Of Container Ships, Supply Chains, and Retail

0:00:06 Hi everyone, welcome to the A6NZ Podcast. I’m Sonal. In this episode, we’re resurfacing
0:00:11 one of our favorite episodes on one of the most seemingly boring, but not to us, topics,
0:00:15 container ships, the logistics of supply chains, and more. In this episode, first recorded
0:00:21 over two and a half years ago in Washington, D.C., we interviewed the box author Mark Levinson.
0:00:24 Here’s the original intro with more details about what follows.
0:00:29 Hi everyone, welcome to the A6NZ Podcast. I’m Sonal. Today’s episode with me and Hannah
0:00:34 is another one of our podcasts from our recent road trip with voices from the ground in Washington,
0:00:38 D.C., though this one actually takes us all around the world. Our guest is economist,
0:00:42 historian, and journalist who was last at the Economist, Mark Levinson, the author of the beloved
0:00:46 book, The Box, which is about how the shipping container made the world smaller and economy
0:00:51 bigger. But this Hallwaystall conversation is actually a quick tour through all his books,
0:00:55 starting from his most recent one, An Extraordinary Time, where we touch briefly on the topic of the
0:01:00 golden age of productivity and beyond, to the topic of the death of retail and his book The
0:01:06 Great A&P, to finally wrapping up on logistics, transportation infrastructure, supply chains,
0:01:10 and touching very briefly on the future of work, and where government comes in policy-wise and all
0:01:15 this or doesn’t. We’re so excited to have you. Welcome, Mark. Thank you. Glad to be with you.
0:01:20 So those seem like really different topics. What’s a big idea that drives the thrust of
0:01:25 your work that kind of connects all the dots? I’m really interested in the connections
0:01:34 between economics and the world we live in. A lot of my work starts out at a microeconomic level,
0:01:40 looking at particular companies, looking at particular industries, and tying the developments
0:01:46 there to broader trends that really affect how we live, affect our standards of living. More
0:01:53 recently, I’ve been focusing on some of the trends in productivity growth because I believe that a
0:01:58 lot of the improvement in our living standards really comes out of these kind of micro improvements
0:02:04 at the private sector level rather than as a matter of great policy. And what that means,
0:02:08 and this is a frustration for public officials, is that there are no easy government solutions.
0:02:16 We’ve now been through generations in which politicians and the economists who advised
0:02:22 them said that they had the cure for poor productivity growth. I argue in an extraordinary
0:02:28 time that actually this was what was behind the political swing to the right in the late 1970s,
0:02:35 early 1980s, when we got Margaret Thatcher and Ronald Reagan. Because the more social democratic
0:02:41 type of governments before that hadn’t been able to restart productivity growth. And so voters
0:02:47 turned to people with other ideas, but the people with the more free market ideas proved no more
0:02:52 successful than the people with the more statist idea. What are we actually comparing to as we’re
0:02:57 thinking about these ideas? Well, this is not good enough. What are we holding up as something
0:03:02 that we’d prefer it to be? The end of the post-war boom and the return of the ordinary economy.
0:03:10 The story I’m telling is that the quarter century after the war was an unusual period of very rapid
0:03:19 economic growth. The period from 1948 to 1973 was probably the period of the fastest economic
0:03:25 growth in the history of the world. GDP around the world grew at more than 5% a year. Now,
0:03:33 at 5% a year, something doubles in 14 years, quadruples in 28 years. So even with some population
0:03:39 growth, people’s incomes were growing very rapidly. People’s living standards were rising
0:03:45 in a way that was visible to them. They were able to buy houses for the first time and cars for
0:03:51 the first time and send their kids to high school and maybe even college. And we had all kinds of
0:03:56 very rapid advances in living standards. What was that due to? What was the big driving force?
