Containers and Causality

The specter of technological determinism looms over all three of these books. Two of them stand unabashedly in determinism’s shadow. The author of the third has one foot in the darkness and one in the bright light of cold, economic skepticism.{1}

Did containerization spawn globalization? Cast in those terms, the question involves Karl Marx’s famous epigram that “the hand-mill gives you society with the feudal lord; the steam-mill society with the industrial capitalist.” Defenders of Marx insist that the master did not really indulge such reductionist thinking. So too does Marc Levinson, the author of the third book considered here, insist that containerization changed the world without becoming deterministic. As with Marx, the truth of the matter is enshrouded in economic complexities that defy simple formulation.

Most—but not all—authorities agree that containerization has lowered the cost of moving manufactured goods over long distances. Some attribute the savings to reduced labor costs of cargo-handling at dockside. Some add the savings realized by reduced pilferage and breakage. And some think that the most important savings come from reduced capital costs to ship-owners. Because container ships load and unload in a fraction of the time required by conventional cargo vessels, the container ships spend more time at sea earning revenue and less time in port idle. The result is that goods can be shipped globally from almost any manufacturer to almost any consumer for essentially negligible transportation costs. Some commentators assert—without much reliable data—that transportation costs of container shipping average one percent of retail price.

Containerization is a transportation technology that loads packaged cargo—what maritime shippers called “break-bulk cargo”—into standardized steel containers capable of intermodal carriage on ships, trains, and trucks. By international agreement, the containers are standardized at 8 feet wide, 8 to 8 1/2 feet high, and 20 or 40 feet long. A twenty-foot container constitutes one TEU (twenty-foot equivalent unit), while forty-foot units are FEUs. Fifty years ago, there were no standard containers and only a few experimental types in service. In 2005, the world’s seventy-seven busiest container ports passed 297 million TEUs in and out, and this does not count the rail and road traffic in TEUs around the world. Since 1982, container volume has risen on average by 9.9 percent annually. Ships and ports have been transformed to accommodate a seemingly insatiable appetite for the movement of containers and their cargoes.

The three books considered in this essay describe the container revolution from a variety of perspectives, but all base their accounts on the same foundational story. It all began when Malcom McLean divested himself of the trucking company he had founded in his native North Carolina to buy a ship company and transport truck trailers by sea. To fund his scheme, McLean applied his legendary powers of persuasion to young Walter Wriston, a junior officer at First National City Bank (now Citibank) who would go on to be chairman. McLean’s Ideal-X, a converted World War II tanker, launched the modern container age when it departed New Jersey on 26 April 1956 with fifty-eight boxes stacked on a makeshift framework on deck. Through its first decade of operation, McLean’s Sea-Land Corporation struggled along on the brink of bankruptcy; acquiring and refitting more ships; developing and standardizing the containers; mounting cranes on the ships themselves and then on custom docks; promoting new port facilities; courting stakeholders such as longshoremen, truckers, and railroad operators; raising new money in gravity-defying feats of “financial and legal engineering” (as Levinson puts it in The Box [p. 45]); and keeping government regulators at bay. Seeing the Vietnam War as an opportunity to prove his system and build up the infrastructure of his fleet, McLean promised improved service to Vietnam’s ports at no risk to the United States government. By the late 1960s, containerization was taking hold and other companies were getting on the bandwagon. McLean sold his interest in Sea-Land to Reynolds Industries in 1969 and accepted a position on the company’s board, walking away with $160 million. By 1972, however, he was back in the game, buying United States Lines (USL) and introducing an entirely new model of container ship. This venture, however, foundered, sending USL into bankruptcy and consuming much of McLean’s personal fortune. Still, the great man had started a revolution that would continue to gain momentum into the twenty-first century.

All of the books present containerization as the Malcom McLean story, but each constructs and construes the story differently. The Box That Changed the World is the container shipping industry’s tribute to McLean on the fiftieth anniversary of Ideal-X’s famous voyage. Arthur Donovan is a historian of science who taught at the U.S. Merchant Marine Academy and co-authored a highly regarded analysis of the decline of the American merchant marine.{2} Joseph Bonney is editor of the Journal of Commerce, which published and managed the production of The Box That Changed the World on behalf of the Containerization & Intermodal Institute. Corporate sponsors fill the first five pages with dedications and the last thirty pages with letters of congratulations.

Corporate sponsorship notwithstanding, The Box That Changed the World is a serious book. It explores in some depth attempts before McLean to introduce containerization, or unitized cargo, as it was often called. It pays attention to experiments such as Seatrain, which loaded railroad cars and other wheeled vehicles aboard ships. And it demonstrates the ways in which McLean’s roots in the trucking industry informed his vision of containerization and intermodal transportation. In the last two chapters of their book, Donovan and Bonney address the impact of McLean’s revolution on globalization and the prospects for the future of containerization. In the end, however, celebration trumps analysis and documentation. The book emerges primarily as a coffee-table treasure—oversized, richly illustrated, and graced with stunning photographs, many from the corporate archives of the sponsors. Some of the most recent photographs are in color, capturing the crazy-quilt appearance of container ships and marshaling yards. Thousands of containers with their distinctive corporate colors pile atop one another like a rainbow of LEGO pieces in a child’s playroom.

