Sunday, September 13, 2015

Book Review: "The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger," by Marc Levinson


Photo of bananas being unloaded in New York, from U.S. National Archives Flickr page

From Chaos to Order
If you watched a ship loading or unloading in the early 1950s, it wouldn't look that much different than it would have in the 1850s or even the ancient world. Sure, the port of 1950 might have forklifts and motorized cranes, but like long ago nearly every piece of cargo would be touched by a person. Furthermore, the ship's holds would be crammed with a wide variety of cargo — industrial goods, food, clothing, chemicals — all packed together to maximize the carrying capacity of the ship and maintain seaworthiness. This made loading and unloading an arduous and dangerous processes. For example, the 60-kilogram sacks of green coffee in a pile in the aft hold would be carried one by one to a pallet in the center of the hold. The port's crane would lift the pallet to the dock, where it would be shuttled to a storage area. Or, more likely, the bags were just piled onto the docks to be sorted later. To make matters even worse, the tight packing and limited access to the holds meant that ships often needed to be completely unloaded and the docks cleared before loading could begin, thus keeping the ship tied up even longer. This chaotic, expensive and body-breaking process meant that cargo ships often spent a week in port, resulting in a high fraction of the shipping expenses being port-related.

Photo of containers and crane at Port of Long Beach

Contrast this with today's container ports. Soon after the container ship ties up at the dock, a team of cranes starts stripping the ship of its hundreds of containers like a flock of vultures removing the flesh from a dead animal. Every two minutes or so, a crane grabs a container, carries it to the dock, sets it on a waiting truck trailer or train car, which then carries it to a storage area or the customer's destination. On some docks, there is more than one crane working each ship, which speeds the process even more. This goes on around the clock for 24 to 48 hours, whereupon the reloading begins. The cargo is protected from the elements, relatively safe from theft (getting free stuff, like bottles of booze, radios, and other small things used to be a fringe benefit of dock work), and ready to hit the road or the rails.

Shipping by container is a relatively new development, and it took many years to evolve from a hunch to a world-wide method. How we got from the random-pack chaos to container order is the subject of The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, by Marc Levinson (Princeton University Press, 2006). Levinson, an economist and writer, is interested in three themes: how transportation technology evolves, the importance of innovation, connection between transportation costs and economic geography ("who makes what where'). Along the way, he explores the birth of the modern container, its effects on port labor, the challenge of standardizing containers, and how they ended up changing the nature of ports and world trade.

I have been wanting to read "The Box" for quite a while. Living a few miles from the Port of Oakland (the 5th largest port in the U.S.) and working in the diesel emission control industry, port operations intersect with my life: during my many years of commuting through Oakland on I-880, I'd drive alongside many trucks hauling containers to and from the port; the above-ground stretch of BART between the 12th Street station and the transbay tube provides expansive views of the container storage area and the cranes; on my infrequent ferry rides across San Francisco Bay, the ferry travels next to the containership docks; port trucks were always an important market for my company; and, of course, there's a chance that some of the many imported goods I use came through the Port of Oakland.

The Trucker Who Shook Up the Transportation Networks
The hero of Levinson's book is Malcolm McLean, the person most often credited as the driver of containerization. Born in 1913 in North Carolina, McLean grew up in relative affluence. In the midst of the Depression, he more or less fell into the trucking business, and founded a one-truck trucking company in 1934. Driven to succeed through relentless cost-cutting, a willingness to gamble, and refusal to go along with "that's just the way we do things" thinking, his company grew steadily, from 11 trucks in 1935 to 617 trucks in 1954, with steady revenue growth (and plenty of debt — McLean's companies were always highly leveraged).

