What Russia Got Wrong
Can Moscow Learn From Its Failures in Ukraine?
THE most serious error made in discussing our shipping problem lies in the assumption that it is entirely economic. The truth of the matter is that for the present it is largely political. The economist has neatly proven on many occasions that it is better for our country to let the carriage of its goods by sea be done by countries which can do it cheaper than our own nationals. In their opinion all is over so far as a large American merchant marine is concerned except the choice of a suitable epitaph. Yet we have a large fleet of merchant ships under the American flag and the trend of events points to a continuance of this situation. The manner in which this recrudescence of our merchant marine came about and is being carried on has a number of implications worth consideration.
The United States is today one of the leading maritime countries of the world--on paper. In 1914 only three-quarters of a million gross tons of steam shipping were registered for foreign trade under the American flag and only a dozen or two vessels were actually engaged in deep-sea traffic. The American flag on a merchant vessel was a rare sight in most ports of the world. Today three million gross tons of our shipping are actively employed in oversea trade with distant foreign countries, three-quarters of a million more in near-by foreign trade and 8,600,000 tons are registered for such service. American ships literally are "sailing the seven seas." The United States is second only to Great Britain in the amount of sea-going tonnage owned, and has nearly four times as much shipping as France and Japan, which stand third and fourth on the list.
The story of this change is fairly familiar; the increase in tonnage was caused by transfer from other flags and by construction. Just after the outbreak of the war in Europe, Congress passed the Ship Registry Act of August 14, 1914, under the provisions of which two-thirds of a million gross tons of fine ships were admitted to American registry. These ships were almost entirely owned by American capital; they had been built abroad and had been operated under foreign flags as a matter of economy.
The greatest gains, however, were from new construction. After the uncertainties of the latter part of 1914 and the early part of 1915, shipbuilding responded quickly to the increased demand for ships. The established American yards were booked to capacity with orders, and new yards were rapidly laid out. The output of steel ships in this country in 1915 was only 155,000 gross tons. In 1917 it was 513,000 tons, in 1918 over 1,000,000 tons and in 1920 a peak of 3,660,000 tons. Our steam tonnage registered for foreign trade jumped from 725,000 gross tons in 1914 to 10,466,000 in 1921, an increase so large that it looks awkward when expressed as a percentage.
The essential fact in this enormous expansion of our potential merchant fleet is that it was accomplished through government, and not private, action. Our so-called shipping problem today hinges on the fact that the Government owns and operates a large part of our merchant marine, and dominates the whole.
It was by chance that our Government became heavily enmeshed in shipping. It is by design that it does not extricate itself. Ten years ago the Government had only slight contact with ocean shipping through registry laws, steamboat and radio inspection, etc. In 1912 a larger control over ocean transportation had been forecast in the investigation of the House Committee on The Merchant Marine and Fisheries into the activities of steamship conferences. This Committee recommended that some form of Government supervision over steamship agreements and rates be set up. In succeeding sessions of Congress bills were introduced to establish a shipping board, which was to have regulatory and quasi-judicial authority over shipping activities and rates somewhat similar to that exercised over our railroads by the Interstate Commerce Commission. In the meantime our export trade was suffering severely because the Allies, and particularly the British, had found it necessary to withdraw shipping from trading routes for war purposes. Cotton sold on the farms in the South for as low as five cents a pound. Stocks of all kinds of goods piled up at our ports. Ships to carry our commodities abroad seemed to be the solution. The Democratic Party, which for the last few decades has had a decided leaning toward government ownership, was in power. After a prolonged debate in 1916, provisions were inserted in the pending shipping bill whereby $50,000,000 was provided for the building, purchase, charter, and operation of vessels by a subsidiary corporation which the Shipping Board was authorized to establish.
