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«Mark Harrison Department of Economics University of Warwick Coventry, England CV4 7AL Tel +44 203 523030 Fax +44 203 523032 Note This is a ...»

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This increment to food resources clearly released domestic food supplies for civilian use, and prevented overall nutritional standards from falling further. To the extent that minimum standards had been achieved, however, then farmworkers could be released for other equipment-using employment - military service, or equipment-making for industry and the military. Moreover, since agricultural work was of very low productivity by 1943-44, in ruble terms far below that industrial workers, especially in engineering and munitions, the transfer of workers from farm to factory could significantly affect total output. 45 To the extent that military needs were satisfied, capital investment gained.

The importance of lend-leased equipment for the Soviet capital stock and postwar reconstruction has received some attention. Some light was shed on this topic when, in 1946, Voznesenskii reported the results of a Gosplan investigation into the cessation of Lend-Lease, undertaken in response to war cabinet instructions of the previous summer. He concluded that while, in many branches, domestic shortages of previously lend-leased commodities would be automatically compensated by a reduction in the requirements of war production, a number of persistent shortages would require special attention. The "deficit" commodities, including iron 44 A classic treatment of this problem is the "two-gap" model devised by H.B. Chenery, A.M. Strout, "Foreign Assistance and Economic Development", American Economic Review, 50 (1966), 679-733.

Mark Harrison, "Soviet Production and Employment in 45 World War II: a 1993 Update", University of Birmingham, Centre for Russian and East European Studies, Soviet Industrialisation Project Series, no. 35 (1993), table 3.

- 29 and steel products, nonferrous metals, chemical and rubber products, paper, equipment, food products, and aircraft fuel, are listed in table 9, which illustrates the quantitative dependence of Soviet industry on imported supplies under each heading in 1944.

Dependence of the Soviet economy on external machinery supplies in this period has been emphasized recently by Khanin. He has suggested that between 1941 and 1950, two fifths of gross investment in the stock of Soviet metal cutting machine tools was derived from imports comprising lend-leased supplies and postwar reparations. 46


By comparison, the inter-Ally dimension of wartime aid is easier to grasp. Was aid a subsidy from rich to poor, or an instance of resources shared among equal partners? Wartime governments naturally tended to emphasize the latter. It suited equally the Anglo-American desire to cement the USSR into a temporary union of strange bedfellows, and Soviet national feeling. Nor were the ideas of pooled resources and effective collaboration merely rhetoric. There was a real, practical logic at work, expressed in the division of labour among the Alliance partners. Within the alliance the wealthy, capital-abundant United States economy specialized relatively in the production of capital-intensive commodities such as weapons and machinery, high-grade materials and fuels, and high-grade concentrated and long-life processed foods. The Soviet Union continued to produce a broad range of military and civilian goods and services, but, relative to the Allies, specialized in the labour-intensive activity of fighting. The UK occupied an intermediate position, supplying weapons to Russia in the early stages of the war on the eastern front, but meanwhile receiving food, fuel, and machinery from the United States;

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eventually, American supply reached a scale sufficient to release significant British labour resources for the invasion of Europe from the west.

In principle, to the extent that the pattern of specialization followed a common Grand Strategy of the wartime Allies, each of the countries in receipt of American aid could have claimed a counterbalancing "export" credit item based on the supply of military services to the Alliance as a whole, matching the American contribution of machinery and materiel. Alan Milward has suggested that "in those cases where British tank crews had used American tanks it would make at least as much sense to charge the United States for the crew as the United Kingdom for the tank". 47 In practice, of course, no such crediting took place. One suspects it was not just an accident of peacetime accounting conventions that the result appeared to show Britain and the USSR as in receipt of a large subsidy. For one thing, any alternative would have involved the distasteful business of costing the expenditure of British and Russian human effort (on current account) and lives (on capital account) in the same currency as machinery and fuel. It would have meant an explicit recognition that the Alliance had chosen "rationally" to spend life most carelessly where it was cheapest. That this was indeed the tendency in World War II is suggested by the following figures. 43 Alan S. Milward, War, Economy and Society, 1939-1945 47 (London: Allen Lane, 1977), 351; see also Peter Howlett, "The Wartime Economy, 1939-1945", in R. Floud, D. McCloskey, eds, The Economic History of Britain Since 1700, 3 (forthcoming, 1993).

