Everyone is entitled to his own opinion, but not to his own facts.
--Daniel Patrick Moynihan

July 29, 2012

The Amorality of the Market

By David K. Shipler

The lobstermen on the Maine island where I spend summers stayed home yesterday. They did not leave port to haul traps in the season that is usually the busiest and most lucrative of the year. It wasn’t the weather. The windless sea was as calm as gray glass, and the patchy fog burned off soon after sunrise—not that fog ever stops these guys anyway.

The reason they left their boats on their moorings, as many of their colleagues on the Maine coast have done from time to time this summer, was the ruthless market. Their co-op told them it wouldn’t be buying yesterday, because the price has fallen to the lowest since the 2008 economic collapse—at this moment, just $2.05 a pound “at the boat,” as they say. It’s slipped below $2.00 on other parts of the coast.

That doesn’t leave much after subtracting diesel fuel, sardines used as bait, and the wage or percentage paid the “sternman” who stands aft and baits traps and clamps the lobsters’ claws closed with thick rubber bands. When is this not going to be worth doing? I asked a morose friend who was unloading his day’s haul. “Soon,” he grimaced.

Another lobsterman I’ve known for years told me that even when he grosses $150,000 to $160,000, he sometimes ends up with so little that a few years ago, when he needed critical surgery, he qualified for Maine Care, the state’s name for Medicaid. He didn’t seem to know that Obama’s health care law will increase his likelihood of eligibility, if Maine’s Republican administration accepts the federal offer to expand the program. The edge of poverty is an odd place for a man who harvests a food that most consider an expensive luxury.

This is only one falling price that’s been bad for the island. Another is the plummeting cost of natural gas, which has reduced the fees for the electricity we get through a submarine cable to the mainland. The temporary benefit of cheaper power—now costing about what it did a decade ago—has prompted the struggling little electric co-op here to suspend longterm plans to erect a wind generator. If residents can’t be promised definitive savings on their electric bills, they’re not going to approve big borrowing to harness the plentiful wind, especially with federal credits due to expire while Congress is still tied up in knots.

The reasons for the falling prices of both lobsters and natural gas were graphed in your Economics 101 course, in that supply-and-demand chart showing how prices decline when supply outstrips demand. In brief, we have too much natural gas and too many lobsters.

Natural gas supplies have grown through fracking, an environmentally dangerous practice that now, at least here on this island, has scuttled an environmentally friendly alternative in wind power.

And global warming may have contributed to this year’s glut of lobsters. The fishermen believe that a warm spring raised water temperatures early, inducing a premature run of lobsters into the warmer bays and coves where they shed their shells. Most of these “shedders,” soft-shelled, are bought by processors in Canada, whose ranks were thinned by the 2008 collapse, when their credit lines held by Icelandic banks suddenly froze. This year, the processors quickly filled their freezers and stopped buying for a time. Fishermen are not always 100 percent correct about everything, but this analysis makes sense.

Nevertheless, the lobstermen’s answer to the problem is not the behavior that might be predicted by that supply-and-demand chart: Instead of cutting supply to drive up prices, they add to supply by desperately setting more traps, trying to expand their hauls to make up for the low prices. A day here and there without hauling just leaves lobsters in the traps for a day or two longer, feasting on sardines. Then they’re hauled up and dumped on the market.

Many more colorful lobster buoys decorate the bays and coves this year than usual—so many that, if they could support your weight, you could hop from one to another and walk considerable distances--truly. Here and there, local groups of lobstermen have agreed voluntarily to lower the number of traps each fisherman sets, but overall the catch grows, worsening the over-supply. There seems no danger of fishing out the stock. Given well-observed limits on what size lobsters can be kept, and the luscious sardines they are provided, some specialists think of this as a lobster-feeding system.

The market’s brutality contains no morality and no justice. It goes by its own rules of efficiency, and its self-corrections often bring pain. I wouldn’t trade it for anything else, though. Having reported for four years in the Soviet Union, where the government owned everything and screwed up everything, I can’t see a more ingenious economic order than the free-market system. The interplays within the private economy usually work well, except when they don’t, and then some careful measure of government assistance can reduce hardship.

It’s too bad we can’t get past our highly ideological divide on this point. When conservatives idealize the private economy, and seem to think it represents some higher authority of righteousness, I’d like them to consider the lobstermen. Nobody works harder, nobody is more enterprising. They are on the water from 5:00 a.m. to mid-afternoon, and I often see my friend still on his boat at 6:00 p.m. or later. They are highly skilled, self-reliant, and independent entrepreneurs—just what the American individualist is supposed to be.

Nevertheless, many of their families will be going to the island’s food bank this winter. The minister who runs it told me a couple of years ago that I’d be surprised to see who showed up in need of help.

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