The Shipping Act, 1916, has a double significance; it authorized the government to attempt to regulate ocean shipping, and at the same time allowed it to take part in the business to be regulated. It should be stated in fairness that the intentions of Congress were good and that originally they limited the life of the subsidiary corporation (the Emergency Fleet Corporation) to five years after the cessation of hostilities. The emotions of the time and concentration on the unusual happenings in the world obscured the incompatibility of the two basic activities provided for in the Shipping Act of 1916. Many of the incongruous actions of the Shipping Board in recent months are explainable only in terms of the conflicting functions Congress has asked it to perform.
To understand adequately the present tendencies in our shipping, it is necessary to discuss briefly the chaotic happenings of the last seven years. For logical convenience the events of these years may be divided arbitrarily into five periods: (1) construction, (2) vainglory, (3) bewilderment, (4) receivership in bankruptcy, and (5) cross purposes.
The period of construction began with our entry into the war and continued until the early part of 1919, although the effects of the war policies did not result in a maximum output of ships until about a year later. Our successful participation in the war depended upon ships. The German submarine campaign had resulted in a monthly loss as high as three-quarters of a million gross tons. The quickness with which this country mobilized its resources to build ships astonished the world. Congress appropriated over $3,500,000,000 for this and closely allied purposes. From the middle of 1917 to the armistice, the major concern of the Shipping Board, working through the Emergency Fleet Corporation, was to send ships down the ways in increasing numbers. The original program of the Board just before the end of the war called for the construction of 3,249 ships aggregating 18,092,921 deadweight tons.
It would naturally be supposed that construction on new ships was largely stopped with the signing of the armistice. It is even on record that President Wilson cabled instructions from Paris to that effect. But the thing was not done; indeed, it could not have been done. Several thousand men were employed in shipyards on every coast of the country and even on the shores of the Great Lakes, and thousands more were busy fabricating materials and manufacturing supplies in the remotest corners of the country. A sudden cessation of shipbuilding activities would have had a severe and depressing effect on domestic prosperity. Furthermore, the Government had made contracts with shipbuilding companies for the construction of vessels and it is expensive even for the government to cancel contracts. But the main reason why work on so few ships was stopped was political. It would not have been easy to justify to a Congress composed of representatives elected on a regional basis why contracts in specific regions were cancelled. The ship construction program viewed from the political angle was the biggest pork barrel ever provided by a Congress.
So the Board in its annual report for 1919 said: "The general basis on which cancellations were undertaken depended upon the type of vessel involved. . . . In the case of steel vessels, before action was taken toward curtailment the construction program was reviewed by officials of the corporation and by constituted boards of ship owners and operators. It was determined that more of certain types of vessels were under construction than could be utilized profitably, and suspensions or cancellations were instituted where construction had not advanced to such a degree as to make this action unwise. To round out the shipbuilding program, the design of several additional types of vessels running from 10,000 to 15,000 tons deadweight was undertaken, many of them being of relatively higher speed than the average vessels under construction, the motive power in certain instances being Diesel engines and in others quadruple expansion reciprocating engines on geared turbines, depending upon the service desired."
It will be immediately noticed that the mind of the Board as late as the middle of 1919 was still centered on building more ships rather than on stopping work on the enormous number called for by their program. What were the results of the feeble efforts at cancellation? Work was stopped on 467 wooden and concrete ships totaling 1,479,000 deadweight tons; few reliable voices had ever been raised in favor of these types. Contracts were cancelled for 379 steel ships aggregating 2,690,000 tons, or only twenty-three percent of the total. Looking at the problem from another angle, 5,658,000 deadweight tons had been delivered by June 30, 1919, seven months after the close of the war, and 7,759,000 tons, or 57 percent were still to be delivered.
