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DECLINE

Containerization and the Decline of South Street Seaport

by Christine Graham

What is containerization?

Containerization is the packaging of goods into shipping containers that fit into the cargo holds of boats and can be easily transferred to trucks, railroad cars or even commercial jets. A container is essentially a rectangular, 20- to 40-foot long, 8-foot wide, and 8 to 8 1/2 half-foot high truck trailer.1 Smaller packages of goods are consolidated together and packed into this larger box, or container.

Origins and Early History

Containerization was the brainchild of Malcom McLean, owner of a North Carolina-based trucking company who was able to conceptualize the “systemic” nature of shipping, which involved air, sea, and land transport of goods. He started a larger company, Sea-Land, in 1956, which owned both trucks and ships and converted World War II tankers, which could carry truck trailers.2 The first of his ships, the Ideal-X, sailed out of Newark in 1956, and a revolution was born; he later built a 101-acre facility at Elizabeth for his company, and containerization dominated the shipping scene by 1964.

Economic Benefits

Containerization dramatically lowered the cost of freight handling, enabled logistical separation of shipping centers from factories and markets, and allowed manufacturing to move out of urban centers.3 Before containerization, international trade was an expensive process; 25 percent of the cost of goods could be attributed to crating, insuring, transporting, loading, unloading, and storing goods being exported.4 Labor costs were also drastically reduced by containerization, as longshoremen were no longer required to to pack and unpack each small parcel aboard a ship by hand. The cost of longshore labor comprised up to half the cost of shipping; by decreasing the amount of handling required to ship goods both labor and shipping costs were substantially reduced. One also did not need to pay a man operating a crane as much as they would have had to pay a unionized longshoremen, nor did they need to pay as many crane operators as they did longshoremen. Labor costs thus plummeted. It also opened the door to international shipping and manufacture, which meant manufacturers could take advantage of low manufacturing costs abroad. Taking advantage of the ability to exploit cheap labor led to a more global economy, in which production could be diverted away from the manufacturers’ homeland. It actually became cheaper, for example, to produce clothes in Asia and import them into New York rather than to produce them in New York and sell them in New York. China and other formerly impoverished Asian nations thus came to prominence as manufacturing centers. New York lost its dominance over many industries in which it had been a primary producer, such as the garment industry.

How it Works

In order to fully understand how the process of containerization works and why it was such an improvement over older methods of cargo handling, one must first understand “breakbulk” shipping, the standard up until McLean’s innovation. When it arrived from ships, cargo was an incoherent jumble; one cargo ship could contain a variety of dissimilar items. These goods needed to be taken off the boat and put into a transit shed, a warehouse adjacent to the dock, before they could be taken away and loaded onto incoming trucks or railcars. Trucks and railcars would also bring goods which needed to be unloaded and stored in the shed before they could be loaded onto boats. Goods in these sheds were subject to potential loss, theft, or tampering.

Longshoremen would consolidate these sundry pieces of freight into a “draft” of cargo. They would then put it on top of a pallet which could be lifted with a forklift, hoist this from the dock with a crane, guide it over an open hatch, and lower it into the hold of the ship. At this time, other longshoremen on the ship would remove the boxes from the board to which they had been attached in order to be slung into the ship, stowed it using “wheeled carts, forklifts, metal hooks, and their own brute strength,” and built retaining walls of lumber and metal around it to secure the cargo and hold it in place during its travels.5 A “hatch gang” usually contained 18 to 23 men but could contain up to 100 to 125 men.6

The introduction of the shipping container eliminated most of the work required of longshoremen. These sundry parcels of goods did not need to be individually unloaded and loaded; everything was pre-organized into truck trailer-sized containers, which could be moved out of ships and easily attached to truck chassis or placed into railroad cars to be moved away from the pier. Container-sized slots awaited incoming containers in the ship’s berth, into which containers were loaded by cranes and secured by pins attached to the ship’s hull. If parking lots were available, truck chassis and containers could be kept on the port’s premises and used as needed to facilitate shipping and transport. Once goods were unloaded from ships they could be taken away to their destination after minimal, painless, and fast handling. Once the amount of handling necessary was decreased, the demand for laborers and the number of dock jobs available decreased as well; instead of as many as 100 men, only a handful of men were needed to operate the crane and drive the trucks.

Why it Was so Hard on South Street

Logistics

The decline of South Street Seaport can be traced back to the 1840s when steamboats replaced sailing ships; these larger ships were too big to navigate the shallow East River, or to dock and turn around once docked at the East River piers. These piers were built for comparatively smaller sailing ships. Some piers were even too small for a truck to turn around on. Because of this development, most commercial traffic went over to the Hudson River by the 1850s, where deeper waters facilitated quick, easy, and- importantly- cheap docking and unloading of cargo. While doing so was cumbersome and time-consuming, some steamships continued to use South Street, anchoring further out in the river and unloading onto small tugs which carried the goods aboard the ship back to the pier.

