p44  Chapter Three

The Half-Century of Neglect

Causes of Decline

In March, 1870, President Grant sat at his desk penning a message to Congress on the importance of steps to revive what he called "our drooping merchant marine." At that time only about a third of the combined import-export trade was carried in American vessels. Though the Cunard, Inman, North German Lloyd, Compagnie Generale Transatlantique, and other foreign companies were all prospering, not a single transatlantic line worthy of the name carried the American banner. The country, as President Grant pointed out, was paying from twenty to thirty million dollars annually (a sum which then seemed large) to foreigners for shipping services.

Building ships and navigating them, the President argued, would give employment to a large amount of capital; would furnish work to thousands of men; and would create a home demand for the products of iron-mills and machine-shops. Not least important, it would give the country an invaluable resource in time of conflict. During the recent Civil War the navy had drawn six hundred vessels from the merchant marine, exceeding one million tons, and manned by about 70,000 seamen, for the blockade and for armed service.

 p45  "A portion of the vast and ever-increasing interior resources of the United States," declared Grant, "extending, as it does, from one to the other of the great oceans of the world, with an industrious, intelligent, energetic population, must one day possess its full share of the commerce of these oceans, no matter what the cost."

Why had the merchant marine of the United States declined so precipitously since 1855? It was once usual to answer that question by a brief reference to the Civil War. Beyond question, the Alabama and other Confederate cruisers had wrought great havoc on the oceans. They destroyed about 110,000 tons of shipping. They spread such panic among shipowners that during the four years of war 752,000 tons were sold to foreign buyers. Meanwhile, construction facilities were devoted chiefly to naval uses, while the hundreds of vessels impressed for the arduous work of blockading, cruising, and troop transportation suffered from hard usage. Our fleet of ocean-going merchant vessels had reached 2,497,000 tons in 1861: five years later it was down to 1,388,000 tons. But the war by no means furnishes the full, or even the chief, explanation.

The unescapable fact is that the decline had clearly set in during the late 1850's, and was attributable to at least four causes which had nothing to do with the clash of North and South. They were (1) the introduction of steam as the cheapest motive power for merchant ships; (2) the growing use of iron instead of wood as ship material; (3) the overproduction of vessels, and especially of sailing ships, under the stimulus of foreign wars and California gold; and (4) the absorption of American capital and energy by the more lucrative business of building railroads, opening mines and oil fields, and otherwise developing the nation's interior resources. The merchant marine would in any event have entered upon a period of decline, and the Civil War and its aftermath  p46 merely accelerated it. This aftermath was important; it included currency deflation, high prices, and high taxation, all of which hampered efforts at a revival. Meanwhile, the opening of the Suez Canal benefited British shipping by shortening its route to India and the Far East.

The full advent of steam propulsion gave the British, who had been signally bested by our sailing ships, an opportunity which they seized with characteristic energy. They had the best engine-works in the world, abundant coal supplies, and an established principle of government subsidy. Making use of these advantages, they rapidly placed themselves in the van. It may seem remarkable that the same Americans who made such efficient use of steamboats on the Sound, the Hudson, the Ohio, the Mississippi, and the Great Lakes, should have placed so heavy a reliance upon sailing ships for ocean traffic. They developed the packet and clipper — and then stood still. But large steamships required a heavy capital outlay, and the American government refused to offer any such subventions as those which Parliament voted to the Cunard and Inman Lines, the Peninsular & Oriental, and the Pacific Steam Navigation Company. Such steamships required machinery which the British, for all the work of Ericsson and Corliss on this side, still excelled in making. The worldwide empire of Britain, with coaling stations dotted everywhere, and the efficiency of the British consular service, were also invaluable to steamships carrying the Union Jack.

