by Walter Reid
Dear Mr. President:
These notes are sent by Col. Lee, who is returning with Halifax. Will you save them for me until I get back, when I shall try to put them into readable form.
The people here are amazing from Churchill down, and if courage alone can win – the result will be inevitable. But they need our help desperately, and I am sure you will permit nothing to stand in the way. Some of the ministers and underlings are a bit trying, but no more than some I have seen.
Churchill is the gov’t. in every sense of the word – he controls the ground strategy and often the details – labour trusts him – the army, navy, air force are behind him to a man. The politicians and upper crust pretend to like him. I cannot emphasise too strongly that he is the one and only person over here with whom you need to have a full meeting of minds.
Churchill wants to see you – the sooner the better – but I have told him of your problem until the [Lend-Lease] bill is passed. I am convinced this meeting between you and Churchill is essential – and soon – for the battering continues and Hitler does not wait for Congress.
The perceptive comment about the ‘politicians and upper crust’ is instructive.
At the first meeting over dinner at Number 10, Hopkins asked Churchill if there were anything that the USA could do for Britain. Churchill said, ‘I should like a million rifles. I don’t like telling the British army to fight the Germans with dummy rifles made of wood.’ Hopkins said he was not sure that they had a million rifles; perhaps they could find 500,000. Soon he left the room, returning to say that he had spoken to the President, and that the first consignment of a million rifles would be shipped on the following day. Churchill dissolved into tears. This anecdote was told by Bracken (who was at the dinner) to Lascelles. It is almost certainly a true account of what happened at the dinner, though it is not known whether the shipment was ever made. Hopkins understood the magic of moments such as this, and what they meant to Churchill – and to an extent to Roosevelt. Such alchemy could impart a romantic and emotional dimension from time to time into a relationship that was otherwise cold, calculating and often unappealing.12
Colville’s diary records one of the Chequers weekends:
When the women had gone to bed, I listened in the Great Hall to as interesting a discussion as I ever hope to hear. We sat in a circle, Portal, Hopkins, Jack Churchill and myself and the Prof. [Cherwell], while the P.M. stood with his back against the mantelpiece, a cigar between his teeth, his hands in the armpits of his waistcoat. Every few seconds he would start forward, trip over the marble grate, walk four or five paces, turn abruptly and resume his position against the mantelpiece. All the while a torrent of eloquence flowed from his lips, and he would fix one or other of us with his eye while he drove home some point. He talked of the past, the present and the future …13
During his final weekend at Chequers, Hopkins produced a box of gramophone records with an Anglo-American theme. ‘We had these until well after midnight, the PM walking about, sometimes dancing a pas seul, in time with the music. We all got a bit sentimental & Anglo-American, under the influence of the good dinner & the music. The PM kept on stopping in his walk & commenting on the situation – what a remarkable thing that the two nations should be drawing so much together at this critical time, how much we had in common etc.’14 Churchill enjoyed these pas seuls, and was inclined to say that although he danced indifferently with a partner, he danced beautifully on his own.
However beautifully he danced, it was bold of him to allow Hopkins such a privileged sight. But Hopkins was won over, and he told Roosevelt that the story about anti-American prejudice could be disregarded. He saw no evidence, equally, that Churchill’s capacities were ever impaired by alcohol: in February 1940, Sumner Welles reported that he had visited Churchill at the Admiralty to find him drunk at 5 p.m. When Churchill became Prime Minister, Roosevelt said that he ‘supposed Churchill was the best man England had, even if he was drunk half the time’.15
The Hopkins visit concluded with a very moving small dinner party in the Central Hotel, Glasgow, before he went aboard ship to return to the States. Everyone wanted to know what the burden of Hopkins’s report to Roosevelt would be. When he rose to his feet he said that he was going back to Roosevelt to ‘quote a verse to him from the Book of Ruth, which the President would know well: “Whither thou goest, I will go; and where thou lodgest, I will lodge: thy people shall be my people, and thy God my God.” ’ In a whisper he added four words of his own: ‘even to the end’. Churchill was again in tears.
