Two years ago Marc Levinson published The Box, an account of how the development of the shipping container had dramatically reduced transport costs and abetted the shift to global production in the modern economy. The configuration of modern economic production has made firms dependent on the ability to manufacture goods in a variety of locations, then transfer them to other locations for final assembly. The final product then requires transport to the wholesaler, the consumer, and so forth. All of this make the modern economy more dependent on low transportation costs than previous economic configurations. And this, as yesterday's New York Times makes clear, is becoming a problem:
“If [oil] prices stay at these levels, that could lead to some significant rearrangement of production, among sectors and countries,” said C. Fred Bergsten, author of “The United States and the World Economy” and director of the Peter G. Peterson Institute for International Economics, in Washington. “You could have a very significant shock to traditional consumption patterns and also some important growth effects.”As with all economic phenomena, an overall loss can produce both winners and losers. Local labor wins from higher transportation costs, as workers in even high wage countries can again become competitive. Local agriculture also wins. Losers are firms that have a high percentage of their production in decentralized, offshore locations, and other producers who depend on export. To be sure, oil prices aren't the whole story; environmental concerns over the impact of long distance shipping are also limiting the decentralization of production. Still, these are important developments to follow, as they impact the ability of a variety of different interest groups to effect political change in the United States and elsewhere.The cost of shipping a 40-foot container from Shanghai to the United States has risen to $8,000, compared with $3,000 early in the decade, according to a recent study of transportation costs. Big container ships, the pack mules of the 21st-century economy, have shaved their top speed by nearly 20 percent to save on fuel costs, substantially slowing shipping times.
--Robert Farley
