Sjostrom on Levinson, _The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger_

[eh.net-review at eh.net]

Published by EH.NET (March 2007)

Marc Levinson, _The Box: How the Shipping Container Made the World 
Smaller and the World Economy Bigger_. Princeton: Princeton 
University Press, 2006. xi + 376 pp. $25 (cloth), ISBN: 0-691-12324-1.

Reviewed for EH.NET by William Sjostrom, Centre for Policy Studies, 
National University of Ireland, Cork.


Marc Levinson, a New York based economist and former economic 
journalist, has written a lively and entertaining history of the 
shipping container. Although it lacks a clear timeline of when 
containers replaced conventional break-bulk shipping, it has some 
solid stories about important events in the history of 
containerization, based not only on secondary sources, but on company 
archives and interviews. It also has a lot of entertaining anecdotes 
that economists can learn from.

At the core of Levinson's history is Malcom McLean, a colorful 
entrepreneur whom he conventionally and I think fairly credits with 
driving containerization, not just as a big storage box on a ship, 
but as the centerpiece of a system making world transport 
substantially cheaper by rapidly transferring cargo from one 
transport mode to another. McLean did not merely use containers; he 
conceived the idea of specialized ships designed for rapid loading 
and unloading. Containers had been used before McLean, back to the 
nineteenth century, but they were simply boxes stowed on conventional 
break-bulk ships, which had to be positioned in the holds along with 
all the other cargo. Levinson brings McLean to life, describing his 
business maneuvers, his business failures, and his unusually driven 
personality.

There are other well told histories of particular events. Chapter six 
describes the personalities and the issues in the long fight to 
change work rules to accommodate the high speed, heavily mechanized 
container transfers, compared to old break-bulk days, when crews of 
21 or 22 longshoremen would pack individual bales and boxes into the 
hold of a ship. Because the longshoremen crew could be much smaller, 
the longshoremen were bought out, largely with generous early 
retirement benefits. Levinson cites one official of the International 
Longshoremen's Association as saying about their 1959 contract: "What 
the shippers did was give us a piece of the pie. Their savings with 
containers will be tremendous and they just passed on some of the 
cash to us." If industrial organization economists had paid 
attention, they would have spared themselves years wasted on 
simplistic profit-concentration studies that assumed all excess 
returns went to capital.

Chapter ten discusses how militant unionism in Britain eliminated 
London and Liverpool as Europe's major ports. It also led to the rise 
of previously obscure Felixstowe as Britain's leading container port, 
and to the rise of Rotterdam as Europe's largest container port.

I was fascinated by the chapter on the role of containers in 
supplying U.S. forces in Vietnam. I had never before heard of the 
DeLong pier, basically a 300-foot barge through which pilings could 
be driven to the harbor floor, and then jacked up to create a pier. 
One was towed from South Carolina through the Panama Canal and across 
the Pacific to form the first pier at Cam Ranh Bay. I was startled to 
learn that Gen. Frank Besson, head of supply for the army, estimated 
in 1970 that the U.S. military could have saved $882 million (over $5 
billion today) by switching to containerization in 1965 rather than 
in 1968.

Economists should pay particular attention to chapter seven, a fine 
history of the politics of standardizing container sizes. Shipping 
lines had differing views on the ideal container size, and the 
Federal Maritime Board would not approve federal mortgage insurance 
for ships with non-standard containers, so a lot of different 
proposals were fought over. Pan-Atlantic (later renamed to the more 
familiar Sea-Land) wanted 35-foot containers, because that was the 
maximum length allowed on roads in New Jersey, their base. Matson 
wanted 24-foot containers because their big product was Hawaiian 
pineapples, and bigger containers would prove too heavy. Grace Line, 
which planned service to Venezuela, wanted 17-foot containers for 
South America's mountain roads. Chapter eight extends the discussion 
of standardization to the energetic efforts of the railroads to get 
involved in containerization, and the equally energetic efforts of 
the ICC to get in the way with rules about limiting competition and 
covering overhead costs.