As for iron and steel, until Carnegie and Hewitt developed their mills in the 1870's our manufacture remained distinctly behind Britain's, while even after that our metal was more expensive. When Grant penned his message, only seven or eight establishments in the United States were able to build iron ships, and they did little business. It was then estimated that our iron vessels  p47 cost a third more than the British, a prohibitive differential. John Roach, buying some iron works in the late 1860's and a shipyard at Chester, Pa., on the Delaware River, in 1871, set up a •120‑acre shipbuilding plant that was for years the best on the continent. He combined with it an engine manufactory. A man of force and energy, he kept his establishment active after the panic of 1873, constructing sixty-three vessels in a dozen years. But this, the Cramp shipyard farther up the Delaware, and the Harlan & Hollingsworth yard at Wilmington were the only producers of iron ships at the time worth mentioning. On the other hand, such great British builders as the Lairds at Birkenhead created impressive facilities and made ships for the whole world. British shops led, too, in the development of the screw propeller and of the compound engine.

But perhaps the cardinal reason for the long-continued slump in shipbuilding lay in the simple fact that American investors who wanted eight or twelve per cent on their capital could better find it in manufacturing, railroading, mining, land development, and  p48 other domestic employments. The greatest fortunes of the time were to be made in steel, oil, lumbering, meat packing, and railroad building; the industrial princes — the Carnegies, Rockefellers, Weyerhaeusers, Armours, Harrimans — were busy in these fields. It is an eloquent fact that by 1880 the total capital invested in American railroads was $4,762,000,000, while that invested in deep-seas shipping was only about $100,000,000. The House Committee on Commerce in 1881 made a report declaring that the decline of shipping was explicable on the ground that, lacking "sufficient capital of our own to improve our soil, develop our mines and manufactures, build our railroads, carry our government bonds, and own ships for our ocean-carrying trade, all at the same time, capital has sought those investments that would yield the largest returns."

Western Railroad Construction Scene

Profits in the merchant marine had usually been small. Under the highly competitive conditions after 1865, four per cent could be taken as a good average. And it was to be considered that costs of handling and maintenance were greater for the United States, a high-wage nation, than for Europe. Wooden ships were soon simply out of the running; Joseph Nimmo of the Treasury Department reported in 1870 that depreciation and repairs on them were ten per cent a year against five per cent on British iron steamships.

Proposed Remedies

Grant's message having accomplished nothing, Nimmo proposed three remedies for the situation. The United States might strengthen its merchant marine, though at the same time it would injure its shipbuilders, by admitting foreign vessels to its registry. It might admit free of duty such shipbuilding materials as copper, tin, zinc, anchors, canvas and cables, a step which would reduce ship construction costs by about one‑tenth. Or the government  p49 might pay bounties on ships built of American materials. Our shipping interests were not irretrievably fallen, wrote this expert. "We have all the natural resources, the mechanical skill and the commercial enterprise which are requisite to place our merchant navy in the front rank."

But as none of these remedies was adopted, the merchant marine continued to decay. When in 1882 a Congressional committee made a fresh investigation, it found that the tonnage engaged in overseas trade had fallen to a new low level. In 1865 approximately 1,500,000 tons had been so employed; in 1870, about 1,400,000 tons; and in 1880, only 1,300,000 tons. The coastwise, fishing, and internal fleets had grown, but the ocean-going marine was now pitifully small. The proportion of our export-import trade carried in our own vessels sank lower and lower; to 12.5 per cent in 1981, to 11 per cent in 1897, and to 8.2 per cent in 1901. Meanwhile, a symbolic if little-noticed event took place in Boston in 1880. Into that port crept a battered old sailing ships to be broken up; and though her name had been changed, nautical experts who looked at her peculiar hull saw that she was a vessel which had once represented American leader­ship on the high seas. The forlorn hulk was the Baltic, onetime holder of the Atlantic speed record, built by Collins 30 years before.

The Steamship Baltic When New Courtesy of The Mariners Museum, Newport News, Virginia

 p50  Yet a few sparks of life remained in the merchant marine to show that it might still be restored to vigor. A line of sailing packets to the northern coast of South America developed into the Red D Line plying between New York and Venezuela; first with German-built steamers, and then with three excellent iron ships of American construction. It prospered and grew. At first it competed with the United States & Brazil Company, and, when that corporation died in 1893, became the only regular steamship line under our flag running to the east coast of South America. More famous was the Ward Line, established as a Cuban service in 1877 with iron steamships, and later extended to Mexico. It too prospered, carrying both passengers and freight.

