To get past the new Secretary of Defense’s firm opposition to the Navy’s proposed supercarrier, USS United States, the Bureau of Ships gave a discrete green light to Newport News Shipbuilding to start work on what was to be the biggest ship in the world in 1949. Beyond the workshops and shipyard fence, workers spent March and part of April of that year setting up 13 long rows of keel blocks on the floor of Dry Dock No. 11. On 18 April, a shipyard crane operator swung the first of 11 24-by-30-foot steel plates into place to lay the keel. A curt telegram from the Pentagon five days later that the $189 million contract had been canceled. “Naturally, it is disappointing to lose a job which we had started and felt well qualified to do, but of course the National Defense must come first,” shipyard president John Brockenbrough Woodward Jr. commented.1
A Curious Collaboration
The embarrassment of the dismissal did not, however, lead the Navy and the shipyard to back away from one another. The collaboration between the Navy and Newport News Shipbuilding on the USS United States put supercarrier construction on a fast track less than two years later. By the early 1960s, Newport News Shipbuilding would be the only builder of American carriers. Its monopoly, however, did not arise naturally out of physics or geography. It had no edge in facilities over other large shipyards. It had no labor market advantage compared to the pools of skilled metalworkers in New York, Philadelphia, or the Bay Area. It had no edge over the low-wage Gulf Coast. The Navy had its own shipyards and was always pressured to keep them as busy as possible. The collaboration between the Navy and Newport News Shipbuilding led them to develop a rare example of a monopoly supplier of a product to the only buyer of that product (a monopsony). The explanation lies with the distinctive dynamics of such a monopoly-monopsony duet, first described as a theoretical plaything in the 1880s by the economist Francis Ysidro Edgeworth.
Monopoly vs. Monopsony
Economists and political philosophers have long detested monopoly. Jean Buridan wrote in 1327 that utility, not control of supply, ought to determine what goods cost. Economists generally have argued that monopsonies mirror monopolies by forcing the sale of goods and services to them at unfairly depressed prices.2 What happens when one supremely powerful market actor encounters the other is less clear, Edgeworth hypothesizes (in the absence of any actual case study) in a study of market dynamics. Price, he theorized, would be indeterminate—just as it is when the Navy contracts for a ship at one price and then covers cost overruns thereafter. Instead, for both monopoly and monopsony, there is a range of acceptable terms derived from the monopoly seller’s various marginal net revenue schedules and monopsonist’s various marginal utility curves. The result is that collaboration between buyer and seller, not contest, ultimately sets the final price and nature of the goods or services.3 It is a perceived need to collaborate that drives formation of a monopoly-monopsony duet and sustains it over time.
Shrouded in Secrecy
The start of work on the USS United States flouted the usual proprieties. There were no flags flying, no bunting and no speeches, admirals, or members of Congress at the keel-laying. Woodward did not even show up. The only yard officials there were assistant general manager N. L. Rawling, production manager Harold T. Bent and P. F. Halsey, the superintendent of the steel hull division. Nobody came south from the Navy’s Bureau of Ships to mark the day. “Still shrouded in secrecy because of the controversy raging on Capitol Hill between the Air Force and the Navy,” the Newport News Times-Herald reported, the discrete [see above] keel-laying “represented a clearcut phase in the contract,” since “objectors will find it more difficult to have the investment thus far be tossed aside.” The months of speculation that Washington was to pull the plug on the work “is a moot question,” the newspaper told its company-town readers. “The facts in the matter are that the keel has been laid, steel fabrication is well under way and opponents of the plan will have a harder time now trying to get the contract thrown out.”4
Newport News Shipbuilding spent millions to help the Navy try to force the issue of the USS United States. The shipyard’s metal fabrication shop had cut and shaped thousands of tons of steel, and the yard had paid for an additional 3,000 tons of steel to be prepared for the project. It had ordered $10 million of parts or services from subcontractors, while the Navy had spent only $7.5 million so far to cover these costs. Representative James E. Van Zandt, a member of the Armed Services Committee, estimated that sums already spent exceeded $20 million.5
However, the yard’s cooperation with the Navy had started even earlier and included costs that Van Zandt’s estimate did not. The shipyard launched a multimillion-dollar investment in modernizing and expanding its shipways three months before the formal award of the contract, an initiative that ensured it could handle the 1,090-foot-long carrier.6 All that so that the Navy, after a secretive keel-laying, could declare triumphantly: “The laying of the keel of the new carrier marks the start of construction of the first ship of the Navy’s postwar building program.”7
The USS Forrestal
North Korea’s invasion of South Korea the following summer put paid to Secretary of Defense Louis Johnson’s cost-cutting drive—and, soon enough, to Johnson himself. On 21 May 1951, Congress formally authorized funding for construction of a new large carrier—it was to be a flush-deck carrier, only a little shorter than the USS United States and, in its initial version, largely based on the plans the Navy and Newport News Shipbuilding already had refined. However, rumors that the yard had secured work on a new carrier had been circulating; two months before the contract award, Senator Harry F. Byrd had reassured an Armed Forces Day dinner in Newport News that the new supercarrier would be built there.8
