Joseph Hansen

The Shipbuilding Scandal

(May 1943)

Source: Fourth International, Vol.4 No.5, May 1943, pp.147-149.
Transcription/Editing/HTML Markup: 2006 by Einde O’Callaghan.
Public Domain: Joseph Hansen Internet Archive 2006; This work is completely free. In any reproduction, we ask that you cite this Internet address and the publishing information above.

The “war for democracy” has resulted in an ever-larger share of the economy coming under the control of a handful of monopolies; over 70 per cent of war contracts are now held by 100 corporations. To maintain this grip, the monopolies have gone to any lengths to prevent the use of productive forces and new techniques not controlled by them. The resultant restriction of production constitutes sabotage on a grandiose scale. A considerable part of the facts are in the public record – particularly in reports of Congressional committees – but have received a minimum of newspaper-space. Readers of Fourth International have been provided with much of this material. [1]

Now we can add the latest chapter: how the shipbuilding corporations, headed by Bethlehem Steel’s shipbuilding subsidiaries, have succeeded in preventing the introduction by a competitor of a revolutionary technique in shipbuilding; and have thereby cut down production in the field which is the bottleneck of war production. They were able to do so thanks to the connivance of Admiral Land, chairman of the Maritime Commission, i.e., the person who is officially in charge of expanding the production of ships.

The story came out during the recent Senatorial debate over Roosevelt’s renomination of Land for another term. The main indictment of Land was made by an AFL investigating committee.

Senator Aiken placed the AFL report in the Congressional Record of March 30 during his attack on the Maritime Commission for too generously diverting treasury funds into the pockets of stockholders in ships and shipyards.

The AFL committee was set up to investigate the Maritime Commission’s cancellation (July 18, 1942) of its contracts with the Higgins Corporation of New Orleans to build a mass-production shipyard and 200 Liberty ships. The committee, headed by Holt Ross, southern district representative of the Laborers’ International Union, included the following members:

“Robert Quinn, president New Orleans Metal Trades Council; ... E H. Williams, president of the Louisiana State Federation of Labor; John Berni, president New Orleans Building and Construction Trades Council; E.J. Bourg, secretary of the Louisiana State Federation of Labor; Alfred Chittenden, president, International Longshoremen’s Association, Local Union No.1418; J. Harvey Netter and Monroe T. Stringer, Jr., representing the Colored Wjorkers, American Federation of Labor; M.D. Biggs, representative Seafarers’ International Union; T.M. Freeman, special representative, Laborers’ International Union, Gulfport, Miss.; Steve Quarles, president, New Orleans Central Trades and Labor Council; Henry J. Barbe president, Ship Carpenters, Caulkers and Joiners, Local No.584; B.A. Murray, vice president of the International Union of Bridge, Structural and Ornamental Iron Workers; and Claude Owens, Louisiana State business agent, Hoisting and Portable Engineers.” [2]

Charles J. Margiotti, former attorney-general of Pennsylvania, served as counsel for the committee, aided by two of his associates. A certified public accountant likewise served the committee.

Although the committee had no power of subpoena, 26 witnesses appeared before it, including government officials. Testimony taken before the Truman Senate Committee and two investigating committees of the House was likewise read before the AFL committee. Hearings were held at New Orleans and Washington. The committee’s complete record consists of more than 2,000 pages of testimony and hundreds of exhibits.

There can be no doubt as to the responsibility of the committee or the thoroughness of its investigation under the handicaps which necessarily limited its scope.

The Higgins Contract

“The decision to build cargo vessels by the Higgins assembly-line production method,” reports the committee, “was the result of the desperate situation at the time.” Grandiose as had been Washington’s shipbuilding plans, we may remark, the outbreak of war not only found them far from completion but proved them completely inadequate. It was necessary to take seven-league strides.

