Essays - Winter 2019

Launching the Greatest Fleet

How American war surplus helped build the world’s most successful merchant marine

By John Psaropoulos | December 3, 2018
Built in 41 days, the SS Black Hawk was launched in New Orleans in January 1943. She, like the Cormorant, was part of the U.S. fleet of Liberty Ships. (The National WWII Museum/Gift of Earl and Elaine Buras)
Built in 41 days, the SS Black Hawk was launched in New Orleans in January 1943. She, like the Cormorant, was part of the U.S. fleet of Liberty Ships. (The National WWII Museum/Gift of Earl and Elaine Buras)

Even though more than half a century has passed, Captain Yiannis Tsaganis remembers his worst storm clearly. He had embarked on the Greek merchant vessel Cormorant as a seaman in 1964. The ship’s five holds had been filled with lumber in Vancouver, and because lumber is a light cargo, beams had been strapped with ropes to the hatch covers as well, allowing the ship to reach its maximum capacity of 10,000 tonnes. The Cormorant ’s destination was the port of Yokohama—a distance of more than 4,000 nautical miles across the treacherous North Pacific. Normally the trip lasted about 15 days, but on this occasion the ship began to list. The lid of the ship’s aft ballast tank had cracked and was seeping water into the cargo holds. Then, a typhoon hit, with waves as high as 36 feet bashing the Cormorant to the height of the bridge.

The storm might very well have sunk the ship, but its captain turned adversity to advantage. First, he ditched the lumber strapped on deck to lower the center of gravity. Since the weather came from the northwest, he nosed the Cormorant southwest, keeping the wind to his right. “We sailed the ship like a caique, keeping the weather to our list side,” says Tsaganis. “You could really feel the lift of the weather from starboard. It kept the vessel up.” Using the wind against the list meant that the flooded holds were no longer a liability but a stabilizer.

When the Cormorant arrived at Yokohama, she was listing so badly that the Japanese pilot refused to come on board and guide the ship to its moorings. According to Tsaganis, the captain told the pilot to board the ship to sign a release “ ‘saying you refuse to pilot me,’ and as soon as the pilot was on board, he pulled up the ladder. He got the pilot to guide us to the outermost buoys at Yokohama port and then let him go.” When the crewmen stepped off their ship for the first time in a month, they realized what had frightened the pilot. “The starboard deck was barely six inches from the water.”

The captain of the Cormorant was an example of the Odyssean seamanship and diplomacy that helped catapult the Greek merchant fleet from ninth place globally before World War II to the top of the league after 1972, a place it has held ever since.

Greek ships carry a fifth of the world’s seaborne trade. Some 4,746 ships, capable of shouldering 365 million deadweight tonnes, or dwt, of cargo, make the Greek-owned fleet the largest in the world. It is distantly followed by Japan’s (whose fleet can carry 223 million dwt), China’s (165 million dwt), and Germany’s (112 million dwt). Half of the entire European Union fleet is Greek owned.

An often forgotten historical fact contributed to this success: after World War II, the United States put the bounty of its war production to peaceful use. The Cormorant was an American-built Liberty Ship—probably the most mass-produced vessel type since the trireme that plied the Mediterranean in ancient times—and although it was designed as an expendable, one-voyage oxcart to ferry war materiel, the Greeks bought Liberty Ships after the war and sailed them competitively for three decades. Combined with Greek maritime dexterity and global postwar growth, the Liberty Ship became responsible for refloating the Greek merchant fleet.

America’s contribution to Greek shipping remains one of the most important historical bonds between the two countries, not only because of its ultimate economic importance, but also because it stems from a moment when Greece played a role out of all proportion to its size and, alongside Britain and the United States, fought World War II at sea and won it.

From the beginning of the war, German U-boats targeted Allied merchant shipping, aiming to choke off U.S. supplies to Britain. After the British and American fleets, the Greek merchant fleet was the only Allied one of any size, so securing it was a priority. As Germany invaded Greece in April 1941, the government in Athens passed a law allowing Britain to enlist Greek merchant vessels in the war effort and laid down the framework for conscription of the entire Greek merchant marine. But this was a formality. Greek ships were the first neutral vessels to be time-chartered by the British in October 1939, and they saw action even earlier, as of the beginning of September.

