Sample Chapter for Levinson M.: The Box: How the
Shipping Container Made the World S
maller and the World
Economy Bigger. Book Search: Keywords Author Title or ISBN More Options Power Search Search Hints Google contents of this website: Google full text of our books: The Box:How the
Shipping Container Made the World S
maller and the World
Economy BiggerMarc LevinsonBook Description | Reviews | Table of ContentsCOPYRIGHT NOTICE: Published by Princeton University Press and copyrighted © 2006 by Princeton University Press. All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying recording or information storage and retrieval) without permission in writing from the publisher except for reading and browsing via the World Wide Web. Users are not permitted to mount this file on any network servers. Follow links for Class Use and other Permissions. For more information send e-mail to permissions@press.princeton.edu This file is also available in Adobe Acrobat PDF format Chapter 1 THE WORLD THE BOX MADE On April 26 1956 a crane lifted fifty-eight aluminum truck bodies aboard an aging tanker ship moored in Newark New Jersey. Five days later the Ideal-X sailed into Houston where fifty-eight trucks waited to take on the metal boxes and haul them to their destinations. Such was the beginning of a revolution. Decades later when enormous trailer trucks rule the highways and trains hauling nothing but stacks of boxes rumble through the night it is hard to fathom just how much the
container has changed the world. In 1956 China was not the world's workshop. It was not routine for shoppers to find Brazilian shoes and Mexican vacuum cleaners in stores in the middle of Kansas. Japanese families did not eat beef from cattle raised in Wyoming and French clothing
designers did not have their exclusive apparel cut and sewn in Turkey or Vietnam. Before the
container transporting goods was expensive--so expensive that it did not pay to ship many things halfway across the country much less halfway around the world. What is it about the
container that is so important? Surely not the thing itself. A soulless aluminum or steel box held together with welds and rivets with a wooden floor and two enormous doors at one end: the standard
container has all the romance of a tin can. The value of this utilitarian object lies not in what it is but in how it is used. The
container is at the core of a highly automated system for moving goods from anywhere to anywhere with a minimum of cost and complication on the way. The
container made
shipping cheap and by doing so changed the shape of the world
economy. The armies of ill-paid ill-treated workers who once made their livings loading and unloading ships in every port are no more their tight-knit waterfront communities now just memories. Cities that had been centers of maritime commerce for centuries such as New York and Liverpool saw their waterfronts decline with startling speed unsuited to the
container trade or simply unneeded and the manufacturers that endured high costs and antiquated
urban plants in order to be near their suppliers and their customers have long since moved away. Venerable ship lines with century-old pedigrees were crushed by the enormous cost of adapting to
container shipping. Merchant mariners who had shipped out to see the world had their traditional days-long shore leave in exotic harbors replaced by a few hours ashore at a remote parking lot for
containers their vessel ready to weigh anchor the instant the high-speed cranes finished putting huge metal boxes off and on the ship. Even as it helped destroy the old
economy the
container helped build a new one. Sleepy harbors such as Busan and Seattle moved into the front ranks of the world's ports and massive new ports were built in places like Felixstowe in England and Tanjung Pel
epas in Malaysia where none had been before. S
mall towns distant from the great population centers could take advantage of their cheap land and low wages to entice factories freed from the need to be near a port to enjoy cheap transportation. Sprawling industrial complexes where armies of thousands manufactured products from start to finish gave way to s
maller more specialized plants that shipped components and half-finished goods to one another in ever lengthening supply chains. Poor countries desperate to climb the rungs of the ladder of economic development could realistically dream of becoming suppliers to wealthy countries far away. Huge industrial complexes mushroomed in places like Los Angeles and Hong Kong only because the cost of bringing raw
materials in and sending finished goods out had dropped like a stone.1 This new economic geography allowed firms whose ambitions had been purely domestic to become international companies exporting their products almost as effortlessly as selling them nearby. If they did though they soon discovered that cheaper
shipping benefited manufacturers in Thailand or Italy just as much. Those who had no wish to go international who sought only to serve their local clientele learned that they had no choice: like it or not they were competing
globally because the
global market was coming to them.
