World Shipping and Shipping Markets

The basis of the global trade system at the start of the twentieth century had been consolidated in the nineteenth: industrial goods flowed from Europe to the rest of the world, while raw materials poured from all over the world into Europe. Because of these two-way flows, a small number of bulk commodities carried in massive quantities increasingly dominated deep-seagoing trade throughout the maritime world; in the last third of the nineteenth century, grain, cotton, and coal were the main bulk cargoes that filled the holds of the world fleet.Footnote ⁸

Just as importantly, the ships of that fleet were increasingly powered by steam instead of wind. New technology, as was so often the case during the First Industrial Revolution, transformed the shipping industry; the transition from sail to steam, apart from increasing the availability of cargo space at sea, caused a revolutionary decline in freight rates.Footnote ⁹ Europe remained at the core of the system: until the eve of World War I, three-quarters of world exports in value and almost two-thirds of world imports flowed into or out of Europe.Footnote ¹⁰ Because of steam, European ships, the largest part of the world fleet, were able to carry an increasing volume of cargo between continents with greater speed and at lower cost. By the turn of the twentieth century, Great Britain was the undisputed world maritime power, owning 45 percent of the world fleet, followed by the United States, Germany, Norway, France, and Japan. Over 95 percent of the world fleet belonged to the fifteen countries that formed the so-called Atlantic Economy; Greece was among those countries, with 2 percent of the world fleet in 1914.Footnote ¹¹

The Vaglianos, as Ionian British citizens, had a hand in both of these large-scale developments. They were among the first to open the south Russian frontier and eventually became the largest exporters and shipowners in an area that was the granary of Europe by the latter part of the nineteenth century. In the Mediterranean, apart from state-subsidized corporate liner-steamship navigation companies, the Vagliano brothers were the first Greek shipowners (and the largest of the independent shipowners in the eastern Mediterranean and Black Sea) to invest massively in large cargo steamships. They bought their own steamships and also financed other Greek shipowners to help them invest in steam. During World War I, the withdrawal of British ships from trade routes not directly related to the Allied cause opened Atlantic routes to the neutral Norwegians and Greeks, which meant that their fleets were able to profit from high wartime freight rates (Greece entered the war in 1917). Shipping, as a derived demand, depends on trade and can suffer (but also profit) from sharp freight-rate fluctuations. Timing is extremely important to losing or amassing wealth.Footnote ¹²

During the interwar period, world shipping faced severe problems stemming from contracting sea trade worldwide, as well as decreasing immigration and increasing protectionism.Footnote ¹³ British shipping companies were particularly hard hit, starting the long eclipse of their fleet (although it would be another forty years before Britain lost its primacy in global shipping).Footnote ¹⁴ From 1918 to 1936, the absolute size of the British fleet decreased only slightly, but as a percentage of the world fleet it plummeted from 43 to 31 percent. The decrease continued in the postwar period: by 1963, it had declined to 15 percent and by the turn of the twenty-first century to just 3 percent of the world fleet.

Other countries rushed to fill the void left by the British. The United States handed out costly subsidies to shipping entrepreneurs, raising its world share from 11 to 18 percent. In the Pacific, Japanese companies took over trade routes abandoned by the British, almost doubling their fleet in the process.Footnote ¹⁵ The Norwegians and Greeks (in tramp shipping), and the Italians and the Dutch (in liner shipping), made moderate increases.Footnote ¹⁶

After World War II, the world fleet witnessed an exponential and unprecedented expansion: from 67 million Gross Register Tonnage (GRT) in 1937 to 146 million in 1963 and 444 million in 1992. The Greek-owned fleet led the way, rocketing from 3 percent of the world fleet in 1937 to 10 percent in 1963 and 14.5 percent in 1992.Footnote ¹⁷ The Greeks, along with the Norwegians and Japanese, gradually replaced the old guard (the British, Germans, and Americans) as the decades passed, and proved the most dynamic fleets of the second half of the century.Footnote ¹⁸

The growth of the Greek shipping industry was interconnected with the most important change in global trade during the interwar period: the replacement of coal by oil as the world’s leading source of energy. In 1900, coal was king, and the British, as in shipping, were the power behind the throne. The United Kingdom produced 225 million metric tons of coal in 1900, or 51 percent of Europe’s production. On the eve of World War II, Britain still led the way in the coal industry, producing 42 percent of total European output in 1937. By comparison, in 1870 the production of oil was less than a million tons, and thirty years later it was still an insignificant source of energy; in 1900, world production of 20 million tons of oil met only 2.5 percent of world energy consumption.

All this changed in the interwar period. By 1938, oil production had increased more than fifteen times; it was 273 million tons and accounted for 26 percent of world energy consumption.Footnote ¹⁹ In 1900, because production was so limited, there had been little need for specialized vessels; oil tankers, mostly owned by Europeans, accounted for a tiny 1.5 percent of world merchant tonnage. Four decades later, the tanker fleet had grown to 16 percent of world tonnage. Although these ships were mostly owned by oil companies, independent tanker owners started to appear after the worldwide depression of the 1930s, when oil companies discovered it was less costly to charter tankers than to own them. The largest independent owners of the interwar period were the Norwegians.Footnote ²⁰ It was through Norwegian shipowners that Aristotle Onassis was introduced to the oil market and its tankers during the 1930s; he was the first Greek shipowner to invest in the tanker business and led the way for the rest. The entry of other Greek shipowners into tankers defined their future in the second half of the twentieth century.

