784. Shipbuilding before the war.—An excess of imports into the United States, over the exports from this country, will come sooner and will be larger if the country resumes an important position in ocean shipping, as some believe it will. The United States continued, before the World War, to build shipping in considerable volume. The statistics of Lloyds Register show that in the first decade of the twentieth century, American shipyards contributed about one-seventh of the total tonnage built in the world. Most of the vessels built, however, were destined for service on the Great Lakes or in the coasting trade; the tonnage of steamers built for the foreign carrying trade was relatively unimportant. Foreign ships carried regularly about nine-tenths of our sea-borne trade in merchandise.
785. Shipbuilding by the American government.—In the first year of the war the tonnage of ships built actually declined. The provision of adequate cargo space became, however, a matter of urgent importance, as ships were drawn into service as transports and the ravages of the submarine extended. The government established in 1916 a Shipping Board, for the construction of ships as a public enterprise, and when it entered the war in 1917 it proposed to make one of its most important contributions to the war by the supply of new tonnage. The results are presented in the statistics of the accompanying table.
| Vessels Built in the United States, 1914-1920 | |||
|---|---|---|---|
| (Figures in thousands of gross tons; fiscal years ending June thirtieth.) | |||
| Sailing | Steam | Total[13] | |
| 1914 | 14 | 224 | 316 |
| 1915 | 8 | 142 | 225 |
| 1916 | 15 | 238 | 325 |
| 1917 | 43 | 461 | 664 |
| 1918 | 84 | 1,000 | 1,301 |
| 1919 | 79 | 3,107 | 3,327 |
| 1920 | 132 | 3,603 | 3,881 |
786. American shipping at the close of the war.—Comparing the figures of the table with the years of the war (and noting that each year of the table ends June 30, not Dec. 31) it is apparent that the contributions of the United States to relieve the dearth of shipping were of real importance in the last year of the war, but that the new industry developed slowly and reached its maximum of output only after peace had been declared. The peak of monthly production was attained in August, 1919, when about 400,000 tons of sea-going steel steamers were constructed. The sudden expansion of the industry, demanding the training of nearly a million men called from other occupations, was necessarily expensive. In three years, ending in 1920, the Shipping Board expended about 3 milliard dollars, a sum greater than the book value of the total shipping of the world in 1914. As a result of its activity the government owned about 8 million tons of ocean shipping. In the period of depression which followed the war fully half of this amount was idle, and the operation of ships by the government proved to be a losing venture. An act of 1920 directed that the ships be sold to private owners, but the close of the period left their future still in doubt.
787. Foreign exchange at the close of the war.—To understand the commercial position of the United States at the close of the war it is necessary to return again to questions of currency and foreign exchange. The situation appears in the following table.
| Average Annual Rate of Exchange in New York | |||
|---|---|---|---|
| 1913 | 1919 | 1920 | |
| On London | 100 | 90 | 75 |
| On Paris | 100 | 71 | 36 |
| On Rome | 100 | 56 | 26 |
| On Berlin | 100 | 7 | 7 |
The table signifies, for example, that the American in New York could buy in 1919 for $90 or in 1920 for $75 as many pounds sterling as had cost him $100 before the war; that he could pay a debt at Rome with half as many dollars in 1919, with a quarter as many dollars in 1920, as he would have had to pay in 1913. During the war the rate of exchange, like many other prices, was subject to government control; the figures for 1919 and 1920 show the tendency of the rates when they were left free to represent the actual value of the different currencies in international transactions.
788. Effect of depreciation in stimulating exports.—The table shows a great depreciation of the European currencies compared with the American. The United States had had a great expansion of bank credit during and after the war, but, after all, had in its enormous stock of gold the means to maintain the dollar on a gold basis, while the European countries had in circulation varying amounts of irredeemable paper. The reactions of this situation on international transactions were manifold, but two of them are worth particular attention.
When the issue of paper money continued, as in Germany for example, the value of the mark in foreign exchange fell more sharply than its purchasing power in the home market. An American importer would be able to buy more marks for the dollar. The mark would not buy as much as before in Germany, but the dollar’s worth of marks would buy more than before; and the importer would find a transaction profitable which previously he would have been unable to undertake. Unequal depreciation of this kind acted as a stimulus or premium on exports from Germany, which was seriously felt by competing producers in other countries.
789. Effect upon the international money market.—The situation had also an important effect on the course of international loans. Let us assume for example the case of Brazil, desiring to place a loan abroad. If it borrowed in New York it would get gold dollars and would feel assured that when it came to repay the loan it would repay it in the same currency, with units of approximately equal value. If, on the other hand, it borrowed in London, in terms of pounds sterling, it would get paper pounds, at a discount in comparison with gold, but must look forward to repaying the loan with gold units if in the interval the English had succeeded in putting their currency on a gold basis and thereby bringing their exchange to par. Even if Brazil desired to make the loan for financing some expenditure in the European market it would do better to buy dollar credit in the first instance, and buy with that the foreign currency that it needed; and to accomplish this end it would be willing to pay higher rates in New York than in London. It would be hazardous to assert that as a result of the war New York will replace London as the world’s money market, but it is clear that the position of London is seriously prejudiced so long as English currency is at a discount in comparison with gold.