This history of antagonistic labor-management relations gave rise to two problems that plagued the shipping industry around the world. One was theft. Theft had always been a problem on the waterfront, and the growth of trade in higher-value products after World War II caused it to reach epidemic proportions. Some longshoremen justified thievery as a response to deteriorating economic conditions, but it remained a problem even where union contracts or government intervention had led to better wages: a British joke from the 1960s concerned a docker who was caught stealing a bar of gold and punished by having its value deducted from his next pay. “It wis the pilferin’ that upset me,” recalled a Scottish longshoreman of the 1950s. “It was terrible, terrible, terrible.” Longshoremen prided themselves on such arcane skills as the ability to tap whiskey from a sealed cask supposedly stowed safely in a ship’s hold. In Portland, small objects such as transistor radios and bottled liquor were usually stolen for personal use by family and friends, but not for sale. No such limits were observed in New York, where crime was rampant. Grace Line discovered that even sixty-kilo burlap bags of coffee beans were not immune from theft; the company purchased a sealed scale, protected against tampering by checkers who were aiding theft rings, to confirm the number of bags aboard trucks leaving the pier.20
The second problem arising from dockworkers’ intense suspicion of employers was resistance to anything that might eliminate jobs. Wherever they secured a foothold, dock unions insisted on contract language to protect against a long history of employer abuses. The number of men needed to work a hatch, the placement of those men in the hold or on the dock, the maximum weight of a sling, the equipment they would use, and countless other details related to manning filled page after page in collective bargaining agreements. Shipping interests in Liverpool tried repeatedly to eliminate a practice known as the welt, under which half of each longshore gang left the docks, often for a nearby pub, while the other half worked; after an hour or two, the absentees would return and those who had been working would take a prolonged break. Ports the world over had seen strikes over employer efforts to alter work practices. In Los Angeles, labor productivity dropped 75 percent between 1928 and 1954 as union and management struggled over mechanization; West Coast ports handled 9 percent less cargo per work-hour in 1954 than in 1952. The Port of New York needed 1.9 man-hours to handle a ton of cargo in 1950, but 2.5 by 1956. In Britain, tonnage per man-year was nearly flat from 1948 to 1952, leaped by one-third thanks to a surge of cargo in 1953, and then sank again under the weight of stringent work rules.21
The solution to the high cost of freight handling was obvious: instead of loading, unloading, shifting, and reloading thousands of loose items, why not put the freight into big boxes and just move the boxes?
The concept of shipping freight in large boxes had been around for decades. The British and French railways tried wooden containers to move household furniture in the late nineteenth century, using cranes to transfer the boxes from rail flatcars to horse carts. At the end of World War I, almost as soon as motorized trucks came into wide civilian use, the Cincinnati Motor Terminals Company hit upon the idea of interchangeable truck bodies that were lifted onto and off of wheels with a crane. Farsighted thinkers were already proposing “a standardized unit container in the form of a demountable closed auto-truck body, which can be readily transferred by cranes between railroad flat cars, auto chassis, warehouse floors and vessels.” The first American railroad to adopt the idea was the New York Central, which around 1920 introduced steel containers that fit side by side, six abreast, on shallow-bottomed railcars with dropdown sides.22
The mighty Pennsylvania Railroad, the nation’s largest transportation company, became a powerful proponent of this new idea. The Pennsylvania’s problem was that many of its customers did not generate a large amount of freight for a single destination. A small factory, for instance, might hold a boxcar on its siding for a week while filling it with goods for many different buyers. The railroad would have to attach this car to a freight train and haul it to its nearest interchange point, where the contents would be removed from the car, sorted into hand trucks, and reloaded into other boxcars headed toward different destinations. The Pennsy’s alternative was a steel container just over nine feet wide, perhaps one-sixth the size of the average boxcar. The shipper might fill one of these containers with freight for Detroit, another for Chicago, another for St. Louis. The containers could be placed on a railcar by forklift, and at the interchange point, a forklift would simply move the containers to the proper connecting trains. Sorting loose freight at the transfer station cost 85 cents per ton, by the railroad’s reckoning; transferring a five-ton container cost only 4 cents per ton, and also reduced damage claims and the need for boxcars.23