The choices and exploitation of technological advances by shipping entrepreneurs determined the path of world shipping. The first half of the twentieth century was characterized on the one hand by the use of steam engines and their gradual replacement by diesel engines, and on the other by massive standardized shipbuilding projects during the two world wars. From 1914 to 1918, 50 percent of the Allied merchant fleet was sunk (5,861 ships in total). US and British shipyards replaced this sunken fleet between 1918 and 1921 with “standard” ships that became the main cargo ship during the interwar period; these were steamships of a standard type of 5,500 grt, built on a large scale. It was these standard ships that Greek, Japanese, and Norwegian tramp operators purchased en masse from the British secondhand market in the 1930s, expanding their fleets even amid the world economic crisis. The first two steamships that Onassis bought in the early 1930s were of this kind.

During World War II, faced again with potentially crippling losses of merchant ships to German U-boats, the United States and Canada launched the most massive shipbuilding program the world had known, using new and much faster methods of building ships (the ships were assembled in sections and welded instead of riveted together). In four years, the US Maritime Commission managed to build about 4,700 vessels of all kinds, both commercial and military; out of these about 2,700 were the well-known Liberty ships that formed the standard dry-bulk cargo vessel for the next twenty-five years, and about 500 were tankers of the so-called T2 type.Footnote ²¹ Liberty ships and T2 tankers later formed the basis of the great leap forward of the Onassis shipping business (see Chapter 7).

The world economy grew almost uninterrupted between 1945 and 1975. Seaborne trade between the end of World War II and 1973 expanded more than sixfold by volume, from 490 million metric tons in 1948 to 3,210 million metric tons in 1973. About 60 percent of this massive expansion was caused by an almost ninefold increase in oil shipments.Footnote ²² (Tonnage of the five main bulk cargoes – ore, bauxite, coal, phosphates, and grain – also grew impressively.) To carry the enormous volumes required to feed the industries of the West and East Asia, ships carrying liquid and dry cargoes had to get much bigger. And as ships grew gigantic, they also increasingly specialized in single types of cargo and operated under flags of convenience (today called open registries) or under the auspices of offshore companies whose nationality was difficult to trace. In the immediate postwar years, such ships were used most extensively by Greek and American shipowners in the carriage of oil.Footnote ²³ Aristotle Onassis, as we shall see, pioneered not only ship gigantism, but also used offshore companies and flags of convenience almost exclusively in his fleet.

Until the last third of the nineteenth century the shipping market was unified, meaning that cargoes did not determine either the type of ship or the organization of the trade. In the latter decades of the nineteenth century, the shipping market diverged into two distinct categories: liner shipping and tramp shipping. The type of cargo and ship determined the method of shipment; for example, liner ships carried general cargoes (finished or semifinished manufactured goods) and tramp shipping carried bulk cargoes (like coal, ore, grain, fertilizers, oil, and so forth). Furthermore, liner shipping carried cargo on regular routes, and tramp shipping on demand. Specialization of markets thus led to specialization of shipping firms in serving these two markets.

For the next hundred years, until the 1970s, liner and tramp-shipping markets continued more or less on the same lines. From the 1870s to the 1940s, the cargoes carried by liner and tramp shipping were not always clearly defined: liner ships could carry tramp cargoes and vice versa. Although there was substitution between the two distinct markets, their main structures were diametrically opposed: oligopoly and protectionism for the liner market (after the formation of shipping cartels starting in 1880, called “shipping conferences,” in order to regulate freight rates and monopolize certain routes), and almost perfect competition for tramp shipping.Footnote ²⁴ By the eve of World War I, 60 percent of the British fleet was employed in tramp shipping and 40 percent in liner shipping; the Germans and the French were primarily involved in liner shipping, while the Italians and the Spanish kept smaller fleets also engaged mainly in liner shipping. The Greeks were involved almost exclusively in tramp shipping, and, along with the Norwegians, they have remained Europe’s main tramp operators.

In the postwar era, as world production and trade expanded at an unprecedented rate, more distinct changes in the structure of the markets led to a gradual decrease in substitution between liner and tramp shipping.Footnote ²⁵ In the latter, the introduction of new liquid bulk cargoes on a massive scale, like oil, and of a few main dry bulk cargoes (coal, ore, fertilizers, and grain) led to specialization of function: individual bulk markets and ships built to carry specific cargoes.

The introduction of container ships in the 1960s revolutionized the carriage of industrial goods, world transport, and port systems. It also meant a landmark decade for the liner industry in the 1970s. Containerization, uniquely suited to liner transport, meant radically new designs for vessels and cargo-handling facilities. It led to global intermodal transportation (use of interconnected multiple modes of transportation, e.g., ship, rail, and truck), some of the earliest uses of modern information technology, and finally structural changes in the industry through the formation of consortia, alliances, and international megamergers.Footnote ²⁶ Liner shipping companies were the beneficiaries of these far-reaching transformations, and they became the archetype of the globalized, multinational shipping company. If you think of modern shipping, you will likely envision gargantuan container ships and the Brobdingnagian cranes devoted to the loading and unloading of a ceaseless stream of such ships. Ocean transport happens on the largest of scales.