Hopkins returned to America seized of an admiration and respect for Britain – and for Churchill in particular – that was all the more important for being so new to him. He remained an American first and foremost, and indeed towards the end of the war could, with some regret, differ from Churchill on aspects of policy. But overwhelmingly his role was that of a broker between the two English-speaking countries, and his influence on Roosevelt undoubtedly made the President a better friend to Britain that he would otherwise have been.
In the course of his visit, Hopkins concluded two important agreements with Britain. One provided that American aircraft carriers would transport aircraft to Britain ‘in case of urgent need’. The other provided for the pooling of British and American intelligence in enemy-occupied countries. On the same day that these agreements were signed, a staff conference opened in Washington to discuss unity of field command in joint operations between Britain and America, in the event of America declaring war. A critical conclusion of the conference was that even if war broke out in the Pacific, the European theatre would take precedence. That was a crucially important decision, though taken well below the level of heads of government.
At about the same time, America provided Britain with a ‘Purple’ machine, the Japanese equivalent of Enigma. It went to Bletchley Park, accompanied by two American signals experts. When the American crypto-analysts arrived at Bletchley Park with Purple, they were shown the deciphering machine and how the Enigma Code had been broken. Although at that stage Ultra, the intelligence product itself, was not shared, one of the American experts acknowledged when he returned home that they had been saved years of labour.16 Without any overt political decision, the practical foundations of integrated command were being laid.
While Purple was shared with Britain, the crucial Japanese ciphers, ‘Magics’, which the Americans had discovered prior to Pearl Harbor were not yet communicated to the British. Churchill was furious to discover after the war that in the run-up to Pearl Harbor he was only being advised selectively, and late, about shift in Japanese positions. It is often forgotten that it was the Poles who courageously provided Britain with the Enigma machine, which was eventually to allow access to first Luftwaffe signals, then those of the German navy, and by 1942 those of the army. Equally it should be remembered that the process of prising these secrets from the machine was achieved with the help of a team of French cryptologists, who worked alongside the British until the fall of France, and thereafter never disclosed their secret to Vichy. De Gaulle and the Free French, with their appalling lack of security, never knew about Enigma.
But even if a rapprochement was taking place, it was discreet and largely unobserved by the American public or politicians. Measures that had to be taken visibly and in the political arena were taken more grudgingly. Churchill described Lend-Lease for propaganda purposes (in his obituary tribute to FDR in the House) as ‘the most unsordid act in the history of any nation’. But Lend-Lease was no altruistic gesture. Even so the legislation only got through Congress after two months of hard fighting.
And Roosevelt had not rushed into Lend-Lease. After his 1940 election victory he had a quick look at the US Treasury estimates of Britain’s resources – ‘Well they aren’t bust – there’s lots of money there’ – and went off on his cruise.17 It was only later that he admitted to one of his Cabinet members, ‘We have been milking the British financial cow, which had plenty of milk at one time but which ha
s now about become dry’.18
The Lend-Lease Act of March 1941, formally House Bill 1776, a significant collection of digits, grew out of the press conference after the post-election cruise. It was developed at a US Cabinet meeting in December 1940. At that meeting, the President and Henry Morgenthau, Junior, the Secretary of the Treasury, required as a precondition for assistance that Britain should liquidate all its American holdings, worth some two billion dollars. In return for that the Act would provide just $7 billion of aid. Senator Taft said that returning the garden hose after the fire was out was like asking someone to return used chewing gum. Taft did not think Britain’s survival was essential to the welfare of the United States; fortunately Roosevelt did.
