With Flights Grounded, Kenya’s Produce Wilts

By JEFFREY GETTLEMAN

Published: April 19, 2010

NAIROBI, Kenya — When Kenneth Maundu, general manager for Sunripe produce exporters, first heard about a volcano erupting in Iceland, he was excited. “I thought, ‘Oh, wow, a volcano,’ ” he said.

And then reality hit him in the face like a hurled tomato.

Because Kenya’s gourmet vegetable and cut-flower industry exports mainly to Europe, and because the cloud of volcanic ash has grounded flights to much of northern Europe since Thursday, its horticultural business has been waylaid as never before.

On Monday, Mr. Maundu stared at the towering wreckage: eight-feet-tall heaps of perfectly good carrots, onions, baby sweet corn and deliciously green sugar snap peas being dumped into the back of a pickup truck.

“Cow food,” he said, shaking his head. “That’s about all we can do with it now.”

If farmers in Africa’s Great Rift Valley ever doubted that they were intricately tied into the global economy, they know now that they are. Because of a volcanic eruption more than 5,000 miles away, Kenyan horticulture, which as the top foreign exchange earner is a critical piece of the national economy, is losing $3 million a day and shedding jobs.

The pickers are not picking. The washers are not washing. Temporary workers have been told to go home because refrigerated warehouses at the airport are stuffed with ripening fruit, vegetables and flowers, and there is no room for more until planes can take away the produce. Already, millions of roses, lilies and carnations have wilted.

“Volcano, volcano, volcano,” grumbled Ronald Osotsi, whose $90-a-month job scrubbing baby courgettes, which are zucchinis, and French beans is now endangered. “That’s all anyone is talking about.” He sat on a log outside a vegetable processing plant in Nairobi, next to other glum-faced workers eating a cheap lunch of fried bread and beans.

Election-driven riots, the Sept. 11 terrorist attacks and stunningly bad harvests have all left their mark on Kenya’s agriculture industry, which is based in the Rift Valley, Kenya’s breadbasket and the cradle of mankind.

But industry insiders say they have never suffered like this.

“It’s a terrible nightmare,” said Stephen Mbithi, the chief executive officer of the Fresh Produce Exporters Association of Kenya. He rattled off some figures: Two million pounds of fresh produce is normally shipped out of Kenya every night. Eighty-two percent of that goes to Europe, and more than a third goes solely to Britain, whose airports have been among those shut down by the volcano’s eruption. Five thousand Kenyan field hands have been laid off in the past few days, and others may be jobless soon. The only way to alleviate this would be to restore the air bridge to Europe, which would necessitate the equivalent of 10 Boeing 747s of cargo space — per night.

“There is no diversionary market,” Mr. Mbithi said. “Flowers and courgettes are not something the average Kenyan buys.”

Thus, the trash heap of greens. At Sunripe, one of the most profitable sides of the business is prepackaging veggies for supermarkets in Europe. Most of the peppers, corn, carrots, broccoli and beans are grown in the Rift Valley, trucked to Nairobi, and then washed, chopped and shrink-wrapped. There are even some packages labeled “stir fry,” which few Kenyans have ever heard about.

The vegetables are marked with the names of some of England’s biggest supermarkets. (They requested not to be mentioned in this article.) But those supermarkets are very particular about their brands and do not allow Sunripe to give away excess produce with their labels on it.

So, on Monday, a man in a Sunripe lab coat and mesh hair net stood at the back of the pickup truck in the company’s loading bay tearing open plastic bags of perfectly edible vegetables, each worth a couple of dollars, and shaking out the contents. Sunripe does give away unpackaged food, and two nuns from an orphanage stood nearby, waiting for some French beans.

Upstairs, Tiku Shah, whose family owns Sunripe, shouted into his cellphone. “Give us half the plane, you take half, we take half!” he said to someone.

“Arusha and Dar are also packed,” he followed up, referring to two Tanzanian cities whose warehouses were full.

Before he hung up, he said, “I’m waiting for Raila to call.”

Raila Odinga is Kenya’s prime minister, and exporters are hoping that the Kenyan government will help defray the costs of organizing special cargo flights to ship out produce.

No one here knows when the flight chaos will end. Countless tourists are also stranded in Kenya, although many of them on spotless white-sand beaches.

By Monday afternoon, a few tons of vegetables had been flown to Spain, where airports had reopened. From there, the produce will be trucked the rest of the way to northern Europe.
“The cost is doubling,” Mr. Shah said. “But we don’t have a choice. If we don’t have product on the shelves, our customers will look for alternatives.”

