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America’s Lost Shipyards: Why America Forgot How to Build Ships — An Industrial Own Goal



The American shipping industry, once a powerful engine of economic growth, is today widely regarded as having almost completely collapsed. Although the United States remains the world’s largest consumer economy, its industrial capacity to build the ships that carry its goods has nearly disappeared. This is not only an economic problem, but a strategic one as well.

The loss of roughly 97 percent of the American shipbuilding industry was not a sudden event. It was the result of a long chain of political, economic, and strategic misjudgments. The following analysis traces this decline chronologically—from postwar dominance to today’s dependence on foreign shipyards.

Error 1: Misreading Postwar Dominance (1945–1960s)
Initial Situation
After World War II, the United States possessed:
  • the largest merchant fleet in the world,
  • enormous industrial capacity, and
  • technological leadership in shipbuilding.
The Error
Political leaders assumed this dominance would be permanent. Instead of continuously modernizing the civilian shipbuilding industry, it was treated as a completed success story.
Consequences
  • Minimal investment in productivity improvements.
  • No long-term strategy for the civilian global market.
  • Focus on military rather than commercial vessels.

Error 2: Detachment from Global Competition (1960s–1970s)
Initial Situation
Europe—and later East Asia—began deliberately restructuring their shipyards around mass production and export-oriented vessels.
The Error
The United States chose protection over competition:
  • The Jones Act created a small, sheltered domestic market.
  • U.S. shipyards were not forced to compete on international prices.
  • Efficiency, automation, and economies of scale were neglected.
Consequences
  • A widening productivity gap with Japan and later South Korea.
  • A cost structure increasingly disconnected from the global market.
  • Technological stagnation in civilian shipbuilding,

Error 3: Short-Term Subsidies Instead of Structural Reform (1970s)
Initial Situation
The U.S. industry was already losing market share to Asian shipyards.
The Error
Rather than addressing root causes, the government relied on construction subsidies that artificially offset price differences without improving efficiency.
Consequences
  • Shipyards adapted to subsidies, not to market conditions.
  • Innovation pressure remained low.
  • Competitiveness was “purchased,” not earned.

Error 4: Abrupt Removal of Subsidies Without a Transition Strategy (from 1981)
Initial Situation
U.S. shipyards had become structurally more expensive than their international competitors.
The Error
Construction differential subsidies were eliminated without:
  • modernization programs,
  • transitional financing, and
  • a coherent industrial policy strategy.
Consequences
  • U.S.-built ships suddenly became many times more expensive.
  • Shipping companies moved abroad.
  • Commercial orders collapsed almost entirely.

Error 5: Abandoning the Civilian Market for Military Niches (1980s–1990s)
Initial Situation
Civilian demand collapsed, while military contracts remained.
The Error
U.S. shipyards specialized almost exclusively in:
  • naval vessels,
  • one-off custom builds, and
  • highly complex, non-scalable projects.
Consequences
  • Loss of serial production expertise.
  • No learning-curve effects.
  • Further cost increases due to low production volumes.

Error 6: Acceptance of Deindustrialization (1990s–2000s)
Initial Situation
Globalization shifted production chains toward Asia.
The Error
The United States tacitly accepted:
  • the loss of industrial know-how,
  • the closure of numerous shipyards, and
  • the dismantling of maritime supplier industries.
Shipbuilding came to be seen as “no longer competitive”—and therefore politically expendable.
Consequences
  • Skilled labor was lost.
  • Training systems collapsed.
  • Rebuilding capacity became increasingly difficult.

Error 7: Ignoring Economies of Scale in the 21st Century
Initial Situation
Asian shipyards today build:
  • dozens of nearly identical ships per year,
  • using highly automated processes, and
  • within integrated industrial clusters.
The Error
U.S. policy systematically underestimated:
  • the importance of production volume,
  • the role of supply-chain proximity, and
  • the cost impact of industrial learning curves.
Consequences
  • A ship built in the United States can cost up to 500 percent more.
  • Fixed costs are spread across too few units.
  • U.S. shipyards remain permanently unattractive to the global market.

Error 8: Delayed Recognition of Strategic and Security Risks (from 2020)
Initial Situation
Geopolitical tensions and supply-chain crises exposed the extent of dependency.
The Error
The security relevance of a domestic merchant fleet was recognized only after the industrial base had already been largely destroyed.
Consequences
  • High financial outlays for minimal capacity gains.
  • Slow responsiveness in times of crisis.
  • Lack of civilian reserve shipping capacity.

Overall Assessment: A Systemic Failure, Not a Single Mistake
The loss of 97 percent of the U.S. shipbuilding industry is the result of:
  • long-term political misaligned incentives,
  • the absence of coherent industrial policy,
  • protectionism instead of competition, and
  • the gradual abandonment of civilian shipbuilding.
No single error was decisive—the chain was.

Conclusion
Today’s reality—where a ship built in Philadelphia costs several times more than an equivalent vessel built in South Korea—is not surprising. It is the logical outcome of decades of compounded misjudgments. A reversal is theoretically possible, but it would take decades and require a consistent, far-reaching reorientation of U.S. industrial policy.