Nevertheless, this book is devoted to tramp/bulk shipping. Despite the importance of liner shipping companies, it is worth mentioning here that, to the present day, more than two-thirds of the volume of world trade is carried by tramp/bulk shipping and less than one-third by liners or container ships. The development of tramp shipping did not involve such innovative technological developments and no dramatic changes in the organization and structure of markets took place. Instead, the tramp ship was replaced by specialized bulk carriers built according to the bulk cargoes they carried, and to highly specialized dry and liquid bulk shipping markets.Footnote ²⁷ The great technological innovation in this market was ship gigantism. The general pattern of trading, however, has not changed over the last 130 years and the tramp-shipping companies have remained, to a large extent, family businesses.Footnote ²⁸

The Evolution of the European Shipping Firm

Taking into consideration the above developments, I introduce a rough overall model, centered on the evolution of the European shipping firm as depicted in Figure 1.1 There are four distinct stages in the evolution of the European shipping firm: (1) up to the 1820s; (2) from the 1830s to the 1870s; (3) from the 1880s to the 1930s; and (4) the 1940s‒1970s.Footnote ²⁹ The transformation of the shipping firm from one stage to another was determined by economic and technological developments. The first stage contains the forms of merchant shipping business as it developed during the early modern era. It is interesting to note that until that stage, shipping was not distinctive from trade. In fact, the term “shipowner” did not exist at the beginning of the nineteenth century in Europe’s main port cities;Footnote ³⁰ shipowning was just one role for the “merchant” or “trader,” as they were typically called. Merchants’ activities subsumed trade, shipping, and finance. The transition to the second stage happened in the 1820s; the exponential rise in production due to the Industrial Revolution demanded other trading business structures that led to the dissolution of the big chartered trading companies and liberalization of trade. The second stage, from 1830 to the 1870s, is characterized by a peak in sailing ship companies, the formation of big international trading companies, and the formation of the first subsidized steamship companies.

Figure 1.1 The evolution of the European shipping firm

Source: Gelina Harlaftis, “The Evolution of the European Shipping Firm: From Local to Global,” in Teresa da Silva Lopes, Christina Lubinski, and Heidi Tworek, eds., The Routledge Companion to Global Business (London: Routledge, 2019).

The third stage, from the last third of the nineteenth century to the 1930s, proved an important landmark for the specialization of shipping markets and the introduction of two business models: liner shipping and tramp shipping. At this stage the full effects of the introduction of steam power were evident in the transformation of the shipping industry and consolidation of the liner and tramp-shipping firm. The British, who in many ways invented the modern shipping company, dominated this steam era until the 1930s, after which Britain’s loss of the world’s maritime hegemony began. It was also marked by the dramatic decrease of British tramp-shipping companies, often led by single shipowners who had passed down local maritime traditions from generation to generation. This did not happen in southeastern Europe: Greek shipowners resisted this trend, as we shall see. The fourth stage was characterized by the “golden years” of the post-World War II period, the consolidation, growth, and gigantism of oil tankers and the new technology of container ships. It also marked the globalization of the shipping firm, with the widespread use of offshore companies and flags of convenience.

Until the 1820s (the first stage, see Figure 1.1), European commercial and shipping businesses in the nineteenth century developed in lockstep with their countries’ colonial empires, and the inter-empire and national external trade was operated by close-knit business networks. At the beginning of the nineteenth century there were two types of enterprises in European shipping: chartered companies and free traders. The big chartered merchant companies of the seventeenth and eighteenth centuries, whether British, Dutch, French, or Scandinavian, had special trading privileges in certain countries and maritime regions. They traded, owned fleets, and financed all that mercantile activity, and as their trade became more and more regularized, they increasingly resembled precursors of latter-day liner shipping companies. However, the growth of international trade during the Industrial Revolution brought with it the need for structural changes that most chartered companies were unable or unwilling to make, and by the 1820s most had disappeared.

It was independent shipowners, the so-called free traders, who developed tramp/bulk shipping. In the first stage (before the 1830s) the free-trader sailing ship constituted the first form of shipping firm. Free traders were ships outside the control of the chartered companies and were formed by shipmasters or merchants who attracted investors in partnerships.Footnote ³¹ At that stage, the tramp sailing ship was involved in a dual activity; sailing ships, apart from providing sea transport services, were traders. The sailing vessel was therefore also a merchant trader with two functions: commercial and maritime.Footnote ³²

In the second stage, from the 1830s to 1870s, two types of companies filled the vacuum left by the vanished chartered companies. The first type was the international trading company and the other was the steamship companies, which had obtained state subsidies to carry the mail (Figure 1.1). International trading companies followed in the footsteps of the chartered company; they were involved in trade, shipping, and finance, owned large fleets, and exploited trade links between the home country and its colonies during the age of imperialism.Footnote ³³ The big British trading companies were typical of the species. Although the majority of them evolved, in the twentieth century, into important multinationals with diversified and multifaceted activities, some decided to specialize in shipping. Furthermore, the fact that they started as international trading companies sometimes disguised their significant shipping dimension. For example, this was the case when Mackinnon Mackenzie founded the British India Steam Navigation Company, known as BI, one of Britain’s giant shipping concerns, based in Glasgow. The same thing happened with the China Navigation Company of the Swires, based in Liverpool.Footnote ³⁴

