The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger

by Marc Levinson

  Then came a remarkable stroke of good fortune: the company that purchased Bull Line, a privately owned maritime conglomerate, had expanded its way into financial trouble. It first stopped reconstruction on the two ships it had acquired for Bull Line, and then, in June 1962, stopped sailing altogether. As Bull Line collapsed into bankruptcy, McLean was able to grab the two ships. Overnight, Sea-Land became the dominant carrier to an island that was almost totally dependent upon U.S. shipping. Before new competitors could move in, it quickly consolidated its position, scheduling containerships from Newark to San Juan every two days and adding sailings from the West Coast and Baltimore. Sea-Land spent more than $2 million on two new terminals in San Juan in 1962 and 1963. In a politically deft move, it also opened routes to the Puerto Rican ports of Ponce and Mayaguez. Neither city had much besides canned tuna to ship out in containers, but providing container service earned McLean the goodwill of Teodoro Moscoso, the creator of Operation Bootstrap and a powerful figure in Puerto Rico’s economic development.32

  The expansion of Sea-Land’s Puerto Rico service coincided with a remarkable flourishing of the island’s economy. In the 1950s, Operation Bootstrap had attracted mainly small, labor-intensive factories to Puerto Rico. Many workers gained regular wage employment for the first time, and the resulting rise in personal income drove a surge in consumer spending. Retail sales rose 91 percent between 1954 and 1963 after adjustment for inflation. A large share of that merchandise came from the mainland, filling the southbound ships in the Puerto Rico trade. As the island’s rising wages began to make it less attractive for labor-intensive factories, Operation Bootstrap undertook a concerted drive to bring in large, capital-intensive manufacturers. Manufacturing, only 18 percent of Puerto Rico’s economic output in 1955, reached 21 percent in 1960 and 25 percent by 1970, with most of the growth coming in nontraditional sectors such as pharmaceuticals and metal products. Total trade between Puerto Rico and the mainland nearly trebled during the 1960s, and almost all of it went by ship.33

  Sea-Land benefited from this boom—but it also helped cause it. Puerto Rico’s shipping-dependent economy had been a prisoner of high transport costs. Between 1947 and 1957, as U.S. prices overall were rising 31 percent, rates per ton for shipping between the mainland and Puerto Rico increased about 50 percent. Federal regulators approved five general rate increases over that decade, effectively taxing Puerto Rican consumers to cover the inefficiencies of U.S.-flag ship lines. McLean’s push into the Puerto Rico trade in 1958 began to shake up this rate structure, which benefited mainly Bull Line. Over the ensuing decade, by Sea-Land’s estimates, the cost of shipping consumer goods from New York to San Juan fell 19 percent, and the average rate per ton for freight shipped in full truckloads fell by a third. Lower southbound rates for industrial components and northbound rates for finished products magnified the advantages of opening factories in Puerto Rico, and McLean Industries established a new subsidiary to help manufacturers locate there. By 1967, Sea-Land was carrying 1,800 containers each week between the island and the U.S. mainland, half of them to or from Puerto Rican factories.34

  Its unassailable position in Puerto Rico provided a firm base for Sea-Land’s growth. Sea-Land owned 7,848 containers, 4,876 chassis, and 386 tractors at the end of 1962. By the end of 1965, it had expanded to 13,535 containers and controlled 15 containerships calling at 15 ports, using Puerto Rico as a hub to serve the Virgin Islands. At the center of this expanding empire was a new office building at Port Elizabeth, New Jersey, where the berths at the new Sea-Land terminal, the first purpose-built container terminal anywhere, were visible out the window. The building, like the rest of the Port Elizabeth complex, was built by the Port of New York Authority, without a nickel of Sea-Land’s money. “A lot of people thought Malcom was building a big pagoda,” recalled Gerald Toomey, who was recruited to Sea-Land in 1962. “He knew what he was doing. You put a pencil to what that building cost and what it’s saved the company, it turned out to be a very good deal.”35

