Steve Reads

(Attention conservation notice: 2100 words about a book that will make you jealous: [book: The Box] is a terrific read about shipping containers, of all things. It’s like if you spent every day using your Honda Civic’s gear shift, then one day found that someone had written [book: The Lowly Honda Civic Gear Shift and How It Will Change Everything] and made millions off it. “I should have written that!” you say. But you didn’t write it. Marc Levinson did, and he did it better than you (or I) would. He did it incredibly well, in fact.)

Why do cities form where they do? Why do they grow to the sizes they do? One popular answer has to do with companies’ desire to be near their customers and near their suppliers. Much of Krugman et al.’s [foreign: magnum opus], for instance, is based around this idea. The idea, in turn, depends critically upon transportation costs. Imagine instead that you could get products to your customers, and components from your suppliers, via a teleportation machine that magically conveyed them at no cost to you. Would you still need to locate your company near your customers? It seems unlikely. You might still put your company near where your suppliers are, so that you could draw on a pool of specialized talent when it came time to hire. But that teleportation machine would radically change your business.

We may have arrived at the teleportation era. As Glaeser and Kohlhase put it, “it is better to assume that moving goods is essentially costless than to assume that moving goods is an important component of the production process.”

Imagine the steps involved in moving a dishwasher from Maytag in Newton, Iowa to somewhere in the French countryside 40 to 50 years ago. It might be loaded on a train in Iowa, conveyed to the Port of New York, unloaded from the train by a burly longshoreman, loaded onto a ship, carried across the ocean, unloaded by another burly longshoreman on the Brittany coast, loaded manually into a train, brought to a major French city, then loaded onto a truck and brought to the countryside. Maytag would typically hire a cargo-forwarding company to handle all these details. The shipping costs in many cases were a double-digit percentage of the final cost of the product.

One of the main reasons why these costs were so high is that the process was so labor-intensive. As Marc Levinson lays out in [book: The Box], stevedores would fit miscellaneous bits of cargo in every available nook and cranny of a ship: bags of coffee alongside televisions alongside containers of solvent. They’d have to be laboriously packed and unpacked whenever the shift from ships to trains or trains to ships or trains to trucks happened. The more-than-occasional crate of whiskey or bag of coffee or box of electronics would go missing.

In retrospect the solution seems obvious: find some way to get machines to do this for us. Put everything in uniform containers. Then get cranes to pull the containers off ships and drop them on the backs of trucks. Cut humans out of the process altogether (apart from operating the cranes). Radically reduce the labor-intensity of the process. Do what capitalism does best: replace humans with machines.

To fully exploit the benefits of the process, there must be standardization, and the standardization must extend from ships to trucks to trains. The more specific rules people must remember (“this 30-foot container has a special coupling to clamp it to a 20-foot container, and of course the 20-foot container must sit atop the 30-foot one …”), the harder it is to scale. With standardization, machines can grab the containers, shift them off trains, shift them onto trucks, and keep moving without thinking. (A.N. Whitehead:
“It is a profoundly erroneous truism, repeated by all copy-books and by eminent people when they are making speeches, that we should cultivate the habit of thinking of what we are doing. The precise opposite is the case. Civilisation advances by extending the number of operations we can perform without thinking about them.”)

How else might we keep pushing costs down? Well, if I’m a shipping company that sends a 20-foot container from Iowa to France, I need that container to come back to me somehow. I could just ask the ship to turn around after it deposits its goods in France and bring empty containers back to me, but that’s a ship that’s making no money — it’s just transporting empty boxes. To make back my costs, I need to charge customers for the outbound trip and the empty-box return trip. If I want to minimize idle shipping time, and thereby lower what I can charge customers, and thereby get more customers, I need to fill up that ship on the way back. This is easier when the trade gap between the two trading countries is near zero. Imagine, instead, that this is a ship traveling from China to L.A. The U.S. current-account deficit to China is quite large, meaning that there’s a lot of stuff coming from China and not a lot going back. So if a ship is going to make the circuit from the U.S. to China, it maybe will want to take a side trip from the U.S. to Japan before returning to China.

To lower prices, we’ll also want to put more boxes on board each boat. But here we run into problems: not all ports can handle monstrous ships carrying thousands of boxes. The Port of New York, as it turns out, was designed for the earlier era when stevedores manually unloaded cargo; they were caught completely unawares by the “containerization revolution.” Elizabeth, New Jersey invested many millions in containerizing their port, and they’re now the busiest port in the United States. New York is history.

Imagine the ships growing larger and larger. As Levinson says at the end of [book: The Box], there will someday soon be ships larger than “Malacca-max,” which is the largest size of ship that can fit through the Strait of Malacca. (Should such a ship ever sink, it would take with it a billion dollars in cargo.) As these ships grow larger, and the cost per ton of goods thereby shrinks, it may become cost-effective to centralize shipping to a single port, say, on the East Coast of the United States, even though the goods would then have to travel a much longer distance by train. Levinson discusses the possibility of building a port on rather remote islands north of Scotland and shipping the goods to London from there; again, all of this becomes possible as the ships become larger.