=> Change mode from air to trucks, which cause higher lead time and costs.

Among them, he said, Guatemala(瓜地馬拉) was a rising threat, along with North Africa.

A version of this article appeared in print on April 20, 2010, on page A11 of the New York edition.

High-speed railroading

America’s system of rail freight is the world’s best. High-speed passenger trains could ruin it
Jul 22nd 2010 | From the print edition

http://www.economist.com/node/16636101

UNION STATION in Los Angeles has been restored as a fine example of the Art Deco architecture that typified California in the 1930s. It has served as a backdrop for many Hollywood films, from “Union Station” (naturally) to “Blade Runner” and “Star Trek: First Contact”. It was the last grand station to be built before America's passenger railways went into what you might call terminal decline.

Today it is a hub for Metrolink commuter trains and Amtrak services to faraway cities such as Chicago and Seattle. These trains have to pull in and then back out in a clumsy manoeuvre. But there are plans for through tracks in time to carry the high-speed services that California is desperate to have by 2020 under an ambitious $42 billion plan to connect San Diego, Los Angeles, San Francisco and Sacramento.

California's plans were given a boost by Barack Obama's stimulus package last year. This earmarks a lump sum of $8 billion, plus $1 billion a year, to help construct fast rail corridors around America (see map). Such lines are common in Europe, Japan and, increasingly, China, yet the only thing at all like them in America is Amtrak's Acela service from Boston via New York to Washington, DC. It rarely reaches its top speed of 150mph (240kph) and for much of the way manages little more than half that, because the track is not equipped for higher speeds. Acela, like virtually all trains run by publicly owned Amtrak, has to use tracks belonging to freight railways, whose trains trundle along at 50mph; passenger trains must stick below 80mph. Despite the excitement of railway buffs and the enthusiasm of environmentalists, high-speed rail in America is likely to mean a few more diesel-electric intercity trains at 110mph, not swish electric expresses going nearly twice as fast.

But the problem with America's plans for high-speed rail is not their modesty. It is that even this limited ambition risks messing up the successful freight railways. Their owners worry that the plans will demand expensive train-control technology that freight traffic could do without. They fear a reduction in the capacity available to freight. Most of all they fret that the spending of federal money on upgrading their tracks will lead the Federal Railroad Administration (FRA), the industry watchdog, to impose tough conditions on them and, in effect, to reintroduce regulation of their operations. Attempts at re-regulation have been made in Congress in recent years, in response to rising freight rates. “The freight railroads feel they are under attack,” says Don Phillips, a rail expert in Virginia.

America's railways are the mirror image of Europe's. Europe has an impressive and growing network of high-speed passenger links, many of them international, like the Thalys service between Paris and Brussels or the Eurostar connecting London to the French and Belgian capitals. These are successful—although once the (off-balance-sheet) costs of building the tracks are counted, they need subsidies of billions of dollars a year. But, outside Germany and Switzerland, Europe's freight rail services are a fragmented, lossmaking mess. Repeated attempts to remove the technical and bureaucratic hurdles at national frontiers have come to nothing.

Staggering progress

Amtrak's passenger services are sparse compared with Europe's. But America's freight railways are one of the unsung transport successes of the past 30 years. They are universally recognized in the industry as the best in the world.

Their good run started with deregulation at the end of Jimmy Carter's administration. Two years after the liberalization of aviation gave rise to budget carriers and cheap fares, the freeing of rail freight, under the Staggers Rail Act of 1980, started a wave of consolidation and improvement. Staggers gave railways freedom to charge market rates, enter confidential contracts with shippers and run trains as they liked. They could close passenger and branch lines, as long as they preserved access for Amtrak services. They were allowed to sell lossmaking lines to new short-haul railroads. Regulation of freight rates by the Interstate Commerce Commission was removed for most cargoes, provided they could go by road.

Before deregulation America's railways were going bust (使破產). The return on capital (ROC) fell from a meagre 4.1% in the 1940s to less than 3% in the 1960s. In 1970 the collapse of the giant Penn Central caused a huge shock, including a financial crisis. By 1980 a fifth of rail mileage was owned by bankrupt firms. Rail's share of intercity freight had slumped to 35% from 75% in the 1920s. Tracks were neglected and fell into disrepair, leading to a downward spiral of speed restrictions and deteriorating service. The term “standing derailment (出軌)” was coined to describe the toppling-over of stationary freight wagons when the track gave way beneath their wheels.

