Monday, February 02, 2009

Lend-Lease Pragram of Second World War II

Lend-Lease (Public Law 77-11)[1] was the name of the program under which the United States of America supplied the United Kingdom, the Soviet Union, China, France and other Allied nations with vast amounts of war material between 1941 and 1945 in return for, in the case of Britain, military bases in Newfoundland, Bermuda, and the British West Indies. It began in March 1941, over 18 months after the outbreak of the war in September 1939.

A total of $50.1 billion (equivalent to nearly $700 billion at 2007 prices) worth of supplies were shipped: $31.4 billion to Britain, $11.3 billion to the Soviet Union, $3.2 billion to France and $1.6 billion to China. Reverse Lend Lease comprised services (like rent on air bases) that went to the U.S. It totaled $7.8 billion, of which $6.8 billion came from the British and the Commonwealth. Apart from that, there were no repayments of supplies that arrived before the termination date, the terms of the agreement providing for their return or destruction. (Supplies after that date were sold to Britain at a discount, for £1,075 million, using long-term loans from the U.S.) Canada operated a similar program that sent $4.7 billion in supplies to Britain and Soviet Union.[2]

This program is seen as a decisive step away from American non-interventionism since the end of World War I and towards international involvement. In sharp contrast to the American loans to the Allies in World War I, there were no provisions for postwar repayments. Some historians consider it an attempt to bolster Britain and the other allies as a buffer to forestall American involvement in the war against Nazi Germany.

Political background


Lend-Lease came into existence with the passage of the Lend-Lease Act of 11 March 1941, which permitted the President of the United States to "sell, transfer title to, exchange, lease, lend, or otherwise dispose of, to any such government [whose defense the President deems vital to the defense of the United States] any defense article". In April, this policy was extended to China as well.[3] Roosevelt approved US $1 billion in Lend-Lease aid to Britain at the end of October, 1941.

Earlier, there was an entirely different program in 1940, the Destroyers for Bases Agreement whereby 50 USN destroyers were transferred to the Royal Navy and the Royal Canadian Navy in exchange for basing rights in the Caribbean and Newfoundland. The UK had been paying for its material in gold under "Cash and carry".

Everett Dirksen, at the time a Republican U.S. Representative, was able to secure the passage of an amendment to the Lend-Lease bill by introducing the resolution while 65 of the House's Democrats were at a luncheon. Section (3)(c) of the Act thus provided that "after the passage of a concurrent resolution by the two Houses before June 30, 1943, which declares that the powers conferred by or pursuant to subsection (a) are no longer necessary to promote the defense of the United States, neither the President nor the head of any department or agency shall exercise any of the powers conferred by or pursuant to subsection (a)"

Administration


Franklin Roosevelt set up the Office of Lend-Lease Administration in 1941, appointing steel executive Edward R. Stettinius as head. In September 1943 he was promoted to Undersecretary of State, and FDIC director Leo Crowley became head of the Foreign Economic Administration which absorbed responsibility for Lend-Lease.

Lend-Lease aid to Russia was nominally managed by Stettinius. Roosevelt's Soviet Protocol Committee, dominated by Harry Hopkins and General John York, who were totally sympathetic to the provision of "unconditional aid." Until 1943, few Americans objected to Russian aid.

Significance


This chart shows the relationship in Gross domestic product between the Allied and the Axis during 1938-1945. For more information, see Military production during World War II.

Lend-Lease was a critical factor in the eventual success of the Allies in World War II[citation needed], particularly in the early years when the United States was not directly involved and the entire burden of the fighting fell on other nations, notably those of the Commonwealth and, after June 1941, the Soviet Union. Although Pearl Harbor and the Axis Declarations of War brought the US into the war in December 1941, the task of recruiting, training, equipping U.S. forces and transporting them to war zones could not be completed immediately. Through 1942, and to a lesser extent 1943, the other Allies continued to be responsible for most of the fighting and the supply of military equipment under Lend-Lease was a significant part of their success[citation needed]. In 1943-44, about a fourth of all British munitions came through Lend-Lease. Aircraft (in particular transport aircraft) comprised about one-fourth of the shipments to Britain, followed by food, land vehicles and ships[citation needed].

Even after the United States forces in Europe and the Pacific began to reach full-strength in 1943–1944, Lend-Lease continued. Most remaining allies were largely self-sufficient in front line equipment (such as tanks and fighter aircraft) by this stage, but Lend-Lease provided a useful supplement in this category even so, and Lend-Lease logistical supplies (including trucks, jeeps, landing craft and, above all, the Douglas C-47 transport aircraft)[citation needed]were of enormous assistance.