Box Boats has a much different flavor. Author Brian Cudahy is a director of the Steamship Historical Association and a veteran writer on transportation history, with previous books on the cruise and ferry industries. He is fascinated with the container ships, and focuses on them almost to the exclusion of other sectors of the intermodal system that McLean imagined. Also, Cudahy believes that the containerization story and the McLean story are virtually synonymous. After a brief introduction to the history of modern break-bulk cargo shipping, Cudahy devotes more than three quarters of his text to McLean’s companies and their successors. Other container companies and pioneers appear, but they are all foils for McLean. This a book about ships, mostly McLean’s ships. Each of the entrepreneur’s fleets is dissected and catalogued. Charts report the vital statistics: length, width, draft, capacity, lineage. An appendix repeats most of the same information in one massive table. As a sympathetic insider, Cudahy even won access to the McLean archives, which are not yet open to public examination. Though Box Boats is more thoroughly documented than The Box That Changed the World, it still takes liberties with the evidence. Cudahy invents internal dialogue for McLean and he confuses companies and corporations, putting the reader on guard and casting doubt on other parts of the text. Still, Box Boats is an informed and generally reliable view of containerization from the perspective of a maritime enthusiast.

The most scholarly and thorough treatment of the topic appears in The Box, whose subtitle, How the Shipping Container Made the World Smaller and the World Economy Bigger, suggests the author’s carefully calibrated claims for containerization. Marc Levinson is an economist, journalist, and author of three previous books on finance and economics. In The Box, he alternates between topical and chronological treatment. The resulting balance allows him to develop aspects of the McLean story that emerge less clearly in the other two books, while at the same time painting the container story on a much broader, indeed global, canvas. Topically he devotes sequential chapters to the components of the container revolution: McLean’s innovation, the transformation of ports, accommodation with labor, standardization of containers, intermodal connection with trucks and railroads, and the pivotal demonstration of the system in Vietnam. In Levinson’s treatment, McLean is not a trucker-turned-shipper but a visionary of a large-scale technological system, a Thomas Hughes system builder comparable to Thomas Edison and Henry Ford. While most accounts portray McLean as a ship-owner and -operator, Levinson sees him more fully as a champion of seamless intermodal transportation from any point on the globe to any other point. That vision is central to Levinson’s estimation of the impact of containerization.

Chronologically, Levinson portrays the container revolution as passing through several phases. Its first decade was primarily an American affair, with McLean showing the way. In the second decade, the system began to spread internationally and develop band-wagon momentum that led to overbuilding of ships and a collapse in the market. Containerization took off, in Levinson’s view, in the late 1970s and early 1980s, setting the pattern of ship design, intermodalism, and port development that continued into the twenty-first century. Growth has been steady since that take-off, with no end in sight, but the revolution climaxed twenty years ago. The steady growth since then has been denouement.

Levinson approaches the big question of economic impact with a historian’s wisdom and an economist’s caution. “Trying to compute the extent to which containerization changed ‘average’ maritime rates for shippers,” he notes at one point, “is an exercise in futility” (p. 252). He does believe that containerization lowered shipping costs, though he cites economic studies that cast doubt on even that claim. But he believes that cheaper shipping is not the key to the containerization story. The critical step came when shippers figured out how to exploit these lower costs to change the way they did business. Shippers broke with the cartels that had been setting shipping rates since the nineteenth century; they supported deregulation of all shipping, including most importantly domestic land transport; they moved their sites of production to exploit advantageous labor and tax environments; and they developed just-in-time manufacturing to reduce inventory costs and take advantage of dispersed component production. Less than one third of the container traffic passing through the ports of southern California in 1998 was cheap consumer goods from the sweat shops of Asia; rather the containers brought manufactured goods for assembly and sale in the U.S. Product-slicing, as this manufacturing technique is called, brings to fruition the dream of Adam Smith. Manufacturers all over the world can produce the widget they produce best and ship it quickly and economically to the factory where it combines with other widgets to produce most efficiently the final consumer good. Instead of Adam Smith’s pins, brake drums from China can be shipped to Kentucky for installation on new Toyotas.

Levinson employs not deterministic language, like “the container bred globalization,” but rather instrumental language. Containerization, in his view, “permit[ted] a worldwide economic restructuring” (p. 276). At another point he says that the container lowered the risk of just-in-time manufacturing, “opening the way to globalization” (p. 267). Most directly, he says:

The argument of this book is not that containerization initiated the geographic shift of industrial production, but rather that it greatly increased the range of goods that can be manufactured economically at a distance from where they are consumed, the distances across which those products can feasibly be shipped, the punctuality with which that movement occurs, and the ability of manufacturers to combine inputs from widely dispersed sources to make finished products (p. 281).

