A British armored division equipped with General Sherman tanks built in Chicago breaks through the German fortified line at El Alamein and the rout of Rommel’s Afrika Korps begins. A division of Russian infantry slogs through the mud of the Eastern Front in sturdy leather boots made in America. A squadron of British Spitfires, manned by American pilots, roars over France, shooting up a retreating Nazi column.

On the other side of the world a U. S. regiment stationed in New Zealand sits down to New Zealand chow—on the house. In one of Australia’s newest hospitals American veterans of the jungle-fighting in New Guinea get convalescent treatment just as if they were Aussies.

Every one of these operations is connected with lend-lease and reverse lend-lease. All of them advance the common United Nations cause against the common Axis enemies. They are but a few out of hundreds of instances of the pooling of arms and resources by the United Nations. The idea is to make war goods wherever the mostest can be made the fustest, and then send them wherever the need is greatest—the Soviet Union, France, Italy, China, or the South Pacific—wherever the enemy can be met in combat.

As a tool of strategy, lend-lease is the sort of bold innovation in warfare that wins the decisive battles of history. As an arrangement between nations it raises the problems of any system whose flexible provisions can lead, after the battles are won, to misunderstanding and ill feeling.

That’s why we need to know about lend-lease: where it came from, how it works, and how it may end up.

Where did lend-lease start?

Lend-lease came to life in an act of Congress of March 11, 1941. But the story really begins three months earlier, on December 17, 1940. The occasion was the semiweekly White House press conference.

There was an air of expectancy that day as the reporters crowded into the President’s oval office. Almost immediately Mr. Roosevelt launched into a discussion of the war situation as it affected the United States. He talked about the importance to our national security of continued British resistance. He emphasized the advantage to us of a sturdy defense industry built up on British munitions orders. He referred to the traditional ideas of providing the sinews of war—in which the dollars-and-cents angle is most prominent.

But, said the President, there were other methods being studied of getting war aid to Great Britain that would “eliminate the dollar sign.” To illustrate what he was getting at, he told a kind of parable.

“Suppose my neighbor’s home catches fire,” he said, “and I have a length of garden hose four or five hundred feet away. If he can take my garden hose and connect it up with his hydrant, I may help him to putout his fire. Now, what do I do? I don’t say to him before that operation, ‘Neighbor, my garden hose cost me $15; you have to pay me $15 for it.’

“What is the transaction that goes on? I don’t want $15—I want my garden hose back after the fire is over. All right. If it goes through the fire all right, intact, without any damage to it, he gives it back to me and thanks me very much for the use of it.

“But suppose it gets smashed up—holes in it—during the fire. We don’t have to have too much formality about it, but I say to him, ‘I was glad to lend you that hose; I see I can’t use it any more, it’s all smashed up.’ He says, ‘How many feet of it were there?’ I tell him, ‘There were 150 feet of it.’ He says, ‘All right, I will replace it.’ Now if I get a nice garden hose back, I am in pretty good shape.”

Where was the fire?

This was a homely way of pointing out that the world was on fire and that the flames endangered us, too. The Rome-Berlin Axis was then almost at the crest of its power. Nazi Germany, aided by Fascist Italy, was master of the continent of Europe from the North Sea to the Adriatic and from the Pyrenees to the borders of Soviet Russia, Yugoslavia, and Greece. All the peoples living in this vast area—except the Swiss in their little island of neutrality—bowed before the dictator of Berchtesgaden and his goose-stepping armies or cringed before his murderous Gestapo. Not since Roman times had Western civilization come so close to domination by a single nation.

Britain virtually alone opposed the armed might of the Axis. Poland, France, Belgium, Holland, and Norway all had fallen after brief resistance. Britain’s armies had lost their equipment in the retreat from Dunkirk. British cities were being bombed by the Luftwaffe. Parts of London were in ruins. So were sections of Birmingham, Liverpool, Coventry, Plymouth, and other cities. Across the Channel the Germans were massing barges, troops, and materials for an invasion of the British Isles.

German planes were already heard over Iceland and a Nazi radio station was discovered in Greenland. Nicely spaced between this country and England, it indicated plainly enough which way the Germans were looking if they ever became established in the British Isles.

Could we feel the heat over here?

What was the feeling of people in the United States at the time? We had watched with growing concern the spread of war and Nazi conquest. We didn’t like the looks of things, but we weren’t convinced that the situation called for us to jump into the fight. Our national policy for many years had been to stay out of any conflict which did not directly affect the Western Hemisphere.

