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tical ur of Ship Problems- Analysis of Economic and Commercial Questions Which Will Affect America's New Merchant Fleet If we could first know where we are, and whither we are tending, we could better judge what to do and how to do tt. HESE clear and_ simple words, spoken over sixty years ago in re- lation to a great national problem, apply, in equal degree, to the situation which confronts the commercial world, as an aftermath of the great war. Modern civilization is, at the base, in- dustrial. Commerce is, from its nature, dependent upon production. It follows that profitable commerce is impossitle ex- cept it go hand in hand with prosperous and productive industry. The late war effected an appalling de- struction of the instruments of produc- tion, among all the greatest industrial nations. This destruction has carried in its train disorganized commerce and finance. ' progress toward normal conditions, the underlying causes of the present situation must be diligently sought, clearly under- stood, stripped of generalities and jar- gon and bravely confronted. As applied to the present world situa- tion in ocean shipping, the babel of voices is quite as incoherent and confus- ing as in other directions. Here, too, we have the familiar mental confusion be- tween cause and effect. For instance, the statement that the chief obstacle to our export trade is the depression in European exchange, is about as illuminating as to say that measles result from spots on the skin. The depression in foreign exchange is far less a cause than a symptom. To us, rates of foreign exchange simply mean Before we can hope for sound - BY ROBERT EDWARDS ANNIN the market values of foreign currencies expressed in terms of our own. Our own currency is now on a gold basis; that is, all of our government cur- AHVUUUUUEUNCUATECEUUUUOQUOUOOOUEUUOOQEEUONUOUETORLEC OUEST What Series Will Show N THE series, which starts with this article, Mr.- Annin will present a practical analysis of the problems of the new American merchant marine. This analysis covers not only the im- portant political and legislative phases of the subject but also the actual op- erating problems which demand solu- tion before success will meet America's new entry into the field of worldwide ocean competition. Mr. Annin has the fundamental training essential for dis- cussing this subject, based on nearly thirty years of actual experience in op- erating ships. His ability to analyze to- day's problems is evidenced by the books on shipping subjects which he has written. The serics will prove of value to anyone interested in America's marine future, whether as a student or as an executive charged with the task of keeping the new merchant fleet in serv- ice or, like above, of building ships. SOUTHS rencies are, on demand, redeemable in gold. European currencies are below the parity of ours because they cannot be now redeemed in gold. The capacity of European nations to produce marketable commodities has been so reduced by war that their surplus val- ues (after supplying their own immediate needs) are insufficient to offset the value 206 of foreign goods which they urgently re. quire. Again, since this distorted relation of production to consumption has existed for some years, some of our most valu- able customers abroad have already ex. hausted their credits. To sum up, such. customers cannot pro- duce at home sufficient to fill their needs. and for what they require from abroad they can neither pay (in cash or com- modities) nor obtain credit. Therefore, relief from the present de- pression in ocean freights can only fol- low the revival of industry, defla- restoration of cred- interna- tion of itss = and currency, the resumption of tional trade under something approaching normal conditions. To look for a profit- able ocean traffic, previous to material im- provement in all these respects, is simply to expect that effect will precede cause. This situation is serious enough. But European conditions have been aggra- vated by an immense over-speculation in certain lines--for example, freights, coal and sugar. About the middle of 1920 the world's markets, in these and other com- modities, collapsed, bringing many sup- posedly strong interests, here and abroad, to or over the edge of bankruptcy. The influence on ocean freights was instantaneous. In less than a year trans- atlantic rates, for instance, have de clined from a point which showed 4 profit of from $8 to $10 per cargo tom after covering interest, depreciation and repairs, to a level which shows a loss of from $2 to $3 per cargo ton, allow- ing nothing for those items. As Europe has so little to export, our ships must come back either in ballast