A critical element of Newport News Shipbuilding’s advantage in winning the Forrestal contract was the work it already had done for the USS United States, as it did its part to support the Navy’s controversial campaign to secure access to atomic bombs by having carriers that could accommodate the large bombers then required. Like the USS United States, the Forrestal “will handle heavy atomic bomb-carrying planes and will have its flight control island mounted on an elevator so that it can be raised or lowered to provide a flush deck,” the shipyard reported in its bimonthly Bulletin. Also like the United States, the Forrestal featured a radical departure in carrier design. The flight deck, rather than the hangar deck, was to serve as the ship’s main “strength deck.” Even before the Forrestal contract was in hand, some 700 shipyard designers and engineers were working on revisions to the basic USS United States design.9
They soon would be busier still. Months after the keel was laid, the Navy changed its mind about a basic feature of the design and called for a fixed “island” superstructure to be built amidships on the starboard edge of the flight deck. In 1953, a year after the shipyard laid the Forrestal’s keel, the Navy ordered a major modification—an angled flight deck extension, a new concept pioneered just after studying the Royal Navy’s test of the idea the year before when it painted new directional lines on the fore-and-aft oriented flight deck of HMS Triumph.10 Later in 1953, the Navy approved a new steam catapult for carriers, and with construction on the Forrestal now in its 18th month, the piping and control systems for that, too, had to be incorporated.11
This kind of collaboration had become old hat with the Navy and Newport News Shipbuilding. After all, the Shipyard Bulletin had noted, “The Forrestal will be the sixth design of a large aircraft carrier and with her building our company will have developed five of these basic designs . . . developments which were to prove of value in later years were at least partially perfected in our plant.” Those included the standard aircraft elevator, weapons elevators, aviation fueling system, the lubricating oil system, and the large open hangar deck.12
Still, Newport News Shipbuilding did not have a lock yet on carrier construction, though its intensifying collaboration with the Navy was yielding an important competitive edge. Newport News Shipbuilding had completed the Forrestal in 38.5 months; meanwhile, the Brooklyn Navy Yard needed nearly 43 months to complete the second carrier in the class, 45 months to complete the fourth, and 49.5 months to complete the sixth. New York Shipbuilding’s Camden, New Jersey, yard took even longer, 52 months, to complete the fifth Forrestal-class carrier. Meanwhile, Newport News cut construction time for its follow-on Forrestal carrier to 36 months.13
At the same time, two years before the formal Department of Defense and Atomic Energy Commission (AEC) announcement in 1954 that they were planning to launch nuclear-powered surface ships, shipyard president William E. Blewitt Jr. dispatched a half dozen engineers to the Oak Ridge National Laboratory in Tennessee to begin learning about nuclear reactors and systems.14 By 1955, the shipyard was sending 40 engineers from its then 240-person strong Atomic Power Division to Washington to work with the Bureau of Ships on preliminary plans for a nuclear-powered aircraft carrier. Shipyard engineers also were immersed in the detailed design of a prototype large-ship nuclear reactor propulsion system at the AEC’s National Reactor Testing Station in Idaho. By 1956, the supervisors and inspectors the yard sent from Newport News to Idaho, as well as the local metal workers and other skilled tradesmen, brought the total to 185. The first reactor was up and running in October 1958, and the full, two-reactor prototype was generating 70,000 horsepower—a quarter of what a carrier would need—by January 1959.15
Newport News Shipbuilding’s investment in nuclear engineering at this point—well before the formal award of a contract to build the first nuclear-powered carrier, the USS Enterprise, in August of 1957—also included setting up a health physics group responsible for monitoring and reducing radiation risks, a specialist inspection department, and a new department for fabricating the lead shielding required for reactors. The shipyard set up classes in reactor theory and nuclear engineering for its engineers; they and the yard’s metallurgists developed new welding techniques for the alloys specified for nuclear plants. Eventually, some 70 welders were specially qualified to handle piping systems for reactors, a push that required an estimated 45 man-years of training by 1967. The yard also added another 100 feet to the shipway 11 dry dock since the carrier was to be even longer than the Forrestal.16
Yet, Newport News Shipbuilding was not the only commercial yard interested in building large nuclear-powered surface ships. New York Shipbuilding’s Camden, New Jersey, yard also had developed the specialized construction techniques and radiation protection measures necessary for winning the contract for the nuclear-powered freighter Savannah in 1955. That year, the Camden yard also won the lead ship contract for the new, conventionally powered Kitty Hawk class of large carriers after missing out on the chance for any follow-on Forrestal-class ships.17 Bethlehem Steel’s Fore River Shipyard near Boston, Massachusetts, won the 1956 contract for the Navy’s first nuclear-powered cruiser.