The introduction of steamships and their evident advantages over sailing ships induced most European nations into a wild competition for the control of the seas. State-subsidized steamship companies sprang up all around the continent’s rim, and subsidies were given mostly in the form of mail subventions by their states. These steamship companies, the second descendants of the chartered company, did not charge for carrying the mail of particular countries with which they traded, in return enjoying certain tax exemptions within these countries; their obligation was to serve a particular route a certain number of times per week or month. All European nations established steamship companies which competed in cargo and passenger transportation in both European waters and the world’s oceans.Footnote ³⁵

“Free traders” that combined trade and sea transport sometimes evolved into international trading companies (thus overlapping in some cases with the descendants of the charter companies), but more often became independent shipping companies specializing in sea transport, owning a large number of ships, and drawing capital from their hometowns through co-ownership. Joint ownership practices were usual in the sailing ship era all over Europe. Greeks, British, Norwegians, Dutch, French, Italians, and Spanish – anywhere in Europe with a traditionally strong maritime culture – all relied on joint ownership, with its strong kinship ties and local merchant family networks.Footnote ³⁶

The watershed in the evolution of the European shipping firm happened in the third stage: the advent of steam for shipping of all types. During the last several decades of the nineteenth century, shipping companies coalesced into tramp-shipping companies on one hand and liner companies on the other – all using steam.Footnote ³⁷ As before, connections with home ports and strong family ties provided regional sources for investment funds, not to mention control over shipping businesses themselves. Moreover, during this stage specialization in shipping, as distinct from trade, was completed. The shipping industry became an independent sector involved exclusively in sea transport services and a number of supporting companies with specialized function developed, including ship management companies, ship broking, and ship agencies, all to serve the needs of the exponential growth of international sea trade.

In order to control growing competition, the existing British steamship liner companies collaborated to form shipping cartels, the so-called conferences.Footnote ³⁸ These were coalitions of liner companies trading in specific oceanic regions with the sole purpose of blocking new entrants and keeping the prices at higher levels. Closed entrepreneurial networks on a national and international level proved extremely important. These liner shipping companies were joint-stock companies but, in most cases, control was still in the hands of one family or one person.

Tramp shipping grew in Europe’s maritime regions, areas that developed fleets in small port-towns, islands, or regional maritime centers. In Britain, for example, until the nineteenth century the traditional areas of free traders were, apart from the London area, the South West ports and the West Country.Footnote ³⁹ The Industrial Revolution changed the geography of shipping. In the nineteenth century, the main tramp-shipping areas of Britain developed along with and relied upon coal exports: The North East English ports and Wales became the main hubs of British tramp-operators in combination with those of the Clyde in Scotland, which was traditionally connected with the worldwide trading networks of Scottish merchants. All these areas had been traditional providers of shipping (like Whitby in the North East or Swansea in Wales), producing some of the best master mariners of the British fleet. Tramp sailing and steam shipping thrived and formed the largest part of the British mercantile marine up to World War I, consisting of 55 percent of the fleet.Footnote ⁴⁰

Other main maritime regions of deep-seagoing tramp sailing vessels in northern Europe, apart from Britain, included Scandinavia, with the southwestern Norwegian coast being the most prominent, and the Dutch deltas in the Low Countries. In southern Europe, deep-seagoing tramp shipping thrived in Spain, along the Basque coastline, and in Italian Liguria and the Sorrento coastline. The Adriatic Dalmatian coastline developed an important maritime culture, but the Ionian and the Aegean islands nourished the most important tramp operators of the eastern Mediterranean.Footnote ⁴¹

Most European tramp-shipping companies were family-owned. Intermarriages among ship operators allowed them to keep the business within closed circles and expand regionally. Such strong regional ties resulted in close-knit maritime communities; for example, a shipmaster from a particular port might recruit seamen from the same port in addition to having a partnership with local investors. In Britain, tramp ships were owned by the old method of the “64th system,” where the “sixty-fourthers” were shareholders of ships they held with unlimited liability; this system served well during the sailing ship era. But with the advent of steamers the cost of one share became prohibitively high (averaging as much as £300). In the late 1870s, single-ship companies of unlimited liability were introduced, producing a real boom in the market in the main tramp-shipping areas of Britain.Footnote ⁴²

Through this innovation, the British invented the modern form of the tramp-shipping company, which acted as the managing agent of ships owned by joint-stock single-ship companies nominally distinct from each other but with the shipowner in firm control of all. In this way, shrewd entrepreneurs could satisfy their shipowning ambitions at very little cost to themselves, by tapping sources of investment from a wider public.

The British, in their regional maritime areas, further developed the usual practice of joint shipownership during the steamship era of the last third of the nineteenth century.Footnote ⁴³ Then, in the early twentieth century, big British firms expanded their sources of finance by exploiting resources beyond their local regions, instead seeking backing from banks that specialized in shipping finance, like the Westminster Bank or the Royal Bank of Scotland.Footnote ⁴⁴ But the single-ship model still ruled in the tramp-shipping sector. In 1931–1932, 53 percent of British shipping companies owned just one ship. In France the number was 56 percent, in Norway 61 percent, and in Greece it was highest of all: fully 74 percent of Greek shipping companies owned only a single ship.Footnote ⁴⁵ In Norway and Greece, the single-ship model has continued to dominate. Single-ship firms have been the basis of shipping business expansion, that is, startups of new business in shipping.

