Popular Science Monthly/Volume 86/April 1915/The Extension of our Merchant Marine

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THE subject which has been assigned to me for discussion this afternoon is "The Extension of our Merchant Marine." With all respect I would suggest that "The Revival of our Merchant Marine" would have been a truer and more appropriate title. By whatever name we may choose to call it, the subject is one of tremendous importance—of such importance that, while I am glad to have the opportunity of presenting it, I hope and trust that it may be discussed in many other forms; that my very imperfect presentation may be supplemented and improved; and that these discussions may go on until we reach a real and practical remedy for the present deplorable conditions. One of the most notable of Sir Walter Raleigh's many notable aphorisms was his declaration, "Whosoever commands the sea commands trade. Whosoever commands the trade of the world commands the riches of the world, and consequently the world itself." That statement is as true to-day as it was when he made it. The converse of the proposition is equally true—that whosoever does not command the sea, trades at the pleasure of others and contributes to the wealth of others, who will in time command the world itself. Never has the world had such an object lesson in the value of "command of the sea" as is afforded to-day, when the industries and commerce of England continue in an almost normal way in the midst of a war for national existence, while Germany's commerce has been banished from the seas and her vessels are tied up in all the great ports of the world, her exporters are idle, her looms are silent and her people must economize in their use of foodstuffs to avoid the danger of ultimate starvation. You may say that this is a question of a navy rather than of commerce, but I would have you note that the two are inseparably related. An adequate navy must include colliers, transports, supply and hospital ships and scout cruisers, as well as battleships, torpedo boats and submarines. There must be ship-yards for construction and repair work, and there must be a reserve of men trained to the sea, to meet the added demands and losses of war, and unless there is a merchant marine you can not have these things. Ship-yards can not live on the construction of battleships alone. Confine them to that, and war will find you without ship-yards, without trained artisans, without an adequate supply of auxiliary ships, and without facilities for manning such ships as you might otherwise be able to put in commission. Leave out the question of national defense, and look merely at what our position would be if, instead of an undisputed mastery of the sea by England, there was an even distribution of sea-power and England, France, Germany and Austria were all preying upon each other's commerce, and goods could not be shipped with safety in the vessels of any of those nations. We produce about 43 per cent. of the world's pig iron, nearly 25 per cent. of its wheat, over 40 per cent. of its coal, over 70 per cent. of its corn, and 60 per cent. of its cotton. A great deal of our production of these articles we export—two thirds of our cotton and nearly a quarter of our wheat, not to speak of 32 million barrels of petroleum annually—and with these exports we pay a large part of our annual charge of 600 to 800 millions due to the rest of the world for interest, dividends, freights, and payments and remittances of various kinds. If there were no ships in which these goods could be exported, what pen could describe the financial and industrial chaos in which we should be plunged? Think of the point to which wheat would drop. Think of the iron furnaces out of blast, the mines closed down, the farmers ruined, and our gold-supply exhausted, unless universal repudiation were enforced. The picture is too horrible to contemplate, and yet, like a drunken man dancing on a tight rope, we go on relying upon the Providential mercy which has thus far preserved us from such a national catastrophe. This is no figure of rhetoric, or over-drawn picture. It is a self-evident peril, which stares us in the face and to which only fatuous folly will seek to close its eyes.

