What is the fundamental cause of the explosive growth in international trade since the Second World War? Competing and, at times, complementary hypotheses include, but are not limited to: (1) the decline in tariffs under the auspices of the GATT/WTO system (Subramanian and Wei, Reference Subramanian and Wei2007); (2) the decline in tariffs under various regional trade agreements; (3) the decline in transportation costs (Hummels, Reference Hummels2001, Reference Hummels2007); (4) the rise of vertically integrated production facilitated by (1), (2), and (3) (Yi, Reference Yi2003); and (5) the decline in communication costs (Freund and Weinhold, Reference Freund and Diana2000).
The book under review contributes to this debate by offering a vivid picture of how oceanic transport costs fell as containerization entered and came to dominate international shipping between the mid-1950s and the mid-1970s. It is a thoroughly researched book that earns its place in the industrial history genre alongside Daniel Yergin's The Prize or David Halberstam's The Reckoning. The story of the entrepreneur Malcom McLean, a small town trucker turned international shipping magnate, is interesting and well-worth reading, even if it lacks the narrative pace and excitement of the best books in this genre.
In terms of its contribution to the debate over the rapid growth of international trade, this book unfortunately cannot inform the question ‘exactly how much did the movement from break-bulk shipping to containerization reduce costs?’ The book provides detailed snapshots of the myriad costs that were imposed on a shipment of goods from one factory to another across international borders in the days before containerization, during the transition period when multiple non-standardized technologies proliferated, and during the era of containerization. It leaves the reader feeling awestruck at the dramatic rise in shipping efficiency, but, aside from a few tables that present financial costs of shipping along selected routes at different points in time, it does not attempt to quantify the magnitude of the efficiency improvement in dollars or time.
However, the best academic research on changes in international transport costs in the post-Second World War period (Hummels, Reference Hummels2001, Reference Hummels2007) leaves us with a puzzle. Oceanic shipping costs for break-bulk (mixed, non-commodity) freight have not declined much since the mid-1950s. This puzzle is apparently resolved by examining how the marginal good that is shipped across borders changed and how the mode of shipping (from ocean to air) changed as the cost, speed, and quality of transportation improved over time. Hummels' work teaches us that transportation costs are an endogenous variable. Thus, a naïve analysis that views them as an exogenous force for changing trade patterns over-simplifies the debate about the growth of globalization. Levinson's book adds value to this discussion by informing us about the qualitative improvement in shipping efficiency that enabled the set of goods that could be shipped to expand. However, it overstates its argument in favor of containerization as the most important driver behind the post-Second World War growth of international trade.
Although The Box is pitched as a story about international trade, the book's strongest points are in its detailed descriptions of the interactions between government policy and entrepreneurial innovation. From the perspective of an economist who wants to understand how innovation occurs and is disseminated throughout the economy, Levinson provides one of the best case studies yet of a highly regulated industry that both stimulates innovation and tries to suppress it.
Levinson traces the development of containerization by following the career of Malcom McLean, a small-town truck driver, who rises out of obscurity to build an interstate trucking company that makes money by exploiting the great inefficiencies of the US's regulatory system for inter-state commerce. In response to the price-gouging problems of an earlier era, by the 1950s the Inter-state Commerce Commission (ICC) had constructed a command-and-control nightmare of shipping rates that appeared to be divorced from any economic incentives. McLean steps into this world (along with others who tackle the same problem with varying degrees of success) and extracts profits by utilizing new technologies, exploiting government programs for veterans, and finding the regulatory loop-holes that allow him to charge lower shipping prices.
McLean's initial leap from inter-state trucking to inter-state coastal shipping is spurred by the ICC's heavy regulation of trucking and rail services. But in this story government regulation is not a universal scourge. The huge capital investments in retro-fitting ships for containers, in designing and building cranes, and in building the containers themselves are made possible by restricted entry into the coastal shipping market and direct government investment. Thus, innovation in transportation services is both motivated by the inefficiencies generated through restricted entry in one industry (trucking and rail) and is facilitated by government restrictions on entry into another (coastal shipping).
McLean's story continues into international shipping with anecdotes about financial innovation (a fuller treatment of National City Bank's innovative financing of McLean's investments could be a story in its own right) and conferences on the efforts to standardize the size of shipping containers around a world in which highways and railroad gages have different widths. Unfortunately, international conferences on shipping standards are about as exciting as they sound and Levinson's treatment fails to add the spice that could propel the general reader easily through this and yet does not contain the details that might draw in a more specialized reader.
In addition to the interplay between regulation and innovation, the book has another strong point. The lively negotiations of the longshoremen's unions on the East (ILA) and West (ILWU) coasts provide an interesting comparative history of the modern labor movement. The substitution of capital for labor, especially high-cost unionized labor, is something we might expect unions to fight tooth and nail. In general, they have. Thus, the fascinating story to emerge here is how the West coast union supported automation and gambled that the union could benefit from container technology through higher wages and shorter working hours. Ironically, a contract that relaxed work rules to facilitate automation led shippers to extract more physical labor out of longshoremen. By the mid-1960s, the West coast longshoremen were filing grievances demanding more mechanization of the docks. A further odd twist in the story is that adoption of container technology led to dramatic growth of jobs at the technology-averse port of Los Angeles, while San Francisco, the early and strong supporter of automation on the West coast, declined. Counter-point to this story, the East coast longshoremen, represented by a different union, vociferously opposed technological change until they received significant income guarantees in 1965.
In summary, the book advances a hypothesis that the use of giant steel boxes for transporting and shipping goods was a major technological advance that facilitated the dramatic growth in international trade since WWII. In support of this argument, it provides vivid anecdotes that provide a clear, qualitative picture of the inefficiencies of shipping miscellaneous merchandise across borders before containers came into widespread use. Given what we know about the time and money costs of international oceanic and air transport from Hummel's (Reference Freund and Diana2001, Reference Hummels2007) work, Levinson's book probably ascribes too much causality of international trade growth to the box. However, the insights the book provides make it a worthwhile read for anyone interested in how international trade in goods has evolved over the last 50 years.
