13

Lend-Lease

Roosevelt Re-elected President — British Munitions Contracts in the United States — Lord Lothian Visits Me at Ditchley — “Cash and Carry,” November, 1939 — British Losses of Dollars in the Twilight War — A New Era, May, 1940 — I Draft My Letter of December 8, 1940, to the President — The Common Interests of Britain and the United States — Need of Forward Planning — British Recovery Since June — Impending Peril on the Atlantic in 1941 — Our Shipping Losses — British and German Battleship Strength — The Menace of Japan — The Atlantic Lifeline — American Influence on Eire — My Request for Two Thousand Additional Aircraft a Month — Army Equipment — How to Pay the Bill? — Appeal to the United States — The President’s Discovery: “Lend-Lease” — His Press Conference of December 17 — “Eliminate the Dollar Sign” — Lend-Lease Bill Presented to Congress — Sudden Death of Philip Lothian — I Choose Lord Halifax as His Successor — My Tribute to Lord Halifax — Mr. Eden Returns Home to the Foreign Office— Captain Margesson Secretary of State for War — Waiting for Lend-Lease — New Year Greetings to the President.

ABOVE THE ROAR AND CLASH OF ARMS there now loomed upon us a world-fateful event of a different order. The presidential election took place on November 6. In spite of the tenacity and vigour with which these four-yearly contests are conducted, and the bitter differences on domestic issues which at this time divided the two main parties, the Supreme Cause was respected by the responsible leaders, Republicans and Democrats alike. At Cleveland on November 2, Mr. Roosevelt said: “Our policy is to give all possible material aid to the nations which still resist aggression across the Atlantic and Pacific Oceans.” His opponent, Mr. Wendell Willkie, declared next day at Madison Square Garden: “All of us – Republicans, Democrats, and Independents – believe in giving aid to the heroic British people. We must make available to them the products of our industry.”

This larger patriotism guarded both the safety of the American Union and our life. Still, it was with profound anxiety that I awaited the result. No newcomer into power could possess or soon acquire the knowledge and experience of Franklin Roosevelt. None could equal his commanding gifts. My own relations with him had been most carefully fostered by me, and seemed already to have reached a degree of confidence and friendship which was a vital factor in all my thought. To close the slowly built-up comradeship, to break the continuity of all our discussions, to begin again with a new mind and personality, seemed to me a repellent prospect. Since Dunkirk, I had not been conscious of the same sense of strain. It was with indescribable relief that I received the news that President Roosevelt had been re-elected.

I did not think it right for me as a foreigner to express any opinion upon American politics while the election was on, but now I feel you will not mind my saying that I prayed for your success and that I am truly thankful for it. This does not mean that I seek or wish for anything more than the full, fair, and free play of your mind upon the world issues now at stake in which our two nations have to discharge their respective duties. We are entering upon a sombre phase of what must evidently be a protracted and broadening war, and I look forward to being able to interchange my thoughts with you in all that confidence and good will which has grown up between us since I went to the Admiralty at the outbreak. Things are afoot which will be remembered as long as the English language is spoken in any quarter of the globe, and in expressing the comfort I feel that the people of the United States have once again cast these great burdens upon you I must avow my sure faith that the lights by which we steer will bring us all safely to anchor.

Curiously enough, I never received any answer to this telegram. It may well have been engulfed in the vast mass of congratulatory messages which were swept aside by urgent work.

Up till this time we had placed our orders for munitions in the United States separately from, though in consultation with, the American Army, Navy, and Air Services. The ever-increasing volume of our several needs had led to overlapping at numerous points, with possibilities of friction arising at lower levels in spite of general good will. “Only a single, unified Government procurement policy for all defence purposes,” writes Mr. Stettinius,¹ “could do the tremendous job that was now ahead.” This meant that the United States Government should place all the orders for weapons in America. Three days after his re-election the President publicly announced a “rule of thumb” for the division of American arms output. As weapons came off the production line, they were to be divided roughly fifty-fifty between the United States forces and the British and Canadian forces. That same day the Priorities Board approved a British request to order twelve thousand more aeroplanes in the United States in addition to the eleven thousand we had already booked. But how was ail this to be paid for?

* * * * *

In mid-November Lord Lothian flew home from Washington and spent two days with me at Ditchley. I had been advised not to make a habit of staying at Chequers every week-end, especially when the moon was full, in case the enemy should pay me special attention. Mr. Ronald Tree and his wife made me and my staff very welcome many times at their large and charming house near Oxford. Ditchley is only four or five miles away from Blenheim. In these agreeable surroundings I received the Ambassador. Lothian seemed to me a changed man. In all the years I had known him, he had given me the impression of high intellectual and aristocratic detachment from vulgar affairs. Airy, viewy, aloof, dignified, censorious, yet in a light and gay manner, he had always been good company. Now, under the same hammer that beat upon us all, I found an earnest, deeply stirred man. He was primed with every aspect and detail of the American attitude. He had won nothing but good will and confidence in Washington by his handling of the destroyer-cum-bases negotiations. He was fresh from intimate contact with the President, with whom he had established a warm personal friendship. His mind was now set upon the dollar problem; this was grim indeed.

