Davos is here again. The barons of globalisation are sequestered in the luxury resort but the mood sounds distinctly anxious. José Manuel Barosso, erstwhile president of the European Commission and the current chair of Goldman Sachs International could come with no better internationalist credentials, but he is worried. “Tension between the US and China was accelerated by the pandemic and now this invasion of Ukraine by Russia – all these trends are raising concerns about a decoupling world…friction from nationalism, protectionism, nativism, chauvinism if you wish, or even sometimes xenophobia” threaten the liberal global order, he has told his fellow Masters of the Universe, “and for me it is not clear who is going to win.”
Anyone who has been reading my research output over the last decade or longer will know that I have been saying that geopolitics and deglobalisation represent the greatest challenge to shipping’s fortunes. If any industry benefits from a global level playing field, it’s ours. But in the years since the Global Financial Crisis, the politics of globalisation have unwound. Indeed it’s somewhat disingenuous of JM Barosso to bemoan globalisation when it is OECD nations which have led on anti-trade legislation in the years since the GFC, even when the legislation is presented as meritorious. One example is the proposed EU carbon border, which will impose carbon emission taxation on imports to the EU. Having exported its pollution, the EU might now tax its supplier-polluters with none of the financial benefit going to the supplier-polluters. It’s a neat trick if you can pull it off.
Politics and Economics in the end come down to demographics. As the 21st century winds on, we have to accept that we are reaching peak human populations. It isn’t just the Covid baby crunch. Improving educational and economic prospects for women are reducing birth rates everywhere, even in the fastest growing populations like Indonesia, Bangladesh and Nigeria. In the US and Europe, reproduction rates are below the replacement rate and only immigration keeps populations growing, with political consequences. The fact is that economic growth, as we currently measure it, relies on population growth. By the middle of this century, population growth will have peaked. Shipping demand patterns will therefore begin to alter before the population peaks globally – investors need to be aware of how the changes will happen.
This is all happening as shipping has to decarbonise, adding to the strategic headeache for ship owners and investors. We are at the bottom of the S-curve in this technological transformation from hydrocarbons to zero-carbons. But doing nothing cannot be a long-term strategy. A massive global shipbuilding spree can be expected if the global fleet is to be replaced or refitted by mid-century. But the IMO’s ambitions for emission reductions are predicated on an assumption that shipping demand will continue to grow. This assumption needs to be tested.
I’ve encapsulated these issues and what they mean for corporate and independent ship owners today and in the next thirty years in my latest report, Five Tiers of Transition: A Shipping PESTO Analysis. This 45 page, 28,000 word report details the Political, Economic, Social and Technological context for the industry and the Operational implications for ship owners over the time scale 2022 to 2050.
If you’d like a copy of the report, it’s available from my online shop for GBP 199 (VAT payable where applicable).