Shipping costs no longer offered shelter to high-cost producers whose great advantage was physical proximity to their customers; even with customs duties and time delays factories in Malaysia could deliver blouses to Macy's in Herald Square more cheaply than could blouse manufacturers in the nearby lofts of New York's garment district. Multinational manufacturers--companies with plants in different countries--
transformed themselves into international manufacturers integrating once isolated factories into networks so that they could choose the cheapest location in which to make a particular item yet still shift production from one place to another as costs or exchange rates might dictate. In 1956 the world was full of s
mall manufacturers selling locally; by the end of the twentieth century purely local markets for goods of any sort were few and far between. For workers of course this has all been a mixed blessing. As consumers they enjoy infinitely more choices thanks to the
global trade the
container has stimulated. By one careful study the United States imported four times as many varieties of goods in 2002 as in 1972 generating a consumer benefit--not counted in official statistics--equal to nearly 3 percent of the entire
economy. The
competition that came with increased trade has diffused new products with remarkable speed and has held down prices so that average
households can partake. The ready availability of inexpensive imported consumer goods has boosted living standards around the world.2 As wage earners on the other hand workers have every reason to be ambivalent. In the decades after World War II wartime devastation created vast demand while low levels of international trade kept competitive forces under control. In this exceptional environment workers and trade unions in North America Western Europe and Japan were able to negotiate nearly continuous improvements in wages and benefits while government programs provided ever stronger safety nets. The workweek grew shorter disability pay was made more generous and retirement at sixty or sixty-two became the norm. The
container helped bring an end to that unprecedented advance. Low
shipping costs helped make capital even more mobile increasing the bargaining power of employers against their far less mobile workers. In this highly integrated world
economy the pay of workers in Shenzhen sets limits on wages in South Carolina and when the French government ordered a shorter workweek with no cut in pay it discovered that nearly frictionless nearly costless
shipping made it easy for manufacturers to avoid the higher cost by moving abroad.3 A modern
containerport is a factory whose scale strains the limits of imagination. At each berth--the world's biggest ports have dozens--rides a mammoth oceangoing vessel up to 1 100 feet long and 140 feet across carrying nothing but metal
containers. The deck is crowded with row after row of them red and blue and green and silver stacked 15 or 20 abreast and 6 or 7 high. Beneath the deck are yet more
containers stacked 6 or 8 deep in the holds. The structure that
houses the crew quarters topped by the navigation bridge is toward the stern barely visible above the stacks of boxes. The crew accommodations are s
mall but so is the crew. A ship carrying 3 000 40-foot
containers filled with 100 000 tons of shoes and clothes and electronics may make the three-week transit from Hong Kong around the Cape of Good Hope to Germany with only twenty people on board.4 On the wharf a row of enormous cranes goes into action almost as soon as the ship ties up. The cranes are huge steel structures rising 200 feet into the air and weighing more than two million pounds. Their legs stretch 50 feet apart easily wide enough for several truck lanes or even train tracks to pass beneath. The cranes rest on rails running parallel to the ship's side so that they can move forward or aft as required. Each crane extends a boom 115 feet above the dock and long enough to span the width of a ship broader than the Panama Canal. High up in each crane an operator controls a trolley able to travel the length of the boom and from each trolley hangs a spreader a steel frame
designed to lock onto all four top corners of a 40-ton box. As unloading begins each operator moves his trolley out the boom to a precise location above the ship lowers the spreader to engage a
container raises the
container up toward the trolley and pulls trolley and
container quickly toward the wharf. The trolley stops above a rubber-tired transporter waiting between the crane's legs the
container is lowered onto the transporter and the spreader releases its grip. The transporter then moves the
container to the adjacent storage yard while the trolley moves back out over the ship to pick up another box. The process is repeated every two minutes or even every ninety seconds each crane moving 30 or 40 boxes an hour from ship to dock. As parts of the ship are cleared of incoming
containers reloading begins and dockside activity becomes even more frenzied. Each time the crane places an incoming
