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The Dubai Ports Issue is Really Wal-Mart and Toyota All Over Again!

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Mr. Marina is Professor Emeritus in History at Florida Atlantic University, a Research Fellow of the Independent Institute, Oakland, CA, and Exec. Dir. of the Marina-Huerta Educational Foundation. He lives in Asheville, NC.

Good Heavens! George Bush is threatening to veto a piece of Congressional legislation, breaking his record of never having used the veto. What's going on?

A coalition of Democrats led by New York Senators Charles Schumer and Hillary Clinton, joined Republican Senate leader, Bill Frist, as well as Christian conservatives such as Cal Thomas, see Dubai's acquisition of P&O's port concessions as a threat to American security. Why, two of the 911 bombers came from that small nation!

Bush's "War on Terror" having cried "wolf" everywhere, including Saddam's Iraq, is now having the issue come back, as it were, to "bite the President in the rear."

Beneath all of this "security" clamor, it's really the Wal-Mart question again, in a slightly different guise!

There have been protests around America over the last few years as Wal-Mart has sought to open new stores in a various communities. The hue and cry has come basically from two groups pushing two separate issues.

The first is that Wal-Mart's "low" wages and lack of other benefits is threat to the American worker. Yet, thousands of people line up for the potential job openings as a new Wal-Mart prepares to open its doors. The unions operating in a number of America's other supermarket chains have complained to politicians about that competition. The unions at General Motors and Ford have said the same thing about Japanese and other foreign auto makers building new plants in this country, especially in the South.

Well, are American ports any different? Only slightly.

American ports used to be controlled by a corrupt alliance of politicians and unions. One can recall with nostalgia a half century ago, as Oscar week approaches, Marlon Brando and Karl Mauldin in On the Waterfront, offering us a glimpse of this relationship. And, as we observe the posturing of Chuck and Hillary, we are reminded that all of our actors are not in Hollywood! As a former Floridian and co-author of A History of Florida (3rd ed., 1999) I can attest that the Port of Miami has been a case study in such shenanigans, and that explains why some of the pols there are so upset.

A piece by John Nichols, "Corporate Control of Ports is the Problem," lets the cat out of the bag.

Nichols concedes that, Dubai and security issues aside, no corporation should be operating an American port, " it would be a bad idea." Further, "Ports are essential pieces of the infrastructure of the United States, and they are best run by public authorities that are accountable to elected officials and the people those officials represent. While traditional port authorities still exist, they are increasingly marginalized as privatization schemes have allowed corporations -- often with tough anti-union attitudes and even tougher bottom lines -- to take charge of more and more of the basic operations at the nation's ports."

So, the real issue is privatization. Mr. Nichols would prefer government ownership. In all of this talk of accountability, nowhere is there any mention of the historical reality that American ports were long bastions of the unholy alliance of corrupt politicians, bureaucrats and union officials. No wonder all of the unions, from teachers to longshoremen, are behind Chuck and Hillary on this issue.

In the course of criticizing the idea that corporations are in business to make money, Nchols inadvertently concedes the phoniness of the "security" issue. " First: Like most American firms, most Arab-owned firms are committed to making money, and the vast majority of them are not about to compromise their potential profits by throwing in with terrorists."

The other side of the Wal-Mart equation, the threat to smaller business interests, is revealed in a piece by Robert Wright in the Financial Times, "Backlash to Dubai deal sends danger signal to US ports sector," which is, unfortunately, available online only to subscribers. I shall, therefore, quote generously from it.

Wright reminds us this is not the first time such a controversy has arisen, citing the effort of the Chinese company Cosco in 1998 to take control of the Port of Long Beach. Cosco simply switched to nearby Los Angeles and used the facilities there.

First, the "legislation proposed by US senators now could affect a number of companies that already operate container terminals in the US, possibly forcing them to sell."

Secondly: "The dispute could also put at risk the US's reputation in the maritime industry as a safe, predictable place to do business, observers believe."