In McLean's early container explorations, he wasn't thinking about completely reorganizing the global shipping ecosystem — he simply wanted to get his trucks up and down the Atlantic coast in less time for less money. His first idea was to load truck trailers onto specially designed barges, sail the coastal waterways to the next destination, and unload the trailers. The idea was soon followed by a plan to deposit just the trailer container (not the wheels and frame, which took up valuable space), thus freeing valuable space and dramatically reducing costs. Levinson recounts an early cost calculation involving a shipment of beer. McLean's team estimated that the current "breakbulk" methods would cost about $8 per ton to ship from Newark to Miami. Using containers, the estimate was an astonishing $0.25 per ton — over 90% cheaper!
Fig. 2 in U.S. Patent 3,042,227, inventor Keith W. Tantlinger;  original assignee, Sea Land Service;  issued July 3, 1962

McLean was ahead of his time: the suggestion to link transportation modes was incomprehensible to most in the industry and government, and he no doubt heard many comments like "that simply isn't done...", "trucking, railroads and ships are completely different universes — it makes no sense to combine them," "our regulations aren't set up to handle your plan." Shaking off the negativity, his companies pressed on, building prototype containers, designing cranes, and retrofitting an old tanker to hold containers, and finally running real-world experiments. Eventually, he had enough equipment to make a full-scale test run between two ports. It began on April 26, 1956, when 58 containers were loaded onto the Ideal-X in New Jersey. Five days later, they were unloaded in Houston, making this the first significant container shipping event in history.

To be sure, McLean wasn't the first to think that containers should be used shipping — many small attempts had been made in previous decades. But McLean's critical realization is that container shipping requires an entire ecosystem of infrastructure and dramatically new ways of doing business: expensive specialized cranes, truck trailers that are compatible, rail cars that are compatible, an inventory of containers, land to store containers, business integration between the modes of travel, and so on. He and his associates had the drive and financial resources to keep pushing forward, to keep taking risks. Levinson writes,

Malcolm McLean's fundamental insight, commonplace today but quite radical in the 1950s, was that the shipping industry's business was moving cargo, not sailing ships. That insight let him to a concept of containerization quite different from anything that had come before. McLean understood that reducing the cost of shipping goods required not just a metal box but an entire new way of handling freight. Every part of the system — ports, ships, cranes, storage facilities, trucks, trains, and the operations of the shippers themselves — would have to change. In that understanding, he was years ahead of almost everyone else in the transportation industry. His insights ushered in change so dramatic that even the experts at the International Container Bureau, people who had been pushing containers for decades, were astonished at what he had wrought. As one of that organization's leaders confessed later, "we did not understand that at that time a revolution was taking place in the U.S.A." (p 53)

Along the way, McLean's enthusiasm convinced others to get into the container game, which eventually required international standards to be created so that everyone's hardware could get along.

Developing Standards, Dealing with Labor, the Importance of the Vietnam War
Levinson extensively covers the years between the early days of containerization and the big boom in the late 1960s, devoting chapters to international standardization (so that containers can be held by all ships, lifted by all cranes, etc.), the turmoil in the labor markets caused by containerization (the responses on the east and west coasts were quite different), and the effect of the Vietnam War on container shipping (it played an important role, providing huge revenues to support expansion of containerization).

Photo of containers and truck at Port of Long BeachHow Containerization Changed the Ports
One of my most significant take-aways was a new appreciation of the tremendous land-side changes caused by containerization. In the old days, the port was part of a tight-knit ecosystem of customs brokers, manufacturing and retail, and they had "prospered by interrupting the flow of trade." Ships were small, significant time and labor were needed to unload them, so it made sense to put the piers were the people were, e.g., with scores of piers along the waterfronts of Manhattan, Brooklyn, Baltimore and San Francisco.

The container era, in contrast, is all about efficiency and utilization of equipment. To have a container port that will attract ships and cargo, you need waterways, land, access and money.  You need deep channels and long docks for the ships, a lot of land to handle containers, good access to road and rail networks, and money to make the investments. In the Bay Area, Oakland had these but San Francisco did not, so Oakland became the major regional port. In the New York area, the New Jersey waterfront near Newark had these items, so New York's major port moved across the Hudson in the 1960s. In the mid-Atlantic United States, Hampton Roads, Virginia took much of Baltimore's cargo because its coastal location allows four more trips per year for ships sailing back and forth to Europe. When your shipping company is highly leveraged and your containerships are costing more than $50 million each, it's imperative to keep them at sea as much as possible.

