SHIPPING AND THE WAR
_The following Chapter was published during the War, and fairly
describes the attitude taken by shipowners towards the War, and the
great work they successfully performed._
1.--NOW AND AFTER
It is unfortunate that no adequate statement has been forthcoming
setting before the public the important services shipowners are
performing for the country, and the serious position of the shipping
industry. Even in the House of Commons the voice of the shipowner has
never been effectively raised.
It is no exaggeration to say that the shipping interest of Great
Britain has sacrificed more than any other leading industry--and the
country does not realise the serious difficulties which are in front
of shipowners if they are to "carry on" after the war and maintain our
maritime position. Indeed, so far from the true position of the
shipowner being realised, there appears to be a general impression
that he has made undue profits out of the war, and is still in a
privileged position, and is gathering in exceptional riches.
It will scarcely be disputed that the material prosperity of the
country depends upon the existence of a great mercantile marine, and
that our shipping industry is vital to the existence of the nation.
In times of peace we depend upon it to feed and clothe our people, and
to bring us the necessary raw products, the manufacturing of which
gives employment to our industrial population. We are apt to forget
that we live upon an island, and with the exception of coal and iron,
we depend almost entirely upon our shipping to supply the wants of our
forty-five millions of people and to maintain our industries.
Were it not for our merchant ships the present war could not have been
carried on. It would, ere now, have been lost, and the people of this
country would be in the grip of famine. Nor have our shipowners merely
supplied our commercial wants; our merchant ships have been turned
into armed cruisers, patrol ships, hospital ships, and transports, and
have thus rendered the most effective assistance in the conduct of the
war.
Anyone who realises these facts will see how important it is that our
shipping interest should be supported, so that it may be in a position
to resume its activities; and that its individuality should not be
crushed and extinguished by Government control and bureaucracy. As a
proof of the successful enterprise of our shipowners in the twenty
years prior to the war, our tonnage increased from 8,653,543 tons to
19,145,140 tons, and we owned 43 per cent. of the world's shipping.
[Illustration: SS. "Olympic," 1911]
It may be well to deal at once with the allegation that shipowners
have made excessive profits. There is no doubt that during the first
two years of the war ships earned large freights, not, however, due to
what is commonly called "profiteering," but simply because the
Government hesitated to check the imports of merchandise of a bulky
character. After the Government had taken up the tonnage necessary for
their transport purposes, what remained was not sufficient to convey
the produce pressing for shipment. If imports had been regulated as
they are now, the pressure for freight room would have been reduced
and freights kept within moderate limits.
The urgent need for checking imports of a bulky character was, I know,
urged upon the Government by shipowners who foresaw the scramble for
freight space, but the Government failed to respond to these
representations. Their hands were very full, the tonnage problem was a
new and difficult one, opening up many embarrassing questions, viz.,
as to what imports should be checked, the effect of this upon our
manufacturers, and what would be the result of checking trade in one
direction, in causing its dislocation in another, and the consequent
disturbance of our foreign exchanges. All these and others were points
upon which we had little or no experience to guide us, and the
position was aggravated by the loss of tonnage due to the ravages of
the submarine.
Taking a calm view of the retrospect, and the gigantic and unique task
with which the Government has been faced, they have accomplished their
work with fewer blunders than might have been expected. After all,
freights have not bulked largely in the increased cost of produce; a
freight of £10 per ton is only 1d per pound. If we are to find the
true cause of our high cost of living we must look at the inflation
and consequent depreciation of our currency, the high rate of wages,
and increased spending power of our working classes, and the
indifferent harvests of last year in all parts of the world.
The high freights earned by our shipping in 1914, 1915, and part of
1916 naturally caused the value of shipping to rapidly advance. Very
few new merchant ships were being constructed; ships were being
destroyed, and shipowners possessing established lines were forced to
buy to maintain their services, and thus the value of secondhand
steamers advanced to two, three, and even four times their pre-war
values. Many holders, especially of tramp steamers, sold out and
realised great fortunes, and these unexpected and unprecedented
profits unfortunately escaped taxation, on the ground that they
represented a return of capital; and it is these profits that have
appeared unduly large in the public eye.
The shipowners who remained in business, and this comprised the great
majority, were deprived of 80 per cent. of all their profits above
their pre-war datum, and afterwards this tax on their excess profits
was relinquished, and the Government requisitioned all tonnage on what
are known as Blue Book rates--which on the basis of the present value
of shipping yield only a poor return.
