21 December 2013

The Real Reason that Guy in China Can Do Your Job: Container Ships and Globalization

Rose George writes about a world that hardly anyone sees that provides us goods that everyone uses. In her book Ninety Percent of Everything: inside shipping, the invisible industry that puts clothes on your back, gas in your car, and food on your plate, she focuses on modern ships that have driven down costs and made the vast distances between continents (economically) meaningless. It's a fascinating book that explains much of what you take for granted.

George rides on a container ship to get a first-person experience of being out to sea transporting goods between continents and her stories offer a window into a world with pirates, shipwreck, and shore leave of only two hours after months at sea. But from a perspective of markets, it is what she reports about containers that matters most.

The container was invented by the American businessman Malcolm McLean, who thought that standardized containers could make it easier to ship goods. He was right. "There are at least twenty million containers crossing the world now."

"Before containers, transport costs ate up to 25 percent of the value of whatever was being shipped. With [container ships], costs were reduced to a pittance. A sweater can now travel three thousand miles for 2.5 cents; it costs 1 cent to send a can of beer."

"The biggest container ship can carry fifteen thousand boxes. It can hold 746 million bananas, one for every European on one ship. If the containers of Maersk alone [one of the largest shipping companies] were lined up, they would stretch eleven thousand miles or nearly halfway around the planet. If they were stacked instead, they would be fifteen hundred miles high, 7,530 Eiffel Towers. If Kendal [the ship Rose George reports from for most of her book's narrative] discharged her containers onto trucks, the line of traffic would be sixty miles long."

"At her most laden, Kendal carries 6,188 boring TEUs, or twenty-foot-equivalent unit containers. TEU is a mundane name for something that changed the world, but so is the 'Internet.'"

These TEUs shorten the time at dock. A quantity of cargo that once took weeks to unload can be transferred off the ship in less than twenty-four hours.

What's the result? Globalization on steroids. It is now cheaper to ship Scottish cod 10,000 miles to China to be filleted by Chinese filleters and then sent back for use in Scottish restaurants and shops than to pay Scottish filleters. The marginal cost to ship goods has been reduced to the point that geography is hardly a consideration. 

Curiously, one characteristic of ships is that they are, to a certain degree, free of laws. Only 1% of ships are registered to the US, ship owners choosing to register with the least-demanding country in terms of regulations and enforcement. Ship captains often have power that land-based rulers lost decades or centuries ago. 

Even though modern nations have trouble influencing these ships that work in international waters, these ships have huge influence on modern nations. It could easily be that these ships - crossing vast oceans with trillions in goods - are silently doing what the Internet has done more conspiciously. These are the agents of globalization that deliver the promises - the orders - made by modern communication. To risk a strained metaphor, these ships that are subject to waves and storms are making communities everywhere more vulnerable to the waves and storms of a global economy. The reality of shipping that few beside Madame George have bothered to contemplate has made changes to our economies and labor markets that we've all been forced to consider.

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