The shore-side network and high cost of ships might help explain the dominance of the megaports of Los Angeles and Long Beach. Amazingly, even though they are in the far southwest of the country and their transportation networks are often overtaxed, approximately 33% of imports to the U.S. flow through those two ports (by weight, see "Import MT" in this spreadsheet from MARAD). This happens because so much of our trade is with Asia, and it makes more financial sense to bring cargo to LA/LB and then move it across the country by train and truck than to travel through the Panama Canal or around South America to reach ports on the East Coast or Gulf Coast (the Canal is expensive and too small for the biggest ships).

The world of container ports is like so many other parts of the modern economy: the rich get richer, the poor get left behind. Successful ports can plow their profits — or public money that is appropriated because of lobbying muscle — into improvements like new cranes, deeper channels, integrated systems like the Alameda Corridor in L.A. County.  These improvements increase throughput and make them more attractive to the bigger and bigger ships that are sailing the seas.

How Containerization Changed the World
Levinson argues that the container is a critical element in globalization: massive trade between far-flung regions would simply not be possible using old-style shipping. The container revolution also shaped the contours of globalization separating nations into the haves and have-nots of modern ports. If a country has efficient ports, it's more likely to get international contracts that take advantage of lower costs. Without that expensive infrastructure, fewer ships will call on your port to pick up your exports. The rapid reduction in shipping over water also creates major advantages for coastal regions. For example, Levinson notes that it costs $2500 to transport a container from Baltimore to Durban, South Africa. To move that container from Durban a few hundred miles to Maseru, Lesotho costs about $7500 (p 270). 

Superports have downsides, of course. They concentrate air pollution in a relatively small area (a piece I wrote for Eat Local Challenge a while ago describes this in detail). Although the ports are making progress, especially on truck pollution (e.g., improved truck technology, rerouting trucks, shore power for ships) whenever you have so many emitters in one space, it's not good for breathers. Good arguments can also be made that the low cost of shipping goods around the world can create labor and environmental injustices (e.g., large corporations exploiting workers around the world).

Conclusion
As I reviewed the book again while writing this piece, I was impressed by the scope and level of detail provided by Levinson in The Box, and often wanted to dive in again. Levinson's writing can be evocative, like this one from the opening chapter:

An arriving ship might be carrying 100-kilo bags of sugar or 20-pound cheeses nestled next to 2-ton steel coils. Simply moving one without damaging the other was hard enough. A winch could lift the coiled steel out of the hold, but the sugar and cheese needed men to lift them. Unloading bananas required the longshoremen to walk down a gangplank carrying 80-pound stems of hard fruit on their shoulders. Moving coffee meant carrying fifteen 60-kilo bags to a wooden pallet placed in the hold, letting a winch lift the pallet to the dock, and then removing each bag from the pallet and stacking it atop a massive pile. (p. 17)

However, unless you love details about financial arrangements and corporate organization, you'll run across many sections that are long strings of statistics or explanations of complicated business arrangements (joint ventures, debt loads, mergers, spin-offs, etc.). And so I found myself skimming a bit until the narrative picked up again. Nonetheless, the story of how the container took over world trade is an fascinating story and if you want to understand the origins of today's global economy, The Box is essential reading.



Postscript
Coincidentally, as I was writing this, NPR's Planet Money re-ran an episode about the history of the shipping container. As part of a series of stories about how their special T-shirts were made, some of the team are visiting a port in Columbia where a portion of the Planet Money T-shirts are being loaded onto a containership. One of the guests in the piece is Marc Levinson. The episode is The Humble Innovation at the Heart of the Global Economy.


Photo of ship, containers and crane at Port of Long Beach


Photo credits

Photo of bananas being unloaded in New York, from U.S. National Archives Flickr page, no known copyright restrictions (created for the National Research Project)

Figure 2 in U.S. Patent 3042227, "Shipboard Freight Container Transferring Apparatus" (inventor, Keith W. Tantlinger;  original assignee, Sea Land Service;  issued July 3, 1962).  Sea-Land Service was one of the companies that McLean controlled.  The company went through various owners over the years, and most recently was purchased by Maersk and renamed SeaLand, so when you see a container marked SEALAND or some variation, it has a connection to McLean. 

Photos of container ports by the author from the Port of Long Beach harbor tour in 2015.


Random link from the archive:  Oak Tree Galls

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