Carnegie Endowment for International Peace
DIVISION OF ECONOMiCS AND HISTORY
JOHN BATES CLARK, DIRECTOR
PRELIMINARY ECONOMIC STUDIES OF THE WAR
EDITED BT
DAVID KINLEY
Profeitor of Polidcai Economy, University of lilioois
Member o( Committee of Reiearch of the Endowment
No. 9
INFLUENCE QF THE GREAT WAR
UPON SHIPPING
BY
J. RUSSELL SMITH
Professor of Geography and Industry, University of Pennsylvania
NEW YORK
OXFORD UNIVERSITY PRESS
AMERICAN BRANCH; 3S Wmt 32Mt> Stxe«t
-LONDON. TORONTO. MELBOURNE, AND BOMBA •
^ - 1919
4'«
mm
Carnegie Endowment for International Peace
DIVISION OF ECONOMICS AND HISTORY
JOHN BATES CLARK, DIRECTOR
PRELIMINARY ECONOMIC STUDIES OF THE WAR
EDITED BY
DAVID KINLEY
Professor of Political Economy, University of Illinois
Member of Committee of Research of the Endowment
No. 9
INFLUENCE OF THE GREAT WAR
UPON SHIPPING
BY
J. RUSSELL SMITH
Professor of Geography and Industry, University of Pennsylvania
NEW YORK
OXFORD UNIVERSITY PRESS
AMERICAN BRANCH: 35 West 32nd Street
LONDON. TORONTO. MELBOURNE. AND BOMBAY
1919
COPYRIGHT 1919
BY THE
CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE
2 Jackson Place, Washington, D. C.
•^1>G
EDITOR'S PREFACE
This monograph on shipping, by Professor J. Russell Smith,
of the University of Pennsylvania, is one of the series of pre-
liminary war studies undertaken by the Endowment, the first of
which was published in January, 1918. Few matters connected
with the war have attracted the attention of the public of the
country, and, indeed, of the world, in recent months so much
as the question of the shipping supply. The dastardly policy
of the Imperial German Government in sinking all ships, with-
out reference to their character or their mission, has proved so
serious a menace that for a time some alarm was felt as to the
ability of the United States and her allies to find sufficient means
of transportation for men and goods. When the question be-
came a pressing one for us we turned naturally to the experi-
ence of our English brethren. But our problem was somewhat
different from theirs, for the reason that we did not have the
experience and facilities on so large a scale as had Great Britain.
Moreover, it seems as if nations, like individuals, refuse to bene-
fit by the experience of others. The British Government, in its
attempts to stimulate and regulate ship production, and to con-
trol shipping in the general interest, made many blunders which
we might have learned from her experience to avoid. For, in
spite of the fact that Britain is a shipping nation, we find in the
early government attempts to control shipping some such igno-
rance, some such blundering and some such inefficiency as have
marked our own conduct in the matter.
Professor Smith describes and explains the causes of our
blundering and inefficiency so fully that it is not necessary to
say much about them here. It seems clear, however, to a dis-
interested observer that there has been little in our experience
during the past year in connection with shipping to justify us in
thinking that governments are more efficient than they ever were
248518
iv EDITOR S PREFACE
in economic matters ; or that the piibhc interest on the whole
is any better served by the entrance of the government upon
the field of industrial activity. Regulation the government may
undertake successfully, provided it will leave operation and
management to individual intelligence, initiative and enterprise.
For government departments must work by general rules, .and
general rules are not applicable to the details of industry and
commerce. No more forcible illustration of this could be found
than the story told by Professor Smith of an incident of the
British experience, in which, because an order had been issued
that ships nearest completion should be used for the most im-
mediate need, a vessel constructed for one purpose was stripped
to the keel in order to make an oil tanker, while the framework
for another vessel was on an adjacent slip and needed only to
have the construction go forward to meet the need. But gov-
ernment officials thought it necessary to throw away all the labor
and time consumed in the construction of the first vessel in order
to follow a general rule.
To be sure, one might wish for stronger ground for believing
in all respects in the efficiency of some of our great business
men, if that much lauded efficiency is seen at its best in the parts
that some of them have taken in assisting the government in the
administration of the war. Their failure, however, so far as it
has occurred, may be due to the fact that they have not had
sufficient authority. But whatever the cause, it is certainly true
that we have had less success than we expected, both from gov-
ernment intervention and from the participation of business
leaders in government affairs. Fortunately, so far as shipping
is concerned, we seem at last to have found the right men, and
present efficiency in shipbuilding has restored public confidence
in this matter. It is to be hoped that the equals of Mr. Schwab,
Mr. Hurley, and their coadjutors may be found in all other
lines of government business necessary to the war.
One of the most interesting questions connected with the mat-
ter of shipping is the policy that will be followed after the war.
The savage onslaught which Germany has made on the inde-
EDITORS PREFACE V
pendence of the world, prefaced as it was by long continued
economic penetration, has led many people in dififerent countries
to declare that each country must be economically self-sufficing
after the war; that never again "shall we depend" upon a
foreign Power for things necessary to national existence. But
no country can, in the long run, be economically self-sufficing.
No country can be mainly so, except at high cost. Nor is such a
reversion to extreme nationalism desirable, either from the point
of view of national or international ethics, or of international
law. One of the aims of the present war is to free the nations
from danger of domination, economic or military. With that
purpose fully attained, economic domination need not be feared.
The pursuit of a policy of economic isolation by the nations after
the war would defeat one purpose of the war. This statement,
of course, does not mean that economic pressure may not be
justly brought upon the Central Powers after the war if, in ad-
dition to their military defeat, it is necessary to use such pres-
sure to educate them up to the moral plane of the rest of the
world.
Three lines of policy are open for the w^orld after the war.
We may have, as just intimated, maritime independence on the
part of each country, under government control, or government
operation ; or, in the second place, we may have a restoration of
the conditions of competition, without the evil features of pool-
ing and monopoly which characterized the years before the war;
or, in the third place, we may conceivably have a policy of inter-
nationalism in which the shipping supply of the world may by
agreement be apportioned among the nations according to some
principle agreed on.
If every government undertakes to aid shipbuilding and pro-
motes shipping, which latter is a different thing, there will surely
be a supply of ships far in excess of the world's needs. What
shall be done with the surplus? One nation would cut prices to
drive out the ships of the others. The result would be, in the
long run, such a reduction of cost of shipping to shippers at the
expense of the general public, that the whole plan would collapse.
-vi EDITOR S PREFACE
That the nations can reach a conclusion on an apportionment of
shipping is doubtful. The only course left is the restoration of
shipbuilding and shipping to individual enterprise. Some
assistance may properly be given by governments both to ship-
building, and to ship operation, but such assistance should be
given either for present or prospective services in return. And
we must not forget that we may be generous in our support
of shipbuilding and yet render our efforts nugatory by an unwise
policy concerning ship operation.
The author's criticism of our past policy appears to the editor
to be, on the whole, fair, although the author himself must of
course carry the responsibility of the personal judgment which
he expresses about individual officers. It must be borne in mind
in all criticisms of public officers, especially army and navy
officers, that they are assigned frequently to do things which
they themselves do not feel able to do well. The editor has
watched with some care the operation of the government depart-
ments as they have expanded under the pressure of war for more
than a year. I have found little, however, to encourage my
belief in the advantage of government management of business
except for certain routine work, or in the wisdom and fairness
even of government control.
David Kinley,
Editor.
FOREWORD
Late in August, 1917, I was asked to prepare a report for
the Carnegie Endowment for International Peace showing the
" effects of the war on shipping as a commercial proposition,
with especial reference to the United States and Great Britain;
giving an account of the ship shortage and its effects on rates
and profits; the efforts of the different countries to replace the
lost ships; the proposals for new kinds of ships, such as the
standard ship ; the efforts to meet the shortage by increased gov-
ernmental control such as the taking over of shipping by the
British and American Governments; the compulsory and volun-
tary diversion of ships from one trade to another, the transfer
of ships from flag to flag; the new provisions that have been
made to meet the crisis in marine insurance; the effect of the
ship shortage and the taking over of ships on imports and ex-
ports — the probable loss of trade routes and trade and the absorp-
tion of trade by other countries; the preparations during the war
for shipping expansion after the war; and finally whether and to
what extent socialism produced by the war will be permanent —
a question on which the shipping administration during the war
has much bearing."
This has proved to be a much heavier task than I expected.
For example, nearly half the happenings recorded in the book
have occurred since I began it, eight months ago. It is so close
to the present moment that we have not had time for perspective
to develop or for the material to be partly worked up. Accord-
ingly, the record has had to be gathered in most scattered places.
Many statistics have had to be consulted. All this has been
much more work than I could do alone in the time at my dis-
posal, and I am therefore indebted to others for much help. I
am especially indebted to Mr. John E. Orchard of the University
of Pennsylvania for constant, loyal and discriminating assistance.
vii
viii FOREWORD
The chapters on Marine Insurance and Government Aid to Ship-
ping are almost entirely his work. I am also indebted to Henri-
etta Stewart Smith for much searching for material and for
critical assistance with several chapters. For the gathering of
material in connection with the chapter concerning trade I am
indebted to Mr. W. E. Warrington, Miss Erna Grassmuck and
Miss Mary B. Goodhue. To Mr. Octavius Narberth of Lloyd's
Register of Shipping I am indebted for m.uch advice and infor-
mation. I am similarly indebted to Mr. O. K. Davis of New
York. I wish also to express my appreciation of the skilful
assistance of my secretary. Miss Anna Y. Satterthwaite.
Great effort has been made for the desired but never entirely
attainable accuracy. This book is one which by the nature of
its preparation should make an appeal for the clemency of the
future critic. It is written in the midst of a struggle. As I
finish it the Germans are making their terrifying drives toward
Amiens, and there is serious Allied talk of the possibility of
German occupation of Paris and the Channel ports. In this book
I am trying to state and explain the occurrences of the first part
of the struggle, so that we may the better understand the period
that is to follow. Every passing month gives the critic a gift
of new fact and of perspective that is denied the author, who has
undertaken this work in the hope that it may do a little to increase
the understanding of one of the many phases of economic activity
with which our government must deal for our good or our ill.
J. Russell Smith.
The University of Pennsylvania,
Philadciph ia. Pa. ,
May 30, 1918.
CONTENTS
CHAPTER PAGE
I /The Organization of World Shipping before the
Great War 3
II ( The World's Shipping Industry during the War —
Brief Summary with Special Emphasis on
Freight Rates 26
III The Effects of the War on Marine Insurance .... 49
IV Trade Dislocations Due to War — Some Possible
Readjustments 74
V \ Government Aid to Shipping ' 124
VI Control and Operation of Shipping by the British
Government, 1914-1918 153
VII "Control and Operation of Shipping by the United
States Government, 1914-1918 185
VIII' Shipbuilding during the War — Technical Develop-
ment 217
IX Shipbuilding in the United Kingdom 244
X Shipbuilding in the United States, 1914 to May,
1918 266
XI .Shipping Policy after the Great War 308
XII World Shipping, World Organization, World
Peace 339
Index 351
INFLUENCE OF THE GREAT WAR
UPON SHIPPING
CHAPTER I
The Organization of World Shipping before the Great War
War Destroys the Old Order
The war has destroyed the daily life of the citizen, put him
into the trenches, giving him an entirely different routine and
regimen. Similarly has it destroyed a wide reaching shipping
organization, and, as with the men, the ships themselves have
in many cases been destroyed, and those that remain are in
strange uses or strange management, or both.
The management of the world's shipping has not received
enough attention from students of industrial organization and
social philosophy. For some reason economists have, in times
of peace, let it very much alone, despite the fact that it probably
affords an unrivaled example for the testing of a favorite
piece of social philosophy — the doctrine of the maintenance of
equality through the maintenance of equality of opportunity.
It is doubtful if there is to be found anywhere else in all the
world, or in all history, so good an opportunity to study the
workings of individualism with real equality of opportunity as
the commerce of the sea affords. The sea is always there. It
takes care of itself. Use does not destroy it. No one owns it.
In times of peace it lies open to all. The result of man's efforts
in this arena of freedom should be of great interest to the student
of society.
It is true that the prewar organization of ocean commerce is
gone, for a time at least, but its present non-existence should
not end our interest in it. Even during the period of the Great
War the organization of ocean commerce needs to be studied
in retrospect, because of the necessity of some kind of reorgani-
zation that must follow the war. When the military struggle
3
4 INFLUENCE OF THE GREAT WAR UPON SHIPPING
ends, men will have new and greatly enlarged ideas of the role
that government may play. Governments themselves will be in
complete control of their shipping. Governments will probably
own outright much of their shipping, some of their shipyards
and many other productive industries. Starvation will have
taught us, as books could never teach us, the necessity of com-
merce and our absolute dependence upon the sea. How shall we
of the postwar world utilize these ships? Shall we reconstruct
the old system? By how much shall we vary? In any dis-
cussion of this reconstruction we need first to have a picture
of the organization of commerce and the operation of the world's
shipping as it was before the great explosion.
What Was This World Commercial Organization?
To understand it we must appreciate the importance of the
base fact : namely, that in times of peace the sea is free. Any-
body may sail his ship upon it wherever he will or can. Not
only is this world's highway toll-less, but it is also lighted free
of charge, and is carefully surveyed and charted that the ships
may be safe from the perils of nature. Navies protect it from
pirates. They hunt out derelict vessels and blow them up. Pilots
sail far out from shore to welcome the incoming ship, and with
their special knowledge take her safely into port. The ports hold
out an almost universal welcome to the ship. Every little port
wants to become a bigger port. Every big port wants to become
a metropolis. They all strive with each other in the race for
facilities that may bring them ships and commerce. ^Millions
are spent digging channels through which the ships of all na-
tions may sail, and usually free of all cost, into the welcoming
harbor. If there are any charges for channels and harbors, they
are alike to all shipowners.
Not only are the natural facilities of the sea and the artificial
facilities of the harbor alike open to all ships of the world, but
the organization of business is such that anyone can enter it.
It is no more difficult, requires no more special knowledge to own
ORGAXIZATIOX OF WORLD SHIPPIXG BEFORE THE WAR 5
a freight ship for hire than to own a house for rent. The method
of conducting them is the same. You own your house, or your
ship in full or in part, subject to partnership or mortgage. You
turn it over to an agent for the business of finding a customer
for it. If it leaks, he patches it. If it needs paint, he paints it.
If it needs caretakers, he hires them. After a certain period he
turns over the proceeds to the owner. Here indeed is an oppor-
tunity for the golden age of free competition. But what did
we find? We found trusts, the tightest kind of trusts. Between
distant countries we found groups of steamship lines that divide
the traffic between each other to the hundredth of a per cent.
They maintained uniform rates of freight with almost as little
variation as the post office maintains the price of stamps. Indeed
they succeeded in taking to themselves the trade as definitely as
if it had been assigned and divided among them by statute. It
has been divided by statute — for the agreements of steamship
lines have been the law — even the printed law — of many a trade
route.
This statement of the astonishing absence of ■ competition
where one would expect to find freedom of competition should
not be taken as covering the whole of the world's trade. This
trade is of two kinds : monopolistic and free. It is carried on
in two ways, the line of steamers operated as a unit and the
single ship operated as a unit. It is the line traffic that tends
to become monopolistic, but in addition to line traffic there were
in times of peace thousands of vessels operating independently,
commonly called tramps. Those ships were for hire to anybody
who could send a shipload at one time. This is a great limita-
tion to the freedom of the trade. The necessity of shipping a
minimum of 2,000 to 8,000 tons reserves the tramp to special
shippers and special commodities. Who ever heard of a ship-
load of cotton cloth, or of hats, or shoes, or autos, or locomotives,
or freight cars, of cutlery, books, playing cards and musical in-
struments, of cigarettes, ready-made clothing, or ostrich feathers,
of lard, bacon, butter, biscuits, canned salmon or copper ? These
are typical commodities of that very long list of things that must
6 INFLUENCE OF THE GREAT WAR UPON SHIPPING
go in small quantities, and therefore can not make use of tramp
service but need the regular dependence of the line T vessels
sailing on schedule and combining in their cargo a'^nundred or
a thousand or five thousand small shipments of assorted ma-
terials. Shippers can avail themselves of the freely competing
tramps only with goods of great quantity, usually raw materials
of low value. At some time of the year you may find on almost
every sea ships loaded with coal, iron ore, nitrate of soda,
wheat, corn, sugar, lumber. Many of these tramp commodities
are seasonal goods, handled in great quantity after harvest in
a busy trade that falls away to nothingness a few months later.
Thus the Argentine needs one hundred tramp ships per month
in November, December and January to take her maize to
Europe. During those months she imports a large part of her
millions of tons of coal, which comes almost exclusively from
Wales. To successfully operate these tramp steamers is a
great puzzle in applied commercial geography. The goal of the
tramp manager is to keep his vessel always loaded, a fact which
the nature of trade always denies to some of them. Therefore
the most skilful manager keeps his vessel loaded as nearly all
the time as possible. He can not consider a single voyage alone.
He must consider the next and the next. He prefers to sail
from Wales to Buenos Aires rather than to Cape Town because
Cape Town lacks the heavy cargo for return voyages, so that the
coal ship from Cape Town must often go in search of cargo
across the Indian Ocean to India, or the Atlantic Ocean to South
America before her captain can hear the welcome sound of
freight going into the hold. If outbound to Australia, she may
at some seasons carry coal thence across the wide Pacific to
Chile, and load there with nitrate of soda for the North Atlantic.
In this ocean her owners would much prefer to discharge at
Savannah, Ga., than at London, for Savannah has cotton and
lumber to ship to Europe, whereas hungry London has nothing
for the tramp, which must go out in ballast, while the liner takes
the London export of fine manufactures.
Rather than fruitless ballast, any owner would choose to
ORGANIZATION OF WORLD SHIPPING BEFORE THE WAR 7
take coal at less than cost, and so it happens that the world's
coal is distributed as a kind of by-product of the tramp steamer
traffic, a: ' Britain is its chief source of supply, not because of
superior quality or quantity of her coal, for in both of these
respects she is the inferior of the United States, but because
Britain is a tremendous importer of food and raw materials,
and, as her export of manufactures is much lighter than the
raw imports plus the food, she has five or six million tons a
month of empty outgoing ships whose owners are glad to carry
coal at a nominal price. Since the United States is an exporter
of bulky material, a coal vessel leaving our shores would have
to come back in ballast, and therefore our export coal freights
are entirely in disproportion to British freights, and our role as
coal exporter bears no proportion to our role as coal producer,
our export in 1913 having been 22,000,000 tons, while that of
England was 77,000,000 tons. Yet our coal production was
several times larger than that of the British Isles.
This tramp traffic reflects the freedom of the sea. It is com-
petitive. But this fact is of small comfort to the importing
merchant in Rio Janeiro, Cape Town, Melbourne, Calcutta,
Shanghai, London, or New York, whose interest lies in groceries,
in clothes, in manufactured machinery, or that wide variety of
things handled by department stores. Handlers of this class of
goods wish to get a few dray loads of boxes and bales which may
comprise altogether a hundred varieties of goods. They are
interested in the ship that sticks to her route twelve months in the
year, and has enough sister ships to make a good schedule. This
line traffic has grown up since the period of the steamer.
Roughly, it is the creation of a half century. The merchant's
ship of an earlier day gave way to the packet ship, and the
packet ship to the liner, and the line traffic has been ever in-
creasing both in proportion of the world's trade routes that it
satisfactorily served, and in the frequency and quality of the
service.
At the opening of the war, Britain had approximately 3,900
vessels of over 1,(500 tons each, with an aggregate gross tonnage
8 INFLUENCE OF THE GREAT WAR UPON SHIPPING
of about 16,900,000 tons. Of these 3,900 vessels, 1,200 with
7,000,000 gross tons, slightly less than half the total tonnage,
were liners/
Development of Line Traffic
The transoceanic line traffic began on the North Atlantic where
the advantages of a short route and great traffic gave it such
excellent opportunity, but it has widened out until in 1914 we
found ourselves possessed of fairly regular line service, main-
taining regular schedule and rather frequent sailings to all the
important parts of the world. From New York there were lines
to India, China and Japan, to Australia, South Africa, South
America, both east and west, to the West Indies, to Central
America, to Spain, Italy, Greece, Egypt and Constantinople,
to all the countries of western Europe, including Denmark, Nor-
way and Sweden,
The Evolution of the Shipping Trust
After one line has established itself in the trade, its success
naturally tempts a rival. Rivals that share one's business are
never desired. The natural result is competition and a rate
war. Rate wars by rail and ship have been greatly overappreci-
ated by the too little thinking citizen. Now a rate war is peculiar,
in that it has the same result whether it is won or lost, the re-
sult being the elimination of competition. If the newcomer by
his competition makes it so unprofitable for the existing service
that he must be taken in, there is a rate agreement and competi-
tion is ended. If the fight ends so disastrously that one company
or the other must fail and go away or be taken over by the sur-
vivor, the competition is ended. In fact, open competition among
ship lines bears a striking resemblance to the same phenomenon
by railroads. For half a century we gleefully clapped our hands
when the railroads competed and then we discovered that there
could not be any such basis of railroad transport. Now we have
come to believe in and apply the doctrine that the railroad is a
' The Economic World, May 19, 1917. Fairplay, November 8, 1917.
ORGANIZATION OF WORLD SHIPPING BEFORE THE WAR 9
natural monopoly, that rate wars can not be tolerated, and that
rates must be controlled by statute.
While the sea has been free to carriers, the fact that no one
owned it has tended to put its trade beyond the jurisdiction of
any country, especially as the dififerent ends of trade routes
were usually in different countries. With all this free-
dom the last half century has witnessed the creation upon
its mobile surface of a situation that bears a striking resemblance
to transportation by land, so that by the beginning of the Great
War the normal condition in ocean line service the world over
was one of agreement among line carriers. Whether it was in
the waters of the Tropic or the Arctic, of the Occident or the
Orient, the two or more lines engaged in the same trade usually
agreed as to rates, sailings, etc., although they might compete
as to service, and their agreements might from time to time be
ended by fierce rate wars, to be followed again by new treaties
of peace, with conditions more or less favorable to the strong
or the weak members of the combine.
Tlie Prevention of Competition within the Group
How are these groups of lines kept from competing with each
other on the free sea ? There are several ways.
Fear.
The simplest means of control is fear of trouble, where with-
out any agreement whatever the small companies follow the
lead, so far as they can, of the big fellows in the same service.
They know they must, or competition will drive them off the
seas. This form of agreement of action may, however, have no
more formality and apply no more rules than that of an Ameri-
can express company which has rates for a certain service that
duplicate those of the parcel post.
Formal Agreements as to Rates.
(1). Fixed rate agreements. In several of the North Atlantic
agreements, such as to the Baltic or the Mediterranean, various
10 INFLUENCE OF THE GREAT WAR UPON SHIPPING
members of the conference agree on prescribed tariffs which are
only changed by mutual consent.
(2). Minimum rate agreements. This is the common device
in the North Atlantic where the enormous passenger traffic has
called into being a fleet of freight and passenger carrying
steamers that have much more freight capacity than can be used
in normal times, even in the direction of greatest freight move-
ment, which is east bound. Here, then, in this empty space was
the most pressing necessity for some kind of agreement. Since
they can not all get enough freight even by competition the
companies have agreed that they will not take it below a certain
minimum, which rate is usually the actual rate, because of the
impossibility of getting any higher rate when there is so much
unused space sailing every day or two.
(3). Differential rate agreements. In some services some
lines have slower steamers than the others and are allowed
to take freight at a lower rate because of that fact. Here again
we find an exact duplicate of the freight differentials that have
long existed between Chicago and North Atlantic ports, from
Newport News to Boston.
Division of Territory.
Many of these agreements provide that one company shall
serve certain ports, and that other companies shall let these
ports entirely alone, and have for their own exclusive use
certain other ports. Thus the Hamburg-American runs to Ham-
burg, and the North German Lloyd to Bremen, and as a result
of a recent rearrangement of a conference, Hamburg- American
Lines withdrew their New Orleans service, leaving that trade
to be served by the British lines of Lamport and Holt, and the
Prince Line. Such division of territory works to good advan-
tage on a coast with many ports like the west coast of South
America, in which many small ports are arranged in a long
string so that it is a great advantage to all concerned if the
vessels of one line will call at some ports, and those of other
lines at the remaining ports, thus giving a faster service to all.
ORGANIZATION OF WORLD SHIPPING BEFORE THE WAR 11
Division of the Traffic.
(1). By restricting the number of sailings on the part of
each line. A good example of this is furnished by the agreement
as to the American-Brazilian trade by which the Lamport and
Holt Line was allowed annually twenty-four sailings from New
York; the Prince Line twenty-four sailings; the Hamburg-
American Line twenty-four sailings, while returning to America
allotments were as follows : Hamburg-American, twenty-four
sailings to New York; Prince Line, twenty- four to New
York, twelve to New Orleans; and the Lamport and Holt
Line, with the lion's share, as many as might suit its conven-
ience.
This American-Brazilian conference, with seventy-two sailings
a year from New York, is an interesting fact to keep in mind
the next time some one is heard to announce that we have or had
no lines to Brazil. In the general ignorance which prevails con-
cerning ocean transportation this particular statement, for which
there has been no basis in fact, for several decades has repeat-
edly found itself in all kinds of places, including the Con-
gressional Record and serious economic discussion. It seems
to have been part of the general mythology which in the Amer-
ican mind surrounds shipping. This agreement for the seventy-
two sailings was signed February 14, 1908, and was the treaty of
peace that ended an expensive rate war that had made all parties
lose money for a year.
Pooling the Freight Money.
This rather common device sometimes covers the total income,
sometimes a part of the income. Sometimes it is only used as
an adjustment to balance up the proportion of traffic which was
allotted in advance to each line of the conference. Thus it was
applied to a North Atlantic steerage passenger traffic agreement
in such a way that any company carrying more than its agreed
upon share should pay to the other companies seventy-five francs
for each excess passenger. At other times the same result is
obtained by raising the rates the moment that the company's
12 INFLUENCE OF THE GREAT WAR UPON SHIPPING
quota has been obtained. This automatically shunts the traffic to
other lines.
An interesting example of agreement between lines was that
of January, 1903, between the North German Lloyd and allied
lines on the one hand, and the French lines on the other. The
lines divided among themselves ^ the entire third class passenger
traffic from ports between Cronstadt and Bordeaux, both in-
cluded, to the ports in United States and Canada. It was to
be divided between the two groups in proportion to the num-
bers they carried during the years 1900 to 1902, inclusive.
Keeping down Competition of Carriers Outside the Conference
The above mentioned methods of controlling competition all
refer to those lines that have established places in the agreement.
But how shall these agreeing members keep outsiders from com-
peting with them ? There are several means.
(a). The deferred rebate is one of the most widely used and
effective means of making the shipper let rival lines alone.
Carriers make an agreement with the shipper, promising to re-
turn to him 5 or 10 per cent rebate of the freight he pays, pro-
viding he ships by no other than conference lines. The rebates
are calculated for a period of three, six, or even twelve months.
They are held for six months more before being paid, so that
' "In addition to many other details, the agreement provides,' in article 10,
that—
The port of Havre is especially reserved, both for freight and passenger
business, by direct line to and from the United States and Canada, to the
Transatlantique. All other French Atlantic and Channel ports, w^ith the
exception of Cherbourg and Boulogne, will be also reserved to the Trans-
atlantique, but only as far as passenger business by direct line to and from
the United States and Canada is concerned.
Article 11 stipulates that —
The Transatlantique binds herself not to call at any port between Cron-
stadt and French frontier, either for freight or passenger business, except
with the previous consent of the N. D. L. V. lines.
Article 12 provides that —
Passengers from Scandinavia and Finland shall not be considered in any
way in this cgntract, and the Transatlantique shall not engage passengers in
these countries."
S. S. Huebner, Report on Steamship Agreements and Affiliations in the
American Foreign and Domestic Trade, 1914. vol. 4, pp. 29-30. U. S. House
of Representatives, 63d Cong., Committee on Merchant Marine and Fisheries.
This book is an invaluable storehouse of accurate information.
ORGANIZATION OF WORLD SHIPPING BEFORE THE WAR 13
the carriers always have a club (deferred rebates) over the
head of the shipper. He forfeits this rebate money if he ships
even one box of matches by a rival line. Naturally this kind
of control is more efifective in the long lines of service like
that from New York to Africa and Australia than in short lines,
because of the greater difficulty of the rival line offering adequate
service. If a shipper gets at outs with the conference carriers,
he may be at their mercy, and the rival who tries to break in
has great difficulty in offering as good service as the existing
conference lines together can give, so the position of the lines is
strong.
(b). Fighting ships are the most easily effective means
whereby the conference beats off the rival who tries to get in.
The Germans have perhaps carried this thing to a greater degree
of organization than any other nation, in that six German com-
panies formed a corporation known as a fighting corporation,
which owned four small steamships and chartered others as
occasion arose. If a rival started a competing service to any
of the conference lines, the fighting corporation's ship came
alongside, announced the same sailing day, the same ports and
proceeded to cut rates far beyond the limit of profit.
I remember as a small boy reading with wide stretched eyes
a highly colored account of a combat between a diver and an
octopus. The huge eight-armed monster of the deep reached
out one arm and seized the diver's right wrist. With a second
arm he seized the diver's left wrist. With the third arm he
throttled him, and still had five arms left to hold tight to the
sunken wreck, while he strangled the diver. In this fighting
ship of the six great German corporations we see an exact dupli-
cate of the many-armed octopus. The six great companies
could easily afford to lose on the little fighting corporation,
which would kill one aspiring rival after another, while between
times its ships would be chartered out on short time charters
on profitable work if there was any, or even chartered by some
of the various lines that owned the fighting corporation. The
fact that the free sea can produce such tight shipping trusts
14 INFLUENCE OF THE GREAT WAR UPON SHIPPING
explains the great absence of foreign shipping lines from Ger-
man ports, and the wide reach of the German shipping lines over
all oceans.
The two leading German companies, Hamburg-American and
North German Lloyd, in guarding their territory from com-
petition, have not only driven and kept rivals away from their
own ports, but for the last forty years the establishment of
services to Scandinavia, except by Scandinavians, has been re-
garded as undue and unpermissible encroachment, because it
might carry directly the goods handled by transshipment through
Hamburg and Bremen, especially Hamburg.
(c). Long time contracts with shippers serve to hold their
trade during the existence of the contract.
(d). Contracts with railroad companies are very common in
the American trade, and their object is usually to put the trade
brought by a certain railroad from a certain region into the
hands of certain steamship companies.^
Despite all the methods of scaring away the outsider, rate
wars have been common occurrences. Like the initial price of
ships so the cost of a rate war was a part of the cost of getting
established in business — a kind of initiation fee that often
amounts to a million or more." It can, however, be safely said
that with the sea as with the land, the rate war has declined in
frequency in recent years, due to the increasing thoroughness
and rigidity of the organization of land and ocean carrying.
' " Judged from their wording most of the agreements have brought about
a close preferential alliance between vast railway systems, controlling the
traffic of large sections in the interior of the United States, and important
conference steamship lines, which is bound to prove a powerful aid to
the preferred water carrier as compared with any independent line not thus
allied."
S. S. Huebner, ofy. cit., vol. 4, p. 293.
^ " Moreover, the federated lines can conduct the competitive struggle with
the comfortable assurance that, following the retirement of the competing
line, they are in a position to reimburse themselves thru an increase ni
rates. To allow the existence of conferences, therefore, generally means
giving the trade to the lines now enjoying it. Only a powerful line can hope
to fight its way into the trade, and witli the inevitable result, if successful,
that it will join the combination or be allowed to exist by virtue of some
rate understanding."
S. S. Huebner, op. at., vol. 4, pp. 304-305.
ORGANIZATION OF WORLD SHIPPING BEFORE THE -WAR 15
Infortiial Agreements.
Perhaps the most suggestive thing in the whole list of lines
relations is the documentless, even wordless, agreement that
works so surprisingly well.
Reference should here be made (1) to the tendency
toward oral understandings, instead of written agreements,
between the lines operating to and from ports of the United
States, and (2) the care which has been exercised to pre-
vent agreements and understandings from becoming public.
While not involving as strong a moral obligation as written
agreements, the evidence shows that for all practical purposes
oral arrangements are quite as efifective. Judging from the
manner in which the lines observe the same, the existing
oral understandings give unmistakable evidence of the high
order of integrity prevailing in modern business, and justify
fully the phrase " gentlemen's agreements." Written agree-
ments seem to have accomplished their purpose in many
cases and are apparently no longer needed. The lines in
some instances need not even meet in conference; they may
avoid every appearance and every act which would seem to
show the existence of an agreement or understanding; and
yet operate in the same spirit of harmony that would pre-
vail if a written agreement existed. There is still friendly
rivalry in procuring business, but this business is secured
at not less than certain understood rates. Again, in nearly
all of the few trades where agreements or understandings
have been denied by all the interested lines, a remarkable
uniformity in rates seems to exist and not a trace of a rate
war can be found. The situation has been explained to the
committee as one of " following the leader," the dominant
carrier fixing the rates and the less important lines adopt-
ing these rates, they being allowed to exist in the trade with-
out having an effective fight w^aged against them, as long
as they conform to the rates and conditions established by
the dominant carrier.
Where written agreements govern the rates and methods
of the lines, the terms of the agreements have been guarded
with the utmost secrecy.^
S. S. Huebner, op. cit.. vol. 4, pp. 293-294.
16 INFLUENCE OF THE GREAT WAR UPON SHIPPING
Perhaps the force of these understandings might instead have
been pointed out as an evidence of the great losses that occurred
from rate wars.
Such in brief was the condition of competition upon the free
sea at the beginning of the Great War. These shipping organiza-
tions were among the most international of man's affairs. The
fact that the sea is free meant that the shipping combine could
sail all seas and reach the ports of all worthwhile lands. Few
things could better illustrate the supreme internationality of the
sea and its trade than the fleets of Norwegian banana boats ply-
ing between the United States and the Caribbean, or the Eng-
lish and German lines fighting each other almost to the death
for the privilege of carrying the trade between United States
and Brazil, and then when the struggle ended dividing the trade
up among themselves with mathematical exactness.
Our Attitude toward Shipping Agreements
It is probably true that the average American has a sense of
opposition to this wide reaching and well-nigh universal shipping
control by agreement. Yet a further examination shows that
in a way it helps to bring to pass a condition for which many
of us have a prejudice : namely, the condition of the survival of
many small units rather than the creation of one large unit, for
it is a fact that the rate agreement keeps the small carrier alive,
whereas competition means monopoly through the elimination
of the weakest.
Attitude of the Shippers toward Shipping Agreements
The attitude of the shippers in line traffic is less venomous to
conferences than we might at first expect. The conference rates
are stable rates, and stability of rates is very important for the
development of the export trade in which men have to quote
prices for goods delivered at future dates. During a period of
competition the exporter is continually receiving complaints from
his customers in foreign countries because one man gets goods
ORGANIZATION OF WORLD SHIPPING BEFORE THE WAR 17
from this week's steamer at a certain price and the rate on his
rival's goods on next week's steamer may be lower and the
customer objects to his rival getting this low price. The con-
ference places all shippers on the same basis, just as the public
railway rate of America when adhered to puts us on the same
basis and gives none of us the advantage of a railway rebate.
Many ocean shippers aver they would prefer high uniform rates
for all rather than low but fluctuating rates. The peacefully
working conference gives a much better distribution of sailing
days than three or four warring lines which may send off three
competing steamers on the same Saturday and then none for a
fortnight.
The Necessity of Government Interference
Despite these advantages to the shipper the agreements of
carriers produced a situation fraught with problems — a condi-
-tion that democratic legislatures did not look upon with favor.
The control of world shipping was rapidly working around to
the place where governments would have had to take some
action for the protection of individuals. The competitive system
had largely ended, so far as line traffic was concerned, and one
need look no further than the historic facts of human nature to
know that seeds of trouble lay in the secret monopolies, under
the name of shipping conferences, that practically encircled the
world. These conferences were in the nature of a monopoly,
and one need scarcely cite history to prove that monopoly, carry-
ing unlimited authority, is one of the things that the human
being is incapable of using humanely. So much power turns his
head, and it has been found to do so in all ages and in all climes,
whether in ancient Egypt, modern Mexico, Germany or New
York. The shipping conference has many advantages, but even
in times of congressional investigation, shippers are loath to com-
plain,^ for fear of some form of retaliation. Occasionally one
can be found to speak out and say that carriers have become un-
' S. S. Huebner, op. cit., vol. 4, pp. 309-314.
18 INFLUENCE OF THE GREAT WAR UPON SHIPPING
reasonably slow in settling damage claims, unreasonably care-
less in the handling of goods, that they advance rates without
due notice. Shippers claimed that once the authority of car-
riers is unquestioned, it is apt to develop into unfair favoritism
for some large corporation or friend, to the detriment of other
shippers. Exhaustive investigations made by a committee of
Congress in 1914 ^ show conclusively that it is widely believed
by those in a position to know that some form of government
aid is necessary to protect the individual from this strong or-
ganization of carriers, and the analogy between railroads and
ships is carried out by the uniformity with which these recom-
mendations refer to the sufficiency of publicity. It will be re-
membered that railroad control began first by public rates, then
by rate regulation, and we are now moving rapidly toward
government ownership. The analogy with shipping is striking.
When the war is over, the history of prewar conditions must
form the background of the intelligent settling of the questions
that will arise in the reorganization of the world's carrying
trade.
Ocean Freight Rates
The story of the combination of line carriers is not yet all
told. Ocean rates must be understood. In this respect we can
not understand line traffic and its rates until we understand the
tramp traffic and its rates. In the tramp traffic where the single
ship is operated independently on the absolutely free highway
of the world, we do really find the competitive rate giving us a
full-fledged example of that freedom which we would theoreti-
cally expect.
If freight is scarce, the ships compete for it, and down go the
rates. If ships are scarce, the shippers compete for them, and
up go the rates. The term " semi-piratical," as applied to the
shipping business by one of its own devotees, is not entirely un-
merited; for there is in the tramp traffic no shadow of that
' S. S. Huebner, op. cit., vol. 4, pp. 309-314.
ORGANIZATION OF WORLD SHIPPING BEFORE THE WAR 19
shibboleth of the land, namely, a fair and reasonable rate. If
ships are plenty, they are cheap, the rate goes down, down, down
to the point of operation at cost, which may be said to include
wages, maintenance, depreciation, overhead charge, and reason-
able interest. The rates will go down until there is no money
for interest, no money for depreciation, sometimes even no money
for maintenance; for it seems to be well established that there
have been long periods when ships have been operated at a dead
loss, the only limit being the decision of the carrier to tie up
his ships rather than take the existing rate. On the other hand
the present war has shown again the well established fact that
the carrier also knows no limit when he gets the shipper on the
hip. Rates will go up, doubling, tripling, quadrupling, quintu-
pling, until the limit is the absolute inability of shippers to pay.
Perhaps someone asks why the tramp ship owners do not com-
bine when rates get so low. The answer is that the temptation to
stay out of the combination and reap the advantages rather than
stay in it and pay the cost is too great for human nature, espe-
cially when that human nature lives in such different and far
separated breasts as those of the Japanese, Hindu, Greek, Nor-
wegian, German, Englishman or American. The Parliament
of man is simpler than this. Suppose the world needs 85 per
cent of the existing shipping, and suppose 90 per cent of the
existing shipowners agree to combine for a certain rate or tie
up their ships. It should be a profitable rate, or it is scarcely
worth doing. The 10 per cent of outside shippers would cut
1 per cent under it, and be as busy as they could be while the
agreeing shippers would have 15 per cent of the world's ship-
ping idle on their hands. The picture of an agreed upon rate
sets the tramp ship owners talking in every depression; but the
facts of free competition have always kept them from attaining
any substantial result in the various feeble attempts at rate
combination that they have attempted.^
' See J. Russell Smith : Ocean Carrier, pp. 235-255, for discussion of
theory and history of attempts at rate control. Also Fairplay, London,
lebruary and June, 1914.
20 INFLUENCE OF THE GREAT WAR UPON SHIPPING
Upon the whole, tramp traffic had not been particularly profit-
able for the ten years before the Great War. From 1899 to 1901,
the shipowners had a golden age, the period of the Boer War,
when Britain, conducting a campaign G,000 miles from home,
needed large cjuantities of shipping and took it, making a scarcity
that sent rates soaring. The exorbitant, profits of the owners
caused enormous building of new ships which came upon the
sea in 1901 and 1902 at the same time that the end of the war
caused the British Government to release its chartered vessels,
with the result that rates fell with a crash. They stayed at a
low figure for years. ^ There was one short respite when rates
rose to a good figure in 1912 and 191-3, but upon the whole hope
seems mostly to have run ahead of realization in the tramp
traffic and overbuilding kept the rates down. The editor of one
of their journals said in August, 1914:
I have repeatedly shown that the shareholders in British
shipping would be better off now if they had invested their
money in good 4 or 5 per cent securities.^
The Influence of Tramp Rates on Line Rates
It is true that line traffic and tramp traffic differ, but if the sea
is full of starving tramps, line traffic can not escape the influence
of their low rate. It may seem preposterous to say that great
passenger steamers of the North Atlantic must give a low rate
because of the possible competition of the passengerless un-
known tramp that must remain tied up to the wharf at Lisbon or
Calcutta, but none the less that idle tramp is an influence through-
out the world. Ocean commerce is a world commerce. The
tramp rate is a world rate. Line traffic is different from tramp
traffic, yet it is not a world to itself. The tramp can not com-
pete with the great express passenger liner. Yet the passenger
liner must carry freight too. Then there are freight liners, lots
of them, and the service tapers down to the point where it fuses
with the tramp traffic. Much of the world's line traffic is done
' See J. Russell Smith, op. cit., pp. 235-255, for examples of unprofitable
ship operation.
' F airplay, August 27, 1914, p. 371.
ORGANIZATION OF WORLD SHIPPING BEFORE THE WAR 21
in vessels which are tramp today, liner tomorrow, because a
line has chartered them for a voyage or a season. Thus the
lines can at any time increase their service by taking on tramps,
and the unprofitable or unemployed tramp is ever tending to
break into the line traffic.
Putting a Vessel on the Berth
The practice of ship brokers in " putting a vessel on the berth,"
shows the constant menace of the tramp to the line. The broker
announces that on a certain date a certain ship will sail from
Calcutta to Liverpool. Then he busily seeks the whole port
through to find traffic to load her in competition with any and
all lines that may be there. Large shippers always have the
possibility of loading a tramp themselves, and since the chief
hold of the liners is a deferred rebate of 10 per cent it is quite
possible, if their rates are too high, that it will pay the shipper
to lose the 10 per cent and take advantage of a tramp vessel, or of
the vessel loading at the berth. Thus we really have a world rate
for shipping. The widely fluctuating tramp rates in the main
run in great curves from high to low, with the line rates follow-
ing in their wake. This influence has been graphically stated by
the editor of the British marine journal Fairplay, in the spring
of 1917:
But as a matter of fact, so far as monopolies are con-
cerned, the biggest combine on record, that engineered by
Mr. Pierpont Morgan, was a fiasco, for not only was it
not able to force high freights in order to pay dividends
on the inflated capital, but for fourteen or fifteen years it
could not even earn enough to provide for depreciation and
interest on debentures. What happened in 1901 will always
happen again — the tramp cargo boat will always dominate
the situation. If there are more cargoes than ships, high
freights will have to be paid. If there are more ships than
cargoes, the shipowners will have to accept what is offered,
or lay up their vessels.
The same philosophy is clearly put in a report submitted
by a New York committee of conference line representatives be-
•22 INFLUENCE OF THE GREAT WAR UPON SHIPPING
fore a committee of Congress in which they maintain in defense
of the charge that their rates were too high, that
prior to 1911, freight rates had dropped to a figure previ-
ously unknown, entaiHng heavy losses on the regular lines,
which had the choice of continuing their services or with-
drawing from the business in which they had long been en-
gaged. Competition among tramp owners produced a low
level of rates, and as soon as the world's trade got ahead of
the tonnage available (referring to the rise in rates of
1912) tramp steamers were put in a position where they
could advance their rates beyond anything that had been
experienced in recent years.
It is also the contention of the conference line representatives
that, in the enormous rise in ocean rates during recent years,
the rates charged by the regular lines at no time rose to the
level of the tramp freight market, and
were less than what the regular lines could have earned
if they had withdrawn their steamers from their established
services and chartered or placed them in other trades.
As showing the enormous rise in the charter rates of tramp
steamships, not working under any agreement or conference, the
following represents in part the data furnished by the New
York committee. It was before the war.
Illustrations.
Petroleum in cases from New York to four Increase in the rate from 17c
ports in Australia. per case, June, 1908, to 35c
in Feb., 1913.
Lumber from the Gulf to the River Plate. 95/ per standard in Nov., 1908
—125/ in Sept., 1911, and
192/6 in Nov., 1912. ■
Cotton from the Gulf to United Kingdom, 8/6 per ton d.w. of steamer in
or Continent on net from charters. Nov., 1908, to 25/ in Nov.,
1912.
Sugar from Cuba to New York. 7c per 100 lbs. in Jan., 1908, to
17c in Nov., 1912.
Time charter from Baltimore to Glasgow. 3/3 per ton of total dead
weight capacity in Aug.,
1908, to 8/6 in Aug., 1913.
Full cargoes of grain from Baltimore to 1/3 per qr. of 480 lbs. in Sept.,
Rotterdam. 1908, to 3/6 in Jan., 1913.
ORGANIZATION OF WORLD SHIPPING BEFORE THE WAR 23
To appreciate what these rates mean, think of ordinary busi-
ness having its costs remain the same and the income increase
from 100 to 280.
Freight Depression of 1914
The Great War broke in a period of low rates and depression
among shipowners. In February, 1914, and again in June the
shipping journals, Lloyd's Weekly and F airplay, were discussing
the ever present golden dream of the depressed shipowner,
namely, the possibility of an agreement to raise tramp rates, and
they came to the usual conclusion that it could not be done, de-
spite the fact that
Depression in the shipping trade has followed so swiftly
on the heels of a remarkable boom that, almost before ship-
owners have had time to realize it, freights have touched
an unprofitable level. Steamers are being laid up at cer-
tain ports in steadily increasing numbers. . . . Seventy
Greek boats are laid up in the principal ports of Greece,
and many Scandinavian vessels are idle at the buoys, as
well as a large number of British vessels in our own
ports. ... At the present time vessels of all nations are laid
up, for the simplest reason that there is no need for them.^
In June a British tramp sailed in ballast from Australia to South
Africa, from South Africa to Montevideo, and then, still search-
ing, continued her empty wanderings to Barbadoes. In July the
shipowners were preparing themselves for a period of long de-
pression, and the question was, "how long would it last?"'
Lloyd's Weekly, August 21, page 547, predicted that the
year 1914 would go down as the blackest in shipping his-
tory generally, and referred to anticipated loss of earnings and to
the prospects of the steel makers shutting down their plants be-
cause shipbuilders would not buy plates. The lines in the cargo
' Lloyd's Wccklw February 20, 1914, pp. 120-121.
■ Fairplay, August, 1914, p. 345.
24 INFLUENCE OF THE GREAT WAR UPON SHIPPING
trade between Scotland and Canada and the United States were
reducing their sailings, and similar accounts of depression were
to be had from nearly all parts of the world.
The Bitterness of International Competition
Into this period of languid hopelessness broke the war, but
it did not break upon complete international pleasantness in the
world of shipping. Agreements among carriers do not always
mean pleasantness. They may be, and usually are, like the
treaties that end any war, for such indeed they usually are.
During the summer of 1914 a bitter rate war between the Ger-
man and English lines to Buenos Aires reached a crisis. For
some time it had been true that every time the one built a ship
the other built a ship and started a new one, until in July two
German vessels had been tied up for want of traffic.
The shipping situation between these two great rivals, Britain
and Germany, reflected the facts of their national genius, namely
individualism versus organization. The tramp ship is an indi-
vidual task, a business unit. It is owned by a man, operated
by a man. In this field Germany has played no important part,
while English owners with their fleets of ten to thirty boats have
carried much of the bulk freight of the world. In contrast to
this, the line is a great organization, a cooperative enterprise,
one in which governments can well and efifectively help, and one
in which the German Government has helped much more than
has the English Government. This means organization, in which
Germany is strong, in contrast to individual liberty and initiative,
in which England has led the civilized world. We can see its
results in the fact that the Hamburg-American Company with
seventy services was by far the widest reaching carrier upon the
face of the world oceans. The German coasts were almost
clear of foreign lines, yet German liners stopped at the ports of
almost every other country, as witnessed by the following bitter
lament of the editor of Fairplay, December 24, 1914, page
1001:
ORGANIZATION OF WORLD SHIPPING BEFORE THE WAR 'lo
Our enemy was fast Germanizing the world, and bid well
to drive our mercantile marine off the seas, so far as profit-
able trading was concerned. We certainly thought it a
disgrace to this country for German liners to be leaving
here for our colonies, to say nothing of the humiliation of
being driven completely out of certain trades.
In a thing so evenly balanced as must be the trade of the free
sea, it becomes plain on a little reflection that the influence of
governmental action will be prepotent whether for aid or in-
jury. What will happen after the war? It will end with the
nations themselves in control if not in possession of their mer-
cantile marines. What will be the policy of the nations in oper-
ating these fleets ? Will they promptly hand them back to private
owners? Will they operate them themselves, or will they take
a middle ground of direction, subsidy, or other financial sup-
port? In any case a host of problems present themselves. We
can not expect a chaos of unending competition and rate wars
between the nationally supported steamship lines, but the Ger-
man experience seems to indicate that the lines which have the
most government support will in the end be able to win out over
lines that lack such advantages. Certainly we shall need a care-
fully thought out marine policy. Fortunately we shall have a
little time to think, for the early peace period of months or years
will be a period of pinching ship shortage when all the world
will strive against necessity. The first strife will be against the
vacuum made by the submarine. When this is filled and ships
begin to hang at the buoys waiting for a call, at starvation rates,
we shall then have a very real problem to face. Before that
time arrives, we shall need to have formulated a policy that shall
not be the policy of the landsman that America has thus far in-
sisted on being.
CHAPTER II
The World's Shipping Industry during the War — Brief
Summary with Special Emphasis on Freight Rates
An End of Freedom on the Seas
Then came the war, and now all is changed in this world realm,
the sea. No more is it the place for individualism, for freedom
to do as one pleases, to come and go, compete, combine, cut
rates, make commercial war. War of blood, iron, and death has
swallowed up rate war and freedom; every vestige of both is
gone. Laissez faire no longer operates upon the sea. It may
some day return, but today (May, 1918) no shadow of it remains.
Iron rules prevail, covering the operations of the world's ships
and of shipowners. Without the consent of government you
may not now buy or sell a ship, nor build one. Without con-
sent of government, you can not hire nor sail her, nor buy coal
for her bunkers, nor take a single piece of freight. Although
you may have owned the ship for twenty years, now you may
not even set the rate for her services. The ships, the ship-
owners, and the shippers, have become an army, and as with
armies, so now it is with ships — you do as you are told.
How has this change come about ?
Paralysis of Trade at the Beginning of the War
The war fell on a world oversupplied with shipping. Ship-
owners, like everybody else, were stunned by the explosion, and
the war itself; their industry had a paralysis — a quadruple
paralysis.
(a) Vessels arriving in British ports found the financial con-
dition so disturbed by war that there was no cash with which
to pay freights. Therefore owners would not release cargoes,
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■ /S/3 /S/
^/6
28 INFLUENCE OF THE GREAT WAR UPON SHIPPING
and vessels lay idly at the docks. For two months this paralysis
lasted.
Ships here [N.Y.] can not obtain cargoes for the reason
that American shippers are not convinced that they can get
quick payment. ... Until the state of the financial market
is improved there will continue to be hundreds of vessels
lying idle at the docks. ^
(b) Meanwhile German raiders had almost closed distant seas,
such as the South Pacific, the South Atlantic, and the Indian
Ocean where the famous Eindcn ran her wild and destructive
career. For many days the raiders reaped a harvest of British
shipping. It is not surprising that on the 6th of August the
British ship charter market was reported {Fair play) to be " ab-
solutely dead." and on the 12th Syren and Shipping declared
" Chartering has come to a complete standstill in all the trades
of the world."
(c) Owing to the danger of destruction by raiders, under-
writers virtually refused to insure, and as insurance is one of
the unwritten laws of the sea, no shipowner would send his ship,
no shipper would send his freight. The consequent tie-up was
almost complete, except in nearby seas where the British Navy
could furnish protection.
Governments rescued shippers from the insurance dilemma.
Within three weeks all leading maritime countries had given
national aid in the insurance market, either by direct govern-
ment insurance or by subsidizing private enterprise.
{d) This enabled the shipping business to resume, but the
business is a speculative one, and the world's mind was unsettled
- — the attention of everybody was fixed on the great drama in
northern France. As there are in normal times stocks enough on
hand for a short time, business languished, for no one knew
whether the market was going to go up or down, whether the
war would be long or short. Ocean freights accordingly de-
clined even from their unprofitable July level. In the words of
a London shipowner on the 25th of August:
' Lloyd's Weekly, October 2, 1914, p. 627.
THE SHIPPING INDUSTRY DURING THE WAR 29
There are plenty of boats ready, but no cargo to lift. If
the situation continues as it exists today, there would seem
to be no alternative but for owners to lay up their ships,
pending an easier tinancial position and an increase, not only
in freights, but also in the volume of trade moving. And
I can not myself see this improvement coming about until
the war is over.
One must remember that St. Petersburg. Gothenburg,
Copenhagen. Danzig, Hamburg, Stettin, Emden, Antwerp,
Rotterdam, and Trieste, are practically closed to trade.
These are all large receiving ports, and the fact that they
are all shut down means that some of the largest markets
in the world are closed to shipowners.
The w^hole of the Black Sea, too, is practically shut to
commerce. . . .
With all these ports closed, the result makes itself felt at
once in the way of a surplus of tonnage for a largely di-
minished volume of business. In outward business char-
terers are reducing rates by shillings per day. Cardiff to
Rio, for instance, dropped 3 shillings at one fell swoop.
We are, as a matter of fact, getting down to a level of rates
that would have been cavilled at prior to the war, and one
fails to see how owners .can take up engagements at these
figures when they are faced with heavy war risk charges.^
On the 7th of September the Germans began the retreat from
the Marne. This retirement helped maintain the early conviction
that the war would be short. October was filled with military
uncertainty, but during that month the Germans dug in on the
Aisne. On the I7th of September the Dutch lines again adver-
tised sailings, and on the 29th of October, Fairplay reported that
time charter rates had gone up a shilling a ton per month. But
the two months had given the shipping world no vision of what
was in store for them. About the 20th of the month Messrs.
Ropner & Co., British shipowners, sent the following letter to
their shareholders :
Dear Sir or Madam : Possibly some of our shareholders
are wondering what effect the war in which we are involved
' Lloyd's Weekly, August 28, 1914.
30 INFLUENCE OF THE GREAT WAR UPON SHIPPING
is having on the shipping industry, and we think it is
advisable to inform them that the position at present is
deplorable.^
A little later the Royal Mail Steam Packet Company deferred
dividends because of the heavy expenses, especially insurance
which had more than offset increase in freight rates that tney
had made. The International Mercantile Marine also decided
to defer interest on bonds for the same reasons.
In early November the English attempt to turn the German
flank ceased before the furious attempts of the German army
to reach Calais, and the resulting long drawn and terrible battle
of the Yser settled the conviction that the war would be long.
It was also discovered by this time that the war was a matter
of artillery and materials. Manufacturing began, and a revival
of trade was bound to follow, and prosperity once more came
to the sea.
The Revival of Trade and Shipping
On the 12th of November, Fair play reported rates to be climb-
ing day by day, and that ship values had doubled in a month.
The British settled down to prepare for a long war. As the
armies increased in size, the government requisitioned more ships
to carry army supplies, and the shipping world began to realize
what was involved when East European supplies were cut off
from West Europe. It means increased ship business instead of
reduced ship business, for it means more distant sources of
supply, which makes more ship mileage. The case of Norway
is an excellent example. Before the war it was calculated that
250,000 tons gross of shipping was sufficient to supply Nor-
wegian needs. At that time most of her grain came from Ger-
many and Russia, but by the end of 1917 the necessity of secur-
ing her supplies in distant places made it necessary to use 750,000
tons of shipping instead of 250,000 tons.^ By January. 1915,
the rates had risen so that Fairplay (Jan. 7, 1915), the champion
I Fairplay, October 22, 1914, p. 640.
' K. F. Knudson, Glasgow Herald, December 29, 1917.
THE SHIPPING INDUSTRY DURING THE WAR ^1
of the shipowner, was deriding those theorists who were talking
of fixing maximum rates for shipping. The next week higher
rates than ever before known were reported. In another week
Fairplay remarked editorially that the scarcity of tonnage was
becoming more and more serious every day, especially as the
Italians were furiously bidding for ships to supply their needs.
The Ship Famine and the Ship Prices
The relative moderation of the then record rates of January,
1915, can, however, be seen by an examination of what followed.
Thus the rate on cotton from United States to Britain, which was
25 cents a hundred pounds in July, 1914, rose to 40 cents in
September, 50 cents in November, $1 in January, 1915, $2
in April, back to $1 in July, up to $3 in January, 1916, $5 in
December, 1916. These figures, unusually high though they are,
have now been exceeded. In January, 1918, $7 a hundred was
being offered for so heavy a commodity as syrup in barrels, from
North Atlantic ports. United States to London. On June 1, 1917,
Lloyd's Weekly reported 400 shillings a ton on coffee from
Rio Janeiro to Marseilles, and even the lowly coal, which ordi-
narily goes out at almost ballast rates, was paying 125 shillings
a ton from United States to Argentina.
But worse was yet to come. In October, 1917,^ 600 shillings
per ton were paid on a 6,000 ton cargo of rice from Burma
to Cette, the French port set apart for the Swiss.
It should always be remembered that the ocean rates are
world rates. Thus when the interallied chartering executives
authorized " a rate of 47 shillings, 6 pence, per ton per month
for neutral vessels of over 10,000 tons, and not exceeding 52
shillings on vessels up to 2,000 tons, it is worthy of note that
there had been six weeks before a 50 per cent rise in rates,
namely from 40 cents to 60 cents a hundred pounds for the
very short journey across the South China sea from the French
port of Sigon t9 Hong Kong.
I Fairplay, October 11, 1917. p. 606.
■ Lloyd's Weekly, February 2, 1917.
32 INFLUENCE OF THE GREAT WAR UPON SHIPPING
In September, 1917/ a vessel chartered at Buenos Aires for
England at £20 per ton, sublet part of the space the next week
for casks of tallow at £31 per ton.
In November, 1917,^ an offer of 900 shillings per ton from the
Philippines to Spain failed to attract a vessel. The next month
an 8,300 ton steamer was chartered to go from San Francisco
to three ports in Australia and return for the sum of £100,000.
enough to have more than paid the cost price of such a steamer
in 1914. Most astounding of all is the well authenticated case
of $1 per pound being asked and obtained on parcel freight from
New York to Marseilles.
The awful pressure for shipping is apparent when the per-
centage of increase in the rate is noted. Ships which in 1914
were to be had for 2 shillings 6 pence per ton per month, in
1917 were bringing 47 shillings 6 pence — excellent illustrations
of the extent to which extremes of competition can go when
demand is keen and supply is scarce.
The influence of these rates on ship prices has been equally
expansive. The price of a ship naturally fluctuates with her
earning power. As evidence of this a British firm in the habit
of building a certain standard kind of 2,250 ton shelter deck
freight vessel for sale for their own account, reports the follow-
ing prices :
On February 15, 1910, the company would have been only
too pleased to have accepted £17,500 for a vessel of this type ;
on the 1st of July, 1912, they asked £22,500; two months
later, £26,750, and a month later, £27,500. On August 30,
1913, their price had dropped to £26,000. On November 3.
it was £24,500, but by May, 1914, it had dropped to £21,500
and just prior to the war only £20,000 was asked. By
November 3, the price had risen to £23,500 and on No-
vember 25 to £26,000. On the 8th of January, 1915, they
were asking £32,000 with delivery in four months, which
shows an advance since the 14th of June of no less than
60 per cent.^
* Falrplay, September 6, 1917.
' Lloyd's Weekly, November 16, 1917.
* Fairplay, January 14, 1915, p. 55.
THE SHIPPING INDUSTRY DURING THE WAR 66
But these figures are very moderate in comparison to the later
extremes of the war.
In times of peace British freight ships ordinarily cost about
£G to £7 per ton of dead weight freight carrying capacity, but
in the spring of 1917^ a 10,000 (d.w.) steamer building in
Union Iron Works, San Francisco, and about ready for delivery
was reported sold for £60 per ton. As a result of this price
Japanese and American owners with vessels under way for de-
livery October, 1917, to March, 1918, who had been willing to
sell for $200 per ton, withdrew them with the idea of securing
$300 a ton when nearly ready for delivery. As speculators they
won, for the ships were worth $350 per ton in the early months
of 1918.
The prices for old vessels are no less astonishing. In the
summer of 1917, the French Government paid £475,000 for r.
ship which ten years ago sold to the Japanese for £32,000. By
all the rules of good shipping conduct this vessel in 1911 was
ready for breaking up, yet this piece of floating junk, which sold
for $160,000 in middle age ten years before brought $1,800,000,
so hard pressed were the Allies. These prices arose from the
enormous profits of the shipping business. Dutch shipping com-
panies paid 100 per cent dividends; Danish shipping shares rose
100 points in a week, reached 1,000 on a par of 100, and made
profits in a year that were greater than the capital. It is no
wonder that after America entered the war the cry of " ships,
ships, and yet more ships" came continuously across the sea
from the leaders in Europe.
Increased Demand and Low Efficiency of Shipping
Many causes have combined to produce this world shipping
famine.
(a) First, of course, is the inconspicuous submarine making
its conspicuous sinkings. This and many other causes have
helped to produce the shipping scarcity. Among these secondary
causes may be mentioned :
^ Fair play. May 10, p. 780.
34 INFLUENCE OF THE GREAT WAR UPON SHIPPING
(b) The absolute increase of need for ships. In a short time
after the war was under way, Britain was using one-half her
huge fleet in the war either in the direct service of her
own needs, or indirectly by handing over the vessels to her
allies.
(c) Closely akin to these was the necessity of longer haul.
This became inevitable when the Central Powers cut Europe in
two. As with the above mentioned case of Norway, which re-
quired three times as much tonnage after the Baltic was closed,
so the blocking of the Dardanelles cut off France and Italy from
the grain supply of the Black Sea. The closing of this source
affected not only the Mediterranean combatants, but also Greece,
Spain, and Portugal, and even Britain herself, compelling all these
people to seek their grain supplies in more distant places — South
America, India, Australia and America.
(d) Then after reducing the shipping that was left available
for increased work, the war crowded the shipyards with war
work, making it impossible to get adequate overhauling to keep
the ships in order, and even delayed imperative repairs when
vessels were disabled.
(e) The danger of attack by the submarine made necessary
long detours, thereby increasing the time at sea.
(/) The management of ships by amateur hands of the war
machine, according to the often bitter complaints of the British
shipowners, still further reduced the efficiency of such ships as
sailed.
(g) Very considerable reductions in active tonnage resulted
from the detention of enemy ships in neutral harbors, and the
holding of ships in port for fear of destruction by submarines.
At the end of 1917 half the Swedish marine was reported idle
for this cause.
(/i) Lastly and perhaps worst of all was the port congestion
that promptly followed the revival of trade after the outbreak
of the war. The attempts to increase the traffic at any par-
ticular point showed us how surprisingly delicate was the balance
between the trade of peace and its facilities, how limited were
THE SHIPPING INDUSTRY DURING THE WAR 35
storage facilities, how constant was the flow of goods, and how
low the reserves ordinarily kept. When the war chopped world
trade in two, and made it necessary to supply great armies, the
trade of some ports was suddenly doubled or tripled. Paralysis
and congestion inevitably followed. For example, France had
received much of her import from the Rhine ports of Rotterdam
and Antwerp, which latter soon passed into German hands. This
naturally threw her trade around to the western ports, ^ and at
the same time the necessities of rapidly increasing armies brought
a steady succession of ships with entirely unusual supplies to the
ports of the channel and the Bay of Biscay. For the time that
the French capital was at Bordeaux, nearly all cargoes for gov-
ernment account went to Bordeaux, which port was in a terrible
tangle. This situation seems to have resulted wherever traffic
was suddenly increased.
From Alexandria, Egypt, came the complaint that it took 10
to '20 days to unload a steamer. Lloyd's Weekly, May 28, 1915,
reported that 2S steamers lay at anchor in the roads at Marseilles
waiting for a berth and without definite information as to when
they were likely to get inside a harbor.
Liverpool - had in mid- April 70 vessels waiting for discharging
berths, and many of the berths allotted to steamers were full of
cargoes discharged from previous vessels, technically known as
foul berths, and therefore practically useless for the purposes of
discharge. Three weeks later the number of waiting vessels at
Liverpool was 78.
In January, Genoa had over 40 coal and grain laden steamers
in the outer harbor.^ Yet Fair play in its issue of October 15
previously had been commenting upon the decadence of the
shipping of Genoa. By the fall of 1915 it had become so
crowded that for a time the unloading of coal vessels was entirely
' M. de Monzie in the French Chamber of Deputies said that before the
war France imported over 18,000,000 tons of freight by land. In 1916 it had
dropped to 1,000,000 while 43,000,000 tons came by sea. Fair play, September
13, 1917.
"- Lloyd's Weekly. May 7, 1915.
" Pairplay, January 7, 1915.
36 INFLUENCE OF THE GREAT WAR UPON SHIPPING
prohibited/ Perhaps the extreme case of congestion is covered
by this lament :
It is monstrous to be paying 40 shippings per cent war
premium for three months for the privilege of having a
boat at a French port for 90 days as a warehouse. Some
boats after arriving at certain French ports have been
ordered to a second and even a third port and in one case
to a fourth port."
Lloyd's Weekly (January 14, 1916) reports that Glasgow was
in a bad snarl because of increased war traffic, nearly all of which
was rail borne, and port authorities were considering pooling all
railway facilities by all lines as a matter of relief. The next
month, February 25, Lloyd's reported that London was so over-
crowded that it was rare for a vessel to get unloaded within two
weeks, and that it often took longer. One of the causes of this
port congestion was the actual labor shortage, because men had
gone to the war, and the constructive labor shortage arising from
new prosperity. The high wages of the stevedores resulted in
a sense of affluence which enabled them to enlarge their in-
dulgence in holidays.^
Port congestion began in France, England, and in Italy, but it
extended to America also. For many months New York was
congested to a point of inefficiency rivaling that of European
ports, and helping to produce an appalling railway congestion.
With all these disturbing elements it is easy to see why we
had ship famine, starvation rates, and shipping profits that were
beyond the shipowners' fondest hope.
Shipbuilding
What was the world's response to this, the greatest goad that
ever pressed upon the desire of gain in shipowners and ship-
builders? The first result was that the shipowner took his profits,
' Llovd's Weeklv, October 22, 1915, p. 676.
' Fairplay, October 29, 1914, p. 676.
' Sir Norman Hill. Secretary Liverpool Shipowners Assn., quoted in Fair-
play, January 21, 1915.
THE SHIPPING INDUSTRY DURING THE WAR 37
all he could get. Secondly, he rushed off to get more ships to
get more profits. It is interesting to note that the Norwegian, a
neutral carrier, and a professional seaman with 20 per cent of his
sons making their living by shipping, with his look-outs on his
high promontories, was the first to see the situation. He first
arrived at the shipyard gate with his money bags. In Britain
he was turned away because the first shipbuilding response in
Britain was to load up all yards with war vessels. The Nor-
wegian, refused in England, placed contracts for hundreds of
thousands of tons of shipping in American yards, and later sold
most of it to British owners at a handsome profit.
When the war had gone on for a year, particularly after th«;
battle of Jutland, June, 1916, England realized that her problem
was not so much the naval battle as it was pressure for freight
ships. Late in 1915 she began to divert her energies from war-
ships to freighters. She had early placed all her shipyards under
requisition to do the government's bidding, and as the need for
ships became ever more pressing, she multiplied her efforts and
in 1917 started in on a campaign of government owned ship-
yards, building three in one district on the Severn, and thus hoped
by 1918 to get her merchant ship launchings back to as great
a figure as she had ever had.
Every shipyard in the world possessing shipbuilding possibility
was the scene of busy work. Ocean commerce, being absolutely
international, found all ships equally acceptable, whether they
were built in Zealand or New Zealand, England, or New England,
Occident or Orient, all of which places are as a matter of fact
building as fast as they can. None built ships more furiously
than the Japanese while their materials held out. Later Japan
had a very interesting negotiation with the United States, when
the latter refused to supply steel for the Japanese shipyards with-
out return of some of the shipping built. The United States
shipyards booked themselves ahead with orders placed at phe-
nomenal prices. American, British, and Norwegian owners en-
larged their orders and shipbuilders stretched their facilities on
all coasts. Ten thousand ton steel steamers were built even at
248518
38 INFLUENCE OF THE GREAT WAR UPON SHIPPING
Hong Kong/ After our entrance into the war we added to the
private efforts of American builders the great plan of government
yards managed by the United States Shipping Board and financed
by the billions of congressional appropriation ; this, too, in addi-
tion to the hundreds of ships that the United States Government
had contracted for in private yards. America also followed Eng-
land's example and requisitioned all shipyards to do the nation's
bidding. It is only France that has neglected shipbuilding, and
this from necessity. She has borne the brunt of the war, and
also lost her coal fields and much of her iron industry. This
being the case all her metal industry has gone toward munitions
rather than to shipyards. Some unfinished steamers stood al-
most untouched in French yards from 191-i until the end of 1917.
Norway and Denmark, despite the heavy dependence upon sea
borne trade and their relatively large merchant marines, have
been unable to secure from either England or the United States,
the necessary raw material to run their yards to anything like
full capacity. The Dutch have been peculiarly ground between
the two contending groups of combatants. Submarines and home
necessity kept British and American steel from going into Hol-
land, and while the Germans had steel they would not part with
it except under conditions that redounded to the benefit of
Germany.
No steel can be obtained from either Great Britain or
France, and the Germans refuse to export unless they obtain
certain specified goods in return and also unless the materials
exported are used only as they direct. They insist on Dutch
shipbuilders signing a contract, valid for five years after the
war is over, stating that they will not sell any new ship
without giving Germany the option of purchase, that they
will not allow the ships they build to be employed, directly
or indirectly, for the benefit of Germany's present enemies',
and that no ship is repaired with German iron or steel by
any firm on the German black list."
^ " The Hong Kong yards are now building ships in competition with the
shipyards of Europe, and are building them as cheaply as the cheapest."
The Economic World. February 12, 1916, p. 200; also Wall Street Journal.
^ Glasgow Herald, December 29, 1917, p. ZZ.
THE SHIPPING INDUSTRY DURING THE WAR 39
Spain was more fortunately placed. She could trade. She
had beds of precious hematite ore without which English steel
mills could not meet the needs of war industry. With the power
of embargo on this ore, Spain could get what supplies she needed
for her few shipyards, which are as busy as any yards.
Despite these worldwide efforts at rebuilding, it is well known
that even yet (May, 1918) the total world output is less than
submarine sinkings, and the problem of the tonnage supply is
becoming ever more acute.
The results of this ever increasing shortage of shipping supply,
and the ever increasing scope of the world war, have placed upon
the Entente countries as well as upon neutrals, most unimagined
necessities for economic and commercial readjustments along the
line of do-without. The nations are in a situation much like
that of Jules Verne's ship in w^hich his globe-trotting hero crossed
the Pacific on that record journey around the world in eighty
days. Before reaching San Francisco the coal ran out, so they
burned the furniture, the superstructure, the upper deck, and
finally reached port with the vessel cut down almost to the water's
edge, but still floating, still steaming, although she was consuming
herself as she went.
Faced by similar necessities, governments have seized upon
industry with the merciless grasp of the drowning man. Ship-
ping was one of the first to be subjected to national need.
Government Control of Ocean Freight Rates
The combination of all these factors — reduced shipping, in-
creased demands for freight, decreased efficiency of existing
shipping — has made possible the piratical rates which ship-
owners have been able to ask and receive. Britain, living as
she does upon sea borne goods, has shielded herself in part from
these financial exactions by a policy of government control of
shipping which has been steadily increasing from the small be-
ginnings of her early requisitions to almost complete control. A
week after the war started there was a royal proclamation
40 , INFLUENCE OF THE GREAT WAR UPON SHIPPING
(August 7, 1914) announcing the policy of requisitioning of
ships. There is of course nothing new in this. In the process
of registering under a flag, virtually all nations make provisions
whereby, without question, the ship goes into the service of the
nation under reasonable terms of compensation at the time of
national need. For a time the British Government, in the time
of ship depression at the opening of the war, went into the open
market and took ships as any other charterer. Then when the
war settled down for a long struggle, there was established the
much controverted scale of rates spoken of in bitterness as the
Blue Book rates — a complicated scale of prices depending on
character, equipment, size, speed, etc., of the vessels. These
rates, made in October, 1914, were fair rates in the ship market
as it then existed. They provided for fair income on the ship
at its value at that time, or at its previous value. But as the
war went on the rate of the ship free to bargain rose week by
week almost without limitation, as previously stated. That left
the British shipowner in the unhappy position of seeing the neu-
tral ship or the unrequisitioned British ship earning, first, double
the hire he was receiving for his requisitioned ship, then triple,
then quadruple. Finally the static Blue Book rates became one-
sixth or one-seventh of the amount the British Government itself
was compelled to pay to get a neutral ship to meet some of its
needs. In order to distribute this burden of mixed earnings with
some degree of fairness, there was established a policy of taking
a certain proportion of the shipping of a particular company,
aiming to leave all owners about the same proportion of their
fleets free to reap the fat harvests of the high seas. Some
owners, however, complained that this distribution of requisition-
ing was very unfairly handled, some people having nearly all
their ships free, others having nearly all their ships taken. ^ In
order to prevent undue competition of the various Allies with
each other in the ship market, and in order the better to utilize
the existing tonnage, there was formed an interallied chartering
' Lloyd's Weekly, about January, 1916. Review of shipping for the year
1915.
THE SHIPPING INDUSTRY DURING THE WAR 41
board which put under one hand the task of securing ships for
all the European Allies. The management of ships was in De-
cember, 1916, brought from various hands in the War Depart-
ment and the Admiralty under the hands of a new^ official, the
shipping controller, Sir Joseph Maclay, an experienced ship-
owner under whose administration the bitter complaints of ama-
teur inefficiency have declined.
The proportion of British ships under reciuisition at Blue Book
rates by the government has steadily increased, until by the
middle of 1917 it became 100 per cent of all ships above 500
tons.
The United States, Holland, and nearly all other countries
have been compelled similarly to control at least that part of
the national fleet that was meeting the national needs.
British Control of Shipping through Coal Supply
Not only have the British taken 100 per cent of their own
shipping, but by a quiet and judicious application of the primal
force of might, they have succeeded in getting considerable
amounts of neutral shipping as well. The only coal to be had
in the maritime world of Europe and Africa is British. The
shores of the Mediterranean have no coal, save Spain's, and her
supply is only a fraction of the home needs. France is in a coal
famine. The German, Belgian, and Russian supplies are shut
off by the war. Japan is too far away to play much of a part.
The pressure to move food, munitions, and raw materials, almost
shut out American coal, which had had a short boom in the early
months of the war; and so Britain, the dominant source of
supply, has been virtually in a position to dictate what ships
should get the coal that she shipped with such effort. When the
Danish shipowner ran his vessel into a British coaling station in
South Africa, or the Suez Canal, or England herself, there was
a fine opportunity for a bargain. The British hand was strong.
Why should she give coal to the neutral with his piratic rates
when she so sorely needed it for herself and her allies? There
42 INFLUENCE OF THE GREAT WAR UPON SHIPPING
is no good answer. Therefore many a foreign shipowner got
coal only on condition of taking a cargo to Britain or hiring a
proportion of his fleet to the British Government. The case is
exactly analogous to the Japanese attempt to get American steel,
and the American attempt to trade food for Dutch and Nor-
wegian shipping.
National Value of Britain's Big Merchant Marine
Britain may be said to have been saved thus far by her huge
and far flung fleet. Not only was she carrying her own trade,
but also that of many a neutral as well. These ships have been
called into service of the mother country one by one. For
example, an American firm of exporting merchants operated their
own ships and ran a steamship line from New York to western
South America. While the vessels belonged to American capi-
talists with headquarters in New York, they were registered
under the British flag because it permitted them to be bought
more cheaply and run more cheaply than under the American
flag.^ They were technically owned by a British corporation
with headquarters in London — a subsidiary of the American
corporation. For many years they effectively served trade be-
tween the United States and western South America, but Britain
found need to use all British ships, and these were British ships,
and so one by one, on due notice, the vessels were called in be-
tween July, 1916, and July, 1917.
* From the standpoint of profits, the American owners had staked their
money on the wrong horse. They would have been millions of dollars richer
had they elected Norwegian registry rather than British, because it happened
to remain neutral, and they would not have been compelled to go into the
open market and bid for such shipping as was available at the almost pro-
hibitive rates then existing. They were unable to secure anything but slow
tramp steamers unsatisfactory for the purpose, but the best to be had. The
International Mercantile Marine is another company partly American with
vessels under the British flag, which has lost enormous possible earnings
during the period of our neutrality when vessels of America or other neutral
registry were able to reap the full profits of the high sea rates while the
British vessels such as those of the International Mercantile Marine were
controlled by the British Government. There was enough of profit, however,
left to the British liner to enable the International Mercantile Marine to
make good its watered stock, of which it had small hope in an era of peace
and competition.
the shippixg industry during the war 4^3
The Disturbance and Limitation of International Trade
Remote indeed is the habitation of the human being whose
daily life has not been at some point pinched by the trade embar-
rassments that have resulted partly from the limitations of pro-
duction due to the war, but more because of the ship shortage.
In a short time after the war started, the cessation of exports
from Argentina had so disturbed employment in Buenos Aires
that people stood in bread lines waiting for the doles of charity.
The cessation of the purchase of cotton made for a season a
low price and great depression in the southern United States.
As the war went on, goods for export piled up upon the piers
in almost every land, especially in distant continents to which
it became ever more difficult to send the ships. Thus we now
hear of nearly a million tons of sugar waiting in Java, and from
two to three hundred million bushels of wheat in far away
Australia hopelessly beyond the reach of hungry Europe. In
the spring of 1916 even so valuable a commodity as wool waited
in the New Zealand warehouses, to the embarrassment of farmer
and trader, because ships were not available to carry even this
commodity, worth hundreds of dollars per ton.
