The Return of Labor?

Unfolding the World, Appendix 2

This one would normally go out Friday, but considering the timely nature of the subject I decided to release it early.

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This standalone article also serves as an appendix to my series Unfolding the World, a history of demographics and geopolitics that sheds light on the enormous historical currents moving world events. If what you read below intrigues you, be sure to check out the rest of the series.

This email is long enough that your service might choke on it. If it does, find the original article at http://jdanielsawyer.substack.com

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As I type these words, something is happening to the United States that hasn’t happened since the 1970s:

Someone other than the government is trying to win an argument by crippling a significant sector economy.¹

In this case, the boogeyman is the International Longshoreman’s Association, the union representing the workers who unload container ships at the nation’s ports. They’ve gone on strike, shutting down every single US port from Maine to Texas. Shortages are coming—not toilet paper shortages (unless panic buying causes them), but shortages of things that come in on ship:

• Electronics (both consumer goods and components for value-add)

• Steel (and stuff made from it)

• Produce from Europe, South America, and Southeast Asia

• Cars

• Car parts

• Furniture

• Tools

• Clothes

So, pretty much anything you’d buy in an Ikea, Best Buy, Harbor Freight, Autozone, your local tire shop, and about half of what you’d by at Costco, Wal-Mart, or Home Depot.

And, of course, if it goes on long enough it’s gonna throw people out of work up and down the supply chain as industries—such as car repair, fabrication, and large-scale construction—are unable to get the necessary supplies to continue operating.

Now, before you panic:

Freight from the NAFTA zone (including the U.S.), which comprises ~90% of the American goods economy and a healthy portion of which is shipped over-land, will still be in play. Factories in the U.S., Canada, and Mexico will keep making stuff until and unless they run out of foreign-sourced parts and materials (which, for Canada and Mexico, at least, is unlikely to happen).

America’s West Coast ports are still open as well—this doesn’t mean you’re gonna get easy access to foreign trade goods if you’re east of the Rockies. Our trucking fleet is already stretched to breaking point, both in terms of manpower and available machines (both thanks to recent regulatory changes), so there’s only so much spare trucking capacity available.²

That said, if it goes on long enough at least some of those trade goods will get diverted to Mexico and Canada, and some of the truckers who normally service the East Coast ports will move to running NAFTA zone routes. But there’s a catch:

What you can get shipped overland is gonna cost you. Shipping by truck is ~12x the cost of shipping by water, which is why those of you in the midwest—and particularly landlocked states—already pay a premium for your food vs. the otherwise pricier coastal states (And you do. I’ve lived in both. If your rents weren’t so cheap I’d be amazed anyone could afford to live there.)

But, any way you shake it, unless the West Coast unions join the strike AND the NAFTA zone closes for some other reason, this won’t be as bad as Covid (at least not for quite a while).

But it has the potential to last longer, because what’s happening here isn’t a mere labor dispute, but another honest-to-God world historical event. And, no matter how it pans, you can rest assured that you’re going to see across-the-board permanent price inflation following hot on the heels of this strike.

The Dispute

Here’s the skinny:

The Longshoremen are pissed off at working through Covid when everyone else got to stay home. They’re pissed that despite holding linchpin positions in the economy, the non-management worker can only hope to eventually hit a top-end salary of ~$84k/yr. They believe that port owners are making bank off of them (and they’re not entirely wrong about that) and they want a bigger slice of the middleman pie. They’re also afraid that their jobs are about to disappear.

Therefore, they are demanding:

• A 77% raise over the next six years (which, considering inflation, will amount in the end to either a very slight raise or a break-even proposition, but I digress).

• A 6 year moratorium on port automation technologies

And a few other things that aren’t terribly interesting to those of us who aren’t party to the dispute.

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Update: The ILA has suspended the strike for 90 days due to finding a suitable compromise on the wage issue. Other issues are still under negotiation. The strike, at the moment, is set to resume in January unless a full deal is reached. This news does not affect the substance of this article.

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A “strike” is something most of us only know about from television—the United States hasn’t had a strong labor movement since the early 1970s, so we haven’t had to deal with much in the way of “life suddenly stops because an essential group of workers decides to throw a hissy fit.”