It was while ships were being completed and delivered every day that the Board dreamed a great dream. The exceedingly high rates of the time made it profitable to operate almost any kind of ship over almost any ocean route. Dozens of new services were inaugurated out of insignificant ports in this country to equally insignificant ports abroad. The Shipping Board boasted that it had "209 general cargo berths, of which 202 were between United States and foreign ports and between United States ports, and seven between foreign ports. These various berths afforded shippers 229 services." To man and maintain this great expansion in our shipping, it was necessary to train hundreds of men for various posts. The idea was even conceived of training executives overnight and the scheme of "super cargoes" was initiated. A super cargo was "a young man assigned to a vessel to assist the master in all clerical work, as well as to report on conditions in favor of or against the vessel, its management, crew, etc., and also to make a detailed study of shipping facilities in foreign ports." The anomoly of having a young inexperienced man reporting on the technical activities of captain, engineer, and master stevedore is obvious. Coincident with the inauguration of this scheme, Mr. Hurley, who was Chairman of the Board at that time, confessed that he had encouraged "American toymakers to produce some playthings that would bring the American Merchant Marine to the attention of American citizens in early childhood. They brought out a self-propelled sheet-iron cargo vessel and a game by playing which young Americans will learn the products and needs of the different nations and the rules and customs of ocean traffic. The need for such educational measures is a real one, for the popular character of the merchant marine is its very life-blood in every maritime nation on earth."
These bizarre examples of the plans made in this period of vainglory are given by way of illustration. They show the illogical conception of fundamental conditions which was the great characteristic of this period. The first assumption was that the mere possession of ships makes a maritime country. Since we were second in tonnage only to the British, we were going to drive British ships from many of the trade routes of the world. Secondly, it was assumed that high ocean freight rates would continue forever, and that our 229 services would always be profitable. If high ocean freight rates were to continue indefinitely, why not ask $225 a ton for ships which were selling in Great Britain at from £20 to £25 a ton? The result was inevitable; the government ships were not sold and the government became more firmly established in the shipping business.
As so frequently happens, this period of vainglory was followed by one of bewilderment. The membership of the Board dwindled, through resignations, to two commissioners. Ocean rates dropped precipitantly. The vast network of world services became an enormous liability. Losses piled up on every hand--at a rate in excess of $100,000,000 a year--although the account-methods of the Board were so poor that it was impossible to get an accurate statement. There was no courage to remedy the situation. A weak attempt was made to sell ships. Within less than a year the terms of sale and the basic prices were changed five times; every reduction in price was made after the market had changed and no reduction ever met the open market rate. Only a few hundred thousand of its 8,000,000 tons were disposed of by the Board.
With the advent of the Harding Administration the Shipping Board, figuratively speaking, passed into the hands of a receiver. When Mr. Lasker assumed office as Chairman of the Shipping Board he frankly admitted that he was in charge of a bankrupt enterprise. Over 600 vessels, totaling nearly 5,000,000 deadweight tons, were being run in helter-skelter services with an accounting system in Washington so poor that no one knew how large losses were; intelligent guesses placed them at around $15,000,000 a month. Even the supervision of the laid-up vessels was costing nearly $1,000,000 a month. The new broom swept clean. The management of the Emergency Fleet Corporation was in a measure divorced from the Board itself; highpriced practical steamship men were brought in from industry to handle operations. The number of ships actually employed was reduced one-third, and while the laid-up fleet was greatly increased, the expenses of caring for it were reduced two-thirds. A corps of trained accountants was secured and after months of work it was possible for the first time to draw up a balance sheet and to know each month how large losses were. The experienced steamship men, given large powers in actual operations, were soon able to have ships sail on advertised schedules. A system of publicity and soliciting was inaugurated which bore results in the way of increased confidence on the part of shippers and good cargoes for the ships. It is not intimated that conditions in the Shipping Board and Emergency Fleet Corporation during this period were ideal, or that they ever can be, but anyone acquainted with the intimate details is forced to admit that Mr. Lasker accomplished immense reforms that saved the taxpayers of the country millions of dollars.
