Australia USA Lend Lease

[Lang]

This has just been mentioned on another thread. I put it up a long time back but can not find it.

This is one of the finest documents ever written by two governments with a will to get the job done. Only months after the war all Lend Lease arrangements (both ways) were finalized. Australia was $20 million behind but laid off debts by giving USA title to land ie the American Embassy in Canberra and promising to run education programs - I don't know if they ever did such a thing.

You will note that any US manufactured items are never to go back to USA and all current orders are to be completed (I think the Studebakers we did not need were in this category). This was to prevent the collapse of American industry while retooling for peacetime production.

[Matthew P]

One of the most interesting objects in my collection is a US made tent with a US quartermaster Depot tag on it... that the tag clearly states is "Australian Pattern". It was lend Lease that either never made it or, as you just mentioned was returned? Either way it is rare and makes for quite the conversation when I use it at reenactments.

Matt

[Lang]

One of the things not quite clear in the USA/Australia relationship is the fact Australia actually paid cash for a huge amount of equipment in normal commercial sales outside Lend Lease.

A very large amount of stuff coming in to Australia was actually paid for unlike the British after the first 18 months. That is one of the reasons the deal could be finalised so quickly as the ledger balance was close to even.

Churchill's greatest feat of the war was to convince the unwilling Americans to give them stuff on time payment (Lend Lease). Britain was absolutely broke, they had turned all their gold reserves over to the Americans who demanded COD. They even tried to run roughshod over the Australians and Canadians to use their gold reserves on American shopping sprees for Britain but common sense prevailed.

Lang

[Mike Cecil]

Lang,

For the period Sept to Nov 1939, there was no purchases whatsoever of warlike stores from the USA. From Nov 1939 to March 1941, it was the 'Cash and Carry' period where a country had to pay for all purchases in cash, and from March 1941 it was mostly Lend Lease, with the Australian policy being to obtain as much as possible under Lend Lease and only small cash purchases were allowed.

According to the Ministry of Munitions, the balance of LL to RLL at war's end was that the RLL side of the ledger was about 75% of the LL side.

Mike

[Lang]

Mike

That was my point.

There was LL and Reverse LL. If as you say the balance was 75/25 how did Australia finish up so close the square? Certainly more at play with this treaty then raw LL/RLL figures.

Lang

[Mike Cecil]

$27M difference in 1946 $ hardly seems like 'close to square' to me, Lang. The only cash purchases I have found record of after March 1941 were small amounts in the hundreds of $$ per transaction, which fits with the government policy ceiling of $1,000 USD. Even then, the purchase had to be approved by the US LL authorities as being in the mutual interest and best use of the resource.

Given the wide variety of items and quantities supplied to US Forces under RLL, it seems quite reasonable to me that Australia reached around 75% of the LL total supplied to Australia by war's end.

Mike

[Lang]

Mike

All converted to dollars. Reserve Bank of Australia historic charts.

In government terms at the end of a 6 year war $US27m or 9m Australian pounds is pretty much SFA. This was around 3 weeks pay bill for the Australian Army at average numbers during the war. This equates in buying power today to $683,361,000 Australian Dollars.

At that time it took 3 US dollars to buy an Australian Pound.

They announce that much every election on single squeaky wheel vote buying projects. The proposed Virginia Class submarines for the RAN will cost $171,000,000,000 at the end - without the doubling in price as the project turns into the usual shambles. That is about $22,000,000,000 per boat each which is 32 times the value of Australia's WW2 LL debt - both in today's buying terms.

It certainly was not in the ball-park of the billions equivalent British debt.

Regardless of the amount, how many years, or decades, would it take the bureaucracies of both countries to create a similar result 3,000 page treaty today?

Lang

[Mike Cecil]

Lang,

Nice figures.

However, your initial statement was " One of the things not quite clear in the USA/Australia relationship is the fact Australia actually paid cash for a huge amount of equipment in normal commercial sales outside Lend Lease." (my underline)

I've not seen any evidence of large cash purchases by Australia after March 1941. Perhaps you could direct me to your source for the evidence of this, as it would certainly mean a re-think for me about the LL -RLL relationship and process.

Mike

[Lang]

Mike

Just getting some figures together.

The indicators I am getting have more to do with commercial transactions from Australian companies involved in the war effort not official government treasury direct payments.