All is not roses and sunshine and cheap iPhones, however. Throughout [book: The Box], we see the longshoremen’s unions fighting tooth and nail against the mechanization of their jobs. I’ve been unable to find numbers on a quick scan, but Levinson suggests that stevedores have lost their jobs in droves. (What’s unclear to me is whether the increased volume of shipping has made up for decreased per-unit labor costs.)

Now that transportation costs are negligible, manufacturers will choose to locate their factories where labor costs are lowest, rather than locating them, say, in New York or Chicago or L.A. I don’t know enough economics to judge whether this is better for the world overall. It’s certainly brought jobs to China, whose suffering throughout the 20th century was the stuff of legend (“Finish what’s on your plate; there are kids starving in China.”)

As Karl Polanyi taught us, mechanization of everything is part and parcel of capitalism, and it is always and everywhere destructive. This may be “creative destruction,” as Joseph Alois Schumpeter put it, but it’s destruction nonetheless, and every capitalist society has done what it could to slow that destruction. I say “slow,” not “stop,” because it’s likely impossible to slow technological adoption. Stevedores seemed to know that they were eventually going to be automated out of jobs, so they negotiated contracts wherein shipping companies paid some of their savings from containerization into a fund for their employees. In the long term, I don’t know how well this worked out for stevedores — how many of them got help transitioning into new jobs, versus how many became decided to leave the labor force early, versus how many took jobs as supermarket checkout clerks because that was the best job they could find given their age and skill set. This mechanization of jobs happens continuously under capitalism, and we can expect it to continue. Librarians may lose their jobs because of Google and e-books; secretaries may lose them because of Microsoft Word and email. Many of these people have spent their lives doing exactly what we teach them that they’re supposed to do: train to become experts at their jobs and spend a lifetime working hard to gain mastery. They reach age 50 or 55, they get automated out of a job, and now what? A just society helps them either transition with dignity to a new job, or, when that seems impossible (for instance, because they’re too old to retrain), it helps them retire with a decent pension. And a decent society provides a high level of general education to everyone, so that it’s easier to transition from one job to another.

You could imagine a fantasy scenario wherein a perfectly rational, perfect omniscient corporation sees, 40 years in advance, that its business model is going to be rendered irrelevant. Better yet, corporations as a whole might, after centuries of watching the same pattern over and over, see that creative destruction is entirely predictable, and they might plan for it to protect their employees. But you can also very easily imagine the opposite (e.g., companies increasingly don’t expect their employees to stick around for more than five years, so there’s an equilibrium wherein companies don’t invest in their employees for the long term). And the opposite is much easier to imagine than the fantasy. Long story short, I don’t see any institution other than the government that’s in a position to guarantee workers job security or a dignified retirement. And given the GOP’s perennial desire to gut Social Security, I have my doubts even that the government is in a reliable position here.

Another classic capitalist pattern is the race to the bottom among state and national governments, and we see it in the shipping context as well. Ports invest millions and billions of dollars to accommodate larger and larger boats, and they take on the risk that no one will use them — or that some other port, likewise investing billions, will steal away all their business. As soon as it’s economically sensible for a shipping company to move to a cheaper port somewhere further down the coast, it will do so, leaving billions of dollars of wasted port investment.

There’s a concern, when reading a book like [book: The Box], that you’ll get a monomaniacal focus on one single cause: that the author, having spent a decade researching shipping containers, will attribute everything in the modern world to that one cause. The big questions we’d want to ask are:

• how much international trade moves by ship?
• how much has the cost of final goods declined because the costs of shipping declined? How much has the cost of final goods declined for other reasons (like, for instance, because cheap manufacturing labor has become available in China)?
• how much did it cost for a given parcel to move, door-to-door, before and after the containerization revolution?
• how much did the increase in international trade have to do with containerization, and how much had to do with the rise of the Asian Tigers?

Levinson is not really in a position to answer these questions, both because they’re not his book’s focus and because the data aren’t available to answer many of them. It turns out to be hard to count total shipping costs, door to door, when large companies often got under-the-table discounts for bulk shipments. Levinson’s focus on containers sometimes makes him credit them when other causes seem just as likely — for instance, his assertion that Korean exports trebled thanks to the containerization of their ports. It seems just as likely to me that the rapid rise of the Korean economy, the Korean government’s support for domestic manufacturers (particularly export industries?), and massive capital investments had a lot to do with the rise of Korean exports. I don’t know one way or the other, but Levinson doesn’t address these other possibilities; his book leaves little room for that.

[book: The Box] is a terrific book indeed, and I think in no small part that’s because of his monomania. It’s a tautly told tale about the men who built up their container businesses before the world even knew that standardization would change everything, and at the same time it presents a flood of data in a highly readable way. It’s one of the few books I’ve read that manages to tell a good story and deliver data well. You’ll love it.