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The merchant marine policy of the United States with particular reference to the period 1936 to July, 1941

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1936 to JULY, 1941
A Thesis
Presented to
the Faculty of the College
of Commerce and Business Administration
The University of Southern California
In Partial Fulfillment
of the Requirements for the Degree
Master of
Business Administration
Elmer L. Schick
August 1941
UMI Number: EP43164
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I. INTRODUCTION...........................
Statement of the problem..............
Justification and importance of the problem
Organization of the thesis . . . . . . . .
Statement of the sources of d a t a .......
MARINE, 1800 to 1936 ..................
The American merchant marine prior to
the World W a r ......................
The World War and the shipbuildingprogram
The Merchant Marine Act of 1920.. .......
The Merchant Marine Act of 1928.. ......
The Copeland-Bland B i l l ..............
Provisions embodied in the A c t .........
1936 to 1 9 4 0 .......
The labor p r o b l e m ....................
The Government Subsidy question prior to
the outbreak of the present European
The transportation problem with regard to
Latin American countries..........
Great B r i t a i n .....................
I t a l y ............................
J a p a n .............................
The American merchant marine at the
outbreak of the present European war . . .
Should the United States Maritime Commission
launch into a greater construction program
the topic of 1940 ..................
1 9 4 1 ............
The British plight..................
The United States Maritime Commission -its m e m b e r s .....................
The United States Maritime Commission —
its present tasks
. . . . . . . . . . . .
The existing United Statesmerchant marine .
The United States Merchant Marine
Shipbuilding program ..................
The labor situation................ . .
The United States shipping pool
The Ship Warrant B i l l ..............
Statement of the problem. One of the most perplexing
problems of national policy has been the United States merchant
Inconsistency and confusion have continued to prevail
regarding the policy of the United States with respect to the
participation of American vessels in international trade.
fluctuation of public opinion has been difficult to comprehend.
For the greater part of American history the people of this
country have been satisfied to consign the transportation of
American goods to foreign merchant marines, however, with un­
foreseen suddenness the public becomes aware of the latent
advantages of sea mastery and demand a hastily planned program
of merchant-vessel construction.
Subsequent to this sudden
desire for a powerful merchant fleet, has always been the un­
explained waning of public interest for continuing an adequate
merchant marine, which results in the disappearance of Americanship:participation in foreign trade due to the lack of protec­
tion to counterbalance the competitive low costs of foreign
Another illogical policy has been the contentment on the
part of the American people to engage in the outlandish practice
of launching into an enterprising naval-construction program,
but constructing an inadequate merchant marine auxiliary.
humiliating incident was the result of this inconsistent
In 1 9 0 8 , when the United States Naval Fleet was
sent around the world to impress various foreign countries
of its power, the Fleet was required to be serviced and
attended by non-combat vessels of other foreign powers.
has been a discredit to the progressiveness of the United
States that the merchant amrine policy has not always ad­
hered strictly to the formula postulated by Admiral Alfred
T. Mahan, that ’’sea-power equals naval vessels plus bases
plus merchant vessels."
In view of these and many other inconsistencies of
policy, which are discussed later in the thesis, it will be
the endeavor of the author, through the presentation of his­
torical background and current policies and practices, to
describe the manner in which this contradictory course of
action has been, can be, or will be challenged.
Justification and importance of the problem. The
problem, whether the United States merchant marine and its
policies have been and will be of benefit to the nation,
answers, to a great extent, the justification and importance
of this writing.
Shipping performs a twofold service— the
preservation and the development of foreign trade and its
importance to national defense.
United states is the greatest exporting country in
the world and next to the United Kingdom, leads the world in
Any serious curtailment of exports would cripple
certain or various sections of the United States through the
loss of purchasing power.
Any diminishing of the importation
of commodities, which are not produced in the United States
or would he only produced at excessive costs, would seriously
deprive the American people of certain necessities and the
nation of the imperative need for strategic materials.
An adequate American merchant fleet participating in
international trade would considerably guarantee against
possible interruption of service.
Prior to the World War,
when the greater portion of American exports and imports was
carried by foreign merchant marines, the United States was
often deprived of the necessary foreign fleet to transport
its materials.
During periods of war, assuming that the
United States remained neutral, withdrawal or destruction of
this foreign fleet would seriously hamper the foreign trade
of the United States just when it was most urgent to parallel
the demands of new and expanding markets.
In order that American shippers may contend favorably
with foreign shippers, they necessitate reliable, direct, and
speedy service, and an adequate merchant marine would enhance
the quality of this service.
United States has experienced
the disadvantages of the necessity of depending upon foreign
shipping services.
Sailings were not always prompt and
Infrequency of sailings was common, as services out of American
ports were likely to be less certain and inferior to those
foreign shipping interests offered their own shippers.
delays were the result of indirect transshipments. It has
not been many years ago when commodities destined to the
east coast of South America had to be shipped by the way of
A merchant fleet of sufficient size would encourage
the establishment of additional regular lines services and
would make transshipments dispensable.
National defense is an important vindication for the
upkeep of a merchant marine in foreign trade.
Actually the
merchant fleet can be considered as the second-line of de­
fense, as it is an indispensable organ with regard to naval
The United States merchant fleet can render
military and naval services in many avenues.
passenger and cargo vessels can be converted into aircraft
carriers and auxiliary cruisers.
Similar vessels capable of
lower speeds can be used as troop transports, hospital ships,
and various types of tenders.
Tankers which are capable of
accompanying the fleet can also perform an important selfexplained military function.
In addition to the possible Over-water military opera­
tions .of a merchant fleet, is the service rendered by the
cargo vessel which must serve the demands of commerce in
time of war.
Vast quantities of raw materials essential both
to industry and civilian consumption must be procured from
foreign markets, and to pay for these imports and to protect
United States standing in foreign markets, a large export
trade must beecontinued.
This dual function of shipping— trade'and defense—
unquestionably benefits the nation, and anything which renders
an important service, as this does, to a country, justifies
its study and presentation.
An additional validation of this
problem, which cannot be ignored, is the fact that the ship­
ping question involves a consideration of various related
national policies; most important of these are the shipping
controversy brings in the dispute over the maintenance of the
protective tariff and shipping legislation has and will have
important reverberations upon the neutrality policy of the
United States.
Organization of the thesis. This thesis is arranged
in six chapters.
The second chapter coveis the development
of the American merchant marine from its beginning (1800) to
the year 1936.
Within this period, beginning with the Civil
War and up to the World War, nearly the complete dissipation
of the American merchant marine is witnessed.
The outbreak
of the World War finds the United States wit$ an alarming
inadequate merchant fleet, which is frantically supplemented
by a poorly planned, shipbuilding program under the direction
of the Emergency Fleet Corporation.
With the termination of
emergency conditions, created by the War, the disposal of the
existing Government fleet is the paramount problem.
problem heralds in the Merchant Marine Act of 1920, which be­
stows great benefits and satisfaction upon private shipping
interests, but does little to justify its enactment when bene­
fits to the American people are considered.
Failure of this
act resulted in the birth of the Merchant Marine Act of 1928,
which was no improvement over the previous legislation.
cessive discretionary powers given to the Shipping Board re­
sult in the scandals uprooted by the United States Senate in­
vestigation in 1935 and by the Post Office Department inves­
tigation regarding the corruption practiced in relation to
ships sales and competitive bidding and the letting of mailsubsidy contracts.
The third chapter is devoted entirely to the Merchant
Marine Act of 1 9 3 6 . This act is the result of the desira­
bility of an adequate merchant marine and the scandalous
practices permitted under previous merchant marine legisla­
All mail contracts, are terminated and replaced with
construction-differential subsidies and operating-differential
subsidies, crew conditions are improved, naval needs and re­
quirements are given more consideration, greater control over
unreasonable profits by shipbuilders a M excessive dividends
paid by shipping companies is established, and sounder re­
strictions of subsidization are evident.
The United States Maritime Commission replaced the
old Shipping Board, andaalthough the character of this body
is an improvement over the Board's, emphasis must be placed
upon the wise selection of personnel for this agency.
gardless of the obvious improvements of this act, invalidation
is found in inaccuracies present in determining differentials
between foreign and domestic costs and in the evils of exten­
sive discretionary powers granted to the Commission.
The fourth chapter directs its attention to the major
problems confronting the United States merchant marine for
the years 1936 to 1940.
Space is first given to the labor
problem, which embraces the deplorable maritime labor condi­
tions, both employer and employee sides being presented, as
they were found to exist through a series of investigations,
interviews, and hearings; the United States Maritime Service
and its program of training seamen; and the threat of Com­
munistic domination of American shipping.
Attention is next
directed to the government subsidy question prior to the out­
break of the present European war.
are summarized.
Arguments for and against
The transportation problem, with regard to
Latin America, occupies additional pages of this chapter.
The tragedy of United States previous indifference toward
the matter of shipping services between United States and
Latin America Is emphasized, and particular mention is made
regarding exactly what ways foreign governments, prior to
the declaration of war, were outclassing United States in
governmental aid to shipping and shipbuilding.
Another sec­
tion of this chapter is devoted to the United States merchant
marine as it existed at the outbreak of this war.
on tonnage and the number of ships are given, and comparison
with the shipping shortage crisis of 1914 is shown, the current
shipbuilding program is discussed, and the influence of the
Neutrality Act of 1939 upon the American merchant marine is
given attention.
The final problem in this chapter is the
much discussed topic of 1940--Should the United States Mari fee.
time Commission embark upon a greater construction program.
Arguments for and against additional expansion are listed.
The fifth chapter embraces recent developments in
merchant marine policy.
First, the British shipping crisis
is emphasized by means of a survey of present British mer­
chant marine tonnage, and the Administration's attitudes
and actions, in connection with this crisis, are presented.
Subsequent pages are devoted to the present membership of
the United States Maritime Commission and its present tasks
of weighing rivalry demands of the naval and the merchant
marine shipbuilding programs and the problem of securing and
assigning ships to the most appropriate channels.
Presented next is the existing United States merchant
marine statistics, along with the description of the Commis­
sion's regular shipbuilding program of five hundred vessels
and the mass production program of prefabricated ships for'
Great Britain.
Associated with these building programs is
the presentation of the problem regarding the construction
of new ways and yards to accomodate this present shipbuilding
The need for additional yards and ways also intro­
duces the question-of extensive shipbuilding on the Great
Lakes, which Involves the opposition of and the justification
for the St. Lawrence Deep Waterway project.
In connection
with this program of constructing added shipyards, is the
discussion regarding the problem of training sufficient num­
bers of new shipyard workers.
The labor situation is introduced as the next maritime
Responsibility is placed upon defense industries
as the cause for shortages in maritime labor.
This is reme­
died by salary increases in maritime labor and the role
played by the United States Maritime Service.
Another phase
of the labor problem discussed is the strike situation evi­
dent in the shipyards on the Pacific Coast.
In connection
with this unrest is the important role played by the Ship­
building Stabilization Committee.
The United States shipping pool is another present
development included in the fifth chapter.
This subject
indicates the change of United States ships in world trade,
and the inability of the American merchant fleet to carry
the greater volume of the. world’s trade, which necessitated
the creation of this pool.
Methods used to create this pool
are discussed, involving the policy of requisitioning seized
idle foreign ships, and the explanation where this pool of
ships will operate, is given.
The mo&t recent development discussed in this chapter
is the ship warrant bill, which gives the Commission greater
control over shipping through the issuance of warrants to
ship operators in return for priorities offered in various
Reasons for the bill are presented in addition to
the provisions embodied in the bill, and the functioning of
the bill is explained.
Important debate in Congress, regard­
ing the merits and defects of the bill, is discussed, conclud
ed with the bill's passage and the justification of the act.
In the final chapter of this thesis a summary and
conclusion are presented.
Statement of the sources of data. Although there have
been numerous histories of the merchant marine, particular
acknowledgement should be given to two historical studies:
John R. Spear's "Story of the American Merchant Marine” and
Erich ¥. Zimmermann,s "Ocean Shipping."
Despite the fact
that Mr. Zimmermano*s book was published back in 1921, this
volume also proves to be an excellent handbook for business
Strangely, thorough studies of the shipping question
have been meager.
Propaganda material has been plentiful,
but these sources of maritime information have not described
the true picture of the situation, as they have been circulated
with the principal objective of securing government aid for
various shipping interests.
The most comprehensive study
of the shipping question has been
Shipping Policy."
Paul M. Zeis* "American
This book is concerned primarily with the
motives and forces which influenced Congressional action,
leading the author into the field of pressure politics.
no branch of legislative activity have pressure groups played
a more important role than in the field of shipping legisla­
This analysis of the Congressional action of the
shipping question directed the author to disclose "whether
the United States had a shipping policy, what this policy was
and why it was adopted, whether the policy accomplished its
objectives, and whether the policy had been of benefit to the
Several accounts of the economic and political aspects
of the merchant marine policy have been written, and three
writings deserve credit*
Hsin Ssutu's "The Merchant Marine
Policy of the United States" is excellent.
This study was
written as a doctoral dissertation for the Department of
Economics of the University of Pennsylvania.
The author was
concerned with the economic and political aspects of the
shipping question, reviewed shipping legislation, examined
the factors favorable and unfavorable to an American merchant
marine, and suggested remedies and a program of future direct
and indirect government aid.
Another study is the survey made by the United States
Maritime Commission in 1937, which resulted in the publica­
tion of the "Economic Survey of the American Merchant Marine."
It was written with the belief it would be helpful to the
Congress in dealing with problems confronting the shipping
When this survey was begun, those working on the
survey were instructed to take nothing for granted.
The sur­
vey was a fine piece of work, as the best informed persons
in the country were consulted.
University professors made
specialized studies, shipping lines loaned their experts,
labor relations experts were called in, and Government offi­
cials and experts were drafted for contributions.
The survey
was reduced to five major inquiries:
Should the United States attempt to compete in
the international carrying trades.
What are the requirements of the United States.
What is the present status of the subsidized
merchant marine.
What should be the policy of the United States.
What will it cost to maintain an adequate mer­
chant marine in foreign trade.
The third book, which has been written on the economic
and political aspects of the merchant marine policy is the
National Industrial Conference Board’s "The American Merchant
Marine Problem." No further description need be made of this
contribution as it covered the material in a very much the
same manner as does the book written by Hsin Ssutu.
Just brief mention need be made here of an excellent
study issued by the United States Department of Commerce.
is an analysis of the subsidy program of principal paritime
nations of the world.
"Shipping and Shipbuilding Subsidies,"
was prepared by Jesse E. Saugstad, and it offers a detailed
historical account of subsidies and government ownership, a
statement of economic and political forces which influenced
national protection of the shipping and shipbuilding indus­
tries, and a statement of maritime-credit provisions.
Periodical articles were the principal sources of
information regarding recent developments and changes in poli­
cies of the American merchant marine.
Achkowledgement must
be accorded to two noteworthy issues of Fortune Magazine.
first of these was the dedication of an entire issue to the
extensive survey of the shipping question.
This survey was
titled "United States Shipping," and was found in the
September issue, 1957.
The case for and the case against
the American merchant marine was presented, starting with the
year 1914 and continuing up to September, 1937, when emphasis
could be directed at the results and accomplishments of the
Merchant Marine Act of 1 9 3 6 . The other issue of Fortune was
the July issue, 1941.
Two articles on the United States
merchant marine were included--"How Many Ships How Soon" and
"Ships for This War,"
These articles presented the current
paramount problem faced by United States shipping— "all-out
aid to the democracies."
Stress was placed on the Maritime
Authority's solution of employing to the greatest advantage
the existing merchant marine, its problem of increasing
United States shipbuilding capacity fourfold, and its job of
training additional shipyard workers.
Recognition must be also given to the numerous arti­
cles written in the magazines, Business Week and Newsweek.
These two periodicals' were of particular value with regard
to recent developments in the labor situation and the United
States shipping pool.
The periodical articles, listed in
the bibliography, written by John C. DeWilde always proved
to be excellent writing aids.
The numerous Government publications, as listed in the
bibliography, served as valuable sources of supplementary
Reference has already been made of the United
States Maritime Commission's "Economic Survey of the American
Merchant Marine" and Jesse E. Saugstaf's "Shipping and Shipa
building Subsidies."
"The Shipping Acts and Merchant Marine
Acts of 1916, 1920, and 1 9 3 6 ,” published by the United States
Department of Commerce, supplemented by the "United States
Statutes at Large," were of great aid when referring to pre­
vious shipping legislation.
The United States Maritime
Service's pamphlet, "General Information on the United States
Maritime Service," was used almost exclusively regarding the
subject of training seamen.
Congressional hearings held by the Seventy-third and
Seventy-fourth Congresses were the important sources of infor­
mation regarding scandalous methods uprooted by Senate inves­
tigation, practiced under the Merchant Marine Act of 1 9 2 8 .
"Proceedings and Debates" in the Congressional Record were
most valuable in the presentation of an intelligible explana­
tion of the legislation regarding the shipping pool and the
ship warrant bill.
to 1936
The American Merchant Marine Prior to the World War.
The hlrth of the American merchant marine properly began at
the outbreak of the Napoleonic wars.
The United States
remained neutral in the long struggle between Great Britain
and France, and while entire Europe was occupied with war,
consequently, neglecting foreign commerce, the foreign trade
of United States rapidly grew.
The reason for this rapid
development was the great need for American food products
and raw materials.
Now, as the British merchant marine
fleet was devoting its time to the conducting of the war and
French shipping was at a standstill, this enabled American
ships to perform the greater amount of the world's carrying
Much of the trade between Latin America and the Far
East was conducted by the way of United States.
In 1801, it
has been stated, that more than half of American exports
were re-exports. 1
Mostly due to the Napoleonic war, the
tonnage of American ships for ocean transportation increased
six-fold in the fifteen years following the adoption of the
Constitution with a corresponding increase in the earnings
1 E. L. Bogart, Economic History of the United States
(New York: Longmans, Green and Company,TgUfJ, p. HT2.
of the American merchant marine.
