to enter into modern competition. The number that are tied up in the James River and in the northern and the Gulf ports are simply rotting away, as we know. The others that have been remodeled at tremendous expense have proved that it is, I think, a waste of money to attempt to use that old, worn-out instrument in competition with the modern, efficient, highly geared machinery of our competitor nations. That, of course, is all remedied in the act, as I understand it, and the arguments I spent so much time in convincing people about are accepted.

However, in that act, I understand, there are certain things which it has been deemed ought to be, if possible, amended or strengthened, or in which greater liberality should be shown.

One of the first is with respect to helping the industry build ships. The act presupposes a building program which will supply that deficiency caused by the obsolete fleet, and provisions are made, as the act sets forth, for the advancement of 75 percent of the total cost, new, which is a concession in the proposed amendment, leaving 25 percent to be found by the industry. Without in any way being a spokesman for the industry, for labor, or for the Government, but purely as a student of the matter, and after having shopped around a good bit and talked with the industry, I do not believe, sir, that they can find today 25 percent. In other words, to carry through this program which is of national importance, I do not advocate or suggest deletion even of that, but I do want to go on record as saying that it is still very difficult, as I understand from the industry, for the industry to raise even 25 percent of that needed total foreign cost which, I repeat, is a concession from the Government, modifying the original provisions of the act.

The result of that is that I doubt very much if the necessary replacement program will get under way with the speed that the emergency requires. That particular point, whether or not the Government still will have to help more with the 25 percent, is more a question of fiscal solution than of economic. However, as a merely collateral fact, I do believe that they will not find even that 25 percent. Why? I think the blame there has to be evenly adjusted. A good bit of that blame is the industry's own; but a good bit, too, is due, I think, to unwise criticism of the merchant marine by the Government. I apportion that blame on both sides; namely, that the whole industry, particularly as an investment field, has been made so suspect, has been made so almost guilty of corrupt practices, that nobody is going to invest in it any more. I understand from authorized sources that they find it difficult even to get 25 cents of a dollar25 percent. They find it difficult to get that necessary amount.

That is unfortunate, because it has destroyed confidence in what used to be our greatest pride. I agree thoroughly with the admiral who preceded me as to the damage that has been done to one of the most important links in our national economy, the merchant marine. That damage is attributable, as I see it, to several factors, and it is a mistake, I think, and an injustice, to blame it all on one side. I followed with tremendous interest the various hearings during the last few years. The hearings sometimes allow certain elements. to be largely publicized to the derogation of others. The result was, as we know, a falling off, even a suspicion, with regard to the merchant marine. I think that ought to be remedied immediately,

Mr. Chairman and gentlemen; otherwise we are going to grow worse and worse.

Senator MALONEY. How would you remedy that, Father?

Father WALSH. Any remedy, naturally, must attack the causes. No. 1: As an investment field, it is useless today. I think that is a fair description. To get that 25 percent, even, which the act and the amendment will require, there are only about three companies which would be able to take that 25 percent out of reserve. I think that is a fair statement-about three. What will the others have to do? the bankers.

The others will have to go to

Let us take a unit of measurement. Suppose it is a million-dollar ship which in American yards would cost a million and in foreign yards would cost about $600,000. We have estimated about 40 percent difference in the construction of these ships, with the disadvantage against us. Of course, if it is a large ship, it may be $10,000,000; but I am speaking merely in the unit of a million.

There will have to be put up 25 percent of $1,000,000 for a small ship, or of $10,000,000 if it is a large ship, and it will be necessary to go to the bankers for the balance, which becomes practically a second mortgage, the Government holding the first mortgage through the provisions of the act.

The CHAIRMAN. He has to go to the bankers for the first payment? Father WALSH. The first payment, yes; with the hope that the other payments shall derive from income.

As far as I have been able to ascertain, the bankers themselves regard it as a very poor risk. The shipowner will have to pay secondtrust rates, which may go up to 7 or 10 percent on whatever he gets, and he would be coldly received. Several have been, as I understand it, up to date. That is to be remedied. Whether the remedy shall lie in the act or in the Government providing a different approach, I am not prepared to say at this particular moment.

