Chris Bambery takes a look at what happened to Hanjin shipping company and what it tells us about comptemporary capitalism
A seafarers life is not always a happy one. Spare a thought for seafarers aboard container ships owned by the South Korean corporation, Hanjin, the seventh biggest shipping company in the world. For over a month now, since the company went bankrupt with a staggering $5.4bn worth of debt, half its 141 vessels have been blocked from docking at ports across the oceans with others impounded in port because of Hanjin’s unpaid fees.
The crews have been forced to stay on board and are only now beginning to be allowed home after matters have proceeded through the courts. On board the stranded ships are 400,000 containers holding goods worth $14bn ranging from Samsung tablets and smart phones to waste paper.
Eventually the majority of Hanjin’s container ships will be sold, snapped up by its rivals at a bargain price. The older ships will be sent to India to be scrapped. Once its seafarers get home they will have to look for a new job, and the other shipping lines can seize the chance to hire experienced crew at lower wage rates.
What is going on in the global shipping industry is straight out of Karl Marx’s “Capital.” First we have the rise of monopolies. The top 10 container shipping lines control 63.5 percent of the market, up from 49.3 percent in 2000. They work together to control shipping routes, fix prices and so on are but are also in deadly competition. Making a profit is not enough because each of these corporations also seeks to expand its market share, and that involves investing.
Recent years have seen them building bigger and bigger ships in order to capture more of the market, to the cost of their competitors. Shipping costs dropped against a background of global trade figures which have not recovered to their 2008 pre-financial crash figure.
The Los Angeles Times quotes a shipbroker as saying: “They just keep slitting each other’s throats with lower rates.” He adds: “They’re building larger and larger ships to increase their capacity so they can cut costs, but with each larger vessel ordered they’re making the market worse. For at least the last five years it’s been a fight to the death,” the US shipbroker adds.
This has created a crisis of overproduction, there are simply not enough cargoes for all these ships, and of overaccumulation, where the costs of investing in new vessels outstrips the money made from shipping and handling cargoes, the profit extracted from the crew. The vessels don’t make any money themselves unless they are loaded, sailed and docked.
The top five shipping lines – APM-Maersk (Danish based), Mediterranean Shipping (Swiss based), CMA CGM Group (French based), COSCO Container Line (Chinese) and Evergreen Line (Taiwanese-based) – can probably survive by drawing on their reserves. But others, Japanese Nippon Yusen and the South Korean Hyundai Merchant Marine Co look vulnerable.
It’s worth talking about what’s going on in the shipping industry because it’s a reminder of what fundamentally causes economic crises, and why they repeatedly happen. The 2007-2008 crash was triggered by the financial crisis but underlying it were the same problems we see with the collapse of Hanjin.
Since 1982 the global economy had experienced growth, in large part on the back of the neoliberal measures introduced by Reagan, Thatcher and others which benefitted the corporations at the expense of the workers. But this period of growth was punctuated by periodic crises which should have acted as warnings of what lay ahead.
In the 1990s the Asian Tiger economies – South Korea, Hong Kong, Singapore and Taiwan – were being hailed as miracle economies. Helped by their respective states they had targeted specific sectors of the global economy and succeeded in breaking in. The huge industrial conglomerates, known as chaebols, had invested massively to capture market share. But by 1997 Goldman Sachs estimated that while their output was worth hundreds of billions of dollars, they had $65m in profits.
In 1997 the Asian Tigers crashed and the US ruthlessly used the International Monetary Fund to bail them out at the cost of austerity programmes. They recovered, but never to the giddy heights of the 1990s.
In 2000 the US was hit by the dot.com crisis when the success of eBay, Amazon and AOL led to investors rushing to place their money because massive profits lay in wait. In March 2000 World.com filed for bankruptcy and it soon became clear other companies were in trouble. Investors took fright and sold up for whatever they could get. The US experienced a short, sharp recession.
Such bubbles are a constant feature of capitalism. But overproduction and overaccumulation are a constantly reoccurring feature of the system.
Last week a British venture capitalist wrote a piece in City AM on fin-tech, warning that investment there had reached “saturation point.” His solution was for the industry to shift from financial services to pensions and insurance. In large part that is because the banking industry has been fighting back against the challenge posed by these upstarts and had more money to deploy in investing in the new digital economy, but it’s also because investors, largely venture capitalists, are cooling in their ardour for fin-tech because the returns aren’t meeting their expectations.
The problem facing fin.tech firms trying to seize a section of the pensions or insurance sectors is that they will come up against the big corporations there too.
Fin-tech sounds like another bubble waiting to go pop. Meanwhile spare a thought for those seafarers stranded off Singapore or Long Beach. As always it’s the people that do the work who create the profits. They are also the ones who pay the price for this crazy system that will waste billions by building too many container vessels because a handful of corporations will beat their rivals into the grave in order that they can survive.
Chris Bambery is an author, political activist and commentator, and a supporter of Rise, the radical left wing coalition in Scotland. His books include A People's History of Scotland and The Second World War: A Marxist Analysis.