International Monetary

The Lend-Lease Act of 1941 was designed to maintain United States neutrality in the wake of ever-increasing tensions in Europe. The strategy of Lend-Lease was two fold. First, it was designed help our allies in the war effort. Second, it was designed to keep us from joining in the direct fighting efforts. Franklin Roosevelt’s plan was intricately designed, though arrogantly flawed, containing a provision that was, at its core unconstitutional (Jackson, 1953). Additionally, there were issues raised as to how the money and materiel that was lent through Lend-Lease would be repaid, which led to the idea of the International Monetary Fund.

In order to understand Lend-Lease, we have to understand the historical context into which it was born. It was designed in response to both the Johnson Debt Default Act and the Hoover debt moratorium. The Johnson Debt Default Act forbade the United States from lending money to any country that was delinquent in repaying its debt obligations from World War I. All countries had defaulted on their obligations in 1934, except Finland, who repaid in full. This act was an act of United States’ isolationism, which did not recognize that the countries could not repay their debt obligations because of the Hawley-Smoot Tariff.

This act excluded European exports from United States markets, severely limiting the European countries abilities to repay their obligations. The Lend-Lease Act extended the United States isolationism, thus extending the European countries abilities to repay their obligations under Lend-Lease. The Hoover debt moratorium was a way to give the European countries breathing room in the wake of the mounting financial crisis that would become the Great Depression. It was only when the European nations defaulted yet again that the Johnson Debt Default Act was passed.

Any discussion of the Lend-Lease Act must begin with what exactly it is. According to the United States Government, it is “an act to promote the Defense of the United States” United States Government, 1941). It was designed to provide “defense articles”, that is, any weapons, munitions, aircrafts, vessels, or boats, machinery, facilities, tools, component material, or agricultural, industrial, or other commodity or article for defense (Ibid). The act was designed to lend materiel to our allies in the war in order to help them defeat the axis powers.

If the powers lost the materiel in an attack, they would repay the Americans in full for their value (Stettinius, 1942). If the materiel was not destroyed, it was returned to the United States (Ibid). The Lend-Lease Act was meant to operate until 1946 (United States Government, 1941). When it was ended in 1945, it had given slightly over $50 billion dollars in aid to the allied powers (Super, 2005). We also know that Britain took advantage of Lend-Lease by moving a munitions plant from England to the United States (Stettinius, 1942).

Stettinius called this “Lend-Lease in reverse (Ibid). ” How was Lend-Lease administered? We gain real insight into how Lend-Lease worked by listening to its administrator, Edward Stettinius, Jr. He wrote a very insightful piece in the Saturday Evening Post in September of 1942 which detailed exactly how Lend-Lease operated. Lend-Lease was not an act of charity. It was simply an act of survival for the United States. We did not want to get actively involved in the war effort, but we had an active self interest in making sure that no other allied powers fell as France did.

According to Stettinius, what we gave to Britain, Russia, et al was not aid per se, but it was part of the United States’ own military strategy (1942). Our neutrality was of the utmost importance to us, so we did what we could to save it for as long as we could. We should continue to bear in mind that Lend-Lease was passed about nine months before the attack on Pearl Harbor. By performing obligations under Lend-Lease, we were not considered belligerents, nor were we actively engaging in the war effort. We were, however, engaging in a series of machinations designed to increase our involvement in European affairs incrementally.