Thursday, February 13, 2014

Globalisation & Shipping – a critical analysis

Master Mariner

Transportation is said to be the fourth cornerstone of globalization along with telecommunication, trade liberalisation and international standardisation. In transportation, it is the maritime transport that dominates this sector with 80% of share by volume. Matter of fact, the growth rate of world trade and consequently the seaborne trade is exceeding the growth rate of world GDP. It stands to reason that it is the reducing cost of marine transportation that facilitates growth of trade thereby contributing positively to the growth of economy.

The efficient port operations, economies of scale achieved on size of ships and importantly the economic advantages drawn out of globalisation have all contributed to this lowering of cost.

Shipping is today an integrated constituent of global supply chains, so marine transportation is constantly under pressure to contribute to its nuances of cost, time compression, reliability, standardisation, just-in-time delivery, information system support, flexibility, customization, etc.

However, it also needs to be noted that maritime transport is a safety-critical industry. Hence concerns for human safety and environmentally safe operations co-exist with service quality that includes operations and management efficiency. Shipping produces its service with the ship as its core constituent unit that operates geographically remotely and in a high risk environment and the unknown – out of sight – seafarer lies at the heart of it.

The phenomenon of globalisation

Extant literature is rife with arguments that globalisation is a form of capitalist expansion that entails the integration of local and national economies into a global, unregulated market. Although economic in its structure, globalisation is equally a political phenomenon, shaped by negotiations and interactions between institutions of transnational capital, nation states and international institutions. Its main driving forces are institutions of global capitalism, but it also needs the firm hand of States to create enabling environments for it to take root.

Globalisation is always accompanied by liberal democracy, which facilitates the establishment of a neo-liberal state and policies that permit globalisation to flourish. Contrary to the development theories that conceived development as ‘national development’, present notions underlying neo-liberal economic development being pushed through globalisation re-conceives development as global competitiveness within the global market place.

The neo-liberal freedom as a concept gets tied down to free markets where people are free so long as they submit to the dictates of deregulated free markets.  Significantly, the race to the bottom hypothesis argues that states in their competition to attract mobile capital must converge to the lowest common denominator.

Economic globalisation thus underpins the state-capital-labour relationship. The increasing dependence of national economies on the global economic flow of investments sees financial capital play off one territorial jurisdiction against another to gain optimum return including labour that is cheaper, more flexible and more easily subjected to hard work.

As nations compete amongst themselves the content of their labour laws are watered down to the detriment of their workers including those that protect their rights. Even ILO has conceded that while there is improvement in global production systems, globalisation has impacted work and worker relations, compromising the observance of core labour standards.

A growing amount of literature on social dimensions of globalization shows that many are wary of the so-called benefits of globalisation. Labour fortunes are undermined by an ideological discourse that upholds profit as a sign of efficiency that will generate the required levels of productivity to sustain economic growth for national development. To succumb to labour demands or interests would render an economy inefficient and directed towards failure, thus making out labour ‘standing in the way’ of national progress if it insists that its interests should be considered.

In this way, while globalisation is about removing State restrictions on capital, it seeks also to control labour by making believe that social protection and job security are uneconomic and inimical to economic growth. Such economic policies that purport to separate efficiency issues from equity treat labour as a commodity and runs counter to the interest of workers.

‘Labour market flexibility’ and ‘capital market flexibility’ appear as symmetric policies but they have very asymmetric consequences – and both serve to enhance the welfare of capital at the expense of workers.

Globalisation & Shipping

The maritime business is no exception to these pervasive forces of globalisation. The extra-ordinary element for the shipping industry is the fact that the law of the seas is grounded in the notions of freedom of the seas with underlying principles of navigation of the oceans freely, a ship’s national State having exclusive dominion over that ship and no other nation can exercise dominion over that ship.
The Flag of Convenience (FoC) phenomenon and later mimicked by the international registries that is encouraged in such an environment shows the veracity of de-regulation of the marine industry. This conforms to the notion of globalisation theory put forth earlier and explains the minimalistic attitude adopted by the industry regulators.

The fact that an international regulation is enacted upon a nation by nation basis which remains keen to make its States an attractive choice as regulators, the sovereign privilege creates an unregulated environment where capital is free to act as it pleases.

The ‘low road’ globalisation of employment relations is in sharp contrast to what was historically an icon of national identity involving citizen employer and citizen seafarer. The appeal of ‘open registers’ to ship owners lay in the offer of low wages, lower taxes and less rigorous regulatory environment unlike traditional national fleets.

There is widespread laissez-faire approach which has resulted in significant restructuring of its labour market to the detriment of the seafarer where ineffective regulatory infrastructure, weak employment practices, the absence of trade union support and lack of organisational trust in the shipping context manifest deeper sociological issues and organisational weaknesses in the shipping industry.

Contractual appointments, fluid labour markets and high crew turnover result in lack of commitment by a transient workforce in as much as employers being indifferent to them. With the special conditions of seafarers’ occupation and employment relations the seafarers consider the agent or the third party manager who intervenes to secure his employment as employer rather than the principal that employs him.

Ship management companies engage the services of specialist crewing agents who offer competitive services by engaging labour from the new labour supply countries and intensify their use through reduced crewing levels and extended working hours afforded by registering vessels under FoCs associated with lower regulatory cost, weak labour rights and lower wage levels.

Today the world’s largest fleets are attached to FoCs and over the last 25 years, 80% of the world merchant fleet has been manned with multicultural crew, i.e. one ship having crew from different countries and different cultural backgrounds thus throwing up its own challenges.

Under the influence of forces of globalisation the industry structure becomes fragmented giving rise to ‘split incentives’. It is seen that in the international shipping environment there are myriad of actors in a common enterprise. This starts with the ship owner himself who has become a mere asset player. This creates failures and barriers in its holistic and well founded development of the industry.

In summation, while the seafarers’ commitment to the industry remains unequivocal, the economic short-sightedness of the split-incentivised industry is seen to totally ignore him, when he is the keystone to the industry and on whose performance the fortunes of all hinge.

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