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What in the World?

How the US system created conditions for rail strike scenario

Dec 01, 2022


With the help of the Biden administration, the House voted to avert a rail strike that would have crippled the U.S. economy to the tune of up to $2 billion daily. The legislation, which now goes to the Senate, approves new contracts that give workers a 24% pay raise from 2020 through 2024. However, some unions say Biden betrayed them, arguing the contract needs to do more around paid sick days. Straight Arrow News contributor Peter Zeihan breaks down how the American political system, including the Jones Act, created the conditions for the potential strike.

Excerpted from Peter’s Dec. 1 “Zeihan on Geopolitics” newsletter:

Rail is one of the primary means of transport in the U.S., and a union strike could put all of that at risk. To understand how the US got itself into this mess, we have to consider the following facets of the American system.

First, the Jones Act diverted a majority of the cargo away from waterways, meaning without rail a whole lot of things just…stop. Second, the turning of the political system has forced the organized labor faction into a game of tug of war between both parties, each vying for the union’s support.

As long as there is a threat to the systems that the union has a stake in, they will resist. This will likely result in government intervention, but not necessarily the kind of intervention we would have seen 10 years ago.

(The situation surrounding the potential U.S. freight rail strike remains fluid. At the time of publishing, the U.S. House of Representatives has voted to approve a tentative labor deal to avert a strike, but it remains unclear how the U.S. Senate and rail workers will respond.)

Hey everybody, Peter zine here coming to you from San Diego. Today I wanted to talk about the rail dispute that is about to generate a strike in the United States. Rail, the United States is used for any sort of large type of bulk transport, whether it’s fuel or food or containers that have been moved from the ports, specifically in things that are transferred from either the Pacific Coast inward for and consumption, or things like fertilizer that come from the Gulf Coast up to the Midwest. It’s an important part of the system. It’s the second largest transport capacity that United States has in terms of tonnage miles. And it matters for two reasons. First, my perennial one man war against the Jones Act, we used to ship a lot of things be a water. But with the Jones Act, we now can only ship items between two American ports that are American on vessels that are American owned, operated, captained and crude. And that has led us to reduce the use of the waterways by in excess of 99%, almost condemning our maritime transport system, which is the best natural network in the world to irrelevance. As long as that is the case rail is the only way that can move things in size. And if we had something like the Jones Act for rail, the rail system would shut down if we had something like the Jones Act for transport no more Toyota, no more Mercedes or BMW or Fujitsu or any of the others. So it gives you an idea of how distortionary it is. Second, it’s political. If we were under a different timeframe, say Obama earlier, we would have had a very different resolution here, because we probably would have had some strike busters already been ordered by the federal government, because the rail system is so critical to the American Economic functioning. However, we’re not going to see that if anything, we’re going to see this administration siding with the unions. And the reason is, is that we are at a turning of the political system. Now every generation or to the factions that make up the political parties in the United States move around. And in many ways, this is not a bug. It’s a feature of the system, we have a two party system, because that’s what our constitution more or less requires dictates. We have a first pass the post single member district system, which is a fancy way of saying that when you go to vote, you vote for a specific person who will represent a specific geography, you’re not voting for a party, you’re voting for an individual. And that makes American political parties relatively weak compared to say how they are in Europe or Asia. And that means that we get factions of these independent party candidates within the umbrella of the big tents of the Democrats and the Republicans. And as technology evolves, as the economy shifts, as demography changes, those factions rise and fall in power. And sometimes once a generation or two, the factions lose power or gain power to a scale that disrupts the entire system. This has happened to us six times before. The last big time it shifted in the 1930s. All the African Americans were Republicans and all of big business were Democrats. And obviously, that’s not the world we’re in today. Well, in the last 30 years, we’ve had the rise of ultra globalization, and now it’s collapsed the rise of China and now it’s collapsed, the rise of information technology, the Green Revolution, all of these things have happened in a relatively short period of time, coinciding with the collapse of the Soviet Union and other Return of the Russians. Of course, we’re going to manage our political system differently. And so the factions are once again in motion. And the faction that is currently in the middle of a tug of war between the Democrats and the Republicans is organized labor. So any issue that the unions don’t like is not something that any one is going to raise at the national level, because they feel they need that faction. That’s a lot of votes. And so whether it’s union issues with the Jones Act, whether it’s union issues with the railyards, and whether it’s issues of immigration, the unions are against the changes in those systems, and so they are going to resist and as long as that is going on, we are not going to see a resolution. So with the railyards, I do expect the federal government to get involved, but on the side of the unions, and that has nothing to do with the fact that Biden has generally been pro union. It’s just because that’s where the pullet politics are falling on both sides. If anything, we’re actually seeing the Republican Party right now. arguing for the unions, which is a weird place to be in but again, everything is in motion. All right, that hopefully explains it. That’s it. Whoa, seagull. That’s it for me. Until next time.

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