The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger (43 page)

The huge increase in long-distance trade that came in the container’s wake was foreseen by no one. When he studied the role of freight in the New York region in the late 1950s, Harvard economist Benjamin Chinitz predicted that containerization would favor metropolitan New York’s industrial base by letting the region’s factories ship to the South more cheaply than could plants in New England or the Midwest. Apparel, the region’s biggest manufacturing sector, would not be affected by changes in transport costs, because it was not “transport-sensitive.” The possibility that falling transport costs could decimate much of the U.S. manufacturing base by making it practical to ship almost everything long distances simply did not occur to him. Chinitz was hardly alone in failing to recognize the extent to which lower shipping costs would stimulate trade. Through the 1960s, study after study projected the growth of containerization by assuming that existing import and export trends would continue, with the cargo gradually being shifted into containers. The prospect that the container would permit a worldwide economic restructuring that would vastly increase the flow of trade was not taken seriously.
¹⁸

“The market” got many things wrong when it came to the container, and so did “the state.” Both private-sector and public-sector misjudgments slowed the growth of containerization and delayed the economic benefits it would bring. Yet in the end, the logic of shipping freight in containers was so compelling, the cost savings so enormous, that the container took the world by storm. Half a century after the
Ideal-X
, the equivalent of 300 million 20-foot containers were making their way across the world’s oceans each year, with 26 percent of them originating in China alone. Countless more were being shipped cross-border by truck or train.
¹⁹

Containers had become ubiquitous—and in addition to cheap goods, they were bringing a new set of social problems. Stacks of abandoned containers, too beaten up to use, too expensive to repair, or simply unneeded, littered landscapes around the world. The exhaust of containerships and the trucks and trains serving them had become a massive environmental problem, and the endless growth of traffic in and out of expanding ports was subjecting nearby communities to congestion, noise, and high rates of cancer attributed to diesel emissions; the price tag for a cleanup in Los Angeles and Long Beach alone was estimated to be $11 billion. The flood of containers had become a major headache for security officials concerned that a single box, loaded with a radioactive “dirty” bomb timed to explode upon arrival in a major port, could contaminate an entire city and throw international commerce into chaos; radiation detectors went up at the gates to many terminals in an effort to keep terrorist containers from being loaded aboard ships. The use of containers outfitted with mattresses and toilets to smuggle immigrants had become routine, with immigration inspectors unable to detect more than a tiny share of containers with human cargo among the hundreds of thousands of boxes filled with legitimate goods.
²⁰

None of these problems, serious as they were, posed the most remote threat to the growth of container shipping. Containers themselves kept getting larger, with 48-foot and even 53-foot boxes allowing trucks to haul more freight on each trip. The world’s fleet expanded steadily, with the capacity of pure containerships rising 10 percent per year from 2001 through 2005. And ships themselves reached unprecedented size. Dozens of vessels able to carry 4,000 40-foot containers had joined the world’s fleet by 2006, and even larger ones were on order.

Where vessel size had once been limited by the locks in the Panama Canal, containerships had grown so large that twenty-first-century naval architects were constrained by the Straits of Malacca, the busy shipping lane between Malaysia and Indonesia. If a containership ever reaches Malacca-Max, the maximum size for a vessel able to pass through the straits, it will be a quarter mile long and 190 feet wide, with its bottom some 65 feet below the waterline. If it should sink, it will take nearly $1 billion of cargo with it. Its capacity will be 18,000 TEUs, or 9,000 standard 40-foot containers, enough to fill a 68-mile line of trucks each time it arrives in port. Where it will call is a serious question, because few ports anywhere are deep enough to accommodate it. The answer may well be brand-new ports built in deep water offshore, with Malacca-Max ships linking offshore platforms and smaller vessels shuttling containers to land. If they ever come about, these enormously costly ships and ports will create yet more economies of scale, making it still cheaper and easier to move goods around the globe.
²¹

The following abbreviations are used in the endnotes.

1.
Steven P. Erie,
Globalizing L.A.: Trade, Infrastructure, and Regional Development
(Stanford, 2004).

2.
Christian Broda and David E. Weinstein, “Globalization and the Gains from Variety,” Working Paper 10314, NBER, February 2004.

3.
As Jefferson Cowie shows in a definitive case study, the relocation of capital in search of lower production costs is not a new phenomenon; see
Capital Moves: RCA’s Seventy-Year Quest for Cheap Labor
(New York, 1999). 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.

4.
For a description of life aboard a modern containership, see Richard Pollak,
The Colombo Bay
(New York, 2004).

5.
Former U.S. Coast Guard commander Stephen E. Flynn estimated in 2004 that it takes 5 agents 3 hours to completely inspect a loaded 40- foot container, so physically inspecting every box imported through Los Angeles and Long Beach on the average day would require 270,000 man-hours. This equates to approximately 35,000 customs inspectors for those two ports alone. See the thorough discussion of ways to improve the security of container shipping in his
America the Vulnerable: How the U.S. Has Failed to Secure the Homeland and Protect Its People from Terror
(New York, 2004),
chap. 5
.

