Kennedy Reports

As he released his long-awaited report on the U. S. merchant marine in Washington last week, Joseph Patrick Kennedy declared "This is the toughest job I ever handled in my life, without any reservations whatever." Mr. Kennedy has had tough jobs before, including organization of the Securities Exchange Commission, but even a quick glance at the official summary, briefed down to 17 pages, was enough to convince reporters that Mr. Kennedy spoke with feeling and sincerity. The report itself was a monumental document of 40,000 words. No desiccated aggregation of charts and tabulation, it was a bluntly dispassionate analysis of a national problem that has been obscured for a generation in a curious combination of nostalgic sentiments and cunning self-interest. A more hard-boiled document has never come out of official Washington than the Maritime Commission's Economic Survey of the American Merchant Marine.

Under the Maritime Act of 1936 Mr. Kennedy's Commission was ordered to make not one but several studies of U. S. shipping. That seemed to beg the question, so Mr. Kennedy decided upon a unified, comprehensive study which would serve as a foundation for future shipping policy. Experts in every phase of the shipping industry were drafted to aid in the work. And the upshot was to propound and answer five major questions:

Does the U. S. really need a merchant marine? Of all the arguments ever advanced for a subsidized fleet, the Commission found only two that were sound--the importance of shipping to foreign trade and to National defense. Today the U. S. is the world's greatest exporting nation, about 10% of the country's movable production going overseas. In imports it ranks second only to the United Kingdom. Without its own ships the U. S. might be left stranded, as it was during the War, when foreign bottoms virtually disappeared from trade routes outside the War Zone.

A merchant marine is a definite branch of the National defense. It was a U. S. admiral, the late Alfred T. Mahan, who devised the standard war college formula: Sea power equals naval vessels plus merchant vessels. The Commission estimated that in the event of a war with a major foreign power, the U. S. would need a minimum of 1,000 merchant ships of all types. These are now available but they are old, and in certain categories there is serious shortage. There are only ten combination freight & passenger vessels which could be converted into aircraft carriers. The Navy thinks there should be at least 20. The 300 tankers needed to service the battle fleets are available but there is a deficiency of high-speed tankers (16 1/2 knots or better). When Roosevelt I sent the U. S. Navy around the world in 1908 the fighting ships were followed everywhere by a raffish stream of foreign-flag tenders, a ludicrous exhibition which the Navy Department never forgot.

Then what kind of merchant marine does the U. S. need? It needs, says Mr. Kennedy, 23 services to 600 ports in 120 foreign lands. It does not need tramps. It does not need superliners--("The American Merchant Marine is a service proposition"). Overseas air lines, over which the Commission asked jurisdiction, may cut sharply into the superliner traffic. "The American contribution to North Atlantic travel should be fireproof, vibrationless, attractive and economical vessels of reasonable size and speed, distinguished by the utmost in safety and comfort . . . available for National defense. . . ." For the rest, the U. S. should build fairly standardized combination freight & passenger types. However, the Commission's first proposed type--the so-called C-2 carrying 7,000 tons of freight, twelve passengers and a crew of 46--has met practical objections from shipowners.

What has the U. S. got to start with? The total of U. S. shipping is 26,588 vessels of more than five tons, footing up to 14,676,128 tons. The seagoing fleet is only about 1,500 vessels, more than nine-tenths of which will be obsolescent within the next five years. In vessels of twelve knots or more the U. S. ranks behind Great Britain, Germany, Japan and France. In vessels of ten years or less it ranks even behind Italy. To keep ahead of obsolescence would require a building program of $500,000,000 per year for the next five years.

The corporate state of shipping is just as sorry as the physical, and there is little likelihood of attracting more private capital. Mr. Kennedy could find only nine companies reasonably sure to survive on the new subsidies. And Mr. Kennedy reported: "The brutal truth is that the American Merchant Marine has been living off its fat for the past 15 years; that is, we have been subsisting upon the war-built fleet. . . . Many of our operators built their business on vessels which they secured from the Government at prices as low as $5 a deadweight ton. Who is going to replace these vessels at $200 a ton? The Commission is forced to conclude that from all present indications it will have to be the Government."

Even more depressing to Mr. Kennedy than outlook for new ships was the "deplorable" state of maritime labor. "The shipping industry is now paying for its shortsightedness in repressing labor for so many years." He urged a special labor law for all maritime labor, including longshoremen, on the lines of the Railway Labor Act with a mediation board. He also recommends a Government training school for seamen to be run by the Coast Guard. James A. Farrell, onetime president of U. S. Steel Corp., has offered his Tusitala, a full-rigged ship, as a training ship.

What should be the U. S. shipping policy? Since the golden days of clipper ships the U. S. has never had a consistent shipping policy. Nor was it settled by the Maritime Act of 1936, for, as Mr. Kennedy points out, there are still three alternatives: 1) continuation of the subsidy program, which promises to bog down for lack of private capital, 2) Government ownership and private operation, or 3) straight Government ownership and operation. In other great maritime nations the course for Government domination of shipping is clearly charted. Mr. Kennedy seems to feel without saying so that a merchant marine, being today essentially an instrument of National policy, not an economic enterprise, is logically Government business.

He would give private capital every opportunity. Indeed, most of the changes recommended in the present law were designed to encourage the private operation --protection against unjust cancellation of subsidies, reduction of down payment on ships from 25% of domestic cost to 25% equivalent foreign cost, permission to build abroad when the cost is more than 50% cheaper than at home, easing provisions for recapture of profits, easing restrictions on foreign registry and allowing the Commission to waive at its discretion the present $25,000 salary limit for officers of subsidized lines.

What will it cost? In the past 20 years the U. S. Government spent $3,800,000,000 on the merchant marine. "We have come today to the end of our once-magnificent armada. Of the 2,500 vessels launched in the mightiest shipbuilding program in history but a few hundred aging specimens remain." Operating subsidies alone may mount under the present law to $15,000,000 or $20,000,000 per year. With luck and $50,000,000 of taxpayers' money solvent lines may launch 65 ships in the next five years. At the moment, the Commission has $200,000,000 available or earmarked. The report concluded: "We are about to start again, not in a riot of enthusiasm, not with an expenditure of billions, but with a carefully planned program that gives due regard to the factors of need, method and cost. Therein, we believe, lies our hope for the future of the American Merchant Marine."

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