Some railroads sought to take advantage of the container not simply by lowering rates, but by changing the way they charged shippers. Since the onset of federal regulation in the 1880s, the Interstate Commerce Commission (ICC) had held firm to the principle that each commodity required its own rate, which of course was subject to ICC approval. With containers, though, the railroads were not handling commodities; the size and loaded weight of the container mattered far more than the contents. For the first time, they offered purely weight-based rates: the North Shore Line, running between Chicago and Milwaukee, charged 40 cents per 100 pounds to carry a 3-ton container, but only 20 cents per 100 pounds to carry a 10-ton container, with no adjustment at all for what might be inside. After four months of hearings in 1931, the commission ruled weight-based rates illegal. Although it found the container to be “a commendable piece of equipment,” the commission said that the railroads could not charge less to carry a container than to carry the equivalent weight of the most expensive commodity inside the container. With that ruling, containers no longer made economic sense on the rails.24
Different container systems came into use on railways in other countries during the 1920s in response to a new competitive threat—the truck. Although long-distance truck transportation over primitive and often unpaved roads was impractical, trucks had obvious advantages for shorter hauls, and the railroads sought ways to reduce the truckers’ cost advantage. In Australia, the Sunshine Biscuit Company used containers plastered with its advertising to ship its treats on open railcars with sides of wooden slats. The London, Midland, and Scottish Railway carried three thousand containers in 1927, and the French national railway promoted them as an efficient way for farmers to ship meat and cheese to the city. In 1933, it joined other railroads to form the International Container Bureau, an organization dedicated to making international container freight practical in Europe. Several U.S. and Canadian coastal ship lines tried carrying containers and truck trailers in the early 1930s, and Grace Line built wooden vans with metal reinforcing to cut pilferage of shipments between New York and Venezuela. The Central of Georgia Railroad formed Ocean Shipping Company to move loaded railroad cars between Savannah and New York—an idea that allowed the Central of Georgia to keep control of its freight, rather than handing it off to another railroad.25
Experimentation began anew after the war. Amphibious landing ships were recycled as “roll on-roll off” vessels to transport trucks along the coast, improving upon techniques originally developed to land troops and tanks in over-the-beach invasions. The International Container Bureau was reestablished in 1948, and the U.S. military began using small steel containers, called Conex boxes, for soldiers’ personal belongings. The first ships designed for containers arrived in 1951 when Denmark’s United Shipping Company opened a container service to move beer and foodstuffs among Danish ports. Dravo Corporation of Pittsburgh created the Transportainer, a steel box seven feet nine inches long, and more than three thousand were in use around the world by 1954. The Missouri Pacific Railway promoted its “speedboxes,” aluminum containers on wheels, in 1951, and the Alaska Steamship Company began carrying both wood and steel containers from Seattle to Alaskan ports in 1953. Seatrain Lines, a ship line, app
roached containerization a different way, hoisting entire railcars on board ships and sailing them from U.S. ports to Cuba. All of these undertakings were modest in scope, but all had the same aim: to cut the cost of moving cargo through slow and inefficient ports.26
Yet these efforts were far from successful. “Contrary to what had been thought at first, the handling of containers led to hardly any cost savings,” an influential European maritime expert admitted. A 1955 census found 154,907 shipping containers in use in non-Communist Europe. The number is large, but the containers were not: fully 52 percent of them were smaller than 106 cubic feet, less than the volume of a box 5 feet on a side. Almost all European containers were made of wood, and many had no tops; the user piled the goods inside and covered the load with canvas—hardly an efficient system for moving freight. The containers promoted by the Belgian national railway were meant to be slid up a ramp to fit inside truck bodies, requiring an extra stage of handling. American containers were typically made of steel, providing better protection but at enormous cost; one-quarter or more of the weight of a loaded container was the container itself.27
All over the world, the main methods for handling containers in the years after World War II offered few advantages over loose freight. “Cargo containers have been more of a hindrance than a help,” a leading steamship executive complained in 1955. Many containers had metal eyes on top of each corner, requiring longshoremen to climb atop them to attach hooks before they could be lifted. The lack of weight limits meant that lifting could prove dangerous. Moving them with forklifts instead of winches, though, often damaged the containers. Large, expensive longshore gangs were still required to stow containers alongside loose freight in the holds of ships, where the boxes had to be maneuvered past built-in posts and ladders. “[I]t is certain that the goods would occupy far less space if they were stowed individually instead of in containers,” the head of the French stevedores’ association acknowledged in 1954. “This wasted space is quite considerable—probably over 10%.” Ten percent of the ship’s volume sailing empty amounted to a huge penalty for carrying cargo in containers.
