Foreign Affairs: 100 Years
Why the Ukraine Crisis Is the West’s Fault
The Liberal Delusions That Provoked Putin
THIS year the United States expects to build over four times as many ships as were launched by all the countries of the world in 1938, when shipbuilding was at a 17-year peak. By the end of the war the United States is almost certain to have the largest merchant fleet in the world, with considerably more tonnage than when the war broke out. When the immediate postwar tasks are completed, when the American troops have returned home and world reconstruction is well under way, should this country try to maintain itself as the dominant shipping nation of the world? If we do not seek shipping predominance, what ought to be our goal?
When Germany invaded Poland, the world had about 59 million gross tons of seagoing merchant shipping, counting both tankers and dry cargo vessels.[i] Probably about 25 million tons of shipping had been sunk by the end of 1942 and just under 15 million tons of new shipping launched.[ii] During 1943 launchings will probably come to about 16 million tons for the world as a whole; in 1944 they may be 20 million or more. Sinkings are likely to be anything from 5 to 15 million tons a year. On this basis, the world's merchant fleet at the end of 1943 would be between 50 and 60 million tons, and at the end of 1944 between 55 and 75 million. Therefore, if the war should end during these two years the world might have anywhere from 85 to 125 percent of the shipping it had in 1939. The carrying capacity of this fleet would be smaller than the figures indicate, because many of the ships counted here as merchantmen are being used as transports, naval auxiliaries and aircraft carriers. Ship production would be at such a level that merchant tonnage would increase rapidly once sinkings were stopped.
The United States is rapidly becoming the dominant shipping nation of the world. While the published figures do not permit an accurate calculation of the present size of our merchant fleet, Admiral Vickery of the Maritime Commission said in March 1943: "In not many more months, the American Merchant Marine will be the largest in the world."[iii] By the end of the war as much as half of the world's shipping may fly the American flag. The reason is obvious enough. All nations are losing ships. Production is concentrated in the United States, and all but a few of the ships built here continue to be owned here even if they are lend-leased to our Allies. If present schedules are adhered to, the United States will produce 60 times as much shipping in 1943 as it did in 1938. We will produce some 12 million tons, or about 75 percent of the world's production; whereas in 1938 the American share was 10 percent of a much smaller total. England is launching ships at about its prewar rate. Production in Continental Europe is probably below what it was before the war. Canada has started a shipbuilding program that may produce a million tons this year. Japan is expanding its ship production from its prewar average of between 400,000 and 500,000 tons, but is unlikely to exceed the million-ton mark until 1944.
Before the war, American shipbuilding was subsidized and protected because many foreign countries could build ships more cheaply than the United States. Most American ships sailing in international trade were subsidized because they could not compete effectively with foreign ships except on a few routes. Many other countries, including France, Italy, Japan and Germany subsidized some or all of their merchant marines. Britain subsidized some of its tramp shipping during the depression, but for the most part its merchant marine was able to compete effectively in the international market. Norway, the Netherlands and Greece were important among the shipping nations that operated without subsidies. We do not know what countries will be the most efficient ship operators and shipbuilders after the war. A study of the factors which might change the pattern of national advantages in these fields is one of the most important requirements for working out an intelligent postwar policy, once fundamental principles are decided. Only governmental agencies could attempt such a study in wartime. It will be assumed here that the United States could not economically maintain the relative predominance in shipping and shipbuilding that it will have at the end of the war; and that even if the United States could operate efficiently a larger merchant marine than before the war, economic considerations indicate that a large share of the world's international trade should be carried by ships of British, Dutch, Norwegian and other nationality.
There are three considerations which can be taken into account in determining a postwar shipping policy for the United States: national prestige, economic advantage, and security (defense) requirements. In principle, our policy might be based entirely on any one of these. Actually, all three are likely to play some part. Our concern here is to see what it would mean, to the United States and to the rest of the world, if any one predominated. From this analysis there should emerge the broad outlines of a constructive postwar shipping policy for the United States.
Some people regard a large merchant marine as a sure and necessary sign of national greatness. The costs of subsidies and of uneconomic operation are considered as secondary to the gains in national prestige which would accrue from operating the largest merchant fleet in the world and ensuring the regular entry of ships flying the national flag into the ports of Hankow, Papeete, Valparaiso and Zanzibar. A great people, it is held, formed into a powerful state, ought not to have its overseas trade carried in foreign ships. This view seems to have found ready acceptance in the United States and is part of the stock-in-trade of those who argue for a big merchant navy, whether because they are personally interested in shipping or otherwise.