At the beginning of 1804 American foreign trade met a
serious blow.
Through the jealous^ of Great Britain and
France, brought about by the fact that United States was the
country that was actually profiting from the war, England,
in 1804 and France in 1806-1807 declared a blockade upon
each other’s ports, with the order that all ships trading
with the other country or her allies would be subject to
This brought the rapid growth of the American
merchant marine to a halt.
This, however, was not the only
difficulty; United States was enraged with the actions of
Great Britain In the practice of stopping American ships
and taking off sailors that Great Britain claimed were
British and were needed in the war.
United States tried to
make requital by the Embargo Act of 1807 which prohibited
American ships from leaving America for foreign ports.
This was a grave error, as the results desired were not
realized, and instead of starving Europe, it worked tremen­
dous hardships upon United States.
The Non-Intercourse Act
of 1809 tried to relieve this situation somewhat by allowing
trade with all countries save France and Great Britain, which
finally brought United States and Great Britain to the War of
^ J. P. Young, International Trade and Finance
The Ronald Press Company, 1938')*,’ P» 36.
After the War of 1812 the foreign trade of the United
States, to he expected after a war, expanded greatly.
with the tremendous amount of import of foreign goods,
resulting in serious damage to American manufacturers, the
boom of 1 8 1 4 -1 8 1 6 was brought to a close with the enactment
of the protective tariff of 1816 which imposed high duties
upon foreign textiles and other foreign goods.
The depression
lasted from 1816 to 1821, and imports accordingly fell from
about $147,000,000 in 1816 to about $74,000,000 in 1820.^
With the enactment by most countries of tariffs and other
trade restrictions and the desire of United States to direct
most of her attention to the development of her own industries
and resources, this decline of foreign trade for the United
States continued until 1850.
From 1850 to the outbreak of
the Civil War our foreign trade expanded rapidly, and most
of the increase in exports during this period was due to the
development of the cotton industry in the South.
The Civil War marked the doom of the American merchant
Most of the ships were sunk by Confederate warships,
were converted into war vessels, or were sold to foreigners.
United States did not permit, after the war, those vessels
that were sold to foreigners to fly the American flag.
Another factor responsible for almost the complete disappear­
ance of American ships was the inability of American ship­
builders to compete with foreigners because of the high duties
3 Young, Ibid., p. 3 9 .
upon shipbuilding materials, steel, iron, copper, lumber,
and cordage.
The end of the wooden ship era was another
important factor, the construction of which the United States
was favored.
The United States was not well prepared to
build and operate iron and steel vessels propelled by steam
as were the European countries.
The rapid industrial develop­
ment of the United States after the Civil War and the comple­
tion of the transcontinental railroad system offered richer
returns for the investor than could be obtained from ocean
shipping, thereby, helping to bring about the decline of
American shipping.
Figures show that American shipping ton­
nage engaged in foreign trade dropped from 2 ,3 7 9 ,3 9 6 tons in
1860 to 782,517 tons in 1910.*
The World War and the Shipbuilding Program. The
beginning of the World War found the United States with prac­
tically no merchant marine.
In fact, the American merchant
fleet in foreign trade was less than one-half what it had
been when the Civil War began, and ships of other nations
were carrying more than 90 per cent of the cargoes that
crossed the ocean.
called home.
P. 2 9 .
In August,
191^, those ships were suddenly
The British Navy prevented all German boats
^ Hsin Ssutu, The Merchant Marine Policy of the United
(Philadelphia: University of Pennsylvania, 19351*
from leaving this country, while the fear of German cruisers
induced the allied shipowners to keep their boats in port.
To make things worse, the marine insurance companies hesitated
to write insurance for cargoes on ships sailing into European
The consequence of all this was that additional ex­
ports almost ceased-and the warehouses soon became congested
with commodities awaiting shipment.
In spite of the rush of
war orders for American goods and great rise of wartime prices,
United States exports fell from $2,485,000,000 to $2,115,000,000.
The panic created by the outbreak of the War gradually subsided
due to emergency legislation.
Congress in the latter part of
provided for the establishment of a war risk insurance in
the Treasury Department.
This made it possible for shipping
companies to resume operations at reasonable insurance rates.
The second emergency measure, enacted near the same time, was
the ship registry law which gave protection of a neutral flag
to American shipowners who owned ships operating under British
and other flags
With the entry of the United States into the War in
the Spring of 1 9 1 7 , the Shipping Board created the Emergency
Fleet Corporation with a capital of $50,000,000.
The corpora­
tion undertook a huge program of ship construction.
5 "United States Shipping— Marine Subsidies," Fortune,
16:65, September, 1937.
6 P.M.Zeis, American Shipping Policy (Princeton:
Princeton University Fress, 1938), "p. 83.
by conferring extraordinary war powers upon the President,
who in turn, delegated these powers to the Shipping Board
and the Emergency Fleet Corporation, increased the appropria­
tion of ships to $2 ,8 8 ^,0 0 0 ,0 0 0 , a figure twice the value of
the total sea-going commercial fleet of the world before the
Between 1917 and 1922 exactly 2,316 hulls were launched
by the Nation’s shipyards.
Most famous of all these shipyards
was Hog Island, a swamp on the Delaware River near Philadelphia
At the height of production, a completed ship was delivered
every twenty-three and one-half working hours.
Out of the
122 3hips built there, ninety-nine still operate in commercial
The Hog Island shipyard no longer stands; it was
sold to Philadelphia for $3,000,000 to serve as part of a
municipal airport.
Within three years the Government had made
the American merchant marine into one of the largest in the
The tragic thingiwas that these ships were not con­
structed soon enough to be of much help during the war.
The Merchant Marine Act of 1920. By the middle of
1919 the emergency conditions created by the War were at an
The problem to be confronted was that of disposing of
the existing Government fleet.
Act of 1920 was enacted.
In 1920 the Merchant Marine'
Congress blindly passed this bill
7 J.E. Saugstad, Shipping and Shipbuilding Subsidies,
United States Department of Commerce, Trade Promotion Series
No. 129 (Washington: United States Government Printing
Office, 1932), p. 45.
which was actually put through by the Senate Commerce Committee
and the Shipping lobby . Very little doubt remains as to
the great benefit and satisfaction this act gave to private
shipping interests.
Some of the provisions of this act were
as follows:
A construction loan fund of $25,000,000 (later
increased to $1 2 5 ,0 0 0 ,0 0 0 ) to be used in aid of
the construction of modern ships.
To protect American vessels against unfair
foreign competition.
Exemption for American shipowners from the excess
profit tax for a period of ten years.
Encouragement given to American vessels for the
carriage of American mail.
The granting of preferential railroad rates on
goods imported or exported in American ships.
The promotion of American marine insurance
companies by relieving them from the restrictions
of the Sherman and Clayton anti-trust laws.
The repeal of treaties or conventions restricting
the right of the United States to impose discrimi­
nating duties on goods Imported in foreign and
American bottoms.
By just glancing at these provisions, one can easily
see why this act gave much satisfaction to private shipping
By 1928 the results of the Maritime Act of 1920
could be summed up in two statements:^
(1) The Shipping
8 United States Maritime Commission, The Shipping Act
of 1916 and the Merchant Marine Acts 1928 and 19J5 (Washington:
United States Government Printing Office, 1956), pp. 2 9 -6 0 .
^ Fortune, op* cit., p. 1 8 2 .
Board's chief object was to sell its 2,316 ships.
They had
gone slowly and had not brought the Board any substantial
part of the $2 ,9 0 0 ,0 0 0 ,0 0 0 it had put into them;
and (2 )
the United States merchant marine was still declining.
reason for this decline was that practically no ships had
been launched.
Of the $125,000,000 available for loans,
only $1 8 ,6 0 0 ,0 0 0 had been paid out to build fifteen ships
with a combined gross tonnage of barely 106,500 tons.
while, since 1 9 2 1 , some 4 ,0 0 0 ,0 0 0 gross tons had been with­
drawn from foreign trade.
The Merchant Marine Act of 1928. Revived interest in
Merchant Marine legislation started again in 1926, and the
request for mail subsidies and for alterations in the con­
struction loan fund were met in a most liberal fashion by
the measures which became known as the Jones-White bill,
which sought "to further develop an American merchant marine,
to assure its permanence in the transportation of the foreign
trade of the United States, and for other purposes. " 10
interesting story is connected with this bill.
had two things in mind:
A very
(1 ) the prevention of any curtailment
-10 Congressional Record— Senate, Proceedings and Debates
December 9 , 1 9 2 7 , p. 342. For debates and reports in the
Senate, refer to: January 16, 1928 to January 3l> 1928, pp.151317, 1926-1954, 2009-2015, 2049-2076, 2125-2178, and 2229-2251.
For debates and reports in the House, refer to: May 4, 1928
and May 5, 1928, pp. 7826-7853 and 7895-7921.
in naval construction and the discouragement of naval dis­
armament as much as possible;
and (2) the stimulation of
public interest in and the securing of public financing for
a program of merchant ship construction in American yards.
The real story involves two gentlemen by the names of William
B. Shearer and C. L. Bardo.11
As the story goes, the ship­
builders engaged the services of a certain gentleman by the
name of William B. Shearer to serve as a super-salesman to
educate the country to the need of a long navy and merchant
marine program.
In 1927 Shearer was sent to the Geneva Dis­
armament Conference as a "spectator" or at least the ship­
builders said he was sent in this capacity; however, Shearer
later denied this and stated that he was sent to break up
the Conference and that he had succeeded in doing so.
claimed that the shipbuilders had promised him $250,000 for
services and he actually only received $50,000.
of the authenticity of Mr. Shearer's statement the Conference
failed, and it seems to be the overwhelming conclusion that
the motive of the shipbuilders in sending this gentleman was
to prevent the adoption of any disarmament program.
With the failure of the Geneva Conference, the ship­
builders accomplished their'first objective.
Attention was
then directed in all efforts to secure of public finance, a
Committee on Naval Affairs, United States Senate,
Hearings on Alleged Activities at the Geneva Conference, 71st
Congress,“Tst Session, pp. 1 5 5 ,T 9 6 ,and 6 Bd.
program of merchant marine subsidy and replacement.
Here is
where C. L. Bardo of the Brown Bovari Electric Company comes
into the picture.
Under his leadership the shipbuilders
organized a fund of $1 5 0 ,0 0 0 to be used for the purpose of
creating interest in the merchant marine program. 12
lobbying activity of this group was the proposal for the
construction of immense ships, capable of thirty-five knots
which would make the Atlantic crossing in four days.
actual operation such vessels would prove even more expensive
and uneconomical than the Queen Mary and the Normandie, as a
slight increase in speed involves an enormous increase in
operating costs.
The shipbuilders never expected to construct
these ships, but this proposal successfully created interest
in the merchant marine problem and augmented the securing of
mail subsidies for private shipping lines under contracts
which called for the construction of new ships to replace
those becoming obsolete.
Mr. Shearer comes into the story
again, however, now hired as a "painter" in order to prevent
the disclosure of his activities at the Geneva Conference.
He was paid $9,550 for painting pictures of proposed superliners.
The Shearer and Bardo affair is one of the good
examples showing the method used to pass the Jones-White bill.
12 Committee on Naval Affairs, United States Senate,
op. cit., pp. 55, 674-682.
The Merchant Marine Act of 1928 Increased the sum
which was set aside in the Act of 1920 for loans to ship­
builders at low rates of interest.
A revolving loan fund
of $2 5 0 ,0 0 0 ,0 0 0 was authorized from which shipbuilders could
borrow, for a period of twenty-years, as much as seventyfive per cent of the cost of building a vessel.
This act
did very little to curb the power of the Shipping Board
despite the unimpressive record it previously had shown.
The only restriction was that five of the seven members had
to agree before any more of the public vessels could be sold
to private purchasers.
The Shipping Board was given practi­
cally unlimited discretion in matters of construetion-bans
and the extremely important matter of determining the type
and speed of vessels to operate on the new mail contract
routes, and in only a few cases were there exceptions where
it had to secure the agreement of the Postmaster General.
country has dearly paid for the mistake made by Congress of
placing this extreme discretionary power In the hands of the
Shipping Board, which was subservient to private shipping
The scandals of 1935 which were brought to light
and the investigation of the government's mail contracts by
Senator Hugo L. Black of Alabama substantiate this statement.
The Act of 1928 was a colossal failure considering the country
at large, but an amazing success when considering the interests
of the shipowners and shipbuilders.
At the time of the passage of this act the Shipping
Board still owned a large number of vessels and maintained a
considerable portioned of this Government fleet in active
service by means of managing operators; and the majority
of the Shipping Board which had previously favored the manag­
ing operators again wished to continue this policy of favorism.
With this view in mind, it employed the:preference policy of
the Merchant Marine Act of 1920 which sidetracked around
the section that provided that the sale of ships must be
made by means of competitive bids.
The former section
directed the Board in the sale of established ship services
to give preference "to persons who are citizens of the United
States who have the support, financial, and otherwise, of the
domestic communities primarily interested in such lines if the
Board is satisfied of the ability of such persons to maintain
the service desired and proposed to be maintained . . . .
With this section in the Act, the shipping Board had no limi­
tations on what it might do in the case of ship sales.
procedure followed by the majority of the Shipping Board, in
holding these preference sales, was first to hold a sale on
the basis of competitive bids and then, if necessary, to give
the managing operator an opportunity to revise his offer.
Such was the case of the sale of the Black Diamond Lines.^
^3 United States Maritime Commission, The Shipping and
Merchant Marine Acts,_cp. cit., pp. 33-34.
^ United States Senate, Hearings in Investigation of
Ocean and Air Mail Contracts, Vol. I, I9 3 3 , PP. 723-724.
The managing operator hid about $1,500,000 while the United
States Lines (still under Chapman and Sheedy management) bid
$2,455,000 or $23.82 per ton.
Chairman O'Connor apparently
advised the former to submit a new bid of $2 3 .8 3 per ton
since he knew the-terms of the second bid of the managing
operators before it was officially submitted.
This case was
not the only one of its kind, and the majority of the Board's
attitude was that the managing operators had done such a good
job in operating Government ships that they deserved a special
award in the form of being given preference in the purchasing
of ships and eventually securing of mail contracts.
out the Hoover administration the Shipping Board displayed
the same preference for steamship interests and the same dis­
regard for the public welfare as was shown during previous
The same preference policy in the awarding of mail
contracts was not in the Act of 1 9 2 8 . This act made it em­
phatic that all bidding must be strictly competitive.
ever, in the case of mail contracts the Shipping Board also
evaded the competitive bidding
c l a u s e . ^5
The companies who
desired to secure mail contracts sent their representatives
to the Post Office Department and the Shipping Board and
^5 United States House of Representatives, Merchant
Marine Committee, Hearings to Develop an American Merchant
Marine, 1935, P. I0 9 8 .
had. the Post Office Department establish a so-called "mail
route" over their identical trade route beginning at the
same ports then served and ending at the same ports then
served by the trade route.
In every case there was the
formality of an advertisement, but in fact it was so worded
as to the ports to be served, the type of vessels to be used,
and:the length of time within which service might be re­
quired, that without exception the contract was awarded to
the bidder favored by the Post Office Department and the
Shipping Board and with few exceptions at the highest rates
allowed by law.
The requirements of competitive bidding in
the Act of I9 28 were evaded very successfully by the Postmaster
General and the Shipping Board.
Out of forty-three contracts
only three had more than one bidder and but six were let at
less than the maximum rates specified in the law.-^
Evasion of competitive bidding was not the only defect
in the letting ot the mail contracts.
Some of the agreements
were awarded to companies controlled by the International
Mercantile Company which operated a large fleet of foreign
trade ships.
Many of the vessels operating under mail con­
tracts were placed in improper classification so far as speed
and tonnage was concerned and, consequently, received mail
-*-6 John C. DeWilde, "More Aid for Shipping,"
Republic, 83:245, July 10, 1935.
payments larger than were provided under the classification
in the Act of 1 9 2 8 . Postmaster-General Farley conducted a
series of tests to find out whether the vessels really were
capable of making the speed for which they were being paid.
Up to March 3 1 , 1936, these tests had resulted in extensive
reclassification of the ships and a saving to the Government
of $1 ,3 4 2 ,6 9 2 through re-rating of thirty ships owned by
nine companies.
In 1929 mail contracts amounted to approximately
$9 ,0 0 0 ,0 0 0 and in 1934 they amounted to $2 9 ,0 0 0 ,0 0 0 and would
have gone over this amount if it had not been for a curtail­
ment recommended by the Director of the Budget.
This huge
subsidy, which started in 1917 and continued down to 1937
when mail contracts were cancelled, enriched the operators
at the expense of the Government.
An interesting case was
the one of Lykes Brothers Company.1®
This company started
out in 1918 with an investment of $115,439*13 and without
c ontributing another cent of its own money had made a profit
of $6,625,936.09 through its various subsidies by June 30,
1? New York ¥orld Telegram, May 4, 1936.
in P. M. Zeis, op. cit., p. -161.
18 United States Senate, Special Committee, Hearings
in Investigation of Ocean and Air Mail Contracts, op. cit.,
-pp.'1364-1:365:--------- ------ --------------- --
In this same investigation it was revealed that one
American steamship company in 1929 received an average of
$66,000 for each poundcof mail transported.
In 1932,
American ships carried 65 per cent of America's foreign
mail and received 94
per cent of
ments for foreign mail.
the total government pay­
ships on the otherhand,
carried 35 per cent of the ocean mail originating in America
and received only 6 per cent of the total payments.^9
was estimated that in 1933 the Government paid $23,000,000
more for ocean mail service than would have been necessary
on a poundage basis.
been made by weight,
If paymentIn that year would have
the Government would only haveneeded
to spend about $3,000,000 for such service.
