My interest in Globalization led me to stroll around the Harbourfront district of Singapore on a hazy weekday afternoon last year. I went there initially to browse through Singapore’s largest shopping mall, VivoCity, which had few customers at the time because the denizens were busy at work. VivoCity is not very distinguishable, except for the strange presence of a Barcelona Football Club shop along side all of the Eurolux boutiques. My attention turned to the neighboring Port of Singapore, the largest container port in the world as measured by shipping tonnage. This is the transport hub of Southeast Asian trade. Containers are loaded on and off giant ships (each docked at one of fifty or so berths) using highly efficient cranes. The containers don’t dally in the yards for long, nor do they tend to land on the beds of train-cars and trucks. This is mostly a transshipment point, with containers moving from massive ocean-going freighters to smaller ships, and then on to ports in nearby countries. Goods from Malaysia, Indonesia, the Philippines and Thailand flow through here on the way to world markets. Material and parts suppliers also use the port as a relay point in production supply chains. The scale and efficiency of it all is impressive.

I have paused to check out container ports before. I’ve stood on the docks of Halifax wondering why there are no ships to be found at its relatively tiny container port. And I’ve looked out over the sizable but mostly empty Oakland container port, wondering whether it is another loser in the global economy. What is it about the containerization of trade that has so favoured some ports over others?

Also, how does all this container shipping link together? I grew up in Winnipeg, a landlocked train-and-trucking hub. When I lived there, I would frequently pass by a large “inter-modal terminal”—the place where containers are moved between truck and train. I knew such containers usually became waterborne at the Port of Vancouver, the largest port in the Pacific Northwest. This is the spot where containers flow between Western Canada and the rest of the Pacific Rim. Other than that, I was largely in the dark about how the system operated. I’ve read a lot about the economic geography of North America but container traffic is rarely singled out for special attention within that literature.

Knowing how such systems operate is part of the burgeoning field of logistics management. These days, manufacturers assemble products made up of parts from around the world. Just-in-time inventory and production management techniques accurately coordinate tightly coupled supply networks. Such networks prevent costly inventories from languishing in warehouses before they are used. Highly competitive retailers, such as Walmart, have developed sophisticated distribution systems whereby empty shelves can be replenished in short order due to the speed of supply lines. New high-tech products go from drawing board to production facility to retail outlet in shorter and shorter spans of time. Most of this is orchestrated using container shipping. This raises a third question: how does the seemingly simple technology of standardized container shipping enable such efficient and flexible systems?

The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger
by Marc Levinson (Princeton University Press, 2006), pp. xvii, 376.

Marc Levinson’s new book The Box answers all three questions, although he doesn’t dwell too much on the technicalities of that last one. Levinson is mostly interested in how the system came to be. Even though containers of one sort or another have been around for quite some time, it wasn’t until the late-1960s that the standardized aluminum or steal container began to revolutionize international shipping. In the 1970s, the investments in port infrastructure and modern shipbuilding began to pay big dividends for those needing to ship products. In the 1980s, deregulation of land transport created economies in the entire land-sea container system. In the 1990s, the cut-throat shipping industry was mostly consolidated into a group of tightly integrated multinational corporations, such as Danish giant Maersk. In many ways, this is a story of how a new technology leads to major upheaval across a number of industries, with a lot of wreckage strewn in its wake—capitalism as creative destruction, in full affect.

There is a scene in the Cohn brothers’ film Raising Arizona in which a dim-witted roughneck asks a storekeeper about a package of balloons. “Are those the balloons that make funny shapes?” “Nope,” answers the storekeeper, “unless you think round is funny.” In the same vane, you might be wondering whether the container industry was built by a cast of colourful characters. Nope, unless you think relentless cost-cutters and obsessive engineers are colourful.

Levinson focuses on the founder of the modern container movement, the businessman Malcolm McLean, and his one-time sidekick, the engineer Keith Tantlinger, although a number of other figures make cameo appearances. These pioneers demonstrate the formative role played by early entrepreneurs. Unfortunately, their story also shows that being the first mover is not always the best position to be in. You may have a lasting impact on the development of the industry. However, everyone else gets to learn from your mistakes and has a better vantage point from which to make initial investment decisions. In the case of McLean, the story shows how even the greatest players in the game can quickly drive a company into bankruptcy by gambling on a risky gambit.