Finally: "The ultimate effect may be to divorce practice in the US's relatively protected, inefficient container ports sector further from that elsewhere in the industrialised world, where large international companies have generally developed more efficient businesses."

Neil Davidson, a container ports analyst at London-based Drewry Shipping Consultants, indicates "the US container port industry would be unworkable without companies controlled by foreign governments. Proposed emergency legislation by senators Hillary Clinton and Robert Menendez would prevent foreign governments from controlling US container port assets."

"Among key companies that could be barred from operating US container terminals are China Shipping, the state-owned Chinese line, which has a terminal at the Port of Los Angeles, and APL, a line based in Oakland, California, and owned by Singapore's state-owned NOL," and "There are a number of major state-owned shipping lines that have terminals in the US," Davidson notes.

Further, "The law would prevent DP World, which is owned by the emirate of Dubai, from making any future investments but also lock out permanently Singapore's PSA, the world number three container port operator by capacity, owned by the Singaporean government. DP World will become the world number four through the P&O takeover but will be only just behind PSA and Denmark's APM Terminals."

Finally: "Without DP World and PSA, the US would be further cut off from the influence of the world's largest, most efficient container port operators. Hong Kong's Hutchison Ports, the world number one, already refuses to invest in the US because its executives are skeptical of how the container ports industry is organized."

Still, "that may suit the mainly small family-owned companies that lease container terminals at many US ports from the publicly owned port authorities controlling nearly all of them, Such small companies dominate the sector in the US, along with shipping lines, which lease dedicated terminals for their ships at many ports, especially on the west coast."

Thus, "Although the restrictive practices at union-dominated US ports mean profits are not as high as in other parts of the world, business for such family-controlled companies has generally been good, according to Mr Davidson. Few have chosen to sell out in the same way as the owners of ITO, the small terminal operator that sold P&O its north American assets in June 1999."

Finally, "US politicians well beyond Washington might also benefit if the deal were to fall apart. Many local port authorities are run by political appointees, who might benefit from attacking Arab interests if P&O North America's terminal leases were surrendered and could be relet."

Concludes Mr Davidson, "The US ports business is a pretty political animal."

So, in summary, privatization has been going on for some time in American ports with modest profits as the efficiency of our ports has fallen relative to the operations of larger companies in Asia and elsewhere. Like the small businesses opposing a local Wal-Mart, these companies would like things to remain much as they are, and they are relying on Chuck, Hillary and Bill to keep it that way. If I might refer once again to a film analogy, I hope this time George will "veto one for the Gipper!"


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omar ibrahim baker - 10/19/2007

Some years ago a major Kuwaiti Fund was forced into selling its shares in British Petroleum!
They , the Kuwaitis, could not be trusted into being "in" at a major British Corporation!
Before that a great bruhaha erupted at a Libyan (Proposed or actual?) part ownership in the then substantially, if not exclusively, German Daimler Benz Corporation of Mercedes Benz cars fame.
Now some major US ports and U Arab Emirates ownership.
All and similar reactions to be are perfectly understanable..
All three: the Kuwaiti, Libyan and UAE have a very week memory or were,are,acting under duress.
They had only to remember what happened to Irianian funds in US banks together with the cash advance made to Boeing by the Iranian regime of the day ; both were frozen and the planes were NOT delivered; up to this day.
Both sets of funds were made more than 27 years ago .
Is it their weak memory, gestures made to please the boss or payments made under strict orders to redress the balance of payment?


Peter K. Clarke - 10/9/2007

Good points. "Keep in mind" also, however, that this is one of the most inept administrations of all time. They are very good at fearmongering during election campaign season, but not at much else. They could make apple pie and motherhood seem sinister and suspect.


Peter K. Clarke - 10/9/2007

The Dubai port issue is not the national security crisis it has been made out to be, but it is not exactly a triviality either.

Study after study, and analyst after analyst has shown that ports and container transport constitute a weak link in America's "homeland security."
It is therefore a legitimate question whether a Middle Eastern owner of U.S. port operations might not be slightly more easily infiltrated by terrorists.

