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December 10 - December 10, 2016
The factory sector held steady through 1967, then abruptly collapsed. Between 1967 and 1976, New York lost a fourth of its factories and one-third of its manufacturing jobs. The scope of this deindustrialization was shockingly widespread, with forty-five of forty-seven important manufacturing industries experiencing double-digit declines in employment.41
Automation became a serious issue when the ILA negotiated new contracts in the fall of 1956. After observing McLean’s container operation, the New York Shipping Association sought freedom for employers to hire only as many longshoremen as they wanted “for any type of operation not practiced at this time.
The largest of the Pacific ship lines, Matson, was facing a financial squeeze, and it persuaded the others that it was time for “a new look” in labor-management relations. The companies agreed to leave the work rules alone, in return for a contract clause allowing stevedores to use new devices and methods so long as individual workers did not face speedups. Innovation would no longer automatically trigger a strike. If a gang thought it was being asked to perform dangerous or excessive tasks, a union representative and a supervisor would try to work things out while unloading or loading
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Dozens of bargaining sessions followed before the landmark Mechanization and Modernization Agreement was finally signed on October 18, 1960.
Contrary to the union’s expectations, these massive productivity gains came from sweat, not automation. “The evidence suggests that the employers, for the most part, devoted their effort to trying to squeeze more physical labor from the workforce, rather than innovating or undertaking new investment,” wrote economist Paul Hartman
Bizarrely, the parties now switched sides. The union demanded that the employers mechanize faster to eliminate these physical burdens. “We intend to push to make the addition of machines compulsory,” Harry Bridges told management negotiators in 1963.
The appearance of a union victory was misleading. A separate statement by the mediators could be read in no other way than as a warning to the ILA: “We wish … to emphasize our strong belief that the capacity of this industry to support wages and benefits to which the employees are entitled cannot continue without serious impairment in the absence of marked improvement in manpower utilization.” The implication was that if the union remained unwilling to make a deal on containers, the government stood ready to impose one.
The Mechanization and Modernization Agreement on the Pacific coast and the Guaranteed Annual Income in the North Atlantic were among the most unusual, and most controversial, labor arrangements in the history of American business.
President Kennedy addressed the issue himself in 1962: “I regard it as the major domestic challenge, really, of the 60s, to maintain full employment, at a time when automation, of course, is replacing men.
And of course, in tune with the times, the use of the word "men" stands out like a sore thumb.
The Marine Steel Corporation, a New York manufacturer, advertised no fewer than 30 different models, from a 15-foot-long steel box with doors on the side to a steel-frame container with plywood sides, 4½ feet wide, made to ship “five-and-dime” merchandise to Central America.
The new standards were promptly tested by Daniel K. Ludwig’s American Hawaiian Steamship Company, which wanted to build a ship carrying 30-foot-long containers. The Federal Maritime Board would not approve federal mortgage insurance for a ship fitted for nonstandard containers, so American Hawaiian asked the committee to declare 30-foot containers “standard.” The committee rejected the request 3 to 2, with Marad once more casting the deciding vote. Federal aid was not forthcoming, and the ship was never built.
The standards Hall wanted stood to have huge implications for the transport sector. No ships or containers then in use or in design would fit into the container system of the future.
On January 29, 1963, Sea-Land released its patents, so that the MH-5 committee could use them as the basis for a standard corner fitting and twist lock.
Only one roadblock remained. ISO rules required that the documents supporting proposed standards had to be distributed four months in advance of a meeting. The MH-5 committee had made its recommendation only a few days earlier, and no technical documents were ready. The ISO committee voted unanimously to waive the four-month rule.
Ouch!
The most powerful evidence against the international standards came from the marketplace. Despite the U.S. government’s pressure on carriers to use “standard” sizes, nonstandard containers continued to dominate.
“In the economics of transportation, there is no magic in mathematical symmetry.
The ships would initially carry only 24-foot containers, but if market requirements changed, the frames could be adjusted so 20-foot containers could be carried in the same space. This new feature, Powell said, would add only $65,000 to the $13 million cost. No such design existed; the entire scheme, cost estimate and all, had been drawn up on the floor of a
hotel room the previous night.
The use of 40-foot trailers on superhighways instead of 28-foot trailers on congested two-lane roads led to large productivity gains that helped truckers take business from railroads. Trucking companies’ intercity revenues doubled during the 1950s, and growth would have been even higher if trucks owned by or operating under contract to
manufacturers and retailers were included in the count.
U.S. railroads owned 723,962 boxcars in 1955 but got very little use from them. The typical boxcar spent as
little as 8 percent of its life under way, earning revenue.
Manufacturers such as General Electric and Eastman Kodak quickly discovered that there was money to be saved by organizing their production so they could fill trailers or containers and ship them to a single recipient by train, rather than sending a few cases or crates by truck. By 1967, three-quarters of all manufactured goods (excluding coal and petroleum products) left the factory in shipments of at least thirty thousand pounds.
