The British Treasury were aware of the consequences the frivolous spending on goods from the United States had on the British Reserves, but the political anxiety of the Germans potentially invading Britain was far worse. The British Treasury, on average, spent twenty million pounds a month during the first year of the war. If they were to keep that as a constant rate of spending, then the entire reserve would have been completely depleted by 1943. In 1938, the gold stock in this British Reserves amounted to 800 million pounds, but just a year later, 300 million pounds were spent on the importation of weapons through the cash and carry provision. By fighting this war without the United States or Soviet Union, John Maynard Keynes, the British financial advisor, believed that the British fighting the war without the United States and the Soviet Union, was an economic disaster waiting to happen. The British were in over their heads as it was fiscally impossible to decrease their consumption and mass convert all of their production to wartime goods only, thus it made them relay on the exports produced in the United States. Once France fell in 1940, Britain realized how much they were economically wearing thing. With the Battle of Britain and the campaigning in Africa, their naval fleet was also thinning, which a detrimental to the expansive empire as they were once known for the largest Navy.
People of Congress and Parliament sought the Battle of Britain as the capitulation of the British Empire being inescapable, but Roosevelt remained firm in the demands to help the men fighting this world war. Within Roosevelt’s annual State of the Union Address, he stressed to Congress and the US public for a change in the isolationist ideas the Neutrality Acts of the 1930s promote to an internationalist perspective. Following the news of risk of British bankruptcy, President Roosevelt enacted a legislations called “Destroyers for Bases” to trade Great Britain old World War I destroyers for 99 year leases on army bases in British colonies. It may have pushed the limits of the neutrality acts, but technically still allowed since they trade material goods and still receive something of monetary value in return. This allowed American Imperialism to flourish as they had the capability to expand their rule internationally, while the British Empire shrunk in size. With the victory of the Battle of Britain, it was time for the United States to relinquish more of the neutrality act provisions and create a long-time initiative to help with the war.
The Germans have access to any resources and munitions they could get as many countries in Eastern Europe were under their occupation. Third Joint Secretary of the Treasurer, Sir Frederick Phillips, was sent from Britain to the United States to discuss in further detail a solution to the supply problem and a potential dollar loan. The dollar loan was shut down in Congress as it would repeal an act called the Johnson Act were no loans were to be made as the Congress did not want to see what happened after the First World War because of the mass American war debts. Cordell Hull, US Secretary of State, urged Sir Phillips to come up with British collateral to help urged the Congress to act upon the introduction of a new program to succeed “Cash and Carry” and the “Destroyer for Bases.” Alas, the British had already sold off most of their easily liquidated assets and did not have much to give as their market grew more depressed. In early January of 1941, a draft of the Lend-Lease Bill went before Congress to seek approval.
The Lend-Lease Act became a critical aspect of war as it provided provisions “to sell, transfer title to, exchange, lease, lend, or otherwise dispose of… any defense article… for the government of any country whose defense the President deems vital to the defense of the United States.” The United States did not only give tanks or arms, but also food and wiring for radios and telephones. These articles were to be delivered back to the United States once war ended, but many of the resources would not return. To maximize their return on investments, the United States gained leases to military bases on the Allied Nations. This act lead a great portion of the United States’ economy to be materialized and shipped off overseas, while their Allied nations were hit by the casualties of the physical war. Other countries who received aid through the act included the United States’ enemy of the Cold War, the Soviet Union.
Prior to the Lend-Lease, the United States enacted a “moral embargo”on the Soviet Union as they sign non-aggression pact with Nazi Germany. Roosevelt knew the greater threat to the world order was not the Soviet Union, but Nazi Germany. With the enactment of the Lend-Lease, Roosevelt cooperated with the Soviet Union and provided oil tankers and other locomotives to the Soviet Union to modernize their railroad system since their military was inferior with what little resources they had possessed. With this modernization of the railroad system, the USSR troops were able to mobilize at a more rapid pace in comparison to what it was at the start of the war. Nikita Khrushchev, who was the military commissioner during the war, made note of the significance of the Lend-Lease to their military and victory against the Nazi Germany. The Lend-Lease Act contributed fifty billion dollars in aid with the British receiving over thirty billion dollars of it.
This was over eleven percent of the United States’ wartime expenditure. Through the Reverse Lend-Lease,the renting of military bases, the United States gained 6.8 billion dollars from the British and their commonwealth countries. The notable economist, Eugene Staley, recognized the favoritism the militarily strategic act had towards the global dominance of United States in comparison to the British who were limited due to their acceptance of the wartime aid in his article, The Economic Implications of Lend-Lease. In Professor Michael Hudson’s book, Super Imperialism: The Origin and Fundamentals of U.S. World Dominance, he assures this point as President Roosevelt was aware that the Lend-Lease would grant the United States economic superiority over Great Britain, as the British war assets surmounted their financial holdings, thus the start of the British Empire began to crumble under the economic despair. Without the Lend-Lease Program, the British and Soviet Union would have fallen under the Fascist reigns of Nazi Germany.
