In The Container That Changed the World, Virginia Postrel explains that the shipping container’s story “is a classic tale of trial and error, and of creative destruction”:
Just as the computer revolutionized the flow of information, the shipping container revolutionized the flow of goods. As generic as the 1′s and 0′s of computer code, a container can hold just about anything, from coffee beans to cellphone components. By sharply cutting costs and enhancing reliability, container-based shipping enormously increased the volume of international trade and made complex supply chains possible.
“Low transport costs help make it economically sensible for a factory in China to produce Barbie dolls with Japanese hair, Taiwanese plastics and American colorants, and ship them off to eager girls all over the world,” writes Marc Levinson in the new book “The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger” (Princeton University Press).
For consumers, this results in lower prices and more variety. “People now just take it for granted that they have access to an enormous selection of goods from all over the world,” Mr. Levinson said in an interview. That selection, he said, “was made possible by this technological change.”
When the first container ship set sail 50 years ago, businesses and regulators treated distribution not as a single process but as a series of distinct modes: ships, trucks and trains. Every time the transportation mode changed, somebody had to transfer physically every box or barrel.
“By far the biggest expense in this process was shifting the cargo from land transport to ship at the port of departure and moving it back to truck or train at the other end of the ocean voyage,” writes Mr. Levinson, a Wall Street economist and former economic journalist. This “breaking bulk” could easily consume half of the total cost of shipping.
Goods often had to wait in warehouses for the next stage. Those transfers and delays made shipping slow and schedules uncertain. They also created opportunities for damage, mistakes and more than a little theft. (Whiskey was one of the first products shipped by container because it was so subject to pilferage.) Different companies in different industries facing different price regulations for different goods handled each step.
Today, by contrast, “you can call one of the big international ship lines, tell them to pick up your container in Bangkok, which is not a port, and tell them to deliver it in Dallas, which is not a port, and they will make the arrangements to get it to a port and get it on a ship and get it off at another port and get it onto a train or truck and get it where it needs to be,” Mr. Levinson said.
On her own site, Postrel adds a key point:
At first, containerization grew through cracks in the rigid regulatory structure of the 1960s. But today’s fully integrated systems became possible only after trucking and rail were deregulated in the 1970s and maritime rates were deregulated (to very little fanfare) in 1984. Assumptions about transportation regulation have changed so radically that reading about the bad old days seems like science fiction.
As Levinson said in our interview, “Nobody even remembers what the Interstate Commerce Commission used to do. But you’ve probably been in the old ICC building on Constitution Avenue in Washington. It had a choice spot in Washington. Important agency, important location, big building. This was a key federal agency. And it spent its time hearing arguments about whether this truck line ought to be able to carry cigarettes in the same trucks as it carried textiles or whether the rates that were being charged to carry pretzels were adequate. People have trouble remembering that today.”
Incidentally, this was Postrel’s last “Economic Scene” column for the New York Times — but there’s good news: she’s “writing a column on commerce and culture for The Atlantic,” and Tyler Cowen is taking over her Times slot. Excellent.