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Sea Transport the Global Economy.pptx

Sea Transport the Global Economy.pptx - Maritime Economics...

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Maritime Economics Lecture 1: Sea Transport & the Global Economy
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The role of sea trade in economic development In “The Wealth of Nations” published in 1776, Adam Smith argued that the key to success in a capitalist society is the division of labour. As productivity increases and businesses produce more goods than they can sell locally, they need access to wider markets. E.g Working alone, ten craftsmen can produce less than 100 pins a day, but if each specializes in a single task, together they can produce more than 48,000 pins a day. This is far too many to sell locally. So unlocking the power of ‘division of labour’ depends on transport, and this is where shipping has a crucial part to play.
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The role of sea trade in economic development In primitive economies shipping is generally more efficient than land transport, allowing trade to get started earlier. Technology has moved on since Adam Smith wrote these words in 1776, and the economically developed countries now have a massive inland transport infrastructure, but technology in the shipping industry has more than kept pace.
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The story of the shipping industry since the first steamships were built more than a century ago has been one of ingenuity, professionalism, fabulous profits and some disastrous miscalculations It includes the drama of the supertanker,1 the meteoric rise of shipping superstars like Niarchos and Onassis, and some equally dramatic scandals such as that involving Tidal Marine
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which built up at 700,000 dwt (deadweight tonnage) shipping fleet in the early 1970s and was subsequently indicted, with a number of bankers in New York, on charges of fraudulently obtaining more than $60 million in loans. There was the great asset play market of the 1980s when ships bought for a few million dollars increased in value by 600–800 per cent, making the lucky few investors some of the wealthiest men in the world.
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Among the miscalculations, at the forefront must be the remarkable episode in the tanker market in 1973 when orders were placed for over 100 m.dwt of supertankers, for which the demand never materialized, with the result that some went from the builder’s yard straight into lay-up, and few ever operated to their full economic potential. In short, shipping is a ‘larger than life’ industry
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Even shipping magnates are subject to the laws of supply and demand. However, in carrying out our economic analysis we must not neglect the fact that the shipping market is a group of people —shipowners, brokers, shipbuilders and bankers— who together carry out each year the Herculean task of transporting more than 4,000 bt of cargo by sea and who may see shipping as much more than just a business
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Seaborne trade is, in a sense, at the apex of world economic activity. The first reaction of ship owners on hearing of some global event, such as a nuclear disaster in Russia or a change in the price of oil, is
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