It is not as great a film as many people believe (including my late aunt, who said it was her favorite movie). But due to the better sections of this film noir, particularly that justifiably famous "fun house" finale, THE LADY FROM SHANGHAI has gained a position of importance beyond it's actual worth as a key to the saga of Orson Welles' failure to conquer Hollywood.
By 1946 Welles' position as a Hollywood figure was mixed. CITIZEN KANE was not recognized as the great movie it has since been seen as due to the way it was attacked by the Hearst press and by Hollywood insiders themselves. Welles' attempt at total control (direction and production and acting) of his movies seemed to threaten the whole system. His best job in this period was as Edward Rochester in JANE EYRE, supposedly shot by Robert Stevenson, but actually shot in large measure (with Stevenson's blessing) by Welles. But the credit went to Stevenson. Only THE STRANGER, a film benefiting from a postwar interest in fleeing Nazi war criminals, made a profit. For five years in Hollywood it was barely a great record.
Welles returned to Broadway in 1946, hoping to recapture his critical abilities by his production of AROUND THE WORLD IN 80 DAYS. But despite the assistance Mike Todd, and Cole Porter composing the score, the musical was a failure. His failure occurred just at the same time that his wife, Rita Hayworth, was on the rise with her portrayal of GILDA. So the marriage was going on the rocks as well.
Welles had to make money - his Broadway production had led to his personal bankruptcy. He sold his interest in the possible movie rights to AROUND THE WORLD to Todd (which he would eventually rue), and he also sold the idea of a film about the career of Henri Desire Landru to Charlie Chaplin, who was supposed to be directed in it (and who turned it into MONSIEUR VERDOUX).
The story goes that Welles, with a $10,000.00 tax bill to worry about, called Cohn and offered to do a film with Rita for a down payment. Cohn was willing to do so, but naturally asked what the film was. It was a wise question. Welles was on a pay phone in New York in a pharmacy that had a book department. He grabbed a book with the title THE LADY FROM SHANGHAI, and raved that it was a great thriller. Somehow Welles convinced the normally astute Cohn that Welles knew what he was talking about. Cohn said he'd look into getting the rights, and sent Welles his down-payment of $10,000.00. After Cohn hung up Welles bought the book and read it - and found it was really pretty bad. He spent time rewriting a treatment and screenplay that would build up Rita's character of Elsa Bannister.
Certainly it has a curious plot development. Michael O'Hara is a seaman/longshoreman. He rescues Elsa Bannister, when she is apparently attacked by gangsters in a park in San Francisco. Elsa is married to Arthur Bannister (Everett Sloane) a crippled criminal lawyer with a great reputation. She convinces him to hire Michael as the skipper of their yacht. The cruise also contains Bannister's sinister partner George Grisby (Glenn Anders) and one Sidney Broome (Ted De Corsia) who turns out to be a detective hired by Bannister to watch Elsa. When they can Michael and Elsa try to find time together, but Broome or Grisby keeps showing up.
Grisby makes Michael an offer - he wants (for reasons connected to his so-called fatalistic view of modern society) to drop out of it, pretending to be dead. According to Grisby (the plot becomes murky here) he can still collect his life insurance (although dead?) and use it to run off to the South Seas. He will pay Michael $10,000.00 if he will pretend to shoot Grisby. This includes actually signing a document admitting to the murder (Michael does not realize that such an admission would wipe out the need to produce a corpse if all the other evidence suggests that Grisby is probably dead).
Of course Grisby is killed, and Michael is arrested for that, and for the murder of Broome (shot with Michael's gun). Michael is tried with Bannister defending him, and discovers that the latter is doing a second rate job because he wants Michael to be convicted. Michael is convinced that Bannister is the actual murderer, and manages to escape just before the jury verdict. He is knocked out and deposited in a deserted carnival, and this leads to the famous "fun house" sequence and the conclusion of the film.
It's a terribly confusing movie (as I have had commented on). That does not mean it's not worth seeing - visually it is striking. Witness the fight between Michael and the police in the trial judge's quarters, where he knocks the bailiff into the judge's bookcase, shattering glass. Or the clever use of photography to capture Hayworth diving from a rock, reflected on the lecherous Grisby's binoculars.
The acting is pretty good, in particular Sloane (possibly that fine actor's best film role). Glenn Anders was a leading Broadway performer. He rarely made movies before THE LADY FROM SHANGHAI, and his slimy Grisby is unforgettable. Also Ted De Corsia does very nicely with Broome - a detective who is really looking for his own interests, to his own cost.
As for Hayworth, she turns in a performance that was unlike most of what she had done before (BLOOD AND SAND, TALES OF MANHATTAN, and THE STRAWBERRY BLOND are exceptions), and is a memorable siren. Welles' O'Hara is a very unusual character for the actor - a likable but naive man who learns the hard way not to believe what he secretly wants to believe. It's not KANE, AMBERSOMS, OTHELLO, TOUCH OF EVIL, or CHIMES AT MIDNIGHT, but it is a good film for all that.

I've gotta say, I usually like horror movies that i've never seen... however, this one was just to pathetic for my gory taste. I'm used to the gory, gut wrenching types... but this particular movie was lame. The acting was horrible (yet the corny (no pun intended) one-liners were cute). And the sequel to it, Scarecrow Slayer was even worse! Yes, probably, when it first came out, there was a huge rave about it and people liked it. But when movies like The Ring and The Exorcist of Emily Rose come out, movies like these make movies like Scarecrow seem childish. If you want a movie to just pass the time, pick this one! The special effects are cheesy as heck. But seeing that it was a low budget movie, I can kind of see where that would come in. This will kind of remind you of the movie "Children Of The Corn." Independent movies rock.... most of the time. So if you want to see a scarecrow killing people with corncobs, or in the sequel, 2 scarecrows going at it, then these movies would be for you.