The Maritime Commission thereupon entered into a contract with the Higgins Corporation, which had long built small vessels for the Navy under a revolutionary method of ship construction. In place of laying the keel in a ship way to which materials were brought as in the conventional system, Higgins applied the belt-line system which had already converted auto, rubber, etc., into mass production industries. The entire vessel moves along the assembly line. For lack of capital Higgins had not yet developed his yards for the production of large ocean-going ships. The Maritime Commission now made up for this financial weakness.

For $178,000 it purchased 1,200 acres near New Orleans and began construction in accordance with Higgins’ plans. A service canal 11J4 miles long which would also serve as an “important link in the intra-coastal canal system,” was begun. 89,366 piles were ordered of which “22,291 were driven at an additional cost of approximately $25 per pile.” The remaining piles, after cancelation of the contract, “were left lying on the ground” where they are “rapidly deteriorating as a result of being exposed to the weather.”

“Of the estimated 27 miles of railroad track needed within the site, about 3 miles had already been completed. Materials for construction of the additional 24 miles of track were on hand or had been ordered ... A steam locomotive and a large number of flat cars had been delivered for use on the plant’s railroad. Hundreds of huge trucks, about 100 huge busses, dozens of crates, and large numbers of heavy and light tools and equipment had been delivered to the Higgins Corporation and were on the site. Huge quantities of both heavy and light electrical equipment and many thousands of feet of electric wire and cable had also been delivered.”

“Twenty-nine thousand tons of structural steel were ordered lor the plant ... nearly all of which had to be specially fabricated.” Of this order 15,443 tons had been completed at the time of cancelation and had to be “scrapped.”

“The Louisville and Nashville Railroad doubled about 12 miles of its track from the city of New Orleans to the site ... Telephone, power and other utilities acted rapidly ... More than 150,000 was spent by the New Orleans Public Service Corporation on power facilities ... New Orleans merchants ... stocked up with merchandise. Real estate and other ventures were numerous. Tragic losses were sustained by many families who sold their homes in other parts of the country to come to New Orleans.”

Within a short time the Maritime Commission had laid out in orders and commitments “a total of $30,000,000.” An idea of the size of the project can be gained from the fact that “seven hydraulic dredges and four clamshell dredges were assembled – making one of the largest concentrations of such equipment in history, greater than the amount of that type of equipment used in the construction of the Panama Canal.”

Under the Higgins plan “32 ships would be under simultaneous construction.” After completion of a mid-section, each hull would have “rolled out onto a track along which it would have progressed past manufacturing sites of the other seven sections of the ship, each completed section in turn being brought out onto the track and welded into place.” Superstructures completed along a different line “were to be placed in position in one operation through the use of giant cranes.” This system would reduce the man-hours required in the construction of a Liberty ship from the present average of more than 500,000 down to 230,000 or less. “On the basis of an average labor cost of $1 per hour in shipbuilding plants, the government would have saved in labor costs alone on these ships at least a quarter of a million dollars on each vessel launched.” On the initial order alone of 200 ships the government would have saved “at least $50,000,000.” That is, more than enough to have “paid for the construction of the shipyard.”

Under full production the yard could have turned out from 1½ to 2 ships per day, “a rate far in excess of any shipyard now existing in the world.”

The committee calculated that “At the rate of 60 ships per month, the Higgins shipyard could have launched far more in one year than have been launched by all other Liberty cargo-ship yards of the United States in the past 12 months.” Not only that – but in comparison with other shipyards, the Higgins plant could “have saved our Nation $180,000,000 annually.”

“The Higgins yard and the Kaiser yard together could have produced the entire 15,000,000 tons of shipping ordered by President Roosevelt for the year 1943.” This means that even under the present expanded war production the present shipbuilders would have faced competition that would have greatly reduced payment of dividends to stockholders.

“The evidence before this committee establishes conclusively,” reads the report, “that no shipyard in the country could have competed in cost, speed, or labor savings with the Higgins yard.”

How the Contract Was Cancelled

The existing shipyards apparently considered the threat of the Higgins shipyard to be far more critical than the threat of the Axis. Roosevelt’s appointee, Admiral Land, agreed with them. They went into action.

