Full text of Economic Review (Federal Reserve Bank of San Francisco) : October 1972

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LIBRARY
NOV 131972

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Monthly Review

In this issue

Confessions
of a new Central Banker
On the Waterfront

October 1972

(S@mf@s§o®Ei3§ of @ N ew C e n tral SSciraker
. . . The new President of the Federal Reserve Bank of San Francisco
analyzes some of the nation's major economic problems.

O m ffe© Wea#©rfr®H#
—'Tlie Uni©!
. .. W e st C o a st dockworkers negotiated a landmark agreem ent in I960,
giving up (for a price) longstanding restrictive practices.

— The Strike
. . . The 134-day strike had a major (if temporary) impact on
the regional econom y— and a major impact on Phase II machinery.

— The le x
. . . The longshorem en's future depends upon containerization
— a simple yet revolutionary innovation in cargo handling.




Editor: W illiam iu rk e

October 1972

MONTHLY

REVIEW

Confessions of a New Central Banker
By John J. Bailes, President
Federal Reserve Bank of San Francisco

Remarks made by Mr. Bailes at a dinner meeting of Federal Reserve Directors and
Commercial Bankers, Los Angeles, October 5, 1972.

t is a real pleasure to be here this evening
with the Directors of the Federal Reserve
Bank of San Francisco and its branches and
with a group of leading bankers from the Los
Angeles area. It is certainly an honor to
serve in my new job as the ninth chief execu­
tive of the Federal Reserve Bank of San
Francisco, which I have always regarded as
one of the leading Reserve Banks.
To be sure, I came here from the East, and
most of us recognize that there are some dif­
ferences between eastern and western banks
and bankers. Nevertheless, the similarities
are also important. Thus, I don’t feel like a
total stranger in this environment— especially
since I have been closely acquainted with
some of you for years. I am looking forward
to getting better acquainted with the rest of
you.

I

I view my new position as an opportunity
to become a part of the dynamic and innova­
tive financial community of the West. Having
come from an area of the country character­
ized by limited-area branch banking, one of
the major differences I already have noted in
this part of the country is that, despite the
prevalence of state-wide branching, there is
obviously an opportunity for small and
medium-size banks to play a role in the
regional economy, particularly in quick adap­
tations to local circumstances. The number
of such banks represented here tonight testi­



fies to the fact that they can prosper even in
the shadow of large branch systems.
Commercial to Central Banker
It is certainly a challenge to share the plat­
form tonight with the illustrious Chairman of
the Board of Governors of the Federal Re­
serve System. This is particularly true in view
of the fact that I have not attended a meeting
of the Federal Open Market Committee since
1959 and am now about to begin a refresher
course in central banking. Perhaps I could
rise to the challenge and do something spec­
tacular for the Federal Reserve System if I
could get the cooperation of an old friend
who is here tonight. He is Lee Atwood, a
former director of the Los Angeles Branch of

our Bank and the retired President of North
American Rockwell Corporation, on whose
Board of Directors I was privileged to serve
until I accepted my present position. When
Rockwell-Standard was merged with North
American Aviation to form North American

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Rockwell, a technology-transfer committee
was established, whose main purpose was to
explore ways of applying space-age technol­
ogy to commercial products. Now that Lee
is retired and has a lot of time to think about
such matters, I may ask him to consider ways
of applying space-age technology to the ad­
ministration of a Federal Reserve Bank and
to the formulation of monetary policy!
Having so recently come from commercial
banking, where I was privileged to serve for
the last thirteen years with Mellon Bank, I
would have to admit that I haven’t yet fully
shifted back to the point of view of a central
banker. In recent years, I have spent consid­
erable time on the affairs of the American
Bankers Association, including service last
year as Chairman of the Special ABA Com­
mittee on the Presidential Commission on
Financial Structure and Regulation, and also
including service until recently as a member
of the Administrative Committee of the Gov­
ernment Relations Council and as a member
of the Economic Advisory Committee.
Just before resigning recently from the
Trustees of the Banking Research Fund of
the Association of Reserve City Bankers, I
was managing trustee for a study, which I
had proposed, of loan comm itm ents by
banks. This study is still in preparation and
is being done by a well-qualified professor at
Harvard, who was formerly on my staff at
Mellon Bank. It was aimed at answering the
general questions of what constitutes a pru­
dent upper limit to loan commitments and
how such commitments can be better man­
aged. Among other things, we were attempt­
ing to test the feasibility of a suggestion made
by Arthur F. Burns, in an April 1970 address
to the Association of Reserve City Bankers,
that banks should limit their loan commit­
ments to amounts they reasonably believe can
be financed in periods of tight money and
that banks should charge at least as much
for take-downs under commitments as they




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are paying for additional funds at that time.
Needless to say, I will be very interested in
seeing the study when it is finally published.
The only purpose in mentioning my back­
ground in such an immodest fashion is to
make the point, for those of you who don’t
yet know me, that if I don’t understand the
problems of commercial banks, it has not
been for lack of opportunity. There is the
further point that your views and problems
will always receive a sympathetic hearing at
the Federal Reserve Bank of San Francisco
— whether or not we end up agreeing with
you about any proposed course of action or
remedies. In the same breath, I should also
mention— as Chairman Burns reminded me
during a visit in Washington before I as­
sumed office— that I am now working for all
the people, and should solicit views and opin­
ions not only from the banking and business
communities, but from other segments of
society as well. I am certain that you will
appreciate the desirability of doing this.
Role of Federal Reserve Bank
of San Francisco
In this age of specialization, I certainly
don’t pretend to be knowledgeable on all
phases of banking— far from it. But I believe
that we have in the combined staff of this
Bank such knowledge and expertise as is
necessary to carry out our functions. I know
that if I can’t answer your questions on some
bank operating matters, such as check col­
lections or cash operations, we have people
who can— a group headed by our very able
First Vice President, A. B. Merritt, and in­
cluding Paul W. Cavan, Senior Vice Presi­
dent and M anager of our Los Angeles
Branch, who is one of our hosts tonight.
With the team we now have and will de­
velop, it is my hope to make the Federal
Reserve Bank of San Francisco an active
partner with the banking and business com­
munities in improving the financial and eco­

October 1972

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nomic climate of the Twelfth District. I don’t
yet have a blueprint on how to do this, and
it would be premature to even mention some
possibilities I have in mind until they have
been studied more thoroughly. Pending com­
pletion of such studies, however, we would
welcome now or at any time any suggestions
or proposals which you might have along
these lines.
Federal Reserve S y s te m Key Problems
Let me now turn to several other matters
having to do with the Federal Reserve Sys­
tem. In so doing, I propose to dig back into
past history, feeling that this offers valuable
perspective on the present. It is especially
appropriate to do this in view of the fact
that the Chairman of our Board of Directors,
Dr. O. Meredith Wilson, was a distinguished
historian before he became President of the
University of Oregon and later the Univer­
sity of Minnesota. Incidentally, he informs
me (presumably with tongue in cheek) that
in his current position as President and Di­
rector of the Center for Advanced Studies
in the Behavioral Sciences at Stanford, he
is running a monastery for scholars— but
without celibacy!
There are two general points I want to
make. First, to the extent that there have
been “mistakes” in past monetary policy, as
viewed by impartial observers, the most fre­
quent cause has been deficit financing by
the U. S. Government. The second point
has to do with the vital necessity of main­
taining an independent central bank.
First, as to monetary policy, second-guess­
ing the Fed is a popular pastime. Some peo­
ple have even made a career of it. And I
would have to admit that I have done my
share over the years, starting with a doctoral
dissertation in 1950 on the subject of mone­
tary policy during World War II and the im­
mediate postwar years..



REVIEW

If there was one lesson that was indelibly
impressed upon me in preparing that disser­
tation and in subsequent studies, it was that
efforts to maintain a predetermined and rel­
atively low level of interest rates necessarily
immobilize monetary policy as an instrument
of economic stabilization— and indeed make
the central bank an “engine of inflation.”
Further, the use of fiscal policy as an instru­
ment of restraint also becomes unworkable
under such conditions. It now seems so clear
in retrospect. Yet, it was not so clear at the
time, as I was reminded recently when rem­
iniscing with Cecil Earhart, my predecessor
twice removed, who served as President of
the Federal Reserve Bank in those years. We
recalled the agonizing debates which took
place on the subject in the postwar years—
i.e., could the level of interest rates be al­
lowed to rise from the artificially low levels
maintained during the war without serious
risk of a financial and economic collapse?
Along with many others at that time, I urged
the necessity of restoring timely and flexible
monetary policy, in conjunction with fiscal
and debt-management policies, as indispens­
able in a broad program of vigorous eco­
nomic growth without inflation. When the
Government securities market was finally un­
pegged in March, 1951, in the now famous
Treasury-Federal Reserve Accord, the econ­
omy and the financial markets did not col­
lapse, and monetary policy was restored to a
viable role in combatting the inflationary
pressures that arose with the Korean War.
It was true then, and is true today, that
if monetary, credit, and fiscal policies are
used in a coordinated manner, they are ca­
pable of exerting a powerful influence on in­
come, production, and prices. Moreover,
since these instruments of policy operate to
influence the general economic environment
in an indirect fashion, they are more com­
patible with a private enterprise economy
than the main alternative approach—namely,

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a system of direct economic controls involv­
ing detailed regulation of markets and prices.
It seems that we have to keep re-learning
the lesson that the principal obstacle to suc­
cessful use of monetary, credit and fiscal pol­
icies has been the failure to use them in a
coordinated fashion. In that case, they are
likely to offset and defeat each other. In­
deed, much of our economic history is mark­
ed by inappropriate budget deficits defeating
efforts to combat inflation through credit re­
straint. The problem that we are faced with
at present— namely, a huge Federal deficit
in a period of strong economic expansion, is
in fact new wine in an old bottle— and there
have been many such “old bottles” over the
years.