Most of the statements by members of the Maritime Commission regarding postwar shipping policy have contained some suggestion of the prestige argument. For instance, Admiral Land, chairman of the Commission, recently said: "Our goal is to have the best ships in the world and as many of them as any other nation. We must plan, too, that those ships shall carry a sufficient portion of world trade to restore the United States to a maritime position befitting a nation of her status."[iv] Admiral Land has also referred to the United States' "rightful place in the postwar maritime scheme," "the Nation's share of the world's carrying trade," and the "proper position of preëminence" of the United States in world trade.[v] Similar attitudes have been expressed by shippers and other businessmen, one of whom said: "If this nation can afford to build and operate ten or twenty million tons of shipping to help carry on war, it can equally well afford to maintain the greatest merchant marine in peacetime that any nation has ever possessed. We subsidize agriculture and silver mining and, through a protective tariff, our manufacturers. Why not continue to subsidize merchant shipping?"[vi]
In a world of nations competing for prestige and jockeying for position, a large merchant navy may be of political advantage. Under certain conditions there is undoubted prestige value in such an establishment, though how much this will be true in an airminded world remains to be seen. If national rivalries dominate the world after the war, the case for a larger merchant navy on political grounds should be presented clearly to the American people so that they may decide if the advantages will be worth the subsidies they will cost and the economic dislocation likely to result in the rest of the world. But for the United States to suggest now that it plans to have the biggest merchant marine after the war will help to create just such a world. It is hard to tell from day to day how good the chances are of realizing the constructive peace aims stated by the United Nations governments. Clearly, the adoption of a big merchant navy policy by the United States will jeopardize whatever chances do exist. Britons, Dutchmen, Norwegians, Greeks and others who hear Americans say that they intend to dominate the shipping lanes regardless of cost cannot put much faith in general promises of economic reconstruction for the benefit of all. If the United States is going to have a larger merchant fleet than can be economically sustained, then other countries must have smaller ones and take the consequences to their economies. Shipping and shipbuilding play a much greater rôle in the national economies of a number of foreign countries than in that of the United States. The impact on these countries of American shipping dominance might be very serious. Sooner or later, the indirect effects coming through the disruption of the world economy would be felt in this country. It is to be hoped that American prestige will have a sounder basis than ownership of the world's largest subsidized merchant fleet.
Economic advantage is the second consideration which may determine national shipping policy. From this point of view, the chief interest of the United States is that our foreign trade should be carried as efficiently and cheaply as possible, whether by American or foreign ships, and that new ships should be built wherever they are best built, regardless of nationality, so long as they are freely for sale. This need not mean laissez faire. Efficient shipping service requires scheduling, availability of ships, reasonable stability in rates, and many other conditions that call for planning and management of the shipping and shipbuilding industries. Controls to ensure such conditions would further, not prevent, the most economical distribution of shipping and shipbuilding among nations. Governments operating their national merchant marines might pursue the same goal. It is to the economic advantage of the United States to further whatever organization of the shipping industry produces the conditions of cheap and efficient service. If the result is that the bulk of American foreign trade is carried in foreign bottoms, that would free productive energies here for use in fields of greater comparative advantage.
Unlike some countries, the United States has no national producer interest in shipping or shipbuilding. We have been net importers of shipping services and are in a sufficiently strong creditor position so that we could pay foreigners to carry all of our trade without straining our international accounts. Shipbuilding is a protected industry; we exported very few vessels. The level of employment and activity in these industries in peacetime has had no great effect on the national economy as a whole. The producer interests of the United States in shipping and shipbuilding are of a private and sectional sort, including shipowners and operators, shipbuilders, maritime and shipyard labor, and the areas of the country where such industries are located. The interest of these groups has been fostered by governmental policy; if that policy changes they would be entitled to special consideration. There should be reasonable compensation for capital investment and aid to workers in finding new employment, including adequate support during a transitional period and, if necessary, re-training.
