The American Merchant Marine thus stands on the threshold of a new era. With the assistance of government funds a sincere and tremendous effort is being made to restore the American flag to its former position of dominance in the world carrying trade.
It is time that the Merchant Marine should again become a subject of interest to every citizen. For many years, American energy has been absorbed by the problems of an inland empire, and the welfare of one of the major industries of the United States has been left to chance and the grim persistence of a group of men who have felt that the United States has a vital concern in the foreign carrying trade. Thanks to their efforts and to the mail contracts authorized in 1928, a few splendid passenger ships have been constructed and are in operation. But no general cargo vessels have been built in the United States in the past seven years, whereas many such ships have been put into service by foreign competitors.
For it is, in the final analysis, the medium-sized, moderately fast, economical and reliable cargo carriers, loaded with scrap iron or cotton bales, or even the cheap tin trays of poetry, which are the mainstay of any merchant marine. England’s domination of the world’s shipping routes is based upon the possession of hundreds of these craft, some operating on regular schedule and others serving in the so-called tramp trade, which will carry anything anywhere. The United States needs ships such as these to regain her position as a maritime power. The American shipping industry is anxious to build such ships. But the cards have been stacked against the independent operator by the policy of the great foreign powers which would make the Merchant Marine virtually subsidiary to the Navy. These nations defray a considerable proportion of the operating expenses of their commercial vessels in order to insure their availability in time of war. For a variety of reasons, the United States has been loath to embark upon such a program. It was felt that subsidies were for the “weak sisters,” not for the capable operators. But there is now too great a differential in favor of the ship under a foreign flag to make possible extensive operations in foreign trade without some assistance.
The matter of wages paid seamen is a case in point. In 1936, for example, deck officers and seamen of four maritime nations were compensated thus:
| First officer | Second officer | Third officer | Able seaman | Ordinary seaman |
United States | $178 | $160 | $137 | $60 | $44 |
England | 100 | 72 | 55 | 41 | 24 |
Sweden | 103 | 76 | 55 | 38 | 33 |
Japan | 39 | 27 | 22 | 16 | 11 |
Wages for other ratings and departments follow the same scheme.
Recent computations show that American-built vessels cost about 60 per cent more than the same type built in England. The life of the American ship is no longer than that of the English, which means that the cost of depreciation alone should be 60 per cent greater than that of the foreign craft. Theoretically, American earnings should be about double those of the English competitor. But freight rates are not made arbitrarily to suit the individual shipowner’s need; they are evolved from and by the competition of the trade. Thus American ships are excluded from trade in which there is foreign competition, unless some form of financial assistance is available.
Such assistance is desirable to many different groups, for ships are of economic importance to hundreds of crafts and trades. Wherever a ship goes, she spends money. If the ship is American, her home port is in the United States, which means that not only will her personnel be paid off in the United States, but that the great bulk of her supplies will be acquired in this country. It means further that all the routine repair and maintenance work will be done in American docks or yards, by American workers. It guarantees an outlet for many industries which to a greater or less extent depend upon shipping for their livelihood.
Thus the ship operator’s request for government aid is not a plea for a gift which will bring in no return to the taxpayer. Rather, it is a proposal of a business deal which will pay a fair return. Since the cost of operation is greater under the American flag than under any other, it is essential that the shipowner be granted assistance which will make it possible for him to do business in competition with men and ships of every nation and type. The American people may spend ten to twenty million dollars a year in subsidizing its Merchant Marine, but more than this amount will be received in return.
For one thing, there is the matter of competitive freight rates. If there is only one line serving a given route, there is a tendency to charge monopoly rates. If the United States relies exclusively upon foreign tonnage to transport her freight, she is laying herself open to excessive exactions for service. The possession of an adequate merchant fleet, serving the principal trade routes of the world, means that the American shipper will be protected from exorbitant charges. From that standpoint alone, the investment in subsidies is worth while. An equally important item is the fact that in most cases the establishment of American flag lines operating to foreign markets has been accompanied by the development of trade between the United States and those markets.
Subsidy for the merchant fleet is an economic necessity, not an extravagance. What money the shipowner collects from the government is obtained only after meeting exacting requirements laid down in rules to which the operator must agree. From the salary of the executives in the home office of the line to the number of slices of bread which must be provided for each hungry seaman, there are regulations. If the operator fails to meet any of them, he may forfeit his subsidy. Possibly it is public money expended on private enterprise, but the government receives full value for every cent paid to the shipowners.