6

Monetary-Fiscal Mismatch, 1965
By way of illustration, in the latter part
of 1965, when the “new economics” was
still calling for expansive policies on aggre­
gate demand, with a view to pushing the un­
employment rate below 4% , there were some
observers who recognized the emerging in­
flationary threat. One of these was Arthur
F. Burns, then President of the National Bu­
reau of Economic Research and John Bates
Clark Professor of Economics at Columbia
University. In his Benjamin Fairless Memo­
rial Lectures in Pittsburgh at Carnegie In­
stitute of Technology (now Carnegie Mellon
University), Dr. Burns recognized the con­
tributions made by the “new economists.”
But he observed that their favorite instru­
ments of policy, if pushed beyond a point,
may bring on inflation and undermine pros­
perity. Specifically, he observed that such a
point was close at hand, if not already
reached, and he called for less liberal mone­
tary and fiscal policies, in the interests of
both the domestic economy and our inter­
national balance of payments. Following a
luncheon that Mellon Bank gave for Dr.
Burns, I recall a discussion I had with some




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“new economists” who believed that it was
too early to start fighting inflation. That view
proved clearly wrong, as illustrated by subse­
quent developments.
Meanwhile, the Federal Reserve System
had also correctly diagnosed the emerging
inflationary pressures stemming from the es­
calation of the Viet Nam War in mid-1965
and from the concurrent expansion in “Great
Society” welfare expenditures. By Decem­
ber 1965, the System increased the discount
rate as a public signal. Prior to the increase,
strong public statements were made by vari­
ous high-ranking members of the Adminis­
tration, including the Secretary of the Treas­
ury, warning against such action. After the
increase, there was strong denunciation of
the move, including a statement by the Chair­
man of the Council of Economic Advisers to
the effect that it represented a serious breach
in coordination of monetary and fiscal policy.
However, by the spring of 1966, it was
clear that the Council of Economic Advisers
had seriously underestimated the strength of
the inflationary boom that was developing.
Not only did the Administration fail to re­
vise its fiscal stance at the time, but it at­
tempted to dissuade the Federal Reserve
from meeting the threat through a modest
measure of credit restraint. With the benefit
of hindsight, it appears that the December
1965 increase in the discount rate and the
associated move toward credit restraint was
not only appropriate but overdue.
Lessons from Abroad. At this point, I
would like to digress for a moment. In 1959,
I happened to be in London on Mellon Bank
business at the time when the Report of the
Committee on the Workings of the Monetary
System— better known as the Radcliffe Re­
port—was scheduled for debate in the House
of Commons. In the course of that debate,
I heard the Chancellor of the Exchequer an­
nounce that one of the principal recommen­
dations of the Radcliffe Report had been im-

October 1972

MONTHLY

plemented — namely, that henceforth any
proposed change in Bank rate by the Bank
of England would have to be submitted in
writing by the Governor to the Chancellor
and approved by the Chancellor before be­
coming effective. Actually, of course, this
new procedure simply formalized a practice
which had been followed since 1946 when
the Bank of England was nationalized.
Can there be any doubt of the outcome
had such a system prevailed in the United
States in 1965—i.e., any doubt that the Sec­
retary of the Treasury would have refused to
ratify the proposed increase in the discount
rate by the Federal Reserve? Can there be
any doubt that our economic situation would
have ended up even more unbalanced than
it did, in the “credit crunch” in the summer
and fall of 1966?
Perhaps this one illustration will serve to
buttress the case of those of us who believe
that the independence of the central bank
within government— but certainly not from
the government — is a vital protection to
sound economic policy in a free society. The
world’s largest debtor— i.e., the U.S. Trea­
sury— at times has not taken an unbiased
and objective view on measures affecting the
cost and availability of money.
Independence of the Federal Reserve Sys­
tem. This point has special relevance in
view of repeated efforts in certain quarters
in the Congress to undermine the indepen­
dence of the Federal Reserve within govern­
ment. Most recently, this effort has taken
the form of an amendment to an omnibus
housing bill (H.R. 16704) which calls for
an annual audit by the General Accounting
Office of the Board of Governors and the
Federal Reserve Banks. It would give the
G.A.O. access to all books and records of
the Federal Reserve System. At first blush,
this appears to be something that is hard to
argue about— who can be against audits? In
point of fact, it happens that the Board of



REVIEW

Governors of the Federal Reserve is already
audited by a reputable private firm (Lybrand, Ross Bros. & Montgomery); in turn,
the Board’s staff thoroughly audits the Re­
serve Banks.
The real point of the amendment in ques­
tion is that it would not be confined to a fi­
nancial audit. Instead, it would include an
appraisal of operations, not only in regards to
compliance with law, but also in reference to
recommendations “for attaining a more eco­
nomical and efficient administration” of the
Federal Reserve. The authority is so broad­
ly described that it could include a review of
System open-market and foreign operations.
In my judgment, this could lead to intimida­
tion of the Federal Reserve and to efforts to
influence its policy. Fortunately, it now ap­
pears that the amendment is dead for this
session of Congress, mostly because of the
clogged legislative calendar, but the pro­
posal is almost certain to be raised again.
Eternal vigilance is the price necessary to
avoid “political money,” and I urge that you
be alert to such proposals in the future.
Budget Deficits — the Main Barrier to
Monetary Policy. To return to the subject
of Federal Reserve policy, I recall my par­
ticipation in President Nixon’s pre-inaugural
Task Force on Inflation in 1968. On this
task force, I associated myself with the crit­
icism of “stop-and-go” monetary policy, as
evidenced by the “credit crunch” of 1966
and the unduly rapid monetary expansion
in the second half of 1968—which, subse­
quent to our report, led to the “credit
squeeze” of 1969. Flowever, I managed to
see that our report recognized the fact that
large budget deficits are the most likely fac­
tor to pull monetary policy off course toward
over-expansion, leading later to the necessity
of tromping hard on the credit brakes.
Politically, while it is not too difficult to
use fiscal policy for purposes of economic
stimulus, it is very difficult to use it on the

7

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side of restraint. Recently, we have again
heard words of warning on this subject. In
view of the huge deficit in the Federal budget,
which threatens to get still larger, Chairman
Burns has stated before the Joint Economic
Committee his fear that the Federal budget
is out of control, and has called for support
of current Administration and bi-partisan
Congressional efforts to secure passage of
a $250 billion ceiling on Federal expendi­
tures in the current fiscal year. I was pleased
to note that the American Bankers Associa­
tion also called for such a ceiling in its
action of August 22, and proposed other
measures to arrest the alarming uptrend in
Government expenditures. A vote on the
expenditure ceiling is scheduled in the House
this week, and a great deal depends on the
outcome.
The fundamental problem is to re-estab­
lish a sense of fiscal discipline in Congress,
and especially to regain control over Fed­
eral spending. Otherwise, fiscal policy will
not only fail to live up to its potential, but
is likely to defeat monetary policy as well.
Unfortunately, some of those prominently
associated with the “new economics” are
calling for a different approach than the
one I have outlined. In a recent article in
the Wall Street Journal, one such represen­
tative warned against “prematurely” cutting
off the monetary and fiscal lifeblood of the
current economic expansion, stating that we
need not start throttling down until mid1973. In my personal judgment, this would
be too late to re-establish fiscal discipline for
purposes of economic stabilization, given
current circumstances.
In Conclusion
In closing, I would like to indicate the

8



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challenge I see in my new job which drew
me to it, despite the attractiveness of a ca­
reer in commercial banking. I see an op­
portunity, which I hope I can fulfill, to serve
the community as a whole by accepting a po­
sition where I can work closely with bankers
and businessmen from a huge and dynamic
region—the Twelfth Federal Reserve Dis­
trict—to help solve some of the trying finan­
cial and economic problems now besetting
society.
The kinds of problems I have in mind in­
clude : (1) the world’s apparent inability to
come to grips with inflation; (2) the acceler­
ating need for capital, based on rising ma­
terial expectations, especially from those
groups in society which have tended to be
by-passed by the promise of technology; (3)
the exacerbation of the capital shortage by
the need to refurbish existing capital facili­
ties and to improve the quality of the envi­
ronment; and (4) the need to use financial
institutions in our society in a way which
will benefit all of the people, through in­
creasing opportunities for them to earn their
own livelihoods and lead the “good life.”
That is a tall order— and is a challenge to
all of us. Unless we succeed, the future of
private enterprise is in danger. In striving
for these goals, let us recall the words of
Woodrow Wilson’s first inaugural address,
which happen to be inscribed on a plaque
at the entrance to the Federal Reserve Bank
of Cleveland, where I first began my tour
of duty in central banking:
“We shall deal with our economic
system as it is and as it may be modified,
not as it might be if we had a clean
sheet of paper to write upon, and step
by step we shall make it what it should
be.”

October 1972

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REVIEW

On the Waterfront
S. The Union
quarter-century of almost unbroken
labor peace on the West Coast docks
came to an end in mid-1971, when the dockworkers of the International Longshoremen’s
and Warehousemen’s Union (ILWU) closed
down Los Angeles, San Francisco, Seattle,
and other major ports. By the time the twostage, 134-day strike finally ended in Febru­
ary of this year, the ILWU had taken over
center stage in Phase II wage negotiations,
and had also become embroiled in contro­
versies regarding the impact of maritime
labor disputes on foreign-trade flows and the
impact of technological change on dock pro­
ductivity. This report describes these issues
against the background of an industry which,
despite its limited size, has played a crucial
role in the regional economy throughout the
past generation.