0:04:03 We had an unusual confluence of factors in the post-war period that people have really forgotten
0:04:10 about now. One is that there was a great deal of underused capacity, underused resources in the
0:04:17 economy. I’d like to remind people that at the end of World War II, we still had 3 million mules
0:04:21 on farms in the United States. Wow. It’s such a technical post-industrial revolution time. You
0:04:28 don’t even realize it. You had millions of people, and not just in the United States. European peasants
0:04:34 and Japanese farmers are owned half an acre of land who could be moved from very low productivity
0:04:40 jobs into very high productivity jobs in the cities. And we had a lot of that in the 50s
0:04:48 and 60s. So that was one big boost to productivity. We had very rapid increases in education levels,
0:04:54 and we know that education is associated with productivity. In the United States at the end
0:05:03 of World War II, going to college was not common. Just a few percent of the population of 18-year-olds
0:05:08 actually went on to college. And the average education level was around eighth or ninth grade.
0:05:14 So in a very few years, governments spent a lot of money building a more educated workforce,
0:05:18 and it paid off. The government was the one that seeded that, or was that just a shift in the fact
0:05:25 that adolescents existed and childhood change? No, this was heavy expenditures, building universities
0:05:29 all over the place. Take a look at how many universities in the United States started after
0:05:34 World War II. That’s when a lot of government money started. It was no longer an elite thing
0:05:39 to go to university. And how about women entering the workplace? Well, women entered the workplace.
0:05:44 The other thing I think that was really consequential in this quarter century, I’m describing,
0:05:49 was that we had the growth of motorways, the interstate highway system in the United States.
0:05:53 So public infrastructure, like the transportation infrastructure. And think about what that does
0:05:59 if you are a manufacturer or a retailer that lets you sell over a wider area, lets you operate
0:06:04 your facilities more efficiently. You don’t need a warehouse in every town. You can have one little
0:06:09 serve a large area. If you’re an employer or a worker, it’s changed the size of your labor market.
0:06:16 I mean, in Silicon Valley, San Jose and San Francisco are now part of the same labor market,
0:06:20 right? That wasn’t the case after World War II. These were very different cities and they were
0:06:27 a considerable drive apart. And so that creates a better fit between people and jobs and then
0:06:33 leads to higher productivity. They can’t be repeated. Once you’ve moved those sharecroppers
0:06:41 to the cities to take jobs in industry using heavy machinery, they’ve moved. And you don’t have
0:06:46 those underused resources again. There were countries around the world that literally went
0:06:54 25 years from 1948 to 1973 without a single year of recession. We had countries that had
0:06:58 less than 1% unemployment back then. So how did this burst of productivity,
0:07:04 this golden age actually come to an end? Well, in 1973, we really saw a trend change.
0:07:09 That was the year of the great oil crisis that some people may remember.
0:07:15 What we have moved into since 1973 is really an environment in which economic growth has been
0:07:20 slower. The improvement in living standards has been slower. The unemployment rate in most
0:07:27 countries has been permanently higher. We have not been able to recapture the very unique good
0:07:33 times that we had in this golden age. And I think that we’re not going to be able to.
0:07:40 What we’re experiencing more recently is actually normal. This is the way most economies work most
0:07:45 of the time. And how it worked before this golden era? The golden age was actually the exceptional
0:07:51 time. It’s not normal that economies grow at a rapid pace. It’s not normal that incomes double
0:07:56 or triple or quadruple in the matter of just a few years. And I don’t think we should expect
0:08:00 that to recur. I view this as analogous to child development and how human body and adult develops
0:08:05 because there’s a rapid development that happens in the birth of a child. And then there’s another
0:08:09 big rapid issue that happens in adolescence. And then you continue to grow, but it’s a little
0:08:15 slower. And in fact, thinking about the natural conclusion of your argument is that that growth
0:08:20 is now shifted to other countries like India, China, where they are now experiencing the kind of boom
0:08:27 that you were describing that happened pre-1973. That’s a great analogy. Take Japan, which in the
0:08:33 1960s or early 70s was growing at seven or eight percent a year. And then it downshifted. And then
0:08:38 it downshifted some more. More recently, China went through a period where it was growing at ten
0:08:43 percent a year. In China’s case, we do have to take the numbers with the big grain of salt.