Even with their combined merchant fleet, though, the Allies could not outlast the U-boat onslaught. Winston Churchill wrote, “The only thing that ever really frightened me during the war was the U-boat peril.” The Allies and neutral countries lost more than 4,700 ships to enemy action during the war. Of these, just under 500 were Greek merchant ships, representing three-quarters of the Greek merchant fleet by tonnage—a far greater proportion than that lost by either Britain (54 percent) or the United States (35 percent); in addition to this, the Greeks lost 95 percent of their merchant fleet under sail—another 551 ships.

The British government indemnified losses after the war, but the money could only be spent in Britain and its dominions. Greek ship owners based in London used the money to order new vessels in British shipyards, but these would take months or years to launch. In the meantime, 20,000 seamen—two-thirds of the merchant marine—were unemployed, and Greek ship owners were without ships. To benefit from reconstruction, they needed replacement vessels fast.

In October 1940, Britain had looked to the United States to build 60 merchant ships a year. American shipyards were feverishly completing rearmament contracts for the U.S. Navy, but finally the first of the British ships, the SS Patrick Henry, was launched on September 27, 1941. It and its successors were deliberately small, so that no single vessel of its kind would present a major target or, if sunk, a major loss. It was a tramp ship—constructed simply to give it maximum versatility in the types of cargo it could hold—and its engine ran on steam, not diesel, so that it would be cheap to build, reliable to run, and easy to repair at sea.

Had the Allied effort relied upon these 60 ships a year, the war would almost certainly have been lost. Total Allied sinkings, including enemy action and marine peril, were 1,059 in the year the Patrick Henry was commissioned and 1,299 in the year she was launched. America’s entry into the war after Pearl Harbor, however, gave this program a completely different impetus. Every major U.S. shipyard was enlisted in the construction of Liberty Ships, as the adaptations of the British model came to be called, and some shipyards were established for the purpose. Liberty Ships were built in a production-line process, which brought the cost per ship to under $2 million and the manufacturing time to as little as four days.

Ultimately, American shipyards won the war in the Atlantic through an audacious strategy of outbuilding the losses to U-boats. Of the 2,710 Liberty Ships built, only one in 13 would be lost in combat. When the war ended, the surviving ships idled in massive clusters off the East and West coasts. In June 1946, the United States Maritime Commission decided to put them up for sale to the Allies. New York–based Greek ship owners had been entrusted with 15 of these vessels during the war (losing one), because the United States didn’t have enough trained crews to man the ships it was building. After the war, the Greeks were eager to buy them and, together with London-based Greek ship owners, requested 100 more.

“Beware of Greeks bearing gifts,” Laocoön warned the Trojans, but in 1946 it seemed as though the Greeks were incapable of receiving gifts. The U.S. Maritime Commission offered generous terms of sale: Liberty Ships at $544,500 apiece, less than a third of their construction cost, with buyers paying only a quarter of this upfront. The rest was payable over 17 years at low interest. The only obstacle was that the Greek government would have to act as guarantor for the loan that the U.S. government would effectively be extending to ship owners.

A month of squabbling ensued over whether the ship owners or the Greek government would finally be responsible for backing the loans. The government was evidently conflicted over how much to help ship owners. On the one hand, it was desperate to rebuild the economy. On the other, it lacked the resources with which to do so. The Nazi occupation had ended in October 1944, but one of its enduring legacies was a lack of confidence in the drachma; after liberation, 170 trillion drachmas were needed to buy a single British gold sovereign. In their retreat, the Germans had destroyed what remained of the country’s infrastructure: almost all bridges, passenger ships, train engines and rolling stock, aircraft, buses, and trucks. Agricultural production was down to half its prewar level. More than a million people were homeless. An estimated 90,000 Greeks died during the first year of peace, mostly due to starvation—the same death rate as during the war. From such an economy the government couldn’t raise enough taxes to provide basic state services, let alone create jobs, and what little it had, needed to be spent at home.

The Greek political situation was an even bigger disincentive to underwrite Liberty Ships. Although Konstantinos Tsaldaris had come to power with 55 percent of the popular vote in March 1946, his conservative government’s legitimacy was undermined by the Communist Party’s boycott of the election and an incipient civil war between government forces and the communist former resistance fighters. Athens had already seen six weeks of pitched battles beginning in early December 1944. Despite a truce, sporadic fighting was again ramping up in the summer of 1946, and the government was suffering mass defections from the armed forces. Conservative leaders were desperate to keep any political ammunition out of the hands of the Communist Party and avoid being seen to offer concessions to a privileged expatriate elite.