Levinson’s book is filled with a rich description of the history of containerization. A review can only capture a thin sliver of this richness. I’d like to draw attention to a few interesting aspects to the story, nonetheless.

Shipping used to be dominated by small break-bulk ships that are loaded and unloaded by crews of longshoremen. The labour-intensiveness of loading and unloading was a major barrier to trade, as the expense added too much to the final cost of imported goods (relative to domestic goods). And this process happened every time freight switched between ship, train, and truck. Theft was a problem, particularly of consumer goods. This loading and unloading is also dangerous, with many longshoremen losing their lives each year. Factor in tariffs and shipping rates based on commodity. Then there is a problem mindset: each area of transportation (train, truck, and ship) thought of itself as a separate industry, not as a single freight industry. It’s no wonder that companies once opted for branch-plants in foreign countries as a substitute for trade. Containerization changes all of this by moving everything from one mode of transportation to another in sealed containers by crane using a smaller cadre of relatively skilled workers. Union hacks did what they could to save the dingy, unskilled, inefficient, and dangerous jobs. They usually wound up destroying their local port as less established ports happily embraced the new technology with greater enthusiasm. The location of the port and proximity to markets became largely untethered as a cost calculation. Today, the system works so efficiently that the long-distance freight costs for most products is negligible on a per-unit basis.

The most interesting chapter of The Box relates to the establishment of standards. Standards are important because without a commitment to consistency, containers would not be guaranteed to fit on every train, truck, and ship. Even slight misfits and variations would cause major inefficiencies. As Levinson describes it, the standardization process was somewhat comical in its evolution and yet the system worked out fine in the end. A U.S. government agency started the process, only for an industry association to wrestle away control. Then the U.S. military wanted its say. Then an international standards body took over. Then the politics of patent ownership messed things up. Once resolved, the released patents formed the basis for a standard until it was discovered that not all standard configurations of container would work physically. Even with the standard established, there were too many variations of the “standard” container. And even the standard specifications were not embraced, despite the push of government subsidies, for a variety of practical reasons. After the process was all over, industry players had to spend enormous sums upgrading ships, containers, ports, trains, cranes, and trucks. If you think the establishment of Internet standards is a drawn out and costly process, container standards put those annoyances into perspective (but only just).

Like the early Internet, much of the cost of containerization was borne by government (notably the U.S. military and Asian governments), at least during the “revolutionary” period between 1967 and the early 1980s. Shipping lines and ports were massively undercapitalized. Government regulations placed onerous restrictions on transportation methods of all kinds, including price controls. International private cartels and proprietary infrastructure usually picked up where government left off when it came to protectionism. To their credit, governments around the world eventually got their act together to endorse standards, subsidize the building of new infrastructure, and relax the regulations. Government subsidies and credit markets did (fortunately or unfortunately) fuel a classic over-investment boom, as companies created too much excess capacity in the late 1960s that the 1970s started with a price war. Fluctuating oil prices and the Arab-Israeli war further distorted investment decisions in the 1970s. Shipping companies took on big debt-repayment obligations for an industry that is vulnerable to harsh economic cycles. It wasn’t until the deregulation of land transportation and consolidation of the industry that container shipping stood on its own two feet as a mature business with capital to invest.

Levinson’s discussion of the fortunes and failings of particular ports is highly engaging. Singapore became the biggest container port because it embraced the new technology shortly after it became an independent country. Similar enthusiasm was found in Rotterdam, Hong Kong, Kaoshung (Taiwan), and Dubai, which also had relatively little baggage from the past. Oakland became the biggest container port on the west coast of North America by striking a special deal with the largest container shipper, only to be left behind once other ports got their act together (Los Angeles and Long Beach). New Jersey overtook New York because McLean’s pioneering Land-Sea company started its operations there. Gulf of Mexico ports lost out as freighters found it more economical to just truck containers from East Coast ports. Big fish Liverpool and Tilbury (London) ports were killed by bureaucratic dithering and union militancy, while the minnows Seaforth and Felixstowe took over. Le Havre, Antwerp, Hamburg, and Breman made the switch. Yokohama and Busan also made impressive gains. Tokyo and Kobe held on. Shanghai, Shenzhen, and (to a lesser extent) Qingdao added to China’s export might.