Before the war the United States was governed by the pre-war Neutrality Act, which obliged the President on September 3, 1939, to place an embargo on all shipments of arms to any of the belligerent nations. Ten days later, he had called Congress to a special session to consider the removal of this ban, which, under the appearance of impartiality, virtually deprived Great Britain and France of all the advantages of the command of the seas in the transport of munitions and supplies. It was not until the end of November, 1939, after many weeks of discussion and agitation, that the Neutrality Act was repealed and the new principle of “Cash and Carry” substituted. This still preserved the appearance of strict neutrality on the part of the United States, for Americans were as free to sell weapons to Germany as to the Allies. In fact, however, our sea-power prevented any German traffic, while Britain and France could “carry” freely as long as they had “cash.” Three days after the passage of the new law, our Purchasing Commission, headed by Mr. Arthur Purvis, a man of outstanding ability, began its work.

* * * * *

Britain entered the war with about 4,500,000,000 in dollars, or in gold and in United States investments that could be turned into dollars. The only way in which these resources could be increased was by new gold-production in the British Empire, mainly of course in South Africa, and by vigorous efforts to export goods, principally luxury goods, such as whisky, fine woollens, and pottery, to the United States. By these means an additional two thousand million dollars were procured during the first sixteen months of the war. During the period of the “Twilight War,” we were torn between a vehement desire to order munitions in America and gnawing fear as our dollar resources dwindled. Always in Mr. Chamberlain’s day the Chancellor of the Exchequer, Sir John Simon, would tell us of the lamentable state of our dollar resources and emphasise the need for conserving them. It was more or less accepted that we should have to reckon with a rigorous limitation of purchases from the United States. We acted, as Mr. Purvis once said to Stettinius, “as if we were on a desert island on short rations which we must stretch as far as we could.” ²

This had meant elaborate arrangements for eking out our money. In peace, we imported freely and made payments as we liked. When war came, we had to create a machine which mobilised gold and dollars and other private assets, which stopped the ill-disposed from remitting their funds to countries where they felt things were safer, and which cut out wasteful imports and other expenditures. On top of making sure that we did not waste our money, we had to see that others went on taking it. The countries of the sterling area were with us: they adopted the same kind of exchange-control policy as we did and were willing takers and holders of sterling. With others we made special arrangements by which we paid them in sterling, which could be used anywhere in the sterling area, and they undertook to hold any sterling for which they had no immediate use and to keep dealings at the official rates of exchange. Such arrangements were originally made with the Argentine and Sweden, but were extended to a number of other countries on the Continent and in South America. These arrangements were completed after the spring of 1940, and it was a matter of satisfaction – and a tribute to sterling – that we were able to achieve and maintain them in circumstances of such difficulty. In this way we were able to go on dealing with most parts of the world in sterling, and to conserve most of our precious gold and dollars for our vital purchases in the United States.

When the war exploded into hideous reality in May, 1940, we were conscious that a new era had dawned in Anglo-American relations. From the time I formed the new Government and Sir Kingsley Wood became Chancellor of the Exchequer we followed a simpler plan, namely, to order everything we possibly could and leave future financial problems on the lap of the Eternal Gods. Fighting for life and presently alone under ceaseless bombardment, with invasion glaring upon us, it would have been false economy and misdirected prudence to worry too much about what would happen when our dollars ran out. We were conscious of the tremendous changes taking place in American opinion, and of the growing belief, not only in Washington but throughout the Union, that their fate was bound up with ours. Moreover, at this time an intense wave of sympathy and admiration for Britain surged across the American nation. Very friendly signals were made to us from Washington direct, and also through Canada, encouraging our boldness and indicating that somehow or other a way would be found. In Mr. Morgenthau, Secretary of the Treasury, the cause of the Allies had a tireless champion. The taking-over of the French contracts in June had almost doubled our rate of spending across the Exchange. Besides this, we placed new orders for aeroplanes, tanks, and merchant ships in every direction, and promoted the building of great new factories both in the United States and Canada.

* * * * *

Up till November, 1940, we had paid for everything we had received. We had already sold $335,000,000 worth of American shares requisitioned for sterling from private owners in Britain. We had paid out over $4,500,000,000 in cash. We had only two thousand millions left, the greater part in investments, many of which were not readily marketable. It was plain that we could not go on any longer in this way. Even if we divested ourselves of all our gold and foreign assets, we could not pay for half we had ordered, and the extension of the war made it necessary for us to have ten times as much. We must keep something in hand to carry on our daily affairs.

