The 26th April 1956 isn’t a date in history that most people will know, even though the seismic aftershocks of that day are still being felt today. It is the day on which an old Liberty ship from the Second World War, called the Ideal X, set sail across the Atlantic. What made it special? It’s cargo: containers. It was the first container ship to ever set sail, transforming the speed at which goods could be loaded and unloaded, leading to an explosion in global trade.
Today, container ships are the ubiquitous, if boring, symbols of the global trading system, but back then, they were revolutionary. Before standard-sized containers, ships had their cargoes stored in their holds, meaning that everything had to be manually packed and stored, which could up to a week at a time. By pre-packing goods into containers, it dropped the load/unload time of a cargo ship from days to hours. The same amount of ships could therefore exponentially increase their time at sea, criss-crossing the world, bringing markets ever closer together in a process we now know as globalisation.
But globalisation didn’t happen by accident. As World War 2 drew to a close, America scented an opportunity. The world trading system before 1939 was dominated by rival capitalist systems – empires. Each country had its own rival closed trade system between its home market and colonies. This system was called Imperial Preference and drove the Americans mad. This was because they were unreconstructed free marketeers, from the Adam Smith school. Rather than construct and maintain a costly empire, the Americans used their growing military might around world to force open new markets to sell their products in. From Spain to Japan, China to Chile, ‘gunboat diplomacy’ was the order of the day – cheap to do and hugely enriching.
The ultimate act of this gunboat diplomacy was to be conducted at the peace treaty tables of 1945. As its price for helping win the war, America wanted a single global free market that all nations had access to. It was the death-knell of the empires. New institutions were established to finance, maintain and police this new world order, from the United Nations to the World Bank and the IMF.
The subsequent seventy years became humanity’s most prosperous and peaceful. In the 1990s this system received a further boost as the Soviet Union collapsed (and with it the last major opponent to capitalism), and China joined the club.
The latter lead to an explosion in already huge supply chains, as firms moved manufacturing operations to China to take advantage of its vast and inexpensive labour market. Thanks to the humble (and now massive) container ship, raw materials and finished goods could now be shipped across the world ever more cheaply.
We now take it for granted that something as ubiquitous as a smartphone has a supply chain from as many as 47 separate countries. The plastic in its shell comes from Saudi oil (which is turned into plastic by a German chemical plant), its chipset includes cobalt, aluminium and nickel, that come from Congo, Australia and Russia, and the whole thing is powered by lithium batteries (which is mined Chile). Its intellectual property and design belong to yet another country or countries.
This incredible feat of human ingenuity and interdependence is more fragile than people would imagine, however. A singular effect, such as the 2007 tsunami in Japan, had a cooling effect on the global automotive market as factories that supplied parts to Japan’s (and many other countries) automotive plants were knocked out. Similarly, the process of globalisation has been buffeted by the financial crisis of ’09, Trump’s trade war with China, and now Covid-19.
Traditionally, the push towards globalisation was driven by two factors: access to cheap energy, and access to ever cheaper labour. This meant that the Middle East and East Asia, were central in the latter part of the 20th Century to the project of globalisation. But what happens to this process when energy becomes more cost-effective from renewables than from oil (as is currently happening), and machines increasingly take over factory floors, replacing low and medium skill workers?
Take that a step further – what begins to happen to global supply chains when we stop making things in factories altogether, but start manufacturing them in our own homes? This may seem a little far-fetched, but this process has already begun. During the Covid outbreak, as countries were scrambling for PPE, an army of ‘makers’ across the world fired up their home 3D printing machines and began ‘printing’ products to pre-set specifications that could then be used by healthcare and other key workers. These plastic masks were simple enough to make, but it begs the question – what happens when we can start printing more complex consumer goods in our own homes? What happens to the global supply chain when you can download a schematic, and head to bed with your printer building you a new pair of trainers (or stilettos) in a completely unique style, made just for you?
The schematics for ever more complex, and deadly, products are already filling the internet and dark web, available for anyone to download. If people make a habit of downloading and building products in their own homes, then government revenue, in the form of VAT, will be ever more affected.
Whilst home manufacture may still be in its infancy, a bigger and quicker trend is taking place: the automation of factories. In the light of the Covid pandemic, many countries and companies are taking looking at their supply chains and realising that they have an over-dependence on China, having piled into the market three decades ago as it opened its vast labour force to the world’s use. Some economic nationalists are currently rubbing their hands in glee, thinking that this will lead to the opening of new factories on home soil, creating manufacturing jobs in the process. They’re right and wrong at the same time. While more assembly plants will appear in places like the UK and US, they will largely be automated, meaning that this secondary manufacturing boom won’t employ the low and medium skilled workers of times gone past. Whilst the capital costs of automated factories eclipse those of starting a labour-intensive operation in China, the longer-term economics are far better: machines can run 24 hours a day, have minimal downtime for maintenance, don’t get sick, don’t require salaries, and don’t pay tax (not yet at least).
Where the shipping container became the printing press of the modern era, in terms of the massive societal and economic impact that it had, so too may the humble 3D printer become the 21st century’s shipping container. Covid, and the West’s nervousness over the influence of China on its supply chains, will begin to accelerate this process. Automation in virtually everything is now a given. It could elevate humanity to previously unthought levels of prosperity but it is going lead to a massive societal and economic disruption in the process. It’s high time that we begin to steer this process, rather than fall victims to its fallout further on down the line.