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The Rivers Run Through It

Mises Daily: Thursday, June 03, 2004 by

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It should come as little surprise to anyone living near a port of trade that transportation throughout the network of the nation's waterways, at one time the arteries of domestic commerce, has become nothing less than a state-woven web of interventionist circuitry and waste. 

Over the last decade, the citizens and legislators of Louisiana have finally begun to realize the expenses and costs that are the direct result of the inefficiency and bureaucracy of the state driven monopoly of river pilots, specifically regarding their organization and pay. 

State officials have charged that the pilots' business dealings have damaged Louisiana's reputation with much of the shipping industry and thereby have had difficulty attracting business. Currently the pilots are divided into three separate groups each controlling a segment of the lower Mississippi River by means of a commission, which oversees dealings and determines fees and pay. In all, there are 280 such state-commissioned pilots who guide large vessels on the Mississippi and Calcasieu Rivers for a targeted $342,000 a year. 

It is also no secret to the public that there is widespread nepotism, porkbarrelling, and featherbedding amongst the river pilot ranks. (See the Google on the topic for a sample of how hot the controversy has become.)

Rather than accounting for the source of these ills, state ownership and administration of the waterways, the looming questions legislators, river pilots, and the shipping industry now concern themselves with are how much authority commissions and advisory boards should have in hiring and other workforce decisions, and how the industry should be revamped to increase efficiency. Says governor Blanco of the current condition of talks, "I don't really care what the structure is, as long as it actually works." 

Of these "structures" she refers to, one is a bill that would seemingly succeed in achieving compromising ends, as far as these economic illiterates would presume. The proposed legislation would replace the separate fee commissions with one eight-member commission appointed by the governor, and create another nine-member board, also appointed by the governor, to oversee the existing pilot boards.

While additional legislation seems to be the most suitable solution for most people witnessing these events, the only real, workable solution is for the abolition of intervention. The river pilot industry has followed, and will continue along the path of, the same formula that characterizes all state-handled markets: regulatory legislation causes disorder which incites presumably corrective but more regulatory legislation, each leading to more chaos and inefficiency as they move further from a self-regulating free market. 

However, what is noteworthy of the river pilot industry is that it is far ahead of many other heavily regulated industries being that it is but one tier short of being another bona fide branch of government. For what other industry operates entirely on public land, is exclusively monopolized, has a state-commissioned workforce, and determines the fees charged and wages paid through a series of board meetings? This sort of administration and its concomitant shortcomings and failures are reminiscent of the departmentalization of industry in Soviet Russia, a system which politicians in the United States purport to oppose.

What the public may witness here is a perfect example of the failures of bureaucracy, intervention, and planned economy. Indeed, the crux of the issue is that where there lacks a market for a good or service there lacks the efficiency and quality that naturally arise via the existence of or the potential for competition. There is a list of markets which are disturbed if not incapacitated by the state manipulation of the river pilot industry. 

First and probably most obvious is the real estate both along and including the river. A system of private property rights is the only just, and in  most cases productive and efficient, way for mankind to deal with scarcity. The fact that the state holds and prohibits individuals from using and homesteading the river predestines the waterway and all activities taking place on and along it to inevitable conflict in determining how it may be utilized, such as the case of the river pilot controversy. 

Second, the market for river pilots, as a labor market, is not a "market" at all, but an extremely rich labor union resembling the processes of political appointment rather than trade and competition. River pilots are arguably the most protected workers in all of the state, licensed solely by the state and free of virtually all market forces pertaining to wage and working conditions. 

Consequently, not only is there no profit-loss incentive or competition for employment, but there are no signals to note and reward productive pilots while flagging those who perform poorly. 

Finally, the market for virtually every consumer and producer good transported along the river is effected by the dynamics of the river pilot industry. The individuals who incur the greatest burdens and expenses as a result of the current organization of the river and transportation along it are consumers.

As though being taxed for the upkeep of the river were not enough (upkeep which itself would be much better in a market setting), any individual purchasing goods traded along the river now pays higher prices for the additional transaction and transportation expenses. Once one succeeds in taking into account the costs associated with the lack of efficiency and quality that typically characterize monopolies without the existence or the threat of competition, the full costs of the river pilot industry may be gauged.

Both in theory and history, those markets least regulated by the state have been the most efficient. The solution to Louisiana's river pilot controversy and shipping famine is not new legislation, but the exact opposite: de-intervention. Only by destroying the monopoly of river pilots and state ownership of the waterways will industry be attracted to the Mississippi and Calcasieu Rivers. And only when a free market is allowed to emerge can real wealth be created.

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Erich Mattei is a graduate student in economics at the University of Georgia. ehmattei@loyno.eduSee his archive. Comment on this article on the blog.