Lothian was confident that the President and his advisers were earnestly seeking the best way to help us. Now that the election was over, the moment to act had come. Ceaseless discussions on behalf of the Treasury were proceeding in Washington between their representative, Sir Frederick Phillips, and Mr. Morgenthau. The Ambassador urged me to write a full statement of our position to the President. Accordingly that Sunday at Ditchley I drew up, in consultation with him, a personal letter. On November 16, I telegraphed to Roosevelt, “I am writing you a very long letter on the outlook for 1941 which Lord Lothian will give you in a few days.” As the document had to be checked and rechecked by the Chiefs of Staff and the Treasury, and approved by the War Cabinet, it was not completed before Lothian’s return to Washington. On November 26, I sent him a message, “I am still struggling with my letter to the President, but hope to cable it to you in a few days.” In its final form the letter was dated December 8, and was immediately sent to the President. This letter was one of the most important I ever wrote. As it gives a view of the whole situation agreed to by all concerned in London, and as it played a recognisable part in our fortunes, it deserves study.

10 DOWNING STREET, WHITEHALL,

December 8, 1940.

MY DEAR MR. PRESIDENT,

1. As we reach the end of this year, I feel you will expect me to lay before you the prospects for 1941. I do so with candour and confidence, because it seems to me that the vast majority of American citizens have recorded their conviction that the safety of the United States, as well as the future of our two Democracies and the kind of civilisation for which they stand, is bound up with the survival and independence of the British Commonwealth of Nations. Only thus can those bastions of sea-power, upon which the control of the Atlantic and Indian Oceans depend, be preserved in faithful and friendly hands. The control of the Pacific by the United States Navy and of the Atlantic by the British Navy is indispensable to the security and trade routes of both our countries, and the surest means of preventing war from reaching the shores of the United States.

2. There is another aspect. It takes between three and four years to convert the industries of a modern state to war purposes. Saturation-point is reached when the maximum industrial effort that can be spared from civil needs has been applied to war production. Germany certainly reached this point by the end of 1939. We in the British Empire are now only about halfway through the second year. The United States, I should suppose, is by no means so far advanced as we. Moreover, I understand that immense programmes of naval, military, and air defence are now on foot in the United States, to complete which certainly two years are needed. It is our British duty in the common interest, as also for our own survival, to hold the front and grapple with the Nazi power until the preparations of the United States are complete. Victory may come before two years are out; but we have no right to count upon it to the extent of relaxing any effort that is humanly possible. Therefore, I submit with very great respect for your good and friendly consideration that there is a solid identity of interest between the British Empire and the United States while these conditions last. It is upon this footing that I venture to address you.

3. The form which this war has taken, and seems likely to hold, does not enable us to match the immense armies of Germany in any theatre where their main power can be brought to bear. We can, however, by the use of sea-power and air-power, meet the German armies in regions where only comparatively small forces can be brought into action. We must do our best to prevent the German domination of Europe spreading into Africa and into Southern Asia. We have also to maintain in constant readiness in this island armies strong enough to make the problem of an oversea invasion insoluble. For these purposes we are forming as fast as possible, as you are already aware, between fifty and sixty divisions. Even if the United States were our ally, instead of our friend and indispensable partner, we should not ask for a large American expeditionary army. Shipping, not men, is the limiting factor, and the power to transport munitions and supplies claims priority over the movement by sea of large numbers of soldiers.

4. The first half of 1940 was a period of disaster for the Allies and for Europe. The last five months have witnessed a strong and perhaps unexpected recovery by Great Britain fighting alone, but with the invaluable aid in munitions and in destroyers placed at our disposal by the great Republic of which you are for the third time the chosen Chief.

5. The danger of Great Britain being destroyed by a swift, overwhelming blow has for the time being very greatly receded. In its place there is a long, gradually maturing danger, less sudden and less spectacular, but equally deadly. This mortal danger is the steady and increasing diminution of sea tonnage. We can endure the shattering of our dwellings and the slaughter of our civil population by indiscriminate air attacks, and we hope to parry these increasingly as our science develops, and to repay them upon military objectives in Germany as our Air Force more nearly approaches the strength of the enemy. The decision for 1941 lies upon the seas. Unless we can establish our ability to feed this island, to import the munitions of all kinds which we need, unless we can move our armies to the various theatres where Hitler and his confederate Mussolini must be met, and maintain them there, and do all this with the assurance of being able to carry it on till the spirit of the Continental Dictators is broken, we may fall by the way, and the time needed by the United States to complete her defensive preparations may not be forthcoming. It is, therefore, in shipping and in the power to transport across the oceans, particularly the Atlantic Ocean, that in 1941 the crunch of the whole war will be found. If, on the other hand, we are able to move the necessary tonnage to and fro across salt water indefinitely, it may well be that the application of superior air-power to the German homeland and the rising anger of the German and other Nazi-gripped populations will bring the agony of civilisation to a merciful and glorious end.

But do not let us underrate the task.