Much of the aid can be better understood when considering the economic distortions caused by the war. Most belligerent powers cut back on production of nonessentials severely, concentrating on producing weapons. This inevitably produced shortages of related products needed by the military or as part of the military/industrial economy.

For example, the USSR was highly dependent on trains, yet the desperate need to produce weapons meant that only about 92 locomotives were produced in the USSR during the entire war. In this context, the supply of 1,981 US locomotives can be better understood. Likewise, the Soviet air force was enhanced by 18,700 aircraft, which amounted to about 14% of Soviet aircraft production (19% for military aircraft).[6]

Although most Red Army tank units were equipped with Soviet-built tanks, their logistical support was provided by hundreds of thousands of US-made trucks. Indeed by 1945 nearly two-thirds of the truck strength of the Red Army was U.S.-built. Trucks such as the Dodge ¾ ton and Studebaker 2.5 ton, were easily the best trucks available in their class on either side on the Eastern Front.[7] US supplies of telephone cable, aluminium, canned rations and fur boots were also critical, the latter providing a crucial advantage in the winter defence of Moscow[citation needed].

Lend Lease was a critical factor that brought the US into the war, especially on the European front. Hitler cited the Lend-Lease program and its significance in aiding the Allied war effort when he declared war on the US on 11 December 1941.

Repayment


Large quantities of goods were in Britain or in transit when Washington suddenly and unexpectedly terminated Lend-Lease on 2 September 1945. Britain needed to retain some of this equipment in the immediate post war period. As a result the Anglo-American loan came about. Lend-lease items retained were sold to Britain at the knockdown price of about 10 cents on the dollar giving an initial value of £1,075 million. Payment was to be stretched out over 50 years at 2% interest. [8] . The final payment of $83.3 million (£42.5 million) due on 31 December 2006 (repayment having been deferred on several occasions) was made on 29 December 2006, it being the last working day of the year. After this final payment Britain's Economic Secretary, Ed Balls, formally thanked the US for its wartime support. It should still be noted that Britain has never paid off its WW I debt, there is still a balance owed of 866,000,000 GBP valued in 1934. Britain made payments until 1934 and then stopped after the US agreed to a 1 year halt, but they never resumed making payments after that. It must be noted that Britain was owed far more by other countries taking part in WWI than she herself owed, a net loss for the British Empire, the richest empire in the world. [1]

Size and repayment terms of the British debt


The original size of the debt and repayment terms (including deferments) can be ascertained from the debates in the Commons on 28 February 2002 and House of Lords on 8 July 2002 as recorded in Hansard:

"Bob Spink: To ask the Chancellor of the Exchequer (1) what outstanding liabilities there are to the United Kingdom of lend-lease loan facilities arranged during the Second World War; [38441]…"
"Ruth Kelly: The information is as follows..."

"Under the Agreement, the loans would be repaid in 50 annual installments commencing in 1950. However the Agreement allowed deferral of annual payments of both principal and interest if necessary because of prevailing international exchange rate conditions and the level of the United Kingdom's foreign currency and gold reserves.

The United Kingdom has deferred payments on six occasions. Repayment of the war loans to the United States Government should therefore be completed on 31 December 2006, subject to the United Kingdom not choosing to exercise its option to defer payment.

As at 31 March 2001, principal of £243,573,154 [$346,287,953 at the exchange rate on that day] was outstanding on the loans provided by the United States Government in 1945. The Government intends to meet its obligations under the 1945 Agreement by repaying the United States Government in full the amounts lend [sic] in 1945."

Similarly, Hansard records from a debate that took place in the House of Lords on 8 July 2002:

"Lord Campbell of Croy: My Lords, is this payment part of the lend-lease scheme under which the United States supplied munitions, vehicles and many other requirements including food and other provisions that were needed badly by us in the last part of the war?

Lord McIntosh of Haringey: My Lords, I referred to lend-lease in the context of the generosity of the United States throughout that period. However, the debt that we are talking about now is separate; it was negotiated in December 1945.

Lord Stoddart of Swindon: My Lords, will the noble Lord remind me as to exactly how much the loan was, and how much we have repaid since then in principal and interest?

Lord McIntosh of Haringey: My Lords, the loan originally was £1,075 million, of which £244 million is outstanding. The basis of the loan is that interest is paid at 2 per cent. Therefore, we are currently receiving a greater return on our dollar assets than we are paying in interest to pay off the loan. It is a very advantageous loan for us."

Quotations


Franklin D. Roosevelt, eager to ensure public consent for this controversial plan, explained to the public and the press that his plan was comparable to one neighbor's lending another a garden hose to put out a fire in his home. "What do I do in such a crisis?" the president asked at a press conference. "I don't say... 'Neighbor, my garden hose cost me $15; you have to pay me $15 for it' …I don't want $15 — I want my garden hose back after the fire is over."

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