PLAY-DOH AND ERECTOR SETS. It all seems so obvious now. Railroading, North American style, is long strings of coal or grain or ethanol or automobile cars staying out of the way of the time-sensitive stack trains. Recently, I observed some children watching trains from the Chesapeake Bagel store, and they're attuned enough to contemporary practice to wait for the end of the train before they finish counting the engines.

Rochelle, Illinois, 9 July 2006.

Marc Levinson's The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, the subject of Book Review No. 48, suggests that it wasn't at all obvious, and that (as in the emergence of any industry standard) what we see today is not necessarily what any of the pioneers intended.

The book touches on a number of themes that frequently provide material at Cold Spring Shops. Start with the cartelized industrial economy of the United States immediately after World War II, the one that the self-styled progressives have retrospectively decided wasn't so bad after all (see here or here or here or here) in which public policy rigorously separated transportation companies by type (a trucking company could not own a railroad or a ship) and ratemaking equalized opportunities by equalizing rates (such that a good offloaded at any Pacific port would pay the same freight charge to Chicago, and a good manufactured at a midwestern city would pay the same freight charge to any Atlantic port) and unions and political bosses would keep everyone poorer in order that their members would be relatively less poor. The container is an idea of a trucking executive, Malcom McLean, who, worried that cheap government-surplus Liberty and Victory ships would take business from him, conceived of the if-you-can't-beat-em gambit of designing something that could be loaded at a factory, trucked to dockside, shipped to another dockside, and trucked to the consignee. To do so, however, breaches the wall of separation between over-the-road trucking and shipping companies (the book alludes to, but probably wisely does not get too deeply into, the complications of trailer- and container-on-flat-car ratemaking in those days) and it threatens the ability of the longshoremen to take a slice of the gains from trade through their special ability to stow cargo into the odd spaces inside a tramp steamer's hull in such a way that it doesn't shift and capsize the ship, while stacking it in such a way that the entire ship doesn't have to be unloaded to get at the consignment for the next port of call, and while helping themselves to some of the whiskey going into the hold. (I vaguely remember an advertisement from the early days of container shipping comparing the fate of a cask of olives in a container to what happened on the traditional waterfront. At each stop, a few olives got crushed and a few got eaten.) The container is clearly a Marshallian improvement, (the benefits to its adoption outweigh the losses from its adoption) although the agreement the ports and the longshoremens' unions came to is not the same thing as a full Kaldor or Scitovsky compensation. Dockers received job-protection or buyout compensation, and at some ports retraining to operate container-handling equipment. But other ports were bypassed as the technology diffused, and Mr Levinson notes that the substantially larger minimum efficient scales of container ships and container ports has effectively isolated much of the developing world.

At the same time, the container gave shippers opportunities to negotiate with transportation companies, and transportation companies temptations to deviate from the very strictly defined rates of the day (does anybody else remember class, commodity, and exception rates?) producing pressures to deregulate surface freight transportation (relatively straightforward for trucking, somewhat more challenging in railroading, where relationship-specific assets are common, and potentially a research topic for shipping, where the relatively small-scale tramp steamer operators had sufficient irreversibilities to make Marshallian competition difficult, something probably exacerbated by the larger scale of the container ships.)

The container ship gave ship operators new opportunities to deal with uneven trade flows. Although the money value of trade flows tends to be equal among trading partners over time, the volume, which is what matters for providing transportation capacity, can be unequal. (A New England that imports staple foodstuffs and exports textiles, shoes, and machine tools has a better chance of supporting ports and railroads than a New England that imports staple foodstuffs and exports live lobsters and computer software; the latter New England is richer than the former. Marshallian improvements again.) The notorious triangular trade of the European colonial period is an attempt to equalize volumes. Some container shipping lines offered round-the-world sailings, primarily eastward, in an attempt to keep the ships more or less continuously filled. Those attempts require reliable timekeeping, however, and come a cropper whenever fuel prices rise.

Mr McLean, I discover, was slightly ahead of his time. As early as 1966, his company envisioned "an audacious proposal to build railroad yards in Chicago and St. Louis, at its own expense. Freight forwarders owned by McLean Industries would collect freight from shippers, consolidate it into McLean-owned containers, and load the containers aboard McLean-owned railcars, specially designed by the Pullman Company to carry containers stacked two high. The Pennsylvania Railroad would pull McLean's all-container train straight to a rail yard Sea-Land would build by the docks at Elizabeth, arriving in time to meet a Europe-bound ship." Page 169. John Kneiling's visionary Integral Train Systems of 1969 anticipates intermodal trains for anything that isn't a single cargo of a bulk commodity, but his container trains are single level flats. Conrail and the Commonwealth of Pennsylvania got around to enlarging the Gallitzin tunnels on the old Pennsylvania Railroad for double-stacks in 1995.

There is plenty of additional material for the student of transportation economics. My colleague and shipping conference expert William Sjostrom has a more formal review along those lines.

The Play-Doh? An engineer stuffed some into the space between the stacks of containers and the walls of the hold, to measure deflection in heavy seas. The Erector sets? To work out, on a small scale, the practicality of a shipboard crane that could move a container from hold to dockside without capsizing the ship. The Imperial Walkers the railroads use pose fewer challenges.

(Cross-posted to 50 Book Challenge.)

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