Coincident with this reorganization of the Board came the drive for a direct subsidy. The bill introduced in Congress proposed to grant a bounty to ships engaged in foreign trade on the basis of the tonnage of the ship and the mileage traveled in a year. After lengthy hearings the House passed the measure by a considerable majority. A filibuster, however, developed in the Senate in the closing days of the session of Congress and the bill was killed. Soon after the failure of the subsidy program, Mr. Lasker retired. It should be said in his favor, as the facts mentioned above indicate, that he came very near doing the impossible and his administration stands out in contrast to those that went before as conspicuously able.
And so began the period of cross-purposes. The Lasker mantle descended upon the shoulders of Mr. Farley. His chairmanship was brief. He was the advocate of a scheme whereby corporations subsidiary to the Emergency Fleet Corporation were to be formed and to which the active government vessels were to be delivered for operation. Heated discussions, both verbal and physical, were held on this subject by the Shipping Board, with the Chairman unable to control the opinion of the other members. Exit Mr. Farley. There followed a brief interregnum and then Mr. O'Connor was promoted by the President to the chairmanship of the Board and Admiral Palmer was chosen as President of the Emergency Fleet Corporation.
At this time the Shipping Board was somewhat frightened. Unsympathetic meddlers were suggesting that the operation of Government ships be divorced entirely from the Shipping Board. Proponents of this idea pointed out that in a highly competitive business, such as ocean shipping, important decisions could not effectively be delayed until a meeting on next Tuesday of seven men with a strong local bias and unlearned in the details of ship operation. It is true that the seven commissioners would still have had a life-time job, barring political accidents, but these unwelcome interferers were even suggesting that the salary of each member of the Board be reduced from $12,500 to $7,500 a year. The whole matter was of such serious importance that it was discussed on several occasions with President Coolidge.
The Shipping Board won. A compromise was agreed to, according to which the President of the Emergency Fleet Corporation was to have wide freedom of action, merely referring his decisions to the Board for formal approval. The Commissioners of the Board breathed more easily, as men do after escaping from a tight corner. They apparently had conceded a great deal to the Emergency Fleet Corporation. Actually they still held the strings--as, indeed, the Merchant Marine Act, 1920 made it obligatory for them to do.
An example of how this agreement was to work soon appeared. Congress reduced the appropriation of the Shipping Board from $50,000,000 in the fiscal year ended June 30, 1924, to $36,000,000 for the year ending June 30, 1925. This reduction in appropriation made it essential that the operation of ships be curtailed. Admiral Palmer, with good business judgment, decided to consolidate the numerous existing services in order to reduce overlapping and competiting activities among the operators of Shipping Board ships. His plans were designed to keep operating losses within the limit set by Congress. He could not institute these reforms without the approval of the Board. Only after long delays were any of the plans of the Emergency Fleet Corporation accepted, and many were disapproved by the Board entirely. One side is not living up to the promise made to President Coolidge that the operation of ships should be in practice largely divorced from the Shipping Board.
In this manner we have arrived at the present situation. Over $3,500,000,000 of the taxpayers' money was spent during and after the war to construct and acquire around 8,000,000 gross tons of ships for the Government. Of this total three-quarters of a million tons were wooden vessels, which were never worth the bolts that were intended to hold them together and which, after five years of indecision, have at last been almost completely scrapped. Of the seven and a quarter million tons of steel vessels belonging to the Board, it still has six and a quarter million tons. Of the ships it still possesses, only 2,4000,000 tons are in operation, while nearly 4,000,000 tons are laid up in various rivers and harbors over the country. It is generally recognized both here and abroad that over 2,500,000 gross tons of the laid-up fleet are not fit for commercial operation at the rate levels which are likely to exist within the rapidly diminishing life of the idle fleet. But it takes courage for a politically appointed Board to decide to sell or to scrap ships. It is even known that while Mr. Hurley was Chairman of the Board he was urged to set a sales price of $100 a deadweight ton of the Government ships instead of $225 a ton. To this proposal Mr. Hurley objected, saying that a certain group of papers would be on his neck the next morning. "Yes," his adviser replied, "and the next day the taxpayers of the country will call you a statesman." Statesmen, of course, are scarce today and it is probable that none have desk space with the Shipping Board.