The trade situation offered two dangers to the Allied peoples,
and these made two strong reasons for rigid control of trade by
government. The first of these dangers was that of strengthen-
ing the enemy by indirect trade. This flourished at a lively rate
for many months through neutral countries, especially Holland
and Scandinavia. It was because of this that the British policy
of licensing particular shipments before they could be permitted
to go overseas was begun. The licensing began with coal and
food, but its scope gradually widened under the two pressures —
fear of supplying the enem3^ and home needs. With the decline
of shipping and the impossibility of meeting all the demands of
trade it became necessary for the government to say which ship-
ment was necessary and must have precedence over others which
could wait. Closely akin to this was the similar control of
industry, d. control that involved again the application of the
44 INFLUENCE OF THE GREAT WAR UPON SHIPPING
concept of greater relative necessity and therefore of priority of
supply or opportunity. Should this man be permitted to build
a new automobile factory? The answer must be given in terms
of the relation of the need to war. If war needs automobiles,
thev may be made'. If it does not need them, they can not be
made. Such is the British answer. This worked around rather
rapidly to the point where Britain was controlling not only im-
ports and exports, but the establishment of new enterprises, and
the enlargement of old enterprises.
Next came the prevention of undue profiteering in industry as
it had been checked in shipping, until Britain worked around to
the point where the government is a large price controller and
virtually the only importer. All ships are being operated as the
government orders, to carry the goods that government orders, at
rates the government orders.
Industrial Readjustments
Numerous readjustments have been made with the object of
increasing the directness by which national energy shall focus
on the war, and especially on shipbuilding. The war has
become a struggle in which every man, woman, and child par-
ticipates in some degree — a struggle in which every hour of
work, every piece of material has a bearing. Shipping becomes
a part of all transportation, so all transportation must be con-
trolled and systematized in the interests of efficiency. Ship-
building becomes a part of all manufacturing. It too must be
controlled along with all its materials.
To simplify the railroad's work, Britain has been districted
so that certain coal mines shall supply the markets nearest them.
The Ministry of Munitions has taken absolute control of the
iron industries and distributes this material to meet the most
pressing needs of the nation, namely, ships and munitions. In
the interests of increasing shipyard efficiency, the Admiralty
early established committees in each shipbuilding region to
expedite building in every possible way. These committees
THE SHIPPING INDUSTRY DURING THE WAR 45
consist of engineers, builders, material men, and others con-
versant with the various needs of the trade. The army was
combed out to bring back to industry men particularly needed
at strategic points in shipyards and machine shops. In May,
1917, the shipbuilding and supply work of the Admiralty and
War Office and Ministry of Shipping was coordinated by being
placed under the single hand of Sir Eric Geddes.^
In the attempts to increase the labor supply women by the
thousands have taken up shipbuilding work and are doing a
surprising variety of operations which before had been con-
sidered as the exclusive tasks of men.
America Follows British Example in War Organization
America has felt the same pressure that has squeezed Europe,
but we have felt it much less because we have done less in the
war, and because we are less dependent on trade, owing to our
huge natural resources, our extensive manufactures, and the
completeness of our manufacturing and agricultural industries.
In spite of all these riches, we felt, even as neutrals, the ever
increasing pressure of high freights, high prices, and occasional
shortages, which were acute only in the two important com-
modities of potash and dyestuffs. Upon our entrance into the
war, however, our conditions more nearly resembled those of
the European countries, and we have promptly copied many of
their devices.
We began with the export licensing, by which we attempted
to control the shipment of goods to Germany through the neu-
tral countries, especially Holland and Scandinavia. This policy
took the form of almost complete prohibition of export to these
regions. A spectacular episode was sixty Dutch steamships lying
loaded in New York harbor for months between August, 1917,
and midwinter, 1918. There they lay despite the fact that each
one of them was worth thousands of dollars a day upon the
high seas, to which they finally went as a result of extended
negotiations; but they went under charter to the United States
' Lloyd's Weekly, May 18, 1917.
46 INFLUENCE OF THE GREAT WAR UPON SHIPPING
Government to serve our coasting trade and our South Ameri-
can trade. Their cargoes were eaten in America.
The Norwegians had the distinguished Dr. Nansen here for
months in the attempt to get food, but we wanted something in
return. Nansen claimed that the American Government's con-
ditions, Norwegian shipping in return for food, were too
onerous, so we had practical prohibition of trade with Norway
for a considerable period of time, after which they got hungry
(see Chapter IV) and a bargain was reached.
The American Government also copied the policy of Great
Britain by requisitioning all American ships (October, 1917)
above 2,500 tons dead-weight carrying capacity. In this respect
we also followed the English example, particularly in the case of
line vessels, by immediately handing the vessels back to the old
owners to operate, but on government account, thus giving the
government complete control over where they went, what they
carried, and the part they would play in war and in meeting
national needs.
American railway congestion, and port congestion, resulting
shortage of supplies of coal and many other commodities, have
brought home to America some realization of the fact that the
numerous independent enterprises that have resulted from our
individualistic system of industry and trade are really inefficient
and wasteful, as an examination of industry in war countries
clearly shows. The whole of the world commerce has been a
great crisscross much like what the trade in California oranges
used to be during the period of individualistic independence.
At that time a city like Chicago might receive fifteen cars all
in one morning, and Milwaukee none; Vv'hereas the next day
Milwaukee might receive ten cars and Chicago three, resulting
in starving and glutting of markets and extra moving of cars
to places where they were desired. All this waste of oranges
and waste movement of oranges has been eliminated by putting
their marketing in the hands of one association which surveys
the field and sends the oranges direct to the places that want
them.
THE SHIPPING INDUSTRY DURING THE WAR 47
A similar simplification of national and international trade,
first worked out to some degree in Germany, is a necessity
which the war has been step by step forcing upon the Allied
nations. Many interesting readjustments have already occurred
in the United States. An illuminating example is furnished by
the Tide-Water Coal Exchange operating in the coal exporting
ports of New York, Philadelphia, Baltimore, Norfolk, and Cleve-
land. They claim to have reduced the average lie-over of loaded
coal cars in Philadelphia from about eight days to about three
days, by the elimination of individual- enterprises through co-
ordination that results in the simple practice of pooling. It
appears that it has been the practice in Philadelphia, for
example, for company A to load a 1,500 ton barge of coal of
a certain grade for shipment to New England. This 1,500
tons requires 30 cars of 50 tons each. The company would
have four or five cars of a certain kind of coal arriving today,
a few tomorrow, a few the next day, until finally it would have
30 cars in port and would then proceed to load the barge. Mean-
while company B was doing exactly the same thing, as were
company C, company D, and company E. The coal exchange
pools all this business. If company A has a barge of a certain
kind of coal to ship, and all five companies together have enough
cars of that grade of coal in port, it is dumped into that barge
and the cars sent back to the mines. The next day company
B's barge is loaded and the next day company C's. In each case
every company gets exact credit for all the cars it ships, but the
lie-over has been reduced by many days and the coal cars, yard
space, and pier space are cleared for work instead of being used
for congestive storage. This is a small but admirable illustration
of what M. Augagneur, Ex-Minister of French Marine, said in
discussing port congestion and marine transportation :
Arrange for the close coordination of land and sea transport,
give the Ministry of Alarine entire control of the ports, for
it knows all their needs better than the Ministry of Public
Works, and, finally, arrange your arrivals in such a manner
as not to leave a port empty for 15 days and then have three
48 INFLUENCE OF THE GREAT WAR UPON SHIPPING
boats arriving each day. Then you will see that freight
rates will go down. If vessels are to discharge rapidly
laborers are necessary. It is, therefore, indispensable to re-
lease the dockers who have been mobilized.^
In the application of this process we have found it desirable in
this country to establish war port boards that can look over the
whole port rather than let each company work in its own inde-
pendent way, and late in January, 1918, the congestion of the
port of New York had become so bad, due to the inability to
transfer goods from cars to warehouse, and from warehouse
to ship that a committee of experts composed of two American
shipping men and one representative of the British Admiralty
was appointed to the work of coordinating the various Atlantic
ports. They order ships to the places where they can be loaded
most expeditiously because they find it saves time to send a
vessel on to Philadelphia, Baltimore, or Norfolk, rather than let
her lie for days at New York waiting for a chance for her cargo
to be dug out of a hopeless mass of cars on the hundreds of miles
of tracks surrounding that terminal.
This is very similar to the action of the Lake Carriers Asso-
ciation, November, 1917, who voted to mobilize the lake fleets
and put them all in charge of one committee with power to order
their movements, making the greatest possible expedition and
least waste of time.
It is unfortunate that the world's shipping situation could not
have received early the benefit of a more thorough organization
of American and Allied resources moving toward the elimination
of useless motion, the reduction of eflfort on non-essential indus-
tries, and the focusing of national energy on the vital point of
shipping. The steps that have been taken toward this end will
be explained in some detail in ensuing chapters.
* Lloyd's Weekly, January 7, 1916, p. 14.
CHAPTER III
The Effects of the War on Marine Insurance
Dependence of Trade on Marine Insurance
During the first week of August, 1914, vessels of all nations,
neutrals as well as belligerents, were held in port as effectively
as if the fleet of Great Britain or all the submarines of Germany
were lying in wait just outside the harbor limits.
What had caused this virtual blockade? An answer is to be
found in the failure of marine insurance facilities to meet the
emergency. The vessels could not be insured. German raiders
were operating in all seas appearing where least expected. The
British fleet was making every effort to cut off the trade of the
Central Powers. But these increased risks were not sufficiently
great to prevent vessels from venturing from port providing
adequate insurance on hull and cargo could be secured. But
such protection was not available. The very foundations of the
marine insurance business had been swept away. Underwriters
faced conditions that were strange to them. What was the risk
to be met? How was the amount of the premium to be deter-
mined? Where was the necessary capital to meet the increased
demands for insurance to be secured ? For many days there was
no marine insurance market. Vessels could only be insured at
excessive premiums which shippers and shipowners refused to
pay. The cessation of commerce resulted.
The United States, though not engaged in the European War,
suffered greatly from a congestion of commodities produced in
large part for the export trade. In the southern States an im-
mense crop of cotton had been raised for the English and Ger-
man mills. With the cutting off of all marine insurance facilities,
the planters were without a market. No cotton was exported;
49
50 INFLUENCE OF THE GREAT WAR UPON SHIPPING
prices fell; the cotter, producers faced ruin. To save the situa-
tion appeals were finally sent to Congress.
In most of the countries of Europe, the financial markets were
closed with the declaration of war on Serbia by Austria. There
was a rush on the part of the panic-stricken holders of securities
abroad to convert their holdings into gold in the open American
markets. There was the possibility of the United States being
drained of its supply of gold. But comparatively little gold left
the country. Insurance could not be secured, or could be secured
only at such high rates that it was impossible to make shipments.
On July 29, 1914, the marine insurance underwriters of New
York met and advanced their rates for war risk insurance on
gold from $1,250 to $5,000 for every $1,000,000 of gold in-
sured.^
On the one hand the lack of marine insurance seriously injured
the commerce of the United States, and on the other it perhaps
prevented a financial panic. Both cases, however, show how
dependent the trade of the country is upon marine insurance.
Development of Marine Insurance in England
Marine insurance, this all powerful aid of commerce, is, as
the English put it, an ancient and honorable institution. It has
existed since the very beginning of trade by water routes. In
England, the marine insurance business was carried on orig-
inally by men called underwriters. The capital of each under-
writer was small, and the amount of his business limited.
Several underwriters subscribed to cover the risk on a single
vessel. During the seventeenth century sea captains and traders
met at the coffee house of Lloyd's in London and to them came
the underwriters for the purpose of underwriting the risks upon
voyages about to be begun. Thus was founded the great as-
sociation of Lloyd's, England's insurance center. Later it lost
its identity as a coffee house and became purely an insurance
exchange. It should be understood that Lloyd's is not an in-
' New York Journal of Commerce, July 30, 1914.
THE EFFECTS OF THE WAR ON MARINE INSURANCE 51
surance company, byt a place where writers of all kinds of
insurance meet. They are governed by rules drawn up for the
protection of the insuring public. The growth of the large com-
panies or corporations has been the latest development of the
marine insurance business in England. At the present time
most of the English marine insurance is carried, not by the
underwriters meeting at Lloyd's, but by the large companies
such as the British and Foreign, the Indemnity, or the Union.
Development of Marine Insurance in the United States
The merchants of the United States have had to depend upon
foreign companies for marine insurance, just as they have had
to depend upon foreign vessels to carry their cargoes. The small
amount of marine insurance written by home companies in the
United States prior to the war was carried in much the same
way as in England. There were the large companies and also
the private underwriters, each subscribing to only a part of the
risk on a vessel. Many of the fire insurance companies were
permitted by their charters to engage in the marine insurance
business, but few have availed themselves of the privilege. Be-
fore the war, American marine insurance was on an equality
with the American merchant marine.
Relation of War Risk to Ordinary Marine Insurance
To understand the influence of the war upon marine insurance
we must draw a distinction between ordinary marine insurance
and war risk insurance. Ordinary marine insurance insures the
vessel and the cargo only against the perils of the sea, fire, storm,
rocks, etc. Marine war risk insures against sinking by mines, sub-
marines, raiders, and sometimes against capture or against deten-
tion in a belligerent or neutral port. It is the universal practice
for ordinary marine insurance policies to contain clauses ex-
pressly excluding war risks. A separate policy must be taken
cut for such risks.
52 INFLUENCE OF THE GREAT WAR UPON SHIPPING
The war has had comparatively little effect upon insurance
from the perils of the sea. It is true that there has been some
rise in the premiums charged, but the rise has been slight. The
war has made navigation more dangerous through the changing
of routes and the suppression of shore lights. Ships are being
used long past the time when they should be placed in the dry
dock for repairs because of the demand for shipping, the high
freight rates, and the use of the docks for naval vessels or new
shipping. Also many ships are being used in transoceanic trade
which were built primarily for coastwise or even lake voyages.
That the sea is claiming more than its usual toll is shown by
the increasing number of vessels posted as missing at Lloyd's.
When we speak, therefore, in the following paragraphs, of the
effects of the war on marine insurance, we refer to the effects
of the war on war risk insurance, a form of insurance of practi-
cally no importance in times of peace, but handled during pre-
vious wars by the same agencies as the ordinary marine insur-
ance.
Prohibitive Rates at the Beginning of the War
Now let us examine more closely the direct effect of the war
upon marine insurance rates. The New York Journal of Com-
merce for July 31, 1914, reported that war risk insurance had
reached almost panic rates in London the day before. In the
week following August 1, 1914, war risk insurance rates became
almost prohibitive. For voyages from England to the United
States the rates advanced from 5 shillings per hundred on July
28 to 10 guineas per hundred (10.5 per cent) on August 4,
and 20 guineas per hundred on August 6, an increase from -J^
of 1 per cent to 21 per cent in a little over one week, 25 to 30
per cent was charged to cover voyages through the North Sea.
South American rates advanced to 10 per cenL and rates to
India and the Far East were as high as 15 to 20 per cent.^ The
marine insurance rates rose at Philadelphia from a normal of
' Market World and Chronicle, September 5, 1914, p. 302.
THE EFFECTS OF THE WAR ON MARINE INSURANCE 5J
1 per cent to 10 per cent and even at the high rate the great
majority of companies refused to transact business/
Causes for High Rates
Difficulty of Estimating Risk
The primary cause for such prohibitive rates was the un-
certainty of the risk. The underwriters possessed no informa-
tion or experience from which to determine the amount of the
premiums that should be charged. They knew that vessels were
being sunk and they knew that more would be sunk in the future,
but they had no way of determining what percentage of the voy-
ages begun would be safely completed. Insurance could no
longer be governed by the laws of probability. The business
became a gamble. As Lloyd's had shut down in London tem-
porarily, no guidance was forthcoming from that quarter and
the leading houses in New York concluded to refuse to take
any more risks. ^ This situation ended after a few days when
some business was accepted at very high rates.
The German Commerce Raiders
In addition to the difficulty of determining rates the activities
of the belligerent naval forces also tended to bring about a sharp
advance. It will be remembered that during the early days of
the war, German sea raiders, such as the Emden, the Karlsruhe,
and the Koenigsberg, worked havoc in the commercial routes.
Their successes were very directly reflected by the insurance
market. During September, 1914, the number of ships sunk by
the Emden in the Bay of Bengal gave the war risk market a
severe shock. As high as 40 guineas per hundred (about 42 per
cent) was paid on boats to that section. At the same time
two raiders were known to be in the South Atlantic and 50
guineas was paid for at least one boat from South America to
^ New York Journal of Commerce, August 1, 1914.
54 INFLUENCE OF THE GREAT WAR UPON SHIPPING
New York.^ During the same period there was a dechning
tendency in the rates on routes known to be free of raiders. In
November occurred another rapid rise on certain voyages due
to the increased activity of the Emden and the Karlsruhe in the
Indian Ocean. A week later the insurance market became easier
with the report that the Emden had been put out of action at the
Cocos Islands and that the Koenigshcrg was unable to do any
further harm as she had been cut off in the Rufiji Delta. A de-
cline in rates followed.
Again in January, 1917, the German raiders were active in
the South Atlantic. Within a few days fourteen vessels were
reported sunk or captured. The quoted rates to the east coast
of South America, which had been from 3 to 4 per cent for bellig-
erents on January 10, rose to 6 to 10 per cent on January 18."
A week later, January 26, there was a drop to 5 to 8 per cent.
The German Submarines
The success of the German submarine has also been a cause
for rise in rates. During the earlier days of the war it was a
new and untried weapon, but reports of torpedoed vessels were
constantly coming in. There seemed to be no method of com-
bating the menace. Again underwriters were unable to de-
termine just what the efifect would be on shipping and were
unable to fix an equitable rate. By the last months of 1916,
the submarines' success as a commerce destroyer, seemed to be
established and much higher rates prevailed on voyages through
the submarine zones than to other sections. There was also
a growing certainty in the minds of underwriters and shipping
men that Germany was about to renounce her pledges to the
United States and resort to ruthless and indiscriminate destruc-
tion of all vessels, neutral and belligerent. Rates again advanced.
Early in December premiums from American ports to Great
Britain increased from I3/2 per cent and 2 per cent to 3 per cent.^
' Fairplay, September 24, 1914, p. 509.
' New York Journal of Commerce, January 18, 1917.
' The Economic World, December 2, 1916, p. 734.
THE EFFECTS OF THE WAR ON MARINE INSURANCE 55
In February shippers had the greatest difficulty in obtaining in-
surance. For a time there threatened to be as complete a block-
ade of commerce as had existed in the fall of 1914. Under-
writers refused to consider any rates less than 8 per cent for
voyages to British and French Atlantic ports. Rates to the
Mediterranean were from 2 to 5 per cent higher still. ^
In May of 1917, with the marked decrease in the reported
submarine successes, the war risk insurance market became much
freer. Underwriters had not become sufficiently confident of the
supremacy of the Allied destroyers to quote new rates, but where
the quotations showed a spread of 2 to 5 per cent, risks were
usually accepted at the minimum rate or at a rate considerably
below the maximum quoted. The British Admiralty's policy of
secrecy in reporting the successes of the submarines probably
prevented a more substantial decline in insurance rates at the
time."
It is impossible to secure complete quotations of rates, but
the rates offered in September, 1917, will serve to show the
effect of the submarine on marine insurance. During the month
there was a marked falling off in the number of large British
vessels sunk. For the voyage from New York to Liverpool the
rate for passenger steamers was 6 per cent, cargo steamers 8
per cent, and neutrals 10 per cent; New York to the Mediter-
ranean, special steamers, 8 per cent, neutrals, 15 per cent; New
York to South Africa, 3 per cent. The further decline of the
success of the submarine in December brought a drop in the
rate on belligerent cargo steamers to the United Kingdom of
3 per cent.
The British Blockade
But the chaos of the marine insurance lousiness can not be
attributed to Germany alone. The British blockade was also a
disturbing factor. Early in the war, it became apparent that Eng-
' The Economic World, February 17, 1917, p. 242.
"-Ibid., May 19, 1917, p. 710.
56 INFLUENCE OF THE GREAT WAR UPON SHIPPING
i
land and the Allies were determined to make the war econom-
ical and financial, and that a systematic effort was to be made
to cut off completely the commerce of the Central Powers. Un-
derwriters accordingly realized the danger of covering risks on
vessels to any but the ports of the Allies.
On voyages to ports of the Central Powers it was practically
impossible to secure war risk insurance. Insurance on cargo
might be found, although the rate was very high, but only 80
per cent of the value of the hull could be protected. No in-
surance was available against capture by the Allied Powers or
against detention in a belligerent port, for the English insurance
companies were ordered by the government to stop insuring
vessels against capture or detention by the British Government
or her allies.^ Despite the fact that cotton could be sold in Ger-
many at a price three times the price on the Southern markets,
little was shipped because of the absence of adequate insurance.
The Uncertainty Regarding Contraband
It was also early recognized that the lists of contraband or
conditional contraband articles were not dependable. A cargo
at the time of departure from port might be on the list of per-
mitted articles, but before it reached the war zone it might
be transferred to the list of contraband. Over night articles
were changed from one list to the other. There was also the
danger that some part of the cargo would be found to be the
property of the enemy or consigned to a citizen of an enemy
country. These two factors tended either to make insurance
rates on vessels to neutral or German ports exorbitant or to
make such insurance entirelv unobtainable.
The Fluctuation of Insurance Rates
Not only did the prohibitive rates halt commerce, but the rate
fluctuations had the same effect. At this time it is impossible
^Market World and Chronicle, October 24, 1914, p. 523.
THE EFFECTS OF THE WAR ON MARINE INSURANCE 57
to present a chart showing the changes in war risk quotations
from week to week beginning with July, 1914. Such a chart
would furnish information of considerable value to the enemy
in determining the success of the submarine. Even if the weekly
quotations could be obtained they would not serve as an accurate
index to the market. There has been no standard rate, and
usually the rates offered on any particular voyage have shown
considerable spread. For example, a quotation of 5 per cent
was given by one underwriter on a certain voyage; on the very
same day and on the same voyage another underwriter quoted
a rate of 10 per cent. The rate also varies with the commodity
and with the character and the speed of the vessel. Even if
obtainable, therefore, a chart of rate quotations would not be
scientific and would not show accurately the fluctuations of
rates.
From the few quotations available, we can state without fear
of contradiction that rates have fluctuated tremendously dur-
ing the last three years artd a half. The following quotations
are for voyages from the United States to Great Britain and are
on belligerent merchant ships. The rates for neutrals are usually
somewhat higher.
Per Cent
July 28, 1914 1/4 of 1
July 31, 1914 3
August 4, 1914 10^4
August 6, 1914 21
September 5, 1914 4^^
January 14, 1915 Vi oi \
July 17, 1915 1
December 2, 1916 3
January 3, 1917 6
February 2, 1917 8
March 17, 1917 8-10
September 12, 1917 7-12
October 24, 1917 5-9
November 14, 1917 4-9
December 22, 1917 4-9
January 12. 1918 4-9
February 8, 1918 4-5
March 15, 1918 3-4
April 1, 1918 4
Aoril 20, 1918 3
May 13, 1918 2V2
May 20, 1918 214
58 influence of the great war upon shipping
Inadequacy of Capital of Private Companies
So far reference has been made only to the ordinary marine
insurance facihties in existence in times of peace, the under-
writers and the large companies. However, we must not place
upon them the blame for the chaotic condition existing in ma-
rine insurance at the beginning of the war, the prohibitive and
fluctuating rates and the resulting halting of commerce. The
underwriters and the companies were endeavoring in every way
to meet the emergency for which they were entirely unprepared.
They could not be prepared for it.
Marine insurance is ordinarily a business that can be con-
ducted on a small capital. With the outbreak of the war, the
insurance market was called upon to cover not only the risks
arising from the perils of the sea, but also a second line many
times as great — the risks arising from war. The underwriters
did not possess the necessary capital. Increased premiums might
fully equal the losses occurring over the period of a year, but
there were more frequent calls for the payment of losses than
before the war.
Again, as soon as commerce was partially revived, shipping
prices advanced greatly. The value of vessels advanced from 50
to 100 per cent and in some cases even more; freights advanced
500 per cent; and cargoes about 50 per cent in value. An under-
writer instead of being called upon to cover the ordinary marine
risk on a vessel valued at $400,000, on freights valued at
$20,000, and cargo valued at $1,000,000, must furnish both
marine insurance and war risk insurance on a $600,000 to $800,-
000 vessel, $120,000 freights, and a $1,500,000 cargo— two
risks of $2,420,000 instead of $1,420,000, one risk of pre-
war days — an increase of $1,000,000 or about TO per cent.
It is natural that the underwriters were unable to handle the
situation and that chaos resulted. Nor is it astonishing that the
underwriters and companies advanced their rates so sharply that
they were soon prohibitive.
the effects of the war on marine insurance 59
The Formation of Government War Risk Bureaus
Very early in the war, however, another important factor
entered the insurance field. When the lack of insurance facili-
ties threatened to halt all commerce for the duration of the war
and when it was perceived that private capital could not meet
the increased demands made upon it, the various governments
were quick to act. They went into the insurance business. With-
in a very few weeks after war was declared, eleven national war
risk bureaus were in operation in the following countries : Bel-
gium, Denmark, France, Germany, Greece, Great Britain, Italy,
Japan, Norway, Sweden and the United States.
Although all the bureaus were established to accomplish the
same purpose, the protection of the nation's commerce, they
differ in their methods of operation. All of them, however,
follow closely one of the four general plans adopted by the
United States, Great Britain, Japan and Norway, respec-
tively.^
The United States War Risk Bureau
In the United States, by an act of Congress, approved Septem-
ber 2, 1914, the Bureau of War Risk Insurance was established
as a bureau of the Treasury Department." Mr. William C. De
Lanoy, an experienced insurance underwriter, was appointed
Director of the bureau at an annual salary of $5,000. An ad-
visory board of three members skilled in the practices of war
risk insurance was also appointed for the purpose of assisting
the bureau in fixing rates of premium and in the adjustment of
claims for losses.
The original act empowered the bureau under the direction
of the Secretary of the Treasury to make provisions for the in-
surance by the United States of American vessels, their freight
and passage moneys, and their cargoes against loss or damage
by risk of war, whenever it should appear to the Secretary
' Market World and Chronicle, October 24, 1914, p. 523.
= Public No. 193, 63d Cong.
60 INFLUENCE OF THE GREAT WAR UPON SHIPPING
that American vessels, shippers, or importers in American ves-
sels were unable in any trade to secure adequate war risk insur-
ance on reasonable terms. No fixed. rates were established, but
it was provided that the bureau should determine the rate for
each voyage according to the character of the vessel, the route
taken, and the cargo carried. Disputes over the adjustment of
claims were to be settled in the district court of the United
States in the district in which the claimant or his agent resided.
An appropriation of $5,000,000 was made from the Treasury
of the United States for the purpose of paying all losses and an
additional $100,000 for salaries and expenses of the bureau.
The act specified that the bureau might be suspended by the
President whenever the need for such insurance ceased to exist
and at most was not to continue more than two years. ^ Later
amendments to the act of September 2, 1914, have extended the
time of operation of the act to not later than June, 1921."
There were two outstanding features of the United States
War Risk Insurance Bureau established by the act of September
2, 1914, and operating while the United States remained neutral.
(1) Insurance was issued only on vessels flying the American
flag, or only on cargo carried in American vessels. (2) The
premium rate might be fixed for each voyage by the bureau,
although in practice it remained almost unchanged for certain
of the safer trade routes.
Before the United States entered the war, the bureau refused
to cover risks on any cargo that might be considered contraband
by the belligerents. Follov/ing Germany's declaration of unre-
stricted submarine warfare in February, 1917, and the breaking
of diplomatic relations between the United States and Germany,
the bureau revised its regulations. On March 31, rates were in-
creased but at the same time risks on cargoes that were classed
as contraband were accepted, thus recognizing the practical state
of war with Germany.
Following the entrance of the United States into the war,
' Public No. 193, 63d Cong.
^ Public No. 20, 65th Cong.
THE EFFECTS OF THE WAR ON MARINE INSURANCE Gl
an amendment to the act above outlined was passed on June 12,
1917, extending radically the scope of the Bureau of War Risk
Insurance. The bureau was authorized to make provision for the
reinsurance by the United States of vessels of foreign friendly
flags or their cargoes, or both, when such vessels or their cargoes
were insured by the government of a country at war with an
enemy of the United States, and also to reinsure with such gov-
ernments American vessels and their cargoes. Additional ap-
propriations were granted to the bureau by this amendment,
$50,000,000 for the payment of losses and $250,000 for the ex-
penses of the bureau.^
Under the amendment of June 12, 1917, the bureau entered
another insurance field. Realizing the heavy risk of death in-
curred by officers and crews of the merchant vessels entering the
submarine zone. Congress authorized the bureau to establish
a Seaman's Division and the owners of American vessels were
required to take out war risk insurance for the officers and crews.
Within three weeks 5,446 individuals had been insured. Under
this scheme provision is also made for the payment of an in-
demnity for loss of limb or any other permanent disability. A
second advisory board of two members skilled in the practices
of accident insurance was appointed for the purpose of assisting
the bureau in adjusting claims in connection with the seamen's
insurance.^
At the present time the Bureau of War Risk Insurance is ad-
ministering not only the marine insurance on vessels and car-
goes, but also the accident and life insurance on the officers and
crews of merchant ships and on the soldiers and sailors in the
service of the United States.
On August 19', 1917, the bureau issued certain specifications
regarding the vessels upon which insurance would be placed.
Ships were required to be armed, painted to reduce visibility,
provided with smokeless fuel, and equipped with appliances for
producing smoke clouds to escape torpedo attack.
' Public No. 20, 65th Cong.
62 INFLUENCE OF THE GREAT WAR UPON SHIPPING
The British War Risk Bureau
The war did not find Great Britain entirely unprepared, at
least as far as war risk insurance was concerned. In 1908 the
committee on a national guarantee for the war risks of shipping
was appointed by the British Parliament. A lengthy investiga-
tion was conducted by the committee and their report and rec-
ommendations were published but no legislative action followed.'-
In July, 1913, another committee was appointed, which in May,
1914, submitted to Parliament a government war risk insurance
scheme which was accepted by Parliament on the Monday before
war was declared."
Although there was no time to work out some of the details,
the British scheme of war risk insurance was put into operation
during the first week of August, 1914, dealing separately with
hulls and cargoes. The insurance on the hulls was worked in
conjunction with mutual clubs which existed when war was de-
clared. All vessels were required to be insured in one of these
clubs or associations. The clubs, in turn, reinsured with the
government SO per cent of their war risk on vessels, the gov-
ernment receiving the same proportion of the premiums. The
scheme applied only to British vessels and required owners and
their captains to conform to all instructions issued by the Ad-
miralty.
Only cargoes carried in vessels insured by the clubs or other
associations approved by the government were insured by the
government office. A minimum and a maximum premium rate
was recommended by the committee responsible for the scheme,
but as there was not sufficient time to fix such premiums on the
basis of possible risks, a flat rate was established. In this respect
the British scheme differs from the scheme adopted in the United
States, the latter in theory determining the rate for each voyage
and the former fixing a definite flat rate for all voyages.
' Report of Committee on a National Guarantee for the War Risks of
Shipping, Wyman and Sons, Limited, London, 1908.
' f airplay, January o, 1918, p. 102.
THE EFFECTS OF THE WAR ON MARINE INSURANCE 63
The aims of the government War Risk Bureau were two :
First, the maintenance of the British overseas trade, the ex-
change of manufactures and coal for the nation's supplies of
food and raw materials. Second, the concentration of the Royal
Navy on its primary duty of defeating the naval strength of the
enemy, by relieving it from the demands of the individual trader
and shipowner for protection against individual loss.
On August 19, 1917, a new plan for the insurance of hulls
went into effect in Great Britain. In many cases under the
first scheme, the premiums received by the clubs had not been
sufficient to meet the losses and the balance had to be made good
by calls on the members. Under the new plan, the entire liability
is at the risk of the government, and more definite provisions
are also made to determine the value of vessels lost. Risks were
divided into three classes, fully requisitioned steamers, vessels
under liner requisition, and freight ships. The government as-
sumes responsibility for all war risks on vessels of the first class,
whether total or partial, and in case of total loss payment is to
be made on the " ascertained value." The government also pays
claims for particular average, salvage charges, and general
average in case the vessel is damaged and not totally lost.^
The same risks are covered on vessels of the second class,
but in case of total loss the owner is to have the option of re-
' " The loss resulting from any of the perils above mentioned (perils of
the sea, war risks, etc.) may be a partial loss and may be settled either in
accordance with ' general average ' or ' particular average ' rules. The mari-
time laws of nations ordinarily provide that any loss resulting from a volun-
tary or deliberate sacrifice of vessel, cargo, or other property for the common
safety and welfare should not be borne entirely by the particular owners of
the sacrificed properties, but should be fairly prorated among all interests
that are benefited by such sacrifice. This rule is known as general average.
A partial loss may also be settled in accordance with the ' particular
average ' rule, i. c, when the property insured is damaged by accident or
is not destroyed by the master of the vessel for the purpose of saving other
property, the loss must be borne entirely by the owners of the damaged
property or by its insurers.
A partial loss or liability may result from the payment of salvage, which
is the reward granted by law to those who save life and property at sea.
If a vessel in distress receives assistance from another vessel and is towed
to port, the vessel giving assistance may claim salvage, and the amount legally
due is payable by the owner or by the insurer of the vessel and cargo to
which assistance is given." Johnson and Huebner: Principles of Ocean
Transportation, p. 248.
64 INFLUENCE OF THE GREAT WAR UPON SHIPPING
covering the loss on the " ascertained value " or on the amount
insured under his policies which is based on the government
value, as at present calculated, plus an excess value to be fixed
by the committee and approved by the controller.
Freight ships are to be insured against the risks of war under
policies for voyages at rates to be fixed from time to time. In
all three cases compensations and allowances to dependents of
officers and crew up to the government scale will be paid.^
When the submarine policy of Germany threatened to cut off
England from her sources of supplies, the government war risk
insurance was extended to all neutrals trading with the United
Kingdom. The rate was the same as the rate offered to British
shipping and was several per cent below the rate enforced on the
open market. It was realized that the government would prob-
ably suffer heavy losses because of such low rates, but that the
increased imports from neutrals thus gained would more than
offset any possible loss.
The'scheme of war risk insurance in operation in Great Britain
has not proved entirely satisfactory. The flat rate fixed by the
bureau has been too low for the dangerous trades and too high
for the safer trades. As a result the safer risks have been in-
sured in the open market and the dangerous risks have been left
to the government. The deficit of the bureau has had to be
made up by taxing the people.
In October, 1917, several changes were being considered to
remedy this feature. It was proposed to do away with the flat
rate and to fix rates each day through a special body of experi-
enced underwriters. The government was to insure all cargoes,
nonrequisitioned as well as requisitioned, thus closing the free
war risk market. Such a scheme was opposed by the English
underwriters because of the insurance monopoly given to the
government.
Recently the flat rate was abandoned and premiums are now
being determined according to the risk of the voyage. There ap-
peared in the New York Journal of Commerce for May 24, 1918,
' The Mariner, September 15, 1917, p. 269.
THE EFFECTS OF THE WAR ON MARINE INSURANCE 65
a Statement issued by the British War Risk Insurance Office re-
ducing the rate on voyages between the United Kingdom and
the east coast of North or Central America from GO shilHngs
per hundred to 45 shilHngs and on voyages between the United
Kingdom and the east coast of South America from 70 shillings
per hundred to 60 shillings. The same announcement established
a rate of 7 per cent on voyages from the United Kingdom direct
to Greece.
The Japanese War Risk Plan
The plan adopted in Japan, September 12, 1914, differed radi-
cally from either of the above plans. No government war
risk bureau was established, but insurance was handled entirely
through the usual prewar channels, the underwriters and the
insurance companies. Since most of the Japanese commerce was
far removed from the region of the submarine or the German
raider, the need for a government war risk bureau was not felt.
Up to the end of 1915 only two steamers owned in Japan had
been lost by a war risk.
Following is an extract from the 15th Financial and Economic
Journal of Japan (1915) issued by the Japanese Government
descriptive of the Japanese scheme of war risk insurance:
The War Marine Insurance Indemnity Act was promul-
gated on September 11, 1914, and the Ordinance No. 19 of
the Department of Agriculture and Commerce on the fol-
lowing day, and both were immediately put in force.
According to the act above referred to, if any Japanese
insurance company, or any foreign insurance company
having branches in Japan, makes a war insurance contract
at a premium not higher than the rate fixed by the com-
petent authorities and makes good therefore any loss or
damage caused by the war, the government is to grant
as an indemnity to such insurance company a portion of
the sum thus made good. It is provided for in Ordinance
No. 19 of the Department of Agriculture and Commerce
that the amount to be so granted by way of indemnities
shall be 80 per cent of the sum thus made good.^
' The Economic World, February 19, 1916, p. 258.
66 INFLUENCE OF THE GREAT WAR UPON SHIPPING
In Other words, Japanese insurance companies, or foreign
insurance companies with branch offices in Japan, insuring ves-
sels at rates not higher than the maximum fixed by the govern-
ment are indemnified by the government to the extent of SO per
cent of all their losses and are permitted to retain all of their
premiums. The companies carry but 20 per cent of the risk,
but are paid 100 per cent of the premium. The proposal covers
both Japanese hulls and cargoes and also cargoes exported to
or from Japan by steamers of any nation except an enemy, be-
tween points specified by the government. In January, 1915,
a new arrangement was made allowing the risk on vessels leav-
ing England for Japan to be covered in London without cabling
to Japan, the bill of lading being endorsed to the effect that the
cargo had been insured against war risk.^
The original scheme continued in force until the losses paid
out for the few Japanese vessels sunk proved to be too heavy a
burden on the treasury. In September, 1917, a new scheme
came into operation under which the government fixed the
premium, received it, and paid the loss, a government bureau
taking the place of the government aided insurance underwriters
and companies."
The Norwegian War Risk Plan
In Norway a company was formed to take 20 per cent of the
war risk insurance on all goods shipped to or from Norway.
The remaining 80 per cent of the war risk is assumed by the
state and the assured. War risk on hulls of steamers is com-
pulsory in a mutual association which has been established in
Christiania. The owner is allowed to take 20 per cent of the
insurance himself. A maximum and a minimum premium has
been fixed.^
' Fairplay, January 21, 1915, p. 88.
= Ibid., January 3, 1918.
' Ibid., October 8, 1914, p. 581.
THE EFFECTS OF THE WAR ON MARINE INSURANCE b(
The Rates of the Government War Risk Bureaus
In general the rates of the government war risk bureaus have
been considerably under the rates charged by private companies.
The market rate on voyages between the United Kingdom and
the United States on August 6, 1914, was 20 guineas per hun-
dred, and the British Government war risk rate on the following
day was 4 guineas for the same voyage. In August, 1917, the
United States War Risk Bureau increased its rates between
United States ports and European and Mediterranean ports
from 5 per cent to 6% per cent. At the same time the open
market rate quoted in New York was 7^/^ per cent to 10 per cent
to British ports, 12 per cent to Havre, and 10 to 15 per cent
to Mediterranean ports.
In February, 1917, the rate charged by the British Govern-
ment was 3 per cent as compared with the flat rate of 10 per cent
enforced on the local market. During the same month, the
United States Bureau quoted a rate of 2 per cent although the
prevailing market rate was 9 to 10 per cent.
Effect of Government Bureaus on Private Companies
The natural conclusion to draw from such low rates would
be that all the business had gone to the government bureaus and
that private companies had been forced to discontinue, but such
has not been the case. Most of the government bureaus are so
hedged in by restrictions and conditions that many vessels find
it impossible to secure insurance from them. In the first place,
with few exceptions, the bureaus are permitted to write insur-
ance only upon vessels flying the flag of the respective countries
that established them. As a neutral the United States bureau
declined to underwrite the war risk on all commodities that had
been held to be contraband by any of the belligerent Powers,
or which were in cargoes any part of which consisted of such
contraband. For that reason, insurance on cotton could not
be obtained from the government War Risk Bureau even in
68 INFLUENCE OF THE GREAT WAR UPON SHIPPING
American bottoms. The restrictions, as has been pointed out
above, were modified when the United States became a belHger-
ent, but vessel owners must still follow closely regulations re-
garding equipment and coal before insurance will be granted by
the bureau.
The text of the law creating the War Risk Insurance Bureau
also specifically provides that war risk insurance shall be issued
" whenever it shall appear to the Secretary that American ves-
sels, shippers or importers in American vessels, or the masters,
officers, or crews of such vessels are unable in any trade to se-
cure adequate war risk insurance on reasonable terms."
As we have shown in an earlier paragraph, the flat rate of
the British War Risk Bureau proved to be too low for dangerous
voyages and too high for the safer trades, resulting in most of
the insurance on safer trades being carried on the open market.
In both the United States and Great Britain the value of the
business done by the government bureaus has been a very small
part of the marine insurance business transacted. The report
for the United States War Risk Bureau issued in August, 1917,
shows that from the founding of the bureau, September 2, 1914,
to June 30, 1917, insurance to the amount of $623,904,598 was
written and that premiums were received to the amount of
$15,208,730.37.' For the year 1916 alone, the thirty-two ma-
rine insurance companies reporting to the State of New York
covered marine risks totaling $1,214,119,435 and received in
premiums $42,137,536. The latest report of the bureau, Janu-
ary 6, 1918, showed that only $1,001,537,525 in insurance had
been issued up to January 1, 1918.
Despite the small amount of insurance carried by the govern-
ment bureaus, they have given very valuable aid to shipping.
They have been successful, not because they have monopolized
the marine insurance market and covered enormous risks, but
because they have served as a steadying influence for the private
companies and have prevented the charging of unreasonable
and prohibitive rates. They came to the rescue of commerce
' The Economic World, August 4, 1917, p. 170.
THE EFFECTS OF THE WAR ON MARINE INSURANCE 69
at a time when the ordinary insurance facilities were in a condi-
tion of chaos.
In an address in the summer of 1915, Sir Edward Hain,
Chairman of the London General Shipowners Society, declared
that the introduction of the government scheme for war risk
insurance at the outbreak of the war had done much to prevent
panic rates for insurance and had given confidence to shipowners
to continue their oversea trading.^
Their steadying influence may be seen in the higher rates
charged on neutral vessels in Great Britain soon after the be-
ginning of the war. The government bureau was permitted to
underwrite the risks only on cargoes carried in British hulls and
the insurance on neutral hulls and cargoes had to be taken in
the open market. Since there was no competition with the gov-
ernment bureau, the underwriters were able to quote whatever
rates they liked without fear of losing business. In September,
1914, cargoes in British steamers were being insured for four
guineas per hundred, but cargoes in Dutch and Japanese hulls
were paying private companies six and seven guineas.
The Continuation of the Government Bureaus after the War
The government war risk bureaus upon their establishment
were regarded universally, even by the marine insurance under-
writers, as highly beneficial institutions. But already their
future is being viewed with suspicion, especially by the business
world, now that the insurance market has adjusted itself to the
changed conditions. The fear is expressed in the United States
that the bureau is only a forerunner of government ownership
of a business that has always been a private enterprise. The
bureau is being branded as socialistic and hostile to the rights
of the individual.
The editor of The Economic World in the issue for April 1,
1916, opposed the continuing of the government bureau beyond
the period of two years provided for by the act creating it in
' Fairplay, July 29, 1915, p. 187.
70 INFLUENCE OF THE GREAT WAR UPON SHIPPING
1914. In a later issue, after commending highly the work of
the bureau and especially its extension of insurance to the
officers and crews of merchant ships, the editor concludes :
At the same time it is well to keep clearly before the
public mind that acquiescence in this war arrangement is
not to be construed to be acquiescence in the perpetuation of
this great government insurance after the war is con-
cluded. Insurance men and all other American citizens
who hold government monopolies to be an anathema in
times of peace and normal activities should keep this point
continually in mind.
Marine Insurance and World Trade
The war has brought, and is bringing, many lessons forcibly
home to the people of the United States. We are beginning to
realize the fallacy of allowing our merchant marine to decline
from the proud position it occupied seventy years ago to the few
vessels flying the American flag at the outbreak of the war. An
effort is being made to remedy the mistake and a fleet of mer-
chant vessels is now leaving our shipyards which will soon re-
establish the United States as a powerful commercial nation.
But shipping is only a part of the foundation of international
trade. Mr. Evans, president of the Continental Insurance
Company and the Fidelity-Phenix Insurance Company, recently
somewhat overstated the financial side.
The economic proposition at the base of the foreign trade
of every nation is the union of banking, shipping, and in-
surance strength. In the absence of any of the three, the
other two factors will be exposed to weakness that will
inevitably bring waste or loss, if not failure. Great Britain
has commanded the foreign trade of the world because she
has financed it herself, carried it herself, and protected both
its credit and its losses by insuring every possible dollar of
her own trade, when possible, with her own insurance.^
The Federal Reserve Act opened the way for the banking
independence of the United States- in world trade; our merchant
' Spectator, November 15, 1917, p. 206.
THE EFFECTS OF THE WAR ON MARINE INSURANCE 71
marine is being reestablished; the third member of the com-
mercial triad, insurance, must not be neglected.
Growth of Marine Insurance in the United States
Since 1914
It is true that there has been a marked growth in the insur-
ance facilities of the United States since 1914. Before the war
there were about 2-4 marine insurance companies operating in
New York City. In October, 1917, there were 87 companies of
which 53 were American. At the close of 1916, the reports
of the 32 marine insurance companies reporting to the State of
New York showed that during the preceding year they had
issued insurance to the amount of $1,214,119,435, an increase
over 1915 of 41 per cent and that the total income of the com-
panies for the year was over $50,000,000, an increase over 1915
of about 40 per cent.
In October, 1917, announcement was made that an American
Lloyd's had been established in New York City. The Old
Delmonico Building has been leased and will be remodeled as an
insurance exchange. There underwriters will meet and be pre-
pared to accept business offered without the many delays caused
by the present decentralization of insurance facilities.
The President's Proclamation, July 14, 1917, closing for the
duration of the war the American branches of the German ma-
rine insurance companies, opens a new field to the American
companies. No doubt British competition will be keen, but the
growing American companies should be able to retain the major
share of the insurance in this country.
A Lesson of the War
War has shown the weakness of the structure of our inter-
national trade built up in times of fancied security and the in-
ternationalism of capital. Our commerce was paralyzed and
foreign markets were closed to us because of the lack of ma-
rine insurance facilities. Shipment of gold from the United
72 INFLUENCE OF THE GREAT WAR UPON SHIPPING
States was effectually checked, beneficial as such restriction may
have been. Such interference with our commerce will be possible
just as long as we continue to depend entirely upon foreign
companies for our marine insurance.
Two remedies are open to the people of the United States
involving two opposing economic concepts. First, we can develop
a national independence of marine insurance facilities just as
we are, for the moment at least, developing our shipping inde-
pendence. Through government subsidies and restrictive legis-
lation, probably involving higher cost, we can encourage the
establishing of marine insurance companies and underwriters'
associations which can be conducted profitably because of the
government aid and despite the scarcity of capital and the high
rate of interest prevalent in this country.
Secondly, we can establish by congressional action the neces-
sary machinery to create overnight, in case of war, a govern-
ment war risk bureau similar to the present one. Or the present
bureau can be made a permanent bureau to be put into operation
only in case of a national emergency. With such a latent remedy
always at hand we can, if it is less expensive, continue to depend
in times of peace upon foreign companies for our marine in-
surance, purchasing in the cheapest market, whether that mar-
ket be English, French, or Japanese.
Of the two schemes, the second is undoubtedly the safer policy
to follow. Encouraging as has been the development of marine
insurance facilities in the United States during the war, it is
doubtful if this development can continue without substantial
government aid when conditions of international competition
have been restored. Laboring as we are under the handicap of
high construction and operation costs of our merchant marine,
it is important that we secure our insurance in the cheapest mar-
kets if we expect to compete successfully with the ships of other
nations. The experience of the nations at the outbreak of the
present war is ample proof that national independence of insur-
ance facilities is not sufficient protection against blockade of the
merchant fleet. The merchant marine of Great Britain, backed
THE EFFECTS OF THE WAR ON MARINE INSURANCE 16
by Lloyd's Association and the powerful British marine insur-
ance companies, was as effectively blockaded during the first days
of the war as was the merchant marine of the United States de-
pendent upon the German and British companies. Not until
the British Government War Risk Scheme, accepted by Parlia-
ment a few days before, was put into operation was the blockade
lifted and not until the United States followed the example of
Great Britain in September, 1914, were ships of this country
free to leave port. In the meantime, much valuable time had
been lost while the bureaus were being established, rates deter-
mined and policies prepared and printed.
Dependence on foreign insurance is very different from de-
pendence on foreign shipping. Insurance, under a government
war risk scheme, can be created in twenty-four hours, if the plans
are laid in advance; the creation of a merchant marine may re-
cjuire twenty-four months or more, even if well planned in ad-
vance. There appears, therefore, no greater reason to work for
complete independence in marine insurance than there is in com-
plete independence in bananas or money to lend.
CHAPTER IV
Trade Dislocations Due to War — Some Possible
Readjustments
Worldwide Trade Changes
Afghanistan, buffer state, untouched by jealous Britain and
jealous Russia, has been a closed land, one of the last refuges of
unchecked barbarism. Here before the Great War a white man
went, if at all, at the risk of his life. In the summer of 1915 a
native of this no man's land gathered up a few mule loads of
country produce and went down 160 miles to the head of the
British railway to trade at the annual fair, as was his wont.
The market was glutted. No buyers were there. He was tokl
that the Hindus who usually bought his wares had gone over the
sea to a white man's war. " Humph! " said the Mohammedan,
'' I don't care, I will take my stuff over to the Russian railway."
*' The Russians have gone to the war, too," he was told, " and
the railroad will carry no freight." Whereat the indigene cursed
all unbelievers and carried his produce back to his fastnesses
where it probably still awaits the return of peace.
Long indeed will be the search to find the people, even the man,
whose daily life has not been changed in some respect by the
trade disturbances arising from this war. The world trade of
1914 is no more. Trade has always been the football of states-
men, but nothing like the disturbances of the present has occurred
in the modern epoch. Several distinct factors have combined to
destroy the old and make a new commercial world.
Factors That Have Altered Trade
(a) Rise of Munition Trade.
Munitions and war supplies suddenly became one of the major
demands of world commerce, rather than one of the minor
74
TRADE DISLOCATIONS DUE TO WAR 7o
articles, and their fabrication suddenly took the time of millions
of workers.
(b) Decline of Food Production and Increase of Food Con-
sumption.
The putting of millions of men under arms reduced food pro-
duction at once in the warring countries, increased food consump-
tion and multiplied the demand for it in international trade.
(c) The Stopping of Exports from Central Empires and Russia.
World commerce was impoverished by losing the goods of
Germany and Austria, due to the Allied blockade, and of Russia,
due to the closing of the Dardanelles.
{d) Declining Ship Supply.
A diminishing ship supply restricted ocean transportation.
This diminished ship supply was partly real, due to the destruc-
tion and internment of vessels, and the cessation of building, and
partly constructive, due to the necessity of transatlantic voyages
replacing shorter European voyages, to the lessened efficiency of
shipping under war conditions and also the actual increase of
trade in supplying armies. The movement of Canadian and
Australian and Siberian troops alone almost amounted to the
transport of nations and their support over sea.
(e) Declining Man Power.
All this creation of burdens fell upon diminishing man power,
and has resulted in great efforts to increase the labor supply in
many countries.
(/) Prevention of Exports to Central Empires.
Commerce was further embarrassed by the necessity of pre-
vention of trade with the enemy — a most difficult thing to do, as
witness the relative failure, the innumerable orders, restrictions,
foreign complications and animosities that have resulted.
76 INFLUENCE OF THE GREAT WAR UPON SHIPPING
{g) Governmental Restrictions of Industry.
The necessity of keeping home industries going under the re-
duced conditions of labor, materials and transport has brought in
its wake a train of restrictions almost as rigid as the blockade of
Germany.
As a result of all these causes, the nations have been compelled
to take control of industry almost as definitely as they have of
the life of the conscript in the army. Nations have been rationed
as to the food they should eat. Industry has been rationed as to
the raw material it should get. Priority orders decide what in-
dustry shall get supplies and what shall be starved. Licensing
boards have permitted or checked the issuance of capital, and the
building of works. The national complex of railroad companies
has been welded into one system in all the major warring coun-
tries. Import and export trade have been put on the war basis
of license or prohibition as public needs seem to demand, and,
lastly, ocean shipping and the management of ocean traffic is
being pooled by the Allies in a way identical to the pooling of
traffic and equipment by the nationalized railway systems of the
United States or England.
As the war wears along into its fourth year (May, 1918),
every disturbing factor is becoming more acute — war materials,
food, man power, ship shortage, and the consequent necessity for
more rigorous economies of labor, material, railway and ship
transportation is even more apparent. Trade is being daily
brought down nearer and nearer to the bare bones of naked
necessity.
The Paralysis of Trade
Statistics can never measure the trade disturbances of this war;
partly because they are incomplete, partly because some that we
most desire are unavailable, and probably will not be available
until after the war, and partly because mere statistics can not
measure anguish. Nevertheless the charts of vessel movements
even down to the end of 1916, the last year available, are very
significant. A comparison of 1913 and 1916 shows that Britain
received from the Argentine a million less tons of shipping, the
TRADE DISLOCATIONS DUE TO WAR i i
movement having shrunk from 2,000,000 to 1,000,000. The
outgoing ships to Argentina fell away twice as much. From
Australia 400,000 tons less of shipping arrived, while the tragedy
of the closing of Russia is shown by the falling away of vessels
from 3,o00,000 to less than 750,000, with departures reduced
to an even greater extent. The figures of Norway and the
United States show a substantial increase as a measure of the
attempts to replace the old with new trades.
Examination of traffic movements shows even more significant
facts. Coal, upon which our age depends and for which most
of the importing world has looked to Britain, shows painful de-
cline in Britain's exports. Italy's supply from this source fell
from nearly 10,000,000 to less than 0,000,000; Greece lost more
than three-fourths of her supply; Egypt nearly as much; Argen-
tina went from over 3,500,000 tons to less than 750,000.
Sweden, suspected of being too friendly to Germany, got dropped
from 4,500,000 to 1,000,000, but Norway, the busy supplier of
Britain, was allowed coal to take back in her ore, w'ood, and pulp
carrying ships. But Denmark and the Netherlands, both adja-
cent to Germany, both in the zone of the submarine, show heavy
decrease, which helps explain the economic disturbance of those
countries.
For a time the gap caused by the shortage of British coal
was partly filled by American coal (see table), but the ship
COAL EXPORTS OF UNITED STATES
Tons, 000 Omitted
1912 1913 1914 1915 1916 1917
Italy 276 2,Z2 776 1,628 2,833 1.099
Greece
101 89
Soain 16 50 42 100 160
l?ane ■:::".■.:: :■.:■.:■. 43 16 47 50 iso
Argentina 156 38 139 564 782 706
Brfzil 307 236 239 527 681 756
Chile 29 112 84 58 152
shortage has now wiped out that possibility, as evidenced by the
nearly tenfold increase in the Italian supply from us between
1913 and 1910, and its heavy decline in 1917. Argentina had a
somewhat similar fate, while Brazil, with coffee and manganese
78 INFLUENCE OF THE GREAT WAR UPON SHIPPING
ore for return cargo, has been able to more nearly hold her
American supply.
The two facts of the actual blockades of war and the pro-
gressive blockades of ship shortage, make it clear why so many
parts of the world are in industrial paralysis. For example,
Russia with imports of $365,000,000 in 1914 imported but $200,-
000,000 in 1917, and that was an increase over 1916. But even
this small trade was chiefly war supplies sent in by her allies, for
her export of $349,000,000 in 1914 had dropped to $40,000,000
in 1915, $53,000,000 in 1916, and but $26,000,000 in 1917.
Perhaps the best known and most conspicuous example of
stagnation is afforded by the Australian wheat situation, where,
according to unofficial figures, 200,000,000 bushels of wheat are
piled up waiting the chance for shipment, for which the ever de-
clining tonnage gives small promise for many months to come.
The stock of wheat exceeds by many fold all ordinary need for
warehouses and all possibility of proper storage. It is said to
be piled up more than 10 miles long in enclosures made by walls
of sacked wheat 10 to 20 feet high and 10 to 20 feet wide. This
drew mice, which have multiplied, and in spite of being fought
day and night by gangs of men they have continued to multiply
until it is estimated they have destroyed 40,000,000 bushels of
wheat. They increased to such myriads that from crowding, a
plague of soft ringworm fell upon them, which in turn was caught
by the men who fought them, and became a plague among the
people.^
The export of Australian coal which had gone in hundreds of
thousands of tons to South America and the East Indies, is
similarly stopped, with shut-down collieries and the labor unrest
that arises from unemployment.
New Zealand, slightly more distant, finds that the paralysis has
affected a trade so valuable and so vital as wool. As early as
March, 1916, the wool sales of her ports had been postponed
indefinitely and arrangements were being considered to provide
for cash advances to the growers similar to the means by which
' Collier's Weekly, March 2, 1918. Mark Sullivan.
^ J-- lyj vv /\K
80 INFLUENCE OF THE GREAT WAR UPON SHIPPING
the Australian Government had made cash advances to the wheat
growers.
In Argentina, a country with a trade consisting of heavy ex-
ports of wheat, corn, flax-seed, and meat, imports of coal and the
great variety of manufactures needed in a modern state, the
interference with trade by the war is very acutely felt. It began
early.
Argentina is about to feel the effects of the war very
seriously. Imports are becoming beautifully less, exports
are very reduced and laborers are as plentiful as leaves in
Vallombrosa, with labor conspicuous mainly by its absence.
Free dinners are being given, and it is very disheartening
to see hundreds of strong and able men waiting listlessly to
be fed.
Work in the port is very scarce, and hundreds of steve-
dores, lightermen, sailors, and others wander about with
their hands in their pockets.
Business continues at a complete standstill, and all stocks
and shares are either unquotable or extremely weak.^
Within two months after the war had started 10 per cent of
Buenos Aires clerks had been dismissed from their positions.
By September, 1917," the vessel arrivals were 50 per month less
than in normal times. Our consul reported,^ that " due princi-
pally to lack of shipping space, the exports from Argentina for
the first eight months of the year were considerably smaller than
for the same period the previous year, except for quebracho logs,
skins and hides, butter, wool, tallow, and frozen beef."
January to August
1917 1916
Wheat (tons) 765,919 1,597,578
Maize 695,327 1,562,440
Linseed 61,958 495,331
Oats 231,697 573,221
Quebracho logs 75,799 74,779
Butter 5,965 4,237
Wool 95.840 82,772
Frozen beef (quarters) 3,642,516 3,304,745
\Fairplay, October 1, 1914, pp. 554-555.
" U. S. Commerce Reports, November 22, 1917, p. 721.
' Ibid., October 22, 1917, p. 290.
TRADE DISLOCATIONS DUE TO WAR 81
The suffering of the people is indicated by the fact that the
previous winter coal from the United States had paid 80s. a ton
ocean freight. A reduction of much more than half in the total
coal supply shows the pinch to which industry was put. On
May 20, 1918, the daily press reported the people in the interior •
of Argentina burning maize in the place of coal which they could
not get.
From the Caribbean comes the worldwide plaint of hunger
and trade stoppage.
Central America can not supply the foods which we com-
monly think of as necessities. They import wheat, corn and
beans, and are suffering from lack of these now.
I could speak of cocoanuts or of bananas, thousands of
bunches which, being perishable, are thrown into the sea
weekly, because there are no ships to carry them.
There are natural fruits that perish by the millions of
bushels and could be fed to pigs— all of which are lost
through lack of organization.^
A bulky product like lumber is naturally one of the early vic-
tims of declining tonnage. Months ago we sent regiments of
American lumberjacks fully equipped to France and England, to
produce in Europe what we could not ship across the sea. From,
San Francisco came the complaint more than a year ago, of
Mr. J. J. Donovan, President of the Pacific Logging Congress :
Because we have few suitable ships for the foreign trade
on the Pacific, many logging camps are closed, and many
mills are silent. The foreign ships on which we depended,
find the food and munition trade with the warring nations
so remunerative that there is little space or thought of
lumber, except for military purposes.'
' Cyrus F Wicker of N. Y. : Proceedings of American Academy of Politi-
"■'-'Ti f.rsiictifn^mie'/eip'oJi Zw whf .he above re,narl<s were made,
?'*rn^H Irnl 1^79 000 000 fe" to 700,000,000. From the Pacific the per-
cema.e ono's ds'gr^^^^^^^^^^ 718,000,000 to 322 000,000, and there were
fur he? dec hies in 1917. A heavy Pacific export of shooks and staves fell
82 INFLUENCE OF THE GREAT WAR UPON SHIPPING
The traffic of the Suez Canal is a suggestive index of the phght
of the world's trade. In 1915 the traffic had fallen 23.8 per cent
below that of 1913 which was slightly above 20,000,000 net tons.
This reduction was but little more than the amount of German,
Austrian, and Turkish tonnage passing in 1913. but the 1917
tonnage of 8,300,000 tons was a 45 per cent drop from 15,400,-
000 tons of 1915.
Some of the industrial deadenings due to the war must con-
tinue and even increase until the war is over, or at least until
shipping increases, while others are temporary, such, for example,
as that of the Chilean nitrate business which declined in the early
part of the war, but which has risen to greater heights than ever
as the increased demand for material for explosives has sent the
ships of the Allies in ever increasing numbers to the nitrate
ports.^
American cotton also has had its decline and recovery. The
temporary paralysis of 1914 and 1915 caused the price to go to
an exceedingly low and unprofitable point, which upset the whole
basis of industrial life in the cotton belt, and created depression,
very general discontent, and some anti-English feeling. It
caused the national agitation and campaign that every man should
buy a bale of cotton, the President himself buying one to set the
example. This, however, has long since passed away, but the
possibility of partial return is indicated by the shutting down of
British mills in the spring of 1918, for want of raw cotton.
However, the cotton belt is now safely launched upon the sub-
stitute industry of raising meat, for which it is so well fitted, and
for which the demand is so unprecedented.
Of all the trade disturbances caused by the war, perhaps the
most conspicuous were those induced by the cessation of the
German export of her erstwhile world monopoly supplies of
away almost completely; the Pacific export of railroad ties dropped from
1,100.000 to 500,000 but the nearness of the Atlantic to the war bases in
France caused the Gulf and Atlantic coasts to increase their shipment of this
war supply threefold, to 2,500,000 ties.
' Despite heavy shrinkage in other parts of the world, Britain increased
her entrances from Chile from 150,000 to 350,000 tons, while the movement
to the United States increased from 510,000 tons in 1913 to 720,000 tons in the
first ten months of 1917.
TRADE DISLOCATIONS DUE TO WAR
83
chemical dyes and potash. For a time many textile manufac-
turers refused to guarantee their colors, and England and the
United States were compelled to diligently create a new dye
industry. The American success is registered ' by the increase
in our export of American made dyestuff from $1,200,000 in the
first seven months in 1915 to $8,400,000 in the corresponding
period two years later. Our dyestuff trade to France jumped in
this two years from $250,000 to more than $1,000,000; to
United Kingdom, from $500,000 to $2,000,000.
With potash the substitution has been far less satisfactory.
The famine still continues to the great injury of potatoes ' and
many other crops and many manufactures, despite the fact that
we have busily dredged the bottom of the sea, burrowed in the
beds of Nevada lakes, tunneled the Utah hills, and experimented
in many laboratories.
The greatest of all the trade disturbances will be the most
ephemeral, but also the most revolutionary while it lasts: namely,
the food trade.
The World's Food Supply— A Measure of War's Trade
Disturbances
The war fell upon the earth in a way to embarrass peculiarly
the international trade in food, and the Allies' food supply. All
the West European Allies are heavy food importers and all the
W^est European neutrals as well, for food importing has become
the habit of Western Europe. From Norway clear around to
Greece, inclusive, no country produced all of its own bread or
meat, and some of them, especially Britain, Norway, Sweden,
and Denmark, were almost as dependent upon outside supplies
as New England itself; France, Spain, Portugal, and, to a lesser
extent Germany, were also food importers. Even the beasts of
all these countries depended to some extent on imported food
' II S Covimerce Reports. October, 1917, p. 271.
= Owing to he importance of potash as a fibre strengthener many prom-
ising potato crops of 1917 wihed before the attacks of bhght which they
would^have withstood if adequately fed on potash, which is pecuharly im-
portant to this crop.
84 INFLUENCE OF THE GREAT WAR UPON SHIPPING
and in Holland and Scandinavia they depended to a great extent
upon oversea supplies of cottonseed meal, oil-cake, bran and
Indian corn.
There were six sources for these vital import supplies of
Western Europe : the Baltic Sea, the Black Sea, North America,
the River Plate, India, and Australia. The Baltic was instantly
closed upon the declaration of war, for the German navy made
trade with Russia, the Baltic grain exporter, impossible. In a
short time the entrance of Turkey into the war shut off the
Black Sea, which, as the outlet of Bulgaria, Roumania, and
South Russia, was the greatest wheat exporting district of the
world. This threw the Allies back upon the grain supply of
North America, the River Plate, India, and Australia. Of these,
the last two were relatively unimportant, and the United States
happened for two years to have, from its standpoint, a streak
of agricultural good luck, which has probably turned out to be
Allied bad luck, for it kept us unduly asleep.
It so happened that in 1914 this country, which had had
wheat crops averaging 705,000,000 bushels in the three pre-
vious years, had the biggest crop ever recorded — 891,017,000
bushels. That enabled us to have a surplus for Europe that
season. Also Europe had a fair crop. Then, by the same luck
which enables a gambler occasionally to throw two double sixes
in succession, the crop of 1915 was again the biggest ever —
1,011,505,000 bushels — and we shipped to the Allies a total of
243,000,000 bushels. The 1916 harvest dropped back to rather
below normal size— 640,000,000 bushels; in 1917 to 660,000,-
000 bushels.
The phenomenally big crops of 1914 and 1915 coming as they
did with the decline in shipping let a smaller tonnage supply the
Allies, because the wheat was unusually nearby. It also kept
bread price down and served to prolong our dream that the war
was 3,000 miles away, and hid for one full year the real facts
of ship shortage and food shortage. Then the normal crop of
1916, coming with the increasing ship scarcity, showed that for
1917 the usual supplies could not be drawn from India, Argen-
TRADE DISLOCATIONS DUE TO WAR 85
tina, and Australia because of the absolute scarcity of tonnage.
.\nd we had slept one year too long, postponing cruelly the be-
ginning of a policy of shipbuilding.
In the meantime the needs of Western Europe were becoming
yet greater and greater, because the home supply was failing, due
to the shortage of man power, beast power, and fertilizer.^ Now
we come into the dreadful year of 1918 in which America, be-
lated duplicator of the experience of her allies, promises a
reduced supply of agricultural produce because of labor shortage
and fertilizer shortage.
The measure of this pinching of the world's trade is found in
the rationing of the people of Belgium and France to rations
reduced to the point where their inadequacy is shown by the
spread of tuberculosis — a hunger disease. In England also the
food shortage has become almost as bad and America is in a
condition that may well be said to be partial informal rationing.
The Dislocation of Trade
In addition to trade destruction, there is an enorrtious amount
of trade dislocation. Great efforts are being made to cut out
waste motion and shorten distance in the handling of the small
quantities .of goods with which the world must content itself.
As a result we are learning two things — to get along without, and
to go the short route with what we have. The world's trade is
being partly rerouted.
Rerouting of Trade
When shipping revived in the autumn of 1914 there was a
temporary paralysis in many localities due to the disappearance
of German ships and German trade. Mediterranean trade which
had been carried to the United States by German vessels, was
transshipped for a time at Liverpool. Then the Cunard line put
on new direct service from the United States to Greece, and the
' In 1912 we sent 1.100,000 tons of fertilizer to Europe. In 1916 we sent
44,000 tons and in 1917 our total exports were less than the year before.
86 INFLUENCE OF THE GREAT WAR UPON SHIPPING
Italian Government aided new Italian lines direct to the United
States to replace the German lines. New lines went from Amer-
ica to Scandinavia, but next to the supply of ships to the scene of
war itself, the greatest single rearrangement was the trade of
Archangel, the only European outlet for over 100,000,000 people
engaged in war. Despite its limited connection with the rest of
Russia through a single track narrow gauge railway, so much
traffic was thrown there that in the summer of 1915 it was a port
in rank second only to New York in number of vessels arriving
and clearing.^
Russia made a further attempt at outlet by promptly establish-
ing new steamship lines from Vladivostok across the Pacific to
Seattle and British Columbia, which of course meant longer voy-
ages and more shipping to render the same service that had pre-
viously been rendered by the short voyage from Baltic ports to
Britain. It also meant partial transfer of sources of Russian
supplies from Britain to United States.
Reduction of Entrepot Trade
The elimination of the entrepot trade, so far as possible, is
one conspicuous feature of the trade dislocation. In times of
peace a surprising proportion of the world traffic was trans-
shipped at some convenient port which held this business for the
double reason of excellent shipping connections and the estab-
lished force of market. For example, large quantities of Aus-
tralian wool were shipped to the United States by way of London,
for, despite the fact that there were direct vessels going between
the United States and Australia, the London wool auctions served
as magnets to keep the business moving by the old and more cir-
cuitous channels. Liverpool was a great transshipping port for
American cotton, likewise Bremen. American tobacco was trans-
shipped all over North Europe from Bremen, Dutch colonial
produce from Amsterdam, African produce from Antwerp, and
so on. The list might be extended to greater length. Now the
' Marine Review, May, 1916, p. 171.
TRADE DISLOCATIONS DUE TO WAR
87
triple pressure of actual blockade, ship shortage, and govern-
mental interference, is rapidly doing away with this. Of course
Bremen's tobacco and cotton business is gone perforce, for the
time being at least, and Haiti,' which had previously sent her
tobacco to Holland via Bremen, now sends it to Amsterdam
direct. In 1915 a Dutch cotton association was formed in
Rotterdam- to handle cotton which had previously come by
Bremen, and large fire-proof warehouses were built to handle
it. The congestion of the Italian port of Genoa ^ in 1915 was
partly due to the sudden rise of a wool import business direct
from the River Plate. Before the war Argentine wool came to
Italy through France and Antwerp, cleaned and ready for spin-
ning. This business was absolutely ended by the war and Genoa
had to erect wool cleaning and washing works to handle the
direct importations.
Much Dutch East Indian produce, coffee, rubber, tobacco, etc.,
previously shipped to the United States via Amsterdam, is
reported shipped direct.* In this case ship shortage is assisted
by the restrictions which the Entente Powers have placed on
Dutch imports for fear of ultimate transshipment to Germany.
England, however, lacks this factor, so that a recent order.
November 21, 1917,' shows the extremity to which the world is
brought; for this order is a deliberate annihilation, for the pres-
ent at least, of one of the most precious commercial treasures of
the British Empire— London's entrepot trade. For generations
London has busied and fattened herself as a rehandler of inter-
national trade, the world's greatest entrepot,*^ and now comes a
' U. S. Commerce Reports. October 30, 1917, P- 401.
"- The Economic World. February 10, 1917, p. 211.
'F airplay, January 3, 1916, p. 72^
4 U. S. Commerce Reports, October 3, 1917, p. lyu.
"Mr.'j a^Broadbank. chairman of the Docks Committee of the Port of
London Authority, said at the beginning of the war :
"London is the preeminent entrepot port pf the world, and has been so
since the destruction of Antwerp by the Spaniards m 1576.
The value of this class of trade can not be overemphasized. It gives tar
more employment to labor than trausit business: large sums are paid to the
warehouse keepers for rent. Banking and insurance business follows. A
mutiUide of pay ng guests in the form of buyers is brought into the city^
.It could be argued with some plausibility that the chief factor which
88 INFLUENCE OF THE GREAT WAR UPON SHIPPING
British order that no goods for France may be sent via England.
Referring to the difficulties of any reexportation, f airplay com-
plains editorially, December 21, 1910:
Further, in the case of coffee and of some sorts of spices
which are not consumed to any extent in England, the un-
fortunate merchant, who had been asked to continue export
trade, is now saddled with a burden which he has himself
financed, and which he will not be able to unload until the
return of peace enables him to resume his usual vocation;
which is a position at which even the selfishness of a red-
tape worm would, I should think, gird.
Changes in the Source of Supply
This class of dislocation has been worldwide, with innumerable
examples arising from the combined influence of the blockade,
the difficulties of transport for the finished produce, inability to
secure raw material, or inability to make the goods themselves
because of pressure of war work. The following are some typi-
cal examples of this type of trade changes.
has made London has been the carrying on of its huge entrepot trade during
the last 300 years.
Today there are 600,000 tons of goods in the warehouses of the Port
Authority, and when the stocks at the other pubHc warehouses are added, we
can reckon on 1,000,000 tons of goods being in the port. This, of course,
altogether leaves out of account the stocks of dealers or shopkeepers.
Just as every class of manufactured article can be obtained at the West
End stores, so the great wholesale markets on the eastern side of London
offer the world" the choice of the products of the world in bulk — wool,
timber, tea, rubber, tobacco, sugar, coffee, cocoa, spices, wine, brandy, rum,
metals, ivory, ostrich feathers, drugs.
Wool represents the largest value of the importations into London, and it
affords one of the most striking examples of the entrepot trade. Of the
25,000,000 pounds of wool coming into London every year, practically none
remains in London. About two-fifths is purchased by foreign buyers ; the
rest goes to the manufacturing districts of our own country. The wool is
brought to London merely to be sold. The same fact largely applies to the
other goods.
Ivory may also be mentioned as an instance of the magnetic power of the
London market. If you go into the ivory showroom of the London dock,
you will always see some barrels of small pieces of ivory from America.
These pieces are the discarded shavings of tusks originally sold in London
to American buyers. The shavings are sent here for sale from America, and
it may well happen that some of them will be purchased by Americans for
pianoforte keys or backs of brushes, and so have a third voyage across the
Atlantic before being finally used." Lloyd's Weekly, October 2, 1914, p. 629.
TRADE DISLOCATIONS DUE TO WAR 89
Long rivalry in the Argentine between the American and
British meat companies ended in September, 1914, by the ship-
ments from Argentina ^ to America being consigned to the
American rather than the British companies.
The closing of the Baltic whence British collieries had for
years drawn their supplies of mine props, sent a deputation of
timber m»n to Newfoundland prospecting for new supplies in
September, 1914.-
In December, 1914,^ the importers of the Belgian Congo
turned to America for the supplies which had previously come
from Europe via steamer lines that were then thoroughly dis-
organized. America is still feeding West Africa direct.
The Spanish fig export jumped from 2,000 tons in 1914 to
15,000 in 1915, because of the disturbance of the Turkish
(Smyrna), Greek, and Italian trade in this product.*
From the province of Amoy, China, comes the report ^ that
the indigo industry which had been almost killed out during the
last twenty-five years by the import of German aniline dyes, has,
by the shutting off of this trade, been restored to the point of
again supplying the local needs.
Our consul reports ^ that in Sumatra many articles previously
supplied from Europe now come from America, such as auto-
mobiles, patent medicines, chemicals, toilet articles, household
goods, etc.
The drug imports of Paraguay ' show that the supply of drugs
from Germany had disappeared, from France they had shrunk
to one-fifth, and from Britain to one-half their former import-
ance, while the supply from the United States had much more
than doubled.
A book might be filled with similar examples of small local
trade dislocations. More important, however, are the larger
' Fairplav. October 8. 1914, p. 588.
= Ibid.. September 24, 1914, p. 503.
' U. S. Commerce Reports, December 7, 1914, p. 1041.
* Ibid., October 18, 1917, p. 253.
"Ibid., January 2, 1918, p. 3.
Ubid., January 10, 1918, p. 119.
'Ibid., January 10, 1918, p. 125.
90 INFLUENCE OF THE GREAT WAR UPON SHIPPING
movements. Among these, three are particularly conspicuous:
(1) the decline in European exports; (2) the corresponding rise
in the trade of Japan; and (3) of the United States.
Decline of European Exports
The most pronounced characteristic of European trade has
been declining exports, and because of loans abroad, the ever-
increasing imports. Amidst the general decline of exports there
has been a surprising continuance of the British export of cotton
manufactures. An examination of the economics of this in-
dustry shows good reasons why it should persist far into the
struggle. The raw material takes up small bulk in proportion to
its value. The finished product takes up little space and so long
as Britain can import food or any raw materials, she has abun-
dant space going outwards. The cotton industry, unlike iron
and steel, is one in which women can do the preponderance of
the work. We find that between 1913 and 191 G Britain actually
held and substantially increased her cotton cloth export (quan-
tities) to South America, the United States, Egypt, and other
Mediterranean countries. Beyond Suez the competition of Japan
and the pinch of high prices on poor purchasers, made themselves
manifest by a decline of one-third (a billion yards) to the British
Indies ; that to China fell from 570,000,000 to 370,000,000 yards;
to Japan from 50,000,000 to 16,000,000; with a one-fifth decline
in the Dutch East Indies.
Japan Gains in Trade
To date Japan has kept out of the Allies' ship pool that her
ships may serve herself. Strenuously has she striven in trade
bargains to get heavy supplies of raw material, particularly steel
to build ships for herself. So diligently has she manufactured
that her imports of raw material, especially cotton and steel, have
exceeded all precedent, and the busyness of the western world
has given her a chance to establish many a trade which she will
strive to hold. Her cotton blankets are gladly taken by South
TRADE DISLOCATIONS DUE TO WAR 91
Africa and Australia, and hosiery which she has previously sent
only to Asia, is now sent to Australia, South Africa, and even to
Holland and England/ A measure of these trade gains is a
fivefold increase of Japanese cottons to New Zealand between
1914 and 191G, while the more important supply from the mother
country had less than doubled in value."
In the Foochow district of China ^ where the British had a
monopoly on piece goods trade before the war, the Japanese had
in three years with diligent work, succeeded in getting TO per
cent of it.
Japanese cotton spinning was the most prosperous industry of
the Empire in 1917, paying about 60 per cent dividends and being
slightly ahead of the manufactures of chemicals.* Hong Kong,
long a heavy flour importer from the United States, is experi-
encing a change of diet because it is now being supplied with
Japanese flour made of Manchurian wheat and brought down the
coast in Japanese steamers.^ The Japanese newspapers announce
that this change has come to stay.
More interesting and more suggestive is the way Japan has
seized the Austrian trade in pencils, by supplying us 3 to 5 per
cent of our import in 191G, and 50 to 60 per cent in 1917; and
the German trade in toys, of which the oriental copyist supplied
90 per cent of our 1917 imports of nearly $2,000,000.