France deals with this kind of thing all the time, but the French are a very different breed of people on every level, with a cultural tradition that diverges from our own, over and over, across the past thousand years. For one thing, they don’t place the same cultural value on work, and consequently their legal system and society place a far greater emphasis on leisure time, aesthetics, and personal fulfillment—but it comes at the cost of rapid economic growth and all the exciting stuff that implies.

In the U.S., we don’t work like that. Due to our Puritan roots (and the fact that the industrialists who shaped our system in the late 19th and early 20th century were almost all WASPs who inherited the attitude that work was a moral good on its own), we work all the time.

But we’re also a culture of individualists who value personal freedom.

So when someone decides they’re not willing to work for the offered compensation we get…confused.

The moralists (and economically self-interested) among us start squawking about greedy parasites that are trying to benefit by making our lives more expensive. Who the fuck do they think they are? The leadership of these unions is organized crime (this is usually literally true), and they’re going to bend us over and make our shit cost more? They should be in jail!

Meanwhile, those with sympathies for the labor movement, or who really like watching the little guys stand up for themselves, tend to think See, this is what it’s all about! Taking responsibility, standing up to the man, refusing to be a slave! I hope those fucking port bosses choke on it, and the government fails to contain the situation. They’ve been shitting on the workers of this country for far too long, and it’s about time people started waking up and either fighting for their own interests, or going their own way.

The hell of it is, this isn’t a situation where “each side kinda has a point.”

It is, instead, a situation where each side is more-or-less 100% correct…and it doesn’t matter in the least.

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This Situation

Before we get into the nitty-gritty, there are a few things to keep in mind:

1. Ports in the United States are privately owned and operated. The Maritime Alliance is the collective bargaining association (a.k.a. cartel) going up against the ILA. It’s comprised of the ten corporations that run most of the ports on the planet. None of these corporations are majority American-owned (yes, America’s major ports are owned and operated by foreign business interests). The government is not involved in this situation unless it either decides to go black-ops on somebody, or it invokes the Taft-Hartley act, which would force workers to return to work for a 90-day “cooling off” period. But, contrary to what everyone reminiscing about Reagan breaking the ATC worker’s strike seems to think, that’s the extent of the government’s legal power in this situation. The Air Traffic Controllers were Federal contractors, and could be barred from holding Federal jobs for life as a consequence for striking. The Longshoremen are private employees of privately-held international conglomorates.

2. Workers can be ordered back to work, but they can’t be made to work well. Anyone who’s ever worked an office job knows how easy it is to “look busy” and accomplish nothing. If Taft-Hartley is invoked, it’ll produce a “quiet strike” (analogous to “quiet quitting”).

3. Historically, labor disputes in the United States are fairly violent affairs. Workers have historically been willing to beat and kill those who cross the picket lines (either defectors from their own ranks, or replacement workers hired by the company). Companies, on the other hand, have, on occasion, employed private armies in order to regain access to their property, resulting in the occasional massacre.³ If the Longshoremen are serious about this strike, you should expect at least some violence to happen in the form of picket-line scuffles, if nothing else.

4. This is not an ordinary labor dispute. Nor is it a fluke.

A Brief History of Labor

The labor movement in the United States was crushed by a combination of law enforcement, intelligence, and business interests who found themselves unexpectedly in bed together against both foreign influence and organized crime. In the 1920s the Soviet Union sank considerable effort and cash into infiltrating the American labor movement and largely succeeded into making it a safe haven for socialist fifth columnists who could then work from inside the apparatus of business and State⁴ to bring down the American system and/or morph it into something more closely resembling the Soviet system, in furtherance of the Soviet goal of worldwide communist revolution.

Unfortunately for the American intelligence apparatus who would love to have squashed that particular campaign, by that time the Unions were already well under the control of various organized crime syndicates, and the intelligence services under the State Department depended upon the Italian Mafia, the Jewish mob, and the Russian mob to launder its black ops money, give it access to black market trade networks across the globe, supply it with disposable hit men, and to help it maintain communications networks in hostile Eastern European territory throughout World War 2 and the Cold War.