But have we no ships, you may ask? Oh yes, if you will refer to the last issue of Lloyd's Register you will be gratified to find that the American Merchant Marine comprises 3,100 vessels of over 5,300,000 tons gross register, and these figures are the narcotic which has lulled to sleep so many of our statesmen and business men and economists. But if you will analyze these figures, and subtract the vessels which ply only upon our lakes, rivers, bays, sounds, or canals, and which are either absolutely imprisoned on our inland seas, or otherwise unavailable for ocean transportation, you will have left only 361 vessels of a gross tonnage of 1,375,000 tons to represent our ocean-going American Merchant Marine, and even from that paltry remnant there should probably be a further deduction made on account of vessels which, owing to their limited size, are not commercially available. The available ocean-going marine is therefore just about equal in tonnage to the fleet of one single German company. Put in a different form, whereas in 1861 over 65 per cent. of our foreign commerce was carried in American bottoms, in 1901 only 8 per cent. was so carried. To-day our foreign commerce represents about one eighth of the world's total, and not more than one tenth of that one eighth, or 1¼ per cent. of the world's commerce, is carried in American bottoms. For the carriage of the other nine tenths of our foreign commerce it is estimated that we are paying to the shipowners of other nations in ocean freights and passage-money from $200,000,000 to $250,000,000 a year. This is a direct loss, and takes no account of the profits we might make if, like other nations, we engaged in the business of transporting goods other than our own. By the neglect of this business it is therefore evident that we are not only (a) losing these last-mentioned possible profits, and (b) paying this enormous and killing charge, but we are also subjecting ourselves daily to the frightful risk of an utter paralyzation of our whole foreign trade.

Having thus outlined present conditions, it may be pertinent to refer very briefly to the causes which have brought them about. In the early days of the nation nearly all of our foreign commerce was done in American vessels—in 1821, for example, 89 per cent. of it. Up to the civil war there was a slow but steady decline, the proportion being 86 per cent. in 1831, 83 per cent. in 1841, 73 per cent. in 1851, and 65 per cent. in 1861 (fractions omitted). Then came a rapid drop—32 per cent. in 1871, 16 per cent. in 1881, 12 per cent. in 1891, and 8 per cent. in 1901. With all the tremendous increase in our foreign trade in the last fifty years, the American tonnage carrying it is now only 40 per cent. of what it was 50 years ago. What is the explanation? The size of vessels had been increased, and iron and steel had taken the place of wood in construction. Instead of being built in a sort of local cooperative way, the construction of vessels had become a specialized form of industry. Construction had been subjected to the inevitable results of our protective tariff policy, and operation had been subjected to both these results and to the effects of our Navigation Laws. We had made ships about 60 per cent. more expensive to build in American than in foreign ship-yards, and from 20 per cent. to 35 per cent. more expensive to operate after they were built. Having thus bound a ligature around each leg of our Merchant Marine, we have watched the legs atrophy, and have for forty years confined ourselves to eloquent regrets that our bound and shackled victim did not run and dance, and to expressions of fervid hope that he soon would. We can grant a monopoly of coastwise commerce. We can give a practical monopoly to a public utility company, or a limited monopoly to a line of land transportation, but, on the broad ocean, which is the highway of all the world, there can be neither monopoly nor preference, by nation, race, or creed. There all comers meet on equal terms, and "the race is to the swift, the battle to the strong." In that unrestricted competition the weak, the overburdened, and the handicapped can not even hope for success. Is it not about time for a people as intelligent as the American people to alter their attitude upon this all-important subject? There are certain economic or industrial changes which could be made to advantage. I believe that the high cost of vessels built in American ship-yards is largely due to the fact that they are finished with an unnecessary degree of elaboration, and that there is an utter lack of standardization. An ocean "tramp" built merely to carry bulk freight does not need to be highly finished. She should be strong and seaworthy, but neither speed nor appearance is material. Many of the modern freighters constructed abroad are mere steel boxes, pointed at the ends, with an engine, a propeller, and a rudder. Our lake-freighters are sometimes described as being "built by the mile and sold by the foot," but their effect upon transportation costs has been little short of marvelous. In the memory of living men it used to cost 32½ cents a bushel to bring wheat from Duluth to Philadelphia. Last fall it was brought over the same route for 6½ cents a bushel. Grain has been moved from Duluth to Buffalo for 1 cent a bushel, and coal and iron between Superior and the lower Lake ports for 40 cents to 50 cents a ton. There is no reason to doubt that what these freighters have accomplished in lake transportation, and what a great Detroit manufacturer has done in automobile construction may be, to a great extent at least, duplicated in ocean transportation. Standardization is the secret, but standardization is only effective when it can be applied on a large scale, and what opening, it may be asked, is there for it when, as at present, there is practically nothing to standardize?

