We live in a world where globalization and trade have become one of the most vital aspects in determining the power of a country’s economy. In fact, the process of getting goods from point A to point B might be one of the most important economic drivers in the world, yet no one talks about it. And somehow…quietly in the background, We might be seeing the creation of the most powerful trading economy in the world…but not for the reasons that you might think.
If you want to ship an item from a manufacturing hub like China, to a consumer hub in a Place like New York…how would you do it?
Well you could just send the package on a direct flight and it’ll get their in roughly 15 hours. But this is extremely costly. It actually costs anywhere from 5 to 15 times more to ship by air than to ship by the most common shipping method… by sea.
So, we are probably going to need to use a sea freighter. Now how would you deliver the package? Well you could drop the package off at long beach, and use a rail or truck to move the item to new york, but again, that is usually more costly.
Now we are in a predicament. In order to get an Item from China, all the way to new york, a ship would need cross the pacific ocean, travel all the way around the bottom of south america, make its way through the atlantic ocean, before reaching its destination after travelling 30,000 kilometres.
And this is a problem that was faced for hundreds of years. For example, when countries like Great Britain wanted to trade with the west coast of the united states or south america. Virtually all ships would’ve needed to travel around the bottom of south america in order to deliver their goods.
That was until the early 1900’s when the United States decided to buy up an 82 kilometre long plot of land in Panama. You see, the united states saw that this was the smallest amount of land that separated the Atlantic Ocean from the Pacific Ocean. So they thought this land could be used for both trade and military purposes. So, they purchased this plot for roughly $40 million dollars, or roughly $916 million dollars today.
They then created an artificial lake, and dug trenches from this new artificial lake(gatun lake) to both the pacific and atlantic oceans.
And finally on August 15th, 1914, the Panama Canal was opened. And the first american ship to ever travel directly from the atlantic ocean to the pacific ocean, without going around south america, had passed through the Canal. It was a cargo ship called SS Ancon, and was largely responsible for shipping cement from New York, to Panama in order to help build the Canal’s infrastructure.
And this opening of the Panama Canal would go on to change the world in many ways. For example, in 2019 nearly 1 million ships passed through this Canal, which indirectly resulted in trillions of dollars worth of commerce. The Canal also generated roughly 2.6 Billion dollars worth of fees for granting access of use of the Canal, so the Canal itself is a pretty decent money maker itself as well.
But this Canal also has limits, for example, no ships longer than 1200ft or wider than 168ft can actually pass through the Canal, as the waterway is simply not large enough to allow bigger ships through. So that is why today, you see most cargo ships being built with the exact dimensions needed to fit in the Panama Canal.
Another more unforeseen effect that this Canal had was that it wreaked havoc on some south American countries like Chile. This was because the ships that once had to stop at multiple port cities along the Chilean coast, all of a sudden stopped coming by. This was a large contributing factor to an economic collapse in Chile, which saw its state income and international trade cut in half within 2 years.
Way too long. End of transcript
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