container on one vehicle it picks up an outbound
container from another simultaneously emptying and filling the ship. In the yard a mile-long strip paved with asphalt the incoming
container is driven beneath a stacking crane. The stacker has rubber-tired wheels 50 feet apart wide enough to span a truck lane and four adjacent stacks of
containers. The wheels are linked by a metal structure 70 feet in the air so that the entire machine can move back and forth above the rows of
containers stacked six high. The crane engages the
container lifts it from the transporter and moves it across the stacks of other
containers to its storage location. A few hours later the process will be reversed as the stacking crane lifts the
container onto a steel chassis pulled by an over-the-road truck. The truck may take the cargo hundreds of miles to its destination or may haul it to a nearby rail yard where low-slung cars specially
designed for
containers await loading. The colorful chaos of the old-time pier is nowhere in evidence at a major
container terminal the brawny longshoremen carrying bags of coffee on their shoulders nowhere to be seen. Terry
Malloy the muscular hero played by Marlon Brando in On the Waterfront would not be at home. Almost every one of the intricate movements required to service a vessel is choreographed by a computer long before the ship arrives. Computers and the vessel planners who use them determine the order in which the
containers are to be discharged to speed the process without destabilizing the ship. The actions of the
container cranes and the equipment in the yard all are programmed in advance. The longshoreman who drives each machine faces a screen telling him which
container is to be handled next and where it is to be moved--unless the terminal dispenses with longshoremen by using driverless transporters to pick up the
containers at shipside and centrally controlled stacker cranes to handle
container storage. The computers have determined that the truck picking up incoming
container ABLQ 998435 should be summoned to the terminal at 10:45 a.m. and that outgoing
container JKFC 119395 a 40-foot box bound for Newark carrying 76 800 pounds of machinery and currently stacked at yard location A-52-G-6 will be loaded third from the bottom in the fourth slot in the second row of the forward hold. They have ensured that the refrigerated
containers are placed in bays with electrical hookups and that
containers with hazardous contents are apart from
containers that could increase the risk of explosion. The entire operation runs like clockwork with no tolerance for error or human foibles. Within twenty-four hours the ship discharges its thousands of
containers takes on thousands more and steams on its way. Every day at every major port thousands of
containers arrive and d
epart by truck and train. Loaded trucks stream through the gates where scanners read the unique number on each
container and computers compare it against ships' manifests before the trucker is told where to drop his load. Tractor units arrive to hook up chassis and haul away
containers that have just come off the ship. Trains carrying nothing but double-stacked
containers roll into an
intermodal terminal close to the dock where giant cranes straddle the entire train working their way along as they remove one
container after another. Outbound
container trains destined for a rail yard two thousand miles away with only the briefest of stops en route are assembled on the same tracks and loaded by the same cranes. The result of all this hectic activity is a nearly seamless system for
shipping freight around the world. A 35-ton
container of coffeemakers can leave a factory in Malaysia be loaded aboard a ship and cover the 9 000 miles to Los Angeles in 16 days. A day later the
container is on a unit train to Chicago where it is transferred immediately to a truck headed for Cincinnati. The 11 000-mile trip from the factory gate to the Ohio ware
house can take as little as 22 days a rate of 500 miles per day at a cost lower than that of a single first-class air ticket. More than likely no one has touched the contents or even opened the
container along the way. This high-efficiency transportation machine is a blessing for exporters and importers but it has become a curse for customs inspectors and security officials. Each
container is accompanied by a manifest listing its contents but neither ship lines nor ports can vouch that what is on the manifest corresponds to what is inside. Nor is there any easy way to check: opening the doors at the end of the box nor
mally reveals only a wall of paperboard cartons. With a single ship able to di
sgorge 3 000 40-foot-long
containers in a matter of hours and with a port such as Long
Beach or Tokyo handling perhaps 10 000 loaded
containers on the average workday and with each
container itself holding row after row of boxes stacked floor to ceiling not even the most careful examiners have a remote prospect of inspecting it all.