The most notable figure to emerge in merchant shipping after Collins, William R. Grace, was (like the shipbuilder John Roach) of Irish birth. As a boy he worked his way to America on one of the old sailing ships. The early 1850's found him in Callao, Peru, with the firm of Bryce & Company, shippers and commission merchants. He became a partner, and finally head of the firm. Then, at the close of the Civil War, he returned to New York to organize the firm of W. R. Grace & Company to trade with South and Central America, grew wealthy and influential, and was twice elected mayor of the metropolis. In 1891 he established the New York & Pacific Steamship Company, and later the important Grace Steamship Company. The "Grace Line" became one of the proudest ornaments in our merchant marine. It might be added that, after the annexation of Hawaii, the American-Hawaiian Steamship Company was organized and proved profitable; but this, like the older Pacific Mail Company, was essentially a line in the protected coastal service, which no foreign ship might enter.

One and only one transatlantic line of consequence was in operation during the later years of the century. The American  p51 Steamship Company, a corporation sponsored by the power­ful Pennsylvania Railroad, had four fine iron steamers, the Ohio, Pennsylvania, Indiana, and Illinois, built in the Cramp shipyard in 1872‑73, and put them in service to Liverpool. Patriotic Americans long patronized these speedy and comfortable vessels; President Grant began his tour around the world in one of them. Never allowed a government subsidy, the line had any deficits which it incurred met by its wealthy railway sponsors. The fact that it plied out of Philadelphia, a city not served by any British liners, was to its advantage. It always boasted that it never lost a passenger or a mailbag — an unparalleled record of safety.

Brightening Skies

Little by little, even in this dark period, the basic conditions for the creation of a new merchant marine improved. The American steel industry rose before the end of the century to full equality with Great Britain's; and since steel was supplanting iron in shipbuilding, the United States found itself the equal of other countries in its command of materials. The much-advertised "new navy," the creation of which is variously credited to the Arthur Administration and the Cleveland Administration, gave the whole country a new interest in its future on the seas. As people gazed at pictures of the "white squadron," maritime ambition reawakened. Government orders encouraged shipbuilding companies to expand and modernize their yards, and aided engine makers and machine shops.

Reverting to the principle of special government encouragement of the merchant marine which Washington, Adams, and Jefferson had accepted at the beginning of our national history, Congress in 1891 passed a much-needed subsidy measure. This was a Postal Aid Law which gave a special payment to mail-carrying vessels on their outward voyages, varying according to the speed  p52   p53 and tonnage of the ship from 66⅔ cents to $4 a mile. The swiftest vessels were entitled to the largest payment. One of the prime purposes of the enactment was to help establish a North Atlantic mail service with vessels of 8,000 tons or over, making at least twenty knots. The $4‑a‑mile rate would furnish about $12,000 for the outward voyage to Liverpool. The sum was obviously not enough — European governments were much more generous; but by a happy stroke of fortune, an important new American line emerged to claim it.

At this very time the British government abruptly terminated its mail contract with the Inman Line, ostensibly on the ground that the two services of the Cunard and White Star companies were enough. Part of the real ground was that the Inman Line had passed under the control of an American corporation, the International Navigation Company, which now owned the American Line. It happened that the Inman Line was just completing two splendid vessels on the Clyde, the City of New York and City of Paris. As the first twin-screw passenger ships yet built, the first "unsinkable" ships, and the best-appointed and most luxurious of liners, they had some title to be called the finest craft afloat.  p54 The Yankee owners proposed to the government that they be admitted to American registry, thus becoming eligible for the new postal subsidy. Congress agreed, and on February 22, 1893, ceremonies aboard the New York marked the change of registry and the raising of the new house flag of the American Line, a blue spread eagle on a white ground. In approving the change of registry, Congress stipulated that two similar ships be built in American yards.