A

Longshoremen's work
The variety of dry-cargo goods handled by
the West Coast longshoremen reflects both
the natural-resource mix and the industrial
and consumer requirements of the Pacific
region. The chief outbound goods are (from
California) cotton, rice, fresh and processed
fruits, iron ore, steel scrap, hides and tallow,
machinery, vehicles and other manufactured
goods, plus (from the Northwest) wheat,
logs, lumber and paper. The principal in­
bound cargoes are bananas, coffee, copra,
sugar, iron-and-steel mill products, nonferrous ores, vehicles, machinery, jute prod­
ucts and (in Southern California) lumber.
The longshoremen handle these different
types of dry cargo in a variety of forms—
packaged in cartons, bales, sacks, individual



pieces or, increasingly, in containers. Tanker
cargoes, in contrast, are usually handled out­
side the main harbor areas by specialized
industrial employees.
Roughly two-thirds of this movement of
dry-cargo goods is in foreign trade, with
about one-third of the entire total involving
shipments to and from Japan. Domestic
commerce generally consists, in roughly
equal parts, of general-cargo trade with Ha­
waii and Alaska, lumber and iron-and-steel
shipments in the Atlantic Coast trade, and
lumber carried in Pacific coastwide trade.
According to the standard study of the
industry, Paul Hartman’s Collective Bargain­
ing and Productivity, roughly 200 steamship
companies were sailing about 800 dry-cargo
ships in the Pacific trade in the late 1960’s.
However, the number of firms and the num­
ber of ships has varied somewhat over time,
since changes frequently develop as shippers
divert ships from a route in one part of the
world to another, and as firms enter and
leave the industry.
The nine American-flag companies with
Pacific Coast headquarters generally utilize
their entire fleets in the Pacific trade, while
several Atlantic and Gulf Coast firms allo­
cate a large fraction of their fleets to trading
with West Coast ports. These firms carry
roughly half of all Pacific dry-cargo tonnage,
and foreign companies carry the other half.
Japan furnishes the largest single foreign
contingent, but the Scandinavian countries,
Great Britain, Germany and the Netherlands
also are major participants in this trade. As
a group, American-flag firms have about
one-third more ships, but account for about

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three times as many sailings, as Japanese
firms.

10

Longshoremen's bosses
Stevedoring contractors are the direct em­
ployers of the West Coast longshoremen.
Most of the stevedoring companies are small
firms which supervise cargo loading and un­
loading, and in addition provide certain types
of machinery and technical services. How­
ever, some of the cargo-handling services are
performed by relatively large operators of
terminals and special facilities. These com­
panies provide all the handling, sorting, stor­
ing and moving of cargo between the ships
and the rail or truck carriers.
Stevedoring contractors sell labor services
(but little else) to ship operators or their
agents. Contractual relations between these
firms and the ship-operating companies re­
semble those between contractors and their
customers in building construction or build­
ing maintenance, in situations in which labor
service is the largest or the only commodity
exchanged.
In principle, competitive bids are submit­
ted by the contractors to ship operators or
agents, with rates quoted for various com­
modities by conventional physical units. The
commodity rates reflect each contractor’s
productivity experience, prevailing wage
rates, differentials for handling difficult cargo,
and a standard amount added to cover over­
head, insurance and profit. In practice, how­
ever, the bids vary only slightly, so that the
business relationship between a given con­
tractor and the ship operator or agent may
continue for a long time without interrup­
tion. Direct hourly labor costs, including
fringe benefits, are uniform for the entire
Pacific Coast, and are specified in the labor
agreement between the employers’ group
(the Pacific Maritime Association) and the
union (the ILWU).
Gangs of workers or individual longshore­
men are dispatched on a first-in first-out




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basis to each job. The job, which consists
of the loading or discharging of a single ship,
lasts no more than several days, and the men
then report back to the hiring hall for re­
dispatch. Although longshoremen often have
preferences for individual employers or indi­
vidual locations, they generally cannot estab­
lish a permanent employment relationship
with any employer. Over any period of time,
the men usually work everywhere and for
everyone in the port. Occupational special­
ization exists, but it is usually limited to
“ steady m en” engaged in certain highly
mechanized operations. Thus a given em­
ployer has a continuously changing work
force, and his productivity eventually tends
to equal the port average.

The Pacific Maritime Association was
founded in 1949 as the successor to earlier
groupings of waterfront employers and ship
operators. The association includes all of
the large firms and most of the smaller firms
engaged in ship operations, stevedoring op­
erations, and terminal or other shoresidefacility operations, as well as agents for for­
eign lines calling at Pacific Coast ports.

October 1972

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Stevedoring contractors and terminal opera­
tors together provide a slight majority of the
firms making up the PMA.
Longshoremen's union
The ILWU, the employees’ organization,
is built around a number of local units, which
are defined along both geographical and
occupational lines. Typically each Pacific
port has a local for longshoremen, another
for ship clerks, another for “walking bosses”
(immediate supervisors), another for ware­
housemen, and so on. The California, Ore­
gon and Washington locals of the principal
dockwork occupations constitute a major
department of the union, formally organized
into the longshore division. But this division
—the group involved in the massive dock
strike— contains less than one-fourth of the
ILWU’s total membership of 65,000. (More­
over, the dockside labor force today, at
about 13,500, is only half of what it was a
quarter-century ago.) The rest of the union
membership consists of dock workers in
other areas (Alaska, Hawaii and British Co­
lumbia), Northern California warehousemen,
and Hawaiian sugar and pineapple workers.
Union activity in Pacific ports was quite
sporadic before the turn of the century. Some
units that had affiliated with the Knights of
Labor vanished when that organization broke
up in the 1890’s, but many of the survivors
then affiliated with the nationwide Interna­
tional Longshoremen’s Association (ILA ).
Longshore unions were badly hurt in the
early part of this century, when they lost
major strikes in 1901, 1916, and again in
the 1919-22 period. San Francisco steve­
dores struck in 1919 for larger work gangs
and decreased sling loads, but their strike
was broken and employers thereafter en­
forced compulsory membership in a com­
pany union. From then until 1934, the few
independent unions which continued to exist
on the West Coast docks had no voice in
determining wages or working conditions.



REVIEW

The Great Depression and a more favor­
able political climate— including the passage
of the National Industrial Recovery Act
(1933)— stimulated new union activity on
Pacific Coast docks. The West Coast ILA
locals, meeting in February 1934, thereupon
decided to seek a coastwide contract cover­
ing wages, hiring practices, and dockside
working conditions.
Decades of tension
When negotiations failed in May, the long­
shoremen (and later the seamen) went out
on strike, but waterfront employers attempt­
ed to continue operations nonetheless. In a
number of confrontations involving pickets,
strikebreakers, and police, several strikers
were killed and hundreds injured, mostly in
the “Bloody Thursday” outbreak which took
place in San Francisco on July 5, 1934. This
incident was followed by a general strike in
the San Francisco Bay area, which ended
only when representatives of the employers
agreed to submit the disputed issues to
binding arbitration.
The arbitration board, after more than
two months of hearings, granted most of the
union’s demands. The decision established
a uniform coastwide contract, a 30-hour
workweek, and a jointly run hiring hall with
a union-appointed dispatcher to give out job
assignments in strict rotation.
The Pacific Coast District of the ILA
broke away from the parent body and joined
the newly organized Congress of Industrial
Organizations in 1937. The seceding district
reorganized itself into the present organiza­
tion— the International Longshoremen’s and
Warehousemen’s Union — and became in
name as well as fact independent of the East
Coast and Gulf Coast longshoremen. By
1937, the union ran the hiring halls under
rules negotiated with the employers and was
well on its way to its goal of complete job
control.
The next two decades consisted essentially

FEDERAL

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of employer counterattacks and union con­
solidation, as employers attempted to regain
control over dockside work rules. However,
other issues also came to the fore during
World War II and the early postwar period.
For example, the 1946 negotiations, which
led to a damaging 52-day strike, largely in­
volved the size of the wage increase needed
to offset the postwar inflation.
Years of ill will finally led in 1948 to a
complete breakdown in dockside labor rela­
tionships. The Waterfront Employers Asso­
ciation, representing the stevedoring contrac­
tors, once again challenged union operation
of the hiring hall. For a while, the two sides
agreed to sidetrack that issue while awaiting
a court test of its legality under the newly
passed Taft-Hartley Act, but a breakdown
ensued soon thereafter when, because of a
unity pact with other unions, the ILWU
joined a maritime strike called in early Sep­
tember. At that point, the employers flatly
refused to bargain with any of the union’s
current leaders.
The impasse finally was broken when rep­
resentatives of the ship-operating firms met
with union leaders without the participation
of the stevedoring contractors. The new em­
ployer group and the union reached agree­
ment after some days of negotiations, and
the strike ended in early December. Even
so, the agreement changed relatively little;
the hiring hall was still run by a union-named
dispatcher, while union work rules remained
unchanged.
The present structure of waterfront col­
lective-bargaining institutions took shape in
1949 and 1950. In early 1949 the Pacific
American Shipowners Association and the
Waterfront Employers Association merged
to create the Pacific Maritime Association.
The union meanwhile developed as an inde­
pendent entity after it was expelled from the
CIO in 1950 on the grounds of dominance
by left-wing leadership. Most importantly,
the turmoil of the12 1930’s and 1940’s was



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followed by a period of unprecedented labor
peace. Between the time of the 95-day stop­
page in 1948 and the 134-day stoppage in
1971-72, there were no major strikes on the
Pacific Coast docks.
Gaining job control
Over several decades, the ILWU gained
a strong position on the docks through its
control over the labor supply and the pace
and methods of work. Moreover, nearly all
the important elements in this control were
won during the first half-dozen years of the
union’s existence. The union successfully
eliminated all traces of worker allegiance to
specific companies, and changed the employ­
ment relationship from the conventional one
in which the firm hires, directs and discharges
workers to one in which the union partici­
pates in all of these functions. These gains
were obtained through a number of economic
pressures — principally several coastwide
strikes of long duration and hundreds of
smaller local job actions.
The ILWU eventually acquired more job
control than probably any other union in the
nation. A variety of restrictive work rules
and practices developed over time: redun­
dant manning, formal and informal output
restrictions, specified methods of production,
and paid idle time. These rules paralleled
somewhat the restrictions imposed by some
craft unions, such as bogus typesetting by
printers, excess manning on the railroads,
and specified tools and techniques in con­
struction. Still, the ILWU outmatched these
other unions in the scope of the powers that
it obtained.
In striking contrast, the typical industrial
union obtained hardly any job control during
this period. Hiring remained management’s
prerogative in these areas. Most industrial
unions, unlike the ILWU, obtained little
power over job assignments, methods of
work, and job-manning schedules.
Paradoxically, the strong drive for com-

October 1972

MONTHLY

plete job control came from the leftist ILWU
rather than from the conservative businessstyle unionists of the ILA. Longshoremen on
all seacoasts were unionized and established
collective-bargaining procedures at about the
same time. However, the West Coast union
sought and won job control relatively quickly
in the 1930’s. The East Coast union did
neither; as late as 1954, job assignments
were handled through the corruption-prone
shapeup rather than through strict hiringhall procedures, and reforms came about
only then as a part of government efforts to
clean up the New York docks.