What I feel I could do is to say that I doubt if they will get even their 25 percent, because of the present public opinion of the merchant marine. That has come from, I think, unwise generalization and too broad accusations as to the condition of the merchant marine in past years. Of course, there were a few operators—some operators who used mail subsidies in too generous a manner and profited in a way that was not intended by the act; but there has been launched on the basis of that an indictment of the whole industry, which I consider a catastrophe.

Senator MALONEY. Father, do you think that if they cannot meet that 25 percent, the Government ought to be more liberal with them? Father WALSH. It is not a question of liberality. I think there are means, Senator, by which the entire domestic cost of any unit of the merchant marine can be assumed by the Government and paid back cent by cent by the operator, so that there is really no assumption of a cost but merely the advance of a loan; and over a period of years that can be returned absolutely, even without the first initial payment.

I am not speaking for the industry, as you understand, because I have no interest in it; but I am afraid this would slow up our program. What I am afraid of is that the program which is so necessary is going to be slowed up further through that plan.

Senator RADCLIFFE. Do you think that this is a situation that is likely to be temporary, or do you think that because of the character of foreign competition and other demands which enter into it, the difficulty to which you refer is a permanent situation? Just how much do you think we must reckon with that as a permanent situation?

Father WALSH. Do you mean, sir, the disfavor?

Senator RADCLIFFE. Yes.

Father WALSH. Unless the disfavor is remedied, it will become permanent; in fact, I consider it every day and every week getting worse and worse; or it may be only a temporary infection, if I may use that phrase, but the results will be permanent. Every day we are slipping.

I have just come from the Pacific coast, from California, and that entire coast, as we know, has been in the last 2 years frequently almost paralyzed on this question of the maritime problem. It is not an economic problem, but a labor problem.

The rehabilitating both of the physical equipment and of the morale standing of our merchant marine before the world and the country is, I think, our immediate project. It is at its lowest ebb at this moment.

Here is the psychology of the thing: With the passage of the act and the publication of it, and with the publication of the Maritime Commission Chairman's report, there was a high wave of optimism throughout the country. It has fallen, because when the operators went out to get the necessary means to put into production what they had hoped for, they found a very frigid reception, and one. after another of the companies reported, "We can't get it, and we cannot keep the commitments which we have undertaken under the' act."

Therefore, we are in a sort of second slump, Senator, which we ought to be pulled out of.

But I think, too, that the element of personnel and the very serious. labor problems, about which you have doubtless heard in this committee, are a result of that other; and indeed, labor conditions may give rise to some conditions that accentuate the other.

Senator GUFFEY. Father, do you think we will ever get an efficient merchant marine with private capital?

Father WALSH. You are getting none at present with private capital.

Senator GUFFEY. We are getting none; I agree with you on that. If the Government furnishes a 100 percent of capital, which I think we will have to do, what is your plan of operation? Government operation or Government lease?

Father WALSH. I would be opposed, and I say this more from the point of view of economics, having no interest in the matter of a personal nature

Senator GUFFEY. I understand; but I am now seeking information. Father WALSH. I would be opposed to absolute Government ownership and operation. I would be in favor of an initial Government. ownership through the present period of stagnation and demoralization, with the obligation on the industry of acquiring, of itself, over a period of years, each unit of the merchant marine, operating it, in the meantime, privately.

I was tremendously interested in the suggestion of the previous witness that there should be more Government participation than ever before. I would concur in this, Senator, for as long as even 75 percent of the construction differential subsidy comes from the Government and a sliding amount of operation differential comes. from the Government, the Government, more than at any time before, has more reason to know what is happening to its tremendous investment, by having people, in the way outlined by the previous speaker, or under the Steamboat Inspection and Navigation Bureau, or through the cooperation of the Navy, exercise some kind of supervision. That would be a matter which could be worked out by the competent authorities. But the principle itself is sound.