Another interesting case brought to light by the
United States Senate investigation was that of the Munson
Steamship Line.
When it received its mail contract In 1928,
it was already operating at a profit, and under the subsidy
the postal route almost doubled its qperating profits in the
following two years. But while the profits were being rea­
lized, Munson was wasting its earnings in twenty-nine sub­
sidiary companies which included building corporations, two
hotel companies, and a gold course in the Bahamas.
By 1933,
Munson, had lost about $7,000,000 and the following year
went into bankruptcy.
*9 Young, op. cit., p. 456.
Another case was the lighterage company owned "by
Stanley Dollar, his wife, Esther Dollar, Harold Dollar, and
A. F. Haines (all of whom controlled the Dollar Line).
had only physical assets of $10,000 and through government
subsidy, this company paid to its owners in five years more
than $1,000,000 in profits.
Another example, was the W. R.
Grace and Company which received a government subsidy and
paid over $1 ,5 0 0 ,0 0 0 to two of its officers.
The chief objective of the Merchant Marine Act of
1928 had been to provide for a program of new construction
to replace the Shipping Board fleet which was rapidly be­
coming obsolete.
Despite an extremely liberal administra­
tion of the construction loan fund by the Shipping Board,
new construction had been very meager.
Failure of the con­
struction program was in the drafting of the mail contracts.
Of the forty*three awards only twenty actually required new
construction involving a total of merely fifty-one ships.
By 1935, only twenty-nine of these mail contract ships had
been constructed.
Besides these twenty-nine ships the
American trade fleet was composed up to this time almost
entirely of vessels built by the Shipping Board during and
shortly after the World War.
The average service -of a ship
is about twenty years, consequently, these ships could not
20 John C. DeWilde, op. cit., p. 246.
compete effectively with the faster add more modern vessels
constructed in the recent years by other maritime powers.
With all this damaging evidence unearthed by the
United States Senate special investigation committee, under
the leadership of Senator Black, Congress authorized the
President at his discretion to cancel or riiodify the ocean
mail contracts.
With this power, the President requested
the Postmaster General to conduct an investigation and also
authorized the appointment of an interdepartmental committee
to consider shipping policy.
The Post Office Department made a thorough examination
of the mail contract system, and on January 11, 1935 sub­
mitted to the President a report which made strong accusations
against the administration of the subsidy law and recommended
a series of sweeping reforms to protect the Government from
the profiteering of the shipping companies.
The operations of
the system were summarized in the report as follows:
Comparatively little of the enormous grants had
gone into the building of a permanent merchant
marine on a sound basis.
The liberal treatment accorded to the operators
had resulted in much waste, extravagance, and
corruption. •
Too many contractors had diverted these grants
or subsidies to other than sound shipping
Many of them had employed lobbyists and special
representatives at enormous fees.
They had paid high salaries and excessive
In order to pipe these funds away from the
mail contracting company, they had organized
holding companies, operating companies, ter­
minal companies, agency companies, stevedoring
companies, repair companies, towboat companies,
and supply companies, thereby, freezing out
independent firms.
They had also formed corporations to operate inter­
coastal and coastwise vessels in competition with
non-subsidized companies, contrary to the law
which does not permit the award of mail contracts
or subsidies to operators engaged in the coastwise
and inter-coastal trade.
In this way millions of dollars of mail pay
had been diverted from use in foreign trade
and used to operate in inter-coastal and
coastwise trade.
In some cases mail contracts had actually been
awarded directly to favored inter-coastal and
coastwise operators without the necessity of
having to organize subsidiaries to so unfairly
compete with other non-subsidized American
4. Some of the largest contractors were engaged in
commercial and industrial enterprises and employed
ships receiving mail pay largely in transporting
their own cargoes.
5. Some of the operators had their principal interest
in foreign flag ships and had diverted millions
of dollars of mail pay into foreign-flag operations.
6. The shipping Board and Post Office Department
policy in prior administrations had been to give
every dollar they could to the contractors and
permit them to expend as little of it as they
cared to toward reconstruction or new construction.
The interdepartmental committee submitted a much more
favorable report in regard to the operator than did the Post
Office Department.
It recommended the desirability of con­
tinuing a policy of government subsidies to private shipping
companies, but that the mail contract system should be replaced
by a system of direct subsidies.
With these reports in his possession, President
Roosevelt gave his views of the desirability of an adequate
American merchant marine.22
To me there are three reasons for answering
this question in the affirmative. The first
is that in time of peace, subsidies granted by
other nations, shipping combines, and other
restrictive or rebating methods may veil be used
to the detriment of American shippers. The main­
tenance of fair competition alone calls for
American-flag ships of sufficient tonnage to
carry a reasonable portion of our foreign
commerc e.
Second, in the event of a major war in
which the United States is not involved, our
commerce in the absence of an adequate American
merchant marine, might find itself seriously
crippled because of its inability to secure
bottoms for foreign trade.
Third, in the event of a way in which
the United States itself might be engaged,
American-flag ships are obviously needed not
only for naval auxiliaries, but also for the
maintenance of reasonable and necessary
commercial intercourse with other nations.
We learned in the last war.
21 United States House of Representatives, Committee
on Merchant Marine and Fisheries, Hearings to Develop an
American Merchant Marine, 1935, pp. 1122-1123.
22 ibid., pp. 1 0 9 3 -1 0 9 5
With his affirmative statement in regard to the
desirability of an American merchant marine, he also recom­
mended, in view of the abuses that existed under the Act of
1928, that the mail contracts be ended as soon as possible
and that Congress should establish direct subsidies to re­
place them.
He made the statement that the new subsidy
policy "should cover, first, the difference in the cost of
building ships; second, the difference in the cost of opera­
ting ships; and finally, it should take into consideration
the liberal subsidies that many governments provided for
their shipping."23
President Roosevelt also recommended
that the present policy of construction loans be discon­
tinued with new legislation to prevent the squandering of
government funds in profits for affiliates, excessive salaries,
and operations not directly connected with shipping.22*
United States House of Representatives, Committee
on Merchant Marine and Fisheries, op. cit., p. 1094.
24 Ibid., p. 1094.
The Copeland-Bland Bill. The shipping interests knew
that the time had come when the American merchant marine
policy was to go through a radical change, especially in the
curtailment' of huge profits that were made under the mail
With this in mind, the shipping lobby pushed all
its efforts toward maintaining the chief features of the
subsidy system as provided by the existing law.
The shipping
interests were represented by Senator Royal Copeland of New
York and Representative Schuyler Bland of Virginia, while
the liberal opposition was led by Senator Black of Alabama
and Clark of Missouri.
Very shortly after President Roosevelt’s statement in
regard to the American merchant marine, both of the gentle­
men who were friendly to shipping and shipbuilding officials,
introduced the first important subsidy measure in both
houses of Congress; this was the Copeland-Bland bill of 1935.
It was a very generous bill to shipping interests, as it
provided for direct subsidies to the shipping companies with
very few restrictions.^- The bill provided for a continuation
of construction loans; it contained no provisions requiring
1 Paul M. Zeis, American Shipping Policy.
Princeton University Press, I938), p. I89•
the abolition of affiliates, the maintenance of reserve funds,
repayment of excess profits, or even the cancellation of the
existing mail contracts..
All these matters were left to the
discretion of the Maritime Authority which was to replace
the old Shipping Board.
Restrictions were meager in regard
to salaries and profits of shipbuilders
o£ ship operators.
The Maritime Authority was permitted complete discretion in
determining what construction and operating subsidies should
be granted, and in what manner the difference between
American and foreign costs were to be determined.
This bill was passed by the House of Representatives,
but it was killed in the United States Senate with the oppo­
sition of Senator Black and Senator Clark.
This did not help
matters, because as long as opposing factions could not agree,
and President Roosevelt had not exercised his discretionary
power to cancel the mail contracts, the shipping companies
continued to enjoy the corrupt subsidies of the Merchant
Marine Act of 1928.
With the opening of the second session of the Seventyfourth Congress, Senator Copeland introduced a new measure
which contained practically the same provisions of the
previous Copeland-Bland bill.
This time, however, the bill
was faced with a competitive bill called the G.uffey bill,
and although this bill never got out of the committee, Senator
Black was able to make small concessions to the opposition
and in that way shaped the Copeland hill to much the same
form as that of the discarded Guffey hill.
The majority in
the House was not pleased with this shipping hill, as it
regarded the hill as too strict hut felt forced to pass it
in order to end the filibuster which Senator Black was
leading of other important legislation in the United States
On June 29, 1936, the President signed the Mer­
chant Marine Act of 1936.
Provisions embodied in the Act.
The Merchant Marine
Act of 1936 embodies the following declaration of policy:
It is necessary for the national defense and
development of its foreign and domestic commerce
that the United States shall have a merchant
marine (a) sufficient to carry its domestic water­
borne commerce and to provide shipping service on
all routes essential for maintaining the flow of such
domestic and foreign water-borne commerce at all
times, (h) capable of serving as a naval and military
auxiliary in time of war or national emergency, (c)
owned and operated underthe United States flag by
citizens of the United States, and (d) composed of
the best equipped, safest, and most suitable types
of vessels, constructed in the United States and manned
with a trained and efficient citizen personnel.
is hereby declared to be the policy of the United
States to foster the development and encourage the
maintenance of such a merchant marine.3
2 Senator Black kept the House' Post Office
Appropriation from passing the Senate until the opposition
gave in to his demands.
3 United States Statutes at Large, Public Laws,
7 4 th Congress, 2nd Session, Vol. 49, Part I, Chapter 8 5 8 ,
June 2 9 , 1936, Section 101. p. 1 9 8 5 .
The Act provided for the creation of an agency to be
known as the United States Maritime Commission which was to
consist of five members appointed by the President with the
approval of the Senate.
No person could be appointed a
member of the Commission "who;/ within three years prior to
his appointment, shall have been employed by, or have had
any pecuniary
interest in, any carrierby water or substan­
tial portion of his revenues from any business associated
with ships or shipping. "i1' The President could remove any
member for "neglect of duty or malfeasance in office."5
One of the duties of the Maritime Commission was that of
making a survey of the merchant marine to determine a program
of replacements to accomplish the following objectives:
First, the creation of an adequate and well
balanced merchant fleet, including vessels of all
types, to provide shipping serviceon all routes
essential for maintaining the flowof the foreign
commerce of the United States, the vessels in such
fleet to be so designed as to be readily and quickly
convertible into vessels in time of national emer­
gency. In planning the development of such a fleet
the Commission is directed to cooperate closely with
the Navy Department as to national-defense needs and
the possible speedy adaption of the merchant fleet
to national-defense requirements.6
^ United States Statutes at Large, op. cit., Section
p. 1985.
5 Ibid., Section 201a, p. 1 9 8 5 .
6 Ibid., Section 210,
p. I9 9 8 .
Second, the ownership and the operation of such a
merchant fleet by citizens of the United States.
Some of the provisions were designed to increase the
efficiency of crews on American merchant ships.
The Commission
could incorporate in the subsidy contracts provisions estab­
lished minimum wage scales.7
Under previous laws all officers were required to be
American citizens, but restrictions in this Act were imposed
also upon the crew.
Cargo vessels receiving subsidies upon
each departure from the United States were to carry a crew
composed exclusively of American citizens; on passenger
vessels at least eighty per cent and after two years, ninety
per cent of the crew were to be American citizens.
were permitted only in the steward’s department and they
were required to give evidence of legal admission.
deck and engineer officers, on subsidized vessels were re­
quired, if eligible, to become members of the United States
Naval Reserve.8
The principal object of the new subsidy law was to
supply a substitute for the scandalous mail contract system.
In accord with this, all mail contracts were to be terminated
by June 30, 1937. 9
7 United States Stutes at Large, op, cit., Section
301, p. 1992.
8 Ibid., Section 302, p. 1993.
9 ibid., Section 401, p. 1993.
The most important sections of the new law were those
providing for subsidies to cover the differential in construc­
tion and operating costs and for charter operations.
much care had been made to eliminate the abuses prevalent in
the mail contract law, much discretionary power was left to
the Maritime Commission, thus stressing the need for de­
pendable personnel.
One of the most important powers of the Commission
was the discretionary authority to determine what trade
routes and services were "essential for the promotion, de­
velopment, expansion, and maintenance of the foreign com­
merce of the United States.
Operators on these necessary
trade routes could apply for a construetion-differential
subsidy, and such authorization could be made if the
Commission decided that:
(1) the service, route, or line requires a new
vessel of modern and economical design to meet
foreign-flag competition and to promote the
foreign commerce of the United States; (2) the
plans and specifications call for a new vessel
which will meet the needs of the service, route,
or line, and the requirements of commerce; (3)
the applicant possesses the ability, experience,
financial resources, and other qualifications
necessary to enable it to operate and maintain
the pcoposed new vessel in such service, or on
such route or line, and to maintain and continue
adequate service on said line or route, including
replacement of worn-out or obsolete tonnage with
new and modern ships; and (4) the granting of the
10 Iftid., Section 211a, p. 1 9 8 9 .
aid. applied for is reasonably calculated to carry out
effectively the purposes and policy of the Act.ld
Current European developments emphasized the importance
of the following provision.
Before the final approval to
proceed with the construction of a new vessel, her plans
and specifications must be submitted to the Navy Department
to suggest changes as it judged indispensable to transmit
the vessel easily transformable into naval or military aid.
After plans were approved by the Navy Department,
they must be returned to the Commission and are submitted
to the private shipbuilders for bids on the job of construc­
If there were no bids at all or if the bids were
too high, then the Commission may have the ships built at
cost by oneoof the navy yards and sold or leased on a
charter basis; however, if a bid had been accepted, the
Commission entered at the same time, into contracts with
both the company desiring the new vessel and the ship-,
builder engaged to construct it.
The Act encouraged West
Coast shipbuilding by giving Pacific yards a six per cent
leeway over Atlantic yards in bidding for Pacific ships.
The editors of Fortune asked the question: nIs the Navy and
its eventual war with Japan behind this?”
. Section 501a, p. 1995.
To continue,
all payments to the shipbuilder were to he made by the
Commission which was to sell the ships to the purchaser at
a price estimated by the Commission to equal the cost of
building the vessel in a foreign shipyard.
Suppose that the
Commission had decided that a particular ship could have
been cuilt in a foreign shipyard forty per cent cheaper than
the lowest American shipbuilder’s bid which was $15,000,000.
This would have meant that the $6,000,000 difference between
the estimated foreign cost and the actual American cost would
be paid by the Government.
The Act normally set the standard
for construction subsidies not to exceed 33 1 /3 per cent of
the building cost of the vessel.
In this case then the
Commission would have paid $5,000,000 instead of $6,000,000;
however, upon the affirmative vote of four members of a con­
struction subsidy of up to fifty per cent of the cost of the
vessel could have been made by the Commission.12
This maxi­
mum rate provided in the Act brings forth the question,
whether or not American shipyards are despairingly ineffi­
cient as compared with their foreign competitors.
To con­
tinue, the applicant was required to make a cash payment to
the Maritime Authority equal to twenty-five per cent of the
construction cost of the vessel and the balance of the pur­
chase price formed a loan to be paid within twenty years
12 United States Statutes at Lar^e, op. cit., Section
502b, 1996.
after delivery of the vessel on the basis of equal annual
installments, interest computed at 3 l/ 2 per cent per annum.^
The Commission was authorized to purchase the obsolete
vessel to be replaced at a price not exceeding its cost to
the owners less depreciation on a basis of twenty year life
for the ship, less obsolescence, such sum to be applied as
part of the purchase price of the new ship.
The Commission
could sell the old ship for scrap.
The great defect in this
provision was the ship companies could relinquish their di­
lapidated equipment at a sum very much higher than could
have been obtained by sale in the open market.
The new Act did a great deal in the checking of un­
reasonable profits of shipbuilders.
In addition to the
authority to reject unreasonable bids and to use navy yards
for the purpose of construction, the Commission was given
the right to inspect all records and books of shipbuilding
companies and their affiliates; these companies were also
required to file a complete report of their profits and
costs; all profits above ten per cent on contracts over
$10,000 were taken by the Commission; and lastly, the
Commission was to endeavor to see that shipbuilders paid
reasonable prices for materials specified in the contracts.^
-45 United States Statutes at Large, op. cit., Section
502c, pp. 1996-7 .
14 Ibid., Section 5 0 5 b, pp. 1 9 9 8 -9.
In addition to the administration of constructiondifferential subsidies, is the management of the operatingdifferential subsidies.
Here again the Authority was given
broad discretionary powers, with the only provision that
this type of subsidy should not "exceed the excess of the
fair and reasonable cost of insurance, maintenance, and
other operating costs in which the applicant was at a sub­
stantial disadvantage in competition with vessels of foreign
Two other important provisions of the Act were:
first, that no aid was to be granted to those vessels not
operating in foreign trade, and vessels given aid were posi­
tively not allowed to compete with non-subsidized coastal
or intercoastal carriers; and, second, in order to require
the withdrawal of obsolete vessels from operation and the
construction of new vessels, no subsidy was to be paid for
the operation of any vessel more than twenty years of age
except through special exception on the part of the
With the possible outcome of excessive dividend pay­
ments by subsidized companies, the Act instituted two re­
serve funds:
a capital reserve fund and a special reserve
^5 United States Statutes at Large, op. cit., Section
603b, p. 2002.
> Section 605b, p. 2003.
In the former the party of the contract was to put
aside each year a sum equal to depreciation charges on his
To counteract any transitory financial condition
the latter reserve fund was established with profits in ex­
cess of ten per cent were to be placed in the fund.1?
A group of provisions were set up to curb the contrac­
tor in relation to the evils that permeated the previous
mail contract system.