The shortage of British steamers in Eastern seas is resulting
in an increasing service by Japanese steamers in the Indian coast
trade, as well as an increased Japanese share in the trade itself.^
The figures of Japanese trade, imports and exports, from 1913
to 1917, are startling, even when allowance is made for the
rise in prices. The shrinkage in her imports of manufactures,.
coupled with enormous increases of raw and partly manufactured
goods, and the decline in food imports, show she is developing
' U. S. Commerce Reports, October 17, 1917, p. 226.
"'Ibid., October 25. 1917, p. 341.
'Ibid., November 9, 1917.
■ * Report of Consul General Scidmore, Official Bulletin, January 31, 1918,
p. 1.
'' U. S. Commerce Reports, November 5, 1917, p. 487.
" Fairplay, December 28, 1916, p. 1012.
92 INFLUENCE OF THE GREAT WAR UPON SHIPPING
her colonial empire for food and capturing foreign markets with
her manufactures, which show in 1917 more than threefold the
figures of 1913. During this period her total exports sharing the
conditions of the United States have gone from $300,000,000
to $800,000,000.
TRADE CHANGES— INCREASED FOREIGN TRADE OF JAPAN '
Imports
1913 1914 1915 1916 1917
Foods, beverages,
tobacco
Unmanuf'd . .$ 38,613,000$ 25,981.000$ 9,974,000$ 7,315,000$ 10,112,000
Prepared ... 21,498,000 13,271,000 9,040,000 8,362,000 8,255,000
Raw materials . . . 176,241,000 163,877,000 169,408,000 215,304,000 281,458,000
Partly iiianuf d . . 63,273,000 47,982,000 49,041,000 100,478,000 160,770,000
Whoflv manuf'd . 61,828,000 43,494,000 25,659,000 42,373,000 51,688,000
Miscel'laneous ... 2,169,000 2,369,000 2,304,000 3,247,000 4,060,000
Total $363,622,000 $296,974,000 $265,426,000 $377,079,000 $516,343,000
Exports
1913 1914 1915 1916 1917
Foods, beverages,
tobacco
Unmanuf'd ..$ 12,290,000$ 13,013,000$ 18,661,000$ 23,597,000$ 36,639,000
Prepared .... 18,688,000 18,653.000 21,277,000 28,524,000 49,197,000
Raw materials . . . 25,593,000 22,678,000 22,643,000 29,418,000 40,620.000
Partly manuf'd . 163,540,000 152,720,000 161,216,000 269,651,000 361,700,000
Wholly manuf'd . 92,180,000 83,693,000 21,069,000 189,791,000 293,195,000
Miscellaneous ... 2,980,000 3,907,000 8,225,000 21,062,000 17,747,000
Total $315,271,000 $294,664,000 $353,091,000 $562,043,000 $799,098,000
American Trade
Since 1914 the United States has found herself to be what
England has often called herself during the past century —
namely, the workshop of the world. In the first months of the
war, steamships and cables could not work fast enough at placing
contracts for guns and shells, motor trucks, barbed wire, and
explosives in the United States. Then came the rush on our
shipyards with ships for European owners. Then the demand
for food, of which we shipped enough for the complete rationing
of 16,314,000 men on the average for the whole period, July 1,
^ U. S. Commerce Reports, February 19, 1918, p. 665.
TRADE DISLOCATIONS DUE TO WAR 93
1914, to January 1, 1918, and in addition enough protein to feed
22,000,000 men.
The trade balance of the United States during this period has
attained a condition never before witnessed in the history of the
world's trade, and we may hope never again to be duplicated, for
it is the sign of woe. Before we entered the war, Europe was
supplying itself and feeding itself not by trade, but in promises
to trade, namely, bonds, which are promises to send money
(really goods) at some future time. Then when the borrowing
capacity of the nations dealing with American individuals was
about exhausted, we entered the war, floated our own loans, and,
as a government, advanced the money to Europe (more than
$2,000,000,000 in the first six months of the war) thus permit-
ting a continuation of this astonishingly unbalanced trade, as
evidenced by our total exports during the calendar year 1917 of
$6,200,000,000, and total imports of less than $3,000,000,000,
U. S. TRADE BALANCE, 1917, CALENDAR
(In Millions of Dollars)
Imports Exports Imports Exports
Europe 551.1 4,054.3 Sweden 18.0 20.9
Asia 758.2 431.1 Norway 6.2 62.8
Africa 73.0 51.4 Canada 413.6 829.9
Oceania 99.2 117.1 Argentina 178.2 107.6
N.America 871.9 1,264.6 Brazil 145.2 66.2
S. America 598.8 312.4 Chile 142.5 57.4
, China 125.1 40.2
U. K ... 280.0 2,001.0 Japan 253.6 186.3
France 98.6 940.8 Australia & N. Z. . 32.0 76.9
Italy 36.4 419.0
Russia in Europe.. 12.3 314.6 Total 2,952.4 6,231.2
Netherlands 22.7 90.5
The figures to Europe as a whole, $4,000,000,000 exports, and
less than one-seventh as much imports from Europe, are indeed
startling. The examination of the figures with the principal
belligerents, Britain, France, Italy and Russia, shows how our
trade consists virtually of a hand-out of goods without return in
kind at the time.
The trade with Canada, equally at war, partakes of the nature
of the European combatants, while from South America and Asia
94 INFLUENCE OF THE GREAT WAR UPON SHIPPING
we are getting a surplus of imports to partially, but only to a
very small degree, square the account.
Comparison of 191G with 1917 shows that these tendencies of
enormous export of American produce were steadily increasing,
at least on the value basis. The figures of import of raw ma-
terials give a good measure of the manufacturing effort that the
United States is making. Right down the column are heavy in-
creases in hides, rubber, wool, oil, and especially in the more
valuable ores where the jump in manganese of more than 100
per cent in the three years of the war shows how our steel in-
dustry has been called upon for high-grade products. In the
bulky iron ore, ordinarily secured largely from Europe, we see
a heavy decline (a million tons) which we can fortunately replace
at home.
U. S. IMPORTS CRUDE, 1914-1917, FISCAL '
Quantity (000 omitted) Value (000 omitted)
1914 ' 1917 1914 1917
Hides, lbs 561,070 700,207 $120,289 $216,363
India rubber, lbs 131.995 333,373 71.219 189,328
Silk, raw, lbs 28,594 33,868 97,828 156,085
Wool, unmanufactured, lbs. . 247,648 372,372 53.190 137,137
Cotton, raw, lbs 123,346 147,061 19.456 40,429
Flaxseed, bu 8.653 12.393 10,571 25.149
Mineral oils, gal 773,052 1.034.590 11,776 14.109
Leaf tobacco, lbs 60.107 46.136 35.029 25.481
iron ore. tons 2.167 1,149 3,986 6.984
Manganese, tons 288,706 656,088 1,841 10,545
Total value for 1914, $632,865,860; 1917, $1,109,655,040.
In addition to becoming the workshop of the world, the United
States has also been called on to return two decades in its indus-
trial history and become the provisioner of the world. Despite
the fact that our export of foods has been rapidly declining for
tw'enty years and had in some lines approached the vanishing
point, we suddenly found ourselves the only nation in a position
to send food. With exports of fresh beef and veal that had de-
clined to 6,000,000 pounds in 1914, and which were returned
twentyfold in imports from the Argentine, Uruguay, Australia,
' Official Bulletin, October 24, 1917.
TRADE DISLOCATIONS DUE TO WAR 95
New Zealand, and Canada, we suddenly increased it to 170,-
000,000 pounds in 1915, 231,000,000 in 1916, and 215,000,000
in 1917 (calendar). Meanwhile the bacon and ham exports had
jumped from 350,000,000 pounds to over 800,000,000.
Our wheat export which averaged 40,000,000 bushels in three
prewar years, went up to 259,000,000 in 1915, 173,000,000 in
1916, and, alas, down to 106,000,000 in 1917 (calendar).
Butter, in which we had been an inconspicuous figure with
4,000,000 pounds export for three years before the war, went up
to 26,000,000; cheese from 3,700,000 to 66,000,000; condensed
milk from 17,000,000 to 259,000,000 pounds, and as is well
known the call for food is becoming ever louder.
We have, however, recouped ourselves to some extent, and
with our war prosperity, kept up the flavor of our eating by
maintaining our imports of coffee, teas, and spices, and substan-
tially increased our imports of cocoanuts and crude cocoa (179,-
000,000 pounds in 1914, 367,000,000 in 1917).
The decline in the imports of some luxuries is a measure alike
of European inability to produce, and, since we have got into the
war bond buying business, of our own inability to buy this kind
of entirely non-essential commodities; for example, our consul
general at Paris reports for the first nine months of 1917 ^ the
falling ofif of exports to this country through Paris from $42,-
000,000 to $35,000,000, decreases being chiefly precious stones,
pearls, silk manufactures, champagne, feathers, cotton manu-
factures.
Similarly, during the year 1917 the consul at St. Gall, Switzer-
land, says that the small shipments of cotton embroideries and
laces are responsible for a decline in trade from $7,500,000 to
less than $4,000,000."
The ivory and ostrich feather market of London had reached
an unprosperous condition as early as the middle of 1916.^
' U. S. Commerce Reports, October 13, 1917, p. 177.
- Ibid., February 8, 1918, p. 516.
' Fairplay, December 21, 1916, p. 955.
96 .influence of the great war upon shipping
Military Domination of Economic Life
The year 1918, granted a continuance of the war in full vigor,
will show more changes than any single year during the war, for
the reason that the whole basis of trade is changed. Normal
trade is controlled by competition and the desire for gain. This is
now eliminated. Now all governments are controlling com-
merce with ever increasing disregard of individual preferences
and profits as national need, ship shortage, and war stress make
need rise higher and higher, thus pushing national control to
severities previously undreamed.
Government regulation of trade has been the bugbear of Anglo-
Saxons in the recent decades of peace, but now it has become a
Cyclops in this time of war, holding trade in an all inclusive and
entirely relentless grip. As the government conscripts the sol-
diers, so it conscripts trade in the dual attempt to prevent trading
with the enemy and, with lessened resources, to produce increase
of economic efficiency at home, in Allied lands, and on the battle
front.
Trading uuith the Enemy
Human nature is much too weak to resist the temptation of
war profits even by selling to the enemy, and governments have
ample provocation for all the restrictions they have taken. Some-
times the trader had some excuse. Sometimes he had none.
Thus, the Scandinavian market has been partly supplied with Ger-
man goods and the American and British trader could properly
wonder if the great increases of Scandinavian trade were not re-
placing German supplies for Scandinavia rather than going on to
Germany. There was, however, no question about the results of
the reported export of coal at $40 a ton from New York to
supply German cruisers that were destroying American and
British trade in the South Atlantic in the early part of the war.^
Even clearer is the example of the German firms in Chile and
' Fairplay, October 22, 1914, p. 642.
TRADE DISLOCATIONS DUE TO WAR 97
Argentina who, with good profit to themselves, consigned to
America cargoes of hides and nitrate to be made into the war
suppHes for which in the early years of the war Germany so
bitterly denounced America.
The British Blockade
England early commenced the dual policy of controlling her
trade to strengthen herself and weaken her enemies by blockade.
Within two weeks after the war started, she prohibited the
export of practically all kinds of foods and began her policy of
holding up cargoes bound to Germany or to neutral countries
adjacent to Germany. Thus ships to the Mediterranean were
searched at Gibraltar for contraband, and a two weeks delay for
an American steamer while hundreds of tons of copper were
being taken from her was a common occurrence.^ The list of
contraband articles was constantly being changed as the economic
concept of the war grew. Control of neutral trade was also in-
fluenced to a considerable extent by the fear of too great resent-
ment in foreign countries. Thus for a time the cotton blockade
helped to cause such low prices of cotton and such industrial
depression that our whole South was, generally speaking, resent-
ful toward the Allies. For this reason and for the lack of full
appreciation of the war value of cotton, Britain permitted it to
go to Germany for a time early in 1915 when more than a
quarter of a million bales were sent from this country direct to
Germany.- If the Germans had been in the English position,
they would have bought that cotton and stored it — in Bucking-
ham Palace if necessary.
Despite Britain's complete supremacy of the sea, the interna-
tional difficulties and the international law with regard to what
was contraband caused her blockade policy to be quite ineffective
because of the large amounts of trade that went through neu-
• U. S. Consular Reports, October 26, 1914. p. 1310.
- Another British decision, since probably repented, was the refusal to buy
sugar that came from Germany for fear of strengthening Germany, and
the purchase by the government of distant supplies instead.
98 INFLUENCE OF THE GREAT WAR UPON SHIPPING
trals. Mr. de Tankerville, editor of the Nautical Gazette, writ-
ing in June, 1917, says :
It is no secret now that the foundations of many a for-
tune in the new era of shipping were made carrying cargoes
to ports in Italy, Spain, Portugal, Holland, Sweden, and
Norway, which eventually found their way to Germany.^
The resentment of the American people at having their trade
stopped and the protests of the American Government on this
subject caused so much more favorable treatment for our vessels,
that they were at a premium.
American ships were favored by underwriters in the
matter of insurance against the risk of detention and cap-
ture and American ships were able to command better rates
in the charter market. Soon merchants engaged in this
lucrative traffic began to scour American ports for coasting
steamers able to undertake voyages across the Atlantic, and
thus for the first time in a generation the American flag was
restored to a conspicuous position on the transatlantic sea
route. ■
Some measure of Britain's failure early in the war to check
trade to Germany was shown by the enormous increase of trade
to Genoa in the winter of 1914 and 1915, when for a time
the port got so full of steamers that sixteen of them were
lying in nearby ports waiting to discharge cargoes of grain, ni-
trate, etc., a large part of which got to Germany.^
The increase of trade through the northern neutrals was
astonishing:
Before the war the United States exported only negligible
quantities of aluminum to Germany and the six neutrals.
In 1912 we sent $5,709 worth to the six neutrals. But
in 1915 we sent more than $411,000 worth to Norway and
Sweden alone.
Neither the Netherlands nor any other of the northern
^ New York Evening Post, June 30, 1917.
' R. de Tankerville, New York Evening Post, June 30, 1917.
' Fairphy, January 1. 1915, p. 103; November 12, 1914, p. 746.
TRADE DISLOCATIONS DUE TO WAR 99
neutrals took any special quantity of brass from us prior to
the war. They all developed an interest in our brass, how-
ever, just about the same time that it began to be very
important for Germany to secure additional supplies of it.
Denmark, which had been importing less than $20,000 worth
annually, increased her purchases to $143,000, Norway
jumped from $5,845 in 1912 to $183,321 in 1916."
Holland had been buying about $25,000,000 worth of copper a
year from the United States, largely for industrial Germany up
the Rhine, but Englanxl soon cut that to $2,000,000, although
there was a great increase in Sweden's copper trade during 1915
and 1910.
Tinplate to the six neutrals went up from less than 400,000
pounds in 1912, to 9,000,000 pounds in 1916. By every possible
means Germany increased her stocks of materials, even before
the British blockade had begun. They took a census of copper
throughout the Empire, which listed the roof of the Reichstag
building, and the cooking pots in the Emperor's kitchens, and
then scraped and smuggled to save His Majesty's culinary outfit.
Food also apparently went to Germany by the roundabout way.
Before the war Germany bought annually considerable
quantities of American rice and Norway none. Since the
outbreak of the war Norway has bought practically what
Germany used to take, and Germany has had none.^
In the same way dried fruits to the northern neutrals have in-
creased in amounts just about equal to that taken by Germany
before the war. Vegetable oils went up four or fivefold, bacon
from 15,000,000 pounds to 60,000,000 pounds, and sole leather
from 200,000 pounds in 1912 to 12,000,000 pounds in 1916. It
is little wonder that the English and French said bitter things
about the American profiteers.
England attempted to stop this trade so far as she could by
making her famous black list of firms with which English sub-
' O. K. Davis, March, 1917.
100 INFLUENCE OF THE GREAT WAR UPON SHIPPING
jects could not trade because the firms were more or less German,
had German capital, or were aiding Germany. To the vigorous
American protest concerning this action, the British answer was
sound. This they said was no attempt to influence American
trade. It was merely an order to English citizens as to with
whom they should or should not do business.
Running the British Blockade
When cotton reached $4 a pound in Germany, January, 1916,
and some other commodities were of equal value, we can see an
explanation for the great ingenuity of parcel post traders who
sent packages seeming to be newspaper, but which were hollowed
out with a cavity in the middle for hidden freight. Corrugated
wrapping papers often had in each corrugation a tiny strand of
copper wire, or a tiny filament of rubber. Books were hollowed
out and turned into little trunks. One of the most ingenious
cases, and one which illustrates the difficulties of blockade and
the straits of Germany for a valued product, is the following:
From an American port parcels were sent by post to a China-
man at Shanghai who rewrapped and sent them to a Chinaman
near Singapore. He rewrapped and sent them to another China-
man near Bombay. This man in turn forwarded them to Persia,
and they went through British parcel post, despite the fact that
they contained a product imported by Persia. Final transference
from Persia overland to the Turks and thence to Berlin was
simple.
The War Changes United States Policy in Industry and Trade
When the United States entered the war, the problem of trade
control was simplified for Britain, but very much complicated for
the neutrals. Instead of officially protecting American exports
that were bound eventually for Germany via Holland, Denmark,
Norway, Sweden, or Spain we now became really interested in
destinations.
It was high time, for in the months preceding our entrance
TRADE DISLOCATIONS DUE TO WAR 101
into the war we had steadily strengthened Germany through the
oil-cake and the cottonseed meal that were sent to the Dutch and
Scandinavian cows, and also through the vegetable oil, bacon,
grain, metals, cotton that went to these northern neutrals.
When we entered the group of trade controlling nations, we
passed a trading with the enemy act and started on a stage of
rapid evolution, and, as with the conscript army and other war
matters, we repeated the steps that had been taken by the nations
that had been earlier pressed by the war. The trade restrictions
of the war in their simple chronicles would fill volumes. Only
their general tendencies can be mentioned here.
Early in the war Britain was suddenly called upon to produce
munitions in quantities before unimagined. She had to take con-
trol of the output of the cruder iron and steel industries, thus
guaranteeing that the war industries got their raw material. To
concentrate labor on essentials, new buildings could only be built
with special permission, which unless it was a war enterprise was
universally refused, except for structures costing less than £500,
so that by 1917 houses were very scarce in many parts of
England.
Before the war was two years old, English industries and
consumption were beginning to feel the shortage of imports, of
which about one-fifth (12 to 15 million tons) were classed as
non-essentials that could be spared.^ The editor of Fairplay
estimated in the spring of 1916 that prohibitions or semi-prohibi-
tions of the government had already stopped about one-third of
this, leaving 9,000,000 more tons which could be dispensed with
in the interests of the national service. Sixteen months later, in
the autumn of 1917, a new definition of dispensable and indispen-
sable had been adopted, for the British Government officials ad-
mitted that the normal British imports of 60,000,000 tofis for
civilian use had shrunk to 25,000,000 tons and still the submarine
was sinking ships much faster than they were being built. This
makes it clear why the British Government ordered the ending
of the entrepot trade to France ; why in the early months of 1918
'Fairplay, May 11, 1916, p. 730.
102 INFLUENCE OF THE GREAT WAR UPON SHIPPING
the British cotton mills began to \^ partly unemployed; why
European publicists l)egan to suggest, March, 11) is, that perhaps
Europe had better have food rather than soldiers from America,
and why the United States and England commandeered, (March,
1918) a million tons of Dutch shipping.
Government Control in Industry
The pressure of these ever hardening necessities has caused an
almost infinite number of exercises of national control of imports,
exports, and industries. With the declining supply of shipping
the British Government found that they could not leave trade to
the free arrangement by individuals, for the reason that luxuries
could outbid the necessities and get the ships. A small increase
of percentage of value on luxuries would make a tremendous
freight possible, whereas anything like the same amount of in-
crease on necessities would make an impossible price. So, to
prevent luxuries outbidding necessities, and the economic wel-
fare of the nation from suffering, the government acting under
orders in council under the Defense of the Realm .\ct, made one
commission after another to control imports. They l>egan with
sugar, then wheat, then corn, oats, oil-cake, until the whole cereal
group was under control. This of course took away the business
of importers who had been handling these goods, but the gov-
ernment virtually requisitioned the importing firm to do business
for the government. They allowed the wheat importer, for
example, a satisfactory sum for handling grain, enough to allow
him a moderate profit. After this the miller was allowed to buy
it on condition that he made a moderate set profit in grinding.
Then, the food controller, if he found bread selling at a high
price, could start right back along the line, see who had been
profit grabbing and stop him, and so, beginning with government
import and price control, they kept unreasonable profiteering at
a minimum, and prices were therefore much lower than in the
United States, and the war was therefore less expensive.
If wages or other costs of business go up and some of the men
TRADE DISLOCATIONS DUE TO WAR 103
along the line between the importer and consumer are losing
money, they can come before the commission, prove their case,
and get a slight increase in profit. But the conspicuous thing is
the small amount of this that has happened. All England has
become a war machine. As the work enlarged, its organization
was made more permanent by having a Ministry of Munitions,
a Ministry of Food Control, a Ministry of Shipping, etc.
Nothing was too large, nothing too small, to come under this
government control. .\t one end of the iron industry the British
took possession of all the iron ore mines in the counties of
Cumberland and Lancashire,^ and at the other end the British
War Office forbade the sale or loan or manufacture of a hosiery
needle without the permission of its hosiery committee." No
one c(juld sell or export wood-working machinery without a
license, and so on for many possible pages.
Controlling Trade to Aid the War
The United States promptly adopted the same principle. In
the autumn of IKIT we prohibited export of coal for a time
across the Lakes to Canada, so that the coal might go instead
up the Lakes to our own Northwest. A little later on it was
allowed to go to Canada by special license for each shipment.^
The United States suddenly prohibited the export of sulphur
to Canada in September until we could investigate local supplies
and local needs to see whether or not we had the sulphur to spare.
Sweden at the beginning of winter (September, 1917) requisi-
tioned all fodder within the kingdom and gave a very long and
specific list of articles that were fodder.* Spain, by royal order,
prohibited the export of fresh olives in January, 1918.^
Examples of this sort by the score can be had from all quarters
of the world, even from the neutrals who are not adjacent to
combatants. For instance, Guatemala prohibited the export of
' Official Bulletin. .Anpust 2. 1917, p. 5.
' Ibid.. October 13, 1917. p. 8.
* Ibid.. October 2. 1917. p. 1.
* Ibid.. September 29. 1917, p. 4.
''U. S. Commerce Reports, January 31, 1918, p. 402.
104 INFLUENCE OF THE GREAT WAR UPON SHIPPING
cattle into Mexico. This example has no new principle in it at
all. even no new method.
By the autumn of 1917, with the United States in the war and
helpini;- rather than hindering trade restrictions, the matter of
trade control became more systematized. The British embargo
put exports into three classes :
a. Those prohibited to all destinations.
b. Those prohibited to all destinations other than British
Colonies and protectorates.
c. Those prohibited to all destinations in Europe and on the
Mediterranean and Black Seas other than Allied coun-
tries and Spain. ^
About this time France had a million tons of raw materials
piled up in the Atlantic ports of the United States and her muni-
tion plants were running part time, so that her trade restrictions
took on the more strenuous form of licensing every shipment of
import and approving the route of every vessel that sailed. She
also reduced her sailings between distant points like Madagascar,
Argentina, New Orleans, in the interests of more frequent
shorter voyages across the North Atlantic.
After the outbreak of the war our Congress promptly placed in
the hands of the President very inclusive powers for the control
of commerce. At the beginning of the enforcement of the law.
President Wilson, in a proclamation, stated :
It is obviously the duty of the United States in liberating
any surplus products over and above our own domestic
needs to consider first the necessities of all the nations en-
gaged in war against the Central Empires. As to neutral
nations, however, we also recognize our duty. ... In con-
sidering the deficits of food supplies, the government means
only to fulfil its obvious obligation to assure itself that neu-
trals are husbanding their own resources and that our sup-
plies will not become available, either directly or indirectly,
to feed the enemy.
' U. S. Comvicrcc Reports, October 23, 1917, p. 305.
TRADE DISLOCATIONS DUE TO WAR 105
By executive order he created an Exports Council (June 22,
1917) " to formulate policies and make recommendations neces-
sary to carry out the purposes of the law." This council con-
sisted of the Secretaries of State, Agriculture, Commerce, and
the Food Administration. Execution of the law was in the
hands of the Secretary of Commerce. The first license they
granted was to Captain Raoul Amundsen, for shipment of food
" from the United States to Raoul Amundsen, at the North
Pole." Within a week the Exports Council published a list of
eighty-seven articles of which export was prohibited.
Two months later, August 21, the President created an
Exports Administrative Board, composed of representatives of
Secretaries of State, Agriculture, Commerce, Food Administra-
tion, and the Shipping Board, and gave them the executive
authority that had previously been vested in the Secretary of
Commerce. At the same time he added the chairman of the
Shipping Board to the Exports Council and limited the functions
of that body to advice upon such matters as may be referred to
them by the President or the Administrative Board.
On October 12 another change of administration was made by
adding the Secretary of the Treasury to the list of men in charge
of the Administration of Exports, and the new body was called
the War Trade Board. Our list of prohibited exports rapidly
grew until the list, as published in the Official Bulletin for
October 22. contained GO articles and classes, including wool,
copper, tin. machines, all of which were practically prohibited,
and ten columns of articles which could only be exported with
special license for each shipment.
Xoveml)er 28 the President issued a proclamation making
operative the law for the control of imports, and we found our-
selves rapidly approaching the position of our European allies,
especially, as by midwinter, we brushed all these complications
aside and adopted the general policy of licensing all imports and
all exports. On March 22 we went a step farther. The War
Trade Board announced a List No. 1 of 82 classes of imports
which it termed " least essentials " which will be almost pro-
lOG IXl-LL'KNCE Ul- THE GREAT WAR Ll'D.N SIlirriNG
hibited after April !'». Licenses to import will only l^e available
when it can be shown that space is a\ailable — a very ellcctive
limitation.
The Ofi rial Mind Retlaces Siitlv and Demand
All these changes make a comj)lete destruction of the old basis
of trade in which individual need, individual initiative, the law
of supply and demand, guided by the desire of gain, had been
allowed to meet the nation's needs. In place of all these time-
proved and time-honored adjustments we now have the will
of an official saying who shall buy and who shall not, and what
shall be bought and what shall not be bought. Thus in midwinter
a shipowner came before the chartering committee of the Ship-
ping Board, seeking permission to take a cargo of resin and
barbed wire to Para, Brazil. It was refused, but he could take
coal. He had no alternative, so he took coal, which would keep
ice plants and factories running in Para, whereas resin would
merely make soap, and the barbed wire would l^e a drain on our
home industry. Returning, the ship captain wished to bring a
cargo of Brazil nuts. He was refused. Statistics of the period
showed that we had imported heavily of Brazil nuts the previous
six months, but the aeroplane factories needed cedar logs, which
the captain was permitted to bring and did Ijring. Similarly
other men wished to clear their ships to Africa, to Australia, to
Brazil. The chartering committee refused, but said they could
go to the west coast of South America and that they must take
coal. They did so, for the Shipping Board was the agency by
which this government was providing itself with nitrate of soda,
for which the war had given us enormously increased demands,
and by sending coal outward to the nitrate coasts we were guar-
anteeing that the mines and railroads of those countries kept the
wheels of basal industry turning.
All this control of the import and export for national purposes
and for the starvation of the Central Empires naturally left the
economically dependent neutrals out of account, and brought
vigorously to the fore the question of international policy with
TRADE DISLOCATIONS DUE TO WAR 107
regard to the neutral. There was, for example, the case of the
row of loaded Dutch steamships which lay anchored in the
Hudson at New York, but each day they were refused permission
to sail. For six long months they lay there, at an expense of
two or three or five thousand dollars each per day, paying their
crews and waiting for the permits that were steadily refused,
although rumor has it that their owners were receiving pay for
the ships' time from the German Government. Finally, how-
ever, the lonj^ siege was broken, the cargoes were unloaded and
sold for American consumption, the vessels chartered by the
United States (iovernment and put in the South American trade.
Nations as Bargainers
As the trade between the United States and many other coun-
tries had become for each shipment a matter of request and per-
mission between the individual and the government, so inter-
national trade has become a question of bargain and dicker
ijetween the different governments. For example, Sweden in-
formed the British Government of her intention to prohibit the
export of fish, whereupon, and not before, the United Kingdom
permitted two cargoes of lubricant, so vitally needed in Sweden,
to go forward.* Japan bargained hard and long for American
steel that she might build ships and not hire or sell any ships back
to the United States, but we were obdurate. If we could not
get some ships, we would not sell the extra steel, and we did not.
It was much easier for us to arrange with Britain for the release
of the necessary burlaps from Calcutta to pack the Cuban sugar
crop. One of the interesting war trade dickers occurred between
Argentina and the United States. We wanted Argentine wool,
which did not take much ship space, and they wanted coal, which
took more space. As the shutting down of the power, light and
gas plants in Buenos Aires was imminent, it is plain that we had
the stronger hand at the game. An almost amusing element was
added to the episode by the fact that the companies using this
coal for the convenience of the Argentine were German.
• Official Bulletin. July 12, 1917, p. 1.
108 INFLUENCE OF THE GREAT WAR UPON SHIPPING
Before we had been many months in the war almost all the
European neutrals came to us to beg, sending commissioners
after the fashion of the Allies. The arrangements with Nor-
way, whose commission was headed by the famous Fridtjof
Nansen, hero of the Arctic ice, is typical. After months of nego-
tiation we finally made a bargain with Norway, and the War
Trade Board made a public statement concerning it.^ This is a
remarkable, almost a ludicrous, document. It sounds like the
scriptural father talking to the prodigal sou as he equijjped him
for a second journey into the wicked world. In part it says :
L'ntil very recently the board was engaged in determining
the commodities and quantities the United States could
spare, her own and her associates' needs and the require-
ments of the other neutrals being given due consideration.
On January 18 a conclusion was reached with respect to
a large numljer of these items and a list was handed to
Dr. Xansen.
When it was found that further time would be required
to obtain full informati(jn concerning the quantities of the
remaining supplies nectled by Norway, the board deemed it
fairer to state its willingness to furnish those commodities,
the quantities to be hereafter fixed in accordance with Nor-
way's necessities when ascertained.
The proposed schedule of commodities agreed to by the United
States and her associates in the war as sufficient to cover " this
year's Norwegian requirements, considering the existing condi-
tions," is very specific, containing among other things the follow-
ing items :
Metric Tons
Bread grains, including rice 300,000
Starches 1,000
Sauces and pickles 80
Spices 382
Antimony 12
No longer does Hans import at will. We examine his larder
very carefully and conclude that he needs next year just 80 metric
' Official Bulletin, January 28, 1918, p. 13.
TRADE DISLOCATIONS DUE TO WAR 109
tons of pickles, no more, no less. No more does he get, and we
make him give many promises as to what he will and will not
do with them, and what he will and will not send to Germany.
In the meantime conditions in Norway's larder are such that
they are not likely to export much to Germany, for the special
correspondent of the Christian Science Monitor^ quoted Mr.
Haakon Five, Director of Rationing, as saying :
In future, the feeding of cattle on any kind of grain would
be forbidden. It would be necessary to set aside a small
quantity for the pigs, but most of the pigs would have to be
killed whilst poultry would have to be reduced by two-thirds.
In order to maintain the farm work it was absolutely essen-
tial to set aside 80,000 tons for fodder, nearly all of this
being apportioned to the horses. As great endeavors were
to be made to increase the area under grain by 1,000,000
maal, a further 80.000 tons must be set aside for seed, leav-
ing lioO.OOO tons for human food. When it is considered
that the normal imports into Norway of rye, wheat, and so
forth are generally some 500,000 tons, it will be seen that
the government have very good reasons for resorting to the
present drastic rationing.
The present scheme allows of 200 grammes per day of
all kinds of cereal and peas. The corresponding British
ration is :535 grammes, whilst the German bread ration is
much higher than that of Norway.'
This merelv means that at peace Norway's food supply is very
similar to that of France at war, as indicated by the speech of
Mr. Andre Tardieu, March, 1918, in which he implores the
United States to send France more cereals :
You are aware that the French nation has always lived
mostly on wheat bread. Our prewar consumption was
700 000 tons per month. Our present consumption has been
now reduced to 530,000 tons, a reduction of about 2o per
cent.
= f/enmark found^herself in a similar situation (Omdal Bulletin, January
2. 1918 p 2). and Sweden had preceded them both m the adoption of
rationing.
110 IXFLUEXCIi OF THE GREAT WAR L TON SII H'lMNT,
Feeding of horses and cattle on cereals which could l)e
used for the making of bread has been prohibited. This
resulted in a decrease of ')() per cent in the number of horses
in France and in an important reduction in our cattle.
We have radically suppressed, on the other hand, all
flour-consuming industries. The manufacturing of biscuits
and of pastry has been completely prohibited. Strict rules
have been imposed on hotels and restaurants, namely :
Absolute suppression of fancy bread.
We have reduced our sugar consumption l)y 4'.» per cent;
our rice consumption by (H per cent; our imports of dried
vegetables have been reduced by "»- per cent; of oils and
fats by }s per cent.
I am aware of what you have d(jne in order to reduce your
domestic consumption and to increase your exports. But
you must do more. You must do it l)ecause it can be done.^
And still the sul^marines are sinking merchantmen and the war
demands ever more shipping. Trade is cut almost to the bone.
What next? Mr. Tardieu says America must make savings,
because she alone can. He is right.
Scientific Restriction- of Trade
How can we so change life and industry that it will result in
economy of shipping? There are three ways.
a. Cutting the luxury out of our industry and out of our lives.
b. Cutting out crisscross trade.
c. Developing home supplies of heavy imports.
(a) Cutting out of Luxuries
What is a luxury, a dispensable luxury ? The decision is one
before which administrations tremble, particularly in democracies,
until they are given the courage of desperation. We are getting
it — years too late. England and France have already had it.
For example, the pleasure automobile has long since all but dis-
' Andre Tardieu, French High Commissioner to U. S. Philadelphia Xorth
American, March 19, 1918.
TRADE DISLOCATIONS DUE TO WAR 111
appeared from Berlin, from London, and from Paris, and many,
many other things in its wake. With war loans, drafts, priority,
and a War Trade Board, we are at last moving in the same direc-
tion — years too late.
(b) Cutting out Crisscross Trade
In our arrangement of individualism, with each man, each city,
each State, seeking its own markets, and its own supplies, the
movement of goods has been along the lines of an almost ridicu-
lous crisscross trade, commodity X going from city B to city
C, and from city C back to city B. Here is an actual example : A
farmer in Bedford County, Pa., hauled a barrel of apples to his
station, and .shipped it by train 40 miles to Altoona. There it
was put upon a dray and hauled to a commission merchant's
place. -After keeping it for a few days the merchant sold it to
a man who hauled it to the station and shipped it 114 miles over
the Alleghany mountains to IMttsburgh. It was again put in a
dray, taken to a commission house, again sold and again hauled
back to the station, put on a train and shipped back to Altoona,
carted to a commission merchant's store, sold to a retail grocer,
who hauled it to his store, broke it open and delivered the con-
tents in many small lots to his customers. Four sales, six cart-
ings, three railroad journeys, and all on one barrel of apples.
We can not afford that kind of nonsense when the railroads are
overcrowded with war work as they are now. All that wasted
work happened to the barrel of apples because the marketing of
food was unorganized. Each man was working by himself in
the dark, in an unorganized way. Marketing must be organized
so that we can work together, and know where to send things
to make the least hauling. So far as possible each neighborhood,
each county, each State, and each nation, must feed itself and it
must be planned in advance. Out of the chaos of individualism
must come the precision of order, akin to that to be produced by
an Economic General Staff, which unfortunately we have needed
but have not had.
Perhaps the reader thinks this dry land apple story does not
112 INFLUENCE OF THE GREAT WAR UPON SHIPPING
apply to international trade. But it does, and thereby hangs the
possibility of ship saving in the year 11)18. As proof that it exists
in international trade, I will cite a few facts from our own for-
eign trade. In ten months in 1U17 the United States imported
274,0()0.()()0 pounds of rice, and exported 201,000,000 pounds.
Some uf it went to Greece, yet the main source of supply of rice
for the world's export is Burma, l^eyond Suez. Despite the
fact that Europe wails for food, we imported in that ten months
1)0,500,000 pounds of macaroni from Europe. We exported
12,000,000 pounds of peanuts, and imported 48,000,000 pounds,
enough to have kept a r),000 ton steamer busy for a year. It
sounds unbelievable, but the tonnage busy at carrying corn from
Argentina to the United States in 11)17 (the greatest corn pro-
ducer in the world) would carry 2.000,000 bushels of wheat a year
to the arm)' in Erance. The list might l)e extended, but the point
is certainly proved. The existence of such traffic in the year of
ship famine 11)17 shows clearly that government, despite its many
attempts to control trade, had scarcely appreciated that there was
such a thing as scientific utilization of shipping. The whole
Allied world is busy today in the attempt to cut waste motion
out of trade. Let us hope that it succeeds, for it will be one
of the great achievements of the war. and should endure to some
extent after it is over.
The same thing needs to be done for every little town, for
every big city, for every nation, as well as for international trade.
England has tried it with her railroads and her coal by districting
Ihe regions of coal production and regions of coal consumption,
so that coal would move in the shortest and most direct line from
mine to furnace door. The United States, through the Fuel
Administration,^ has attempted to do the same thing, and our
War Trade Board with its export licenses and import licenses
must of course, as soon as possible, apply itself to the task of
so controlling our imports and exports that there shall not be a
single ton mile of ship space wasted. Let us hope that the trade
statistics of 1918 when they are compiled, will show an almost
' Official Bulletin, January 3, 1918, p. 5.
TRADE DISLOCATIOXS DUE TO WAR 113
complete absence of the amazing crisscross trade that still existed
in international trade as late as 1917 when the United States
imported about 2,000,000 tons of sugar, and reexported 027,000
tons of it. In that one item is a huge vessel movement. In ten
months of that year we imported 1,085,000 bushels of beans and
exported 1,000,000. We imported cottonseed from Brazil and
sent cottonseed oil back again. They should have made their
own oil, fed the meal to their own cattle and exported the meat
to Britain. Despite the famine of food fats in Europe, our
consul in Malaga, Spain, reported in the autumn of 1917 a sub-
stantial increase in export of olive oils to the United States.^
Through the export license intelligently applied, we should see
to it that during 1918 and any succeeding war years we bring
nothing to our shores that does not need to come, or that we
can produce here ourselves. And the same thing is being applied
by our allies, and the saved space will be needed, every ton of
it for many, many months even if the submarine is put under
control.
(c) Developing Home Supplies of Heavy Imports
A couple of years ago a highly educated young German said
to an .American, " We would have no trouble fixing you if you
got into the war. We would just send a few submarines to blow
up the ships that bring you manganese ore from Brazil and your
steel industry would crumple up so that you couldn't do any-
thing."
Therefore safety and ship economy alike should urge us to
make every effort to reduce the import of vital ores of which
manganese is the most essential alloy for high-grade steel for
munitions and important industrial uses. The war has doubled
our import of it. Flake graphite is necessary for the crucibles
to make crucible steel and brass. Tungsten is necessary for high
speed tool steel, and is supposed by experts to be the material of
the new and terrifying 74-mile gun of the Germans. Antimony
' U. S. Commerce Reports, November 12, 1917, p. 580.
]14 INFLUENCE OF THE GREAT U AK IPOX SIlirPING
is required for hardening lead bullets. Chromite is used tor
making armor plate. Magnesite and mica are also indispensable
in metallurgical industries. Secretary of the Interior Lane said
( l''el)ruary. rJl8),
-American mines can pnxluce all of these minerals, providing
they are given the necessary assistance of the federal gov-
ernment. I have, therefore, asked Congress to make a spe-
cial api)roi)riation so that a large force (jf metallurgists can
l)e set to work immeiliately on the necessary chatiges in
practice to use lower grade manganese ores.
The request of the Secretary is wise, for herein lies the possi-
l)ility of increasing tiie national security and reducing tonnage
that now brings us I'.ooo.oiio tons of mineral imports.
Trade After the W ar
At the ])resent moment every nation on earth is being C(jm-
pelled by ship shortage and trade restrictions to reverse the
process of the last half century and become increasingly inde-
pendent in the development of home industries to produce prod-
ucts previously brought overseas. Some of these war industries
will be found to have a naturally permanent basis. L'poii the
return of peace others will naturally go down as quickly as they
came, unless tariffs, bounties, and other forms of national pro-
tection and price raising be more widely enforced as a part of
a worldwide policy of national independence. This, unfortu-
nately for the wealth, comfort and peace of the world, may quite
possibly be the case. Some of the war industries will certainly be
protected either by natural conditions or government aid, such,
for example, as the British and American dye industries, the
American optical glass industry, the restored British agriculture,
which has natural resources and market in favor of it. Among
the quickly perishing war industries we may probably class most
of the numerous and relatively unsuccessful attempts to produce
potash outside of Germany.
The trade in manufactures will afford the greatest field for
TRADE DISLOCATIONS DUE TO WAR 115
probable readjustment. England, France, Italy, Germany, and
Austria, will have many good reasons for wishing and needing
to win back their lost markets, lost to Japan, United States, and
the present neutrals. The point of view that looks upon our
enemies or our impoverished allies as poor competitors after the
war is, I believe, mistaken. Because of their poverty they will
have great need, and will be compelled to do the necessary things
to win trade. In that respect they will have a certain resem-
blance to China and Japan, who, because of their poverty, are
such doughty competitors in the industries for which they have
the resources. There will be less shortage of man power in
Eunjpe than we think; for despite the losses of the war the
simpliticatiun of consumption forced l)y the war will tend to
reduce the scale of living. The speeding-up and reorganization
processes of the war have increased the rate of output. Many
new mechanical inventions have been made, so that every man
killed or maimed is much more than replaced Ijv the enormous
imi)rovement in mechanical power, technical processes and indus-
trial organization that have come during the war. As a result
the Euro|)ean countries will emerge from the war with a greater
])roducing power in manufactures and also in agriculture than
they had at the beginning.
The new government control of industry will of necessity con-
tinue for a time — how long a time it is indeed interesting to
speculate. The record of the old prewar industrial system is
against it. The complete inadequacy, the gross inefficiency of
individualistic, unregulated industry, when examined in the light
of strong nationalism and war needs, has been a great shock to
thinking people in the Anglo-Saxon world. It should be noted
that the war emergenc}- has created nothing new to take its place.
It has merely borrowed the personnel of the old system which
they have laid aside for a time — a time of industrial truce. This
truce must last for a time after the war — and then? England
has already announced her intention of continuing government
control for three years after the war. We may depend upon
it that this time will be utilized to the full to develop the export
110 INFLUENCE OF THE GREAT WAR ITON SHIPPING
trade, for which very comprehensive plans are already being care-
fully matured. We hear rumors of many C'lerman plans, but our
knowledge of England is greater. For example, the American
consul at London reports * that the British Minister of Recon-
struction has appointed a committee on financial facilities after
the war. The chairman vi this committee, the president of
Lloyd's Bank, one of the two largest banks in Britain, points out
that while government control may not last after the war. indus-
trial organization has certainly come to stay. He is quite right.
As an example of this industrial organization attention may be
called to the " BritishManufacturers Corporation,"" an organi-
zation to promote export trade. Its avowed purpose is to
meet the needs of British firms after the war as regards
financial facilities for trade. According to its prospectus,
the l>ritish Trade Corporation will specially devote its ener-
gies to the trade of the Piritish Empire in every part of the
world. It intends to lend to exporters on longer credit than
banks can offer, and to open new markets for British indus-
tries, and to effect further coordination in commercial and
industrial undertakings.^
It has planned to have one thousand members who will pay
$500 to $1,000 each per year. Its authorized capital is $'>0,-
000,000 and all shares offered have been taken. The organiza-
tion will have agents abroad who will receive ample compensation
and devote their whole time to finding local firms who will act
as agents for various British manufacturers, and doing all that
they can in their territory to promote British export. This pro-
posed organization is an admirable example of the British way of
doing things by private organizations freed from the limitations
of official red tape. Persons who fear state socialism should
give more attention to this private collectivism of Britain. Thus
Lloyd's Register of Shipping has a board of directors made up
' Official Bulletin. January 9, 1918, p. 8.
-" Ibid., January 10. 1918. p. 3.
'Gilbert H. Montague. New York City: Cooperation under the IVebb-
Pomerene Bill for the Rehabilitation of Europe after the War, p. 12.
TRADE DISLOCATIONS DUE TO WAR 117
of the leading business men of the shipping world, who regard
their unpaid position as directors of Lloyd's Register as one of
the greatest honors in their lives. The organization has repre-
sentatives in many foreign ports. They are well paid and, like
the servants of government, pensioned when they retire. It is
easy to see the " British Manufacturers Corporation " rapidly
developing into the same type of efficient institution, which, for
soundness of work, is more respected than any government.
While the British Trade Corporation was under consider-
ation, the President of the Federation of British Industry,
speaking of the preparations necessary for conditions after
the war, said : " One thing that has been obvious in the
past has been the harm done by extensive competition be-
tween comparatively small firms. This must be eliminated
in the future."
In France a similar enterprise, under the name of the
Association Xntionalc d'Expansion Economiquc, has been
organized to promote the economic expansion of France in
foreign markets.^
Aleanwhile the British Government is also shaking itself awake."
The Foreign Office and the Board of Trade which have long
jangled over their authority in trade, have joined, forming a
joint intelligence department which will have entire charge of
matters pertaining to trade, and one of the first steps is to in-
crease the pay of consuls and attaches.
The British Minister of Reconstruction now proposes,
after the war. to import raw materials required for British
manufactures, and to allocate them among various estab-
lishments according as the British trade associations may
suggest. His proposal includes plans under which these
British trade associations shall survey their respective in-
dustries, determine the equipment requirements of then-
members, explore the possibilities of new development,
maintain a bureau of information regarding the best means
" Gilbert H. Montague, op. cit.
" Official Bulletin. January 10, 1918, p. 8.
118 l.NTLUtlXCl^ OF THE GREAT WAR UPON SIIIPPINT.
of production, and exchange data regarding' tlie prices for
the protection of consumers.
Pariianient already has under consideration the Xon-
Ferrous Bill, recently introduced by the British (Government,
which provides that no one in (ireat I^ritain shall deal in
copper, tin, zinc and nickel, for a period of live years after
the war, unless he has a license from the government, and
that no one who has been a subject of an enemy country
shall obtain such a license.'
Meanwhile, of course, the United States and Japan are doing
the exporting because they have less war strain and therefore
more surplus goods than I'ngland. I hit the record of trade
.statistics during the war is a very deceptive basis to use as a
gauge for what will happen after the war. The following
passage from official .\nierican sources seems to me to be
])eculiarly suggestive, alike in its (lescri])tion of the j)resent. of
the past, and in its inferences descriptive of the future. The
Official Bulletin ( Xovembcr 1, I'.HT, page .'» ) quotes the U. S.
Department of Commerce as saying:
Practically all the news print paper that is received by
Peru. Bolivia, and Ecuador now comes from the United
States. . . .
Previous to the war nearly r»0 per cent of the paper im-
ports of Peru came from Germany, :2() per cent from the
United States, 10 per cent from Spain. France. Belgium,
Italy, and other European countries. The principal factors
in the European strength according to the bureau's report,
were lower prices, longer credits, better shipping facilities,
more active selling campaigns, willingness to produce the
goods desired, better packing, greater attention to detail,
and influence of European colonies engaged in the paper and
printing trades.
This passage, which sounds like a fearful arraignment of our
commercial capacity, could be essentially duplicated from a hun-
dred ofificial sources. It is really a statement of the fact that
^ Gilbert H. Montague, op. cit.
TRADE DISLOCATIONS DUE TO WAR 119
before the war we were not in a position to seek foreign trade
seriously. Has the war changed us? It is true that the United
States also has been making rapid strides toward developing for-
eign trade. We have improved our international banking system.
\\'e have organized a great private corporation to promote for-
eign trade, but more especially foreign investment, and we have
matched the European countries by passing, April 10, 1918, the
very comprehensive Webb-Pomerene Bill, which enables Ameri-
can' manufacturers to do almost anything that is needed to
develop exports. Whatever is needed
can. under reasonable conditions, and with certain for-
malities, be accomplished under the Webb-Pomerene Bill, so
long as trade within the United States is not affected, and
so long as there are no unfair methods against some outside
American competitor, who also is engaged in the American
export trade. ...
What are these methods and arrangements t
IMainly thev are onlv those methods and arrangements
that apparentlv raise some question under the anti-trust laws
—representation abroad, for instance, for groups of com-
petitive American concerns, by common selling agencies, or
common sales branches, or other cooperative selling organi-
zations in foreign markets, and all manner of contracts or
understandings between competitive American concerns, re-
specting the apportionment of orders, profits, losses, business,
or terrltorv. or agreement regarding prices ^"foreign
markets, upon anv basis whatever, when trade within the
United Sta es is not affected, and when no un air method of
petition is practiced against some outside Americ^. com-
petitor who also is engaged in the American export trade.
Whatever results may follow this, the British at least fear us,
but perhaps thev overestimated the menace thus described by the
Buenos Aires correspondent of a British journal:
Directlv the war is over, it is argued, and British
traders are able to deliver the goods as heretofore, the
• Gilbert H. Montague, op. cit.
120 INFLl'ENCK OF THK C.RKAT WAR IPON SHIPPING
Yankee will disappear. I am diihious. The Xorth Ameri-
can is firmly establishing himself in this matter. Every
steamer brings down several keen business men, and these
men, who used to be mere travelers, are now Ijecoming resi-
dents. It is hardly likely that they will be shaken off with
cunsummate ease after the war is over. They are making
money for a rainy day ; they are learning rapidly by experi-
ence, and Slaving banks behind them. It would l)e really
unwise to count on their disappearance after the war. It
is my opinion that they will be greater rivals than the
Germans.^
But it should be remembered that we have not been a trading
people and that we have had little practice in the real art of
foreign tr;ide during this present war. If there is any art that
has not been needed in the foreign trade during the war, it is
the art of salesmanship. For the present it may be called a lost
art or at least a slumbering art. In times of peace the foreign
market has been hard to cultivate. Experts have persuaded cus-
tomers to buy. In this period of war diplomats l>eg for goods,
special eml^assies cross the seas and camp for months at Wash-
ington trying to persuade us to let the goods that lie in their
ships go forward. Antl they often beg in vain.
We may want to hold some of our newly won war trade, but
the holding will not be easy. The most important single factor
in the development and prosecution of foreign trade is the trade
organization, a thing which statistics do not touch. The organi-
zation of international trade in brief is this: A wholesale firm
in ^Melbourne, Buenos Aires, or Rio Janeiro has dealings with two
or three hundred retail merchants scattered over its own city
and in many inland towns. The relationship is largely a per-
sonal one. The retailer know-s somebody connected with the
wholesale house. The wholesale house has purchasing branches
in Xew York, London, Paris, Hamburg, or Berlin. Its real
headquarters may be in any of the cities mentioned. It buys
goods wherever it can secure them, and sends them out on atiy
steamer that offers service. Sometimes these firms even own or
' Fair play. May 11. 1916. p. 751.
TRADE DISLOCATIONS DUE TO WAR 121
charter steamers for their own business and take goods for others
also.
What has the war done to this organization? Statistics do
not show. As a matter of fact, German firms, when German
steamers were tied up in 1914, promptly chartered Norwegian
ships. They even chartered British ships which were insured in
the liritish War Risk Bureau, and which carried British or
American or French goods to the German firms with the many
local connections. Later came the black list,^ which was of
course met by camouflage in change of name. The sign of
Hans Mittendorf came down from the Argentine warehouse, and
in its place one read that Alfonso Diez conducted the import
business, but Hans was still inside. Alfonso had been a trusted
clerk. 1 lans became a trusted and obeyed manager for Alfonso,
and the same salesmen visited the Argentine back country and
they sold any goods they could get and they will in all probability
be there when peace is declared. In China in 1915, German
firms, no longer able to get German goods, were handling Eng-
lish, l-'rench, .American, and even selling Chinese goods to the
Chinese. The United States has of course had an undisturbed
chance to buihl up trade organization during the war, but the
stimulus of competition has been lacking, and it would probably
be overoptimistic to think that we had in that time developed any
superior it V over Europe. German interests at this day have title
to an uncanny amount of property — vital raw materials in for-
eign countries, some of which they are reported to have secured
since the war began.
The trade in the decade after the war will be one in which it
seems inevitalile that competition will be keener than it has ever
been before, with every prospect of more government aid than it
has ever had before. It should be remembered that in this matter
of extending government aid to industry, Germany has the mas-
ter hand. Government aid means a favorable price list. After the
' When one considers the way that the American at home, using the device
of incorporatinn. has for decades openly flouted the plain will of the people
and the lawmakers, it is easy to believe that a black list is a very weak tool
with which to break up a commercial organization in a foreign land.
122 INFLUENXE OF THE GREAT WAR UPON SHIPPING
war the price list, salesmanship, the desire to please, credit and
banking facilities — especially the price list and the desire to
please — will, as in the prewar period, win most of the traffic. In
these respects the European lower wai^e. as in the past, particu-
larly tlie lower wage of the continental peoples, promises to give
them ( as in the past ) an advantage. Certainly the young men
of Germany will continue to work in South America for less
than the young men of Xorth .\merica. And unless the English
and Americans change their ways, they will not Ix; loved in for-
eign parts any more in the future than they have been in the
past, and in many countries they will have no sentimental advan-
tage. It is unt)flicially repijrted that, owing largelv to the Rus-
sian dislike for the English, over three-fourths of the <'.,U()() Eng-
lish hrms in Russia were driven out in less than a year after the
overturning of the Czar.
In making predictions for postwar trade developments, we
have no reason to expect any permanent results from the war,
e.xcept where there has been some permanent change in the rela-
tive powers of the competitors. The fundamental conditions
underlying trade are resource conditions. These will have
changed but little. The whole world will have reduced its capital.
Europe more than .America. That merely means that Europe
will have the same relation to the world market that the unem-
ployed man at the gate has upon the labor market — that of a
price cutter. In the words of Otto H. Kahn :
\\'e shall have to meet, after the return of peace, both in
our own country and abroad, the onset of the business men
of Europe, spurred on by dire necessity to put forth their
utmost efforts, trained to discipline, cooperation and in-
ventiveness in the cruel school of years of desperate war
upon their own soil or at their very door, backed by the full
power of their respective governments and the laws of their
countries.
It is easy to think that these spectacular changes of today are
revolution when thev are merelv rotation. Go back to the trade
TRADE DISLOCATIONS DUE TO WAR 123
literature of IDOO and 1001 when Britain was busy with the
Boer War and a coal strike was on, and you can read no end
of prophetic nonsense based on the assumption that we had cap-
tured the world's trade forever because we had made a few sales
while England was temporarily engaged. Trade depends chiefly
on the delivered price of the satisfactory goods. This means
factory cost, plus ocean freights, plus banking, plus insurance,
plus the organization to sell, plus the willingness to please. The
evidence is not yet in hand to show that we in America will have
any new relative superiority over Europe in any one of these
six counts. It is quite likely that the heavy borrowings of Europe
in this country will put us on an inflated money basis that will
result in a high price level that will leave the export advantage
with Europe until we ccjme down from our high horse. We will
be safer if we merely regard the war in its foreign trade aspects
as a mel(jn that has been cut, to be followed by the lesser melon
of helping reconstruct devastated Europe, and then — competition.
CIreat lalxjr unrest and discontent, serious industrial dis-
placements, large financial adjustments, enormous tax
burdens, and the depressing anxiety resulting from cata-
clvsmic changes and abysmal uncertainty, will then weigh
heavilv upon Europe, and presumably be shared in some
degree by America.
Purchases in .America after the war, for account of Euro-
pean reconstruction, will undoubtedly be more or less cen-
tralized, either in government agencies, or in unofficial but
noncompeting buying agencies for foreign interests.^
We see (juite as much in the public press now about tariff which
is a trade barrier as we do about the promotion of trade. Any
discussion of foreign trade should reckon with the fact that the
average American does not seem to have the mind or stomach to
appreciate and act on the fact that foreign trade consists in buy-
ing as much as you sell. As a nation we seem to glory in the
idea of a sale, and shudder at the idea of a purchase— which
really gives us something.
' Gilbert H. Montague, op. cit.
CHAPTER V
Government Aid to Shipping
Tun Universality of Government Aid to Shipping
It scarcely needs argument to show tliat tlic cost of carriage
of ocean freight varies in (MtTerent countries. Rates of wages
dilTer, costs of buikMng the ship (hffer, costs of food, coal and
.sui)j)lics differ, therefore the costs of running the completed
ship must also differ. If shipowners and business men were let
entirely alone by governments, we would have nearly all the
world's carrying done by a few peoples, and most nations would
be without a first class ship. Now add to this situation the fact
that a nation without ships may find itself at the mercy of for-
eigners, and wc see the cause for worldwide effort at encourag-
ing shipping. In this attempt at some degree of maritime in-
dependence, temporary (jr j)ermanent. many devices have been
tried. Every nation of importance has done something. Before
we can consider a postwar shipping policy, before we examine
the shipping policy during the war. we should review the leading
facts and principles of government aid to shipping that were in
force, before the war made it necessary for the nations to take
control of shipping and virtually make it a service, indeed an arm
of the government.
To get together complete information on this wide reaching
subject is of itself a lengthy investigation, and we are fortunate
in that it has recently been done in a thorough manner by Mr.
Grosvenor M. Jones, Commercial Agent in the U. S. Depart-
ment of Commerce, and published as Xo. 119, Special Agent
Series, Department of Commerce, Bureau of Foreign and Do-
mestic Commerce. Government Printing Office. Washington,
IDIG. Owing to its recent date and satisfactory character the
material in this chapter is very largely abstracted and excerpted
124
GOVERNMENT AID TO SHIPPING 125
from Mr. Jones' report to which I wish here to give all possible
credit.
Definition of Terms
In this chapter ^ " subsidy " and " bounty " are treated as
synonymous terms and are used to describe grants that are made
without any requirement of special service to the government.
The term " subvention," on the other hand, is used to describe
grants that are conditioned upon the performance by the grantee
of certain prescribed services for the state, such as the rapid
transportation of mails on regular schedules and the construc-
tion of merchant ships according to plans of the naval authorities
for use as auxiliary cruisers and transports in time of war.
Forms of Government Aid
State aid to merchant shipping may take a number of forms.
In the commonly accepted version of the term government aid
means the payment of bounties, subsidies, or subventions, but
its scope is. in fact, much ])roader. since substantial assistance
is often rendered by the grant of privileges whose benefits can
not be computed in terms of money.
Government aid is here treated under two broad heads, namely
direct and indirect aid. Under the head of indirect aid are con-
sidered (a) reservation of coasting trade; (b) exemption from
import duties on shipbuilding materials; (c) admission of for-
eign built vessels to national registry; (d) preferential railway
rates; (e) loans to shipowners; (f) reimbursement of port dues,
etc.; (g) reimbursement of canal dues, and (h) other indirect
aid. such as exemption from taxation, etc. Under the head of
direct aid are (a) postal subventions; (b) bounties or subsidies,
and (c) subventions to foreign steamship lines.
Indirect Aid
(a) Reservation of Coasting Trade.
In the case of many countries the extent of the coasting
trade is so limited that its monopolization by ships flying the
' While the present tense is used in this chapter it refers in many cases
to conditions that prevailed before the war suspended them.
120 INFLUENCE OF THE GREAT WAR IPOX SHIPPING
national flag is of comparatively little advantage to such
Nhipping. Of the leading maritime countries Great Britain
is distinguished by the fact that the extensive coasting trade of
the British Isles and the so-called imperial coasting trade (the
trade between the mother country and the colonies and between
the colonies themselves) have been open to the ships of all na-
tions since about iS.'iO. when the navigation acts were repealed.
In recent years, however, consiilcratitm has been given to a pro-
posal that the British and imperial coasting trade be closed to
.ships of nations denying British ships reciprocal privileges and to
subsidized foreign ships, exce])t upon j)ayment of an indemnity.*
The coasting trades of Norway and Sweden are o|)en to the
shij)s of all other nations except Sweden and Norway, respec-
tively. The coasting trade of Denmark is open without (|uali-
tication. The configuration of the coasts of these countries and
their sparse population make their coasting trade of little value
in the development of a merchant marine. In fact, both Nor-
way and Sweden find it necessary to subsidize a number of coast-
wise lines to insure regular trade and mail communications.
The coasting trade of (iermany, while not important, is largely
held by German ships, but this is not a result of legi.slation. since
nominally, the coasting trade of (iermany is open to the ships
of other nations that grant reciprocal privileges to (ierman
ships.
Both the meagre coasting trade of the Netherlands proper and
the extensive trade between the Netherlands and the Dutch lu'ist
Indies are open to the ships of nations that grant reciprocal
privileges to Dutch ships.
The United States. France, Italy, .\ustria-Hungarv. Spain,
and Belgium, among the more important maritime countries, have
long reserved their coasting trade to national ships, while Japan
has reserved all of its coasting trade to its own ships onlv since
1910.
Russia has long reserved the trade between Russian ports
' Report of British Board of Trade Select Committee on Steamship Sub-
sidies, December 3, 1902, p. .\.\ii.
GOVERNMEXT AID TO SHIPPING 127
on the same sea for Russian ships, but it was not until the issu-
ance of the royal decree of May 29, 1897, that the trade between
all Russian ports was restricted to Russian ships.
ib) Exemption from Import Duties on Shipbuilding Materials.
All shipbuilding]^ materials have been exempt from customs
duties in England since the adoption of the free trade policy.
Such materials have been exempt for many years also in Ger-
many and the Netherlands. Belgium has granted free admis-
sion to shijjbuilding materials since April 12, 1804. All ship-
building materials have lieen on the free list in the United States
since the tariff act of 1909, although many such materials had
been exempt from duties since me tariff act of 1894.
France. Italy and Spain levy duties on materials used in the
C()n>tructi(m, repair and equipment of ships, despite the fact
that their inm and steel industries can not under present condi-
tions compete with those of Great Britain and Germany, and
many products of these industries must be imported. These
countries wish, however, to protect domestic industries, even
though they must pay bounties to shipbuilders to offset the
duties. The fact that these countries levy import duties on ship-
building materials must be borne in mind when reference is
made to the fact tiiat they pay lx)unties on ship construction.
The Scandinavian countries impose import duties on ship-
building materials but get around the difficulty in another way
by allowing drawbacks. Sweden allows a drawback of duties
actually paid on materials used in the construction in Swedish
vards of any ship of 40 tons and over. Denmark allows a draw-
back equal to not more than 2 per cent, of the selling price of
all ships built in Danish yards. And Norway makes in lieu of
a drawback a grant amounting to 2 per cent of the selling price
of new steamers of more than 300 gross tons and to 1 per cent
on new steamers of 50 to 300 tons and sailing vessels of 50 tons
and over, as well as a grant equal to 1.5 per cent of the cost of
repairs on vessels of 300 tons and over, if the cost is at least
l.nOO kroner ($2G8).
128 IN'FLUENCE OF THE GREAT WAR L'POX SHIPPING
(c) Admission of Foreign Built I'csscls to National Registry.
For many years no country of importance with the exception
of the United States has required that ships flying the national
flag shall be of domestic construction, although practically every
country has made this requirement in the case of steamships
receiving postal subventions.
England has granted registers to foreign built ships, in (jther
words, has pursued the " free ship " policy since about 1S.'>0. At
that time wooden sailing vessels were predominant and these
could be secured more cheaply in the United States, which had
larger supj)lies of timber and naval stores and a more efficient
shipbuilding industry. As a result of this free ship policy the
merchant marine of Great Britain received large accessions
during the Civil War, when more than 750,000 tons of American
shipi)ing secured foreign registers to avoid capture or destruc-
tion by Southern raiders.
Germany has also pursued the free ship policy, but at the
same time has given much encouragement to the domestic pro-
duction of ships by making low railroad rates on materials
transported from the iron and steel manufacturing centers in
the interior to the shipyards along the coast and by requiring
that subventioned steamers should be of domestic construction.
The United States has adopted the free ship policy in full
only since the outbreak of the present war in Europe and only
in respect to ships engaged in the overseas trade. However, a
step in this direction was taken in the Panama Canal act of
August 24, 1912. which admitted to American registry sea-
worthy foreign built ships not more than five years old. The
policy pursued by the United States from 1702 down to 1914 of
granting registers only to American built ships resulted from
a desire to foster the domestic shipbuilding industry. There is
no question that this policy has been of some assistance in main-
taining the industry, for there has been a large and growing
demand for ships for the coastwise trade which is restricted to
American built ships and has developed rapidly. If, however,
the shipbuilding industry of the United States had been obliged
GOVERN M EXT AID TO SHIPPING
129
to depend upon orders for ships in the overseas trade, it would
have decHned long since because of the higher costs of Ameri-
can ship construction. It. therefore, appears that we have had
little gain from our policy of exclusion of foreign built vessels
for overseas trade.
One of the strongest arguments against various subsidy bills
that have l)een proposed in the past twenty years has been the fact
that the bills jjrovided for navigation bounties that would have
been to a large degree bounties on construction, since they were
intended to offset the higher depreciation and interest charges
of the higher priced American built ships, as well as the higher
operating costs. Such legislation appeared, therefore, to grant
an artificial and unwarranted stimulus to the construction of
overseas ships and to have been prepared in the interest of the
shipbuilder rather than in the interest of the shipowner or of
the exporter.
(d) Preferential Raihvay Rates.
Assistance in the form of lower rail rates on goods shipped
over specified steamship lines is a practice that has l^een followed
in Germanv with respect to the German Levant and the German
East Africa Lines since the years 181)0 and 1895, respectively.
These differentials have a double purpose, since by enabling
German manufacturers to sell their products at lower prices
in the countries reached by these lines they develop German
trade and at the same time increase' the traffic on the preferred
steamship lines.
France, like Germanv. has made use of differential export
railroad rates to assist in the development of traffic on certain
French steamship lines, as well as to promote the foreign trade
of France. The United States vice consul at Havre reported
in llti;;. that the Orleans Railway gives reduced rates on goods
shipped to French West Africa and to South America, and a
special reduction of 20 per cent on goods shipped to Newhaven,
England, from St. Xazaire by vessels of the Compagnie Generale
Tratisatlantique : that the Western Railway makes a special rate
130 IXFLUENCE OF THE GREAT WAR IPoN SHIPPING
on shipments to Xew York on the freight vessels of the Com-
paynic Gcncralc Transatlantiquc ; and that the Paris-Lyons-Medi-
terranean Railway makes special rates for goods shipped to the
Levant and the Far Kast by specified French lines.
Both Germany and France have a general system of export
rail rates, as well as a special system of rates for goods carried
by specified steamshij) lines. The general system is to be found
also in the United States, Xorway, Sweden. Denmark, Belgium,
the Netherlands and Spain. In the United States it is not a
special stimulus to shipping except tliat it amounts t(j a bonus
by the railway to all export of inland goods taken to port bv rail.
(V) Loans to Shipowners.
The policy of granting loans to shipowners at low rates of
interest or without interest was begun, it is believed, bv Austria.
A contract made on July 2"). ISIH. l)etween the .Austrian Gov-
ernment and the Austrian Lloyd Steamship Co. provided that
the latter should receive a government loan of 1,500.000 florins
($()0;).000) for the construction of new steamers, the same to
be available in three equal amounts and to be repaid without
interest in five yearly instalments, beginning January 2. 1!»02.
The only instance of a loan to a steamship company by the
British Government was the loan made to the Cunard Steamship
Co. under the mail and admiralty subvention contract of r.)0:3.
Under this contract the British Government loaned the steam-
ship company £2.600.000 ($12,052,900) for the building of two
steamers (the Lusitania and the Maurctania) that should
be faster than any afloat and suitable for the use of the
Admiralty. The loan was made at the rate of '1% per cent,
which is about 2 per cent lower than the rate at which the com-
pany could have borrowed a similar amount in the open market.
Representatives of the company have stoutly averred that the
extra cost of the ships and their operation quite offset the ad-
vantages. The government has now had years of war service
by the Maurctania.
Since the beginning of the present year the French Govern-
GOVERNMENT AID TO SHIPPING 131
ment has considered a plan to increase the French merchant ma-
rine by providing for government loans to shipbuilding enter-
prises. A bill presented to Parliament on January 14, 1916,
authorized an appropriation of 100,000,000 francs ($19,300,-
000 ) to be used in making loans during the war and for a period
of 12 months thereafter. The bill provides that the interest on
these loans should be calculated at the rates charged by the Bank
of France for loans on securities, and that the loan should not
exceed TO per cent of the purchase price of vessels bought by
steamship companies having a fleet of 20,000 tons or over and
so per cent in the case of companies having smaller fleets.
(/) Rcitnbiirsoncnt of Port Dues, etc.
Denmark and Belgium are the only important countries that
have extended aid to shipping by granting exemptions from, or
making reimbursement of. port dues.
For many years prior to the war in Europe, Belgium reim-
bursed the North German Lloyd, the Kosmos Line, and the
L'nited Steamship Company of Copenhagen for all pilotage fees,
port dues, etc., paid to Belgian and Dutch officials in getting to
Belgian ports.
(g) Reimbursement of Canal Dues.
The policv of granting indirect aid to shipping by reimburse-
ment of canal dues was instituted by Russia in 1879. This
practice has been extended from time to time and now provides
for the reimbursement of the full amount of the canal dues paid
by Russian steamers bound for or sailing from any Russian port
in the Far East, and for a reimbursement of two-thirds of the
full dues paid by Russian steamers bound for or sailing from
ports on the Indian Ocean and non-Russian ports on the Pacific
Ocean. In the period from 1^79 to 1900 the Russian Govern-
ment expended approximately $4,400,000 in reimbursement of
Suez Canal dues.
The Austrian Government makes a reimbursement of Suez
Canal dues paid by the steamers of the Austrian Lloyd. This
132 INFLUENCE OF THE GREAT WAR I'PON SHIPPING
policy is believed to have been instituted under the mail subven-
tion contract of July lM, 1SJ>1. The benefits conferred by this
form of indirect aid may be seen from the fact that in the period
from lixn to 1!)10 the amounts paid annually to the Austrian
Lloyd Steamship Company in reimbursement of canal dues
ranc]^ed from $;5!»r..:)Sr) to $4{»2.r)00.
The policy of making reimbursement of Suez Canal dues paid
by French steamships was instituted in the contract made on
December :5(). 1!>11, with the CoDipagnic dcs Mcssagcrics Mari-
times.
(h) Exemption from Taxation.
This form of indirect aid has, so far as can be ascertained,
been granted only in the Kingdoms of Austria and Hungary.
The practice was first introduced in Austria in the law of June
18, 1890, which granted an exemption from income and trade
taxes on all iron or steel vessels engaged in ocean voyages.
The laws of the State of New York exempt from all taxation
for State and local purposes all American owned ships registered
at any port in the State if engaged in the foreign trade of the
United States. Corporations owning such shi])s are exempt until
December 31, 1922. from all taxation upon their capital stock,
franchises and earnings.
Alabama exempts ships engaged in foreign commerce from
taxation, while the State of Washington exempts all ships, built
or in process of construction, in the coastwise as well as in the
foreign trade of the United States.
Direct Aid
{a) Postal Subventions.
The granting of postal subventions to steamship lines ante-
dates the bounty or subsidy system and is in more general use
throughout the world. The leading maritime nation of the
world. Great Britain, was probably the first to adopt the policy
of paying subventions for the transportation of mail, the first
GOVERNMENT AID TO SHIPPING 133
contract of this character being the contract made in 1838 with
the Peninsular Company for the transportation of mails between
England, Spain and Portugal. About this period also the first
contracts with the Cunard Line, the Royal Mail Steam Packet
Co., and the Pacific Steam Navigation Co. were entered into.
The United States and France soon followed the example of
Great Britain. The first United States contracts were made in
1847, and were with the Ocean Steam Navigation Co. for serv-
ice between New York and Bremen and New York and Havre,
and with E. K. Collins for a service between New York and Liv-
erpool. The first formal mail contract made by the French Gov-
ernment was in 1851, and was with the Compagnie Gcncrale
Transathintiquc.
Germany did not adopt the policy of paying postal subven-
tions until 188G, when a contract with the North German Lloyd
was concluded. At the present time the payment of postal sub-
ventions is the only form of direct financial assistance that has
been maintained by the German Government.
The purpose of mail subvention contracts is primarily to en-
courage the maintenance of fast mail services on regular routes
and schedules. In many instances a motive of almost equal
weight is that of maintaining the fastest possible communica-
tion between the mother country and her colonies. Incidentally
a third object is commonly achieved, namely, that of providing
vessels suitable for auxiliary cruisers and transports in time of
war, and, in many cases, a fourth object, namely, that of foster-
ing the domestic shipbuilding industry by requiring that the sub-
ventions shall be paid only to domestic built ships.
In many cases the financial aid granted by the mail contracts
may be thought to be in excess of the cost of the service actually
rendered, but it should be remembered (1) that subventioned
ships are required to operate at fast speed, which is dispropor-
tionately more expensive than operation at moderate speed; (2)
that the operation of vessels on fixed routes and on fixed
schedules often prevents the vessels from receiving full cargo
and precludes a change of route to suit the changing conditions
134 INFLUENCE OF THE GREAT WAR UPON SIIII'PIXO
of trade; and ('j) that most of the mail steamers are constructed
and equipped in a special manner to fit them for use as auxiliary
cruisers and transports in time of war and are subject to the call
of the naval authorities on short notice.
The original grants made to the Cunard Line by the British
Government were large and probably contained a large element
of bounty. At that time England and the United States were
keen rivals for supremacy on the seas, particularly in the trans-
atlantic trade. The steamship was then largely an experiment
and the operation of steamships was " an infant industry "
which required protection. The purpose of the large grants
made by the British Government was not, however, merely to
assist in the establishment of a steamship line for the line's sake,
but more particularly to promote rapid communications between
England and her American and Australian possessions. This
motive is clearly seen in the fact that the original Cunard con-
tract stipulated that a call should be made at Halifax on both the
outbound and the return voyages and that a connecting line
should be operated between Halifax and Quebec.
With only two important exceptions, all financial aid extended
by the British Government has been in the form of postal and
Admiralty subventions. The first important exception was in
the case of the contract made with the Pacific Steam Navigation
Co., in 1840. granting a subsidy for the operation of steamships
along the west coast of South America. A more recent excep-
tion is to be found in the subsidy granted the Elder-Dempster
Line operating between Jamaica and England, the purpose of
this subsidy being to encourage trade in the agricultural products
of Jamaica which was then in a condition of industrial depres-
sion.
The United States and Germany, whose merchant navies rank
next in importance to that of Great Britain, have likewise ex-
tended financial aid to shipping only in the form of mail sub-
ventions. The United States instituted this policy in 1847. as
stated above, and for a time made much more liberal payments
than the British Government, but in spite of the greater aid the
GOVERNMENT AID TO SHIPPING 135
American lines did not prosper. In the case of the Collins Line,
which received most generous aid for about 10 years, the terms
of the contract were probably too exacting to permit of the suc-
cessful operation of its vessels from a purely commercial stand-
point, the requirements as to speed and frequency of sailings
being such as to prevent these ships from securing a satisfactory
amount of cargo. In the opinion of many, some of these lines
might have been successful if the subventions had not been with-
drawn in toto. The United States did not, however, pursue
the policy of mail subventions continuously until the passage of
the mail subsidy act of March 3, 1891, which is still in force.
Germany instituted the policy of mail subventions in 1886,
when a contract was concluded with the North German Lloyd
for service to the Levant and the Far East. These grants are
considered by many as having been made as much for the ex-
tension of German trade and influence as for the development
of German shipping. One of the most striking features about
the whole commercial policy of Germany is the fact that its
commerce and shipping have been so effectively coordinated
that each contributes directly to the development of the other.
The only other mail subvention paid by the German Govern-
ment has been to the German East Africa Line, although aid of
an indirect character, namely, preferential railway rates, has
been jrranted to both this line and the German Levant Line.
The largest of the German steamship companies, in fact, one
of the largest in the world — the Hamburg-American Line — has
received comparatively little financial assistance from the Ger-
man Government. For a time it shared with the North Ger-
man Lloyd a subvention paid for the carriage of mails to China
and Japan, but the amounts received in this manner were small.
It is interesting to observe also that probably the most re-
munerative service of the North German Lloyd has been the
service to New York, and that the amounts received by this com-
pany from the United States Government for the transporta-
tion of United States mails to Europe have been on the average
about one-fourth as large as the subventions which this com-
13G IN'FLUENCE OF THE GREAT WAR UPON' SHIPPING
pany has received from the German Government for services to
Australia and the Far East.
The subventions paid l)y the Norwegian Government, whose
merchant marine ranks tOurth amonj^ the merchant navies of the
world, have been almost exclusively for the maintenance of mail
lines along the coast of Norway on routes that would be un-
profitable without financial assistance of this character.
The small amounts paid in mail subventions by Sweden and
Denmark are also largely of this character.
The French Government has for years paid liberal mail sub-
ventions for routes to the United States, the West Indies, South
America, the west coast of Africa, Corsica, Australia, China,
and Japan. The subventions paid to these lines are regarded as
having contributed more to the maintenance of the French mer-
chant marine than the large sums expended in bounties and sub-
sidies since ISSl.
Japan has paid subventions for the transportation of mails
l)ractically ever since that country a(loj)ted the European type
of steamship. The original grants were mainly for service in
the Far East, but in recent years grants have been made for serv-
ices to Europe and to North and South America.
The mail subventions paid by Italy, the Netherlands, Spain
and Portugal have had for their ol)ject in most cases the improve-
ment of communication between the mother country and the
colonies. This is true also of a number of the contracts made
by the French Government with several French steamship lines.
Payments made under the mail subvention contracts between
the Austrian Government and the Austrian Lloyd Steamship
Co. may be regarded more in the nature of subsidies than of
subventions since the grants have been out of all proportion to
the amount of postal service rendered. In other words, under
the guise of mail subventions the Austrian Government has really
paid subsidies whose prime purpose has been to promote Austrian
trade and shipping.
The Dominions of Canada and New Zealand, the Common-
wealth of Australia, and the Union of South Africa pay large
GOVERXMEXT AID TO SHIPPIXG 137
amounts annually in the form of mail subventions. When these
subventions were established, the primary object was to promote
faster and more regular communication with the mother country.
In more recent years, however, the commercial motive has en-
tered into the payment of these grants. This motive is clearly
shuwn, for example, in the recent contracts of the Canadian
Government, which require that in the assignment of cargo
space preference shall be given to Canadian goods and Cana-
dian shippers.
From the outset the mail subvention contracts have been ex-
acting in their requirements as to speed, sailing time, schedules,
and ports of call and in the matter of deductions for noncompli-
ance with contract stipulations. The tendency has been to ex-
tend the re(|uirements until today the ordinary mail subvention
contract gives the government not only a very large control over
the company's affairs, but also an active participation in its de-
liberations and a share in its profits.