It is difficult to understand why the Government should have placed
shipping on a basis of taxation differing from all other
industries--it is the industry which beyond all others is essential to
the conduct of the war, and which is exceptionally subject to
depreciation. The Chancellor of the Exchequer (The Right Hon. A. Bonar
Law) was undoubtedly carried away by his own amateur experience as a
shipowner, and thought there was no limit to the extent he might filch
away the shipowner's earnings, little recking that if the shipowner is
unable to put on one side a reserve to replace the tonnage he loses,
he is forced to go out of the trade; and also utterly disregarding the
rapid headway being made by neutral countries, who are profiting by
the high freights and using their profits to greatly extend their
mercantile fleets.
In estimating the financial results of our shipowning industry during
the early period of the war, allowance must be made for the increased
cost of working a steamer. Coals, wages, insurance, port charges, and
cost of repairs, and upkeep were all very high; indeed, it may be said
that the nett results to the shipowner of the high freights which
prevailed in 1915 and 1916 were not very excessive when all these
things are considered, for in addition to the increased cost of
working, there was heavy depreciation to provide for, the shipowner
suffered a complete dislocation of his trade, and in many cases lost
his entire fleet, the creation of long years of toil, and with this
his means of making a livelihood.
2.--DIFFICULTIES OF RESTORATION
We have considered the position of shipping as the paramount industry
of the country--its great services in the conduct of the war, and what
it is suffering in consequence of the diffusion of fairy tales of the
excessive profits made by shipowners. We can now turn our attention to
the extraordinary difficulties which stand in the way of the
restoration of the shipping industry, which are fraught with
considerable peril to the future of our Empire.
Shipping may be divided into two classes, both of which are of
national importance. The liners, which comprise fixed services of
passenger and cargo ships. These services must be maintained, and new
tonnage built at whatever cost to replace lost ships. The other class
is our cargo ships. Many of these conduct regular services; others are
what are known as "tramps," and go where the best freights offer. It
is the owners of the tramp steamers who have realised large profits by
selling their ships. The Government in their shipping policy have
entirely failed to discriminate between these classes, not recognising
that the liner services involve a complete and costly system of
organisation both at home and abroad, which, once dislocated, is
difficult to restore. The urgency for additional cargo ships prevents
the building of liners, and there must be a considerable shortage of
this description of vessel when the war ends.
Probably the cause which has been most detrimental and disastrous to
shipping was the obstinacy of the Admiralty in declining to recognise
the urgent necessity for building more merchant ships. They filled all
the yards with Admiralty work, and when the violence of the submarine
attack aroused the nation to a sense of the danger before it, and the
cry went up throughout the land "Ships, ships, and still more ships,"
the Government then--only then--responded, and decided that further
merchant ships must be built at once. There was great delay in giving
effect to their decision to build "standard" ships--plans had to be
submitted and obtain the approval of so many officials that many
months elapsed before the keel of the first standard ship was laid,
and in the meanwhile the losses through the submarine attack
continued.
The destruction of tonnage by submarine attack in 1917 assumed very
serious proportions, but latterly the number of vessels sunk has been
gradually reduced, and we have the recent assurance of the Secretary
to the Admiralty that our methods of dealing with submarines have
improved, and that we are now achieving considerable success in
destroying them. The following statement gives the position to-day in
gross tonnage:--
1917.
U.K. World.
Sunk 4,009,537 6,623,623
Built 1,163,474 2,937,785
Nett loss 2,846,063 3,685,838
January-March, 1918.
Sunk 687,576 1,123,510
Built 320,280 864,607
Nett loss 367,296 258,903
The nett loss of British tonnage of 367,296 tons during the first
three months of 1918 was still very serious, but we were told that we
were making distinct progress in our rate of shipbuilding, and the
following returns seem to bear this out.
The United Kingdom monthly output of new ships from May, 1917, was in
tons:--
May 69,773
June 109,847
July 83,073
August 102,060
September 63,150
October 148,309
November 158,826
December 112,486
January 58,568
February 100,038
March 161,674
April 111,533
In the year ended April, 1917, new U.K. ships totalled 749,314 tons,
and for the year ended April, 1918, 1,279,337 tons.
The growing scarcity of shipping, the urgent need of providing tonnage
for the food supplies, not only for this country, but also for our
Allies, forced the Government to consider in what way they could make
the most economical use of the tonnage available. The position was
rendered more acute by the entry of America into the war, and the
adoption of the "convoy" system as a protection against submarine
attack.