6.
Several factors make freight-cost data particularly treacherous. Average costs are greatly affected by the mix of cargo; the now defunct ICC used to report the average cost per ton-mile of rail freight, but year-to-year changes in the average depended mainly upon demand for coal, which traveled at much lower rates per ton than manufactured goods. Second, most historical cost information concerns a single aspect of the process—the ocean voyage between two ports—rather than the total door-to-door cost of a shipment. Third, a proper measure of freight costs over time would have to account for changes in service quality, such as faster ocean transit and reduced cargo theft, and no freight cost index does this. Fourth, a large number of freight shipments occur either within a large company or at prices privately negotiated between the shipper and transportation carriers, so the information required to measure costs economywide often is not publicly available. Edward L. Glaeser and Janet E. Kohlhase, “Cities, Regions, and the Decline of Transport Costs,” Working Paper 9886, NBER, July 2003, p. 4.

7.
U.S. Congress, Joint Economic Committee,
Discriminatory Ocean Freight Rates and the Balance of Payments
, November 19, 1963 (Washington, DC, 1964), p. 333; John L. Eyre, “Shipping Containers in the Americas,” in Pan American Union, “Recent Developments in the Use and Handling of Unitized Cargoes” (Washington, DC, 1964), pp. 38–42. Eyre’s data were developed by the American Association of Port Authorities.

8.
Estimate of freight rates reaching 25 percent of value is in Douglas C. MacMillan and T. B. Westfall, “Competitive General Cargo Ships,”
Transactions of the Society of Naval Architects and Marine Engineers
68 (1970): 843. Ocean freight rates for pipe and refrigerators are in Joint Economic Committee,
Discriminatory Ocean Freight Rates
, p. 342. Trade shares are taken from U.S. Bureau of the Census,
Historical Statistics of the United States
(Washington, DC, 1975), p. 887.

9.
Eyre, “Shipping Containers in the Americas,” p. 40.

10.
Paul Krugman, “Growing World Trade: Causes and Consequences,”
Brookings Papers in Economic Activity
1995, no. 1 (1995): 341; World Trade Organization,
World Trade Report 2004
(Geneva, 2005), pp. 114–129.

11.
Robert Greenhalgh Albion,
The Rise of New York Port
(New York, 1939; reprint, 1971), pp. 145–146; Peter L. Bernstein,
Wedding of the Waters: The Erie Canal and the Making of a Great Nation
(New York, 2005); Douglass North, “Ocean Freight Rates and Economic Development 1750 1913,”
Journal of Economic History
18 (1958): 537–555. W. W. Rostow, among many others, argues that railroads were essential to the “take off” of U.S. growth in the 1840s and 1850s; see his
Stages of Economic Growth
(Cambridge, UK, 1960), pp. 38–55. Alfred D. Chandler, Jr.,
The Visible Hand: The Managerial Revolution in American Business
(Cambridge, MA, 1977), also assigns a critical role to railroads, although for very different reasons. Robert William Fogel,
Railroads and American Economic Growth
(Baltimore, 1964), rejects the Rostow view, asserting that “the railroad did not make an overwhelming contribution to the productive potential of the economy,” p. 235. Albert Fishlow also rejects Rostow’s claim that railroad construction was essential in stimulating American manufacturing, but contends that cheaper freight transportation had important effects on agriculture and led to a reorientation of regional economic relationships; see
American Railroads and the Transformation of the Ante-Bellum Economy
(Cambridge, MA, 1965) as well as “Antebellum Regional Trade Reconsidered,”
American Economic Review
(1965 supplement): 352–364. On the role of railroads in Chicago’s rise, see William Cronon,
Nature’s Metropolis: Chicago and the Great West
(New York, 1991), and Mary Yeager Kujovich, “The Refrigerator Car and the Growth of the American Dressed Beef Industry,”
Business History Review
44 (1970): 460–482. For an example from Britain, see Wray Vamplew, “Railways and the Transformation of the Scottish Economy,”
Economic History Review
24 (1971): 54. On transportation and urban development, see James Heilbrun,
Urban Economics and Public Policy
(New York, 1974), p. 32, and Edwin S. Mills and Luan Sendé, “Inner Cities,”
Journal of Economic Literature
35 (1997): 731. On aviation, see Caroline Isard and Walter Isard, “Economic Implications of Aircraft,”
Quarterly Journal of Economics
59 (1945): 145–169.

12.
The seminal article along this line was Robert Solow, “Technical Change and the Aggregate Production Function,”
Review of Economics and Statistics
39, no. 2 (1957): 65–94. On the problems of innovation, see Joel Mokyr, “Technological Inertia in Economic History,”
Journal of Economic History
52 (1992): 325–338; Nathan Rosenberg, “On Technological Expectations,”
Economic Journal
86, no. 343 (1976): 528; and Erik Brynjolfsson and Lorin M. Hitt, “Beyond Computation: Information Technology, Organizational Transformation, and Business Performance,”
Journal of Economic Perspectives
14, no. 4 (2000): 24. Electricity was first used in manufacturing in 1883; for discussion of its relatively slow acceptance in manufacturing, see Warren D. Devine, Jr., “From Shafts to Wires: Historical Perspective on Electrification,”
Journal of Economic History
43 (1983): 347–372. Examples of the debate over computers include Paul A. David, “The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox,”
American Economic Review
80 (1990): 355–361; Stephen D. Oliner and Daniel E. Sichel, “The Resurgence of Growth in the Late 1990s: Is Information Technology the Story?”
Journal of Economic Perspectives
14, no. 4 (2000): 3–22; and Dale W. Jorgenson and Kevin J. Stiroh, “Information Technology and Growth,”
American Economic Review
89, no. 2 (1999): 109–115.