Globalization and the ‘Neighborhood Effect’

An excellent article from the New York Times covers rising transportation costs the world over, which is causing what economists call the ‘neighborhood effect.’ That is to say, global supply chains are shrinking and more goods are starting to be produced closer to home. The days of fish caught in America and then shipped to China for packaging, only to be shipped back to the United States for consumption are probably numbered.

From the Times article:

Cheap oil, the lubricant of quick, inexpensive transportation links across the world, may not return anytime soon, upsetting the logic of diffuse global supply chains that treat geography as a footnote in the pursuit of lower wages. Rising concern about global warming, the reaction against lost jobs in rich countries, worries about food safety and security, and the collapse of world trade talks in Geneva last week also signal that political and environmental concerns may make the calculus of globalization far more complex.

“If we think about the Wal-Mart model, it is incredibly fuel-intensive at every stage, and at every one of those stages we are now seeing an inflation of the costs for boats, trucks, cars,” said Naomi Klein, the author of “The Shock Doctrine: The Rise of Disaster Capitalism.”

“That is necessarily leading to a rethinking of this emissions-intensive model, whether the increased interest in growing foods locally, producing locally or shopping locally, and I think that’s great.”

Read the full article here: