S1: Do you remember the moment when you realized that something might not be right?
S2: Yeah. It was the middle of the night. I was asleep and they came over the loudspeaker. It was loud. It woke me up and it was fireteam to engine room, whatever. Fires means engine room, whatever. And they just kept saying it.
S3: It was February 2013. Stindl Penya was aboard a cruise ship in the Gulf of Mexico when a fire broke out on a lower deck. No one was hurt, but the ship was disabled and the power went out of water.
S4: Systems were no longer ringing like the shower started backing out. A toilet wouldn’t flush and it just got worse and worse because we were on that ship for days. I mean, there was a point where like there was like feces running down the wall.
S5: The ship drifted aimlessly for a week with no plumbing or electricity and dwindling food supplies before it was finally towed to shore.
S6: I took a picture ice cream machine because you quit feeding us. Mara lost a bit. But the ice cream machine that had once been like our favorite spot. And it was like the floor by it was like her hand. It was awful. Okay.
S5: When you were in the depths of this experience, did you ever have the urge to just, like, jump off the ship?
S6: We all did. And we talked about it a lot. Like, OK, well, something’s probably not going to affect the way, but we get higher, better together and we could slow it down. And then it’s like, yeah, but then what happens if they pick you up and they put you back on the ship?
S1: So you were thinking it would be better to just be floating in the Gulf of Mexico than to be brought back aboard the ship?
S6: Yeah, absolutely. Absolutely. Yes.
S3: There’s something sort of innately comical about a ship covered in excrement, but the poop cruise as this voyage came to be known, was traumatic for people like Sindel who endured it. The ships in it was on asone by the Carnival Corporation, which operates several cruise lines. This was not the first time one of its ships found itself in serious trouble. A year before the poop cruise. Another Carnival own ship ran aground off the coast of Italy, killing 32 people who were board.
S7: And now Carnival again finds itself in turbulent waters for entirely new reasons. Even after countries began to lock down as a result of the Corona virus crisis, carnival ships remained at sea, floating off shore, waiting for safe harbor with no ports willing to accept them, which left crew and in some cases, passengers stuck aboard in awful conditions. More than fifteen hundred people aboard carnival ships were eventually diagnosed with the Corona virus. Dozens died, some of them on board. The cruise ship business occupies a strange place in our collective imagination. It’s synonymous with gluttony. Those obscenely large ships and those all you can eat buffets and those armies of slovenly tourists who storm into little port towns all over the world. Cruising is also becoming known for its ugly mishaps. The poop cruises, the waves of terrifying illness. I’ve mentioned just some of the awful incidents that have occurred on carnival ships in the last decade. They’re the ones that make big news and stick in people’s heads. But carnival ships have also been sites of disturbing sexual assaults, and Carnival has been found guilty of a slew of environmental offenses. It all traces back to the weird nature of the cruise industry. It’s no accident that when the HBO series Succession wanted to add a subplot about a corporate cover up, the writers located the sordid crimes within their fictional companies cruise ship division for a number years.
S8: There was another official company policy on the cruise lines that if there was a serious criminal incident, we would have possible sail not home, but to a Caribbean or South American port where there were so-called friendly authorities. And we can minimize the incident to avoid negative PR. Incidents like theft, sexual assault, rape, murder. OK. The bad ones.
S5: But the Carnival Corporation is easily the biggest cruise ship company in the world. It has more than 100 ships, which between them carry roughly half of the world’s cruise ship passengers. Its history is deeply entwined with the history of the cruise industry, and its story explains so much about cruising evolution from swashbuckling little startups to multi-billion dollar global behemoths to an industry whose entire future has been thrown into doubt by the spread of a deadly virus.
S9: Mindset’s Stevenson, welcome to Thrilling Tales of Modern Capitalism. On this show, we’re going to look at companies in the news and explain how they got there. Today’s episode, Floating Hell escapes the Carnival Corporation.