Levinson's use of economic models, however, leaves much to be 
desired. Right up front, he says he will not use economic models to 
demonstrate the container's effect. Except that he does, regularly, 
and his use of them is frequently ad hoc, casual, and incomplete. 
Three examples. Chapter five tells the fascinating story of the 
decline of Manhattan and Brooklyn as ports, as traffic switched to 
New Jersey. Levinson tells this story as part of his thesis that 
containers radically changed the location of industry by 
substantially lowering the costs of supply lines. But right away he 
mentions that Manhattan and Brooklyn were able to survive as ports, 
when the train terminals were across the river and goods had to be 
carried to the ports by lighters, only because they were protected by 
ICC tariff regulations. Levinson tells a great story about the shift 
in traffic from New York to New Jersey, abounding with political 
coalitions. But fascinating though this story is, it has little to do 
with containers and much to do with land prices and access to the 
docks.

Second, Levinson devotes chapter two to the life of longshoremen 
before containers, emphasizing the practice of the shape-up, or what 
the British more colorfully called "the scramble." Familiar to anyone 
who has seen _On the Waterfront_, it is the practice whereby 
longshoremen show up at the docks looking for work, and depend on 
getting picked by the foreman. The chapter is a good description of 
the corruption engendered by the system. For example, in Liverpool 
docks, gombeen men were dock foremen who lent at 25% for short 
periods, a loan a longshoreman would take because it would ensure his 
being picked by the foreman. Although the willingness of longshoremen 
to stay in the trade in the face of these conditions suggests a 
substantial wage premium, Levinson is frustratingly silent on why 
wages stayed high, and what role unions played in those wages. 
Instead, using an implied but unanalyzed model of immobile labor and 
monopsony, Levinson piles on sermonizing about how tough the shape-up 
was on longshoremen.

Third, Levinson notes in chapter four that in Pan-Atlantic's early 
days, management got bonuses in the form of stock as some form of 
incentive system. Unfortunately, although Levinson discusses 
Pan-Atlantic's debt in detail, there is no other mention of the 
firm's equity. If the stock was tradable, then it was simply the 
equivalent of cash, unless there was restriction on its sale. But 
Levinson offers no details.

But too much can be made of these criticisms. Much of the fun of the 
book is in the anecdotes. For example, when McLean was running a 
trucking line before he went into running liner shipping, he had 
novice drivers paired with more experienced drivers to learn about 
safe driving. If the novice got through his first year without an 
accident, the trainer got a month's pay as a bonus. Talk about 
high-powered incentives.

There are a lot of fascinating anecdotes about government regulation 
and its destructive effects on the development of containers. The 
North Shore Line, running between Milwaukee and Chicago, tried to use 
containers, charging by weight rather than by specific goods, but 
after hearings in 1931, the ICC ruled that containers must be charged 
based on the most expensive item in the container, effectively 
killing containers on rails for decades.

Some of the anecdotes are simply bizarre. Keith Tantlinger, chief 
engineer at Brown Industries in Spokane, designed McLean's first 
containers, which were to be carried on old tankers being modified at 
the Bethlehem Steel shipyard in Baltimore. When he arrived for a 
breakfast meeting with McLean at the Lord Baltimore Hotel, he learned 
that McLean and his executives were already at the shipyard. He went 
there to find McLean and his executives jumping up and down on the 
roof of the containers to see if they were as sturdy as Tantlinger 
claimed (they were).

Levinson asserts at the beginning of _The Box_ that the container 
"has all the romance of a tin can." Stuff and nonsense. _The Box_ 
does a fine job of demonstrating how exciting the container industry 
is, and how much economists stand to lose by ignoring it.


William Sjostrom is Senior Lecturer in Economics at the Centre for 
Policy Studies, National University of Ireland, Cork. He is the 
author of "Ocean Shipping Cartels: A Survey," _Review of Network 
Economics_, 3 (June 2004), 107-134.

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