Mr. Todd makes a number of excellent points in his post above, some of which can be usefully extended. I am not sure, for example, that I see a huge difference between a "publicly owned" operator or a private monopoly running these ports under government regulation. Either way there is a tendency for encrusted red tape and corruption to grow over time. From that limited standpoint, a change of ownership might remove a few cob webs and improve efficiences at least for a time.

By far the most ridiculous notion on this page, however, is Mr. Marina's faux-libertarian delusion that this port controversy is any way comparable to the difficulties Wal Mart faces in its efforts to rape small towns across America. As a result, Marina's piece amounts to little more than misplaced propaganda.

With the question of Dubai and New York, we are not talking about a new port owner that would do much more than streamline or change management procedures of the basic existing function. There is no prospect that Dubai or any other new owner would, for instance, fill in New York Harbor at public expense, turn the Statute of Liberty into a trucking depot, and replace all the wharfs with gigantic runways for supersonic air cargo planes that would destroy the cultural ambience of Manhattan.

Yet that, give or take a few analogies, is the kind of radical transformation of small towns that occurs thanks to WalMart and its ilk.
It is NOT simply a matter of replacing high-priced poor-selection mom and pops with a bigger, cheaper warehouse of consumer goods. When Wal Mart invades a small town, the existing economic and social core of the community is gutted. Wal Marts are a form of corporate welfare, fundamentally based on subsidized transport. They faciliate urban sprawl
with all the social alienation, dysfunctionality, pollution, car dependency, traffic congestion, reliance on terrorist-financing foreign oil, and associated tremendous ripping-off of taxpayers that goes along with such asinine sprawl.

In the limited sense of transport costs, the question of allowing Wal Marts to take over what remains of America's retailing IS related to the port ownership issue, but in the opposite way pretended by Marina. A more efficient, profit-oriented port and transport system would tend to inhibit the spread of Wal Marts by reducing the advantage they obtain through government-subsidized cheap transport, which has been a key component of their profitability and growth.



Douglas M. Charles - 2/26/2006

"However, have you thought, seriously, what it means when, upon being told that X is a professional historian, one can then more or less automatically assume that X knows quite a lot less about technology than the average schoolboy?"

How ironic is it that to support a claim of ignorance, someone uses stereotyping? What ever happened to that axiom about assuming?

Have you taken a survey of all professional historians? Have you taken a representative sampling of them in a random poll? I think not.


Andrew D. Todd - 2/25/2006

Well, which Boeings do you mean, the E3 AWACS, or the KC-135 tankers? Quoting Col. Trevor N Dupuy, The Almanac of World Military Power, 4th ed., 1980, at the time of the Iranian revolution, Iran had:

449 Combat aircraft, incl.
77 F-14 Tomcats
190 F-4 Phantoms
166 F-5 Tiger II's

481 other aircraft, incl.
57 C-130 Hercules
6 KC-135
6 Boeing 747
16 CH-47 Chinook helicopters
100+ Bell 214 helicopters (UH-1, "Huey")
100 AH-1 Huey Cobra
-----------------------
(on order, inter alia)

250 F-18
40 F-14 w. Phoenix missile
110 F-5 Tiger II
140 F-16 Falcons
10 E-3A AWACS
11 KC-135 tankers
6 Boeing 747
287 Bell 214 helicopters

Of course it was a great folly to sell advanced war materiel for oil, but that was what the Arabs all wanted, and "the customer is always right," you know.


Andrew D. Todd - 2/25/2006

We have been discussing the question of the ports in a rather unhistorical way. I am an engineer as well as a historian. That means I have the choice of two very different methods of reasoning. To my way of thinking, historical thought is good for dealing with extremely complex problems with a strong human dimension, which do not lend themselves to being reduced to numbers. Historical reasoning is not a very good way of determining technical facts, however. I think the thing to do is to use engineering analysis to bring out the essential properties of a technological situation, and then go looking for analogous historical situations. For example, souped up cars, motorcycles, etc. are a mean to the end of danger, thrills, etc. You are not necessarily going to find useful referents in the history of transportation, but you may very well find such referents in the history of dueling. So, trying to figure out what a motorcycle means, you look at authors such as V. G. Kiernan and Francois Billacois, and the curious case of a French nobleman who was tried and executed for public dueling in, I believe, the year 1627. You understand the Comte de Montmorency-Bouteville, and you are in a fair way to understanding the Hell's Angels.

