How a Shipping Container Changed The World & Why It Happened

6-minute read (9-minute listen)

The boom in global trade was caused by a simple steel box. Shipping goods around the world was – for many centuries – expensive, risky and time-consuming.

But, as Tim Harford explains, 60 years ago the trucking entrepreneur Malcolm McLean changed all that by selling the idea of container shipping to the US military.

Against huge odds, he managed to turn ‘containerisation’ from a seemingly impractical idea into a massive industry – one that slashed the cost of transporting goods internationally and provoked a boom in global trade.

Full Audio Interview (transcription below): 

Perhaps the defining feature of the global economy is, well, exactly that. It’s global. Toys from China, phones from South Korea, copper from Chile, t-shirts from Bangladesh, wine from New Zealand, coffee from Ethiopia, tomatoes from Spain.

Love it or loathe it, globalisation is a fundamental feature of the modern economy. The statistics back this up. In the early 1960s, world merchandise trade was less than 20% of world economic output. Now it’s around 50%. Not everyone’s happy about this.

There’s probably no other issue where 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 TTIP, TRPS 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 high and 40 feet long, about 3 metres by 3 metres by 13. It’s a shipping container.

To understand why this metal box has been so important, consider how a typical trade journey looked before. In 1954, an unremarkable cargo ship, the SS Warrior, carried merchandise from Brooklyn in New York to Bremerhaven in Germany.

On that trip, just over 5,000 tons of cargo, from food to household goods, letters to vehicles, were being carried as 194,582 separate items in 1,156 different shipments.

The record-keeping alone, tracking 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 vessel, poking and pulling at the merchandise with steel hooks until it settled into place against the curves and bulkheads of the hold, skillfully packing the cargo so it wouldn’t shift on the high seas.

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 SS 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 ton to move in today’s money.

Given typical delays in sorting and distributing the cargo by land, the whole journey might take three months. 60 years ago then, shipping goods internationally was costly, chance and immensely time-consuming. Surely there had to be a better way?

Indeed there was. Put all the cargo into big standard boxes, and move the boxes. 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 trucked 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 the containers also meant there’d be fewer jobs to go around.

Stodgy US regulators also preferred the status quo. The 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?

The man who navigated this maze of hazards, who can fairly be described as the inventor of the modern shipping container system, was Malcolm McLean.

How a Shipping Container Changed The World & Why It Happened 3

McLean didn’t know anything about shipping, but he was a trucking entrepreneur. He knew plenty about trucks, plenty about playing the system, and all there was to know about saving money.

McLean not only saw the potential of a shipping container that would fit neatly onto a flatbed truck, but he also had the skills, the nous and the risk-taking attitude needed to make it happen.

First, McLean cheekily exploited a legal loophole to gain control of both a shipping company and a trucking company.

Then when dockers went on strike, he used the idle time to refit old ships to new container specifications. He repeatedly plunged into debt.

He took on fat cat incumbents in Puerto Rico, revitalising the island’s economy by slashing shipping rates to the United States. He cannily encouraged New York’s port authority to make the New Jersey side of the harbour a centre for container shipping.

But the most striking coup took place in the late 1960s when Malcolm 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 would be unrecognisable to a hard working longshoreman of the 1950s. Even a modest container ship might carry 20 times as much as the SS Warrior did, yet unload its cargo in hours rather than days.

Gigantic cranes, weighing a thousand tons apiece, will lock onto containers that weigh upwards of 30 tons, and swing them up and over, onto a waiting transporter.

This colossal ballet of engineering is choreographed by computers, which track every container as it moves through a global logistical system.

The refrigerator 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 scheduled to keep the ship balanced.

And after the crane has released one container onto a waiting transporter, it’ll 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. 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 SS Warrior to ship a ton of goods across the Atlantic, you might now pay less than $50 a ton.

Indeed economists who study international trade often assume that transport costs are zero. It keeps their mathematics simpler, they say. And thanks to the shipping container, it’s nearly true.

The key source on the shipping container is Mark Levinson’s influential history, The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger.

Source:  BBC World Service

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