This was not a deterministic rule, however. Japan and 48 Italy, both poorer than Germany, suffered less heavily. GDPs per head are from R.W. Davies, Mark Harrison, S.G.

Wheatcroft, eds The Economic Transformation of the Soviet Union, 1914-1945 (Cambridge: Cambridge University Press, 1993), table 2 (Harrison); war losses and prewar populations are from B. Urlanis, Wars and Population (Moscow: Progress Publishers, 1971), 295, except USSR from Davies, Harrison, Wheatcroft, The Economic Transformation, 000 (Davies, Wheatcroft).

- 31

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Later, Soviet historians noted Truman's candid admission

that Lend-Lease dollars were aimed at saving American lives:

every Russian, British, or Australian soldier who went into battle equipped by means of American aid reduced the danger to young Americans. 49 For another reason, despite the rhetoric of Allied collaboration and the pooling of resources, there was never any doubt as to the national "ownership" of national military personnel. If, even on the western front, the command structures of the British and American forces were merged only at the highest level, in the east the coordination of Soviet with Allied military action was fragile in the extreme. It would have been no technicality or matter of indifference to leaders of the United Nations whether Soviet troops had operated with lend-leased American equipment, but under Soviet command, or had themselves been lend-leased to some multinational UN force.

In the end, therefore, it suited everyone to talk about mutual specialization and the pooling of resources, but in practice to account for resource transfers as aid and trade favouring the poorer countries of the Alliance. Both British and Soviet accountants dealt with the resulting ambiguity (aid as pooled resource, or as subsidy) by means of a common device; they accepted Lend-Lease, treated it as hidden revenue to the budget, and incorporated it in their own military spending totals.

Nonetheless, it seems that Allied aid to the USSR made possible the division of labour which won the war. Without it, everyone on the side of the Allies would have had a

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worse war. The Russians would have had to fight on their own resources, which were inadequate in quantity if not in quality as well, and would have fought less well, maybe only to a stalemate. The British and the Americans would have had to fight harder, because they would have had to take on a larger share of the killing of Germans and being killed by them; they would have had to choose either fighting with the same bitterness and intensity as the Russians, or accepting stalemate in the west. Perhaps, in 1942 and 1943, in place of surrogate combat for the few in the night skies over German cities, they would have had to choose combat for the many in the killing fields of Kent and Sussex; perhaps the required bitterness and intensity would have been supplied by an occupation regime on the south coast, with concentration camps in Kent, and corpses hanging from telegraph poles in Wiltshire villages.


Even now when the archives are becoming more accessible, there is no "true story" waiting to be uncovered among dusty documents, which will tell the world just how Lend-Lease was spent in the Soviet Union. Identification of the resources released by aid remains a matter for theoretical reasoning and scholarly conjecture, and will not be found in any auditor's report.

It remains no more than a plausible suggestion that 50 or so cents in every Lend-Lease dollar were reflected in increased Soviet defence outlays. But to the extent that the technical form of lend-leased goods for military use increased the military effectiveness of Soviet defence outlays as a whole, 50 cents in the dollar understates the direct impact of Lend-Lease.

The other 50 cents went, under assumptions reviewed above, to underpinning the bare subsistence of the working population, and to investment in maintenance of inventories and the fixed capital stock. Whatever the true proportions of its utilization, aid must certainly have freed some

- 33 resources for civilian use, both for investment and consumption; this was necessary and inevitable given the high degree of domestic economic mobilization, the extreme deprivation of the civilian sector, and the consequent blurring of the distinction between front and rear. In the last stages of the war, continued Allied aid may have freed some resources for postwar reconstruction. But there is a strong possibility that civilian resources were already too constrained for aid to do much more than avert further deterioration in both the working population and the capital stock.

