eration, but the statement of the honorable Senator, the chairman of this Commission, that you do not wish more history has very nearly closed my mouth.

Knowing your desire for facts and realizing that no adequate remedy for the removal of the effect can be applied without at least a partial knowledge of the cause, I crave your permission to encroach upon the forbidden ground on my promise that my trespass will be only slight and no more than required to trace the relationship between cause and effect.

A LONG LOOK BACK.

As stated, my active connection with ships commenced in 1855, the middle of the decade, 1850 to 1860, the palmy days of American shipping, a time when to be a shipowner, a shipmaster, a shipbuilder, aye, even a humble fisher boy on a Yankee schooner, was a matter of pride. In the years 1856 to 1861, as an apprentice in the Boston Navy-Yard, I often paused from my work to watch the launching of the finest specimens of naval architecture the world had yet known, as they slid from the ways of one or another of the half dozen shipyards on the East

Boston shore.

I saw many of the celebrated clipper ships of the day, ships created largely to meet the necessities of this fair land, so dear to every Californian, launch and fit for the premier trade of the world.

The reputation of Boston builders, particularly Donald McKay, was world-wide. They not only built American ships, but they built British ships and continental ships.

Where are the Boston shipyards now? Where are the shipbuilders of that time? Long, long since, the last ship was launched from a Boston yard. "Here lies the body," tells the tale for most of the builders.

From the palmy days of the fifties to the present several changes have occurred that point a moral, and from a history of the past we must forecast a probable future.

But first let us look back of the fifties to learn the cause of that prosperity (we had no Republican Administration then). Another half century before that date both America and England had enacted navigation laws on somewhat similar lines, a leading feature of which was the restriction of ship owning to the product of their own yards. America had strenuously followed the idea of discriminating duty for our ships. We had, apparently unlimited in extent, the finest forests under the sun. Our people lived mostly on the seashore and a relatively large proportion by the sea. Here was a combination unapproached by any other nation.

Under such circumstances Great Britain repealed that portion of her law that prohibited the purchase of ships abroad and began buying the best of our ships.

Is it a wonder, then, that we became the shipbuilders for the world; that the Black Ball and other celebrated lines of packets on the Western ocean, James Baines's and other Liverpool-Australian lines, and the Cape Horn trade to California was practically all done in Americanbuilt ships.

In that prosperity we had the natural outgrowth of the existing conditions. Nothing short of a change of conditions could destroy that prosperity.

OUR ADVANTAGE LOST.

Now, what change came? About 1839 or 1840 the steamship made its advent for business on the Atlantic, but did not make very rapid strides while its construction was confined to wood. Nearly coincident with the steamship iron, as the builder's material, came into use. It took fifteen to twenty years' experience to demonstrate the merits of iron as a shipbuilding material. The expiration of that time brings us to about the date of my first connection with ships. Adopting the profession of the American shipbuilder, I had not terminated my apprenticeship before I realized that I had chosen a decaying business, and that the art of the woodworker was to be superceded by that of the ironworker. In other words, about 1860 wood was dethroned and iron set up as king. Now, that change just reversed the splendid combination we previously held. We could not then approach Great Britain in the production of iron.

A trifle later our civil war commenced, and the transfer of our American-built ships to the British flag received an acceleration very marked.

Had no change taken place in the building material, I believe we would have soon recovered from that excessive transfer, but by reason of the building of iron ships by Great Britain the stimulus of foreign orders fell from our yards, the rapid appreciation of the merits of the then existing iron ships by shippers and underwriters disparaged our wooden ships, and their demand rapidly fell off.

Our American people were slow to appreciate the situation. It was so recently that we had been building the finest and best ships that floated that we could not realize that another nation was building better. We closed our eyes to facts and tried to convince the world that they were wrong and we were right.

We did institute some inquiries; we called together the celebrated Boston convention of shipping men; we appointed Congressional commissions somewhat similar to the present, but on all such occasions assigned a variety of reasons more or less soothing to ourselves by placing the blame on the other nations or on every conceivable thing but the right one.

For a long period the transfer caused by the war was a leading reason assigned for the decline, but as years elapsed and no recovery took place that reason was no longer applicable, and the diversion of capital to internal improvements, railroads, etc., became the favorite. Finally, when the country was pretty well gridironed with railroads, that reason had to be discarded in favor of subsidized competition, etc.

In the absence of a better reason, we attributed our decline to the other nations' prosperity based on subsidy, completely overlooking the fact that the great increase in trade and the bulk of the commerce of the world was done in ships that never had received a dollar of subsidy or any other than legitimate earnings to sustain them.

THE ROOT OF THE EVIL.

Those are but a few of the many reasons assigned for the decay of our maritime interests, but none of them reach the root of the evil. We may then ask, What is the reason of our decay?

tion.

I think that question is answered in three words-cost of producWe can not build ships as cheaply as Great Britain. We can not in high-priced ships earn dividends in competition with low-priced ships. We can not maintain a nondividend-paying business. The facts, I think, are self-evident. I think we have had testimony enough before us in this room to establish that. I believe this inquiry, as well as previous ones, has clearly demonstrated what I have stated. If, then, our starting point is based on facts and we follow our reasoning to a logical conclusion, what will be the result? As our ships on the great highway of nations must be in direct and active competition. with those built in Great Britain and Germany and will cost 50 per cent more (we may modify that to 35 per cent, according to testimony here, although some say it runs as high as 100), we must either have that difference compensated by some gift from an outside source, content ourselves with a lower dividend, or buy ships at prices paid by our competitors.

ADVOCACY OF FREE SHIPS.

