Oh, boo-hoo, say the pessimists and doomsayers. The system is broken. There are no jobs left in the U.S. Everyone is poor except the top tiny percent who have all the money. BUNK!
If that were really true we wouldn’t have record earnings among most companies traded on the stock exchange. After all, who is buying their stuff if everyone is too poor to go out to dinner? That is a common example of what poverty has done to the middle class, as if the highest use of their disposable income is a dinner at a restaurant. And where does their disposable income go? Housing, clothes, schooling, cars, TVs and cell phones, cable TV connections, food at grocery stores and other necessities. We realize that much of that is paid for on credit cards, but did you know that something like 30% of all credit card holders pay off their balances every month?
How does this relate to ship canals? Everything that is made has to be shipped to where it will be bought or used. We don’t often think of the costs of getting stuff from one place to another. In fact, we remember our econ professors describing the supply and demand curves and noting that “all things being equal” meant that we’re not including the costs of shipping in these calculations. And that is massive.
Ships, trains, planes and trucks are all busy bringing you your necessities every single day in the year. What happens when one mode becomes less expensive? Either cheaper or faster? That changes the equations for all the other modes. Look at this exciting example in last Friday’s WSJ: Ripples Likely From Wider Canal.
The picture above is just a container ship. There are also double-sided petroleum tankers, humongous cruise ships, automobile transport ships and many other kinds of specialized vessels that are getting bigger and bigger. They need more space to get through various ship canals around the world. Panama, whose economy is much influenced by Chinese trade, is leading the way.
A domestic example: the Port of Houston website notes that “…more than 88 steamship lines offer service between Houston and 1053 ports around the world.”
Investment lesson: look behind the curtain. These changes wouldn’t be happening in the absence of manufacturing and trade goods.