Several factors had combined to bring about this sorry(可悲的) state of affairs. Services and rates were tightly regulated. Companies were obliged to run passenger services that could not make a profit. And road haulage received a huge boost from the building of the interstate highway system, which began in the late 1950s. Although this was supposed to be financed by taxes on petrol and diesel, railmen saw it as a form of subsidy to a new competitor, the nationwide trucking industry. In a neat twist, the poor condition of today's highways and the lack of public money for repairs have tilted the competitive advantage back to a rejuvenated rail-freight industry.

Giving the railroads the freedom to run their business as they saw fit led to dramatic improvements. The first result was a sharp rise in traffic and productivity and fall in freight costs. Since 1981 productivity has risen by 172%, after years of stagnation. Adjusted for inflation, rates are down by 55% since 1981 (see chart 1). Rail's share of the freight market, measured in ton-miles, has risen steadily to 43%—about the highest in any rich country.

The $34 billion purchase last year by Warren Buffett's Berkshire Hathaway of Burlington Northern Santa Fe (BNSF), one of the seven main freight railways (see chart 2), opened many Americans' eyes to the industry's significance. That America's shrewdest investor should place his biggest bet on BNSF focused attention on how the country's railways have been quietly boosting the economy by sucking costs out of many supply chains.

Coal is the biggest single cargo, accounting for 45% by volume and 23% by value. More than 70% of coal transport is by rail. As demand grows for the lower-sulphur coal from the Powder River Basin in Wyoming, it has to travel farther. In response railroads have invested in more powerful locomotives to haul longer coal trains: since 1990 the average horsepower of their fleet has risen by 72%. Yet energy efficiency has also improved. Lighter, aluminium freight wagons, double-decker ones and more fuel-efficient locomotives have lifted the number of ton-miles per (American) gallon of fuel from 332 to 457—an improvement of 38%.

But the fastest-growing part of rail freight has been “intermodal” traffic: containers or truck trailers loaded on to flat railcars. The number of such shipments rose from 3m in 1980 to 12.3m in 2006, before the downturn caused a slight falling back. Behind this lies the tide of imports coming into the West Coast ports of Long Beach and Los Angeles. A special rail expressway for freight, the Alameda Corridor, was opened in 2002 to link the ports to the big national rail routes, bypassing the 200 level crossings (grade crossings, in America) on the original branch lines that used to cause huge traffic jams on the roads as mile-long freight trains rumbled across. The corridor, one of the biggest infrastructure projects in modern America, was completed on time and on budget for $2.4 billion by a public-private partnership considered by many to be a model for other rail schemes, such as California's proposed high-speed passenger line.

Despite lots of investment—amounting to $460 billion since 1980, and equivalent to 40% of revenues in recent years—capacity constraints and rising fuel costs pushed up freight rates from 2003 until the onset of recession, since when they have leveled off. This has caused unhappiness among some coal companies which have no alternative means of transport. Although most American rail corridors involve two railroads covering the same origin and destination points, in reality competition is limited. Usually one route is more direct than the other, and if a mining company has sidings and a branch line linked to one railroad it cannot quickly and easily switch to another. Even so, American rail freight is among the cheapest in the world, costing less than half as much as in Japan or Europe. After adjusting for differences in purchasing power it is cheaper even than in China (see chart 3).

But the past ten years have seen another source of growth, as interstate highways have become clogged in places and have shown the effects of a lack of investment. Since one freight train can carry as much as 280 lorries can, railways can help to limit the rise in road congestion. Trucking companies such as J.B. Hunt have come to see the advantage of putting trailers on flat wagons for long-haul and using roads only for local pickup and delivery. This move was also spurred, according to Mr Phillips, by a shortage of lorry drivers. He says that tougher drink-driving rules and social changes have shrunk the numbers of “good ole boy” truckers inured to a life on the road. Most hauliers now suffer labour turnover of 100% a year.

Freight railways' very success is starting to create difficulties for them. The Department of Transportation estimates that many are already exceeding their theoretical capacity and are congested. It estimates that lots more investment will be needed, because capacity will have to rise by nearly 90% to meet forecast demand by 2035. The investment bill could rise yet more because of a change in the pattern of trade: in 2014 the Panama Canal opens a second lane, doubling its capacity and allowing it to carry bigger container vessels and bulk ships. Coming through to Gulf of Mexico and East Coast ports, these vessels will increase the need for better rail links inland.