6. Our shipping losses, the figures for which in recent months are appended, have been on a scale almost comparable to that of the worst year of the last war. In the five weeks ending November 3, losses reached a total of 420,300 tons. Our estimate of annual tonnage which ought to be imported in order to maintain our effort at full strength is forty-three million tons; the tonnage entering in September was only at the rate of thirty-seven million tons, and in October, of thirty-eight million tons. Were this diminution to continue at this rate, it would be fatal, unless indeed immensely greater replenishment than anything at present in sight could be achieved in time. Although we are doing all we can to meet this situation by new methods, the difficulty of limiting losses is obviously much greater than in the last war. We lack the assistance of the French Navy, the Italian Navy, and the Japanese Navy, and above all of the United States Navy, which was of such vital help to us during the culminating years. The enemy commands the ports all around the northern and western coasts of France. He is increasingly basing his submarines, flying-boats, and combat planes on these ports and on the islands off the French coast. We are denied the use of the ports or territory of Eire in which to organise our coastal patrols by air and sea. In fact, we have now only one effective route of entry to the British Isles, namely, the northern approaches, against which the enemy is increasingly concentrating, reaching ever farther out by U-boat action and long-distance aircraft bombing. In addition, there have for some months been merchant-ship raiders, both in the Atlantic and Indian Oceans. And now we have the powerful warship raider to contend with as well. We need ships both to hunt down and to escort. Large as are our resources and preparations, we do not possess enough.

7. The next six or seven months [will] bring relative battleship strength in home waters to a smaller margin than is satisfactory. Bismarck and Tirpitz will certainly be in service in January. We have already King George V, and hope to have Prince of Wales in the line at the same time. These modern ships are, of course, far better armoured, especially against air attack, than vessels like Rodney and Nelson, designed twenty years ago. We have recently had to use Rodney on transatlantic escort, and at any time, when numbers are so small, a mine or a torpedo may alter decisively the strength of the line of battle. We get relief in June, when Duke of York will be ready, and shall be still better off at the end of 1941, when Anson also will have joined. But these two first-class modern 35,000-ton ³ fifteen-inch-gun German battleships force us to maintain a concentration never previously necessary in this war.

8. We hope that the two Italian Littorios will be out of action for a while, and anyway they are not so dangerous as if they were manned by Germans. Perhaps they might be! We are indebted to you for your help about the Richelieu and Jean Bart, and I daresay that will be all right. But, Mr. President, as no one will see more clearly than you, we have during these months to consider for the first time in this war a fleet action in which the enemy will have two ships at least as good as our two best and only two modern ones. It will be impossible to reduce our strength in the Mediterranean, because the attitude of Turkey, and indeed the whole position in the Eastern Basin, depends upon our having a strong fleet there. The older, unmodernised battleships will have to go for convoy. Thus, even in the battleship class we are in full extension.

9. There is a second field of danger: The Vichy Government may, either by joining Hitler’s New Order in Europe or through some manoeuvre, such as forcing us to attack an expedition despatched by sea against the Free French Colonies, find an excuse for ranging with the Axis Powers the very considerable undamaged naval forces still under its control. If the French Navy were to join the Axis, the control of West Africa would pass immediately into their hands, with the gravest consequences to our communications between the Northern and Southern Atlantic, and also affecting Dakar and of course thereafter South America.

10. A third sphere of danger is in the Far East. Here it seems clear that Japan is thrusting southward through Indo-China to Saigon and other naval and air bases, thus bringing them within a comparatively short distance of Singapore and the Dutch East Indies. It is reported that the Japanese are preparing five good divisions for possible use as an overseas expeditionary force. We have today no forces in the Far East capable of dealing with this situation should it develop.

11. In the face of these dangers we must try to use the year 1941 to build up such a supply of weapons, particularly of aircraft, both by increased output at home in spite of bombardment, and through ocean-borne supplies, as will lay the foundations of victory. In view of the difficulty and magnitude of this task, as outlined by all the facts I have set forth, to which many others could be added, I feel entitled, nay bound, to lay before you the various ways in which the United States could give supreme and decisive help to what is, in certain aspects, the common cause.

12. The prime need is to check or limit the loss of tonnage on the Atlantic approaches to our island. This may be achieved both by increasing the naval forces which cope with the attacks and by adding to the number of merchant ships on which we depend. For the first purpose there would seem to be the following alternatives:

(1) The reassertion by the United States of the doctrine of the freedom of the seas from illegal and barbarous methods of warfare, in accordance with the decisions reached after the late Great War, and as freely accepted and defined by Germany in 1935. From this, United States ships should be free to trade with countries against which there is not an effective legal blockade.