( b ) Bounties or Subsidies.
General bounties or subsidies to merchant shipping are of com-
[)aratively recent origin if an exception is made of the original
grants made by the British and American Governments to the
lines established about the middle of the last century, which
were at the outset so liberal as to contain a large element of
bounty or subsidy.
The system of paying general bounties to shipping may be
said to have been instituted by France, which entered upon this
policy in 1881, and has made a more extensive use of bounties
than has any other country.
The first subsidy law in France, that of January 29, 1881,
was adopted after careful investigation by a special commission
and was intended to assist the domestic shipbuilding industry as
well as the shipping under the French flag.
Much of the benefit that might otherwise have accrued from
tlie liberal bountv expenditures of France has been negatived
by the almost irreconcilable conflict between shipbuilders and
138 INFLUENCE OF THE GREAT WAR UPON SHIPriNG
shipowners. As stated alx)ve, French subsidy legislation has
attempted to distribute bounties between cunstructiun and navi-
gation in such a way as to promote the interest of both the ship-
builder and the shipowner. Apparently this result has not been
attained, since the shipowners accuse the shipbuilders of absorb-
ing not only the construction bounty but much uf the navigatii)n
bounty by raising unnecessarily the prices on domestic built ships.
Cash payments are made to the builders on the basis of tonnage
of shipi)ing built, and to the shipowners on the basis of ijiiles
sailed in foreign trade. Rnglish owners have charged that the
French owners have at times made voyages merely to get the
bounty.
It is extremely doubtful whether any system of Ijounties can
under present conditions sufficiently overcome the handicaps of
natural conditions so as to enable France to take higher rank
among the merchant navies of the world.
Italy adopted a system similar to that of France about i^>u^
vears after the passage of the first French subsidy law, that is,
in 1885. Moreover, Italy has made changes in her subsidy
system about as frequently as France, and on the whole has been
little, if any. more successful. Both countries have been handi-
capped by the lack of a highly developed iron and steel industry
such as would enable them to manufacture iron and steel vessels
cheaply. Italy has been further handicapped by the heavy bur-
den of taxation and lack of coal.
Japan rivals France in the extent to which government aid has
been extended to merchant shipping, but has been much more
successful. The method followed has been closely modeled on
that of France. The Japanese merchant marine has developed
more rapidly than that of any other country during the past 35
years. In 1880 the economic condition of Japan, measured by
European standards, was poor. Likewise the shipping industry
of the country was comparatively insignificant, and consisted
largely of junks suitable only for navigation in coastal waters or
trade with China and the neighboring islands.
The Japanese merchant marine has developed from almost
GOVERNMENT AID TO SHIPPING 139
nothing, and shows a remarkable rate of increase largely for
that reason. Nevertheless, the increase in Japanese shipping has
been substantial, and it is due in part to the payment of liberal
subsidies. The Japanese Government realized that if she in-
tended to build her own vessels she must foster the shipbuilding
indu.stry until her people had learned the European methods of
manufacture, and if she intended to operate merchant vessels in
competition with those of European countries she must assist
Japanese shipowners. The industry could not exist without this
aid.
The bounty systems of the Kingdoms of Austria and Hungary
are quite similar to that of France.
Spain now rivals France, Italy and Japan in the extent of
government aid to shipping. For many years the only direct
aid was in the form of mail subventions for rapid communica-
tion with the Spanish colonies. A subsidy system was not intro-
duced until the enactment of the law of June 14, 1909. This
system closely follows that of France. It is difficult as yet to
say what the net result of the law has been. It is interesting to
note that the law has been suspended since the outbreak of the
present war in Europe largely at the request of a majority of
the subsidized lines, which were making such large, profits as to
be quite independent of the subsidies and desired to avoid the
restrictions imposed by the subsidy laws.
{c) SiibfCHtioris to Foreign Steamship Lines.
A number of countries pay subventions to foreign steamship
lines. The principal purpose of such grants has been to utilize
foreign steamship services operating to remote points.
Italy has for many years paid a subvention of 70,000 lire
($13,0 10) to the Netherlands Steam Packet Co. for the trans-
portation of Italian mails between Genoa and the Dutch East
Indies.
Belgium has paid subventions, either in direct grants or in re-
imbursement of pilotage dues, port charges, etc., to three Ger-
man lines, namely, the North German Lloyd, the German-Aus-
140 INFLUENCE OF THE GREAT WAR ITON SHIPPING
tralian and tlic Kosmos, and io a Danish line, tlic United
Steamship Co. of Copenhagen, for the purpose of having the
steamers of these lines call regularly at Antwerp. Bulgaria had
the same object in view in making annual grants tu the (iernian
Levant Line and to Fraissinet et Cie.. a I-'rench steamship line,
for making regular calls at Burgas and X'arna.
Other countries that have paid or are leaving subventions to
foreign steamship lines are: Brazil, which contracted in r.Hli
with four Italian lines for a service between I3razil and Italy;
Chile, which formerly granted a subvention and now grants
valuable wharrtng privileges at X'alparaiso to the Pacific Steam
Navigation Co.. a British line, for carrying mails between Chile.
Peru and England; Mexico, which has granted subventions to
American, Canadian, British and Japanese lines; and Xew Zea-
land, which paid a subvention to the Oceanic Steamship Co.. an
American line, for the transportation of mail between Auckland
and San Francisco.
Sununary of the Policies of Goicniincnt Aid by Nations
Great Britain.
England was the first country after the advent of the steam-
ship to pay subsidies or subventions. It is probably accurate to
refer to the original grants to the Peninsular & Oriental Steam
Navigation Co. and the Cunard Line as combinations of subsidy
and subvention, since the element of bounty predominated in
those years, although the endeavor to promote faster comnumi-
cations to India and Australia and to Canada was also stronglv
emphasized. In its early stages rapid steam navigation was a
good deal of an experiment and expensive, as the experience of
the several subsidized American lines of that period abundantly
proved, and the British Government deemed it expedient to
contribute toward the expense of maintaining the new lines.
An infant industry was granted protection, however, not
merely for the sake of the industries and trade of Great Britain,
but also for imperial purposes or. in other words, to bring the
GOVERNMENT AID TO SHIPPING
141
colonies into closer communication with the mother country.
The colonial subvention element in the early grants to the British
steamship lines is to be seen in the fact that the first contract
with Samuel Cunard called for a service not merely between
Liverpool and Boston but also for a call at Halifax on both the
outbound and the homeward voyages, and for a connectmg
line, with two river steamers, between Halifax and Quebec.
One of the striking features of the subvention policy of Great
Britain is that, with few exceptions, it has consisted exclusively
of grants for the operation of fast mail steamships between the
mother country and its colonies. An important exception at the
outset was the grant to the Pacific Steam Navigation Co., which
then operated exclusively on the west coast of South America.
Another exception — and a more recent one — was the subsidy
paid to the Klder-Dempster Line for a service between Jamaica
and luigland. the primary purpose of this grant being the pro-
motion of the banana trade of Jamaica.
Cargo ships have received no aid from the British Government.
No bounties have been paid on the construction of any ship nor
have general navigation bounties been given. It might be sug-
gested that the loan at low rates of interest to the Cunard Co.
for tlic building of the Liisitania and the Maurctania is a con-
struction bountv to the extent of the saving in interest, but since
these vessels were constructed to meet admiralty requirements
and were to have unusual speed, the saving in interest
really amounts to an admiralty subvention for admiralty
purposes. .
The financial aid extended to the merchant shipping of Great
Britain has been limited to a small proportion of the total ton-
nage under the British flag. The United States Commissioner of
Navigation, in his annual report for 1S94 (page 91), estimated
that Uie tonnage then in receipt of financial aid constituted not
more than ?> per cent of the total. It is probable that the propor-
tion is no higher now. .
Attention has been called to the fact that cargo or freight
steamers have never received aid of any kind from the British
142 INFLUENCE OF THE GREAT WAR UPON SHIPPING
Government, and this is true also of a number of lines of pas-
senger steamers, for example, the White Star Line, which has
been a competitor of the Cunard Line in the transatlantic trade
and has been far more successful as an earner of dividends
than has its subsidized rival. This is true also of the Anchor
Line, the Leyland Line, and the Red Star Line, in the same
trade.
A striking- feature of the policy of England is the fact that
at the time when the first contracts were made with the Cunard
Line and the Peninsular Line the policy of free trade had only
recently been introduced, and that not long after (from 1S41) to
1854) England discarded all of the protectionist features of
her navigation laws which had been in force for about two
centuries.
Among the laws that were repealed at that time were those
which restricted to British ships the coasting trade of the United
Kingdom, the trade between the United Kingdom and the col-
onies, and the trade among the several colonies ; those which pro-
vided that no produce of Asia, Africa, or America could be im-
ported for consumption into the United Kingdom from Europe
and that none could be imported from any other place except
in British ships or in the ships of the country of production; and
those providing that certain specific articles of European pro-
duction could only be imported for consumption when trans-
ported in British bottoms. At the same time Parliament re-
pealed the law giving the government power to impose differ-
ential duties on the ships of foreign nations that levied similar
duties on British ships and the law restricting British registry
to British built ships.
The continuity of subvention payments to the lines originally
receiving such payments is another feature of the system of gov-
ernment aid as followed by Great Britain. All of the original
subventioned lines — the Peninsular & Oriental, the Cunard, the
Royal Mail Steam Packet Co., and the Pacific Steam Naviga-
tion Co. — are still in existence and are still receiving mail sub-
ventions. The support of the British Government has been con-
GOVERNMENT AID TO SHIPPING 143
stant. In this respect its policy is in marked contrast to that of
the United States, which countr)- has been spasmodic in its sup-
port of lines established under subventions.
Canada.
The Canadian Government proposes to grant tonnage bounties
to equalize the difference in cost of construction, as compared
with the price charged by British firms. The construction of
steel vessels under this scheme had been begun as early as June,
191G, at Halifax, Nova Scotia.^
Subsidies have also been propo-'ed by the British Columbian
Government, by the Nova Scotian Government and by several
municipalities. In some cases free sites are to be granted to
shipbuilders and the land is to be free from taxation.
The Government of British Columbia has passed an act pro-
viding for a shipping commission with powers to own, buy,
lease, manage, charter, build, rebuild and repair ships and all
kinds and descriptions of property. The commission also has the
administration of the subsidy policy. The act provides for loans
amuunting to .5") per cent of the value of the ships built, con-
struction to be under the supervision of the board and upon plans
and specifications approved by the board. The loans in direct
aid will be paid to the owner of each ship up to the number of
not more than 20 ships constructed and launched in the province
after the coming into effect of the act, in ten annual instalments,
each instalment being computed so as to bring the net earnings
of the ship, in respect of which aid is granted, up to 15 per cent
of the actual cost. The subsidy paid on any one year, however,
shall not amount to more than $5 per ton dead-weight capacity.
The first annual payment will be made the first year after peace
is declared. It is stipulated that the bounty will be paid only so
long as the ship remains in continuous British Columbia servico,
that is, carries cargo from British Columbia and brings return
cargo to the province. Provision is also made for aid to ship-
building plants to the extent that the commission may advance in
• }farmc Review, November, 1916, p. 373, and Fairplay, June 8, 1916, p. 888.
144 INFLUENCE OF THE GREAT WAR UPON SHIPPING
securities to the amount of 55 per cent of the actual cost of each
plant as certified by the commission.^
The mail subsidy to the Auckland-X'ancouver Line has been
renewed for another year at the rate of $!)7..'J30 for 1.'3 sailings,
or at $7,487 per voyage, and it is understood that the Canadian
Government contributes a like sum. The conditions of the sub-
sidy provide that the steamers of this line give New Zealand
and Canadian shipments preference. The last two steamers
from Auckland to Vancouver took very little freight for points
in the United States, since most of the space was taken by Cana-
dian buyers; and it is understood that practically the same
conditions prevail at Vancouver. -
The United States.
The only direct financial aid extended by the United States
has been the payment of mail subventions. Such payments may be
divided into three periods, namely, 1847 to 1857, 18G4 to 1877.
and 1801 to date. Prior to the enactment of the postal subsidy law
of March 3, 1891, the efforts of the United States along this
line were somewhat spasmodic and lacked definite purpose. Ap-
parently too much was expected within a short time and serious
mistakes were made, the two most prominent being the exces-
sive speed required of the Collins Line and the use of a corrupt
lobby in 1872 to obtain an additional subvention for the Pacific
Mail Steamship Line. The experience of the United States with
mail subventions has not, therefore, been overly encouraging.
The merchant shipping of the United States has entered upon
a new era since the outbreak of the war in Europe. The privi-
lege granted under the ship registry act of August 18, 1014, of
registering foreign built ships in the United States has been of
great assistance in the development of the American merchant
marine and may continue to be so. Moreover, as a result of the
extensive development of the shipbuilding industry during the
' Report of Vice Consul R. ]\I. Newcomb, Victoria. Marine Review,
September, 1916, p. 312.
■ U. S. Commerce Reports, December 8, 1917, p. 943.
GOVERNMENT AID TO SHIPPING 145
past 18 months domestic yards may possibly be able in the future
to compete on more nearly even terms with the shipyards of
Great Britain.
We have the interesting example of a single American city,
Portland, Oregon, seriously considering the advisability of sub-
sidizing a steamship line to serve its trade.
Recognizing the need of better shipping facilities, particu-
larly for Columbia River traffic, and determined to take
some action looking to improvement, about 40 of the rep-
resentative business men of Portland, Ore., recently met
with the directorate of the chamber of commerce and
adopted plans which, it is believed, will solve the question.
The Marine Review for October, 191 G, briefly outlined the
project inaugurated for financing a company for the con-
struction of ships to operate between Portland and Alaska,
Puget Sound. San Francisco, and other points on the Pa-
cific Coast. The plan is to raise a tax of one mill a year
for five years, the fund to be disposed of by a commissioner
of docks, port of Portland, or a special shipping commis-
sion authorized by legislative act, in the form of a subsidy
or bonus for steamship lines that will give the service
needed.^
Indirect Aid. The monopoly of the coasting trade to Ameri-
can built vessels has been an advantage that built up our marine
to a certain point, but it could not help us to enter the overseas
trade despite our policy of free import of shipbuilding ma^
terials.
Gernianx. ,
The financial aid extended to the merchant shipping of Ger-
many has been comparatively small, and may be said to have been
given as much for the extension of German trade and influence
as for the development of German shipping. The largest of the
German lines, the Hamburg-American Line, which is one of
the largest in the world, has developed rapidly without direct
government aid. Much of the development of the next largest
' Marine Revieu: October, 1916, p. 352.
14(3 INFLUENCE OF THE GREAT WAR UPON SHIPPING
German line, the Xorth German Lloyd, has been accomplished
on the unsubsidized services. The only important mail subven-
tion contracts have been with the North German Lloyd fur serv-
ices to the Far East and Australia and with the German East
Africa Line for services to the German East African colonies.
The rapid development of the German merchant marine is
due chierty to favorable economic conditions. The imports and
exports of Germany are not only large but also well balanced in
tonnage ; moreover, the foreign trade is concentrated largely at
Hamburg and Bremen, which assures a maximum of cargo for
ships calling at these ports. Much of the success of German
shipping is attributable also to the etTicient coordination of the
industrial and commercial activities of the country. Mention
should also be made of their success in forming combinations
and in driving away foreign competition as explained in Chap-
ter 1.
Reservation of Coasting Trade. The coasting trade of Ger-
many is open to the ships of all nations granting reciprocal priv-
ileges. The German seacoast is of comparatively small extent
and offers little support for the development of a merchant
marine. The highly developed system of canals and railroads
in Germany affords, on the whole, a more direct and efficient
means of transportation between points located along the sea-
board than is possible on the North and Baltic seas, although the
Kaiser W'ilhelm (or Kiel) Canal shortens by hundreds of miles
the journey between points on the North Sea and the Baltic
Sea, and has done much to improve the coasting trade.
Exemptions from Import Duties. Germany has long pursued
the policy of granting free admission to foreign built seagoing
vessels and to foreign built vessels, other than pleasure craft,
for navigation on rivers and lakes, and this policy is still pur-
sued, although the domestic shipbuilding industry has developed
greatly and is now able to turn out the tonnage demanded by
German shipping interests.
Although there is no general requirement that ships seeking
registry in Germany must be built in German yards, it is, nev-
GOVERNMENT AID TO SHIPPING 147
ertheless, required that the vessels of subventioned lines must be
of domestic construction.
Another advantage enjoyed by German shipbuilders is the
privilege of importing, free of duty, foreign materials required
for the construction, equipment, or repair of vessels, other than
pleasure craft, for use on the high seas, rivers, or lakes.
Preferential Raikvay Rates. The policy of granting preferen-
tial railway rates on shipbuilding materials transported from the
interior section of Germany has also been of marked benefit to the
German shipvards. This poHcy was instituted in October, 1885
and provides for a reduced rate for the transportation by rail of
raw and manufactured materials used in shipbuilding, such as
steel plates, angle bars, rivets, bolts, chains, anchors, etc.. shipped
from the great centers of the iron and steel industry on the Rhine
to the shipvards at Hamburg. Bremerhaven and other ports.
In addition to the reduced rates granted by the state railways
for the transportation of shipbuilding materials from the Rhine
and other districts to the great shipyards at Hamburg and
Bremerhaven. the state railways offer special reduced rail rates
on practically all export commodities shipped on through bills of
^^"^r tecial form of preferential railway rates was introduced
on Tune 15 1890, when the German Levant Line was established
and was used again on April 1. 1915, in the case of the German
Fast Africa Line. Goods exported from interior points in Ger-
manv on through bills of lading either to the Levant or to East
Africa via these lines are granted largely reduced transporta-
tion rates on the German state railways. The railway portions
of these through rates are said to be much lower than those ap-
plied to goods'sent to German ports for exportation by sea to
"1^r::^%^en m the tari^ of the Levant Line are based
upon he arrangement of this company with the German Govern-
ment for carr^'ng exports from the interior of Germany to the
port "tie Le^^nt' excepting Tunis and Tripoli), including
mI ta Alexandria, Pir.us, Smyrna, all the important ports of
148 IXFLUENCE OF THE GREAT WAR UPON' SHIPPING
Turkey, Bulgaria, Roumania (and various stations of the Turk-
ish and Bulgarian Railway), and all ports un the Black Sea.
Besides being favored by the reduced sea freights of the Levant
Line and the German state railways, goods sent by this com-
pany's steamers on through bills of lading are allowed also re-
duced rates of transportation on the Turkish and Bulgarian rail-
way lines, if destined for stations thereon.
How the preferential railroad rates of Germany work out in
practice was recently stated by Robert P. Skinner, the United
States consul general at Hamburg. In a report to the United
States Government, quoted in Fair play, March 30, lOlC, he wrote
that in November, IIUI, a manufacturer in the vicinity of Frank-
fort shipj)ed one hundred cases of zinc dust to Lorenzo Marques,
upon which the transit tariff from Frankfort to destination via
Hamburg was $132. SC; whereas a Hamburg exporter, under-
taking to forward a similar consignment out of his local stock,
would have been obliged to pay in the first place, land freight
from Frankfort to Hamburg $52.41, plus sea freight amounting
to $152.77, or almost 50 per cent more than the sliipper irom
the interior. The Hamburg exporter got over the difficulty by
sending his goods to a nearby town in the interior and thence
reshipping them under a through bill of lading to the foreign
destination, so as to obtain the export rate. The effect of this,
of course, is to enable the shipper to deliver his goods at the
destination at a lower freight charge than the British competitor,
as well as to prevent the British shipowner carrying the goods. ^
France.
France has been called the " bounty giving nation par ex-
cellence." The policy of granting aid to the merchant shipping
of France has been so long in operation as to have become virtu-
ally a tradition.
The policy of granting mail subventions, which seems to have
produced better results than the bounty system, was instituted
on a formal contract basis as early as 1S51 and has been in force
• Fairplay, March 30, 1916, p. 535.
GOVERNMENT AID TO SHIPPING 149
since that time. The bounty system was not introduced until
1881 and has been in force continuously since that time, although
a number of important changes have been made in the original
scheme. Each succeeding subsidy law has been more exacting
in its requirements and, on the whole, more liberal in its pay-
ments than the preceding one. The amendments, however, do
not appear to have had the desired effect, for no substantial
benefit has resulted from the large amounts expended.
As has been stated above, France has attempted by the pay-
ment of liberal bounties to overcome serious handicaps of her
present economic condition.
Italy.
Italy has followed the example of France in attempting to
overcome natural handicaps by the payment of liberal subventions
and subsidies. An elaborate system of bounties, which was in-
troduced in Italy in 1885, or about four years later than a simi-
lar system was adopted in France, has not on the whole been
successful although large amounts have been expended.
The mail subventions have probably been more successful than
general subsidies and the large expenditures made on this account
have been warranted to a great extent as a part of the Italian
program of greater influence in the world's affairs and because
of the use of these ships as an auxiliary for the navy.
Atisiria-Hungary.
The policy of Austria-Hungary is really the policy of the
Kingdoms of Austria and Hungary acting in their separate
capacities. The policy of granting financial aid to shipping has
been in operation in Austria since 185G when the state assisted
in the organization of the Austrian Lloyd by guaranteeing the
interest of the capital borrowed by the promoters of the com-
pany. From that day to this the relations of the Austrian
Lloyd, which has the largest amount of tonnage under the
Austrian flag, and the Austrian Government have been inti-
mate.
150 INFLUEN'CE OF THE GREAT WAR UPON SHIPPING
Japan.
The policy of granting direct financial aid to merchant ship-
ping was adopted by Japan not long after that country adopted
the European type of ship. The original grants were mail sub-
ventions to promote steamship services in the adjacent Far East.
A liberal subsidy policy was instituted in ISDG under a law re-
sembling in many respects the subsidy laws of France. The ex-
penditures of Japan for mail subventions and subsidies have been
very liberal. The fact that the merchant marine of Japan has de-
veloped very rapidly since the institution of the subsidy policy
has Ijeen attributed by many to the lil)cral state aid which it has
received, but account should be taken of the fact that Japan has
had a remarkal)le industrial and commercial development during
this period. Although the j)rincipal Japanese steamship companies
have been in receipt of government aid since isSS and have de-
veloped rapidly, their financial statements for recent years show
that they have not got beyond the need for financial assistance
from the state. In other words, the " infant industry " has never
grown up.
Scandinaznan Countries.
Norway. Sweden and Denmark have merchant navies that
rank among the largest in the world. These countries rank very
high in respect to per capita ownership of merchant shipping. The
development of the merchant marine of Norway has far out-
stripped that of France, and has been due in a very small de-
gree, if any, to financial aid granted by the Norwegian Govern-
ment. The grants made to Norwegian shipping companies
have been primarily and almost exclusively for the maintenance
of mail services along the coast of Norway. The high rank of
Norway as a shipping nation is due to the seafaring qualities of
her people, to her geographic location, and to the fact that
because of her limited industrial development merchant shipping
offers greater financial rewards and better opportunities for the
employment of her capital and her people.
The policy of Sweden and Denmark has been similar to that
GOVERNMENT AID TO SHIPPING 151
of Norway in that the financial aid by the government has been
limited chiefly to the payment of small amounts for mail and
trade communications, mainly within the limits of the Baltic
Sea.
The Netherlands.
The policy of the Netherlands has been distinguished by
the fact that no bounties or subsidies have been paid. The direct
aid extended by the government has been exclusively for mail
subventions to improve steamship and mail communication with
the far distant colonies.
Belgium.
The most striking feature about the policy of Belgium has
been the indifl'erence to a Belgian merchant marine. Belgium,
which has a very large overseas trade, has been content to have
most of this trade carried in foreign bottoms and has gone so
far as to subsidize directly and indirectly three German lines
and one Danish line.
Spain and Portugal.
Spain has pursued the policy of granting mail subventions
since 18G1. when a contract was made with the Compahia
Transatldntica Espanola for the regular transportation of mails
to Santo Domingo, Cuba, and Porto Rico, and it was not until
1909 that a general bounty or subsidy law was instituted. The
payments of financial aid to the merchant shipping of Portugal
have been on account of mail subvention contracts for regular
transportation on routes between Portugal and her several
colonies.
Latin American Countries.
Subventions are paid by five Latin American countries, namely.
Brazil, Chile, Guatemala, Mexico and Peru. All of these coun-
tries pay subventions to foreign lines for the purpose of having
the benefit of the overseas communications. All except Guate-
152 IXI-LUEXCE OF THE GREAT WAR IPOX SH II'TING
mala pay subventions to national lines also, but the amounts
thus paid by Mexico were small and were for inland river lines.
The Influence of the War
The basis of government aid to shipping has been modified
and largely destroyed for a time by the war. First, it has put
the freight rates up so that any ship could make profits any-
where. The request of the Spanish lines, mentioned above, to
be freed from their subsidy contracts so that they could roam
the seas and make money is interesting. The seizure of vessels,
both line and tramp, by governments and their operation on
govenmient order far transcends anything before known.
However, the war will end presently and the war experience
will have its chief result in making men feel the need of ships and
many nations will examine anew the j)rewar experiences to see
which method shall be used to guarantee national ships upon
the sea.
CHAPTER VI
Control and Operation of Shipping by the British
Government, 1914-1918
The Government's Requisition Policy
The war with its sudden demand for overseas transport found
plenty of idle ships available for the needs of the government.
The Admiralty and the War Office, following accustomed prac-
tice, chartered them for a time as any other charterers. They
also requisitioned some ships, as British law provides that the
government can take the ship first and pay for it afterwards.
In fact, many steamers taken in August had not had rate of
settlement agreed upon the following January.^
October, 1914, brought the realization of a long war. The
British Government settled down to it in earnest. Shipping rates
started to rise and the government instead of getting ships one at
a time on individual dicker at market rate through brokers, estab-
lished the now famous and much denounced Blue Book rates,
which were published
in Blue Book form in October, 1914, based upon normal
working expenses at that time, by the Admiralty Arbitra-
tion Board. The government rate of hire (lis. per ton
gross) for a common ocean cargo steamship of the popular
size of 7,000 tons dead-weight carrying capacity, works out
about Gs. Gd. per dead-weight ton per month, out of which
all the running expenses including wages, provisions, stores,
repairs, renewals and maintenance, marine insurance, pro-
tection and indemnity, management and superintendence,
etc. have to be paid by the owners. The gross monthly hire
of such a British tramp is about £2,275 sterling, paid only
so long as she is in an efficient working condition.
' Fairplay, January 14, 1915.
153
154 IXFLUENCE OF THE GREAT WAR L'PON SHIPPING
The neutral steamer of the same class has been paid dur-
ing the past year (1!>10) up to 4r)s. per dead-weight ton per
month, employed in British trades for continuous periods of
time, so that her gross monthly hire has been as high as
£15,750 sterling, or close upon seven times the monthly gross
earnings of a similar requisitioned British cargo steamer.
. . . A particular case of three steamers under requisition
fur long periods has been brought under my notice, where
the (actual working expenses) tigures show that the govern-
ment rate of hire is less than the actual expenses, 7vlic>i the
cost of marine insurance at replacement ivlue payable by the
oivner is taken into account, because of the heavy increase
in working costs, and particularly the great rise in marine
insurance premiums since the Blue Book rates were insti-
tuted.'
These rates represented a fair competitive rate at the moineni,
but they reflected the market for scarcely a week, as they were
made at the very beginning of the swift and unprecedented ascent
of rates which government requisitioning helped to produce. A
year later one of the under-secretaries. Dr. McXamara, speaking
in the Mouse of Commons, in answer to the question as to how
much more the government was paying for chartered vessels at
the present time as compared with the prewar period, said, that
in the case of transports the percentage of increase in the
price per ton may be taken as alxDut 11 per cent above the
figures generally ruling at a date shortly before the war.
In the case of colliers the rates, so far as comparable, are
about 18 per cent higher than in 1013, while in the case of
oil tankers the rates now paid are actually 20 per cent lower
than in 1913. When it is borne in mind that expenses have
materially increased, in some instances by over 100 per cent,
it will be seen that shipowners are receiving net consider-
ably less when chartering their vessels to the government
than shortly before the war."
The British shipowner, long subject to the fluctuations of the
market, taking all he could get, standing his losses when they
' Fairplav, February 15. 1917, p. 308.
'Ibid., November 4, 1915, p. 715.
BRITISH CONTROL AND OPERATION OF SHIPPING 155
came, has been in a peculiarly exasperating situation. Here was
his ship taken by the government at a low, not to say unprofitable
rate, and here was the ship market where the law of supply and
demand let fortune lie in every charter. Naturally this follower
of supply and demand felt aggrieved, and that conservative ship-
ping journal, Lloyd's Weekly, stated his feelings thus:
There, is no reason why, following the universal law of
supply and demand, the shipowner should not be entitled in
every sense to the profits accruing from increased freights.*
Fortunately for Britain this appeal for an old right which had
suddenly become almost the right of piracy has fallen upon deaf
governmental ears.
The British Government gave the shipowner a very substantial
sop, however, by promising that the vessels were to be taken only
for war work - and that a part of every man's fleet should be
left free to work the competitive market, which would naturally
rise in response to the shortage created by the requisitions of
government. Thus he could recoup himself. Apparently the
administration made a consistent effort to leave this free margin
of shipping for all the owners,^ but Lloyd's allege that it was
not always done,* and Fairplay, the champion of the individual
owner, maintained at the end of 1916 (see January 4, 1917, page
IG) that either the Blue Book rates must be amended, or
owners must be allowed an occasional voyage off requisi-
tion to take advantage of high rates of freight where these
do not affect the Allies; for instance, a freight from the
United States to Spain, Brazil, Argentina, etc.
' December 17, 1915. p. 804.
' Fairplay. December 28. 1916.
' See Marine Review, May, 1916. for an account of the elaborate system of
ship records.
' " The real kernel of the trouble seems to be that certain shipowners have
had large percentages of their fleets taken over for Admiralty work, while
others have had but a few ships commandeered. These latter fortunate ones
have consequently been able to reap the full advantage of their full tonnage
in the highly paid trades of the world." Lloyd's Weekly, Review of Shipping
in 1915. ^
l^>0 INFLUENCE OF THE GREAT WAR LPON SHIPPING
The same journal charged (August -'*, I'.'IT. page 't'M) that the
government had induced shipowners to undergo costs amounting
to many thousands of pounds per ship on the promise that a free
voyage at current rates would he allowed them in order to recover
the extra amount so disbursed. " Things seemed shipshape, but
what happened? The government repudiates the promise and
re(|uisitions boats immediately they arc linishcd."
The Blue Book rates had an elaborate scale providing for tlif-
ferent rates of payment for vessels of difTerent speed, type and
condition, but much complaint arose from the application of these
rates to particular ships:
The Director of Transports has. however, now l)een guilty
of an even greater act of injustice, as, after using high
class steamers of 11 to I'J knots for the carriage of troops
and horses for periods up to twelve months, which vessels
were, however, not previously run in regular lines, he has
suddenly decided that these boats must l^e classed as common
tramp steamers and be paid accordingly.
lie has laid it down that a very ordinary tramp steamer
'20 years old and steaming, say, s knots with difficulty, is
a regular liner because she has been running in a regular
line, and must therefore be paid for at the rate of 12s. ."Ul. per
ton gross, whereas the high class modern steamer with a
speed of say i;> knots, which has rightly been receiving 15s.
3d. per ton gross under the same charter, or ISs. 3d. if
requisitioned in Australia or Xew Zealand, is only entitled
to lis. per ton because she is a common or garden tramp,
and that the owner must repay to the Admiralty all amounts
received over and above this rate.^
The High Profits of the Early War Period
Of the 22,000,000 tons gross of British shipping (35,000,000
tons dead-weight) Mr. J. H. Welsford - says that approximately
' Fail-play, September 20, 1915, p. 501. CThis is a striking illustration of
the point made in Chapter I that it is hard to draw the line between tramp
and liner.)
'Ibid.. March 8. 1917, p. 421.
BRITISH CONTROL AND OPERATION OF SHIPPING 157
25 per cent was immediately requisitioned at the Blue Book rates.
Other authority states that the government was operating 1,200
steamers by the end of October. This was really just enough to
produce the desired (by shipowners) condition of famine so far
as rates were concerned and leave the owners enough tonnage to
reap a rich harvest. The ensuing year was the hey-dey of British
shipping frcjm the standpoint of profits — the richest harvest in
shipping history. For example, a small company in ten and a
half months made 105 per cent profits on its four tramp
steamers.' While this was perhaps unusually large, it was a
year of great pr(jfits all around, and a year during which public
animosity toward the shipowners rose to a strong point. Being
islanders intimately connected with the shipping business, and
knowing their vital dependence upon it, the news of shipping
profits went to every hamlet in the kingdom. It was easier to
hear of the great profits of shipping than it was to hear of other
war profiteers. The rising prices could very easily and naturally
l)e blamed ui)on the shipowner whether he was guilty or not, so
that he became a kind of national scapegoat for the whole tribe
of profiteers. Lloyd George said that whenever he went after
any group of laborers, as he often did, in an attempt to get them
to work better, or to get them to make concessions for the public
welfare, he always had hurled in his teeth some bitter remarks
about the undue and extravagant profits of shipowners— why
didn't he stop their profits too."
The Asquith administration refused to take formal control of
the shipping of the country, despite many requests that it should
do so. Thev did. however, make many indirect efforts that
resulted in substantial rate reduction. Shipowners were in-
formally notified that if they didn't take moderate rates their
boats would be requisitioned. In other cases,^ shipowners were
flatlv told to take oats at 5s. a quarter, or the boat would be
requisitioned, thev took 5s. a quarter, which was much less
than the open rate, but better than the Blue Book rates. Later
^ Fair play, December 23. 1915.
' Ibid. December 21, 1916, p. 958.
' Ibid., November 11, 1915.
158 I.NTLL'LNCIi <'l- 1111. GREAT WAR I'l'n.s Miirii.Ni.
came the licensing of imports, and ihrougli the refusal of licenses
grain rates were kcj)t clown sometimes as much as l<>s. per (|uar-
ter.' In Xovc'inl)cr, r.>l'). an Order in Council gave the Boanl
of Trade power U) recjuisilion merchant ships in case of emer-
gency for the carrying of foodstutTs ami other necessary supplies.
The power was to he exercised hy a recpiisitioning committee
which had two aims: to have tonnage available in case of need,
and " to prevent freights im such commodities (foods) rising to
prohibitive levels." ■
By January, l*M'>, tin.- \(hniralty \\.i> i.iiKti the largest ship-
owner in the world, merchant ships oidy being counted,* but
during the year 1'.>1'> there was a steady increase in the requisi-
tioning of ships. In November the net numl)er added was 111,
in December rj!». while lO'.J were added in the first half of
January. lltH!.* They were usually taken in the British ports.
This made the British ship undesirable because no charterer knew
when a prize worth a fortune would be taken away from him. so
that in some cases the neutral got a 2'> per cent or Inrtter rate
than British vessels, and I>ritish vessels shunned the United King-
dom whenever they could. ^ Their opportunities for avoiding the
United Kingdom were ended, however, by the regulation late in
1!)15. that there should l)e no more triangular voyages whereby
the British vessel carried a cargo from one neutral to an-
other."
By the end of 1015 the pressure of the national need was be-
ginning to make itself felt on British shipping. The increase of
requisitioning at Blue Book rates, estimated at 50 per cent of
total by January 1, lOlCt." and the increase of taxation began to
show themselves in the value of British shipping. For example.
sister ships, the one. British, sold in October of that year for
' Fairplav, April 6. 1916.
= Ibid., November 18. 1915, p. 803.
* Ibid.. January 14, 1915.
* Statement by Under-Secretary >[cXamara. Fatrtlax, January 27, 1916,
p. 141.
M. H. Welsford, Fairplay, March 8, 1917, and Sir Norman Hill, Secy.
Liverpool S. S. Owners .Assn., Fairplax. March 4, 1915, p. 745.
* The Economic World. December 11, 1915, p. 745.
■ Fairplav, December 21, 1916, p. 896.
BRITISH COXTROL AND OPERATION OF SHIPPING 159
£5G,000; the other. Norwegian, brought £83,000 and jumped to
£100.000 in a month.'
Organization and Efficiency of Ship Management^
1915-1916
By the autumn of 1910 the control of shipping was vested in
two departments, the Admiralty and the Board of Trade, and
three special committees : the Shipping Control Committee, the
Ships Licensing Committee and the Port and Transit Executive
Committee. It is no wonder that with these five heads there
had been an insistent demand for the consolidation of authority,
and the creation of a Ministry of Shipping which should be able
t(j consolidate these numerous and inevitably conflicting authori-
ties.
Despite their poor organization the government shipping de-
partments did a great work during the first two years of the
war. Some slight measure of this work and its difficulties can
he gathered by comparing the commercial freight movements at
certain French ports in 19i:i and in 1915. During this time the
imports of Rouen jumped from 5,100,000 tons to 8,000,000;
Nantes-St. Xazaire from 3,100,000 to 4,500.000; Havre from
2.700,000 to 4,500,000; and Dieppe from 470,000 to 770,000
tons. All this increase was in addition to the work of the
l)ranches of the British and French Government engaged in the
strictly military work, the supplying of the armies which required
also the movement of vast stores as well as great numbers of
men.
The Amateur in Office
The attempt of the government to so suddenly change and
increase its activities and conduct trade in unprepared places
naturally resulted in much confusion and gave rise to much criti-
cism covering both the conduct of affairs in port and the opera-
tion of ships at sea. In the creation of a new force to do this
' Fairplay. December 23. 1915. p. 1084.
100 INFLlKXtK OF Til!-: ORKAT WAR LTON SmriMNC.
new work, Britain sult'ercd from two of the universal weaknesses
(jf mankind: (1) tlie common desire of man t') do something
he has not practised. This desire often gets humored in times
of emergency, and gives people the chance to exercise an inherent
egotism which makes so many of us sure we can do the thing we
never did he fore, the thing for which we are not trained. Thus
the(jrists and talkers first come to the front and get themselves
placed in positions requiring knowledge that only exj)crience can
give. The shipping fraternity of I'.ritain seemed generally sure
that in the early days of the war an unduly large numher of
inexperienced persons got in control of shipping.* A special
correspondent in the Gla.ujcm' Herald says ( March 2'.>, r.'lT. page
We shall never he ahle to estimate the amount »»f harm
that the activities of the rash amateur - have heen permitted
to do to all industries, hut especially to shipping.
(2) Britain suffered from another of the inherent weaknesses of
humanity that tends always to cripple — the sense of caste superi-
oritv which arises from officialism. In the words oi Mr. J. H.
Weisford.
Unfortunately the departments formed to deal with trans-
port matters, owing to their lack of experience, the over-
lapping of departments, friction, jealousy and other causes,
in attempting to handle this big fleet without the cooperation
of the individual owners, whom they treated with contumely,
have reduced the efficiency, some think, by 50 per cent.^
Ships" time seems to have been wasted both at sea and in port.
Port Congestion
Bad congestion of many ptDrts was one of the first results of
the necessary ending of free competition and of supply and de-
' October 29, 1915, the Chamber of Commerce urged the enlargement of
the Ships Licensing Committee by the " addition of members with wide
experience of chartering and the management of general trading vessels."
Lloyd's Weekly, March 3. 1916. p. 6.
"See also the same point made by Sir A. Williamson, Lloxd's Weekly,
November 26, 1915, p. 759.
'Fairplay, March 8, 1917, p. 421.
BRITISH CONTROL AND OPERATION OF SHIPPING 161
mand as controls of commerce. This arose very naturally, for
war trade was thrown in on top of peace trade, and both accom-
panied by diminution of man power. It was estimated ^ that if
prewar loading and discharging conditions could be restored to
Britain alone, it would result in 10 per cent increase in imports.
But French ports were the scene of- the greatest delays. The
Liverpijol Shipowners Association reported at their annual meet-
ing (February, IDl."))- that the chief causes of port congestion
were (1) shortage of labor on quays, in the yards, and in the
railway depots; (2) heavy demands by the Admiralty on the
crews of mercantile marine; (.'3) absorption of tugs, lighters, and
other appliances by the Admiralty, and railway cars by the army;
(4) crowding of quays and warehouse space by government im-
ports of sugar; ( fi ) increased railway traffic not mentioned by
the shipowners should be added to this list. As illustrations of
some of these claims, Lloyd's IVcckly (December -'>, 1915, page
T7'5) cites the case of a shipowner who had had goods bound
for Holland in a waterfront warehouse, but owing to the lack of
lighters four steamers sailed without his being able to get
the goods alongside. At Cardiff ^ difficulty of handling rail-
way cars was keeping ships idle in the port and miners idle
at the mines. Committees were appointed to advise on con-
gestion.*
Some of the specific steps made to handle this situation were
the construction of extensive new freight sheds at ^Manchester
and London. Perhaps the most revolutionary single change,
however, was the establishment by the Port and Transit Execu-
tive Committee in the spring of 191G of mobile battalions of
port workers, really gangs of green stevedores who were shifted
from place to place to help stop temporary port congestion. As
this continued it showed the possibility of interfering with the
established monopoly of a trade union, and the proposal to en-
large the dockers battalion to 10,000 in December, 1916, was
' Fairflav. ^rarch 16. 1916.
= f.lnvd's'lFccklx. February 5, 1915, p. 94.
• /^fW.. Febniarv 26. 1915, p. 141.
* Ibid., Review of 1915.
102 inkli:enci-: of tiii: crkat war vvos siiippixr.
opposed in vain by tlic Xational Transport Workers Federation*
Shortly before this a royal proclamation, issued under the Muni-
tions of War Act. had ordered (llasgow dock laborers back to
work pcndini,^ arbitration of the (juestion of hours and wages
because the dispute prejudiced the manufacture and transport of
munitions.
The port congestion in I'rance was more inevitable than in
I»ritain. because of the smaller number of ports, the closing of
S(Mne of her usual trade channels, and the greater necessity of
the concentration of war sup()lies at the northern port>
The next trouble was lack of regularity in the trade, as
evidenced by the fact that in London in .\oveml)er. IKl.'), the
dock workers were idle, while in the following Jaiuiary twenty
steamers were waiting. There had as yet been no system estal)-
lished for the correlation (jf ships, trade and facilities. (lovern-
ment activity in trade had begun in October, r.>14, by extensive
imports of sugar until all the dock facilities of the kingdom
were crowded and ships lay in harbors with no place to put their
sugar. Two years later they had apparently not yet learned their
lesson, as evidenced by corresponrlence in the Pailx Mail, quoted
in Fairf^lay, October ."», 1!>1(>:
A steamer with 5.000 tons of coal lay idle at anchor for
twenty days waiting for a berth and occupied a further
seventeen days to discharge her cargo. Thirty-seven days
in port ! During that time she could have made a voyage
across the Atlantic and back to this side with a cargo of
wheat, and yet people who cry for government control com-
plain of the price of bread.
There is only one dock with a quay space of 1.7')0 yards
at this port, and yet the government, in face of the growing
scarcity of tonnage through loss by submarine, mine, and
other causes, crowd steamers into such ports, producing con-
gestion, delay and loss to the nation.
This is only one example, of one port, of many similar
cases, and yet when I make vigorous protests to the Ad-
miralty against extravagant waste of British tonnage, its
'Lloyd's Weekly, March 7, 1916. and Fairplay, December 7, 1916.
BRITISH COXTROL AND OPERATION OF SHIPPING 163
effect on food prices, and its lasting and disastrous results
to British trade. I am informed that these matters are de-
cided by " officials of wide experience in the management of
steamers " ! Heaven protect us from such management and
such control. ( R. P. Houston, shipowner and Member of
Parliament. )
In the summer of 1U15 the government appointed a comfnittee
in Glasgow to coordinate the naval, military and civil require-
ments of the port, and to insure that the powers already possessed
in relation to traffic should be used in the most effective way for
all parties. A shipowner was made chairman.^ This was done
because a similar committee had l>een successful at Liverpool.'
This first stcj) in coordination was urgently in need of more far
reaching application, which has since beeamade.
A passage from the annual report of the Anglers Steamship
Company at the end of 1910 ^ is both descriptive of the then
existing conditions and their needs, and also prophetic of those
that have come :
in normal times a shipowner has many difficulties to sur-
mount in order to get a full year's work into twelve months
of his vessel's life, and to these are added many more in war
time. Time is wasted at sea not only occasionally, as in
peace, bv bad weather, bad navigation or accidents, but
almost invariably, by the necessity of taking routes other
than the shortest in order to avoid danger from submarines,
mines, etc., while time in port is wasted through the ineffi-
ciency and insufficiency of labor to load or discharge the
cargo, and of the railroads and other means of removing it
from the quays and docks. One is almost tempted to be-
lieve that a radical cure can only be effected by a system of
centralizing all chartering and so allotting tonnage that, so
far as the chances of the seas allow, only so many steamers
shall be bound to arrive together at any one port as that
port can handle.* At present, even so far as concerns the
' Lloyd's IVeekh. August 27, 1915, p. 55.
' Fairplay, -August 26. 1915, p. 315.
• Ibid.. January 4. 1917. , • , . ( ,..ar
♦The gentleman's trepidation at such suggestion after two years of uar
would be ludicrous were it not so serious. Such is the stuff against which
reforms must beat.
1G4 INFLUENCE OF THE GREAT W AK ITON SHIPPING
national requirements of the Allies, there seems to he no
settled plan of operations. One or more hranches of each
s^overnmcnt appear U) be chartering more or less independ-
ently (^f all the others. The result is confusion which is
had for all concerned — not (piite all, as with the ministries
in each capital, the various state railways and semi^overn-
mental munition works all bidding one aj:;ainst the other,
neutral and Japanese shipowners reap a rich harvest. Hav-
ing fi.xed his ves.sel on time-charter at the hi^h rate resultant
upon their had organization, the shipowner views with e(|ua-
nimity the difticulties of the charterers which arise from the
same cause, when she arrives at a \)()T\. already more than
full of tonnat^'e all really running; for the same principals
but all rhartt-red throuf,di ditYcrcnt chaimels.
Lo:^' lifficicucy of Shipping
The journals representin*^ the shippinj^ interests fairly reveled
in stories of official inet^ciencies with ships, and make clear to us
why Britain had to reorganize her system. K. V. Houston,
Membe'" of Parliament, criticized
tiic way in which requisitioned ships had been waste fully
employed, and mentioned that a 10.000 ton liner, for which
the government were paying -tK ►..')( »o a month, had been ly-
ing in the --Egean Sea for some time accommodating about
40 military and naval officers. It was popularly known as
the United Service Club.^
Again
there was great waste going on in the Transport Department
in connection with sending unsuitable tonnage for certain
purposes. For instance a fine passenger steamer, carrying
:200 passengers, all the accommodation having been pracli-
callv booked, and she being ready to load, was taken by the
Admiralty and sent out in ballast to Chile. She was an
unsuitable boat for the purpose, burning considerably more
fuel than an ordinary cargo steamer, and yet she was sent
the whole of -that distance in ballast. Another vessel en-
• Lloyd's, November 5, 1915, p. 709.
BRITISH CONTROL AND OPERATION OF SHIPPING 165
gaged in ore trade, which was also taken over by the
Admiralty, was sent in ballast the whole way from Spain
to a nitrate port to get a load of nitrates. She, too, was
an unsuitable vessel, too small for the trade.
We had these vessels going out in ballast at a time when
we knew that the Argentine railways were hungering for
coal, and were being compelled to pay much higher freights
for the few vessels available. If we had had practical
people managing this business, and if these people had
known the needs of the Admiralty in advance, they could
have laid out the tonnage in such a way as to avoid this
wasteful extravagance.^
In the winter lULJ-li;, with freight rates higher than ever
before in the history of the world, seventy good steamships were
allowed to get caught in the ice and spend the winter at Arch-
angel. In the winter of 1910 a shipowner reported" that his
vessel had been under government requisition for 437 days, of
which she had lain in port 373 days, in one case with a cargo
of coal so lung unloaded that it fired from spontaneous com-
bustion. Another glaring case was the much talked-of episode
of the tankers fitted up for troop transport ^ but not used.
Perhaps the worst example of all is the story of the steamer
that had six destinations assigned to her before she finally got
started, and then she went on service for which she was not
fitted. She was
' Lloyd's. November 26, 1915. p. 759.
' /-airplay. February 24, 1916.
' Mentioned by Sir A. \\'illiainson in the House of Commons on the 18th
of November last. " I^st February (1915) ten oil tankers were requisitioned
by the -Admiralty, and at great expense four of them were completely and six
roughly fitted for the transport of troops. After the cost had been incurred,
inquiries apparently were made as to their fitness for the desired purpose,
when it was discovered that their low speed rendered them unsuitable. But
it was not until the following August that the boats were handed back to
the owners, never having been put to any useful purpose whatever in the
interval. That little transaction must have cost the country one way or
another about £800,000. ... A small steamer was requisitioned to carry
coal to an East Coast port, and under the departmental system she managed
to accomplish two coasting trips in precisely the same time as that in which
she usually completed five when run by her own owner. . . . Two vessels of
like capacity were requisitioned, one at the time being in Canada, the other
on this side. In order, I suppose, to avoid all invidious distinctions, each was
sent in ballast across the Atlantic." {Fair play, January 20, 1916, pp. 90-92.)
IGO INFLUENCE OF THE GREAT WAR UPON SHIPPING
loaded with a cargo of coal in this country for Archangel,
and the necessary insurances were effected. Xo sooner was
this done than the authorities altered the destination to the
Meditcrnnican, and requested the owner to cover the altered
risk. This he did. when the authorities, who evidently
imagined that they were engaged in a game of general post,
decidcil next to send the boat to the White Sea, and notified
the owner, who had only just time to change his insurances
when the vessel's destination was once again altered to the
Mediterranean, and then instructions were again received
that she was really to go to .Archangel after all. Ultimately,
when everything was arranged and the lx)at was about to
sail for the last named destination, after Lloyd's and the
company's offices were closed, the authorities decided to or-
der her immeiliate disj)atch to the Mediterranean, e.xpre^sing
their unbounded surprise when the owners informed them
that this could not be done, as it would Ix^ impossible to rover
her for the voyage in the absence of uiKJerwriters. In the
end. and after the vessel had been delayed for a number of
days, the necessary insurances were in fact carried out and
the vessel proceeded, .\fter such an exhibition of business
cai)acity it comes almost as an anticlimax to hear that the
boat, not being fitted in any way for an Eastern voyage, was
sent through the Suez Canal ; that being unsuited for such a
purpose, she was utilized as a tug. and that, although every-
body outside the great commercial departments of state is
not permitted to forget that tonnage is urgently wanted,
she has at the time of writing still part of her original
cargo on board, and will not be free until probably next
month/
It is true that in the spring of 1910 even so good an enemy of
officialism as Fairplay reported that the mistakes in the govern-
ment operation of steamers were growing less, but plainly there
was need of reorganization, which came with the creation of the
Ministry of Shipping in December, 191C.
Before it came about the licensing of all voyages except those
in the coasting trade had been begun, by order of council, March
1, 1916. In May, 191.j. the licensing of coal exports had been
begun." This reduced the price of coal from 2J: to 14s. per ton,
' Fairplav. September 21, 1916. p. 394.
= Lloyd's Weekly, August 16, 1915.
BRITISH CONTROL AND OPERATION OF SHIPPING IGT
hut the dearth of coal shipments to the French ports shows that
even these provisions failed to bring efficient results, for many
steamers had to cross the Channel to Wales for bunker coal, at
great waste of time and danger from submarines.'
On December 1, 1015, Order in Council provided that no
British ship could carry cargo from one foreign port to another
without license from the Ship Licensing Committee." In the
early months of 191(1 the powers of licensers were enhanced bv a
>ystem of import prohibitions.^
Crkation and Work of the Ministry of Shipping
The steadily increasing power that had been given to the
various committees, such as the licensing of exports, of imports,
of particular voyages, etc., really gave possibilities of increased in-
efficiency through lack of system or coordination in the work of
the various departments, as indicated in some of the above de-
scribed occurrences. Accordingly the natural next step of put-
tmg it all under one authority was finally taken, December, 1916,
by the creation of the Ministry of Shipping, which was placed
under the control of Sir Joseph Maclay, described by Lloyd
George as
a very shrewd, able, and experienced shipowner,* who has
the caution of his race. He is at the head of our shipping
department, and has practically the whole shipping of this
country for the first time under control and requisition.
What does that mean? It means that the ships of this
country are going to be concentrated henceforth upon the
essential and vital trade of the country. There was a good
deal of trade done by this country in times of peace, very
essential and very profitable; but it is important now that
we should consider what is vital to the life of the
nation.^
' Fairplax. August 23, 1917, pp. 314-316.
' Lloyd's' ll'ccklw November 12, 1915, p. 729.
• Ibid.. March 3." 1916.
• Of the firm of Maclay & McAndrews.
• Lloyd's Weekly Review, May 14, 1917, p. 7.
IGS INFLUENCE OF THE GREAT WAR LTON SHIPPING
Mr. Maclay was accepted by tlie shipping fraternity as the
answer to tlieir requests for unity and a practical man. He
issued an open call that the public might inform him of inefficien-
cies in the service.
The Controller of Shipping will consider it a favor if dock
authorities, steamship owners and labor organizations,
through their representatives, will advise him from time to
time of any detentions and delays in harl)ors at home or
abroad from any cause whatsoever which, in their opinion,
might be obviated.
lie then went cm tn point nut iliat thi> had only come after
we have been at war for two and a half years, and tonnage
has been wasted in a prodigal way practically the whole
time.^
Within six months after his appointment Lloyd's Weekly pointed
out (May '"^. 11^>17) that the inefficiency charges in the operation
of shipping were declining.
Mr. Maclay instituted two drastic changes in policy: ( 1 ) he
asked for a heavy reduction in imports, which was shortly
granted by the government, although it had been asked for by
the Glasgow shipowners a year before." At the time of the
institution of the changes, it was generally recognized that many
commodities could be spared. Along with the restriction of
imports Mr. Maclay created a priority committee to deal with
restrictions in shipping.^ (2) Controller Maclay's second big
move was to greatly extend the requisitioning of British shipping.
When he took office about half the available tonnage was under
requisition by the state. The great majority of these vessels
were tramps, the liners with few exceptions remaining unrequisi-
tioned and running under license in their ordinary trades. In the
course of a few months the ministry brought practically the whole
^Fairplax, February 1. 1917, p. 178.
- Ibid.. January 27. 1916.
^ Glasgoisj Herald, December 29, 1917, p. 36.
BRITISH CONTROL AND OPERATION OF SHIPPING ] 69
of the British ocean-going mercantile marine, Hners as well as
tramps, under requisition at Blue Book rates. With this ex-
tended control, the government was able to redirect vessels by
withdrawing tonnage from distant trades and putting it into near
traders. The efficiency of a ship was greatly increased and the
given tonnage handled much more trade. Even the capacity of
the ships themselves was increased on these shorter voyages, be-
cause of the smaller space required for bunker coal.
How THE Ministry of Shipping Operated Ships
It is easy to regard this seizure of the nation's shipping as
being more of a revolutionary act than it was. Examination of
the actual method shows that it is much more a problem of con-
trol than of operation. The government had no organization to
handle such a vast mass of shipping, nor has it created one.
The government recognizes that the state can not provide
any organization capable of working the smaller cargo
steamships. It is equally true that the state can not provide
any organization capable of working the ocean-going steam-
ship. By stretching the prerogative of the Crown, the
vessels themselves have been requisitioned, but the govern-
ment is now appealing to the shipowners, whose vessels have
been taken, to continue to carry on with those same vessels
the business which they, the shipowners, are alone capable
of carrying on — and it is asking the shipowners to render
these services to the nation without any profit to themselves.^
What really happened was that they commandeered the ships and
then virtually also commandeered the old organizations that ran
the ships.
The lines continue in their usual trades, committees com-
posed of representatives from each section being formed
under distinctive titles such as the River Plate Conference,
Indian Conference. Mediterranean Conference, etc., and to
these conferences the ^Ministry of Shipping issue directions
^Lloyd's Weekly. May 18, 1917, p. 5.
170 INFLUENCE OF THE GREAT WAR UPON SHIPPING
as to the nature and quantities of the goods to be carried.
All details are left to the management of the individual
lines. Both tramps and lines are paid Blue Book rates of
hire, and all freights are accounted for to the government.
Rates of freight under these conditions can not go higher
than the government are prepared to allow them, but, mer-
chants can only ship such articles as are considered essential
for the country's requirements. There is consequently no
competition between shippers or between one market and
another, and tonnage is directed to where it is most wanted.
The machinery existing for this complete control of shipping
is naturally vast. In the summer of r.>17 about 10,000 peo-
ple were employed in the London offices of the Ministry of
Shipping.^
Although this machinery may be vast, it is simplicity itself in
comparison to the actual task of running the vessels.
With regard to the tramps, the problem and the method differ
in part from that used with liners. Some of the tramps that
are doing civil work, such as carrying grain, sugar, nitrate, are
operated as of yore by shipping firms who know how and act as
agents for the Transport Department. But the Transport Depart-
ment of the Admiralty has long operated ships, and the British
Government is now operating a part of the many tramps under
its control.
They are being worked directly by the Department of the
Ministry of Shipping. Cargoes are arranged, loaded, and
discharged entirely under government orders, while the man-
agers or owners simply attend to the provision of a crew,
stores and general upkeep of the steamer.
The Naval Sea Transport Branch provides for the car-
riage of millions of tons of liquid fuel and coal a year, its
collier section alone employing hundreds of vessels and
handling a monthly average of well over a million tons of
coal. In eight months of 1917, the Military Sea Transport
Section moved, in round figures, 1,000,000 people, 12,000,-
000 tons of stores, 300,000 animals, and 100,000 guns and
vehicles. In practically the same period the Commercial
* Glasgoiv Herald, December 29, 1917, p. 35.
BRITISH CONTROL AND OPERATION OF SHIPPING 171
Branch provided for the loading of milHons of tons of
cereals, sugar, iron ore, timber, pyrites, flax, metals, and
fodder. Its aggregate shipments in nine months were, as
a matter of fact, well on towards 13,000,000 tons/
This work had to be done, as did much of the civilian work also,
under the limitations of the convoy system, which, a British ship-
owner reports,- have resulted in a delay of 28 per cent in time on
thirty particular voyages. in comparison to similar voyages of the
same vessels without the troubles of convoy.
The many small vessels of the British coasting trade were,
with their work, such a complex that the government from sheer
fear of details of the job let them alone when it took shipping
engaged in the foreign trade. But as early as 1916 the coasters
had begun to take advantage of the situation by putting their rates
up to such a point thai it was cheaper to send by rail than by
boat from British port to port.^ This unwonted and before un-
heard-of condition was naturally confusing to the railroad situa-
tion, and accordingly the Shipping Controller made a rather be-
lated announcement * setting maximum rates in the British coast
trades for the carriage of the raw materials for iron making, and
intimates that other rate controls will follow.
Nationalization of the British Mercantile Marine and
Shipping Business
It seems that it would be difficult to figure out many more
controls that the British Government might enforce upon the
British ships and shipping business, which for the present have
been nationalized in operation and in part in ownership. Mr. T.
Patterson Purdie, Chairman of the Clyde Steamship Owners
Association, and member of the government's Ships Licensing
Committee, in an address before his association early in 1917,
summarized under thirteen heads the very extensive controls that
' Glasgow Herald. December 29, 1917, pp. 35-36.
'Ibid., Januarv 17, 1918, p. 161.
'Ibid., April 27. 1916.
* Ibid., January 3, 1918.
172 INFLUENCE OF THE GREAT WAR L TON SHIPPING
were in force two months after Shipping Controller Maclay was
appointed.
It is advisable that I should here recapitulate some of the
controls over British shipping instituted by the government
which have been in force during the past year, in order to
show, to some degree, the conditions under which our mer-
cantile marine has been working :
(a) Fifty per cent to sixty per cent — embracing every
type of British mercantile ship — is under requisition to tlie
government and employed in Admiralty and military service
at Blue Book rates, which admittedly arc the very essence of
limitation.
(b) All ships for the carriage of sugar cargoes and Aus-
tralian wheat are put under re(|uisition and paitl for at Blue
Book rates.
(c) Freight limitations have been, and are, in force as far
as practicable per British steamers.
(d) All refrigerated ships and oil tankers are operated on
government account and at fixed rates.
(e) All regular liners — not requisitioned — are under
obligation to carry a fixed proportion of cargo at fixed rates
of freight.
(f) Cargo steamers — not requisitioned — are directed to
perform specific voyages and to transport specific cargoes on
fixed terms and conditions.
(g) No British vessel over 500 tons gross register can
proceed on any voyage without first obtaining a license for
the specific voyage intended. Here, again, control is the
order of the day, because licenses are refused by the Ship
License Committee, unless the particular voyage is deemed
to be in the best interests of the national requirements and
those of our Allies. Shipowners throughout the United
Kingdom know only too well how licenses have l)een refused
for legitimate trading on many occasions, and have accepted
the Licensing Committee's decision without demur, knowing
that it acted solely in the best national interests with the
knowledge it possessed, and that national interests were
supreme and paramount over all individual or other interests.
(h) A certain proportion of our mercantile marine is
placed at the disposal of the Allies for their emergent war
demands at Blue Book rates.
BRITISH CONTROL AND OPERATION OF SHIPPING 173
(i) The government has taken over, arbitrarily, as emer-
gent demands arose, absolute possession of some mercantile
ships building, or at work, most suitable for its requirements.
regardless of shipowners' private interests, and left the latter
to accept its ideas of price, or arbitrate.
(j) Shipowners having ships building even under prewar
as well as postwar contracts have had to pay, owmg to
increased wages and costs of materials, substantial sums m
addition to their contract prices to enable the ships and their
engines to be completed. As regards these new vessels
which have no prewar datum line of profits, they are only
allowed. under the new Finance Act, 6 per cent profit on the
capital, and 4 per cent on the first cost of the ship, which
is an altogether unsound and unremunerative basis, and has
effectually prohibited the building or acquisition by private
enterprise of further tonnage at existing inflated prices, at
a time when additional British ships are an urgent ana
clamant necessitv.
(k) Ml shipping contributes to the state 60 per cent ot
anv excess profits earned over the prewar standard plus 5s
per pound of taxation— or in the case of new vessels, the
per cent standard on capital— after allowance of 4 per cent
depreciation on first cost, which has for years been the basis
allowed, and as shipping revenues are derived and profits
earned principallv from foreign countries, all revenues to the
state in the shape of taxes from British shipping constitute
a material contribution to every man, woman and child
throughout the United Kingdom. .
(1) Ever V British ship has to conform to certain regula-
tions necessarilv imposed in these abnormal times upon them,
which add materiallv to their working cost, as well as
lengthen the time on (their) voyages, which lessens their
efticiencv and carrying power.
(m) Xo British vessel can be sold or transferred to any-
one except Britishers.'
Soon after coming into power, the Controller extended requisi-
tions to virtually all British vessels, and the unrequisitioned liners
which had been ordered to hold a share of their space for govern-
ment disposal each voyage saw the percentage gradually creep up
• Fairplay, February 15, 1917, p. 307, also Marine Revieu'. July, 1917.
174 INFLUENCE OF THE GREAT WAR UPON SHIPPING
from 10 to 20, to 30, to 40, to 00, to 80, until with the bef^inning
of 11)18 in most services 100 per cent of tlie Hner space was on
government order.
To make the control even more tight, Britain was not content
to let even one Britisher sell a ship to another, for an Order in
Council published in the London Gazette, February 1«>, l'.»17,
states that
A ])erson shall not without permission in writing from
the Shipping Controller, directly or indirectly, and whether
on his own behalf or on behalf of or in conjunction with any
other person, purchase or enter into or offer to enter into
any agreement or any negotiations with a view to an agree-
ment for the purchase of any ship or vessel.
A little later on it was enacted that no British ship should be sold
to a foreigner, without the consent of the Board of Trade, for
three years after the war.^ Then further to clarify the matter of
sale of ships, the above mentioned regulation of February, 1917,
was amended " to make it clear that the purchase of shares in a
ship or vessel or any stock, debenture, or other security by which
a person might gain control of a ship should be construed as the
purchase of the ship itself.
February 15, 1018, an Order in Council amended the Defense
of the Realm Regulations by providing that every contract for
the chartering of British ships, and every contract made in the
United Kingdom for the chartering of any ships not British
must contain provision making the validity of the contract con-
ditional on approval of the Shipping Controller. It would be
difficult to see how the driver of a motor truck in the Quarter-
master's Department of the army could be more subject to gov-
ernment, more a part of the government machine.
Shipping as a Source of Revenue
It has been said that Britain has used her shipping to reduce
the cost of living within the Empire, and has sent her ships out
' Fairplay, October 18, 1917, p. 654.
* U. S. Commerce Reports, February 14, 1918.
BRITISH CONTROL AND OPERATION OF SHIPPING l75
as tax gatherers to bring revenues from foreign lands. Both of
these statements savor strongly of the truth, as evidenced by the
statement of Mr. J. H. Welsford {Fairplav, March 8, 1917, page
421):
A simple calculation can be made, showing the difference
between what this tonnage, requisitioned at Blue Book rates
by the government today, would earn at the rates which
neutral shipping is obtaining. From which it will be clear
that the shipowners' contribution to the state in services can
be conservatively valued easily at £300,000,000 per annum,
while, in addition, during the last fifteen months, the con-
tributions in excess profits have been over one hundred mil-
lion pounds.
Such income as shipowners may get is still further subject to
income tax. Even further than this the shipowners claim, as a
grievance, that the government itself has been in many cases
making the direct profit by charging more for the use of ships
than it pays their owners. Upon being questioned in Parlia-
ment Sir Leo Chiozza Money, representing the Shipping Control-
ler, admitted :
that British liner steamers loading on the berth at Buenos
Aires for Liverpool were directed by the government to
charge 50s. to o2s. 6d. per ton on government cargo, and as
high as 250s. per ton on cargo for civil and commercial pur-
poses, the steamers being under requisition and the owners
only receiving payment at Blue Book rates, any profits ac-
cruing going to the government.^
And again Fair play points out editorially (August 23, 1917, page
314):
It is obvious to a child that, inasmuch as the government
pay British shipowners only Blue Book rates and charge full
current market rates on all our exports, and various rates
above Blue Book rates on our imports, and full rates on
' Fairplay, Augyst 16, 1917, p. 270.
17G INFLUENCE OF THE GREAT WAR IPON SHIPPING
goods consigned from the East to other ports ** sume " profit
must he secured — in one case, for instance, tlie freight col-
lected was t.')!). (>()(>. and the owner received about tJ.noo.
On Tuesday, last week, Sir Leo, in answer to Sir Walter
Ruiiciman, endeavored to explain that " the pt)licy of the
Ministry of Shipj)ing is to charge the equivalent of Blue
Book rates where the benefit of the low freight would accrue
to the consumer — that is. where the commodity is one of
which the supplies are controlled — and to charge full market
rates where the benefit of a lower rate would l)e likely to
go (hnvn to the producer, merchant, or middleman, with no
advantage to the con>umer."
To the outsider this seems like the height of wise policy.
In addition to the direct, there are indirect ways of getting
money nut of the steamers. Thus* it is pointed out that by
handing the vessels over to the Allied Ciovernments at Blue Book
rates and making the Allied (iovernments .ts>,nme the war ri^^k,
the British (iovcrnmcnt makes a profit.
Ships have also been made a source of profit through the prices
they paid for coal.
One instance of the e.xtent of government exploitation of
our major industry must suffice : An owner having carried
a cargo of coals to .Mexandria for the Admiralty on l>lue
Book terms was allowed the privilege of conveying an'?ther
cargo to this country from India at a very low rate, but on
condition that he bought ♦)')0 tons of bunkers from the gov-
ernment at W 10s. a ton. What was the result? Just this,
that on the making up of accounts instead of receiving any
freight from the government for the outward voyage, the
owner actually had to pay them a small balance in respect
of the coal on which they had made over ^') per ton profit."
The Maintenance of the Private Fleets of British
Merchantmen
Altogether the financial status of British shipowners has
greatly declined in the period of the fuller nationalization. As
' Fairplax. December 13, 1917. p. 979.
"■Ibid., March 8, 1917. p. 514.
BRITISH CONTROL AND OPERATION OF SHIPPING 177
an evidence of this the earnings of the International Mercantile
Marine Co. operating liners declined from £20,100,000 in 1916
to £11,500,000 in 1917. During the period of partial requisition-
ing, the British press rang with complaints of shipowners and
their friends, because the government would not grant war risk
insurance sufficient to replace a ship when she was destroyed.
Thus a shipowner saw himself in a position of having a ship
today worth in the open market £240,000, and after she was
torpedoed he found himself in possession of a claim against the
government for £l«j(),000 insurance, which might he paid some
months later anil was entirely inadequate to replace his steamer
at present prices, although that sum may perhaps build him two
ships three or four years after the war ends.
.Mr. W. J. Noble in seconding a protest to the government in
the North of luigland Steamship Owners Association meeting
said :
Taking the actual sums received in respect of V.) specific
vessels from the commencement of the war, plus deprecia-
tion, the aggregate amounts were little more than one-half
the sum reijuired to replace the tonnage on the basis of pres-
ent shipbuilding prices offered by neutral owners for new
tonnage.'
While the shipowner had the chance for a part of his fleet to
be free and get the high rates of the market, he had some possi-
bility of setting aside profits to get more ships even at war prices,
but when the whole of the British fleet went under requisition at
Blue Book rates, the possibility of replacement or private exten-
sion of shipping Ijecame virtually nil. for the price and cost stayed
at phenomenal figures and the ship's earnings were ever growing
less because of a fixed Blue Book rate and the steadily increasing
costs of operation. The situation is well shown by the statement
nf W. 11. Kaeburn in a presidential address before the Chamber
of Shipping of the United Kingdom in March. 1917:
What are called Blue Book rates were moderate enough,
all things considered, when they were agreed upon with the
government at the commencement of the war: but everybody
• Lloyd's IVcckly Review. October 19, 1916, p. 5.
178 INFLUENCE OF THE GREAT WAR UPON SHIPPING
knows tlie cost of running ships has far more than doubled
itself. Up to a certain time it is perfectly true that ship-
owners were making large profits through having a fair
proportion of their tonnage free of requisition: hut grad-
ually the percentage of requisitioned ships has increased
until now there are very few vessels, which are not running
at either Blue Book rates or freights restricted by the state.
I now hear that all liners have been commandeered. Tak-
ing into account the heavy increase in the cost of insurances,
the enormous prices paid for upkeep and repairs, and the
time vessels are off hire doing necessary repair work, not
to speak of our having, at our own expense, to provide gun
mountings and pay and feed the gunners, the Blue Book
rates leave no margin for fresh enterprise. In the case of
steamers which have been completed at war prices, there is
not even as much margin as will cover ordinary depre-
ciation,^
As to the profit aspect of Blue Book rates, a few months later
Mr. Bonar Law. in introducing the budget in Parliament, said :
I have myself e.xamined something like a score of accounts
of typical ships — and that is a kind of examination that I
am really competent to make on my own account — and in
not one of those cases was it possible for them under the
requisition terms to make anything like prewar rates of
profit. I wish the House to realize that. Many of them
show a loss. But my point is that it is impossible under
the requisition terms to make even a prewar scale of profits."
The bankruptcy of a company that started in the ship business
on the high prices of lUlO, largely on borrowed money, is there-
fore a very natural proceeding ^ for the simple reason that the
ships being requisitioned the company could not pay the interest
on the mortgage, and the stock was valueless.
The war brought two other troubles to the British shipowner
with his fixed Blue Book income. One is the delays due to the
inadequacy of docks for repair work. This inadequacy arises
' Fairplay. March 8, 1917, p. 427.
= Lloyd's Wcekh Rcviczv, June 22, 1917, p. 5.
''Fairplay, September 13, 1917. p. 493.
BRITISH CONTROL AND OPERATION OF SHIPPING 179
from the large utilization of yards for naval work, the increased
repairs of merchant shipping and the shortage of labor, which
means altogether that the ships are losing more time in repair
than in peace times.
The second of these troubles is increased wages. British labor,
alert and thoroughly organized, has not failed to take some ad-
vantage of the opportunities offered by the war. After requisi-
tioning had become almost universal, there was a strike at Liver-
pool. Seamen were offered £1 a month increase, but having
effective votes the labor leaders went off to London and through
political pressure won an increase of rates from £8 10s. and £9
per month to £11 and £11 10s.— £600,000 a month from the
pockets of British shipowners.^
The tendency to sell out, and the anticipation of lower prices
before the war ends - is aided by some sense of alarm at Ameri-
ca's large shipbuilding program. The tendency for the tramp
owner to sell is further promoted by the desire of British lines
to buy and thus maintain their services and clientele. The only
way they can do this is to buy or charter tramps for the work.
The smaller number of ships now afloat reduces the need for
managers and owners. As a result of all these influences British
shipowners are constantly leaving the trade.'
All this restriction, reduction and inability to make money or
increase his tonnage is very alarming to the British shipowner
who thinks of ships only as private property built by private
enterprise. He sees the Scandinavians and Japanese, and, up
to a recent date, the Americans, piling up huge reserves of war
profits which he fears will be used against him in postwar period
when he must fight to win back the lost trade, if he wins it back.
And he naturally views with alarm such a proceeding as that of
the making of many contracts late in 1917 between British ship-
builders and Norwegian shipowners for vessels at £25 per ton
for delivery after the war, subject to the permission of the British
Government, with the further provision that any increase in
^ Fahplav. October 25, 1917, p. 678, and October 11, 1917 p. 602^
= LloYd's Weekly, June 1, 1917, p. 5. Fairplay, November 8, 1917, p. 758.
" Fan-play, February 28, 1918, p. 410.
ISO INFLUENCE OF THE GREAT WAR UPON SHIPPING
material or wages over existing costs shall be added to the price
of the contract. The price represents at least four times prewar
costs, and solely because of government restrictions, it is une
which British shipowners are not in a position to pay. These
particular contracts were the cause of the Xorth of England
Shipowners Association petitioning the Shipping Controller to
make representations to the government that it should revise its
policy and " take such steps as wimld enable the liritish owners
to rehabilitate the British mercantile marine."' ' In the meantime
the British Government shows no signs of letting the British ship-
owner rehabilitate the mercantile marine. He can onlv do that
out of war freight rates, and the government is prohibiting war
freight rates. But it is nevertheless building ships itself with
might and main, and the question of ultimate ownership of these
lleets is problematical, although it is generally expected that they
will be sold after the war. It is, however, scarcely problematical
to predict that the Norwegians will wait a long while for those
high priced ships to be built for them in British shipyards, for
the yards like the ships are now and probably, for a time at
least after the war, will be under requisition by the British Gov-
ernment, which seems to be maintaining a consistent policy of
doing everything in its power to stop undue profiteering in ship
operation and shipbuilding. It is wisely preventing the paving
of war rates and it is therefore preventing their capitalization.
Yet it is striving to keep British ships upon the seas. It is much
concerned about the welfare and safety of the nation and very
little concerned about the profits of any group. This is as it
should be. The soldier is making no profits. He serves and a
truly loyal nation will serve on the same basis. The question of
the restoration of business to the profit basis after the war or*
leaving it on the service basis, brings us face to face with one
of the war's greatest and most interesting results. At present
the government is utilizing something it did not make, namely the
commercial organization of peace. This peace organization has
made or been compelled to make a truce on profits — for a time,
' Lloyd's Weekly Revieu.', October 19, 1917, p. 5.
BRITISH CONTROL AND OPERATION OF SHIPPING ISl
it has been drafted. The government could no more create anew
a ship management than it could create anew a fleet. The getting
of the shipping business off the war basis may be almost as per-
plexing as has been the process of getting it on to the war
basis.
The Loan of British Ships to France and Italy
The British shipowner has exercised his national prerogative
of grumbling, but he has certainly had a fair amount of basis as
an individual for this complaint, and perhaps nothing has tended
more to exacerbate him than the sight of the service Britain has
rendered her allies. A million tons of British shipping, requisi-
tioned at Blue Book rates, was early handed over to France. By
the oOth of July, 1917. AI. de Alonzie, Under-Secretary of State,
reported in the French Chamber that the amount had reached
2,000,000 tons.^ While this was going on, a considerable por-
tion of the French commercial fleet was, until midsummer of
1917, in nowise controlled as to freights, being free to go upon
the sea and earn enormous profits for its owners. Naturally
the British owner thought that Franca should have requisitioned
and controlled her own shipping before taking advantage of
England's shipping." The explanation of this situation by M.
de Monzie in the French Chamber is naive in the extreme, for he
said:
This portion of the free tonnage was employed usefully
and used for the national good by its managers, who have
experience in the management of the ships confided to them.
He could not be expected without any organization, with-
out cooperation, " without a staff, without commercial ex-
perience, to order that the state shall suddenly, brutally seize
these 4()5,000 tons, especially seeing that, by the decree of
July 17, the gov^ernment has the right to exercise the per-
manent control on every voyage and the power to refuse a
license." ^
' Fairplax, September 3. 1917, p. 462.
■ Ibid.. September 9, 1917.
^ Ibid., October 11, 1917, p. 595.
182 INFLUENCE OF THE GREAT WAR UPON SHIPPING
To whicli the natural British reply was that if the French Gov-
ernment was unable to manage 465,000 tons of their own ship-
ping, what could they do with 2,000,000 tons of British shipping.
A crisis seems to have been brought about by the amazing and
almost unbelievable episode of a IVench ship carrying to a French
port a full cargo of rhododendrons, to which M. de Monzie in
his Chamber report, July 30, 1U17, made full confession.
For example, one day, in one of the important French
ports, at a time when the dearth of ships was great, and
anxiety was multiplied by reason of certain torpedoings, one
saw arriving a surprising ship, which carried a full cargo of
rhododendrons at a time when steel was so necessary. And
if we did not know of the fact, the Fnglish Admiralty did,
and protested with energy that measures had not been taken
to prevent such abuse. ^
As a matter of fact, this freedom of certain French ships to
continue to take the toll of free rates continued for some months,
and prevailed for a part of the Italian shipping even down to
1918, at the same time that England was gallantly placing her
ships at the disposal of Italy at a low rate.
In the spring of 191G," Italy sent a special commission to
Britain, which resulted in the British Government placing 70
steamers, of 5,000 tons dead-weight each, at the disposal of the
Italian Government to bring 350,000 tons of grain to Italy at the
same freight England was paying to requisitioned steamers. She
also gave sufficient tonnage to carry 50,000 tons monthly of coal
from Cardiff for the Italian state railways for the duration of
the war, and eighteen months later some Italian ships were still
fattening their owners' pockets with the outrageous earnings of
the full market rate.
Interallied Chartering
After the English, French and Italian Governments had to
supplement their own supplies of shipping by chartering neutral
^ Fairplav, September 13, 1917, p. 462.
