Not too long ago, I was at the shore waiting for something photographic to happen, when a containerized cargo ship slowly sailed by… and then another… and then another.
To be honest, I’ve never thought much about cargo containers and the ships that carry them — other than that they are a frequent sight in the Puget Sound area. A friend of mine and his wife once sailed halfway around the world in a small sail boat. He told me that his biggest fear arising from two-plus years at sea wasn’t pirates, but rather cargo containers. It turns out that somewhere between 2,000 and 10,000 containers fall overboard each year. A cargo container can float for days just below the surface of the ocean and can rip the bottom out of small boat literally in seconds.
So while patiently waiting for a fish-snatching Bald Eagle or a Great Blue Heron to fly by and make my photographic day, I occupied myself by watching three container ships heading toward Seattle or Tacoma and listening to MSNBC on my SiriusXM radio. During one particular political segment, the station played a clip of John Boehner doing one of his “Jobs…Jobs…(It’s all your fault, Mr. President)… Jobs” rants. At that point, a question occurred to me: How many US jobs, now exported, did those three cargo vessels represent?
Modern containerized shipping got its start in the 1950s. Twenty-foot containers became the standard and the basis for the unit of measurement known as TEU – which stands for Twenty-foot Equivalent Unit. These containers are 20 feet long, 8 feet wide and ~ 8 feet high. America imports roughly two (2) trillion dollars in goods annually from other countries. Approximately 50% of these imports come to America by container ship.
Although I’m not an economist, I like numbers (Numbers are our friends!) and assumed the math exercise would be a piece of cake. I reasoned that with a few key numbers: GDP, value of imports, the unemployment rate, and the number of containers and container ships arriving in US ports that I could calculate a fairly accurate estimate. It turned out to be a bit more complicated than I expected. But as I did my research, I kept uncovering questions. As I dug for answers, I invariably found even more questions. Aarrgghh! What started as a simple math exercise had morphed into an analysis of US economic policy, free trade and global economics.
Where did all the jobs go?
A commonly held belief is that one of the reasons hiring in the US has not yet improved significantly is that American companies have become much more efficient. While true, this axiom is only part of the story. As my research had shifted away from cargo containers to economic analysis, I learned that imports are having a more devastating effect upon the US workforce than I previously believed.
Free Trade –This will only hurt for a little while.
The way Free Trade was supposed to work was like this: As the “global economy” developed, when US jobs were exported overseas, they would be replaced by other jobs produced by the synergy of Free Trade. Said another way: If low-skill, piece-work manufacturing jobs were lost, this would be OK because other off-setting, higher skill jobs would be created here at home. Given sufficient time, free market economies would stabilize and countries would thrive; each doing what they do best and most efficiently. We’ve all been told that the US was moving toward a service and retail economy. “They” told us the free-market system was working as it should. “They” were (and are) horribly wrong.
American industry loved the idea of free trade. Cheaper labor… cheaper goods. What’s not to love? And thus American industry set about shedding US manufacturing jobs with abandon. Towards the end of the 2008 recession, 8.4 million US jobs were gone.
The problem is that when a country is not manufacturing things, it is not creating wealth. But the GDP numbers, the stock market numbers and the ever-rising home values gave Americans a false sense of prosperity and wealth. When things started to go badly in the US economy, the Fed opened the gates to free and easy money. Banks were flush with cash and their underlying problems masked. Homeowners, too, felt rich. Personal and public debt reached dizzying new heights. Then the music stopped, the bubbles burst, and the American dream seemed to vanish.
What problem? Please pass the Grey Poupon.
Surprisingly, the realization that this latest economic downturn is different was slow to arrive. Republicans prescribed tax cuts and less government as the cure. Democrats cited sins of the past and promoted the need for more regulation and Federal stimulus. But, as Ross Perot might say, no one was looking under the economic hood. America’s manufacturing base is almost gone. Once it was a robust 20% of our economy. Now manufacturing comprises just six percent. Meanwhile, the wealthiest in the country are reaping bountiful harvests in foreign fields. For them, the system is working wonderfully – even if over fourteen million Americans are not.
Leave it alone; the economy will fix itself.
Over the past couple of decades, Americans became accustomed to boom and bust cycles. The economy always seemed to bounce back – if not to previous heights, perhaps high enough. Possibly because of the expectation that the economy would recover and the “lost” jobs would come back, many economists failed to realize just how damaged the country’s economic engine had become.
A Fundamental Misunderstanding.
What happened? What went wrong? Our Government has bought into the false belief that America can prosper without a strong manufacturing sector –the mistaken belief that a service/retail-dominated economy will serve us just fine. I say again, if a country is not building things, it is not creating wealth. There is nothing inherently wrong with Free Trade. There is something terribly wrong with America believing it did not need to find a way to maintain a strong manufacturing sector.
I Pledge Allegiance to the Flag with the Highest ROI.
Rather than invest in new technologies that will allow us to automate and compete with low-cost manufacturers (as Germany successfully did), we contented ourselves with the notion that the market would soon right itself and the US economy would be reborn. Instead, we chose to invest in wars, in our military and in our wealthiest citizens. Corporations became international in both focus and allegiance. For the wealthiest, America became the place of low tax rates, favorable government policies and a nice place to live while investing their wealth overseas.
