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The “American Century” Implemented: Stettinius and the Liberian Flag of Convenience*

Published online by Cambridge University Press:  11 June 2012

Rodney Carlisle
Rodney Carlisle
Affiliation:
Associate Professor of History, Rutgers University
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Abstract

Students of the efforts of western maritime nations to improve conditions aboard their merchant ships, and to tighten regulations in general, are aware that one result was the emergence of the “flag of convenience,” whereunder a nation exploits the need of operators for a haven from high standards. One such nation was Panama, but by the end of World War II its officials had come to demand such private tribute that a new flag of convenience was needed. Providing such a registry under the flag of Liberia became a major service of the development company formed by former U. S. Secretary of State Edward R. Stettinius, Jr., in the late 1940s.

Type
Research Article
Information
Business History Review , Volume 54 , Issue 2 , Summer 1980 , pp. 175 - 191
Copyright
Copyright © The President and Fellows of Harvard College 1980

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References

1 Williams, William Appleman, The Tragedy of American Diplomacy (New York, 1962), 180–181, 199–200Google Scholar; Gardner, Lloyd, Architects of Illusion: Men and Ideas in American Foreign Policy, 1941–1949 (Chicago, 1970), 22–23.Google Scholar

2 Stettinius's business and government career is reviewed in Johnson, Walter, “Edward R. Stettinius, Jr.” in Graebner, Norman, ed., An Uncertain Tradition: American Secretaries of State in the Twentieth Century (McGraw Hill, 1961), 210–222Google Scholar; Stettinius quoted p. 212.

3 Extensive materials on Stettinius Associates are in unsorted order in the Edward R. Stettinius Manuscript collection of the Alderman Library, University of Virginia, Charlottesville. Material cited here is used by permission of the Stettinius Access Committee. Specific references to non-Liberian efforts: Morocco: Dr. Sulzberger to M. J. Chancerelle, June 4, 1948, Box 790; Ethiopia: Blackwell Smith to Haile Selassie, July 19, 1948, Box 789; N.E.I.: De la Rue to E. R. Stettinius, July 7, 1948, Box 789; French W. Africa; De la Rue to E. R. Stettinius, July 14, 1948, Box 789, Stettinius MSS.

4 Articles appeared in Time, Life, National Geographic, Ebony, and Reader's Digest, among others. Connection with Rockefeller, et al.: New Haven, Connecticut Journal Courier, February 14, 1949. The influence of Eric Johnson on the “American Century” concept is also mentioned in W. A. Williams Tragedy of American Diplomacy, 176, 181.

5 “Original Press Release,” September 27, 1947, Box 767, Stettinius MSS. Report on Meeting, April 21, 1948, Box 791, Stettinius MSS.

6 Memorandum, “Points in connection with the U.S. Public Interest in the Liberian Program,” February 15, 1949, p. 1, 3–4, Box 797, Stettinius MSS. Earlier drafts in same box indicate that Stettinius participated in writing the memorandum.

7 Stephen Hlophe, “A Class Analysis of the Politics of Ethnicity of the Tubman and the Tolbert Administrations in Liberia,” a paper given at Liberian Studies Association meeting, April 2, 1977, Macomb, Illinois, p. 8–14.

8 On Neutrality and Panamanian Shipping: Standard Oil Company of New Jersey, Ships of the ESSO Fleet in World War II (1956); New York Times, December 22, 1939, p. 39; Ealy, L., Republic of Panama in World Affairs 1903–1950 (Philadelphia, 1951), 106–108Google Scholar; on conditions and consuls: Carell, W. P., “A Study of American-Owned Vessels Under the Flags of Panama, Honduras and Costa Rica,” (Master's Thesis, University of Virginia, 1962), 35, 37, 50Google Scholar; International Labor Office, Conditions in Ships Flying the Panama Flag: Report of the Committee of Enquiry of the ILO, May-November, 1949 (Geneva, 1950)Google Scholar, Studies and Reports, New Series #22, 1–11, 45; Argirotto, E., “Flags of Convenience and Sub-Standard Vessels, A Review of the ILO's Approach to the Problem,” International Labor Review, 110 (November, 1974), 437–453.Google Scholar Percentages derived from Lloyds Register of Shipping.

