Prompted by the persistent accounts of failure on the part of the Shipping Board to point the way toward the permanent establishment of a merchant marine, I submit the outline of a program which takes into account both the need of the operator and the universal desire to have our government in control of an adequate auxiliary fleet of ships.
This program was first suggested some years ago when there were some 1,400 ships at the disposal of the Board. It was based on the thought that having a certain amount of tonnage in government ownership, continued ownership and control could be secured, without continuance in the shipping business. This could be done by offering government ships to private concerns on such favorable terms, that the private operator could not afford to ignore the proffered assistance.
With this end in view the operator would be told that he could select such government ships as he desired; that there would be no restriction as to their use, he to have as complete control as though they were his own; that there would be no stated charge for their use; that he would be responsible for all expenses of upkeep as a part of operation; but that in consideration of an obligation to be assumed by the government to replace tonnage as the ships became decrepit the operator would pay such amount annually as would amortize the capital represented by the accepted tonnage within the life of the ships involved. The operator would, in other words, pay to the government the annual replacement increment which he would in case of his own ship charge to operation expenses. He would be further assured that there would be no other payments exacted unless his business was profitable, in which event he would be required to pay a share in his net profits on a reduced basis, as would be a proper profit allowance to a private party thus furnishing ships.
The plan would embody certain conditions, as, for example, that no operator should be allowed more than say twenty ships; that the ships must be kept adequately insured; that no company be allowed to take any ship unless its authorized capitalization was at least $1,000,000 with at least $250,000 paid in; that on two years’ notice ships might be withdrawn and that in case of emergency as in the event of war or menace, the United States might take possession without notice.
The amount of the annual replacement requirement would depend on the present or remaining value of the ship, and on the probable remaining life of the ship.
When any ship went out of service and was to be replaced, the replacement would be out of any stock of ships on hand, or, if necessary, by new construction. In the latter event the cost of the new ship would afford the starting point for estimating the annual replacement requirement (current depreciation).
Such an arrangement should be welcomed by the operator because it would put capital into his business without requiring him to pledge securities and without any interest charge so long as his venture continued unprofitable, and with only half the sacrifice, or possibly even less, that he would ordinarily have to make on a partnership arrangement if his venture turned out profitable.
The ships built to replace old ships would conform to the most modern requirements. The Shipping Board would soon be out of the operating business and would then have little else to do except to take care of replacements. There would, moreover, be a gradual accumulation of funds out of profits received from successful operators. These funds could be drawn upon as required to pay bonuses to certain operators in order that they might without sacrifice maintain ships on lines where, otherwise, successful operation would be impossible.