The Box That Changed the World, 51 Years Ago Today

A ship takes on thousands of containers near Norfolk, Virginia.

Some inventions are obviously important from the moment they appear. When James Watt patented a radically improved steam engine in 1769, it was the first new power source since the windmill had appeared in Persia a thousand years earlier. Watt’s rotary steam engine, patented in 1784, could turn a shaft and thus could power almost any type of machinery from cotton mills to printing presses to ship engines. By enabling the Industrial Revolution to move into high gear, Watt’s rotary steam engine remade the world in less than a hundred years.

And some inventions are just, well, sexy. The Wright brothers’ airplane fulfilled a dream of humankind that dated back to the day a caveman had first looked with wonder upon a bird. It is doubtful that anyone in 1903 could have foreseen a Boeing 747 or an F-16, but the airplane from the outset was regarded as a wondrous thing.

Some inventions, however, no matter how important, just don’t get the credit due them. The stirrup, for instance, is so simple and, once invented, so obvious that it is hard to imagine riding a horse without it. But although mounted cavalry made the chariot obsolete beginning about 1000 B.C., the stirrup was only invented, in India, around 200 B.C., and it didn’t reach Europe until the eighth century A.D. Once it did, it made the mounted knight the dominant instrument of European warfare, profoundly affecting medieval history.

The twentieth-century equivalent of the stirrup, perhaps, is the cargo container, which was first used when a ship sailed out of Newark, New Jersey, bound for Houston, on April 26, 1956. No one would call the cargo container sexy. It is, after all, just a metal box. Nor does it usually get the credit it deserves for initiating an economic revolution.

Much of the expense of freight transportation has always lain in breaking bulk, when goods are transferred from one form of transportation, such as a ship, to another, such as a truck, train, or river steamer. Since men first went down to the sea in ships, cargo was loaded on board piecemeal and unloaded the same way. This called for great skill both to ensure that cargo space was used to the utmost and that weight was properly distributed. Modern cargo ships required sometimes hundreds of stevedores to be unloaded quickly, and then the cargo had to be loaded piece by piece onto trucks or trains to get to its final destination. It was a cumbersome and expensive process.

In the early 1950s an American trucking executive named Malcom (that’s how he spelled it) McLean initiated a better idea: Carry the cargo in aluminum and steel containers that could fit directly on flatbed railroad cars or trucks. A few crane operators could then load or unload a ship and have the goods on their way in a matter of hours.

McLean had been born near the small town of Maxton, North Carolina, in 1913. A born entrepreneur, he started in the trucking business in 1934, hauling oil for a gas station he was managing in nearby Red Springs. By 1940 he owned 30 trucks. The war proved a bonanza for him, and his revenues in 1946 were 10 times what they had been in 1940.

In 1937, waiting while lumber was being offloaded from his truck and loaded on a ship, McLean thought about how much more efficient it would be if the entire truck, in effect, cargo and all, could simply be put aboard the ship and then rolled off on the other side of the ocean. He was unable to do anything with his idea at the time, but when he sold his trucking company in 1955 for $25 million he could and did. He bought a shipping company and two World War II tankers and converted them to hold containers.

As the first container ship sailed out of Newark, bound for Houston, an official of the International Longshoremen’s Association, the notoriously corrupt union whose members handled cargo at East Coast ports, was asked what he thought about it. “I’d like to sink that son of a bitch,” he replied.

He was right. Most of the cost of freight handling at ports went to the wages of the many longshoremen needed to load and unload ships in a timely manner. Containerization reduced freight-handling costs from $5.86 to 16 cents a ton, a drop of 97 percent. (Containerization greatly reduced the amount of dockside pilferage as well, which also reduced costs substantially.) Since cargo handling is what economists call a “transaction cost,” a cost of bringing a product to market without adding at all to its value, any reduction in it translates directly into increased profits for manufacturers and—thanks to competition—decreased prices for customers.

The idea of containerization was slow to develop at first. Agreements had to be reached on standard sizes for the containers. Ports had to be fitted with cranes able to handle them. And unions, needless to say, fiercely resisted a technology that threatened the livelihoods of their members and the political power of their leaders.

It was the Vietnam War—a logistical nightmare for the U.S. military—that powered the triumph of containerization. By the late 1960s, Malcom McLean’s company was shipping 1,200 containers a month to the port of Cam Ranh Bay, making it possible to field half a million well-supplied troops at the end of an 8,000-mile supply line. Since the military contracts covered the cost of returning the containers, mostly empty, to the United States, McLean saw opportunity in Japan. At the time, Japan was the world’s fastest growing economy (industrial output in Japan rose by a factor of four between 1960 and 1973). He was soon very profitably shipping televisions and stereos from Japan to the United States at the rate of six shiploads a month.

Because containers so greatly reduced shipping costs, manufacturing could move to areas where labor was much cheaper, giving those areas—especially the so-called “Asian tigers”—a big economic boost. This made them, in turn, larger markets for the goods and services of the more developed countries. It was a classic win-win economic situation, and world trade exploded as a result. (A continuing reduction in tariffs since World War II also helped, of course, by further cutting the cost of imported goods.) In 1950 the United States exported less than $10 billion worth of goods. That figure doubled by 1960 and doubled again by 1970. But as containerization really kicked in in the 1970s, American exports rose by a factor of five. Some of that was inflation, but the real increase was still huge. In 2006 the value of U.S. exports was a hundred times what it had been in 1950, and many other countries had had similar increases.

Today, 300 million 20-foot-long containers cross the world’s oceans every year, and a single modern container ship can handle 4,000 40-foot containers. These vast ships are far larger then those that can fit through the Panama Canal, so-called Panamax ships. And there are plans to build container ships that are “Malacca-max,” just able to fit through the important shipping channel in the Strait of Malacca, between Singapore and Indonesia. A Malacca-max ship would be a quarter of a mile long, 190 feet wide (the Panama Canal is 110 feet wide), and draw 65 feet.

The total value of world exports today is over $12 trillion a year, equal to more than a quarter of world GDP. So the box may not have been a sexy idea when it sprang into the entrepreneurial mind of Malcom McLean, as he waited impatiently for his truck to be unloaded. But it was certainly a most important one. Indeed, one might not entirely unreasonably describe McLean as the father of the modern global economy.

—John Steele Gordon writes “The Business of America” for American Heritage magazine. His most recent book is An Empire of Wealth: The Epic History of American Economic Power (HarperCollins).