WE HAVE SEEN from our earlier tables that the Victories and C-Type dry-cargo vessels did not bulk very large in over-all tonnage in our wartime merchant fleet. All told, they amount to less than 8 million gross tons out of a total of about 39 million gross tons. But they are crucial. They probably represent as much tonnage as all ships of approximately their caliber before the war.

You will read perhaps that in 1939 there were some 68.5 million gross tons of shipping in the world. But this is a deceptive figure. It includes all ships of over 100 tons; whereas, generally speaking, only those of over 2,000 tons can be used regularly in ocean shipping. This figure also includes tankers, lake ships, broken-down tramps, and all the rest of the vessels that, practically speaking, were ever built anywhere. But among all the maritime nations in the world, there were probably not, all told, 8 million gross tons of dry-cargo vessels that could come close to averaging 15 knots. Of this total, the United States owned a very small proportion before the war. Now we own most of it. What shall we do with it?

How many alternatives are there?

Any possible program for the disposal of these government-owned merchant ships must at least consider all the following alternatives even though some are much more plausible than others:

1. The government can retain ownership of the ships and (a) operate them directly or (b) lease or charter them to American operators, to foreign operators, or to both equally.
2. The government can sell them to American operators.
3. The government can sell them to foreign operators.
4. They can be sold to all comers equally, either at (a) fixed price, (b) varying price, or (c) auction; and they can be sold for either cash or credit.
5. They can be scrapped in large quantities.
6. They can be tied up as shipping security in case of future national emergencies.

There are plenty of arguments, pro and con, for most of these alternatives. No doubt more than one of them will have to be adopted. Before examining them in detail, however, it would be profitable to look back and see what we did with our merchant marine after the last war.

What happened after World War I?

The problem of disposal of ships after the first World War was not so large or so complicated as it is today, especially for the United States. We got into the war late and got out quickly. We were left, however, with contracts that ultimately produced a total tonnage of wartime freighters about equal to the tonnage of today’s Victories and C-Types—that is about 8 million gross tons of shipping.

In disposing of these ships the Shipping Board, which was the government agency controlling the situation at the time, pursued an inconsistent and costly policy. At the start of disposal, when tonnage was still in great demand and steamship rates were fabulously high, the Shipping Board tried to get as great a return as possible, by charging all that the market would bear. Prices as high as $300 per dead-weight ton were paid for some of the vessels. (Dead-weight tonnage refers to the weight in long tons that a vessel can safely carry.) In other words, a slow, 10,000-ton freighter might sell for a fantastic three million dollars. Many were sold for as much as $175 to $200 per dead-weight ton.

The over-all results, however, were unsatisfactory. The collapse of 1920 soon shook the market; shipping and shipping rates fell off; no one was interested in buying ships at high prices; few cared for them even at low prices.

The Shipping Board soon realized that prices must be cut severely if the ships were ever to get off the lakes and rivers, where they were tied up, and moved into commercial activity. So a new price of $30 per dead-weight ton was established. This was obviously quite a drastic slash. It got some more ships sold; but about half the wartime fleet remained in the hands of the government for years.

Only at the outbreak of the second World War was the government able to find use for the old World War I freighters which had been tied up at Hog Island—below Philadelphia—and many other places. Then they came in real handy. For, though they were in abominable condition, getting them back into shape was much faster work than building the first Liberties.

A lot more happened after World War I

Thus the government, between the two wars, experienced many of the things that could happen to an overbuilt merchant marine. The government had:

1. Tried high prices to get back a decent return on the taxpayer’s investment in ships.
2. Cut those prices drastically in order to get any return at all in a declining market.
3. Laid up a lot of ships which couldn’t be sold at all.
4. Refurbished those ships quickly to recondition them for the new war.

In the process there were many inequalities. Those ship operators who dashed in and paid good prices, and good returns to the taxpayers, were saddled with costs that the latecomers did not have to face. Obviously, it makes all the competitive difference if you pay $300 per ton or $30, if you pay $3,000,000 for a ship or $300,000.

There were other inequalities in the government’s methods of selling ships. Foreigners were not allowed to buy at the low prices. This had two very important consequences:

1. With foreign buyers barred or discriminated against, the ships did not sell as fast as they might have.
2. Barred from buying cheaply in the American market, foreigners stayed home and built their own superior ships, diesel-powered, designed for peacetime competition rather than for war. They were built more cheaply, manned at lower cost, and operated for much less than American ships. Therefore they were vigorously competitive.

In order to fight them, the United States had to continue its protective program and expand its subsidy program. These terms “protective” and “subsidy” must be explained in some detail before we can discuss the disposal of the present merchant fleet. They have historical aspects which should be clearly understood before we can understand the disposal problems of today.

From EM 25: What Shall We Do with Our Merchant Fleet? (1946)