Marc Levinson

Month: April 2022

  • The Cost of Slow

    A few days ago, I chatted with a shipping executive who made a bold prediction. The future of ocean shipping, he told me, is slow: the maritime industry faces great pressure to reduce its greenhouse gas emissions, he said, and steaming at lower speeds is the only way to do it. If my friend is right, he has identified an additional drag that will depress the growth of goods trade in the years ahead.

    After ocean carriers first tried out “slow steaming” around 2007, container ships required three or four additional days to cross the Pacific and as much as an extra week to steam between Asia and Northern Europe — long before pandemic-induced backups at major ports. Steaming slower still will make it even less attractive to send goods pegged to fashions and fads long distances by water. Manufacturers and retailers may choose instead to relocate time-sensitive parts of their supply chains closer to their customers, even if that means higher factory production costs.

    Slower steaming will influence globalization in less visible ways as well. As container ships travel more slowly, each ship will complete fewer round trips each year. That will effectively reduce the shipping industry’s capacity. At the same time, each voyage will entail more days of crew wages and mortgage payments than a similar trip today. This combination of factors means container freight rates are likely to remain higher than they might otherwise be. Containers themselves will have to be leased for a longer period in order to complete a shipment across the oceans, adding to the freight bill.

    And then there is the matter of inventory costs. In recent years, with interest rates near zero, the shippers who own the goods aboard those vessels queuing for a berth at major ports haven’t faced much of a financial penalty due to longer transit times. But interest rates aren’t zero any more, and the cost of owning goods during longer trips across the seas is no longer negligible.

    As I wrote in Outside the Box, trade in manufactured goods is likely to grow more slowly than the world economy in the years ahead. While container shipping rates seem to be descending from their pandemic peaks, slower steaming means that the days when transport costs were an afterthought may not return soon. Companies will have to take this into account as they decide what to make where.

  • American History, Revised

    It’s natural, I suppose, that we place ourselves in the center of history. Generations of American school kids have learned history as if Isabella and Ferdinand, Elizabeth I and George III, the French traders who founded Detroit and the Dutch who colonized New York all were obsessed with the land that would become the United States. The story we are taught revolves around us.

    The reality, though, was rather different. Until well into the nineteenth century, North America lay on the fringe of the world economy and was a minor concern of the various European powers that claimed parts of it. The real action was elsewhere.

    Howard French’s wonderful book Born in Blackness, which I’ve just finished reading, challenges our understanding by placing Africa at the center of modern history. It was African gold, he shows, that drew European powers, starting with Portugal in the fifteenth century, into colonial adventures — at a time when several African kingdoms were strong enough to dictate terms to the Europeans. That gold, moreover, provided European royals the wherewithal to finance exploration and settlement, including sugar plantation in places like Brazil, Barbados, and Saint Domingue (now Haiti) that would be populated by enslaved Africans. These sugar colonies became the major source of wealth for Europe in the seventeenth and eighteenth centuries, French asserts, while the main role of North America was to provide the foodstuffs that kept the slaves in the sugar colonies alive. It was only the boom in cotton in the second quarter of the nineteenth century, grown by slaves whose forebears came from Africa, that made the United States essential to Europe.

    In contemplating French’s argument, I got to thinking about another terrific book, William Dalrymple’s The Anarchy. The content of Dalrymple’s book has nothing to do with Africa; it’s mainly about how the British East India Company ravaged India. The commonality is that eighteenth-century India, like Africa in earlier times, loomed far larger in European minds than North America. One reason those disgruntled colonists in Massachusetts and Pennsylvania failed to get George III to strike a deal in the early 1770s may have been that the king’s attention was on India, which he correctly thought mattered more to Britain’s prosperity.

    Both of these well-written books shed new light on how the world economy developed. They’re well worth reading.