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.