By the end of the interwar period, particularly in Britain, most of the liner and tramp-shipping firms had merged into large conglomerates. The structure of British shipping changed, leaping from private family businesses to the corporate liner companies. The economic crisis of the 1930s hit British shipping and its companies hard. In the liner business, the colossal Royal Mail group, a public company that owned 11 percent of the British fleet, collapsed, while the liner companies that retained their family character (like those belonging to shipping families such as the Holts or Furnesses) were better able to withstand the financial turbulence. British banks intervened heavily to save British shipping.Footnote ⁴⁶ On the eve of World War II, the British fleet, despite the loss of a large percentage, was still the leader with 28 percent of world tonnage; however, the fleet had lost what proved to be its backbone, its small-scale operators involved in tramp shipping.Footnote ⁴⁷

The interwar period marked a time of stagnation for British tramp shipping, and saw the gradual contraction of traditional tramp-shipping areas and their concentration to London. Tramp shipping declined from 55 to 39 percent of the British fleet.Footnote ⁴⁸ The most important thing lost, beyond ships and localities, was the human dimension. The self-reproduction of human capital from traditional maritime communities, with their special expertise and unique business cultures, was a sine qua non for the continuation and expansion of the shipping industry, which was facing intense international competition during and after World War II. Instead, Britain, for the most part, lost this human capital: tramp owners whose professional origins were either from “the Counting house” or “the Hawse hole” (that is, they were employees from commercial/shipping companies like the Burrels, Jones, or Radcliffes, or master mariners like the Hains, Runcimans, Pymans, or Tatems). Greek tramp operators had similar professional origins, but retained their local knowledge.

In the fourth stage, from the 1940s to the 1970s, a large number of the European liner companies continued to function but faced major challenges due to the reduction of passenger traffic, which increasingly relied on airlines. The advent of container ships revolutionized the business and brought further deep changes. However, most of the major shipping lines still function today as global liner/container shipping groups after having undergone major restructuring in the 1970s.Footnote ⁴⁹

In the pre-1940s period (the first three stages in Figure 1.1), the tramp-shipping operators fell into two categories: cross-traders like the Greeks or the Norwegians, who carried mainly cargoes for third countries, and “national” traders like the British, Germans, French, or Italians. In both cases capital, flag, and labor came from their national state. Tramp companies had a national character, each with a particular predominant regional dimension, organized around family capitalism; however, many also participated in the international tramp markets.

After the 1940s, international trade transformed tramp shipping. During this time, many tramp operators lost their national culture and became companies of an international character. They drew resources from global capital and labor markets, and took advantage of internationalizing institutions like offshore companies and competitive open registries.Footnote ⁵⁰ Tramp operators were becoming increasingly globalized, losing their national character.

Except for the Greeks. Remarkably, Greek shipowners formed global businesses with a distinct Greek character; they were able to incorporate the local into the global without losing either.

The Stages of Development of the Greek Tramp-Shipping Firm

The Vagliano and Onassis companies, like most Greek tramp shipowners, followed the path of other European tramp-shipping firms, as shown in Figure 1.1; in fact, they survived through all the stages of the transformation of the shipping industry, becoming international players with an indelible Greek character. The three Vaglianos, coming from a traditional maritime family of free traders from the Ionian islands, started their careers as island shipping firms, and were able to make the great leap forward from the first stage to the second stage, becoming a powerful international trading firm involved in trading, shipping, and finance, as well as transforming themselves into a steam-shipping company during the last third of the nineteenth century. A landmark in these transformations was the creation of a hybrid Greek ship management office in London, which opened the way from the second to the third, and eventually to the fourth stages. Aristotle Onassis, meanwhile, started his tramp-steamship business in the 1930s out of a Greek London ship management office, purchased his first two ships, and started a tramp-steamship company. From there he made the great leap forward to becoming a global tramp/bulk-shipping group.

During the eighteenth and nineteenth centuries, Greek shipping fleets from the Ionian and Aegean seas competed successfully against the French, the Spanish, the Italians, and the British in the long-haul Mediterranean trade, supplying their goods and services efficiently and at low cost. Why were they so competitive against these international powers? First, they formed unique institutions and organizational structures. The shipowners of the Ionian and Aegean islands operated in a borderless and economically integrated maritime area, regardless of whether that area was under Ottoman, Venetian, French, Russian, or British control at any given time.Footnote ⁵¹ The seafarers of the area had to develop their own institutions and organizational structures on every island that conformed to Mediterranean shipping practices, without relying on a national model. As the prominent Greek historian Spyros Asdrachas has described it, they were part of an economic entity that was, in effect, a “dispersed maritime city” (Map 1.1). This vast city of islands formed a unified market.Footnote ⁵² Its four districts, the Ionian Sea and the western, central, and eastern Aegean, each developed several maritime centers. During the sailing ship era, as many as forty islands and port cities developed important deep-seagoing fleets, owned by prominent local shipping families.Footnote ⁵³ The island of Cephalonia in the Ionian Sea had by far the largest fleet of all. It was also the original home base of the Vagliano brothers.Footnote ⁵⁴

Map 1.1 The four districts of the “maritime city” of the northeastern Mediterranean

Source: Gelina Harlaftis and Katerina Papakonstantinou, eds., H ναυτιλία των Eλλήνων, 1700–1821: H ακμή πριν την Eπανάσταση [Greek Shipping, 1700–1821: The Heyday before the Greek War of Independence] (Athens: Kedros Publications, 2013).

