50 Years After the Edmund Fitzgerald, It’s Time to Fix American Shipbuilding

F ifty years ago this November, the SS Edmund Fitzgerald sank in the icy waters of Lake Superior.

The storied Great Lakes iron ore ship — immortalized in the haunting folk song — carried millions of tons of taconite ore over its lifetime from 1958 to its untimely demise in 1975 to steel mills across the northern tier of the nation. The “Mighty Fitz” carried enough taconite ore on each trip to build over 10,000 cars, to say nothing of all the ships in Cleveland, machine tools in Milwaukee, and paper machines in Wisconsin’s Paper Valley that could be made, which in turn supported millions of good-paying jobs that built the American middle class.

If taconite pellets were the cells of the American economic body, then shipbuilding was its beating heart, the organ that kept the body alive and moving. The Fitzgerald was one of dozens of ore carriers built in the great American shipyards in the mid-20th century that plied the Great Lakes. In 1980, about 16 cargo ships were constructed in the U.S. alone.

But shipbuilding took a dive the following year when President Reagan discontinued the U.S. Construction Differential Subsidy (CDS) program in 1981. The CDS, which paid up to 50 percent of the difference between foreign versus domestic construction costs in U.S. shipyards, had been designed to level the playing field against international competition that could (and did) undersell U.S. businesses and kill thousands of American jobs. The year the subsidy was axed, former Hill staffer Charles Fager singled out the CDS program at the time as a “lurid” example of the kind of wasteful and unproductive government programs that Reagan sought to end. Fager may have been on to something, though. As we detail in our new book, unbeknownst to many at the time, the Fitz itself fell victim to shoddy design work, a patchwork maintenance record, and inferior components, all done in by a corrupt oversight agency that certified the crumbling vessel as seaworthy time and again. It was one more reason to shoot down a supposed special interest program in Reagan’s open season on federal spending.

More than 45 years later, the industry has yet to rebound. That could be on the verge of changing, though, with an investment announcement that could jumpstart an industry that’s been languishing since the Fitz went down.

On November 3, the White House announced that Hanwha, Korea’s dominant ship concern, would invest $5 billion in the U.S. shipbuilding industry. A year ago, Hanwha spent $100 million to acquire the Philly Shipyard, and this new investment is meant to turn it into “a digitally-enabled, high-efficiency shipyard, with world-class automation.” Hanwha hopes that the shipyard will go from producing fewer than two ships annually to around 20.

Hanwha’s investment is not just good politics to placate a finicky president who has slapped a dizzying array of tariffs on Korean industry this year. It’s also very good for business. Hanwha and other Korean firms face $137 billion in backlog orders. By expanding operations into North America, they can meet customer demand while giving U.S. shipyards a lift in this $214.2 billion global industry.

In the meantime, Japan has pledged $550 billion “to rebuild and expand core American industries,” according to the White House, which includes “new [ship]yards and modernization of existing facilities.” It’s another powerful sign that the world recognizes that the U.S. shipbuilding industry can be a cornerstone of mutually beneficial innovation.

A few years ago, National Review staff writer Jerry Hendrix singled out the sorry state of U.S. shipbuilding and rightfully called on industry and government to renew its commitment to this and other crucial transportation industries: “[T]he country should . . . implement a comprehensive diplomatic, economic, and military strategy that focuses primarily on securing and stabilizing the four great global commons — the seas, air, space, and cyberspace — as a means of preserving the nation’s preeminent position.”

We couldn’t agree more. But we should take it a step further. We should not rest on our God-given “geostrategic location in the northern, resource-rich portion of the Western Hemisphere,” as Hendrix writes. Rather, we ought to restart the CDS and match foreign investment dollar for dollar.

In 1980, the CDS cost $262 million, or $1 billion in current dollars. With a $5 billion down payment from one Korean company in one year — with more coming from Japan — restarting the CDS is a smart strategy. The Fitz might be buried in Lake Superior, but hopefully, shipbuilding in America is on its way to surfacing once more.