(2) It would, I suggest, follow that protection should be given to this lawful trading by United States forces, i.e., escorting battleships, cruisers, destroyers, and air flotillas. The protection would be immensely more effective if you were able to obtain bases in Eire for the duration of the war. I think it is improbable that such protection would provoke a declaration of war by Germany upon the United States, though probably sea incidents of a dangerous character would from time to time occur. Herr Hitler has shown himself inclined to avoid the Kaiser’s mistake. He does not wish to be drawn into war with the United States until he has gravely undermined the power of Great Britain. His maxim is “One at a time.”

The policy I have ventured to outline, or something like it, would constitute a decisive act of constructive non-belligerency by the United States, and, more than any other measure, would make it certain that British resistance could be effectively prolonged for the desired period and victory gained.

(3) Failing the above, the gift, loan, or supply of a large number of American vessels of war, above all destroyers, already in the Atlantic is indispensable to the maintenance of the Atlantic route. Further, could not the United States Naval Forces extend their sea-control of the American side of the Atlantic so as to prevent the molestation by enemy vessels of the approaches to the new line of naval and air bases which the United States is establishing in British islands in the Western Hemisphere? The strength of the United States Naval Forces is such that the assistance in the Atlantic that they could afford us, as described above, would not jeopardise the control of the Pacific.

(4) We should also then need the good offices of the United States and the whole influence of its Government, continually exerted, to procure for Great Britain the necessary facilities upon the southern and western shores of Eire for our flotillas, and still more important, for our aircraft, working to the westward into the Atlantic. If it were proclaimed an American interest that the resistance of Great Britain should be prolonged and the Atlantic route kept open for the important armaments now being prepared for Great Britain in North America, the Irish in the United States might be willing to point out to the Government of Eire the dangers which its present policy is creating for the United States itself.

His Majesty’s Government would, of course, take the most effective measures beforehand to protect Ireland if Irish action exposed it to German attack. It is not possible for us to compel the people of Northern Ireland against their will to leave the United Kingdom and join Southern Ireland. But I do not doubt that if the Government of Eire would show its solidarity with the democracies of the English-speaking world at this crisis, a Council for Defence of all Ireland could be set up out of which the unity of the island would probably in some form or other emerge after the war.

13. The object of the foregoing measures is to reduce to manageable proportions the present destructive losses at sea. In addition, it is indispensable that the merchant tonnage available for supplying Great Britain, and. for the waging of the war by Great Britain with all vigour, should be substantially increased beyond the 1,250,000 tons per annum which is the utmost we can now build. The convoy system, the detours, the zigzags, the great distances from which we now have to bring our imports, and the congestion of our western harbours, have reduced by about one-third the fruitfulness of our existing tonnage. To ensure final victory, not less than three million tons of additional merchant shipbuilding capacity will be required. Only the United States can supply this need. Looking to the future, it would seem that production on a scale comparable to that of the Hog Island scheme of the last war ought to be faced for 1942. In the meanwhile, we ask that in 1941 the United States should make available to us every ton of merchant shipping, surplus to its own requirements, which it possesses or controls, and to find some means of putting into our service a large proportion of merchant shipping now under construction for the National Maritime Board.

14. Moreover, we look to the industrial energy of the Republic for a reinforcement of our domestic capacity to manufacture combat aircraft. Without that reinforcement reaching us in substantial measure, we shall not achieve the massive preponderance in the air on which we must rely to loosen and disintegrate the German grip on Europe. We are at present engaged on a programme designed to increase our strength to seven thousand first-line aircraft by the spring of 1942. But it is abundantly clear that this programme will not suffice to give us the weight of superiority which will force open the doors of victory. In order to achieve such superiority, it is plain that we shall need the greatest production of aircraft which the United States of America is capable of sending us. It is our anxious hope that in the teeth of continuous bombardment we shall realise the greater part of the production which we have planned in this country. But not even with the addition to our squadrons of all the aircraft which, under present arrangements, we may derive from planned output in the United States can we hope to achieve the necessary ascendancy. May I invite you then, Mr. President, to give earnest consideration to an immediate order on joint account for a further two thousand combat aircraft a month? Of these aircraft, I would submit, the highest possible proportion should be heavy bombers, the weapon on which, above all others, we depend to shatter the foundations of German military power. I am aware of the formidable task that this would impose upon the industrial organisation of the United States. Yet, in our heavy need, we call with confidence to the most resourceful and ingenious technicians in the world. We ask for an unexampled effort, believing that it can be made.

15. You have also received information about the needs of our armies. In the munitions sphere, in spite of enemy bombing, we are making steady progress here. Without your continued assistance in the supply of machine tools and in further releases from stock of certain articles, we could not hope to equip as many as fifty divisions in 1941. I am grateful for the arrangements, already practically completed, for your aid in the equipment of the army which we have already planned, and for the provision of the American type of weapons for an additional ten divisions in time for the campaign of 1942. But when the tide of dictatorship begins to recede, many countries trying to regain their freedom may be asking for arms, and there is no source to which they can look except the factories of the United States. I must, therefore, also urge the importance of expanding to the utmost American productive capacity for small arms, artillery, and tanks.