By the 1970s, though, the intelligence community had managed to rid itself of enough of its dependency on these particular syndicates (partly by diversification to other syndicates through the international drug trade) that it could turn its attention to the communists. The FBI was already hot under the collar about organized crime, and the business community was desperate to break the back of the unions, and so a series of prosecutions and sting operations were arranged. Over the course of a little over a decade, they were able to successfully break the power of both organized labor (at least that which operated outside of the state bureaucracies) and La Cosa Nostra (the Italian mafia). Both entities continued to exist, but were generally a shadow of their former selves. The death blow to labor’s power was dealt in the early 1980s by President Reagan when he used the 1949 Taft-Hartley act against the striking Air Traffic Controllers.

As a result, the United States hasn’t really had to deal with labor unions on the non-governmental scene for almost half a century.

Or, at least, that’s the way the socialists and the Reaganites would spin the story.

Those facts are all more-or-less true.

But those facts are not the truth, because they ignore the most essential factor.

The Real Story

This labor dispute is a collision of two world-historical forces at the same time. One of them will sound familiar, as it’s more-or-less the reason that labor disputes even exist in the first place:

Automation.

Consider what happens at a port:

A big ship comes in to dock looking like this:

All those colored boxes? They’re ISO shipping containers. ISO is the International Standards Organization, and ISO containers—whether they come in 20ft, 40ft, Standard Cube, or HiCube dimensions—are (as the name implies) standard the world over. That used shipping container that your weird neighbor got for a couple thousand bucks and uses for a shed was once on a ship, and then on a train, and then on a truck. It was loaded with trade goods from the other side of the world. It was moved from truck to train to ship to train to truck with forklifts, cranes, and dollies that are all manufactured to identical specifications.

The world is made of Legos.

And if you’ve played around with programmable motorized Lego sets, you know that it doesn’t take more than a fifth grade education (if that) to realize that moving a pile of standard sized boxes that are clearly labeled with sort codes and routing numbers isn’t a job that needs…well, any people at all. You can literally build the automation system to run a port using off-the-shelf hardware and software. Yeah, its not something you’ll do in your back yard because of the physical size of the boxes involved, but there’s really no logistical reason in the world why any human hands ever need to touch cargo in transit.⁵

Automation happens in every other sector, and (increasingly) at the ports of every other nation, so why not here?

America’s ports are not automated because the Longshormen have successfully kept automation out of the ports in previous contract rounds.

This raises an interesting question:

How the hell have the longshoremen been able to keep the ports from automating?

The first, and most boring answer, is that they have backing from some interests from within the National Security establishment.

China was the first country to automate her ports. China builds the current crop of off-the-shelf port automation technology. If China (which already, through Chinese holding companies, owns an interest in some of our ports) were to install this technology, and the Chinese Ministry of State Security has back-door’d this technology in the way any self-respecting geopolitical player would, then China could interrupt all our maritime trade with the flip of a switch.

So, the Intelligence Community has been helping organized labor, which is still in the pocket of organized crime. Everything old is new again.

That’s one of two factors. And, like I said, it’s the boring one.

The interesting one takes us back to the real reason why the labor movement hit the skids in the first place.

Harvey Weinstein and the Death of Labor

You remember that whole #MeToo thing a few years ago? It kicked off when some women came forward accusing Harvey Weinstein—arguably the most successful film producer since Samuel Goldwyn—of exploiting his power to pressure women into performing sexual favors for him. He could make sure you “never work in this town again,” so when he dropped trou in front of you, you’d best comply, or say goodbye to your dreams of stardom.

A horrible scandal ensued, which took America by storm with a protracted moral panic that wound up with Harvey in jail and his company in ruins.

Lost in all the noise was the question: “How did nobody know this was going on?”

Well, it wasn’t really lost in the noise—there were cursory performative answers given, but the truth is much simpler than anyone was willing to make it sound:

Everyone knew.

Everyone knew Harvey was an abusive bully. He beat people up outside night clubs in New York. He threw heavy objects at his employees. He showed up to every awards show and party with a new starlet on his arm, and he blackmailed financiers and distributors into letting him put the new Hot Young Thing into his movies…and he was almost always right about the level of talent they had. Jennifer Lawrence, Mira Sorvino, Gwenyth Paltrow, and just about every other high-powered blonde that burst on the scene through a Miramax film from 1993 to 2008 came through Harvey Weinstein’s office and had some kind of encounter with his casting couch (whether they submitted to it or not).