Aid to the USSR contributed to the mutual specialization of the Allies according to the comparative advantage of each. This specialization made sense in so far as it allowed everyone to do what they were good at. The western powers could specialize in the serial production of sophisticated weapons, and in using them to fight at a distance, while the Russians could get on with combat at close quarters. This pattern was nonetheless perceived as burdensome on each side, since the qualitative differences of role were not felt to be mutually compensating. The British, and still more the Americans, resented the Russians' economic dependence, their official presumptions of moral superiority, and lack of official gratitude. The Russians resented the way their richer partners used their wealth to help the Russians to kill and be killed.

Here were the roots of mutual suspicion - the potential use and abuse of aid by both donors and recipients for purposes which had less to do with winning the war than with civilian and postwar objectives. Was Lend-Lease used in the Allied interest, substituting young Russian lives for those of Britons and Americans? Was it exploited by the Russians for civilian as well as military purposes, to serve postwar as well as wartime objectives? The answer to both these questions is, realistically, yes. But Allied aid was also, nonetheless, an effective "Weapon for Victory", and there

- 34 was no good alternative to it under the constraints of the time. Without it, everyone would have had a worse war. The western Allies would have had to kill and be killed in greater numbers. The Russians would have done less killing and more being killed. The tensions were simply inherent in the aid relationship, as the history of postwar development aid will amply testify.

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Source: R.G.D. Allen, "Mutual aid Between the US and the British Empire, 1941-1945", Appendix 3 of R.S. Sayers, Financial Policy, 1939-1945 (London: HMSO, 1956), 529, 535.

- 39 Table 2. Monthly Lend-Lease shipments to the USSR, 1941-1945 ($ million)

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Source: 1941-42, calculated from United States President, Report to Congress on Lend-Lease Operations, no. 14 (Washington, D.C.: U.S. Govt.

Printing Office, 1944), 58; 1943-45 from no. 20 (1945), 49.

- 40 Table 3. Principal commodities in United States total exports, cash and Lend-Lease, to the USSR, 1941-1944 ($ million)

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Source: United States Department of Commerce, "United States Trade with Russia (USSR) During the War Years", International Reference Service, 2, no. 41 (1945), 3.

- 41 Table 4. The burden of defence on Soviet resources, 1940-1944 (billion rubles and 1937 factor costs) 1940 1941 1942 1943 1944

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Absorption is GDP plus net imports. GDP and defence outlays are obtained in principle as by Mark Harrison, "Soviet Production and Employment in World War II: A 1993 Update", University of Birmingham, Centre for Russian and East European Studies, Soviet Industrialisation Project Series, no. 35 (1993), tables 1, 4; current revisions relate to new estimates for the production industries and defence procurement, and will be described in future work.

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no. 32 (1991), table G-2) is used to adjust Bergson's 1944 parity of 6 rubles/dollar to a 1937 basis; (b) for consumer goods and food products, "trade margins and extra processing costs" are ignored, and a further correction is made to convert prevailing-price rubles to factor cost rubles, assuming an average rate of turnover taxation in state and cooperative retail outlets of 90.6 per cent in 1937 (calculated from Bergson, Real National Income, 130), together yielding a parity of

7.4 factor cost rubles to the wartime US dollar rather than Bergson's 19 rubles.

Imports of non-US goods are accounted for only in terms of United Kingdom reciprocal aid (table 1) and trade, estimated freehand as follows: 1942 - $600m, 1943 - $400m, 1944 - $240m, and converted at the rate of 8 rubles of 1937 factor cost to the dollar suggested by Bergson, Real National Income, 100n.

- 43 Table 5. Revenues to the USSR state budget from foreign transactions, 1942-1943 (million rubles)

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