For international shipments, customs authorities often charged duties on the container as well as the contents. And then there was the cost of sending emptied boxes back where they had come from, which “has always been a heavy handicap to container transport,” Jean Levy, director of the French National Railway, admitted in 1948. Shipping food from a depot in Pennsylvania to an air base in Labrador cost 10 percent more using containers than with conventional methods, a 1956 study found—if the container was left in Labrador. When the cost of returning it empty to Pennsylvania was figured in, container shipping was 75 percent more expensive than loose freight.28
TABLE 2
Cargo Aboard the Warrior
By the early 1950s, there was little dispute that freight terminals were a transportation choke point. An unusual government-sponsored study, conducted in 1954, laid bare just how backward cargo handling was. The subject was the Warrior, a fairly typical C-2-type cargo ship, owned by Waterman Steamship Corp. The ship was chartered to the U.S. military, but on its run from Brooklyn to Bremerhaven, Germany, in March 1954, it carried a mix of cargo typical of merchant vessels, and was loaded and unloaded by civilian longshoremen. With government consent, the researchers had access to unusually detailed information about the cargo and the voyage.
The Warrior was loaded with 5,015 long tons of cargo, mainly food, merchandise for sale in post exchanges, household goods, mail, and parts for machines and vehicles. It also carried 53 vehicles. The cargo comprised an astonishing 194,582 individual items of every size and description.
These goods arrived in Brooklyn in 1,156 separate shipments from 151 different U.S. cities, with the first shipment arriving at the dock more than a month before the vessel sailed. Each item was placed on a pallet prior to storage in the transit shed. Longshoremen loaded the ship by lowering the pallets into the hold, where the men physically removed each item from its pallet and stowed it, using $5,031.69 worth of lumber and rope to hold everything in place. The longshoremen worked one eight-hour shift per day, excluding Sunday, and required 6 calendar days (including a day lost to a strike) to load the ship. Steaming across the Atlantic took 10½ days, and unloading at the German end, where longshoremen worked around the clock, took 4 days. In sum, the ship spent half the total duration of the voyage docked in port. The last of its cargo arrived at its ultimate destination 33 days after the Warrior docked at Bremerhaven, 44 days after it departed New York, and 95 days after the first Europe-bound cargo was dispatched from its U.S. point of origin.
The total cost of moving the goods carried by the Warrior came to $237,577, not counting the cost of the vessel’s return to New York or interest on the inventory while in transit. Of that amount, the sea voyage itself accounted for only 11.5 percent. Cargo handling at both ends of the voyage accounted for 36.8 percent of the outlay. This was less than the 50 percent or more often cited by shipping executives—but only because Germany’s “economic miracle” had yet to drive up longshore wages; the authors noted that port costs would have been much higher were it not for the fact that German longshoremen earned less than one-fifth the wages of U.S. longshoremen. Their conclusion was that reducing the costs of receiving, storing, and loading the outbound cargo in the U.S. port offered the best method of reducing the total cost of shipping. The authors went beyond the normal admonitions to improve longshoremen’s productivity and eliminate inefficient work rules, and urged a fundamental rethinking of the entire process. “[P]erhaps the remedy lies in discovering ways of packaging, moving and stowing cargo in such a manner that breakbulk is avoided,” they wrote.29
Interest in such a remedy was widespread. Shippers wanted cheaper transport, less pilferage, less damage, and lower insurance rates. Shipowners wanted to build bigger vessels, but only if they could spend more time at sea, earning revenue, and less time in port. Truckers wanted to be able to deliver to and pick up from the docks without hour upon hour of waiting. Business interests in port cities were praying for almost anything that would boost traffic through their harbors. Yet despite all the demands for change, and despite much experimentation, most of the industry’s efforts to improve productivity centered on such timeworn ideas as making drafts heavier so that longshoremen would have to work harder. No one had found a better way to ease the gridlock on the docks. The solution came from an outsider who had no experience with ships.30
* “Bulk” cargo usually refers to commodities such as coal or grain, which can be loaded on a ship in a continuous process without packaging or sorting. “Breakbulk” cargo, by contrast, consists of discrete items that must be handled individually.