Job control on the Pacific Coast came
about because of the impact of an aggressive
new union on a fragmented old industry. The
union-run hiring hall and work-force control
developed out of the union’s attempt to de­
casualize the labor market, to establish uni­
form working conditions, and to limit the
size of the work force, all as a means of
obtaining higher pay. Restrictive work rules
were sought to protect the health, safety, and
employment opportunities of the unionized
dockside work force.



REVIEW

During the 1930’s and 1940’s, however,
employers fought long and bitterly to halt
the union’s increasing job control. The
union-run hall was first granted by an arbi­
tration board, not by the employers, and
employer opposition did not cease until more
than a decade later. Regulations concerning
sling loads, pace of work and idle time were
seriously contested for some time, except
during World War II. Employer attempts to
roll back completely all elements of union
job control ended with the collapse of the
old employers’ association during the 1948
strike, but employers continued to press for
greater productivity through elimination of
work restrictions. Within a few years of the
1948 debacle, the then-new PMA began to
gather productivity data for use in bargain­
ing, and this led eventually to the elimination
of restrictive work rules under the landmark
contract negotiated in 1960.
Giving up job control
Market pressures and the increasing sub­
stitution of capital for labor helped over­
come the union’s resistance to change in the
years preceding that new contract. The
American-flag segment of the West Coast
shipping industry had never been strong ex­
cept during World War II. Profit margins
chronically were narrow, and coastwide and
intercoastal trade clearly had begun to van­
ish as trucking and other modes of trans­
portation took over more and more traffic.
Moreover, because of restrictive labor prac­
tices, dockside employers consistently had to
contend with the highest dock costs in the
nation.
Mechanization — in particular, the onset
of the container revolution — could have
been held off at least for a few more years.
Yet if the union opted for accepting mechani­
zation, it could count on an increase in de­
mand for efficient port services, sufficient to
generate high wages for at least a substantial
portion of the dockside labor force.

FEDERAL

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In addition, there was the threat of govern­
ment interference with the union’s high de­
gree of job control. The union-run hiring
hall and its closed membership lists were
contrary, at least in principle, to the public
policy proclaimed by the Taft-Hartley Act.
Only slight changes in the law or its inter­
pretation would be required to destroy both
practices. Restrictive work practices also
were very difficult to defend in public.

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H e o v y e@ra<g©Bi#r®ti@§! of older men
persists in middle of M & M decade
_________________________ |
|

14




66+

|_________________________

6 0 -6 5

|

|

5 5 -5 9

|

5 0 - 5 4 ________________________________ _______ I

|
|

_______________________ 4 5 -4 9 _______________________________ |
|

4 0 -4 4
1

[

3 5 -3 9
|

|

3 0 -3 4 __________ I
|

|

Historic agreement
The end result of all these pressures was
the historic Mechanization and Moderniza­
tion (M&M) agreement of October 1960.
Mechanization meant the adoption of new
machines and new techniques of cargo han­
dling; modernization referred to the elimina­
tion of obsolete work rules and practices.
The PMA undertook to pay $5 million a year
for 5 Vi years into a jointly administered fund
to provide both a wage guarantee and retire­
ment pay for older men. In exchange, the
union gave up work practices which mangement regarded as restrictive but which the
union hitherto had considered as essential to
job security—load limits, double handling of
cargo at dockside, and the “four-on four-off”
practice of job manning in the hold. About
one-third of the M&M fund represented the
“sale price” of the restrictive work practices,
and the remainder represented the men’s
“share of the machine.”
Both sides expected that the agreement
would lead to increased capital investment,
higher labor productivity, lower costs— and
decreased employment. But they also felt
that job reductions would be accomplished
by attrition, estimated at about 4 percent a
year. No fully registered (Class A) long­
shoreman could be laid off except for cause.
Yet wherever attrition was not sufficient to
compensate for job cutbacks, the wage guar­
antee was to compensate unemployed or
underemployed longshoremen at the rate of
35 hours of straight-time pay per week.

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| = 100 Workers

2 5 -2 9

j

[ 3

Employers paid $27.5 million into the
M&M fund during the period covered by the
agreement, and they paid $34.5 million more
during the five-year extension of the pact ne­
gotiated in 1966. In addition, the basic
hourly wage rate rose from $2.82 to $3.38
under the original agreement and increased to
$4.25 under the 1966 pact. (In contrast, av­
erage hourly earnings in manufacturing rose
from $2.26 to $3.57 between 1960 and
1971.) Also, over the course of the M&M
decade, pension payments for retired long­
shoremen rose from $110 to $235 a month.
Despite the obvious monetary attractions
of the 1960 M&M agreement and its 1966
extension, a substantial number of longshore­
men voted against ratification in each case.
The older workers feared job shifts and
even job losses— no matter how well-cush­
ioned by wage guarantees or pension rights
—while many younger workers felt that their
interests had been sacrificed to meet the de­
mands of the older segment of the ILWU
membership.
Most of the dissatisfaction centered among
the younger workers, especially the limited
registration (Class B) lo n g sh o re m e n and
casual dock workers. The M&M agreement
emphasized payment of a sizable separation
benefit upon retirement after 25 years of ser­
vice. This benefitted the older men, but
younger men realized that they would have
a long time to wait for their turn to collect
— and without any assurance that there

October 1972

MONTHLY

would be any mechanization fund by the
time they retired, because of the lack of fund­
ing for this plan. Not surprisingly, then, the
1966 agreement was actually rejected by
some locals — especially the Los Angeles
local — which were dominated by younger
workers.
Yet over time, this generation gap in
worker attitudes was partially healed by the
success of the M&M plan in accelerating the
pace of retirements. The average (modal)
age of Class A workers rose from 47 to 51
years during the 1960-66 period, but the




REVIEW

average then dropped as the pace of retire­
ments almost doubled, to roughly 400 a year,
during the second half of the decade.
By 1971, the average age of the longshore
work force was down to about 45 years, re­
flecting the attrition associated with the de­
parture of the older men. There still re­
mained a large group of older men from the
massive additions to the membership during
and immediately after World War II. Still,
by 1971 nearly half of the union’s member­
ship consisted of men taken in since the first
modernization agreement was put into effect.

15

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II. The Strike
In his keynote address to the 1971 ILWU
convention, President Harry Bridges failed to
make any direct mention of the once-her­
alded M&M agreement. At the same time,
the delegates expressed their disappointment
with the failure of labor-management nego­
tiations to keep up with the rapid pace of
technology— specifically, containerization—
by passing a resolution which stated that
technological improvements in moving cargo
had made job safeguards in earlier agree­
ments inadequate. The resolution called for
a “work and/or wage” guarantee and the
right to negotiate on plant or port closures.
It also demanded new job-security measures,
such as minimum employment levels and
the right to consultation on proposed layoffs.

16

Jurisdiction issue
“Stuffing” and “stripping” (packing and
unpacking) container cargo had become an
issue several years earlier, and concern over
this subject had led to a brief work stoppage
in early 1969. The issue was complicated by
the fact that jurisdiction over off-dock ware­
house work had been held by several ILWU
warehousemen’s locals and, more seriously,
by both the International Brotherhood of
Teamsters (IBT) and the ILWU. Build­
ing and breaking down on the dock had
been within the jurisdiction of ILWU long­
shore locals for decades. But the inaugura­
tion of container operations caused much of
the cargo preparation — including container
stuffing and stripping—to be moved to other
terminal areas not clearly on the docks. Some
employers, utilizing a narrow definition of
“dock,” had begun to employ others besides
longshoremen to do the work.