Secondly, more than ever before have we lost sight of the specific character of the merchant marine as distinguished from a land industry. Much of the controversy in recent months, and in the past years, respecting labor conditions has been based upon something which I think labor has overlooked. The merchant marine, I think, whether it be tied up at dock, at anchor outside the 3-mile limit, or in any foreign waters, is entirely different from a factory at Detroit, where a strike or sit-down operation may find some justification. They found certain justification in high places at the beginning of that new phenomenon, and it was at least controversial. There can be no controversy with respect to the fact that a floating factory, if you want to call it such, or a floating hotel or floating fortress-any floating thing which carries passengers as well as goods-is under the old, traditional, maritime and international law, which does not permit any of those other claims which are true on land.

Therefore, a strike at sea, even for certain grievances, would have been unheard of in the past. Now, as we know, it is debated. I have read with great distress authentic reports from our consuls at: Shanghai, Marseilles, Havre, and Naples informing the proper authorities of actions in those ports of American crews which would have been unthinkable 25 years ago, and which, when I read, caused me to get down a report which was made to the British Parliament exactly 100 years ago.

We have in our collection of maritime records the notation that in 1837 the British Parliament appointed a number of men to make a study to find out what was the secret of the efficiency of the Ameri-. man merchant marine. Now, what the British are getting are published records, authenticated, with notarial seals on them, describing the inefficiency of the American merchant marine in many respects, although not altogether. Doubtless you have read the reports of our consuls at Shanghai, Marseilles, Hong Kong, Naples, and at other ports telling what is taking place; in other words, that the crew of an American vessel could sit down and dispute with the master as to whether or not it could do certain things which he had ordered; that it could send a delegation to inform him that they were not going to do this, or that they would not do that, that, and the other thing.

Without entering, for the moment, into the question of controversy, the fact, I think, is one of the things itself that has to be corrected. It is a vicious circle: First, discredit and disfavor, because of, let us say, imprudence on the part of some operators since the passage of the first Merchant Marine Act; secondly, public criti

cism, from high sources frequently; thirdly, the reaction of personnel on board ship, all of which now conspires to make it true that day after day you are losing passengers from American ships.

You have in the record a collection of documents, attested, which would frighten anyone and discourage him from going on the ships

any more.

The CHAIRMAN. Father, I am glad you have mentioned that, because the committee, and particularly the chairman, has been subjected to criticism because of the anonymous nature of the charges made, while, as you have suggested, the record is filled with the reports of consular agents, attested reports.

Father WALSH. Yes, sir. Not only that, Mr. Chairman, but I base my information also on a great deal of traveling that I, myself, have done; and what is included in the nature of official reports of consuls is, I think, justified by the dozens of instances I, myself, have come across abroad.

If it is proper in your procedure at this moment, I have with me. my secretary, to whom I gave a vacation last summer to go abroad. He took his wife with him. They were on their honeymoon. They sailed from a southern port. When they came back they had firsthand information. He can give you his personal testimony. If it is within your procedure, he could tell you just what he experienced. The CHAIRMAN. We would be very glad to have him tell us.

STATEMENT OF DR. JAMES LOWE, WASHINGTON, D. C.

The CHAIRMAN. Dr. Lowe, did you have some experiences that you would like to tell us about?

Dr. Lowe. Well, there was the same condition on board this ship, which was a very small merchant ship, as has been described here. I feel that I was in a good position to observe the conditions, because I have seen them not only from the bridge but also from the forecastle. The first trip I made at sea was as a sailor. That was during my second year in college, about 8 or 10 years ago.

The CHAIRMAN. I have a suspicion that I read that record. I am not going to say more than that unless you do.

Dr. Lowe. Since that time I have made two other trips, both times. as a passenger.

Last summer I went to Italy with my wife, and the first time that I had to inquire into the matter of discipline, and so on, was because our stateroom happened to be right next to the sailors' mess, and there was a lot of language there that I thought might be offensive to my wife.

I asked the captain if he would mind speaking to the sailors and .reminding them that there were ladies on board and that it would probably or possibly offend them if the language that was being used continued. He said that he would be very glad to do this, but that, as I had probably observed by that time, the master of the ship had absolutely no control over the seamen with respect to a number of different matters, and that if he should go down to their quarters and suggest that they not use certain language, that would only make it twice as bad.

He said, "Our control over the personnel on board these ships has practically gone.”