Everyone knew it.

And nobody cared, because he was powerful, and he had the Midas touch. He made hits, the stars whose careers he touched turned to gold. The directors he discovered defined an era. It was a courtly setup, and Harvey was king, and everyone knew it.

Literally everyone.

How do I know?

Because I knew it, and I was as far on the out on the frontier of the independent film industry during that time as it was possible to get and still be in that world. The first networking party I went to, I was warned: Be careful around Harvey. He plays hardball. He’ll beat your ass and fuck your women, but if you’re the real deal, he’ll also make you a star.

Harvey didn’t suddenly get exposed and brought down by Ronan Farrow’s intrepid investigative journalism.

Harvey made enough enemies with his boorish bullying abusive behavior that, once his films stopped being reliable blockbusters (in the early 2010s), people who were hungry for revenge saw a chance to pounce.

This is also more-or-less what happened with organized labor in the United States.

All other things being equal, workers should rule the world. With every stage of automation, new classes of workers have been created. Jobs have diversified. But the need for warm bodies with agile minds has persisted since the days of the first water-driven industrial weaving mills in the 14th century mountains of Europe.

The economy doesn’t run if workers don’t work. So employees must either be bribed into compliance or forced into submission.

Laborers have been fighting for power ever since the days of the Luddites and the saboteurs, and they’ve been fighting against automation just as long—after all, mid-life retraining to a new career is incredibly difficult, and sometimes impossible.

Despite its longstanding opposition to automation, the organized labor movement grew in power in direct proportion to automation, because increased productivity spurred increased demand for new and novel products, which meant more demand for labor.

In the years following World War 2, organized labor was at its zenith. The world had been razed by bombs for over half a decade, and tens of millions of men were dead. The economic demand created by the rebuilding process dwarfed all other demand spikes the world has ever seen, before or since. There were nowhere near enough bodies to fill the available jobs. Wages were up, benefits were up, consumption was up, and there were lots of kids running around who were going to keep consumption (and thus, demand) high for a long time to come.

The only people unhappy with the situation were the industrialists, who were paying through the nose for labor costs.

And then those little kids—the Baby Boomers—hit the labor market with the force of a meteor strike. With approximately four workers from that generation to every one worker⁶ from the preceding generation (the Silent Generation), the question that business owners had to ask themselves wasn’t “where will we find enough skilled workers?” but “how low can we slash our wages before these bozos stop knocking on the door looking for work?”

Economics, for all its complexity, works on a very simple principle: Scarcity.

Things are expensive when they are more wanted than they are available.

Wages stagnated starting in the 1970s because there were too many workers chasing too few jobs. Organized labor completely lost its bargaining power because any strike-buster could easily find a surefit of scabs to plow through the picket line. Fuck solidarity—a guy’s gotta eat.

Like Harvey Weinstein, organized labor made a lot of enemies on its way up, and it got into bed with a lot of weird characters, and by the late 1970s its chickens were coming home to roost.

Reagan didn’t kill organized labor.

Demographics did.

All Hail the Risen Savior?

For the last fifty years, “capital” has had the upper hand in the age-old struggle between capital and labor. The business community has done a pretty good job keeping the labor market oversupplied through the lean years of Gen X with the H1B visa program, and various amnesties for illegal immigrants, and the trade deals that offshored the bulk of low-value-add American manufacturing (and, before you start complaining too much about any of those things, consider how few of us Gen X-ers there were. We got screwed, yeah, but if none of that had happened we’d have had hyperinflation in the 1990s, and been screwed a lot sooner and a lot harder).

The current border crisis in the US and the immigrant crisis in Europe are both attempts at political solutions to the demographic crisis we’re in.

Oh, right, the demographic crisis.

Well, the Millenials (who are quite a big generation) helped keep labor prices—and, thus, inflation—quite low up through the 2010s despite the worst and most profligate money printing in history.⁷

But Gen Z, the current “young worker” demographic, is even smaller than Gen X was. And, despite the desperate push with AI and its precursor technologies, the world isn’t automating at anything like the pace you need it to in order for Gen Z to be a large enough labor force to keep inflation under control (even counting all that illegal immigration).