The South Street piers were unfit for container ships not only in terms of size but because of their decrepit condition and age. The East River pier at Roosevelt Street dated from the 1870s; many of these old, narrow “finger piers” were so dilapidated they were literally collapsing into the water.7 Such piers were not substantial enough to accommodate large-scale, intense cargo shipping which employed multiple means of transportation, dependent on the stability of the pier.

Before the advent of containerization in the 50s and 60s, New York handled one third of America’s foreign trade and three quarters of the nation’s wholesale trade. Because containers could be transferred easily to railroad cars, it made sense that once shipping with containers was the norm, shipping centers needed to be located near railroad terminals, not near factories as they were at the Seaport. The Seaport and Port of New York simply did not have the space available on the densely-built Manhattan Island to fulfill this need, and thus they lost their hold on the shipping industry as it went over to the more capacious Port Newark-Elizabeth Marine Terminal.

The land space available in New Jersey was also advantageous because it allowed for parking lots. Container shipping requires 30 to 50 acres of back-up space for the storage and handling of containers.8 Trucking was an essential link in the chain which enabled containerization, and without parking lots the process would become inefficient. Trucks had to wait at least 1 or 2 hours just to get into traffic-clogged Manhattan and navigate its crowded highways, streets, and bridges. They then had to compete for parking near piers. At Newark, on the other hand, one could use Elizabeth, a 450-acre facility at which trucks could park and 25 vessels could dock at once.9 The ease of shipping in New Jersey was an extreme disincentive to use the Port of New York at all. Docking at New York meant wasting unnecessary time, money, and effort, when parking lots, proximity to railroad and airport facilities, and state-of-the-art piers were available at Newark.

Union Politics

The Port of New York was known for its expensive, slow, and unproductive cargo handling. Shippers had to pay high costs for sub-par service from longshoremen, for whom rushing to unload cargo meant going home with less pay at the end of the day. They were thus disinclined to handle the goods expediently. As members in unions like the ILA (International Longshoremen’s Union), longshoremen had a monopoly over port activity. Attempting to bypass the longshoremen and unload the cargo with a shipping company’s own workers resulted in vandalism. These unions functioned as gangs, hostile to all who were unwilling to fully accommodate their demands. Longshoremen’s strikes in New York closed the docks in 1945, 1948, 1951 and 1954, which made shippers uncertain their goods would even be handled upon arrival in the Port of New York. Inter-union rivalries between the American Federation of Labor; the Teamsters Union, a mob-affiliated body; and the ILA exacerbated these uncertain conditions and further deterred shippers from using these conflict-ridden piers in New York.

Denial and Rejection of Help

New York has always been a forerunner on the international scene and is a justifiably proud city. In the case of containerization, though, pride may have been its greatest downfall. Too arrogant- based on prior economic performance- to accept help and too proud to admit it needed any, New York fell to the wayside as containerization became the order of the day. Port Authority made an offer to New York to modernize its piers in 1947; New York promptly rejected the proposal. A strong city on the whole economically, the rejection of this proposal evidenced a critical oversight: while the whole city may have been doing well, its piers were not. Newark, on the other hand, was not as strong a city as New York economically and was in a position to accept the help of an outside body. It leased its docks and airport to Port Authority in 1947. Port Authority gave Newark $11 million to dredge its channels and rebuild wharves once Newark agreed to work with them; New York received nothing and did not change. Port Authority built superior facilities at Newark. The Waterman terminal, for example, the biggest terminal at the site, had a fifteen-hundred foot wharf running parallel to its shore, which meant fast docking and easy loading were possible in a way New York could not match.10

Because of its proximity to rail lines and its space for marshal trucks, Newark wound up reaping the benfits of a 1953 offer by McLean Trucking company to build a terminal at New York harbor after Port Authority intervened on Newark’s behalf. Port Authority also funded the development of the 450-acre facility at Elizabeth south of Newark. With these tools at their disposal “every ton handled in New Jersey meant one less ton handled in New York” and the decline of New York was pronounced and undeniable. It became further and further overshadowed by Newark.10 Goods which would take days to load onto a ship in New York via the “breakbulk” system could be loaded onto containerships at Newark in eight hours.