  Sea-Land was a large company by 1963, with nearly three thousand employees, and an increasingly difficult one to manage. Computers had arrived in 1962, but only for administrative purposes such as payroll; at Port Elizabeth, Sea-Land kept track of its incoming and outgoing boxes on magnetic boards high on the walls of its octagonal control room, with an employee reaching a long pole to move the corresponding metal piece on the board each time a container was moved in the yard. At the end of each day, photos were taken of the board to provide a permanent record. Containers had a way of vanishing, especially in Puerto Rico, where a lack of warehouse space led many recipients to store goods in the containers they arrived in; headquarters produced an “aging report” listing containers that had not been seen for a week, and local supervisors frantically worked the phones to try to locate missing boxes before a manager called. Loading required teams of vessel planners to pore over sheets listing the weight and destination of each container as they figured out the best way to load each ship. Computers would not begin to take on that job until 1965.36

  Malcom McLean could no longer be involved in every decision. Yet his basic approach to management remained unchanged. McLean was still a daily presence at headquarters. “It wasn’t unusual that when you came to work, he’d say, ‘Good morning, how are you doing this morning?’ “recalled a long-time Sea-Land accountant. “Malcom was a good salesman. He’d give the impression that he knew you.” When a building for consolidating container loads was needed in Baltimore or Jacksonville, McLean would go and choose the site. When refrigerated containers were needed, managers would spend two days debating how many to buy, only to hear McLean say, “I appreciate the exercise, but I’ve already signed a contract for five hundred.” When the chance came to buy Alaska Freight Lines in 1963, McLean hardly bothered to investigate the company’s finances, much less such operational issues as access to Anchorage harbor in the winter; McLean was in a hurry, and the chance to break into the Alaska trade quickly was too good to pass up.37

  Above all, he kept his eye on the money. Teletypes clattered constantly as outlying terminals sent booking information to headquarters. Clerks updated records showing how many days each container had carried revenue traffic, how many tons it had hauled, how many dollars it had grossed. Geographic analysis documented the land transportation patterns of Sea-Land cargo. Monthly financial re ports revealed how much revenue Sea-Land received from each commodity shipped from Newark to Texas, reminding all that an eighteen-ton container of liquor was twice as profitable as a four-ton container of toys. Weekly reports documented cash flow. And there was an endless stream of demands for better cost control. Shaving 1.6 cents off the cost of handling 100 pounds in Ponce could save $14,300 a year. One more container lift per gang hour would save $180,000. Limiting long-distance telephone calls to three minutes would save $65,000. “Probably more attention was paid to financial results there than you find in any company around today,” remembered Earl Hall, later Sea-Land’s chief financial officer. In 1961, its sixth year, Sea-Land’s container business had finally moved into the black. So long as McLean was involved in running it, Sea-Land never lost money again.38

  Chapter 5

  The Battle for New York’s Port

  For the Port of New York Authority, which was providing Pan-Atlantic a home, the arrival of containerization was a godsend. For New York City, it proved to be a disaster. City officials wasted enormous sums in a futile attempt to keep the city at the center of a shipping industry whose changes New York could not possibly accommodate. Despite their costly efforts, the local economy was left devastated as new technology made the nation’s largest port obsolete.

  In the early 1950s, before container shipping was even a concept, New York handled about one-third of America’s seaborne trade in manufactured goods. New York’s role was even larger when measured in dollars, because the port had increasingly come to specialize in high-value freight. This success was not easily earned, for the city had some important
disadvantages as a port. The city’s piers—283 of them at midcentury, with 98 able to handle oceangoing vessels—were strung out along the Manhattan and Brooklyn water-fronts. The main railroad connections, however, were across the harbor and across the Hudson River, in New Jersey. Freight trains arriving from points north, south, and west were sent to the rail roads’ large yards located inland, where the cars were sorted by destination and moved by switch engine to one of the railroad terminals that lined the New Jersey side of the harbor. Each railroad owned a fleet of lighters, barges pushed by tugboats, to carry its freight cars across the harbor, either to or from its own New York terminal or to the dock being used by an oceangoing ship. Getting tires from Akron to a Europe-bound vessel thus entailed repeated shunting and shifting. It was economically viable only because the Interstate Commerce Commission, the federal regulator, required railroads to charge the same rates to Brooklyn and Manhattan as to New Jersey; in effect, they were forced to throw in the lighter trip across the harbor for free to keep New York competitive with other East Coast ports.1

