How the Shipping Container Made the World Smaller and the World Economy Bigger
Marc Levinson, 2006
First of all, yes. This is a book about shipping containers. Niche choice, I know. I came across this one on Gates Notes, the non-fiction book review website run by Bill Gates (in a way, this puts me in competition with Bill Gates. Hopefully it doesn't end too poorly). The underlying tale of creative destruction is certainly an important one, and so I think it's unfortunate that The Box didn't do enough to try to place its particular story in the context of a broader, more general archetype of innovation.
Make no mistake, shipping containers are damned important. Levinson's opening chapter is titled The World The Box Made, and it's hard to believe that we could be living in anything but. On the face of it, it's rather obvious that containerisation (a real word) made long distance freight cheaper, more reliable, safer, and faster. The vast implications of that, however, are not so obvious. With massive reductions in cost came the sundering of the historical geographic ties between production and consumption, changing the economic geography of the planet forever.
The examples are obvious. The rise of the Asian Tigers took place on the back the container, and nobody in their right mind thinks that Singapore would be half as rich today if not for their prodigious location on the Strait of Malacca. More broadly, the larger trade jurisdictions enabled by the container have given rise to levels of specialisation never seen before. The gains from specialisation are indeed one of the most important insights to ever have come from economics. Important enough that Adam Smith chose specialisation to be the topic that he begins with in his foundational epic The Wealth of Nations. Mancur Olson, one of the most important minds of the past several decades in my opinion (see my reviews of his Logic of Collective Action and The Rise and Decline of Nations, forthcoming) has some fascinating (if brief) work on the significance of jurisdictional integration in his booklet How Bright are the Northern Lights, available online for free thanks to the Institute of Economic Research at Lund University. It's highly worth the hour or so it will take to read.
However, most of The Box focuses less on the importance of the container, and more on the story of how it came to be. Levinson recounts in detail the story of Malcom McLean, shipping magnate extraordinaire, and the way he changed the world forever. It's a reasonably interesting story, and Levinson is certainly a good author, but at the end of the day, nobody is buying this book for the narrative. Levinson's research is comprehensive, and takes us through everything from the engineering challenges to the business brilliance of McLean's endeavour. However, I ultimately found that a good deal of the detail was superfluous to the central themes that I was reading the book for, and I thought it was a much better read the second time around, when I only read the passages I'd highlighted the first time.
As with all the great tales in the growing genre of Disruptive Heroism, The Box is as much a tale of triumph over government regulation as it is about human domination over steel and sea. Regulations from the Interstate Commerce Commission, focused on ensuring the reliability (taking precedence over efficiency) of the nationally important cargo industry, hamstrung the container by restricting the ability to move cargo between modes, and limiting the prices that carriers could charge. Levinson offers the interesting example that, until recently, 'logistics' was a military term. Companies didn't have supply chains, they had warehouses, and purchased shipping services on an ad hoc basis when they needed to move something. It wasn't until shipping deregulation in the 1980's that manufacturers were able to sign long term contracts with shippers, with guaranteed standards for regular service. Levinson calculates that if sales to inventory ratios were at the level they were before shipping deregulation, US nonfarm inventories would be more than $1 trillion than they actually are, costing the economy over $80 billion in inventory costs every single year. Deregulation did more than merely lower shipping prices, it enabled the creation of a massive new supply chain industry.
Of course, as always, scratch even slightly beneath the surface and the technolibertarian veneer starts to wear off. No doubt, companies like Uber have every right to complain about patronage subsidies to the taxi industry. But those who see this as reason for an utterly minimal government might want to ask where Uber would be without GPS signals, provided free of charge from a constellation of US Air Force satellites (my review of Innovative State develops this idea in far more depth). Similarly, the shipping container owes its timeliness, if not its entire existence, to the subsidised sale of retired WWII ships to McLean's shipping line; the Operation Bootstrap subsidies for companies to set up supply lines to Puerto Rico; and most importantly, the Pentagon's decision to use shipping containers to supply the Vietnam War, the greatest logistical exercise ever taken, and the inflection point of the container age. As in all heroic epics, things are more complicated than the seem.
Lastly, no tale of creative destruction is truly complete until we hear the story or those who got destroyed. In this case, it was the stevedores who had been loading and offloading ships by hand for generations (often literally, in this father-and-son trade), and who saw their livelihoods shattered, unable to compete with the majestic efficiency of the box. Famous for both their cohesion and their militancy (a characterisation I'm not at all ashamed to say I'm basing mostly on season two of The Wire), it should come as no surprise that the port unions did not go gentle into their good night. In fact, it was likely the port unions that delayed the introduction more than any other single factor. Regulated inefficiencies were rife. Union contracts often required ships to use gangs with more than twice as many workers than were needed, and at one point the International Longshoremen's Union tried to pass 'strip-and-stuff' rules, requiring that every container be unpacked by hand and repacked immediately, for no real reason other than to undermine the efficiency of the container. These rules were, of course, enforced with near-constant strikes, and frequent outbreaks of extreme violence against anyone who tried to cross the picket line. As a result, the ILA and the ILWU were both able to obtain compensation payments from shipping companies in return for their acquiescence (not unlike the recent requirement for Uber to compensate taxi owners in New South Wales, Australia). It's an interesting piece of trivia, and one that Levinson unfortunately doesn't expand on a great deal, because I think it's probably the most important part of the book for understanding the coming debates about creative destruction.
At the end of the day, The Box does have a great deal of relevance to the conversations we're having today around creative destruction. It's not a focused analysis of the issue, but it is an important example that shines a lot of light of many aspects of the question we're still struggling with. However, a lot of this importance is buried under Levinson's emphasis on the particular story of Malcom McLean and his shipping containers, and the real value does take some work to extract, and I think most readers would be better served by going directly the source, and reading Schumpeter's Capitalism, Socialism, and Democracy (or at least the relevant chapters). The Box certainly remains an interesting book, but unfortunately not quite as interesting as I had hoped.