Regulating the cruise industry

Last week’s floating stool ship has put a little focus on the cruise ship industry and brought forth some suggestions the industry requires more regulation.

It appears that by cruising between international ports the industry has avoided coming under the jurisdiction of any one government.  It also appears to be a highly competitive industry and one that is prospering.  Maybe there is a lesson here about competition and government interference.

johnny_automatic_ocean_linerI have a theory that at the request of business governments pass laws to restrict competition in the belief that there will be greater profits if there is less competition.  Then to control the excesses of monopoly they introduce regulations.    If this is correct an industry in which competition is not restricted has no need for regulations.

It seems to me the cruise ship industry is regulated by its customers.  It is highly competitive and depends very much on returning customers.  These guys have to look after their customers.  If there develops a perception that the Carnival Triumph passengers are not being treated fairly or that ships are not being properly maintained,  the whole industry will probably pay for it.

Employees may not be in such a strong position.  Wages tend to be a function of supply and demand and the cruise companies draw their unskilled employees from the world market.  The companies benefit from world over population.  So  do the passengers whose fare would be quite a bit higher if the ships had to pay all their employees North American wages.  Employees also benefit from higher wages than they would get at home.

We have to note that a lot of companies in North America (and their customers) also benefit from the low wages that go with high unemployment.

One way to deal with the exploitation of labor would be some sort of guaranteed annual income which would make it a little less necessary for workers to accept poor pay or working conditions.

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One Response

  1. There is something here which you have alluded to in passing. A very interesting and growing subject. The theory of optimal regulation.

    Economists have taken bites at this subject from time to time. In the ’50s it was shown that a great deal of regulation in certain industries were requested by that industry in order to exclude competition, fix prices, and increase profits. The transport industry in the US, trains and trucks, were a prime example.

    This was swept away in the ’80s. Then the fashion became “No regulation is good regulation” especially in the financial industry. This was the fashion in the ’90s until 2008.

    Now economists are looking at the question of “some regulation, but how much?”

    There is the constant undertow in this subject of pressure group politics. So even if economists work out what is “optimal”, politics will prevent this nirvana ever being reached. But as understanding of the subject grows, there is hope.

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