Transportation drives the economy. It gives way to competition. Where there is free movement, the scope of various economic activities such as industries, agriculture, inventions, capital and more opens up. Let’s see how does supply and demand, market prices and competition vary due to transportation.
As transportation difficulties are overcome, and the vehicle becomes quick and cheap, the reach of demand also extends. Demand is never uniform. Whatever becomes accessible becomes desirable. For example, if there are only grown fruits in the south of the country, it becomes the demand of the people of the north.
The supply tends to be uniform at different times and places. With the ease of transportation, items are imported and exported. Due to this, the supply of that particular place becomes more regularized and also has greater security.
Due to quick transportation, there is no need for keeping storing large stocks of goods. In many sectors of trade, the stock held is much more than the samples present. As soon as orders are placed, the factories ship them out. The same is the case for raw materials; very little is held as stock. Only in cases of emergency, they prefer to buy them.
With this, the whole economic process gets greatly hastened. Holding stock can lead to a long duration between production and consumption. In the present time, materials are primarily in their crude form when orders for the finished product are taken.
Where there is facilitated transportation, the capital might decrease. This is because there are no stocks held for investment. For example, Agricultural implements are sold through agents who work for either the manufacturer or local dealers. These people have no capital. However, this has a scope for a considerable investment, as large stocks are necessary.
For any market – transportation and communication are the drivers. For instance, say there are two retail dealers. One who deals around only a single place. And the other, who is connected by a telephone to manufacturers from two to three areas. This brings in competition between the two. However, if his connections keep increasing, the time by which the goods are transported from various places will increase. This will lead to imperfect competition. That being said, whoever has the facilities of both transportation and communication can make a great deal of difference in the market.
Effective transportation can lower prices and decrease the variations in the price of a commodity between different times and places. Thus, transportation can make up for the free interaction of industry forces, making society competitive and ideal. However, one thing should be noted: this is only possible when the opportunities for transportation are equal for all.
The fact remains that means of transportation is used for creating inequalities among persons, striking at the very roots of freedom. The principle of laissez-faire favours economic liberty. There should be no interference whatsoever. Free competition largely depends upon how does transportation functions.
No one ever denies justice, as long as it’s a principle. But when it comes to its application, many difficulties arise.
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