The basic American economic interest in shipping is a consumer interest. We want the best possible service at the cheapest price. This economic advantage has no connection with considerations of national prestige and may run directly counter to a big merchant navy policy. Veblen has stated the basic divergence pungently. "That a nation's trade should be carried in vessels owned by its citizens or registered in its ports will doubtless have some sentimental value to the common run of its citizens, as is shown by the fact that disingenuous politicians always find it worth their while to appeal to this chauvinistic predilection. But it patently is all a completely idle question, in point of material advantage, to anyone but the owners of the vessels; and to these owners it is also of no material consequence under what flag their investments sail, except so far as the government in question may afford them some preferential opportunity for gain, -- always at the cost of their fellow citizens . . . . These gains, such as they are, go to the investors and businessmen engaged in these enterprises; while the costs incident to the adventure are borne almost wholly by the common man, who gets no gain from it all . . . . The common man is proud and glad to bear this burden for the benefit of his wealthier neighbors, and he does so with the singular conviction that in some occult manner he profits by it. All this is incredible, but it is everyday fact."[vii]
The third element in shipping policy is security. As this country well knows, a large merchant marine is a necessary weapon for any nation that has to fight overseas in a major war. Building ships has been a major task of an American war economy twice already in this century. There is a sound argument, then, for the maintenance in peacetime of enough merchant tonnage and shipbuilding capacity to meet at least the initial needs of wartime. An argument based on national defense will probably secure strong support from a people to whom the vital need of ships in wartime has been made as clear as it has been made to Americans in the last few years.
Even if the United States should once again think it could remain neutral in a major war, there would be reason to maintain a merchant fleet of wartime size in peacetime. A neutral dependent on belligerent shipping in wartime must take second-bests and leftovers, as Ireland and others know. Without shipyards, the neutral has few chances to acquire all the tonnage it wants after war starts. Turkey, Chile, Colombia and Venezuela have all begun shipbuilding programs. The once mythical Swiss navy now exists in the commercial field, and the director of the company operating it has advocated that Switzerland maintain a permanent merchant marine of 200,000 tons to give her independence in wartime.[viii]
The security argument makes sense in a way that the cry for a big merchant navy for prestige purposes does not. We hope that after the war an effective system of international security will be created, but we do not know that this will be so. In any case, the effectiveness of the security system will for a long time probably depend on the military strength of the Great Powers that support it. In a perfectly functioning security system, where unanimous action was assured, we might be able to rely on the nations which are economical shippers in peacetime to provide whatever merchant fleet was necessary to support an American military effort. Until there is proof that such a system exists, our military and naval officials would probably be unwilling to commit themselves to future action unless they had an American merchant marine to rely on. If the United States does not plan to disarm as soon as the war is over, it would make little sense to demobilize the merchant ships and shipyards needed to support the army and navy.
There are, then, two possible bases for determining our merchant marine policy which are legitimate in terms of the long-run national interest of the United States: economic advantage and national security. The two approaches will probably lead in different directions. It would be pure accident if the merchant fleet and shipbuilding capacity judged sufficient by the military authorities corresponded with those that could be economically operated under postwar conditions. The more likely event is that security considerations would call for a much larger merchant marine and much greater shipbuilding capacity than could be maintained without subsidies. The practical results of a security policy would be very similar to those of a shipping policy based on considerations of prestige. The United States would operate a large fleet and maintain oversize shipbuilding facilities to the detriment of nations that could operate and build ships economically. Other nations, intent on their own security programs, would follow similar policies backed up by nationalistic legislation.
An intelligent postwar shipping policy must be based on a reconciliation of the two aims of economic advantage and national security. The only basis of compromise that can be clearly seen now is the maintenance of a reserve merchant fleet and skeleton shipbuilding facilities over and above the ships and yards that are economically justifiable. It is assumed that more ships will be required for the purposes of national security than can be economically operated by American shippers (or the Government). The difference could be held by the United States Government as a wartime shipping reserve, part of the national defense establishment. Similarly, the Government could maintain shipyards (or ways in commercial yards) in addition to those needed for regular production. This device would distinguish the two motives of our shipping policy and to a considerable extent keep them from interfering with one another.
These suggestions are put forward only very tentatively. Whether or not they are practical depends on technical, political and administrative considerations which cannot be examined here. Only broad lines of approach are sketched; much remains to be done.
There are a number of ways in which the defense reserve might be held. When this war began, the United States had a laid-up fleet of about 700,000 tons, composed largely of ships constructed at the time of the First World War. Many were in poor condition, but in a short time all but a few had found their way to sea again. This is not the most satisfactory way of keeping a reserve, but it is one possible way. The experience indicates that rather than scrapping ships at the end of the war we might tie them up as a reserve for emergencies. As other ships were retired from commercial service, the Government might buy them at scrap value to replace the poorest of the reserve ships.