Containers can be just as efficient for smuggling undeclared merchandise illegal drugs undocumented immigrants and terrorist bombs as for moving legitimate cargo.5 Getting from the Ideal-X to a system that moves tens of millions of boxes each year was not an easy voyage. Both the
container's promoters and its opponents sensed from the very beginning that this was an invention that could change the way the world works. That first
container voyage of 1956 an idea turned into reality by the ceaseless drive of an entrepreneur who knew nothing about ships unleashed more than a decade of battle around the world. Many titans of the transportation industry sought to stifle the
container. Powerful labor leaders pulled out all the stops to block its ascent triggering strikes in dozens of harbors. Some ports spent heavily to promote it while others spent huge sums for traditional piers and ware
houses in the vain hope that the
container would prove a passing fad. Governments reacted with confusion trying to figure out how to capture its benefits without disturbing the profits jobs and social arrangements that were tied to the status quo. Even seemingly simple matters such as the
design of the steel fitting that allows almost any crane in any port to lift almost any
container were settled only after years of contention. In the end it took a major war the United States' painful campaign in Vietnam to prove the merit of this revolutionary approach to moving freight. How much the
container matters to the world
economy is impossible to quantify. In the ideal world we would like to know how much it cost to send one thousand men's shirts from Bangkok to Geneva in 1955 and to track how that cost changed as
containerization came into use. Such data do not exist but it seems clear that the
container brought sweeping reductions in the cost of moving freight. From a tiny tanker laden with a few dozen
containers that would not fit on any other vessel
container shipping matured into a highly automated highly standardized industry on a
global scale. An enormous
containership can be loaded with a minute fraction of the labor and time required to handle a s
mall conventional ship half a century ago. A few crew members can manage an oceangoing vessel longer than three football fields. A trucker can deposit a trailer at a customer's loading dock hook up another trailer and drive on immediately rather than watching his expensive rig stand idle while the contents are removed. All of those changes are consequences of the
container revolution. Transportation has become so efficient that for many purposes freight costs do not much effect economic decisions. As economists Edward L. Glaeser and Janet E. Kohlhase suggest "It is better to assume that moving goods is essentially costless than to assume that moving goods is an important component of the production process." Before the
container such a statement was unimaginable.6 In 1961 before the
container was in international use ocean freight costs alone accounted for 12 percent of the value of U.S. exports and 10 percent of the value of U.S. imports. "These costs are more significant in many cases than governmental trade barriers " the staff of the Joint Economic Committee of Congress advised noting that the average U.S. import tariff was 7 percent. And ocean freight dear as it was represented only a fraction of the total cost of moving goods from one country to another. A pharmaceutical company would have paid approximately $2 400 to ship a truck-load of medicines from the U.S. Midwest to an interior
city in Europe in 1960. This might have included payments to a dozen different vendors: a local trucker in Chicago the railroad that carried the truck trailer on a flatcar to New York or Baltimore a local trucker in the port
city a port ware
house a steamship company a ware
house and a trucking company in Europe an insurer a European customs service and the freight forwarder who put all the pieces of this complicated journey together. Half the total outlay went for port costs.7 This process was so expensive that in many cases selling internationally was not worthwhile. "For some commodities the freight may be as much as 25 per cent of the cost of the product " two engineers concluded after a careful study of data from 1959.
Shipping steel pipe from New York to Brazil cost an average of $57 per ton in 1962 or 13 percent of the average cost of the pipe being exported--a figure that did not include the cost of getting the pipe from the steel mill to the dock.
Shipping refrigerators from London to Capetown cost the equivalent of 68 U.S. cents per cubic foot adding $20 to the wholesale price of a midsize unit. No wonder that relative to the size of the
economy U.S. international trade was s
maller in 1960 than it had been in 1950 or even in the Depression year of 1930. The cost of conducting trade had gotten so high that in many cases trading made no sense.8 By far the biggest expense in this process was shifting the cargo from land transport to ship at the port of d
eparture and moving it back to truck or train at the other end of the ocean voyage. As one expert explained "a four thousand mile voyage for a shipment might consume 50 percent of its costs in covering just the two ten-mile movements through two ports." These were the costs that the
container affected first as the elimination of piece-by-piece freight handling brought lower expenses for longshore labor insurance pier rental and the like.