On September 5, 1946, the Tsaldaris government finally relented. It would underwrite three-quarters of the value of the Liberty Ships in return for a deposit worth 10 percent of their value plus a second mortgage on the ships. Ship owners would pay their annual interest in a lump sum at the beginning of each year. A debacle had been averted, and ship owners would start operating their vessels early the next year. But the government would pay a political price. The Communist Party newspaper, Rizospastis, got hold of merchant marine minister Nicholaos Avraam’s correspondence to his son, in which he promised him “a gift” from New York. Rizospastis spun the implication as a financial kickback, forcing Avraam to resign in disgrace. Only later was the gift revealed to be a model of a Liberty Ship.

The Liberty Ship deal was seen as one component in the much larger reconstruction challenge of the day. Few people could have realized the seminal importance of those first 114 ships. They would prove such a success that out of roughly 1,200 vessels sold by the Maritime Commission, two-thirds would at one time or another pass through Greek hands. One energetic and imaginative entrepreneur, however, did fully envision the potential of the Liberty Ships, even though he was prevented from participating in the 1946 sale. His name was Aristotle Onassis.

Max Scheler/Süddeutsche Zeitung Photo/alamy

At about the time he came of age, Onassis was a refugee. In 1922, a three-year effort by Greek forces in Asia Minor to re-create the Athenian Empire collapsed. Twelve Greek divisions retreated before a resurgent Turkish army under the command of Mustafa Kemal Atatürk. Their departure exposed the Greek population, whose ancestors had colonized the eastern Aegean coast three millennia earlier. The Turkish onslaught forced an estimated 1.5 million Greeks onto eastern Aegean islands or overland through Thrace on foot.

Finding little economic opportunity in Greece, Onassis joined an uncle in Buenos Aires. By his own account, he “begged” a Greek ship owner there to take him on as a deckhand and was turned down. He got a job as an operator in the telephone utility instead, but quickly moved into the tobacco trade with his uncle, where his business acumen clearly shone. “I started out importing 15 packets of tobacco a year in 1924,” he would later boast, “and by 1934 achieved imports of 15,000 bales a year.”

Onassis did not lay aside his shipping ambitions for long. In 1934, he started buying used bulk carriers. Between 1938 and 1942 he built three state-of-the-art tankers in Swedish shipyards. He moved to the United States during the war and between 1946 and 1954 built an empire of 30 companies operating more than 60 ships. Onassis financed these acquisitions by chartering tankers at fixed rates.

After the war, Onassis had expressed an interest in buying those initial 14 Liberty Ships, and the 100 that followed, but the other Greek ship owners blocked him. All these vessels went to established, third- and fourth-generation shipping families, including that of Onassis’s future father-in-law, the revered shipping magnate Stavros Livanos. (Onassis would only much later marry Jacqueline Kennedy, the widow of President John F. Kennedy.)

Onassis was so incensed at being pushed out that he publicly totted up the profitability of the Liberty Ships, exposing the government guarantee as scandalously superfluous. As the pace of reconstruction in Europe and Japan quickened, cargo rates rose. “The 100 Liberty Ships, which were practically given for free, will enjoy, during their first 12 months in operation, a combined net income of $30 million,” Onassis wrote 10 months after the ships entered service under their Greek owners. “The Greek state not only asks for no taxes or hard currency; it will even wait for ship owners to settle their debt in 17 years, which they are in a position to pay off today.” In the event, the ship owners did pay off the 100 Liberty Ships—by 1951.

Although the Liberty Ships were built to be expendable, the solidity of their construction impressed the Greeks. “They were made from original mineral ore, not scrap metal,” says Captain Mihalis Fyssas, who first boarded a Liberty Ship as a deck hand and graduated a sublieutenant. It helped that Greek ship owners were meticulous about keeping their metal plate shipshape. One of the deck hands’ main jobs was to go around the vessel chipping away rust with a sharp-nosed hammer, a matsakoni, and then paint over the area with fish oil, which was cheaper than varnish.

