Carpe Diem

The shipping container – a market-based innovation – has been more important for globalization and world trade than all free-trade agreements negotiated by governments combined

ContainerFrom The Economist:

The humble shipping container is a powerful antidote to economic pessimism and fears of slowing innovation. Although only a simple metal box, it has transformed global trade. In fact, new research suggests that the container has been more of a driver of globalisation than all trade agreements in the past 50 years taken together.

Containerisation is a testament to the power of process innovation. In the 1950s the world’s ports still did business much as they had for centuries. When ships moored, hordes of longshoremen unloaded “break bulk” cargo crammed into the hold. They then squeezed outbound cargo in as efficiently as possible in a game of maritime Tetris. The process was expensive and slow; most ships spent much more time tied up than plying the seas. And theft was rampant: a dock worker was said to earn “$20 a day and all the Scotch you could carry home.”

Containerisation changed everything. It was the brainchild of Malcom McLean, an American trucking magnate. He reckoned that big savings could be had by packing goods in uniform containers that could easily be moved between lorry and ship. When he tallied the costs from the inaugural journey of his first prototype container ship in 1956, he found that they came in at just $0.16 per tonne to load—compared with $5.83 per tonne for loose cargo on a standard ship. Containerisation quickly conquered the world: between 1966 and 1983 the share of countries with container ports rose from about 1% to nearly 90%, coinciding with a take-off in global trade (see chart above).

14 thoughts on “The shipping container – a market-based innovation – has been more important for globalization and world trade than all free-trade agreements negotiated by governments combined

  1. Noam Chomsky complains about the rise of containerization. His problem with it? It reduces labor-union leverage. He should complain about washing-machines, then — and looms, as well, for that matter.

  2. Marc Levinson wrote a great book in 2006 about the history and impact of the humble “ISO container” appropriately titled, “The Box.” The box’s impact was not limited to the globalization of the economy, but was also felt by unions, ports, railroad infrastructure, and highway transportation.

    • My wife and I have been pushing this idea since reading the excellent history book you mention (The Box). We cruise a bit, and have been the impact of the container at many, many ports world-wide, from the smallest to the most vast.

      My favorite story is walking down the main street in Papeete Tahiti, and seeing a freezer on the sidewalk with Hagen-Daas ice cream bars. This WOULD NEVER HAVE BEEN POSSIBLE without the container. It is miracle that you can eat an ice cream bar created in the U. S. on the hot strand of Tahiti. To us, it seems quite normal.

      Indeed, the container has completely changed the world. I am of the opinion that it has profoundly changed the world as much as the railway did in the 19th century.

  3. From the conclusion of the study that is referenced by the Economist:

    “Our identification strategy allowed us to draw inferences for what might be called ‘the early period of the container age: 1966-1990’. We leave it for future research to assess the effects of containerization for the post 1990 period.”

    The effects of containerization on trade are immense but what about since 1990? Global communications, led by networking of computers, is probably the biggest driver of increased trade activity, imo.

    Also, since 1990 there has been the rise of China as an economic superpower. I suspect the authors of the report would have a hard time reconciling the effects of very efficient outbound Chinese port infrastructure, with the “break bulk” inbound port facilities of China .

  4. The “shrinkage” phenomenon was so significant and so well established as the norm that I can recall several instances of west coast longshoremen threatening strikes when containers were introduced and getting their contracts renegotiated to compensate them for the inability to collect their “fair share” of containerized cargo.

    • I can recall the same nonsense from the longshoremen – some wanted to be paid AS IF they UNPACKED and REPACKED each container. At some docks they went on strike – NO PROBLEM, send the containers to another port and truck them to their destination.

      These bozos had a big hand in the proliferation of containers – they CUT OFF THEIR NOSE TO SPITE THEIR FACE.

  5. When you look at the impact the shipping container has had on world trade, and then the impact world trade has had on reducing poverty levels worldwide, one could make the case that the shipping container is one of the greatest humanitarian achievements in human history.

  6. I might also add that it absolutely ruined liberty port calls for merchant sailors. A container ship can arrive in the morning, and leave in the evening. Not much time for barhopping and whorehouse visiting. A breakbulk ship netted two or three nights of debauchery for the crew.

    Ah, for the good ol’ days….

  7. I also recommend a good article (in Spanish): “Los ladrillos de la globalización” (Globalization’s bricks) by Francisco Moreno in Liberalismo.org

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