  The growth of the trucking industry starting in the 1920s made the inadequacy of New York’s piers even more apparent. By midcentury, about half the cargo headed to or from the docks traveled by truck rather than by train. After coming through the Lincoln or Holland Tunnel, truckers had to navigate dockside streets so congested that, in 1952, the city barred all but pier-bound vehicles from Twelfth Avenue, the waterfront street in midtown Manhattan. If they were headed to the Brooklyn docks, truckers coming from the west had to fight their way through Manhattan to cross one of the East River bridges. Trucks normally waited in line an hour or two just to enter a pier to pick up or deliver at a transit shed, a warehouse adjacent to the dock. The transit sheds were usually designed with truck (or, in some cases, rail) loading docks on one side of the structure and access to ships on the opposite side. Outbound cargo would be taken off the truck with a forklift or by hand, stored in the transit shed until the ship arrived, and then handled again to get it onto the dock, with each operation adding yet more expense.2

  Delivering by truck meant engaging a “public loader,” a type of enterprise unique to New York. A public loader was a gang that claimed the sole right to load and unload trucks on a particular pier, backed by the muscle of the International Longshoremen’s Association, the dockworkers’ union. Shipping interests, mayors, governors, and the Teamsters union, which wanted its members to handle the work, had tried for decades to get rid of public loaders. The men who did the loading were members of a thoroughly corrupt ILA branch, Local 1757, and were ostensibly owners of the “cooperative” for which they worked. In reality, however, the public loaders were secretly controlled by leaders of the ILA, which had joined forces with a trucking organization to create a “Truck Loading Authority” that published “official” rates for loading—5½ cents per 100-pound bag of almonds or marble chips; 6½ cents per 100 pounds of auto parts, tires, or fish guts; 8 cents per 100 pounds of canned beer—with all hours after 5 p.m. paid at time-and-a-half. Other firms that sought to handle unloading encountered vandalism and outright violence. Shippers that tried to circumvent the public loaders’ illicit monopoly by using their own workers to unload were liable to find that the ship would sail with their cargo sitting on the pier. Even after the newly established Waterfront Commission banned public loaders in December 1953, thugs continued to control access to the docks.3

  The port was a vastly important source of jobs in New York City. In 1951, as operations were returning to normal after the war, more than 100,000 New Yorkers were employed in water transportation, trucking, and warehousing, not counting railroad employees and workers in the municipal ferry system. Another 14,000 New Yorkers worked in “transportation services,” such as brokerage and freight forwarding, handling the complexities of international trade in an age when each leg of a complicated journey had to be arranged, and paid for, separately. More than one-third of all “transportation services” workers nationally were located in New York. About three-fourths of the nation’s wholesale trade in the early 1950s was trans acted through New York, even if the goods did not always pass through the city. Across the country, about 1 in 25 private-sector workers (excluding railroad employees) worked in merchant wholesaling in 1951, but the ratio in New York was 1 in 15.4

  Then there were the factories situated on the waterfront for ease of shipping. Food-processing plants had located along the Hudson River and the Brooklyn waterfront during the first quarter of the twentieth century, and dozens of factories making dyes, paints, pharmaceuticals, and specialty chemicals dotted the shore from Long Island City in Queens to Bay Ridge in Brooklyn. At midcentury, New York’s expanding manufacturing sector occupied more than 33,000 chemical workers, 78,000 workers in food processing, and thousands more in shipbuilding and electrical machinery, industries that needed inexpensive freight transportation. In 1956, according to a conservative estimate, 90,000 manufacturing jobs within New York City were “fairly directly” tied to imports arriving through the Port of New York.5