The United States saved the Second World War through their economic generosity. Also, it would not allow the United States the ability to have a European campaign to join the warfront as a strategic partnership with the United Kingdom. With President Roosevelt’s untimely death in April 1945, Vice President Harry Truman was immediately sworn into office and put in the position to end the war victoriously. One of the first initiatives under the Truman Administration was revokement of the Lend-Lease Act. With war nearing the end, President Truman and Congress sought to limit the support from the act. The one issue was Section 3c, amended in 1944, which the President held the authority to exercise their executive powers to continue aid after wartime in order to carry out the complete contract. Congress, with the backing of the President, devised a new amendment in April of 1945 revoking Section 3c’s terms by stating that the President shall not carry out any contract that required the United States to grant aid to countries for postwar relief or postwar rehabilitation as it is no longer a necessity for the United States’ defense.
Countries under a Lend-Lease contract, like Great Britain, now had to be further screened and require cash payments for the goods that were being still in production and transported before the end of the war. The termination of the Lend-Lease in 1945 on VE Day marked the end of World War II and then end of aid from the United States. Great Britain, who was now economically relient on the United States, was forced scrap numerous domestic postwar plans since their financial safety net throughout most of the Second World War broke. Two years prior to this abrupt end of aid, the British Ambassador to the United States, Lord Halifax, gave a speech at Purdue University about the future United States post war financial support for British reconstruction by stating, “I should think little of a man of great riches who had no sense of responsibility to his community and was purely self-indulgent…The same law goes for great nations”, so when the act ended, it completely blindsided the British.
Within a month after the act end, John Maynard Keynes and Lord Halifax, the corresponding British economic advisors, went in front of Congress to ask for postwar aid and received little sympathy after the war as Truman believed that the Lend-Lease was solely a weapon for war. This miscommunications between countries was a result of the changing of political parties and the leaders. The financial inferiority of England to their former colony was apparent, but the British Parliament believed the Anglo-American diplomatic partnership made Britain relevant within the postwar era. With the Labour Party leader, Clement Attlee, succeeding Churchill as the Prime Minister in the 1945, talks of Britain becoming a Welfare State needed financial backing since the British Funds lacked the means to reconstruct the government. Economic solutions, like increasing British exports, were presented to Parliament, but very few were feasible as the country was indebted to many countries they once traded with. John Maynard Keynes argued to Parliament that Great Britain ratify an agreement with the United States for economic assistance in the form of a grant. He was confident in his plan to secure enough aid to suffice until production levels in Britain were back to pre war levels.
Keynes and his colleague Lord Halifax, assumed that their fight and role in the beginning of the Second World War granted them compensation in their time of need. He felt the no need to accept anything less than the six billion dollars grant-in-aid or an interest-free loan as he assured the equality of sacrifice balanced out. In September 1945, Keynes arrived to Washington D.C to seek a settlement on the British’s Lend-Lease accounts and to present the new inquiry of American aid. Keynes made the case that if the United States did not help, then the British would have to resort to maintaining their wartime controls and bilateral trading in opposed to the mutual interests of a multilateral trade agreement. Keynes and Halifax spent three days under the scrutiny of the United States Federal Reserve going into detail of the British funds and how truly of an economic crisis Great Britain faced.
Keynes was under strict instructions from Parliament to secure the grant-in-aid, but when telegrams were made to the British Cabinet, they were infuriated that such negotiations were taking place. On October 18th, 1945,William Clayton, Assistant Secretary of State for Economic Affairs, proposed to the British representatives a five billion dollar loan with two percent interest over a half a century. The Parliament collectively declined the offer immediately as they still were eager for that interest-free loan. (EXPLAIN THE FINAL NEGOTIATIONS OF THE AGREEMENT) The Anglo-American financial negotiations had drawbacks that the Conservative Party in Parliament did not agree with. Winston Churchill, the new Leader of the Opposition, believed the loan would hinder Britain’s imperialistic spirits and their relationships with their colonies. Winston Churchill urged his party to abstain from the vote. Seventy-nine members of Parliaments ignored his request and seventy-one voted “no” towards the loan negotiations. Conservatives saw right through the American’s true motives for the loan.
By accepting the loan, America’s economy would flourish as the loan ensured that Great Britain and her colonies would buy enormous amounts of manufactured goods. A Conservative critic of the loan negotiations was Former Secretary of State for Burma and India, Leopold Amery. Amery published The Washington Loan Agreements: A Critical Study of American Economic Foreign Policy, where he outlines the sterling-dollar convertibility, proposed in the loan agreement, is dated and causes the British to lose control of their own currency within the markets furthering the American economic control over the British monetary policies. Prime Minister Attlee and most of the Labour party agreed with the loan as it financially secured their blueprints for their domestic policies, but they too had their suspicions about their imperial power within global affairs. Attlee and his officials urged Parliament to consider the loan as the Labour Party fears the blame of an economic depression like the one after the First World War.
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