Admiral Land’s testimony before the Truman committee, quoted in the AFL report proves that he was well aware of what the Higgins yard meant to the industry:

“Should this contract (Higgins) be reinstated, it is my best judgment that it will seriously affect from 20 to 30 other shipbuilding concerns in these United States.”

Admiral Land’s concern for these war profiteers soon manifested itself in more than platonic ways. He appointed J.L. Baker to have “full power of approval and rejection over all Higgins Corporation activities and expenditures.” Several weeks after the project was begun, Higgins “followed a recommendation and suggestion” of Baker that Brown & Root of Texas take “charge of construction.”

“The performance of Brown & Root, Inc., on other government projects had been satisfactory.” Their performance, however, now became so “unsatisfactory,” so many delays and troubles ensued that Higgins finally cancelled the deal. Prior to “the apparently obstructive tactics of Brown & Root,” the “construction of the facilities” had been proceeding “speedily and satisfactorily.”

While Brown & Root were taking “charge of construction” Admiral Land busied himself in other places. First he asked Donald M. Nelson of the War Production Board “for more steel ... to pile up a higher inventory and supply of steel in yards.” Nelson responded with a promise to furnish the amount of steel already allocated which included, naturally, the allocation for Higgins. To L.R. Sanford, New Orleans regional director of the Maritime Commission, Admiral Land and Vickery interpreted this response of Nelson’s as “instructions from the War Production Board to cut down the consumption of steel for shipbuilding purposes.” In a masterpiece of understatement the AFL committee comments: “Your committee finds that the Maritime Commission had no such instructions.”

Land then telephoned Nelson and “told him that facilities existing before the Higgins contract awards were sufficient to build the tonnage ordered by the President.” As added inducement he told Nelson “if the Higgins contract was cancelled 58,000 tons of steel to be used in building the plant facilities could be saved and in addition, steel that went into the equipment could also be saved.” Land exaggerated, since the total steel Higgins required was only 29,000 tons. Nelson approved Land’s recommendation.

Admiral Land thereupon cancelled the Higgins contracts, giving as his primary reason the “shortage of steel.”

Donald Nelson appeared before the AFL committee and succeeded in convincing its members that he was not simply passing the buck in accusing Admiral Land of full responsibility for the cancellation:

“Mr. Nelson stated positively that he would not have given his approval to cancellation ... if all the facts as he knew them when he appeared before this committee ... had been known to him at the time of Admiral Land’s request for approval. Mr. Nelson was, without doubt, misled into giving his approval.”

“Factual misrepresentations and concealment of material facts were resorted to by Admiral Land in his successful attempt to get Donald M. Nelson to approve the cancelation,” declares the committee.

When the contract was cancelled, Admiral Land distributed the order for 200 Liberty ships among the existing shipyards. This was a tremendous order – in 1939 Land’s “long range program” for war contemplated building not more than 500 ships.

Such figures as Admiral Land have long acted in Washington as executive agents of policies that favor the existing shipyards, the committee points out:

“Both the Bureau of Ships and the Maritime Commission have for years openly pursued a policy of protecting existing shipyards, by opposing construction of new shipyards by Independent firms. In 1940, while being consulted as to the erection of a new shipyard at Mobile, Ala., Admiral Vickery stated that any new shipyards on the Gulf coast would be built only over his dead body, except at Pascagoula, Miss., and Houston, Tex. ... The exceptions applied to conventional shipyards owned by long-established shipbuilding interests ... This committee heard testimony describing in detail the futile attempts by several groups of reputable Individuals to establish new yards in various parts of the country.”

Joseph W. Powell of the Bureau of Ships, which is in charge of construction of vessels for the Navy, just as the Maritime Commission is in charge of construction for the merchant marine, declared according to the committee

“... that no new shipyard would be opened up or financed by the United States Government and that no yards would be financed or constructed except those which would be under the control and management of existing shipbuilding companies.”