Morgenthau was instructed that Britain’s assets in America and throughout the world were to be taken from her. Roosevelt requires ‘a couple of billion … as collateral’. Morgenthau wanted ‘a hundred cents on the dollar’ for every item that was provided. There was little of ‘lending’ in the transaction. Indeed Roosevelt’s original intention was to deal with Britain’s inability to pay cash by taking over British possessions, especially in the western hemisphere in exchange for cash or credit. Morgenthau supported Britain by pointing out that this scheme was unfair and would not work.19
Much of this had to be done to get the measures through the Congress, and the negotiations were not attractive. The US Treasury required full details of Britain’s financial position; Britain’s assets in the United States were to be sold; and South African gold was pledged to cover any shortfall. A ship was sent to collect $120 million of gold bullion: Churchill’s reaction was that it was like a ‘sheriff collecting the last assets of a helpless debtor’. This least mercenary of men had been appalled earlier by America’s insistence on payment in cash at a time when France was collapsing and Britain threatened to go with her. Now he drafted one of his bitterest telegrams to Roosevelt, a telegram which in the event was not sent:
I am much puzzled and even perturbed by the proposal now made to send the United States battleship to collect whatever gold there may be in Cape Town … It is not fitting that any nation should put itself in the hands of another, least of all a nation which is fighting under increasingly severe conditions for what is proclaimed to be a cause of general concern … I should not be discharging my responsibilities to the people of the British Empire if, without the slightest indication of how our fate was to be settled in Washington, I were to part with this last reserve, for which alone we might buy a few months’ food.20
This unsent telegram stressed the fact that Britain was being asked to hand over her gold without knowing what if anything the United States was planning to do.
To understand the nature and background of Lend-Lease it is necessary to remember that there was as much opposition in America to this measure as to anything that Roosevelt had pushed through to date. But that was partly because Roosevelt wanted to achieve a degree of consensus and did not use his considerable legislative majorities to bulldoze the legislation through. Rather, he accepted innumerable amendments and watched the Bill create as much controversy as his Supreme Court measures. American public opinion, quite apart from feelings within Congress, was far from overwhelmingly in favour of Britain. Even after Pearl Harbor, polls in 1942 showed that 30 per cent of Americans wanted a compromise peace with Germany.
Quite how Roosevelt saw Lend-Lease is far from clear. It seems unlikely that he thought it through in detail. But in the event the deal had little to do with hosepipes. Lend-Lease, for one thing, dealt only with the future. Morgenthau insisted that orders already placed should be paid for, even though it meant selling British investments overseas and writing off gold reserves. Keynes complained that America was treating Britain ‘worse than we have ever ourselves thought it proper to treat the humblest and least responsible Balkan country’.21 At the time Britain’s concerns were far too great to allow the luxury of looking the gift-horse in the mouth. Most of Churchill’s countrymen took the gesture at face value as an example of American open-handed generosity which would end in a writing-off of debts, but Keynes said that with the arrival of Lend-Lease Britain ‘threw good housekeeping to the winds’; and the story certainly did not end in debts being forgotten.22
Churchill was much less than complimentary in private when America’s niggardly approach was discussed. In August 1940 the government contemplated requisitioning gold, including wedding rings, to shame America.23
The idea of Lend-Lease was sold to the American public not as something that would accompany American participation in the war, but as something that would make participation unnecessary: Britain was being paid to do America’s fighting for her. The Bill’s title was ‘An Act to Promote the Defense of the United States’. America’s role was limited to being ‘the great arsenal of democracy’. And a price was to be paid for what was provided. The terms were at the President’s discretion, which was why there was always the prospect in British minds that the debt might be written off against the ‘moral debt’ which Churchill reasonably enough felt the world owed Britain. Truman ended Lend-Lease extraordinarily precipitately immediately after Japan surrendered in 1945, and while goods were actually in transit to Britain, and there was no writing-off.
