How Lend Lease bankrupted Britain.


Ad Honorem
Nov 2011
The Dustbin, formerly, Garden of England

How Lend Lease bankrupted Britain.

“..the most unselfish and unsordid financial act of any country in all of history.”
W.S. Churchill—spoken as part of his eulogy to FDR in the House of Commons on 17 April 1945.


I prefer Milton Friedman “There ain't no such thing as a free lunch” (Or Robert Heinlein for purists)

To fully explain why Lend-Lease bankrupted Britain, I must bore you with a little economic history, skip forward if you know it all.
The US Smoot-Hawley Act and the financial crises of the following year had caused world trade to contract by half by 1932 and encouraged the formation of currency and trading blocs which used exchange controls, tariffs and import quotas to protect home markets and prop up their currencies. Capital flight of dollars from many countries exacerbated the dollar shortage cause by the collapse of trade. British reaction to previous bouts of US protectionism had been to invest heavily in the USA, this was not possible in the 1930s to any large degree because of strict capital controls. So earning dollars through either trade or investment was severely limited for Britain and most other countries. Although the situation slowly changed with the Roosevelt Administrations Bi-lateral trade deals from 1933 onwards the US only concluded 17 trade deals by 1937 and world trade had only recovered to 60% of its 1930 value. The Imperial (or Commonwealth) Preference Area and the Sterling Bloc (which included many non-Commonwealth countries such as Norway, Argentina, Denmark and Portugal among others) was considered a major irritant by the US as it isolated US trade from a third of the world's markets outside the USA and almost immediately began to lean on its most important market, Canada. Imperial Preference was not unanimously supported in the UK, many Free Traders opposed it, especially one Winston Spencer Churchill, but he was was out of favour and out of power. The various trade blocs and other measures had some success; most countries had pulled out of depression by 1936 although the US notably slipped back into one and remained in trouble until the cash started rolling after the war began in earnest.

Financing a war

Neville Chamberlain, for all of his other faults, had been one of the most astute Chancellors of the Exchequer that Britain ever had. As Prime Minister he chaired a financial planning committee immediately after the Austro-German Anchluss