Captain, there seems to be a problem in the Engine Room and the helm is not answering!
Even now as many economists and some business leaders are now coming to realize the seriousness of the problem facing our country, the political partisanship has become so rancorous that real, cooperative and bi-partisan solutions are simply not possible. The debate has become so ideologically driven and so ‘dumbed-down’ that it is useless.
If, however, you are part of the country’s wealthy elite, the system has worked just fine. Over the past decade alone, your net worth has increased dramatically. If this is your socio-economic group, you want more of the same and thus you find and support politicians who share your views.
The next-generation manufacturing jobs, should we choose to pursue them, will be different from jobs in the past. They will involve the creation, maintenance and support of highly automated production lines that will enable American manufacturers to compete on price in the world marketplace. These manufacturing jobs will require specialized education, so now is not the time to be demonizing teachers. They literally carry the education lanterns that will illuminate our path out of this dark hole we’ve dug for ourselves.
Now, about those container ships…
According to my math, each container ship arriving at a US port represents the loss of 524 American jobs. I call it the five-twenty-four CSI – short for Container Ship Index – or Crime Scene Index — either one works.
Here are the numbers I used to make the calculations. It is not a perfect approach, but I tried several and this one seemed to work the best. (If you have better numbers or a “better way,” please let me hear from you.)
Value of Imports ($1 trillion)————— $1,000,000,000,000
Containerized Imports (in TEU’s)———– 16,000,000
Value per TEU———————————— $62,500
Employment Impact (“lost” US jobs) ——–9,432,800
Number of Ship Calls in US ——————–18,000
Job Impact per Ship Call ———————524
US GDP ——————————————–$14,700,000,000,000
US Population ———————————— 311,000,000
Number of US Workers ————————-138,641,000
Worker Per Capita ——————————$106,029
No. of Unemployed Americans ————–14,837,000
Unemployment Rate —————————-9.7%
So how do the numbers break down?
US imports are calculated at $2 trillion per year. Since roughly 50% of this figure comes into US ports aboard containerized cargo ships, I cut the number in half to $1 trillion. 2010’s estimated number of containerized imports is sixteen (16) million.
For the purpose of the calculation, I “assumed” that the entire $1 trillion dollars of imports would “shift” directly to US GDP. In other words, our $14.7T GDP would, in effect, actually become $15.7T.
I calculated a Worker Per Capita by dividing the number of US workers (139 million) into the GDP of $14.7 trillion. This yields a “Worker Per Capita” of $106K. Using the forecasted GDP of $15.7T AND assuming the worker per capita amount would remain unchanged, I calculated that adding $1 trillion to the GDP would put 9.4 million Americans back to work and reduce unemployment rate to 3.5%.
Are these numbers realistic?
Yes… and no. Worker productivity is somewhat elastic. Productivity enhancement means more can be done with less, so it is reasonable to expect that the existing 139 million US workers would accomplish some of the extra work reflected in the $1T GDP increase without adding to the US employment numbers.
The expectation that we could shift $1trillion in imports to US GDP on a one-to-one basis is admittedly unrealistic. However, I believe we assign too low a value to the import numbers. Their true value is not what the items currently cost, but what the items would cost if they had been made in the US. In addition, some of the imports are not finished goods and, therefore, would not count towards ‘final product’ status. Consequently, there are indeed some aspects of the formula and data inputs that are flawed. The remaining numbers used in the calculation are the best and most recent that I could obtain. And, yes, I do believe the calculations reflect the size and scope of the US job-export problem.
But don’t US exports create jobs?
Absolutely, but not the same types of jobs as we exported. A lot of US exports are agricultural – important to be sure, but they do not create the same types of manufacturing jobs as those we transferred overseas.
Conclusion: While I haven’t changed my mind about cargo container ships representing dramatic losses of American jobs, I now view the problem from a broader perspective. I see container ships as a symptom of a much larger problem.
So, where do we go from here?
Cargo ships will continue to call on US ports in increasing numbers. The global marketplace is not going away. And while the world marketplace will remain fiercely competitive, it is not in America’s national interest to simply walk away from the struggle. We need to fight to keep manufacturing jobs in America. Presently our industrial policies are being set by corporations that are primarily international in their focus and allegiance. They see overseas markets as where the growth is – where cheaper labor is. If left to their own devices, American corporations will continue to export jobs and invest overseas. Why? Because that’s where they think the money is… where the profits are… where the largest Return on Investment (ROI) exists.
This is where the US Government has a role to play in establishing a national industrial policy. We should reward companies that create jobs here in America. We should go further by helping companies find ways to create the next generation manufacturing jobs. America has great schools, the proven ability to innovate, and a highly productive work force. We have so much going for us. We can create jobs here in the US if we choose to do so. But at present (in the eyes of corporations), it is easier and more profitable to create the same jobs overseas. We need to change that mindset. (And we will likely need to change a large number of ideological politicians along the way.) But we begin by communicating the principle that America needs manufacturing jobs and that a service/retail economy is not one that can produce the American dream.