16. I am arranging to present you with a complete programme of the munitions of all kinds which we seek to obtain from you, the greater part of which is, of course, already agreed. An important economy of time and effort will be produced if the types selected for the United States Services should, whenever possible, conform to those which have proved their merit under the actual conditions of war. In this way reserves of guns and ammunition and of airplanes become interchangeable, and are by that very fact augmented. This is, however, a sphere so highly technical that I do not enlarge upon it.

17. Last of all, I come to the question of Finance. The more rapid and abundant the flow of munitions and ships which you are able to send us, the sooner will our dollar credits be exhausted. They are already, as you know, very heavily drawn upon by the payments we have made to date. Indeed, as you know, the orders already placed or under negotiation, including the expenditure settled or pending for creating munitions factories in the United States, many times exceed the total exchange resources remaining at the disposal of Great Britain. The moment approaches when we shall no longer be able to pay cash for shipping and other supplies. While we will do our utmost, and shrink from no proper sacrifice to make payments across the Exchange, I believe you will agree that it would be wrong in principle and mutually disadvantageous in effect if at the height of this struggle Great Britain were to be divested of all saleable assets, so that after the victory was won with our blood, civilisation saved, and the time gained for the United States to be fully armed against all eventualities, we should stand stripped to the bone. Such a course would not be in the moral or economic interests of either of our countries. We here should be unable, after the war, to purchase the large balance of imports from the United States over and above the volume of our exports which is agreeable to your tariffs and industrial economy. Not only should we in Great Britain suffer cruel privations, but widespread unemployment in the United States would follow the curtailment of American exporting power.

18. Moreover, I do not believe that the Government and people of the United States would find it in accordance with the principles which guide them to confine the help which they have so generously promised only to such munitions of war and commodities as could be immediately paid for. You may be certain that we shall prove ourselves ready to suffer and sacrifice to the utmost for the Cause, and that we glory in being its champions. The rest we leave with confidence to you and to your people, being sure that ways and means will be found which future generations on both sides of the Atlantic will approve and admire.

19. If, as I believe, you are convinced, Mr. President, that the defeat of the Nazi and Fascist tyranny is a matter of high consequence to the people of the United States and to the Western Hemisphere, you will regard this letter not as an appeal for aid, but as a statement of the minimum action necessary to achieve our common purpose.

A table was added showing the losses by enemy action of British, Allied, and neutral merchant tonnage for the periods given.⁴

The letter reached our great friend when he was cruising, on board an American warship, the Tuscaloosa, in the sunlight of the Caribbean Sea. He had only his own intimates around him. Harry Hopkins, then unknown to me, told me later that Mr. Roosevelt read and re-read this letter as he sat alone in his deck-chair, and that for two days he did not seem to have reached any clear conclusion. He was plunged in intense thought, and brooded silently.

From all this there sprang a wonderful decision. It was never a question of the President not knowing what he wanted to do. His problem was how to carry his country with him and to persuade Congress to follow his guidance. According to Stettinius, the President, as early as the late summer, had suggested at a meeting of the Defence Advisory Commission on Shipping Resources that. “It should not he necessary for the British to take their own funds and have ships built in the United States, or for us to lend them money for this purpose. There is no reason why we should not take a finished vessel and lease it to them for the duration of the emergency.” It seems that this idea had originated in the Treasury Department, whose lawyers, especially Oscar S. Cox, of Maine, had been stirred by Secretary Morgenthau. It appeared that by a statute of 1892 the Secretary for War, “when in his discretion it will be for the public good,” could lease Army property if not required for public use for a period of not longer than five years. Precedents for the use of this statute, by the lease of various Army items from time to time, were on record.

Thus the word “lease” and the idea of applying the lease principle to meeting British needs had been in President Roosevelt’s mind for some time as an alternative to a policy of indefinite loans which would soon far outstrip all possibilities of repayment. Now suddenly all this sprang into decisive action, and the glorious conception of Lend-Lease was proclaimed.

The President returned from the Caribbean on December 16 and broached his plan at his press conference next day. He used a simple illustration:

Suppose my neighbour’s house catches fire 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 put out the fire. Now what do I do? I don’t say to him before that operation, “Neighbour, my garden hose cost me fifteen dollars; you have to pay me fifteen dollars for it.” No! What is the transaction that goes on? I don’t want fifteen dollars – I want my garden hose back after the fire is over.

And again:

There is absolutely no doubt in the mind of a very overwhelming number of Americans that the best immediate defence of the United States is the success of Great Britain defending itself; and that, therefore, quite aside from our historic and current interest in the survival of Democracy in the world as a whole, it is equally important from a selfish point of view and of American defence that we should do everything possible to help the British Empire to defend itself.

Finally:

What I am trying to do is to eliminate the dollar sign.