Moore-McCormack pegged the cost of loading containerized cargo at Port Elizabeth as $2.00 to $2.50 per ton, versus $16.00 per ton for conventional freight.29
Liquor exporters had long complained of huge losses to theft on the docks, and convincing them to use containers was not a hard sell.
“In 1966, commitments by ship operators and ports to containers passed the point of no return,” a consultant judged.31
Only 3 ship lines were offering international container service from the United States in the spring of 1966. By June 1967, one researcher counted 60 companies offering container service to Europe, Asia, and even Latin America
In the winter of 1965, the United States government began a rapid buildup of military forces in Vietnam. In the process, it created what may have been the greatest logistical mess in the history of the U.S. armed forces.
The resolution of that mess represented containerization’s coming of age.1
The various American forces in the country had sixteen different logistical systems, a situation that led to endless competition for basic resources such as delivery trucks and warehouse space.
The process was so slow that barges carrying ammunition from ships near Nha Be required ten to thirty days to make a single round trip to shore.
In terms of getting supplies to the field as quickly as possible, the push system was a success. Spending by the Army Materiel Command, the agency that bought the army’s weaponry, soared from $7.4 billion in fiscal year 1965 to $14.3 billion the following year as ammunition, weapons, building materials, and vehicles were pumped into Vietnam.
“Ten first class ports in CONUS [the continental United States] are shipping material to SVN [South Vietnam] as fast as they can—we have four second-class ports to receive it,” the head of the military’s trucking branch complained.
When Malcom McLean saw the film, a colleague recalled, “[h]e got obsessed with the idea of putting containerships into Vietnam. He was back and forth to Washington, talking to people, and they told him there isn’t anything you can do in Vietnam.”12
Almost overnight, Cam Ranh Bay was turned into a large containerport.
Sea-Land’s state-of-the-art computer system at Cam Ranh Bay used punch cards to keep track of every container from loading in the United States to arrival in Vietnam to its return to America.
Containerization enabled the United States to sustain a well-fed and well-equipped force through years of combat in places that would otherwise have been beyond the reach of U.S. military might.
In 1969, a Swedish ship line’s massive neon sign, a fixture of the San Francisco water-front for decades, was moved across to the Oakland side of the bay, the glowing words “JOHNSON LINE” offering San Franciscans a nightly reminder that their city’s time as a major port was over.16
Of the 144 wharves that had operated in London at the start of 1967, 70 closed by the end of 1971, and almost all of the rest followed soon after.
By 1962, its vast imports pushed Rotterdam ahead of New York as the world’s largest port by tonnage. Rotterdam set aside land for containers early on, and Dutch longshoremen, unlike their British counterparts, posed no objections when containerships began calling in 1966.
As the Royal Seaforth Docks opened in 1972, ten of Liverpool’s historic piers, some of them two centuries old, were abandoned for good. The great maritime center of the British Empire, the cosmopolitan city whose cotton trade fueled the Industrial Revolution and whose Cunard and White Star steamers dominated the North Atlantic, fell into an economic stupor that would last for three decades.
Amid a general government crackdown on dissent, the Port of Singapore Authority was able to slash the size of longshore gangs from twenty-seven to twenty-three, institute a second shift, and boost by half the amount of cargo handled per man-hour.
The $36 million East Lagoon complex opened in June 1972, three months ahead of schedule, cementing Singapore’s reputation as an island of efficiency.
In 1971, before the new terminal opened, the Port of Singapore Authority forecast 190,000 containers after a decade in operation. Instead, it handled over a million boxes in 1982 and was the world’s sixth-largest containerport.
In 2005 Singapore became the world’s largest port for general cargo, pulling ahead of Hong Kong, and some 5,000 international companies were using the island-state as a warehousing and distribution hub—testimony to the power of transportation to reshape the flow of trade.
The price tag was $32 million per ship. Containers and other equipment would bring the total cost of the SL-7s to $435 million. For McLean Industries, even if it could have raised the money, spending nearly half a billion dollars on ships would have been a bet-the-company gamble. For R. J. Reynolds, it was almost spare change. The tobacco giant was so cash rich that in 1970 it purchased a petroleum company, American Independent Oil Company, to provide a cheap source of fuel for Sea-Land’s expanding fleet.9
Capacity on the largest international routes increased fourteen times over between 1968 and 1974.
Those fixed costs accounted for up to three-quarters of the total cost of running a container operation, and they had to be paid no matter how much cargo was available.
On the North Atlantic, where one-third of containership capacity was unutilized, American Export Isbrandtsen Line lost so much money in 1970 and 1971 that its parent company’s shares were suspended from trading on the New York Stock Exchange and its president was forced out.