Excluding terminal facilities, no
contractor was to employ affiliated companies to carry out
shipping services; nor was he to use any of the subsidy
money with the purpose of competing with unsubsidized
coastal shipping; nor was the operator to use such methods,
as holding companies, to draw out profits from the operating
expenses of the business.^
Validity of the Act.
Discussion of the Merchant
Marine Act of 1936 is practically inexhaustible, but it has
been necessary only to embrace the more salient provisions
of the Act.
This new law is undoubtedly of greater validity
in comparison with the previous merchant marine laws, but
17 United States Statutes at Large, op. cit., Section
p. 2004.
18 Ibid., Sections 8 0 3 , 804, and 805, pp. 2012-13.
this new act does not solve with gratification the problem
of the American merchant marine.
The mistake lies in the
extensive discretionary powers bestowed the Maritime Com­
It is given free rein to mollify the regulations
inflicted upon shipowners and shipbuilders, and determining
what subsidies should be granted and how far-reaching they
should be.
With such broad discretionary powers, the per­
sonnel of the agency must be selected with caution, and with
the view that this body must consider of primary importance
the interests of the public, and secondary importance, the
interests of shipbuilders
The new law approaches short of validity with its
concept that accuracy can be accomplished in the determination
of the differential between foreign and domestic costs.
Shipbuilding costs fluctuate widely from nation to nation
and even among various yards in a single country.
changing price levels and the fluctuations of the inter­
national exchange cause additional changes in costs from
month to month.
Accurate statistics on foreign costs will be
difficult, if not impossible, to obtain, and the situation
will be complicated further by the impossibility of ■
President Roosevelt appointed to the Commission the
following: The civilian members: Chairman Kenneth P. Kennedy,
once a Wall Street speculator; Edward C. Moran, Jr., an insur­
ance man turned able politician; Thomas W. Woodward, a
Philadelphia lawyer; and representing the Navy: Admiral Henry
A. Wiley and Rear Admiral Emory S. Land.
ascertaining the overhead costs which should he charged to
each ship constructed inasmuch as these costs vary widely
according to the number of vessels built during a given
period of time.
Only the future will tell whether this subsidizing
of the American shipping industry will effect increased
inefficiency resulting from charges for raw material that
are superfluous, labor that is squandered, and undistributed
costs that are much more costly because the subsidized
industry does not view the need to operate as an effective
competitive unit.
MERCHANT MARINE -- 1936 to 1940
The labor problem. One of the obstacles -of- great
magnitude the United States Maritime Commission has had to
confront has been the sorrowful labor conditions existing in
the American merchant marine.
Although some success has been
achieved, partly brought about by the European War and the
hardening of public opinion against unnecessary labor, dis­
turbances, further curtailment of attrition between the
maritime unions and improved crew efficiency and discipline
must be fulfilled before the Government can hope for an
efficient American fleet.
Granting that there has been a very notable Improve­
ment in the maritime labor situation,1 still, there has been
an undercurrent of discord and distrust between the employers
and the seamen on the one hand, and between factions among
the seamen themselves on the other.
Blame cannot be placed
solely on the employer or the employee.
In the opinion of
1 The Copeland Personnel Act of 1936 gave seamen a
degree of immunity from arbitrary treatment, a standard
eight hour day, and protection in case of sickness and death.
Regulations in 1937 specified that living quarter space must
be 120 cubic feet. It kept in mind that this better­
ment of living and working conditions only applied to those
foreign trade ships subsidized by the Government.
the Maritime Commission, responsibility for the prevailing
unsatisfactory labor relations must be assigned in part to
the employer who "has in the past imposed long hours, low
wages, and cramped quarters," and in part to the employee
who "has abused his employment in a manner that would not be
tolerated in any other industry."2
The United States Maritime Commission, in order to
obtain the inside story of the labor problem conducted in­
terviews with several of the
carried on in New York;
These interviews were
the Commission had arranged with a
private agency to interview one thousand men.
The men in­
terviewed had been at sea anywhere from one month to forty
years, and most were single, practically none had bank
accounts, and few voted.
The earnings of the American sea­
man were found to be higher than those of other foreign
merchant marines.
The monthly salary of the first mate can
be taken as an example.
In United States, he received approxi­
mately $192; in Great Britain, $102; in Germany, $120; in
Italy, $62; and in Japan, $40.^
American shipowners have
2 Clarence N. Weems, Jr., "Rebuilding the United States
Merchant Marine," Foreign Policy Reports, 13:247, January
1 , 1938.
2 United States Maritime Commission, Economic Survey
of the American Merchant Marine (Washington! United States
Government "Printing Cffice, 1937), P. 45.
4 "United States Shipping--Everybody Knows They Lose,"
Fortune, 16:112, September, 1937*
used these figures to support their statement in regard to
the fair treatment shown their employees.
figures do not1 provide a proper comparison.
However, these
For one thing,
they are distorted by currency fluctuations and they do not
take into account subsistence, security, pensions, or the
purchasing power of the seaman's wages in his own country.
An important point brought to light in these inter­
views was the excessive turnover of employment.
Many seamen
reported eight to ten years of service, of which, perhaps,
not more than four months had been spent on one ship or
even one line, and that even during prosperous times the men
would spend an avarage of several weeks a year "on the beach"
This excessive turnover has probably been a
result of the primitive living conditions on some ships of
which it is not uncommon for the majority of the crew to
leave after one trip.
The Commission knew that the only method to make
certain of the working conditions on vessels was to permit
the personnel to present their grievances to the Authority,
consequently, another program of interviews was held.
hearings were carried on at various ports on the three
coasts; at which both employers and employees were represented.
5 United States Maritime Commission, Economic Survey of
the American Merchant Marine, op. cit., p. 45.
These hearings were followed by a general hearing in
Washington, D. C.
In supplement, members of the Commission
investigated more than fourty vessels in order to see for
themselves the conditions under which the seamen were asked
to work.
In many cases the Commission found that the em­
ployees’ grievances were justified;
that quarters were
crowded, insanitary, and poorly ventilated.
The Maritime
Commission recognized that these living and working conditions
were the root of much of the labor trouble, and on all the
subsidized ships of the foreign fleet (approximately 150 in
number) the betterment of the crews’ quarters have been ac­
complished or are presently under
Up to this point a case has been presented against the
shipowner, which Is only part of the picture.
The order,
discipline, and efficiency of the American seaman has been in
many occasions unexcusable.
Passengers have complained of
contemptuous in behavior, and vessels have been delayed by the
frequent use of the "sit down” and "quickee."
With such con­
ditions prevailing, shippers and travelers have been justified
in considering a disorderly vessel as an unsafe ship, and have
been within their rights to turn to vessels of competitive
"The sea Is no place for divided authority.
a man puts foot on the deck of a ship, he becomes part of a
6 It is exceedingly difficult and expensive to attempt
to remodel old vessels to meet the needs of today.
disciplined organism subject to the navigation laws of the
United States.
Seamen must recognize that the nature of their
calling, which gives them a unique status under the law, also
imposes upon them obligations- not common to shore occupations.”?
As to the incompetence and bad seamanship of the mer­
chant marine, there can be no doubt as to the authenticity of
this statement;
however, Joe Curran of the National Maritime
Union of America (Eastern division) pointed out in the Senate
hearings, that shipowners and discredited ISU officials dur­
ing the strikes of 1936 and 1937 "scoured the Inland towns
and farms for young men and boys with whom to man their ships.
These people were given all sorts of seamen’s and lifeboat,
certificates and placed aboard large passenger ships without
warning to the traveling public.
In the time that has elapsed
since then these men have received some training from union
members sailing the ships, and in most instances are becoming
competent seamen."®
In view of the policy declared in the Merchant Marine
Act of 1936, "that United States shall have a merchant marine
(d) composed of the best equipped, safest, and most suitable
types of vessels, constructed in the United States and manned
? United States Maritime Commission, Economic Survey of
the American Merchant Marine, op. cit., p. 453
Felice Swados, "Seamen and the Law," The New Eepublic,
94:125, March 9 , 1938.
•with a trained and efficient citizen personnel,” the Mari­
time Commission established two systems for training sea
personnel under the administration of the United States
One, the training of licensed or unlicensed
personnel who have served at least twelve months, within
three years prior to application for enrollment, on an
American vessel; and the other system, dealing with the train­
ing of apprentice seamen.
The purpose of the former system is to raise the stan­
dard of efficiency of present sea personnel with a threemonths intensive training course.
During this probationary
training period, quarter, meals, and a uniform clothing out­
fit are furnished by the Government without charge.
personnel who have served as officers in charge of a watch
are eligible as ensigns at $125 per month, while unlicensed
personnel are eligible for enrollment at $36 per month.
authorizing enrollments, there is no discrimination of an
applicant'a race or creed or his membership in any lawful
organization, and no military obligation is imposed by en­
A regular enrollee who is released from active
duty is expected thereafter to-serve annually eight months
on a seagoing merchant mess el and one month with the Maritime
Service with pay.
9 United States Maritime Service, General Information
on the United States Maritime Service (Washington: United
States Government Printing Office, revised January, 1941),
pp. 1 -1 9 .
Maritime Service training stations are maintained at
Hoffman Island, New York Harbor for unlicensed Personnel and
at Fort Trumbull, New London, Connecticut, for licensed per­
The two stations serve seamen from Atlantic ports,
the Great Lakes,, and the Gulf.
The training station at
Government Island, Alameda, California, receives both
licensed and unlicensed personnel from Pacific Coast ports.
The other system is that of training apprentice sea­
A limited number of citizens between 18 and 23 years
of age are enrolled at $21 per month.
Previous sea service
is not required, and the training course is lengthened and
adopted to the needs of the inexperienced enrollees.
training station for this group is maintained at Port Tampa,
The "American Seaman," a steam vessel of 7,000
gross tons which has been especially fitted for use as a
training vessel is used.
Two hundred enrollees are carried
in addition to the regular crew.
Special training facilities
for practical instruction include complete machine shops,
various types of lifeboats and attendant gear, and all navi­
gational equipment of the most modern character.
In view of the labor conditions of the American mer­
chant marine, the Maritime Commission recommended that ship­
owners and the unions establish a mediation board similar to
that provided in the Railway Labor Act and resembling the
National Maritime Board in England, a private agency with
government support, which has been successful in settling
disputes of British shipping for over twenty years.^
Following the pattern of the Railway Mediation Board,
when a controversy arose, either or both of the parties could
call for the service of the Mediation Board, or the Board
could tender its services.
With- the failure of mediation,
the Act could provide a method of non-compulsory arbitration.
With the failure of both methods, both parties could be free
to act, however, if the action of either party bereaved the
Nation of a needful service, the Board would notify the
President of the United States, who would appoint a special
investigation board to compile the facts and report to him
within a short period of time.
During this period the
parties would be forbidden to alter the employer-employee
relationship by strike or any other action.
The establishment of the tribunal would in no way
interfere with the jurisdiction of the National Labor Relations
Board, which deals with questions of representation, collective
10 On June 23, 1938, the Mediate Act was passed.
Under this Act Congress set up a Maritime Labor Board
charged with "using its best efforts" to bring the parties
to agreement.. The Board and its duties are very similar to
the recommendations, discussed above, submitted by the
United States Maritime Commission. This Act is to live for
three years, and on or before March 1, 1940, the Board was
to submit to the President and to Congress a comprehensive
plan for the establishment of a permanent Federal policy.'
The Board has no actual enforceable power; presumably its
work is a beginning, as the Act itself intimates, of a study
for a permanent" Federal policy of "stabilization."
bargaining, and the elimination of unfair labor practices.
The purpose of this legislation would be:^
(1) To avoid interruption to water-borne commerce;
(2) To provide for the prompt and orderly settle­
ment of all disputes concerning rates of pay,
rules, or working condition; and
(5 ) To provide for the prompt and orderly settle­
ment of all disputes growing out of the
grievances or out of the interpretation or
application of agreements covering rates of
pay, rules, or working conditions.
There has been much discussion regarding Russia’s
operations to seize the dominate the American waterfront,
merchant shipping, and marine communications with the pur­
pose in mind to control highly important channels of ware­
housing and food distribution.
in an article, stated:-*-2
Mr. Charles Yale Harrison,
"unless its powerful grip on these
essential channels of our economic life is shaken loose, it
will become a stranglehold that will help render this country
powerless in the face of a concentrated attack by the dic­
tatorships, "
Mr. Harrison’s entire attack centers upon three trade
union columns and their leaders:
(1) the National Maritime
11 United States Maritime Commission, Economic Survey
of the American Merchant Marine, op. cit., p. 48.
Charles Yale Harrison, "Stalin's American Merchant
The American Mercury, 51:135, October, 1940.
Union, with its some 65,000 members manning vessels which
operate on the Atlantic, the Gulf, and the Great Lakes,
which is organized under the leadership of Joseph Curran;
(2) the International Longshoremen’s and Warehousemen’sAssociation which is established on the Pacific Coast with
Harry Bridges serving as headmaster; and (3 ) the American
Communications Association which governs radio operators of
the United States Merchant Marine under the directorship of
Mervyn Rathbone.
The author of this article has uncovered and forwarded
to the proper Federal authorities, with the cooperation of
former officials of the N. M. U., minutes of meetings, secret
reports, letters, telegrams, and teletype messages; all of
which reveal communistic affiliation of the three above labor
William L. Holler, former associate editor of The
Pilot, official instrument of the N. M. U., declared in 1937:
Over 800 seamen were sent to Spain to fight the
Franco forces; a good half of the membership (of the
W.M.U.) were shipped into a frame of mind to stop
''war materials’; and ships were stopped and delayed
. . . . The ridiculous extreme in Pilot' propaganda
was an appeal to American Seamen to carry on coastal
espionage- work as to the nature oF~ships' cargoes
and the internaFTohal affiliations" of the ships'
operators^ Many seamen acted upon TTTis propaganda.-*-5
The Commission of the Commonwealth of Massachusetts
which made an inquiry into the undermining activities in
Charles Yale Harrison, Ibid., p. 137.
in quotation above by the author).
that state in 1938 reported:
We "believe the conclusion is inescapable that
the Communist Party already has control of the
National Maritime Union in Massachusetts. What
was true of Massachusetts in 1938 is now true,
•unfortunately, of the entire Atlantic seaboard, the
Gulf ports, and the Great Lakes.W
Benjamin Gltlow, former general secretary of the
Communist Party, in his book, I Confess, stated:
Moscow considered it essential to Soviet military
preparedness to gain control of the seamen in the
merchant marines of the capitalist countries. Today
the Soviet government dominates the most strategic
industry of the country through the National Mari­
time Union of America which has jurisdiction over
the oceangoing, coastwise, and lake shipping. The
union is completely controlled by the Communist Party.^5
At the time this article was written, the author still
saw 11three missing links in the Communist chain around the
entire American network of shipping, communication, and the
flow of vital commodities," which might and could, play an
important part in removing the peril.
The Seamen's Union of
the Pacific (A.F.L. affiliation) was the first; the long­
shoremen's union on the Atlantic coast which was under the
leadership of J.P.Ryan (also A.F.L. affiliation) was the
second; and,last, a non-communistic C.I.O. organization which
controls the Nation's warehouse, wholesale and retail, em­
ployees .
Harrison, Loc. cit.
Ibid.,,, p. 141.
An F.B.I. investigation in the summer of 1940 revealed,
that a high percentage of radio operators were Communists, or
Nazi sympathizers, however, by March, 1941, 250 full fledged
operators free of questionable allegiances were expected to
graduate from Commission
The Government Subsidy question prior to the Outbreak
of the present European conflict. There has been considerable
diversity of opinion in regard to the arguments for and
against Government subsidization of the American merchant
There can be no denial that the subsidy laws have
been responsible for a great part of the merchant marine
difficulty of undue expenditures and improper management;
however, the faot remains, if government support were with­
drawn, the greater part of United States shipping could not'
compete with other countries in international trade.
say that subsidy has shown to be a failure; either the sums
paid have been too small, with the result that the contrac­
tors have become bankrupt, or they have provided excessive
profits without stimulating any expansion; certain contractnrs acquired monopolies of government aid, and hence in­
efficiency was difficult to control.
What are the arguments for and against government
D. Wharton, "Our New Merchant Navy,"
38:37, January, 1 9 4 1 .
subsidization of shipping?
It might he well to present the
opinions of both sides.1''7
Points in opposition to government subsidies can be
summarized as:
(1) Shipping is itself an item of foreign trade:
when you ship goods under another nation’s flag
you import a service, and conversely you export
a service when you carry them under your own.
Thus a shipping subsidy is a tariff in reverse.
And to the internationalist, who blames most of
the world's financial grief on tariff walls (and
especially on United States tariff walls), a
United States shipping subsidy merely aggravates
protectionism and disturbs the balance of trade.
(2) The United States merchant marine is the most
costly in the world to operate. By using the
shipping services of other nations we buy our
transportation cheaper and benefit from other
people's subsidies.
(3) The United States economy is not an overseas
economy, but an internal economy. We should
leave the operation of ships to those nations in
which ships play a major economic role--to
Britain, for instance.
(4) Maritime subsidies may conflict with our present
foreign-trade policy, because they tend to cut
total United States imports, of which shipping
service is one. Which, may so far as the more
strictly maritime nations are concerned, offset
the good will gained by mutual tariff concessions.
(5) Subsidies may conflict with our neutrality policy.
The principal arguments for subsidies were:
(1) A United States merchant marine on the high seas,
17 "United States Shipping— Marine Subsidies,"
Fortune, 16:66-67, September, 1937.
serving our industries to and from every part of
the world, is a protection to all United States
business from certain competitive factors--es-pecially from discrimination against United States
exporters in foreign markets by foreign shippers.
(2) In the event of an emergency growing out of eco­
nomic or actual warfare, a merchant marine will be
essential for the purpose of conducting foreign
trade, and especially of ensuring our imports.
