On the Decline of our Merchant Marine

by William R. Carr

Our once proud Merchant Marine is in near eclipse. The recent Maritime Security legislation, passed in 1996, puts a 47 ship "decline floor" on our once world-class fleet. (47 militarily useful ships will be subsidized at about half the former operating differential subsidy.) We are the world's largest trading nation, but possess the world's 11th largest merchant fleet, after such maritime giants as Panama, Liberia, Cyprus, and the Bahamas. China, (No. 8, and gaining fast) of course, is a real giant, and will soon cast a long shadow around the world—and it will do it with our help. (Already the Chinese government owned China Ocean Shipping Company, COSCO, is taking over former U.S. military port facilities both in Panama and our own West coast with our blessing and assistance.)

Globalization, termed "free trade," and deregulation of critical national industries, (encouraging internationalization of once American corporate capital) are the primary causes for the decline of our merchant fleet. The Merchant Marine, I have always contended, is on the very "cutting" edge of the New World Order. From strictly a bottom-line perspective, it makes little sense to own or use American ships when Liberian, Panamanian, or other flag of convenience registries are available to American companies with no penalty. It makes no sense to hire American seamen when third world sailors will work for a fraction of an American living wage. As a result, the American flag and American seamen are endangered species on the high seas.

American capital, however, still owns a huge percentage of global merchant tonnage. The only things missing, of course, are the American flag and American seamen. Both the companies and ships largely escape American taxation and regulation, and profits are not shared with American labor. American flag ships, and American seamen, will not, and cannot, be competitive in the emerging globalized economy until such time as American and third world wages and regulations are on a par. This will not happen soon -- but it is in the offing, much to the detriment of American seamen and American labor in general.

So long as there is a large disparity between American wage standards and those of other maritime nations, operating differential subsidies and protective regulations will be necessary to prevent the total demise of our deep-water Merchant Marine.

While the abandonment of the American flag may make good business sense to multi-national corporations, there are serious down-side costs to the nation, both strategically and economically.

A viable commercial Merchant Marine is literally as important to the nation and its defense as the Navy itself. But, unlike the navy, the Merchant Marine helps generate national income in addition to fueling many other related industries. Unfortunately, not many people realize these facts. Another thing to consider is that a maritime nation that is not self-reliant in ships and seamen is not really internationally independent, especially if it depends upon international trade to any significant degree, as we increasingly do. A maritime nation that willfully places itself in such a position, as the result of national policy, is committing a none too subtle form of economic and strategic suicide.

Global free trade agreements, such as GATT and NAFTA, are intentionally weighted against labor in high wage countries. The short-term benefit that makes the trade agreements attractive to the unwary public is inexpensive consumer goods in our chain stores. The down-side is domestic corporate down-sizing, ripple-effect job loss, and long-term wage and benefit reductions for labor across the board, as corporations move production to low wage countries "in order to remain competitive in the new globalized marketplace."

Maritime subsidies were necessary simply to keep maritime capital "loyal" to the nation. Without bribery, (and/or regulatory constraints) the nationless, predatory nature of capital manifests itself to the fullest extent. Capital has no conscience, and the quest for profits (greed) is its primary driving force. Combine this with the unaccountability of globalized corporate mercantilism and you have something of a witch's brew. The globalized corporation has absolutely no commitment to any nation, community, labor, or to any "people." And it never will have without the constraining pressures of government regulation to look out for the public interest. Such constraints are being abandoned in the name of globalization and free trade.

Are Maritime subsidies corporate welfare? Well, yes, in a manner of speaking—but, if a viable national Merchant Marine is to exist, (and it must, if the nation is to have a viable national defense capability that extends beyond our own shores) the maritime industry is one where corporate welfare makes abundant good sense. All critical national defense industries require some sort of protection in order to prevent our nation from becoming dependent upon foreign military suppliers for our national defense needs. The Maritime industry, by its very nature, (perhaps more than any other industry) unavoidably competes head to head with the merchant fleets of every other nation. Only subsidies can level a very uneven playing field, as long as there is a large disparity between American living standards and those of other maritime nations.

Picture the U.S. Navy operating without taxpayer subsidies. Nobody questions the necessity of having a strong navy comprised of American owned ships manned by American sailors. Yet it would be much cheaper, and make more economic sense, to charter say the Russian or Puruvian navy to statisfy our defense needs.