Now, as applied to the port situation, certain modern industrial plants have reached a level of automation such that they are effectively computers with peripheral devices attached. These peripherals happen to be robots, rather than, say, printers, but that is not critical. What we can look at, therefore, is the history of computers which were used for moving money instead of moving containers.

I should like to introduce into the record, the following book:

Thomas Whiteside, _Computer Capers: Tales of Electronic Thievery, Embezzlement, and Fraud (1978).

Reduced to essentials, the introduction of computers for accounting caused traditional systems of auditing to break down, because the traditional systems were based on pen and ink, and paper ledgers. There was a period of crisis until the auditors eventually learned to use computers to audit computers. During this "window of opportunity," there were spectacular swindles straight out of the works of the Russian satirical novelist Nicolai Gogol (Dead Souls, The Inspector General, etc.). One technique was the "salami slice," ie. program the computer to embezzle ten cents from every account in a bank. Then there were a number of "dead souls" cases, involving the creation of large numbers of fictitious accounts and fictitious customers. Gogol's premise was of course that nearly everyone was venal, and that the swindler could go his merry way by appealing to the venality of everyone he met. The computer swindles, however, relied on the fact that, with computers, very few people needed to know anything about the accounts.

See also: Elise G. Jancura, _Computers: Auditing and Control_, 2nd ed. (1977). This is a festschrift, edited by an academic accountant and computer scientist, and reflects the first stage of grappling with the problem.

There are obvious similar possibilities involving "dead containers."


Eric Vondy - 2/24/2006

Follow the money. This isn't about national security although it should be. This isn't even about the UAE. This is about business and cronyism. Look at the Carlyle Group, James Baker, CSX Lines, and their relationship to DPI. Briefly, you'll find that the Carlyle Group was the main stock holder in CSX Lines which was subsequently purchased by DPI. James Baker and George Bush Sr have played big roles in the Carlyle Group.

Keep in mind as well that this is one of the few bipartisan issues we've had in this administration. Clinton, Schumer, Frist and even Tom DeLay agreeing on an issue? Fox News turning against the President? It's almost unheard of.


Andrew D. Todd - 2/24/2006

To Oscar Chamberlain:

Well, perhaps I should clarify. I did not intend to speak so much about you personally, as about the whole institutionalized tendency of the historical profession, especially as expressed in academic regulations. You are, of course, a product of your education, but it is unfair to expect you to swim against the current to the extent required to break free of this institutionalized tendency. However, have you thought, seriously, what it means when, upon being told that X is a professional historian, one can then more or less automatically assume that X knows quite a lot less about technology than the average schoolboy?

Practically, I don't think you can really understand technology unless you do technology. Doing technology gives you an informing sense of realism, even when you don't have specific knowledge. Specific knowledge is easy enough to find, especially via Google. The catch is that you have to know enough to ask for it. That's where the informing sense of realism comes in. This will of course be tagged as an "elitist" statement by people who would regard it as self-evident that, in order to speak French well, you have to go and spend some time in France. There is this kind of double standard. Every so often, I write a thousand-line computer program. In terms of work, I should say that is the equivalent of writing at least a hundred pages of prose. My most recent program is a tool designed to assist in web-publishing books, though it is pitched to the special requirements of the novel, as distinct from those of the monograph. The typical attitude of liberal-arts academics to this kind of work seems to be that of the Victorian lady who despised cooking because it could be done by an Irish servant girl. The Irish servant girl could not play the piano, so playing the piano was what was important. Liberal Arts academics seem to be painting themselves into the same kind of corsets-and-crinolines-and-fainting-spells gilded cage as the Victorian lady.