President Harrison Raising the New House Flag of the American Line, February 22, 1893

The S. S. City of New York, 1893

The result was that the International Navigation Company contracted with the Cramp Company for the construction in 1894‑95 of two beauti­ful steel ships, the St. Louis and St. Paul, which became an object of much justifiable national pride. Vessels of 11,600 tons, they were built from stem to stern of American materials,  p55 and their design embodied innovations of great value. Having no doors or other openings in the steel bulkheads below the main deck, they were the safest ships afloat. Their graceful lines recalled the distinction of the old clipper ships, giving them a distinctively American aspect. A crowd of twenty-five thousand people assembled to watch the St. Louis take the water on November 12, 1894. President Cleveland was there, and Mrs. Cleveland christened the vessel. The next spring the St. Paul was launched. Thereafter the International Navigation Company (which took over the four iron steamers of the American Line, and which was the lineal ancestor of the present‑day United States Lines) had the crack greyhounds of the North Atlantic. Its new ships easily took and for several years held the New York-Southampton record, the St. Paul crossing from Southampton in 1896 in six days and thirty‑one minutes.

President and Mrs. Cleveland at the Launching of the St. Louis

An important factor in molding possible sentiment was the books of Captain Alfred T. Mahan, whose Influence of Sea Power Upon History, 1660‑1783, appeared in 1890, and was quickly followed by the Influence of Sea Power Upon the French Revolution, 1793‑1812, and by his works on Farragut, Nelson, and the Second War with Britain. He was the first to expound, with philosophic acumen as well as mastery of historical fact, the salient part that maritime activity has played in modeling the destinies of nations. The merchant vessel no less than the warship engaged his attention. In a book entitled The Interest of America in Sea Power, Present and Future, he preached a direct gospel of maritime activity to his own generation. Throughout his works he showed that a strong merchant fleet and a strong navy are interconnected, and that one cannot exist without the other. The United States, he insisted, needed a strong navy for the protection of its vital interests. "Can this navy be had without restoring  p56 the merchant shipping?" he asked in the first chapter of his first book. "It is doubtful."

The Spanish War also gave an impetus to maritime ambition, for it illustrated Mahan's ideas, particularly in showing that an adequate merchant marine is indispensable to effective naval operations on any large scale. The conflict, short and petty as it was, demanded reserves which we did not have. The government of course took over the four large new steamships of the American Line, and the St. Louis and St. Paul did yeoman work in Cuban and Puerto Rican waters. It also commandeered some of the largest liners of the Southern Pacific system, the Red D Line, and the Ward Line. It was a great fleet of more than fifty merchant vessels, bought or chartered as transports, which took the American troops to Cuba, Puerto Rico, and the Philippines. Had the war been longer and more serious, the lack of modern shipping would have been a formidable handicap. It brought, as one says, "a wholesome awakening."

Immediately afterward, the new insular dependencies and our responsibilities in China under the Open Door agreement helped lift the eyes of Americans to the seven seas. Large (and, as it proved, quite exaggerated) hopes were entered of a vast new Oriental trade. When Theodore Roosevelt became President in 1901, he did his utmost to stimulate the rising interest in ocean affairs. He had written a naval history of the War of 1812, had been Assistant Secretary of the Navy, and was keenly interested in economic opportunities overseas. Nobody did more to emphasize and popularize the ideas of Mahan. "He lays stress," wrote Roosevelt in reviewing one of Mahan's books for the Atlantic Monthly, "on the necessity for a large commercial marine, if we wish the sea population which alone furnishes a secure base for naval power."

Finally, the building of the Panama Canal, an undertaking  p57 which aroused the greatest national enthusiasm, both created a more favorable business foundation for American shipping, and strengthened the sentiment for a large-scale utilization of our maritime opportunities. Foreign vessels had been practically debarred from our coastwise service after 1789, and completely debarred after 1817; the traffic between the Atlantic and Pacific ports through the canal was now defined as "coastal," although the voyage was longer than most transoceanic routes. It grew extremely heavy, relieving the transcontinental railroads of much of their freight, and was generally profitable. The canal reduced the distance from New York to Manila, by way of Hawaii, from 17,800 miles to 12,000.

