Containerization and globalization
by ship lines, as the standardization made inter-company transportation viable, which was the base of the later formed North Atlantic Shipping Conference. Those standards are still in use today.
However, containers only began to change the global economy as a whole since the mid-1970s, when the transportation industry was deregulated in the US. There is no doubt that this brought enormous benefit for consumers and shippers. ‘Airfares are down sharply; trucking rates have fallen; the nation’s railroads are offering new services. ’ 10 Heavily fallen transportation costs made moving labour- intensive production to countries with lower labour costs viable. In 1975, the time when transportation costs began to plummet, the mean hourly compensation costs for production workers in the Figure 2, World Merchandise Trade as a percentage of World GDP 11
World Merchandise Trade(% of GDP)
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1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980
Figure 2: World Merchandise Trade as a percentage of World GDP 12
manufacturing sector was $6.24 in the US, while the average earning in manufacturing of Japan at that time was only $2.95, and even lower in South Korea ($0.31) and Taiwan ($0.39). 13 This means that moving labour-intensive work abroad could easily save more money from wages than extra transportation costs, and that was what employers did. From the chart above we can see that trade has had an increasing share of world GDP during the 1970s, which supported the view that lower transportation costs encouraged firms to move their production to countries with lower wages since it reduces their costs. Obviously, this is beneficial to producers, as lower costs are always a good thing; meanwhile, the competition among firms also made a part of the benefit of lower costs to the pockets of consumers, which made goods cheaper in developed countries. However, it wasn ’t everyone that enjoyed the benefits: As jobs are being transferred to relatively less
10 Moore, T. G. (1982) ‘Deregulation and Re - Regulation of Transportation’, Cato Institute Policy Analysis No. 12. 11 World Bank. ‘ Merchandize trade (% of GDP) ’ . https://data.worldbank.org/indicator/TG.VAL.TOTL.GD.ZS. 12 World Bank ibid. 13 U. S. Bureau of Labor Statistics. (2010). ‘Mean hourly compensation costs in selected countries, 1975 and 2007’. https://www.bls.gov/opub/ted/2010/ted_20100714.htm?view_full.
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