' Ibid., May 4, 1916.
BRITISH CONTROL AND OPERATION OF SHIPPING 183
shipping, it became early evident that the competition of one with
the other tended to force up rates more than would be the case
if they had a single chartering board, which was accordingly
created under the title of the Interallied Chartering Committee
and which has been at work for many months. A similar attempt
to conduct interallied ship purchases through a common board was
not so successful, according to the admission of an under-secre-
tary in the British Parliament.
On English initiative the Allies agreed that, as we had a
common policy for chartering, it was necessary to have a
common policy for purchasing. The ships of all the world
were to be placed on the table, and to be divided in friendly
agreement. It was agreed that each country — France,
Italy and England — which was represented on the purchas-
ing committee could only buy a ship after it has been
authorized to do so by the international committee. The
result was that when a manufacturer or a shipowner desired
to purchase a Norwegian or a Greek ship, he sent in a re-
quest to the Ministry, declaring that he had an option, or
that he is negotiating for the purchase of the vessel. The
government talks over the proposition, and transmits it
through its representatives on the interallied committee in
London. The representatives of the three countries then
discuss whether the ship shall be placed among those allotted
to France, England or Italy.
]\I. Gratien Candace : Meanwhile a neutral buys the ship.
Under-Secretary of State: I agree that in practice the
system has been very disappointing. ... In truth, I re-
peat the system of the purchasing committee has been the
source of numerous disagreeable experiences.^
As the result of his experience with the law^ of supply and demand
when supply had ceased to be able to meet demand, the under-
secretary made the following interesting lament:
If it is not for want of money, why have not purchases
been more numerous? In truth, it must be stated, without
any desire to extract therefrom any exposition of principle,
' Fairplay, September 13, 1917, p. 462.
184 INFLUENCE OF THE GREAT WAR UPOX SHIPPING
free competition is an excellent system in time of peace, but
impracticable in time of war. whatever attraction there may
be for certain state ownership formulas, it is not possible to
allow complete freedom in this matter. Complete freedom
is bad in other things, but it is especially bad in the question
of chartering and purchasing ships.
International Control of Ships
The continued delays of ships in port, such as a vessel requir-
ing a month to unload at a French port in the spring of 1017.^
showed the Allies the necessity of absolute planning of all ship
work by some comprehensive body, and therefore of absolute
consolidation of its control. It was iiut natural that within a
year after the establishment of unified control of British shipping
under the Shipping Controller, there should follow the natural
next step : namely, an international organization to coordinate
the transport facilities of all the .Mlies, such as was planned by
the Interallied Conference at Paris, December, 1017. A com-
mittee was formed with American representatives, and a British
member resident in Xew York. (See Chapter \TI.) This body
is able to order any Allied steamer by wireless to any port which
their knowledge of conditions makes it most desirable that it
should reach, even to the extent of changing the routing of the
vessel while at sea.
Similar attempts at simplification of the coal transport trade
(see Chapter IV) and the wool transport ■ were doubtless of
value in helping the railroads keep the ports clear.
The problem of port congestion has largely disappeared but in
this connection the increasing ship famine and freight famine
should not be overlooked.
It is to be hoped that this national and international unification
of control may bring about that desired condition where vessels
load promptly, sail promptly and then immediately proceed on
their next assignment.
• Fa;>/)/ov, Alarch 15, 1917.
■ A committee created by order of the Army Council was established with
headquarters at Bradford to approve of wool shipments so they would pro-
vide better shipping and most direct routes.
CHAPTER VII
Control and Operation of Shipping by the United States
Government, 1914-1918
Similarity of English and American Experience
Like causes tend to produce like results. It is for this natural
reason that we in the United States have duplicated England's
experiences with ship operation in all important respects, but
with great ditference in detail resulting from the different ways
in which the problem unfolded itself in the two countries. While
England was having two and a half years of war with ever in-
creasing pressure, we were having a period of profitable neutral-
ity, during which the American nation — farmer, manufacturer,
exporter, financier, and shipowner alike — fattened his purse at
the expense of England, France, Russia and Italy. Then we
entered the war, and within less than a year a swift series of
increases in governmental authority left American shipping
bound, controlled, to all intents and purposes drafted, an arm of
the government, as was the case with British shipping.
Along with this increase in authority went the rapid realiza-
tion of inefficiency of operation, accompanied by the persistent,
almost pathetic, pleadings of Europe for help, for ships, ships,
more ships. These calls, driven home by the spectacle of block-
ades and partial paralysis of our own industry because of trans-
port congestion, led to rapid developments in organization and
more organization in the struggle to add efficiency unto author-
ity. We probably had no reason to expect it to be otherwise,
but it is none the less an unpleasant reflection that during this
three and one-half years the American democracy showed in its
development of shipping policy no sign of having learned by
observation when the object lesson was so near and so well
known as the English experience. Certain conditions produced
185
ISG INFLUENCE OF THE GREAT WAR UPON SHIPPING
certain results in England, and all we learned from it was to
recognize the resulting symptoms somewhat more promptly
when we in our turn had the causative trouble and had the facts
repeatedly pointed out from Europe. The slowness of our wak-
ing up serves as an added reason why the educated imperialism
of Germany must be suppressed, for it is plain that society based
upon individualistic profiteering industry has no chance to sur-
vive in the presence of scientific imperialism organized for con-
quest.
United States a Bystander in the Shipping World
UNTIL 1917
During the first two and a half years of the war the United
States Government, as for decades past, played the part of the
bystander in the world of shipping. It is true that the Ameri-
can shipyards, individualistic enterprises all. were busy building
ships partly for American, but chiefly for foreign owners, but
the attitude of the nation and the actual achievement of the gov-
ernment was, as aforesaid, chiefly that of a bystander. We had
been able to do this in times past in peace, for the simple reason
that in the conduct of our economic life we did not need to build,
own. or operate ships. Have we not. every month of our lives,
heard the true boast about the great variety and completeness of
American resources and industries? We all knew we could live
comfortably on the products of our complete round of natural
resources. We did not need foreign trade! (At least we did not
need it much.) Therefore, we did not need to provide for it!
The chief trend of our trade legislation has been to build up
tariffs to prohibit imports which flow to us because the world
had to have the rich products of our monopoly supplies of
cotton, oil. copper, lumber, grain, meats, tobacco and patented
machinery, which have made up the great bulk of our exports.
European nations built their ships and came to our shores
for these goods, and when war came our monopoly position
was strengthened because of our great ability to make munitions.
AMERICAN CONTROL AND OPERATION OF SHIPPING 187
The Allied ships came for munitions also, so that still we
did not seriously need ships, and never having had any, we
knew, nationally speaking, little about them. This is well
proved by examination of the part the shipping question played
in the life of Washington during the first two years of the
war, when Congress spent much time exposing our general
national ignorance of shipping questions.
IV e Admit Foreign Ships to Registry
As a bystander, we hastened to gather up the wreckage of the
battle. With surprising alacrity Congress threw open the door
to foreign shipping by passing a new ship registration act within
less than three weeks after the war started (August 18, 1914).
For the first time in decades the foreign built ship was permitted
to register under the ^American flag. In the next ten and a half
months, namely, to July 1, 1915, we received 148 vessels ^ of
523,301 gross tons, but foreign prohibitions of transfer of ves-
sels to other nationalities reduced this amount to a small figure
the next year. It should be stated, however, that about nine-
tenths of the vessels that came to us represented no change of
investment, merely the transfer of American owned vessels "
from the foreign flags under which they had been running more
economically to the American flag under which they were com-
pelled to run more expensively, but, owing to the troubles of the
war, with greater safety and profit.
' Of these, 96 of 332,258 gross tons, were formerly under the British
30 •
• 147,742 "
5 '
• 17.401 •'
6 '
' 10,549 "
5 '
• 5.452 "
1 '
' 5,275 " "
1 '
' 1,352 "
1 '
• 1,381 "
2 '
• 1.349 "
flag
German
Cuban "
Belgian "
Mexican "
Rumanian "
Uruguayan "
Chilean "
Norwegian "
Neu! International Year Book, 1915, p. 589.
' The Standard Oil Co. of New Jersey owned 25 of 130,322 gross tons; the
United Fruit Company. 24 of 113,243 gross tons; and the United States
Steel Products Co., 10 of 48,271 gross tons; and 44 individuals or corporations
owned each a single ship. New International Year Book, 1915, p. 589.
188 INFLUENCE OF THE GREAT WAR UPON SHIPPING
The La Follcttc Seamen's Bill
Despite the war, the American Congress passed the La Follctte
Seamen's Act, March 4, 1015, which went into effect for Ameri-
can vessels November 4 of that year, and for foreign vessels in
American trade, March 4, I'JlO. This was generally considered
to Ije in favor of the Seamen's Union rather than of shipping or
export trade. It made desertion a less serious offense, it pro-
vided that the crew should be paid half their wages at every
port, thus making desertion much easier. American shipowners
Hatly declared they could not run vessels under this act and
several American lines sold their ships to foreign owners. The
most conspicuous of these was the Pacific Mail Company, which
since 1848 had been an important factor of transpacific trade,
and which now sold to Japan the fastest steamers crossing the
Pacific — the IS-knot. 11,000-ton boats Siberia and Korea.
Altogether the losses by sale of American vessels for IJJ 15-10
(102,479 tons) were greater than our gains by transfer from
other flags (83,480).
President Wilson's Shipping Bills, 1915-1917
During the winters of 1914-15 and 1915-10, the general ques-
tion of the world's ship supply was forcing itself upon the atten-
tion of every nation with any overseas trade. By January, 1915.
rates had reached the highest point ever known. The disappear-
ance of the German liners from the sea and the steady requisi-
tioning of British vessels was causing us to appreciate as never
before the fact that we had but few ships. The Wilson admin-
istration brought forward a bill aiming to relieve the situation
by providing $25,000,000 to build or purchase ships to be owned
by the United States Government. This precipitated a long and
acrimonious debate in Congress and in the press. It had as its
intellectual background the general impression that America had
few ships, that the carrying of her trade was in the hands of
the foreigners, that the foreigners had formed themselves into
AMERICAN CONTROL AND OPERATION OF SHIPPING 189
trusts who did as they pleased with American trade, and that we
were being gouged by these foreign trusts. This feeling was some-
what increased by the knowledge that England w^as getting her
own service from her ships at the low- Blue Book rates while
unrequisitioned English ships were charging us the highest rates
ever known. Our sense of independence was offended. Mean-
w^hile there stood the Interstate Commerce Commission as a
model in most American minds of the way in which a transport
monopoly might be curbed. Why not curb the shipping mo-
nopoly as we had curbed the railroad monopoly, by act of Con-
gress ? The necessity of doing something was generally admitted,
but the Democratic bill providing for a Shipping Board and a
$25,OUU,000 fund for ship purchase and possibly building and
certainly government ownership was opposed by nearly all of
us, and it was defeated despite the pressure of a strong Adminis-
tration intrenched by a big congressional majority backed up by
strong party discipline. The Republicans called it a plain sub-
terfuge that the Democrats, having put themselves on record as
opposed to subsidy, and realizing that they were wrong and that
we had to have something of the sort, were doing worse, to save
their faces, by making it government ownership. Government
ownership beyond a doubt is, or in 1915 certainly was, one of the
greatest ogres that could be called to the attention of the business
interests of America. We distrusted it — we distrusted its wis-
dom,^ wc distrusted its efficiency, we distrusted its disinterested-
' " It seems to us that the most superficial study of the actual situation
with regard to ocean tonnage, present and prospective, must make it clear
to any thinking person that the Administration's shipping measure, even if
promptly enacted bv law of Congress, could not be counted upon to afford the
country's commerce any appreciable relief with respect either to available
ocean carriers, or to ocean freight rates during the period of real stress. . . .
Just as today nothing is so profitable as a ship, so within a short time
after the coming of peace, nothing will be so unprofitable as a ship." Edito-
rial in The Eccnomic World. January 29, 1916, p. 138.
Similar opinion from high sources freely crossed the Atlantic: witness
editorial comment from the great and conservative, but individualistic, Lloyd's
Weekly. October 22, 1^15 :
" In other words, the United States is going to set up a system whereby
certain people must be invited to speculate in shipping with government
The United States Government, it is stated by Mr. McAdoo, ' will control
routes and rates.' It may attempt it. but how will it stand up against the
competition of the independent shipowner, whether American or foreign?
190 INFLUENCE OF THE GREAT WAR UPON SHIPPING
ness. We feared it as a tool for political favoritism and it was
opposed anyway to the essential genius of our individualistic
democracy. American business was opposed to it through and
through. For example, the United States Chaml^er of Commerce,
a very representative body with widely scattered membership,
took a questionnaire vote that showed the great opposition.
Proposition T. Do you favor the government undertaking
the purchase, construction, or charter of vessels for mer-
cantile purposes, together with the operation of such ves-
sels? In favor, 82; opposed, G98.
Proposition II. Do you favor ownership of merchant ves-
sels by the government, but with operation by private
parties under leases? In favor, 54; opposed, 711.
Proposition III. Do you favor subsidies from the govern-
ment sufficient to offset the difference in cost between
operation of vessels under the American flag and opera-
tion in the same deep sea trades under foreign flags?
In favor, 558; opposed, 186.
Proposition IV. Do you favor subventions from the gov-
ernment to establish regular mail and freight lines under
the American flag to countries in which the commercial
interests of the United States are important, and to
American dependencies? In favor, 718; opposed, 48.^
The public discussion of the bill generally centered around
the idea of government purchase of ships, but the sum provided
would not have gone far and the prices would have been en-
hanced by the appearance of this strong purchaser in the ship
market. A proposition of Mr. McAdoo, Secretary of the Treas-
ury, that the government build 500,000 tons of shipping, received
The private merchant ship will, of course, let the state merchant ship have
any unprofitable trade that is going, but no more. It will be interesting to
see how this curious plan of hitching a merchant marine on to the American
Navy works out in practice, if it ever gets the chance."
' Marine Review, August, 1915, p. 281.
AMERICAN CONTROL AND OPERATION OF SHIPPING 191
scant attention, despite its wisdom and direct bearing on the real
need, which was to create ships.
The bill was lost. We were in a position that only govern-
ment action could help, and we overwhelmingly refused to give
government the power. But meanwhile ships continued to sink.
The British continued to call their vessels home, even American
owned vessels sailing from New York to South America. The
ship famine increased, and rates rose to unimagined heights. In
his December, 1915, message. President Wilson again recom-
mended government owned vessels as a means of " restoring
our commercial independence on the seas." A couple of months
later the Administration presented a bill much like its predeces-
sor, except that it provided $50,000,000 instead of $25,000,-
000. to build or purchase ships and combined with it the Inter-
state Commerce Commission idea of control. The bill carried
specific and drastic provisions for the control of rates and traffic,
such as the elimination of rebates, and fighting ships, the filing
of all rates and agreements, and governmental power to can-
cel the same; power to enforce maximum rates, thus preventmg
some of the extremes of competition; and power to prevent dis-
crimination between persons and places. On its other side it
was to issue bonds necessary for the $50,000,000 with which
to purchase or build cargo ships and set them to work carrying
American merchandise across the seas. If private owners would
not come forward to charter these vessels, the Shipping Board
was, as a last resort, to create a corporation to do the business
itself, keeping control of at least 51 per cent of the stock and
thus becoming a carrier on the high seas.
Another long and bitter discussion followed, for we now had
added to the ogre of government operation that other ogre of
extensive government control, and this time it was control of
the private carrier l)y the Shipping Board, which might also be
his business rival. The bill was presented in January and passed
in September. 1917, after being amended in May to provide
that the Shipping Board should disband its business corporation
five years after the war, sell or charter its ships to American citi-
192 INFLUENCE OF THE GREAT WAR UPON SHIPPING
zens. and sell its other property to the best advantage. The
political character of the board was partly eliminated by remov-
ing from its personnel two of the Cabinet ofificers as provided in
the first draft.
The Shipping Board
President Wilson was at this time carrying out the policy of
negotiation and nonpreparation. Perhaps that is the reason he
delayed the appointment of this Shipping Board ' three and a
half months after its authorization, until December •22. We
had other months of delay before it became very active. Thus,
although the bill gave extensive control of ocean freight rates
and traffic, the President tried to obtain that result by exhorta-
tion at as late a date as July 11, 11)17. Witness the following
remarkable statement from his published message of that date
to the business men of the country :
Let me turn for a moment to the shipowners of the
United States and the other ocean carriers whose example
■ they have followed, and ask them if they realize what
obstacles, what almost insuperable obstacles, they have been
putting in the way of the successful prosecution of this war
by the ocean freight rates they have been exacting. They
are doing everything that high freight charges can do to
make the war a failure, to make it impossible. . . . The fact
is that those who have fixed war freight rates have taken
the most effective means in their power to defeat the armies
engaged against Germany. When they realize this we may
— I take it for granted — count upon them to reconsider the
whole matter.
This may have been needed for its influence on public opinion,
but it is difficult to take it as a serious attempt to control rates.
It came two years and seven months after England had set the
rate for her own shipping, years after we had set the rate on
railway carriage, and three months before our Shipping Board
^ See Chapter X for an account of the Shipping Board.
AMERICAN CONTROL AND OPERATION OF SHIPPING 193
used the powers it had then had for a year— and set the rate on
American shipping.
After four and a half months of uninterrupted submarine
sinking, and two and a half months of war, our Shipping Board
finally became active. Congress passed an emergency act of June
15, 1917, giving it additional powers and increasing its funds to
$500,000,000, after which the government began in earnest the
work on the two policies of encouraging shipbuilding (see Chap-
ter X) and shipping control.
Increasing Shipping Facilities
{a) Building of ships by the government. In addition to
starting shipyards of its own, the government let a number
of contracts to private shipbuilders, but this policy promised
little actual increase, for the reason that the yards were booked
ahead with foreign orders to such an extent that it was said
2,000,000 tons were under way or under contract for foreign
owners. All of this the Shipping Board requisitioned August 3,
taking not only the ships that were under way, but even those for
which the keels had not been laid, but for which some materials
had been gathered.
(b) The admission of foreign vessels to American coasting
trade by an act of Congress the middle of September was a
distinct though needlessly belated aid. The attractions of the
transatlantic business had taken vessels from our coasting trade
at such a rate that as early as February 24, 191G, the English
shipping journal Fairplay reported that 80 per cent of the ves-
sels engaged in American coasting trade had left their accustomed
routes for transoceanic service. The traffic thus thrown back
upon the railroads of the United States helped to increase the
congestion of their tracks and terminals.
{c) Commandeering of neutral vessels. Following the ex-
ample of Great Britain, our government has virtually com-
mandeered neutral shipping through the bunker privileges.
Without coal a ship is helpless. She could get coal only by
194 INFLUENCE OF THE GREAT WAR UPON SHIPPING
promisinj^ to return to the United States — a " voluntary agree-
ment," as a representative of the Shippin^^ Board called it. with
a perfectly straight face. By this means many a neutral vessel
has been tied down to a definite route and a definite rate in the
service of the Allies. In the case of the Dutch vessels we had to
act more formally. On March 18 the United States joined the
other Allies in commandeering about 1.000,000 tons of Dutch
shipping which lay within their territorial waters. This was the
final conclusion of long negotiations in which it was claimed that
the Dutch would have l)een glad to give us by voluntary agree-
ment what we were finally compelled to take, but that they
dared not do so because of the menace of German reprisal.
Speaking of this operation. President Wilson in his proclamation
cf March 21. 1918. said:
Meanwhile. German threats have grown more violent, with
a view to preventing any permanent agreement and of forc-
ing Holland to violate any temporary agreement. ... I pro-
foundly sympathize with the difficulty of Holland's posi-
tion under the menace of a military power which has in
every way demonstrated its disdain of neutral rights. But,
since coercion does in fact exist, no alternative is left to us
but to accomplish, through the exercise of our indisputable
rights as a sovereign, that which is so reasonable that, in
other circumstances, we could be confident of accomplishing
it by agreement.^
The element of bargain was furnished by the fact that we
made sacrifices by granting Holland a liberal supply of food,
100,000 tons of grain. We left her enough shipping to supply
her local needs, paid liberal charter rates for the vessels we took,
promised to return them at the end of the war or sooner,
promised to pay for them if lost by the risk of war. or if the
owner chose to wait for another vessel, it would be delivered as
soon as possible. ^leanwhile he would receive interest on his
money. The crews were sent home in a Dutch vessel, staying
in the intervening period at the expense of the American nation.
' Philadelphia Bulletin, Alarch 21, 1918.
AMERICAN CONTROL AND OPERATION OF SHIPPING 195
After being taken, the Dutch ships were manned by United
States Naval Reserves. It was planned to use them as much as
possible outside the war zone.
Increasing the Supply of Sailors
In anticipation of the need for increased crews to man the
new ships the Emergency Fleet Corporation established a Re-
cruiting Service on June 1, 1917. Henry Howard of the Custom
House, Boston, who had brought the matter to the attention of
the Emergency Fleet Corporation, was appointed director.^ The
recruiting service involves the training of the personnel for all
services in the merchant marine; that is, deck officers, engineer
officers, sailors, cooks, stewards, oilers, water tenders, firemen,
etc. For this work two types of schools were established, one
for deck and engineer officers and the other for apprentice
seamen.
Schools for Deck and Engineer OMcers
The assistance of the Massachusetts Institute of Technology
was secured in taking charge of the teaching in both the en-
gineering and navigation courses. Dean Burton of that school
was formerly connected with the Coast and Geodetic Survey
and was an expert navigator. He organized and trained the
navigation teachers. Professor Miller of the Steam Engineer-
ing department of the Massachusetts Institute of Technology,
in like manner, took charge of the engineering courses. The
country was divided into seven sections, corresponding as closely
as possible to the sections employed by the Steamboat Inspec-
tion Service. In each of the sections, one or more schools were
established. They are as follows :
Section 1. Extends from Eastport to the Connecticut River.
Navigation schools at Cambridge, Mass., Gloucester, Mass.,
' Mr. Howard prior to his appointment was Vice President of the Merri-
mac Chemical Company. He had had considerable experience on the sea
as an amateur, having been a yachtsman since the age of 12. He had studied
navigation and had had about twenty years of experience on ocean-going
steamships.
lOG IXFLUENXF. OF THE GREAT WAR ll'ON SHIi'I'ING
Portland. Maine. Rockland. Maine. Providence. R. I. En<ji-
neering school, Mass. Institute of TechnologA-. Boston.
Section 2. Extends from the Connecticut River to Cape
Charles by Norfolk. Navigation schools. Baltimore. Newport
News, two in New York. Norfolk. \'a.. Philadelphia and Atlantic
City. Engineering schools. Stevens Institute, Hoboken, N. J.,
Johns Hopkins University, Baltimore. Md.
Section '.\. Extends from Cape Charles to Cape Florida. One
navigation school at Jacksonville, Fla.
Section 4. Includes Gulf Seaboard from Cape Florida to Rio
Grande. Navigation schools, Galveston. Mobile. New Orleans.
Engineering school. Tulane University at New Orleans.
Section '). Includes California Coast. Navigation schools. Los
Angeles. San Diego, San Francisco, Eureka.
Section (I. Includes Washington. Oregon Seaboard. Naviga-
tion schools, Bellingham. Wash., I'ortland, Ore., Tacoma. Wash.
Engineering school. University of Washington. Seattle.
Section 7. Includes the Great Lakes. Navigation schools at
Buffalo, Chicago. Cleveland and Detroit. Engineering schools.
Armour Institute. Chicago. Chase School of .Applied Science.
Cleveland.
At the head of each of these sections has been placed a busi-
ness administrator who is serving at a salary of $5 per month.
These men are not necessarily acquainted with the technical
points of training for officers as the instruction in the schools
is under the direct supervision of Dean Burton and Professor
Miller, both of the Massachusetts Institute of Technology.
Men between the ages of 10 and ')5 who have had at least
two years experience at sea are admitted to the schools. . No
attempt is made to train men for officers who have not had the
previous two years sea experience. Candidates must be citizens
of the United States. At the end of a period of training of from
four to six weeks, they are required to take the usual officers'
examination of the Steamboat Inspection Service. If exam-
inations are passed successfully, the men receive appointments,
as vacancies occur, to positions on ocean-going steamers, usually
as third deck officers or third engineer officers. With further
experience they are promoted to more responsible positions.
AMERICAN CONTROL AND OPERATION OF SHIPPING 197
On March 2, 191S, there were enrolled in the schools for
deck officers 634 students, and in the schools for engineer officers,
203 students. Up to and including December 1. 1917, 1,516
students had completed the course of training. It is the aim of
the recruiting service only to meet the demand for officers and
not to overstock the market. Accordingly, in the fall of 1917,
when the supply seemed to be greater than the demand, the
schools were not advertised and the number of students de-
clined. At the present time, however, an effort is being made to
secure additional students in order that officers may be trained
for the new vessels being turned out by the Shipping Board.
Student officers are not paid while in training. They must pro-
vide their own board and lodging, but tuition is free.
Sdiools for Apprentice Seamen
For the training of sailors, firemen, oilers, water tenders,
cooks, stewards, etc. two training ships, the Calvin Austin and
the Governor Dingley, accommodating between five and six
hundred sailors each, have been provided. These ships are to
be kept at sea as much as possible while training is going on.
Particular attention is being paid to the handling of lifeboats.
This course of training lasts from four to six weeks. The
men are divided up into groups according to the particular
work they desire to follow: that is, sailors, firemen, etc. Over
each group of ten an experienced able seaman is placed as an
instructor. At the end of the course of training the men are
placed on ocean-going steamers as ordinary seamen. While in
training they are paid S30 a month and board. It is planned at
the present time by the recruiting service to secure additional
vessels to be used as training ships.
Rearrangement of Shipping Resources
The most effective utilization of the shipping creates haras-
sing problems, for there are two calls for every ship and we must
make some kind of a choice. For instance, in October, 1917. a
1U8 INFLUENCE OF THE GREAT WAR UPON SHIPPING
conference was held in Washington between the National Coun-
cil* of American Cotton Manufacturers and representatives of
trade and transportation in the attempt to speed up the cotton
movement. Among other things they urged upon the federal
Shipping Board the diversion of a reasonable percentage of
overseas shipping and traffic to South Atlantic and Gulf ports,
and the immediate apportionment of a maximum amount of the
available coastwise tonnage for the transportation of cotton
direct to New England ports. The conference also urged greater
density and uniform size of cotton bales in order to increase
the capacity of cars and ships. ^ In May the Council of National
Defense had urged the withdrawal of 30.000 tons of coastwise
shipping for carriage to Allied governments.
At least five rearrangements of facilities have been made.
TJic Raihvay Congestion Problem
Inthe attempt to relieve railroad congestion, which was mak-
ing port congestion and interfering with shipping, the Shipping
Board announced that it would have barges built to assist
in the movement of ore and coal on the Ohio and Mississippi
rivers. This came a week after an appeal to the Shipping Board
from the 16th Annual Convention of the Upper Mississippi Im-
provement Association, which on October 12 petitioned the
Shipping Board to sell or lease a large fleet of barges to en-
able the Mississippi to assist in war work by carrying ore. This
recommendation was made in the light of successful trips of
heavy barges carrying ore from St. Paul to St. Louis, and coal
back to St. Paul.
Government Requisitions all Large Ships and Controls the
Charter Rate
Late in September the Shipping Board announced its deci-
sion to requisition all ocean-going merchant vessels above 2,500
tons dead-weight capacity and, following the example of
Great Britain with her Blue Book rates, set a base rate. The
' See 47th annual report, New Orleans Cotton Exchange.
AMERICAN CONTROL AND OPERATION OF SHIPPING 199
American rate differed from that of England, however, in be-
ing a very kicrative one and also in being somewhat below the
market in which it was made. The base rate was $5.75 per ton
for -cargo vessels of over 10,000 tons dead-weight going up to
$7 a ton for 2,500 to 3,000 ton boats; passenger ships with
greater speed received higher rates going up to $10.50 a ton
for boats of more than 15 knots. It was also planned that the
War and Navy Departments, which had been commandeering
ships for their own use at varying rates, would now get their
vessels from the Shipping Board which would do all the re-
quisitioning needed by the government. Naturally shipowners
felt aggrieved at the loss of profits made by the reduction of
rates, and there was many a protest. A shipowner with profane
indignation declared he would never let the United States Gov-
ernment have one of his vessels at that price, that he would go
to Washington and settle things. The Shipping Board repre-
sentative asked him what he wanted, saying, " You have a
schooner that cost $50,000 before the war and she sold for
$75,000, then for $100,000, and you bought her for $150,000,
and you are now making 40 per cent on that. What do you
want?" "Why," he said, "the shipping business was bad
before the war. This is our chance to make some money." But
he took the Shipping Board rates.
The government very properly and very reasonably stuck to
its policy and, what is of even greater interest, this policy was
ere long enforced also upon neutral vessels. So much of the
world's trade was in the hands of England, France, Italy, and
the United States that there was not room enough outside for
the neutral to trade unless he came into the ports of some of
those countries or used their coal, and so it was virtually a
choice between taking the Allied government rates or lying idle.
The government rate policy was admirably shown by an an-
nouncement by the Shipping Board, February 20, 1918.
The Shipping Board is endeavoring to control the rate
situation on transatlantic voyages.
There are a number of small vessels which are not with-
200 IXFLUENCE OF THE GREAT WAR UPON SHIPPING
in the requisition size that have been making these trips
under exorbitant rates, and after consideration of the mat-
ter by the ship-control committee it has been decided that,
after February 20, lUiy, no American steamship under
2,500 tons dead-weight will be permitted to clear for a
transatlantic voyage or to engage in other long voyage
trades.
This ruling has been adopted by the United States Ship-
ping Board as a measure of conservation and economical
use of tonnage, since in its judgment steamships of small
tonnage are uneconomical and unsafe in the trades in ques-
tion. Steamships so excluded will be employed in the
coastwise, West Indies, or other appropriate service.
On the 23d of May the Shipping Board announced that on
June 1, it would reduce the base rate 50 cents per ton per month
on all boats that had been requisitioned on the bare-boat basis.
For other vessels on which the owner paid the crew, etc., the
rate was unchanged.
The requisitioning of all shipping was, however, more an act
of government control of industry than of government opera-
tion. Its purposes were twofold : one to control rates, the other
to see that shipping was utilized in places and trades where it was
most needed. These objects could be obtained without the neces-
sity of actual governmental operation. The liners were at once
handed back to their original owners to operate for government
account, and the cargo vessels when not operated by the Navy,
War Department, or Shipping Board, were chartered out to
brokers who operated them as before. Some of them, particu-
larly some of the captured German vessels, were handed over
to foreign governments.
Shipping Moved from Pacific to Atlantic
One of the first acts after the requisitioning went into force
was to move 150,000 tons of American shipping from the Pacific
to the Atlantic, thus leaving the Japanese in charge of the Pacific
trade, but giving us more vessels for coast and transatlantic
trade. In the same way lake steamers were transferred to the
AMERICAN CONTROL AND OPERATION OF SHIPPING 201
Atlantic, although many of them had to be cut in two, taken
around in pieces and put together after they got through the
canals. This process is still going on.
Exchange of Vessels with France
Another rearrangement of shipping that occurred at this time ^
was the exchange of vessels with France. Owing to the help-
lessness of a sailing vessel in the submarine zone, the French
Government made a temporary exchange of 400,000 tons of
French steel sailing vessels for 150,000 to 200,000 tons of
steamers, the steamers to go in the submarine zone, the sailing
vessels to be used in American trade outside the submarine
zone.
Australian Wheat via California
Akin to this last arrangement was the literally far-fetched
attempt to get Australian wheat to Europe by carrying it across
the Pacific Ocean in sailing vessels, to be ground in California
mills, taken by rail to the Gulf ports (for which service the
Southern Pacific Railway made slight reduction in freight rates)
and carried thence in steamers to France. There was actually
some grain movement to California under this plan.
All these changes were rather bewildering at times to the
shipowner who was not always informed of what was going
on so long in advance as he would like, and did not always un-
derstand it even when he knew. For example, one shipowner
cited the case of a schooner that he had been loading with oil
for France. He had secured all permits necessary, cleared from
the Philadelphia custom house, and the vessel was being towed
down the river. At League Island (below the city) a government
cutter called her back. As to the reason why, no answer except
some discourteous remarks. The vessel was brought back to
Philadelphia, the crew ordered to remain without communication
from land. The tug had to be paid, and so did the pilot who
' Philadelphia Public Ledger, October 20, 1917.
202 IXFLUENCn OF THE GREAT WAR UPON SHIPPING
was already on l)oar(I. Two days later the captain received in-
formation from the navy that sailing vessels were not allowed
to proceed to France. At the same time other sailing vessels were
loading at other ports, and agents thought they were acting in
entire propriety/
The same complaint was made " of a steamer that was partly
loaded at New Orleans. Thence it came to Philadelphia to com-
plete cargo; secured permits to ship everything they had on her,
and when loaded, about ready to go, received orders that she
could not sail. A trip to Washington to find out the reason she
could not. brought no answer except that she could not, and
there the boat lies. They can't get her clT, and can't find the
reason why she can't go."
We had to create our ship control organization with great
speed, and upon the whole there seems to have been less com-
plaint from shipowners in this country than in Great Britain.
Certainly there has been no more.
The Need of Organization
After we had exercised our powers of taking over nearly
everything, we duplicated England's experience by getting into
trouble that could only be cured by unified control. The year
1917 ended with an autumn of gathering trouble. We were
now sending troops and supplies to France, and had three nearly
independent authorities operating ships for government account,
the War Department, the Navy Department, and the Shipping
Board. In addition the Shipping Board was exercising vast con-
trol of the movement of ships by licensing every voyage. The
traffic both upon sea and upon American railways was greater
than the facilities could handle. It was naturally a period when
unsatisfactory conditions should be expected to show themselves.
It takes vast planning to perform such a task, even with the
leisure and possible prearrangement of peace. When haste is
added to war. and trade exceeds facility, it is natural that in-
efficiency should occur, such as some of the things reported by
' Interview, December 22, 1917.
AMERICAN CONTROL AND OPERATION OF SHIPPING 203
R. G. Carroll, officially credited correspondent with the Ameri-
can Army abroad.
After inspecting our port of debarkation in France, he told
of steel rails being sent back to America as ballast, of knock-
down houses among a thousand parts of which there was not a
complete house, of three days spent to get a boiler out of a hold
because it filled the hatchway full and the slings which should
have been left upon it had been removed when it was dropped
into place; of cargo so mixed that boats had to be shifted from
side to side of the harbor to get at first the little cranes and then
the big cranes ; of thousands of loose magazines and newspapers
for soldiers' reading lying loose on the wharves; truck chassis
waiting for six weeks for their trucks, which were in some
other vessel.^ No one could be blamed for the fact that the
attempt to reinforce the Italians during the German drive in
December made it necessary for France to utilize her rolling
stock to such an extent that 15,000 American troops lay for three
weeks on ships in a French port, short of both food and water.
But the Patriotic Education Society made severe arraignment
of the general conditions.
The government's obsolete methods in handling sea
transport operations are causing the virtual waste of a
great amount of tonnage. . . .
Consider only the loss due to the convoy system as oper-
ated at present. First of all, there is loss of time while
the merchant fleet is gathering at the port of departure.
An ocean liner frequently consumes more time waiting for
its companion ships than it formerly took to cross the
Atlantic. Once at sea, the fleet may be divided into two
squadrons. The speed of each squadron can not be greater
' " Here 1 am," declared a frantic looking ship operator of much experi-
ence who was donating $20,000 worth of time per year (at prewar rates) to
the government's embarkation service, "trying to dispatch ships for the
government, and my helpers don't know the bow of a ship from the stern,
while hundreds of the fellows who know have been taken ofif to the army
camp where they are no more account than any wop."
By March this same man found his staff greatly improved as a resuU of
the adoption by the War Department of a more careful attitude toward the
relationship between a man and his qualifications for his job.
204 INFLUENCE OF THE GREAT WAR UPON SIlII'lMXr,
than the speed of the slowest vessel. The division is so
unscientifically handled that a vessel accustomed to travel
at fifteen or twenty knots is reduced to ten knots. All of
this means that a fleet ocean greyhound — we will say one
of more than ir>,()0() tons capacity — sometimes takes thirty-
one days to get to the other side, when she is capable of
making the passage in six days, an absolute loss of about
45,000 tons a month on thi^ ont- vessel.
Confusion and delay in the moving of men and material
are another result of adherence to red tape regulations and
impractical methods. These have utterly broken down in
the {)resent great emergency.
Although the personnel of the United States War De-
partment has had no practical experience in shipping trans-
portation, it is exercising a jurisdiction over intricate and
extensive shipping operations that only shipping men
familiar with large problems can successfully administer.
Instead of regarding transportation operations as wholly
a business consideration to be handled with strictly business
methods, army officers look upon them entirely from a
military point of view.'
An American exporter of much experience confirmed at this
time the frequently stated estimate that shipping was being
operated altogether at about 50 per cent efficiency because of the
delays incumbent upon loading and unloading in crowded ports
(see Chapters II and VI), and the further great delays of the
necessary convoy system. We had a period of disturbed in-
dignation in this country much like the one in England that
preceded the unification of shipping management there.
One shipping company whose ships have been com-
mandeered by the board and are being operated by it,
states that those ships are not doing 50 per cent of the
work they would be doing under private management.
" See that steamer out there," said an officer of a steam-
ship company. " That's one of our commandeered boats.
* Philadelphia Public Ledger, November 20. 1917.
AMERICAN' COXTROL AND OPERATION OF SHIPPING 205
To my positive knowledge she has been lying at anchor for
three weeks, empty as a toy balloon, waiting for orders from
Washington. The chances are that some clerk is the only
person who has official knowledge of the status of that boat
and has forgotten to tell somebody in authority about it.
Some day somebody wall check up the list of commandeered
boats and then it will be discovered that a 3,000-ton ship
has been wasted for weeks." ^
December was a month when the American official mind began
to appreciate the necessity of drastic change. Our piers were
piled almost to the eaves with goods for export. Freight cars
by the thousand were serving as additional storage houses, and
railway freight conditions got worse and worse. Just as in
England they consolidated all railway systems into one national
system, so on December 28, 1017, we announced the unifica-
tion ' of American railways into one national system, and the
pooling of their resources. And just as Sir Joseph Maclay,
upon being made Controller of British Shipping, had called two
years before for a reduction in British imports, so plans were
begun in Washington for the systematic reduction of our im-
ports.
The January Traffic Crisis
January was a month of crisis, with alarming conditions which
brought drastic changes in shipping organization. It w^as one
of the coldest months on record and one of the worst for snow
blockades. On January 1 there were 7,086 carloads of freight
standing on wheels at New York, and for six North Atlantic
ports there was a total of 41,108 carloads of freight waiting
for export. Port congestion made it necessary to handle and
rehandle freight in warehouses to get the particular consign-
ments for particular ships, and to shift and reshift freight cars
* Nr'i' York Tribtme, November 24, 1917. , , ,
^Th.^ affords an admirable example of inability to learn by the experience
of others Our railways had been in trouble with their traffic for a year
Enel^h officials had urged us to consolidate our railroads to get ready for
3e? but w-e waited until the breakdown became acute in the snow blockade
of December.
20G INFLUENCE OF THE GREAT WAR UPON SHIPPING
in the crowded yards to get the cars with goods for particular
ships, all of which meant delay in loading. This congestion
had many causes: increase in traffic, shortage of ships, removal
of expert men by the draft, and especially the breakdown of
the old individualistic system of competition, and supply and
demand. This is well illustrated by the work of the freight
contractors who had for many years sought cargo to ship, and
then sought and freely found all the ship space they wanted in
which to ship it.
Avarice of foreign freight contractors and eagerness
of shippers to move their export shipments is one of the
causes of the freight congestion in New York and one
reason why thousands of freight cars are tied up. accord-
ing to a steamship man in Philadelphia, who is conversant
with conditions.
These contractors, he said, are speculators in the freight
market. Their method is to book certain space on a steam-
ship and then contract with shippers to move their freight,
invariably charging the shipper a much higher rate of
freight than they, in turn, paid the steamship company.
Of course, he said, when a freight contractor booked
2,000 tons of freight when he had steamship space for only
500 tons, it means that 1,500 tons of freight for which
there was no steamship had come to the seaboard. This
freight blocked the yards and occupied cars that might
have been moving freight for which steamship space had
been reserved. In this manner thousands of cars were
brought to the seaboard and added to the congestion already
existing. Sometimes these men would have five consign-
ments of freight coming to the seaboard when they had
room for only one of them.^
This condition of port congestion with the resultant car
shortage aggravated by the snow blockades, caused 213 ships
to be waiting in New York for bunker coal on January 15."
After a week of strenuous efforts there were still 81 ships wait-
ing for coal. Some of them lay long enough for coal to be
' Philadelphia Ptiblic Ledger, January 26, 1918.
= Ibid., January 22, 1918.
AMERICAN COxMTROL AND OPERATION OF SHIPPING 207
sent out from England to supply them. One Spanish vessel in
Hampton Roads was compelled to burn her furniture to keep
steam pipes from freezing. It was at this time that the coal
administration enforced its almost complete temporary shut-
down of American coal using industries, whereby in the vicinity
of New York alone 40,000 establishments and more than 2,000,-
000 employes were compelled to be idle. To make matters
worse, it was at this time that Lord Rhondda, the British Food
Administrator, sent his alarming call for more food :
Unless you are able to send the Allies at least 75,000,000
bushels of wheat over and above what you have exported
up to January 1 and in addition to the total exportable sur-
plus from Canada. I can not take the responsibility of assur-
ing our people that there will be food enough to win the
war.
The relative conditions of New York and Philadelphia show
the need of some of the drastic reorganizations that promptly
came. Mr. George S. Webster, director of Philadelphia
Wharves and Docks, said : ^
There are vessels tied up here in New York that are
paying as high as $2,500 per day demurrage when they
would just as well be loading in Philadelphia. Some of
these ships have been held up here for many days because
of lack of coal.
At the same time he exhibited a map for the port of Phila-
delphia which showed that at noon the previous day there were
29 vessels loading at Philadelphia with berths for 42 more.
Yet at the same time. D. J. :\Iurphy, boss stevedore of Phila-
delphia, complained that:
The congestion at Pier 39, the Quartermaster's dock in
Philadelphia, is very bad and something must be done at
once. The pier is piled to the roof with war supplies, sup-
plies which should be on the way to France. In addition
' Philadelphia Bulletin, January 24, 1918.
208 INFLUENCE OF THE GREAT WAR LTOX SHIPPING
automobile trucks loaded with supplies are lined up for six
squares outside the pier. We must have more ships, and
it must be done at once.^
Plainly there was need of system in the control of trade, from
the siding, at the farm, the mine, the factory, straight to the rail-
way port terminal, the ship and the point of linal consumption
on the other side. That was the task which the January tie-up
forced into the teeth of the Allies, particularly the American
Shipping Board which had become the chief depository for the
authority for the carrying of our trade.
Steps in the Organization of Shipping Management
A number of interesting steps have been taken to bring about
that even flow of goods so necessary to the best utilization of
our facilities. The Tide-Water Coal Exchange, mentioned
above (see Chapter II), is a perfect example so far as it goes
of better utilization of the coal terminal facilities and barges
within the port.
Iiiiproz'oncnt in Coal Handling Facilities
On March 22 the Shipping Board announced that it was sur-
veying all our leading seaports to see how coaling arrangements
could be enlarged and improved. The need of such improvement
was cited by Joseph A. Hall, Deputy State Fuel Administrator
for New York,- when he said :
New York as a port always has been behind the times.
The ports on the Great Lakes, for example, have been using
machinery for loading and unloading vessels that the folks
here never even heard of. Thev can handle more freis^ht
and coal m the same time by long odds than can be done
here in New York. Until we learn something from the
ships along the lakes, we will never solve this problem.
^ Philadelphia Bulletin, January 24, 1918.
- Ibid., January 22, 1918.
AMERICAN CONTROL AND OPERATION OF SHIPPING 209
Control of Barges and Tugs
The example of the Tide-Water Coal Exchange was almost
exactly duplicated by giving one man similar authority over
barges and tugs in the coastwise coal trade.
One thing more than anything else that helped the speed-
ing up of vessels is the power given to Captain Crowley to
dispatch tugs from here and also from coal ports with
whatever barges are ready, regardless of whether or not
they belong to the same concern that owns the tugs.
In this way tows have been kept moving where serious
delays might have resulted under the old methods. In other
words, Captain Crowley has complete control of the fleet
of tugs and barges both as regards their movements and
the ports at which they shall load and discharge.^
The Official Speeder-up
The Shipping Board sent men to the various ports whose task
it was to see that vessels were being handled with all the speed
possible. One of the findings in this piece of work was that
when a vessel entered Philadelphia she had to make five stops
between the breakwater and the port for examination by sundry
government departments when shipping men said all the in-
spections could have been made at one time and place.
War Port Boards
In the autumn of 1917 War Port Boards were appointed in
several of our ports. That in New York had men from the
Shipping Board, Navy Department, and War Department, sit-
ting with a previously existing joint board appointed by the gov-
ernors of New York and New Jersey which had been working
on the question of the orderly development of the port. This
new board found that the various government department heads
were rushing freight to New York as fast as they could, hoping
for ships to move it.
' Letter : Boston Chamber of Commerce, February 14, 1918.
210 INFLUENCE OF THE GREAT WAR UPON SHIPPING
Coordination of Freight and Facilities
One of the first things this board did was to attempt to get
Washington authorities to work out routing plans whereby
goods would come to the port only when ships were there to
handle them. This was attempted by the general operating
committee of the eastern railroads, and by midwinter they were
making a systematic attempt to regularize export movements.
Before this committee will allow a shipment to start
from the interior, it ascertains from the steamship company
whether room actually has been reserved for that cargo
and that exporters' licenses have been obtained. In this
manner no goods are allowed to come forward unless a
ship is ready. Even then the shipment is not allowed to
start from the interior unless the ship is in sight or in the
port where the cargo is to be loaded.^
This problem showed the real situation. We had not yet de-
veloped the concept of a unification in control in freight han-
dling to take charge when the excess of traffic over facilities broke
down the old unorganized individualistic system.
An even greater lack was discovered in that, despite the fact
that war is an economic struggle, we had had no economic gen-
eral staff back of w^ar activities in either industry or transporta-
tion. As an evidence of the possibilities in this field, some per-
sons believed at the end of January that at least a million tons
of shipping would be gained by the new plan of shipping co-
ordination that had been just then agreed upon at Washington.
Mr. Henry L. Gantt, efficiency engineer, in speaking of our
industrial difficulty, said :
The national machine is built wrong. Divided responsi-
bility in governmental work has been responsible for more
messes than you can think of.
Perhaps the way to show that we were sailing without economic
pilots, is to repeat two questions and answers given and received
by Mr, Lincoln Colcord, who, by cjuestioning the head of the
^ Philadelphia Public Ledger, January 26, 1918.
AMERICAX CONTROL AND OPERATION OF SHIPPING 211
War Department and the head of the Shipping Board, showed
that the real problem then had no one to provide for it.
Question — Whose business is it to say how the present
available American ship tonnage shall be used to the best
advantage ?
Chairman Hurley — That is distinctly a question for the
Secretary of War to decide.
Question — Whose business is it to say how the present
available American ship tonnage shall be used to the best
advantage ?
Secretary Baker — That is distinctly a question for the
Shipping Board to decide.
" I am here only to supply ships," said Mr. Hurley. " H
Mr. Baker comes to me and wants twenty-five ships, I have
to go out and get them for him. I have nothing to do with
his war plans. He makes up his plans, estimates how many
ships he will need and then comes to me for the ships."
" But suppose there was a serious shortage of ships, and
you knew it, and suppose you had to take ships from a field
where they were vitally needed, what would you do? "
" That is not my business," he answered. " My business
is to build ships and get ships and run ships." ^
No chaos in industry is too great to result from such chaos in
plan. It is scarcely reasonable to expect thorough plans to have
been worked out for so large and so new a problem in so short a
time. The staff idea and advance plans have been at a low ebb
in the United States. And unfortunately we are, as a nation, still
largely in that undirected condition, but moving step by step
toward an ordered national effort. The ship was one of the first
things to be ordered because it was one of the first things to
become painfully chaotic and acutely scarce.
Shipping Control Committee
After this lack of plan had brought its natural results
of general confusion, we were quite wdlling to act upon the
' Philadelphia Public Ledger, October 17, 1917.
212 INFLUENCE OF THE GREAT WAR UPON SHIPPING
previously made British suggestion and appoint a shipping con-
trol committee which should unify the control of American ships
and to go }'et further by pooling them with our Allies. After
a conference/ two committees were formed. Messrs. Franklin
and Thomas of the International Mercantile ^Marine and "Sir.
Raymond of the Clyde Line, were the American committee,
while Messrs. Thomas and Raymond of this committee and Sir
Connup Guthrie, representing the Britfsh Admiralty, took charge
of interallied affairs. The committee was given authority to
divert any and all shipping to whatever ports seemed best able to
handle it. Thus vessels bound to the congested port of New
York could be ordered by wireless to Philadelphia, Baltimore,
or Charleston, or wherever the best opportunities for loading
were to be had. There was no law giving the committee author-
ity to tell American shippers to what ports they must send their
goods, but by its control of ships this new committee could tell
the. shipper that the vessels to carry his goods were to clear from a
certain port and he had no choice but to send his goods where
the ship would be. This new committee brought under one
control ships that had previously been operated by three inde-
pendent and by no means overfriendly departments : namely,
naval transport, army transport, and the Shipping Board. Inci-
dentally also the personnel showed the conversion of the Admin-
istration to the policy of placing business in the hands of the
men who know. It is to be hoped that all this combination of
new authorities will make impossible the recurrence of such a
criminally wasteful episode as the following example of delay
while indi\»iduals quarreled over profits.
A sailing vessel loaded with oil for France had secured ad-
vance payment of freight. As she started to sail she was ordered
back by a captain of the navy, and lay at her berth in idleness
' This conference was attended by Chairman Hurley of the Shipping
Board, Judge Edward Chambers of Director General McAdoo's staff, Major
Coates of the War Department, Commander Belknap of the Navy Depart-
ment, Mr. Raymond and Mr. Franklin, E. T. Chamberlain, Sir Connup
Guthrie, Sir Richard Crawford, commercial attache of the British Embassy,
and E. M. Raeburn, British shipping authority. Philadelphia Public Ledqer
January 3, 1918.
AMERICAN CONTROL AND OPERATION OF SHIPPING 213
from the 20th day of September, 1917, until the 22d of the en-
suing January, when at last with a lawsuit still pending for the
prepaid freight, her cargo of oil was discharged into an army
transport, although the transport at the time could not get
coal to sail.
A Supreme Shipping Council
Still further to unify plans and if possible to increase the
efficiency of shipping, Colonel House on his visit to Europe
late in 1917 suggested an Allied Maritime Transport Council
which held its first meeting in London on March 13, 1918, when
the following announcement was made :
The council will have a permanent organization consist-
ing of four citizens, one for each government. The council
will obtain through its permanent staff programs of import
requirements for each of the main classes of essential im-
ports and full statements as to the tonnage available to the
respective governments. It will examine the import pro-
grams in relation to the carrying power of the available
tonnage in order to ascertain the extent of any deficit and
will consider means whereby such deficit may be met,
whether by reduction in import programs, by acquisition, if
practicable, of further tonnage for importing work, or by
more economical and cooperative use of the tonnage already
available.
The members of the council will report to their respective
governments with a view to making sure that the action
required to give effect to any recommendations made by
the council are taken in their respective countries.
Controlling Commerce to Relieve Shipping
Reducing Trade
In order to economize ship space, we are controlling trade
along several lines. The most important is the cutting off of
trade that can be spared. Very significant was the announce-
ment, February 9, 1918, that the Shipping Board had created a
214 INFLUENCE OF THE GREAT WAR UPON SHIPPING
division of planning and statistics with E. F. Gay, Dean of the
Harvard Graduate School of Business Administration, at its
head. This division works with the War Trade Board in de-
termining what imports and exports can be reduced and elimi-
nated. Six weeks later the War Trade Board announced a list
of articles whose import would be restricted almost to the point
of prohibition after April 15. It contained eighty-four classes,
beginning with agricultural implements and including such
classes as the manufactures of vegetable fibers and textile
grasses except jute, gold and silver manufactures including
jewelry, manufactures of wool, goat's hair, camel's hair or
alpaca. Some estimators thought that 1,500,000 tons of ship-
ping had been saved by this one act alone.
Foreign Trade Reducing Staff
Meanwhile, in order to facilitate this process of trade reduc-
tion the Shipping Board reported early in March that it already
had representatives in London, Paris, Berne, Scandinavia, Rio
Janeiro, Buenos Aires and Tokio, and was rapidly completing
a foreign staff of commercial representatives. The State De-
partment also was sending commercial attaches abroad to assist
with the work of licensing and reducing imports to this country.
Stimulating Home Proditction of Imported Articles
Secretary of the Interior Lane asked Congress, February
23, for a special appropriation so that a large force of metal-
lurgists could be employed at working out necessary changes in
practice that would enable us to use lower grade and local sup-
plies of metals of which we now import 2,000,000 long tons a
year, most of which might be, on an emergency, produced at
home. For instance, nitrate, sulphur, manganese, flake graphite
for crucibles, tin, mercury for explosives, potash for explosives,
and fertilizer; tungsten for high speed steel, antimony for hard-
ening bullets, zirconium for armor plate, and tool steel, and mag-
nesite used as refractory in metallurgical plants.
AMERICAN CONTROL AND OPERATION OF SHIPPING 215
Scientific Loading
Reducing the bulk of exports and imports is another fruitful
field for work. For decades when space was cheap and the
transatlantic journeys short, we loaded ships with a bulky cot-
ton bale that would fill the ship's hold full and still leave most
of her buoyancy unutilized. Thus,
American cotton bale of 22 lbs. per cu. ft. takes 102 cu. ft. a ton.
Egyptian " " " 37 lbs. " " " " 60 " " " "
Indian and Chinese " 56 lbs. " " " " 40 " " " "
This means that a 5,000 ton vessel having 200,000 cubic feet
of space could carry 1,960 tons of American cotton,
3,333 " " Egyptian "
5,000 " " Indian
A 6,000,000 ton crop would require 3,061 vessels loaded with
American bales, but only 1,200 vessels loaded with Indian bales. ^
Plainly we must, before another cotton crop is moved, smash
established and vested industrial conservatism at this point and
make a cotton bale which is as good as the Indian cotton bale,
and save a whole flotilla.
Manifestly many other commodities, especially fabrics, are
capable of similar compression. Instead of canned foods 70
or 80 or 90 per cent water, bulky with tin and wood, we can
send dried foods in paper and burlap sacks. Boilers were sent
to France in plates and erected there. Gun carriages also are
being sent to France in pieces for erection. The whole question
of scientific baling and packing is one to which attention has
never been given, for the object of trade has been to please cus-
tomers rather than to save freight space. Very considerable
economies in tonnage may be expected from this source during
the year 1918, and later.
Under scientific loading we might include concentration of
freight at specified ports so that no steamer would consume time
by loading at two ports, as is the common custom.
' U. S. Commerce Reports, October 11, 1917, p. 153.
210 IXFLUEXCE OF THE GREAT WAR UFOX SIIIFFIXG
CONCLUSIOX
We now have our shipping reduced to the status of an arm
of the government. W'e may think of the ship as a company or
regiment of soldiers which operates singly or in groups, with
others of its kind, obedient to the orders of the supreme com-
mand. This very great difference is to be pointed out. The ship
and its company are an independent unit of civilians, the old in-
dividualism, even though obedient to the supreme command as
to when and where and how the ship goes, what it carries, and
at what rate of freight. It is still a private business enterprise.
To all intents and purposes it is a contractor's outfit working
for a government that has taken its services for a time. This is
war policy and this condition is to last for the period of the
war — at least, but the ship skill is private skill, not government
skill. This raises to a higher degree of interest the question of
postwar policy which is discussed in another chapter.
CHAPTER VIII
Shipbuilding during the War — Technical Development
Early Stagnation and Revival in Building
During the first weeks of the war the stagnation of the
shipping trade was transmitted to the already equally stagnant
shipbuilding trade. While ships lay idle and a supposedly short
war pressed, there was no temptation to build more ships, and
it was the general opinion that there would be no building dur-
ing the war. In August, 1014, more than 1,500 men enlisted
in a single week end from the great shipyards of Harlan & Wolf
at Belfast, the builders of the Mauretania, Liisitania, and many
of the crack ships of the British fleet.
In November the world of shipping discovered the war.
The realization that the war was to be long and that ships
were to be scarce, deluged the world's shipyards with two kinds
of orders at the same time, naval and mercantile. With this
double pressure, shipyards have worked with ever increasing
speed from the autumn of 1914 to the present moment. Energy
has not been limited to the mere matter of building ships. There
has been equal activity in the question of design. The war's
emergency in combat has called for new types of fighting ships,
and the war's emergency in trade has called for simzplified
types of freight ships.
Naval Work
Some of the early battles of the war demonstrated the great
importance of the fast battle cruiser, but did not remove the final
dependence upon the heavy battleship, so there have been
orders for battleships and battle cruisers. Meanwhile the fight-
ing of the submarine became the pressing order of the day. For
217
218 INFLUENCE OF THE GREAT WAR UPON SHIPPING
this purpose there has been speedy evolution in type of vessel
as the submarine has become larger. At first a small motor boat
with a light gun sufficed, and it is reported that 550 of them were
built in the United States for the British Navy in the first two
years of the war, but now that the submarine has got to carrying
heavy guns, these small vessels no longer suffice. The energy is
being focused upon destroyers and flying boats, and a new type
of mosquito craft called eagles, being built by Henry Ford.
Their chief function is depth bombing.
A second special type of boat designed for service in the
war has been the troop ship with high speed to dodge the sub-
marine. It also has many compartments and large size to take
several torpedoes and still float.
Merchant Vessels
For the decade before the war the attention of the reading
public, when called to shipping at all, was called to this or that
fast passenger ship, which attracted attention by its speed, its
size, its luxurious appointments, its elevators, its swimming
pools, its close approach to a great floating hotel. The war has
elevated to a prime position the tramp, the common cargo car-
rier for which nations strive and pray and pay. The awful
demand for speed in turning out these ships to beat the subma-
rine has set the technical world into a fever of study of ways
to get them made quickly, with the result that we are now wres-
tling with new types of design, new mxCthods of construction,
and new materials of construction.
New Types of Design
(a) The Corrugated Ship
The simple device of corrugation, which is well known, gives
added strength to material built to that form. This fact is be-
ing used to some extent as a factor in material saving. The
ship's side is corrugated to give it strength which in other cases
SHIPBUILDING DURING THE WAR 219
it attains by greater use of frame work. Such ships are being
built in the United Kingdom, but their number is not great and
they are not an important factor.
(b) Standardi::ed Ships
Of all kinds now building, the standardized ship has attracted
the most attention, but the standardized steel ship upon which
so much thought and so much work are being expended may
not be the only type that will be important in helping to carry
freight to win the war. That honor may be shared by the cement
ship.
The standardized construction has been adopted as the official
method by the governments of the United Kingdom and the
United States, both of which are building ships. In this country
standardization did not have the bitter opposition that was met
in Great Britain. It is easier for us to do it than for the British,
because we are a less conservative people in industry, more ex-
perimental, more scientific, less permanent, more willing to scrap
machinery. Again, our shipyards were so few that most of our
emphasis upon standardization could be applied to new yards
in which it made no difference. England resisted it bitterly,
partly because in one sense she had no standardization,^ and
in another sense she had a good deal. I say she had no stand-
ardization because every yard was a law unto itself, and the
boast of the common British shipyard was that it could do any-
thing.
' A good illustration of British individualism is afforded by Fairplay, April
5, 1917, quoting Mr. D. B. Morison of West Hartlepool to the effect that
" standard machinery adaptable to a useful range of vessels could quite well
be constructed but for the fact that Lloyd's Register, Board of Trade and
British Corporation Registry issued independent rules; in the making of one
single ended boiler of specified dimensions, the three authorities . . . specify
three different working pressures."
For example, the advertisements in one of the leading maritime papers
(Fairplay) the week war was declared showed 17 British firms advertising
a great variety of shipbuilding, boiler making and engine making, in fact
practically anything in shipbuilding, 2 appeared to be exclusively repairers,
6 seemed by their advertisements to be primarily engine and repair works,
1 seemed to be primarily engine fitters to ships, 16 advertised accessories of
the more important character, not including such matters as paint.
220 INFLUENCE OF THE GREAT WAR UPON SHIPPING
While I say they were unstandardized, some of the yards had,
however, adopted to a considerable extent, the practice of stand-
ardization in that they had built duplicate ships, ^ for even on the
building of so few as three ships 15 per cent could be saved if
they were all alike. Thirty years ago one English firm made 30
sailing vessels on the Clyde after the same model. Another
English firm had the habit of making one type of freight ship
on speculation and selling them when completed. In the early
part of the war" several of the leading English steamship com-
panies organized a company to build a new shipyard near Bristol,
which was to build ten steamships at a time. They planned
to turn out only one model, an 8,000 ton freighter to replenish
their depleted fleets. In the main, however, English shipyards
not only boasted of their wide variety of capacities, but every
shipowner had his own notions as to what constituted the proper
ship. The shipyards were there to please him. It was claimed
by many that the supremacy of Britain's shipping was due to the
great variety of her ships, enabling them to enter every port and
every trade. Consequently, when the British Government
•established its Ministry of Shipping and laid down a standard
model, opposition, very naturally, expressed itself, particularly
in a nation that loves to grumble.
Fairplay, the partisan champion of the individual shipowner,
commented editorially :
The principle of standardization is a deadening, soul
destroying thing. It crushes individuality of design in pro-
duction, just as it kills out individuality of performance
among workmen. Applied to design it is exactly the same
idea as the trade unions would apply to labor when they
insist on uniform rates of wages — the good and the bad
workman to be paid alike. It has a leveling effect which
converts individuals into cogs in the industrial machine. So,
if there is to be progress in naval architecture after the
war, standardization must be absolutely abolished as a
compulsory principle, and with it must go all idea of state
' Marine Reviezv, July, 1916.
' Ibid., September, 1916.
SHIPBUILDING DURING THE WAR 221
control. There can not be continued state control without
continued standardization, and one or the other, or both,
would mean utter stagnation. Suppose the principles of
state control and standardization were in force when Dr.
Kirk was evolving the triple-expansion engine at Govan,
and applying his new ideas to actual vessels.
The thing had never been done before, there were no rules
and regulations applying to it, it was out with the standards,
therefore on with the break. ^
And a2:ain :
t>'
It is useless for anyone to contend that standardized
boats will get over the "Breach"; they are not the class
of boats that the trade of the country needs, and in this
contention we believe that we have all owners, and certainly
all our shipbuilders, standing firmly behind us.^
while a British shipowner, Walter Runciman, expressed British
disgruntled individualism as follows :
Put an end to the fandango moonshine of standardized
ships, which nine-tenths of the people who use the phrase
imagine to be an up-to-date, progressive invention, where-
as the type is wholly reactionary. Duplicates of ordinary,
up-to-date cargo vessels, alike in every particular, could be
built in a month or six weeks less time; perhaps I am un-
derstating it. ... I wonder if there will ever be made
publicly known the amount of time that has been wasted
by the multiplication of alterations, made in a variety of
ways to those immortal standardized delusions, and how
many vessels of rational construction could have been put
into the water while the altering and realtering has been
going on. The thought of it beshames one's mechanical
and commercial instincts.^
The official point of view toward the standardized program
is well stated in the words of
Sir L. Money, parliamentary secretary to the British
Shipping Controller, replying recently to a question as to
' Fairplay, September 13, 1917, p. 448.
=" Ibid., February 7, 1918.
' Glasgow Herald, December 29, 1917, p. 36.
222 INFLUENCE OF THE 'gREAT WAR UPON SHIPPING
the building of standardized ships : " The program of
standardized cargo shipbuilding which is being carried
out is designed, under expert advice, to produce for the
national use, in the shortest possible space of time in the
given circumstances, vessels specially designed to meet the
conditions of war, and it is not the case that these standard
ships have been substituted for vessels which are equally
suitable. The standard program is not one of disorganiza-
tion; on the contrary, it is a method of organization which
economizes time, material and labor." ^
In getting up its standard design, the British Government
asked various shipbuilders who had been building more or less
standard ships, to send in various designs simplified as much
as possible. One of these, with some simplifications, was
accepted as a standard, but there was nothing revolutionary
about it. It was merely made as simple as possible. For ex-
ample, the deck of an ordinary steamer curves from end to
end, giving bow and stern some rise, but for 15 years the Holt
Line vessels have been flat. For a long time American vessels
have been flatter than British, so the adoption of a ship with
almost flat deck was not a revolutionary move, but it is easier
to make.
Nearly straight sides was another simplification. It used to
be that the girders down the side had to be put in the furnace
and heated at the yards to be given the exact curve at the bilge.
Now the bilge in the standardized ship is made at almost right
angles, so the straight side pieces like barn timbers can be used
and no heating at the yard is required. The nice curves of the old
deck house are gone. It is simply a plain rectangular box. The
standardized ship is a ship down to its lowest terms, and then
duplicated.
The individualism and much of the beauty of the old ship
are gone. One hundred years ago the ship was a work of art.
Every man on it regarded himself as something of an artist.
The carpenters on the outside of the ship each had certain space
^Marine Review, July, 1917, p. 249.
SHIPBUILDING DURING THE WAR 223
to work in in putting on planks. They strove for the most dif-
iicuh work. It was easier to do it on the flatter parts of the sides
and very difficuh at the extreme bow. There was a sense of
rivalry prevailing among the carpenters for the privilege of
doing the bow. As they each worked on scaffolding hung over
the edge of the ship, one of their delights was to leave a man
who could not keep up hanging in the air as they worked up or
down the ship's sides. All this individualism has gone. All
this beauty has gone. It is simply a uniform, modified stand-
ardized approach to a box made as nearly as possible in straight
lines, but a cheaper, more efficient carrier.
The first British vessel built under standard specifications had
the keel laid February, 191T, was ready to sail on the 25th of
August and in every way passed satisfactory tests. ^ In the
United States Government's shipbuilding program the stand-
ardized ship was accepted without any serious debate. We had
the example of England's adoption. The war was further
advanced and the imperative necessity for ships was manifest.
Then, too, the American manufacturer had long been practising
the policy of utilizing standardization and interchangeable parts
— methods of manufacture which had given us mechanical su-
premacy in the reaper, bicycle, typewriter and automobile, with
the world renowned example of the Ford car in every man's
mind and the dollar watch in every man's pocket. All students
of machine shop practice were familiar with the chief advantages
of standardization, namely, the influence of repetition to reduce
cost.
The Influence of Standardization on Cost.
The expert machinist, the old style machinist, can take
any kind of a machine and do any kind of work, but he is
now as much out of date as the man who can make a watch
or a wagon from start to finish.
It is wasteful for one man or one machine to do many
kinds of work. The reason of this is that the machines are
elaborate; they must be adjusted and set for each kind of
^ U. S. Commerce Reports, October 23, 1917, p. 312.
224 .INFLUENCE OF THE GREAT WAR UPON SHIPPING
operation that they perform. Thus the setting of a ma-
chine to do a piece of work often takes more time than the
actual doing of the work. Sometimes it takes a half day to
reset the machine. Sometimes it takes a week. It may
take ten minutes to work up one piece after the ma-
chine is set. Thus the costs of shaping a particular piece
of metal in a machine shop were, for one piece, 25 cents,
for two pieces 15 cents each, for five pieces 10 cents each,
for 100 pieces 5 cents each, for 500 pieces 3 cents each.
Now we see why it is so much cheaper to make the valves
for every one of a hundred ship engines all alike, new style,
than it is to make one or two for single or sister ships, old
style.
Then, to cap the climax of this thing, these pieces made
at such low cost are interchangeable, and will fit into any
one of tens of thousands of machines of a certain
type. It is by the utilization of these revolutionary proc-
esses, standardization and specialization, that the Ford
car, the dollar watch, and the American locomotive, made
by highly paid men, are sold in competition with the prod-
uce of men who work for lower wages but on the old
unstandardized methods.
The adoption of standardization gave the shipbuilding in-
dustry access to the machine shops of the whole nation rather
than making them dependent upon works immediately beside
the river bank. By assembling parts made to fit, the first Liberty
motor designed for aeroplanes was made in twelve factories
scattered between Connecticut and California. Ship design has
for some time been at the point where the vessel's entire frame,
floors and plates, can be cut in lengths sufficiently short to be
shipped on freight cars to any point where it is desirable to
assemble them into a complete ship. This permits any steel mill
to make plates, angles, shapes of standard dimensions, with
holes punched 1/8 or 1/16 of an inch scant allowing for ream-
ing after the plates are in place, all reaming, riveting and caulk-
ing being done by engine power through the aid of pneumatic
tools. Thus standardization of design leads to distant manu-
facture of parts, like knock-down houses, and the putting of
these parts together wherever it is most suitable. Thus we have
SHIPBUILDING DURING THE WAR 225
the so-called " fabricated " ship. This is a tremendous contrast
to practices prevailing in most shipyards whereby each plate,
angle, and shape is a law unto itself in dimension, form, fitting,
and the number of fastenings required to secure it in place, so
that the ship is built as a house is built, by pieces made to fit on
the spot, whereas the fabricated ship of the war emergency
shipyard is to be put together like a knock-down house or the
parts of a steel skyscraper.^
Mr. Geo. J. Baldwin, president of the New York Shipbuilding
Co., puts it thus:
When we first started in on this program of so many
ships a year we bumped right into a stumbling block. Many
of the skilled machinists and iron workers did not know
a thing about building ships. Hundreds of structural iron
shops had plenty of steel, but could not furnish the fancy
twisted shapes that had always been required for the build-
ing of ships.
What did we do? Why, our engineers and designers
simply got together and designed a boat that could be
made with the use of straight beams, such as can be turned
out in any shop where bridge or structural iron work is
turned out.
We cut out all curved sides, all camber decks, and we
are building fiat bottom ships. In this way we are obviating
all the troubles that used to enter into the building of a
steamship.
In days gone by, and right up to a few months ago, it
was thought that no boat could possibly get along un-
less it had a camber deck. This means that the deck
bulged up a little to let the water run of¥ during heavy
weather.
We figured that water will run ofT a fiat surface almost
as quick as it will any other kind, and so we decided to
have all our decks built fiat. We have found that this is
just as good, and even better, than the old way, and that
it dees not require any special rolling machinery to make the
beams. -
' See Department of Commerce, Standardisation in the Construction of
Freight Ships. E. P. Stratton, 1916.
'Philadelphia Inquirer, May ii, 1918.
226 INFLUENCE OF THE GREAT WAR UPON SHIPPING
" It's like launching a soap box," remarked a shipyard worker
at a recent launching on the Delaware.
The United States Government accordingly built three yards,
one at Hog Island, below Philadelphia, one at Bristol, above
Philadelphia, and one at Newark, New Jersey. The one at
Newark plans to build 50 ships at once, all exactly alike, and
before the first keel was laid forty-nine steel plants in different
parts of the country were at work making steel for these ships. ^
Thus thousands of men (and women) who never saw the
sea, who never saw a ship, are at work helping to build ships.
The Westinghouse Company has built a ship machinery fac-
tory with 35 acres of floor space and 110 acres reserved for
buildings near Chester, Pa., for the supply of Eastern ship-
yards.
The first stage in the work of the famous Hog Island plant
at Philadelphia was the building at the nearby plant of the New
York Shipbuilding Co. across the river of -a steamer complete
in every respect, after which this model ship was taken to pieces,
each of the 20,000 pieces blueprinted or reduced to exact meas-
urements so that they might be duplicated with a degree of ex-
pertness and exactness heretofore unknown. These 20,000 pieces
were then let out to contractors all over the United States for
manufacture, to be assembled at the Hog Island plant. It is
claimed that careful planning of the routing of material and
equipment about the plant saves 25 per cent of the construction
cost.
This fabricating system undoubtedly throws more strain
^ It is doubtless true that if all the various plants busy on some minute
part, such as valves, pumps, compasses, electric apparatus, etc., were counted,
the total number of plants would reach into the hundreds. This enables a
bridge plant in Pittsburgh, a boiler plant in Ohio, a structural steel mill in
West Virginia, and a plate mill in Illinois, to specialize and adjust their
machinery to make hundreds of thousands of duplicate pieces for hundreds
or thousands of duplicate ships. So an automobile plant here, a windmill
plant there, an engine shop yonder, can make some of the parts of the
marine engine and the rather numerous small machines that are needed in a
ship, such as small engines to hoist cargo, pumps for water, pumps for oil,
fans for ventilators, pulleys, cables, compasses.
Standardize, standardize, standardize ; specialize, specialize, specialize !
Thus we can win the war, {/ we try. Fortunately we can try much harder
than we are now trying.
SHIPBUILDING DURING THE WAR 227
Upon the railroads of the country because of the thousands of
carloads of parts and the tens of thousands of shipments of
pieces, every one of which must be in hand and in place before
the ship can sail.
Standardisation in Wooden Ships.
The attempt to apply standard design to wooden ships has
proved less of a success at the hands of the United States Ship-
ping Board. The fault is not with the principle of standardiza-
tion, which, however, is far less effective in wood than in steel
construction. It seems that the shipyards of Maine were accus-
tomed to building a certain kind of ship for which their timbers
' of limited size and shape were admirably suited. These vessels
did not exceed 2,400 tons in capacity. The builders of the Pacific
Coast, with the giant trees of that region, could get timbers of
almost any size they wished, and could build larger vessels.
The builders on the Gulf Coast had lumber of intermediate size,
and built a still different type of ship from either the Pacific or
Atlantic.
On going into the Shipping Board, General Goethals said he
did not know anything about ships, but he finally adopted the
Ferris design of wooden ship, which it is claimed was merely
a copy of a steel ship, and gave little regard to the material from
which it was built. As a result it was exceedingly difficult to
construct and required timbers of great size. Despite this fact,
General Goethals. and his successors on the Emergency Fleet
Corporation, adhered rigidly to this design as the one and only
one they wanted to build, with the result that the Maine ship-
builders could not construct it, and the Gulf shipbuilders could
only complete it after importing train loads of special timbers
from the Pacific Coast at great cost. In the meantime the South-
ern lumber manufacturers had lost much money in searching
their forests through and through for the rare trees that might
fill this peculiar lumber bill which they had contracted to fill.
There is httle doubt that standardization here was carried
too far. The New Englanders could have duplicated their best
228 INFLUENCE OF THE GREAT WAR UPON SHIPPING
schooner on one standard New England design not exceeding
2,400 tons capacity. The Gulf builders could have had one
somewhat similar vessel, whereas the Pacific Coast could have
made one above 3,000 tons with ease. As it is, there have been
idle wooden shipways in the United States during the whole
period of the Shipping Board's career, namely January, 1917,
to May, 1918, and during part of that time men have begged
in vain for the privilege of building ships.
(c) The " Unsinkable" Ship
The unsinkable ship has long been the dream of man. The
Titanic and the Lusitania with their water-tight compartments
were supposed to have been such ships, but the ice and the tor-
pedoes proved otherwise. Their compartments were too big,
and there is always the possibility of torpedoes hitting on the
line of division between two and flooding both.
There are ships, however, now sailing the seas that have been
torpedoed and have floated on because the compartments were
not too large and the divisions went clear up to the deck far above
the water line. Mr. J. W. Isherwood, British ship designer,
some of whose plans have been so extensively followed, has de-
signed an ordinary shelter deck vessel which British shipowners
think is a close approach to the unsinkable ship, because she is
subdivided to the extent that she could have four of her com-
partments open to the sea and yet float. The particular advan-
tage of this design is that while the vessel would ordinarily carry
0,000 tons on 27 feet draft, she becomes unsinkable with a re-
duction of but 7.5 per cent in her carrying capacity, namely, to
8,330 tons on a draft of 25 feet, G inches.^
Another English ship designer has aimed to add security by
combining many compartments with the placing of the machin-
ery far aft. This presents a target only half as long as the ordi-
nary construction which puts machinery in the middle of the ship
with long shaft back to the propeller. An Italian designer,
' Fairplay, September 20, 1917, p. 489.
SHIPBUILDING DURING THE WAR 229
Pugliese, adds further security by placing three separate skins or
bulkheads around the engine and coal space.
Early in the war the English experimented on some Channel
boats by filling them with empty casks, which, when pressed by
the rising water, burst through the deck. The United States
Shipping Board experimented with the Austrian steamship Lucia
by fastening to the inside of her hull 12,000 wooden boxes,
each covered with thin galvanized sheets of steel. This unfor-
tunately took about 15 to 20 per cent of her freight space, and
while it was well agreed that vessels by this means could be
made to float, it would not at all prevent a torpedo from wreck-
ing her to the extent of making her worthless, so that she might
float about like a wrecked lumber schooner, a factor, however,
of great value for a troop transport. Suggestions almost in-
numerable have been made to the Shipping Board, many of
which have been tried out, and most, of course, refused, but
they are building several vessels whose plans for a high degree
of unsinkability have been approved by naval experts.
New Methods of Construction
The discovery that large pieces of metal could be fastened
together by welding with the electric arc rather than by rivets
is a process which came in time to be of great value, but prob-
ably came too late to give us sufficient time to work out the
technique necessary to use it in building the hull of a ship more
economically than by the present method of riveting plates to-
gether.
It has rendered us great service in that it enabled us to easily
defeat the plan of Germany to wreck the German steamers in
American ports so we could not repair them for many months.
This plan was to break parts of the machinery, selecting such
parts as would require almost complete tearing out and recon-
struction to repair. But the new invention permitted us to weld
them in place and in a surprisingly short time the ships were
loaded with American troops crossing the Atlantic. The last
of these vessels was in order by January, 1918.
230 INFLUENCE OF THE GREAT WAR UPON SHIPPING
If welding used the ordinary rolling mill plates, it would be of
advantage only if it worked faster or easier than riveting, be-
cause at the present time the capacity of rolling mills of the
country promises to be absorbed by the riveting method. There
have already been found many places in inside work where the
welding method is more efficient than the old way and it is being
used.
New Materials
(a) Wooden Ships
The rush to get ships of any sort has caused a temporary
revival of the wooden shipbuilding industry of the United States.
Incidentally it also cost us more in that it was partly the innocent
cause of the paralyzing controversy between Messrs. Denman
and Goethals as to what kind of ships we should build. The
wooden ship, however, has come to stay during the present
period of ship famine because it represents an added material
and an added source of supply, using a class of labor, namely,
carpenters, unacquainted with metals and unfitted for building
iron ships, and a material whose production in nowise interferes
with the maximum production of steel. Wooden shipyards have
been revived from picturesque ruin and are now busy on every
one of our coasts,
(b) The Composite Ship
In the early months of the shipping famine we let a number
of contracts for what were called composite ships : namely, ves-
sels with steel frames and wooden sheathing. These, however,
appeared to be of questionable merit, and have now been aban-
doned because they cost almost as much as steel without many
of its advantages.