Capital and Marine Opportunities

From 1830 to 1900 the main interest of Americans had lain in the exploitation of the nation's vast internal resources; but after 1900 commercial expansion began to attract general attention. President McKinley's speech at the Pan‑American Expedition just before his assassination looked to broad development of overseas trade. The success of the International Navigation Company, the Grace and Ward Lines, and later of the Munson and Robert Dollar Lines, were straws in an increasingly favorable wind.

The two last-named enterprises each deserve a special word. Walter D. Munson, a Connecticut farm boy who fought in the Civil War, took a single schooner in 1873 to begin a freight service between New York and Nevada. He gradually expanded his business, sticking at first to sailing vessels. In 1899, when he was using steamships and had extended his operations to Mexico, Haiti, Jamaica, and Central America, he incorporated the Munson Steamship Line. It grew and prospered, so that at the time of his death  p58 in 1908 it controlled sixty steamships and played a major role in Caribbean commerce. Robert Dollar, who was born in Scotland, first made a fortune in large-scale lumbering on the Pacific Coast of the United States and Canada. In 1901 he ventured into Pacific shipping with the Arab, a 6,500‑ton steamship. His business expanded rapidly. Before the beginning of the First World War he was an important factor in Pacific shipping. A few years after its end he controlled a majority of the American passenger vessels in that ocean, owned some which did a round-the‑world service, and had built up a huge freight traffic. He had offices in most great ports, and his liners, named after Presidents from Adams to Hoover, did much to make our flag a familiar ocean sight.

One significant indication of the fact that American capital was no longer exclusively interested in domestic spheres lay in E. H. Harriman's Far Eastern ventures. Another lay in the increasing penetration of Central and South America. Consolidations were now popular in the business world, and invaded shipping. Charles W. Morse presently undertook a great consolidation of coastwise shipping lines from Maine to Texas — and failed. Much more importantly, J. Pierpont Morgan in 1902 attempted a daring forward step in the development of an American merchant marine by his organization of the International Mercantile Marine Company. C. A. Griscom, one of the leading figures in American shipping, and president of the International Navigation Company, which was included in the combine, became the president of the new company.

This combination brought together the White Star Line, the American Line, the Atlantic Transport Line, the Leyland, the Dominion, and the Red Star Lines. More than one hundred and twenty steamships were thus taken under one general direction. For a time great alarm was felt in Britain, and Balfour had to make  p59 a reassuring statement in Parliament: corresponding elation was felt in some American circles. While nearly all the vessels remained in foreign registry, and the White Star offices were kept in London, this gigantic combine did promise to increase American owner­ship and control of ocean shipping. But public opinion in America and Britain was skeptical and in considerable degree hostile. I. M. M. encountered financial difficulties, and in 1903 J. P. Morgan announced a reorganization.

P. A. S. Franklin, a man of unusual ability, became receiver of the company; and his energy and astuteness, together with the support given by a Virginia banker, Frederick W. Scott, shortly rescued it from its difficulties. Both men had faith in the company's future, and in the early revival of shipping. Within little over a year after the receiver­ship had been instituted, the situation was transformed. The market value of the capital had risen to more than $165,000,000, and the company was in a position to make steady progress. While Morgan's experiment did not achieve its objective, it did indicate that American capital was turning in a larger way to the oceans, and it did have some enduring results.

"The present exclusion of America from the deep sea," wrote Winthrop L. Marvin with confidence in 1902, "is only for a time, and now for a brief time. No race like ours with a grasp upon two oceans and the mingled blood of Viking and pioneer can long be cheated of its birthright." His prophecy was nearer its justification than he could have supposed. It was high time, for with only one‑tenth of its foreign trade under its own flag, the country was sorely handicapped in transporting its goods abroad. It had to cope with infrequent and slow service to many non‑European lands, the necessity for much costly transshipment, and not a little outright discrimination.

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