By focusing on the shippers and stressing the permissive nature of the container revolution, Levinson makes common cause with Lynn White jr. When White’s Medieval Technology and Social Change appeared in 1962, it was widely denounced as deterministic, especially his essay on the stirrup and feudalism. But White insisted that technologies do not determine the course of history. Rather, they open doors. Whether or not people choose to pass through those doors is a question of human agency and historical context. Levinson argues that the container revolution contributed to globalization not just when transportation rates fell, but rather when shippers and manufacturers chose to seize that opportunity, in conjunction with other structural changes in the international economic system, to reshape world industrial production. This opened the way to globalization.

This complex and richly nuanced analysis of containerization and its impact improves upon most of the existing literature on the topic, but it leaves at least two enticing questions unanswered. First, what accounts for the rush to gigantism that swept the container shipping industry in the last quarter-century? As Cudahy’s meticulous documentation of the Sea Land fleets makes clear, container ships began to grow in size when Malcolm McLean ordered his first purpose-built container ships in 1969. These unprecedented vessels could carry almost 2,000 TEUS. Today container vessels of 14,500 TEU-capacity ply the world’s oceans, and larger ships are on order. Too large to traverse the Suez or Panama Canals, such vessels are limited to a handful of special-built ports around the world. Levinson believes that the upper limit might be the Malacca-max vessel, the largest ship capable of sailing the Straits of Malacca. This vessel is a quarter of a mile long and carry 18,000 containers, enough to load a line of tractor-trailer trucks 68 miles long. Such megaships suggest an imperative of scale that will keep driving the shipping industry until some catastrophe does for container ships what the Exxon-Valdez did for tankers. Levinson estimates that the loss of a Malacca-max vessel would sink almost a billion dollars in cargo. When the 62,000-ton Napoli grounded in the English Channel in January 2007 with almost 2,400 containers aboard, looters swarmed over those that washed ashore while authorities scrambled to salvage the boxes remaining on the ship.

The second major question raised by these books is the direction of the causal arrow in the relationship between containerization and globalization. Even Levinson, with all his qualifications, sees the causal arrow running from containers to global trade: efficiencies of containerization bred more trade. But why, one wonders, do students of globalization so seldom recognize containerization as a primary causal factor? Most explanations of globalization are political and structural. They entail openness to trade, market penetration, regulation, capital flows, labor costs, product slicing, standardization, communications, computerization, and a host of other factors. Shipping costs are addressed, but seldom do they have the salience that they enjoy in descriptions and analyses of containerization.

Furthermore, empirical data on shipping casts further doubt on the impact of containerization. Countries still trade most with their neighbors, suggesting that declining transportation costs have not banished distance. Most evidence for the economic impact of containerization on trade in specific commodities is anecdotal. Containerization introduced its own inefficiencies into transportation. The U.S., for example, as a net importer, is also a net importer of containers, which either pile up and go to waste in American ports or destinations or travel back empty to America’s trading partners. 80 percent of U.S. economic activity is in services, not goods; the number for the world economy is about two thirds. Less than 8 percent of world shipping tonnage is invested in container ships. Bulk cargoes—oil, ore, grain, stone, etc.—comprise most shipping cargoes, both by weight and by value. Containerized cargo represents too small a portion of world trade to account for globalization. Shipment by air, which is not containerized in the same way as surface transport, is growing faster than container shipping in value.

All of this evidence suggests that containerization did not cause globalization. Indeed, the opposite is just as plausible: globalization caused containerization. The integration of the world economy in the late twentieth century stimulated trade and made possible economics of scale realized in container shipping. Far more research is needed to determine where the causal arrow points. It may well be, as Levinson suggests, that there are simply too many variables and not enough data to arrive at a firm conclusion:

Given the vast changes in the world economy over a span that saw the breakdown of the exchange-rate system, repeated oil crises, the end of colonialism, the invention of jet travel, the construction of hundreds of thousands of miles of expressways, and many other developments, no model is likely to be conclusive in distinguishing the impact of containerization from that of the many other forces (p. xx).

Still, it is safe to say that containerization has been an important dimension of globalization. World trade may have increased in any case, but it moves around the globe in unprecedented ways through the door that was opened by Malcom McLean.

{1} The books reviewed in this essay: Brian J. Cudahy, Box Boats: How Container Ships Changed the World (Bronx, N.Y.: Fordham University Press, 2006, xii+338, $29.95); Arthur Donovan and Joseph Bonney, The Box That Changed the World: Fifty Years of Container Shipping, An Illustrated History (East Windsor, N.J.: Commonwealth Business Media, 2006, xxiv+262, $59.95); and Marc Levinson, The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger (Princeton, N.J.: Princeton University Press, 2006, xi+376, $24.95).

{2} Andrew Gibson and Arthur Donovan, The Abandoned Ocean: A History of United States Maritime Policy (Columbia, S.C., 2000).