By Daniel R. Schnaider, Wisefy
The caravels, innovative 15th-century ships, marked a crucial turning point in the history of navigation and global trade, ushering in the era of great discoveries. With their agile design and long-distance capability, these vessels enabled European explorers like Vasco da Gama and Christopher Columbus to venture beyond known coastlines, reaching the Americas, India, and beyond.
Before the caravels, trade was primarily limited to the Mediterranean and the land routes of Asia, such as the famous Silk Road. The ability to navigate the open ocean opened new commercial paths for spices, gold, silver, and other precious goods, radically transforming European economies and initiating an unprecedented period of wealth accumulation.
The introduction of these global maritime routes not only promoted trade between distant continents but also laid the foundation for the modern global market system. For instance, Vasco da Gama's arrival in India in 1498 established direct spice trade between Europe and Asia, reducing dependence on Arab and Venetian intermediaries.
This new era of trade and exploration led to capital accumulation in Europe, funding the Renaissance and later the Industrial Revolution. Comparatively, before this period, European economies were relatively closed and localized, with wealth based primarily on agriculture and limited regional trade. The shift to a global trade-based economy permanently altered the world's social, economic, and political structures.
The global supply chain is inherently a part of our lives. Fuels, machinery and equipment, electrical and electronic materials, fertilizers, and vehicles are just a few of the many imported items that impact our daily lives.
Brazil, for instance, supplies the world with food and minerals. Products arrive at or depart from ports primarily via a fleet of two million trucks, but also by rail, waterways, and airways. Hidden in the price of every material good you have ever purchased is the cost of this entire chain, which in many cases can reach 20% or more. However, it was only in 2020, after a turbulent period, that we began to recognize the fundamental importance of the supply chain in our lives.
The COVID-19 pandemic triggered an unprecedented series of disruptions in the global supply chain, exposing its vulnerability to systemic shocks. The impact was felt across multiple sectors, from shortages of essential products like food and medicine to delays and increased costs in electronics and automobiles.
According to an OECD (Organisation for Economic Co-operation and Development) report, the reliance on highly concentrated supply chains in certain regions, such as electronic components in Asia, exacerbated the effects of the pandemic. Disruptions in maritime and air transport, along with factory shutdowns, led to significant increases in delivery times and freight prices, directly impacting end consumers with inflation driven by reduced product availability.
The less fortunate, who already spend a larger proportion of their income on basic needs like food and housing, are the hardest hit when the supply chain is disrupted. An example of this was observed during the Ukraine war, where the disruption of grain exports and the energy crisis negatively affected the prices of these items, particularly harming those segments of the population that cannot protect themselves from rising inflation.
Poverty in a region often reveals deficiencies in the supply chain. Underprivileged areas frequently lack potable water, adequate sanitation, access to education and healthcare due to a shortage of professionals, and face food insecurity and absence of electricity and internet. If there were easy access to products and services by train, plane, vehicles, or even ferries, the possibilities of reversing the situation would be greater.
In general, areas like mountains, where it is more expensive and complex to establish a supply chain, are often poorer, such as the Appalachian region in the US, in contrast to the cradles of civilization near important rivers like the Nile, Euphrates, and Tigris. Rivers that facilitate the transport of people or goods, like the Mississippi River, ease agricultural development in the region and contribute to wealth accumulation.
If we want to improve our society, eliminate poverty, and protect the environment through the circular economy, we need to return to the history books to understand how, after hundreds of thousands of years of extreme poverty, humanity managed to break this cycle. Spoiler: it was innovation in the supply chain.
References and sources: Organisation for Economic Co-operation and Development (OECD), World Bank; "História Geral das Navegações e Descobrimentos" by David Birmingham; United Nations Food and Agriculture Organization (FAO); Report "The State of Food Security and Nutrition in the World 2021".
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