The Lend-lease scheme of 1941 changed history. It deferred payment for the war until after the war was over.
The Lend-lease scheme had its roots in the ‘Cash and Carry’ provisions of the US Neutrality Acts of the 1930s – Isolationist factions in the US Congress introduced the successive Neutrality Acts to outlaw military aid to the growing number of belligerents around the world. In response, pro-Allied legislators sought loop-holes in the legislation. The ‘Cash and Carry’ provision (September 1939) became the compromise – a belligerent nation could purchase munitions from the US on the condition that (a) the munitions were paid for immediately in cash and (b) the munitions were transported on ships of the belligerent nation at its own risk. A uniquely American solution, in which commercial advantage outweighed any other political principle.
‘Cash and Carry’ worked, for a while. Britain had gold reserves which America was happy to acquire.
In Part 5 (of this 10 Part series), I will discuss the emergence of gold as the guarantor of the value of paper money to provide some broader to this strategy.