The second factor that led to the increased competitiveness of the Greek-owned fleet was its specialization and verticalization of production, innovations that happened alongside an important technological development: the adaptation of western European sailing ship types. These new types of vessels provided flexibility and better carrying capacity and adaptability; it was during the 1790s that the Greeks began to adopt western ship types like pollacas, brigs, and brigantines.Footnote ⁵⁵ The groups of family shipping firms that Greeks formed in the maritime centers of a certain region functioned as “clusters.” Clusters are groups of firms nestled close to each other, their businesses interlinked and their institutional structures appropriate to a very specific economic sector. They are linked by common characteristics and businesses that supplement each other.Footnote ⁵⁶ The galaxy of ancillary businesses that supplied the shipping firms was an integral part of the cluster. Through these interwoven clusters, shipping firms in Greek maritime centers increased their competitiveness via vertical and horizontal production of sea transport services.Footnote ⁵⁷ As these clusters of firms interacted with each other, unifying the local markets of individual maritime regions, their seafarers tended to specialize in certain kinds of trade, or trade with a specific region.

The configuration of a specialized seafaring working force was a third determinant factor in the success of the Greek shipping firm. A stable cadre of about 18,000 seafarers spread throughout the forty islands comprising the dispersed maritime city in the Ionian and Aegean seas was a key factor in Greek competitiveness. These seafarers specialized in long-haul trips, and were trained in navigational skills onboard vessels alongside their fathers, sons, brothers, cousins, uncles, and friends. Shipping was their only way of life, their sole source of income, and a fount of personal recognition. They proved that cohesion and the flow of information in the “maritime city” gave them increased knowledge and thus the competitive advantage that allowed their vessels to compete with their western European counterparts.Footnote ⁵⁸

Fourth, Greek entrepreneurs expanded beyond their Aegean and Ionian home base – sometimes far beyond. The geographic expansion beyond the borders of the Ottoman or Venetian dominion proved a fundamental entrepreneurial strategy for the development of the sea trade and the increase in the wealth of the maritime centers. Starting in the eighteenth century, captains imitated their peers in following new and hazardous ventures, leading to a gradual expansion through imitation. When a captain returned to his island with a profit, there were many who were ready to disregard risk and follow his path.

Thus, Greek competitiveness at its heart came from the formation of entrepreneurial networks – the consequence of their creation of sea transport systems and their harnessing of an ever-increasing flow of information. Every maritime region developed information networks regarding, for example, loading places, or the times of arrival of ships. Finding new ways to get such information quickly – and spread it quickly – resulted in faster loading and unloading of cargoes; and succeeded in creating a chain of logistics in combined maritime and land transport.Footnote ⁵⁹ In this way the island business groups linked local entrepreneurial activity with the periphery and with other countries through articulated entrepreneurial networks. The firms of the Aegean/Ionian maritime city exhibited a remarkable dynamism in economic development and institutional formation, as well as the ability to adjust flexibly to accommodate all economic circumstances. From the one side there were the groups of shipping firms of the islands/maritime centers of the “maritime city” of the Ionian and the Aegean seas and, from the other, the diaspora trading companies in the merchant communities of the Greeks dispersed along the Mediterranean and the Black Sea.Footnote ⁶⁰

Long before the formation of the Greek state in 1830, Greek subjects of the Ottoman and Venetian states in the Ionian and Aegean islands had developed the so-called fleet dei Greci (fleet of the Greeks). By 1821, the year of the beginning of the Greek War of Independence, they owned the biggest fleet in the eastern Mediterranean and the Black Sea, comprising 1,000 deep-seagoing vessels; it was the only substantial fleet of the Levant, and ran mostly under the Ottoman flag. At the same time, the most important western Mediterranean fleets were those of Spain, France, the Italian states, the Habsburgs, and the Republic of Ragusa. The Greek fleet was the fifth largest in the Mediterranean during the last third of the eighteenth century; it underwent a remarkable fivefold growth from the mid-eighteenth century to the 1820s.Footnote ⁶¹ It was a fleet of free traders combining trade and shipping.

In the second stage of the evolution of tramp shipping, from the 1830s to the 1870s, Greek free traders evolved into international trading houses, on one hand, and sailing ship companies based on individual islands, on the other. International trading companies, the leading ones originating from Chios and Cephalonia, represented some of the most powerful of the Greek diaspora traders, expanding as they did beyond the boundaries of the Ottoman Empire and the Greek state. The international entrepreneurial networks that were formed by Greek international houses in the nineteenth century have been described as the “Chiot” network, which had its heyday during 1830–1860, with the Ralli brothers as a leading family; the “Ionian” network followed from 1870 into the twentieth century and was led by the Vaglianos.Footnote ⁶² Diaspora trading companies conformed to the theory that has been developed about multinational companies, entrepreneurship, and international business.Footnote ⁶³

Greeks proved adept at exploiting local and international political circumstances as they expanded. The rise of the Russians as the most dynamic presence in the Black Sea after their victories against the Ottoman Empire proved very important for the Greeks. Russian dominance consolidated international trade and channeled it through the Straits and the Russian Empire conquered the lands covering the northern and eastern Black Sea coastline, from Odessa to Batoum. Greeks, who excelled in trade, shipping, and finance, handled more than half of all the external trade of the Russian Empire by the mid-nineteenth century.Footnote ⁶⁴ The Greek position in the eastern Mediterranean was strengthened when the Ionian islands became a British protectorate after 1815; moreover, the formation of the newly independent Greek state after 1830 gave them the right to fly their own Greek flag.

