The Year of the (B)OX

A little while ago (Vol. XII, Art. 28 – mid-August 2007), we heard from Mr. Chang Yung-fa, the founder and chairman of Evergreen Lines, that he and his firm had no intention of joining the rush to order megaships.

“I’ve been in the business for 40 years, and have weathered a lot of storms,” he told interviewers. “Now is not the time to build because the prices are extremely prohibitive. Operators that follow the crowd are likely to suffer once the recession sets in. When the lull comes, the huge ships will suffer instability. In a recession, if my ships are half loaded they will still be viable, but the large ships will be placed at a very high risk.”

Pretty smart guy. His opposite numbers should have listened to him.

He gave another interview on New Year’s Day, and maybe this time officials will pay close attention to what he’s saying. According to the local Taiwan media, Mr. Chang warned that his nation’s economic outlook could worsen in the second half of 2009 and that the global economy wouldn’t improve until 2012.

He told interviewers that the shipping industry was the most effective indicator of the economic climate, because only when the economy is in good condition does a shipping company ship more goods. But “countries around the world have been cutting their orders from China amid the deteriorating economic conditions,” he added.

When asked if his government’s stimulus package would help reverse the economy in the second half of this year, Mr. Chang expressed doubt by saying that “the government would have to work very hard to achieve this end.”

Mr. Chang’s remarks echoed those of Mr. Terry Gou, chairman of the Han Hai group, who said two weeks ago that the economic downturn was “three times worse than observers had predicted and that the worse was yet to come”.

Mr. Chang’s remarks have allowed us to put all the ducks in a neat little row. Even that little fourth grade girl could figure this one out because it all comes down to cause-and-effect. Those carriers that rushed to order megaships are now laying up their excess capacity because goods can’t be manufactured for a world that can’t afford to buy them. That means consumers are out of work.

Would all those stimulus plans help? Not a bit. They never have. It would be like giving a guy a fish instead of teaching him how to fish. We’re all losers under those conditions.

Production is the only way to revive our economy, and only the construction of sensibly-sized and efficient merchant ships will create the jobs we need. Three-and-a-half million folks assigned to menial road-building tasks can’t possibly support the rest of this country’s hungry citizens.