(3) In case we, ourselves, are drawn Into an actual
war, the navy would need a merchant marine as an
(^) The maintenance and replacement of a merchant
marine provides work for seamen, dock workers,
shipyard workers, steel workers, and a host of
(5) The maintenance of a marine keeps shipbuilding
alive and the knowledge of how to rim a shipping
service, which is a complicated affair.
(6) The prestige of the United States, its tra.dition
at sea, its pride, its flag, all but prohibit the
thought of allowing the American merchant marine
to vanish forever from the seas.
Assuming that maintenance of the American merchant
marine is deemed desirable, the difference between American
and foreign costs confirm the need for government aid in
American shipping.
United States is not a free-trade nation,
she has always functioned under the principle of protection­
ism, with the result, American shipowners and shipbuilders
have been compelled to operate under the influence of two
opposing factors:
a prevailing standard of living in the
United States and an "unprotected international market."
Domestic industries which supply materials for the building
and operation of ships have been sheltered by tariffs, con­
sequently, enabling them to sustain a price level beyond,
that of foreign countries.
Taking into consideration the
difference of American and foreign costs and the liberal
subsidies granted by foreign governments, the need for
government subsidization is obvious if the United States dees
not wish the American merchant marine to utterly disappear.18
Granting the desirability of an American merchant
marine and the need for government subsidization, Professor
John G. B, Hutchins, Rutgers University, suggested the present
program should be modified along the following lines:
(1) Aid should be given by means of a general navi­
gation bounty, computed on a gross-ton-mile basis,
and available to all owners. Payments should be
ample to induce investment, but might be flexible
in amount, as in the case of the British Cargo
Ship subsidy. Assurances that adequate sums would
be provided should be given, but owners should be
allowed the privilege of transferring ships to
foreign registries, should the aid be cut off.
(This privilege was accorded,)
(2) The present navigation monopoly should be main­
tained, but costs should be reduced by permitting
the free purchase of ships. Consideration should
be given to the question of subsidizing coastwise
jn 1937, the various governments operating subsidies
were estimated as follows: France, $27,600,000; Italy,
$17,310,000; Great Britain, $13,525,000; United States,
$9,290,000; and Japan, $3,105,000. Little was known of
Germany, as the German government virtually owned and operated
the German shipping fleet. Although Japan's subsidy appears
small, extremely low labor costs necessitate no further expla­
shipping. This involves the problem of the most
economical balance between land and water trans­
portation agencies.
(3) American industrial carriers, especially the oil
and fruit companies, should be induced to re-re­
gister their existing tonnage and document their
new tonnage -under the American flag by the grant
of aid on a basis equal to that obtained by gen­
eral carriers. The hostility to, and failure to
grant assistance to, these companies is inconsis­
tent with the expansion of the American marine.
The Transportation Problem with Regard to Latin
American Countries. Recent European developments have com­
pelled the United States to become increasingly "Latin
American conscious,” however, prior to these events the
Government’s attitude in regard to the matter of shipping
services between the United States and the countries of
Latin America has been to a certain degree indifferent.
When thefinancial and industrial interests of the
Stateswere devoting their energy and
money to the internal
development of the country, and neglecting its merchant ma­
rine and intrusting the carrying of its foreign commerce to
foreign vessels, the merchant marines of European countries
were playing an important role in establishing more firmly
their commercial relationship and activities with Latin
American countries.
Before the outbreak of the present conflict, American
vessels, in Latin American trade, were outnumbered by
European and Far Eastern competitors two to one.
The problem
was much deeper than the mere questions of building and oper­
ating costs, new safety regulations, labor difficulties, and
the uncertainty of future legislation;
it was the problem of
government aid.19
Although subsidy awards were transacted openly in the
United States, this was not the case with foreign governments.
Indefinite sums of aid were represented by "hidden" subsidies,
of which the American had no means of determining what aid
his competitors were receiving.
Even with the limited infor­
mation available on foreign government subsidization, there
was sufficient for one to perceive how it had placed at a
disadvantage American trade and shipping in Latin America. 20
France. In 1939, France was to authorize $1,161,000
for the Compagnie de Navigation Sud Atlantique to carry on
a service between France and the east coast of South America.
Another subsidy was granted to the Compagnie Generale
Transatlantique for service to the United States, the West
■*■9 in 1 9 3 9 , thirteen American companies were operating
148 vessels totaling 1,028,398 gross tons,- and were receiving
approximately $1 0 ,0 0 0 ,0 0 0 annually in operating differential
subsidy payments; however, foreign governments were spending
at least four times that figure in countervailing subsidies
to lines competing directly or indirectly with American sub­
sidized shipping.
20 C . H. C. Pearsall, "Transportation Problems," The
Annuals of the American Academy, 204:158, July, 1939*
Indies, Central America, and the west coast of South America.
The sum was to amount to $4,752,000.
Another was the "Nor­
mandie11 service which was granted approximately $2 ,0 0 0 ,0 0 0 .
In supplement to these direct subsidies, France used
its trade agreement and quota system to direct traffic into
these vessels.
The agreement between France and the Dominican
Republic was an excellent example of this practice.
In order
to have maintained a satisfactory coffee quota, the Republic
was compelled to guarantee a shipment of seventy per cent of
its coffee exports to France in French vessels.
arrangements were made with Haiti and Ecuador.
Great Britain. During recent years, Great Britain
had provided little aid to its services participating in
Latin American trade, however, the British crown colonies
in the West Indies provided annually $200,000 to a Canadian
line which operated in the Caribbean.
Reports suggest that
Great Britain has authorized a yearly tramp subsidy of ap­
proximately $1 0 ,0 0 0 ,0 0 0 of which a large amount is to be
used for traffic in the West Indies and the east coast of
South America,
Great Britain has also planned countervail­
ing subsidies to compete with the American Republics Line,
an American subsidized service.
Due to lower construction
and operating costs, this step placed the British lines In
a very advantageous competitive position.
Italy, Italy’s policy has been to augment the number
of superior type cargo liners in Latin American trade.
to subsidy, the Italia line has received $26,300 per round
voyage to the west coast of South America; other lines have
received aid according to size and efficiency.
Italian shipping had also been enhanced by construc­
tion subsidies and tax concessions.
Through direct aid a
vessel whose net cost would have been $1 ,5 0 0 ,0 0 0 would have
probably been reduced to $1 ,0 0 0 ,0 0 0 , while the same vessel
built in American shipyards would have required an outlay of
Even with the maximum lawful construction grant
of fifty per cent, the American owner would have been unable
to compete with the Italian competitor.
In addition to direct financial aid, Italy had em­
ployed the exchange and quota control.
Recently Italy bar­
tered tankers with Mexico for oil.
Germany. Generous construction subsidies had been
granted by Germany, with the result, costs were reduced to
the lowest foreign bids.
Exchange equalization subsidies
also aided German ships.
In competition with American
shipping, the operator was given 4 .2 0 marks for every dollar
obtained as against the normal parity of 2 .5 0 marks.
Another practice had been for German lines to take
freight at "conference" rates, with payment half in foreign
currency and half in marks from some "blocked" account;
result being a reduction in the conference rate.
Other forms
of government aid were the insertion of provisions in barter
agreements to force trade into German vessels, and licenses
were refused on imports- into Germany unless German ships were
Prior the present war the German citizen had paid
dearly for the Government’s efforts to expand German trade and
support German shipping.
Japan. A subsidy of $275,000 has been granted annually
to the Osaka Shozen Kaisha service.
The purpose of this aid
has been the encouragement of transporting cotton from Brazil
to the orient in competition with cotton from the United States.
Another service, the Nippon Yusen Kaisha has been paid approxi­
mately $116,000 to operate between Japan and the west coast of
South America.
Construction bounties have been given to cargo ships at
$11 per gross ton, while faster passenger vessels have received
large subsidies.
Japanese vessels have also been aided through
Export and Import Guilds in Japan, which have
been sanctioned by the Government, control much of the foreign
and the officials of these guilds make certain that
the guild members employ only Japanese vessels.
In view of the policy that has been followed by foreign
governments with regard to the aid offered shipping interests
engaged in trade with Latin America, United States, although
granting that the -present European war has reduced shipping
competitors to a great degree, must realize the importance
of the transportation problem confronting the American mer­
chant marine in relation to Latin American trade.
The American merchant marine at the outbreak of the
present European war. At the outbreak of the present European
conflict the United States was much better prepared to en­
counter a shipping crisis than in 1914.
Although the War had
increased the demand for ships, evidences of shortages of
tonnage available for commercial operation and upward strides
of freight rates were dissimilar to the distressing figures
existing at the beginning of the last war.
In 1914, American
vessels carried less than one-tenth of the foreign commerce
of the United States, as against one-third, when the present
war broke;
and the American merchant marine reached a gross
tonnage of 8,909,892 in 1939 as compared to 2,026,908 tons
in 1914.21
Granting that the merchant marine of the United States
was not sufficiently modern, the Maritime Commission has
undertaken energetically the assignment of rebuilding the
John 0. DeWilde, "The War and American Shipping,"
Foreign Policy Reports. 16:24, April 1, 1941.
American commercial fleet.22
The fact that the replacement
of 1,305 vessels within five years with a necessary expen­
diture of more than $2,500,000,000 was out of the question,
the Commission established a ten-year construction program
of five hundred vessels with an estimated outlay of
The first ship authorized under this 500-replacement
program was the S. S. America.
It was launched in September,
1939, at an approximate cost of $17,000,000, and is the lar­
gest commercial vessel ever built in the United states.
though the liner was designed for luxury trans-Atlantic
trade, its extreme potential value as an instrument of national
defense must not be overlooked. 2 3
In 1938 contracts for fifty-one more ships were per­
With the expectation of the rise in construction
costs that might follow immediately after the possible out­
break of war, construction for the next year was advanced
and eighty-nine vessels were ordered,
with the beginning of
April, 1940, forty-one of these 141 ships had been launched
22 In the 1937 survey, the Maritime Commission revealed
that 91.8 per cent of the number and 88 per cent of the tonnage
of the 1,442 ocean-going vessels under the American flag would
be obsolete {twenty years old or more) by 1942.
23 The S. S. America is 723 feet long, with a 92 foot
beam, and has eleven decks. The twin-screw turbine engines
will enable the 30,000-ton cabin liner to sustain a speed of
22 knots. The vessel will carry a crew of 639 and will be
able to accommodate a capacity passenger list of 1,219.
and twenty-eight completed.. *
In addition to this replace­
ment program, the Commission has engaged in the construction
of twenty-four efficient tankers intended for private oper­
ation in time of peace,and for use as naval auxiliaries in
Private shipping companies have only placed orders for
twenty-eight of the 141 ships that have been constructed or
are in the process of construction, consequently, the
Commission has had to proceed with merchant marine expansion
for its own account.
Conclusive evidence has indicated, how­
ever , that the Maritime Commission has not been carrying out
this construction program in a haphazard manner.
Every ves­
sel has been tentatively designated to an essential foreign
trade route;
and private operators have consented to purchase
or charter a good portion of the 141 vessels under operatingsubsidy agreement, with the understanding that they will ac­
quire government shipping services or can sell obsolete ships
to foreign customers.
The New Neutrality Act of 1939 caused much unreasonable
Many complained that American shipping interests
faced a confinement of ninety-two vessels and 6,000 seamen,
an annual revenue loss of $52,500,000, in addition to lay-up
costs of $4,200,000, and an outlook of the deprivation of a
24 DeWilde, op_. clt.. p. 19.
profitable Western Europe trade to less regulated competitors.
Obviously the Neutrality Act has worked hardships upon ship
operators, however, certain shipping and commercial interests
must rightfully be sacrificed in order to reduce the possible
danger to American lives and vessels.' Although approximately
one-quarter of the foreign trade fleet was deprived of employ­
ment, the tragedy of the situation has been over-emphasized.
Two methods of procedure were opened to ship operators.
course was to relinquish service to Western Europe and sell or
charter the vessels to foreign or American companies that were
not restricted under neutrality legislation, providing they
were not able to re-route these vessels on other self-managed
The other course was to transfer ownership of these
vessels in some manner, but to continue the service with
foreign-flag vessels.
The former alternative has been the more popular, as
the War has made it necessary for the Allies to mobilize a
great portion of their merchant fleet for direct war service
as supply ships, transports, auxiliary cruisers, mine-sweepers
and mine-layers.
This great change in shipping has promoted
a shortage of transportation facilities on. many routes of
which American shipping interests could take advantage, and
the increase in the volume of traffic in certain trades has
25 ’’Neutrality Striking Hardest at United States Ships
and Seamen,” Newsweek, 14:15, November 20, 1939.
made it possible for American lines to expand their operations.
American tonnage, accordingly, has been greatly augmented due
to the increse of trade with Central America, the Orient, and
The only real distressing effect of the War upon the
American merchant marine has been the rapid reduction of re­
venue passenger lines have suffered owing to the unwillingness
of the public to travel by sea during the present conflict.
The problem of the "beached* seamen has incurred much
dissatisfaction, however, tentative proposals have been sub­
mitted to ease the problem: (1) the extension of unemployment
insurance under the Social Security Act, (2) the enrollment
of "beached* seamen in the United States Maritime Service
training schools, and (3) partial employment in transporting
strategic materials to this country.
Should the United States Maritime Commission launch
into a greater construction program -- the topic of 1940.
In view of the European War and its possible outcome, the
most weighty problem the United States Maritime Commission
had to consider was the advisability of accelerating construc­
tion for a greater American merchant marine than the author­
ized 500-ship replacement program.
Arguments against such an expansion may be summarized
in the following points:
(1) Before the outbreak of the War the available
tonnage was considerably in excess of peace-time
commercial requirements. Many ships were idle
and numerous sailed the seas half-empty.
(2) There was no certainty that war losses would be
as large as in the last World War. In the first
six months of the current war., approximately 394
vessels, amounting to 1,-384^669 gross tons, were
sunk— a total far below the 3,856,800 tons sunk
in the first half-year in 1 9 1 7 .2 6
(3) In order to prevent the rapid falling off in con­
struction that happened in the last war, the
British government has assumed utter eontrol of
(4) There is little likelihood that demand for American
goods will experience a boom similar to that of
1914-1918. United States does not have as promi­
nent a share in the world market for raw materials
and foodstuff as in 1914. New and alternative
sources of supply have been developed particularly
in South America and the British Dominions.
(5) From the last World War the Government still has
a large laid-up fleet of 113 old ships.
(6 ) Prolongation of the War will undoubtedly entail
a rise in building costs; and ships built at high
wartime costs would later be under great handicap
in competing with vessels constructed after the
(7) American shipyards may not be able to accommodate
new building, and if they can, it would be only at
considerable expense.
(8 ) Shipbuilding is a highly technical industry which
requires specialized engineers, architects, and
craftsmen. Already a marked shortage of skilled
labor in this field has developed.
(9) The competition of'transoceanic aviation has pre­
sented an additional worry. With current trans­
portation costs under those of the super-liner,
aircraft has a definite place in overseas trade.
The New York Times. March 2, 1940.
In support of an additional expansion of the proposed
500-ship replacement program, the following points.may be
(1) The greater part of the present American merchant
marine is obsolete. By 1942, some 1200 new ocean­
going vessels would need to be constructed to re­
place the-old vessels.
(2) The War has created a brisk demand for the purchase
and charter of American ships by European belli­
gerents .
(3) The tonnage of foreign nations may be greatly de­
pleted by war losses, necessitating the demand of
the American merchant marine to carry a greater
portion of the exports and imports of the United
(4) In case of a German victory, the United States
will be compelled to deal with totalitarian nations
and totalitarian methods. A greater degree of in­
dependence would be necessary, especially in the
case of a merchant marine, to conduct relations
advantageously with these nations.
(5) It is possible that United States exports would
expand more rapidly if a larger number of vessels
were available.
(6) If at the conclusion of the War the United States
had a large number of new ships available, the
chance of capturing a considerable share of the
carrying trade might be greatly enhanced.
(7) There is a pronounced need for new tonnage in the
intercoastal and coastwise services.
(8) The Maritime Commission has been informed by the
Navy Department that it would need a minimum of
1,000 merchant .vessels, aggregating about 6,000,000
gross tons, of all types to satisfy military
requirements during a war.
(9) Now that ships are in great demand, the United
States has an unusually good opportunity to sell
off its old tonnage, that may become a dead loss,
and thus, accumulate funds for new construction.
The British Plight. Washington’s reception in April,
1941, of an Oxford professor of political theory and insti­
tutions, labeled clearly the future merchant marine policy
of the United states.
Sir Arthur Salter, a veteran shipping
expert, has been in the United States to ask for another
’’miracle of 1918,” when 4,000,000 gross tons of shipping
were produced.1
This Briton, who managed the Allied maritime
transport control in the first World War, has definite work
to perform.
There has been no pretense of the fact that his
mission is two-fold:
(1) that of inducing the withdrawal of
a sufficient number of American operating vessels from their
regular routes of travel to replenish England’s urgent re­
quirements, and (2) that'of striving to maintain an everalert attitude on the part of the Administration of the com­
pelling need for the speeding up of its shipbuilding program,
so that in the future production will counterbalance Nazi
Sir Arthur Salter was not cordially received by all
in Washington.
There were those individuals whose true con­
viction was that there existed no true alarming shortage of
1 ”The Sparrow,” Time. 37:18, April 14, 1941.
British, tonnage.
On the surface there appeared to be justi­
fications for these opinions.
At the outbreak of the present
European conflict Great Britain maintained a merchant marine
of some 16,300,000 gross tons.^- In addition to this tonnage,
approximately another 7,000,000 gross tons were acquired
from allied and neutral shipping sources.
Within eighteen
months some 5,600,000 gross tons had been seized or destroyed
by the Hazis, of which possibly 4,200,000 gross tons were
ocean-going vessels.