Differences in costs were a large part of
the problem. ILWU warehousemen, Team­
sters and non-union workers all offered lower
wage scales and less expensive fringe benefits
than ILWU registered longshoremen. For
example, in the late 1960’s the basic long­
shore rate u n d e r th e u n io n a g re e m e n t
amounted to $4.25 an hour for an eighthour day, in contrast to $4.08 for ILWU
warehousemen and as little as $1.50 per
hour paid in some non-union warehouses.
After the brief 1969 stoppage, the PMA
agreed that container stuffing and stripping
on the dock were to continue as longshore
work performed by registered longshoremen,
and that container freight stations— special
sites on the docks or in the harbor area—
were to be manned by these longshoremen
as steady employees of the various firms in­
volved. But the “steady man” issue brought
its own complications. The issue revolved
around the right of employers to hire spe­
cific men on a regular basis instead of going
through the hiring hall— a practice which,
according to many longshoremen, was a
throwback to the bad old days before the
advent of democratic hiring-hall procedures.
Onset of the strike
All of these non-economic issues, as well
as the usual issues over wages and fringe
benefits, remained unresolved when the old
contract ran out in mid-1971. Negotiations
broke down, and the result was a walkout
by 13,500 longshoremen in one of the long­
est strikes in maritime history. The stale­
mate continued for several months’ time, but
then a new complication developed when the
45,000 members of the ILA struck the East

October 1972

MONTHLY

and Gulf Coast ports, causing the first simul­
taneous shutdown of all the major ports in
the nation. The ILA strike was triggered
largely by employers’ refusal to continue a
guaranteed annual-salary plan in any new or
extended contract.
At that point (early October), the Presi­
dent intervened in the 100-day West Coast
strike by directing the Attorney General to
seek an injunction for an 80-day cooling-off
period under the Taft-Hartley Act. Shortly
before, Mr. Nixon had tried personally to me­
diate the strike at a Portland meeting with
ILWU President Harry Bridges and PMA
representative Ed Flynn, but this approach
failed and he was forced to resort to the TaftHartley injunction. IL W U lo n g sh o re m e n
then went back to work, opening up again
at least one of the three major seacoasts.

In their negotiations, the ILWU and the
PMA reached a tentative agreement on pen­
sions and manning levels, but they remained
deadlocked on the guaranted-wage issue,
hourly wage levels and, in particular, the
container question. When the issues were



REVIEW

thrashed out before the Taft-Hartley panel,
the key obstacle to a settlement seemed to
be the ILWU demand for jurisdiction over
container handling “in any new or expanded
container-freight station facilities.” But the
shippers contended that their contract with
the Teamsters p re c lu d e d y ield in g to the
ILWU demand.
In December, when the 80-day Taft-Hart­
ley in ju n c tio n ex p ired , the ILWU over­
whelmingly rejected the PMA’s latest con­
tract offer. Since agreement had not been
reached on the unresolved issues, West Coast
longshoremen were then free to go back on
strike, and they did just that in mid-January
1972. Pressures mounted on both sides for a
settlement— ILWU strikers, for example, re­
ceived nothing during the strike because of
the union’s lack of a strike fund — and an
agreement finally was reached in late Feb­
ruary.
Enter the Pay Board
The ILWU-PMA agreement called for a
two-step, 26-percent basic pay boost over the
17-month life of the contract, with the expi­
ration date set at July 1, 1973. Straight hour­
ly wages were raised 75 cents to $5.00 an
hour, retroactive to December 25, 1971, and
a further increase of 40 cents an hour was
scheduled for July 1, 1972. Both increases
exceeded the 5.5 percent wage guideline set
by the Pay Board.
In addition, the new pact called for in­
creases in fringe benefits and retirement ben­
efits, and established a 36-hour guaranteed
workweek for fully registered longshoremen.
To resolve the container-handling issue, the
PMA agreed to pay a $1.00-per-ton royalty
on all containers loaded or unloaded by other
than ILWU members within a 50-mile radius
of each port— in line with the pattern set by
the ILA on the East Coast docks several
decades earlier. In May, however, the Na­
tional Labor Relations Board obtained a
Federal court injunction against payment of

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Impact on Hawaii
One Western state— Hawaii—was severely affected by the West Coast dock
strike. This should not be surprising, however, because the vast bulk of the island
state’s food, medicine, heavy appliances, autos, cattle feed, industrial products and
clothing— almost every item essential to modern living— arrives in Hawaii by sea
transport. Consequently, the longer-term impact was much more evident there than
elsewhere in the West. The strike deprived Hawaiian households of many con­
sumption items, and also cut off a major supply of items normally processed by
the Hawaiian labor force. Thus, while the strong business advance of the past year
caused a sharp decline in unemployment in most Western states, the jobless rate
actually increased in Hawaii— from 4.9 to 6.1 percent— between the quarter pre­
ceding the strike and the first full quarter following the final settlement.
As a consolation, the strike was not nearly as disastrous as the famous 177-day
strike of 1949. The latter was not only longer than the 1971-72 strike, but was
also a more complete shutdown, because it involved Hawaii’s own longshore local,
which stayed on the job during the 1971-72 walkout. Thus, the 1949 strike affected
all ships destined for Hawaii, and not just trade with West Coast ports. The disrup­
tions caused by that strike boosted the area’s unemployment rate to 17 percent at
one stage.
Hawaii’s consumers, at the peak of the strike last fall, had only a limited variety
of merchandise available to them, and frequently had to pay record prices for what
was available. Fresh meat and produce jumped about 13 percent in price during
the first stage of the strike between early July and early October. For a while, house­
wives in Hawaii were paying as much as 20 cents each for potatoes, 30 cents for an
orange and 25 cents for a single peach, while some staples simply disappeared com­
pletely from grocers’ shelves.
Air freight helped to overcome the worst of the crisis, although at considerable
added cost to Hawaiian businessmen. During the first stage of the strike, air-freight
tonnage between the mainland and Hawaii totaled over 2,000 tons weekly, or
quadruple the normal levels of traffic.
Hawaii’s trade situation again became unsettled this summer and fall. Hawaii’s
own longshore local signed a new contract in July after 15 months of sporadic talks,
but the agreement came unstuck over the question of “satellite” workers, and a
3-day walkout ensued in October. Pensions were a thorny issue throughout the
contract negotiations, because many of Hawaii’s 900 longshoremen are approaching
retirement age. Nonetheless, the local claimed that it was not seeking anything more
than the Pay Board had already approved for West Coast longshoremen. The 3-day
strike cut off almost all shipping in and out of Hawaii and between the individual
islands as well— a much more complete (although much briefer) shutdown than
had occurred during the strike affecting mainland ports.
18



October 1972

MONTHLY

container royalties, arguing that that provi­
sion of the contract represented an illegal at­
tempt to gain sole jurisdiction over container
handling.
The strike settlement came in the midst of
the Administration’s Phase II attempt to re­
duce the size of outsized wage payments, and
thus it came under intense scrutiny from Pay
Board officials. The Pay Board earlier had
reduced, from 12 to 8 percent, a first-year
pay package negotiated by aerospace work­
ers, and in the same vein, the Board turned
to the longshore agreement and removed
about one-fourth of the first-year increase
won by the ILWU, reducing the package
from almost 21 to less than 15 percent.
In its ruling, the Pay Board authorized a
renegotiated settlement that would permit a
first-year increase of 14.9 percent. Specif­
ically, the ruling cut back the increase in the
basic wage package to 10.0 percent from the
15.7 percent originally won by the ILWU—
that is, to 42 from 75 cents an hour—but it
left intact the 4.9-percent negotiated increase
in certain fringe benefits, such as pensions
and life insurance. In addition, the Board
authorized approval of the 7-percent secondyear increase scheduled to take effect July
1, 1972.
Special exception
Even the scaled-back increase required the
Pay Board to make a “special exception” for
the ILWU. Under the Board’s general 5.5percent wage guideline, adjusted for “catch­
up” pay boosts and certain fringes, the union
was still entitled to only an 8.9-percent firstyear increase. However, the Board majority
said that the exception was made “in recog­
nition of the unique nature of the on-going
collective bargaining practices, the equitable
position of the parties involved, and arrange­
ments between the parties specifically de­
signed to foster economic growth.” The lat­
ter referred to the 138-percent increase in
labor productivity achieved on the West



REVIEW

Coast docks over the course of the M&M
decade. In fact, a staff analysis noted that
PMA members had saved probably over
$900 million in mechanization gains since
1960, but that only about $62 million of that
amount had been shared with longshoremen
in the form of improved retirement and payguarantee benefits.
Two months later (May), the ILWU and
the PMA announced acceptance of the Pay
Board decision, thereby ending the threat of
a renewed dock strike. The basic wage in­
crease was made retroactive to December
25th, 1971, when the 80-day cooling-off pe­
riod ordered under the Taft-Hartley injunc­
tion had expired. The new agreement stipu­
lated, however, that the contract could be
terminated at the initiative of either side if
wage and price controls were to be elimi­
nated by November 30, 1972 (on 60 days’
notice) or by January 31, 1973 (on 24
hours’ notice).
Meanwhile, the Pay Board voted in May
to cut to 9.8 percent a proposed 12.1-percent first-year boost in wages and fringes for
North Atlantic dock workers. Dock work­
ers at New Orleans obtained a 12.0-percent
increase and West Gulf longshoremen ob­
tained an 11.4-percent increase. (Each of
the separate groups of dock workers, at
North Atlantic ports, New Orleans, and the
West Gulf ports, had separate cases before
the Pay Board.) ILWU longshoremen thus
won a larger package gain than their ILA
counterparts, partly because of the longer
span of the expired ILWU contract, but
mostly because of a decade of labor-man­
agement cooperation for increased produc­
tivity on West Coast docks.
Legislative activity
The Federal Government’s involvement in
the West Coast strike included legislative ac­
tivity as well as the Pay Board intervention.
In January, the President proposed special
legislation that would empower a three-mem-

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W e s t C o a s t t r a d e fluctuates wildly, with pattern repeated twice:
buildup followed by slump followed by post-strike upsurge in shipments

view of the failure of the original Taft-Hartley injunction and the difficulties already en­
countered when ports on all three coasts had
been shut down. Under this legislation, no
strike or lockout would be permitted from
the day legislation was enacted until the day
when the arbitration board made its deter­
mination. The board’s determination would
be made within 40 days and would be bind­
ing upon the parties for a definite period of
time— at least 18 months. Eventually, this
compulsory-arbitration bill was enacted, but
only after the strike had been settled.