The thing I am trying to simplify is blurred because a great many of the Australian giants, particularly car and engineering companies, were either totally or largely US or British owned. Huge credits and debits were absorbed between subsidiaries. For example GM would send GMH a gearbox valued at X. GMH would sell the gearbox, in a vehicle, to the Australian Government at X + 20%. GM as the owner of GMH would receive the profit dividend (didn't stop just because there was a war on). The X would go to the capital investment they had in GMH which could be returned to them any time the company decided to declare an extraordinary dividend which happens often. All this outside LL and direct government treasury purchases.

Australian wool, previously banned in USA, was released for shipment and millions of pounds worth was shipped during WW2. The Liberty ships did not go back empty.

I still believe Australia got out of jail helped significantly by these commercial operations. Bear with me for some figures.

Lang

[Lang]

Mike

An interesting one from DFAT.

Australia actually had a trade surplus during WW2 (all those Liberty ships full of wool and wheat). Of course the vast majority was with USA which was the only game in town at the time.

Unemployment was at record lows (due to war production and military service), people had more money than ever and the Reserve Bank was terrified of a post war inflation run-away like after WW1.

I venture to suggest that the stuff westbound across the Pacific was war material actually purchased with Eastbound trade profits - a great proportion commercial transactions by Australian war contractors not government.

Still collecting data.

[Mike Cecil]

Hi Lang,

Some points to consider:
. The USA was a net exporter of wheat, not importer (along with Canada and Argentina) and
. the graph shows a net surplus for the 10 year period 1940-1949, not just the WW2 period (1940-45). With the vast amounts of wheat and wool placed into storage in Australia during WW2 (despite moves to both reduce the national sheep flock and restrict the area under cultivation for wheat by the respective governing boards, The Australian Wheat Board and the Central Wool Committee), the 1946-1949 period saw a massive export of commodities generally as shipping became available, much of it to the UK and Europe. I'd suggest the trade surplus for 1940-1949 is more a result of that than "sending Liberty ships full of wheat and wool" returning to the USA during WW2.
. The items eligible for inclusion on the LL-RLL account did not include raw/unprocessed items such as wheat and wool. Item categories included: military stores, food (processed, ready to prepare and consume), services and construction - all of which were supplied to US forces in Australia and the Pacific, not exported to the continental USA.


Mike

[Lang]

Mike

. The items eligible for inclusion on the LL-RLL account did not include raw/unprocessed items such as wheat and wool.

That is what I am trying to track. The credits for those exports remained in the commercial world outside LL and I have no doubt were in the mix of cash/internal corporate dealings which reduced Australia's reliance on LL ..

This is a simplistic explaination and business financial dealings are usually far more complex and often so obscure to be opaque so no financial audit or tax investigation could ever get to the full facts of the operation. This is nothing new and off-shore companies and accounts. shell companies, inter-company billing, kick-backs and profit shifting go back to Roman times in various forms.

My thinking is say, Elders, as agents for the Wool Board sold a shipload of wool to USA and had a million dollars put in their USA branch of Bank of NSW account. The Brisbane Boot Lace Factory needed a million dollars of US bootlaces for a contract with the Australian Army.

The BBLF deposited a million dollars equivilent pounds into B of NSW in Australia to Elders who then credited the BBLF their USD holdings in USA.

Elders via the Wool Board distributed the money to Australian farmers. BBLF brought in the bootlaces, sold them to the government with 20% markup and LL knew nothing about the deal.

No physical foreign exchange outgoings or shifting gold across the room in Fort Knox on a government level, only credit exchange between commercial entities.

Lang

[Lang]

Mike

This is an interesting study on WW2 Australian wool. The vast quantity of wool stocks in Australia you refer to largely belonged to Britain who had paid for them and not a backlog of unsold product.

At the end of the Second World War the stock of Australian, New Zealand and South
African wool in the ownership of the United Kingdom Government is 10.4 million
bales. At a meeting of officials from each country held in London in April-May of
1945, the four governments form a joint organisation called, UK Dominion Wool
Disposals Limited to market and sell the stockpile, together with future clips, in an
orderly fashion to ensure the stability of wool prices. By the end of 1951, all the
stockpile is sold, as well as the wool bought in by the organisation at the floor price.

Lang

https://www.jstor.org/stable/40274932

[Mike Cecil]

So not heading in Liberty ships to the USA.

Thanks Lang, all adds to the understanding.


Mike

[Lang]

Just found there was 250,000,000lb Australian Wool Reserve created in USA'

This would have been the Liberty Ship cargo.