In March, 1941, losses soured to
150,000 gross tons in a single week, and up to this date
1,156 vessels had been sent to the bottom.
Since 1921 to
the outbreak of war there has not been a single year in
which the launching of new vessels in the entire world can
challenge this total.3
With the transfer of American ships,
with new construction or repairing in British ways, and
with the seizure of isolated Axis vessels, this loss was
made less inflicting, leaving some 21,300,000 gross tons,4
which appeared to be considerably substantial total;
but a
closer investigation must be made.
The British Army had pressed into Mediterranean ser­
vice many ships to serve as troop transports and war supply
2 This figure represents vessels of 2,000 gross tons
or more.
3 "Ships, More Ships," Business Week, 13:17, March 29,
4 "How Many Ships How Soon?" Fortune, 24:37, July, 1941.
ships, and the Admiralty had demanded numerous bottoms to
answer to the needs as armed merchant cruisers with convoys.
This lowered the tonnage, which could be employed in non­
military service, to approximately 16,800,000 gross tons.^
Some of this remaining non-military tonnage is unserviceable
with regard to the transportation of foodstuffs and materials,
as it includes passenger liners which are not applicable for
this purpose.
This figure of 16,800,000 gross tons also included
Dominion ships which, through necessity, have been assigned
to the duty of serving the wants of the civilian population
in the Dominions and facilitating the operation of the war
industries in the Dominions.
Some individuals make the
assumption that Canada and Australia are rapidly creating
mighty and efficient merchant marine.
entirely incorrect.
This supposition is
Great Britain has never promoted, with
enthusiasm, shipbuilding in the Dominions, and, moreover,
a shipbuilding industry, in order that it may be adaptable
to rapid growth, must have had its machinery made to conform
to present usage and necessitates an abundant reserve of
skilled labor.
C. D. Howe, Minister of Munitions and
Supplies, states that since the first World War, Canadian
5 Fortune. op. cit.. July, 1941, p. 37.
shipbuilding has been "almost dormant."
Great progress has been made with the improvement and
modernization of the Canadian old shipyards and ways, but the
expected results are'far into the future.
With forty yards
in operation, employing some 15,000 men, depicts a maximum
exertion on the part of shipbuilding in Canada.
She is now
constructing eighteen 9,500-ton cargo ships, and the delivery
date is not expected this year.
The achievements of Australia
are even less impressive, since no significant shipbuilding
results can be anticipated for two years.
Even at Hong Kong,
where eleven 9,000-ton ships are under construction, completion is very much in the future.
Considering both the inability of some ships to carry
cargo and deficiency of the Colonial and Dominion shipbuild­
ing program, this removes all but about 12,500,000 gross
tons to serve the British Isles.
summarize the situation.
This figure still does not
Submarine warfare and aerial at­
tacks have made it compulsory for vessels to follow zig-zag
courses, have necessitated the use of convoys, which must
slow down to the slowest vessel in the convoy, and- have pro­
longed the time required for assembling at both terminals
® Max Gissen, "Can We Build Enough Ships?"
Republic, 104:491, April 14, 1941.
7 Ibid., p. 492.
The New
of the convoy.
All this has curtailed the carrying capacity
of the British merchant marine to approximately twenty-five
per cent. 8 If consideration is made to the damaging of ships
in harbors, which would represent about 1,500,000 gross tons,
the remaining tonnage would represent some 8,000,000 gross
Submarine warfare and aerial attacks can also be
credited with the fact that limited usage of the chief ports
of the Isles is made;
and that the Axis conquest and occu­
pation of well-nigh all Continental Europe has definitely
stopped all trade with these conquered nations.
Great Britain
has been compelled to obtain all of her supplies from a
minimum radius of 2,500 miles, which would-demand a peace
time merchant fleet of some five to six millions gross tons.10
President Roosevelt expressed his opinion when he
’’The present rate of Nazi sinkings of merchant ships...
is more than twice the combined British and American output
of merchant ships t o d a y . H o w e v e r , experts believe that
the British and the United States shipyards will each turn
out about 1,000,000 gross tons a year, and that United States,
by the middle of 1943 will be producing at the rate of
5,000,000 gross tons if present plans are carried through
® This was the reduction made in the first World War.
9 Fortune,
cit.. July, 1941, p. 38.
1° Ibid., p.38.
11 From the President’s speech of May 27, 1941.
to expectations.
On the fourth day of April, 1941, which was, inciden­
tally, one day after Sir Arthur Salter arrived in this
Country, President Roosevelt gave notice that he had directed
a building program of 212 additional merchant vessels, which
came under the Lend-Lease Act.
In addition to this, the Red
Sea was excluded from the combat zone only a few days later.
In the wake of this policy the President called for the
pooling of 2,000,000 gross tons of American ships to be employed in aiding Britain’s sorrowful need of merchant ships.
The United States Maritime Commission —
its members.
Rear Admiral Emory Scott Land, retired, has replaced Mr.
Kennedy as chairman on the Commission.
He is a graduate of
Annapolis and is an authority on naval architecture, of which
he received his training at the Massachusetts Institute of
His right-hand man is Captain Howard Le Roy
Yickery, who is on leave from the Navy.
been similar to his chief’s.
program of the Commission.
His training has
He directs the construction
A lawyer, Thomas M. f/oodard, who
has been titled as ’’Hugo Black’s man” on the Commission,
manages the supervision of the steamship rate-making
This figure represents over one-fourth of the pre­
sent merchant marine of the United States.
13 ’’Bottoms for Britain,” Time, 37:12, March 31, 1941.
conferences, handles all the legal aspects, and is in charge
of the enforcement of control of foreign commerce.
John J.
Dempsey, a former Congressman from New Mexico, concerns him­
self with the business matters of the Commission.
He received
his training while employed at the Brooklyn Rapid Transit,
\vhere he advanced from telegraph operator to vice-president
of the concern.
favored by labor;
The last member of the Commission, who is
in fact at one time Edward Macauley served
as a member of the National Longshoremen’s Board, strangely
supervises the training of seamen, although he is a noted
ship designer."^
With the ever increasing tasks required of the Com­
mission and the need for setting into motion efficiently
our present limited merchant marine, this body of men found
it necessary to induce experts from private industry to par­
ticipate and render their services in this vast shipbuilding
The Division of Emergency Shipping was established,
and Hector Harris Robson was chosen as its head, with three
other executives to serve as assistants.
Mr. Robson has been
the efficient and successful vice-president , in charge of
steamship operations, for the United Fruit Company.
All of
these executives from private industry have been obtained
from shipping companies not benefiting from subsidies of
I4 He replaced Max O'Rell Truitt, a lawyer, on the
first of April, 1941.
the Government to guard against the possibility of fraud or
The United States Maritime Commission -- its present
tasks. One of the more difficult problems which demands the
attention of the Commission, is the rivalry demands of the
Naval shipbuilding program and the merchant marine building
Both need skilled labor, materials, machinery, en­
gines, and yards and ways.
In comparison, and financially
speaking, the naval building program is three times greater
than the merchant ship program.
The naval building program
was set in motion to provide an armada of 483 ships repre­
senting 3,049,480 tons, costing $7,000,000,000.
fleet, which will not be finished until 1946, will include
thirty-five battleships, twenty aircraft carriers, sixtyeight cruisers, three hundred and seventy-eight destroyers,
and one hundred and eighty submarines.
This represents the
largest combat fleet commandeered by one nation since the
beginning of time.
The American merchant marine, which is now afloat,
also presents a perplexing problem.
Its allotments and as­
signments to various channels of need must be made with sound
There is the assistance to be given to both China
15 "Navy Orders Means More Shipyards," Business Week.
12:17, July 27, 1940.
and Great Britain, the matter of importing vitally needed
strategic materials necessary for United States armament
program must be handled, consideration must be given to the
conveyance of vast supplies of construction material to newly
established naval and air bases, and the inadequacy ’of the
merchant fleets of the Latin American countries cannot be
overlooked.Although numerous countries in Latin America
followed suit with the policy of United States by annexing
blackaded ships of the Axis or foreign countries in their
ports, this has not relieved altogether the United States mer­
chant fleet of its obligations, which must be in compliance
with the "Good Neighbor Policy.”
The existing United States merchant marine.17
cluding 406 freighters totalling 2,250,764 gross tons of
shipping, which were needed for the Great Lakes traffic or
which were not applicable or suitable to the requirements of
open sea travel, the ocean-going merchant marine of United
States comprises of 1,122 ships, representing 6,903,838 gross
This figure is somewhat deceiving as 2,627,990 gross
tons, which is nearly a third in number and over a third in
With the exclusion of Ghile, Argentina, and Brazil,
South America has only meager water transportation facilities,
except for coastal and inland water vessels.
These statistics were compiled on April 15, 1941
and include only vessels of 2,000 gross tons or more.
Fortune, op. cit., July, 1941, p. 98.
tonnage, should not be included as they are tankers.
Of the
remaining 4,275,848 gross tons, 270 ships or 1,212,367 gross
tons were vessels used in intracoastal trade and 562,877
gross tons or ninety-six ships were in service carrying on
intercoastal trade from the Atlantic coast to the Pacific
coast by the way of the Panama Canal.
This relinquished,
with the exception of a few remaining government laid-up
ships, only 382 dry cargo vessels of 2,383,047 gross tons
are available for international trade.
The United States Merchant Marine Shipbuilding Program.
Just after Joseph P. Kennedy became chairman of the Maritime
Commission, a comprehensive examination was made of the peace­
time and war-time requirements of the merchant marine.!®
From this survey resulted the ten-year construction program of
500 vessels costing some $1,250,000,000.1^
The construction
of the famous C-l, C-2, and C-3 merchant ships was the result
of this building program.
The C-l cargo vessel is the
smaller series, and is designed to fulfil the minimum require­
ments for ocean-going bottoms.
This 6,000-ton freighter
travels at a speed of fourteen knots, The C-2 is the origi­
nal standard design planned by the Commission.
The belief
18 Cf. ante♦. p. 71, footnote 22.
19 £f. ante., p. 71.
20 W. Creighton Peet, Jr., "We Build More Ships,"
Scientific American. 164:87, February, 1941.
that they were the most capable ship of their class sailing
the Seven Seas has been confirmed by their performances.
This fifteen and a half knot vessel’s tonnage is approximately
8.000 gross tons.
The most efficient freighter in this group
is the C-3 series, which has a gross tonnage of approximately
10.000 gross tons and an attainable speed of sixteen and a
half knots.
With the same hull, as the C-3 cargo vessel, a
combination passenger and cargo ship has been constructed.
All of these freighters have proven to be extremely economical
to operate and easily transformable to naval auxiliary ships.
Their handling gear is of the most modern type, and every pre­
cautionary measure has been made to assure necessary safety.
The ships are all but fireproof, and the risk of sinking
resulting from collision has been reduced to a minimum pos­
sibility, due to the fact that every vessel is compartmental.
Experimentations have been proceeding with the construction of rivetless ships. 21
On the first of June, 1940,
a 492 foot, 8,900 gross ton cargo ship, a C-3, was launched
by the Ingalls Shipbuilding Corporation at Pascagoula,
The "Exechequer” was the first of its kind
built in United States.
This may be one of the greatest
boons to the shipbuilding industry and building program.
Building costs are greatly reduced, as one welder can perform
21 "Rivetless Ship,” Time. 35r74, June 17, 1940.
the work required, of a four-man riveting team.
This is an
important saving, as labor is forty per cent of shipyard
Welding, moreover, introduces a saving of sixteen per­
cent in the consumption of steel.
In repairing a vessel
there is great economy, as the cost of repairing a riveted
ship is $1.50 per rivet.
Subsequent to the inauguration of this one-vessel-aweek program, sixty-four vessels have been completed,22
fifty-three are in various ways, and one hundred and sixtyeight have been contracted.
Aside from this program, the
Commission persuaded the Standard Oil Company of New Jersey
to construct twelve 18-knot tankers, each with a capacity of
150,000 barrels.
With this speed and their combined fuel
oil, they give the Navy a theoretical range of 800,000 nau­
tical miles without the necessity of putting into harbor for
Although contracts have been made under this
regular program which were matching the quota set for 1943,
launchings were not sufficient in number to compensate for
the present need.
With the knowledge of the need fo additional merchant
ships to aid both Great Britain and the United States,
22 The Army and the Navy have put into service twentythree of these bottoms.
23 "Ships for Britain," Business Week, 12:43,
Dece&tber 21, 1940.
President Roosevelt announced on January 3, 19£1, a plan for
the construction of two-hundred prefabricated cargo ships
on a mass production basis, allocating $36,590,000 from his
special defense funds to start getting the necessary new
yards available for operation. ^
In a special message to
Congress on January 16, 1941, the President requested a
prompt appropriation of $313,500,000 to provide for the pay­
ment of the cost of construction.25
Congress completed action
on this bill and delivered it to the White House for appro­
val on February 5, 1 9 4 1 . With the President’s signature
to this bill, United States initiated a close shipping co­
operation with Great Britain for the purpose of building a
"bridge of ships" to free and augment tonnage to supply
Great Britain with consumption needs and to supply her with
All of these two-hundred "ugly ducklings,"
totaling some 1,500,000 gross tons, which is approximately
what the Axis powers destroy in three months, are of stan­
dardized construction, following a single design.
gard for beauty and speed are emphasized, and virtually all
the construction is being done at the steel mills.
E C-21s will be of less tonnage than the sixty prefabricated
24 J. C. DeWilde and George Monson, "Defense Economy
of the United States Industrial Capacity," Foreign Policy
Reports. 16:295, February 15, 1941.
25 New York Times. January 17, 1941.
26 "Spread the Ships," Business Week. 13:17, February
cargo ships the British ordered from the United states in
December, 1940, which should be completed in the closing
months of 1941 at the yards of the Todd Shipbuilding Corpo­
These E C-2 freighters are expected to attain a
speed of fourteen to fifteen knots, compared with the ten
to eleven knots of most of the 2,500 freighters launched by
the American international Shipbuilding Corporation during
the last World VJar emergency. 27
On April 4, 1941, just three weeks after inauguration
of the Lend-Lease Act and the day following Sir Arthur
Salter’s arrival in Washington, President Roosevelt pro­
claimed a plan for the construction of two hundred and
twelve additional ships to be turned over to Great Britain. 28
One hundred and twelve of this total would be ’’ugly ducklings,
or E C-2s, seventy-two would be standard tankers, and the
difference would be regular program cargo ships— C-ls, C-2s,
and C-3s.
Chairman Land’s reaction was not entirely favorable
regarding this new expansion announced by the President.
■ We can handle this program, vast as it is. But any
further expansion of shipbuilding in the United states
will be done only at the expense of efficiency and
’’Shipping Story,” Business Week, 13:17, January
11, 1941.
28 Cf. ante., p. 82.
economy, and with delay in delivery of the vessels now
ordered and authorized. Any further dilution of ship­
building brains, whether the skilled and unskilled labor
in the yards or the managerial and professional talent
in the office, will result in gross waste and inef­
ficiency. It will not accomplish the ultimate result
which we all desire— the delivery of finished ships
to make our country strong and to help make Britain
and her Allies victorious.29
Rear Admiral Land was possibly speaking with reference to
United States experience in World War I, when Hog Island,
with its ninety-four ways, represented a concentration of
emergency production.
This program was carried over a per­
iod of five years, at a cost of $3,000,000,000, and the
tragic part of the situation was that of the 2,300 ships
launched, not a single one became available in time to be
used during the last War.
The principal obstacle with this
program was the fact that exigent demands were centered at
only one production source.
After operations had started
it was revealed that the ways had been built too close to­
gether, consequently, there existed the lack of sufficient
space to unload steel plates and equipment, with the alter­
native of storing the shipments in the freight cars with
serious impairment to the flow of traffic.
Some experts are of the opinion that this paralyzing
congestion cannot possibly exist in the current building pro­
This time the emergency shipbuilding program has been
In his speech over a national hook-up on April 9,
decentralized with, several moderate sized yards, instead of
one huge central production channel;
and the ways will be
built with greater space available for freight cars so that
they may discharge equipment and proceed without delay back
into circulation.
One of the overwhelming problems placed before the
Commission is the building of new yards and new ways.
naval building program, which will not be completed until
1946, is cause for great anxiety.
The complexity of naval-
ship construction promises to render many ways unavailable
for a long period of time.
It requires more than four years
to build a battleship and thirty-four months for an airplane
Three ranking commercial shipyards on the Atlantic
coast have already been requisitioned by the Navy, and will
be needed for two or three years-— Bethlehem’s Fore River at
Quincy, Massachusetts, the New York Shipbuilding Corporation’s
yards at Camden, New Jersey, and the Newport News Shipbuilding
and Drydoek Company’s plant at Hampton Roads.
destroyers are also to be constructed at Bethlehem's San
Francisco yards.3-*In May, 1940, there existed forty-four coastal ship­
yards adaptable to the construction of cargo vessels of
30 Business Week, op. cit.. p. 17, July 27, 1940.
"Ships for This War," Fortune, 24:42, July, 1941.
three hundred feet and over in length.
On the Great Lakes
there were only twelve ways capable of handling cargo carriers
of over three hundred feet.
These were consigned to the
building of only ore, coal, and grain carriers.
Figures pub­
lished in May, 1941, by the National Council of American
Shipbuilders, indicated the addition of four more coastal
yards and an increase of twenty-nine ways.
When all the pro­
posed ways are completed, which will be approximately one
hundred and forty, more than five hundred cargo ships will
be launched every year.
This total of some four million
gross tons, which is in addition to the naval construction
program, should, with the help of the British building pro­
gram of 1,000,000 gross tons a year, be sufficient to balance
Axis destruction.
This is assuming that tonnage losses are
at their peak.
Constant wrangling has been over the justification for
an expansive shipbuilding program on the Great Lakes.
opposition points out the existing bottleneck— the size of
any outlet to the sea determines the size of vessels which
may be launched.
