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ee ee May, 1921 or with cargoes the freights on which will barely pay the cost of fuel; so that a vessel carrying 5000 tons outward and returning in ballast will show a cash loss of from $10,000 to $15,000. Ocean freights are today on a basis where the gross freight lists cannot cover the cash paid out for operating expenses. It results that merchant ships of all flags have been and are now being retired from service, because "lay-up" involves smaller loss than operation. Even the Norwegians; who can operate their ships at least cost, are putting them out of com- mission. Coming to the fleet owned by the American taxpayers--the shipping board fleet--a large proportion is now idle. More ships are likely to be laid up be- fore any material improvement in condi- tions is probable. Adding this to the idle fleets of Europe and Japan, and sur- veying the world conditions in industry and finance, it is clear that no immediate recovery in freights is to be anticipated. . The laid-up fleet must hang as a threat over the freight market until the re- stored commerce of the world shall gradu- ally absorb the idle tonnage. Hence, the American 'taxpayer has on his hands about ten million tons of ships which cost him big mnoney whether they be operated, sold or scrapped. This is where we are. Whither are we tending? The answer to this question depends altogether upon the attitude of the Amer- ican taxpayer toward the maintenance of a merchant marine under the American flag. Continue or Quit The greatest shipowners in the world are the American taxpayers. Collectively they own the greatest single merchant fleet in history. It is paid for, or must be paid for, and the question of its dis- position must be answered by them or through their representatives. Shall we hold or quit? There is a plausible argument in favor of quitting. Ships are today a liability rather than an asset. To lay up an ordi- nary cargo ship is only less custly than to operate her. Certain expenses may be avoided by lay-up, such as wages, sub- sistence, fuel, port charges, loading and discharging, etc. But interest, deprecia- tion and repairs will continue and sooner or later must be written off whether the 'hips be kept in commissio: or not. But the actual losses of operation could be saved by refusing to operate. The fleet then could be laid up until there should be a market for tonnage, and sold as opportunity might offer, on such terms as might prove practicable. The loss would have to be written off like other war costs. In that case our ocean traffic could be expected to gradually resume MARINE REVIEW the. position which it occupied before 1914--that is, there would be few of our ships afloat outside of our coastwise and - colonial trade. In spite of the appalling immediate loss that would have to be faced, this is prob- ably the least expensive course to pur- sue. Moreover, the loss would be less than appears at first glance. <A certain proportion of the fleet will never pay operating costs in normal markets. Such ships can neither be operated nor sold. They are already a loss. Many of them will never earn their repair bills, These need not be considered in planning the disposition of the fleet, for under any probable circumstances they will always cost more than they can earn. Why We Need Shipping This course, while probably the cheap- est for the moment, disregards two fac- tors which have thus far governed our action in striving to build up a merchant marine: First. The question of defense. The years 1914 to 1919 conclusively proved that the control of a merchant fleet may be essential to the national defense; more, it will -be an absolute essential when- ever we have to maintain an overseas army. After our late experience no argu- ment is needed to show what might be our situation should we again be caught without an auxiliary merchant fleet. Second. The question of future trade. Ever since our Civil war we have de- pended upon foreign tonnage to carry our exports and imports, because they could do it cheaper than we could do it. The most prosperous period of American seafaring came to a close shortly after the middle of the last century. For the change there were many contributing factors, but the main cause was the su- perseding of wooden hulls by steel and the displacement of sail power by steam. As long as the wooden hulls dominated the ocean and sail propulsion prevailed, our seaboard forests, mechanical ingenu- ity and our cheap production of cotton and naval stores sufficed to neutralize the lower wage levels of Europe in the car- riage of ocean traffic. But with the ad- vent of iron and steel construction and the progressive displacement of sails by steam, these advantages disappeared and other pursuits offered higher rewards to both capital and labor on this side. There-. fore, from 1870 to 1914, American deep sea tonnage gradually ceased to be an im- portant factor in the carrying trade of the world. In the meantime, we had be- come one of the most important: export- ers of foodstuffs and raw materials. - Before the great war broke out, how- ever, far-seeing statesmen perceived that a change in our economic situation was approaching and that our national policies 207 might have to be modified to meet new conditions. The last speech made by President McKinley evidenced a keen ap- preciation of the fact that in the not far distant future we should have to look to foreign trade to absorb the sur- plus products of our industry. This situation is now here. It has been approaching for many years. The great war was not the cause of it, but has certainly been the means of hasten- ing our recognition of it. Our situation of 30 years ago was fully appreciated by our foreign competitors. The great maritime nations took no. ac- tion against American shipping because they did not fear it. They knew that we were not serious competitors for the carrying trade, and they knew why. They knew that foreign trade was merely * an adjunct and not the backbone of American industry. But to England, for instance, her ocean traffic and export business were absolutely vital, in order that her wide empire might be bound to- gether and her dense industrial popula- tion find employment. For this reason, and because she needed to import cheap foodstuffs and raw materials, her policy toward all the world, ourselves included, was liberal in matters of trade. Competition for Survival No thoughtful man can watch the ut- terances of foreign statesmen, the drift of foreign opinion, or the utterances of the foreign press without realizing that we are today regarded as serious com- petitors, upon the ocean and in foreign markets, and that the competition which we must meet will be a general survival of the fittest. Hence we must expect and prepare for a change in the treatment which we have received from abroad in matters of foreign trade. Our neighbors will not give up any part of their ex- port and freighting business until they have exhausted every weapon of defense at their command. In the struggle for carrying trade, and export markets, they will discriminate against us by every available method, from freight rates to protective tariffs. : Under such circumstances we can not wisely plan our future course by the light of conditions which already have passed away. This, apart from the unanswerable ar- gument of national defense, is the strong- est point made by the advocates of an American merchant marine, and it is on these two considerations that they base their arguments. Therefore, if the de- cision be to quit, that is, to dispose of the ships already built for what they will bring, it should be clearly understood that this would mean a return to our former maritime dependence, in peace and war, for a generation at least; for if the ships