Probably a fleet which is to be effective for security purposes cannot be kept in dead storage. The services will want a certain number of new, efficient ships especially adapted to wartime uses. There also must be officers and sailors to man the expanded merchant fleet in wartime; seafaring skills cannot be developed at anchor. Some of the modern ships would no doubt find a place in the regular merchant marine; some personnel would be trained there. It is likely, however, that a sound security policy will call for the regular operation of some ships in addition to the commercial fleet. Various possibilities might be explored. A reserve merchant fleet might operate as the Navy does in peacetime: training, planning, executing some special missions, but reserving its true function for war. A merchant seamen force could be trained on relatively few ships by providing for some rotation of personnel. If conscription were retained, trainees could be allowed to elect the merchant service. A small public fleet might be occupied in Red Cross and other mercy missions, transportation of army and navy supplies, and other services that are essentially uncommercial. There might be a limited commercial use of the reserve fleet to transport raw materials for stockpiles and perhaps in other government trading operations. Finally, it might prove necessary to operate part of the security fleet under subsidy in regular commercial service.
Any incursion of the security fleet into commercial operations (whether privately or publicly run) would be a derogation of the principle of securing the greatest economic advantage for the United States from its shipping policy. However, this may be necessary as part of the compromise between the two divergent principles on which our merchant marine policy would be resting. Kept within the strictest possible limits, the compromise would provide greater economic benefits than did the prewar practice and than any policy would that was based primarily on prestige considerations. Such a compromise may also be a political necessity in reconciling different American viewpoints as to the proper bases of shipping policy.
The United States has not been the only sinner in the matter of subsidies. After the present war, other countries will be tempted to maintain large merchant fleets for the sake of prestige or security. For a while, none will have as good a chance to do so as the United States. In the long run, however, it might prove difficult for this country to pursue a policy of the sort outlined if other important shipping nations disregarded economic advantage to guarantee to themselves the constant use of a larger merchant marine. It would be desirable, therefore, to secure an international agreement on the bases of shipping policy. Once the principles were accepted, agreements might be made as to how much subsidized shipping each country would retain for security purposes and how the reserve fleets and yards could be kept off the world market. Such agreements would not only make it easier for each country to follow an enlightened policy but would protect the interests of efficient shipping nations, like Norway, which would probably not require a reserve fleet at all if given a chance to operate ships internationally under competitive conditions.
The security fleet idea has been discussed here in national terms because wars are still organized nationally. The same principle could be adapted to international use if that were warranted by postwar political conditions. Countries in alliance, who expected to make war together or stay neutral together, might hold their security reserve jointly. An effective international security organization, whether global or regional, might hold a merchant shipping reserve to be used by member nations in wartime. There are other possible arrangements which can be devised and discussed when the fundamental principles have been accepted and political conditions warrant their consideration.[ix]
This article has taken no account of the domestic political situation in which our postwar shipping policy will be made. Principles may well go down before pressures. The history of American merchant marine policy gives no encouragement to the idea that a policy thought out in terms of the long-run national interest will be adopted because it is wise or reasonable. There still is a need to frame such policies on the chance that they may influence decisions, or even only as a base line from which divergences can be noted. The forces that will influence our merchant marine policy after the war, and the ways in which such forces might be manipulated, are a separate study.
The United States asks two things of its shipping policy: economic advantage and national security. Carried to their ultimate conclusions, these two approaches are likely to prove incompatible under postwar conditions. The reserve fleet plan offers a possible compromise by which a large part of both desiderata may be secured. We would give up some economic advantage for the sake of security and guarantee our security requirements in a somewhat roundabout way to protect our economic interests. We do not sacrifice anything by giving up the idea of having the largest merchant marine in the world for prestige purposes. If the reserve fleet plan is not feasible, some other basis of compromise must be sought because the principles remain the same. We want two different things from our shipping policy; we cannot have all of both of them.
[i] This includes only ships of 1,000 gross tons and over. Figures in this article always refer to gross tons; deadweight tons have been reduced by one-third to convert them to gross tons.
[ii] These and subsequent figures have been estimated and calculated from published sources.
[iii] New York Times, March 26, 1943.
[iv] New York Times, April 29, 1943.
[v] Foreign Commerce Weekly, October 11, 1941 and July 4, 1942; Hearings . . . on H.R. 7105, June 11, 1942, p. 5.
[vi] Frederick E. Hasler, President of the Chamber of Commerce of the State of New York, to the Marine Society of New York. New York Times, January 12, 1943.
[vii] Thorstein Veblen, "An Inquiry into the Nature of Peace and the Terms of Its Perpetuation." New York: Macmillan, 1917, p. 24-26.
[viii] Foreign Commerce Weekly, August 15, 1942.
[ix] The reserves might also be useful in stabilizing the economic conditions of the shipping and shipbuilding industries. When bottoms are scarce, the security reserves might release ships for commercial use; when there is a surplus of tonnage, some of it might be absorbed into the reserve fleets. The aims and problems of such a policy require fuller discussion than there is a place for here.