Containers were quickly adopted for land transportation and the reduction in loading time and transshipment cost lowered rates for goods that moved entirely by land. As ship lines built huge vessels specially
designed to handle
containers ocean freight rates plummeted. And as
container shipping became inter-modal with a seamless shifting of
containers among ships and trucks and trains goods could move in a never-ending stream from Asian factories directly to the stockrooms of retail stores in North America or Europe making the overall cost of transporting goods little more than a footnote in a company's cost analysis.9 Transport efficiencies though hardly begin to capture the economic impact of
containerization. The
container not only lowered freight bills it saved time. Quicker handling and less time in storage translated to faster transit from manufacturer to customer reducing the cost of financing inventories sitting unproductively on railway sidings or in pierside ware
houses awaiting a ship. The
container combined with the computer made it practical for companies like Toyota and Honda to develop just-in-time manufacturing in which a supplier makes the goods its customer wants only as the customer needs them and then ships them in
containers to arrive at a specified time. Such precision unimaginable before the
container has led to massive reductions in manufacturers' inventories and correspondingly huge cost savings. Retailers have applied those same lessons using careful
logistics management to squeeze out billions of dollars of costs. These savings in freight costs in inventory costs and in time to market have encouraged ever longer supply chains allowing buyers in one country to purchase from sellers halfway around the globe with little fear that the gaskets will not arrive when needed or that the dolls will not be on the toy store shelf before Christmas. The more reliable these supply chains become the further retailers wholesalers and manufacturers are willing to reach in search of lower production costs--and the more likely it becomes that workers will feel the sting of dislocation as their employers find distant sources of supply. Some scholars have argued that reductions in transport costs are at best marginal improvements that have had negligible effects on trade flows. This book disputes that view. In the decade after the
container first came into international use in 1966 the volume of international trade in manufactured goods grew more than twice as fast as the volume of
global manufacturing production and two and a half times as fast as
global economic output. Something was accelerating the growth of trade even though the economic expansion that nor
mally stimulates trade was weak. Something was driving a vast increase in international commerce in manufactured goods even though oil shocks were making the world
economy sluggish. While attributing the vast changes in the world
economy to a single cause would be foolhardy we should not dismiss out of hand the possibility that the extremely sharp drop in freight costs played a major role in increasing the integration of the
global economy. 10 The subject of this book lies at the confluence of several major streams of research. One delves into the impact of changes in transportation technology a venerable subject for both historians and economists. The steamship invented in the 1780s and put to regular use by 1807 strengthened New York's prominence as a port and the Erie Canal an undertaking of unprecedented size had an even greater impact. The radical decline in ocean freight rates during the nineteenth century the result of technological change and improved navigation techniques encouraged a huge increase in world trade and added to Europe's eagerness to found colonies. The connection between railroad development and U.S. economic growth has been debated strenuously but there is little dispute that lower rail freight rates increased agricultural productivity knitted the North together before the Civil War and eventually made Chicago the hub of a region stretching a thousand miles to the west. A transport innovation of the 1880s the refrigerated railcar made meat
affordable for average
households by allowing meat companies to ship carcasses rather than live animals across the country. The truck and the passenger car reshaped
urban development starting in the 1920s and more recently commercial aviation redrew the economic map by bringing formerly isolated communities within a few hours of major cities. This book will argue that
container shipping has had a similarly large effect in stimulating trade and economic development--and that as with steamships railroads and airplanes government intervention both encouraged and deterred its growth.11 The importance of innovation is at the center of a second and rapidly growing body of research. Capital labor and land the basic factors of production have lost much of their fascination for those looking to understand why economies grow and prosper. The key question asked today is no longer how much capital and labor an
economy can amass but how innovation helps employ those resources more effectively to produce more goods and services. This line of research makes clear that new technology by itself has little economic benefit. As economist Nathan Rosenberg observed "innovations in their early stages are usually exceedingly ill-adapted to the wide range of more specialised uses to which they are eventually put." Resistance to new methods can impede their adoption. Potential users may avoid commitments until the future is more certain; as early buyers of Betamax
