False Economy - Alan Beattie [108]
Indeed, one of the most unreliable aspects of such a labor-intensive process was the labor. Ports, like mines, were frequently seething pits of industrial unrest. Irregular work on one side combined with what was often a tight-knit, well-organized labor community on the other. Often workers were organized into powerful unions with the ability to stop up the bottleneck of global commerce. The violence, corruption, and struggles for power on the docks of New York depicted in the 1954 movie On the Waterfront were not all that far from reality.
In 1956, loading break-bulk cargo cost $5.83 per ton. The entrepreneurial genius who saw the possibilities for standardized container shipping, Malcolm McLean, floated his first containerized ship in that year and claimed to be able to shift cargo for 15.8 cents a ton. Boxes of the same size that could be loaded by crane and neatly stacked were much faster to load. Moreover, carrying cargo on a standard container allowed it to be shifted between truck, train, and ship without having to be repacked each time.
But between McLean's container and the standardization of the global market stood an array of severe obstacles. They began at home in the United States with the official Interstate Commerce Commission, which could prevent price competition by setting rates for freight haulage by route and commodity, and a formidable labor union, the International Longshoremen's Association. More broadly, the biggest hurdle was achieving what economists call "network effects"; in other words, the benefit of a standard technology rises exponentially as more people use it. To dominate world trade, containers had to be the same size and easily interchangeable among distinct shipping lines, ports, trucks, and railcars, which all had to be standardized to accept them.
The adoption of a network technology often involves overcoming the resistance of those who are most heavily invested in the old system. And while the efficiency gains are clear to see, there are very obvious losers as well as winners in the transformation. For containerization, perhaps the most spectacular example of this was the end of New York City as a port.
In the early 1950s, New York handled a third of all U.S. seaborne trade in manufactured goods. But it was woefully inefficient, even with existing break-bulk technology: 283 piers, ninety-eight of which were able to handle oceangoing ships, jutted out into the Hudson and the East River from Brooklyn and Manhattan. Trucks bound for the docks had to fight through the crowded, narrow streets of Manhattan, wait an hour or two before even entering a pier, and then endure a laborious two-stage process in which the goods were first unloaded into a transit shed and then onto a ship. By union rules, the "public loader" work gangs held the exclusive right to load and unload on any given pier, a power enforced by the International Longshoremen's Association through sabotage and violence against competitors. The ILA fought ferociously against containerization, correctly foreseeing that it would destroy their privileged position as bandits controlling the mountain pass. Thomas Gleason, president of the ILA, said, "The container is digging our graves, and we cannot live off containers."
On this occasion, bypassing them simply involved going across the Hudson. A container port was built in New Jersey, where a 1,500-foot wharf allowed ships to dock parallel to shore and containers to be lifted on and off by crane. Between 1963-1964 and 1975-1976, the number of workdays completed by longshoremen in Manhattan went from 1.4 million to 127,041.
Containers rapidly captured the transatlantic market, and then the growing trade with Asia. The economic effect of containerization is hard to see immediately in freight rates, since the oil price hikes of the 1970s kept them high, but the speed with which shippers adopted con-tainerization made it clear that it brought with it big benefits of efficiency and cost. The extraordinary growth of the Asian tiger economies of Singapore,