The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger
By Marc Levinson
Princeton University Press, 2006
392 pages, $24.95
The recent political flap over the management of U.S. ports masks the powerful change dynamic that has been working its way through the world’s maritime transportation system over the past 50 years. In The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, author and economist Marc Levinson recounts the little-known story of how the humble shipping container has revolutionized world commerce. He tells his tale using just the right blend of hard economic data and human interest.
In April 1956 a converted oil tanker carried 58 containers from Newark to Houston. The voyage of the Ideal-X was the brainchild of an outsider to the shipping industry, a trucker by the name of Malcom McLean. An entrepreneur with a restless, innovative mind and a gimlet eye for cost savings, Mr. McLean had a trucking business that had flourished in the heavily regulated environment of the 1950s. He used what may have been the first leveraged buyout to acquire a shipping line so that he could put his trucks on coastal steamers, reducing costs and avoiding gridlock, but he soon jettisoned this plan in favor of carrying truck bodies — the first containers. In the teeth of resistance from competitors and regulators alike, he and other innovators pursued what we would now call a “disruptive innovation.” In the process of offering huge cost savings, containerization would devastate established firms throughout the long supply chains of global enterprise and disrupt social and management–labor relationships all over the world.
The process did not take place overnight: There were militant longshoreman unions and dockside communities to be placated, factories and warehouses to be relocated, docks to be built, and regulations to be changed. A vast fleet of ships — many of them small rust buckets acquired cheaply after the war — were suitable only for carrying “break-bulk” cargo (loose goods that aren’t containerized). They all had to be replaced with faster, larger ships with sophisticated material-handling equipment, and this in an industry that had always been notoriously undercapitalized. In the 1950s, high shipping costs had allowed many inefficient factories to flourish locally. Now, as packing and loading costs fell and damage and pilferage were reduced, factories could be relocated to more distant regions, and layers of middlemen could be eliminated. In the United Kingdom, London’s Docklands lost much of its business to the hitherto tiny port of Felixstowe, just as New York City lost its shipping business to Port Elizabeth in New Jersey. It’s not surprising that there was such resistance to this change.
One important catalyst was the war in Vietnam, where break-bulk systems proved incapable of meeting the U.S. Army’s massive logistical needs. Mr. McLean, now operating through his Sea-Land organization, landed a lucrative contract to ferry goods westbound from America to the war zone, and then looked for eastbound traffic out of the fast-growing Japanese economy and filled his returning containers with high-value electronic goods.
The container boom, like other booms before and since, has experienced several busts; some were brought on by external events, like the oil shocks, but others were self-inflicted wounds resulting from unconstrained additions of capacity in pursuit of economies of scale. Mr. Levinson’s elegant weave of transportation economics, innovation, and geography is economic history at its accessible best.permalink.