There were two policies open for adoption by the Government. One was
to marshal and organise shipowners, and place in their hands the
provision of the necessary tonnage, thus securing the co-operation
and assistance of trained specialists. The other policy was to
"control" the trade, requisition the whole of our shipping, and to
work it themselves. They unfortunately adopted the latter policy, and
by so doing they not only lost the individual enterprise and
supervision of the trained shipowners, but practically placed
shipowners out of business, and this at a time when "neutrals," who
continue to benefit by the high freights, are making rapid strides as
shipowners.
The shipping control, under the able direction of Sir Alexander
Maclay, is doing its work on the whole better than might have been
expected--thanks to the voluntary assistance of many of our younger
shipowners. Under the control, the shipowner is paid at rates laid
down in the Blue Book, and without going into figures it may be
roughly stated that on the pre-war values of steamers these rates
leave him 6 per cent. or 7 per cent. on his capital, and 6 per cent.
for depreciation, but on to-day's values the return upon his capital
is very poor. A steamer now costs to build at least three times its
pre-war cost. Therefore, it is obvious a provision of 15 per cent. for
interest and depreciation on pre-war cost is only 5 per cent. on
to-day's values. This affords no inducement to enterprise, and it is
not surprising that many shipowners have gone out of business.
The Government control has taken ships out of the long voyage trades
and placed them in the Atlantic trade, where they are required as
transports and for the conveyance of food. This policy, which was
perhaps inevitable, may involve far-reaching consequences. The long
voyage trades have been built up by shipowners at a heavy cost, and
are also the creation of generations. These services involve costly
adjuncts in the shape of docks, piers, barges, repairing shops, branch
steamers, and through traffic arrangements. It may be said all this
will be recovered after the war; but this loses sight of the
difficulty of regaining a trade once its associations and connections
are severed; and also of the probable competition of America and
neutral countries. Certainly, the Blue Book rates give no compensation
for such a disturbance.
The Government are making huge profits out of shipping, but what
becomes of these profits we have been unable to discover; they do not
appear in any returns we have seen. But the time has arrived when the
"Blue Book" rates require to be revised--this, in view of the heavy
cost of the repairs which will be necessary when the war is over, and
the necessity of placing the shipowner in a position to replace his
tonnage at the enhanced prices which will prevail.
3.--PROBLEMS TO COME WITH PEACE
We can now proceed to consider what will be the position of shipping
after the war. This involves much clear thinking, and the discussion
of several questions upon which no definite statement can be at
present made.
We start with a tonnage deficit as compared with 1914 of approximately
3,000,000 tons. The output of new tonnage at present falls short of
our losses; last quarter to the extent of 367,296 tons. This is
serious, but we are gradually overtaking it. We built last quarter
320,280 tons, and other countries did still better, turning out
864,607 tons, and it would appear as if we might now claim with some
confidence that while the curve of the destruction by submarines is
decreasing, the curve of the output of tonnage is increasing, and we
may reasonably hope that at the end of the year our gains and losses
of tonnage will balance. This will leave us still to make good the
losses by submarine prior to this year. We have also to keep in mind
that our shipbuilding yards are still much occupied with Admiralty
work and with the repair of ships damaged by submarine attack.
After the war the Government will have to demobilise, and the
repatriation of armies comprising 5,000,000 men, with their munitions
and impedimenta, can scarcely occupy less than two years, and will
engage probably one-third of our available tonnage.
Europe will be very short of raw materials of every kind; the
importation of them will be very urgent, and food will also be short
for some time.
With the heavy weight of taxation which we shall have to bear, an
increased output of manufactures will be necessary if the prosperity
of the country is to be restored. This will not be possible without an
abundant supply of raw materials.
The repatriation of our armies and the urgent need for raw produce
would indicate that the Government will retain their control of
shipping for some time after the war.
The British and American Governments are building standard and wooden
merchant ships, but they will not last long, and will have to be
replaced by more substantial and suitable vessels.
The prospect before shipowners, therefore, is that there will be a
prolonged period of Government control and of high freights, which
will greatly benefit neutral shipowners. And the serious question
arises, how is the British merchant service to be built up again? The
position is one full of difficulty. Prices of new ships will probably
rule very high, and the Blue Book rates afford no encouragement to
build. In America, France, and Germany the difficulty will probably be
solved by the granting of subventions; but in this country we have a
profound distrust of subventions, as they are invariably associated
with Government control, which has always been destructive of
enterprise.