I do not want to buy the book but the excerpt leads me to believe this was British owned wool to be converted to product for British war effort.

Will follow up.

Lang

British Economic Warfare in the Far East and the Australian ...https://www.jstor.org › stable
by K Tsokhas · 1993 · Cited by 4 — Creation of a reserve of 250,000,000 lbs of Australian wool in the United States. DO 35/1089. Page 13. 56 THE AGRICULTURAL HISTORY REVIEW

[Lang]

Think I have spent enough time on this. Regardless of how it came about it was a pretty quick and neat conclusion with a great can-do attitude treaty.

Lang

[Hanno Spoelstra]

This surely makes for interesting reading. Convinced now more than before that Lend-Lease was used as a money-making scheme for some of the actors in the "value chain". Also think of (mainly US?) companies with overseas plants in occupied countries making equipment for the enemy...

Read the Canadian perspective here: Canadian Economy: US and British Wartime Aid by David Hayward

[Ed Storey]

While Lend Lease certainly paved the way for the Allied victory in the SWW, it also helped open up global markets that were closed to US manufacturers as it was tied to the European powers dismantling their overseas empires in the post-war era.

[Mike Cecil]

250M pounds of wool = between 600,000 and 950,000 bales depending on quality/packing density = much less than a year's Australian wool clip. By June 1942, the US stock of wool from all global sources exceeded 2.7 million Bales of wool. It is why, by 1945, with all the difficulties of selling and exporting wool during the war years, there was over 5Million bales in storage in Australia, most owned by Australia.

The British purchased wool in large quantities in the years 1939 to end 1941 for strategic reasons: (1) to prevent Aust wool being sold to the Japanese and (2) to prevent Aust wool being sold to third countries which could then on-sell to Germany by importation through Russia. By the end of 1941, both strategic reasons had vanished. The Brits sold some of their Aust wool in storage to the US in late 1941 (agreement reached in September) to provide the British with much needed US$ but as noted above, the quantity was not even a single year's Australian clip. So ships heading to the USA in late 1941 and early 1942 may well have carried wool on the return journey.

But did wool and wheat vector into the LL-RLL formaula? Nothing I have found supports that contention. As detailed in Butlin and Schedvin's volume of the official history, the LL-RLL account did not include unprocessed commodities.

The Canadian Mutual Aid agreement - now that's a whole different bag of worms!!



Mike

[Hanno Spoelstra]

Originally Posted by Ed Storey

While Lend Lease certainly paved the way for the Allied victory in the SWW, it also helped open up global markets that were closed to US manufacturers as it was tied to the European powers dismantling their overseas empires in the post-war era.

And who was demanding the European countries to dismantle their overseas empires? Right...

[Ed Storey]

Yeah, its amazing how that works. If you look at current events, as the market in Afghanistan for western manufactured weapons closed, another quickly opened in Ukraine. Ah, there is nothing like a good war to make money off of.

[michaelkoudstaal]

Originally Posted by Lang

... Australia was $20 million behind but laid off debts by giving USA title to land ie the American Embassy in Canberra and promising to run education programs - I don't know if they ever did such a thing.

Originally Posted by Lang

At that time it took 3 US dollars to buy an Australian Pound.

I think the premise of that line of thinking might be wrong. If it is not a strictly financial arrangement, then that shifts it over to something like a value exchange and that's going to get very subjective as to what is fair or balanced or equal.

[Lang]

The main point of my posting the treaty was to demonstrate the goodwill and determination to come to an agreement acceptable to both parties in a miraculously short time.

You might go so far as to equate the US/Australian total Pacific War relationship to some family business. Everybody in the family contributed to their best endeavours. Obviously some were stronger and there were inequities but as Paragraph 7c says, in the interest of a fast conclusion and the opening paragraph talking about defeating the common enemy they shook hands.

There are several paragraphs about each side being able to get their stuff back if they wanted but I am sure this was to appease the naysayers to keep a foot in the door of any bad deals. Of course neither side ever acted on any sort of recovery action.

Lang

[Mike K]

https://recordsearch.naa.gov.au/Sear...spx?B=31426018

More reading

[Mike K]

https://collections.slsa.sa.gov.au/resource/B+70617/2

https://collections.slsa.sa.gov.au/resource/B+70617/3

[Mike K]

Buttons for U.S. uniforms made in Fitzroy, Melbourne

https://fitzroyhistorysociety.org.au...ext-13-Dec.pdf