  Marine construction and ship repair employed thousands more. Add in the lawyers, bankers, and insurance brokers who serviced the shipping business, and the livelihoods of half a million workers may have depended directly on the port. The area near Bowling Green, in lower Manhattan, was thick with shipping company offices, served by the insurers a few blocks away on John Street. Brooklyn, the most populous borough, had less shipping-related office work but more waterfront employment, with 13 percent of all jobs in the borough located directly on the docks.6

  TABLE 3

  Port-Related Employment in New York City, 1951

  This powerful economic engine was already beginning to miss a few strokes in the years after World War II. Its location had helped the Port of New York gain market share during the war, as the re fineries and military terminals in Brooklyn and along the New Jersey waterfront dispatched thousands of ships across the North Atlantic. In 1944, when it moved nearly one-third of all U.S. waterborne exports, New York handled twice as much cargo as in 1928 and five times as much as in the worst Depression year, 1933. Even during the war, though, experts were warning of the parlous state of the docks. Those warnings seemed to be confirmed after the war, as cargo traffic slumped owing to the lack of imports from a prostrate Europe. Although European recovery briefly boosted exports, the Korean War put the U.S. economy back on a war footing and devastated foreign trade. The total value of imports and exports at all U.S. ports sank from $18.5 billion in 1951 to $15.6 billion three years later, with exports hit particularly hard as factories switched production from consumer goods to war matériel.7

  New York was losing the battle for that export traffic. World War II had stimulated economic growth in the West and the South, and factories in Dallas and Los Angeles were much less likely to ship through the Port of New York than were plants in Rochester and Cleveland. The impending opening of the St. Lawrence Seaway in 1956 would permit direct steamship traffic between Great Lakes ports and Europe, with one forecast predicting that it would divert 8 percent of New York’s exports and 3 percent of its imports by 1965.8

  High land freight rates were a further handicap. New York officials were prone to complain that the railroads unfairly favored Philadelphia, Baltimore, or Norfolk, but the truth was that railroads and truckers could serve those points at lower cost; railcars could reach the piers without being floated across the harbor, and truckers faced much less congestion. New York’s rate disadvantage was even larger for truck freight than for rail freight, as sending a load by truck from Cleveland to the New York docks could cost four dollars more per ton than sending it to Baltimore. Truckers frequently sought to add the cost of New York port delays to customers’ bills, charging sixty to eighty cents per ton more to deliver to the piers than to other Manhattan locations and generating a flood of complaints to the Federal Maritime Board.9

  Many of the port’s other problems, however, were of its own making. After three decades of
labor peace from 1915 to 1945, labor turmoil became routine after the war. Some or all of the docks were closed by strikes in 1945, 1947, 1948, 1951, and 1954. Between 1945 and 1955 the International Longshoremen’s Association, the legally recognized union throughout the port, battled with the Communist-backed National Maritime Union and with the American Federation of Labor, which ejected the ILA on corruption charges in 1953 and then set up a new American Federation of Longshoremen in an effort to supplant it. With the demise of public loaders, the Teamsters union sought to claim the right to load and unload trucks on the piers, precipitating violent clashes between Teamsters and Longshoremen in 1954. Wildcat strikes on individual piers were common until the ILA, abetted by shipping interests that preferred one corrupt but reliable bargaining partner to constant conflict among competing unions, won a series of elections and regained control late in the decade. Throughout the 1950s, the high risk of labor disruption encouraged shippers to use other ports.10

  Crime drove shippers away from New York as well. Cargo theft was rampant; most goods were packaged in small boxes or crates, so stealing wristwatches, liquor, or almost anything else was not particularly difficult. The bistate Waterfront Commission, created in 1953 after urgings from New York governor Thomas E. Dewey, made inroads against racketeering by banning public loaders and taking control of pier hiring. It deliberately sought to reduce the workforce and thereby raise longshoremen’s incomes in hopes that they would have less need to steal. Even after the Waterfront Com mission barred 670 ex-convicts from longshore jobs, though, one in five longshoremen had a criminal record. Cargo theft remained a massive problem—so much so that both the Port Authority and the City of New York refused to cooperate with the filming of a comedy starring James Cagney lest the title, Never Steal Anything Small, give moviegoers the wrong impression.11