“…the thought is that we would take over not
all, but a very large number of, future British orders; and when they came off
the line, whether they were planes or guns or something else, we would enter
into some kind of arrangement for their use by the British on the ground that
it was the best thing for American defense, with the understanding that when
the show was over, we would get repaid sometime in kind, thereby leaving out
the dollar mark in the form of a dollar debt and substituting for it a gentleman's
obligation to repay in kind”.
President
Roosevelt outlining what became Lend Lease, December 17, 1940
Bend-Cease
Europeans need a radical defence investment
solution. This past weekend, General Sir Richard Barrons pointed out that the
British Army is now so small with no more than 20,000 deployable troops that the
most it could reasonably hope to conquer in a major shooting war would be a
small market town not very well defended and not very far away. It is beyond a joke.
There are many reasons Europeans cannot
modernise and strengthen their armed forces to meet the minimum requirements of
deterring Russia and keeping the US engaged.
Weak woke governments, economists who see power as accountancy and lawyers
who see law as an alternative to power and who run weak woke governments. There are also ever greater public demands for
welfare, the public debt incurred from saving the global financial system from bad
bankers at the time of the US sub-prime loans scandal back in 2008 (for which amazingly
no-one has gone to prison), the further public debt generated by COVID-19,
greedy defence industrial primes and their too close relationships with
governments, short production runs of new weapons systems that inflate the unit
cost, the conflation/confusion of industrial with defence policy, and good-old-fashioned
government incompetence. The situation
is now so dire that the cost of minimum defence modernisation is now so great
that European governments simply keep putting it off whilst their armed forces
become ever less capable.
Europeans now get so little bang for their
buck they are fast approaching a tipping point beyond which their respective
armed forces are of so little utility they might as well scrap the lot, put
even more into welfare, and pay Donald J. Trump his asking price to defend them. That certainly seems to be the offer Trump is
preparing for a post-Iran NATO - a kind of US defence Fanny Mae. That ended well.
Lend-Lease
Why did the US enter World War Two so relatively
poor and exit it so overwhelmingly rich and powerful? There is a simple answer –
Britain. Between 1939 and 1941 under the
so-called Cash and Carry scheme the British embarked on the greatest transfer
of wealth from one state to another simply to stay in a fight with Nazi Germany
to pay for US materiel, even though Roosevelt publicly admitted keeping Britain
in the war was also a critical US interest.
It was only when the US had effectively bankrupted Britain that Roosevelt
come up with Lend Lease. If one reads Roosevelt’s whole December 1940 interview
it is clear he had no intention of doing the British any real favours. One could even say that one of America’s hidden
war aims was the destruction of the British Empire. They were right. It was time.
When the Lend-Lease Act was enacted on
March 11,1941 it was also called, “An Act to Promote the Defense of the United
States”. Still, the British did pay. So-called
Reverse Lend-Lease from Britain and the Commonwealth to the US repaid a very
significant part of the debt. By the time of ‘victory’ in May 1945 Britain was
broken and in 1946 the US had to make a further loan simply to stop the British
people starving. Debt relief? Whilst the
debt was discounted it still had to be repaid.
The final payment was $83.25 million on December 29th, 2006,
by which time Britain had paid twice the principal in debt interest.
Lend-Lease 2?
In 1939-1940 Britain faced a choice – defeat
or bankruptcy. Cash and Carry and Lend Lease were force majeure. Today, all Western states except for Norway
are deeply in debt. The US is the most
indebted of all which may explain why Trump has embarked on armed mercantilism. In November 2025, British Public Sector Debt
stood at £2927 billion or 96% of GDP, other Europeans are even more indebted. Servicing
the debt annually costs almost 5% of Britain’s GDP, or over twice the annual amount
Britain spends on defence.
So, here is a radical defence investment
idea. Much of the debt is held by
institutions and states who benefit from peace as a public good. Create a new version of Lend-Lease whereby
creditors afford Britain and other Europeans an extended debt holiday and/or
debt relief. In Britain’s case if 50% of the annual cost of servicing the
national debt was transferred to defence investment Britain could immediately spend
the NATO target of 5% GDP on defence and overcome the cost barrier to market
entry that is preventing defence modernisation at scale.
Like Lend Lease the debt would have to be
repaid but it could effectively be put into a box and paid off over an extended
period when peace prevails. Britain and
other Europeans would get the defences they need without breaking the world financial
system and the creditors would still get their money but only when the peace which
they need to make money has been assured.
As for the banks – after 2008 they really
owe the people.
Julian Lindley-French