I don’t fault Levinson for not giving much mention to the Canadian case, given the volume of container trade involved. It is strange that he mentions Tacoma, Seattle, and Portland, but not the largest port in the area, Vancouver. Yet, the omission is probably not so strange given that those U.S. ports compete more with Californian ports. The Port of Vancouver tends to be a funnel into Western Canada. Boarders still matter in North America, apparently, despite a preferential trade agreement. It should be said that Vancouver is a bit of a laggard in container shipping (only three berths and growing), partly due to the volume of natural resource and agricultural exports from Western Canada (commodities that are not shipped in containers). This doesn’t entirely jive with Levinson’s thesis, which under-emphesizes commodity shipping. Levinson does mention the Port of Montreal in passing, possibly because it jives well with his thesis. The presence of North America’s highest volume highway between industrial Ontario, industrial Quebec, and the Port of Montreal (which collectively also happen to be Canada’s largest consumer base) is probably the factor that preserves that container port’s dominance. And given the limited distances involved, and the higher cost of short-distance train freight, trucking is the obvious choice. Driving on Highway 401 certainly involves its share of weaving past a continual rush-hour of container trucks. The circuitous highway and rail system in the Canadian Atlantic provinces, plus competition from Montreal, pretty much explains the languishing of Halifax and other Maritime ports. Thunder Bay is dominated by natural resource and agricultural shipping (again, not containerized).

My only major criticism of Levinson’s book is its relative neglect of how containerization has shaped business models and constellations of manufacturers. His initial chapter promises much in this regard. The main systemic drivers of new modes of manufacturing are discussed but many of the complexities of a reliance on containers in the last twenty years are not addressed. Levinson is looking at the subject more from the perspective of economic geography, not business administration. That said, Levinson does have some insights into McLean’s early methods that deserves to stand out as a case study in its own right. McLean gathered market intelligence through sales people, invested extensively in automation, cultivated workforce skills, built a sales force based on profiles and trained them in technique, and hired a cadre of smart people in strategically important occupations. Most impressively, McLean invested in comprehensive management training whereby each new recruit would work in every area of the business to better understand the complexities involved—one of the things I go out of my way to advocate. Too bad about R. J. Reynolds buying out his business. R. J. Reynolds’ slack executives—used to the stable business of selling harmful, addictive substances—crushed a more complicated business with centralised second-guessing. Alas, oh so typical.

Levinsons voices some concern about the treatment of workers who have had to make major economic adjustments, such as those who have had to cope with the closure of a break-bulk ports or the bankruptcy of a major shipping line. I acknowledge the personal and family upheaval involved but have little sympathy for the protection of inherently unsafe jobs. Whenever I’ve watched a British film about the poor son-of-a-coal-miner becoming a coal miner trying to protect the local coal mine, I’ve always wondered why people want to preserve the tradition of death by black-lung. Likewise, I wonder why labourites lament the days of death-by-crushed-skull due to cargo box slip. Making workplaces safe is about changing technologies by design in order to protect people, not by implementing arbitrary work procedures to give a false sense of security. The usual knee-jerk response of unions is to resist these technologies when they create major efficiencies. My interpretation of the resistance to containers (which move people away from harm and give them skills) is that conservative unions very much resisted these design decisions.

Yet, yet … there is a curious omission related to worker safety that I care more about. There isn’t any mention of the full cost of building and breaking down the enormous container ships that become obsolete within a relatively short period of time. Between the late 1960s and early 1980s, three generations of super-freighter were built and two generations were mostly retired. Today, freighters are regularly run aground in places like the beaches of Bangladesh and hacked to bits by low-skilled workers in extremely unsafe conditions. The parts are recycled but in a way that exposes workers to all sorts of toxic substances and dangerous tasks. Levinson’s final paragraph ponders the possibility of Malacca-Max container ships—those which are so big that they just fit through the Straits of Malacca (a quarter mile long and 190 feet wide). It makes me wonder who the more direct winners and losers are of this unprecedented churn in ship building will be. It’s a pity that Levenson doesn’t even mention the scrap-yard beaches.

Review by Peter Stoyko