Nevertheless, Newport News Shipbuilding was confident it would be the yard to build the first nuclear carrier. “The Yard has a background of several years with projects in connection with the carrier—in Newport News, Idaho, and Washington,” the Shipyard Bulletin explained. The team of engineers attached to the Bureau of Ships had grown to 56. Newport News Shipbuilding had designed the hull section, reactor shielding, piping, and machinery arrangements for the large-ship reactor project at the AEC’s National Reactor Testing Station in Idaho.18 Significantly, the decision to build the carrier at Newport News was not a typical award of work, for “the vessel was assigned for construction subject to further contract negotiation when the ship is about half-completed”—a new approach to dealing with the usually contentious issue of construction costs rising above a budget. This suggested the Navy and the yard envisioned an essentially collaborative approach, much more so that even their earlier efforts on USS United States and USS Forrestal.19 And, just as with the United States, Newport News Shipbuilding was working closely with the Navy to maneuver past potential objections to an adventurous new technology that the Navy desperately wanted.
The award of the unusual USS Enterprise contract was due neither to a uniquely held nuclear expertise nor the size of Newport News Shipbuilding’s drydocks nor political connections, since not even Senator Harry Byrd could secure the Forrestal-class follow-on ship or the conventionally powered USS Kitty Hawk and USS America for the Virginia yard. The award could only come from the Navy’s relationship with Newport News Shipbuilding. While Newport News began to forge that link with its design for the USS Ranger, the first purpose-built carrier, it was not the only shipyard to design and develop a new class of carrier in the 1930s and 1940s. But with the USS United States, Newport News Shipbuilding became a business and political ally of the Navy, with both hoping to build enough of the ship to fend off Secretary Johnson’s clear intent to cancel the contract. The Forrestal contract two years later, with initial plans and specifications largely incorporating the work Newport News already had done for the United States, was one result. Once the Navy decided that its capital ships—aircraft carriers—were to be nuclear powered, the comfort over prices, cost overruns, and specification changes that come when a monopsony buyer deals with a monopoly meant a relationship that the USS United States cancellation had only strengthened would become inevitable.
1. “Yard Leader Disappointed,” Daily Press (Newport News, VA.) 24 April 1949, 1.
2. See Aline Quester and Michael Nakada, “The Military’s Monopsony Power,” Eastern Economic Journal v9, no. 4 (October–December 1983): 295–308; and Peter Dombrowski and Andrew L. Ross, “The Revolution in Military Affairs, Transformation and the Defense Industry,” Security Challenges 4, no. 4 (Summer 2008): 13–38. Generally, analyses of monopsony have focused on labor markets in company towns ever since Joan Robinson detailed that example in an early of a market with a sole buyer, in chapter 25 of her classic text, The Economics of Imperfect Competition.
3. Francis Y. Edgeworth, Mathematical Psychics, “London School of Economics Reprints of Scarce Tracts,” no. 10 (London: Kegan Paul & Co, 1932) 20–26 discussed a theoretical monopoly-monopsony market, as did Gerhard Tintner, “Note on the Problem of Bilateral Monopoly,” Journal of Political Economy 47, no. 2 (June 1939): 263–70, and A. J. Nichol, “Monopoly Supply and Monopsony Demand,” Journal of Political Economy 50, no. 6 (December 1942): 861–79.
4. Thornton M. Tice, “Keel is laid for $189,000,000 Carrier” Newport News Times-Herald, 18 April 1949.
5. “Carrier Stoppage Cost Is Estimated Around $20 million,” Newport News Times-Herald, 30 April 1949.
6. “Yard Bulwarks Carrier Contract On Solid Orders,” Daily Press, 31 December 1948.
7. Navy Press Release, 18 April 1949 (Folder “NNS&DDCO: Supercarriers; 1949” Daily Press Archives).
8. “Newport News Yards Awarded Contract for Supercarrier,” Washington Evening Star, July 12, 1951; “Senator Byrd Drops Strong Hint He’ll Seek Re-election in 1952,” Evening Star, 20 May 1951; and “Newport News Yards Awarded Contract for Supercarrier,” Evening Star, 12 July 1951.
9. “The USS Forrestal,” Shipyard Bulletin 16, no. 1 (November/December 1954), 5.
10. “The USS Forrestal,” Shipyard Bulletin, 6–7.
11. “The USS Forrestal,” 8.
12. “Yard Receives Award for Big Carrier,” Shipyard Bulletin 14, no. 5 (July/August 1951): 11.
13. “Production Records, Forrestal class carriers,” Shipyard Bulletin 21, no. 7 (November 1961): 7.
14. William Tazewell, Newport News Shipbuilding: The First Century (Newport News, VA: Newport News Shipbuilding, 1986), 207.
15. Tazewell, Newport News Shipbuilding,, 207; “Atomic Power Progress,” Shipyard Bulletin 17, no. 2 (January/February 1957): 8.
16. Tazewell, Newport News Shipbuilding, 209.
17. Norman Friedman, U.S. Aircraft Carriers: An Illustrated Design History (Annapolis, MD: Naval Institute Press, 1983) 274–80, 317.
18. “Yard to build Atomic Carrier,” Shipyard Bulletin 17, no. 5 (July/August 1957): 16.
19. “Yard to build Atomic Carrier,” Shipyard Bulletin, 16.