9 First reference: Stettinius to Blackwell Smith, December 31, 1947 in reference to conversation with E. Stanley Klein, Box 767; Memorandum of meeting, January 6, 1948, Box 790; Weekly Assignment Report, March 5, 1948, Box 791; Office Biographic Material, Box 790, Stettinius MSS. Julius Holmes and Admiral Halsey, both participants in Stettinius Associates, were also part-owners of American Overseas Tanker Corporation (AOTC). Three tankers were transferred to National Tanker Corporation and immediately sold to a Chinese-nationalist financed corporation at a profit of $150,000 per vessel. The other five tankers kept by AOTC were financed on a loan from Metropolitan Life Insurance Company, operated with assistance from W. N. Westerlund, President of Marine Transport Lines, and were transferred to Greenwich Marine, a Panama. Corporation, The tankers were chartered by this Panamanian subsidiary of AOTC to Standard Oil. The large profits from AOTC, collected when the operating company was sold to Stavros Niarchos in 1951 led to Congressional investigations. Hearings Before the Permanent Subcommittee of Investigation of the Senate Committee on Government Operations – Sale of Government Owned Vessels. 82nd Congress, February 18, 1952, pp. 1, 24–26, 40, 135–136. For Onassis's claim, see, for instance, Fraser, Nicholas et al., Aristotle Onassis (London, 1977), 101–102Google Scholar; Westerlund story: Fred Lininger interview with author, February 5, 1979.

10 Joseph Grew, and General Julius Holmes, who had been appointed by Stettinius as Assistant Secretary of State, resigned the Department in August 1945. Another officer, Blackwell Smith, President and General Counsel of Liberia Company, had served as an officer of the Foreign Economic Administration during World War II. New York Times, August 18, 1945, p. 1; September 27, 1947, p. 6; memorandum of meeting at home of Grew: March 13, 1948, Box 790, Stettinius MSS.

11 Report by Stettinius, April 21, 1948, Box 791; Stettinius to Blackwell Smith, August 5, 1948, Box 791, Stettinius MSS.

12 De la Rue to F. T. Lininger, January 24, 1949, Box 797; J. G. Mackey to M. D. Franz, November 30, 1948, Box 793; De la Rue to H. L. Green, M. D. Franz, E. S. Klein, with copy to Stettinius, December 16, 1948, Box 793, Stettinius MSS.

13 W. K. Trimble to B. Smith, June 24, 1948, Box 789, Truslow Report: Francis Adams Truslow, Report on the Corporation Code of Liberia, The Maritime Code of Liberia and the Act Establishing the International Trust Company of Liberia, March 10, 1949, p. 80, 882.516/3–1049, Department of State Records, Record Group 59, National Archives.

14 B. Smith to G. Dennis, June 10, 1948, Box 790; Joseph Loucheim to Stettinius, July 21, 1948, Box 789; J. G. Mackey to B. Smith, July 29, 1948, Box 791, Stettinius MSS. Bushrod Howard was an Annapolis graduate who had served in World War I, and since 1920 had worked for Standard Oil. In World War II he served as a consultant to the government's tanker operations, worked as the head of Standard Oil's Marine Operating Division, and was appointed as a Director of Standard Oil, 1945. New York Times, September 1, 1945, p. 17; January 17, 1948, p. 30. Robert Nash can be identified from testimony before Senate Committee on Government Operations (see note 9), p. 4.

15 Memorandum of Conversation, by Stettinius, August 3, 1948, Box 791; J. G. Mackey to B. Smith. August 13, 1948, Box 796; Stettinius MSS.

16 Standard Oil, however, was not a participant in the eventual ownership of International Trust Company.

17 J. G. Mackey to B. Smith, November 29, 1948; Trimble to Smith and Stettinius, December 16, 1948, Box 793, Stettinius MSS. The Company draft of the law, in print, is in Box 791, Stettinius MSS., titled “Draft of an Act Repealing ‘Part 19, Sections 916 to 928, Inclusive of the Revised Statutes of, the Republic of Liberia’ and Establishing a Maritime Code of Law for the Republic of Liberia.” The Legislative-approved version signed into law in December is in Box 793, Stettinius MSS, in mimeographed form, entitled “Draft-Maritime Code as Accepted by Government” on cover sheet and “Draft of an Act to Establish a Maritime Code” on the first page. The crucial variations appear in Title I, Sections 3 and 4 of both versions.

18 S. B. Adams to Palmer, December 31, 1947, 882.5034/12–3147, Department of State Records; J. C. Holmes to D. Sulzberger, May 11, 1948, Box 790, Stettinius MSS.; Meetings summarized in State Department Office Memorandum, Satterthwaite to Nitze, October 12, 1948, 882.5034/10–1248, State Department Records; Stettinius to B. Smith, August 2, 1948, Box 793, Stettinius MSS; Memorandum of Conversation re Operations of Liberia Company – Participants; De la Rue, Rennie, Vernon, Gorlitz, Lynch, Meeker, Sims, p. 4, 882.5034/8–1248, State Department Records.

19 Quoted in State Department Office memorandum, Satterthwaite to Nitze, October 12, 1948, p. 5, 882.5034/10–1248, State Department Records.