20

In addition, the President in 1970 and
again in 1971 proposed major transportationstrike legislation, under the title of the Crip­
pling Strikes Prevention Act. The proposal
would extend Taft-Hartley Act jurisdiction
to all transportation industries — including
railroads and airlines, which are now cov­
ered by the Railway Labor Act.
The measure also would give the Presi-




Hartley’s 80-day cooling-off injunction. If,
as in the West Coast dock strike, no settle­
ment were reached during the injunction pe­
riod, the President could a) extend the no­
strike period for 30 days; b) require partial
operation of the troubled industry for an ad­
ditional 180 days; and c) invoke “final of­
fer selection,” in which a neutral panel would
select (without amendment) the final pro­
posal from either management or the union,
and declare this to be the binding contract.
Union leaders, convinced that this ap­
proach was simply a disguised form of com­
pulsory a rb itra tio n , favored another ap­
proach that would permit selective strikes by
various transportation unions. A Senate la­
bor subcommittee thereupon proposed a bill
that would outlaw lockouts by carriers not
involved in labor disputes, ostensibly in the
interests of forestalling nationwide close­
downs of rail, air or sea transportation. Be­
cause of the election-year adjournment rush.

October 1972

MONTHLY

however, neither this nor the Administration
plan was able to get through Congress be­
fore adjournment.

REVIEW

M achin ery exports hold up well
In strike-affected periods
B illio n s o f D o l l a r s

How costly?
The economic losses from the prolonged
dock strike are difficult to estimate, although
many authorities have been willing to hazard
an opinion. During Congressional hearings,
A g ric u ltu re Secretary Butz said that the
strike cost the nation over $ 1 billion in farm
income alone last year, while Transportation
Secretary Volpe estimated that total losses
to the entire economy might be closer to $2
billion.
The impact indeed was widespread, but
perhaps most apparent in agriculture, be­
cause of the perishable nature of many farm
products and because of the high proportion
of exports for some products. Normally,
this country exports over one-half of its rice,
wheat and soybeans, nearly two-fifths of its
cattle hides, over one-third of its tobacco and
cotton, and one-fifth of its total feed-grain
production.
Total wheat exports dropped from 738
million to 632 million bushels between fiscal
1971 and fiscal 1972. Wheat exports from
Pacific Coast ports alone declined from 214
million to 176 million bushels; in particular,
exports to Japan plunged from 106 million
to 80 million bushels over this period. In
total, Pacific farm exports dropped from
$288 million to $73 million between the
third quarter of 1970 and the strike-affected
third quarter of 1971.
The most visible impact of the strike was
on the ocean-going fleet and its workers.
During the first stage of the strike last fall,
wage losses to crews on U.S. ships amounted
to roughly $21 million, exclusive of fringe
benefits. Moreover, 249 vessels— including
46 U.S. ships—were tied up in port at the
peak of the strike, and this represented a con­
siderable loss, since it costs around $6,000 to



. . o while crude-material imports
remain largely unaffected

$7,000 per day to operate a U.S. vessel when
tied up. However, some of the cost was made
up at the conclusion of the strike by higher
revenue from greater ship utilization— from
cargo already waiting in the ports for ships,
and from faster turnaround times as a result
of cargo consolidation.

FEDERAL

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BANK

In addition, the strike resulted in consid­
erable loss of income to the striking long­
shoremen. For the entire 134-day strike,
this may have amounted to $55 million, or
about $3,600 per man. Although much of
this was offset by later overtime payments,
the immediate loss was substantial, especially
since the ILWU does not maintain a strike
fund.
Impact cushioned?
Despite these significant dislocations, the
effects of the strike on the regional economy
may have been cushioned by shifts in timing
of shipments— at least on the part of larger
firms which are capable of riding out short­
term fluctuations. If this should turn out to
be true, it would fit in with the conclusion of
a Labor Department study of the East Coast
dock strikes of the 1960’s, which suggested
that individual dock strikes generally have
little net impact on shipments over longer
term periods. However, the recent West
Coast dock strike, like the earlier East Coast
strikes, revealed a pattern of very sharp fluc­
tuations in imports and exports, with a pre­
strike buildup followed by a strike-period
slump followed by a post-strike surge. In
this case, moreover, the two-stage feature of
the strike simply accentuated the pattern of
sharp fluctuations.
Total waterborne exports from West Coast
ports declined from $4.17 billion in 1970 to
$3.25 billion in 1971, with significant shifts
from quarter to quarter. Total exports (sea­
sonally adjusted) reached a $3.87-billion an­
nual rate in the first quarter of 1971, rose
further to $3.98 billion during the second
quarter, dropped disastrously to $0.60 bil­
lion during the strikebound third quarter, but
then jumped sharply to a $4.57-billion rate

22



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in the final quarter of the year. In 1972, wa­
terborne exports dropped to a $1.75-billion
rate in the January-February period, when
the ports were partially shut down, and again
rose sharply to a $4.16-billion rate in the
following three-month period. Exports of
machinery and tra n s p o rta tio n equipment
held up relatively well during the strike-af­
fected periods, but exports of foods and
crude materials slumped sharply.
Waterborne imports into West Coast ports
actually increased slightly between 1970 and
1971 — from $5.49 to $5.56 billion — but
again with significant quarterly fluctuations.
Imports reached a $5.79-billion annual rate
(seasonally adjusted) in the first quarter of
1971, and then jumped to $6.82 billion in
the second quarter. During the strikebound
third quarter they fell sharply to $1.63 bil­
lion, but then zoomed to $8.01 billion in the
fourth quarter when shipping resumed. Im­
ports dropped again to a $4.67-billion rate
during the partially strikebound period of
January-February 1972, but rose sharply to
a $7.81-billion rate in the March-May re­
covery period. Imports of most products
dropped sharply during the strike-affected
periods — except for petroleum and other
crude materials which are not handled by
longshoremen.
These figures tend to support the thesis of
the Labor Department study regarding the
comparatively small net impact of longshore
strikes on the overall volume of shipments;
many of the losses suffered during the strike
period are offset by heavy dockside activity
in anticipation of a strike and a great deal
of makeup work after the reopening of the
ports. Larger companies in particular tend
to spread their anticipatory action over a
period of some months, depending in part
on the availability of port capacity.

October 1972

MONTHLY

REVIEW

III. The S®x
The long-term future of the ILWU and of
the West Coast docks depends upon the ef­
ficiency of their cargo-handling operations.
Under the Mechanization and Modernization
agreement, productivity increased by leaps
and bounds in a single decade, initially be­
cause of the junking of restrictive work prac­
tices, but more recently because of the use
of large boxes in handling cargo. Container­
ization— a simple but a revolutionary con­
cept— has begun to transform the entire
transportation industry, in the process af­
fecting workers’ productivity and their labor
relationships as well.
The Pay Board was willing enough to ac­
cept an outsized ILWU pay increase last
spring because of the impressive productivity
record of the West Coast longshoremen. But
it was not always thus. The recent experi­
ence compares sharply with the productivity
record in the period prior to the adoption of
the M&M agreement in 1960, when West
Coast dock operations were considered the
costliest in the entire nation.
Massive efficiency gains
Productivity apparently dropped during
the first few years of unionization in the mid1930’s— perhaps by 20 to 30 percent— and
then remained approximately constant for
the next several decades. All this changed,
however, with the advent of the M&M agree­
ment, as productivity began to increase
sharply year after year. Cargo handled per
manhour increased roughly 40 percent be­
tween 1960 and 1965, and then increased
at almost double that rapid pace in the sec­
ond half of the decade. Everyone had
expected that increased efficiency would
result from the M&M agreement, but no one
had foreseen the actual magnitude of the
gains.



The ILWU pointed up this record of pro­
ductivity when it took a full-page ad in the
New York Times during the Pay Board’s de­
liberations last spring. A c c o rd in g to the
ILWU-PMA statistics quoted in that ad, the
amount of cargo handled on the West Coast
docks jumped from over 19 million tons to
nearly 40 million tons between 1960 and

1970. Man-hours worked meanwhile drop­
ped by 17 percent, so that the amount of
cargo handled per manhour rose 138 percent.
Consequently, labor costs dropped 30 per­
cent over the decade, from $4.94 to $3.46
per ton.
In the union’s words, “Twelve years ago
the members of the ILWU showed their
good faith by voting to accept new ways of
working with new machinery. We accepted

23

FEDERAL

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BANK

bigger cargo handling machines. We con­
verted the loading and unloading of many
commodities from laborious handling by the
piece to bulk handling. We accepted the
processes of unitizing and palletizing, which
made it possible to load and unload ships
much faster. As part of this process of adapt­
ing to new conditions we agreed to lift the
ceiling on single sling loads from 2,100
pounds to as much as 60,000 pounds — 30
tons at a time.”
Productivity gains in the first half of the
decade were based largely on the elimination
of restrictive work rules and practices. The
elimination of redundant manning, multiple

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handling, sling-load requirements, and other
restrictions all added to the efficiency of
operations. Singly, each improvement was
relatively minor, but in the aggregate they
added up to a massive shift in the industry’s
cost curve.
Productivity gains in the second half of
the decade relied more on investment — the
expansion of cost-saving capital facilities.
To be sure, substantial investment had oc­
curred in the early 1960’s, permitting a shift
from break-bulk handling to bulk handling
of feed grains, rice, wine and similar goods.
But the most productive advances came
about only in the last several years, with the