(c) The Cement Ship
Here is a great hope, certainly the greatest hope of any of
the new things that lie outside the old established wood and steel
SHIPBUILDING DURING THE WAR 231
ship. While the fabricated standardized steel ship will undoubt-
edly, when once our plants get to going, be built more rapidly
than ships were ever built before, the cement ship may outstrip
the fabricators. It seems almost too good to be true. If we
only had known in April, 1917, what we can easily know in
April, 1920, we might have had many more ships afloat by this
time. There is no reason why we should not have known in
1917 as well as we will know it in 1920, no reason except the
limitations of the human mind. The experience with the con-
crete ship can be taken as reasonable proof that man after all
is an essentially stupid and ineffective rather than an essentially
intelligent animal. Cement has been known so long and the
history of cement as a shipbuilding material is so old that it is
almost unbelievable that we should have known so little about
it when the war began. Particularly puzzling is the case of
England, a nation whose life absolutely depended upon ships,
and a nation that has known for twenty years that the submarine
was more than a dream. Germany, Holland, France and
America all knew more about the cement ship than did England.
In fact, she never built one for years after other nations were
experimenting with them. Her ignorance in this direction can
only be understood when one remembers that the students at
the universities that crown her educational system and dominate
her intellectual life have during this same period devoted them-
selves so exclusively to the classics that they have called science
" the stinks " because of the well known odor of a chemical
laboratory. This name for science in English universities will
not survive the war.
History of Concrete as Ship Material.
Although the greatest development has taken place within the
past year, a concrete rowboat was built and patented by M. Lam-
bot of Carces, France, as early as 1849. The following year the
invention was investigated by the French Government, but the
development was left to private initiative. The boat was ex-
hibited at the Paris exposition held in 1855,
232 INFLUENCE OF THE GREAT WAR UPON SHIPPING
As late as 1903 this same rowboat was still in first class con-
dition. Not only is this the first instance on record of the use
of concrete in the building of boats, but it is also the first ex-
ample of the use of reinforced concrete.
In ISST barges of from 11 to 55 tons capacity were built for
use on the inland waters of Holland, and one described as
a sloop named de Zccmcuv has been constantly in service since
1887 and is reported to be in good condition although she " has
been employed in the winter months among ice." ^
In 1897 a concrete pontoon 67 feet in length was built in
Italy for use on inland waters.
A vessel of schooner rig 65 feet in length was built in
America in 1892, and is reported to have worked in the
coasting trade for some years and to have made voyages
as far north as Hudson's Bay and as far south as Cape
Hatteras. On one occasion she struck a rock off Cape
Charles, but was undamaged. In the owners' opinion a
steel vessel under the same circumstances would have been
lost.^
In 1905 concrete barges of 150 tons capacity were built by
Carlo Gabellini in Italy. In 1906 a barge, constructed by him for
the use of the Italian Navy in the military harbor at Spezzia,
was tested before acceptance by being driven against some pilings
and afterwards rammed by a steel tow-boat. The results of these
tests were so favorable that the construction of similar barges
followed. Signor Gabellini's system of construction was sub-
sequently adopted in other countries.
In 1909 a 220 ton freighter was built in Germany for river
traffic and in 1912 a concrete sailboat was built in the same
country. In the construction of this boat, great care was taken
to make its lines conform with the approved sailboat designs.
For obvious reasons the present condition of this boat can not
be determined.
' Glasgow Herald, December 29, 1917, p. 35.
SHIPBUILDING DURING THE WAR 233
In Great Britain the first ferro-concrete vessel — a barge —
was constructed on the Thames in 1910 by the Cubitt Con-
struction Company/
In 1914 a concrete motor boat was built by Walter Dorsey
of Iron River, Michigan. Dorsey explains the building of his
boat by saying that he had no wood or steel. For a keel he used
a T-bar bent upward at the ends. Twelve-gauge by 1 inch
fiat steel strips were used for ribs placed at 12 inch intervals.
Steel strips were also riveted to the ribs running from prow to
stern at 12 inch intervals. A Vi inch square wire mesh was
attached to the framework. The cement was applied to this
framework by means of a trowel. The boat when completed was
18 feet G inches in length with a 4 feet G inch beam, % inch wall
and a hull 38 inches in depth. Motive power was furnished by a
six horse-power gasoline motor. Dorsey named his boat Concrete.
Dorsey's boat has now been taken over by the United States
Government for use at the Naval Reserve Training Station,
Chicago, Illinois. The experience of this boat with the jar-
ring of a gasoline motor is very suggestive of success on a
mooted question — the influence of the engines in a concrete
ship.
During 1915 and 1916 many scows and barges were built of
concrete in the United States for use on the lakes. Concrete
pontoons 125 feet in length were built for use as landing stages
for small craft in the Panama Canal because of the scarcity of
steel and wood suitable for such construction. For the last four
years, 500 ton lighters made of concrete have been in use on
Chesapeake Bay to convey coal and water to the dredges and
to carry sand and gravel.
The greatest development of the concrete boat occurred, how-
ever, in 1917. In the Scandinavian countries, Norway and Den-
mark in particular, 100 to 200 ton lighters were constructed for
river and coastwise traffic. Official rules have been laid down
in Denmark for construction of ferro-concrete boats. In Eng-
' Glasgow Herald, December 29, 1917, p. 35.
234 INFLUENCE OF THE GREAT WAR UPON SHIPPING
land a 300 ton concrete motor ship was built for coastwise and
channel traffic. To Norway belongs the credit for the greatest
development of the use of concrete shipbuilding. The leading
company of that country, the Fougner Steel Concrete Ship-
building Company of Moss, Norway, is now engaged in the
building of 200 to 3,000 ton vessels for the traffic between Nor-
way and England. A vessel of 4,000 tons was reported on the
ways of this company in November, 1917. The same company
also has under construction a large tug-boat and a reinforced
concrete lightship for the Norwegian Government. This light-
ship is to be stationed in the stormy sweep of the Skager-Rak.
The first ship turned out by the company to be given any ex-
tended trial was the Namscnfjord a vessel of 400 tons com-
pleted late in 1917. In January, 1918, this vessel completed a
round voyage between Norway and the British Isles, steaming
2,000 miles. It answered every test satisfactorily, and has been
given a class A-1 rating by Lloyd's. The Norwegian Veritas
has placed the vessel in first class (experimental).
Mr. N. Fougner of the Fougner Steel Concrete Shipbuilding
Company, of Moss, Norway, on a recent trip to the United
States organized the Fougner American Steel Concrete Ship-
building Company of New York.
In Spain at the present time, considerable attention is being
given to the building of vessels of reinforced concrete. The
Works & Pavements Corporation of Barcelona has in course of
construction its first cargo boat. The firm plans to construct in
1918 a gross tonnage of 40,000 tons which corresponds to a dis-
placement of 70,000 tons consisting of standard types of ships
of 300, 500, and 1,000 tons each. In Germany concrete is be-
ing recognized as the shipbuilding material of the future as shown
by the following quotation from Fairplay for January 10, 1918 :
Ferro-concrete is evidently coming in all right as a ship-
building material. Captain Persius, the naval expert of the
Berliner Tagehlatt, says that, owing to the prospective short-
age of iron, steel, and timber for shipbuilding, after the war
the leading German and Austrian firms are preparing to
SHIPBUILDING DURING THE WAR 235
use ferro-concrete on a large scale, and " yards are now
being constructed to that end." In his opinion all the great
shipbuilding countries will have to adopt a similar policy
and find substitutes for iron, steel, and wood.
Later newspaper reports through Holland indicate the actual
building of 800 ton concrete motor ships by the Germans.
The largest concrete ship ever built is the Faith, launched on
March 14, 1918, at Redwood City, California, by the San Fran-
cisco Shipbuilding Company. It is ten times larger than any
concrete vessel on record in the United States. The vessel is
320 feet long, A^V-z feet wide, 30 feet deep and draws when
loaded 24 feet. The floor has a thickness of 4^/4 inches and the
walls 4 inches. She weighs 600 tons more than a steel vessel of
similar capacity. The six bulkheads and the deck are also made
of concrete. The bottom of the vessel is covered with a wooden
water-tight floor.^ Displacement is 7,900 tons, carrying ca-
pacity 5,000 tons. 540 tons of steel reinforcing in the form of
bars and a basket work of steel mesh were used. The bars were
welded together, thus reducing to a minimum the quantity of
steel required by avoiding laps that otherwise would have been
necessary. The engines are oil burners of 1,750 horse-power.
The speed of the vessel is 10 to 11 knots, 160 barrels of oil per
day being consumed. In the designing of the vessel no provision
was made for water ballast, as the designers believed that the
heavy concrete floor would make the vessel ride evenly. The
vessel was launched on March 14, exactly as previously an-
nounced, and just six weeks after the concrete was poured. She
was fully equipped by May 1, passed her trial trips satisfactorily
and went to work early in May. The cost of the vessel was
$750,000, a large part of which is due to the fact that it was a
first attempt.
Concrete for the vessel was mixed just the same as building
contractors mix it for a building. The only difference being
the amount of cement used and the size of the gravel stones.
' Philadelphia Public Ledger, March 15, 1918.
236 INFLUENCE OF THE GREAT WAR UPON SHIPPING
Smaller gravel and more cement was the rule governing the
mixing of material on the Faith.
Methods of Building Concrete Ships.
There are several methods in use at the present time for
the building of concrete ships which can, however, be divided
into two general groups. The first method consists in building
forms much the same as is done in the construction of buildings.
Concrete is poured into the forms. Several modifications of this
scheme have been perfected. Internal forms are built which
can be removed after the vessel has been launched. Sometimes,
the external forms are built in sections in such a way that they
can be moved along the ship's side as the construction progresses.
The methods coming under the second group follow very closely
the method invented by Carl Weber of 910 South Michigan
Avenue, Chicago, a well known engineer of the Cement Gun
Construction Company of Chicago. The method proposed by
Mr. Weber consists mainly of :
a. A skeleton of structural steel with members running
transversely and longitudinally throughout the hull.
h. A system of reinforcing steel rods supported by the con-
struction.
c. A layer of wire mesh or fabric placed outside of the
steel rods.
d. A concrete shell in which the reinforcement is imbedded.
Concrete is applied by means of air pressure in a modi-
fied cement gun, directly to the assembled steel frame
work, no forms being required other than a sort of
shield held on the side opposite the cement gun and
directly at the point of application. When concreting
has been completed and concrete has hardened, the ex-
posed surface is rubbed down to a fine smooth finish by
rotary grinding machines.
The method of construction used at the Fougner yards in
Moss, Norway, is similar to the Weber method, although no
SHIPBUILDING DURING THE WAR 237
Structural steel is used. Metal lath is formed into a double
wall and concrete is poured between. Some of the concrete
works out through the perforations and takes the shape of knobs
upon the two outer surfaces. These knobs form in turn the
anchorage upon which the coating of the inside and outside of the
vessel are laid. The steel bars for reinforcing are set in place
between the two walls of metal lath before concrete is poured.
The outer surface of the hull is finished by hand, although the
cement gun may be used to apply bulk of surface coating.^
In Norway the work is mostly carried on in closed-in
sheds, slightly heated, which provide additional advantages
in keeping off rain from the structure in wet weather, and
also in keeping off the sun, which by its heat may cause
cracking of the concrete in setting."
In warmer climates such structures are unnecessary.
Launching the Concrete Ship.
Smaller vessels are built and launched upside down. This is
done because internal forms can be used and the concrete applied
more evenly than would otherwise be possible. When the ves-
sel strikes the water, water is admitted to compartments causing
the vessel to right itself. In the case of the 200 ton lighter
launched in Norway in August of 1917 between 15 and 20
minutes were required for the vessel to right itself. Larger
vessels are built and launched much the same as steel vessels.
The concrete ship, Faith, was launched broadside.
The Advantages of Concrete in Shipbuilding.
(a) It does not interfere with steel construction. Only
the steel rods and steel wire mesh are necessary, and
rolling mill capacity is not required.
(b) Materials needed for the mixing of concrete — cement,
' Scientific American, November 17, 1917.
■ Glasgow Herald, December 29, 1917, p. 35.
238 INFLUENCE OF THE GREAT WAR UPON SHIPPING
gravel, and sand — are at the present time compar-
atively plentiful with unlimited resources. The pro-
duction of cement increased in 1917.
(c) A concrete vessel can be built for the present cost of
a wooden vessel. During the summer of 1917 a
joint committee of the American Concrete Institute
and the Portland Cement Association submitted a
design for a 2,000 ton seagoing barge. The cost per
ton dead-weight of this barge was estimated at $63.
The best available figures as to cost of a steel hull of
the same character were from $90 to $120 per ton
and the cost of a wood hull $70 to $100 per ton. In
The Scientific American for November 17, 1917, it
was stated that a concrete vessel could be built for
$750,000 as against $2,000,000 for the ordinary steel
ships of the same size. The Shipping Board estimates
that a concrete hull can be built for from $10 to
$70 a ton cheaper than either wood or steel. The cost
of engines and boilers would be the same for all
classes.
{d) A concrete vessel can be built more quickly than a
steel vessel or a wood vessel of the same capacity. It
is estimated that a 7,500 ton vessel can be completed
in 90 days.
(e) For the construction of concrete ships a much cheaper
plant is required, the cost probably being about one-
twentieth of the cost of the steel ship plant or $25,-
000 as compared with $500,000.
(/) Unskilled workmen can be used. It is, of course,
necessary to have skilled workmen for the direction
of construction, but fewer are needed than in the
case of a steel ship.
(g) The concrete ship is fire-proof, rat-proof, rot-proof,
and insect-proof.
(h) The cost of up-keep is very low, and repairs can be
made easily.
SHIPBUILDING DURING THE WAR 239
(i) A smooth finish can be given to the concrete ship which
reduces friction in the water to a minimum. The
smooth surface also prevents the accumulation of
barnacles and other sea growths — a constant element
of cost in wood and metal ships.
(;") The concrete ship is durable: witness the case of the
French rowboat constructed in 1849.
" It is claimed that damages to concrete vessels are
easily made good, as it only means increasing the rein-
forcements in the way of the damages so as to obtain
a higher strength than the original. For the same area
repairs will be much less costly in the ferro-concrete
ship than in a steel vessel." ^
A German ferro-concrete barge survived collision
with a Rhine steamer.^ Note the harmless stranding of
the American schooner above mentioned.
(k) Superior resistance to torpedoes. This is flouted by
some, but claimed by Hiram Maxim and explained as
follows :
Owing to the toughness of the steel ship, the metal
bends, holds together as long as possible, and trans-
mits the force of the shock for great distances through
the structure of the ship, thus making extensive dam-
ages. In contrast to this the concrete pulverizes, so
that the torpedo spends its energy in grinding up a
small area of concrete rather than in tearing a large
hole as in the steel structure. The pulverized ma-
terial is also heated by the torpedo, thus utilizing
energy which would otherwise destroy.
The Disadvantages of Concrete in Shipbuilding.
{a) The disadvantages of the concrete ship center chiefly
around points regarding which little or no informa-
tion is available. Little is known concerning the
effect of the sea waves and engine vibration upon the
* Glasgow Herald, December 29, 1917, p. 35.
240 INFLUENCE OF THE GREAT WAR UPON SHIPPING
hull. Smaller vessels as in the case of the
Namsenfjord, however, have been used successfully.
Action of waves and engine vibrations on the larger
vessels such as the Faith can only be ascertained
through actual experience, which fortunately we are
now getting.
(6) It is also feared that salt water will have a deterio-
rating efifect upon the concrete, but it is peculiar if
20 years of experience have left much need for ex-
periment in that field. If salt water is a menace, it
is possible to protect the hull by means of water-
proof paint, or a water-proofing material may be
mixed with the concrete. The deterioration is caused
by action of various ingredients of salt water such as
magnesium sulphate upon free lime in concrete. Cer-
tain varieties of concrete such as " puzzolane " con-
tain no free lime, and if very dense concrete is used
it is not materially penetrated. The chief preven-
tions against sea water are :
(1) Use of rich concrete.
(2) Use of cement containing but little free lime,
gypsum and alumina.
(3) Addition of puzzolane containing silicic acid
to fix free lime.
(4) Use of coarse sand.
(5) Use of dense concrete.
(6) Special surface treatment.
(7) Protection of reinforcing against oxidation.^
This is probably the most menacing of all the
troubles; much reinforced concrete exposed
to sea water has gone to pieces because the
salt penetrated the cement, rusted the iron,
which makes it expand and burst the con-
crete. The engineers should be able to get
defense against this by one or all of the
' Scientific Arnerican, July 28, 1917.
SHIPBUILDING DURING THE WAR
241
three methods — painting the iron, water-
proofing the concrete or its surface. The
Schoop metal spray is one of several re-
cent inventions that may be important in
this work.
(c) The same objection has been made against the con-
crete ship that we made against the steel ship when
vessels were first built from that material: namely,
that it is too heavy, but a concrete vessel of 5,000
tons capacity weighs but 600 tons dead-weight more
• than a steel vessel of the same capacity.
(d) Concrete is not flexible. In answer to this disad-
vantage, engineers claim that concrete is flexible, and
in fact advance this argument as one of the points in
favor of concrete construction.
(e) It has been shown in the past that concrete vessels
are unable to withstand chafing against other vessels
or against a dock. It is also possible to protect the hull
by means of wooden fenders.
It is a sad commentary on the ineptitude of man that we know
so little about cement as a ship material after we have had so
much time in which we might have learned.
Lloyd's Approval of Concrcts Ships.
Lloyd's Register of Shipping has approved plans for the con-
struction of several reinforced concrete ships with a view to
classification by the society. As mentioned before, they have
also given an A-1 rating to the Namsenfjord. This approval
by so conservative and authoritative a body should be given great
weight. Concrete vessels were building on the west coast of
Scotland in January, 1918.
Present Concrete Ship Program
The use of concrete in shipbuilding was brought to the atten-
tion of the Senate Commerce Committee on January 29, 191S,
by Ray Robinson of Chicago. The committee recommended
242 INFLUENCE OF THE GREAT WAR UPON SHIPPING
immediately to the Shipping Board that the use of concrete in
shipbuilding be investigated. On February 2 the Board let con-
tracts for ten 3,500 ton vessels to the Ferro-Concrete Shipbuild-
ing Company of Redonda Beach, California. The company
claims that it will use a newly patented scheme of construction.
The San Francisco Shipbuilding Company, the builders of the
Faith, have plans to build 54 ships, some of much larger
capacity.
Contracts for forty-nine of these vessels were let about the
time the Faith sailed.
The success of this ship resulted in the announcement, May
1, 1918, by the Cleveland Builders Supply Co., that it proposed
to establish on the shores of Lake Erie (Cleveland) a yard for
the construction of concrete vessels, the ships to be for lake and
canal trade, thus releasing lake vessels for sea service. They
are to build four vessels at a time of 1,000 to 2,000 tons ca-
pacity, steam, propelled.
It seems reasonably certain at this time, May 30, 1918, that
the latest word from the cement ships is one of success, and
during this calendar year we shall know how much we can depend
upon them. At present it seems quite likely that, if this suc-
cess continues, we shall be in a position by the end of summer
or certainly before the beginning of winter to start concrete ship-
yards by the dozen on the estuaries of the South Atlantic and
Gulf States and the California coast where they can work unin-
terruptedly through the winter with little or no protection, and
turn out hulls by the score or hundred.^ It is possible also that
we shall develop, as has been suggested, interchangeable parts of
the ship itself to the extent of making detachable engines which
can in five minutes time be uncoupled, lifted out of one concrete
hull as she lies at her pier, and dropped into one of her hundred
sisters that happens to be alongside, thus permitting one engine
' On May 25 a board of engineering experts recommended to the United
States Shipping Board the building of five government yards for building
concrete ships, and it is understood that the locations were to be Wilmington,
N. C, Jacksonville, Fla., Mobile, Ala., San Francisco and San Diego, Cahf.',
all of them locations permitting virtually continuous work throughout the
winter.
SHIPBUILDING DURING THE WAR 243
to run at least two ships on the North Atlantic Ferry. Such
plans, if proved by September 1, 1918, by the experience of the
good ship Faith and other cement vessels, might enable the cement
ship to be of material aid in feeding Europe during the hungry
time of May, June and July just preceding the European harvest
of 1919, which will be a hungry time alike in peace or war, and
to finally be the deciding factor in restoring tonnage despite the
submarine.
CHAPTER IX
Shipbuilding in the United Kingdom
A Problem in Business Administration and Government
Control
British shipbuilding during the first three and a half years of
war offers an interesting study in industrial management. It is
a story of struggle for efficiency through the reorganizing and
nationalizing of an industry embarrassed by war but thoroughly
set in its ways, satisfied with itself, operated by a labor supply
highly organized and deeply intrenched by a host of restrictive
and protective rules, and further backed up by a very strong
political influence. Nevertheless it has been almost revolution-
ized, as was indicated by the discussion of standardization in the
last chapter.
The Government Commandeers Yards and Dictates
Output
When rising freights sent the British owner scurrying to the
shipyard gate in the autumn of 1914 he found it closed, or he
found himself ejected even if he had the luck to get inside. The
yards were commandeered. The British Government, accepting
the idea of a long war and realizing anew the necessity of a great
war fleet, commandeered nearly all the shipyards of Great Brit-
ain, put them at all kinds of naval work from superdreadnoughts
to submarines and mosquito boat submarine chasers. Extensive
contracts for these last were also let in the United States. This
meant that merchant shipbuilding was brought almost to a stand-
still, and continued so for many months, unfinished vessels being
left as they were when the men moved over to the war work.
Many scores of merchants ships are lying on the stocks un-
finished, and as many more on builders' books have not been
244
SHIPBUILDING IN THE UNITED KINGDOM 245
commenced. All this work, indefinitely hung up by the war,
will have to be completed when circumstances will allow;
and when that will be no one as yet has any clear
idea.^
The' Clyde Armaments Committee even proposed - to close
down five Clyde yards that were not working on government con-
tracts so that the men could go to government work in other
yards — with compensation to the closed yards.
By October, 1915,^ there were some signs that the official mind
was beginning to get interested in merchant shipbuilding. High
freight rates had become appalling, and the lack of naval battles
and the increasing loss by submarines were beginning to show the
pressing need was for freight carriers rather than war vessels.
In December, 1915, builders in the Newcastle district were given
permission by the Admiralty to proceed, with mercantile work
that they had in hand whenever the government work they had
on the stocks would allow them to do so.*
The importance of this permission is well illustrated by the
case of a freighter '" which had already been lying three months
at the engine firm's docks waiting for two weeks' work in com-
pleting her engines, and giving to her prospective owner the
anguish of huge missed earnings, of which, however, 12s.
6d. in the pound would have gone to the state. By the middle
of March, 1916, '^ the government had become increasingly
interested in merchant shipping, and issued further permission to
builders to complete merchant vessels already on the stocks.^
' Lloxd's Weeklv. July 16, 1915, p. 459.
'Ibid., May 21/1915.
'Ibid., December 22, 1915.
■* " As berths become vacan-c, builders will presumably be able to lay down
the keels of additional merchant ships, either in execution of old orders or
such contracts as they may now book.
This break in an arrangement which has tied many of the yards down for
many months will be very welcome to shipowners who may begin to calcu-
late when they may expect delivery of the vessels for which they have been
so long waiting." Lloyd's IVecklv, December 17, 1915, pp. 8, 11.
= Ibid., January 28, 1916.
'Ibid., March 17, 1916.
^ Late in February, 1916, Walter Runciman speaking for the government
in the House of Commons said, " An increase in the mercantile marine is
just as necessary as the increase of numbers of warships." (Fairplay, Feb-
246
INFLUENCE OF THE GREAT WAR UPON SHIPPING
Efforts were made to clear the berths of war vessels. Then the
real difficulty of the situation began to show itself. There began
to be vacant berths and neither men nor materials available to
lay down more shipping, and stagnation in merchant building
therefore continued.^
The process of transference to merchant work went on steadily
through the year 1916. By the middle of July- in one district
all shipyards with two exceptions received official notification that
if they had completed current Admiralty contracts, their forces
would not be required for further government work and they
would be free to devote themselves solely to mercantile orders.
On the other hand the two excepted establishments were to be
retained for war work, showing a wise policy of definite speciali-
zation in work of different yards — a tendency of the times that
the war has emphasized in British shipyards.
The output of merchant shipping for the years 1913 to 1917
shows ^ the extent to which this industry has been submerged by
f^e necessities of war.
No.
Tonnage
I.H.P.
1913
1424
1,977,600 gross
1,556,600
1914
1294
1,722,150
1,366,900
1915
517
649,340
540,600
1916
412
582,300
410,280
1917
1,163,474
If shipowners could have got all the ships they wanted, Eng-
land would have built ten or fifteen million tons in 1915 and again
in 1916. As it was, the figures of output were so far below the
submarine sinkings that the year and a half from the middle of
July, 1916, to January, 1918, marked a period of feverish at-
tempts to bring about organization and efficiency, so that by read-
justment a nation with reduced labor and reduced materials
might maintain a navy and restore a mercantile marine. What
ruary 24, 1916, p. 321.) He further stated that less necessary war work had
been allowed to stand aside.
As late as the spring of 1918 there were still at least two uncompleted
merchant ships that had been started before the war began.
' Lloyd's Weekly, February 10, 1916.
"- Ihid., July 21, 1916, p. 11.
' Ibid., May 4, 1917, p. 8.
SHIPBUILDING IN THE UNITED KINGDOM 247
could be done? First of all, labor had to be reckoned with,
for a ship runs back in a hundred directions to labor, to man
power.
The Labor Question
In the matter of labor three entirely different problems pre-
sented themselves: (a) The diplomatic and political task of
utilizing- and changing the unions so that labor might be had
willing to be used to the best efficiency, for the greatest output
rather than for merely the greatest wage, (b) The getting of
more workers, (c) The scientific utilization of this labor to make
the greatest national output rather than the greatest gain for the
individual employers. In brief, apply scientific management
and get labor and capital alike to stop profiteering.
Getting the Unions to Unbend
From the standpoint of maximum output, English labor unfor-
tunately was thoroughly organized and committed to the suc-
cessful policy of limitation of output — that curse of modern so-
ciety, that pet device alike of capital, of labor and of trade, in
fact an instinctive desire of all of us, which seeks by reduction
of output to enrich itself by creating scarcity and high price and
thus taking profit through the impoverishing of society. The
British capitalistic classes had grumbled helplessly at this labor
tmion policy for many years, but now it became a vital question
and under the pressure of national necessity, the urge of pa-
triotism, the menace of a foreign enemy,^ British labor in the
munitions industries, made a bargain early in 1915 with the
government, by which labor promised to stop limiting output.
' The problem and the thoroughly British policy are well stated in an
editorial in Fairplay, November 16, 1916, p. 706.
" We also know that there are not enough men for shipbuilding and
engineering and munitions manufacture, and also for the army. On a mere
counting of heads we can not take men from industry without weakening
industry, and we can not keep, or take, men from the army without weaken-
ing the army. So we must shuffle labor and dilute it, and coax and push
into industry people who have been outside its ranks hitherto, and pay high
wages, and work lots of overtime, and adopt every other expedient we can
think of. In this matter there is only one policy, that of never-ending
compromise."
248 INFLUENCE OF THE GREAT WAR UPON SHIPPING
The government's agreement with the trade unions regard-
ing the conditions which are to govern labor during the
period of the war in the production of munitions is so good
a bargain from the men's point of view that it is difficuh
to beheve in the sincerity of the exceptions which are being
taken to it. It is agreed by the unions that while the present
demand for munitions lasts there shall be no impediment to
the employment on suitable machines of zvomen or semi-
skilled men. For its part the government undertakes that
there shall be complete reversion to the status quo when the
hostilities cease}
Fortunately this mental evolution on the part of munition
workers was in the process of time duplicated in the shipbuilding
field. The process was slow and gradual. In September, 1915,
Lloyd's Weekly (September 15) reported the men working
" well, never so well." But a month later, it ' reported that as
the process of transference of labor from war work to merchant
work was beginning, men refused to be transferred, although the
wages were as good and better. They regarded building a war-
ship as a patriotic enterprise, but they did not care to " enrich
grasping shipowners," so in some cases they refused to build
merchant ships. ^
This is one of many evidences of the strong opposition of the
British public to the shipowner and his profits. Prices were up,
the newspapers were full of stories of enormous freight rates and
great shipping profits, and it was but natural that the average
person, particularly among an island population whose living
'Lloyd's Weekly, "March 26, 1915, p. 207.
Students of sociology, economics and labor should look forward with
great interest to the workings out of this bargain, this permission to revert
to the poHcy of impoverishment at the end of the war — that policy which we
all see to be erroneous in general and all want to practice in our own par-
ticular cases.
"- Lloyd's lVeekly,_ October 15, 1915, p. 667.
^ Before general increases in merchant shipbuilding wages came there was
also a lot of haggling over the fact that men did not desire to return to
merchant shipbuilding because the government in nearly all cases paid 27^/^
per cent extra wage for warship work on the assumption that it was heavier
work. At the end of December, 1915, a munitions tribunal at Edinburgh
fined 59 men 20 shillings each under the Munitions of War Act for absenting
themselves from a Grangemouth shipyard which was a "controlled" (com-
mandeered) establishment. Fairplay, January 6, 1916, p. 25.
SHIPBUILDING IN THE UNITED KINGDOM 249
came from ships, should conclude that these profits were respon-
sible for his high prices, especially in food.
There were frequently small labor difficulties and dissatisfac-
tions during 1915 and early in 1916. Upon the whole, labor
proved itself amenable to instruction to a considerable extent.
The fact that it was so thoroughly organized enabled it to be
dealt with definitely as a mass, a fact not appreciated in the
United States. For example, delegations of munition workers,
union officials, waited upon Lord Kitchener, were told the facts,
went back to their men, and straightened them out on the
matter of living up to the munitions agreement.^
Union rules were relaxed. The stringency of the union re-
strictions against apprentices and other unskilled workers was
relaxed, and particularly the stringent rules whereby each par-
ticular worker must stick to his particular branch of the trade,
were lessened under the ever increasing pressure of national
necessity.^
The labor union restrictions against machines were waived, to
the great benefit of the output. The extent to which this flat
reduction of output, namely, the refusal to use efficient machines
and tools, ^ has been insisted on by organized British labor, is
hard for Americans to understand.
The labor policy at this time, 1916, was a combination of
diplomacy and authority, for an October strike in Glasgow was
by royal proclamation ordered settled by compulsory arbitration
under the Defense of the Realm Act.
Getting More Workers
The relaxation of union rules aided greatly in the getting of
more workers. By June, 1916, it had been discovered on the
' Lloyd's IVeeklv. April 16, 1915, p. 255.
= Liverpool unions succeeded shortly before the war m hinitmg at a low
figure the number that the oxyacetylene blow pipes should bear to the total
number of men on the job. By this means they would have to use slow
old methods rather than this wonderful steel cuttmg device. Thus they mul-
tiplied jobs. Llovd's Weekly, July, 1914.
Mn some British shipbuilding districts it is reported that che men made
no concession on this point.
250 INFLUENCE OF THE GREAT WAR UPON SHIPPING
Clyde ^ that women could do a surprising number of processes
in shipbuilding work for which they had never before been con-
sidered, not only working in machine shops, inside the ships,
but even out in the yards in the rougher work. As an example
of woman's efficiency in this work, it had been found that not
only could she run many machines quite as well as a man, but
a good many vessels have had all the electric wiring done by
women. But it is in the engine building, in the machine shop,
that she has done her greatest work.
During the summer of 1916 the government applied to ship-
building the policy previously applied to munitions, that of bring-
ing back skilled workers from the front whither they had
gone by thousands after enlisting. The Shipbuilder (September,
1916) heralds the return to the yards of "many of the large
number who enlisted." It also heralds the further increase of
the force by the constant dilution with unskilled labor, including
women.
Rearranging Labor for National Rather than Private Gain
In the autumn of 1916 the shipbuilding practices received a
shakeup, for, through the suggestion of a government committee,
there was tried out on shipyards on the River Weir a policy of
pooling labor which expedited output. The yards were so close
that a man could go to any one of eight or ten yards from his
home with ease. Under the old narrow-trade single-yard system
there was a lot of lost time, one group waiting for another to
finish some part of the ship. Certain processes must be finished
in sequence, and it is very difficult even in peace times to keep
them all flowing in such a way that everybody is busy all the
time. Sometimes this trouble became worse through the em-
barrassed supplies of materials during the war. By this new
arrangement the plants shifted workmen around so that all
workers of every kind could be busy all the time — a thing quite
impossible in a single yard.
' Lloyd's Weekly, June 16, 1916.
SHIPBUILDING IN THE UNITED KINGDOM 251
Another part of this Weir plan ^ was the bunching of work
on all ships that were nearly done, so that they might be put
in the water as quickly as possible. Decision as to the focusing
of the mobile labor on the ships that could be finished first, lay
in the hands of a local committee, composed of the local board
of trade surveyor and the surveyor of Lloyd's Register of
Shipping.
The River Tyne (Newcastle district) almost immediately
copied the Weir plan, which shortly became general in its appli-
cation. By 1918 it was reported in some sections to be but little
used for the following reasons. (1) The employer was afraid
to let a man get away for even a day for fear the rival would
keep him. (2) There was such labor shortage that there was
virtually no waiting for work, a condition which priority in
materials, with consecjuent more dependable supply, had helped
to produce.
These changes in the habits of organized labor were made as
a result of much patience, tact and diplomacy, and as a result
of conferences which may be said to have resulted in treaties.
For example, the Admiralty appointed Mr. Lynden McCassey
as Director of Shipyard Labor, and he addressed one Labor
Union Conference after another, persuading their workers to
relax their rules and become national in their point of view.
In October, 191G, Mr. Balfour congratulated Mr. McCassey
upon persuading the Liverpool district committees (Labor) to
adopt such a plan which Mr. Balfour said was " of the greatest
national value and importance." " Five months later Mr. Mc-
Cassey was still at it,^ and was generally credited with having
' Fair play, December 14, 1916.
' Lloyd's Weekly. October 13. 1916. p. 3.
' Mr. Lynden McCassey, K.C., Director of Shipyard Labor, addressed a
largely attended meeting of trade union delegates this afternoon in New-
castle, and explained at length the government scheme for organizing labor
in the shipyards, docks and marine engine works.
The transfer of men from yards and shops where they are not required
to yards and shops where they are required ; the suspension for the period
of the war of all customs restricting output; the introduction and the use
to the greatest possible extent of all time and labor saving appliances, such
as pneumatic tools, hydraulic and electric tools and oxygen -acetylene tools;
the introduction of an appropriate system of payment by results, which would
secure to the government a greater output and to the workers larger earn-
^52 INFLUENCE OF THE GREAT WAR UPON SHIPPING
achieved the national adoption of " labor dilution." This deal-
ing with labor of a region en bloc indicates an aspect of the situa-
tion from which America in the present emergency has undoubt-
edly suffered. English labor, so highly organized, can be dealt
with as a mass, while American labor can in many cases scarcely
be dealt with at all because of the chaos resulting from its great
lack of organization.
Payment by Results
Great effort was made at this time to introduce payment by
results rather than payment by mere time. Mr. Lloyd George
made a statement ^ to the effect that wherever the system had
been introduced there was an increase in the output of a ship-
yard by 20, 30, and even 40 per cent.
Status of British Shipbuilding at the Beginning of 1917
As a result of the policy of " diluted " labor by unskilled
persons of any sort who could do the work, Britain had more
people engaged in shipbuilding in 1917 than ever before, and
while figures were for reasons of public defense withheld, the
First Lord of the Admiralty declared " that there was a greater
output than any year in British history, and that 900,000 workers
were employed.
The Woman Shipbuilder
Of these workers a surprisingly large and rapidly increasing
number were women. A correspondent of The Nezv York
Times (September 30, 1917) said:
ings for the increased output; and the introduction of a reasonable system
of interchangeability of work, so that the work of one trade for which
there were not any tradesmen (workers) for that trade available should be
undertaken by the nearest appropriate trade.
It was explained by Mr. McCassey that the foregoing proposals were
intended to utilize to the best advantage the existing skilled men in the
country, and that when such measures were insufficient to meet a shortage,
their dilution or the introduction of semi-skilled labor to perform more
skilled work should be introduced. (Lloyd's PVeckly, March 23, 1917, p. 5.)
' Fairplay, March, 1917, p. 369.
- Glasgow Herald, December 29, 1917.
SHIPBUILDING IN THE UNITED KINGDOM 253
But in the shipbuilding yards they do work that hereto^
fore was done by strong men.
In every yard there are hundreds of them, and in one
plant, just visited by a staff correspondent of the Associated
Press, 6,000 of them are employed. They are dressed in
khaki trousers and belted coats, which reach well above the
knees. Their hair is tucked up under little round khaki
caps. But they could never be mistaken for men. Nearly
all of them insist upon wearing high-heeled shoes, and their
tastes run to silk stockings.
Around a gigantic machine on the banks of the Clyde the
correspondent saw seven girls, none over 20, lift a heavy
steel plate and, while some held it in place, one guided a
punch and another swung a lever operating the punching
mechanism. They were working as if their lives depended
upon speed, and they worked like a well trained team.
Their efforts as shipyard workers received unmitigated praise.
The Marine Reviezv, July, 1917, p. 250, says :
F. Kellaway, a member of the British Parliament and par-
liamentary secretary of the Ministry of Munitions, recently
stated that he did not think he exaggerated in saying that
but for the work that women had done in the munition shops
of Great Britain the Germans by now would have won the
war. Women were doing important work in marine-engine
building, including turning and connecting rods, propeller
shaft liners, and most of the drilling. So wide was the
scope of women's labor that a prominent British engineer
expressed his firm conviction that, given two more years of
war, he would undertake to build a battleship from keel to
aerial in all its complex detail entirely by women's labor.^
The Organization and Work of the British Government
IN Relation to Shipbuilding
Priority and Price Control in Steel Industry and Shipbuilding
In the beginning of the war the British followed their national
instinct of letting industry alone as much as possible, but the
' Shipbuilders from some parts of England think that statement much
too strong for their districts.
254 INFLUENCE OF THE GREAT WAR UPON SHIPPING
logic of events forced a rapidly increasing development of gov-
ernment control.
The first step was to commandeer the yards for work on war-
ships, but the development of munitions industries at the same
time promptly produced a shortage of steel. To get around this
trouble the government, through the Ministry of Munitions, had
to take charge of the steel industry both for price fixing and dis-
tribution of product, and the shipbuilding industry from start to
finish has had to struggle with an almost continual shortage of
supplies. The distribution of materials brought inevitably a
higher control of industry — the deciding of what should be done
and what left undone. Thus the government very early in the
war had to decide that this ship or class of ships rather than
that other class should be completed. The prewar individualistic
shipbuilder would naturally be aggrieved at this, and it is also
natural that certain inefficiencies and occasional grievous mis-
takes should occur.
On several occasions, when the authorities have decided to
construct oil-tank steamers, builders have been ordered so
as to expedite delivery, to utilize whatever was on the stocks.
But it has happened more than once that the particular gov-
ernment official in charge, being ignorant, of course, of the
minutige of shipbuilding, ha? naturally enough assumed that
the more forward the condition of any boat the speedier her
readiness for any service. And so in one or two instances
we find where two sister ships were being constructed on
adjacent berths for general cargo carrying purposes, and
one was all framed and partly plated, and the other had
only her keel laid, the Admiralty ordered the former to be
converted into an oil-tanker, which necessitated her being
stripped down to the keel; while if the other had been requi-
sitioned the nation would have been saved time, labor and
expense.^
Out of this necessary practice of control and priority orders
there rose a long discussion concerning the fulfilment of uncom-
' Fairplay, February 17, 1916, p. 263.
SHIPBUILDING IN THE UNITED KINGDOM 255
pleted prewar contracts for merchant ships which had been set
aside on the commandeering of the yards for government work.
The merchant contracts had no war clause in them. Some of
them were made on the basis of about £6 per ton dead-weight and
when builders could resume work on them in 191G materials and
labor had gone up to a point where they cost much more than
that/ and new contracts could be easily had at £12 per ton. The
government, however, refused to compensate the shipyards for
any difference in cost on the unfinished contracts, although the
Admiralty " in some cases paid the owners damages when the
work on their ships had been stopped by government order.
The dilemma w'as settled by owners in at least 95 per cent of the
cases paying the difference in cost," as they could well afford to
do owing to the enormous freights which then prevailed on such
ships as were free to get the competitive rate.
Tlie Shiphuilding Dictator
It was natural that the various authorities having control of
something in the shipbuilding field should make conflicts indi-
cating a need for greater harmonizing of efifort. Accordingly
in the autumn of 1916 we find so authoritative a journal as the
Liverpool Journal of Commerce calling for a shipping dictator.
This call was inspired by Lloyd's Register returns for shipbuild-
ing which showed that for the quarter ending September 30,
1916, the vessels completed in the United Kingdom amounted to
the alarming total of but 71,000 tons gross, while for the nine
months there had been but 200,000 tons, compared with a normal
output of at least a million tons, and with losses which this paper
estimated as follows :
For the period of the war to date :
Gross Tons
1. Hindrance of new construction 1,700,000
2. War destruction... 1,520,000
3. Excessive depreciation 1,000,000
Total 4,220,000
^ Actual figures showed that materials had gone up 50 per cent and labor
75 per cent. (Fairplay, May 4, 1916, p. 709.)
- Fairplav. March 16. 1916, p. 446.
' Ibid., October 12, 1916, p. 523.
256 INFLUENCE OF THE GREAT WAR UPON SHIPPING
In Spite of admitted difficulties it is hard for the outsider
to believe that this can not be improved, while everyone
claiming any general knowledge of the situation is well
aware that many more ships could be turned out without
at all interfering with the more urgent requirements of any
other section of our fighting machinery.
Claims on the manhood of the country and on the output
of material for more urgent purposes are admitted ; there is
no complaint on this account. What is not admitted is that
it is necessary to employ a constantly increasing multitude of
officials to stifle the best efforts of shipbuilders and appar-
ently to insure that what available labor and material there
is will be wasted. The shipyards of the country, and the
supplies of labor and material they so urgently require are
being wasted, at a most critical period of our history, by
the grip of officialdom.
The complaints against the existing system or rather mul-
tiplicity of systems each possessing its own little tin head,
are universal. The shipbuilders have been governed by a
sense of loyalty and a desire to do all that is possible, but
there is a limit to what can be borne in silence. The ship-
building industry needs one thing to put it right, namely,
an autocrat, one strong man to govern everything; to see
that the available supplies are not frittered away; to insure
that the man who can best build big ships is given big ships
to build, and not toy ships; in general, to arrange things on
a sensible basis and prevent every official suddenly possessed
of temporary power from overemphasizing his own require-
ments and upsetting everything else. . . .
The post of dictator is not difficult to fill. What is re-
quired is an individual who is intimate with the shipbuilding
industry, and whose career is a guarantee of strength of
character, soundness of judgment and outstanding ability.^
The dictator came December 1, with a change in government, and
the appointment of Shipping Controller Sir Joseph Maclay, who
was heralded as the desired practical man, and has since been
so recognized. Within a month he appointed an expert com-
mittee
' Liverpool Journal of Commerce quoted in Marine Review, December,
1916, p. 421.
SHIPBUILDING IN THE UNITED KINGDOM 257
consisting of leading shipbuilders and engineers, to advise
him on all matters connected with the acceleration of mer-
chant ships now under construction and nearing completion,
and the general administration of a new merchant ship-
building program. This is a matter of the first importance.
Than the men chosen, a better or more capable list could not
have been selected. They represent the Shipbuilding Em-
ployers' Federation, the Engineering Employers' Federation,
the Board of Trade, Lloyd's Register, and the Clyde and
Northeast Coast local employers' associations in shipbuilding
and engineering, and their experience and technical knowl-
edge are practically unlimited; and there being behind them
the driving force of the Shipping Controller himself, and
behind him the new government, we should soon be hearing
of things done.^
The Standardized Fabricated Ship
The new controller promptly started in to apply the idea of
standardization by letting contracts for standard ships for gov-
ernment account.
The government has issued specifications for a number of
cargo steamers of the single-deck type, to carry 8,000 to
10,000 tons dead-weight, which are to be as simple and
inexpensive in design as possible, in order that they can be
turned out quickly. The hulls and machinery are to be
standardized and the vessels are to have priority in construc-
tion. These specifications have been in the hands of the
builders for some little time, and already, it is understood,
orders for some 20 ships have been placed on the Clyde, and
now a like number are in process of being contracted for
on the Northeast Coast and elsewhere. Before long it is
estimated that 40 to 50 of these vessels will be in hand and,
as nothing is to stand in the way of their construction, early
delivery is expected.
As completed, the vessels w'ill be taken over by the Ad-
miralty and engaged in trade essential to the nation, chiefly
grain and food carrying". After the war is over the vessels
will be offered for sale to private owners, and when that
time comes they are certain to find ready buyers.^
' Fatrplay, January 4, 1917, p. 22.
" Lloyd's JVcekly, January 19, 1917, p.
7.
258 INFLUENCE OF THE GREAT WAR UPON SHIPPING
This process of standardization which was discussed at length in
the last chapter aroused considerable opposition. Each builder
wanted to follow his own standard and duplicate his last good
ship rather than change over to the national standard, which for
every maker involved some readjustment. But, fortunately, the
Shipping Controller had his way, commandeering for his stand-
ardized ships " every available berth in the Kingdom." ^ He
was soon advertising " for engineering firms anywhere in the
United Kingdom not usually engaged in building marine engines,
who could undertake this class of work. The marine engine
shortage had been acute for a year.^ As a result of the stand-
ardization policy, plants in inland cities like Birmingham which
had had little to do with shipbuilding, but had built engines, were
soon building marine engines. Owing to standard designs an en-
gine made anywhere could be swung into the hold of a ship in al-
most any yard. By November a half million tons of these standard
ships were under way, another half million under contract, and
the first, a batch of seven, had gone to sea. While the opponents
of the government policy objected to the number of changes in
the design,* and opposition was chiefly based on the short view
of a few months rather than the longer view of a few years, the
consensus of well informed opinion now approves of the stand-
ardization plan.° It was really but an enlarged application of
' Fairplay, March 8. 1917.
= Ibid., April 19, 1917, p. 64.
' Ibid., November 23, 1916.
* Judging from what shipbuilders have told me, the first model left very
much to be desired, and the alterations during construction have been so
numerous that, but for the fact that the controller had the Defense of the
Realm Act behind him, some builders would have refused to go on with
the contract until the minds of the authorities were made up as to what was
really wanted. For instance, fancy any shipowner ordering an ordinary
cargo steamer, and then, when she was well under way, informing the
builders that she must be so built as to carry an oil cargo !
For instance, if the Shipping Controller had ordered the "standard ships to
be built to the same dimensions, but on the Isherwood System and not the
old transverse type, and had used the same amount of hull steel, instead of
100, say, 400 foot vessels, of 800,000 tons dead-weight, he could have secured
109 hulls of 890,500 tons dead-weight. (Fairplay, May 3, 1917, p. 733.)
" Rather glaring examples are cited, however, in which builders' capacity
was wasted by being compelled to build three types of ship in the same yard.
(Fairplay, 'May 24, 1917.)
Complaint was also made because builders were not allowed to finish work
that they already had in the yards.
SHIPBUILDING IN THE UNITED KINGDOM 259
the principle whereby the yards of a given district pooled their
labor. To quote the words of Mr. Runciman, President of the
Board of Trade :
Large groups of yards and engine shops must be treated as
one large establishment, within which labor and all other
resources must be capable of being moved about from hour
to hour as work may require. But behind shipbuilding there
is the even more difficult question of materials. The gov-
ernment are bringing back skilled steel-workers from the
, army, extending their steel works and rolling mills, relight-
ing blown-out blast furnaces, and making such arrangements
as will, they hope, provide " enough for their requirements
and something to spare for Italy and France." ^
The District Speeding up Coniniittees
As evidence of the economies of this system, as applied in
England, it may be pointed out that they were able to reduce
the number of sizes of sections that had to be rolled for ship
framing from 40 to less than 10. Some builders were wedded
to a frame 9/16 inch thick, others 10/16 inch (5/8), others
11/16 inch, differences so small as to be difficult to measure, but
as bothersome to make as any differences. The Committee on
Standards (fortunately there had been a Parliamentary Commit-
tee on Standards before the war) ordered them made to standard
size, which as above mentioned reduced the number of angle
sections from 40 to less than 10. It may really be said that there
was more standardization of ship sections than standardization of
ships, although seven standard types of ships were built, from
A to G, running from 2,500 to 10,000 tons dead-weight. No
liners were built, because it is three or four times as much
trouble to build a liner with passenger accommodations as it is
to build a single-deck tramp, which is really a great floating iron
box with some machinery in one end and minimum housing-
accommodations in the other.
The standardization of sections to be used all over the United
' Fairhlay, November 23, 1916, p. 749.
260 INFLUENCE OF THE GREAT WAR UPON SHIPPING
Kingdom greatly increased the capacity for output of material.
Thus in the old days a rolling mill would get an order for 200
tons of angles, roll them, and then spend 12 hours resetting the
rolls. Now the orders go to the Admiralty Overseas Steel Super-
intendent. He distributes them to the rolling mills of the King-
dom. One mill is put to rolling one size and keeps it up until
the machinery needs to be repaired. With these definite methods,
in combination with rigid priority order numbers, the British ship-
builder can once more have some certainty as to when he will
get his material.
In the attempt to further coordinate the work, the First Lord
of the Admiralty appointed in March ^ committees in various
shipbuilding centers for the sole purpose of expediting shipbuild-
ing both naval and merchant. The district committee of the Clyde
and East Coast, Scotland, consisted of three persons, of whom one
was assistant director of shipyard labor, another a director of
the technical section of the shipyard labor department, and the
third an experienced shipbuilder.
Royal Patronage
In the attempt to put enthusiasm into shipbuilders of all classes,
but especially the merchant shipbuilder, the British pet device of
royal patronage was not forgotten. In September, 1917, poor
King George put in four weary days in the Clyde yards, osten-
tatiously neglecting warships for the first time, but busily climb-
ing over tramps, tugs, barges, dredges in yard after yard. Two
months later he " displayed peculiar interest," in food storing,
food handling and shipbuilding facilities in the port of London.
Admiralty, War Office and Ministry of Shipping Combine on
Building Control and Start Government Plants
In May, 1917, came another attempt to consolidate and utilize
shipbuilding resources to the best advantage. The Admiralty,
trying to duplicate the organization which had supplied the army
' Lloyd's Weekly, March 30, 1917, p. 5.
SHIPBUILDING IN THE UNITED KINGDOM 261
with munitions, brought all the shipbuilding matters under one
authority, placing Sir Eric Geddes ^ in control of the shipbuilding
work of the Admiralty, the War Office, and the Ministry of
Shipping.- For a few months Sir Eric was busy with the
establishment of the standardized ship program and then he made
an announcement of the government's intention of building and
operating government owned plants, which once more set the
shipbuilding world into a buzzing objecting discussion.^ Ship-
builders pointed out that nearly every shipyard in the United
Kingdom had increased its facilities during the war.* For
example, Harlan & Wolf at one time added 41 acres to their
Belfast yard. It was also pointed out that almost every yard
in the country was short of labor, that they were mostly short
of materials, and if new facilities were wanted each yard could
be further enlarged. Therefore, why the announcement of Sir
Eric in his first speech as First Lord of the Admiralty:
We have decided that four (later reduced to three) new
national yards at least will be necessary, and in this we are
following the precedent so successfully applied, and so
courageously carried through, in the case of the Ministry
of Munitions two years ago in their national factories.^
The government stated that by the time the new yards were built
they hoped to be able to make enough steel for them to use and
to have enough labor trained up, with perhaps the assistance of
some foremen from the old yards, to run the new plants.*^ To
the amazement of the shipbuilding world the locations when an-
nounced were not in one of the old centers, but in a new one on
' The shipbuilders thought this was a great joke because Sir Eric was a
railroad administrator who happened to have had some American experience.
This criticism did not apply, for his task was one of higher administration
dealing with men and organization. (See discussions of personnel of United
States Shipping Board in next chapter.)
"-Lloyd's Weekly, May 18. 1917, p. 5.
' Shipbuilder, December, 1917
' " Our producing capacity has been enormously increased." {Fair play,
July 26, 1916.)
' Fairplay, November 8, 1917, p. 777.
° Ibid., November 22, 1917.
2G2 INFLUENCE OF THE GREAT WAR UPON SHIPPING
the River Severn. They were to have thirty-five berths, and were
located
(1) At Chepstow, at the mouth of the Wye.
(2) At Portbury, near Portishead, near the mouth of the
Avon; and
(3) At Beachley, a mile and a half east of Chepstow, on the
banks of the Severn.^
The cost was to be £3,800,000. Work was proceeding on them
by January 1 and they were expected to have much influence
during the year 1918. There was great industrial activity in
the district as a result of new plants being located there.
These new plants were of course to be occupied with the
standard ships fabricated from pieces prepared with the greatest
possible simplicity.
The vessels built will be the plainest of plain structures; in
shape they will dispense almost wholly with the bending of
frames and plates. They will be composed of a remarkably
small number of sections, and all the frames, plates, angles,
and bars will be manufactured to sizes at specified steel
works, and " assembled " at the yards by " unskilled " labor
(composed largely of prisoners of war), working under the
direction of leading hands and foremen drawn from privaie
establishments or from the national dockyards."
Britain's Shipbuilding Problem and Prospects
In a parliamentary discussion, March 20, 1918. Sir Eric
Geddes announced a new policy of frankness with regard to sub-
marine losses, which he said during the previous twelve months
had been 0,000,000 tons rather than the 9,500,000 tons claimed
by the Germans. He showed that British shipbuilding during
the last quarters of each of the three previous years had been:
1915 42,000 tons
1916 2L3,000 "
1917 420,000 "
' Lloyd's Weekly, November 16, 1917, p. 5.
" Glasgow Herald, December 29, 1917, p. 30.
SHIPBUILDING IN THE UNITED KINGDOM 263
and that during the latter quarter of 1917 foreign construction
had been 512,000 tons, making a total output for the quarter of
i)32,000 tons, while the losses during the same period had been
1,200,000 tons, the lowest since the intensive submarine war
began. He pointed out that the Allies were within 100,000 tons
a month of making good their losses and were replacing 75 per
cent of their lost tonnage. Unfortunately, however, Sir Eric
had to admit that British output during the first months of 1918
had been unsatisfactory. It went down almost exactly a third
from -120,000 tons in three months, October to December, 1917,
to 424,000 tons in four months, January to April, 1918. This
was due in part to the recurrence of labor difficulties, and partly
to the enormous increase of repair work, which had increased 80
per cent between August, 1917, and February, 1918.^ The dock-
ing of British naval craft for repairs in the last quarter of 1917
was tenfold that of peace times, amounting to more than 1,000
ships a month. The men so employed might have produced a
half million tons of merchant ships if they had been engaged on
that work. Two weeks earlier Sir Eric had stated that repairs ^
were taking more men than new merchant ship construction, and
at the same time Sir John Ellerman, controlling owner of several
steamship lines, declared his belief that the whole output of ship-
ping in Britain since the beginning of the war was not enough to
replace the losses by marine causes alone. It is undoubtedly
true that the running of vessels on irregular courses, without
lights, has resulted in a great increase in loss by accident and
wreck. Numerous torpedoed ships staggered into the British dry
docks for repairs. Repair facilities have therefore become as
scarce as steel was in 1915, and have had to be apportioned out
in the same way. If a ship is injured, a local port committee,
consisting of the chief surveyor of Lloyd's Register of Shipping
and the Board of Trade Surveyor, decide what shall be done to
' Boats which ought to be docked for long overdue painting and examina-
tion can not be docked, as docks are only available by waiting and sometimes
this seems a long and costly waste of time, everything being under govern-
ment control. (F airplay, October 11, 1917, p. 605.)
' Philadelphia Evening Telegraph, March 6, 1918.
264 INFLUENCE OF THE GREAT WAR UPON SHIPPING
the ship. The owner has nothing to say about it. If they tell
him to repair her temporarily and limp along, he must do so. If
they order thorough repairs, he must comply, his own opinion,
to the contrary notwithstanding.
The enormous increase of repair work in British yards, com-
bined with the German offensive and the call for more men, has
put Britain into a serious dilemma which may yet vindicate the
prophets of evil who predicted that there would be no need for
the government shipyards.
The slump in output at the beginning of 1918 emphasized labor
shortage. To meet this Lloyd George promised to bring back
20,000 expert shipbuilders from the army, but the attempt to
find them in the army in places where they could be spared,
promised so to injure the military units that but 2,000 men came.
March 20, 1918, Lloyd George, replying to criticisms in Par-
liament, said that shipbuilding had not stopped for lack of steel
or steel plates but that the difiiculty had been largely one of labor.
He then went on to state that every man in the home service
skilled in shipbuilding, had already been taken from the army.
But when it was demanded that 20,000 men should be with-
drawn forcibly from the European field, it raised a very serious
question. Many of them were assigned to the manning of bat-
teries, and were the mainstay of complete organizations.
Thus England with unsatisfactory output of tonnage faced
the paralyzing dilemma presented by the German advance in
Flanders and the need for ships. Where should she put the men ?
Should she increase the shipbuilding forces which she so impera-
tively needed? It is natural that they have frankly admitted
lor many months that America was the only hope of getting suf-
ficient tonnage to meet the Allied emergency. Fortunately, most
fortunately, America is now getting down to shipbuilding in fair
earnest. Inventions have embarrassed the submarine and re-
duced its efficiency so that the latest returns for the month of
.\pril show that for the first time in many months, world launch-
ings surpassed world sinkings.
CHAPTER X
Shipbuilding in the United States, 19 14 to May, 1918
Two Periods of Shipbuilding
Merchant shipbuilding in the United States during the war
falls into two very distinct epochs: the first, that during which
there was private building only, the ships being built for private
parties of any nationality. This epoch lasted from the beginning
of the war down to the middle of 1917, when the second epoch
began with the United States Government, through the United
States Shipping Board, starting the firm policy of control of
private shipyards, even to the point of requisitioning all un-
finished ships, and also starting in upon the plan of building gov-
ernment shipyards for operation on government account.
The Revival of Building Early in the War
The war opened in a period when the unusual dullness of the
shipping business had been emphatically passed on to the ship-
yards of the United States as w.ell as Europe. In October, 1914,
Shipping Illustrated said that few of our leading yards were
able to earn anything over fixed charges and interest. This
could not, however, be attributed to the heavy admission of
foreign vessels to American registry for that fact had no in-
fluence on the world's freight market, as it in nowise increased
the total availaljle tonnage. Nor did it have ahy influence on
the American yards because for. years they had had almost
nothing to do with the building for the world's overseas trade.
Later in the same month Lloyd's Weekly (October 23, 1914),
London, predicted that :
While the war lasts there is unlikely to be any demand
for new ocean-going cargo vessels, so perplexing is the
266 >
SHIPBUILDING IN THE UNITED STATES, 1914 TO 1918 267
trade outlook for even the shrewdest shipowners. . . .
The most prominent feature of the British shipbuilding-
situation has been for some time the absence of any con-
siderable demand for true cargo boats of the ocean way-
faring class.
Two weeks later Fairplay, observing the rise in rates, predicted
a rise in price of shipping, and told of one British shipyard that
was beginning to lay down tramps on speculation and was de-
clining to make definite contracts because of the expectation of
higher prices before the ship could be completed. The accuracy
of this prophecy was abundantly vindicated by the sudden burst
of shipbuilding prosperity which within a half year had reached
to every corner of the globe. At the end of the next June, the
Marine Reviczv (July, 1915, p. 252) said:
Prosperity so long denied coast shipbuilders has burst
upon them on a scale completely exceeding the most opti-
mistic expectations and with such abruptness as to render
the present capacity quite inadequate to meet the demand.
From Newport News to Bath, and from Los Angeles to
Seattle practically every berth is filled with a new bottom
in some stage of construction, while many more craft are
under contract and await their turn on the blocks. Since
December 1, it is ascertained by carefully compiled records,
no less than 35 new merchant vessels of good size have been
awarded to the Atlantic yards alone, aggregating approxi-
mately 200,000 gross tons.
The Revolution in Ship Price and the Great Boom in
Building
This coming of business to America, for America was now
beginning to build for Europe, meant complete revolution in
ship price. Whereas the Marine Review (October, 1914)
pointed out that a certain kind of ship would cost $200,000 in
the United Kingdom, and $300,000 in the United States, ten
months later the plight of British shipyards was such that Fair-
play (August 20, 1915) reported British builders only willing
to contract for delivery in twenty-three months and at prices
268
INFLUENCE OF THE GREAT WAR UPON SHIPPING
more than those prevailing in the United States. The entire
disappearance of all prewar conditions and the dorninance of
war costs was shown by the fact that by the middle of 191G ^
American shipyards were getting contracts at $140 and $150 a
ton, while the cost of British shipping twenty-seven months be-
fore had in a number of cases been found to average £5 16s. 7d.
per ton for cargo boats. ^
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DIAGRAM SHOWING SHIPBUILDING CAPACITY OF UNITED STATES IN
TONS PER YEAR AT END OF EACH YEAR, 1914 TO 1918, INCLUSIVE
— From Marine Review, February, 1918.
In its February issue, 1916, the Marine Review published a
report of a survey of American yards, showing that they were
booked far ahead, that two of the largest Atlantic yards would
not promise any more deliveries inside of -two years, and that
they were embarrassed by labor shortage. The next month
' Fairplay, August 31, 1916.
' Ibid., :May 14, 1914.
SHIPBUILDING IN THE UNITED STATES, 1914 TO 1918 269
the same journal reported that $100,000,000 of new capital
had gone into American shipyards in the first eighteen months
of the war. It also reported that most yards could, if neces-
sary, enlarge their capacity from 15 to 60 per cent within twelve
months. This was the shipbuilders' answer to the congressional
discussions of the proposal to build ships with government money.
Naturally, however, the American shipbuilder was loath to put
good capital into an industry which he knew was a strictly
mushroom industry, namely, the building for foreign owners,
a thing which under normal conditions of peace he had not
been able to do for half a century and which the return of peace
promised to promptly take away from him. He had it now,
but could he get enough money out of it while it lasted to pay
reasonable profits, plus principal, plus interest? It looked doubt-
ful with the Allies constantly declaring that each year would be
the last of the war. Meanwhile we built ships with all speed
and the British lamented the novel spectacle of America build-
ing liners for Clyde owners.
She is building a lot of vessels for Norway, and some
for France, but it does seem to be the limit that she should
be building liners for Clyde owners.^
The maternal position of Britain in the shipping world was
shown by the fact that most of these new vessels were built
under Lloyd's survey, which organization had to increase its
staff of surveyors in the United States to fifty by the middle
of 1916.^ Shortly after this one important American shipyard
received reassurance in the form of a contract to build for a cer-
tain length of time for one of the best known British shipping
companies at 100 per cent profit. A single bank reported han-
dling .$50,000,000 for Norwegian capitalists buying ships in the
United States. Under such stimulation as this it is easy to see
why the industry would stretch to its limit. One of the phases
of this expansion was the revival of the decadent industry of
' Fairplav. April 27, 1916.
'Ibid., July 13, 1916.
270 INFLUENCE OF THE GREAT WAR UPON SHIPPING
wooden ship building, which indeed had almost become a lost
art.
The yards of New England, which long ago resounded
with the thump of hammer and caulking iron as the famous
clipper ships of the past were molded into magnificence,
have been rehabilitated and now are busily turning out
smart auxiliary schooners. Ghosts of ships, long left to
decay at their anchorages, have been resurrected, rebuilt,
and sent once more to ply the ocean highways.^
A year ago the builders of wooden ships at North Pacific
yards were practically idle; today these same plants are en-
joying a period of activity never before experienced in the
western section of the maritime world. . . . It is nearly
13 years since the last large wooden sailing schooner was
built on the west coast. ... A dozen lean years, during
which shipowners almost faced bankruptcy, lumber freights
being at a starvation ebb, brought an end to the business of
building wooden ships of large size on the Pacific. Now
it is coming again into its own.
In a brief space of six months, over 15 large new wooden
vessels of various types have been launched from North
Pacific yards."
There has been a remarkable demand for wooden auxili-
ary lumber schooners ranging in capacity from 1,000,000
to 2,250,000 feet, board measure, but the activity is not
confined to any one branch of work, for it includes steel
steamships, large wooden motorships, and smaller gas ves-
sels. Every yard on the coast from Vancouver to San
Pedro is crowded with construction work and every few
days announcement is made of some concern being incor-
porated for the purpose of shipbuilding. No less than
eight such concerns filed articles in Washington during the
last sixty days of the year.''
Shortage of Labor and Materials, 1911-1916
The expanding industry was checked by the two limits of
labor shortage and material shortage. There was great unrest
' Marine Reviczv, February, 1917, p. 43.
■ Ibid., February, 1917. pp. 63-64.
' Ibid., February, 1917, p. 50.
SHIPBUILDING IN THE UNITED STATES, 1914 TO 191S 271
in labor because the new shipyards took labor from the old, and
the 'old yards took labor from each other, and workmen suffering
from undue prosperity began to develop the inefficiency that
usually results from such conditions. Materials were equally
hard to get. The Marine Review (November, 191G) reported
that ship plates were sold up for the next eight months, although
there was great increase in the output, that of 1915 having in-
creased over the preceding year to 1,900,000 tons from 1,300,000
tons. Some of the ship plates were 11 feet wide and required
special rolling mills to make them, and as there had been no
previous demand for them, the steel companies were slow to
enlarge their plants for this product, especially as it required
a great deal of expense. Shipyards were also short of engines
and were compelled to use less desirable types than had been
planned.^ At this time the British heralded with praise our
" remarkable work " in shipbuilding in Baltimore and San Fran-
cisco." Five months later the same journal admitted American
leadership in speed as follows :
A 5,260-tonner was launched in three months from the
laying of the keel ; a tanker of 10,200 tons was launched
in three months and three days ; while similar records were
made with other vessels. These records have never been
approached in this country in ordinary practice.^
The Coming of the United States Shipping Board
While the American yards were booked years ahead with
orders, and were months behind on materials, there raged
through the summer of 191G the discussions of the Shipping
Board bill which became a law in September, 191 G, and then
hung as a factor of suspense, on the shipping world for months
before the Board was appointed, and caused much speculation
as to what, when appointed, it could and would do. There was
not a shipbuilder on the Shipping Board as first organized. It is
' Fairphv. April 19, 1917.
"-Ibid., January 11, 1917, p. 69.
' Ibid.. June 7, 1917, p. 937.
272 INFLUENCE OF THE GREAT WAR UPON SHIPPING
therefore not surprising that as it had to build ships it had rapid
reorganizations. It went through two epochs in less than a year,
and is now in the third. The first epoch may be called the epoch
of the statesmen— men of wide experience and generally good
judgment, men capable of deciding policy, but who had not had
experience in carrying out these policies. The second epoch was
that of the routine, scientific men — the naval constructors who
knew scientific and technical matters, but were quite inexperi-
enced in having manufactures according to these plans executed
with great speed. The third epoch is the epoch of the present,
that of the administrative men, the men who do, but who have
never had much opportunity to distinguish themselves in science
or in the enunciation of national policy, but who have, as admin-
istrators, done things and done them quickly — the epoch of Piez
and Schwab and the experienced shipbuilders.
Upon the whole the career of the Shipping Board stands as a
clear cut example of the great importance of one of the most
lately recognized phases of scientific management : namely, the
scientific employment of men — the getting of the right man for
the work in hand. At present the President of the United
States is one of the largest employment managers on earth, even
for purely industrial matters, yet most employment managers are
more free than he to think of appointments in purely business
terms. Indefinite numbers of people with influence try to get
positions for their friends, from or through the President,
chiefly because these persons are their friends. All this is hard
for a President or any one else to resist. Then, too, a President
is also the head of a party and he can not, except under the
most unusual circumstances, entirely disregard the political ele-
ment even when he lays his hand to economic matters. In gen-
eral the President is the victim of a system. From the very
nature of his position he must usually keep two factors in mind,
industrial and political, even when making an industrial
appointment. The Shipping Board illustrates both phases of
the presidential position, the usual or political and the unusual
or nonpolitical. It began in 1910 in times of peace, and the
SHIPBUILDING IN THE UNITED STATES, 1914 TO 1918 273
President felt it necessary to announce the politics of the mem-
bers. By the end of 1917 after some months of war, he could
and did appoint without regard to politics and wathout their
mention.
After the war was on the Administration had the advantage
also of much patriotic service. Men of large experience and
proved ability gave their services to the Shipping Board for
nothing or for what was to them a pittance.
Epoch I. The Statesmen — January to July 24, 1917
The first Shipping Board was made up as follows, and the
qualifications noted are briefed from the announcement quoted in
the press as given out from the White House at the time the ap-
pointments were made. The announcement as widely quoted in
the press had every man's politics immediately after his name, as
below.
1. William Denman, Democrat, San Francisco, six-year
term, lawyer ; extensive experience in admiralty cases ;
interested in the question of an American merchant
marine.
2. Bernard N. Baker, Democrat, Baltimore, five-year term,
wide experience as shipowner; thirty years president of
Atlantic transport line which he organized and operated.
3. John A. Donald, Democrat, New York City, four-year
term, life-long experience in steamship business.
4. James B. White, Republican, Kansas City, three-year
term, well known lumberman; gained knowledge of ocean
transportation problems of the United States through
experience as an exporter; director of the Yellow Pine
Lumber Manufacturers Association; member of the
Board of Governors of the National Lumber Manufac-
turers Association.
5. Theodore Brent, Progressive Republican, New Or-
leans, two-year term; lengthy experience in railroad
matters; framing rate adjustments brought him in con-
tact with lake and coastwise shipping; general manager
of the Chicago Lighterage Co.
27-i INFLUENCE OF THE GREAT WAR UPON SHIPPING
In the hands of this group of men two tasks were placed.
They were strangers to both tasks. The tasks themselves were
enormous and entirely different from each other : first, that of
managing the nation's shipping in the interests of the nation;
second, that of building the nation's shipping. These two tasks
have no more relation to each other than the running of a loco-
motive works has to the running of a railroad.
The Shipping Board, authorized September 7, 1916, was or-
ganized in January, 1917, with the admiralty lawyer, William
Denman, as chairman. Whereupon Mr. Bernard N. Baker, vet-
eran ship-operator, promptly resigned, the general belief being
that he thought he should have been chairman. His place was
filled by Raymond B. Stevens, Democrat, of New Hampshire,
educated as a lawyer, but reporting himself to be a farmer. His
appointment was called a political one by the Marine Reviczv and
other papers, and the words " lame duck " were used in con-
nection with his name.
One of the first official acts of the new Board, January 31, was
to ask the President to make a proclamation prohibiting the trans-
fer of vessels from American to foreign flags. He issued such
a proclamation February 4. The Shipping Board enforced it
very rigidly, the only exceptions being a few special vessels built
for very specific foreign service, such as small coasters to gather
up sugar from Cuban outports, collecting it at the main ports,
and an ice breaker for the harbor of Archangel.
Late in February the Board asked Congress for power to com-
mandeer ships building in America for foreign countries, but
such permission was not given until the 17th of June, at which
time the board was in the throes of the Denman-Goethals con-
troversy and did not use its power until after its reorganization
in August.
They sought and obtained from Congress power to control the
price of steel, which was materially reduced, thereby lessening
the cost of the government shipbuilding program. This was a
great advantage, for the price of steel was still left at a level
of profiteering price, naturally very stimulating to production.
SHIPBUILDING IN THE UNITED STATES, 1914 TO 1918 275
The Board urged upon shipbuilders the gradual adoption of
the Diesel engine, an internal combustion oil burner which made
great saving both in fuel and cargo space, and by having a round-
the-world fuel radius emancipates the user from the dependence
upon foreign coal, so that our hand might be strengthened in
ocean transportation after the war. This was merely advice.
More important than any of these minor activities, however,
were the efforts to increase shipbuilding by the two methods of
letting contracts and actually building ships. When first organ-
ized the Board did not plan to build ships. They had other plans
for their fifty million dollars. Within a short time there arrived
at their offices almost simultaneously two enthusiastic and re-
sourceful mining engineers, Messrs. Eustis of Boston, and Clark
of New York. They were accustomed to handling materials in
quantity, getting things done in a hurry. They presented a
plan of shipbuilding that received the approval of the Shipping
Board. Within five days they had, by telegraphic summons,
held conferences in Washington with nearly all the leading
wooden ship builders east of the Pacific Coast. Conferences
were also held with the steel ship builders. Out of these con-
ferences came in about a month the plan for the fabricating
plants for steel ships. The much advertised wooden ship cam-
paign was an immediate result. The steel ship builders were
so busy with long time contracts and so far behind on orders and
materials that they held out little hope of much increase in out-
put under eighteen months, or by the middle of 1918. In the
meanwhile the pressing ship shortage of the spring of 1918 was
plainly in sight, and the wooden ship builders presented plans
whereby they could enlarge their plants, call in carpenters from
the back country, and get immediately to work if the government
would guarantee enough orders to make them safe. This the
board, acting through Messrs. Denman, Eustis, and Clark, did
and did promptly up to the full extent of the $50,000,000.
The type of ship that was agreed upon for many of the wooden
ship contracts was a duplicate of each builder's best ship. A
little later the Shipping Board adopted a very simple design
276 INFLUENCE OF THE GREAT WAR UPON SHIPPING
known as the Hough type. It was easy to build, requiring ship-
builders only at the bow. The rest was straight work which
dry land carpenters could do.
The plan of the Hough wooden ship had been tested by sev-
eral years of successful service. It was really but one of the
builders' best ships. The contract that was signed was the long
proved navy building contract. Many men went to work get-
ting their yards in shape because they were told that they would
be given such a contract a little later. I have been told by ship-
builders that Engineer Clark, who was working for $1 a year,
said he would sign contracts for ships subject to the money
being appropriated by Congress. He knew that such action
made him liable for jail, but he considered that a small matter
if it resulted in ships being built in that time of need. Builders
were willing to risk it. Really the risk was small.
By this time (March) the idea for fabricating plants for steel
ships was formulating, the submarines were succeeding appal-
lingly, and the Shipping Board was ready to launch out on a huge
scheme of contract letting and steel ship building. They needed
a big appropriation, an organization for quick work and a man
of large executive ability to carry out their plans.
The Government Forms a Holding Company to Build Ships
It is interesting to observe that in the attempt to build ships
with government money as a government enterprise, the govern-
ment adopted the old constitution-beating, legally law-breaking
but very convenient device of big business — namely the holding
company. The United States Shipping Board created under the
laws of the District of Columbia, April IG, 1917, an ordinary
corporation— the Emergency Fleet Corporation, of which the
United States Government, through the Shipping Board, held
all the stock, and was therefore in entire control. This con-
trol was exercised by seven trustees, and the members of the
Shipping Board were trustees of the Emergency Fleet Corpora-
tion. By being an ordinary private corporation it was clear of
SHIPBUILDING IN THE UNITED STATES, 1914 TO 1918 277
all the red tape of government procedure; the delays of the
civil service, and the bothers, checks, and balances of govern-
ment operation. The Shipping Board could contract with its
creature, the Emergency Fleet Corporation, a private concern,
just as it could also contract with any shipbuilder for a boat, or
with a steel mill for 1,000 kegs of rivets. The steel mill made
rivets as best it could ; so the Emergency Fleet Corporation was
free to make ships as best it could. It was also intended that it
should purchase vessels for the government and operate them
for the government, but its main function was to build ships.
General Goethals Becomes General Manager
Who should take charge of the Emergency Fleet Corporation
to execute the grand program? Here a weakness of govern-
ment enterprise showed itself. Experience shows that war has
now become business, enormous business requiring the largest
and most thoroughly organized economic enterprises that man
has yet conceived. Our attempt to do the biggest .thing in world
industry- — build ships to beat the submarine — shows some of
the difficulty of doing such a work through the electorate.
To build ships the Emergency Fleet Corporation had to have
money, a lot of it and quickly. To get money it had to make
a favorable impression on Congress. To catch congressional
votes they virtually drafted Major General George W. Goethals,
builder of the Panama Canal, who was at the time a national
hero with a reputation as a great administrator. The General
did not want the job, said he did not know anything about ship-
building, but they almost or quite forced him in, got a half
billion dollar appropriation, after which the shipping program
was tied up, and the efforts of the nation were blocked for
months, chiefly because of mistakes in personnel, but partly also
through defective type of organization.
General Goethals was made general manager of the Fleet Cor-
poration. Mr. Denman, chairman of the Shipping Board, was
made president of the Fleet Corporation. This arrangement
278 INFLUENCE OF THE GREAT WAR UPON SHIPPING
seems to have provided a condition of divided responsibility, and
to have developed friction from the start. The general manager
was appointed by the Board, and was virtually responsible to the
chairman. After two reorganizations of the Board, the by-laws
were changed. November 24, so that the general manager became
an appointive officer responsible directly to the president of the
Fleet Corporation.
In Panama. General Goethals had been a dictator. As the
Canal neared completion he had been made Civil Governor of
the Panama Canal Zone, which means in effect that he was sov-
ereign of a substantial part of the earth's surface. He was an
army officer, where discipline and responsibility are definite and
final, and where things had to be done according to an estab-
lished and complicated routine, ill adjusted to speed. In his sol-
dierly desire and efifort for perfection there was a natural basis
for a clash with the civilian engineers Eustis and Clark, who
above all else were seeking action, speed, with the least possible
red tape. In maintaining his military habit of responsibility and
line authority, .he, the chief, had to sign, see and pass judgment
upon nearly everything. The mass was too great for the sys-
tem ^ to produce speed. Nearly everybody had to see the Gen-
eral, but it often took a visitor a week or even two weeks to get
up to his desk. Contracts and therefore shipyards, thousands
of men, and millions of dollars worth of machines waited for
weeks until Goethals could examine the details of the contracts.
The first contracts had been signed on the navy contract blank.
General Goethals had many different contracts printed before
he was suited. This saved money, but killed speed. We needed
speed and an administrator who made decisions quickly, picked
out competent assistants and let them do things. Goethals put a
great ])aralysis on our shipping enterprise because he could not
do it all himself.
Meanwhile, shipbuilders by the dozen sat around Washington
for days and weeks, waiting for contracts that they had fever-
' It is interesting to note that when he became Quartermaster General he
made a reputation by smashing the whole complicated red tape system to bits.