On this foundation the ever-famous Lend-Lease Bill was at once prepared for submission to Congress. I described this to Parliament later as “the most unsordid act in the history of any nation.” Once it was accepted by Congress, it transformed immediately the whole position. It made us free to shape by agreement long-term plans of vast extent for all our needs. There was no provision for repayment. There was not even to be a formal account kept in dollars or sterling. What we had was lent or leased to us because our continued resistance to the Hitler tyranny was deemed to be of vital interest to the great Republic. According to President Roosevelt, the defence of the United States and not dollars was henceforth to determine where American weapons were to go.

* * * * *

It was at this moment, the most important in his public career, that Philip Lothian was taken from us. Shortly after his return to Washington, he fell suddenly and gravely ill. He worked unremittingly to the end. On December 12, in the full tide of success, he died. This was a loss to the nation and to the Cause. He was mourned by wide circles of friends on both sides of the ocean. To me, who had been in such intimate contact with him a fortnight before, it was a personal shock. I paid my tribute to him in a House of Commons united in deep respect for his work and memory.

* * * * *

I had now to turn immediately to the choice of his successor. It seemed that our relations with the United States at this time required as Ambassador an outstanding national figure and a statesman versed in every aspect of world politics. Having ascertained from the President that my suggestion would be acceptable, I invited Mr. Lloyd George to take the post. He had not felt able to join the War Cabinet in July, and was not happily circumstanced in British politics. His outlook on the war and the events leading up to it was from a different angle from mine. There could be no doubt, however, that he was our foremost citizen, and that his incomparable gifts and experience would be devoted to the success of his mission. I had a long talk with him in the Cabinet Room, and also at luncheon on a second day. He showed genuine pleasure at having been invited. “I tell my friends,” he said, “I have had honourable offers made to me by the Prime Minister.” He was sure that at the age of eighty-two he ought not to undertake so exacting a task. As a result of my long conversations with him I was conscious that he had aged even in the months which had passed since I had asked him to join the War Cabinet, and with regret but also with conviction I abandoned my plan.

I next turned to Lord Halifax, whose prestige in the Conservative Party stood high, and was enhanced by his being at the Foreign Office. For a Foreign Secretary to become an Ambassador marks in a unique manner the importance of the mission. His high character was everywhere respected, yet at the same time his record in the years before the war and the way in which events had moved left him exposed to much disapprobation and even hostility from the Labour side of our National Coalition. I knew that he was conscious of this himself.

When I made him this proposal, which was certainly not a personal advancement, he contented himself with saying in a simple and dignified manner that he would serve wherever he was thought to be most useful. In order to emphasise still further the importance of his duties, I arranged that he should resume his function as a member of the War Cabinet whenever he came home on leave. This arrangement worked without the slightest inconvenience owing to the qualities and experience of the personalities involved, and for six years thereafter, both under the National Coalition and the Labour-Socialist Government, Halifax discharged the work of Ambassador to the United States with conspicuous and ever-growing influence and success.

President Roosevelt, Mr. Hull and other high personalities in Washington were extremely pleased with the selection of Lord Halifax. Indeed it was at once apparent to me that the President greatly preferred it to my first proposal. The appointment of the new Ambassador was received with marked approval both in America and at home, and was judged in every way adequate and appropriate to the scale of events.

* * * * *

I had no doubt who should fill the vacancy at the Foreign Office. On all the great issues of the past four years I had, as these pages have shown, dwelt in close agreement with Anthony Eden. I have described my anxieties and emotions when he parted company with Mr. Chamberlain in the spring of 1938. Together we had abstained from the vote on Munich. Together we had resisted the party pressures brought to bear upon us in our constituencies during the winter of that melancholy year. We had been united in thought and sentiment at the outbreak of the war and as colleagues during its progress. The greater part of Eden’s public life had been devoted to the study of foreign affairs. He had held the splendid office of Foreign Secretary with distinction, and had resigned it when only forty years of age for reasons which are in retrospect, and at this time, viewed with the approval of all parties in the State. He had played a fine part as Secretary of State for War during this terrific year, and his conduct of Armv affairs had brought us very close together. We thought alike, even without consultation, on a very great number of practical issues as they arose from day to day. I looked forward to an agreeable and harmonious comradeship between the Prime Minister and the Foreign Secretary, and this hope was certainly fulfilled during the four and a half years of war and policy which lay before us. Eden was sorry to leave the War Office, in all the stresses and excitements of which he was absorbed; but he returned to the Foreign Office like a man going home.

