Transportation Logistics and Economic Decline: Politics, Infrastructure and the Recession

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Transportation Logistics and Economic Decline: Politics, Infrastructure and the Recession

Final Project

Ricky Dartez – 4171437

TLMT498, Summer 2012

Dr. Ernest L. Hughes
October 28, 2012

Table of Contents
Abstract…………………………………………………………………………………………….3 Introduction…………………………………………….……………….………………………….4 The Scope of Logistics’ Economic Impact..…...………………………….……………………….5 The Economy of Logistics: Macro and Micro Perspectives…………….…………………………8 Impacts of the Great Recession……………………………………………………………….…..10 Transportation and Politics………………………………………………………………….….....14 Conclusion……………………………………………………….………………………….…….17 References………………………………………………………;…………………….………….19

Absract
This paper attempts to explain the cyclical relationship between the transportation industry and the U.S. economy. It begins by exploring the scope of logistics activities and their impact upon the economy, and then attempts to show how the economy in turn determines the state of the transportation industry and its ability to contribute to the economy. The paper will then reveal the impacts upon the transportation sector because of the recessionary conditions beginning in 2007 and continuing until 2010. Finally, we will reveal how political partisanship has the ability to depress the health of the transportation industry by withholding needed infrastructure funds and the effect that has upon the economy.

Transportation Logistics: Politics, Infrastructure and the Economy Logistics and transportation as a function of logistics management have a significant impact upon the U.S. economy. The inverse is also true. The economy has a significant impact upon logistics and transportation, especially in regards to the manner in which organizations manage their supply chains. The end of an economic recession in the early 1980s and persisting economic fears developed into an unrelenting pursuit of cost savings and ultimately to offshoring of many ancillary business process, including manufacturing. This new strategy development has been a significant and lasting effect upon transportation and logistics management activities on a worldwide scale. As many organizations sought significant cost savings and other advantages by moving functions abroad, the supply chain became stretched, transportation more expensive and complicated, and logistics management more important on a strategic level. However, as the supply chain was stretched and activities were increasingly offshored, the economic conditions within the U.S. became less stable. A significant portion of the economic strength within the U.S. can be traced to the economic opportunities afforded the middle class (consumers) in this country, as it is their consumption spending that truly drives the health of the U.S. economy. When these opportunities are suppressed, so is the strength of the economy suppressed in similar fashion. Conditions that precipitate such suppressions of the economic opportunity of consumers and, in turn, the strength of the economy have far reaching implications because the U.S. economy is cyclical in nature. Consumers not only drive the economy, they pay the taxes which are used to fund the infrastructures which are the foundation of the nation’s transportation and logistics management systems. The fact that the transport sector of the economy has had a major impact on the development and the welfare of this middle class population can hardly be argued against. On the contrary, Rodrigue and Notteboom (2012) argue that “When transport system are efficient, they provide economic and social opportunities and benefits that result in positive multipliers effects such as better accessibility to markets, employment and additional investments” and conversely, “When transport systems are deficient in terms of capacity oar reliability, they can have an economic cost such as reduced or missed opportunities” (Rodrigue & Notteboom, 2012, para. 1 economic importance section). This paper...
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