The success of the Greek trading companies relied on their human resources. The Greek diaspora’s entrepreneurial networks created a production system of close-knit small, medium, and large businesses within a loosely organized network. This commercial and maritime web assumed a triple dimension: the local/regional, the national/peripheral, and the international. It gave access to ports, agents, and financial and human resources, providing the Greek diaspora networks with the ability to internalize many operations and survive international competition. Their cohesion was derived from the business culture they inherited from the island maritime and trading communities, and, through shipping, they were able to reinvent themselves and survive economically in the international arena.Footnote ⁶⁵ The trust that Greek traders engendered among both clients and ancillary companies was fueled by this complex web of networks, by their allegiance to family and ethnicity, and by pure economic interest.

Greek shipping companies based in the Ionian and Aegean islands, still relying on sailing ships during this second stage, became the sea-carriers for the Greek diaspora trading companies, and profited enormously by the association.Footnote ⁶⁶ At the peak of the sailing-ship fleet in the mid-1870s, there were about 800 shipping families in the forty maritime centers of the Ionian and Aegean seas, operating some 2,500 deep-seagoing sailing ships. Joint partnerships continued to the same degree and Masters were the appointed managers, yet as a rule they were not now the main co-owners. The growth of the fleet and its concentration in international transport altered the structure of shipowning.

During the evolution of the previous period, the island tramp-sailing-ship firms developed in a particular way. Historian Alexandra Papadopoulou, drawing from the paradigm of the maritime tradition of the Aegean island of Spetses in the eighteenth and nineteenth centuries, has distinguished the three phases of development of the family shipping firm of Greek maritime centers.Footnote ⁶⁷ According to her analysis, in the first phase, the shipping firm with one ship took two organizational forms: the independent shipping firm (meaning a single person or entity who owned the ship entirely); and co-ownership of the ship. The two organizational forms are distinguished according to the nominal control of the ship (ownership) and real control (management).Footnote ⁶⁸ Independent shipping firms and co-ownerships formed the “shipping house” in the second phase, its main characteristic being intergenerational continuity: the activity of at least two generations of a family in shipping activities. As she mentions, “with the term ‘shipping house’ we are referring to the male members of the family that are relatives of first or second rank, have the same surname and form shipping firms either collaborating exclusively with each other or with the participation of others.”Footnote ⁶⁹ The third and final phase of the organization of island shipping companies was the business group of a maritime center, formed by the shipping firms/houses, reflecting the economic and social relations that developed among the shipping houses. The island shipping business group is linked in official and unofficial ways that are characterized by trust relations. The latter acts as a safety valve for the reduction of business risk and, ultimately, of the transaction costs. It was those island shipping business groups that configured the international entrepreneurial networks and ensured the competitiveness of the fleet. As will be indicated later, the Greek London office became a hybrid form of the ship management company of the island business group.

The 1870s marked both the growth and the decline of the Greek sailing-ship fleet; almost at the same time that the fleet peaked in 1875, it started a decline from which it never recovered. Greek deep-sea sailing vessels continued to operate to a limited degree up to World War I, but the future lay with the new technology, steam. Masters of sailing ships and investors had to find ways to enter this capital-intensive market.

In the third stage, the 1880s‒1930s, the way opened to the steamship tramp-shipping era. At this stage, the new technology destroyed the old structure of regional maritime centers and brought restructuring. The familiar Greek production system, based on the two pillars of the international diaspora trading companies and the island sailing-ship companies, reinvented itself into hybrid shipping-management offices, the so-called London offices. These were both shipowning companies and shipping agencies.

From the powerful diaspora trading companies of the mid-nineteenth century, based in London, only the Ralli Brothers continued as a British trading company in the twentieth century up to the 1960s. Of the others, some went bankrupt in the 1860s‒1870s, some were absorbed by banking institutions in London, and some continued trading from the Black Sea region until World War I on a more limited scale. The traders that survived through to the twentieth century were those that invested in shipping. Eight out of the top ten Greek shipowning companies of 1910 were diaspora international Greek trading companies that had been based in the port cities of the Danube, the Azov Sea, and in Constantinople (these were the family firms of the Embiricos, Stathatos, Svoronos, Scaramangas, Sideridis Dracoulis, and the Lykiardopoulos – and, of course, the Vaglianos). By the early twentieth century, half of these families had opened shipping offices in London.Footnote ⁷⁰

The great innovation that the Vagliano Brothers brought about was that they set up the first London office.Footnote ⁷¹ The last Vagliano died in 1902, yet by the eve of war in 1914, there were eleven London offices that handled 20 percent of the Greek-owned fleet. By 1937, seventeen London offices handled 45 percent of the fleet.Footnote ⁷² These London offices internationalized and modernized parochial shipping companies in the Greek islands. It was from a London office representing the shipping firms of Ithaca that Aristotle Onassis started his fleet.

