The defining feature of the global economy is that it is fundamentally global.
In the early 1960s, world trade in merchandise was less than 20% of world economic output. Now, it is around 50%. The biggest enabler of this globalisation has been a simple invention: the shipping container. Just a corrugated steel box: 8ft. (2.4m) wide, 8ft. 6in. (2.6m) high and 40ft. (12m) long, its impact has been huge.
In 1954, an unremarkable cargo ship, the SS Warrior, carried some 5,000 tonnes of food, household goods, letters and vehicles from New York to Bremerhaven, Germany. These were carried as 194,582 separate items in 1,156 different shipments. Keeping track of the consignments was a nightmare but the real challenge was physically loading the ship.
Pallets piled high with the cargo were hoisted in a sling and deposited in the hold where longshoremen prodded each item into a snug position so that it would not shift on the high seas. Much of the cargo, from bags of sugar heavier than a man to metal bars the weight of a small car, was shifted with muscle power alone.
It was dangerous work and in a large port someone would be killed every few weeks. On SS Warrior’s trip to Bremerhaven, the ship took ten days to load and unload, as much time as it had spent crossing the Atlantic. In today’s money, the cargo cost around $420 a tonne to move. Sixty years ago, shipping goods internationally was costly, chancy, and immensely time consuming.
The solution was simple: big standard containers. But while inventing the box was the answer, the real challenge was overcoming social obstacles. Trucking companies, shipping companies and ports could not agree on a standard size. Then there were the powerful dockworkers’ unions which resisted the innovation that would mean fewer jobs for members.
The man who can fairly be described as the inventor of the modern shipping container system was Malcom McLean. McLean did not know much about shipping but was a trucking entrepreneur. He knew about trucks, about playing the system and all about saving money.
McLean not only saw the potential of a shipping container that would fit neatly on a flat-bed truck, he also had the skills and risk-taking attitude needed to make it happen. First, he gained control of both a shipping company and a trucking company. Then, he re-fit his ships to new container specifications. He encouraged New York’s Port Authority to turn its New Jersey site into a centre for container shipping and cleverly sold the idea of container shipping to the world’s most powerful customer: the US military.
In solving the logistical nightmare of shipping vast amounts of equipment to Vietnam, the container worked much better as part of an integrated logistical system which the US military could implement. Even better, McLean realised that, on the way back from Vietnam, his empty container ships could collect payloads from the world’s fastest growing economy, Japan. Trans-Pacific trading began in earnest.
The revolution in global shipping has swept the globe and, for an ever-growing number of destinations, goods can now be shipped reliably, swiftly and cheaply. A modern container ship can carry 20 times as much cargo as the SS Warrior did and disgorge its cargo in hours rather than days. And, rather than the $420 per tonne aboard the SS Warrior, customers might pay now less than $50. It is no wonder that shipping containers now carry some 90% of world trade.
Condensed from an article written by Tim Harford, Financial Times’s Undercover Economist column, “50 Things that Made the Modern Economy”, broadcast on the BBC World Service.