In return for paying the construction and operating differential on American ships, the United States government obtains certain privileges and advantages. In the first place, every ship on which a subsidy is paid is subject to requisition by the government in time of national emergency. This means that at the outbreak of war, the most modern and most efficient vessels of the American Merchant Marine will become units of the Navy, and will be used by the United States as is deemed necessary, and for a period limited only by the discretion of the government. If the vessel is chartered, peace-time charter hire will be paid. If the ship is purchased, the peace-time price is to be paid. The operator does not have the opportunity to dispose of his tonnage in a rising market.
The existence of a large American Merchant Marine means that there will be available many trained seafarers who can be used either in the fighting or the auxiliary fleets. As part of their work, merchant seamen travel over the routes of the world, acquiring a knowledge of foreign waters and ports of value to the Navy in time of war. This knowledge can be acquired best in the mercantile marine, since United States naval operations are concentrated in certain areas. To train a man properly takes time. The presence of qualified seamen reduces the dangerous period between declaration of war and the opening of hostilities, which in the new warfare may mean the difference between defeat and victory. That American merchant seamen may be absorbed into the Navy with a minimum of specialized drill has already been demonstrated.
The government further keeps employed in maritime pursuits that large body of skilled men who design and build ships. Only by constant experimentation may progress in shipping be attained. It has been found, thanks to the work of these professionals, that the expense of speed can be reduced. Costs of operation have been forced down by world conditions and competition. Naval architects and marine engineers have met the challenge, and today many freighters have developed speeds up to 14 or 15 knots. The Japanese, with their fast new motor-driven tonnage, are proving that low-revenue freight may be transported profitably at express speeds.
Competition has compelled the adoption as standard equipment of many features considered to be luxuries only a few years ago. Electric winches, gyrocompasses, geared turbines propelled by superheated steam at high pressures—these are commonplaces, and permit the rapid turn' arounds which are now the rule with American flag lines. Today the operators are anxious to build new and more efficient tonnage, which will permit faster schedules and lower costs.
This new construction has been partially financed by the government, which lent the necessary money at low rates of interest. Forty-two ships were built under the terms of the Jones-White Act of 1928, and are in service today. These fine vessels are officered by members of the United States Naval Reserve, and are approved as naval auxiliaries. The operators are proud of this distinction, and are ready to lay down new ships which will be available to the government if they are needed.
But all efforts of the Merchant Marine are not directed toward war, for peace is the normal condition of this country- Great exertions are being made to stimulate foreign trade, for much of this nation’s maritime prosperity depends upon transporting goods in American vessels to the port of destination. As has been set forth, there are many thousands who derive their living from the shipping industry. So the greater the activity of the Merchant Marine, the greater the returns to the country.
When examined in this light, an intelligent, consistent, satisfactory shipping policy becomes a matter vital to all citizens. Some form of subsidy seems the only answer to the problem which confronts the industry. The direct returns of the subsidy justify the expenditures involved.
While subsidization of the Merchant Marine may be traced back to the seventeenth century, it was only in 1837 that our modern methods of financial assistance were adopted, and the mail contract evolved.
Samuel Cunard signed a contract with the British government in 1839, obligating himself to establish a regular mail service between Liverpool and Halifax, N. S. In return for operating three ships on a fortnightly schedule between these two ports, he was to receive an annual payment of £60,000. The American terminal was moved to New York in 1840, and operations since that date have been from that City. In 1841, Cunard's subsidy was increased to £80,000, and his fleet was enlarged to seven vessels.
Cunard's activities seem to have awakened American interest in a fast mail and Passenger service between New York and Europe. By the act of March 3, 1847, the Secretary of the Navy was authorized to accept the offer made by E. K. Collins & Co. to carry the mails from New York to Liverpool. Collins began to operate on June 1, 1850. His contract called for 20 voyages a year, for which he was to receive an annual payment of $385,000. This was equal to $19,250 per trip. To meet the threat of competition, the Cunard line doubled its sailings, and obtained an increase of its subsidy from £85,000 to £145,000, which meant a voyage payment of approximately $15,000.
As was to be expected, the competition between the two lines became severe. Collins' ships were swifter, and attracted 40 per cent more passengers than Cunard's; they also offered a definite menace to Cunard's virtual monopoly of the fast freight business. Rates fell from £7 10s. to £4 a ton before the end of 1850. To proud Americans, it seemed that Collins was going to win the fight with Cunard. Their hopes proved vain, for a series of misfortunes overtook the Yankee line, some natural and some economic, and put an end to an enterprise which otherwise might have given to America the supremacy on the North Atlantic which the British shipping concerns have so long enjoyed. The fine steam vessels of the Collins line, which had been built in American yards, and cost nearly three million dollars, were about 14 hours faster than the Cunard ships, and much more comfortable. Passenger trade turned toward the American fleet until 1854, when the Arctic, with a large passenger list and a heavy cargo of freight, sailed out of Liverpool, never again to be seen. A year later, the Pacific was wrecked with considerable loss of life.