In the meantime, four and one-half million gross tons of privately-owned ships are in operation, and a half million tons are out of employment. Only a million and a quarter tons of privately-owned ships are employed in foreign trade, the balance being in the protected coastwise and inter-coastal trades. In the oversea trades where privately-owned ships are employed they must meet the competition not only of foreign lines but of our own government lines, toward the support of which they contribute in taxes. The President of the Emergency Fleet Corporation recently confessed that every voyage of a government ship was costing on an average $25,000 above receipts. Some business men are so blunt as to say that the foreign trade of the country is being subsidized through the operation of government ships to the extent to which these ships make voyage losses. They overstate the case slightly, for Government operation can never be as efficient as private operation and ocean rates everywhere are abnormally low today. At any rate, the private ship owner can extract little consolation from the situation.
Obscured though they are by the diverting details of the situation, two tendencies of considerable importance may nevertheless be discerned by the careful observer. These tendencies are more vital than the loss of a few million dollars a year by the taxpayers, because in the long run they will cost them infinitely more. The first is the strengthening of the sentiment for a continuation of government ownership and operation of ships, and the second the increasing danger that serious international friction will arise over shipping questions.
Many business men become facetious when the idea is advanced that we seem to have embarked on a new policy of government ownership and operation. They are apparently firm believers in the efficiency of legislation and put their trust in the preamble of the Merchant Marine Act, 1920, which says, "That it is necessary for the national defense and for the proper growth of its foreign and domestic commerce that the United States shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval and military auxiliary in time of war or national emergency, ultimately to be owned and operated privately by citizens of the United States." They stress the declared purpose of the will of the people as expressed in Congress assembled that our merchant marine shall be owned and operated privately by citizens of the United States. They overlook the fact that such is not the case today and that the adverb "ultimately" leads the declaration.
Those who hold to the idea that the Government is going to get out of shipping as soon as it can are doubtless unaware of a serious debate which occurred between two of the learned counsel of the Shipping Board before that body on the question of whether Congress intended that the Shipping Board get out of the shipping business or stay in it. One counsel argued from the preamble just quoted, passing lightly, of course, over the "ultimately," and supported his view by reference to section 5, in which the Board is "authorized and directed to sell, as soon as practicable" all its ships. His opponent in the debate was an easy victor. He merely pointed out that "ultimately" is a long time, that section 5 hedges the sale of ships about with impossible provisions which seem reasonable at first glance, but several of which, if stressed, make necessary an impossible knock-down price, and that other sections provide similar limitations. Section 5 says that the Shipping Board in "fixing or accepting the sale price of its vessels shall take into consideration the prevailing domestic and foreign market price of, the available supply of, and the demand for vessels, existing freight rates and prospects of maintenance, the cost of constructing vessels of similar types under prevailing conditions, as well as the cost of the construction or purchase price to be sold, and any other facts or conditions that would influence a prudent, solvent business man in the sale of similar vessels or property, which he may be forced to sell."
Those who believe the Government should retain its ships have uniformly insisted that their construction cost be the determining factor in fixing the sales price. The ships cost around $225 a deadweight ton, their market value today is around $25 a ton. Furthermore, there is a contradiction in the section. If a prudent business man is "forced to sell" he does not waste much time over original or replacement cost, he sells for what he can get. Finally, in discussing the sale of the ships it must be borne in mind that although in the Shipping Act of 1916 the Board was directed to sell its ships within five years after the end of the war, in the Merchant Marine Act of 1920 the five-year proviso was stricken out; there is no longer a time limit.