0:08:49 Even so, people were extrapolating and saying, you know, when China grows at ten percent a year
0:08:53 for the next century, its economy is going to be twice as large as the rest of the world put
0:08:58 together. But China’s not going to grow at ten percent a year for the next half century. It’s
0:09:04 becoming much more like a normal, mature economy in which the growth rate is a couple of percent a
0:09:09 year. And that’s all they’re going to be able to expect. But it doesn’t mean necessarily that,
0:09:14 like in adolescence or growing as a human being, you only get one burst. These things can come in
0:09:17 waves. There can be other kind of confluence of these factors. When you were talking about the
0:09:22 Japanese farmers with their mules and the sort of move towards the way automation may end the move
0:09:27 to cities, increased productivity, are there any inklings that you’re starting to see of
0:09:31 possibilities like with the automation we’re starting to see happen today? And maybe even
0:09:35 with autonomous cars, new infrastructure might, you know, city infrastructure, are there things
0:09:41 that give you any sense of maybe a new era might be coming at some point? Or just even a way to
0:09:46 juice the body on steroids, like just inject some more steroids into this economy? You’re asking
0:09:53 great questions here. And the answer is maybe. I think that these are things we really can’t predict.
0:10:00 If you look at past episodes of fast productivity growth, in general, they weren’t predicted very
0:10:07 well. For example, we had a spurt of productivity growth, which translated into faster income growth
0:10:14 in the late ’90s and the first years of the 2000s. This is the famous internet boom you may
0:10:21 remember. So we remember it. But in 1992, no one predicted this. What happened was that there had been
0:10:28 investments in infrastructure. There had been developments in technology decades earlier.
0:10:33 And finally, during this period of time, they all came together. But I think a lot of people would
0:10:37 argue that we’re in a moment like that again now. Well, I think that’s a question which we can’t answer.
0:10:43 So if you take a look at a technology, will it actually revolutionize the way certain industries
0:10:48 work? I don’t exclude the possibility. But you have to keep in mind that there are also a lot of
0:10:55 complications. You’re seeing this right now as we go through this rather brutal shakeout in retailing.
0:11:00 Yes, everybody knows that you can order goods on the internet. That’s not news these days.
0:11:06 But the reality is that for a lot of retailers, there’s a problem here because they’re maintaining
0:11:11 an internet business. They’re also maintaining a retail store business because some customers want
0:11:18 that. So in some cases, their costs have gone up. They have not become online retailers. They have
0:11:23 become bricks and mortar slash online retailers. Right. And they’re showrooming for the online
0:11:27 sometimes. They’ve got multiple channels that they’re having to service. And that’s actually made
0:11:31 their operations less efficient in a certain way. I would actually say there’s a flip side of this,
0:11:36 though, again, which I think is really fascinating. Because when you think about the internet economy,
0:11:39 birth of Amazon, which is less face at the behemoth and everything,
0:11:44 the everything store, everything, everything. And they recently, as we know, started
0:11:50 doing physical brick and mortar bookstores. The difference is that they started online and they
0:11:57 went into physical using data to help stock and think differently about how to create their store
0:12:02 in an internet native way in the physical world. So I also wonder if, while the debt or retail might
0:12:07 be on the horizon, if after that there might be an entirely new post boom, a new boom around
0:12:12 retail that’s completely reshaped by new technologies, we don’t know. That’s entirely possible.
0:12:18 But just to give you something to think about, Amazon’s problem in terms of getting its books
0:12:24 into its physical stores is entirely different from its problem getting its books ordered online
0:12:30 to you, the customer. Yes. So now it needs a different kind of logistical system. It needs to
0:12:36 figure out how to distribute to retail stores like the ones that apparently is building.