S10: Once upon a time, ships were basically the only way to get from one side of the ocean to the other. These ships got faster and bigger until the middle of the 20th century when ocean liners were at their peak. In 1952, an American ship set a record by crossing the Atlantic in three and a half days, which is really fast for a ship. The problem, obviously, is that airplanes are much faster than that. And by the mid 20th century, they were cheap and comfortable enough to take over. In 1958, more people crossed the Atlantic by air than by sea for the first time. Twelve years later, 96 percent of transatlantic passengers were going on airplanes. The ocean liner business was essentially over. And a lot of companies were left with big empty passenger ships on their hands. That’s really where the growth of the cruise industry came from, is that you had all of these ocean going vessels and there was no longer use for them. And how else you use them, convert them to Lesia recreational cruise ship vessels.
S3: This is Ross Klein. He’s a sociologist who studies the cruise ship industry. He says the cruise ship vacation was invented for people who missed the romance of the passenger ship era, and he wanted to recapture it, even if instead of taking you from point A to point B, the ship just went around in a loop.
S7: One of the people who got in on the ground floor of this new cruise ship business was a man named Ted Arison, an Israeli emigre who started a company called Carnival. Here’s how the company talks about him in recent marketing.
S10: Forty five years ago, a man set out with a second hand ship and a belief cruising should be accessible to everyone because we all need more fun.
S7: Arrison began with one ship which he bought from one of the old ocean liner companies. He renamed it the Mardi Gras.
S11: The plan was for the Mardi Gras to see a lot of Miami to destinations in the Caribbean. Its maiden voyage was in March of 1972 and things did not go well. The ship quickly ran aground and was stranded on a sandbar. No one got injured, but this was an inauspicious start. It began to claw its way back and then it got a huge boost from an unlikely place.
S10: In 1977, a TV show called The Love Boat made its debut in each episode. A new group of passengers boarded a fictional cruise ship called Pacific Princess and their while being pampered by the boat’s charming crew. They would all pair off and fall in love.
S12: It gave a great image of cruising being something that it wasn’t made and glamorous and it made it attractive. And everyone then wanted to take a cruise, which was great for the industry.
S3: The show was a hit. It ran for almost 10 years. While the Love Boat was getting people excited about cruises, Ted Arison was figuring out how to boogie Carnival’s bottom line. He realized that ticket sales weren’t the only way to get people’s money. Once you had people aboard the ship in a sort of captive situation out on the water, you could sell them copious amounts of liquor at the ship’s bars and drain their wallets at the ship’s casinos. Onboard, revenue became a key to Carnival success. Another key was aggressive marketing. The place I liked, and I’m sure you will to my ship.
S11: In the 1980s, Carnival became the first cruise company to do national television advertisements like this one with Kathie Lee Gifford.
S3: All I can say is, hey, look at where you like the. What they’re selling here has been called mass class, a luxury vacation for people on a budget. And people bought it. Carnival revenue doubled between 1983 and 1986. By 1987. Carnival was the world’s most popular cruise line. It was doing well enough to go public. Its IPO generated about 400 million dollars. Ted Arison used that money to buy up his competition and to dominate the industry.
S12: I would say when it comes to cruise tourism, they were probably model capitalists. They were masters at turning water into money.
S11: Harrison died in 1999. His son, Mickey, took over the company and business wise, it just kept steaming along. Carnival spun off into several different brands, including Princess and Holland America. The different brands would focus on different customer niches from downscale to upscale. Altogether, there are 104 ships under Carnival’s umbrella, and they carry about half the world’s cruise ship passengers. Last year, Carnival made about 20 billion dollars in revenue. Micky Arison himself is worth more than a billion dollars, and he owns the NBA Miami Heat.
S8: So that’s the corporate success story.
S3: But it turns out that beneath the crystal clear waters, there are dark undercurrents.
S13: I’m standing on the top deck, and I think people who are just had their mattresses up to the top deck or had found things, it was like a third world country, really.
S3: There’s always been a kind of lawlessness out on the high seas. I see Lapine learned the hard way. Carnival ships are no exception.