But ever since Dunkirk and the fall of France in June 1940 a large section of American public opinion had become united on several points. Many of us had conic to feel that it was “our war.” Most of us began to realize that, although we were not actually in the war, we could and should help Britain and the other nations fighting Axis aggression. In line with this thought President Roosevelt on September 2, 1940 swapped 50 over-age American destroyers, which the British badly needed, for 99-year leases on bases in British islands and coastal possessions in the Caribbean area. At the same time Great Britain leased to us for 99 years, freely and with out consideration,” similar bases in Bermuda and Newfoundland.

The hour of decision

In America we had begun our own defense program, building up our Army and Air Forces and expanding our Navy into a two-ocean fleet. We were determined to be prepared against attack from any quarter—in the Pacific or Atlantic.

How to aid friends and hit Nazis

As the year 1940 drew to a close, it was clear to many people that the Nazis would not rest long. They were preparing new and more powerful blows. The coming spring would probably see new aggression, perhaps new defeats for the democracies, possibly final defeat for Britain and the still independent European countries.

Numerous individuals and associations were urging Congress and the President to act, demanding a clear governmental policy of all aid short of war to the nations still fighting the Axis. But meanwhile our aid to Britain, instead of increasing rapidly, was threatened with a breakdown.

Our assistance at that time was basically governed by the Neutrality Act of November 1939. This provided that arms and other weapons could be made available to the warring nations on a “cash-and-carry basis”; that is, the goods must be paid for in cash on this side of the ocean and carried across in foreign vessels. American ships were forbidden to sail into the war zones.

Furthermore, according to the Johnson Act of 1934, no loans could be made to nations which, like England, had defaulted on their World War I debts.

In the year following the passage of the “cash-and-carry” provisions, Great Britain had bought large amounts of war goods in the United States and had transported them on British ships. But now Britain’s dollar resources were running low. Unless we became something more than a friendly seller on a cash basis, British purchases would have to stop altogether. Without American supplies Britain could not hope to fight effectively. Its own factories and shipyards could not turn out all the planes, guns, ammunition, tanks, ships, and other articles needed to hold off the Axis.

Wary couldn’t Britain pay?

Just exactly what was Britain’s ability to keep on with cash payments in December 1940? She had entered the war in September 1939 with about 4.5 billion dollars of gold and investments in securities in the United States. Most of these belonged to private British citizens and British companies. During the first year of the war the British government had bought these holdings from its citizens, paying for them in British government bonds. Then it sold the securities and gold reserves for dollars, and pooled the whole amount in one fund. This process produced a supply of dollars on this side with which Britain could purchase war goods in the United States.

From September 1939 to the end of 1940 the British managed to realize some 2 billion dollars—in addition to the 4.5 billion dollars mentioned above—from sales of gold newly mined in the British Empire, from exports, and other sources. But this additional amount had been spent in 1940 for war purchases, chiefly in the United States. Thus, by December 1940, the British supply of dollars was down to about 2 billion. About 1.5 billion of this would be needed to pay for munitions and supplies already ordered in the United States but not yet delivered. So low was Britain’s dollar reserve that new orders for war goods had almost stopped at the time when she needed them most.

Should we be democracy’s arsenal?

This was one phase of the total situation that the- President had in mind as he addressed the reporters on December 17, 1940. Three weeks later, on January 6, 1941, he delivered his annual message to Congress on “The State of the Union.” In it he asked for authority and funds to manufacture additional munitions and supplies and turn them over to Great Britain and other nations fighting the Axis.

He reminded Congress that during the past sixteen months the assault of the Axis powers had blotted out democracy in an appalling number of independent nations, great and small. The assailants were still on the march, threatening other countries, threatening us. He emphasized the need for supporting fully the peoples who were resisting aggression and thereby keeping war away from our own land.

“Let us say to the democracies,” he said, “‘We Americans are vitally concerned in your defense of freedom. We are putting forth our energies, our resources and our organizing powers to give you the strength to regain and maintain a free world. We shall send you in ever increasing numbers, ships, planes, tanks, and guns.’”

In short, he proposed that America become “the arsenal of democracy.” The job placed before Congress was to provide the country with a law that would meet the situation in spirit and in fact. It required an epoch-making decision on policy and the setting up of machinery to provide the needed help in ships, planes, tanks, guns, food, and other supplies.

From EM 13: How Shall Lend-Lease Accounts Be Settled? (1945)