0:12:42 That’s going to have a lot of costs attached. It may have some inefficiencies attached, at least
0:12:49 while they’re developing it. So my point is to say that the path of, sometimes people who are
0:12:55 involved in the tech industry kind of get very romantic about how quickly these great technologies
0:13:01 are getting absorbed. But in reality, life is messy. And some of these technologies take a while to
0:13:05 be used efficiently. And some of them will never be used efficiently. There are more failures in
0:13:09 there are successes. There’s no question about that. So does it remind you at all of the sort
0:13:15 of death of the supermarket that you talked about in your book, The Great A&P? In The Great A&P,
0:13:20 I was writing the history of what was for about 50 years, the largest retailer in the world.
0:13:25 People forget this now, but the Great Atlantic and Pacific. Is that what A&P stood for?
0:13:29 I had one in my town. I didn’t even know that. Yes, it was the Great Atlantic Pacific. It was so
0:13:35 named in 1869 for the Transcontinental Railroad. Wow. And at one point, it had more than 16,000
0:13:42 stores in the United States. So it was a behemoth. It was the Walmart of its day. But one of the
0:13:48 things that kept it so vibrant is that it remade itself continually because shopping trends change,
0:13:54 consumer expectations change. From what to what? It started out as a seller of coffee and tea and
0:14:05 spices. It made itself into a small grocery chain. And then in 1912, it developed the idea of having
0:14:10 an economy grocery chain, which is to say it would have a very bare-bone store and sell
0:14:17 products much cheaper than the competition. And that’s what drove its growth in a small
0:14:22 period of years. It integrated vertically. So it made its own chocolate, its own macaroni,
0:14:29 its own canned, its own salmon. And so it then had a huge network of manufacturing plants. And
0:14:36 again, we’re in the 1920s here. And then it started building supermarkets. It was not the
0:14:42 innovator in any of these things. A&P did not develop the idea of supermarkets. But once it
0:14:48 saw how supermarkets would work and how they would fit with its business, it started building
0:14:52 supermarkets all over the place. And by the end of the 1930s was the biggest supermarket operator
0:14:57 in the country. So what ended up being its downfall? The company stopped innovating. The company
0:15:04 stopped remaking itself. It was big. It was fat. It was happy. The two brothers who had controlled
0:15:11 it for decades both died in the 1950s. And it was then run by people who had been with the company
0:15:19 for decades and whose idea was to preserve it rather than to keep it changing. The beat that
0:15:24 keeps coming up in this is basically the tension between this idea that you can innovate, but then
0:15:29 you get too good at what you do, too comfortable, too complacent. So what’s the big then lesson or
0:15:35 takeaway from that, from your work on the great A&P to this narrative around the death of retail
0:15:43 today? Retailing is full of dead bodies. People like to talk about how unfair competition is
0:15:49 sometimes because the big companies have more power than the little ones. But when you are a
0:15:54 big retailer, you can’t change so easily. If you own one store and you think you need to do something
0:16:00 else, you go in there with a hammer and some plywood and you can do it. If you own 1,000 stores,
0:16:05 you’re stuck. You’ve got your locations. You’ve got your product line. You’ve got your brand name.
0:16:11 And you can’t change easily. It’s a really difficult situation. And so a lot of stores
0:16:16 end up dead. It’s innovator’s dilemma, classic case. So another theme that’s come up and that
0:16:21 connects all the dots with this entire conversation, that this post boom world was one of the drivers
0:16:27 was this rapid development of infrastructure. Amazon exists because of logistics and infrastructure,
0:16:32 like innovations and being able to ship things and deliver things fast. We talk about the supermarket
0:16:36 and the growth of suburbs around railroads and transportation. Transportation and logistics
0:16:40 and infrastructure is like the thread that connects and drives all economies. So let’s
0:16:44 talk about the box, which is all about logistics and infrastructure in the form of container
0:16:49 shipping. You chose one very specific thing in the box to talk about. It had this massive effect
0:16:54 on a global economy. Give us a little bit of a sense of what that story was like. I remember
0:16:59 Tim describing when he pitched your book this incredible scene of just the giant
0:17:04 mountains of peanuts in the ships. Like how quickly did shippers see this possibility and
0:17:09 start using it? Was it fast or slow? Let me give you just a quickie history here. The idea that you
0:17:16 could save money by shipping goods in containers came along in the 1700s. This was an old idea.