In addition the freight railroads face a $15 billion bill for a new safety system to control trains on lines that also carry passengers or dangerous chemical cargoes. This system, Positive Train Control (PTC), is intended to stop or slow a train automatically if a driver goes too fast or passes a red signal. The bill to introduce PTC was signed by George Bush in 2008 only a month after a crash between a Metrolink commuter train and a Union Pacific freight train in California, causing 25 deaths and 135 injuries. The railway companies complain that only 3% of crashes are caused by the sort of human error that PTC is designed to avert and that claims that the system will improve efficiency on the network are unfounded. Whereas the FRA says that the new safety system will apply to only 65,000 miles (out of a total of over 140,000), the industry reckons it will cover more than half the network. The railways are seeking tax breaks and other subsidies to reduce the cost of complying.

Another looming threat is re-regulation. Fed up with increasing rates, customers, notably chemical, coal, agribusiness and utility companies, are complaining that these are evidence that the railroads are abusing their market power. The railroads retort that despite record traffic and profits, their return on investment since 2000 has been only 8%, which according to the Surface Transportation Board, another federal regulator, barely covers the cost of capital. They also say that freight rates are usually governed by what their competitors—ie, truckers—charge. When higher diesel costs put up trucking rates, the railways follow suit.

Politicians from West Virginia have been pushing a bill in Congress that threatens to re-regulate the railways. The industry seems confident it will not get through, but risks will remain: opposing PTC could play into the hands of those who wish to increase oversight. In his annual letter to shareholders in February Mr Buffett said that BNSF, like Berkshire Hathaway's electric utilities, required “wise regulators who will provide certainty about allowable returns so that we can confidently make the huge investments required to maintain, replace and expand the plant.”

The emergence of express intercity rail services may cause the freight railways the biggest problem of all. The policy is not only laid down by the president but also often has enthusiastic support at state level. The railways can hardly oppose Mr Obama's plan to boost high-speed rail, but they are apprehensive about what it will mean for them.

The problem is not the creation of new corridors with trains rattling along at 150mph. Such lines, like those proposed in California or between Tampa and Orlando in Florida, would have their own track, separated from existing lines though on the same strip of land as a freight railway. The expertise to build and run these lies mainly in Europe and Japan, where engineering firms and the technology and consulting arms of national railways have been eyeing the American market eagerly.

The trouble for the freight railways is that almost all the planned new fast intercity services will run on their tracks. Combining slow freight and fast passenger trains is complicated. With some exceptions on Amtrak's Acela and North East corridor tracks, level crossings are attuned to limits of 50mph for freight and 80mph for passenger trains. But Mr Obama's plan boils down to running intercity passenger trains at 110mph on freight tracks. Add the fact that freight trains do not stick to a regular timetable, but run variable services at short notice to meet demand, and the scope for congestion grows.

Return of regulation

The freight railroads have learned to live with the limited Amtrak passenger services on their tracks. Occasionally they moan that Amtrak pays only about a fifth of the real cost of this access. Some railmen calculate that this is equivalent to a subsidy of about $240m a year, on top of what Amtrak gets from the government. Freight-rail people regard this glumly as just part of the cost of doing business, but their spirits will hardly lift if the burden grows.

Their main complaint, however, is that one Amtrak passenger train at 110mph will remove the capacity to run six freight trains in any corridor. Nor do they believe claims that PTC, due to be in use by 2015, will increase capacity by allowing trains to run closer together in safety. So it will cost billions to adapt and upgrade the lines to accommodate both a big rise in freight traffic and an unprecedented burgeoning of intercity passenger services. Indeed, some of the money that the White House has earmarked will go on sidings where freight trains can be parked while intercity expresses speed by.

Federal and state grants will flow to the freight railroads to help them upgrade their lines for more and faster passenger trains. But already rows are breaking out over the strict guidelines the FRA will lay down about operations on the upgraded lines, such as guarantees of on-time performance with draconian penalties if they are breached and the payment of indemnities for accidents involving passenger trains. The railroads are also concerned that the federal government will be the final arbiter of how new capacity created with the federal funds will be allocated between passenger and freight traffic. And they are annoyed that there was little consultation before these rules were published.