The counsel of the Board in arguing that Congress intended the Government to remain in the shipping business pointed out in addition that in section 7 the Board is authorized to study trade routes and to establish and maintain those services which are essential. The reader will not be burdened with a piling up of evidence. A fair-minded person examining the details of the Merchant Marine Act, 1920, is forced to the conclusion that Congress had its tongue in its cheek when it wrote those phrases which seem to indicate that the Government should get out of the shipping business.
The reasons for this policy are evident, if not flattering to our elected representatives. The Shipping Board appropriations are as widely spent as the appropriations for rivers and harbors. No Presidential economy drive is likely to make Congress forego either. In the first place, there are seven $12,500 jobs to be apportioned. That these jobs are not beneath the notice of Congress was proved when the section of the Shipping Act of 1916 dealing with this subject was revised in 1920. Originally the Shipping Board was to consist of five members, each to get $7,500 a year; not more than three of them were to be from one political party. When the Act was being revised in 1920 two Senators from the far West who had taken a public interest in shipping were up for reëlection, and neither was certain that his constituents would be as faithful to him as he had been to them. It was accordingly decided to increase the membership of the Board to seven, with salaries of $12,500 (the cost of living in Washington had increased greatly between 1916 and 1920). Furthermore, to avoid depending too much on the pleasure of the President, it was decided that two members should be elected from the states touching the Pacific (there are only three such states so the percentage for that region was greatly increased), two from the Atlantic states, one from the Gulf, one from the Great Lakes and one from the interior.
If this country were merely to suffer from a large dose of the European patent medicine of government ownership, one might be inclined to say that we deserve what we allow ourselves to be fed with. But the fact that our government is in the shipping business has grave international aspects; it has given rise to a spirit which may be described by the low word, bumptiousness. This spirit has often been in evidence during the last year. Three illustrations will be used. The first is drawn from the agitation over sections 28 and 34 of the Merchant Marine Act; the second is found in connection with the proposed German treaty; and the third has to do with certain utterances of officers in responsible positions.
Section 28 of the Merchant Marine Act stipulates that in this country all import and export rail rates which are lower than the domestic rates on the same commodity (going in the same direction for the same distance) shall apply only where the goods are carried on American vessels. The aim of the proposal, of course, is preferential treatment of American ships. Such indirect aids to shipping appeal especially to the Congressional mind because they call for no appropriation from the Treasury. As a matter of fact, if it were actually put into operation Section 28 would be highly expensive to the business of the country, and it has never been shown conclusively that it would greatly benefit our merchant marine. The most important bulk commodities which move to the seacoast on a substantial rail haul are low-grade articles such as grain, coal and lumber. Our ships do not desire additional freight of this variety; it does not pay them to carry it. The application of the section would tend to concentrate the foreign business of the country in a few coastal cities. Furthermore, there is a real danger that considerable traffic would be diverted to Canadian ports and railways. These disadvantages, and others, would react upon the business of the country as a whole; in compensation, some additional cargo might be secured for American ships.
The more serious aspect of the problem is that international retaliation would certainly follow, once the section were put in operation. It is a truism to say that discrimination of any kind is profitable only so long as the parties of the second part do not retaliate, which of course they always do when they can. Our country in its early days took the lead in getting the maritime countries of the world to abolish discriminating restrictions of various kinds. It is regrettable that we seem intent on reversing our long-established policy.
The manner in which section 28 has been dealt with throws additional light on the habits of the Shipping Board. The law provides that the section is to become operative when the Shipping Board has certified to the Interstate Commerce Commission that sufficient American tonnage exists to handle the traffic contemplated. Immediately after the passage of the Act in 1920, and on several subsequent occasions, the Shipping Board asked the Interstate Commerce Commission to postpone the application of the section. Early in 1924, however, without previous warning, the Board certified to the Commission that sufficient American services, with certain exceptions, existed. The Commission thereupon set June 20, 1924, as the date when the section was to become effective. Immediately a storm of protest arose. Bills were introduced in Congress to give complete jurisdiction in the matter to the Interstate Commerce Commission and to postpone the date of application. Congressional hearings were held. Dozens of business men testified against the section and, aside from the representatives of the Board, the only favorable witnesses were from some minor ports that had especially been favored by the Board. The Shipping Board had to bow to the popular protest and withdraw its certification to the Interstate Commerce Commission. They intimated, however, that they would bring up the matter again at the end of 1924, and as these paragraphs are being written rumblings to this effect are being heard. The section is still capable of causing trouble at home and abroad.