0:17:20 And nobody had ever figured out how to make money out of it because what would happen was that
0:17:27 where you’d make a container out of wood and nailed and you’d put your goods in it and then at
0:17:32 the other end of the trip, somebody would break the container apart and use it for firewood.
0:17:38 That was a pretty inefficient system. And nobody ever found this to be viable. It actually cost
0:17:44 more to ship goods in containers. What made this whole thing work was the arrival of a guy named
0:17:50 Malcolm McClain, who was a trucker. So he didn’t come from the shipping industry. And he understood
0:17:57 that what was needed was not particularly a container, but a new system for moving freight.
0:18:02 And the container was just a piece of what… It was just a container. It was just a container.
0:18:10 And a lot of people back in the ’50s and ’60s who were in the shipping industry were very enamored
0:18:15 of their ships and they thought they were in the shipping business. And McClain’s basic position
0:18:19 was nobody cares about your ship. They just want to get their goods from here to there and let’s
0:18:25 design an efficient system for doing that. So shipping containers first came into use in the
0:18:34 United States in 1956. They started being used internationally across the Atlantic in 1966.
0:18:39 And the industry was pretty substantial by the 1970s. By that time, most of the older vessels
0:18:45 had gone out of service. But it was really in the 1980s when modern logistics took off.
0:18:50 There were a couple of things that happened. You had in this country freight deregulation,
0:18:57 which meant that you could actually sign a single contract to import products and that would cover
0:19:02 delivering the goods to a port and moving them inland by rail to a final destination
0:19:07 or having a truck pick them up and move them to a final destination. So you could actually
0:19:12 integrate all these modes of transportation and have some assurance that the goods would get there.
0:19:19 And then you had improvements in communications. This was referred to as electronic data
0:19:25 interchange. So all of a sudden it became possible to run an international supply chain
0:19:31 in the 1980s. Now you could send instructions across the ocean quickly about how you wanted
0:19:37 something shipped or how you wanted something made. And so this innovation, the container that had
0:19:42 really come about in the ’50s, started to make a substantial difference in the world economy
0:19:45 in the 1980s when we had the birth of modern supply chains.
0:19:50 The most fascinating thing to me, the idea that astounded me most about the box was the idea that
0:19:57 the containerization of moving goods was allowed things to travel multimodally. That because of
0:20:03 that, this modularization, you could now break things across ship to train to plane across the
0:20:07 world. And that is like a really eye-opening idea. And I think it’s really interesting that you
0:20:12 reference the EDI because the analogy that I was thinking of was actually packets and moving data
0:20:17 across lines like the Ethernet. And that packetization of data also led to this thing where
0:20:23 you can move things across phone lines, Ethernet lines, other computer lines, broadband, etc.
0:20:25 And essentially reassemble them at the other end.
0:20:27 That’s a good analogy.
0:20:33 It’s a really mind-blowing idea. So I guess the question I have is what’s happening next and now
0:20:38 that you think is interesting in the next evolution in supply chains that is along these lines?
0:20:42 Well, there are a couple of things that are going on in supply chains and they’re not necessarily
0:20:47 good. International trade and manufactured goods actually grow more slowly than the world economy
0:20:51 for the past six or seven years. That’s a big reversal from the previous trend.
0:20:56 Why is that? One of the reasons is that supply chains have become less reliable.
0:21:03 These ship lines went out and purchased very, very large vessels. And I’m sure your listeners
0:21:06 have seen these vessels can carry that. I’ve actually seen them firsthand because I went to
0:21:10 the Panama Canal and it’s incredible. Panama Canal doesn’t handle the biggest one.
0:21:12 That’s right, because they’re actually greatly limited by the Panama X ship.
0:21:17 The biggest container ships now at sea can carry more than 10,000 truck-sized containers.
0:21:19 Wow. That’s amazing.
