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

1. Identify a selection from this chapter that you found particularly interesting and explain why you selected it.

One of the points that I found most interesting was how easy or efficient 

It can be to smuggle undeclared merchandise, illegal drugs, undocumented immigrants, and terrorist bombs as moving cargo. Of course it’s easy to understand how this is possible, as the chapter described how the average port workers handle around 10,000 loaded containers per workday and a single ship can hold around 3,000 40-foot-long containers, and that even when the doors are opened, it is rare that anything is revealed besides a wall of paperboard cartons. In other words, there really is no sufficient method in which the workers can affirm that the manifest corresponds to what is inside. Clearly this is a significant problem, that needs to be addressed. Obviously the high-efficiency transportation machine is incredibly beneficial and ultimately responsible for international trade and therefore their use needs to be maintained. However, a new advancement and solution will have to be made to avoid this illegal smuggling and dangerous activity, without inspectors and security officials physically inspecting all of the contents of each of the approximately 10,000 containers that they come across each day. 

2. How does the author see the development of the shipping container contributing to globalization?

The author sees the development of the shipping container contributing to globalization because it ultimately enabled international trade. Before the container was in international use, it was much too expensive to trade with far away countries because the transportation costs were so stifling. In 1961, before international container use, ocean freight costs alone accounted for 12 percent of the value of US exports and 10 percent of the value of US imports. In fact, freight costs were said to be even more significant than government barriers like tariffs. The chapter gives the example of a pharmaceutical company paying approximately $2,400 to ship a truck-load of medicines from the U.S. Midwest to an interior city in Europe in 1960. This sum included payments to a dozen different vendors: a local trucker in Chicago, the railroad that carried the truck trailer on a flatcar to New York or Baltimore, a local trucker in the port city, a port warehouse, a steamship company, a warehouse and a trucking company in Europe, an insurer, a European customs service, and the freight forwarder who put all the pieces of this complicated journey together, and that half the total outlay went for port costs. 

However, the container made transportation much easier and cost effective as it brought incredible reductions in the cost of moving freight. Therefore, countries who previously before could not even imagine selling their products abroad because of the transportation expenses were now able to do so. No longer can companies only deliver products to nearby foreign neighbors, but they can afford to ship their products half-way across the globe and further. This highly globalized method of product transportation helped spur innovation as companies were now competing with global competitors and had to find new ways to make their products better, more efficient and ultimately stand out to the customer. So many of our every-day products come from far away countries like China and is thus hard to imagine going without them. For, without the container, while trade with countries like Japan or China would not have necessarily been impossible, it would have been much more expensive and had a very limiting effect on companies that participated in trade and the products they traded. 

3. What short run impact did this innovation have on National Income and employment? What would the long-run impact be? Explain.

In the short-run, National Income would be positively affected by containers. Using the equation Consumption + Investment + Government Spending + (Exports-Imports), consumption would increase as consumers would have a wider variety of goods and services to purchase at lower prices because of the increased levels of competition. Moreover, because companies saved money on transportation costs, they would have more money to potentially invest in their company and other ventures which would also drive the GDP up. It is clear that this innovation would greatly increase exports but it would also increase imports so this particular part of the equation is not clear as to how it would affect National Income as it is dependent on the actual amount of exports and imports. In the short-run, the container certainly eliminated jobs, but it also created jobs as well.

In the long run, national income of countries throughout the world has increased as international trade has enabled richer countries to invest in these poorer countries through their labor and emerging economies. Ultimately, as stated in the text, containers have increased the ready availability of inexpensive imported consumer goods, thus boosting living standards around the world. Thus, in the long-run employment has been positively affected as may jobs have been created through the opportunities of international trade. However, this also comes with a price: “low shipping costs helped make capital even more mobile, increasing the bargaining power of employers against their fare less mobile workers.” Therefore, it is much more difficult now for workers and trade union to negotiate for improvements in wages and benefits.