Boxed in on the Thames
The most striking manifestation of the latest crisis in the United Kingdom was
a three-week dock strike which closed all of the nation’s ports in early August.
Already, in the first half of 1972, more mandays had been lost in strike action than
in all of 1971, in the worst breakdown of labor peace since the 1926 General Strike.
But then came the dock crisis— and the temporary threat of another general strike
—and the ensuing financial crisis culminated in a sharp outflow of funds and the
floating of the pound.
The background to the strike was strikingly similar to the situation on the
U.S. West Coast. Under contracts negotiated in 1967 and 1970, dockside employ­
ers had agreed to full employment of the registered longshore labor force at a high
basic wage, in return for abolition of piece-rate cargo handling and other restrictive
practices. But meanwhile, containerization had increased sharply— especially at offdock sites— and had helped cause a one-third reduction in longshore employment
(from 60,000 to 40,000) in less than five years’ time. In this situation, the dockers’
spokesmen demanded greater job security and higher severance pay for those dis­
placed by the greater mechanization of cargo handling.
The jurisdictional issue centered around the handling of certain containerized
cargo— about one-fifth of the total— that was packed outside of factories, in truck
depots. For the Port of London, an official commission earlier had recommended
that longshoremen should have jurisdiction over container depots within five miles
of the Thames, but this ruling had no enforcement powers behind it. Meanwhile,
shipping firms had been moving container operations inland, where labor costs were
considerably below dockside costs. Eventually, the geography of the Port of London

24



October 1972

MONTHLY

shift toward containerization. Its implica­
tions are described in several recent studies
on containerization prepared by the San
Francisco firm of Manalytics, Inc. for the
U.S. Department of Commerce.
Revolution in a box
The container revolution — that is, the
transportation of water-borne commerce in
preloaded containers suitable for overland
transportation — began in the late 1950’s on
the major domestic trade routes (West Coast
to Hawaii, Northwest to Alaska, and East
Coast to Puerto Rico). After some delay,
containerization was introduced into foreign

REVIEW

trade, first by U.S. firms and more recently
by foreign shipping companies. Even so, the
revolution is still in its relative infancy. Be­
tween 1968 and 1975, the amount of containerizable cargo may increase 26 percent on
foreign-trade routes and 44 percent on do­
mestic routes. To carry this cargo, perhaps
1,800 container ships will be in use in 1975,
with the newer ships being one-fifth faster
and one-half larger than the ships now in use.
Although it is a major innovation in ship­
ping, containerization is a fairly simple con­
cept based on a systems approach to cargo
handling. Unlike conventional break-bulk
cargoes that must be handled as individual

became transformed, as dockside cargo preparation was transferred to sites outside
the port area, and as port operations were shifted to the lower reaches of the Thames
as well as to small ports on the south and east coasts.
In an attempt to forestall a strike this past summer, a joint labor-management
committee promised dockers increased jurisdiction over container work, as well as
sharply increased severance pay benefitting men over 55. Union members rejected
this proposal, however, arguing that they weren’t given a strong enough guarantee
that dockside jobs would be protected in London and the other major ports.
The complex issues surrounding the strike were aggravated by the enforcement
of the new Industrial Relations Act—the U.K. version of Taft-Hartley. The dockers
had refused to handle certain container cargo last spring, in defiance of a ruling by
the Industrial Relations Court, and by the time the dispute had been settled, several
militant dockers had been jailed and the union movement had threatened to call a
general strike.
A central feature of the final settlement was the abolition of the “temporary
unattached” register, which paid dockers about $58 a week when unassigned and
not working. Instead, unneeded dockers were now to be assigned some kind of job
and guaranteed about $100 weekly. In addition, about $9,500 in severance pay
was granted to every docker who agreed to retire.
This feature was so attractive that 5,500 longshoremen— over half of all
those eligible— applied for severance pay soon after the signing of the new contract.
This attrition went a long way toward meeting the targeted reduction of 8,000
jobs by 1975. Some longshore jobs may be saved through expanded container
work, but probably not a significant number, since the dockers were unable to
obtain their demand for a surcharge on container work performed under other
auspices.



FEDERAL

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BANK

items, container cargoes move from point
of origin to final destination as a single unit,
utilizing large boxes which are typically 8
feet square at the end and 20 to 40 feet long.
Containerization can claim some startling
advantages over break-bulk operations —
causing reductions in packaging costs, dam­
age and pilferage losses, and door-to-door
transit times. (A container ship can be com­
pletely unloaded and reloaded in about 24
hours, as against the 5 to 6 days required for
break-bulk cargo.) On the other hand, con­
tainerization can create significant disloca­
tions — of employment opportunities, port
preferences, carg o flows, transportationindustry relationships, and regional-develop­
ment patterns.

26

Containerization decisions seriously affect
the overall distribution system. Implementa­
tion of a container-based distribution system
may change the flow of freight between in­
land points and seaports, producing a surplus of labor in one port and a shortage of




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labor at another port. In the long run, the
existence of a container-based distribution
system will influence the location of new
plants, distribution warehouses and freight­
handling facilities, and may lead to changes
in packaging, inventory policies and produc­
tion schedules.
A fully-developed container system re­
quires a heavy investment in specialized
equipment and facilities, primarily for containerships and container inventories. A 24knot 1100-foot container ship, carrying 20foot containers, costs about $15.3 million
when constructed abroad. In addition, each
ship requires an inventory of 2 to 3 containers
per container slot — over $6 million per
ship. Container-port operations also require
expensive specialized equipment and facili­
ties, including one or more cranes, several
straddle carriers, a fleet of tractors, and 12
to 15 acres of storage area per ship berth.
Massive effects
The growing efficiency of container opera­
tions speeds up turnaround time and reduces
the number of vessels and vehicles needed
to move the same amount of cargo. For
ground modes of transportation, containeri­
zation permits the same number of trucks
and rail cars to move far more cargo in a
given period than would have been possible
with break-bulk cargoes. For water modes,
faster turnarounds speed the flow of goods
through a port, but also bring about the use
of larger and faster ships to carry the flow, so
that the number of ships needed to handle
a given cargo can be sharply reduced.
Economies of scale are evident in the use
of larger and larger ships. The first contain­
er ships carried fewer than 100 boxes. Many
ships now carry 500 to 1,000 boxes, and
some are even being built to carry 2,000.
Meanwhile, barges and lighters are also
being built to carry large loads— and mam­
moth ships are then being built to carry
these loaded vessels. As for increased speeds,

October 1972

MONTHLY

REVIEW

some of the new container ships can average
23 knots, compared with about 10 knots for
the earliest such ships. This innovation, of
course, is independent of containerization
per se.
A concomitant development is the in­
creased competition between container ports,
with the most business tending to go to those
ports capable of handling the larger ships
— that is, to the larger and best-equipped
ports. Again, however, this aspect of mod­
ernization is not necessarily linked to con­
tainerization; it exists, for example, with the
development of mammoth tankers as well.
Nevertheless, where special equipment is
required, port selectivity will be increased.
Investment in such ports can be substan­
tial. As a prime example, modern gantry
cranes capable of lifting up to 45 tons cost
in excess of $1 million each. These cranes
are capable of handling between 20 and 40
container lifts per hour, depending on the
type of ship and the number of containers
in a lift. Major pieces of container transfer
equipment — straddle carriers, side loaders
and forklifts — are also expensive. Straddle
carriers for stacking containers cost about
$135,000 each, but they are capable of
handling 12 to 13 containers per hour. Side
loaders and forklifts, averaging about $90,000 in cost each, are also necessary in han­
dling container cargo efficiently.

uniform size and shape characteristics of
bulk cargo, the container in a sense creates
pseudo-bulk cargo out of break-bulk cargo.
Still, to achieve low unit costs, a contain­
erized system must take full advantage of
economies of scale. High system utilization
thus is all important. When container ships
sail lightly loaded or call at several ports on
a single round trip, the cost per container
carried becomes uncompetitive, even with
quick turns in port and reduced longshoremanpower requirements. Similarly, ports
with low cargo volume cannot afford the new
investment in container equipment and facili­
ties, as the cost per container handled in­
creases rapidly when expensive facilities and
terminal acreage are under-utilized.
The ratio of fixed costs to variable costs
demonstrates the high utilization require­
ments of a container system. The fixed costs
associated with ships, containers, cranes, ter­
minal facilities, shore-side equipment and
overhead account for 50 to 75 percent of a
total cost of a typical container system, oper­
ating at full capacity and taking into account
subsidized U.S. ship-construction costs and
U.S. operating costs. The other 25 to 50 per­
cent, which varies with the throughput, is
largely the labor component. In contrast,
fixed costs account for only about 25 percent
of the total cost of operating a comparable
conventional system.

Economies of scale
The major advantage of containerization
lies in its potential for reducing drastically
the unit costs of cargo handling. Container
systems — partly through the intrinsic char­
acteristics of the container and partly through
the efficient substitution of capital for labor
— make it possible for common carriers to
achieve economies of scale for break-bulk
cargoes similar to those which proprietary
carriers (such as ore and petroleum carriers)
have achieved for bulk cargoes. By trans­
forming the basic cargo so that it has the

Significant differences
According to the Manalytics study, con­
ventional terminals and container terminals
differ most significantly in the amount of
manpower required in relation to capital in-




27

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C o n tain e r fle e t expanding most
rapidly on Far East trade routes

28

vestment, and in the relationship between
variable operating costs and fixed overhead
costs. A typical investment for a single-berth
conventional terminal handling 250,000 tons
a year would be about $3.7 million, including
pier, shed and handling equipment. The
annual fixed cost of such a terminal would be
about $1.3 million, including depreciation
and a 15-percent return on investment. The
manpower requirement would be about 2.0
manhours per ton of break-bulk general car­
go for stevedoring and terminal services com­
bined, or about $4.5 million for 250,000 tons
at current U.S. West Coast costs. This would
yield roughly a l-to-4 ratio of fixed costs to
variable costs.
A comparable container terminal would
require only about 0.1 manhour per ton, or
about $250,000 for 250,000 tons at the con­
tainer labor rate. The annual fixed costs
would be about $1.0 million, including de­
preciation and a 15-percent return on invest­
ment. This would yield roughly a 4-to-l ratio
of fixed costs to variable costs.
Longshore labor requirements, to repeat,
could vary between 2.0 manhours per ton
for conventional cargo and 0.1 manhours per
ton for containerized cargo. Of course, this
reduction by a factor of 20 will not always
be achieved, because of differences in con­
tainer sizes, commodities and locations, but