This brings me to a discussion of some of the remedies which have been suggested by individuals or organizations interested in the subject. Among these suggestions are the removal of duty on materials entering into the construction of vessels; the admission to American registry of foreign-built vessels; subsidies; and various modifications of the navigation laws. It is perfectly evident that, as President Wilson said in his last message to Congress, "To correct the many mistakes by which we have discouraged and all but destroyed the merchant marine of the country, to retrace the steps by which we have, it seems almost deliberately, withdrawn our flags from the seas, except where here and there a ship of war is bidden carry it or some wandering yacht displays it, would take a long time and involve many detailed items of legislation, and the trade which we ought immediately to handle would disappear or find other channels while we debated the items." American shipbuilders are already handicapped by the higher cost of materials and higher wage scale which they have to meet, and to admit foreign-built vessels to American registry as a regular and permanent thing would probably be a fatal blow to the ship-building industry. The admission of ship-building materials free of duty would be wholly inadequate to meet the situation. Many people have argued for many years in favor of subsidies, which have been suggested to successive Congresses in many forms, sometimes undiguised, and sometimes disguised as payments for carrying the mails, or as a guarantee of the bonds of private corporations, or as a government loan to a private corporation. It is a well-known fact that the democratic party is opposed on principle to subsidies, either disguised or undisguised, and as it was never possible to get any form of subsidy through a republican congress, it is scarcely worth while to consider the possibility of its getting through a democratic congress. Any attempt to modify the existing navigation laws will certainly be opposed by the Seamens' Union, supported by all the other labor unions, and reinforced by the enthusiastic advocates of the "safety at sea" idea, whose cause has been so much strengthened by the series of startling marine disasters which have shocked the world within the last few years. It is, therefore, evident that any changes that will bring the cost of either building or operating vessels down to the foreign standard must be very radical changes, and will inevitably be opposed by very powerful interests. I do not mean to say that no attempt should be made to effect such changes. American ingenuity and adaptability have been able to make a success in many lines of industrial activity where foreigners had distinct initial advantages, and I believe that we should find means to overcome in ocean transportation some differences in cost of both instruction and operation, and that changes might ultimately be accomplished which would make it possible to overcome the handicap. It is too evident for argument, however, that the accomplishment of any such result will be tedious and difficult, and that the present conditions should not be allowed to continue for the years that must elapse before such result could be reached.