0:21:24 These are enormous vessels. So what has happened? Well, imagine you’ve got a port,
0:21:30 but instead of having a ship carrying 2,000 containers showing up every day,
0:21:34 now you’ve got a ship that carries 10,000 containers showing up once a week.
0:21:38 You’ve got a mess on your hands because you’ve got this enormous load of traffic,
0:21:41 which you need to get all these containers out of the port.
0:21:43 That’s too much. Think of bottleneck congestion.
0:21:49 Yeah, that’s right. You’ve got a bottleneck. This has come at a time when growth in trade has been
0:21:55 pretty slow. So there’s considerable overcapacity in the industry, and even so, the reliability
0:22:04 has fallen. So what you’ve seen is actually manufacturers and retailers contracting their
0:22:09 supply chains. They would like to make things closer to where they’re used because they think
0:22:14 there’s less risk. One of the things that I think happened in the growth of these international
0:22:21 supply chains is that companies paid a lot of attention to cost. They said our hourly labor
0:22:27 cost in China is a lot cheaper than it is in Detroit. They didn’t really pay much attention to risk.
0:22:34 And risk is a cost factor. There were a number of US companies that failed or came very close to
0:22:40 failure because of supply chain disruptions. Key merchandise wasn’t available when they needed
0:22:44 it for their factories or for their store shops. I mean, this is the story of hardware startups.
0:22:48 The problem isn’t that they can’t plan out and predict and build. It’s that they need to lock
0:22:52 down that supply chain inventory at the right time, but yet they have the issue that they don’t
0:22:56 know how many products their customers are going to buy, so they don’t know how much to make. So
0:22:59 there’s a sort of chicken egg problem. It’s the same thing in book publishing.
0:23:04 So you’ve got the container ship lines that essentially created their own crisis.
0:23:10 They’ve got bigger and bigger ships because that was more efficient for their purposes,
0:23:15 their own costs running ships went down per container as the ships got bigger.
0:23:20 They didn’t devote too much thought to the problems of the ports or the railroads or
0:23:25 the truck lines, and all of them have had a lot of difficulty coping with this flood of containers.
0:23:32 And so I think one question facing this industry going forward is whether these
0:23:36 long-distance supply chains will continue. Well, I have to ask a question though, if that’s,
0:23:41 is that necessarily a disaster because isn’t that also the inevitable sort of cycle of things
0:23:46 aggregating, unaggregating, lengthening and contracting, et cetera. And also in that same
0:23:49 context, one of the arguments I’ve heard for, there’s actually advantages to shorter supply
0:23:54 chains. For example, in the case of hardware and software innovation, there’s this rapid
0:23:59 iteration and back and forth that happens. So if you have a components manufacturer in Mexico
0:24:04 and you’re designing a chip or some piece of hardware, you could rapidly iterate on your designs
0:24:08 without the long delay that happens when you have a big time difference and a bunch of other
0:24:14 logistical issues with someone doing the same thing in China. So there’s some argument that
0:24:18 it’s actually not a bad thing because it actually speedens innovation almost in some cases.
0:24:24 In some cases, it may speed innovation. In general, I think that manufacturers and retailers are
0:24:32 expecting that it’s going to reduce risk. Another trend that you see is that many manufacturers
0:24:39 and retailers are now looking to multiple sourcing. Now, in many industries, it’s cheaper to have
0:24:45 a single source because you’ve got huge economies of scale. One factory makes a ton of stuff,
0:24:49 and that’s great so long as it’s working. It’s cheaper because of the stuff, right?
