THE MOST OBVIOUS FEATURE of the global economy is exactly that: it’s global. Toys from China, copper from Chile, T-shirts from Bangladesh, wine from New Zealand, coffee from Ethiopia and tomatoes from Spain. Like it or not, globalisation is a fundamental feature of the modern economy.
‘Statistics back this up. In the early 1960s, world merchandise trade was less than 20% of world GDP. Now, it’s around 50%. Not everyone is happy about this; there’s probably no other issue about which the anxieties of ordinary people are so in conflict with the near-unanimous approval of economists. And so controversy rages. The arguments over trade tend to frame globalisation as a policy – maybe even an ideology, fuelled by acronymic trade deals such as TRIPS, TTIP and the TFP. But perhaps the biggest enabler of globalisation isn’t a free trade agreement, but a simple invention: a corrugated steel box, 8 feet wide, 8.5 feet high and 40 feet long. A shipping container.
To understand why the shipping container has been so important, consider how a typical trade journey looked before it was invented. In 1954, an unremarkable cargo ship, the S.S. Warrior, carried merchandise from Brooklyn in New York to Bremerhaven in Germany. On that trip, just over 5000 tonnes of cargo – from food to household goods, letters to vehicles – was being carried as 194,582 separate items in 1156 different shipments. The record-keeping alone, keeping track of all those consignments as they moved around the dockside warehouses, was a nightmare.
But the real challenge was physically loading ships like the Warrior. The longshoremen who did the job would pile barrels of olives and boxes of soap onto a wooden pallet on the dock. The pallet would be hoisted in a sling and deposited in the hold of a ship, from where more longshoremen would carry or cart each item into a snug corner of the ship, poking and pulling at the merchandise with steel hooks until it settled into place against the curves and bulkheads of the hold, skilfully packing the cargo so that it would not shift on the high seas. There were cranes and forklifts available, but in the end much of the merchandise, from bags of sugar heavier than a man to metal bars the weight of a small car, needed to be shifted with muscle power.
This was far more dangerous work than manufacturing or even construction. In a large port, someone would be killed every few weeks. In 1950, New York averaged half a dozen serious incidents every day – and New York’s port was one of the safer ones.
Researchers studying the S.S. Warrior’s trip to Bremerhaven concluded that the ship had taken ten days to load and unload, as much time as it had done for the vessel to cross the Atlantic Ocean. In total, the cargo cost around $420 a tonne to move, in today’s money. Given typical delays in sorting and distributing the cargo by land, the whole journey might take three months. Sixty years ago, then, shipping goods internationally was costly, chancy and immensely time-consuming. Surely there was a better way. Indeed there was: put all the cargo into big standard boxes, and move the boxes.
What made McLean different was his political savvy and his daring – attributes that were essential in bringing about a massive change to the global freight system.
But inventing the box was the easy bit – the shipping container had already been tried in various forms for decades, without catching on. The real challenge was overcoming the social obstacles. To begin with, the trucking companies, shipping companies and ports couldn’t agree on a standard. Some wanted large containers; others wanted smaller or shorter versions, perhaps because they specialised in heavy goods such as canned pineapple, or moved them by truck on narrow mountain roads.
Then there were the powerful dock-workers’ unions, who resisted the idea. You might think they’d have welcomed shipping containers, as they’d make the job of loading ships safer – but they also meant there’d be fewer jobs to go around. Stodgy US regulators also preferred the status quo. The freight sector was tightly bound with red tape, with separate sets of regulations determining how much shipping and trucking companies could charge. Why not simply let companies charge whatever the market would bear? Or even allow shipping and trucking companies to merge, and put together an integrated service? Perhaps the bureaucrats, too, were simply keen to preserve their jobs; such bold ideas would have left them with nothing to do.
The man who navigated this maze of hazards – who can fairly be described as the inventor of the modern shipping container system – was an American, Malcom (born Malcolm) McLean. McLean didn’t know anything about shipping. But he was a trucking entrepreneur – he knew plenty about trucks, a lot about the system and all there was to know about saving money. Tales of McLean’s penny pinching abound. As a young trucker, the story goes, he was so poor that he couldn’t pay the toll at a bridge; he left his wrench as a deposit at the toll booth and redeemed the debt on his return journey, having sold his cargo. Even when McLean was in charge of a large organisation, he instructed his employees to keep long-distance phone calls briefer than three minutes, to save money.