The pressure of these facts and conditions has been felt in congress, and at the last session several bills were introduced aiming at either the development of the merchant marine or the provision of auxiliary vessels for the navy, or both. There were hearings before the House Committee on Merchant Marine and Fisheries at which these bills were discussed quite fully, and majority and minority reports were submitted from that Committee. At the present session a new bill has been introduced by Senator Stone which was referred to the Committee on Commerce, and has been favorably reported from that Committee. This bill creates a "shipping board" consisting of the Secretary of the Treasury, Postmaster-General and the Secretary of Commerce. Subject to the direction or approval of the President as to its more important functions, this Shipping Board is authorized to subscribe to any part, not less than a majority, of the capital stock of a corporation undertaking the purchase or construction and subsequent operation of merchant vessels to ply between ports of the United States and the ports of Central and South America, and perhaps elsewhere as necessary to meet the requirements of commerce. It is further provided that government bonds up to $30,000,000 may be issued for the purpose of purchasing or constructing vessels to be sold to such corporation, payment therefor being made in bonds of the corporation. This bill contains a further provision authorizing the President to lease or transfer to such corporation not only vessels purchased or constructed under the provisions of the Act, but also such naval auxiliaries as are suitable for commercial use and not required for use in the navy in time of peace. It is further provided that vessels purchased or constructed under the act shall be, as far as possible, suitable for use as naval auxiliaries and that the government shall have the power to take them for naval purposes at any time. This act, and a similar one introduced in the previous session, have been criticized in many quarters. Some persons regard them as "paternalistic," and others brand them as "socialistic." Some object to the idea of using public money to run steamship lines at a loss. Some persons given to seeing ghosts can only regard this as schemes to buy the German steamers tied up in our ports; while to others the specter assumes the form of "an entering wedge to government operation of transportation by land as well as by water." Others oppose them because they believe the navigation laws should be changed. Others because they believe that the proper remedy is in subsidies to privately owned and operated lines. Both these last classes are unwilling that the patient should be cured by any other remedy than their own—although they will probably admit that there never was a time when the acceptance of either of these remedies was so unlikely as just now. As to the idea that the adoption of such a measure would be a precedent for railroad operation by the government, or would in the slightest degree pave the way to any such result, I can imagine nothing more unlikely. The conditions which exist in ocean transportation, and the theory upon which governmental intervention must be justified, are so wholly different from the railroad situation, that there can be neither analogy nor comparison between the two. Moreover, as the governmental intervention would probably be temporary—ultimately yielding the field to private capital—and would probably show a balance on the wrong side of the ledger, opponents of government ownership of railroads should rather welcome the experiment as likely to prove an illuminating object-lesson. The bill authorizes the shipping board to "purchase or construct" vessels. While much-needed orders would quickly be given to our ship-yards, no doubt, pending construction, some vessels would be either purchased or chartered, to take care of the present trade emergency, and it is quite possible—perhaps likely—that some of these would be German. Does this detail damn the whole proposition? The other objections—paternalism, socialism, and the use of public money in a probably non-remunerative enterprise—all involve the same principle. Men always have differed, and always will differ, as to just what functions governments—national, state or municipal—should undertake. Leaving out the extremists at both ends, I think it may be said that a very large majority of our people are of opinion that government should provide all those things necessary to the health, safety and comfort of the community which private capital does not and will not provide. Where private capital might do it on certain terms, or where private capital is doing it and there is a dispute as to the efficiency of the service or the fairness of the rates and terms, there is always and necessarily a wide field for argument. But where the thing is necessary, and private capital has not undertaken, and will not undertake. to supply it, there is substantial agreement that it should be supplied by the community itself, acting through its constituted authorities. I am not attempting to state this with scientific accuracy, or in the phrase of the political economists. I am only endeavoring to state what I believe to be the plain opinion of the plain people. They have acted on this principle repeatedly, and in many localities. To take two conspicuous illustrations: It brought about the construction of many miles of municipally built and municipally owned subways, and it has created harbor improvements whose cost run into the tens of millions. Cities went into these enterprises, either alone or in association with private capital to which preferential terms were given, knowing that the direct return upon the investment would not be adequate for a period of years, if ever, but knowing also that they were essential to the health, comfort and development of the community; that they must be provided; and that they could not be provided in any other way. I maintain that the entry of the federal government into ocean transportation is justified on exactly similar grounds.

Let me review the facts:

Fact One.—We have (practically speaking) no vessels in which to send out our 2,500 millions of exports, or bring in our nearly 2,000 millions of imports. Because of this fact, we are (1) destroying the efficiency in war of our navy, (2) fattening the rest of the world by an annual payment of $200,000,000 or more, (3) hampering our manufacturers and exporters by compelling them to ship through their competitors, and (4) running the risk of an utter paralyzation of our foreign trade by a war to which we are no party.

Fact Two.—Under existing conditions it is capable of mathematical demonstration that private capital can not and will not supply such vessels.

Fact Three.—These conditions can not be materially changed without such radical and fundamental changes in our policies as could only be brought about—if at all—through an educational propaganda continued over a period of years.

Fact Four.—The federal government can fill the void at a direct cost which can not be more than a very minute fraction of the indirect benefit.

Believing in the absolute truth of these facts, I am strongly in favor of trying the experiment. I believe that the lines established by the government will greatly aid our exporters, and thereby simplify the problems of our bankers; that their operation will develop trade to a point where, within a few years, it will be possible for private capital to take some of them over; that the facts learned, and the experience gained, will pave the way for such changes in the laws as will permit private capital to enter the field; and that thus there will come about, under governmental initiative, that general revival of the American merchant marine about which we have all been dreaming for a generation, but hitherto failing to translate our dreams into action.