The transition from island shipping companies to tramp-steamship companies happened after steam shipping destroyed most of the small maritime centers. Out of the forty maritime islands only six managed to make the transition to steam (one or two from every maritime region). From the Ionian sea, it was the shipowners from Cephalonia and Ithaca; from the eastern Aegean, Chios and Kassos; from the central Aegean, Syros and Andros; from the western Aegean, none. Island shipping families pooled together their capital to purchase the first family steamship; individual family capital was not enough.Footnote ⁷³

In 1914 there were 309 Greek shipping companies owning 515 steamships of 861,080 grt. The interwar period and the formation of the Greek London offices brought expansion of the fleet to all oceans. From 1914 to 1938, the Greek merchant fleet soared from thirteenth to ninth place among the ten largest national merchant marines, accounting for 3 percent of world tonnage. More important, however, Greece now owned the second largest dry-cargo tramp fleet; its 16 percent share trailed only Britain (39 percent) and was ahead of Japan (11 percent) and Norway (8 percent). We can safely assume that the shares of the dry-cargo tramp-shipping market enjoyed by Greece, Norway, and Japan came largely at the expense of the declining British tramp fleet.

This massive expansion continued during the post-World War II global shipping period, led by Onassis. If in 1938 the number of Greek shipping offices in Piraeus, London, and other cities numbered around 300, in 1958 they exceeded 350, by 1975 they topped 800, and by the end of the twentieth century numbered more than 1,000.Footnote ⁷⁴ The year Onassis died, in 1975, Greek-owned shipping was the world’s largest maritime power, with more than 3,000 ships and about fifty million grt in total.Footnote ⁷⁵

In the period after 1945, most of the Greek London offices were transformed into global shipowning groups, such as the Embiricos Brothers, Kulukundis Brothers, Livanos Brothers, Goulandris Brothers, and Chandris Brothers. One should note that all these families had more than three generations’ experience in the maritime business, with the Kulukundis and the Embiricos having at least seven generations of experience. The appearance of new companies made necessary the distinction between “traditional” and “non-traditional” or new shipowners. “Traditional” shipowners were at least second generation; they inherited their shipping enterprises from their parents. “Non-traditional” shipowners entered the sector only after World War II and came from other professions.Footnote ⁷⁶

The only “non-traditional” shipowners in the post-World War II period that prevailed immediately after entering the market were Aristotle Onassis and Stavros Niarchos. However, as renewal of the shipowning community proceeded at a rapid pace throughout the postwar period, new names gradually began to make their presence felt in the forefront of Greek-owned shipping. The participation of the older shipowning families began to wane appreciably after the 1980s and, in the last two decades of the twentieth century, new shipowners held sway.Footnote ⁷⁷ Path dependence provided for the success of the Greeks in the post–World War II period.Footnote ⁷⁸

The success of modern Greek shipowners has depended on their established worldwide networks, which functioned through a sort of exclusive international “club” of Greek shipowners that was crucial to their overall strategy and their economic survival. Moreover, Greek specialization in tramp shipping, dry and liquid (dry cargoes included coal, grain, fertilizers, ore etc.; liquid cargoes included crude oil and its products) made them unique worldwide. Aristotle Onassis triggered the carriage of oil cargoes and the postwar penetration of the tanker business. However, he was not the first Greek shipowner to carry oil or the first to buy a tanker. Greek sailing ships and steamships had been carrying oil from the port of Batoum (coming from the oilfields of Baku) in the Black Sea since the 1890s.Footnote ⁷⁹ As with the Vaglianos, modern Greek shipping tycoons built on the rich, complex history of their industry even as they sought new ways to innovate.

Conclusions

Up until around the 1870s, Greek shipping firms in general followed the development of their European counterparts; this was the context in which the Vaglianos and Onassis shipping firms developed. However, this similar track of institutional development masks a rich, varied, and complex history that made Greek firms leaders in world shipping.

Multiple generations of Greek shipping families formed groups of businesses throughout the various maritime regions and islands of the Aegean and Ionian seas in the course of three centuries. Their success lay to a large extent in the fact that they were family businesses that retained an important connection to specific island maritime communities, each one providing a wealth of human resources and preserving a unique maritime cultural tradition. From this solid base, these firms expanded geographically to form extensive entrepreneurial networks. By developing transport systems in local maritime regions in the eighteenth century, they expanded during the new age of industrial revolution through articulated networks and sea transport production systems in a wider peripheral maritime region in the nineteenth century. The case of the Vaglianos indicates how from the first stage of the evolution of the sail-shipping firm, they made the transition to the second stage of the international trading firm, and then led the way in the third stage, to the formation of a ship-management firm.

The Onassis case indicates how, from the third stage of the ship-management firm, there was a great leap forward towards the fourth stage: the creation of the new form of global maritime business in the second half of the twentieth century. Ultimately, Greeks, by functioning as conduits for the integration of the economies of the eastern Mediterranean and Black Sea regions in the international economy of the nineteenth century, expanded in the twentieth century to all oceans, contributing to the globalization of the world’s economies. The remainder of this book is about how all this was done.