Section 34 of the Merchant Marine Act is of a piece with Section 28. It calls upon the President to take whatever steps are necessary to abrogate those commercial treaties which prevent discriminating duties in behalf of our shipping. Three Presidents have refused to take this action. The arguments against the section are so well-known as hardly to need mention. The proponents of the theory that discriminating duties are efficacious have built up their case as to what happened in the early days of this country on the basis of false and manufactured statistics. Not only can it not be proved that discriminating duties built up our merchant marine in the first two decades of the last century, but it can be shown that a large increase in our shipping took place after discriminating duties were abolished. Discriminating duties would apply to only 16 percent of the total volume of our trade today and hence would give small aid to our ships. The most important aspect of this section, as of section 28, is that it stirs up international animosities which our country was the first to try to allay.
The proponents of discriminatory action in favor of our shipping were able in the last session of Congress to block the passage of the German treaty. They objected to the usual clauses with reference to reciprocity of treatment for ships. Since this was one of a series of new treaties which the State Department has been negotiating with foreign countries, it is to be presumed that the same opposition will develop against each new treaty in turn.
Unfortunately, the delicate situation created by the discussions over sections 28 and 34 and by debates over the German treaty has been intensified by statements of some of the Commissioners of the Shipping Board. In the hearings before Congress two commissioners declared that the Government lines would carry cargo for $2.00 a ton--or even for nothing--in order to get cargo for the ships. Such statements from responsible public officials are almost equivalent to a declaration of commercial war, with the financial power of the Treasury behind the Shipping Board. It is hard enough in these days of intense commercial rivalry along nationalist lines for countries to keep out of disputes leading to war. With our Government engaged in a business which in a dozen ways is subject to international friction, we perhaps are nearer actual conflict than the ordinary citizen is willing to believe.
The competition between the merchant fleets of the various countries of the world has rarely been so keen. Part of the added intensity of rivalry is due to the chauvinism with which countries seem to be afflicted after a great war; part is due to the universal depression from which the shipping of the world is suffering. The first point is obvious, the second needs some elaboration. There are today in existence over 40 percent more steamers than there were in 1913, and there is only about 80 percent as much cargo moving over ocean routes for them to carry. Over 6,000,000 tons of shipping are unable to find employment on any of the trade routes of the world. Ocean rates are far below the prevailing level of prices. The earnings of steamship companies are small and frequently the balances have to be written in red. In such conditions, when every effort is being made to get extra cargo for ships, shipping and trading men in every part of the world inevitably would resent bitterly any special treatment (particularly forms of preference which are regarded as unfair) being given by one country to its own shipping. Their resentment against the United States would be easily aroused by suggestions of preferential treatment for our ships because our people are already being taxed to the extent of $25,000 for each voyage a government ship makes, a fact which contributes directly to the unprofitableness of many foreign lines.
In conclusion, it may be said that the Shipping Board and governmental operation of ships seem to have come to stay. The taxpayer should try to accustom himself to the idea of the Government engaging in business, and to paying without too much complaint the extra taxes for the maintenance of that business. Indeed, there seems to be no other course open for the taxpayer to follow, at least until that final day when rust shall at last have caused the Shipping Board to give up its ships. In the meantime, he should hope that our public officials will go softly, so as not to start the chain of events leading to another war before peace is won from the last one.
A Battle for Access and Influence in the Indo-Pacific