On April 26, 1956, a ship named Ideal X set out from Port Newark bound for Houston. This voyage inaugurated the age of container shipping. Two new books recognize the 50th anniversary of this event by telling the story of container ships and their impact on the world.
The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger
Princeton University Press
392 pages
$4.00
The crucial individual in the development of container ships is Malcom McLean, who founded the Sea-Land Corporation that developed the Ideal X. The story goes that in 1937, a young McLean grew frustrated at the time it took for his truck to be unloaded and wondered why his trailer couldn’t just be loaded onto the ship. Twenty years later, the first container ship debuted.
Marc Levinson’s The Box and Brian Cudahy’s Box Boats both begin with McLean and the Sea-Land Corporation, but they take very different paths from this common origin. The Box traces the development of container technology and its impact on labor relations, urban structure, manufacturing, and trade. It is easily accessible to a general audience and opens a fascinating window into the infrastructure of the modern world. Box Boats is written for someone who appreciates ships—the nautical equivalent of a trainspotter. The ideal reader appreciates detailed lists of ship names and dimensions, and is excited by a company adopting a livery and color scheme “wonderfully reminiscent of the letters ‘PA’ that once adorned ships of the Pan-Atlantic Steamship Company, and the ‘SL’ that was long carried on the bow of Sea-Land vessels.” (I would have preferred an approach like that of Noel Mostert in Supership, in which the author used various features of modern ships or ports as starting points for descriptions of how they developed from previous features.)
The maiden voyage of the Ideal X was an instant revolution. The costs of loading the cargo were $0.158 per ton, compared with $5.83 per ton for the typical cargo ship. These cost savings came along with extreme time savings, as the ship was loaded in fewer than eight hours, as compared with the days a standard ship required.
Despite the dramatic improvement offered by containers, they were not instantly adopted. One reason for the delay is that unions resisted their introduction, fearing that their members would be displaced. This is a typical, and typically futile, response to technological change. The answer provided by economic theory is that in such a situation, those that gain from the new technology are able to share some of the benefits with those that are harmed, thus leaving everyone better off than before. Unusually, the shipping lines and the dockworkers unions were able to craft such a solution, in which long-term dockworkers were compensated from a fund created by the operators of container ships.
A second reason for the delay in adoption of containers is that they required a change in the entire supply chain, not just a change in the configuration of cargo capacity on ships. Until trucks and railroads—and their government regulators—were able to embrace containers, their full potential was not reached. However, once it was possible to seamlessly ship on a predictable timetable, the possibilities for massive trade were realized.
The market economy is based on mutually beneficial exchanges of goods and services. Any voluntary exchange moves resources to a higher valued use. The difference in value between what one is willing to pay to obtain something and the price one actually pays is called “consumer surplus” by economists. If the consumer surplus is large enough, it will cover transport costs, taxes, and other transaction costs. Conversely, transaction costs that exceed the surplus will prevent potentially mutually beneficial trades from taking place.
By 2002, the United States imported four times as many varieties of goods as in 1972. This represents a massive increase in consumer surplus. Most analysis of trade focuses on the gains from lowering the cost of shipping a product to a consumer when the product is already being traded. However, adding a new variety means not only incremental increases in surplus to those that were already buying but also substantial improvements to those who now have entirely new possibilities within their grasp.
Although the transport cost savings are not the only, and perhaps not even the most important, benefit of shipping containers, they are dramatic. Before containers, shipping costs were about equal to tariffs (at 1950s levels) in magnitude. Now, shipping costs are negligible. Thus, this technological change had at least the same impact on costs as all of the free trade agreements signed in the past fifty years.
When setting standards, one approach is to use something convenient or heuristic. The initial Sea-Land containers were 33 feet long because the length of available deck space on the ships used by the company was evenly divisible by 33. The other approach is to design an optimal standard. The Box is effective in both arguing that the size of containers is a situation in which choosing the appropriate standard matters and in describing the (lengthy and difficult) process of agreeing on a standard.
A common mistake is to assume that the optimal solution of today will remain optimal in the future. While choosing a standard is necessary in order to coordinate the actions of multiple firms, limiting flexibility can make continuing improvement difficult or impossible. Ironically, container ships with the ability to adjust to various sizes of containers were contrived as a lobbying gimmick by a company looking for government subsidies. When the company later decided to change container size, it was glad it had left itself the option. Because the potential situations in which flexibility will be useful are by their nature unpredictable, it is a characteristic the value of which is often underestimated.
Levinson illustrates the rapid pace of change in computer technology while describing the process of optimizing container-shipping technology. One company went so far as to use a computer simulation, renting time on an ibm 704 at a cost of several hundred dollars per minute. This would translate into a cost of several thousand dollars per minute in 2006. Today it would be less expensive to purchase outright a computer that is much more powerful, and much smaller, than the ibm 704 of 1958. The simultaneous development of computer processing has facilitated the container shipping revolution, making it possible to track the thousands of nondescript metal boxes from truck to railcar to barge to ship.
People often mistake newer technology for better technology. Box Boats provides an excellent reminder that the best technology depends on many factors. Much of the merchant fleet in the United States after World War II was based on the famous Liberty Ship design. What is not so well known is that the Liberty Ships were deliberately designed around obsolete technology, because the current (as of 1942) technology was only being produced at sufficient capacity to outfit warships.
All technological change creates winners and losers. Container shipping, by requiring large cranes and freight handling capacity on land, reduced the number of ports through which most trade was routed. Some of the largest ports in the container ship era were secondary locations in the past. Felixstowe, a port 90 miles from London, was so small that the main union had never bothered to enlist its workers. As a result, it became Britain’s largest container port in the 1960s when a strike closed the other major ports.
Smaller places are sometimes better able to exploit change because they are desperate enough to gamble on the risks of a new technology. Consider the explosive growth of the ports on the Pacific Coast of the United States. They invested in container capacity early because they struggled during the 1950s while the East Coast ports flourished. In the Gulf of Mexico, Houston—the destination of the first Sea-Land ship in 1956—established itself as the major container port. In so doing, it surpassed New Orleans, long the largest port in the region, but slow to adapt to the new world of containers.
Containers also represent a radical improvement in shipping because of the reduced opportunities for theft that they provide. Even if one could determine where the attractive cargo was, one would be left to figure out how to carry away a 40’x8’x8′ steel box without being noticed. Even opening one, if it is in a stack, provides a challenge. And unlike the days when the cargo would sit for days, containers are loaded and unloaded within hours, leaving very little chance for mischief.
One constant in the world, though, is that all new technologies bring new opportunities for illegal activity. The very speed of shipment combined with the difficulty of inspection that prevents pilferage on the docks at the same time increases the opportunities for successful smuggling. In the post 9/11 world, one fear is that bombs or other terrorist devices could be among the illegal trade. In addition, there are documented cases of specialized containers being used to smuggle people.
The infrastructure of today’s just-in-time manufacturing is built around unglamorous steel boxes and the ships that haul them. Despite their massive size and ubiquitous impact, they are easy to overlook. Reading these books will help us better understand how dramatically our world has changed in large and small ways as a result of this unheralded development, and should leave us humble in anticipating how the unknown Ideal X of today might cast a long shadow over the next half-century.
William T. Bogart is Dean of Academic Affairs at York College of Pennsylvania. His book Don’t Call It Sprawl: Metropolitan Structure in the Twenty-First Century will be published later this year by Cambridge University Press.
Copyright © 2006 by the author or Christianity Today/Books & Culture magazine. Click here for reprint information on Books & Culture.