If you’re a fan of organized labor, the result is an extraordinary historical happenstance:

A window in history has just opened for labor to re-assert its dominance. And—because the world is descending into geopolitical and economic chaos, and transnational migration is happening at historically unheard-of levels—nobody knows how long it will last.

So the labor movement is getting its boots back on.

It doesn’t care if it’s liked.

It doesn’t care if you approve.

It doesn’t give a good goddamn about public relations.

Its leaders know that, for the first time in sixty years, they have hard power.

With the Houthis disrupting international shipping in the Eastern Hemisphere, and the crash of China flooding the US market with ever more cheap consumer goods, and the increased demand for munitions and materiel shipping across the globe, and the security worries around automation in a dicey geopolitical environment, and the lack of young workers across the whole world, labor has the power to do something it has never dared hoped for before:

They have the power to stop the gears of the world and plunge the entire globe into chaos.

This is a hard power game. And they know that if they don’t play hardball now, the window will close.⁸

The Future Is Not Uncertain

Whether the Longshoremen get all they want or not, they have broken the dam. The tacit taboo against hard-power moves by labor has just been smashed. This sort of thing will become more common in the coming years. And, even if a new detente is worked out quickly between capital and labor, more inflation is coming.

Fifty years of pent-up wage inflation is being unleashed because, outside of the United States, there is no large demographic cohort under the age of sixty—and thus, not enough workers to fill the jobs needed to keep the civilizations of the world chugging along.

Eighty years of deficit spending and debt accumulation by every sovereign nation is coming crashing down because there is no tax base that can pay off—or, eventually, even service—national debts.⁹

And, in the midst of this demographic, geopolitical, and economic maelstrom, the United States decided to use its status as world reserve currency to cut Russia and its allies off from international finance, which has made the international community lose faith in the dollar as a neutral asset.

Those dollars—printed at the speed of debt and exported globally to minimize inflation—are also coming home to roost, and they, like labor, are bringing inflation with them.

Buckle up and hold your breath.

We’re now in the thick of it, and we won’t be coming out any time soon.

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1. The government does this all the time, both to our economy and to the economies of other nations. A full catalog would take fare too long, but if you want a taste of recent domestically-targeted examples, read up on Operation Choke Point (including its expansion to adult-oriented businesses), the continual roll-out of Know-Your-Customer banking rules, and the Covid lockdowns.

2. The natural objection to this read is that, with the East Coast ports shut down, there will be spare trucking capacity to shift to the West Coast. While some of this will doubtless occur, it overlooks two important factors: First, those truckers who serve the East Coast live on the East Coast, and only a portion of them will be willing to shift to long-haul work. Second, long-haul trucking requires vehicles with sleeper cabs, while short-haul trucking does not. Only a portion of the actual trucks are suitable for re-tasking.

3. See, for example, the Homestead Strike https://en.wikipedia.org/wiki/Homestead_strike

4. What, you thought public sector unions were about worker’s rights?

5. Okay, I’m overstating this a bit. Lash-down work is generally easier to do by hand than by automation, and crane operations work better with human help due to the rise and fall fo the sea under the ship. You can find a thorough write-up of the ins and outs of port automation in this article:

Do U.S. Ports Need More Automation?

Hat tip to Malloc for pointing me to this source.

However, at automated ports the most common reason to open cargo containers and otherwise manhandle containerized cargo, the above exceptions aside, are for customs inspections, which are legal, not logistical, reasons.

6. Remember, in the Silent Generation most women didn’t work. In the Baby Boomer generation, which was twice as large, most women did work.

7. Well, in the history of the United States. China actually beats us on this one, which is one of the reasons they’re already collapsing while we’re still clinging to the cliff’s edge.

8. The fact that this happens in an election year when several states are literally underwater from natural disasters is just more leverage. The timing here is very lucky for the ILA.

9. This is true even in the US, but we have a longer time horizon because we, unlike anyone else, have the Millenials as a tax base for another 20 years.