At present the St. Lawrence system will
not accommodate vessels which are longer than 242 feet, 44
feet wide, and 14 feet in d r a f t . T h i s is the reason Great
Lakes shipbuilders have been compelled to confine themselves
32 "Lake Ship Boom?” Business Week. 13:20, March 15,
to the construction of lake carriers, tugs, Coast Guard
cutters, barges, motor launches, and work boats.
In fact,
the Great Lakes shipbuilding industry, at present, has only
obtained a mere fragment of the total defense order.
December 31, 1940, contracts amounting only to $45,858,000
had been offered to the Great Lakes shipbuilders.33
Advocates of the Great Lakes shipbuilding program
propose the construction of the seaway which would make it
possible to accommodate any war vessel, except battleships
and aircraft carriers. ^
To those who raise the question of
the time required for this construction, the advocates answer
that if construction on a cruiser were begun at the same time
dredging were commenced, the channels would be available in
twenty-four months, the time required for the completion of
the cruiser.
Skeptics state it would require from six to
seven years to deepen the channels to twenty-seven feet.
With all this opposition to the project proponents
are confidently expecting favorable response, as they recall
the shipbuilding boom on the Lakes during the last World
Business Week,
cit., p. SO, March 15, 1941.
3^ By means of this project the Great Lakes shipbuilders
are not seeking contracts to build more merchant ships, but
are endeavoring to obtain naval orders. This would relieve
coastal yards from this obligation to turn to the construction
of merchant vessels, where they have the facilities to launch
five cargo ships for every cruiser.
War. 35
They are also recalling President Roosevelt’s state­
ment regarding shipbuilding on the Lakes:
The United States needs this great landlocked sea
as haven in which it will always be able to
build ships and more ships in order to protect our
trade and our shores. . . . Shipyards on the Great
Lakes, with access to the ocean, yet close to the
sources of supply and labor, raw and finished mate­
rials, further removed from possible attack, may be
a vital factor in successful defense of this conti­
nent. They will help to build the ships which will
bring back commerce to the harbors of the Atlantic
Coast ports.36
Great Lakes shipbuilders believe that the steel com­
panies which control thehuge yards on the Coast and Rear
Admiral Land are the barriers which oppose the St. Lawrence
As I. F. Stone comments:
Admiral Land
likes public power and is ready to do anything to speed ship­
building— well, almost anything.”37
Parallel with the need for more shipyards is the pre­
requisite of 450,000 new
shipyard workers.The job of
3o During 1915 only eight vessels over 100 gross tons
were launched. In 1916, 44 vessels equalling 119,548 tons;
in 1917, 60 vessels totalling 176,804 tons; in 1918, 188 ships
representing 430,877 tons; and in 1919, 199 vessels reaching
495,559 tons. By 1921, construction had fallen to seven ves­
sels equalling 11,284 tons, and.only two vessels were launched
accounting for only 3,638 tons. In 1937, when the William A.
Irvin was launched at Lorain, Ohio, it was the first ore car­
rier built on the Lakes since the Depression.
3® In a message to the Great Lakes Seaway and Power
Conference at Detroit, December, 1940.
37 I. F. Stone, "Shipping and Admiral Land,” The Nation,
152:632, May 31, 1941.
procuring and training this group will not be as difficult
as one might suppose.
Constructing ships of individual design
is being obscured by the building of '’ugly ducklings" which
are of one pattern.
With this practice the great demand for
a highly specialized personnel is not so imperative.
worker will simply be one who will watch over a machine of
one particular operation.
The only experienced force will
be the trainers who will choose a man on the basis of how
he does a particular job.
The worker will learn on the job
with additional instruction at evening conferences.
system of "segment training" permits a man to master a skill
in three days which, heretofore, required three months.
is agreed that this procedure is not conducive to proper
education, however, it does defend the need for defense
The labor situation. With the merchant marine of the
United States now in service to its capacity, there is evi­
dence of a severe shortage of maritime labor.
The defense
program is attracting sailors away from the sea.
seamen are being claimed by the active shipyards to serve
as riggers.
The Sailors* Union of the Pacific reported that
from them have been taken almost one thousand able-bodied
Wages have been the determining factor.
An able-
bodied seaman receives a compensation of ninety dollars a
month, while $1.10 per hour is paid for ship riggers.
though this paints a very depressing picture, actually basic
wages have advanced on an avarage of twenty-five percent in
the past year.
On all sailings which are considered perilous,
seamen receive an additional two dollars a day, and fortyfive dollars is attached to his salary for each port visited
in the Persian Gulf or the Red Sea.
A bonus of seventy-five
dollars is given for a stop at Suez.
Although the demand for seamen will become greater
when the new shipbuilding program commences to show results,
the Commission does not appear to be troubled over this
The Commission is certain this problem will be suc­
cessfully managed by the United States Maritime Service,
which trains licensed and unlicensed personnel for service
on American merchant vessels.38
Of the 15,000 to 20,000 sea­
men required, 3,200 of them will be officers, the Maritime
Service anticipates the training of 6,000 unlicensed men and
2,000 officers within the next eighteen months.
The remainder
of the necessary unlicensed men will be taken from the ranks
of unskilled labor, and to fulfil the quota of officers, the
Commission expects to persuade able retired officers to report
back for sea duty.
There are those individuals who differ with the
Q3L' ante., pp. 54-56.
Commission’s recommendation of the training of between 15,000
and 20,000 men.
They believe this number is not sufficient.
Last year a move was made in Maine to establish a nautical
school in Portland.
Congressman Brewster introduced a bill
in Washington, amending the old Act of 1874, for the promotion
of marine schools.
The bill designated ten seaboard cities
and embraced a Federal gift up to $25,000 if the State would
likewise contribute.
The bill also provided for the lending,
by the Navy, appropriate vessels and teaching personnel.*^
A very disappointing response was made;
indicated interest.
only five cities
Congressman Bland of Virginia, Chairman
of the House Committee on Merchant Marine sought the advice
of the Commission regarding the bill’s worth.
Land’s opinion emphasized the need for no additional state
nautical schools, aside from the four now existing.^
stated that it would be a needless expenditure of the tax­
payer’s money to train seamen faster than the Commission could
build for them ships.
An opponent to Chairman Land’s opinion very adequately
stated his views by asserting:
To say that seamen shall not be trained any faster
than we can find commercial jobs for them is on all
fours with saying that we will make soldiers as fast
Richard Hallet, "Too many Seamen?” The Christian
Science Monitor, p. 1, July 27, 1940.
40 They are located in Massachusetts, Pennsylvania,
New York, and California.
as we can find wars for them. The present cry is for
1,000,000 or 3,000,000 soldiers to deal with the
enemy after he has landed— and the Maritime Commission
is satisfied with 15,000 seamen to help keep him
from landing. The disproportion is too violent. . . .
If one thing is more certain than another it is that
the North Atlantic Ocean will have to be defended
before the land is defended. The defense is the Navy’s
job, and the Maritime Commission admits that without a
competent merchant marine the United States Navy’s
effectiveness will be reduced by 30 per cent. . . .
The merchant marine is the Navy's lifeline. That
indeed is the reason for the present Maritime Commission
existence. When the World War was over, the United
States had a great merchant marine, as we supposed, but
lacked a rudder.
The Pacific Coast shipyards have been the center of
labor unrest in the shipbuilding industry.
With the endeavor
to seek ways and means to facilitate the most efficient pro­
duction of ships for the Navy and the Maritime Commission,
the National Defense Advisory Commission suggested the estab­
lishment, last November, 1940, of the Shipbuilding Stabili­
zation Committee, headed by Morris L. Cooke, and working
under the labor division of the Office of Production Manage­
The committee is comprised of representatives from
shipbuilding interests, from organized labor, and from inter­
ested government agencies.4^
The West Coast shipyard strike on May 17, 1941, which
suspended work on naval construction amounting to the sum of
41 Hallet, op. cit.. p. 2.
42 njnaustry Facts?”
Business -Week, 13:39, February 1,
$500,000,000 menaced the Shipbuilding Stabilization Conference's
master agreement, and even the existence of the Committee. 4-^
Those involved were the Local 68, A. F. L. International
Association of Machinists and a shipyard local of the C. I. Q.’s
Steel Workers’ Organizing Committee.
Although these two
unions totaled only 1,700 workers, another 15,000 to 18,000
unionists, who complained of no injustice, still refused to
pass through the strikers’ picket lines.
This strike closed
down tight eleven shipyards in the San Francisco Bay area.
The leaders of the two unions were asking for a $1.15
per hour rate, against $1.12 rate established by the Master
In addition, they demanded double time pay for
work performed beyond the five-day 40-hour week, which com­
pared to the time-and-a-half set by the Master Agreement.
On June 15, 1941, the unions voted again 585 to 400 against
the $1.12 pact agreement.
Although the wage demands remained
the real barrier to settlement, the refusal on the part of
the Bethlehem Shipbuilding Corporation to accept the closedshop conditions under which thirty-eight coastal yards worked,
was also an important factor.44
It is the opinion of many
that the strikers had a clear grievance against Bethlehem,
which had declined to make any agreement with the unions.
43 "Shipyard Crisis," Business Week, 13:47, May 17,
44 "Shipyard Pacts," Business Week, 13:57, June 21,
One writer had this to say:
Bethlehem can kick the Navy in the teeth on con­
tracts, provoke strikes by refusing to obey the
laws, and generally comport itself like a cave man
of industry--the Navy loves it just the same. One
sometimes wonders whether Bethlehem exists to sup­
ply the Navy or the Navy to supply Bethlehem. Ad­
mirals who (the author is making special reference
to Admiral Land) know the right answer enter into
their reward on retirement by becoming Bethlehem
consultants. There is nothing like a hereafter
to make men behave themselves.45
All indications pointed to the settlement of the
seven-week San Francisco shipyards* strike.
On the week of
June 22, 1941, the Navy moved in and ruled the abandonment
of picket lines, and offered the machinists the opportunity
to return to their jobs, which would now be civil service,
at wage payments of $1.12 per hour with time and-a-half in­
stead of the $1.15 with double time.
The strikers appeared
to be satisfied to return, especially, as the Bethlehem.
Shipbuilding Corporation proclaimed its desire to sign the
Master Agreement, which included the close-shop clause. 46
The United States Shipping Pool.
Just previous to
the outbreak of the present European War, the merchant
marine of the United States, which was actively participating
in international trade, totaled only some 1,749,689 gross
Of this sum, eighty-seven per cent should have been
4^ I. F. Stone, op. cit.. p. 632. (Italics are the
46 »*pewer Strikes,” Business Week. 13:52, June 28,1941.
placed into inactive duty.
Often these government subsidized
vessels were operating with far less than capacity loads.
Approximately only thirty per cent of the Country’s foreign
trade was carried by United States.
By the first of May,
1941, nearly Britain’s entire merchant fleet had been called
into war service.
Although even with sixty British vessels,
equalling approximately 600,000 gross tons which were still
not forced into war duty, {they were being used solely to
transport essential foodstuff and goods from one part of the
Empire to another) the United States merchant marine was
required to accept the despairing assignment of carrying the
greater volume of the world's freight.
Table I indicates the change in United States shipping.
Despite the pressing into ocean service additional
dry cargo vessels to make available 2,382,047 gross tons,
all efforts by united States lines to keep freight moving
over the oceans were too great a task.
In addition to this
difficulty, Nazi sinkings were avaraging about sixty per cent
more than the building of new vessels by both Great Britain
and the United States.
In view of this great problem facing
the United States and Great Britain, President Roosevelt,
observing that "vital war materials are piling up at the
ports or delayed at the factories," directed Rear Admiral
47 "Via United States Ship," Time. 37:83, May 12,1941.
Number of Ships
March, 1939
Number of Ships
March, 1941
Far East or Orient
Canada and Garribean
Europe and Mediterranean
South America
Around the 'World
48 "Via United States Ship," Time, 37:83, May 12, 1941.
(Some of these figures are the writer’s own estimates.)
Land, May 7, 1941, to create a pool of some 2,000,000 gross
tons of merchant shipping available to this country, and to
"plan the operation thereof in such a manner as will make
their cargo space immediately effective in accomplishing our
objective of all-out aid to the democracies."49
Hector Harris Robson, heading the Emergency Shipping
Division, was assigned to this diversion undertaking to
"get over the hump" of the next eighteen months, until Great
Britain and the United' states would be turning out new
bottoms at a rate of more than 5,000,000 gross tons a year.
With this program Mr. Robson’s course of action has been:
(1) Fifty tankers have been commandeered from American oil
These units will move oil from the Garribbean and
the Gulf to the North Atlantic where it will be transferred
to British tankers.
(2) Notice was served upon intercoastal
lines to furnish thirty-eight freighters, which is one-half
of their ships, for the pool.
This appears to be a severe
demand, however, the transcontinental railways are being em­
ployed to counterbalance this diversion of the intercoastal
The only embarrassing situation is the possible in­
capacity of the railroads to manage the transportation of
The prevailing desire on the part of the oil
companies to induce-Washington to give them priority for steel
49 "Bridge of Ships Strengthened to Speed Lend-lease
Delivery," Newsweek, 17:15, May 12, 1941.
pipe and to require the suspicious railroads to allow them a
right-of-way under their tracks would be the answer to this
(3) The pool has also included the eighty-eight
ships, totaling 481,539 gross tons, belonging to Germany
and Italy or the countries victimized by the Axis powers,
which have been held in protective custody the past several
weeks. 50 The power to seize these vessels was given to the
Commission when the President signed the House of Representa­
tives Bill $4466, June 6, 1941, authorizing !,the acquisition
by the United States of title to or the use of domestic or
foreign merchant vessels for urgent needs of commerce and
national defenses and for other p u r p o s e s T h e President
is authorized and empowered within the time of the declared
emergency (September 8, 1939 and June 30, 1942) through such
agency or officer he designates "to purchase.requisition, for
any period during such emergency charter or requisition the
use of, or take over the title to, or the posession of, for
such use or disposition as he shall direct, any foreign mer­
chant vessel which is lying idle in waters within the juris­
diction of the United States, including the Philippine Is­
lands and the Canal Zone, and which is necessary to the
national defense:
Provided, That just compensation shall be
50 »tRace por ships." Business Week. 13:27, April 26,
51 Act of June 6, 1941, Public Law 101. Seventyseventh Congress, First session.
Number of ships
Gross tonnage
Be lgium
"Race for Ships,” Business Week, 13:27, April 26, 1941.
determined and made to the owner or owners of any such vessel
in accordance with the applicable provisions of section 902
of the Merchant Marine Act of 1936. . . . ”
The hill was
introduced by Mr. George, in the House .of Representatives,
April 22, 1941, and to the date of its passage heated dis­
cussions branded it as a war measure.53
(4) Of the remain­
ing Government’s laid-up fleet, which is now being recon­
ditioned in East Coast shipyards, eleven vessels were requi­
(5) All the above merchant vessels totaled approxi­
mately 1,400,000 gross tons, leaving 600,000 gross tons which
was to be taken from the coastwise fleets.
Although the Commission controlled this pool of
2,000,000 gross tons, these ships were to be operated, as in
the past, by private owners.
An interesting fact to note is
that a good portion of the fleet is to be put into service
operating from Central and South America to New York City or
Halifax, where the cargoes would be transferred to British
This entire arrangement is preferred by the British,
since there are not a sufficient number of English seamen to
operate the ships if they were taken over by Great Britain.
Exception to the restricting of these vessels to
Western Hemisphere waters is the assembling of approximately
fifty vessels already selected for Near and Far East service.
53 ’’Proceedings and Debates,” Congressional Record,
Vol. 87, pp.3661-3677, 3738-3763, 3798-3806, 4114-4130,
4170, and 4194.
When plans are completed there will be forty vessels dis­
patched to the Red Sea area, with fifteen regular sailings
a month, and from four to ten freighters will operate reg­
ularly on the run to Rangoon with supplies for the Chinese
government, to be carried on the Burma Road,54
Although Argentina has remained aloof, Secretary of
State Hull authenticated a statement that conferences were
progressing satisfactorily regarding the procuring of some
830,000 gross tons of idle foreign ships anchored in Latin
American ports;
which could add to the pool of United States
The Ship Warrant Bill, On the tenth of July, 1941,
the fear of shipping interests that the Commission would ac­
quire greater control over shipping became a reality.
passed the House of Representatives Bill $4700, which was "to
provide for priorities in transportation by merchant vessels
in the interest of national defense and for other purposes,"55
With the increase of freight rates up to 500 per cent in the
last few months, and the refusal on the part of shipping
54 "Ship Pool on Job," Business Week, 13:60, May 24, 1941,
55 Newsweek, o£. ci_t., p. 16, May 12, 1941.
56 "proceedings and Debates," Congressional Record,
Vol. 87, No. 128, p. 6116.
companies to accept certain freight which did not offer the
maximum freight rates, something had to be accomplished to
give' the President authority to force these companies to ac­
cept freight which was most urgently needed for national
Congressman Fish explained clearly the existing prob­
For example, if an American ship wanted to fill
up entirely with cocao from Africa, under thepresent
law it could do so, instead of bringing back in the
same cargo some war defense material, such as manga­
nese or copper, essential to our defense, which might
call for a lower rate. The result has been that
these merchant ships, looking for the best possible
rates have loaded down with cargoes that may not be
essential to national defense, and the Administration
has been powerless to prevent it.57
The contents of
the bill and the manner in which it is
to function can be explained briefly on the following pages.
The President is empowered, whenever he judges it to be for
the welfare of national defense to authorize the Maritime
Commission to issue warrants with respect to vessels owned
by citizens of the United States, the Philippine Islands,
and the Canal Zone,®®
and upon application of the owner
with respe.ct to foreign-flag vessels not so owned.