There have been some heated meetings between freight-railroad managers and FRA officials. Henry Posner III, chairman of Iowa Interstate Railroad, ruefully notes that freight railroads, in the form of passengers and regulation, “are getting back things that caused trouble”.

From the print edition: Briefing

America Revealed: Pizza Delivery | PBS America

HOW CONTAINERS MOVE ACROSS CTA

http://hhla.de/en/container/cta/time-lapse-film.html

The 18-Wheeler Recovery

What trucking statistics—yes, trucking—can tell us about the economy.

By Daniel Gross (http://www.slate.com/articles/business/moneybox/2010/05/the_18wheeler_recovery.html)

Whether you are an economic pessimist or optimist, you have to consider all the data—not just the data you like. The problem is sussing(認識到) out which data points to trust. Generally, measurements of actual activity are better than surveys about attitudes or behavior. What's more, many data series come out after the fact and are subject to revision, which makes them less reliable when it comes to gauging what's taking place right now. We won't have a definitive reading on how much the economy grew in this year's first quarter, for example, until much later this year.

But companies that handle a lot of transactions for their customers wind up with a lot of data. And if you're big enough and have national scale, that data can yield some significant insight. That's why a relatively new monthly employment number from ADP, which handles payroll, benefits and other administrative functions for hundreds of thousands of clients, is widely followed. Ceridian, which has a similar business, has a similar information-based data point that aims to provide a real-time snapshot of the performance of a key sector of the economy—and by proxy, of the entire economy. It's the Ceridian-UCLA Pulse of Commerce Index, or PCI.

Ceridian's ComData unit manages payment cards for trucking companies—drivers use them to fill up on diesel at giant truck stops. As a result, it has a pretty good idea of how much diesel is being purchased by professional truckers on any given day. Professor Ed Leamer of UCLA, who helped create the index, had a "Eureka!" moment when he looked at the points of purchase on the map overlaid on the Interstate Highway System. "I said, oh my god, we have sensors at 7,000 locations on all the interstates. What could be better than that?" (Economists get more excited than the rest of us when happening on a potential new indicator.)

Even in this day and age, a huge amount of stuff—commodities, components, finished products—is moved around the country by truck. "Trucking represents inventory and finished goods in motion," said Leamer. "In a normal economy, the trucking activity is proportional to GDP." If you lay the PCI over the Federal Reserve's Industrial Production Index, as you can do with a click on the Ceridian Index homepage, you see that the PCI seems to give us some advance warning of the direction and strength of industrial production. In effect, Leamer argues, the PCI allows us to know sooner than the Fed would tell us how industrial production is going.

But when an economy starts to run into trouble, the goods sector—not the service sector—tends to go south first. And so having a gauge on the performance of the industrial goods sector is highly useful. In late 2007, when few economists saw a recession on the horizon, the PCI began to stall out (使陷入泥潭), and it fell significantly in the first half of 2008—a time when recession denial was at its peak. "It gave us a proper warning sign that the economy was going to sink," said Leamer. Then, the PCI began to turn up in July 2009, the month the recession seems finally to have come to an end.

The index is seasonally adjusted (since October is an abnormally high month due to stocking up in advance of Christmas) and adjusts as well for the number of weekdays in a particular month. (Fun fact: Diesel sales on weekends are half what they are on weekdays.)

Of course, like all economic indicators, the PCI has its weaknesses. Factors other than economic growth can affect fuel consumption. When energy prices skyrocketed, companies got religion about fuel efficiency. Wal-Mart instituted a plan to reduce fuel use in its trucking fleet. Hybrid-electric diesel rigs may soon hit the road. Companies like Greenroad have developed software programs that monitor behavior to encourage better efficiency. If truckers begin hypermiling, the volume of goods could easily rise without a concomitant increase in fuel consumption. And over time, as services grow and more goods become digital (nobody puts boxloads of CDs on trucks anymore), the relationship between trucking miles and GDP will grow more distant.

At this point, however, Leamer says these factors are marginal. So what is the PCI telling us now? The April report says the PCI fell 0.3 percent, although the measure was still 6.5 percent higher than it was in April 2009. Leamer, who believes (as I do) that the U.S. economy is now in a self-sustaining recovery, notes that the PCI, which was strong in December, has slowed down somewhat. As a result, we should expect a weak industrial production number for April. "This is cause for concern but doesn't completely dampen all the positive news we were reading about," Leamer said. As shown by the recent GDP figures, the economy keeps on truckin'—but in a slightly lower gear.