Would any of us for a moment entertain the idea of investing heavily in any business ashore and depend on a direct contribution from the public treasury to keep it alive? Would any of us with the object lesson of the idle ships in this harbor entertain the idea of lower returns than they are likely to give? Of the three alternatives would not the one to buy at bed-rock prices in the cheapest market and then strive for a return on that lower investment, strike you as the most businesslike? But that is free ships, and it is popularly claimed that free ships would destroy all our American shipyards.

But I have already shown that destruction has overtaken our shipyards under the policy of closed shipping, and I ask how are free ships to do us more harm? If we have reached the deplorable condition that is conceded, why not try a period of free ships in full faith that they can not make us worse and may do us good? I think we can be no worse off than we are now.

Representative MINOR. We regret the condition and we want to make it better. We do not want to try any experiment that is liable to hold shipping in its present condition.

Mr. THAYER. If you are a sick man a doctor takes you in charge. If he does not know what is the matter with you he will experiment on you. He will either kill you or cure you.

Representative MINOR. We have that kind of doctors.

Mr. THAYER. That is just what you have to do with your ships. But let me present to you a few figures that I have gathered from the yearly returns from the shipyards of Great Britain and Germany, in the hope that they may dispel the fallacy that free ships are injurious to the shipyards of a country. My friend Dickie this morning stated to you--I was a little surprised that he was afraid they could not continue business under free ships. I have here the returns from the yards of Great Britain and Germany for the years 1888 to 1903, that show clearly the wonderful prosperity of the latter under the freeship rule:

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We find the shipbuilding business of Great Britain well established at the commencement of this term and to have remained during all the time remarkably steady. The output in but one year falls below 1,000,000 tons, but for the past six years there has been, approximately, an average of 1,500,000 tons per year. During all this time, next to her own subjects, the Germans were the best customers of the British Isles. But a short time before the commencement of this period Germany's maritime interests were comparatively insignificant. However, there was a tendency toward the sea, and having no scruples about buying in the cheapest market, Germany commenced the absorption of a number of the best built British ships of the day.

The CHAIRMAN. Germany in that period did not have shipyards to build her own ships.

Mr. THAYER. I will show you that she has built her shipyards by buying ships.

The CHAIRMAN. But at that period?

GERMANY'S FREE SHIP POLICY.

Mr. THAYER. She did not have many shipyards at that time. In the early part of the period under consideration, by reason of having no extensive yards of their own, they placed their full orders with their neighbors, and bought the best the British yards could produce. Every fine ship added to the German marine seems to inspire a demand for more until the Germans came to be quite a factor in the British shipyards. It has been acknowledged in the shipping papers of Great Britain for the last twenty years that Germany was their best customer, that next to British subjects Germany takes more of their ships than any other nation. Taking the generally accepted American view of this business the result attained would be the total destruction of the home shipbuilding yards and industry. But that was not the result. The statistics clearly show the reverse. As is shown by the table I submitted, in the years 1889 to 1903 Great Britain has never maintained less than 67 yards and never more than 74 yards in any

one year.

They follow along 69, 67, 70, 74, then for seven years 70, then 71, 68, 69, and 70. British yards are permanent; they do not change. There

are practically no more now than there were fifteen years ago, and there are practically no less.

Beginning with the same year, 1868, 7 German yards turned out 42 ships. The next year 10 German yards turned out 94 ships of 92,667 tons. The next year there were 9 yards, then 7, 8, 7, etc., and in those eight or nine years they turned out from 30 to 60 ships a year. In the nine years they had not reached a tonnage of 100,000 tons.

During all that time they were absorbing British tonnage; they were large patrons of the British yards; they were practically placing their orders there and buying the best they could get. Under that stimulus, under the stimulus of free ships and being shipowners, they began to increase their own facilities until, in 1897, in 20 yards they built 94 ships of 152,884 tons.

The CHAIRMAN. And they were giving very large subsidies, were they not!

Mr. THAYER. I think not. These are tramp ships, I think, mostly, and are not getting subsidies.

The next year Germany had 17 yards and built 97 ships of 117,889 tons. The next year there was an increase to 23 yards, which built 121 ships of 284,291 tons; the next year 20 yards built 100 ships of 228,044 tons; the next year 29 yards built 146 ships of 267,613 tons; the next year the same number of yards turned out a tonnage of 289,453, and last year a tonnage of 271,619 tons.

There is no more brilliant example of maritime prosperity than that of Germany. The increase in the past fifteen years from 7 to 29 shipyards, and from a yearly output from 30,000 tons to nearly 300,000 tons, is an object lesson that Americans in their dilemma should not pass idly by.

The CHAIRMAN. Will you kindly explain to the Commission how the privilege of buying ships abroad enabled Germany to establish her shipyards and build her own ships?

Mr. THAYER. Yes, sir; I can do so very easily.

The CHAIRMAN. We would like very much to have you do that. It looks anomalous to me.

WHOLE COST IN REPAIRS.

Mr. THAYER. The life of a ship does not exceed an average of twenty years. In twenty years' time we spend in the repair of a ship in our own yards the full value of the cost of the ship. As I have often said to Mr. Irving Scott and to Mr. Dickie also, if there are 40 ships to-day in San Francisco the repairs of which go to the Union Iron Works, the Fulton Iron Works, and two or three more, they have an equivalent in labor to that required in the construction of two ships of the same average size. That if we double the local tonnage and increase 40 to 80 steamships, even though we buy them of foreigners, we double the requirements for repairs from the equivalent of 2 ships to that of 4 ships constructed, thereby doubling the force of shipbuilders and increasing the business of the present shipyards. Any increase in number of locally owned and operated ships will have a proportionate effect.

If then you compare the actual construction in this city for a period. of fifteen years, averaging perhaps one-third of a ship per year, with repairs ranging to the equivalent of from 2 to 5 ships, it is easy to see