In New York City, proposals put forth to update the piers were limited in what they were willing to invest or do to update the piers. Most proposals were heatedly debated and shot down, either by waterfront unions, businesses, or other politicians, all of whom were united in their selfish protection of the piers against modernization. One such proposal for pier redevelopment made in 1961 posited that New York’s piers should be redeveloped to accommodate a mix of loose freight, passengers, baggage, and containers. Containerization, though it was clearly where the port’s logical future would have to lie, was not acknowledged as the primary objective but rather was shoved in amidst a list of arcane concerns.11 For longshoremen, if modernization had to come at the expense of their livelihood, they did not want it to happen at all. As Teddy Gleason, general organizer of the International Longshoremen’s Association said, it would “come out of the hides of the dock workers and their families.” 12 Politicians of the 50s and 60s did not want to lose dockworkers’ votes and thus were willing to invest in modernizing current port facilities but not in containerization, from which dockworkers would incur massive layoffs. Politicians also did not want to irritate the organized crime presence on the waterfront, the Teamsters. Wholesalers and business owners did not want to lose out to internationally-based companies who could manufacture and sell to their own city for cheaper than they could. Rather than accept the reality of the situation, they chose to fight it off until it was too late.

One such proposal in 1956 put forth by Commissioner O’Connor stipulated that two-tiered piers would be built with paved patios on which trucks could park and turn around; however, only 5 would be built, which simply was not competition for a place like Elizabeth that could handle 25 vessels at once. Such proposals exemplify the flippant attitude New York politicians had toward containerization. Even as late as 1961, proposals by New York politicians failed to mention “containerization.”13 Those who could have updated New York’s facilities to contend with Newark and protect commercial maritime interests seemed uninterested in taking the measures necessary to maintain that sector of the economy. They seemed oblivious to the fact that using state-of-the-art cranes and pier equipment, containerships at Newark could be loaded in eight hours, which defeated any impulse many shippers had to go to New York, where the same activity took days. New York paled in comparison, yet was not taking the necessary steps to ameliorate its insufficiency. Because of inaction, New York lost out to Newark on the profitable container shipping industry.

Conclusion

While some may call containerization a blessing for cargo shippers and industrial interests at large, it was the final nail in South Street Seaport’s coffin in its capacity as a functioning commercial port. It had been struggling to keep up with relevant technological developments as far back as the steam engine in the mid-19th century. One might also call it a boon for the Port of New Jersey, which blossomed as it assumed the role of primary site for cargo handling. South Street Seaport was fazed out of its position as a maritime powerhouse. On the other hand, when relieved of its role as a commercial port, the door was opened for South Street to flourish as a tourist attraction, via its restoration. Containerization effectively completed the mechanization of maritime life, rendering it a life and culture lost with the demise of the Port of New York.

Endnotes

1.Gesamtverband der Deutschen Versicherungswirtschaft e.V. (GDV, German Insurance Association), “Container Handbook: Cargo loss prevention information from German marine insurers,” World Shipping Council – industry information, copyright 2007, http://www.worldshipping.org/index.html (accessed November 14, 2007)

2.Shane Hamilton, “Book Review: The Box: How Container Shipping made the World Smaller and the World Economy Bigger, by Mark Levinson,” Business History Review, http://www.hbs.edu/bhr/archives/bookreviews/80/shamilton.pdf (accessed November 18, 2007).

3.Mark Levinson, “Container Shipping and the Decline of New York, 1955-1975,” Business History Review 80 (Spring 2006), 49-80, http://www.library.fordham.edu (accessed November 1, 2007), 49.

4.Ibid, 49.

5.Jacques Nevard, "I. L. A. Aide Hails Cargo Container :Gleason Calls New Method 'Shipping Revolution' That Could Help Foreign Trade ." New York Times (1857-Current File), March 26, 1959,  http://www.proquest.com/ (accessed November 15, 2007); Levinson, Mark, “Container Shipping and the Decline of New York, 1955-1975,” Business History Review 80 (Spring 2006), 49-80, http://www.library.fordham.edu (accessed November 1, 2007).

6.Charles P. Barnes. The Longshoremen (Philadelphia: New York Survey Associates, Inc. and The Russell Sage Foundation), 40.

7.Mark Levinson, “Container Shipping and the Decline of New York, 1955-1975,” Business History Review 80 (Spring 2006), 49-80, http://www.library.fordham.edu (accessed November 1, 2007), 56.

8.Ibid, 57.

9.Ibid, 59.

10.Ibid, 57.

11.Ibid, 64.

12.By Werner Bamberger. "Containers Cited As Shipping Must” :Industry Officials Say Use Will Be Limited Only by Challenge of Labor ." New York Times (1857-Current file),  January 21, 1959,  http://www.proquest.com/ (accessed November 15, 2007).

13.Mark Levinson, “Container Shipping and the Decline of New York, 1955-1975,” Business History Review 80 (Spring 2006), 49-80, http://www.library.fordham.edu (accessed November 1, 2007), 64.

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