Powell, “special assistant to the Secretary of the Navy,” formerly was a vice president of the Bethlehem Shipbuilding Corporation, then president of the United States Shipping Board Emergency Fleet Corporation. In the First World War he “refused to build ships for our country except upon terms which were most advantageous to his company [Bethlehem], which were dictated by him.” The government, “faced with this need” for ships

“... was driven into the acceptance of the Powell-dictated contract on whatever terms Bethlehem proposed. The alternatives were to do without the ships that Bethlehem could produce or to risk military defeat. This was well known by Mr. Powell and he used the Nation’s desperation to force through an unfair contract, providing for exorbitant profit for his company.”

That Bethlehem through Powell still pulls powerful strings in the government’s shipbuilding program is indicated by the following item reported by the AFL committee: A public-relations man of the Maritime Commission informed officials at Higgins “that he had been given instructions by the Maritime Commission about six weeks before the cancelation, to “soft-pedal on Higgins, soft-pedal on Kaiser, and build up Bethlehem Steel”.”

The AFL commmittee concludes cautiously enough that it “believes” Powell

“... influenced the cancelation of the Higgins contracts. By eliminating the Higgins plant, Mr. Powell and the Maritime Commission succeeded in reestablishing their policy of protecting the old-line shipyards. Mr. Powell was in a most favorable position to exert influence against the erection of the Higgins plant, first, because of his power as Assistant to the Secretary of the Navy; second, because of his 40-year friendship with Admiral Land and his close relations with other members of the Maritime Commission; and third, because of his close connection with the big shipbuilding firms which are subsidiaries of the large steel firms of the Nation.”

When it succeeded in crushing a dangerous potential rival, one would imagine Bethlehem would rest content. But it did not forget to file “a claim with the Maritime Commission for over three-quarters of a million dollars” on account of cancelation of the contract for steel to build the Higgins shipyard!

Throughout the AFL report, Higgins is painted as a patriot whose sole interest was furthering the war effort. The committee cites as evidence Higgins’ willingness to build the shipyard without asking the usual fee. Higgins even offered “to fulfill the contract to build approximately 2,000,000 tons of ships without profit to himself, or his company.” In view of the concern of other shipbuilders over profits, Higgins’ philanthropy seems all the more remarkable. One cannot help wondering, however, if his hands did not tremble a bit at the thought of the government building a $50,000,000 shipyard which would be turned over to him as his private property – a shipyard so productive and so efficient that it would inevitably drive many other shipyards out of existence after the war.

The report recommends “labor-management committees” “for the purpose of ensuring harmony and expediting production.” As the report itself proves, however, it is the capitalists themselves who create dissension and curtail production. Joint committees could only act as instruments of the capitalists in imposing their program of profits above all. What is needed are committees of labor such as the one which made this report to check up on the capitalists.

The suggestion that labor should be given “more of a voice in the affairs of conducting the war program” is a plaintive plea that Roosevelt heed William Green rather than the big corporations. So long as labor does not organize its own independent political party there is no chance that the Roosevelt Administration or any other capitalist administration will cease to flaunt in the most brutal way its subservience to Big Business. This was shown by the fate of the committee’s report. It was finished on November 9, 1942. Instead of placing the facts it had uncovered and the grave conclusions it had drawn before the public, the committee meekly and timidly laid its report on Roosevelt’s desk.

It was not taken off that desk until Roosevelt flung his answer in Green’s face – the renomination of Admiral Land for another six-year term. Not even this stung Green to militant action; instead of placing the facts before the people, he crawled with them to the desk of a Republican senator. He got his answer. The Senate, on which not one representative of labor sits, by a vote of 70 to 5 confirmed Roosevelt’s nomination of Land.



1. The Effects of Monopoly on War Production, by Felix Morrow, February 1942; America’s Sixty Families and the Nazis, by Art Preis, June 1942; Patents and US Monopolies, by C. Charles, August 1942; The Month in Review, February 1943.

2. All quotations in this article are taken from the report of the committee as printed in the Congressional Record of March 30, 1943.


Last updated on: 20.2.2006