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Daniel Gross is an editor and columnist at the Daily Beast.

Life Sentence for Chinese Driver for Evading Tolls

By ANDREW JACOBS
Published: January 13, 2011

BEIJING — Like most drivers around the world, Shi Jianfeng did not like to roll down his window at toll booths. In fact, Mr. Shi, a farmer from Henan Province in central China, was so averse to toll collectors, he evaded more than $550,000 in road fees during eight months of highway driving, according to the provincial court that convicted him.

But his punishment, life in prison and a $300,000 fine, has provoked a firestorm in the media and among Chinese who have accused the government of imposing a draconian sentence on a man trying to make ends meet in these inflationary days. “Rape and murder will earn you 15 years in prison but evading road charges will get you life,” said one typically cynical posting on Tianya, a popular message board. “Ours is a miraculous country with peculiar laws.”

Chinese legal scholars said it was the first time toll evasion had earned a scofflaw a life sentence.

There seems to be little dispute that Mr. Shi, who had turned to hauling sand and gravel to make a living, behaved egregiously. He purchased two fake military license plates and other documentation that allowed him and his hired drivers to escape paying tolls on his two trucks during 2,300 trips between May 2008 and January 2009. In announcing the verdict this week, The Dahe Daily suggested that the defendant had accepted his guilt because he declined to appeal. He also did not have a lawyer.

But the financial details of the violations for which Mr. Shi was convicted only served to feed suspicions that he had been railroaded. The toll per truck trip averages more than $200 — a high figure, though truck tolls can go by weight.

But many people noted that his profit during those toll-free days amounted to $30,000. If he had truly evaded $556,000 in road fees, as the police charge, he would have lost more than $520,000 from his trucking business.

The local judiciary was so unnerved by the uproar that it took the unusual step of holding a news conference this week to explain Mr. Shi’s transgressions in detail.

The explanation, however, did little to assuage public anger.

In a commentary he wrote Wednesday in the Beijing News, a lawyer, Xu Mingxuan, said that if the official numbers were to be believed, the greater crime was that Chinese drivers were subjected to exorbitant tolls. “Such figures only highlight the people’s suffering,” he wrote.

With private car ownership soaring in China, the episode seems to have stoked mounting aversion to the tolls that have grown along with the nation’s rapidly expanding highway network. The county has been adding tens of thousands of miles to its highway system, and the vast majority operate with user tolls. A World Bank report in 2007 estimated that mile for mile, Chinese toll rates rivaled those in Germany, where incomes are far more extravagant. One of the capital’s more unpopular highway tolls, for example, is the $1.50 charged for access to the 12-mile highway to Beijing’s international airport. (That roadway’s operators are expected to earn eight times their initial investment, according to government figures.)

Popular aversion to such fees has been inflamed by media reports of freeloading government motorcades and inflated tolls that end up in the pockets of local officials. In 2008, the country’s National Audit Office said that motorists had handed over $2.3 billion at illegally erected tollbooths.

In a commentary on Wednesday, The Yangcheng Evening News in Guangzhou suggested that those who set toll rates, not Mr. Shi, should be punished for onerous fees that added to the ever increasing cost of food and other goods. “Fraud is despicable,” the paper wrote, “but who’s scamming whom?”

Li Bibo contributed research.

A version of this article appeared in print on January 14, 2011, on page A4 of the New York edition

The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger

Marc Levinson
Princeton University Press, May 20, 2010 - Business & Economics - 400 pages

In April 1956, a refitted oil tanker carried fifty-eight shipping containers from Newark to Houston. From that modest beginning, container shipping developed into a huge industry that made the boom in global trade possible. The Box tells the dramatic story of the container's creation, the decade of struggle before it was widely adopted, and the sweeping economic consequences of the sharp fall in transportation costs that containerization brought about.

Published on the fiftieth anniversary of the first container voyage, this is the first comprehensive history of the shipping container. It recounts how the drive and imagination of an iconoclastic entrepreneur, Malcom McLean, turned containerization from an impractical idea into a massive industry that slashed the cost of transporting goods around the world and made the boom in global trade possible.

But the container didn't just happen. Its adoption required huge sums of money, both from private investors and from ports that aspired to be on the leading edge of a new technology. It required years of high-stakes bargaining with two of the titans of organized labor, Harry Bridges and Teddy Gleason, as well as delicate negotiations on standards that made it possible for almost any container to travel on any truck or train or ship. Ultimately, it took McLean's success in supplying U.S. forces in Vietnam to persuade the world of the container's potential.