Such war­
rants would be issuable only to those ♦’citizens” who complied
57 Congressional Record, op. cit.. Vol. 87, p. 4381.
58 phe term "citizen” includes corporation, partnership,
and an association existing, authorized, or organized under the
laws of the United states or any state, district, territory, or
with the following restrictions, which were placed upon their
vessels and the operations of these vessels:
1. The ships could only operate in trades selected
by the Commission, and could undertake only certain
established voyages.
2. Restrictions would be made of the class of cargo
or passenger which the vessel could carry.
3. The maximum rate of charter hire would be fixed.
4. Other restrictions would prevail when incidental
and supplemental matters appeared to the
Commission necessary for the purpose of the
The bill further provided that the Commission in is­
suing warrants would make fair and reasonable provision for
priorities with respect to:
1. the importation of substantial quantities of stra­
tegic and critical materials,
2. the transportation of substantial quantities of
materials when such transportation is requested
by any defense agency, and
3. the transportation in the foreign or domestic com­
merce of the United States of substantial quanti­
ties of materials deemed by the Commission to be
essential to the defense of the United States.59
Vessels holding warrants would, in return, be entitled
to priority over other merchant vessels with respect to the
usual facilities for loading, discharging, lighterage, or
59 Congressional Record, op. cit♦. Vol. 87, p. 5778.
storage of cargo, bunkers, overhauling, dry docks, and.
repair, and would have priority among themselves as deter­
mined by the Commission.
The companies furnishing any of
the above facilities would also be authorized, or with the
approval of the President, might be required to grant such
Certain ship operators feared that the operation of
vessels might be taken away from them and transferred to
someone else, but protection against this danger was written
in the bill.
There was also great concern that the Government,
itself, would go into business, but this fear had also no
basis, as the bill states that ship owners may continue to
operate their own vessels.
During debate in the House of Representatives of the
bill, Congressman Hoffman inquired if the bill dealt with the
relations between master and crew.
were not embodied in this bill.
He was informed that they
His answer was;
What is the use of giving the President authority
to determine priorities of cargo or destination when
he cannot get his ships loaded? The N. L. R. B. holds
that when a vessel is in port the crew can go on strike
and carry on a course of conduct which, if it were on
the high seas, would be mutiny.
If you cannot get a ship loaded— and you cannot get
a ship loaded unless the union consents— why fool
around determining what you are going to load on it or
where it is going.
IJntil this administration--and I mean the President
--takes hold of the present situation and gets some
priority over labor unions for national defense there
11 2
is very little use of passing a bill like
The opposition considered the bill a war measure.
With the authority vested in the President to establish any
voyages he deemed necessary, ships could be sent into com­
bat zones (an example, the Bed Sea) possibly necessitating
naval escorts.
In conjunction with this belief, Congressman
Oliver submitted this amendment:
"Provided, That no warrants
shall be issued under the authority of this act to vessels
of the United states, documented or undocumented, for operation
in the waters of the Red
S e a .
Proponents of this bill answered the request for the
inclusion of this amendment with the following statements:
MR. IZAC: "Now, if you are going to stifle the
American merchant marine, limit it to coastal waters.
I know of no better way to do it than by adopting
an amendment such as the one the gentleman suggests
and have it apply not only to the Red Sea but to the
other areas distant from our shores."
MR. BLAND: "To write this amendment Into the
pending bill will be an attempt to amend the Neutra­
lity Act. The Neutrality bill and the Executive
proclamations there under define combat areas. The
President under the Neutrality law is given the right
to fix combat zones and to redefine combat zones.
That should not be done h e r e . "62
With only brief additional debate in the House of
Representatives regarding this amendment and another asking
60 Congressional Record, op. cit.. 7ol. 87, p. 4379.
» P* 4389.
62 Ibid., pp. 4388-4390.
for the exclusion of the words, ’’notwithstanding any other
provisions of law,” due to fear of its implications, the bill
was passed, rejecting both amendments, on to the Senate where
opponents branded the bill as a measure obtaining "national
unity through methods of totalitarianism."
After this point
was heatedly debated and eight minor amendments were added,
the Senate passed the bill, however, insisting upon its amend­
ments and asking conference with the House.
The Committee
supported all but one of the Senate amendments and, finally,
after both the House and the Senate had agreed to the report
submitted by the Committee of Conference, the House of
Representatives Bill #4700 was sent to the President on the
tenth of duly, 1941, for approval.63
Although many individuals declare that this last move
by Congress will involve the United States in war, they can­
not ignore the timely statement made by Congressman Culkin
of New York:
Keep in mind the frank purpose of the bill. To­
day 80 per cent of the people of the country are
opposed to getting into war, but 80 per cent of them
are in favor of helping England. This is also the
declared policy of Congress. By passing this bill
you will be acting in accord with the wishes of the
American p e o p l e . ^4
63 Congressional Record. op. cit., Vol. 87, p. 5937, and
6116. (Bill signed by the President on July 14, 1941) Public
Law 173, Ibid., No. 132, July 17, 1941, p. 6262.
64 Ibid., p. 4389.
In Chapter II it was revealed that wars have played
an important role in the growth or decline of the American
merchant marine.
Just prior to 1800 and until 1812, the
European war opened new and highly profitable avenues of
trade for United States shipping, however, with the outbreak
of the War of 1812 the British Navy virtually swept American
shipping from the seas, despite the severe damage inflicted
by American armed privateers.
At the termination of the con­
flict American shipping again revived from the blows dealt
it by the war and enjoyed a short period of prosperity until
From 1815 to 1860, a period of discriminating duties
and reciprocity, a continuous but moderate growth of the
American merchant marine was evident.
Development never
reached the peak which was achieved during the Napoleonic
wars, as the American people began to divert their attention
to manufacturing or the internal development of the country.
The Civil War marked the rapid decay of the merchant
The destruction of northern shipping by Confederate
raiders, the panic selling of ships by northern shipowners
to foreign shipping concerns, the levying of heavy war taxes
on shipping, and the growth of the iron shipbuilding industry
11 5
all accounted for this decline, which found United States
almost completely dependent upon ships of other nations at
the outbreak of the World War,
Once again, war conditions displated. a great effect
upon United States shipping.
Except for the short period
of sudden cessation of exports, due to the prevention by the
British Navy of all German boats from leaving this country
and the fear of allied shipowners to permit their ships to
venture into submarine infested waters, United States became
the great manufacturing and supply center for the Allies.
The distressing situation which existed was the fact that,
at the same time when the demand for merchant vessels was
being increased, the supply of such vessels was being di­
minished, which resulted in the practice by shipowners of
exacting almost any rates they wished.
This shortage of
carriage capacity was expected to be challenged successfully
by the passage of the Shipping Act of 1916 and the creation
of the Emergency Fleet Corporation, which supervised the emer­
gency shipbuilding program.
Failure of this program was
due to extravagance and inefficiency.
The fleet was not
built by the Government but by private operators who obtained
exorbitant profits at the expense of the Government.
shipbuilding program also proved to be extremely slow, as
less than one-sixth of the fleet was completed
or more than
one-third of it was commenced by the time the Armistice was
By the middle of 1919 there was no further need for
emergency legislation;
in fact the problem was no longer that
of acquisition and construction but that of disposal.
condition brought about the passage of the Merchant Marine
Act of 1920, followed later by the Merchant Marine Act of
The provisions of the Act of 1920 regarding the reg­
ulatory powers of the Shipping Board were primarily aimed to
protect American vessels against unfair foreign competition
and to bestow upon private shipping interests various con­
cessions and exemptions, which resulted in great benefits to
American shipowners at the expense of the Government.
Act performed very little service regarding the development
of an American merchant marine, as the percentage of total
imports and exports of the United States carried in American
vessels fell almost every year.
This distressing situation called for further legis­
lation, therefore, Congress passed on May 22, 1928, the next
important act— the Merchant Marine Act of 1928.
This act re­
affirmed the policy laid down in the.Act of 1920 and aimed
to aid.the depressed industry by granting loans to the ship­
builders at low rates of interest and provided compensation
for the carriage of mails at rates greatly in excess of the
cost of service.
Despite the extremely liberal administration
of the construction loan of this act, the program of new
11 7
construction materialized in a very meager fashion.
The rea­
son for the failure of this construction program originated
in the drafting of the mail contracts, as they resulted in
waste and extravagance.
These injurious practices led to the
investigations carried out by the United States Senate and
the United States Post Office Department.
In Chapter III the Merchant Marine Act of 1936 was
described and expounded.
The new lav/ repealed two devices
of government aid employed by the Merchant Marine Acts of
1920 and 1928— loans at low rates of interest to private con­
cerns for the construction of new ships or for the recondi­
tioning of old ones and appropriations of large sums of money
for the carriage of the ocean mail, a substantial portion of
which was regarded as a concealed subsidy.
In place of these
methods a plan of construction- and operating-differential
cost subsidies was substituted, and in addition, provision
was made for direct assistance to meet any foreign subsidies
paid to competing lines.
Operation of and conditions attached
to these methods of subsidy were presented in the chapter.
The law reaffirmed the policy set forth in previous
shipping legislation by declaring an adequate merchant marine
is held to be ’’necessary for the national defense and develop­
ment of foreign and domestic commerce of the United States.”
The law also declared that an adequate merchant marine should
be one sufficient to carry all the domestic water-borne
commerce and a substantial portion of the water-borne exports
and imports of the United States, and shipping service was
to be provided on all routes deemed to be "essential for
maintaining the flow of such . . . commerce at all times."
With respect to the national defense, the merchant
marine was to be ."capable of serving as a naval and military
auxiliary in time of war or national emergency."
ownership and operation of the merchant marine by citizens
of the United States, under the American flag, if practicable,
was favored.
In all other circumstances provision was made
for the construction and operation of ships by the Government
on its own account or by charter arrangement.
The Act sup­
ported the policy that ships were to be built in the United
States and would be the "best equipped, safest, and most
suitable types . . . and manned with a trained and efficient
citizen personnel."
The United States Maritime Gommission, an agency of
five persons appointed by the President by and with the ad­
vice and consent of the Senate, was created to administer the
provisions of the Act.
Each member was to serve a term of
six years, and was not eligible for appointment if the person
had a financial interest in or had been employed by "any
business associated with ships or shipping" within three
years prior to appointment.
Improvement over previous legislation was indicated
by stipulation of provisions for the improvement of crew con­
ditions, the adequate control over unreasonable profits re­
alized by shipbuilders, the greater consideration of naval
requirements, the restraint of excessive dividends granted
by shipping lines, and a sensible application of subsidy
Questionable validity of the Act centered upon the
extensive discretionary powers bestowed the Maritime Authority
and the concept that accuracy could be achieved in the deter­
mination of the differential between foreign and domestic
In Chapter IV attention was devoted to the principal
problems confronting the American merchant marine for the
period, 1936 to 1940.
The labor problem was 'one of the most
serious impediments to an efficient merchant marine.
By means
of investigations and hearings, the United States Maritime
Commission found that the maritime labor situation was not
entirely an one-sided proposition, but that responsibility
must be placed upon the employer, who imposed long hours,
low wages, and cramped quarters;
while at the same time, the
employee should be reproached for the intolerable manner in
which he abused his employment.
The United States Maritime
Service, with its program of.seaman training, and the Maritime
Labor Board were held responsible for the improvement of
maritime personnel and conditions.
Along with this maritime labor situation, fear of a
Communistic grip upon the American waterfront, merchant ship­
ping, and marine communications was dreaded.
Evidence re­
vealed Communistic affiliation of the majority of maritime
labor groups, and the assignment of combating this danger was
given to a small, selected group of non-Communistic maritime
labor unions and to the United States Maritime Service, which
would train seamen of unquestionable allegiances.
The vindication of government subsidy was always a
much disputed problem.
Opponents to subsidization emphasized
the fact that the United States merchant marine was the most
costly in the world to operate.
This opposition presented
little justification when consideration was made of the dif­
ference of American and foreign costs and the bounteous sub­
sidies offered by foreign governments, and the desirability
of a merchant marine to compete in international trade and
its service as an instrument of national defense.
In connection with the justification of government
subsidies, indifference shown by the United States Government
toward giving financial aid to shipping services, which oper­
ated between United States and Latin America, was a problem
to be faced.
Gradually United States was roused from this
attitude, only after it was realized that foreign countries,
through liberal, subsidization, were gaining a strong foothold
in the Latin American trade.
With the knowledge that the American merchant fleet
was not adequately efficient and modern, the United States
Maritime Commission was instructed to proceed with a tenyear construction program of five hundred vessels at a cost
of $1,250,000,000.
This construction program led to the im­
portant debate of 1940— whether the United states Maritime
Commission should expand beyond this original shipbuilding
Arguments against such expansion reflected a skep­
tical survey of past experiences and indicated an inaccurate
examination of the true condition of the existing merchant
Arguments supporting additional expansion outweighed
the opposition, as emphasis was placed on the importance of
directing all attention to future developments.
In Chapter V the recent changes and policies of the
United States merchant marine (to July, 1941} were discussed.
The greater part of these developments were the result of the
severe shortage of available non-military tonnage witnessed
by the British.
United States, with its policy of ’’all-out
aid to the democracies,” was expected to apply any methods
possible to supply Great Britain, directly or indirectly,
with the necessary tonnage.
One of the problems was the
proper allotment and assignment of the existing merchant ma­
rine , in order that it would serve the most important channels
of demand.
The obvious inadequacy of the existing fleet di­
rected the Maritime Authority into a program, exceeding the
Commission’s five-hundred vessels, of constructing approxi­
mately four hundred and seventy ships, nearly all of which
were to be prefabricated vessels constructed on a mass pro­
duction basis.
This additional construction program introduced many
There was the belief that any further expansion
of shipbuilding in the United States would only be accomp­
lished at the expense of efficiency and economy, in that it
would delay the delivery of ships already ordered and would
result in the "dilution of shipbuilding brains."
overwhelming problem, which resulted from this shipbuilding
program, was the necessity of constructing additional yards
and ways to accommodate both naval and merchant marine demands.
This brought to light the question of the validity of an ex­
pansive shipbuilding program on the Great Lakes.
to the need for more shipyards was also the job of securing
and training 450,000 additional shipyard workers.
Realizing that this construction program was a device
of the future and that the United States over-seas fleet was
unable to fulfil its responsibility of carrying the greater
volume of the w o r l d ’s freight, the Administration introduced
two pieces of shipping legislation which gave the Maritime
Commission greater say and control over American shipping.
The first of these was the creation of a pool of some
2,500,000 gross tons of merchant shipping which, heretofore,
had contributed inadequately or nothing to United States ob­
jective of "all-out aid to the democracies.”
It included
tankers commandeered from American oil companies, freighters
supplied from intercoastal lines, seized ships belonging to
Axis or victimized powers, the Government laid-up fleet re­
cently reconditioned, and tonnage requisitioned from the
coastwise fleets.
The other form of shipping legislation,
titled the Ship Warrant Act, authorized and made it possible
for the Maritime Commission to route ships and to specify
the trades in which these ships could operate.
This author­
ity was accomplished by the issuance of warrants, which en­
titled shipowners and operators priorities in various essen­
tial services, only if they obligated themselves to the re­
strictions of specified voyages and trades.
Again, as before, the labor situation offered a per­
plexing problem.
The defense program attracted seamen from
maritime service, however, this diversion was gradually being
counterbalanced by salary increases and the anticipation of
the United States Maritime Service to train approximately
15,000 to 20,000 seamen--a number which was considered by
many individuals as not ample.
The shipyard strike situation,
particularly on the Pacific Coast, was also cause for much
agitation and uneasiness, as the West Coast shipyard strike
on May 17, 1941, suspended work on naval construction amount­
ing to the sum of f500,000 ,000.
The unreasonable demands
and obstinacy of both employee and employer were the cause
for this unnecessary state of affairs.
With the establish­
ment of the Shipbuilding Stabilization Committee under the
labor division of the Office of Production Management, re­
presented by shipbuilding interests, organized labor, and
interested government agencies, noticeable results have been
In conclusion it may be mentioned that the future of
the American merchant marine is very encouraging.
Administration has assured, through the lessons experienced
in the last war, that United States will not suffer again the
paralyzing congestion of another Hog Island, which with other
shipyards, constructed 2,300 merchant vessels worth a sum of
$3,000,000,000, over a five-year period.
Only a very small
percentage of these vessels were employed in the emergency,
and the majority of the fleet was deserted to lay idle for
twenty years in such tranquil waters as the Patuxent River
and Prall’s Greek.
Despite the fact that United States is concentrating
on a mass production of prefabricated ships for Great Britain,
one must not overlook the fact that the Maritime Commission
is not disregarding its original construction program of the
renowned series of ships known as C-l, G-2, and C-3 freighters,
of which seventy-four have been built and delivered, fiftythree are under construction, and one hundred and sixty-eight
are on order.
This permanent fleet will be the true backbone
of the furure United States merchant marine, and this modern
flotilla will be able to challenge any foreign fleet with
respect to efficiency, speed, and safety.
In view of a pos­
sible Axis victory, the United States, with this fleet, will
possess an independence which will enable the country to com­
pete and rival totalitarian methods, and regardless of which
power accomplishes victory, the United States chances of
capturing a considerable share of the world’s trade will be
greatly enhanced.
Future success of the United States merchant marine
can also be expected in view of certain advantages the United
States possesses over other nations in the maintenance of a
merchant marine.
The country’s favorable geographical situ­
ation is more of a contributing factor to shipping than is
that of other maritime nations.
The United States possesses
an extensive seacoast dotted by numerous ports and harbors,
which are open to traffic all seasons.
With the country en­
dowed with an abundant oil supply and enriched with extensive ,
resources of iron ore, the United States merchant marine is
placed in an advantageous position.
The existing large volume
of American foreign commerce is also a great asset to the main
tenance of a merchant fleet and the advantageous provisions of
certain shipping legislation is another factor favorable to
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