HUGE LOSSES

Evening Post, Volume CXV, Issue 77, 1 April 1933, Page 11

HUGE LOSSES

AMERICAN SHIPPING

THE SUBSIDIES SYSTEM

A RIVER "BONEYARD"

A few miles up the Mississippi Biver from New Orleans is a pitiful memorial to America's adventure in State-owned shipping. Moored nine abreast along tht levee lie lusting, rotting vessels, which form part of the idle fleet belonging to the United States Government. On the map this section "of the river is marked as Nino Mile Point; but to the people of Now Orleans it is known as "the Shipping Board's boneyard." This place, and others like it at various American ports, are also the graveyards of millions upon millions of dollars raised by American taxpayers, and, lavishly spent by the United States Shipping Board (writes a special reporter of the London "Daily Telegraph"). ■In all, the Shipping Board bought or Imilt a fleet of 2546 vessels, totalling 14,703,717 tons. For tut past seven or eight years it has been selling or transferring that fleet to private operators as faslj as possible, until today fewer than 400 ships remain Government property. UNKNOWN MILLIONS. But, although the Government is retiring from business as a shipowner, it continues to subsidise shipping at a rate which alarms1 even the most patriotic taxpayers. A prominent New Orleans shipping man estimates the total expenditure of the United. Shipping Board to date at five billion dollars (£1,000,000,000 at par).' He told me that it was impossible to obtain any official statement of the publia money spent on the purchase and operation of vessels, on subsidies and on loans that are virtual gifts. The Comptroller-General of the United States iimself, in reply to a New Orleans inquiry, answered that he Was unaware of nny record, of this total expenditure. For the disbursements of the Shipping Board are veiled by the operations of its subsidiary, the Fleet Corporation. This corporation carries on business much as a. private commercial concern, and is not accountable to Congress for its use of public funds. Congress learns the operating los 3 sustained from year to year, without being able to question the transactions by which this moneys has been spent. The last issued statement, covering the year ended June, 1931, showed a loss of 9,294,229 dollars. That sum takes no account of loans and mail contracts, but merely represents the Met deficit on operating the remaining vessels of the State-owned fleot and keeping watchmen on guard over "boneyards" like Nine Mile Point. SKIPS SOLD AS JUNK. Ships that cost the Government large sums, and in many cases saw very little service, are now being sold for trifling prices as junk. A little while ago, for instance, some of the vessels from Nine Mile Point were purchased by Mexico. But Mexico, had no intention of using them to enlarge her mi. hant marine; she scuttled the American ships to make /harbour breakwaters. Again, in the last recorded year of its activities, the Shipping Board sold 71 cargo boats—6o of them as scrap. These 60 vessels were bought by the ship-breakers for 622,910 dollars; what they originally cost and how much was Jost on operating them are facts not revealed to.,tho taxpayer.,, . Foreign shipowners, .who have been hit by State-subsidised competition aro not alono in resenting this bounty. Many Americans themselves believe that legitimate Government support of national interests is being carried beyond all measure, to tho detriment of tho United States merchant marine itself. I have heard much outspoken criticism of the Shipping Board here in New Orleans, which is one of the chief centres of the board's activities. .Technically, tho assistance given is not a subsidy; it takes the form of generous building and reconstruction loans, together . with valuable mail; contract awards. But here, this aid is not regarded as other than a pure subvention, MAIL CONTRACTS. "The subsidy is so excessive as to defeat its own aim and to destroy initiative," the director of a leading shipping firm told me. "We are creating a cringing, dependent merchant marine, and fostering growth without strength. At a time like this* the policy is doubly wasteful; it allows shipping operators to disregard economics, and it stimulates r.uperfluous now construction while hundreds of existing ships arc idle." From 1928 up to Juno, 1931 (tho latest date for which figures nro available), mail contract* were signed involving the construction of sixty-nine new vessels, at a cost of 300,000,000 dollars, in addition to 12,000,000 dollars advanced for the re-betterment of fiftytwo other ships. The Construction Loan rund under the Jones-White Act has authorised loans totalling 145,131,105 dollars. How fine is the lino which divides iuch mail contracts and loans from simple subsidies may bo judged from the fact that • advances have been made at rates as low as £ per cent. Shipowners who benefit from the loans expect to icpay them out of their profits 'on the mail contracts.. Most of the firms now operating Shipping Board- vessels work under what is called "the lump sum agreement," They receive a stipulated Government bounty for each voyage mado, regardless of whether their operations have been profitablo or not. In addition, tho Shipping Board pays ths cost of repairs above a curtain amount, SWELLING- BOUNTIES. If tho agreed bounty should subsequently appear to-the Shipping Board ■ '^unjust," it can be varied at discretion. One illustration will suffice to show how this discretion may be exorcised. A certain firm signed an agreement to operate a Shipping Board lino of vessels for a consideration of 3000 dollars per voyage. When the agreement caino up for review as "unjust," the bounty paid to this operator was raised to 35,000 dollars per voyage. "You can draw only two conclusions from an example like that," said tho New Orleans shipowner who directed my attention to tho case. "Either tho operator who agreed to work on a 3000 dollar basis knew nothing ■ whatever about Mb business and was quite unfit to manngo tho line, or else he is receiving a vastly excessive amount of public money now that his bounty has been raised to 35,000 dollars," Critics believe that tho latter conclusion is the ono justified by the facts. They arc supported by an audit recently made by the U.S. ComptrollerGeneral of the books of another firm operating Shipping Board vessels. This audit showed that the bounty enabled the firm's shareholders to receive a return of 367 per cent, on their invested capital. The Comptroller-General's restrained comment on this and other similar cases was: "Paymcn.ts havo been made, and are being made, not to cover losses, but in accordance with a stipulated amount agreed upon before the lons could possibly have been ascertained." ■ There Is another authenticated in--'stance of Shipping Board operations which might well be the • lif e-story_ -of

