do not make these same demands, machines are available for doing their jobs, and machines are more cost effective.  By the way, who eventually pays for that 77% increase if the union gets what they want?  The folks that buy the goods –  you and me.  This is because the shipping costs are always built into the prices that you and I pay.  If we want more inflation in our food prices, then this union doing this is exactly the way to do it!!!  Conversely, automation would ultimately decrease inflation, all else equal.

Furthermore, if these shipping and dock employers do not “innovate” with the modern technology available, a competitor will come along that will use this new technology.  And because that competitor has a more efficient business, they will be able to offer pricing that is more desirable.  Which means, eventually the business that has employees threatening to shut the place down unless pay is increased by X%, will go out of business.  I submit that this purging would take time in the “docking business,” but in the end, capitalism has a way of “firing” inefficient employees and employers. I am sure the timeline for “automation” has now actually moved up for the shipping/docking employers.

In the end, there is no stopping innovation/automation.  As much as it is unfortunate for those that might lose jobs, innovation/automation is better for the human race because of lower prices.

Creative Destruction

Joseph Schumpeter was an Austrian Economist in the first half of the 20^th century.  He coined the phrase “Creative Destruction.”  Creative Destruction speaks to the way a capitalist society evolves.  Old technology/processes get “destroyed” by new innovations, but it is done in a “creative” way because the end result is better and more efficient.

For instance, the buggy manufacturers where “creatively destroyed” when the automobile was invented.  Was the automobile invention a terrible thing though?  No.  Was it bad for the “buggy makers” that went out of business because nobody wanted a “horse and buggy” anymore?  Maybe.  Unless the buggy maker got an excellent job from Henry Ford working on cars. 

Innovation/automation is good, and people have to change and adapt.  I am in financial services; I know about changing and adapting!!!