0:24:56 But maybe it’s worth paying a little bit more and have an extra warehouse. We’re seeing a lot of
0:25:04 that now. We had, for example, a work stoppage out of Los Angeles, actually the West Coast ports
0:25:12 in general, in the early part of the century, a lockout by the port employers. How did that
0:25:15 affect companies? Was it a lockout? You mean like it was like… They locked out the union workers
0:25:21 as part of a labor dispute. Right. And so a lot of companies said, well, maybe we ought to redirect
0:25:30 some of our traffic to ports on the US East Coast. They still send their goods to Los Angeles or
0:25:35 Long Beach or Oakland, but they also send a portion of them now to Savannah or New York
0:25:41 because they want to have options. They want to not have the risk that their supply chain will
0:25:46 be shut down. There’s another fascinating analogy with the digital world here because it reminds
0:25:50 me of the time of the early days of the internet when as internet became super popular and more
0:25:55 multimedia started coming online, there were tremendous bottlenecks in data traveling through
0:26:00 pipes. And so they had to figure out new methods to essentially reroute and decentralize it from
0:26:04 these central choke points. So it’s kind of a fascinating thing. And also now, by the way,
0:26:08 I explained when I was in Panama, I was a little struck by this thing where every single ship that
0:26:13 goes through spends a day being inspected before you can even put it through. And it costs like a
0:26:16 million dollars per ship to put it through or some, I forgot the amount, but it’s some significant
0:26:21 amount. And it just blew my mind like there’s so much extra work. But now I understand because of
0:26:26 one ship bottlenecks, that entire thing, nothing gets through for like the entire day. And that’s
0:26:32 a huge blockage. Yeah, exactly. It’s kind of fascinating. So what we’re seeing in container
0:26:39 shipping now is a lot like what we saw in the United States with the railroads in the 1870s,
0:26:47 1880s, 1890s, when many railroads went bankrupt, we went from a country that had hundreds of railroads
0:26:54 each a few miles long to a relative handful of large railroad networks. We went through
0:27:00 something similar when we had airline deregulation starting in 1978. You may remember we used to
0:27:08 have lots of regional carriers around the country, had had a number of national airlines and only
0:27:13 two international airlines that were heavily protected by the government. Now there’s a lot
0:27:18 more potential competition. And of course, the carriers have dealt with that by merging. So
0:27:23 you’ve actually now got a situation in which you’re supposed to have cutthroat competition,
0:27:28 but they’ve tried to find a way around it by by emerging and reducing the number of airlines.
0:27:32 It’s inevitable cycle. And we’re headed in the same direction with container shipping now.
0:27:38 Many container carriers are in financial distress. A lot of them have merged into the big carriers.
0:27:45 There are now probably three so-called alliances of container carriers that kind of dominate
0:27:52 world trade. So we may be in an environment in which there are few enough players that they’ll
0:27:58 be able to have a better handle on prices, on shipping rates. And that will mean less competition.
0:28:02 That will be good for their shareholders. It probably won’t be good for shippers.
0:28:05 Okay. So the wrap up, we started this with your view that connects the dots between
0:28:12 all these books. And you have this perspective of this economist historian. And the question is,
0:28:16 is it good to know that this is an ordinary economy or are we just talking about cycles of
0:28:20 things that are just going to inevitably decline and grow? How do you know it’s just not a typical
0:28:26 waning and that it’s actually really is something different? I think this actually has a lot of
0:28:33 political implications. For decades and decades, we’ve trained people to believe that the government
0:28:40 can provide a very steady income, can provide low unemployment, can provide rapid economic growth.
0:28:46 And I think the government’s ability to do this is limited. What we’re seeing, I think,
0:28:51 and not just in the United States, is somewhat of a crisis of expectations.
0:28:52 It’s a reckoning.
0:28:58 If you take a look at what’s going on now in Europe or in Korea or in Taiwan, people expect
0:29:04 more of their public officials than their public officials can deliver. People want their incomes
0:29:10 to grow quickly. Their public officials promise, “Yeah, we’ll bring back the good old times. We’ll
0:29:16 make your incomes grow quickly.” But in reality, we’re in a normal age in which people’s living
0:29:21 standards rise slowly. I feel like while you’re saying this, all I can think is like, “Well,
0:29:25 only really time can teach us that that’s not…” Because I’m trying to think, “Well,
0:29:32 what can we do to reset those expectations?” But we can’t, really. It’s just time and not…
0:29:34 Understanding, possibly.