one of those rusting hulks in the Mississippi "boneyard. "A vessel built in .1881 and reconditioned in 1916 was requisitioned by the board in 1917. A month later she was chartered for the Atlantic coastwise trade, but on hor first voyage proved unseaworthy, and had to bo towed to port. Tho vessel was repaired at a cost of 10,700 dollars, and made one more voyage; then she was laid up for additional repairs. After tho Government had agreed to do repairs costing 47,000 dollars, and to pay the owner a charter hire of 40,000 dollars, the ship was released from requisition in 1918. Later she was sold, and when the new owners subsequently bought another Shipping Board vessel in exchange they were allowed 160,000 dollars as the value of this 1881 boat. Finally, this vessel, having earned only 4000 dollars in charter hire during her career as a Government ship, was disposed of for 10,000 dollars. Shp had cost the American people 243,700 dollars. Meanwhile, New Orleans, second port in the United States, reflects , the seyero depression in commerce. On the day of my arrival there were fifty-eight vessels in port—thirty-six -of them laid up. Many of these ships- have been brought up-river to a wharf just opposite Nine Mile Point, where they lie six or seven abreast, scarcely less forlorn than the Government's idle fleet. BRITISH HARD HIT. British shipping, doubly hit both by the depression and by subsidised competition, shows a heavy falling-off here. From 1920, when 464 British vessels called at New Orleans, there has been a progressive declino to 140 in 1931, and only 123 last yoar. Exports from New Orleans to Britain have fallen in value from 92,000,000 dollars in 1929 to 33,000,000 dollars in 1931. Figures for '1932, not yet compiled, will show a further substantial decline. New Orleans is the great cotton centre, of the South; and falling prices are ruining both the plantation owner and the tenant. The former finds he has spent on running the plantation more than his whole crop realises at harvest-time; while tho negro tenant's share does not fetch enough money to repay his small borrowings from the owner. By the same process of borrowing more than-the crop can pay, hundreds of independent growers who used to own their plantations arc now reduced to the status of tenants. They are tenants of the banks, which have become virtual owners of the plantations in default of mortgage interest.