Maritime subsidies don't cost the national economy anything at all. But try to tell that to people like Senator Charles Grassley of Iowa, or the modern breed of policy-making economists. Maritime subsidies worked, (and worked well) within a closed economic loop, whereby the money paid out was returned to the economy along with industry profits. On the other hand, demise of the operating differential subsidy, (ODS) and the consequent near demise of the American Merchant Marine costs the nation plenty—in terms of balance of trade and payments deficits, as well as national security, not to mention lost jobs. Both Lykes and American President Lines, two of our largest remaining shipping companies, are now foreign owned subsidiaries. Though some of their ships are supposed to remain under the American flag, draconian wage and benefit reductions can be expected for American seamen employed by both companies. A loophole in the law may even allow the new foreign owners to be treated as if they were American owners because their newly acquired subsidiaries are "American." If so, this will effectively downgrade the American flag to another flag of convenience available to foreign interests. Ironically, it will also permit foreign owners to collect the benefits of any maritime subsidy payments from American taxpayers!

Senator Grassley has suggested that if nation security is the rationale for subsidizing the Merchant Marine, that Merchant Marine wages ought to be on a par with those of navy sailors. I don't believe he has really worked out the relative costs  to the nation of maintaining a navy sailor as opposed to maintaining a merchant mariner. Combine the pay of a navy sailor with that of a merchant seaman—and it wouldn't come close to what Senator Grassley takes to the bank in wages and perks. Many unlicensed merchant mariners today labor for near minimum wage—if they are lucky enough to find a berth at all. Of course, like the American seaman, Senator Grassley himself could be replaced a Philippine national at considerable savings to the Treasury.

Any trading nation that does not carry a significant portion of its maritime commerce, (at least half) in its own ships is getting cheated on every international trade deal it negotiates, no matter how good the deal may otherwise seem. American ships don't even carry a tenth of our foreign trade. The result is an increased negative imbalance of trade and international payments—a clearly recognized, and increasing, problem which we currently face, and have increasingly faced for nearly three decades. Our national debt and balance of trade deficit are intimately related, and are both a national disgrace. Both are symptoms of a serious, and exceedingly unnecessary, national malaise.

Nationally, we have effectively given up the idea of having a viable and strong national Merchant Marine, (or anything else conductive of national pride) in favor of integrated international markets in which our national interests are subverted to the interests of global corporations! The decline of our Merchant Marine is merely one of many symptoms of an all-encompassing decline in national economic viability, (Wall Street and the GDP notwithstanding!). Yet most of the "experts" insist that a wonderful new world is just around the corner as a result, and that national suicide should continue to be pursued with all possible haste.

If the problem and its causes are so serious and recognizable, why do we continue to march down the primrose path? One need look no further than Wall Street and the stock market for the answer. The corporate economy is booming, and the stock market is forever up! Internationalized capital is now in power, both economically and politically. Our government has ceased to be "of the people, for the people, and by the people," and has become "of the people, for and by big international capital." The people are relegated to the role of being the source of bail-out money, extracted through income tax and increasing public debt. The weight of this dual demon of taxation and accumulating debt will ultimately take a ghastly toll.

In the mean time, or until we wake up, the name of the game is global interdependence for the benefit of globalized capital interests, and "to hell with national independence" broad-based prosperity (corporate prosperity is enough), and such national industries as a strong domestic Merchant Marine. This is nothing short of national suicide.

A few historical quotes.
From the U.S. Merchant Marine Org, at

President Benjamin Harrison
The United States has been paying an enormous annual tribute to foreign countries in the shape of freight and passage money. The balance of trade as shown by the books of our custom houses has been largely reduced, and in many years altogether extinguished by this constant drain. I have felt, and have before expressed the feeling, that this condition of things was both intolerable and disgraceful.


President Benjamin Harrison
There is nothing more justly humiliating to the national pride and nothing more hurtful to the national prosperity than the inferiority of our merchant marine compared with that of other nations. I am an advocate of economy in our national expenditure, but it is a misuse of terms to make this word describe a policy that withholds an expenditure for the purpose of extending our foreign commerce.

President Grover Cleveland 1894 message to Congress
The millions now paid to foreigners for carrying American passengers and products across the sea should be turned into American hands.