**A nautical mile is equal to approximately 6,080 feet, 1.15 statute miles, and 1.85 kilometers. A speed of 11 knots, or nautical miles per hour, is equivalent to 12.7 statute miles per hour, or 20.7 kilometers per hour.
Chapter 3
The Trucker
The U.S. economy boomed in the years just after World War II. The maritime industry did not. The entire merchant fleet had been commandeered by the government when the United States entered the war, and many ships did not revert to private control until July 1947, almost two years after the war ended. Coastal shipping had been all but closed down after German submarines sank several ships, and after 1945 coastwise traffic remained well below prewar levels. Trucks grabbed market share in domestic transportation, but the need to spend days painstakingly handling cargo each time a ship steamed into port kept the maritime industry from reducing costs enough to compete. “Until cargo handling costs can be reduced, there is little hope for coastwise revival,” warned a California State Senate committee in 1951.1
Yet while the larger American ship lines were not particularly profitable, they were relatively sheltered. Foreign lines were barred from coastal service and routes to island territories, and a new American-owned competitor could not enter a domestic route without proving to the ICC tha
t its entry would not harm other ship lines. Competition was also limited on international routes, where almost all ship lines belonged to cartels, known as conferences, that set uniform rates for each commodity. The U.S.-flag international lines received government subsidies to cover the higher wages of American crews, and both domestic and international lines—for regulatory reasons, international services were run by separate companies—had access to war-surplus ships. Inefficient though it was, the maritime industry thus felt little immediate pressure for change. Reshaping the business of shipping was left to an outsider with no maritime experience whatsoever, a self-made trucking magnate named Malcom Purcell McLean.
McLean was born in 1913 near the tiny town of Maxton, deep in the swamp country of southeastern North Carolina. Maxton, once called Shoe Heel, had been populated by Scottish Highlanders in the late eighteenth century. The local newspaper was the Scottish Chief, and local lore had it that Shoe Heel was renamed Maxton when a rail passenger shouted, “Hello, Mac!” from a train window and ten men responded. At the time of McLean’s birth, Maxton Township, with about thirty-five hundred residents, was very rural and very poor. Electric lighting had arrived in Robeson County only in 1901. The town of Maxton, with about thirteen hundred inhabitants, had telephone service, but the surrounding area did not; as late as 1907, residents of Lumberton, the county’s largest town, had to ride the train to Maxton to make long-distance calls.2
In later years, McLean took to portraying his life as a Horatio Alger story, in which his mother taught him business by giving him eggs to sell, on commission, from a crate at the side of the road. The reality was not quite so harsh. Although the family was far from wealthy, it was not without resources. McLean’s father, also Malcolm P. McLean,* was “a member of a prominent and widely connected family,” according to an obituary published in 1942. An 1884 county map shows half a dozen McLeans farming near Shoe Heel, and several other McLeans farmed or practiced law in Lumberton. Angus Wilton McLean, probably a cousin—his mother, like Malcom’s, was a Purcell—started a bank and a railroad in Lumberton, served as assistant secretary of the United States Treasury in 1920–21, and was governor of North Carolina from 1925 to 1929. Family ties may have helped the senior McLean obtain a job as a rural mail carrier in 1904 to supplement his income from farming. Upon young Malcom’s graduation from high school in 1931, in the depths of the Great Depression, family ties got him work stocking shelves at a local grocery. Those local connections helped once more when an oil company needed a gas station manager in the nearby town of Red Springs, as a family friend lent McLean the money to buy his first load of gasoline.3
The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger Page 5