S13: I definitely didn’t think we would be stuck at sea for as long as we’re stuck at sea. I was sure of it. The U.S. government would come and take care about the raid that we left out of the United States. They just assumed that we were part of their jurisdiction.
S5: Carnival’s main headquarters are in Miami and the company’s CEO is in Miami and its chairman owns Miami’s basketball team. But despite this overwhelming presence in a major American city, Carnival is not an American company. It’s registered in Panama. Carnival ships aren’t American either. They’re registered under various foreign flags of convenience. This strange situation where a company that’s clearly based in the United States is not actually beholden to many of the laws of the United States. What’s carnival get away with? A lot of outrageous stuff. Ross Klein, the cruise ship sociologist, traces this back to cruising nautical routes.
S12: I think part of it goes back to the history of the cruise industry, which goes back to admiralty law or maritime law, where cruise ships operate on the high seas and don’t really belong to any one country. That gives them a degree of arrogance and allows things to go on that wouldn’t go on on land.
S5: Jim Walker, a Miami based lawyer, has another interpretation.
S14: It doesn’t pay U.S. income taxes. It avoids U.S. labor laws and wage laws. It underpays people from India in the Philippines. It overworks them. There aren’t any overtime laws that apply. There are no minimum wage laws that apply. So it’s an industry that is kind of above the law.
S3: Walker started out representing the cruise lines, but he became so disgusted by them, he switched sides. His practice now exclusively sues cruise ship companies on behalf of their passengers and crew. Walker says that most people on a cruise assume it’s safe to let down their guard a bit and let their kids roam around in the ship’s protected environment.
S14: But a cruise ships not as safe as you might imagine when you’re looking at a per capita sexual assault or rape rate. You’re actually looking with the carnival fleet, a higher per capita sexual assault rape than maybe 20 or 25 states in the United States. So it’s a higher rape rate on a carnival ship than the state of Florida. The state of New York, the state of Massachusetts and many other states like that. Most people don’t know that.
S3: Carnival says being on a ship is like being in a small city and that crimes can happen in any community. But if an assault happens on a cruise ship instead of on land, the victim’s legal recourse is murky. There are questions about jurisdiction, and the company has clear motivation to bury cases that might cause bad publicity.
S14: And so once you’re a victim of a sexual assault, who’s going to enforce the rules on the law? We can’t call nine one one and have a police officer show up. There’s no one investigating this. You have an inherent conflict of interest with the shipboard security whose loyalty is to the ship. Of course. And to the captain in when you have a crime being committed by a crew member in this shipboard security are the first people who are. You know, involved in investigating the crime, what kind of fair and impartial investigation could you possibly have in that situation when you have a company that is essentially based nowhere, whose operations take place on board ships roaming about in international waters under foreign flags?
S5: All that lends itself to a certain lack of oversight, and it goes beyond violent crimes on board the ships in 2016. Carnival was convicted of environmental offences. It turned out that for eight years, the company’s ships had been dumping oily waste into the ocean while using various tricks to avoid getting caught. The company paid a 40 million dollar fine for that, and it was put on probation, but it kept dumping anyway. Carnival executives got hauled in front of a federal court last year after their ships were caught polluting yet again. But it seems like Carnival’s place lessness, the thing that’s allowed it to continue operating through illness and scandal, may finally be coming back to bite it.
S15: The Grand Princess cruise ship has been moored off the coast of California since Wednesday night. I want to commend the efforts of our Coast Guard. Heroically, a flu coronavirus tests to the ship. First, the results among those tested. Forty six persons were swab. Twenty one of those on the ship tested positive for the corona virus.
S7: That was Vice President Mike Pence at a March 6th press conference. When the passengers on that ship, Carnival’s Grand Princess, finally disembarked in Oakland, California, it became an early focal point for fears about the virus. Later, reporting showed that Carnival might have mismanaged the crisis in myriad ways, even keeping cruises operating well after the danger signs about the virus were clear. Despite this carnival has argued that given the debilitating economic impact of the corona virus shutdown on its industry, the government should step in with some kind of assistance to keep cruise ships afloat. But relief isn’t coming.