To: Peter K. Clarke

At this point, you can usually transform the performance of a machine by adding computers and electronics, with only minimal hardware modifications. To take an example, China's signature export is cheap clothing, but China is not renowned for its cotton fields, nor its herds of sheep. What China provides is cheap sewing labor. If you can modify a sewing machine in such a way as to make it more automatic, this may have drastic economic implications. If you can carry labor-saving far enough, the benefits of cheap labor become less important than those of being close to the customer, and a class of goods ceases to be imported.

Now, if you look at a logistic facility, such as a dock, a rail yard, a post office, or a Wal-Mart, size is usually a sign of congestion. Goods are just sitting around, instead of being moved to their ultimate destination. The residual hand labor usually turns out to be the main source of this congestion. Automate it, and the whole plant speeds up, and can be made smaller. Far from filling in New York Harbor, a really progressive port administration would probably be giving up land for redevelopment. In fact, that seems to be happening, only not very fast.

However, from the point of view of a businessman, forced-draft modernization is often a no-win proposition. It simply gluts the market, and drives prices down to salvage levels, as in the case of the 1990's telecomm bubble. A government agency, not dependent on trading revenues, can often push modernization further and faster than any business could do. The growth of the American airline industry in the latter half of the twentieth century was extensively subsidized by the Air Force.


Oscar Chamberlain - 2/23/2006

Andrew

Some very interesting information, particularly about the computerization/automation nexus. It does suggest that I should reconsider my position.

However, your (il)logical jump from my not knowing about port automation to assuming I (along with all my colleagues) have a "carefully cultivated ignorance" of all technology managed to be both stupid and insulting. I nearly didn't bother to cut through that crap to the more wothwhile material below it.


Andrew D. Todd - 2/23/2006

William Marina and Oscar Chamberlain have both got their facts wrong, and this fundamentally vitiates their arguments. This is indicative of a larger problem. Historians tend to be technologically uninformed, to the point of being Victorian Old Maids about it. This carefully cultivated ignorance means that they cannot understand the real choices and trade-offs of an immensely technological society. The most such historians can understand is the office routine of the White House and Congress.
The Marlon Brando movie which Mr. Marina relies upon, "On the Waterfront" is technologically obsolete, just as obsolete as "Stoop Down and Pick a Bale of Cotton." Modern longshoremen carry and use hand-held computers, and operate massive specialized cranes which look like traveling bridges. The state of the art is to use a giant gantry crane to lift a twenty-ton container directly from a ship and set it on a railroad car, which gets hauled fifty or a hundred miles to a hump yard to be sorted. The crane operator picks up the container the computer tells him to pick up, and sets it down where the computer tells him to set it down. He doesn't know what is in the container, or where it is going. In a very real sense, the operator is ordered around by the computer. At the hump yard, things are even more automatic. The computer reads the magnetic labels on the railroad cars, and throws the proper switches to steer the cars into the desired sorting tracks. There is no such thing as casual labor in this environment. The equipment costs many millions of dollars.

Junky operations persist on the sea, of course, but their dominant characteristic is the use of obsolete equipment, for example, a rusting old ship (originally built for trading on the English Channel or the Baltic, but rendered obsolete by tunnel/bridge projects) captained by a sometime officer of the Soviet Navy, trying to salvage a pension somewhere. The technological conditions for the Mob are simply gone.

Suppose that the ports were taken over by the United States government. What would happen? The Navy and the Coast Guard would probably scrap about which was entitled to run the ports. It's hard to say who would win. There would probably be a good bit of uneconomic modernization. Admirals tend to like spiffy new equipment. I would not be surprised if the "FastShips" (*) project got restarted under Naval patronage. Corruption would take the form of Dick Cheney, um, "influencing" the purchase of a fifty-million-dollar traveling crane, or something like that, from Haliburton. To take another example, Amtrak does not have any identifiable Mob involvement. It does have esprit de corps.