Drawing on previously neglected sources, economist Marc Levinson shows how the container transformed economic geography, devastating traditional ports such as New York and London and fueling the growth of previously obscure ones, such as Oakland. By making shipping so cheap that industry could locate factories far from its customers, the container paved the way for Asia to become the world's workshop and brought consumers a previously unimaginable variety of low-cost products from around the globe.


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Several hundred books on globalization are now published each year, but very few discuss in any detail the unprepossessing aluminum or steel boxes, in lengths of twenty or forty feet (or sometimes longer), that have become the building blocks of our modern economy. This oversight is unfortunate because more than 18 million containers are now constantly crisscrossing the globe on more than 3,500 cargo ships and countless trucks and trains. At ports and other cargo terminals, giant grab cranes load and unload the huge boxes. Container-based shipping has sharply cut transportation costs and time, enhanced reliability, reduced pilferage and theft, and slashed insurance rates. Containers have been directly responsible for, among other things, an enormous increase in the volume of international trade; the creation of complex “just in time” supply and manufacturing chains built around the geographically dispersed production of intermediary goods; the rapid industrialization of China; and a significant decline in the price of consumer goods. Unlike traditional waterfront activities, however, container shipping usually takes place out of most people’s sight and as a result remains perhaps the greatest hidden wonder of our age.

Although The Box may be somewhat too American centered, economist and business journalist Marc Levinson has written an eminently readable history of the advent of the modern logistics industry that goes a long way toward bringing the attention of a nonspecialist audience to the topic. Despite his belief that his subject has “all the romance of a tin can” (p. 1), his account is anything but dull because he builds much of his narrative around a cast of colorful entrepreneurs, engineers, and union leaders. The most significant character is Malcom P. McLean, who launched modern containerization in April 1956 by having fifty-eight truck trailers loaded onboard a refitted oil tanker that sailed from Newark, New Jersey, to Houston. The main background to Levinson’s account, however, consists of the various roadblocks to containerization put in place and enforced by government regulators in agencies such as the Interstate Commerce Commission (ICC), the United States Maritime Administration, and the Federal Maritime Board. In the author’s opinion, the bureaucrats, far from having the consumer’s best interest in mind, usually undertook to protect established commercial interests by limiting competition in the transportation industry.

As Levinson observes, the idea of shipping freight in large boxes goes back at least to the late nineteenth century, when some British and French railway operators tried to move household furniture stored in wooden boxes from rail flatcars to horse carts. Early American implementation of the concept, however, bumped into the stone walls erected by regulatory agencies. Among other decisions, the ICC put a stop to an early attempt at containerization by a midwestern railroad in the early 1930s because the railroad offered weight-based rates for its services rather than charging a specific rate for each commodity, as required at that time. Although the ICC commissioners found the container to be “a commendable piece of equipment,” they mandated that railroads could not charge less to carry a container than the equivalent weight of the most expensive commodity stored in it.

The situation was much the same on the maritime side of the transit. The problem was not that seamen failed to notice the significance of the time and costs associated with the labor-intensive loading and unloading of loose cargo in so-called break bulk ships. Indeed, most of them were keenly aware of the problems high-lighted by two studies prepared in the 1950s, which found that longshoremen labor accounted for half of the total duration of one particular transatlantic voyage and between 60 and 75 percent of the cost of transporting cargo in another voyage. Nevertheless, most industry insiders had become comfortable working within the rigid regulatory and governmental support structure. As Levinson notes, for all their “earthy bluster,” the businesses of America’s leading maritime industry operators had survived, “thanks almost entirely to government coddling”: “On domestic routes, government policy discouraged competition among ship lines. On international routes, rates for every commodity were fixed by conferences, a polite term for cartels, and the most important cargo, military freight, was handed out among U.S.-flag carriers without the nuisance of competitive bidding. Decisions about buying, building, or selling ships, about leasing terminals, and about sailing new routes all depended upon government directives” (pp. 150–51).

Laws and regulations further ensured that trucks and ships had nothing in common, thereby inhibiting rationalization through multimodal transport. As Levinson observes, McLean’s idea that “a truck line would use its own trucks to drive its own trailers on board its own ships, float the trailer down the coast, and then drive them to their destination at the other end violated the ICC’s basic precepts” (pp. 43–44). The problem was that the ICC had allowed ship rates to be set well below rail and truck rates to compensate for slower service. McLean, in sending his trucks by water, would severely underprice other truckers. He eventually found a way to circumvent regulatory barriers by acquiring shipping lines that had been granted monopoly on lucrative routes and by moving out of the trucking business altogether while maintaining good relations with former collaborators.