But McLean’s biographer MarcLevinson, who wrote the definitive history of the shipping container, argues that such tales don’t capture the ambition or the boldness of the man. McLean saw the potential of a shipping container that would fit neatly onto a flatbed truck, but he wasn’t the first person to propose such an approach. What made McLean different was his political savvy and his daring – attributes that were essential in bringing about a massive change to the global freight system.
For example: in what Levinson describes as ‘an unprecedented piece of financial and legal engineering’, McLean managed to gain control of both a shipping company and a trucking company at the same time. This was, of course, a great help in introducing containers that were compatible with both ships and trucks. McLean was also able to make progress with more straightforward pieces of entrepreneurship: for example, when dock workers were threatening to strike and shut down ports on the US East Coast in 1956, McLean decided that this was the perfect time to refit old ships to new container specifications. He wasn’t averse to plunging into debt to make the investments necessary. By 1959 he was widely suspected of being close to bankruptcy, always a risk of an ambitious debt-funded expansion. But he pulled through.
McLean was also a shrewd political operative. For example, when New York’s PortAuthority was trying to expand its influence in the 1950s, he pointed out that the New Jersey side of the harbour was underused and would be the perfect place for a purpose-built container shipping facility. As a result, he was able to get a large foothold in New York. with both political and financial cover from the Port Authority.
Faced with an unholy logistical nightmare in trying to ship equipment to Vietnam, the military turned to McLean and his container ships to sort things out.
But perhaps the most striking coup took place in the late 1960s, when Malcom McLean sold the idea of container shipping to perhaps the world’s most powerful customer: the US military. Faced with an unholy logistical nightmare in trying to ship equipment to Vietnam, the military turned to McLean and his container ships to sort things out. Containers work much better when they’re part of an integrated logistical system, and the US military was perfectly placed to adopt that system wholesale. Even better, McLean realised that on the way back from Vietnam, his empty container ships could collect payloads from the world’s fastest growing economy, Japan. And so the trans-Pacific trading relationship began in earnest.
A modern shipping port today would be unrecognisable to a hardworking longshoreman of the 1950s. Even a modest container ship might carry twenty times as much cargo as the S.S. Warrior did, yet disgorge its cargo in hours rather than days. Gigantic cranes, weighing 1000 tonnes apiece, will lock onto containers that weigh upwards of 30 tonnes and swing them up and over onto a waiting transporter. The colossal ballet of engineering is choreographed by computers, which track every container as it moves through a global logistical system. The refrigerated containers are put in a hull section with power and temperature monitors. The heavier containers are placed at the bottom to keep the ship’s centre of gravity low; the entire process is designed and scheduled to keep the ship balanced. And after the crane has released one container onto a waiting transporter, it will grasp another before swinging back over the ship, which is being emptied and refilled simultaneously.
Not everywhere enjoys the benefits of the containerisation revolution: many ports in poorer countries still look like New York in the 1950s. Sub-Saharan Africa, in particular, remains largely cut off from the world economy because of poor infrastructure. Without the ability to plug into the world’s container shipping system, Africa becomes a costly place to do business with.
But for an ever growing number of destinations, goods can now be shipped reliably, swiftly and cheaply: rather than the $420 that a customer would have paid to get the S.S. Warrior to ship a tonne of goods across the Atlantic in 1954, you might now pay less than $50 a tonne. As a result, manufacturers are less and less interested in positioning their factories close to their customers – or even their suppliers. What matters instead is finding a location where the workforce, the regulations, the tax regime and the going wage all help make production as efficient as possible. Workers in China enjoy new opportunities; in developed countries they experience new threats to their jobs; and governments anywhere feel that they’re competing with governments everywhere to attract business investment. On top of it all, in a sense, is the consumer, who enjoys the greatest possible range of the cheapest possible products – toys, phones, clothes, anything. And underpinning it all is a system: the system that Malcom McLean developed and guided through its early years.
The world is a very big place, but these days the economists who study international trade often assume that transport costs are zero. It keeps the mathematics simpler, they say – and thanks to the shipping container, it’s nearly true.
COPYRIGHT © 2017 TIM HARFORD, EXTRACTED FROM FIFTY THINGS THAT MADE THE MODERN ECONOMY, PUBLISHED BY ABACUS, AN IMPRINT OF LITTLE, BROWN BOOK GROUP IN PAPERBACK @ £9.99
