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Lend-Lease

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Lend-Lease was the system by which the U.S. gave its allies $50 billion in military aid in 1941-45 to help win World War II.[1]. There was no repayment required. $31 billion went to Britain, $11 billion to the Soviet Union, $3 billion to France, and $1.6 billion to China. In addition, Canada operated a similar program of aid to Britain, and Britain had its own program of aid to others, especially the Societs.

It was a system of mutual and reciprocal aid which gave the U.S. about $ billion of services (especially rental of military bases on Allied soil). More broadly it meant the pooling of the resources, the man power, and the inventive genius of every Allied power. Though the United States initiated the action through the Lend-Lease Act of March 11, 1941, and though it furnished by far the largest contribution measured by monetary standards, lend-lease was a two-way affair, each nation giving to the common cause according to its resources.

Passage

Enactment of the measure was precipitated by the great international crisis of 1940-1941. Smashing victories had given Nazi Germany control of almost all of Europe. Making it worse, Hitler's Germany was allied with Stalin's Soviet Union until June 1941. Britain in the summer of 1940 stood alone, facing invasion and defeat. If, like France, it collapsed, control of the North Atlantic would pass inevitably to German hands, American freedom on the high seas would vanish, and the North American continent eventually would be exposed to invasion. Acting on these assumptions, the Roosevelt administration decided to aid the British, but it had to confront Anglophobia (especially on the part of Irish Americans), isolationism (especially on the part of German-Americans, Scandinavian-Americans, and Republicans), and the myth that the British Empire was so abundantly rich it did not need money.[2]

Acting independently and without approval of Congress, the President in September 1940, turned over to the Royal Navy fifty over-age American destroyers in an effort to make up for the ravages of German submarines against the North Atlantic convoys. In return the British government gave on a ninety-year lease the rights to naval and air bases in British colonies in the Caribbean, Guiana, Newfoundland and Bermuda. The agreement, in President Franklin D. Roosevelt's words, was "the most important action in the reinforcement of our national defense that has been taken since the Louisiana Purchase."

Legal Justification

Opponents of the President's foreign policy attacked the destroyer transfer as a grave breach of the American neutrality laws, particularly the act of June 15, 1917, Section 3 of which forbade sending out of the jurisdiction of the United States, when neutral, any vessel built, armed, or equipped as a vessel of war, with any intent that it should be delivered to a belligerent nation. The Attorney General, however, gave an opinion that the law was directed against vessels built to the order of a belligerent, not vessels built previously for the use of the United States. Integrated with this activity, intended for the preservation of the North Atlantic and the defeat of Germany, were the alliance formed with Canada under the Ogdensburg Agreement of August 1940, and the American occupation first of Greenland in April 1941, and then of Iceland in July. The latter two steps followed the passage of the Lend-Lease Act, and foreshadowed full co-operation with the British and Canadians in convoy duty in the North Atlantic.

The Arsenal of Democracy

The United States, by adopting lend-lease became what FDR called, "The Arsenal of Democracy." The U.S. dedicated its economic resources to the smashing of Nazi Germany. Lend-lease was the logical outgrowth of the cash purchases which the Allies, and Britain in particular, had made in the United States since the beginning of the war. President Roosevelt had referred to the United States in this role as the "arsenal of democracy." With their dollar balances in 1940 approaching zero, the British could not continue purchasing vital war materials in America. The Lend-Lease Act, passed by Congress seven months after the destroyer transfer, authorized the President to procure from government facilities or elsewhere "any defense article for the government of any country whose defense the President deems vital to the defense of the United States." The term "defense article" included nearly everything directly or indirectly used for war purposes. The President was also given broad power not only to sell, transfer, exchange, or lease any such article, including "defense information," but also to prescribe any kind of payment he deemed satisfactory. These flexible and general provisions, allowing the bill to be adjusted to the changing circumstances of war, were later found to be highly important to Allied strategy. Winston Churchill called it "the most unsordid act."

Master Lend-Lease Agreements

After Pearl Harbor (Dec. 7, 1941), when it became a full belligerent, the United States and fourteen of its allies signed master lend-lease agreements providing for reciprocal aid and the pooling of human and material resources directed and coordinated toward the common goal. From that date forward the United States furnished nearly every kind of material and service to its allies, and received in return much the same kind of aid. Mindful of the World War I debt fiasco, as a result of American loans to its allies and the hard feelings that followed, the negotiators drafted Article VII of the master lend-lease agreements to provide that "the terms and conditions thereof shall be such as not to burden commerce between two countries but to promote mutually advantageous economic relations between them and the betterment of world-wide economic matters." The British provided numerous bases and supplies for American forces, and furthermore gave the Americans the Rolls Royce Merlin engine for the P-51 Mustang fighter, the blueprints for the proximity fuze, and vital information on the atomic bomb.

Commonwealth

Canada, Australia and New Zealand had their own lend-lease programs to help the British. Australia and New Zealand imposed rationing on their own people to ship food to Britain.

Termination

As a war measure, Lend-Lease was terminated by President Harry S. Truman in September 1945. Termination was hasty and unexpected and severely upset the Soviet Union and Britain; however the U.S. had also started up an entirely separate program of powstwar relief and loans. Thus the U.S. loaned France $500 million in 1945 and Britain $3.75 billion at 2% interest, three years before the Marshall Plan aid started. Truman ignored Stalin's request for a $6 billion loan.

The United States delivered material valued at more than $50 billion and had received in reverse lend-lease material valued at less than $8 billion. Reverse lend-lease from the UK included worldwide shipping services amounting to £163,944,000, and inland transport of £48,496,000; capital installations in the United Kingdom came to £222,800,000, of which £117,341,000 was spent on air fields for the U.S. Air Force. (The rate of exchange was £1 to $4).

No repayment was required of aid given during the war. Originally ships were to be returned to the U.S., but in practice the U.S. had a huge surplus of ships and did not ask for them to be returned. Supplies that were en-route when the program ended were sold to the Allies on favorable terms at low prices and long-term loans.

Historiography

Gaddis Smith, A. J. P Taylor, Warren Kimball, and David Reynolds have speculated at length on Roosevelt's motives in the lend-lease matter. British historian Taylor implies that the U.S. intended from the first to use Britain's predicament to drain it of gold and dollars, weaken its overseas financial position, and undermine its capacity to compete with the United States in the markets of the world. Others argue that, while Britain's replacement by the United States as the dominant economic power in the world was a result of lend-lease, it was not a cause. The president concluded that the European members of the Axis alliance were bent on world domination and that, after the fall of France, Hitler posed a direct threat to the Western Hemisphere. Quite aside from a natural sympathy for Britain and a desire to see it survive, Roosevelt, Secretary of State Cordell Hull, Secretray of the Treasury Henry Morgenthau, Secretary of War Henry Stimson, and FDR advisor Harry Hoopkins company saw Britain in early 1941 as America's first line of defense. These historians admit that Morgenthau forced the sale of American Viscose Corporation, a subsidiary of the British textile combine, Courtalds, at approximately half its market value of $56 million, but point out that this was trivial compared to the reduction of British holdings the U.S. could have demanded. Morgenthau believed that Congress would never agree to the unprecedented subsidy that lend-lease involved unless the administration could neutralize widely held notions of British opulence by demonstrating that the Exchequer was out of dollars and gold. These latter scholars tend to neglect an important point, however.[3]


  1. The U.S. GDP was about $200 billion a year.
  2. Warren F. Kimball, "'1776': Lend-Lease Gets a Number," The New England Quarterly Vol. 42, No. 2 (Jun., 1969), pp. 260-267 in JSTOR
  3. Woods (1990) pp 9-10.