Of course, regulatory barriers were not the only obstacle that modern logistics pioneers had to overcome. Longshoremen’s unions strongly opposed containerization until their members were given generous job-buyout packages. As might have been expected, however, both labor and port authorities receptive to technological progress ended up better off than their more “stubborn” competitors, in part because containerization led to the disappearance of several smaller ports.

Bureaucratic inertia in the U.S. military was another problem. In this case, the creation of the “greatest logistical mess in the history of the U.S. armed forces” (p. 171), Vietnam in the late 1960s, finally gave McLean and his associates an opportunity to prove the tremendous benefits of their approach. McLean benefited doubly because not only was he generously compensated by the U.S. military, but he also managed to inaugurate the first commercial container service between Japan and the United States in the process.

Following his lead, several American engineers, technicians, and managers eventually developed, from the 1960s onward, new types of containers as well as specialized port facilities and equipment to handle them. Although Levinson provides much detail on these developments, including the intricate financing schemes that were crucial in making them a reality, he unfortunately fails to include a single illustration in his book (with the exception of the dust-jacket cover), leaving his reader often wondering what earlier technologies actually looked like. Despite this shortcoming, readers with an interest in business and technological history will find many valuable descriptions and case studies in his account. In the end, though, today’s fully integrated container shipping system became a reality only after the rail, trucking, and maritime deregulation in the 1970s and 1980s.

Levinson’s treatment of the revolutionary days of container shipping, which lasted until the early 1980s, is very thorough, but his account of the more recent past is much less so. Indeed, people familiar with the industry may get the impression that a final (non-American) chapter is missing from the book. For example, although Levinson describes the rise of container ports in western Europe and East Asia, he devotes only two paragraphs to the fact that European and Asian firms that were late entrants in the game now dominate the industry. No U.S. firm is currently listed in the world’s top eighteen container ship companies. Five of these top firms (including the three largest) are headquartered in Europe, three in China (two in mainland China and one in Hong Kong), three in Japan, two in Taiwan, two in South Korea, and the remaining three in Singapore, Chile, and Israel. (See Ted Smith-Peterson, “Railroading’s New Economy: The Spigot,” Trains 66, no. 9 [2006]: 34–41.) In Levinson’s opinion, these late entrants achieved success because they “arrived with financial and managerial skills foreign to many of the carriers they replaced, skills appropriate to an industry in which raising capital and managing information systems were far more important than maritime knowledge” and because they were not burdened with “the legacy of government subsidies and directives that had crippled many of their predecessors by forcing them to buy ships built in their home countries or to sail routes determined by regulators” (p. 275). No doubt many readers would like to know more about these developments and about which skills Levinson means. Levinson also barely alludes to more recent technological advances and to the amazing fact that the rest of the world now handles only one-third as many containers as the Chinese do (for both domestic and international trade). Furthermore, in the words of one industry analyst, China has now become the “U.S. railroads’ growth engine” and has been the cause of an American “rail renaissance” (Tom Murray, “Railroading’s New Economy: The China Factor,” Trains 66, no. 8 [2006], p. 28).

Despite such shortcomings, however, The Box is highly recommended for anyone with an interest in understanding the emergence of our contemporary “globalized” world economy.

PIERRE DESROCHERS
University of Toronto

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Fact from Wiki (http://en.wikipedia.org/wiki/Intermodal_container)

History 
Main article: Containerization
The standardised steel shipping container has its origins in the 1950s when commercial shipping operators and the United States military started developing such units.[2][citation needed] Shipping owner Malcom McLean worked with engineer Keith Tantlinger to develop the modern intermodal container. The logistics method employing these was named Container Express and was abbreviated ConEx. That abbreviation evolved into a word within the American English lexicon.
ISO standards for containers were published between 1968 and 1970 by the International Maritime Organization. These standards allow for more consistent loading, transporting, and unloading of goods in ports throughout the world, allowing for saved time and resources.
The International Convention for Safe Containers is a 1972 regulation by the Inter-governmental Maritime Consultative Organization on the safe handling and transport of containers. It decrees that every container traveling internationally is supplied with a "CSC-Plate".