Nothing could be more unfortunate than the prolongation of the
shipping control one day longer than is necessary. It is undoubtedly
paralysing the industry, and any attempt, such as has been
fore-shadowed, to nationalise shipping would be most disastrous. How
could a State department administer the shipping industry of this
country in competition with foreign private enterprise?
The national control of our shipping and other leading industries may
be expedient in the present war crisis, but it has taught us that the
nationalisation of any industry penalises it with so many
restrictions, and surrounds it with so many unnecessary difficulties
that it is foredoomed to failure, and would inflict infinite damage to
the prosperity of the country.
Advances of money by the Government at a low rate of interest would no
doubt be an encouragement--and those shipowners who can afford to be
bold and accept the position will probably be rewarded; but to go on
building ships at the very high prices may be beyond the prudent reach
of the average private shipowner. This rather points to the creation
of large companies.
In shipowning, as in every other department of industrial life,
"scale" may be the dominant factor, and the shipowning companies who,
during the war, have been able to lay by large reserves, will find
themselves in a position of great advantage. In view of the necessity
for strengthening the hands of shipowners and enabling them to carry
on in the difficult times before them, the Government is making a
mistake in not giving more encouragement to shipowners.
Experience teaches us that shipowners may be trusted to quickly adopt
every modern means to work their ships economically, and to adapt them
to the trades they serve; but do our port authorities equally
recognise their duties to provide the most up-to-date methods and
machinery for the handling of our cargoes? We may economise in the
working of our ships at sea, but if on their arrival in port they have
to wait for berths to discharge and load, and if these operations are
hampered by the lack of mechanical appliances or labour, the
shipowners' exertions are in vain. Nor does the difficulty end here:
docks lose their value and attractiveness if the cost of moving
cargoes from the ship's side to the warehouse, or to the manufacturing
districts, forms a heavy addition to the freight. In Liverpool we
have, unfortunately, the costly, cumbrous, and old-fashioned system of
cartage still prevailing. There is a lack of good road approaches to
the docks and railway termini--a wholly inadequate means of
conducting the cross-river traffic. Our trade has out-grown our
railway communications with the interior, and our railways continue,
as they have always done, to strangle our trade by their excessive
charges, and thus to deprive our port of the advantage of its unique
geographical position. We want cheap and abundant water, and cheap
electrical energy to extend our local manufacturing industries. All
these things point to a quickening of Dock Board methods, but still
more to the awakening of the City Council to its responsible duties as
the custodians of a great seaport, and the urgent necessity that they
should do their part in its restoration and development, and make it
ready to do its share in the revival of trade after the war.
Our City Fathers cannot rest content with carrying out what Disraeli,
in one of his ironical moods, called "a policy of sewage." We want a
wider outlook, and a more generous appreciation of the fact that
Liverpool depends upon her commerce. Every expenditure which the city
has made in the past upon its development has resulted not only in its
growth and prosperity, but in the well-being of her people.
The British mercantile marine has for long been the envy of
neighbouring nations, who are watching the opportunity to seize the
business which our ships have been compelled to abandon. We have lost
a large proportion of our tonnage, and what is left is taken out of
the control of the shipowner. The situation constitutes a serious
national danger, and we may some day awake to the fact that we have
lost beyond recovery the industry which is above and beyond all
others, the great national asset, and shall rue the day when our
Chancellor of the Exchequer became interested in four small vessels
and drew conclusions from his experience which are not supported by
the wider and more expert knowledge of the shipowner.
Such is the present position of shipping and its future outlook--
A considerable reduction in the available tonnage.
Government control for a lengthened period.
High freights and high cost of new ships.
The probability of a great increase in American and neutral
shipping.
We cannot leave the subject without indicating that everything may be
greatly changed by the attitude of labour. If the present "ca-canny"
and "down tool" policies are to continue it is difficult to see how we
can recover our prosperity. Labour will have to realise that it has
its value, and that the receipt of wages carries with it the
obligation to give an honest day's work. And equally employers will
have to recognise that labour must have a fuller share of the fruits
of their labour and better conditions of life. Strikes will not settle
these matters; they only serve to intensify distrust and ill-feeling.
We must hope that our men returning from the front will have a wider
outlook and altered views of life, and that employers will also
generously recognise the changed conditions. We trust also that the
Whitley report may be quickly followed by the establishment of
Industrial Councils, and that these Councils will be able to promote
confidence and good feeling and remove the friction and distrust which
has too long existed between capital and labour. Meanwhile a
propaganda might be started to instruct our people in those elementary
principles of economic science which govern their labour, and about
which so much ignorance unhappily prevails.