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it illustrates strikingly the efficiencies embod­
ied in container technology.
The terminal investment that makes this
productivity possible is on the order of $4.0
million per berth (including one crane and
yard facilities) and $1.0-3.0 million for a
set of containers (depending on ship size).
A container berth with a single crane has a
potential annual throughput of 50,000 con­
tainer turns or 500,000 tons. This is two to
five times the capacity of a conventional
berth and shed costing about $3.0 million.
Too many ships?
The container fleet, which has already be­
come the principal mode of operation for
break-bulk cargo, is now undergoing a mas­
sive expansion. Altogether, 1,800 full or par­
tial container ships should be in service by
the middle of the decade, according to the
Manalytics estimates. U.S. container ships
already have regained a major position in
the carriage of U.S. break-bulk cargo; in
1970, over 50 percent of the container capa­
city on U.S. shipping routes was under the
U.S. flag as against less than 10 percent of
the capacity for all commodities. By mid­
decade, U.S. ships should account for about
two-thirds of the total container-fleet capa­
city in service on U.S. trade routes.
Container ships on Pacific trade routes
now service principally Japan, A ustralia
and Hawaii, but stop also at Vietnam, the
Philippines, Hong Kong, Taiwan and Korea.
Annual round-trip capacity of the West Coast
container fleet may increase 40 percent to
757,000 slots just in the first half of this
decade, with the entire increase occurring on
foreign routes, especially on the Far East run.
The West Coast trade by 1975 may ac­
count for almost half of the 25-percent rise
(to 2.24 million slots) projected for annual
container-fleet capacity on U.S. trade routes.
But with this increase, the capacity on Pacific
Coast shipping routes by mid-decade may be
three times greater than the amount of avail­

October 1972

MONTHLY

able cargo. Thus, U.S. carriers may have
less to fear from foreign competition — rap­
idly expanding as it is — than from the gen­
eral threat of overcapacity.
Too many ports?
Pacific Coast ports in 1970 were able to
handle about 1.2 million container turns a
year, or about 40 percent of the national
total. Oakland, the nation’s second largest
container port, led other West Coast ports
by a considerable margin — 333,000 con­
tainer turns, as against 291,000 combined
for Los Angeles and Long Beach. (New
York, however, was able to handle more than
all the California ports put together.) West
Coast facilities are divided about evenly be­
tween the Los Angeles-Long Beach, Oakland-San Francisco, and Portland-Seattle re­
gions. East Coast facilities are concentrated
in the New York area, although smaller facili­
ties are located up and down the coast be­
tween Boston and Jacksonville, and others
are located at the Texas Gulf ports.
All seaboards now have more than enough
specialized port facilities to handle all of the
demand likely to develop over the next sev­
eral years — and additional container facili­
ties are being planned every day. Moreover,

REVIEW

much of the less efficient but still useable
conventional-lift facilities can be used for
containers. According to the Manalytics
study, all seaboards — and especially the
Pacific Coast — will have more than enough
container-lift capacity in 1975 to accommo­
date all foreseeable commercial-cargo de­
mand. Container-crane lift c a p a c ity at
Pacific Coast ports (two-shift basis) may be
almost six times the 1975 demand, meas­
ured on the basis of containerizable cargo
flows.
Even if all break-bulk cargo were fully
containerized, West Coast container capacity
still would be underutilized. Container lift
capacity in 1975 will be concentrated in Los
Angeles-Long Beach (26 cranes), OaklandSan Francisco (20 cranes), Seattle-Tacoma
(17 cranes), Portland (7 cranes) and Hono­
lulu (6 cranes). In 1975, Pacific Coast ports
altogether should have 63 container cranes
and 73 container-ship berths, and thus
should account for 40 percent of the nation’s
total crane capacity and 27 percent of its
total berthing capacity.
Containerization, as already indicated,
tends to reduce the number of ports served
by modern cargo ships. To take advantage of
economies of scale, containerization neces-

Pcoeifie C @ o sf c o n t a in e r p o r t s account for 40 percent of total U.S.
capacity . . . Oakland second only to New York in container handling




C o n t a in e r T u rn s (T h o u s a n d s )

FEDERAL

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BANK

sarily concentrates g e n e ra l cargo flows
through a relatively small number of large
specialized ports. Ports having good access
to inland trade routes and a history of largevolume break-bulk cargo movement still have
to make extensive capital investments if they
are to maintain their position under contain­
erization. Oakland has done just that, mov­
ing early to make the required investments,
and consequently has become one of the
world’s dominant container ports. Its cross­
bay rival, San Francisco, in contrast has
lagged far behind, although it is now work­
ing on modernization plans so as to be pre­
pared for the next generation of container
shipping.
Too many men?
In view of the vast efficiencies involved,
the container revolution may reduce signifi­
cantly the number of jobs on the waterfront.
Because of the substantial increase in the
speed of cargo handling, there is a dramatic
reduction in the number of men needed to
load and unload container ships as opposed

30

to conventional ships. There also can be a
reduction in labor for the assembly and dis­
tribution of shipments transported in con­
tainer lots.
Containerization also involves a potential
dislocations of work opportunity, since with
containers it becomes feasible to shift much
of the longshoremen’s traditional work of
handling small shipments away from the




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docks to inland points in the jurisdiction of
other unions. When less-than-carload ship­
ments are stuffed into outbound container­
load lots or are stripped from inbound full
containers at dockside, the work is generally
conceded to be under the jurisdiction of the
longshoremen, and when it is performed at
inland points far distant from the docks it
is under the jurisdiction of other unions, such
as the Teamsters. When the work is done
away from the dock, but still local to the
port, however, the line is not clearly drawn
and a difficult jurisdictional issue arises —
leading to the type of impasse that brought
on the recent strike.
Jurisdiction, if anything, will become a
more serious and persistent problem within
the ILWU and in relations between the
ILWU and other unions. The loss of juris­
diction over container work in harbor areas
would have been intolerable to the ILWU,
but maintaining jurisdiction over container
freight stations raises difficult new problems.
The competitive pressures of labor costs in
non-longshore warehouses are now a major
factor in contract negotiations, since it is
difficult to push or hold wages and benefits
for container work much above the levels
prevailing elsewhere. In addition, major
areas of future job growth will remain out
of jurisdictional reach — warehouses with
container work already organized by the
Teamsters, warehouses far inland (organized
or not), and container handling performed
aboard truck beds by Teamsters.
Death of a union?
The ILWU thus is faced with a dilemma
which threatens its survival, as the longshore
work force declines to a fraction of its for­
mer strength because of rapid productivity
gains, and as jurisdictional challenges occur
in the most likely areas of future cargo expan­
sion. To meet the dilemma, Harry Bridges
recently proposed a “if you can’t beat ’em,
join ’em” type of solution. Writing in the

MONTHLY

October 1972

ILWU newspaper, Bridges said that he had
agreed with Teamster officials Frank Fitz­
simmons and Einar Mohn to set up a new
“Longshore-Waterfront Division” inside the
Teamsters’ Union, with jurisdiction and job
rights of the nonwaterfront divisions of the
ILWU being recognized by the IBT. Bridges
argues the case for a merger in terms of
changing technology and the need for closer
relationships within the trade-union move­
ment. He emphasized that the ILWU is not
a failing union, but “the fact remains that
we don’t have large possibilities for growth”.

REVIEW

The agreement would require the approval
of the ILWU’s executive board before sub­
mission to a rank-and-file vote. Significant
opposition has developed within the 65,000member ILWU to the merger, partly because
of long-standing political and jurisdictional
disagreements with the Teamsters, but also
because of fears of being swallowed up within
a mammoth (2-million-member) organiza­
tion. But Bridges argues that joint action is
necessary if success is to be won in the major
contract negotiations facing both unions in
the next year.
William Burke

Publication Staff: Karen Rusk, Editorial Assistant; Janis Wilson, Artwork.
Single and group subscriptions to the M onthly Review are available on request from the
Administrative Service Department, Federal Reserve Bank of San Francisco, P.O. Box 7702,
San Francisco, California 94120




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International Studies
is a monograph prepared by Donald
R. Sherk, Associate Professor of Economics at Simmons College, under the sponsor­
ship of the Federal Reserve Bank of San Francisco. The study, which is aimed at
an academic and financial audience, focuses upon the degree to which the nations
bordering the Pacific have become meshed within a fairly complementary economic
region over the course of the past quarter-century. Among other topics, the study
analyzes the pre-World War II and postwar patterns of trade in the Pacific Basin,
and discusses the development of U.S.-Pacific trade in terms of international-trade
theory. Individual copies only.
The United States and the Pacific Trade Basin

Devaluation of the Dollar is a report by Ernest Olson on the breakdown of the old
international-payments system and the beginning of a new system under the Smith­
sonian Agreement. The report— a reprint from the June 1972 Monthly Review—
describes the background of the 1971 crisis, involving a deterioration of the U.S.
balance of payments and a speculative attack on the dollar. It also describes the
unfinished business on the international agenda, including agreements on dollar con­
vertibility, loosening of trade restrictions and more flexible payments arrangements.

is a study by William Burke covering the record of China’s trade
with the West over the past two centuries. The report describes the development of
trade under Western auspices during the 19th and early 20th centuries, and then
describes the completely different trading environment existing today. After analyz­
ing the structure of China’s current exports and imports, the study concludes with
estimates of the future magnitude of the China trade.
The C hina Trade

Individual copies of each publication are available on request, and bulk shipments
(except for the Sherk monograph) are also available free to schools and nonprofit
institutions. Write to the Administrative Service Department, Federal Reserve Bank
of San Francisco, P.O. Box 7702, San Francisco, California 94120.