* * * * *

I filled Mr. Eden’s place as Secretary of State for War by submitting to the King the name of Captain Margesson, at that time the Chief Whip to the National Government. This choice excited some adverse comment. David Margesson had been for nearly ten years at the head of the Government Whip’s Office in the House of Commons, and it had fallen to him to marshal and to stimulate the patient and solid Conservative majorities which had so long sustained the Baldwin and Chamberlain Administrations. I had, as a leading figure among the Conservative dissentients from the India Bill, had many sharp passages with him. In the course of those eleven years of my exclusion from office my contacts with him had been not infrequent and generally hostile. I had formed the opinion that he was a man of high ability, serving his chief, whoever he was, with unfaltering loyalty, and treating his opponents with strict good faith. This opinion was also held by the Whips of the Labour and Liberal Parties, and such a reputation is of course essential to the discharge of this particular office. When I became Prime Minister it was generally expected that I should find someone else for the task, but I was quite sure that I should receive from Margesson the same skilful and faithful service that he had given to my predecessors; and in this I had been in no way disappointed. He had served in the First World War, and through much of the worst of it as a regimental officer, gaining the Military Cross. He thus had a strong soldierly background as well as a complete knowledge of the House of Commons.

In Margesson’s place I appointed Captain James Stuart, with whom also I had had many differences, but for whose character I had high respect.

* * * * *

The interval between November, 1940, and the passage of Lend-Lease in March, 1941, was marked by an acute stringency in dollars. Every kind of expedient was devised by our friends. The American Government bought from us some of the war plants which they had built to our order in the United States. They assigned them to the American defence programme, but bade us go on using them to the full. The War Department placed orders for munitions that it did not need immediately, so that when finished they could be released to us. On the other hand, certain things were done which seemed harsh and painful to us. The President sent a warship to Capetown to carry away all the gold we had gathered there. The great British business of Courtaulds in America was sold by us at the request of the United States Government at a comparatively low figure, and then resold through the markets at a much higher price from which we did not benefit. I had a feeling that these steps were taken to emphasise the hardship of our position and raise feeling against the opponents of Lend-Lease. Anyhow, in one way or another we came through.

On December 30, the President gave a “fireside chat” on the radio, urging his policy upon his countrymen.

There is danger ahead – danger against which we must prepare. But we well know that we cannot escape danger by crawling into bed and pulling the covers over our heads…. If Britain should go down, all of us in all the Americas would be living at the point of a gun, a gun loaded with explosive bullets, economic as well as military. We must produce arms and ships with every energy and resource we can command…. We must be the great arsenal of Democracy.

We are deeply grateful to you for all you said yesterday. We welcome especially the outline of your plans for giving us the aid without which Hitlerism cannot be extirpated from Europe and Asia. We can readily guess why you have not been able to give a precise account of how your proposals will be worked out. Meanwhile, some things make me anxious.

First, sending the warship to Capetown to take up the gold lying there may produce embarrassing effects. It is almost certain to become known. This will disturb public opinion here and throughout the Dominions and encourage the enemy, who will proclaim that you are sending for our last reserves. If you feel this is the only way, directions will be given for the available Captown gold to be loaded on the ship. But we should avoid it if we can. Could we, for instance, by a technical operation, exchange gold in South Africa for gold held for others at Ottawa and make the latter available for movement to New York? We must know soon, because the ship is on its way.

My second anxiety is because we do not know how long Congress will debate your proposals and how we should be enabled to place orders for armaments and pay our way if this time became protracted. Remember, Mr. President, we do not know what you have in mind, exactly what the United States is going to do, and we are fighting for our lives. What would be the effect upon the world situation if we had to default in payments to your contractors, who have their workmen to pay? Would not this be exploited by the enemy as a complete breakdown in Anglo-American co-operation? Yet a few weeks’ delay might well bring this upon us.

Thirdly, apart from the interim period, there arises a group of problems about the scope of your plan after being approved by Congress. What is to be done about the immense heavy payments still due to be made under existing orders before delivery is completed? Substantial advance payments on these same orders have already denuded our resources. We have continued need for various American commodities not definitely weapons – for instance, raw materials and oils. Canada and other Dominions, Greece and refugee allies, have clamant dollar needs to keep their war effort alive. I do not seek to know immediately how you will solve these latter questions. We shall be entirely ready, for our part, to lay bare to you all our resources and our liabilities around the world, and we shall seek no more help than the common cause demands. We naturally wish to feel sure that the powers with which you propose to arm yourself will be sufficiently wide to deal with these larger matters, subject to all proper examination.

Sir Frederick Phillips is discussing these matters with Mr. Secretary Morgenthau, and he will explain the war commitments we have in many parts of the world for which we could not ask your direct help, but for which gold and dollars are necessary. This applies also to the Dutch and Belgian gold, which we may become under obligation to return in specie in due course.

They burned a large part of the City of London last night, and the scenes of widespread destruction here and in our provincial centres are shocking; but when I visited the still-burning ruins today, the spirit of the Londoners was as high as in the first days of the indiscriminate bombing in September, four months ago.

I thank you for testifying before all the world that the future safety and greatness of the American Union are intimately concerned with the upholding and the effective arming of that indomitable spirit.

All my heartiest good wishes to you in the New Year of storm that is opening upon us.