While the Lend-Lease legislation did not in itself deal with the concept of repayment, discussion of payment, of what was called ‘the Consideration’, followed very swiftly. Both the State Department under Cordell Hull and the US Treasury saw Lend-Lease as part of America’s foreign and economic policy, and not simply in terms of self-interested defence, which was Roosevelt’s approach.24 In November 1944, for instance, the Treasury threatened to end Lend-Lease unless she received Civil Aviation advantages. The ambassador in London, Gil Winant, was ashamed, and this was one of those occasions when Churchill’s belief in an ultimate American altruism was badly shaken.25
The State Department saw the measure as a means of advancing the cause of economic liberalism and the Treasury saw it as a means of effecting a shift in world financial power to the United States. There is of course no reason why any country should not use its policy to advance its own interests: that is what governments are meant to do. What is singular is the extent to which America proclaimed itself to be following a path of altruism, and the extent to which the world took her to be doing so.
Churchill imagined that when America became a belligerent the penny-counting days of Lend-Lease would be over. He told Halifax on 10 January 1942, ‘Lend-Lease is practically superseded now’.26 He was very wrong. As Cherwell put it, ‘the fruits of victory which Roosevelt offers seem to be safety for America and virtual starvation for us’.27 The negotiations over the Consideration were so fiercely conducted that even Dean Acheson, the Assistant Under Secretary on the American side, accused the American Treasury of ‘envisaging a victory where both enemies and allies were prostrate – enemies by military action, allies by bankruptcy’.28
The legislative basis of the Consideration was contained in the Master Lend-Lease Agreement. The Lend-Lease Act itself was passed on 11 March 1941 and the associated Appropriations Act on 27 March (both only after Britain had been obliged to conclude some humiliating sales of American assets such as the American Viscose Corporation, a subsidiary of Courtaulds, at knock-down prices), but it was almost a year before the Master Lend-Lease Agreement was signed. The part of the Agreement which rankled most with Britain was Article VII, which prohibited discrimination in either country against a product originating from the other. It thus attacked Imperial Preference and the Sterling Area. There were long and difficult negotiations before a softening form of words was adopted to which the British Cabinet could agree.
The practical implementation of Lend-Lease was no broad-brush affair, but was associated with careful accounting and precise financial scrutiny. In practice, America got the use of some British assets: it was by no means a one-way trade. The concept of ‘Pooling’ or ‘Reverse Lend-Lease’ took account of this fact and was not insignifica
nt. America provided Lend-Lease aid to Britain in the sum of about $27 million; in the reverse direction the total was about $6 million.29
It is worth stepping aside for a moment from the march of events to look at the implication for Britain of paying for the war. The US Treasury, to further its policy of achieving international financial domination, sought to emasculate post-war Britain by using control of Lend-Lease to diminish, virtually to extinguish, British reserves. It is a remarkable and unedifying fact that while Britain struggled to fight a war for survival alongside the United States, its principal ally was prepared to leave her bankrupt when the war ended. At the first Quebec Conference in the autumn of 1943, Churchill had to fight the battle of the reserves with Roosevelt and Hopkins, but Treasury Secretary Morgenthau was unmoved. Hull began to take the point that a bankrupt Britain would not be able to assist post-war America either as an economic partner or as a political one and the State Department became an ally of Britain in the fight against the Treasury. Finally Morgenthau himself, after a visit to Britain in August 1944, saw that Britain was now pretty well bankrupt: in any event, the Bretton Woods Agreement had established the post-war international monetary system which he wanted. When he returned to America Roosevelt’s reaction was ‘very interesting. I had no idea that England was broke’. He compounded his ignorance by making a joke: ‘I will go over there and make a couple of talks and take over the British Empire’.
The Bretton Woods Agreement was the outcome of the monetary talks that took place in the Mount Washington Hotel in Bretton Woods, New Hampshire in July 1944. These historic talks addressed more than the question of Lend-Lease. They established monetary arrangements that regulated international finance in the second half of the twentieth century, and that still do in many respects. The World Bank and the International Monetary Fund were its progeny, and so far as Britain was concerned the arrangements in respect of her debts were to last beyond the end of the century. The terms were onerous.