20 State Department Memorandum of Conversation, Rennie of Federal Reserve, Miller of Treasury, Mann of State, August 24, 1948, 882.5034/8–2448, State Department Records.

21 De la Rue to B. Smith, December 14, 1948; B. Smith to Trimble, December 17, 1948, Box 793, Stettinius MSS.

22 State Department Memorandum of Conversations, Dulles-Sims, 882.5034/1–549, State Department Records; Memorandum of telephone conversation Stettinius-Allen Dulles, January 5, 1949, Stettinius MSS; State Department Memorandum, Lovett to American Legation, January 10, 1949, 882.516/1–1049, State Department Records. Truslow background and statement: New York Times, March 3, 1947, p. 32; October 3, 1947, p. 40; Who Was Who, Vol. 3, 864.

23 De la Rue to F. T. Lininger, January 18, 1949, Box 797, Stettinius MSS. De la Rue to F. T. Lininger, January 21, 1949, Box 797, Stettinius MSS. This change appears to have been relayed by the Company directly and implemented during contract negotiations. It did not appear in the final Truslow Report, but was adopted by Regulation and later amendment.

24 De la Rue to Stettinius, February 11, and February 19, 1949, Box 797, Stettinius MSS.

25 State Department Memorandum, Sims to Satterthwaite, March 7, 1949, 882.5034/3–749, State Department Records.

26 Ibid.; Truslow to Thorp, p. 5, 882.516/3–1049, State Department Records.

27 Comparison of the December 1948 version of the law in Box 793, Stettinius MSS (see note 16) and the Truslow Report in 882.516/3–1049, State Department Records (see note 13) reveals the four areas of disagreement. In Truslow Report, the suggested changes are: “Registration” instead of “documentation,” p. 38; no rule making power to be delegated, p. 36; liability extension, p. 57; filing of lien information, p. 47. Comparison of Truslow's suggestions with 1956 republication of the Code, shows only the filing of liens incorporated. Liberian Code of Laws of 1956 Adopted by the Legislature of the Republic of Liberia March 22, 1956 (Ithaca, New York, 1957), Vol. II, p. 811–812, Article 22, Section 106. Minor typographical corrections and contributions were incorporated in June and December 1949, as indicated in the 1956 annotated version of the Code.

28 Blackwell Smith to E. S. Klein, December 1948 (n.d.) Box 793; J. G. Mackey to Schaeffer, December 22, 1948, Box 793; Mackey to Trimble, January 6, 1949, Box 797; Mackey to V. Rodriguez of Sullivan and Cromwell, January 7, 1949, Box 797; Schaeffer to F. T. Lininger, January 17, 1949, Box 797; Mackey to Schaeffer, (n.d.) Box 797; Mackey to Franz, January 5, 1949, enclosing contract, Box 797, Stettinius MSS. This contract is more specific than the draft sent to Schaeffer, January 6, 1949, same file. 32.5¢ of each $1.20 perton for new net tonnage went to the company for operating expenses. This arrangement persisted until 1975–76, when the rate of return for the company was reduced to about 20 per cent or approximately 24¢ per ton of new net registry. Relationship to International Trust Company: Mackey to Schaeffer, December 22, 1948, Box 793; Schaeffer on income: Schaeffer to Lininger, January 17, 1949, Box 797, Stettinius MSS.

29 Stettinius to Grew, December 18, 1948, Box 793, Stettinius MSS.

30 Stettinius to Klein, December 24, 1948, Box 793, Stettinius MSS.

31 Mackey to Franz, January 5, 1949, Box 797 Stettinius MSS; New York Times, February 14, 1977, p. 14; Liberia – 25 Years as a Maritime Nation (International Trust Company of Liberia, 1975), 19; Lininger to Green, January 24, 1949, Box 797, Stettinius MSS.

32 Registration of World Peace: Liberia – 25 Years as a Maritime Nation, 5. Statistics derived from Lloyds Register of Shipping. Revenue estimates: “OECD Study of Flags of Convenience,” Journal of Maritime Law and Commerce 4 (January 1973) 231–254.

33 Liberia – 25 Years as a Maritime Nation, 6.

34 Advertisement, Newsweek, May 30, 1977. “U.S. Maritime Committee to Turn the Tide” is self-described as “a management coalition of ship-builders, ship operators and marine supportive industries.”

35 For an exploration of this problem with more conventional multinationals, see Vernon, Raymond, Sovereignty at Bay – The Multinational Spread of U.S. Enterprises (New York, 1971)Google Scholar; for a treatment of the problem at its earlier stages, Wilkins, Mira, The Emergence of Multinational Enterprise, American Business Abroad from the Colonial Era to 1914 (Cambridge, Mass., 1970).Google Scholar For efforts to control flag of convenience shipping, consult “OECD Study” (see note 32).