Undaunted by these disasters, Collins put into service the Adriatic, largest and finest ship afloat in that year. Public support dwindled, however, after the two casualties, and revenues fell. The mail subsidy was reduced from $33,000 a trip to the original figure of $19,250, and the sailings were cut from 26 to 20 per year. Lack of government support proved fatal, for in 1858 the house flag was hauled down. All mail contracts expired in that year, and none was renewed.
The experiment with the Collins line cost the United States about $4,500,000. Under the guise of mail contracts, the government had granted aid to several other companies besides Collins. The total expenditures for mail carriage from 1847 to 1858 amounted to almost $15,000,000, but there was no planned program, and the merchant marine did not develop.
In 1867, the Pacific Mail Steamship Company, which had grown up as a result of the gold rush to California, was granted a subsidy of $500,000 annually to operate a monthly service from San Francisco to Japan and China, calling at Hawaii en route. Service was maintained according to contract, and in 1872 the company offered to increase its sailings to a biweekly schedule for an additional $500,000 each year. This grant was made in 1873, but it was subsequently discovered that the Pacific Mail had spent over a million dollars to influence congressmen in its favor. Because of this scandal and the fact that the line was unable to fulfill its contract, the new agreement was immediately abrogated by Congress. The Pacific Mail did operate under subsidies for a decade, during which it received $4,583,000 in payment. Since there was no noticeable increase in trade to the Orient, the contract was not renewed on its expiration.
The North Atlantic and the Pacific were not the only waters to be exploited by enterprising business men. Early in the last century, William Wheelwright, American consul at Guayaquil, Ecuador, realized the necessity for a line of steamships to the west coast of South America. He attempted to enlist the United States’ aid, but was unsuccessful. In spite of this rebuff, Wheelwright entered the shipping business in 1829, operating a line of coasting vessels between Valparaiso and Panama. American indifference to his proposals sent the former consul to England, where he was warmly received. In 1840, the Pacific Steam Navigation Company was chartered by the crown, and was awarded a mail subsidy for the route between Central and South American ports. England was motivated only by the desire to extend her commerce with the countries of that region. The means for reaching the end were well justified, for today this organization is completing its tenth decade of service.
British shipping interests are not confined to passenger craft, for the tramp steamer is everywhere representative of the empire. During prosperous years, the tramps operated over the world. When the depression of 1929 began, the tramps were seriously affected. Every citizen who realized the importance of shipping to the empire was concerned over the plight of the merchant marine. As a result of concerted effort, the Shipping (Assistance) Act of 1935 was passed. This provided for a subsidy not to exceed £2,000,000 annually, which was to be paid to tramp operators. Under the terms of the bill, working agreements were effected to reduce competition among the British flag lines. Payments were to be made to owners whenever freight rates declined below the 1929 level. The scheme was successful, and the industry was saved. The general business improvement of the last year has made uncertain the necessity of differential payments to operators.
In spite of Britain’s predominant maritime strength, France has had more experience than England in subsidizing her Merchant Marine. For a century she has consistently followed a policy of government aid to the mercantile navy. The fruit of these years is a subsidy program which differs for each line, but has a single goal to encourage shipping. It has been found that private enterprise is superior to government ownership, but that some form of state aid is essential to keep the ships operating. Rather than guarantee all losses, the government has discovered that more satisfactory results are obtained if only a major portion thereof is underwritten. In return for this arrangement, the government absorbs a certain proportion of the profits in rich years, and thus repays some of the expenses of the poor years. There are obvious flaws in this scheme, but France has a splendid Merchant Marine today, due in large measure to this consistent policy.
The Compagnie Generale Transatlantique has the French government as its majority stockholder. Thus the line has been able to build such expensive craft as the Normandie and the lie de France. It is reported that the line receives an annual subsidy of $10,000,000, which is not excessive when it is recalled that the French Line is the greatest operator in the country.
American Merchant Marine operators are only too well aware of the competition that has been briefly indicated above. In view of what they face, they do not exaggerate when they say frankly: “Without government assistance and a long-range government shipping policy, the American flag must disappear from the seas.”