0:29:39 And not having the same growth, right? Getting used to not having the same growth,
0:29:41 which is sort of disheartening when you think about it.
0:29:42 It is on one level.
0:29:44 Because my question is like, “So how did we move beyond that?”
0:29:50 On one level, it’s disheartening. On another level, I think we have trained people to believe
0:29:54 that government can deliver things that really can’t deliver.
0:29:56 So how do we start to undo that?
0:30:02 There is a question about how the available income is distributed, which is really quite
0:30:07 separate from the question of how fast productivity is growing, how fast the economy is growing.
0:30:14 And I think we have to have a real discussion about how income is being distributed and how
0:30:16 automation is going to affect our workforce.
0:30:20 This is a time of mine for everybody, including us, guests, everybody.
0:30:26 And I bring this up not really in an economic sense, but almost more in a psychological sense.
0:30:31 There’s a lot of concern about where the jobs are going to be for people in the future.
0:30:32 I’m not too concerned about that.
0:30:36 I’m pretty confident that we’ll have ways in which people can earn livings.
0:30:44 But so many people get some degree of satisfaction from their work.
0:30:51 And if what we’ve got is a world in which people are doing part-time work, occasional work,
0:30:52 unsteady work…
0:30:53 I mean, work itself has become containerized.
0:30:59 That’s right. What are people going to be moored to in this sense?
0:31:05 And we can do anything we want to guarantee your income.
0:31:10 But the fact is, if all you do is wake up in the morning and watch television,
0:31:14 because you’ve got nothing else to do, you’re not going to be very happy.
0:31:21 So I think we have an issue here that really goes beyond economics to finding meaning in
0:31:22 our lives as human beings.
0:31:23 To the human condition.
0:31:25 One last thing.
0:31:27 You talk about a crisis of expectation.
0:31:30 But the reality, and this is actually another theme that connects the dots,
0:31:32 is that these problems are multifactorial, multimodal.
0:31:34 There’s crisis of expectations around the world.
0:31:39 And they’re playing out in ripples and waves and different ways across France, Europe,
0:31:41 the US, and so many different ways.
0:31:46 So I also wonder if there’s some change in the geographic or
0:31:48 governance structures that we have to think about.
0:31:51 Do you have any thoughts on the geopolitical implications of this?
0:31:53 There’s any last parting thought on that front?
0:32:00 We’ve seen, obviously, a big shift away from faith in the nation state
0:32:05 to people wanting power and control closer to home.
0:32:10 I think we’ve seen over the centuries cycles in that, that sort of comes and goes.
0:32:17 Will city governments be able to deliver satisfaction in a way that national governments can?
0:32:20 I’m not convinced of that.
0:32:27 But in some issues, some areas related to people’s quality of life, they can be very important.
0:32:36 I think another issue that we face is that there are things we know that will improve
0:32:43 productivity over time. We can’t predict how that’ll work, and we still need to make those
0:32:50 expenditures. So, for example, we know that improving education levels is in general good for
0:32:57 countries’ productivity. So we need to invest in education, but can we say if we spend an extra
0:33:01 billion dollars in education now that it will improve productivity three years from now?
0:33:03 We can’t say that. We’re doing this somewhat on faith.
0:33:05 Especially if the skills and jobs of the future change.
0:33:12 Well, that’s correct. We know that as a general proposition, it’s been important for economic
0:33:18 growth that we’ve had scientific research going on. Does that mean that if we put more money into
0:33:24 scientific research now that we will be able to benefit from the consequences at any predictable
0:33:26 time in the future? The answer to that is no.
0:33:29 Right. And these are the reasons exactly why we tend not to make these decisions.
0:33:33 That’s exactly right. That’s exactly right. These are very tough choices because you’re asking for
0:33:38 our tax money to be spent, and you really can’t promise the return.
0:33:41 It’s like investing in the future. Difficult to do.
0:33:44 Well, Mark, thank you for joining the A6NZ podcast.
0:33:47 Thank you so much for having me. It’s been great fun.
0:33:47 Thank you.
0:33:57 Thank you.