Why are Billions of Dollars Worth of Ships Being Intentionally Destroyed?

Economics Explained

This is the Carnival Imagination, a luxury cruise liner worth hundreds of millions of dollars, which just 10 short months ago was touring passengers in extreme comfort to exotic destinations all over the world.

This ship is sailing dead ahead to its final port of call, where it has been sold for scrap alongside dozens of other ships that have become the latest victims of the global pandemic.

The Chittagong ship breaking yard in Bangladesh is the largest of its kind in the world, and in the past few months even its abundant shores have become inundated with pleasure cruises and industrial cargo ships alike that all could have otherwise sailed the oceans for many more decades.

These are all very troubling signs for the unsung heroes of our modern global economy, the merchant marine fleet. Every year trillions of dollars worth of cargo is transported on ships like these and losing this fleet could turn into a huge barrier to global trade.

But what is really going on here?

Why would profit-motivated companies destroy billions of dollars worth of productive assets? Sure times are tough, tourism and trade have declined massively but this hardly looks like a reasonable response right?

I don’t burn down my house if a video gets less than 10,000 likes, so why would companies in such a competitive industry do something equally as self-destructive?

Well as always it has to do with economics (go figure) and to understand this bizarre behavior we need to understand a few key areas.

• What are the economics behind the merchant marine fleet?
• How do these factors make it financially viable to destroy ships?
• what does this mean for the future of international trade?
• And what does this all have to do with Chinese bridge building?

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