Imagine someone is eating at a restaurant that receives a bomb threat. For some reason, the restaurant cannot be evacuated, and most of the people eating don’t even know that a bomb has been located on the premises. They continue their meals blissfully unaware. Experts slip in, diffuse the bomb with just moments to spare, and the restaurant has no idea how close they came to tragedy.

Metaphorically speaking, this is what just happened to the American economy.

On October 1st, the International Longshoremen’s Association (ILA) began a massive strike the scale of which we haven’t seen in 50 years, affecting the entire Eastern Seaboard and the Gulf of Mexico. The Longshoremen are the workers who work the docks, ensuring that imports and exports can get in and out and on the road.

Nearly 50,000 members walked out, demanding a wild pay increase on top of their already lucrative compensation and banning the most effective machine and automation technology from being implemented in our ports.

The ports affected handle nearly half of all U.S. imports and exports, and President Biden said repeatedly during the lead-up to this showdown that he would not interfere in negotiations or use the Taft-Hartley Act to keep the ports open during negotiations.

“It’s collective bargaining,” Biden said. “I don’t believe in Taft-Hartley.”

The Taft-Hartley Act is a national security measure that allows the President to keep vital infrastructure operating for 80 days even during labor disputes, so that the nation does not suffer the terrible consequences of a union walkout on our most important systems. Biden wasn’t willing to invoke it.

So, with essentially nothing to lose, the ILA went to the negotiating table.

The previous contract, which just expired, started dockworkers out at $20/hour for brand-new, unskilled recruits. By their sixth year of work, these longshoremen were earning $39/hour. For the new contract, the USMX offered a nearly 50% pay increase, a tripling of employer contributions to retirement plans, and improved health care.

The union rejected this offer.

Harold Daggett, president and chief negotiator for the ILA, had this to say to the American people:

“I will cripple you. Everything in the United States comes on a ship.”

Daggett earned a combined salary of over $900,000 last year and has raised eyebrows for his luxury yachts and vehicles.

So what was the dockworker’s union demanding?

A 77% pay increase and a contractual ban on all automation on U.S. ports for all time.

U.S. port efficiency is famously bad when compared to other nation’s ports. In recent rankings, not a single U.S. port made it into the top 50, and only a handful made the top 100 at all – mostly very close to the end of the list.

Many experts have written that the reason for the United States’ severely lacking performance at the ports is due to union contracts, which do not allow many ports to operate at all hours and already severely restrict automation, while the rest of the world uses automation to keep the ports running at all times.

The ILA has also been criticized for choosing to strike in the immediate aftermath of the devastating hurricane that decimated Western North Carolina.

“I’m rabidly pro-union,” says one commentator on X (formerly Twitter) “but Mother Jones would be appalled at the way dockworkers are playing games with the U.S. economy. And I say this as a guy who literally drags his family to her grave every year as we drive up to visit family in Chicago.”

“If prices go up now when we need stuff the most in NC,” says one North Carolina pastor, “I swear I’m becoming rabidly anti-union in ways I would not have anticipated. And I have not been that guy. But not now.”

When the strike first began, Sent to Win asked a top executive in the maritime industry how worried we should be about this. His response was:

“Very worried. The interruption to supply chains can be catastrophic, reminiscent of COVID days.”

He then added that more than 90% of goods in the U.S. arrive via ports.

Experts warned that this strike would cost the economy roughly $5 billion per day, could threaten jobs, and could increase inflation.

In other words, GDP goes down, prices go up, and availability goes down.

ILA president Harold Daggett had this to say, describing what he foresees as the consequences of his strike.

“First week, it will be all over the news… Second week, guys who sell cars can’t sell cars because the cars ain’t [sic] coming in off the ships. They get laid off. Third week, malls start closing down. They can’t get the goods from China. They can’t sell clothes. They can’t do this. Everything in the United States comes on a ship. They go out of business. Construction workers get laid off because the materials aren’t coming. The steel is. The lumber is not coming in. They lose their jobs. Everyone is hating the longshoremen now because they realize how important our jobs are now.”

He was not exaggerating.

Experts have called the potential of this strike “devastating,” and the consequences could have affected the global economy.

The good news is, that the strike only lasted three days (and the three-day strike will require at least three weeks to catch up at the ports, according to Everstream Analytics). So what happened? How was the “bomb” diffused?

What Happened to Stop the Strike?

Essentially, Florida Governor Ron DeSantis stepped in.

“I would say that this [strike] is something that would have significant impacts on the nation’s economy anyways,” he said, “but to have this happen in a way that could negatively impact people who are reeling from a category 4 hurricane – that is just simply unacceptable.”

DeSantis deployed the National Guard to work the ports, set up expedited transportation corridors in cooperation with Florida Highway Patrol, and waived toll fees and size and weight restrictions on trucks traveling from Florida ports.

Other states noticed. Their own governors would have been under pressure to do the same, and if Florida’s port efficiency managed to stabilize or (if this hypothetical gets really crazy) if port efficiency improved while the ILA was on strike, that would have dramatically reduced the union’s bargaining powers.

So the strike was called off until at least January, and the USMX and the ILA have a tentative agreement for a pay increase in surplus of 60%, and they have extended the Master Contract another few months.

For the moment, the sudden crisis is averted.

The winners are most certainly the ILA, which has managed large concessions from the USMX after striking for only a few days. The governor of Florida comes out looking well, for stopping the immediate threat of shortages, inflation, and economic chaos.

The losers, however, might just be the American people, who, despite belonging to the richest nation in the history of the world, will continue to endure higher prices and a slower speed of business, because our ports are in many ways an international embarrassment, purposely held back from using modern technology and closed during many workable hours of the day. (China’s ports, for example, regularly process more than 4 times as much cargo per hour as typical U.S. ports.)

In other words, we managed to hit the snooze alarm for now, but the problem of U.S. ports will continue to catch up to us until we finally embrace innovation and ignore the Harold Daggetts of the world.

Harold will be fine. He has a 7,000 sq. ft. mansion in New York. But come January, we may see fresh trouble as language regarding the use of automation at our ports once again comes into question. As union dockworkers continue to demand higher and higher pay, automation becomes increasingly attractive to port authorities, but interests are now so entrenched that a big shift in operations might mean a big disruption to our economy.

TL;DR

Things are back to essentially status quo for the moment, but be prepared – January 15th could mean another massive strike. When the New Year comes, your business may want to be sure it has the supplies that it needs, and that it does not have an overabundance of debt.

---