The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger

by Marc Levinson

With tensions mounting, the ILA stopped work on November 18 and convened twenty-one thousand longshoremen at Madison Square Garden to hear about the threat of mechanization. Union leaders demanded that employers “share the benefits” and insisted that they would not accept smaller gang sizes. The issue was critical to the union: if Grace Line had its way, far fewer men would be needed on the docks.

“This generation has no right to give away, or sell for money, conditions that were handed on to us by a previous generation,” Hoffer stormed.

Despite these discontents, the longshore unions’ tenacious resistance to automation appeared to establish the principle that long-term workers deserved to be treated humanely as businesses embraced innovations that would eliminate their jobs. That principle was ultimately accepted in very few parts of the American economy and was never codified in law. Years of bargaining by two very different union leaders made the longshore industry a rare exception, in which employers that profited from automation were forced to share the benefits with the individuals whose work was automated away.

For all of their earthy bluster, their businesses had survived thanks almost entirely to government coddling. On domestic routes, government policy discouraged competition among ship lines. On international routes, rates for every commodity were fixed by conferences, a polite term for cartels, and the most important cargo, military freight, was handed out among U.S.-flag carriers without the nuisance of competitive bidding. Decisions about buying, building, or selling ships, about leasing terminals, and about sailing new routes all depended upon government directives. For men who had prospered in this environment, who loved the smells of the ocean and fondly referred to their ships as “she,” Malcom McLean’s wholly unromantic interest in moving freight in boxes had little appeal.

As the ICC was trying to figure out how to help the railroads without hurting the ship lines, Congress intervened—with conflicting instructions. Congress wanted to “breathe into our whole system of transportation some new competition,” Florida Senator George Smathers explained. But while it wanted the economy to benefit from lower rates and new services, Congress also wanted to protect transportation companies and their workers. The result was the Transportation Act of 1958. In a single remarkable sentence, the law ordered the ICC not to keep any carrier’s rates high to protect another mode of transportation, while also directing it to block unfair or destructive competition.

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.

So much traffic shifted so quickly that three years after containerships first sailed to Europe, only two American companies were still operating breakbulk ships across the North Atlantic, making a combined total of three sailings per month.34

Confusing everything was the decision by the Joint Chiefs of Staff to run a “push” supply system. In contrast to a “pull” system, in which units in the field would request the supplies they needed, the push system required supply experts back in the United States to decide what to send. The Army Materiel Command shipped more than one million automatic resupply packets, providing equipment and spare parts based on assumptions about how much a normal unit in the field would require. Supply depots in California made similar judgments about needs for food, clothing, communications gear, and building supplies. The supply experts “had never had grease under their fingernails,” a top army general groused, and from a distance of thousands of miles they had no actual knowledge of the rapidly changing situation in the field. Nor were they familiar with Vietnam.

Officials in San Francisco, where Matson had based its container service to Hawaii, ignored Matson’s request for a separate container terminal, because the city’s port director thought container shipping a passing fad. When Matson installed the world’s first land-based container crane in 1959, it was built not in San Francisco, the West’s greatest maritime center, but in Alameda, a small city within plain view of the Oakland docks.

As containerization’s economies of scale begin to take hold, more than 40 percent of all container movements in British harbors would soon occur in a single port, Felixstowe, whose traffic at the dawn of the container age had been too small even to merit statistical mention.

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. By 1986, Singapore had more container traffic than all the ports of France combined. In 1996, more containers passed through Singapore than through Japan. 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.

response. In the summer of 1969, the Sea-Land division of R.J. Reynolds Industries made its plans for the SL-7 public, ordering eight vessels from European shipyards. 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.

For most shippers, except perhaps government agencies, the cost of transporting goods was decisive in determining what products they would make, where they would manufacture and sell them, and whether importing or exporting was worthwhile. The container would reshape the world economy only when it changed shippers’ costs in a significant way.

Conversely, African countries with inefficient ports and little containership service are at such a transport-cost disadvantage that even rock-bottom labor costs will not attract investment in manufacturing.

“Any change in technology,” the economist Joel Mokyr observed, “leads almost inevitably to an improvement in the welfare of some and to a deterioration in that of others.