Representative Nelson Dingley, Chairman of the House Ways and Means Committee in 1897
The decline of our merchant marine in the foreign trade is a humiliating fact. If our shipping in the foreign trade had grown in proportion to the increase of the cargoes provided by our foreign commerce, we should have had a most magnificent fleet of vessels engaged in transporting our exports and imports.


President William McKinley
Our national development will be one-sided and unsatisfactory so long as the remarkable growth of our inland industries remains un-accompanied by progress upon the seas. There is no lack of constitutional authority for legislation which shall give to this country maritime strength commensurate with its industrial achievements and with its rank among the nations of the earth.
President William McKinley,
speech at the Pan-American Exposition, September 5, 1901, Buffalo, New York
Our capacity to produce has developed so enormously, and our products have so multiplied, that the problem of more markets requires our urgent and immediate attention. By sensible trade arrangements, which will not interrupt our home production, we shall extend the outlets for our ever increasing surplus.

What we produce beyond our domestic consumption must have vent abroad. The expansion of our trade and commerce is the pressing problem. Next in advantage to having the thing to sell is to have the conveyance to carry it to the buyer.

We must encourage our merchant marine. We must have more ships. They must be under the American flag, built and manned and owned by Americans. They will not only be profitable in a commercial sense; they will be messengers of peace and amity wherever they go. Reciprocity treaties are in harmony with the spirit of the times.


Senator Thomas Benton of Missouri
While the lack of power to regulate foreign commerce was a primary defect of the Confederate Government (1774 to 1788) and the necessity for its exercise so great as to form a chief cause for creating the Federal Government, it is singular that Congress has always overlooked it, or confounded it with impost or revenue power. Though not now exercised, it is a power which has found a need for its exercise, and will find it again.


Secretary of State Elihu Root in 1906
We are living in a world not of natural competition, but of subsidized competition. State aid to steamship lines is as much a part of the commercial system of our day as state employment of consuls to promote business. It will be observed that both of these disadvantages under which the American shipowner labors are artificial; they are created by governmental action-one by our own government in raising the standards of living and wages, by the protective tariff; the other by foreign governments in paying subsidies to their ships for the promotion of their own trade. For the American shipowner it is not a contest of intelligence, skill, industry, and thrift against similar qualities in his competitor; it is a contest against his competitors and his competitors' government and his own government also. Plainly, these disadvantages created by governmental action can be neutralized only by governmental action, and should be neutralized by such action.
President Howard Taft

All the great commercial nations pay heavy subsidies to their merchant marine, so that it is obvious that without some wise aid from Congress the United States must lag behind in the matter of a merchant marine.

Senator Wesley L. Jones in 1913
Since 1885, foreign ships have carried over $50,000,000,000 of our foreign commerce. Estimating the freight at 15 per cent, we have paid them over $7,500,000,000 for getting our products to their markets and supplying our own. Of what benefit is a balance of trade in our favor if we pay out most of it for freight?

President Warren G. Harding
Our shipping 'will strengthen American genius and determination, because carrying is second only to production in establishing and maintaining the flow of commerce to which we rightfully aspire.

I do not for one moment believe in government ownership as a permanent policy but I prefer that hazardous venture to the surrender of our hopes for a merchant marine.

So we mean to maintain the flag on the sea until such a future day as when Congress may rise above the obstructionist when the reflective sentiment of all the country will sense the great necessity and compel the legislation required to turn to the national way of triumph on the seas.


Secretary of Commerce Herbert Hoover
We must have ships if we would expand our exports on sound lines, and we must have them as auxiliaries to our national defense . . . .

To secure export markets we must have some sound proportion of American controlled shipping to assure us against combinations in rates which would prejudice our goods in competitive markets. Nor have our merchants been without experience of finding that the transport of our goods in foreign bottoms has been taken advantage of by our competitors to learn details of our trade connections.

It is just as important to the farmer to be guaranteed reasonable rates of sea transport as of land freight. The real security is an American-owned merchant marine.

It is simply a truism to say that we must have an American Overseas Merchant Marine.

There is only one protection of our commerce from discrimination and from combinations which would impose onerous freight rates. That is to maintain upon these trade routes the regular operation of very substantial shipping under the American flag.

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