(*) FastShips -- a proposal for a new kind of cargo ship, put forward by Thorneycrofts, the noted British maker of naval torpedo boats. A FastShip is essentially a very large torpedo boat, of 20,000 tons, which goes at eighty knots by planing over the water instead of going through the water. FastShips were to be fitted as rail ferries, using a hovertrain system, so that they could load and unload cargoes with a speed commensurate with their running speed. At a very rough estimate, one FastShip might have replaced about four containerships, with corresponding reductions in the size of the port establishment. If desired, a FastShip could be nuclear-powered, since it would probably need engines comparable to those of an aircraft carrier. Alternatively, it could be a very large hovercraft, running at two hundred knots.

(Parenthetically, if a FastShip were under control of hostile parties, it could be used for something like the St. Nazaire raid, so FastShips would probably have to be naval ships. Also, a FastShip could definitively outrun a submarine, the way the Cunard Queens could during the Second World War).

Practically, the Mob turns up in industries which specialize in physical labor, because that is where the Mob's comparative advantage lies. Guys who do that kind of work tend to be free with their fists (see William Pilcher, The Portland Longshoremen). Nowadays, the Mob is in garbage hauling. The Mob also turns up in low-wage unskilled "secondary sector" manufacturing, where something approximating slave-driving is wanted (see William M. Adler, Mollie's Job).

Speaking of Amtrak, this raises another point. Government-owned corporations are not the same as stock-market-owned corporations. Stock-market-owned corporations behave as they do because the ultimate owner is willing to sell for a five-percent-premium, without asking who is buying. Government-owned corporations tend to behave as if they were branches of the government service. For example, as Anthony Sampson pointed out, a family of army officers regards it as respectable to work for a government corporation or a quasi-government corporation. Working for such a firm does not constitute being "in trade." That said, it is effectively being proposed that the American ports should be managed by the government service of the United Arab Emirates.

Bear in mind, also, that we are talking about very highly automated operations, especially the gas and oil terminals. Government money, from whichever government, would probably mean even more automation, to the point of becoming uneconomic.Government-owned plants tend to be showpieces. Additional automation tends to give top management more control, and this control can be exercised remotely, say from Dubai. Would an American employee necessarily become a whistleblower when he was ordered to install a piece of software which would enable someone at a desk in Dubai to pump oil around in Baltimore with the click of a mouse? If you can pump oil around, you can spill it. If you can spill it, you can start a fire. In practice, there is such a close interlinking of safety and security interests with managerial prerogative that the United States Government cannot in the last analysis settle for anything less than effective ownership, the right to say that United Arab Emirates' property in America shall lose large sums of money and eventually go bankrupt. The United States Government has to have the right to appoint the manager of the U.S. ports operation, and determine what he shall be paid, and forbid the United Arab Emirates from firing him.

The situation at Los Angeles is not comparable. The single largest bulk of our imports from China consists of a) clothing and kindred household goods and b) auto parts and similar machinery. East Asia is simply too densely populated to be an economic producer of raw materials. The kinds of goods imported into the western ports have much less fire/hazmat potential than the kinds of things which are imported to the eastern ports. Oil refineries, etc. do explode when their operators become careless. Introduce malice, and who knows what can happen?

Instead of this kind of hard-headed thinking, we have President Bush insisting that the United Arab Emirates is just as much of an ally as Britain. Now, I trust the governments of Japan, France, and Germany quite a lot more than I trust the United Arab Emirates. Come to that, I think I even trust the Chinese a bit more than I trust the United Arab Emirates.


Oscar Chamberlain - 2/23/2006

I disagree with much of the analysis above. In particular, dicussing the erosion of worker's pay and security in the US without considering the problems of competition with workers under dictatorships is intellectually bankrupt.

However, in the case of the port, the author is correct. Unless we really are going to shift to putting all our ports under domestic ownership, and I don't know why we would, then this all boils down to pandering with more than a bit of bigotry as a subtext. Bush should veto it.