It turned out that what made the ships competitive in war also made them competitive in commerce. The simple, five-cargo-hold layout designed for versatility meant they could be used as bulk carriers, tankers, or general cargo ships carrying a mixed haul. “You could pour grain beneath and run a deck across the cargo hold and place a different cargo on top—cars or boxes or whatever,” says Fyssas. They were cheap to run because their engines had a maximum speed of 12 knots.

Into this ship the Greeks brought their own competitive qualities. Chief among them was the social cohesion of the crews, which were not merely Greek from top to bottom, but were handpicked from the ship owner’s island and even the same village. This social bond, carried from land to sea, formed what University of the Aegean professor Ioannis Theotokas calls the “psychological contract” between employer and employee, increasing productivity. “Honor was more important than life,” he says.

This localism even provided a form of social security, says Theotokas, who is a native of Chios. During the Iran-Iraq war, “approaching a Gulf port was extremely dangerous because there was a high chance that a ship would be sunk. For this reason, ships traveled without insurance because the cost was very high. … I asked a captain who had served throughout this period [1980–88], ‘Weren’t you afraid?’ He replied, ‘I was afraid, but I also knew that if anything happened to me, my family would have been taken better care of than they are now, because …’—and here he mentioned the ship owner by name—‘would have taken better care of them than I do now.’ No economic model can account for this. It is unquantifiable, but it is the ingredient that launches productivity to the skies.”

Many captains in the postwar period lacked what would now be considered adequate instrumentation. This they could turn into a strength. Tryfon Kazakos, for instance, became a steersman on a Liberty Ship essentially on 18th-century navigation technology—the sextant. This meant that later, as a captain, he was able to sail from Dalian, China, to Vancouver, a distance of more than 5,000 nautical miles, by dead reckoning. Even his sextant was useless. From the Hokkaido Strait to Vancouver, he couldn’t see the sun because of fog. Kazakos charted a course on the map every day by factoring in ship speed and direction, the winds and currents. He managed to land dead-on in Vancouver. A foghorn was the first indication he’d had in weeks that he was on course. “On the last stretch, I heard another boat hailing me on the VHF radio. ‘Hello ship, hello ship,’ I talked to him. It was a Korean ship. He told me he was going to cross my stern. And I asked him, ‘Why don’t you give me your location?’ and that’s how I figured out exactly where I was.”

The most productive aspect of localism, perhaps, was a form of transgression. “The Kardamyla captains had a sort of competition amongst themselves about who was going to haul the largest cargo,” says Theotokas, “such as getting the better of the draft surveyor so that the ship will appear to be at the load line. But in truth it will have taken on more cargo than the legal load limit would allow. A good captain was judged by this.”

Liberty Ships on the Hudson River in June 1946. The United States sold these surplus ships to Greek ship owners for a third of their original cost. (New York State Archives)

Overloading was, as it is now, illegal, but it was widespread, and captains could, if caught, get away with a bribe. They had a personal incentive to do so—captains were eligible for bonuses if the ship did well on a particular run.

“Let’s say you’re loading scrap metal,” says a captain who wishes to remain unnamed. “In the last few hours before you sail, the surveyor comes to check your stability every 15 minutes. At that point, I can overload the boat by 100 tonnes. When the draft surveyor comes along to measure the ballast, you have emptied the ballast tank. Then he goes outside to see the displacement. While he’s checking that, you adjust the ballast, while the draft survey is going on.” The Liberty Ship could hold a potential 1,300 tonnes of water in its three ballast tanks. By adjusting these even a little, during the time it took the draft surveyor to climb from the bottom of the hull to the quay, it was possible to make the ship appear at least a couple of hundred tonnes lighter than it really was.

“It’s worth it for 100 tonnes,” the captain explains. “The buyer of the cargo pays for the extra weight.” Captains thus maximized the carrying capacity of their ships, a measure they could justify by the fact that consumption of fuel and drinking water along the voyage compensated for the overloading at the outset. Even such small increases in the amount of cargo sold amounted to real money over time. At the very least, if overloading didn’t increase profits, it offset attempts by dockworkers or the buyers of the cargo to cheat the transporter, and it protected the captain from accusations of skimming by his employer.