video players can attest it is risky to bet on a technology that turns out to be a dead end. Even after a new technology is proven its spread must often wait until prior investments have been recouped; although Thomas Edison invented the incandescent lightbulb by 1879 only 3 percent of U.S. homes had electric lighting twenty years later. The economic benefits arise not from innovation itself but from the entrepreneurs who eventually discover ways to put innovations to practical use--and most critically as economists Erik Brynjolfsson and Lorin M. Hitt have pointed out from the organizational changes through which businesses reshape themselves to take advantage of the new technology.12 This book contends that just as decades elapsed between the taming of electri
city in the 1870s and the widespread use of electrical power so too did the embrace of
containerization take time. Big savings in the cost of handling cargo on the docks did not translate immediately into big savings in the total cost of transportation. Transportation companies were generally ill-equipped to exploit the
container's advantages and their customers had
designed their operations around different assumptions about costs. Only with time as
container shipping developed into an entirely new system of moving goods by land and sea did it begin to affect trade patterns and industrial location. Not until firms learned to take advantage of the opportunities the
container created did it change the world. Once the world began to change it changed very rapidly: the more organizations that adopted the
container the more costs fell and the cheaper and more ubiquitous
container transportation became.13 The third intellectual stream feeding into this book is the connection between transportation costs and economic geography the question of who makes what where. This connection might seem self-evident but it is not. When David Ricardo showed in 1817 that both Portugal and England could gain by specializing in making products in which they had a comparative advantage he assumed that only production costs mattered; the costs of
shipping Portuguese wine to England and English cloth to Portugal did not enter his analysis. Ricardo's assumption that transportation costs were zero has been incorporated into economists' models ever since despite ample real-world evidence that transportation costs matter a great deal.14 Economists have devoted serious effort to studying the geographic implications of transport costs only since the early 1990s. This new stream of work shows for
mally what common sense suggests. When transport costs are high manufacturers' main concern is to locate near their customers even if this requires undesirably s
mall plants or high operating costs. As transportation costs decline relative to other costs manufacturers can relocate first domestically and then internationally to reduce other costs which come to loom larger.
Globalization the diffusion of economic activity without regard for national boundaries is the logical end point of this process. As transport costs fall to extremely low levels producers move from high-wage to low-wage countries eventually causing wage levels in all countries to converge. These geographic shifts can occur quickly and suddenly leaving long-standing industrial infrastructure under-utilized or abandoned as economic activity moves on.15 Have declines in the cost of
shipping really caused such significant economic shifts? Some scholars doubt that ocean freight costs have fallen very much since the middle of the twentieth century. Others pointing to the undeniable fact that countries trade much more with neighbors than with distant lands argue that transportation costs still matter a great deal. The present work intentionally takes a non-quantitative approach in addressing these questions. The data on freight costs from the mid-1950s through the 1970s are so severely deficient that they will never provide conclusive proof but the undisputed fact that the transportation world raced to embrace
containerization is very strong evidence that this new
shipping technology significantly reduced costs. Nor does this book employ economic models to prove the
container's impact. Given the vast changes in the world
economy over a span that saw the breakdown of the exchange-rate system repeated oil crises the end of colonialism the invention of jet travel the spread of computers the
construction of hundreds of thousands of miles of expressways and many other developments no model is likely to be conclusive in distinguishing the impact of
containerization from that of the many other forces. Nonetheless dramatic shifts in trade patterns and in the location of economic activity over the past half century suggest that the connection between
containerization and changes in economic geography is extremely strong.16 Mysteriously the
container has escaped all three of these very lively fields of research. It has no engine no wheels no sails: it does not fascinate those captivated by ships and trains and planes or by sailors and pilots. It lacks the flash to draw attention from those who study technological innovation. And so many forces have combined to alter economic geography since the middle of the twentieth century that the
container is easily overlooked. There is half a century after its arrival no general history of the
container.17 In telling the remarkable story of
containerization this book represents an attempt to fill that historical void. It treats
containerization not as
shipping news but as a development that has sweeping consequences for workers and consumers all around the globe. Without it the world would be a very different place. Return to Book Description File created: 8/7/2007Questions and comments to: webmaster@pupress.princeton.eduPrinceton University Press ONLINE BOOK SALE New Book E-Mails New In Print Subjects Catalogs Series Sample Chapters Podcasts/Vodcasts Recent Awards E-Books Online Books Online Ordering For Reviewers Permissions Class Use About Us Contact Us European Office Links F.A.Q. Home Page