SHIPBUILDING IX THE UNITED STATES, 1914 TO 1918 2Y9
ishly prepared for by hiring men and getting equipment. Not
knowing (so he said) anything about ships, General Goethals
adopted the Ferris design (see Chapter VIII) and stuck to it.
He held up a lot of contracts^ that had already been let, and
ordered men to build the Ferris design, which it was desired that
everyone should build. As the Ferris design was essentially an
iron ship design to be built of wood, and required timbers that
could not be found in all the East, it is natural that 'construction
lagged, the enthusiasm of the country waned, and there have been
idle shipyards in the United States, A.D. 1917 and 191S.
To further complicate matters the autocratic general found
himself subject to an uncertain extent to a mere civilian, a lawyer,
his junior in years. For months the press of the country fed us
with the details of the Denman-Goethals controversy, as to what
authority each had, what each wanted to do, who was boss, who
would be dismissed, and what kind of ships we should build.
The controversy appeared to rage around the question of ship-
building material. Should the ships be wood or steel, yet despite
apparent recrimination on this subject, both men showed them-
selves, by their final testimony and by the contracts they signed,
to be in favor of both wooden and steel ships. Thus precious
months were wasted.
This lamentable controversy left us two misfortunes: the one
the delay in the beginning of real work, and the other the diver-
sion of the attention of the United States from real constructive
programs, of which two w^ere most imperative : the making of an
army, and the making of a fleet. Finally, Engineers Clark and
Eustis published the whole story in The New York Times (June
8) and in Sea Power, July, 1917, and the President settled it
shortly afterward by asking both Denman and Goethals to
resign, which they promptly did, July 24, 1917,
During the latter part of their service, after June 17, Messrs.
Denman and Goethals after several months preparation placed
contracts for 042,800 tons of steel vessels, and let or agreed upon
^ Builders were ordered to stop all work until inspectors were on the
ground, and then the inspectors were not sent for three or four months.
280 INFLUENCE OF THE GREAT WAR UPON SHIPPING
contracts for 1,218,000 dead-weight tons of wooden ships, and
were negotiating for one hundred more of 350,000 dead-weight
tons. Thus, within forty days the Shipping Board executed con-
tracts or had agreed upon contracts for a production of tonnage
equal to two-thirds of the total of our overseas fleet before the
war. This should not, however, be taken as too great an achieve-
ment when we consider that it provided directly for no new yards
and that the contracts were let to yards already many months or
even years behind in orders. However, it did have a stimulating
influence because the large amount of business thus definitely in
sight enabled private owners to see their way clear to finance
enlargements, especially as many of the contracts provided for
substantial payments as the work proceeded. These advance pay-
ments, however, worked out in some cases to be a real detriment,
because so much was paid at the laying of the keel that owners
at times found it profitable to lay a keel, take the payment, and
stop for a few months while devoting their time to other work.
Epoch II. The Routine Scientific Men, the Men of
Knowledge — July 24 to December 20, 1917
Along with Mr. Denman went his supporter, Mr. Brent, vice
chairman of the Board, and Mr. White had resigned on account
of his poor health a few days before, leaving the Board reduced
to Mr. Stevens, the farmer, and Mr. Donald, the steamship
operator. The influence of technical requirement is evident
in the next appointees. The admiralty lawyer Denman was re-
placed by Edward N. Hurley of Chicago, inventor, and also busi-
ness administrator. He had originated and developed the pneu-
matic riveter and other pneumatic machines so common in metal
structural work. He had been president of the Standard Pneu-
matic Tool Co. of Chicago that made this kind of apparatus. He
had also organized the Hurley Machine Co. of Chicago, engaged
in the manufacture of household electric appliances. Three years
before he had gone to Washington as a member of the Federal
Trade Commission, and had served there two vears. He had
SHIPBUILDING IN THE UNITED STATES, 1914 TO 1918 281
served at President Wilson's request on the Red Cross War
Ccuncil, then he went to the War Trade Board where he lool^ed
after the export license work. He was a proved business admin-
istrator, but there was no shipbuilding in his experience.
This field of knowledge was brought to the Board of Rear
Admiral Washington Lee Capps, chief constructor of the navy, a
master of the art of ship design, a scientist of unquestioned
reputation. For years he had been chief of the Bureau of Con-
struction and Repair in the navy, and Secretary Daniels pointed
out the fact that he was chief constructor from 1903 to 1910,
when our navy more than doubled in size, and the majority of
the present fighting vessels of the navy were designed by him.
He had been sent abroad by the President to represent the gov-
ernment in international maritime conferences. He had been
decorated abroad for his scientific achievements.
This brilliant scientific record throws no light whatever on the
question as to whether or not the distinguished admiral could
build tramp ships rapidly, but it raises the inference that he could
not. Perhaps Charles Darwin, scientist, could have run a stock
farm to perfection; perhaps not. Perhaps Herbert Spencer,
philosopher, would have made a good university president, but
there was no real reason to think so. In fact the study of busi-
ness administration and business success gives us abundant reason
to believe that the man of science, the extreme technical expert,
is by the mere absorption of his attention to those fields prevented
from having or having had time to develop that entirely different
ability — business administration, that which builds ships quickly.
Business judgment, technical skill, and scientific attainment are
three separate and nonrelated things.
A man may be an excellent technical man, capable of
doing skilfully his definite job, but woefully short on this
mysterious, indefinite thing called judgment. It is amazing
how frequently we make the mistake of putting the technical
man in the place where he must use the power he does not
have. For example, a common type of corporation is that
which is built around the inventor. He has evolved by his
282 INFLUENCE OF THE GREAT WAR UPON SHIPPING
mental processes and handiwork a new machine. At this
point some capitalists form a company to manufacture this
machine and put the inventor in charge of the plant. _ _ ■
Failures that waste the nation's substance by the millions
a year arise from this type of error. It is always a grave
risk to put any man in charge of any kind of work that he
has not done ; and a successful corporation will place a man
in charge of work that he really knows, and will not try
to make him learn in large scale operations something he
knows not — as happens when a technical man is suddenly
put in charge of administrative work.^
The very excellent and distinguished master of battleship de-
sign. Admiral Capps, and also the similarly distinguished Ad-
miral Harris who succeeded him for the space of two weeks and
six days between December 1 and 20, 1917, proved that there
is no necessary connection between the ability to design a battle-
ship and to build an unprecedented quantity of freighters in a
short time. These gentlemen were face to face with a problem
they had never seen, and for which their experience instead of
fitting them had unfitted them. With plenty of money, with no
regard for costs, but a sharp regard for waste, they had stood
as watchdogs over private concerns to see that they built battle-
ships, built them nicely, according to specifications which they
had themselves drawn at great leisure. Then, too, they were
versed and had for years been enmeshed in the great official rou-
tine of red tape by which it sometimes takes four days to com-
municate with the man in the next room, because you can only
reach him officially by going to your first superior officer, thence
to your second superior officer, thence to your third superior of-
ficer, and from him to the next door man's third superior officer,
thence to his second superior officer, thence to his first superior
officer, and thence to him, which may take four days or two
weeks. This is possibly necessary for the long run of govern-
ment expenditure. It provides for safety. It is the duplicate
of the wonderful system of checks and balances in our federal
government which protects things as they are and makes any
' J. Russell Smith: The Elements of Industrial Management, p. 47.
SHIPBUILDING IN THE UNITED STATES, 1914 TO 191S 2S3
action, right or wrong, so nearly impossible. It has caused dur-
ing the period of the war the essential overturning of the consti-
tution in the Overman bill which makes the President an autocrat
for the period of the war. This followed the creation of an
entirely new extra departmental government ^ which is conducting
much of the nonmilitary enterprise of the war and of which the
Shipping Board with its holding corporation is one of the best
examples.
The other members of the new Shipping Board, in addition to
Messrs. Hurley, Donald, and Stevens, were Charles R. Page,
San Francisco, who had spent his entire life in the marine insur-
ance business, with the exception of six months which he spent
with a firm of shipowners, and Bainbridge Colby, who had prac-
ticed law in New York since 1892 and had been one of the
founders of the Progressive national party.
The new Board organized wuth Mr. Hurley as chairman. He
also became president of the Emergency Fleet Corporation with
Admiral Capps as general manager.
Requisitioning and Commandeering of Unfinished Vessels
As mentioned above, President Wilson had conferred upon
the Shipping Board, by an order of July 15, the authority to
commandeer all foreign vessels under construction in the United
States. By an order issued on August 3, the Board took advan-
tage of this authority. Not only were the foreign vessels com-
mandeered, but also all vessels under construction for Americans
were requisitioned. They were requisitioned under two schemes.
By the first scheme the Shipping Board paid to the owners of the
vessels the amount that they had already expended for construc-
tion. The contract was then taken over and all future payments
were made by the Shipping Board to the shipbuilding company.
Under the second scheme the Shipping Board agreed to return
the ships to the original owner at the end of the war, or when
' Including the Shipping Board, Fuel Administration, War Industries
Board, War Trade Board and central statistical organization.
284 INFLUENCE OF THE GREAT WAR UPON SHIPPING
completed, provided the owner reimbursed the government for
its expenditures and agreed to operate the vessel under the
Shipping Board's requisition program.
The domestic vessels were requisitioned for three reasons:
first, in order that construction might be speeded up by the gov-
ernment; second, in order that additional tonnage might be se-
cured for government needs; and third, to decrease the freight
charges on shipments to Europe. The new organization con-
tinued the previous program of letting contracts for ships to be
built in private yards and let contracts for additional tonnage,
both wooden and steel, although the wooden ship contracts have
been decreasing in number because of the scarcity of timber.
According to Mr. Hurley's testimony before the Committee on
Commerce of the United States Senate, the Shipping Board con-
trolled on December 21, 1917, work in 132 yards, 58 of which
were old yards and 74 new yards, created since January 1, 1917.
Twenty-two of the old yards were building only vessels which
had been requisitioned by the shipping board.
Four forms of contracts for building ships have been used by
the Shipping Board as follows :
1. The lump-sum contract.
2. The cost-plus contract with guaranteed fee.
3. The cost-plus contract with sliding scale fee.
4. The agency contract.
By far the greater number of contracts have been let under the
first class.
The Building of New Shipyards
The new yards have been built under three general schemes :
1. Private companies have built yards entirely with their own
capital ;
2. Private companies have built yards with capital loaned to
them by the United States Government and advanced on con-
tracts for the building of ships ;
;3. Private companies have built yards for the United States
Government. Under this form of contract the Shipping Board
SHIPBUILDING IN THE UNITED STATES, 1914 TO 1918 285
has furnished materials and labor, and the company has fur-
nished the organization and technical knowledge. The yard is
the property of the Shipping Board. Hog Island is an* example
of the last scheme, as are the two other so-called government
yards.
These three large assembling plants now being constructed are
(1) Hog Island, Philadelphia, the American International Ship-
building Corporation; (2) Bristol, Pa., the Merchants Shipbuild-
ing Corporation; and (3) Newark, N. J., the Submarine Boat
Company. The method is well illustrated by the chief points of
the contract with the American International Shipbuilding Cor-
poration for the yard at Hog Island.
The American International Shipbuilding Corporation is a
subsidiary corporation of the American International Corpora-
tion. It was formed for the purpose of constructing the Hog
Island yard, and building ships for the government. In May,
1917, the United States Government through the Shipping Board
invited the American International Corporation to undertake the
construction of a shipyard to contain 50 ways and to build therein
a fleet of 200 cargo vessels of an aggregate tonnage of 1,500,000
tons. Early in July the American International Corporation had
prepared plans satisfactory to the Emergency Fleet Corporation
and had agreed upon the essentials of the contract under which
the work was to be done. It was expected this work would begin
August 1 or before. This agreement provided for the forma-
tion of the operating company, the American International Ship-
building Company, all of whose acts and undertakings were guar-
anteed by the American International Corporation, which was
then ready to begin immediately the w^ork of constructing the
shipyard. Negotiations were interrupted by the Denman-
Goethals controversy and the resignation of both of these gentle-
men. But immediately upon the appointment of Admiral Capps
they were resumed and continued with astounding leisure. After
the loss of two and one-half months of the best working time
of the year, the contract was awarded on September 13, 1917,
and the American International Shipbuilding Corporation was
286 INFLUENCE OF THE GREAT WAR UPON SHIPPING
instructed to proceed. Work of building the shipyard at Hog
Island, the largest shipyard in the world, began immediately.
Under the contract of the American International Corporation
with the Shipping Board, the Shipping Board agreed to pay for
the necessary materials and labor for the construction of the
shipyard. The Corporation purchased the land at a cost of about
$2,000 per acre, and agreed that the government should have the
option of taking over this land at the same price plus any pay-
ments that were made in the form of taxes, etc., to the State of
Pennsylvania or the city of Philadelphia. The Shipping Board
also agreed to pay for materials and labor used in the construc-
tion of the vessels, the shipbuilding corporation furnishing, as its
share, only the organization, i.e., the know-how. Certain of the
executive officers of the- corporation were not paid by the govern-
ment, but were paid by the corporation itself. As compensation
for the building of the 3^ard, and the building of the ships, a fee
amounting to about six million dollars ^ is to be paid to the
shipbuilding company, on a contract calling for total payments
of approximately $165,000,000. In case the vessels are finished
at a lower cost than the estimated cost, the surplus is to be
divided equally between the Emergency Fleet Corporation, the
American International Shipbuilding Corporation, and the em-
ployes. Premiums are also offered for the early delivery of the
vessels, which can not exceed $14,000 apiece for cargo vessels,
and $17,500 for troop vessels. If the corporation fails to live
up to its contracts, a certain amount of the $6,000,000 fee is to
be deducted as a penalty.^
Rise of Public Dissatisfaction
By November the Board had let many contracts,^ but the
country was getting very restive under the nonappearance of
ships, and the general slow progress of actual work following
' This figure sounds large and resulted in newspaper criticism, but it was
a cheap investment if it furnished good administrative experience, for tliis is
a commodity the government did not have, and which money can not make.
^ Testimony before Senate Committee on Commerce, pp. 241, 243.
'The construction of a great fleet of vessels of 8,800 tons or over was one
of the first steps advocated by Chairman Hurley, of the Shipping Board, and
SHIPBUILDING IN THE UNITED STATES, 1914 TO 191S 2S7
the Denman-Goethals episode. The leisurely delays and the red
tape departmental methods of Rear Admiral Capps' administra-
tion of the Fleet Corporation convinced the majority' of thought-
ful people that something was the matter, and it began to be
discovered that we were still trying to do administrative work
Rear Admiral Capps. The theory was that these vessels could attain higher
speed and be more effective against the submarines. Vessels for use as
transports are being constructed with a new system of bulkheads, which, it
is believed, will make them " unsinkable." It has been stated that at least
three hits would have to be made by torpedoes to cause a disaster, and
under the present system of convoy such a feat by a submarine is looked upon
as impossible.
The following table shows the number of vessels under contract, pending
contract and requisitioned by the Emergency Fleet Corporation :
Total Dead-weight
Type of Vessel No. of Vessels Capacity
Wood 375 1,330,900
Composite 58 207,000
Steel 451 3,186,400
Totals contracted for 884 4,724,300
Contracts pending 99 610,000
Totals 983 5,334,300
Totals requisitioned (all types) . * 426 3,029,508
Grand totals 1,409 8,363,808
* This total includes requisitioned vessels complc ^d and released — 33
vessels ; 257,575 tons.
The 884 vessels contracted for, exclusive of contracts pending for ninety-
nine vessels, and also exclusive of requisitioned vessels, are to be as follows :
Dead-weight
Type of Vessel No. of Vessels Tonnage
Cargo 411 1,438,500
4,000 tons 16 64,000
4 700 •' 12 56,400
5'000 '• 160 800,000
6,000 " 7 42,000
7.500 tons and under 76 569,200
8,800 tons 54 475,200
9 000 " . 44 396,000
lOioOO " •. 34 323,000
Totals 814 4,164,300
Cargo and transport:
8,000 tons 70 560,000
Grand totals 884 4,724,300
The vessels under requisition, all of which are of steel construction and
which are exclusive of those delivered and released, are as follows :
2S8 INFLUENCE OF THE GREAT WAR UPON SHIPPING
with few experienced administrators or shipbuilders.^ With the
coming- of winter the red tape scientist era of the Fleet Corpora-
tion went out under a fire of public indignation and hostile con-
gressional criticism and investigation. The stages in its passing
were as follows.
On the 31st of October, Chairman Hurley received a letter
from the Atlantic Coast Shipbuilders Association, calling his
attention to the fact that up to the present time shipbuilders had
not been accorded proper opportunity of offering their experience
and cooperation to the government. They proposed that they
appoint a permanent committee of shipbuilders to confer with the
Shipping Board, and other departments of the government with
regard to five subjects " which were the basis of a conference
Dead-weight
No. of Vessels Tonnage
Colliers 9 64,500
Passenger and cargo 9 43,558
Tankers 58 565,155
Cargo 317 2,098,720
Totals 393 2,771,933
Grand totals requisitioned and
under contract 1,277 7,496,233
The requisitioned vessels completed and released are as follows :
Colliers 1 12,650
TaJikers i 10,475
Orecarriers 7 73 760
Cargo 24 160^690
Totals S3 257,575
Philadelphia Public Ledger, November 27, 1917.
' The connection of the Board with men of experience was not ahvavs
satisfactory. Designer Ferris was selected because of his great experience
as ship designer He designed a type wooden ship of questionable merit,
but of which 400 were ordered. Mr. Ferris's connection with certain ship-
building contracts created much unfavorable comment among Senators (see
testimony of January 25, 1918) and the public, and was soon followed by
his resignation. Of the many able men who served the Shipping Board he
was the only one who took a salary ($30,000 a year) commensurate with his
civilian earnings. »
Coast ^" ^''J"**'"^"* ^"^ standardization of shipyard wages on the Atlantic
2 Collection, distribution and regulation of labor for emergency ship-
building and increasing the efficiency of labor ^ ^ f
materi^r^" '"^^''°'^' °^ ordering, priority and delivery of shipbuilding
Un1teH^sTJ!.?^r" ':'"d„cooP^'-^tion by the United States Navy and the
Lnited States Shipping Board with the Atlantic Coast builders.
5. Iiquitable policy for the adjustment of unfinished shipbuilding contracts
SHIPBUILDING IN THE UNITED STATES, 1914 TO 1918 289
that day between the Shipping Board and one hundred ship-
builders who had l>een invited to Washington. Before this com-
mittee was appointed, however, the Society of Naval Architects
and Marine Engineers met in New York and sent to the Presi-
dent of the United States, November 19, 1917, a petition which
by its mere statement of fact was almost denunciation, for it
said :
Whereas, At the present time no experienced builder of
merchant ships occupies any position where the counsel of
such men is heard in the decision of national policies, while
other important industries are now represented by the rec-
ognized experts; be it therefore.
Resolved, That the Society of Naval Architects and
Marine Engineers, at its twenty-fifth assemblage in the city
of New York, on November IG, most respectfully and ur-
gently petitions the President of the United States of Amer-
ica to appoint as a member of the Council of National De-
fense a representative builder of merchant ships who shall,
by reason of his experience, ability, and business vision, be
qualified to sit in the high councils of that most important
body.
Stevenson Taylor,
Lieutenant Commander U.S.N.R.F.,
President, Society of Naval Architects
and Marine Engineers.
The previous week the following illuminating dialogue occurred
before a Senatorial committee which was quizzing Mr. Homer
Ferguson, once naval architect of the United States Navy, and
then president of the Newport New^s Shipbuilding Company,
operating the largest shipyard in America :
Senator Martin : " Would the program, in your opinion,
have moved any faster if a practical shipbuilder, in the first
place, had been put in as general manager of the Fleet
Corporation? "
" Yes," Mr. Ferguson replied. " So. far as I know this
is the first time since the program was put under way that
to conserve the interest of shipbuilders and the United States Shipping
Board." (Philadelphia Pxiblic Ledger, October 31, 1917.)
290 INFLUENCE OF THE GREAT WAR UPON SHIPPING
a practical shipbuilder was ever asked officially for his ad-
vice or suggestions as to shipbuilding."
At the time Rear Admiral Capps resigned as general manager
of the Fleet Corporation, Mr. Ferguson was asked, he said, to
take the place, but when he found he would be given no authority
he declined.
In connection with Mr. Ferguson's attitude toward this posi-
tion, attention should be called to the confusions of authority
that entered into the Denman-Goethals trouble, and also to the
above mentioned change in the organization of the Fleet Cor-
poration.
These very direct civilian requests, in combination with the
revelations of the nonexpert character of the personnel, and the
unsatisfactory state of affairs, produced prompt results, not, how-
ever, in the arrival of the shipbuilder, but in the appointment,
November 15, of Mr. Charles Piez as vice president of the Emer-
gency Fleet Corporation, to have charge of actual construction
of the vessels and to speed-up of delivery of materials. Nine
days later came the amendment of the by-laws, making the gen-
eral manager the appointee of the president of the Emergency
Fleet Corporation. A few days later Admiral Capps, pleading
ill health, resigned, although it was generally supposed that the
change in the by-laws on one side, and the appointment of Mr.
Piez on the other side had made his position less agreeable.
Admiral Harris Becomes Manager
Not yet convinced of the inefficacy of the technical rather than
the administrative expert. Rear Admiral Frederick R. Harris, of
the navy, was immediately appointed to succeed Admiral Capps
as the general manager, although Admiral Harris had had noth-
ing more to do with ships than the designing of water front
construction work: namely, dry docks, shops, terminal wharves,
floating dry docks, shipl)uilding ways. He had not been even a
naval constructor, but had had charge of the navy's construction
work on shore. He resigned' December 20, giving as a cause the
SHIPBUILDING IN- THE UNITED STATES, 1914 TO 1918 291
carrying of matters by his subordinates over his head to his
superiors, which had occurred at the request of officers of the
Shipping Board.
Red Tape and tJie Industrial Troubles of Democratic
Socialism
It may be said in favor of the red tape scientist administration
of Messrs. Capps and Harris that by their care and scrutiny of
contracts they saved the country some money. One estimate
gives the amount as $15,000,000 out of a total of $300,000,-
000. This money of course had a certain value, but in saving
it they lost invaluable time. In the words of a conservative
publicist of national reputation, writing at the time of the pass-
ing Admiral Capps :
The actual record of the Shipping Board is something
appalling and, if it were narrated without fear or favor,
would afford a warning so impressive that it should be
heeded. There is a kind of board that would not heed any
warning, where bureaucratic habits and red tape rules
have been allowed to have sway for many years. The Ship-
ping Board has almost completely wasted not less than
seven months of invaluable time. Building arrangements
which were far advanced four or five months ago have been
canceled. Contracts completed and ready for signature
were held up for three months in order that Admiral Capps
might minutely examine and debate the innumerable details
of the contracts. It seemed more important to . . . officials
that every little detail of the contract should be made
microscopically accurate and in the best form than that the
country should have ships when it needs them. The whole
record is one of imbecility, by a board containing a consid-
erable number of really able and patriotic men, and it throws
one brilliant light on governmental action. It does not prove
that the government can never do better than that, but, in
my judgment, the severe " let alone " policy would have
given us more ships than we thus far have promise of and
would have given them far more quickly than we shall get
them. . . . No patriotic American citizen could possibly
know the facts without a great deal of feeling against a
292 INFLUENCE OF THE GREAT WAR UPON SHIPPING
system which would make such things possible. If the war
should be won with grave difficulty and require an extra
year of fighting, it would be due as much to these series of
events as to anything else.
Some of these contracts that were thus held up for the minute
scrutiny customary in the building of battleships in times of peace
were for nothing less than the great fabricating plants with which
America had boasted she would save the day for the Allies by
building ships at a speed never before seen. There is no doubt
also that for the first four months after the government com-
mandeered the vessels in progress, there were less ships built
than would have been the case had the builders been let alone.
The yards were busy working on contracts for private parties,
said contracts having been made in many cases a long while
before under conditions of lower priced labor, more abundant
and cheaper materials. In many cases the builders stood to
lose on the completion of some of the contracts. Naturally they
hesitated about pushing them as vigorously as they would push
other contracts that were on a better price basis. This problem
liad arisen in England and been settled by the shipowners com-
ing forward with more money to enable the shipbuilders to meet
the new conditions, and in this country private owners had been
glad to do the same thing and were doing it right along. But
with the government, it was dififerent. The Shipping Board
found a company working slowly on a certain contract and pro-
ceeded in bureaucratic fashion to hold them up tight to that
contract. If it involved loss, that made no difference. It was
up to the shipbuilder. He had made the contract and must live
up to it. If he lost money, that was his look-out. This forced
the yards to work slowly, to do their work as cheaply as they
could. Various students agree that up to December at least, the
commandeering process by the Shipping Board had resulted in
less ships rather than more ships, as we had so enthusiastically
hoped.
As had been the case in England, also in America there arose
the charge of needless change in specifications of ships, of which
SHIPBUILDING IN THE UNITED STATES, 1914 TO 1018 293
there was much under both General Goethals and Admiral
Capps.
The coming of winter found the government's great ship-
yards in the beginning stages of construction. The giant yard
at Hog Island, Philadelphia, was still but a great morass, with
men wading around in the freezing mud into which they were
driving piles by the tens of thousands, upon which were to come
later the fifty ways of the world's greatest shipyard.
When we consider that this was December, 1917, we must ac-
cept this spectacle as a partial measure of the difficulty of achieve-
ment by government in a democracy. We can blame the Ad-
mirals for three or four months of delay while they discussed the
details of contracts. We can lament that General Goethals
stopped the speedy work of Eustis and Clark. President Wilson
is responsible for a share of the delay. It may be advanced in
general defense of the Administration that the President had
asked Congress in 19 IG and in 1915 for the creation of a Ship-
ping Board with the power to build ships, but there is no getting
around the fact that the ultimate responsibility for months of
delay in shipbuilding comes back directly and solely to the
President, for it is true that when Congress finally did give him
his Shipping Board, September 7, 1917, it was four months be-
fore that Board had even gone through the formality of organ-
izing. He could have organized it in seven days. Further than
that, when it convened, it could have had well matured plans
ready to execute, for there was plenty of talent in the country
that would have been glad to confer with the President months
in advance in the anticipation of a Shipping Board and the
starting of the government's shipbuilding policy, so that plans
could have been ready to launch almost as a ship from the ways.
This indeed was exactly what was done in the Food Administra-
tion. It was organized and at work for weeks while Congress
debated on the bill giving it power and money. Thus, even
with the congressional action delayed as it was, we might
have been almost twelve months further along with at least one
government fabricating shipyard. But it is scarcely fair for
294 INFLUENCE OF THE GREAT WAR UPON SHIPPING
anyone even in retrospect to censure the President. It goes
rather to the presidency. The President must follow public opin-
ion. It is most difficult or indeed impossible to say what public
opinion was in the autumn of 1916. Perhaps the President read
it aright — perhaps he did not. So we may push responsibility for
our delay in starting shipbuilding farther back even than the
President — to the American people. It is difficult for a great
electorate to understand world politics. It is possibly true that
this nation reelected Wilson in 1916 because he " had kept us out
of war." But after war was declared we did not take it se-
riously. Men of national reputation advertised boldly for the
continuance of " business as usual." Most of our press main-
tained more or less of the same point of view, for more than a
year. As a people we failed to heed, and therefore as a govern-
ment we failed to act on the potent policy described in the wise
words of Mr. Bainbridge Colby of the Shipping Board, address-
ing an audience in the Philadelphia Academy of Music, January,
1918, after his return from Europe with Colonel House.
This country is in danger. I tell you, it is in danger.
We must put the ships on the ocean, or this war is lost.
Nothing should stand in the way of shipbuilding. There
shouldn't be a skyscraper built in this country, not a rivet
should be driven into a bridge, not a girder placed in a
tunnel. Every automobile ought to be taken from the
streets and every chauffeur — and all of them are good me-
chanics — should be sent by their employers into the ship-
yards.
No candy should be manufactured, no athletic goods
should be made or an automobile turned out; we should
do nothing of this sort, but build ships, ships, ships.
As a measure of our failure, we made 700,000 pleasure auto-
mobiles in 1917, and are still at it May, 1918, after the Ger-
man drive on Amiens.
In January, 1918, our attention was called to a specific meas-
ure of delay — the fact that the six months needed for a ship-
ping miracle that had sounded so sweet in our ears the previous
SHIPBUILDING IN THE UNITED STATES, lOl-i TO 1918 295
summer, had passed and the miracle had not come. The miracle
was Chairman Denman's proposal of a contract with a bridge
company which, after six months preparation, would launch a
5,000 ton ship every working day as long as desired. ^ The
money, $750,000,000, was appropriated, but the ships did not
come forth.
Enlargements of Private Yards in the United States
While the Emergency Fleet Corporation under Goethals,
Capps, and Harris dallied, private enterprise pushed forward
with speed. Some builders regarded the good business as assured
for five years even if the war ended in 1918. Such was the
conclusion of experts who prepared a report for the American
International Corporation before its purchase of the New York
Shipbuilding Co.^ In November, 1917, the Bethlehem Steel
Corporation, which had gone largely into the shipbuilding busi-
ness through the purchase of the Fore River shipyard at Oumcy,
Mass., the Harlan & Hollingsworth yard at Wilmington, Del.,
the Maryland Shipbuilding & Dry Dock Co.'s plant at Baltimore,
and a plant at San Francisco, arranged to consolidate its ship-
yards under one management so that they might eliminate all
duplicate engineering and overhead work, and adopt standardiza-
tion of design and centralization of labor so far as possible,
thus permitting the greater proportion of its energy to go into
the actual building of ships.^ Many shipyards were enlarging
their plants as much as possible. The Glasgow Herald reported
(December 29, 1917) that in 38 months up to the end of 1917,
$359 000 0©0 worth of new capital had been authorized for
American shipvards. In May, 1918, Norwegian capitalists
announced that thev had purchased ground in New Jersey for
the construction of " one of the largest shipyards m the world
to build vessels flying the Norwegian flag and to be used in the
American trade." One of the finest yards in the country, that
' Marine Reviczv, January, 1917.
^ Fairplay, November 22, 1917.
296 INFLUENCE OF THE GREAT WAR UPON SHIPPING
of the New York Shipbuilding Co., at Camden, enlarged its
capacity 50 per cent. The chairman of the United States Steel
Corporation announced to stockholders at their annual meeting,
April 15, 1918, that the company, with two yards of ten ways
each, one at Newark, and one at Mobile, was preparing to turn
out one ship every ten days when in full operation. The first
launching was expected in May.
The English shipbuilding world hailed our success in phrase-
ology not common in British discussions of American shipbuild-
ing:
I now hear that the Skinner and Eddy Corporation of
Seattle, Wash., has made a world's record, and although
only commencing operations about eighteen months ago,
has launched a steamer of 8,800 tons dead-weight, dimen-
sions 423 ft. 9 in. by 54 ft. by 29 ft. 9 in. and to steam
11^ knots, in G4 working days after the laying of the keel,
and she is for British owners. Of course work was carried
out night and day, but an ordinary individual would imagine
that what can be done in the United States and Japan can
be done as well in this country, if the men and machinery
were available.^
Our government encouraged output by some relaxation of the
standards prescribed by law, but it is interesting to note that
the standards for lifeboats were made more stringent.^
Epoch III. The Administrators, the Men Who Do
Promptly upon the resignation of Admiral Harris, Mr. Piez,
vice president, was appointed general manager,^ continuing to
hold the office of vice president. His record was a good one in
his line, that of scientific production engineer. He had been chief
engineer and later president and general manager of the Link
' Editorial, Fairplav, Deceml)er 13, 1917, p. 993
^ Omcial Bulletin. May 28, 1917.
' Mr. J. W. Powell, vice president of Bethlehem Steel Shipbuilding Cor-
poration, testified before the Senate Committee on Commerce, February 1,
that It was only after Piez became general manager that experienced ship-
huildcrs had had adequate opportunity to lay their experience before the
SHIPBUILDIXG IN THE UNITED STATES, 1914 TO 191S 297
Belt Co., builders of labor-saving machinery for loading and
unloading of vessels, storing and handling coal and other ma-
terials, and of freight in bulk or package. The plants of the Link
Belt Co. had been Meccas for engineers seeking examples of
good practice in scientific management, although they were all
located well inland and had nothing to do with ships. Through
the winter Mr. Piez was assisted by Rear Admiral Francis T.
Bowles (assistant to the general manager), a man whose record
was similar to that of Mr. Ferguson. He was for a time
chief constructor of the navy, followed by eleven years at the
head of the Fore River Shipbuilding Co.. Quincy, Mass. Early
in the spring of 1918 he came to Philadelphia from Washington
to take charge of steel construction in the Philadelphia district.
He did not prove to be a genius at getting along with people,
and his work was divided.
On April 16, Mr. Charles M. Schwab, head of the Bethlehem
Iron, Steel, Ordnance, and Shipbuilding enterprises, accepted
the post of director general of steel construction, for the Emer-
gency Fleet Corporation. It is interesting to note that there is
no suspicion of or mention of politics in this appointment.^ Mr.
Schwab is a .man of great manufacturing experience and a
Republican. He is a man of undoubted ability. It is understood
that Mr. Schwab only accepted the position after being assured
by the War Industries Board that he should have priority in the
delivery of steel to shipbuilding plants. It is said that the Ship-
ping Board has suffered much in this respect because all through
the winter the wants of the navy, army, and railroads had
seemed to interfere. Certain it is that there has been much
complaint about shortage of materials.
One of the first acts of Mr. Schwab was to move the whole
office of the Emergency Fleet Corporation from crowded Wash-
ington to Broad Street, Philadelphia, where it would be in the
^ " In that connection I said to the President of the United States : ' We're
going to get you into a lot of trouble and probably I'm going to make a lot
of mistakes, but, damn it, I'm going to get you ships.' " — Charles M. Schwab
telling the League to Enforce Peace of his appointment and his hopes, May
15, 1918. (Philadelphia Public Ledger.)
298 IXFLUEXCE OF THE GREAT WAR UPON SHIPPING
center of the government's shipbuilding enterprises. As Mr.
Schwab's immediate assistant he appointed Mr. Wm. G. Cox,
to be director of shipbuilding for the Philadelphia district. Mr.
Cox is a real shipbuilder, having been president of the Harlan
Hollingsworth Corporation at Wilmington, Del., when this en-
terprise was bought out by the Bethlehem interests in 1917. Be-
fore this Mr. Cox had been at Cramp's shipyard, Philadelphia.
He had worked on the Clyde, and in Germany where he had
also graduated from the German Royal Technical Institute at
Berlin.
On May 9 there was created a new vice-presidency in the
Emergency Fleet Corporation, by which Howard Coonley of
Boston, a manufacturer and banker, took charge of legal fi-
nancial, auditing, contract, statistical, executive and admin-
istrative divisions, leaving Mr. Piez free to devote himself ex-
clusively to shipbuilding.
Wooden ship construction is under the management of James
L. Heyworth, twenty-two years in the engineering and con-
tracting business, during which time he built the harbors of Port
Arthur, Texas, and Fernandino, Florida.
Shortage of Materials, 1918
The actual achievements of the Shipping Board under the
third epoch have thus far been far from satisfactory to anyone,
due in part to difficulties arising from the severity of the winter,
and to material and labor shortages. December 1 the first
wooden ship under the war rush plan was launched on the Pacific
Coast. It was a boat of 4,000 tons dead-weight, 290 feet long,
built in the record time of 120 days. Some spectacular starts
were made in December, to be followed by falling hopes. On
December 20, the very day that Admiral Harris resigned, the first
rivets were driven in the first of the standard fabricated steel
ships at Newark. In February initial keels were laid at the sister
plant at Hog Island, but a month later nothing had been done,
and the Hog Island keels were still only keels in April because
SHIPBUILDING IN THE UNITED STATES, 1914 TO 1918 299
of shortage of material and the incompleteness of the yard for
the prosecution of the work. The actual amounts of material
involved are stupendous. Mr. E. H. Rigg, architect of the New
York Shipbuilding Co., gave the following figures for material
to be used in the Hog Island contract :
We are building fifty small ships of 7,500 tons dead-
weight and seventy of 8,000 tons dead-weight, making a
total of 120. Many of you have no idea of the v/eight
which is put into the actual building of these ships.
The quantity of material involved in the building of these
120 ships follows :
Pounds Long Tons
Steel 828.700,000 370,000
Woodwork 48,150,000 21,500
Equipment 161,300,000 72,000
Machinery 149,000,000 66,500
Totals 1,187,150,000 530,000
Total horsepower, 510,000; total dead-weight, 035,000
long tons; total oil fuel, 167,000 long tons; total gross ton-
nage, 767,000 tons; total launching weights, 460,000
long tons; total length of ships. 51,410 feet, or nine and
three-quarters miles; total cargo carried, 750,000 long tons.^
There were repeated calls for priority for the shipyards.
Illustrating this difficulty, Homer L. Ferguson said in the Marine
Review, December, 1917 :
It seems to me that we all want to do the best we can,
but we would very much appreciate it if we could go to
Washington and say to seme one that this is the m^ost im-
portant, and that is the next, and that is the next. Instead
of that, we appeal from one department to another, and
frequently end up with nothing.
The exceedingly cold and snowy winter with its accompany-
ing unprecedented railroad blockades, helped to limit the pro-
duction of iron and steel and stop the delivery of materials at
the shipyards. For example, it was reported in January,- that
^ Philadelphia Public Ledger, December 20, 1917.
^ Weekly Journal of Shipping, January 22, 1918.
300 INFLUENCE OF THE GREAT WAR UPON SHIPPING
1,000 cars of piling for Hog Island were tied up in Baltimore,
and for the time at least could not be moved despite their urgent
need in the Hog Island mud.
It is easy to see why Mr. Schwab insisted on priority of steel
for the shipyards, and also why he is reported as planning to
establish at the Hog Island plant a three months reserve of ma-
terials, and to attempt to maintain it, so that in case of emer-
gency the building can go steadily forward from this stock.
The situation was similar with regard to material for wooden
ships. General Goethals had contracted June, 1917, with the
Southern Pine Association for 140 million feet of yellow pine
for 100 wooden ships. Unfortunately, however, after ships were
under way it was concluded that some of the timbers were not
large enough, and could only be secured from the Pacific Coast.
The resulting delay was thus bitterly described by the Phila-
delphia Public Ledger editorial, November 3, 1917 :
Wooden Ships Without Keels. Shipyards full of deck-
plank, upper timbers and finishing materials, and with large
timbers for keels officially forgotten — that is the situation
revealed nine months after the intensification of U-boat
warfare, eight months after the American declaration of
a state of war, four months after the retirement of Denman
and Goethals, and the placing of Hurley and Capps in charge
of the Emergency Fleet Corporation.
On April 15 it was reported that special trains carrying 15,-
000,000 feet of fir timber had left the Pacific Coast for Atlantic
and Gulf shipyards which had been delayed in turning out their
wooden ships. ^ This was done by special arrangement between
the Shipping Board and the Director General of Railroads, who
expected to get the lumber trains through in one-fifth the usual
time. In another month it was expected that owing to another
change in lumber specifications the Atlantic shipyards would
depend upon the Southern Pine Association, and would need to
import no more timbers from across the continent.
' See Chapter VIII. See also Ferris design mentioned above in this
chapter.
SHIPBUILDING IN THE UNITED STATES, 1914 TO 1918 301
The scarcity of materials shows the wisdom of our firm poHcy
in the negotiations with Japan about the exports of steel. For
many months we refused to let it go, except in return for ships
which Japan refused to grant.' After months of negotiation we
came to an agreement in the last week of March, 1918, which
was of mutual benefit. We let Japan have steel, of which one ton
makes about three tons dead-weight of shipping, and Japan agreed
to sell or charter two tons dead-weight of shipping for every
ton of steel. Thus we got ships — 1.5 of 130,000 tons, bought,
to be delivered May to December, 1918; 24 steamships of 150,-
000 tons dead-weight, chartered, for six months, delivery to begin
April, 1918 ; 27 steamships of 234,000 tons to be delivered in
the first half of 1919.
Labor Supply and Housing
The labor supply is naturally a puzzle in a country sending
men to the camps by millions, and called upon to double, triple,
and quadruple the number of workers in the shipyard and other
war industries. The process of standardization of ships simpli-
fied the shipyard labor problem by making it easier to teach the
men the simpler tasks. Manifestly a great many men had to be
trained for the work, and the Shipping Board has gone about
it in a very systematic way. At Newport News they set up a
far-reaching system of industrial education which may almost
be called a shipbuilders' normal school. It was an instruction
training center to which from 75 to 150 skilled mechanics were
sent from various yards for a six weeks course to learn how to
teach a knowledge of their trades to recruits in their own yards.
It was figured that in six months the graduates of this training
school would be in a position to initiate 75,000 new workers
from kindred trades into shipbuilding. New York State and
various city school systems also opened shops and schools for
training of shipyard workers. The British shipbuilders pointed
out with great satisfaction ^ the great advantage America had
' Fairplay, May 13, 1917.
302 INFLUENCE OF THE GREAT WAR UPON SHIPPING
in this emergency because her shipbuilding labor was not organ-
ized, and therefore had not adopted restrictive rules and was
willing to use machinery so far as possible.
One of the serious handicaps in the labor situation has been
the absence of housing facilities. The Shipping Board has acted
on the assumption that they were doing a plenty by putting up
money to build shipyards, and to build ships. The shipbuilding
companies have hesitated to build houses fearing that they
would be idle on their hands when the war is over. Private
capital has been similarly fearful, and yards have accordingly
been idle when they might have worked, and workers have in-
curred expense, discomfort, danger, and loss of time in mak-
ing long, tedious, extremely crowded and exposing journeys to
remote locations almost inaccessible to the commuter, but with no
place of residence near by.
At Newport News the Shipping Board threatened to requisi-
tion houses to prevent rent profiteering.^ For the Hog Island
plant extensive barracks were built on the premises, but by no
means enough to house all the workers. It was proposed to
commandeer houses in Philadelphia, but they were all occupied
and the opposition was too great. Finally, on May 25, 1918,
the Emergency Fleet Corporation began to build some houses of
itc own, 450 in number.
Labor has been very uncertain in the shipyards because of the
constantly rising pay and the constant practice of the new yards
of stealing labor from the old, and the government stealing it
from both. At last the Shipping Board established a labor
adjustment board which attempted to regulate and prevent these
evils as far as possible, for undoubtedly they tended not only
to disorganization of the actual work, but to the great destruc-
tion of esprit dc corps. Through the spring of 1918 there have
been distinct efforts made to create among shipyard workmen
the same pride that prevails in a good regiment. Bowles and
Schwab and others have made many addresses to the men. An
in.spiring speaker Dr. Charles A. Eaton, of New York, went
' Official Bulletin, May 4, 1918.
SHIPBUILDING IN THE UNITED STATES, 1914 TO 1918 303
about from yard to yard addressing meetings for many weeks,
during which lime he alone addressed 150,000 workers and is
still at it. As a result of this kind of work a plate shop in the
New York district that had been turning out SO tons a day
promptly began to turn out 135 tons. At another plant a gang
of riveters who had been averaging 300 to 400 per day turned
out over 1,000. Persons familiar with Delaware River yards
tell me (May 15, 1918) that there is a distinct change in the
attitude of the workmen since the coming of Mr. Schwab.
The Rivalry for Achievement and the Rising Output
There is rivalry between yards for good records — a most
wholesome thing. April 21 at 11 : 57 p.m. the Grant Smith
Porter Co. of Portland, Oregon, launched a wooden steamer,
Waken, on the Willamette River, 51 days after the laying of
the keel, which was agreed to be world's record time. The
Eastern yards did not care to be exceeded by the Western, and
they deliberately announced that they were after the record,
which had for some time been held in the West. On Sunday
morning, May 5, 1918, they got it through the phenomenal
achievement of the New York Shipbuilding Co. of Camden, in
launching the 5,500 ton steel collier Tuckahoe in the unrivaled
time of 27 days, 2 hours, 50 minutes, from the laying of the
keel. She was
launched virtually complete in every detail, boilers in place,
engines installed, masts stepped, funnel in place, propeller
fitted, rudder hung and only minor finishing touches yet to
be pirt on before the vessel is commissioned.
No shipyard in the world has achieved anything approach-
ing the record of the Camden plant. The best previous
American retord was fifty-five days, and the shipbuilders
of Great Britain have not been able to do, it is said, better
than about two and a half months.^
^ The detailed record of the Tuckahoe follows: "April 8, keel laid; April
12, double bottom completed ; April 14, frames and bulkheads erected and
portion of shell plating finished; April 15, stern frame in place; April 22,
304 INFLUENCE OF THE GREAT WAR UPON SHIPPING
In a very few more days the Tiickahoe was en route on the high
seas with a cargo.
Wholesome also in its results is the rivalry of gangs of
riveters, because it brings the effort right down to the in-
dividual worker, and has already become international. The
Philadelphia Public Ledger, May 9, 1918, reported that riveter
Shock's record of 2,720 rivets in nine hours at the Baltimore
Dry Docks & Shipbuilding Co., April, 1918, which was under-
stood to be unbeatable by his associates, held the record for
only a few days, when it was beaten by Edward Gibson and
crew of the Federal Shipbuilding Co. at Camden, N. J., who
drove 2,918 rivets in 8 hours. But the American record soon
went to John Carrigan of Detroit, with 3,415, while on May
8 the Atlantic cables from London reported that one Robert
Farrand and gang in the yards of Frazer & Frazer, hammered
in 4,2GT rivets, or one to every 7/4 seconds. On May 15 the
record of 4,422 rivets in 9 hours was in Scotland. On the 16th
it was back in Baltimore at the astonishing figure of 4,875 in
9 hours by Charles Knight, colored, who had kept seven helpers
busy. One week later Oakland, California, claimed the record
with 5,020 rivets for a gang. On the 29th of May, John Lowry
of England claimed 7,841 rivets. Long may their good speed
continue.^ It indicates that the builders on both sides of the
Atlantic are getting down to their gait, and we may expect that
by the end of the summer American shipbuilding will be at nearly
full swing, with output at a speed never before equaled," although
boilers put on board; April 29, stern post boarded and stern tube put in
plate; April 30, masts stepped and engine installation begun; May 2, funnel
put in place; May 4, machinery all in place and engines completely installed.
From the twenty-sixth day to launching, the time was occupied in putting
on finishing touches." { Philadelphia Public Ledger, May 4, l918.)
' Some say these contests do not have a beneficial effect. The knowledge
of them and the records must inriuencc men who have. been in the habit of
doing but from 200 to 400 per day, but the contests 'are of course a bit
theatrical and under very favorable circumstances, and other workmen stop
to watch the show.
' As proof is being read the following verification comes to hand:
In the 12 months ended just now (10 a. m., September 26) American ship-
yards have built, and the Commerce Department, Bureau of Navigation, has
officially numbered 1,956,455 gross tons, passing the previous high record of
SHIPBUILDING IN THE UNITED STATES, 1914 TO 1918 305
the Hog Island plant is not expected to reach its maximum
until the middle of 1919. As evidences of speed we launched
80,000 tons of steel shipping in a week ^ and seventeen wooden
vessels in the first seventeen days of May." The unfortunate
thing is that we are at least one year behind what might reason-
ably have been attained by an aggressive and efficient adminis-
tration and at least two years behind ' what should have been
produced by a people " able to look things in the face before they
hit us in the face." *
It is greatly to be regretted that the people of this country
have been deceived by a great many uninformed or merely bom-
bastic statements concerning shipbuilding from persons they
had a right to believe.
The Board's Policy
When the existing private plants got going full speed, the
question of enlargements arose about the time of the coming
of Piez, late in December, 1917. Mr. Henry Ford, who had been
consulted as an expert, recommended two things : a reduction in
the number of the types of shipbuilding to one, and the erection
of several yards in the South similar to the Hog Island and
Newark yards to build ships as nearly as possible after the way
he had built automobiles with such astonishing speed. It is
the United Kingdom for 1913 calendar year, 1,932,153 gross tons launched, of
which 1,793,287 gross tons completed (Lloyd's returns).
The United States for 12 months to date completed 1,956,455 gross tons,
and the United Kingdom for 11 months ended August 31 completed tonnage
1,512,640 gross tons. Together 3,469,095 gross tons completed exceeds the
world's record, 3,332,882 gross tons, launched by all nations in the calendar
year 1913.
' Official Bulletin, May 14, p. 2.
" Frederick T. Holbrook, in charge of construction at Hog Island, an-
nounced May 14, 1918, that next year Americans will marvel at the result.
Sixteen keels were then laid. Three days later a gang of workers made
a record of 161 tons in setting steel.- The previous record had been 108 tons.
The Hog Island yard is out to beat the record of the yard across the river
that built the Ttickahoe. They are also after the $53,000 cow, Sophie III,
offered by Mr. Schwab for the best " speeding up " shipj-ard record.
^ The fabricated ship was launched May 30, 1918, from the Newark yard
of the Submarine Boat Co.
* Quoted from A. Lawrence Lowell, addressing the League to Enforce
Peace, May 15, 1918.
306 IXFLUEXCE OF THE GREAT WAR UPON SHIPPING
not surprising that the Board, then overwhelmed with unfinished
tasks and railway congestion, should have announced the policy
as it did, January 21, 1918, of encouraging no more new yards,
but rather to enlarge the old — thus taking advantage of existing
organization.
As a part of this policy to which jNIr. Schwab adheres with his
announced ambitions of three completed ships per day in the sum-
mer of lUl'J ^ the New York Shipbuilding Co.'s plant announced
in mid May the early enlargement of its very excellent plant by
beginning on seven new ways at an expense of seven to eight
million dollars. These are for high class ships — transports, re-
frigerator ships, etc.
The success of the concrete ship gives added force to Mr.
Ford's suggestion of more yards and in the South, and such
yards are in prospect. (See Chapter VIII.)
The United States Government has a Shipping Board, is
spending money by billions, and when the war is over it will
have a big fleet and some shipyards ; but we should note that
from the standpoint of industrial management it has undertaken
no new function. For many years it has drawn up specifications,
let contracts and supervised their execution at the hands of
private builders. That is what we are doing now. The Ship-
ping Board created the Emergency Fleet Corporation, which
is a contract-letting and work-stimulating body. It lets con-
tracts. Thus it contracts with the American International Cor-
poration, which agrees to build ships on contract. But first this
corporation lets contracts to its creature, the American Inter-
national Shipbuilding Corporation, which builds a shipyard by
subletting to Stone and Webster, and many other experienced
contractors. The American International Corporation gets its
shipbuilding knowledge by buying out the New York Shipbuild-
ing Co., Camden, N. J., one of the best enterprises of its kind
in the United States. On its executive side the role of the o-overn-
o
ment has not been changed. It is merely a contract letter and
a subsidizer. and even in this it is going. on patriotism rather
' Philadelphia Public Ledger, May 17, 1918.
SHIPBUILDING IN THE UNITED STATES, 1914 TO 1918 307
than on a mere business basis. Everyone knows that Alessrs.
Hurley, Piez, Schwab, and scores of others in the large and
rapidl}- growing staff of the Shipping Board could make more
money at something else, but not more service.
It is scarcely reasonable to hope that business can continue
indefinitely on that basis. In the background of the field of
governmental enterprise stands the haunting ghost of unsatis-
factory pay. The American legislatures, high and low, are prone
to think of governmental pay in terms of average men. The
result is that the needed specialist can get more pay elsewhere.
Almost equally bad is the fact that the civil service is a place
where the man who has failed can often get more than he is
worth outside. As an advantage on the other side is standardi-
zation, an industrial principle of very wide application which aids
governmental operation of industry, especially production, be-
cause of the uniformity of its conditions.
CHAPTER XI
Shipping Policy after the Great War
Shipping Situation at End of War
The war promises to end with the governments of the leading
maritime nations, the United States and the United Kingdom
especially, in possession of large fleets of vessels and in control of
governmental and private shipyards. There will probably (almost
certainly) follow a period of continued governmental shipbuilding
and ship control during the continuance of ship scarcity and the
great boom of reconstruction. Then wall come overproduction of
shipping, unemployment and low freight rates, very low freight
rates. In that day when anyone can get all the ships he wants at
less than cost we will be in that position of economic balance in
which we can sit down calmly and consider permanent policy. The
war will then be over — so far as ship w'ork is concerned. What
will we want with regard to shipping? The answer is simple. The
trading peoples of the earth want cheap ships, and plenty of them,
always at their disposal for a reasonable hire. The getting of
what they want is not so simple as the stating of it. In a war-
free world this abundance of cheap ships is exactly what w^e
would have and also it is surprisingly close to w^hat we did have
for a quarter of a century prior to 1914.
The Ideal Arrangement
This ideal arrangement of shipping would mean that the nation
or nations with the most abundant capital, and therefore the
nations willing to lend most cheaply, would build or pay for ships;
that they would be manned by the men of those nations who are
w illing to work for the least, and that this cheap capital and these
cHeap workers would enrich us by their inexpensive services.
They would go anywhere. In fact these ships would be as
308
SHIPPING POLICY AFTER THE GREAT WAR 309
mobile in the realms of possible navigation, as other capital has
been throughout the realms of possible investment. Thc}^ would
merely give us one more example of the internationalization of
capital that has been so common; but with this one great dif-
ference : the ship can be withdrawn. She can sail away and
never come back, whereas the railroad, the factory, the mine and
the plantation are fixed property. They stand ; they can be requi-
sitioned, commandeered, or confiscated by the nation in whose
bounds they lie. Because of this mobility of ships, nations not
equipped with capital, materials, and labor, to be natural ship-
owners, have used the economically artificial means described in
Chapter V to guarantee themselves at least a minimum of ship-
ping, which could become national property in time of war or
other emergency. The results of these varied subsidy policies
have in no case, save the possible exceptions of Japan and Ger-
many, sufficed to meet the complete commercial needs of any
important nation. Meanwhile, the countries which may for the
time being be considered the natural shipowning countries, Great
Britain, Norway and Holland, have built or bought millions of
tons of surplus shipping and placed it at the disposal of the
world to meet its shipping needs, just as money to build railroads
and wharves has been placed at the financial and industrial dis-
posal of the same peoples.
In a neutralized world, with war definitely and finally banished,
we would promptly return to this policy. If safe English ships,
manned by Chinese sailors, are indefinitely willing to carry
Americans and others who wish to ride, and are indefinitely
willing to do this service at a less price than American companies,
there is no argument that can be advanced why we should not
permit them to have the privilege and permit ourselves to have
the advantage, and such will be the conditions in a thoroughly
neutralized world if we ever get it. Meanwdiile, we are working
through a struggle in which, while a league of nations is the
great hope, the idea of nationalism, national need and national
force, is perhaps being enhanced. Certainly the national factor
in economic and maritime policy has assumed size before un-
310 IXFLUEXCE OF THE GREAT WAR UPON SHIPPING
dreamed, with national shipyards, national fleets, and absolute
national control of both yards and fleets.
The Impossibility of General National Independence in
Shipping.
When the imperative need for the national policy has passed
should we have hope for national independence with regard to
ships, and if so, what does it involve? The answer is rather
surprising — double or more than double cost of freight, duplica-
tion of fleets, idleness of ships, and over half the world's vessels
running empty all the time.
I once saw two perfectly staked and ridered rail fences parallel
to each other at such a distance apart that each came up exactly
to the edge of adjoining pieces of land. It was called a " mad
lane " because neighbors, having quarreled over their fences, built
each his own perfect fence beside his neighbor's with barely
room to walk betw-een. Similar mad lanes of the sea are in-
volved in complete maritime independence. It would mean that
all American exports to Britain went in American ships, which
could get no British cargo coming back, for that must be carried
westward across the Atlantic in British ships, which in turn
could get no American cargo coming back. Thus w^e have guar-
anteed one-half the world's ships always empty. Add to this the
fact that there is already a very considerable movement of empty
ships because trades are unbalanced and we see that six-tenths,
probably 05 per cent of the world's shipping would be running
empty under this condition of nationalistic independence. Per-
haps that sounds fantastic, but nationalism has already made
many a ship run empty. It has already established mad lanes
of the sea. To find a perfect example one need go no further
from home than our own coasts where our coasting trade is
normally reserved by statute to American vessels, while foreign
vessels in unending procession, empty or partly empty, skirt our
shores from Norfolk where they coal, to Galveston and New
Orleans where they load in whole or in part. For decades the
foreign owners would have been delighted to load them at Gal-
SHIPPING POLICY AFTER THE GREAT WAR 311
veston with cotton for New England, and at Norfolk with coal
Cr iron for Texas. It was only under the pressure of ship famine
produced by war that late in lOlV we finally permitted this simple
economy of permitting American freights to be taken in foreign
ships between two of our own ports/ and then only for the period
of the war and 120 days thereafter, and with a special permit
for each voyage. The policy of carrying goods only in ships
of the producing nation would annihilate the cheaply operated
tramp which is economical because her owners can twist her
and shift her through all the trades of the earth. Under this
nationalism she could not twist around from England to Argen-
tina, from Argentina to Galveston, from Galveston to Norway,
from Norway to Philadelphia, and from Philadelphia to
Genoa, from Genoa to Odessa, and from Odessa back to Liver-
pool.
For countries of simple economic life and heavy seasonal trade,
the idea of complete maritime independence almost passes from
the ridiculous to the fantastic. Take the case of Argentina, an
enormous exporter of wheat, corn, and flaxseed, all of which
have their season of harvest at the end of summer, and are ready
for prompt shipment to the markets of the North Atlantic. Shall
Argentina carry these products in her own ships? If so, shall
she have enough ships to carry them when they ought to go, and
do now go, in a few months after harvest or shall she spread
the service over a year and let the grain lie the while? The
economics of ship operation indicates the latter course, but owing
to fluctuation of harvest, she has some years twice the export of
other years. What should she do the year she has 50,000,000
bushels of surplus grain, making about 1,500,000 tons of freight?
She must either provide ships for the occasional maximum year,
or let the grain lie over for two or three years, subject to moth,
rat, weevil and rain, until her national fleets can finally carry it
to the hungry millions beyond the equator. Such a policy would
be about as sensible as it would be for every railroad in the
' The transport for the AlHed cause would be solved if it could now have
at its disposal the ?hip ton mileage that has been wasted by the foreign
shipping that has steamed in compulsory idleness along our coasts.
312 INFLUENCE OF THE GREAT WAR UPON SHIPPING
United States to try to supply itself with sleeping cars despite
the fact that it used man}- of them but four weeks in the year.
It is easy to imagine that national exasperation in a world
with such shipping management might induce the strong-handed
to enter into bargaining enterprises such as we have seen so forci-
bly used during the trade restrictions of the war. Thus the
potash famine which apparently can be ended only by shipments
from the German mines, gives Germany a strong hand in certain
bargains. The British monopoly of West European coal gives
her also a strong hand for a bargain, but it is somewhat limited
by the fact that there is also German coal. The United States
can also make strong presentation in trade bargain by withhold-
ing her petroleum, her cotton, or her phosphate. But any such
action by any of these nations would be a most unfortunate sow-
ing of the seeds of trouble, for if the war has shown us anything,
it has shown us the difficulty of establishing restrictions on the
ultimate destination of goods. Complete national maritime inde-
pendence for even five leading nations is plainly an idle topic of
discussion. Nevertheless, we have that enhanced sense of the
importance of maritime sufficiency. What will we do about it
after the war? I believe we can safely say that we will do some-
thing to guarantee this nation more ships than she had in the pre-
war period, and other nations will feel the same impulse.
Factors Controlling Shipping Policies
The actual policies that the nations will probably adopt depend
upon four things: (1) their prewar past, and the resulting na-
tional point of view; (2) the influences exerted by the war; (3)
the industrial efficiency of the government control and operation
of industry; (4) the conditions of the first few years of peace
during which the new maritime policies of the new epoch will be
in process of formation.
It is impossible to discuss the fourth of these influences now
because it remains in the unrevealed future. The same is rela-
^ tively true of the third, but the first and second are capable of ^
SHIPPING POLICY AFTER THE GREAT WAR 313
some examination, and by explaining the past and present mari-
time policies of leading nations, we have the best obtainable
chance to view coming events with understanding.
The Policy of Britain — " Laisscz Faire "
Britain has become the leading maritime nation and owner of
half the world's shipping by pursuing the policy of laisscz fairc —
let alone. This, however, proves nothing, except that in the case
of Britain in times past the policy worked. It does not prove
that it was then or now good for other countries, or that Britain
will stick ro it. It worked in Britain's case in times past for a
number of good reasons which combined to give Britain natural
advantages that no other nation could equal. An island, opposite
the populous coasts of Europe at a natural end of trade routes,
she had a prime commercial location. She had coal, iron, and
capital. Her emigrating sons gave colonies and colonial oppor-
tunities for investment of British capital in all quarters of the
globe. The Napoleonic wars gave her for two decades almost a
monopoly of the sea trade. With these opportunities England'"
enterprise, almost unaided by the government, was able to build
up the nation's leadership in shipping and develop in her mari-
time interests that sturdy sense of independence and that sturdy
faith in individualism which finds expression in the following
statement of the president of the Liverpool Steamship Owners
Association :
The British shipowners should be allowed to build their
ships and to carry on and develop their trade free from all
unnecessary restrictions; the government should deal with
abuses in regard to the management of individual ships as
they arise without forcing the whole shipping industry to
comply with harassing and unnecessary rules and regula-
tions; in British ports no distinction should be made between
British ships and the foreign ships which come to compete
with us; and oversea commerce should be encouraged by
being freed from all unjust burdens and hampering restric-
tions. ... Its (the Association's) demands have been for
314 INFLUENCE OF THE GREAT WAR UPON SHIPPING
scope for individual energy and enterprise — for a fair field
and no favors. And the Association has not stood alone.
Its policy has been that of shipowners' organizations
throughout the country/
Even stronger is the statement of a British shipbuilder in the
same journal, September 20, 1917, page 472.
There is really only one way in which the state can assist
shipbuilding and shipping as well. That is not by active
control of any kind, not by trying to direct, and manage
and boss, but by removing restrictions, restoring the liberty
which has had to be sacrificed temporarily in the interests of
national welfare, and by following deliberately and consist-
ently a policy of setting the science and art of shipbuilding
and marine engineering free to develop along their own lines.
It should be a continuous policy of knocking off shackles, not
of fitting on new control levers. Just as soon as it is proved
that anything is hindering progress a strenuous attempt
should be made to have that thing consigned to historical
oblivion — whenever this can be done consistently with na-
tional interests.
Probability of Government Aid in Future.
It is probably true that the love of independence had caused
these statements to be rather stronger than the facts warranted,
for the figures of British trade and shipping for the period before
the war showed signs of change which she could scarcely view
without some concern. For example between the years 1904 and
1913, the percentage of British trade that went in British ships
declined from 02.44 per cent to 50.15 per cent. Between 1904
and 1912 British foreign trade increased 55 per cent; that of
other countries increased 71 per cent; British mercantile tonnage
increased 24 per cent and that of other countries increased 45
per cent.- In view of these declines before the war and the wtU
known destructions during the war, the question very naturally
arises, ^' Will the British continue their policy of let alone in
' Fairplaw October 4, 1917, p. 549.
*/6'd., September 27, 1917, p. 513.
SHIPPING POLICY AFTER THE GREAT WAR 315
shipping matters after the war?" The answer depends in part
upon what her rivals do. That there will be rivalry after the
war may be accepted as a foregone conclusion. Certainly the
British shipowners who have had such control of the world's
trade are not going to relinquish it without a struggle, and to
get it back .there must be a struggle. For example, in the year
ending June 30, 1914, British vessels carried 78.4 of the coffee
exports of Brazil, all others, including German, carried but 21.6
per cent. W^ithin three years time the ravages and rearrange-
ments of war had almost exactly reversed the percentage. For
the fiscal year ending June 30, 1917, British vessels carried but
21.3 per cent while others carried 78.7. Thus neutrals have got
all of Germany's share and more than three-fourths of Britain's.
Can they hold it? Can the British get it back? One of the
British lines in this trade after regretfully handing ship after
ship over to the British Government service and seeing its trade
go to neutrals, laid aside in the middle of 1917 a reserve of
£250,000 sterling " for protection of our trades," which on being
translated means war fund for commercial war after the ending
of the military war.
At the same time news comes from Sweden that " an ocean
liner conference has been formed at Gothenberg to prepare for
the fight against foreign competition after the war." ^
Norway, the while, is feverishly striving to restore her depleted
fleets by ordering abroad more than a million tons of shipping,
in which she follows the lead of the belligerents by adopting
vessels of standard design.
German Policy — Government Aid
Before the war Germany was the best examplar of real national
policy on the face of the globe. She used government aid so
consistently and successfully that her fleets grew to the second
place in the world. German lines kept British lines completely
away from German shores, and it is very significant that German
lines regularly called at British shores and even carried British
' K. F. Knudsen : Glasgow Herald, December 29, 1917, p. 37.
SIC INFLUENCE OF THE GREAT WAR UPON SHIPPING
trade to British colonies. During the war Germany has con-
tinuously amazed the world by the strength and the efficiency of
her national organization as displayed in military and economic
life, and, as in times of peace she prepared for war, so in war
she is preparing for peace. As early as the middle of 1916 ^ it
was reported that the German shipping lines were combining for
fetter organization in the postwar period, that from 700,000 to
800,000 tons of shipping had already been built to replace losses
of the war, and that some of this new work even included big
passenger liners." Early in the war there were consolidations of
German and of English lines to increase efficiency. In Septem-
ber. 1917, a correspondent from Hamburg reported advance
plans of the Commission for Transition Economy — in other
words, plans for postwar economic life. The commission had or-
dered the cancelation of all old vessel charters, and that all new
•ones must be submitted to them for approval. It was further
ordered that German ships should not for a time at least make
voyages between neutral countries, such as, for example, between
the United States and Brazil, as had been their wont, but that
they should be limited to national service. To make the ships
more effective in serving national need, it was announced that
imported luxuries would be curtailed, and while the commis-
sioners lamented their inability to duplicate England's control of
neutral shipping through bunkering privileges, they hoped to be
al)le, through German coal at Hamburg and Bremen, to have
control of some Scandinavian ships. Germany also announced a
policy of subsidizing shipbuilding after the war.
Under the new bill subsidies will be paid for new ship-
building on the basis of cost of building before the war,
the government paying a large percentage of the extra cost.
From GO to 80 per cent of the additional cost will be paid
on ships delivered in the first three yeais, 20 to 40 up to
the seventh to ninth year. . . . We are told of new
' Marine Review, July, 1916.
= For an account of German shipbuilding plans, see Official Bulletin, Jan-
uary 11, 1918, p. 12. ' •>
SHIPPING POLICY AFTER THE GREAT WAR 317
yards projected on the Elbe, on the Baltic, and elsewhere;
of firms which were struggling before the war being recon-
stituted with fresh capital, or taken over by bigger firms; of
shipyard extensions everywhere; and — perhaps equally sig-
nificant — of the financial prosperity of existing concerns.
We need not assume that German shipbuilding will suffer
to any extent whatever as a result of the war/
Shipping Policy of the United States — Protection from
Competition
The United States has been a confirmed landsman for fifty
years before the war. We knew little of the sea except that it
was on the map, and we have solemnly tried to treat it as tliough
it were land, meanwhile displaying in our legislation the greatest
ignorance concerning the economic aspects of the life and the
business upon it. This has been true not only of our legislation,
but also true of our finance; true in the mind of the average citi-
zen, in the public print, and the curricula of our universities. The
dominant fiscal policy of this vast rich country has been to pro-
tect ourselves from the competition of people less favorably fixed
than ourselves. This protection has taken two forms : first, the
protective tariff; second, the positive exclusion of the foreigner
himself from our shores, in so far at least as it has applied to the
Chinaman, the most efficient worker, the one capable of coming
in the greatest numbers if we would permit him to come. Behind
this double protection of tariff and exclusion, our scanty popula-
tion in a land of unexampled riches has been contented and rich.
When our attention was called to the sea, we have appeared to
be ignorant of the fact that there competition reigned, and we
have tried the impossible feat of projecting our protective system
into the realm where competition really does prevail. If our
maritime policy has been guided by desire to establish an i\meri-
can merchant marine upon the sea in any volume approaching our
own needs, we can not apply any better descriptive adjective
than to say that it has been childish. We have tried to apply
^ Fairplay, August 30, 1917, p. 366. See also London Economist, July 28,
1917.
318 INFLUENCE OF THE GREAT WAR UPON SHIPPING
the protective tariff idea to shipbuilding by saying that no ship
should fly the American flag unless she was built in the United
States, which means built with material costing more than our
great rival Britain uses, and by men whose wages are higher
than those of the men who build the rival ships. In the absence
of any other great advantage, this fact alone is final. The ship
could not be built in the American shipyard and has not been
built to any great extent when it had to compete with the yard
using cheaper materials and cheaper labor. Our government has
sought to compensate this disadvantage by making the further
restriction that no foreign built vessel should ply between the
ports of our own country, thereby restricting the coasting trade
to the expensive American vessel, and giving us perforce enough
shipyards to build for our own coasting trade.
Handicap of Restrictive Legislation.
To further handicap our merchant marine, our legislation at-
tempted to protect the American workman and build up a naval
personnel by placing further costly safeguards about the crew
(by statute largely American citizens). This again puts heavy
cost handicap upon the American vessel that would compete upon
the high seas with the ships of other lands. The foreign ship
is free to be manned by Chinese, Hindus, Italians, Scandinavians,
British, all of whom work in their home country for less than
American wages, but the American ship must have a large pro-
portion of her crew naturalized American citizens, thereby guar-
anteeing higher wages and greater cost. Yet further, the more
expensive standard of living prevailing in America is guaranteed
upon our ships by specific provisions in the shipping law that
the crew shall have quarters more spacious and therefore more
expensive than foreign ships afford their crews, that the Ameri-
can crew shall have food better, more varied and more expensive
than afforded foreign crews. All of these handicaps in crew
give the following very interesting comparison of actual costs of
running of British and American steamers at the outbreak of
the war.
SHIPPING POLICY AFTER THE GREAT WAR 319
For an American tramp steamer of about 4,000 tons the total
crew cost per ton per month was 65 cents. For a British tramp
steamer of about 6,000 tons it was sHghtly less than one-fourth
as much, or 16 cents. ^
The details of these costs were as follows :
AMERICAN TRAMP STEAMER OF ABOUT 4,000 TONS
Per Month
Captain $200.00
Mate 90.00
Second mate 60.00
Eight sailors, $35 each 280.00
Chief engineer 150.00
First assistant - 90.00
Second assistant 80.00
Third assistant 70.00
Three oilers, $50 each 150.00
Six firemen, $50 each 300.00
Six coal passers, $40 each 240.00
Four other men at $35 each 140.00
Total wages for 34 men $1,850.00
Food at 75 cents each per day 765.00
Food and wages for 4,000 tons $2,615.00
Food and wages for 1 ton $ -65
[If on a very long voyage, according to the United States
Government and union sailors' requirements, third mate and one
or two more men must be furnished.]
BRITISH TRAMP STEAMER OF ABOUT 6,000 TONS
Per Month
Captain $90.00
•Mate 4.5.00
Second mate ?,r^n
Six sailors, $17.50 each 105.00
Chief engineer • cy^n
Second engineer ^Qcln
Third engineer ,^r■/^/^
Six firemen, $17.50 each 105.00
Eight more men at $17.50 each 140.00
Total wages for 26 men ^o^con
Food at 34 cents each per day 265.20
Food and wages for 6,000 tons I^^^'i'^
Food and wages for 1 ton $ -lo
[No oilers or coal passers carried.]
' Marine Review, October, 1914, p. 381.
320 INFLUENCE OF THE GREAT WAR UPON SHIPPING
Comparisons with Japanese operating costs give similar results.
We took a record of three ships, an American, a British
and a Japanese. The wages on the American ship amounted
to $39,242; on the British ship, $15,096; on the Japanese,
$9,324.'
These figures are probably extreme but true.
Mr. Nakahashi Tokogoro, ex-president of the Osaka Shoso
Kaisha. is quoted in the Philadelphia Ledger, February 15, 1918,
as saying :
Some Japanese appear to entertain apprehensions of
American shipping competition, but in my opinion such ap-
prehensions are entirely unfounded. There is no need of
magnifying American competition. It is true that America
is now building vessels at an alarming rate, but the Japanese
may rest assured that should American vessels be placed on
the Pacific in competition with Japanese ships they will soon
be driven into a corner.
These facts help to explain the astonishing absence ^ of the
American flag from the high seas and make it clear why the
Pacific Mail Steamship Co. recently sold its transpacific vessels
and gave up the competition with the foreign vessels more cheaply
operated and also subsidized.
After imposing all these burdens on the American ship, the
American Government has been unwilling to make any financial
equalization by the payment of subsidies. Therefore, when an
American needed to own a ship he would usually send to Eng-
land for it and have it registered under the British or Norwegian
flag.
To make matters worse from the shipowners' standpoint, the
La Follette shipping bill, apparently aimed to protect the sailor
against the impositions of shipowners, has put in provisions mak-
' Marine Review, March, 1917, p. 107.
'"In 1913 a total of 2,593 vessels entered the port of Buenos Aires; of
these 1.325 were English, 80 Norwegian, 57 Dutch, 225 German, 202 Argen-
tine. 183 Italian, 159 French, 138 Uruguayan, 57 Austrian, 47 Spanish, 27
Brazilian, 25 Swedish, 24 Belgian, 15 Greek, 13 Danish, 6 Russian, 2 Chilean,
and 2 American." {Marine Review, July, 1916.)
SHIPPING POLICY AFTER THE GREAT WAR 321
ing it possible for the crew to leave the ship at any port. It is
undoubtedly true that there has for a long time been injustice
upon the sea in many forms, including the practice of shang-
haiing sailors, or forcibly recruiting them for long voyages dur-
ing which they are bound to the ship. It is also true that the
ship captain has been virtually a miHtary despot in his little realm,
but it is also true that in the operation of a ship there must be
discipline which approaches the military in its implicit obedience.
Shipowners are, however, indignantly of the opinion that the
present American statute virtually places the ship in the hands of
the crew, and that as long as they are able to leave the ship at
any port, the vessel may at any time become merely a passenger
steamer for the crew, and the problem of operating her is greatly
aggravated.
It is easy to understand how all these provisions for controlling
American shipping can have been put in with the idea of afford-
ing special privileges to various groups of people, but it is quite
impossible to consider them as having been enacted by persons
who knew the conditions of ocean transportation and desired
to extend American mercantile marine to a point where it would
be able to do any substantial part of our high seas carrying.
Even Mr. J. P. Morgan, founder of the long unfortunate Inter-
national Mercantile Alarine Company, showed that he did not
know the fundamental facts about ocean transport.
On a par with the above evidence of the American lack of
appreciation of the sea is the recent fantastic claim by an Ameri-
can journal claiming to be a marine journal, that we should
build ships with all speed, for, since Britain with a population
of some 45,000,000 had, when the war broke out, 20,000,000
tons of merchant shipping we should, with these figures as a
fair ratio of what a maritime power needs, have somewhere
between 40,000,000 and 50,000,000 tons of merchant ship-
ping — a quantity equal to the combined fleets of the world in
1914.
Whereat the British maritime journal F airplay editorially
made merry as follows :
322 INFLUENCE OF THE GREAT WAR UPON SHIPPING
The position is most serious for those who hitherto have
snatched a precarious livelihood from the waters, for, with
" democracy " all the vogue just now, it naturally follows
that what applies to one applies to all. And what does that
mean? Just this : that if China had a fleet based on " a fair
ratio of what a maritime power needs," she would require
steamers aggregating 200,000,000 tons gross. Russia
would trot along with 86,000,000 tons; India would mop
up, on her own, 157,000,000 tons.^
Merchant Marine of United States at Beginning of War.
In view of our landsman habits and point of view it is there-
fore not surprising that the Great War found us with a good fleet
of coasting vessels, an insignificant fleet of high seas carriers, and
an almost complete commercial dependence upon the foreign
steamer which served us on all coasts. Promptly upon the out-
break of the war, we sought to take advantage of the misfortune
of our neighbors by changing our laws so that foreign ships could
register under the American flag, but within a short time the
owners of more than three-fourths of the world's shipping found
it impossible to transfer a vessel without national consent, which
it need scarcely be said was rarely forthcoming.
Great Britain enacted such a law on February 12, 1915;
Austria-Hungary issued such a decree on August 27, Den-
mark on October 8 ; Germany enacted such a law on October
21, France on November 11 ; Norway issued a decree on
December 6, Brazil on December 9, and Spain promulgated
a law on January 9, 1916. The merchant shipping of these
countries aggregates 33,900,000 gross tons.^
The fright of war drove this shipping to the American registry,
for despite the greater difficulties of operating the American ship,
the high freight rates made any cost seem inconsiderable. These
same freight rates made the shipowners of America join those of
all other countries in the mad rush to the shipyards clamoring
for new tonnage, so that during the period of our neutrality our
I October 4, 1917, p. 554.
E. T. Chamberlain, U. S. Commissioner of Navigation.
SHIPPING POLICY AFTER THE GREAT WAR 323
shipping increased substantially. Then came the war with the
commandeering of many vessels building in our yards for foreign
owners and finally our grand campaign of national shipbuilding
regardless of cost because of the ever increasing menace of world
domination through the submarine.
There has been a lot of loose talk about our capturing the ship-
building business after the war. Here is one fact for the person
holding that belief. More facts are not needed although they
could be produced. Last month a shipbuilder on the Clyde was
paying war wages — " bleeding wages " he called them, of 12s.
6d. for a certain amount of work. On the Delaware the builders
were paying $7.50 for the same work.
Our Future Policy.
What are we going to do when the w-ar is over? Will we
return to being the international landsmen '.ependent upon for-
eign ships? If we do not, we should at once resign ourselves
definitely to the recognition of the fact that we can not for some
time to come expect to be able to build as cheap a ship in our
yards as can be the case in Great Britain.
What will be the policies of England, Germany and the United
States with regard to shipping when the war is over?
We can safely say that w^e know Germany will do whatever
is needed to get ships, several million tons of them.
What will England do? It should not be forgotten at the
present moment that the British Government is building ships
with all its might and operating them. How long she will keep
on, and whether or not she will stop at all is of course a problem.
On one thing we can depend with great certainty. If unaided
industry can not put British ships upon the sea, an industry aided
by government will do so.
The second fact w'hich we should place alongside of this is
the equally unfortunate one that a Caucasian democracy, such as
the United States, with high standards of living, and in the need
of trained sailors is not likely to have its ships manned by Chinese,
Japanese and Hindus. Therefore we may expect the continuance
324 INFLUENCE OF THE GREAT WAR UPON SHIPPING
of the present higher cost of operating the more expensively built
American ship. In other words, if we are going to have a large
merchant marine, it can not grow up without substantial govern-
ment aid of some sort. This is the more likely because of the
probability that foreign nations, having seen the vital need of
ships, will more strenuously than ever strive to develop their own
marines. It is exceedingly unlikely that we shall adopt the let-
alone policy. The nation is now willing to pay for shipping.