S16: You know, it’s a funny situation because the cruise industry has been essentially excluded from the giant bailout bill that Congress passed and not essentially has been entirely excluded from it.
S3: Jordan Weissmann is Slate’s business and economics correspondent as I spoke to him. The cruise industry was totally scuttled with no cruises sailing and with cruise company stocks at historic lows. But Congress was standing firm.
S16: These companies aren’t technically American. They’ve always legally operated as non American companies. Why should American tax dollars be used to bail them out?
S3: So this setup that allows cruise lines to operate outside American law might mean they also operate outside American largesse.
S16: So they got stiffed. They got entirely stiffed in a way that I wasn’t really expecting to happen, but I’m glad I did. It is a little bit surprising to me that Donald Trump did not do more to protect his friend.
S3: Oh, did I forget to mention that Mickey Arison and Donald Trump are longtime friends? Donald Trump continued to praise the cruise company as the Corona virus crisis decimated it. He described them as a great American business, even though in a legal sense there are great Panamanian business.
S16: One reason why everyone assumed that the cruise industry would get a bailout was that Trump said he wanted it to. He called them prime candidates, just like the airline industry. So there’s some personal ties there that everyone sort of assumed would carry the day, but it appears didn’t.
S3: At least one government has decided to bet big on the cruise industry. The Sovereign Investment Fund of Saudi Arabia bought an eight percent chunk of carnival at a fire sale price right in the middle of the Corona virus pandemic at a moment when the company was desperate for cash. We’ll see if that bet pays off. And if the industry comes roaring back.
S11: It’s not at all clear what will happen to cruising when corona virus fear subside. People are still, to my amazement, booking cruises for 20 21. Polls say lots of people are still excited about the idea of future cruises. But some people might have a hard time ever again looking at a cruise as a fun, carefree vacation option. The truth is, they never should have. The main reason people choose a Carnival cruise ship instead of a beach resort, which would also offer bars and restaurants, maybe a casino and fun in the sun. That reason is at the heart of Carnival’s whole business model, because the reason to book your family on a cruise ship instead of at a resort is that the cruise ship is cheaper. When you look at the price of a room on a carnival ship compared to a resort, it looks incredibly inexpensive. And why is it so cheap? It’s cheap because the cruise ship isn’t paying U.S. income taxes and isn’t bound by labor law and ignores environmental regulations and downplays dangerous crimes to avoid liability. That’s why a cruise vacation is affordable, because operating a business at sea means you can act as though the normal rules don’t apply. But that can have unpleasant consequences. Just ask our poop cruise passenger Sindel Pinga. What are your feelings about Carnival Cruise Lines these days?
S17: I don’t like them. I mean, and that’s putting it mildly. I feel like we really were mistreated.
S1: Did Carnival do any kind of official reimbursement that’s so painful?
S17: Yes, they did. Does it opted not to sue or given five hundred dollars and a precautious equal value, which I never intended to cause. I don’t know if I will ever be able to get on a cruise ship again knowing that nobody really takes care of you when you’re out there in the ocean.
S11: As things stand, as I record, this carnival is laying off workers. Its stock prices down. And it’s the subject of a congressional investigation. But it says it’s still planning to resume cruises later this summer. We’ll see how buoyant the company is or whether it’s finally run aground so hard that it’s unsalvageable. That’s our show for today. This episode was produced by me, Jess Miller and Aisha Solutia, our technical director is Meric Jacob. Special thanks this week to Megan Karlstrom. Gabriel Roth is Slate’s editorial director for audio. Alicia Montgomery is the executive producer of podcasts at Slate. June Thomas is senior managing producer of the Slate podcast network. If you like this show, please tell your friends, but you can also help support it by signing up for Slate. Plus, Slate works hard to bring you great journalism. And right now we need your help. It’s only 35 dollars for the first year and you’ll get this and other Slate podcasts without any ads. Sign up now at Slate dot com slash. Thrilling. Plus, I’m Seth Stevenson. We’ll be back with more thrilling tales next week.