Sometimes the overloading method was more ambitious than turning on the ballast pumps during the draft survey. Some captains repainted the draught markings on the side of the hull, moving them a few inches up. “You could do it at port,” says Kazakos. “If you were docked on your starboard side, you repainted the port side. At night, when the workers went home, you did the starboard side as well. We did this systematically. For instance, if we could load 9,750 tonnes of grain, when we moved the draught gauge it became 10,500. The company profited a bit more from that charter.”

Postwar growth was another major factor in the expansion of shipping, because exports have steadily risen for more than 70 years; but there was a political factor in the saving of Greece itself: the Truman Doctrine. By 1947, the political situation in Greece had become critical. The Tsaldaris government was losing the war against the communist insurgency.

In March, President Harry S. Truman convened an emergency joint session of Congress and asked for financial assistance to prevent Greece from becoming a part of the Soviet bloc. Greece gave rise to what can fairly be described as the first articulation of principle behind all of America’s Cold War engagements, which was to ensure independence for free nations:

“We shall not realize our objectives,” Truman told Congress,

unless we are willing to help free peoples to maintain their free institutions and their national integrity against aggressive movements that seek to impose upon them totalitarian regimes. This is no more than a frank recognition that totalitarian regimes imposed on free peoples, by direct or indirect aggression, undermine the foundations of international peace and hence the security of the United States.

Truman asked Congress for $400 million in financial assistance to Greece and Turkey, “little more than one tenth of one percent,” as he put it, of the $341 billion (in 1947 dollars) America had spent winning World War II. “This is an investment in world freedom and world peace,” he said. America would end up spending $13 billion on assistance to all of democratic Europe in the Marshall Plan, which grew out of Truman’s policy.

By the 1980s, shipping surpassed tourism as the main generator of foreign currency in Greece. Although a large percentage of Greek ships do not fly the Greek flag to avoid higher taxes, these policies gradually repatriated the management and headquartering of the Greek-owned fleet almost in its entirety. By the most generous estimates, offices based in the Athens port of Piraeus kindle economic activity in Greece of more than $16 billion—some seven percent of the economy—and sustain as many as 192,000 jobs directly or indirectly. Over decades, ship owners have also driven investments in tourism, banking, airlines, and ship repair, creating further growth.

Thus shipping could not remain unscathed in the economic crisis that struck the country following 2008. In 2010, Greece was forced to accept the first of three loans from its Eurozone partners in order to avoid bankruptcy. Among the conditions was the balancing of its budget, which it achieved after tremendous cost cuts worth 15 percent of GDP. The cuts had an indirect effect on the economy, which in turn reduced tax revenues. In order to make up for lost individual and corporate income tax, the government taxed real estate and consumption. Under pressure from the Eurozone, it also leaned on its shipping community.

The economic cycles associated with shipping wax and wane with global trade cycles, not Greek ups and downs. The industry had suffered from the unprecedented drop in global freight rates following the 2008 financial crash. This made additional costs and taxes more difficult to absorb. Nevertheless, in 2012, sensing a government intervention, the Piraeus-based ship management offices, representing almost all of the Greek-owned fleet, volunteered to pay Greek tonnage tax in addition to whatever tonnage tax their ships were paying under foreign flags. Moreover, they volunteered to double the tonnage tax for a period of three years as a gesture of solidarity. After the left-wing Syriza party was elected in 2015, it extended this solidarity period by another three years and imposed an eight-to-10 percent tax on the billions of dollars that shipping imports to Greece each year. These measures aim to raise $700 million in six years over and above regular tax revenue from shipping. At the moment, some measures are voluntary and all are supposed to be temporary. Ship owners fear that they could become permanent and obligatory, given sustained Eurozone—and particularly German—pressure to tax Greek shipping even more.

Today, all the factors leading to postwar growth in shipping are being overturned. Government aid to entrepreneurship has in much of Europe been replaced by high taxes on labor and corporations, raising the bar to new businesses. The U.S.-inspired Marshall Plan in Europe has now been replaced by German-inspired austerity policies. Globalization itself may be slowly picked apart. Although it doesn’t seem possible to return to the postwar world, openness in the international system needs a guarantor. The EU can help maintain policies that will sustain openness, but it is up to the United States or China to promote them. For this reason, to this day, the Greek shipping community remains one of the most important links in the relationship between the United States and Greece.

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