Therefore the real question is, what kind of assistance shall we in
America extend to the high seas shipping?
The Methods of Aiding Shipping.
The methods are all described in Chapter V. Shall we have
mail subsidy, voyage subsidy, mileage subsidy, shipbuilding sub-
sidy, government ownership and lease or government ownership
and operation ? Of this last there has been little experience, but
more promise. Canada promises to do it after the war; Aus-
tralia is doing it now, and has tried it for a few years in times of
peace with lamentable financial results. We should not lose
sight of the fact explained in the last chapter that despite all this
war control it is not government organization or business man-
agement that is managing shipping. Government is merely con-
trolling and the men of the business world are doing the actual
managing and operating, exercising the real business judgment.
Few businesses offer less inducement to government operation
than operation of steamships, either line or tramp. It is a busi-
ness of constant change, of the constant exercise of judgment.
Government businesses are renowned for their red tape, and for
their development of checks and balances. They must advertise
for bids, and give due notice of changes in the rate, etc. In
contrast to this, the ship operator sends a long cablegram, at 5
P.M. as the result of his day's business and observations. He
has the reply in from London or Shanghai the next morning and
makes his decision on the spot. I fail to see success as likely to
follow the methods applied to national ship operation by the
nephew of Senator So-and-so, or the appointee of General This,
SHIPPING POLICY AFTER THE GREAT WAR 325
or Cabinet Officer That, nor yet of the ambitious young man who
has passed a Civil Service examination. The experience of West
Australia, a democracy admittedly progressive, intelligent, and of
high rank among the governments of the earth, is suggestive.
They ran a government steamship line at frightful loss.
Complicating Factors Controlling Future Shipping
Policy
While we will probably do something after the war to guar-
antee a considerable amount of American shipping, it would be
rash to predict the means that our government will adopt. That
is indeed a riddle of the future, and the choice will depend upon
a complicated group of interacting factors which may be classed
roughly under four heads :
(a) State of the national consciousness in America, Asia and
Europe.
(b) The state of international relations.
(c) Our economic problems and our appreciation of them.
(d) Technical transport problems.
Let us give some examination to each of these factors.
(a) The State of National Consciousness
Will this nation legislatively represent largely the farmer who
says this overseas business is none of our affair anyhow, and the
thing for us to do is to keep out of it and let the foreigners alone ?
That would give us a compromise policy, or worse, a changing
policy as we have had in the past. Or will our policy represent the
National Foreign Trade Council point of view, which says that
America should have a merchant fleet capable of discharging the
following functions :
First. It should increase the national income and do-
mestic prosperity through greater facilities for the sale
abroad of products of the soil and industry of the United
States, through the importation of materials indispensable
to life and industry, and through the freights collected from
world commerce.
326 INFLUENCE OF THE GREAT WAR UPON SHIPPING
Second. It should maintain, under the flag, communica-
tion with distant possessions.
Third. It should aid the national defense and maintain
commerce during war, whether the United States be
belligerent or neutral.^
It is highly probable that we will as a matter of fact have a
strong and effective desire for more marine self-sufficiency, more
maritime independence than we have had in the prewar period.
Our national attitude in this respect will be greatly effected by
(b) The State of International Relations
Who will win the war? What will be the conditions of the
peace ? What will be our attitude toward foreign powers ? We
must, broadly speaking, find ourselves in one of three conditions :
1. Complete international ease. There is the hope that the
war may end in some kind of internationalism that will enable
the nations to get along as easily with each other as do the
American States. In that case our desire for independence in
maritime policy will be weak. The foreign ships will do. They
will gladly fight in the future, as in the past, for the privilege of
serving us. We will let them serve us. Witness our South
American trade of 1914.
2. The second position of national psychology with regard to
international policy will be one of slight international distrust
such as we had in the prewar period — just enough to produce
feeble efforts looking toward a merchant marine — the contradic-
tory policies such as the prohibition of the import of ships, and
our other policies that made it impossible for us to have American
ships in any numbers; fitful subsidies soon withdrawn, then
shamefacedly camouflaged as under the first Wilson administra-
tion, when, for political reasons we dared not say the word " sub-
sidy," but were feeling around for the same results with a policy
of government owned ships.
' Committee on Merchant Marine of National Foreiern Trade Council,
January 25, 1917.
SHIPPING POLICY AFTER THE GREAT WAR 327
3. The third international relation, the one which all of us
dread, is that the world shall be an armed camp where a nation
shall feel the necessity for the completest kind of national inde-
pendence within and without her bounds. That means a strong
mercantile marine with the government back of it with some form
of heavy financial support.
(c) Economic Problems and Our Appreciation of Them
, In the prewar period we felt small pressure, very small indeed,
of an economic nature to make us build up our merchant marine.
Economically the need was not great. Our goods could go to
almost any part of the world with cheapness and with reasonable
speed. The English and German steamers went regularly from
New York to Rio Janeiro, whence the Brazilian coasters, by
transshipment, took American produce to every little port along
the coast line of that extensive country. Similarly the British
steamers took our goods to Buenos Aires, and coasters and river
steamers took them down the coasts and up the rivers of that
country and her neighbors. The American owned, English reg-
istered, fleet of liners sailing from New York deposited our pro-
duce at Valparaiso for the Chilean and other coasters to take to
small outports not reached by the larger vessels of this line. By
one transshipment- there was steam navigation from New York,
New Orleans, or San Francisco, to almost every port in the world
and in times of peace the rates are not high. Our trade has
suffered far more between 1900 and 1914 from the lack of the
American desire to please the customer than it has from the lack
of ships to get the goods to the customer. In war the problem
is entirely different. The foreign ship is not here to serve us.
The English registered, American owned, lines from New York
to South America have long since been withdrawn for the serv-
ice of the British Government. The American traders are taking
what they can get; namely, slow tramps at a fearful rate of
charter. If these lines had been American vessels, they would
still be running on that route unless perchance the government had
^aken them off to serve more pressing national need. We have
32S INFLUENCE OF THE GREAT WAR UPON SHIPPING
two entirely different problems: one is the peace trade problem
and the other is the war trade problem.
It should be added also that in this particular war we have
fared better than would possibly be the case in some future war,
for the reason that very little of the world's shipping was enemy
shipping, and most of the world's fleets have sailed on. It is
plain that the fear of war if it exists is a mighty factor in mari-
time policy — even the wars to which we are not a party. But,
if we are a party to the war, no mercantile policy is of any avail
unless we have naval control of the seas.
(d) Technical Transport Problems
World situations hang on the progress of invention and in-
dustry. \\'hen gunpowder gave man cannon, artillery and bom-
bardment, the walled city that had been so long the recourse of
man that it had become his vision of heaven, no longer sufficed,
and the great metropolis has become wall-less. Similarly the
invention of the submarine has entirely realigned the world, made
over man's thought, destroyed old international law, and brought
America into the war. Future inventions in many lines may be
equally revolutionary in the political and economic policy of
nations. The development of aerial navigation may upset all our
present methods of thinking, and utterly annihilate all old con-
cepts and practices with regard to the application of national aid
to maritime affairs. The old policy was simple. Do something
to get ships, then build battleships to drive enemy navies out of
the way. What will be the new method of getting and protecting
a fleet upon the sea? It will depend upon the state of the sub-
marine and of the airship. If the submarine survives then the
submarine merchant marine is a natural next step. Shall the
merchant ship of the epoch of the triumphant submarine be the
simple, surface-floating, vulnerable type of the past, or shall it be
submersible ? The answer to this question depends upon the pros-
pect of peace or war. If war seems imminent, the surface ship
might be worthless, and we must build submersible freighters.
SHIPPING POLICY AFTER THE GREAT WAR 329
There seems little reason to anticipate that a submersible freighter
can be built as cheaply as a surface freighter. That being the
case, we possibly face a period when the privately owned ship
may disappear except from coast trades whence it may easily run
to harbor and lie up, and in its place will be great fleets of
expensive submarine freighters which can only be built and oper-
ated by some form of heavy government subsidy. On the other
hand, the airship may be so developed as to change all ideas con-
cerning naval operations and maritime preparedness both eco-
nomic and military.
Continuation of Shipping Board
Certain it is that prediction today is impossible, and we must
look forward to a decade or two when we may need the nimblest
of machinery for readjustments, both legislative and material.
Perhaps maritime matters may be handled best as they are today
by boards of men exercising degrees of discretion which in times
of peace are only exercised by legislators in session. This makes
somewhat reasonable the recommendation of the National For-
eign Trade Council that
Congress establish a permanent Shipping Board, composed
of five members, who shall be men experienced in shipping"
and foreign trade. This board shall recommend to Con-
gress such revision and modernization of all United States
laws relating to ship^^'ng as it deems necessary, and shall per-
manently discharge all the functions of the federal govern-
ment relating thereto. This board shall constitute a perma-
nent advisory body empowered to recommend to Congress
the measures necessary for the maintenance of United States
shipping upon an equitable competitive basis with other na-
tions, always having due regard for the maintenance of
American standards of living and compensation, and keep-
ing in view the needs of the national defense and the neces-
sities of the foreign trade. To this end the board should be
directed to ascertain the cost of construction and operation,
rates of interest on shipping mortgages, insurance rates, etc.,
of American shipping as compared with that of other na-
330 INFLUENCE OF THE GREAT WAR UPON SHIPPING
tions, and it should be its duty to determine what Hne of
ocean-carrying trade shall be permanently developed under
the American flag for the benefit of the foreign commerce
of the United States, and to recommend methods whereby
such lines may be rendered possible, in the event of the cost
of their operation preventing effective competition with for-
eign services in the same zone/
The Council further recommended that such a board should at
once take up the question of advising concerning revising mail
contracts with South America, South Africa, Australasia and the
Orient.
In considering the advices of this National Foreign Trade
Council, we should of course remember that they are a special
group, directly interested in the development of export trade, and
therefore good shipping service from our ports is essential to
a continuance of their business. They further recommend that
the President be empowered to suspend the La Follette Seamen's
Act pending investigation and that their permanent Shipping
Board —
shall likewise report upon the measures necessary to render
investment in American shipping safe and attractive to pri-
vate capital, and to increase the present resources of our
systems of credit, as by the establishment of mortgage banks,
to supply funds to the shipping industry for financing the
construction of tonnage, and to throw around shipping mort-
gages such protection as to remove any apprehension on the
part of investors regarding the safety of shipping proposi-
tions.
]\Iethods of Maintaining American Merchant
Marine
The same Foreign Trade Council says that " some 6,000,000
to 10. 000,000 tons of steamers of various sizes and types would
be necessary to carry GO per cent of the (foreign) trade of the
United States." -
' 3/nri/u- Rcviczu, Julv. 1916, p. 247.
' Ibid.. November, 1917, p. 385.
SHIPPING POLICY AFTER THE GREAT WAR 331
Let US assume that we will maintain that much ocean tonnage
through some form of government aid. We shall want to avoid
waste, we shall want to avoid graft, we shall Vvant to avoid in-
efficienc}-. We must avoid all appearance of favoritism, yet we
must get the ships and have them run. How, considering all the
intricacies of American politics, can this best be done?
First, government loans to the builders or operators of ships of
a given quality. This is a simple and easy method. There is
nothing new about it. It is identical with our adopted policy of
farm loan banks, which are but an attempt to copy the practice of
Denmark, Germany, and other foreign countries which promote
the building of pork packing houses, creameries, farmers' barns,
ditches, and all kinds of agricultural equipment through the crea-
tion of organizations permitting with government aid the borrow-
ing of money at a cheap rate. This method is simple and easy
to apply, and is a substantial assistance, although if we maintain,
as we undoubtedly will, our more expensive crew conditions, it
will probably not be enough to enable our fleets to compete with
neutral shipping.
Second, we can pay definite bonuses per ton to American
builders of certain kinds of shipping, the vessels, of course, reg-
istering under the American flag and staying there. This prac-
tice, however, might be expected to work around sooner or later
to the government ownership of shipyards. Otherwise someone
is likely to get cheated. In one condition it might be the ship-
builder, for the government might give a contract for the build-
ing of a lot of ships that would occupy the yards two or three
years, and then give no more contracts. The capital invested in
the yard might be almost wasted. If the shipyard owners guard
themselves against this by adopting the practice of the munitions
manufacturers who, because of the temporary nature of their
business, expected the first contracts not only to pay profits
but pay for the plant also, then the government is paying too
much for its ships. And if it pays enough for the ships to pro-
vide the depreciation funds to pay for the plant, it ought to own
the plant. Such government plants might be operated by private
332 INFLUENCE OF THE GREAT WAR UPON SHIPPING
concerns just as tunnels, subways and railways are sometimes
owned by governments and operated by private companies. Such
is the case at Hog Island today.
Third, government ownership. A third method of promoting
shipping would be for the government to own ships, which might
be built for it on contract in its own or private yards, and hire
these ships out to private owners to operate them under condi-
tions prescribed by the government. This indeed is the policy
of the present. The government is building ships. They have
also bought ships and, after the age-old practice, are passing
them over to individuals to operate on time charters. This
method permits vessels to be hired to companies that will agree
to carr}- mail over certain routes at certain speed at certain inter-
vals. The same applies to freight lines.
The question of the tramp is more difficult, because the opera-
tion of a tramp may take it anywhere, and it may at times be in
ballast.- The French method of putting tramps upon the sea
by paying a mileage basis has proven of very questionable merit,
because the government has actually paid for what might be
called a pleasure jaunt for a vessel and crew going from nowhere
to nowhere, at government expense because it was better than
tying up. It seems certain that either through loans to owners,
or building subsidies, or certainly by chartering its own ships, the
United States Government could do something to put an Ameri-
can tramp with its expensive crew on a financial parity with the
Chinese, Greek, Scandinavian, Norwegian, or British tramp with
its cheaper crew.
This policy of government ownership in which England and
America are today engaged may easily continue indefinitely and
crowd private ships off the sea, for if national rivalry once gets
started and we subsidize to the point where we make it difficult
for the neutral to compete, then he may start to subsidize and
make it impossible for us to compete, unless we raise the sub-
sidy. Thus we may get started on a process that may wind up
with the complete nationalism of the fleets of the world by
making it impossible for the unsubsidized ship to sail. Indeed,
SHIPPING POLICY AFTER THE GREAT WAR 333
granted the continuance of government ownership in any large
way by leading nations, its complete absorption of the fleets seems
to be probable rather than possible.
Contrast Between Government Ownership and
Government Operation
As to the desirability of this condition there should be pointed
out at once the contrast between government ownership and gov-
ernment operation. It is perhaps a feasible matter for the gov-
ernment to own the fleets, for some board to say, as is the case
today, that you may or may not import this or that commodity,
that you may or may not sail your ship this month to this region
because we need to send the ships to that other region. Boards
in periods of stress may even set the rate of shipping as they do
today, but it is to be hoped that the world may be preserved from
that epoch when both liners and tramps are operated as an arm
of the government by officials rather than by civilians. There
is an inherent impossibility of fusion between the necessary
checks and balances, and inevitable red tape of government opera-
tion of anything, and the endless shifts, overnight decisions and
changes of plan that are involved in that world reaching maze,
that business game of chess that guides thousands of the world's
ships to the hundreds of ports to move the world's freight in
response to the ever changing needs of business, the whims of
climate, the variations due to the failures of crops, and the plans
of men.
The Postwar Transition Period
No matter what the ultimate policy of the United States, her
allies and enemies may be, it is very safe to predict some things
about the period of transition immediately after the war.
Enormous Trade and Ship Shortage
It will be a time of enormous trade and therefore in all prob-
ability of ship scarcity. Before the war the world was getting
334 IXFLUEXCE OF THE GREAT WAR UPON SHIPPING
along with 42,000,000 tons gross of shipping and building about
3,000,000 tons per year. It is impossible to predict the tonnage
at the close of the war, but it is difficult to see how it could be
an} where near adequate to the war needs or the postwar needs.
There has been huge ship destruction by war, and almost no ex-
tension of peace time land equipment. Much of this omitted work
is cumulative and while the estimate of a French commission that
we would need 80,000,000 tons of shipping after the war is prob-
ably too high, it is quite likely that we will need 00,000,000 tons
for several years.
Continued Control for a Time at Least
Even if it were universally regarded as desirable, it is plain
that it will not be possible at the end of the war to return shipping
at once to the freedom of individual ownership and control of
1914. The small amount of shipping, and the great amount of
possible freight to move will make it necessary for some compre-
hensive intelligence, then as now, to decide what trade shall be
permitted, and what trade shall be prohibited. Otherwise we
would be making duplications of that astonishing episode of 1917
when a full cargo of rhododendrons w-as taken into a port of
France, famishing for bread, meat, cotton, oil, lumber, and coal.
For many months after the last torpedo and bomb are fired, the
shipping controllers and the war trade boards will continue to
control the trade and the ships of Britain, of France, of the
United States, and of Germany also, as already long since an-
nounced by that thoroughly planning people.
If the government did not keep a firm hand on shipping and
trade, that is to say, if she gave liberty to the shipowners who
have a monopoly, through the scarcity of their commodity, it
would make sheer robbery of the public by the freight rate exac-
tions, and the crippling of industry by the carriage of unessential
luxuries at the expense of the fundamental national supplies and
raw materials.
SHIPPING POLICY AFTER THE GREAT WAR 335
Possible Nationalisation of Shipping
When might the controller resign, and hand the shipping back
to individuals? The answer is simple. On that day when ship-
ping supply catches up with shipping need. On that day laissc::!
fairc might be trusted to again take charge of the world's trade
without serious injury to any trade or class of people. So much
for classes of people, but national interests can not be forgotten
now. It is one thing to say that on that date the shipping con-
trollers could resign, but will the nations have them do so ? This,
indeed, is hard to predict. Why should not the governments
permanently keep extensive control of shipping? Railroads have
been steadily approacJiing the period of their nationaliza-
tion. Why should not shipping, which renders the other half
of the carrying service, enter also into the class of controlled or
operated public utilities? There is no final answer to this ques-
tion except the one of effectiveness and expediency. It is signifi-
cant that the Canadian Government recently announced that the
merchant ships now built or building with public money will be
kept by the government and operated after the war as a public
utility in connection with the publicly owned railroads. It is
well known that Germany has used her publicly owned railroads
to promote her export trade by carrying export goods at low
rates, the government repaying any losses on this sort by freight
rates on other goods or even by direct taxation. There is noth-
ing impossible at all about the nations keeping their ships indefi-
nitely and even operating them if they will at some cash loss,
just as they now operate warships or a small post ofiice, or as a
large railroad system operates an unprofitable branch line,'-
^ A question of public morals enters — graft. Great are the opportunities
for graft that lie in the way of controllers of shipping and licensers of
exports and imports. The shipping world is full enough of it already. We
threaten to increase it by all this permission and control. The mere securing
of an export license from the United States War Trade Board in 1917 and
1918 has sometimes been worth a fortune. You could, for instance, buy an
inexpensive commodity at a government controlled price of 3^ cents per
pound. Famished foreigners stood in line for the privilege of paying you
18 cents a pound for it. How much could the unprincipled afford to give
the licenser to issue the license?
336 INFLUENCE OF THE GREAT WAR UPON SHIPPING
Period of Overproduction and Depression
The second thing that may be predicted about the transition
period after the war is overproduction of shipping, a slump in
rates and a great and probably prolonged depression in the world
of shipping/
During the postwar famine when the British, French, Italian
and American Shipping Boards, Controllers, etc., are holding the
rates down by authority on the home trades, there will in all prob-
ability be some Scandinavian, Greek and surplus British steamers
wildcatting on the sea for the highest bidder, who may be our
present enemies. The freights will be fortunes. Everybody
will be tempted to get some ships to reap the golden harvest.
Ship owning is a business with a lot of the gambler's chance in it.
It would be hard indeed to find another business so speculative.
It is affected by things entirely beyond the control or prevision
of the shipowner. It is a work in which a man must observe
and come to his intellectual conclusions and then bet his busi-
ness, almost his whole fortune, on his opinion. Thus in July,
191G, a man offered a steamship for two years at 24s. 6d, per
ton per month, but owing to the then scarcity he insisted upon
having .'Jos. per month if the charter was for one year only."
In March, 1917, "'' a charterer offered a shipowner 12s. per ton
dead-weight per month for a period of five years after peace
was declared, or he offered him 8s. per ton per month for ten
years after the war. In view of the fact that 4s. was a good
rate before the war, these figures indicate one man's faith in
the long duration of high freight rates, but it is only one man's
faith.
The history of shipping during and after the Boer War gives
good reason for us to expect a period of overproduction of ship-
ping, with unemployment of ships and therefore conditions mak-
ing unprofitably low freight rates. That insignificant military
enterprise in South Africa which lasted for two years, 1899 to
' Marine Review. March, 1917.
' l^airplaw January 4, 1917. p. 36.
• Ibid., .Slarch 15, 1917, p. 444.
SHIPPING POLICY AFTER THE GREAT WAR 337
1901, was conducted 6,000 miles from the British base, there-
fore requiring a relatively enormous amount of shipping. The
consequent scarcity and high rates gave the shipowners two years
of golden harvest. Every shipyard on earth was busy building
ships for the speculative owners who wished to get new ships
to do the business while the freights were good. What hap-
pened was the joint release of a great number of new ships and
a great number of old ships, so that in the early months of 1901
rates fell with a crash, and it was years before they were re-
stored to coriditions where the tramp steamer could make a
suitable profit.
Despite the fearful famine of the present, the danger of over-
production following this war is perhaps greater than was the
case during the Boer War. We have a greater ship farnine,
therefore greater rates, therefore a greater temptation to the
speculator, for at the present time a man can pay for a ship in
a voyage or two. Hence the almost irresistible temptation to try
to get new ships that may be upon the sea at least long enough
for three or four voyages before the crash comes, at which time
the lucky owner may have his vessel clear and perhaps even some
profit to boot. The longer this war lasts the greater will he
the capacity of shipyards. We will need about four to five mil-
lion tons a year and will have a capacity for several times that.
Hence the shorter the time in which building can catch up with
need. It is almost unthinkable that when that balance is at-
tained it can be maintained without a slump in freight rates that
drives them down to the rather oft-reached point where vessels
must wait at the buoy for returning prosperity; especially is this
situation probable because of the likelihood of a feverish period
of reconstruction and speculation between the end of hostilities
and the usual collapse that follows a war and its resulting com-
mercial disturbance. A surplus of only two per cent of shipping
sends rates to the bottom.
338 INFLUENCE OF THE GREAT WAR UPON SHIPPING
IVImt SJiall be Done ivith Shipyards?
^^'hen shipbuilding has caught up with need the world faces
the certainty that something like half of its shipyards must go
out of commission, for there will be no earthly need of the
ships unless nations shall deliberately build them and lay them
aside as they do rifles in an armory. That would merely post-
pone for a few years the shutting down of shipyards/ Which
\ards shall shut down ? Under the order of competition it would
be the yards with the higher costs per ton that will be shut,
namely, the yards of America, of Italy, not the yards of Britain,
Holland, or Norway, or perhaps of Germany. Then we shall be
face to face with this question : Now that the war is over, fleets
are restored, most of the first industrial wounds are he?.led, what
shall we do with our shipyards? What shall be our policy with
shipping? Will we let it go to the foreigner across the sea?
Will we have mail subsidy, freight voyage subsidy, mileage sub-
sidy, building subsidies? Shall the government own ships and
lease them, or shall it own ships and operate them?
We should not lose sight of the fact that the present policy of
the Go^vernments of the United States and the United Kingdom
is the strongest possible policy, namely building ships and hand-
ing them over to shipowners to run. This is easy while the rates
are mountain high. It will not be so easy when the rates go
down. Postwar policy will therefore probably be less national-
istic than the present.
' The great fabricating plant at Hog Island has 40 temporary ways of
wood and 10 permanent ways of reinforced concrete.
CHAPTER XII
World Shipping, World Organization, World Peace
Our Unified World
The world is one. Ships have made it so. Not only is the
world one, Imt it has also grown big, very big, and suddenly all
because of ships and a safe sea. One hundred and twenty-five
years ago the black flag of the pirate was the dread of the men
who went down to sea in ships. The man who took an oceanic
journey straightened u-p his earthly affairs and bid his friends
a solemn farewell — and for good and sufficient reason. In that
day trade was a luxury. The countries of the world tended to
be economically independent. They had to be so. The land
that could not furnish the materials for essentially economic
independence remained unused. Men clustered along the shores
of the sea and navigable rivers in that comparatively small part
of the world where resources were reasonably complete. The
middles of the continents were mostly empty because they could
not trade even the little that was necessary. Iowa. Kansas,
Dakota, the plains of the Argentine which have for decades been
the granaries of the world, were then the possession of savages
and wild animals, this too when the white man had been in
possession of the shores of all these continents for at least three
centuries. It is only in the last hundred years of steam and a
sea clear of pirates that man has begun to possess and utilize the
earth.
This century of steam and a free sea has given us a world
trade which enabled the struggling settlements along the shores
of America to increase their numbers twentyfold within a little
more than a century. Europe has also gained enormously in
population, as has South America, Africa, Asia, Australia. Be-
cause of this world ship business, men have clustered in places
339
340 IXFLUEXCE OF THE GREAT WAR UPON SHIPPING
where it was good to live. They have ckistered in such numbers
that they could no longer live upon the produce of the land in
which they dwelt, so that -England and Scotland, Holland and
Norway. Italy, the Rhineland, in fact all West Europe from Nor-
way to Greece, had l^ecome dependent upon the sea trade. With-
out it the>- could not eat. Even their cows depended upon antip-
odean hay: witness the export of baled alfalfa from. Chile to
Britain.
America and Japan have also entered into the world's trade
and the world dependence. New England can no more feed her-
self than can old England, and the United States finds itself
using each year more and more things from overseas.
The Prize of Peace
The continuance of this world trade is the prize of peace,
which has enabled us to multiply by bringing to us the raw
materials for the physical life. The cost of war is the probable
ending of this trade, the starvation of peoples, the reduction of
population, the partial emptying of Belgium and Britain, yes,
perhaps of New England also, and the driving of lands back to
the isolation and scanty population of the days of sailing ships
and pirates. Ample proof of this is shown by the plight of
Norway, Switzerland, Holland, Belgium, now that war threatens
to abolish their trade. Still more positive proof is given in Ger-
many's hope of ending the war by starving England through
stoppage of trade. Another possible alternative is trade under
such dictation as a world conqueror might give. Such tribute,
such servility as the Kaiser could enforce through the control
of the world trade on which our life depends! The thought is
sickening!
World trade had not produced its final good results. It was
but beginning. The starvation of millions must accompany the
ending of sea trade, as war threatens to end it, but the prize
of peace is greater than the mere continuation of the w^orld of
1914. The age of machinery has not reached its maximum. It
WORLD SHIPPING, WORLD ORGANIZATION, WORLD PEACE 341
is in its infancy. We had not developed world trade to its
maximum. It had but started. The four hundred million people
of Europe are not its final joyous product of life. The one hun-
dred millions of the United States are but a handful of people
compared to what this country might make comfortable and
happy if we but reach out with ships and bring ourselves the
comforts to be had from other lands across a free sea.
Scientific Utilization of Resources
We had just begun to use climate. We were making a start in
the habit of letting men live and manufacture in places where vigor
grows and men are strong and energetic. The other part of this
new world-habit is to get the raw materials for this manufactur-
ing man, and the food for this manufacturing man, from parts
of the world that are not so good to live in, but still are fair
and could produce much product. For centuries it has been a
rule-of-thumb observation that the man of the cool North was
energetic and the man of the Tropics was less so. The findings
of science and the studies of geography ^ show with increasing
clearness and put scientific reasons back of the historic fact that
man can achieve much more with body and mind in the vigorous
climates of the midtemperate region of United States, Canada,
Northwest Europe and Japan than he can in that larger part of
the world with the green tropic forest as yet almost unmarked by
the hand of man. The millions of England and New England, of
Holland and Belgium and New York, of France. Italy, Japan,
and Puget Sound, are but the forerunners of other more numer-
ous and more comfortable millions who can live in these good
lands, if we keep a free sea and let the world's trade develop
that great exchange that must result if we utilize scientifically
even a part of the untouched resources of the far places. With-
in a generation the daily life of millions who use the automobile,
the motorcycle, the bicycle, rubber hose, and the other myriad
manufactured forms of rubber, a product of a tropic tree, has
' See especially Climate and Civilization, by Ellsworth Huntington, and
Control of the Tropics, by Benjamin Kidd.
342 INFLUENCE OF THE GREAT WAR UPON SHIPPING
become dependent upon a commodity of the tropic world that
can only come to us through ships. It is but a type and a fore-
runner of our commercial dependence upon this great undevel-
oped zone. There we find fiber plants in great number, most
of them still undeveloped but waiting the hand of the scientific
utilizer. New fruits and foods are also coming from this fecund
warm land. Within a short time cocoa and chocolate, from an-
other tropic tree, have passed into everyday consumption and the
cocoanut has sprung almost overnight into a position of enor-
mous importance as a fat food substitute for our more labori-
ously produced butter. Following it comes the alligator pear,
another tropic butter tree that may soon be of enormous value in
the food supply of northern lands. If the supplies of wheat
grow short, there is rice, which the world is now getting chiefly
from the tropic swamps of Burma, but which many another
tropic swamp can be made to yield. If we still need other
bread substitutes the cassava, and sweet potato, the taro
and other starchy tropic roots, easily dried, can furnish it to us
in unlimited quantity. The age of machinery now beginning
will make us able to utilize easily the now almost untouched
Tropics. As man conquers this warmer world, he will need
every machine, from steam dredges to flying machines. The
place to make these complicated devices is in the cool and in-
vigorating North, the middle of North America. Europe,
China and Japan, lands which may, with the development of the
manufactures which science now makes possible, shelter almost
unbelievable millions of manufacturers, farmers, lumbermen,
miners, all busy, and partly fed with the trade of the Tropics
and the other less desirable parts of the world, which are marked
by nature to continue as the producers of raw materials and the
purchasers of manufactures.
World Conquest or World Government
This pictured world of almost countless comfortable mil-
lions, with plenty of food, developing trade, education, the arts,
WORLD SHIPPING, WORLD ORGANIZATION, WORLD PEACE 343
and the great art of living, can only inhabit the earth if we can
banish from it permanently several conspicuous characters of
history — Captain Kidd, Alexander, Caesar, Tamerlane, Kaiser.
Those accursed twins, the pirate and the conqueror, one using
government as a sham, the other boldly flouting it, are the arch
enemies of world peace. Man is by nature a marauder, a con-
queror. History, if we take the history of the race and take it
in perspective, is a sad, sad chronicle of almost unending maraud-
ing conquest. Why did the prehistoric Swiss have lake dwellings,
and the prehistoric Spaniards live in caves, and why was Rome
built on seven hills? And what happened to Babylon, Nineveh,
Carthage, the Aztecs and Louvain? There is one answer — con-
quest. Family has fought family, clan has fought clan, tribe
has fought tribe, people has fought people, until the number of
such episodes must certainly run to seven figures if not indeed
to seventeen. Civilizations as far back as the last seven thousand
years have risen and fallen before the smashing blow of some
vigorous band of rovers. How long it had continued in the pre-
historic past no man can even guess, certainly tens of thousands
of years. Organized society only arises in spots easy of protection
and survives for a time until attack from the outside becomes
stronger than defense from within. Thus rich America was
possessed by one roving band after another, except in the inacces-
sible and arid plateaus of the Southwest where cliff dwellers,
growing a meager food supply in some narrow irrigated valley,
climbed up a trail or ladder to some perilous height and there
protected themselves while they developed the most advanced
civilization in America. Of the great civilizations, only China has
had a long history and that because nature placed her in a situation
with marvelous natural protection ^ where the people had so little
need for defensive war that they could develop pacifist principles
to a high degree and make them not only an ideal but a practice —
a fortunate result of a favorable location. For a time, the
people of America lived in the same Chinese dream of Wash-
ington's farewell address, but suddenly the machinery made
' See J. Russell Smith: Industrial and Commercial Geography.
34-4 IXFLUEXCE OF THE GREAT WAR UPON SHIPPING
by modern science once more strengthened the hand of con-
quest.
As the 42 centimeter gun and the march toward Calais ended
England's insular isolation, so the submarine showed America
that she, too, must fight or submit.
Pacifism is dead. The whole world must defend itself or
take the mercy of the conqueror, which history shows to be a
scanty mercy. See how China changes. Pacifist for forty
centuries, she now has a military academy and drills her sons
in Western war tactics because the steamships and the railroads
of the Western peoples have shown her that her isolation is
ended, that the conquerors are at her doors, each taking a slice
of her territory. She knows that now she must defend herself.
More suddenly, but yet more completely, has the same thing
happened to the United States, upon the appearance of the sub-
marine, a mechanism of conquest, in the hands of a people
ambitious to dominate the earth after the manner of Alexander
and Caesar.
The world is one. It is one in trade; it must also become
one in government. The most serious question just at present
facing the human race is this: whose government shall it be?
Shall we have a recurrence of Caesar and Alexander with world
empire, world dominance, world obedience, world tribute, world
submission, or shall we have a democracy of peoples, each free
to develop its bit of the earth, to perfect its own way of doing
things, to trade with its neighbors, to live as do the citizens
of any well ordered community — tending their gardens, train-
ing their children, buying and selling, coming and going among
their peers, obedient to no one, or to no class, but obedient to the
will of all?
World Thinking and the Development of Government
Our thinking must grow up. We have developed world trade.
world investment, world enterprise. Enterprise must not run
loose and uncontrolled because it is bigger than man's mind,
WORLD SHIPPING, WORLD ORGANIZATION. WORLD PEACE 345
or rather bigger than man's habit of thinking. We have been try-
ing to run twentieth century business with seventeenth century
thinking. Our mental concepts, our mental content, our men-
tal habits, like the vermiform appendix, are of an age long past.
We can make a scientific machine in five years and put ii to work,
but it is a slow job to readjust society to it. We must develop
world thinking and world government, to match world enter-
prise, or suffer. After all, world government is no new step,
merely one more step, a larger development of an old process, a
process of regional consolidation that accompanies increasing
powers of transport. There was a time when tliere was no gov-
ernment on the face of the earth bigger than the family. Then
the maximum government became a small group of families,
then a tribe, until finally nations were born and they have risen
and fallen for millenniums getting ever larger and larger until
now we are faced by the very practical demand for a world
nation, which, after all, is but one more step in the age-old
process of regional consolidation. A recent traveler tells us of
finding a hamlet of twelve houses in the Himalayas so far re-
moved from neighbors, trade routes, and access that they were
absolutely independent of all mankind — a little world in them-
selves. A little more than one thousand years ago England was
seven independent kingdoms; Wales and Scotland a number of
independent rival warring clans. Now they are one. France
has had an identical history. In the memory of men still living
Italy was a half-dozen independent governments only unified in
1S70. Germany is a conspicuous case with scores of independ-
ent states, some say three hundred, a few centuries ago; twenty-
seven states as late as 1870, now one empire. In 1787 the United
States was virtually thirteen independent commonwealths, and the
physical and intellectual task of making the people of those thir-
teen governments function as one government in 1789 had
greater natural difficulties than the task of making the United
States of the World out of the ten leading Powers in 1920. As
compared with the ten Powers of today it took the men of the
thirteen States of 1789 far longer to communicate with each
34G INFLUENCE OF THE GREAT WAR UPON SHIPPING
Other. It took them longer to exchange their products. The
freight rate. /. c, the relative cost, was greater and the basis of
trade and economic unity was less. Just as our ancestors driven
by the menace of chaos made one nation out of the thirteen in
that year,- so must this generation repeat the step and make one
Power out of the leading Powers of the world. Just as the
thirteen States relinquished the possibility of exploiting each
other through war, tariff, trade, and financial disagreement, so
the nations of the world, if they would keep the peace, must
stop the exploitation of one regional group of people by another,
at least, where the exploited is strong enough to disturb the
peace.
Some Conditions of World Government
To make this world organization survive several conditions
are necessary : first, all must have access to the sea. There must
be no more cjuestion about the right of a people to have free
access to the sea than there is about the right of man to have
free access to the public road or street. It may cost the farmer
something to get a lane out to the road, but he has it, by right
of law and eminent domain, and he pays for it and he can get
it and pay for it whether his neighbor will or no. So Switzer-
land and Serbia and Poland and any other people worthy of
independence must have no more question of their right of
commercial access to the sea than the people of Ohio or Ken-
tucky. The sea must be free.
Second, we must reduce the temptations to war. War arises
out of two desires: one the lust of dominion, and the other the
desire for special privilege upon the face of the earth. There
must be some remaking of the map to remove subject peoples
from galling dominion, as in Poland and Turkey. Unfortu-
nately it would jje very difficult in any remaking of the world
map to exclude all the reasons for special privilege, the most
precious of which is the exclusive possession of a piece of the
earth's surface— the right of a people to have a country and rule
WORLD SHIPPING, WORLD ORGANIZATION, WORLD PEACE 347
themselves. This unfortunately is alike the great objective of
the league of nations, and sometimes also one of the greatest
temptations to war. The possession of a section of earth by a
people sometimes brings the menace of land hunger that arises
almost inevitably when two peoples know each other's coun-
tries have different densities of population, or to be more ac-
curate, a dift'erent ratio of man to resources. This is prob-
ably the greatest cause of war. It has cursed man since long be-
fore that ancient day, when the hungry band of Israelites
marched in out of the desert, climbed over the walls of Jericho
and put her people to the sword. Land hunger has helped to
wreck unoffending peoples from the days of Joshua right on
down to that black day four years ago, when heavily peopled
Germany broke like a dam across the boundaries of sparsely
peopled France. One of the grave menaces to eventual peace is
any people's desire to keep a sparsely peopled land alongside a
densely peopled land. Especially dangerous is the white man's
desire to keep his land white and to exclude the yellow man, and
the black man, after the fashion of Canada, Australia and the
United States with their Chinese exclusion acts. This exclu-
sion rests on force. It is an insult and a dare, yet one of the
things that we hold most dear. If we will insist upon it, as per-
haps we shall, we must mitigate it so far as possible by the aboli-
tion of tariffs, which by free exchange of commodities will do
much to share the advantages of exclusive possession of terri-
tory and reduce the need which densely peopled China and Japan
must feel for the empty lands of, the white man in Australia,
California, British Columbia.
International trade policy thus becomes one of the great
cares of those who would organize the world for peace, and per-
mit man's food supply to increase.
Tariffs are the chief factor in trade policy. Fortunately,
of the two reasons for tariffs recognized by economists, one is
passing by a process of legislation and the other will l^e gradu-
ally and automatically removed in exact proportion to the de-
velopment of the strength of a league to enforce peace. These
348 INFLUENCE OF THE GREAT WAR UPON SHIPPING
two reasons for the tariff are (a) the necessity of starting infant
industries which can be started by bounties as well as by tariffs,
and often are so started, and (b) industrial completeness neces-
sary for war.
(a) Closely akin to this infant industry argument is the
protection of the infant industry or any industry in any country
from the commercial practice of dumping; namely, the selling of
an unsalable surplus at less than cost in a distant market to avoid
a break in price in the customary market. This is a normal ele-
ment of trade demoralization, and it may also be deliberately used
by the producers of one country to stifle rivals that promise to
develop competition in other countries. It has often been so used.
Fortunately, however, the control of this' undoubted evil can be
done without the establishment of any general tariff system. It
has in fact already been recognized by the legislation of Canada
and several other countries by the establishment of anti-dumping
statutes. Under these laws foreign goods may not be sold in the
country of import for smaller prices than they bring in the coun-
try of production. It therefore appears that the establishment of
infant industries need be no permanent cause of friction between
countries, provided it is really, as it claims to be, a bounty for the
protection of infant industries during the period of infancy.
(b) The second reason for tariffs is a much more potent one,
one that looms particularly large in the present moment; namely,
the necessity of developing a variety of industries in the attempt
to produce the astonishing industrial completeness necessary for
war. There is almost no limit to the application of this phi-
losophy now that war has become so industrial. Along with this
idea, we should never lose sight of the fact that all economists
recognize in the tariff a factor increasing the cost of living in
the country possessing it. In other words, tariff, except as a
starter of infant industries, tends to impoverish; conversely,
free trade tends to enrich by giving the importing country the
advantage of the specialization that may be developed in all
other countries. As an example of the impoverishment of tariffs,
we may take Portugal, a country that insists upon taxino- everv-
WORLD SHIPPING, WORLD ORGANIZATION, WORLD PEACE 349
thing that comes into its bounds, and has forced the cost of liv-
ing up to a fearful level. As an example of the enrichment of
free trade, we have the prosperity of England and Holland,
with cheap supplies and a low cost of living based on goods from
the world's cheapest markets. Hungry Portugal on the other
hand has to buy in one of the high tariff markets and sell along
with England and Holland in competition with all the world.
At the present moment the pains and perils of the Great War
have served to emphasize the importance of tariffs as factors
aiding the industrial completeness necessary for national defense.
We have, however, already passed the point of the possibility
of this as a general policy for the nations of the world. We have
developed population and trade too far; industry and war have
become too complex for any nation to hope to be commercially
independent, even if its variety of resources is as great as that
of this country. Everyone knows that England and Holland,
France and Norway are dependent upon the sea, but so also is
the United States. Our steel industry with its whole great class
of war supplies can be ruined by cutting off imported ores used
in hardening steel.
We tend to become less independent rather than more inde-
pendent. The development of science, while it may in a way
develop commercial independence of nations, does so only as
5 last resort of discomfort. Its natural tendency is to develop
an ever increasing dependence because of the increasing variety
of product that enters into our daily life. Thus China for ages
was a complete world in herself. She scorned the outside world
that could bring her nothing she herself did not have. But as
the age of science comes, she begins to want our machines and
our specialized productions. That is typical of the present status
of the economic independence concept.
For the conduct of a war a nation needs access to the sea or
colossal preparation such as Germany made, followed by almost
instantaneous success, such as Germany did not get.
Tariffs can not make us even in the United States independent
in war, although if deliberately used for that purpose, they could
350 INFLUENCE OF THE GREAT WAR UPON SHIPPING
make us nearly independent, but at great cost through high living
expenses and inefficient industry.
Every year science is making military completeness less possible,
attack more deadly and isolation more impossible. The past is
gone; along with it isolation is also gone. The world has given
hostage to peace. Our century of world trade has already de-
veloped the degree of interdependence of nations and dependence
on the sea and ships, whereby we are compelled to maintain
this commerce or lapse back to a past epoch of small population
or obedience to some tyrant. The Revolutionary motto, " Unite
or Die." used to bring the American colonies together, was never
more applicable than today and now it applies to the nations of
the world. We must unite in world organization with a free
sea permitting a great world trade, or start into an epoch of
militarism with the menace of being united by some world con-
queror taking a rich world tribute.
We can not hope to remove from man the lust of dominion,
but we can do much to remove from it an admixture of the de-
sire for land, and the desire for trade privilege. We can not
hope to remove land hunger, but we can greatly dull the appetite
by establishing freedom of trade, which will still leave peoples
free to develop their own social conditions. By this mitigation
of desire we have some chance of organizing the world so
that it may be able to suppress the lust of dominion and this
modified land hunger.
INDEX
Admiralty: administrative committees, 44,
45, 153; control over war risk insurance,
56, 62; charter and requisition of ships,
153, 158, 164, 172; functions, 1-",!), 170;
control over shipbuilding, 245, 251, 254,
255. 257; officials, 200.
Admiralty, First Lord of the, 2G0, 261.
See also Geddes, Sir Eric.
Aerial navigation, 218, 328, 329.
Africa: line traffic, 8; tramp traffic, 23;
diagram showing vessel movements to
United Kingdom, 79.
Allied Maritime Transport Council, 218.
American International Corporation, 285,
286, 295, 306.
American international Shipbuilding Cor-
poration, 285, 280, 300.
American merchant marine: condition at
beginning of war, 322-.323; increase, 70,
128. 144; high cost of construction and
operation, 72, 12!»; government aid, 126,
■ 127, 128, 130, 132-135, 144, 145; re-
. quirements for flying national flag, 128,
1 322; free ship policy, 128; State ex-
' emption from taxation, 132; mail trans-
.*. portation, 133-135, 144; officers and
* sailors, 195-197; requisition, 46,198-200;
• method for maintaining after the war,
330-333.
Amundsen, Captain Raoul, 105.
Archangel: trade of, 80, 100.
Argentina: early results of cessation of ex-
ports, 4.3, 77; decreased coal supply, 77,
107; diagram showing vessel movements
to United Kingdom, 79; jjaralysis of
trade, 80, 81; trade with United States,
93, 107, 112, 119, 120; German firms
in, 97, 107, 121, 122; future policy,
311; statistics, 80. •
Australia: line traffic, 8; tramp traffic, 23;
grain exports, 34, 43, 172, 201; de-
creased shipping, 77; wheat situation, 78;
coal exports, 78; diagram showing vessel
movements to United Kingdom, 79; food
exports, 84, 8.5; wool exports, 80; cotton
imports, 91 ; trade with United States,
93; postal subventions, 136; government
ownership of vessels, .324, 325.
Austria-Hungary: jjcncil trade, 91; coasting
trade, 126; government aid to ship-
building, 120, 130, 131, 132, 136, 137,
139, 149; registry legislation, 322.
Austrian Lloyd Steamship Co., 130, 131,
132, 136, 149.
Auxiliary cruisers, 130, 133, 134, 149,
215.
Baker, Bernard N., 273, 274.
Baltimore Dry Docks and Shipbuilding Co.,
304.
Barges, 198, 208, 209, 232, 233.
Belgium: government war risk bureau, 59;
food rationing, 85; news print exports,
118; government aid to shipping, 126,
127, 130, 131, 139, 151.
Bethlehem Steel Corporation, 295.
Black list, 99, 121.
Black Sea: food exports, 84; prohibition of
exports to, 104; German trade with, 148.
Blockade, British: effect on marine insur-
ance, 55; eff'ect on cotton, 5(5, 82, 97;
effort to prevent trade with Central
Powers, 56, 97; failure, 98, 99; meas-
ures adopted by exporters, 99, 100.
Blue Book rates, 40, 153, 154, 155, 156,
157, 158. 169, 172 175, 170, 181.
Board of Trade (British), 117, 158, 159,
174, 257, 259, 2(53; president of — see
Runciman, Sir Walter.
Boer War, 20, 123, 330, 337.
Bounty — sec Subsidies.
Bowles, Rear Admiral Francis T., 297, .302.
Brazil: trade with United States,. 11, 16,
78, !)3, 106, 113; diagram showing vessel
movements to United Kingdom, 79; gov-
ernment aid to shipping, 140, 151; coffee
exports, ,315.
Bristol, Pa., shipyards, 226, 285.
British Manufacturers Corporation, 116,
117.
British merchant marine: national value,
42; blockade of, at outbreak of war, 73;
government aid, 120, 127, 130, 132-135,
140-144; effect of free ship policy, 128;
loans to companies, 130; mail transporta-
tion, 133, 141; requisition of, 158, 109,
172, 173. 178, 180; government control,
172-184; finances, 170-180; registry legis-
lation, 322; statistics, 246, 255.
British Trade Corporation. 110. 117.
Bulgaria: subventions, 140; imports, 148;
railways, 148.
Canada: prewar trade, 12, 23; trade with
United States. 93, 103; government aid
to shipping, 136, 137, 143, 144; govern-
ment ownership, 324, 335.
Canals: reimbursement of dues, 131, 132;
in Germany, 140.
Capps;' Rear .'\dmiral Washington Lee, 281-
283, 285, 286, 290, 291, 293.
Cement ship — see Concrete ship.
Central America: line traffic, 8; trade
paralysis. 81.
Chamber of Commerce (U. S.), questions
concerning ship control, 190.
Chemical products: cessation of German
exports of, 82; American export, 83;
American development and protection of
industry, 113, 114.
Chile: diagram showing vessel movements
to United Kingdom, 79; nitrate business
of, 82, 90; trade with United States, 93;
subventions, 140, 151.
China; line traffic, 8; shipbuilding in. .37;
cotton cloth imports, 90; trade with
United Slates, 93; German firms in, 121;
size of cotton bale in, 215; war prepara-
tion, 344.
Clark, F. H., 275, 276, 278, 279, 293.
Clyde Line, 212.
Clyde .Steamship Owners Association, 171,
351
352
INDEX
Clyde yards: standardized vessels built in,
220, 257; proposal to close, 245; women
workers, 250, 253; government officials,
260. „ ^ .
Coal: prewar shipment. 6, <; increase in
price ;n, SI; British control. 41, 44,
11" 100 170. .SI 2. 323; British exports,
777' lOC! 170; pooling of cnrs, 47;
United States exports, ii, 10.5, lOb;
American control, 112, 108, 20 (, 108,
200; statistics, 77. ,„_,„_
Coasting trade: reservation of. l-u-l-i.
145, 140; restrictions of, 142, 1(1;
British control, 171; restrictions re-
moved, 103; American control, 108, 200.
Colby, Bainbridge, 2S3, 204.
Collins Line. 135, 144.
Commerce before the war: tramp ship
traffic, 5-7; line traffic, 8; prevention of
competition. 0-16; results of agreements,
10; necessity for government interfer-
ence. 17; ocean freight rates, 18-23;
freight depression of 1014, 23; interna-
tional competition, 24, 25.
Competition, prewar prevention of: rate
agreements, 0; division of territory. 10;
division of traffic, 11; pooling of freight
money, 11; outside_ carriers, 12; in-
formal agreements. 15.
Composite ships, 230.
Concrete ships: comparison with standard-
ized steel ships, 210, 231; history of
concrete in shipbuilding, 231-230; meth-
ods of building, 230, 237; launching,
237; advantages, 237-230; disadvan-
tages, 230-241; Lloyd's approval, 241;
present I'nited States program, 241-243;
success, 300. .
Contraband: uncertainty regarding, 50, 0(;
refusal of United States to insure vessels
carrying, 60, 67; ships searched for, 07;
changes in lists. 07.
Convoy system. 171, 202. 203, 204.
Corrugated ships, 218, lilO.
Cotton: freight rates, 22, 31; condition in
Southern States. 43, 40, 56, 82, 07;
effect of blockade on. 50. 82, 07; insur-
ance, 67; decline and recovery of, 82;
British export of manufactures of, 00;
manufactures in Japan, 00. 01; American
conference concerning, 108; reduction in
size of bales, 215.
Cramp's shipyard, 208.
Cunard Line, 85, 130, 133, 134, 140, 141,
142.
Dardanelles, 34, 75.
Defense of the Realm Act, 102, 174, 249.
Dc Lanoy. William C, 50.
Denman. Urn.. 2.30, 273, 274, 275. 277,
270, 280. 205.
Denmark: line traffic. 8, 150; difficulty in
securing raw materials, 38; coal agree-
ments, 41 ; government war risk bureau,
50; decreased coal supply, 77; food im-
ports, 83, 84; trade with Germany, 08,
00; government aid to shipping, 126,
127. 130. 132, 130. 150; concrete boats,
233.
Diagrams: movement of grain from River
Parana. -7; vessel movements to and
from L^nitcd Kingdom, 71»; effect of war
on mcrcliant shipbuilding, 205; shipbuild-
ing capacity of United States. 1914-
1018, 208.
Diesel engine, 275.
Donald, John A.. 273. 280.
Eagles, 218.
East Indies: coal supply, 78; coasting trade,
126.
Egypt: line traffic, 8; port congestion,
35; decreased coal supply, 77; cotton
cloth imports, 90; size of cotton bale,
215.
Elder-Dempster Line, 134. 141.
Emergency Fleet Corporation: recruiting
service, 195; creation of, by Shipping
Board, 270, 300; functions, 270, 277;
officers, 276, 283, 200, 205-208; con-
flict of authority, 290; contracts, 280,
285. 286. 300; delays, 205; movement
to Philadelphia, 207; houses built by,
302; statistics, 287, note, 3.
Entrepot trade, reduction of. 86-88, 101.
Eustis. F. A., 275, 278, 27O,_203.
Exports: prewar conditions, 5; American
licensing, 45, 105, 112, 113; prohibition
of, to Central Powers, 75, 07; decline of
European, 82, 00; British government
control, 103, 104, 100, 107: .American
control, 45, 103, 105; eff'orts to ex-
pedite, 210, 215; administrative agencies,
105; •statistics, 77, 80. 92, 93.
Fabricated ships, 225-227, 257-259, 275,
276, 292, 298, 305, note 3.
Federal Shipbuilding Co., 304.
Female labor: in munitions, 248; in ship-
building, 45, 250, 252, 253; admission
to trade unions. 248; comparison with
that of men. 253.
Ferguson, Homer, 289. 290, 297. 200.
Ferro-Concretc Shipbuilding Co.. 242.
Ferris ship design, 227, >279, 288, note 1.
Flying boats — see Aerial navigation.
Food: effect of production and consump-
tion of, on trade. 74, 75; government
control of, 70, 102. 105; effect of war
on, 8.3-85; demand for, 92, 207; Ameri-
can exports of, 94; British blockade. 97;
German supplies, 99; British control of
imports, 102; Norwegian restrictions,
101; export licenses, 45, 105; statistics,
108.
Food Administration (U. S.), 105, 293.
Food Controller: British, 102, 107; Nor-
wegian. 109.
Ford, Henry, 218, 305, 306.
Fore River Shipbuilding Co., 295. 297.
Foreign vessels: admission to national reg-
istry, 128, 129, 144, 146, 187. 322; sub-
ventions to. 139, 140; legislation con-
cerning, 187, 188; admission to Ameri-
can coasting trade. 103; commandeered
by United States, 283.
Fougner Steel Concrete Shipbuilding com-
^ panics, 234, 236.
France: prewar agreements among liners,
12; port congestion, 35. 36, 161, 162,
184; neglect of shipbuilding. 38; gov-
ernment war risk bureau, 59; dyestuff
imports, 83; food imports, 83, 109; food
control, 85, 110; drug exports, 89; trade
with United States, 93, 05, 100; entrepot
trade to, 101; trade restrictions, 104,
110; trade after the war, 117; news print
exports, 118; government aid to shipping,
120. 127. 120-133, 130-139, 148, 149;
increase in imports, 1.50; use of British
ships, 181, 182; exchange of vessels with
United States, 201 ; concrete rowboat of,
2.31, 230; American vessels built for,
260.
Free ship policy, 128.
INDEX
Freedom of the sea: prewnr, 5, 0; effect
of war, 20.
Freight rates: fixed agreements, 9; mini-
mum rate agreements, 10; pooling of
income, 11; deferred rebates, 12, 21;
cutting of, 13; informal agreements, 15;
tramp and liner comparison, 18-2;$; low
rates of 1914, 2o; inlluence of war on,
30, 31, 53, 58, 151, 1(58; British control
of, 39, 158, 170, 17ti, 180; American
control of, 191, 192, 199, 200.
Fuel Administration (U. S.), 112, 283,
note.
Geddes, Sir Eric. 41, 45, 261, 262, 263.
German East Africa Line, 135, 146, 147.
German Levant Line, 135, 140, 147.
Germany: |)rewar situation, 13, 24; grain
exports, 30; steel exports, 38, 127; Amer-
ican control of shipments to, 45; war
risk bureau, 59; chemical products, 82,
89; food imports, 83; disappearance and
replacement of ships, 85, 86, 121, 188;
war trade, 90, 97, 148; cotton imports,
97; news print exports, 118; coasting
trade, 120, 140; government aid to ship-
building, 120-130, 133-135, 145148,
315; trade with Levant and Far East,
129, 135, 140, 147; concrete boats, 231,
232, 2,34, 239; preparation for the future,
312, 315-317.
Goethals, Geo. W., 227, 2.30, 274, 278,
279, 285, 287, 290, 293, 300.
Gold: effect of war on supply of, 50; ship-
ment of checked, 72.
Government aid to shipping: reservation of
coasting trade, 125-127; exemption from
import duties on shipbuilding materials,
127; admission of foreign built vessels
to national registry, 128, 129, 144, 140,
187; preferential railway rates, 129, 130;
loans to shipowners, 1.30, 1.31, 143; re-
imbursement of canal dues. 1.31, 132;
exemption from taxation, 132; postal sub-
ventions, 132-137; subsidies, 137-139;
subventions to foreign steamship lines,
137; summary, 140-152; influence of
war, 152.
Government shipyards: American, 193, 226,
285, 280, 293. 299, 300. 305, 322;
British, 244, 246, 254, 255, 258, 201,
284-280.
Government war risks bureaus: formation
of, in various countries, 59; United
States, 59-62; Great Britain, 62-65;
Japan, 65, 00; Norway, 06; rates, 67;
effect on private companies, 67; com-
ments, 68-70, 72.
Grain: diagram showing movement of, 27;
Norway's need, 30, 108, 109; effect of
closing of Dardanelles, 34; Australia's
trade. 4.3, 201; imports and exports, 84,
95, 102; American crops, 84; British
control of, 102.
Greece: line traffic, 8, 85; grain supplies
for, .34; formation of government war
risk bureau in, .59; insurance rates from
United Kingdom direct to, 65; decreased
coal supply, 77; food imports, S3.
Guatamala: export of cattle prohibited by,
103; government aid to shipping, 151.
Gulf ports: trade of, 201.
Hamburg-American Line, 10, 11, 14, 24,
135, 145.
Harlan & Hollingsworth, 295, 298.
Harris, Rear .Admiral Frederick R.. 282,
290, 291, 290, 298.
Hog Island shipyard: built by United
States government, 226; contracts with,
285, 286, 299; delays at, 293, 298, 300;
housing conditions, 302; maximum out-
put, .305.
Holland: line traffic, 29; difficulty in se-
curing raw material, 39; government con-
trol of shipping, 41; enemy trade, 4:>.
45, 98, 99; insurance rates, 69; coal
supply, 77; food imports, 84; cotton im-
ports, 87, 91; East Indian produce, 87;
trade with United States, 9.3; ships com-
mandeered by United States, 102, 107,
194; government aid to shipping, 120,
127, 130, 136, 151; cement ships, 231,
233, 235.
Holt Line, 222.
Hough type of wooden ship, 276.
House, Col. E. M., 213, 294.
Houston, R. P., 103, 164.
Hurley, Edward N., 210, 212, note, 280,
283, 288, 307.
Imports: shortage in Great Britain, 101;
government control, 102, 105. 106, 112,
158, 167; exemption from duties on ship-
building materials, 127. 146, 147; li-
censes, 105, 106, 158, 167; reducing bulk
of, 215.
India: line traffic, 8; grain exports, 34;
insurance rates, .52; food exports, 84, 85;
cotton bales. 21.5.
Indian Conference, 169.
Insurance, marine: condition at beginning
of war, 28, 49, 52, 73; dependence of
trade on, 49; development in England,
50; development in United States, 51;
relation of war risk to, 51, 52; pro-
hibitive rates at beginning of war, 52;
causes for high rates, 53-56; fluctuation
of rates, 50, 57; inadequacy of capital
of private companies, 58; government war
risk bureaus, 59-70; relation to world
trade, 70; growth since 1914 in Ignited
States, 71; lessons taught by war, 71-73.
Insurance rates: increase in, 50, 52, 54,
58; effect of war on, 52-50, 58; govern-
ment control, 60, 60, 67.
Insurance, war risk: formation of govern-
ment bureaus, 59; United States bureau,
59-61; British bureau, 62-65; Japanese
plan, 65, 66; Norwegian plan, 67; rates,
67; effect on private companies, 67-69;
continuation after war, 69.
Interallied Chartering Committee, 183.
Interallied Conference, 184.
Interior, Secretary of the, 114, 214.
International Mercantile Marine, 42, note,
177, 212, 321.
International relations after war, 326; eco-
nomic and technical problems arising,
327, 328.
Interstate Commerce Commission, 189, 191.
Iron and steel: Japanese-American agree-
ment concerning, 37, 42, 107, 301; dif-
ficulty of obtaining, 38, 254; control of
industry, 44. 103, 253, 2.54, 300; raw
materials imported, 113. 214.
Isherwood, J. W., ship design of, 228, 2o8,
note 4.
Italy: line traffic, 8, 86; port congestion,
35, 36, 87; government war risk bureau,
59; decreased coal supply, 77; diagram
showing vessel movements to United
354
INDEX
Kingdom. 70; wool imports. 87; trade
with United States. f)3; trade with Ger-
many, rt.'i; news print exports. ITS; Kov-
crnment aid to shipping. SG. 126 127,
l.'Ui 1:58. l."?!). 140; auxiliary cruisers,
14!>; use of British ships, 182; concrete
ships. 231. 232.
Japan: line traffic. 8. 138. 130. 150; agree-
ment concerning steel with United States,
37, 42, 107. 301; government war risk
plan, rio, fl.^. fiCi; rates on cargoes in
Japanese hulls, GO; gains in trade. 00-02,
ll.S; cotton manufactures. 00. 01; toys,
01; statistics, 02; trade with United
States. 03; government aid to shipping,
01. 126, 136, 138. 130. 150; war profits,
170; purchase of American ships, 188;
Pacific trade, 200; comparison of ship
operating cost with American and British
ships, 320.
Java: sugar in, 43; diagram showing vessel
movements to United Kingdom, 70.
Kitchener. Lord. 240.
Kosmos Line, 131, 140.
La Follette Seamen's Act, ,188, 320, 330.
Labor: shortage, 36. 161. 170. 251. 270,
271; situation in .\rgcntina. SO; British
troubles, 170. 248. 2fi4; British __effo_rts
to better conditions. 44, 101, 247. 250.
''52 ■•50 264; conditions in United
States, 226, 271, 205, 301, 302; housing
conditions, 250, 301, 302; education of
employes, 301. See also Female labor
and Trade unions.
Lake vessels. 4S, 200. 201. 208, 233, 242.
Lamport & Holt Line, 10. 11.
Legislation affecting shipping: British, 156,
H!2 167. 173. 174. 240; .American, 187,
iss! lSO-101. 103, 318-321.
Leyland Line. 142.
Licenses for trading: British. 43. 158. 150.
166. 167: American, 45, 105. 202;
French. 104; administrative agencies,
1.50. 167. 171. 172.
Line traflnc: development, 8; prevention of
competition. 0-14; informal agreements,
15-17; influence of tramp steamers on
rates. 20-22; government control of, 42,
46; rerouting of, 85. 86.
Liverpool Shipowners Association, 161, 313.
Lloyd George, David. 157. 252. 264.
Lloyd's: origin and development. 50. 51;
temporary closing, 53; American branch,
71.
Lloyd's Register of Shipping, 116, 117,
210, note, 241, 251. 2.55 263.
Loans to shipowners. 1.30, 131, 14.3.
McAdoo. \Vm. Gibbs. ISO, note, 100.
McCasscy, Lynden, 2.51.
M.icl.Ty. Sir Jos.-ph. 41. 167. 16S. 171. 172,
173. 174. 175. 180, 256. 257.
^L^il transportation: government aid to,
132-137, i:?0, 140. 144, 146, 14S. 140,
15(».
Marine insurance — xcc Insurance, marine.
Maxim. Hiram. 230.
Mediterranean: insurance rates to, 5.5, 67;
trade, 8.5; searching of ships, 07; pro-
hibition of exports to. 104.
Mediterranean Conference. 160.
Merchant marine; Australia. S. 136; .Aus-
tria-Hungary. 126. 130. 131. l.TJ. 136.
137. 130. 140; Belgium. 126. Iii7. 130,
131, 139, 151; Canada, 23. 136, 143,
144; Denmark, 8, 126. 127, 130, 132,
146, 150; France, 12. 126. 127, 120-
133 136139. 148, 140; Germany, 13,
24 '126-130, 133-135. 145-148; Holland,
•'O' 1''0 127, 130. 136, 151; Italy, 8,
86.' 126,'l27, 13(i-130. 140; Japan. 8, 81,
1''6 136 138, 130. 150; Latin .America,
140' 151; New Zealand. 136. 140, 144;
Portugal. 136, 151; Russia. S6. 126, 131;
Scandinavia, 86. 126. 127. 130. 136,
150; Spain, 8, 126. 127. 1.30, 136, 139,
151. See also British merchant marine;
American merchant marine.
IMerchant Shipbuilding Corporation. 285.
Mexico: government aid to shipping, 140,
151, 152.
Mines: insurance against damage by. 51.
Money. Sir Leo Chiozza, 175. 176. 221.
ISIonzie, M. de, 35, note 1, 181, 182.
Morgan, J. Pierpont, 21. 321.
Alosquito craft, 21S. 244.
^lotor boats to fight submarines, 218.
Munitions. Ministry of: control of iron
industries, 44. 101; officials, 2.53.
Munitions: rise of trade in, 74; legisla-
tion, 162; industrial conditions, 247, 248;
women workers, 248, 253.
Nansen, Fridtjof, 46, 108.
National Foreign Trade Council, 325, 329,
330.
Navy Department: vessel supply for. 199,
202; representation on various adminis-
trative agencies, 209.
Netherlands — see Holland.
Neutrals: trade of, 42. 104, 158, 199;
vessels of, commandeered by United
States, 102, 107. 193, 194; British con-
trol of vessels, 41.
Newark, N. J., shipyards, 226, 285, 296,
305. note 3.
Newcastle district, shipbuilding in, 245,
251.
Newport News Shipbuilding Co., 289.
New York Shipbuilding Co., 295, 296, 299,
303. 306.
New Zealand: wool exports, 43, 78; cotton
imports, 01 ; trade with United States,
03; subventions, 136. 140. 144.
North German Lloyd Line, 10, 12, 14, 131,
133, 135. 130. 146.
North of England Steamship Owners As-
sociation. 177. 180. 257.
Norway: line traffic, 8; shipping needs, 30,
34; early efforts to buy ships, 37; dif-
ficultv in securing raw material, 38;
prohibition of trade with, 46; govern-
ment war risk bureau, 50, 66; increased
shi()i)ing, 77, 205, .315; coal supjily. 77;
diagram showing vessel movements to
United Kingdom. 70; food imports, 83;
trade with United States. 93. 108; Ger-
man trade. 9S. 09. 100; German pur-
chase of ships from, 121; government aid
to shipping. 126. 127. 130. 136. 1.50;
British contracts, 179; concrete boats,
233. 234, 236, 237; American vessels
^ for. 260.
Nova Scotia: government aid to shipping,
143.
Ocean Steam Navigation Co., 133.
Officers and crews: insurance, 61. 64; edu-
cation. 10.5. 197; comparison of wages
of British and American tramp steamers,
319.
INDEX
355
Pacific :Mail Steamship Line, 144, 188, 320.
Pacific Sttam Navigation Co., 133, 134,
140, 141, 142.
Paraguay: drug imports, 89.
Parana river, diagram showing grain move-
ments from, 27.
Peninsular and Oriental Steam ^avlgatlon
Co., 140, 142.
Peru: news print imports, 118; govern-
ment aid to shipping, ir>l.
Piez, Charles, 272, 290, 296, 297, 298, 307.
Plate River, tramp ships rates on lumber
to, 22; food exports, 84; wool business,
87; conference, 109.
Pooling operations: freight money, 11; coal
cars, 47; traffic, 70; railway resources,
205; labor, 2.50, 259.
Port and Transit Executive Committee, 159,
161.
Ports and harbors: congestion, 34-36, 46,
47, 48, 87, 98, 160-164. 184, 198, 204-
209; administrative agencies, 48, 159,
161, 163, 209. 212; labor, 161, 162;
government control, 162, 163, 184, 212;
causes for congestion in .America, 206;
efforts to relieve, 198, 208, 209, 212.
Portugal: grain supplies for, 34; food im-
ports, S3; German trade, 98; postal sub-
ventions, 136, 151.
Postwar shipping policy: situation at end
of war, 308; impossibility of general na-
tional independence, 310-312; British sit-
uation, 313-315, 332; German policy,
315, 316, 323; .American handicaps, 319-
.321 ; merchant marine of United States,
321-323, 330-333; factors controlling fu-
ture, 325-329; continuation of Shipping
Board, 329. 330; transition period, 333-
338.
Postwar trade: war products, 114; govern-
ment control of industry, 115; British
organization and plans, 116-119; com-
petition, 121, 122; comments, 121-123,
340-342.
Preferential railway rates, 129, 130 147,
148.
Prince Line, 10, 11.
Raiders: damage done by, 49, 53, 54; in-
surance against, 51; effect on insurance
rates, 53.
Railways: congestion, 46, 193, 205, 300;
British control, 112; preferential rates,
129, 130, 147, 148; American efforts to
relieve congestion, 198, 210; consolida-
tion of systems, 205; car shortage, 206.
Reconstruction, British Minister of, 116,
117.
Red Star Line, 142.
Registry: American owned ships under Brit-
ish flag, 42, 327; foreign ships admitted
to national registry, 128, 129, 144, 146,
187, 322.
River Plate Conference, 169.
River traffic, 198.
Riveters, rivalry among, 303, .304.
Royal Mail Steam Packet Co.. 133, 142.
Runciman, Sir Walter, 176, 221, 245,
note 7, 259.
Russia: grain exports, .30; effect of closing
of Dardanelles on, 75; decreased ship-
ping, 77; small trade with, 78; diagram
showing vessel movements to United
Kingdom. 79, 122; new steamship lines
of, 86; trade with United States, 93; gov-
ernment aid to shipping, 126, 131.
Sailing vessels: government control, 202;
exchange between France and America,
201; on Pacific Ocean, 201; standardized,
220.
San Francisco Shipbuilding C9., 235, 242.
Scandinavia: prewar commercial condition,
8, 14; enemy trade, 43, 45, 96; Arnerican
lines to, 86; government aid to shipi)ing,
150; war profits, 179. Sec also Nor-
way, Sweden, Denmark, respectively.
Schwab, Charles M., 297, 298, 300, 302,
303, 306, 307.
Seamen's division of War Risk Insurance
Bureau, 61.
Severn River yards, 269.
Shipbuilding, technical development of, dur-
ing war: naval work, 217; merchant ves-
sels, 218; corrugated ships, 218; stand-
ardized ships, 219-i:28; unsinkable ships,
228; new methods of construction, 229;
new materials, 230-24.3.
Shipowners: profits, 150-158, 173, 178,
ISO, 1S5, 248, 255; troubles, 15"4, 165,
177-179, 181, 199, 201, 204, 288, 320;
finances, 176-181.
Shipping administration (American) : legis-
lation, 187, I8ST 189-191, 193; increas-
ing shipping facilities, 193-195, 208, 210;
increasing supply of sailors, 195-197; re-
arrangement of resources, 197-202; need
of organization, 202-205; traffic conges-
tion, 198, 205-209; control of ships, 188-
193, 209; organization, 208-213; com-
merce control to relieve shipping,
213-215; condition of industry at begin-
ning of war, 266-271; Shipping Board,
271-307. See also Shipping Board.
Shipping administration (British): requisi-
tion policy, 153-150; profiteering, 150,
157; taxation, 158, 173, 175; organiza-
tion and results, 1915-1916. 159-167;
control of ports, 160-164; Ministry of
Shipping, 167-171; control over mercan-
tile marine, 171-174; revenue, 175, 176;
finances of shipowners, 176-180; aid to
Allies, 181-184; control of yards and
output, 244-252; status at beginning of
1917, 252, 253; organization and results
of government control, 2.53-262; ship-
building problem and prospects, 262-264.
Shipping Board: functions, 105, 106, 199,
202, 211; legislation concerning, 189,
191, 193, 271; appointment, 192; in-
creasing shipping facilities, 193, 194, 283-
286, 295, 303-307; efforts to relieve port
congestion, 198, 208, 209, 212; control
of rates, 199, 200; conflict of authority
with War and Navy Departments, 202,
204, 211; delays and difficulties, 282,
285-293, 298-301; first epoch in admin-
istration, 273-280; second epoch, 280-
296; present epoch, 296-307; continua-
tion after war. 329, ,3.30.
Shipping, British Ministry of: personnel,
41, 45, 167; creation, 159, 166, 167;
changes in policy, 168; methods of work,
169-174, 176; departments, 170.
Shipping control committees, 159. 211-21.3.
Shipping Controller — see Maclay, Sir Jo-
seph.
Shipping Council, 213.
Shipping policy after the war — see Postwar
shipping policy. (
Ships Licensing Committee, 159, 160, note
1, 171, 172,
Skinner and Eddy Corp., 296.
R.^R
INDEX
Society of Naval Architects and Marine
Engineers: petition of, 289.
South Africa: insurance rates to, 5;); cotton
imports, 01; postal subventions, l.i\>.
South America: line traffic. S; division of
territory, 10; tramp traffic, 23; gram
exports, 34; American trade with, 4b,
107 191; insurance rates, 02, 53, 54,
f>5- coal supply, 78; British trade with,
65, 90; French trade with, 129; coast-
wise trade, 134.
Southern Pine Association, 300.
Spain: line traffic, 8; grain imports, 34;
trade of, 37; coal supply, 41; diagram
showing vessel movements to Lnited
Kingdom, 79; food imports, S3; German
trade, 98; trade with United States, 113;
news print exports, 118; governnient aid
to shipping. 120. 127, 130, 136, 139,
151; concrete vessels, 234.
Standardized ships: before the war, 220;
adopted by United States, 219, _ 223;
adopted by Great Britain, 219. 2.m ; op-
position 220, 221, 258; various desifws,
2'i2 225, 259; advantages, 222-225, 258,
259; fabricating system, 225-22 (, 2.57-
260, 262; government committees, 259,
260!
Statistical tables: insurance rates, 1914-
1918, 57: coal exports of United States,
77; exports from Argentina, 80; Japanese
imports and exports, 1913-1917. 91,;
United States trade balance. 1917, 93;
United States imports of raw materials.
1914-1917. 94; British shipbuilding. 246.
255; American shipbuilding, 286, note 3,
299; comparison of crew cost of .\meri-
can and British tramp steamers, 319.
Steel ships: corrugated type, 218; standard-
ization, 219-227: new methods of con-
struction. 229, 230; comparison with con-
crete ships. 237-241.
Stevens. Ravmond B.. 274. 280.
Submarine Boat Co.. 285, 305, note 3.
Submarines, effect of, on ship supply, 33,
34, 246; on raw material imports, 38,
39; insurance for damage by, 51; effect
of, on insurance rates, 54. 55; decrease
in successes. 55. 262. 263. 264; efforts
to avoid. 163; ships designed to fight,
217. 218; ships designed to prevent dam-
age bv. 218. 228, 229, 239; built by
Great "Britain. 244; future of. 328. 329.
Subsidies: definition of term. 125; neces-
sity. 126; arguments against, 129; pur-
pose, 1.34, 137, 138; legislation, 129,
137, 138, 1.39, 150; results, 137, 139;
various systems, 138, 139; summary, 140-
151.
Subventions: definition of term, 125; postal
requirements. 128. 133. 1.34. 1.37; Brit-
ish. 131. 132. 134. 140. 141. 144;
American. 133. i:'.4. 142; foreign lines,
1.39. 140; other countries. 133-137; legis-
lation concerning, 142, 144; summary,
140-151.
Suez Canal: traffic of, 82; reimbursement
of dues. 131. 1.S2.
Sugar: freight rates, 22, 172; in Java, 43;
British imports. 162.
Sweden: line traffic. 8; idle ships. 34; gov-
ernment war risk bureau. ,59; decreased
coal supply, 77; food imports, S3. 84;
trade wUh United States. 93; German
trade. 98. 99; British trade bargain, 107;
government aid to shipping, 126, 127,
1.30. 1.36, 150; after the war policy, 315.
Switzerland, trade with United States, 95,
Tankers, 165, note 3. 172, 254.
Tardieu. Andre, 109, 110.
Taxation: increased, 158, 159, 173, 175;
exemption from, 132.
Tide-Water Coal Exchange, 47, 208, 209.
Trade: paralysis at outbreak of war, 26-30,
71, 74; early revival, 31; disturbance
and limitation, 43, 53, 54, 56, 75, 76-83;
government control, 43, 96-114, 21.3-
215; dependence on marine insurance, 49,
50, 72; factors that have altered, 74-
76; diagram showing vessel movements,
79; world's food supply, 83-8.5; disloca-
tion, 85-90; decline of European exports,
90; Japan's gains, 90-92; American trade,
92-96, 214; with the enemy, 96; British
blockade, 97-100; United States policy,
100, 101, 103-107; nations as bargainers,
107-110; scientific restriction, 110-114,
213, 214; statistics, 77, 80, 92. 94, 108;
after the war — see Postwar trade.
Trade unions: conflicts between government
control and, 161, 248, 249, 251; strikes,
179, 249; relation to capital, 247; con-
ditions in Great Britain, 247-252; agree-
ment concerning munitions, 247, 248,
249; admission of women, 248; agree-
ment concerning shipbuilding, 248; re-
laxation of rules, 249, 251.
Trading with the enemy, 75, 96; American
act, 101.
Tramp ships: description of traffic, 5-7; pre-
vention of competition by line traffic, 12-
14; freight rates, 18-22; Blue Book rates,
153, 156; requisition of ships, 168; gov-
ernment operation, 170; comparison of
British and American crew cost, 319;
future of, 332.
Transport Department, 164, 170.
Transports: prewar provisions for, 130,
133; Director of, 156; administrative
agencies, 162, 164, 170, 211. 213; mis-
takes made in operation, 165, 202. 203;
government control, 184, 212; new types
of ships, 218.
Tugs, government control of, 209.
Tyne River yards, 251.
Unsinkable ships, 228, 229.
Wages: disputes, 162; increased, 179; un-
settled conditions, 302; American con-
trol, 188; British control, 248; com-
parison of American with English and
Japanese, 319, 320.
War Department: vessel supply for, 199,
202; jurisdiction over convoy system,
204; representation on war boards. 209;
Secretary of, 211.
War Industries Board, 283, note, 397.
War Office, 45, 153, 260, 261.
War port boards: personnel, 209; work of,
210.
War risk bureau — see Government war risk
bureaus.
War risk insurance — see Insurance, war
risk.
War Trade Board: formation, 105, 283,
note; control of exports and imports,
105. 112. 214. 335. note; statement con-
cerning Norway. 108.
Wcbb-Pomerene Bill. 119.
Weir river: shipbuilding nlan of, 250.
Welsford. J. II.. 156, 175.
West Indies: line traffic, 8; ships during
war, 200.
Westinghouse Co., 226.
INDEX
357
White, James B., 273, 280.
White Star Line, 142.
Wilson, Woodrow, 104, 105, 188, 191,
l'JL>, 104.
Wooden ships: standardization, 227, 228;
renewal of industry, 230, 270, 275; com-
parison with concrete ships, 238, 239;
Hough type, 27G; Ferris design, 227,
279. 288, note 1; management of con-
struction, 298; raw materials, 300.
Wool: difficulty in shipping, 43, 78, 86. 87;
entrepot trade in, 88, note; Argentine
exports, 107.
World government: conquest or, 342-344;
development of, 344-346; some condi-
tions of, 346-350.
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