1946 Australian Lend-Lease settlement

[bauple58]

Recent scholarship (link below) reveals that although Australia had hoped to retain the bulk of its Lend-Lease combat aircraft, lingering enmities (between the US and Australia) combined with federal election pressures to ensure their exclusion from the mid-1946 settlement agreement - and subsequent destruction.

http://doi.org/10.1111/ajph.12894

 

[Geoffrey Sinclair]

The article does not put a figure on Reverse Lend Lease. New Zealand apparently ended up supplying more to the US on lend lease than it received. WWII cost the Australians 2,500,000,000 Australian pounds.

The Australian official history War Economy 1942-45 by Butlin and Schedvin make the polite point on Lend Lease, on page 127 "The US would receive her "consideration" in the form of an international economy freed from the strictures of excessive interest commitments and, hopefully, from discriminatory tarrifs, which would allow world trade to expand rapidly."

A problem was items like tinplate came under Lend Lease, much of which was used to can food sent to other countries. And of course Lend Lease items sent to other countries but ended up in Australia.

The history notes all figures should be treated with caution, there was some arbitrary amounts and incomplete figures. Things like the exchange rate used further complicate matters. US lend lease to Australia is put at 335,611,000 pounds, or 1,409,565,000 US dollars, this is with 13.5% added to US lend lease shipments for transport etc. costs. Munitions comes to $522,677,000. The article says it was US$2,000,000,000 of aid.

Australian Reverse Lend Lease is reported in 4 categories, the monetary grand totals are Military stores 77,098,000 pounds, Food 77,297,000 pounds, Services 84,117,000 pounds, Construction 43,048,000 pounds. Total 281,560,000 pounds, 1,069,928,000 US dollars, making it US$350,000,000 nett US Aid according to the Official History. Sources for the table are Commonwealth year book no 46 (1944-45) and Finance Bulletin no 38 plus Reports to congress on Lend Lease operations especially 20th and 21st reports. Australia provided 95% of the food the US Army in most or all of the South West Pacific in 1942/43, down to 50% in 1944-45 as the country found it needed more labour to increase production, and bad seasons intervened. There is an article by R Allen "Mutual Aid between the United States and British Empire 1941-45", Journal of the Royal Statistical Society Vol CIX, the total aid figure given for Australia in the article is considered high by Butlin and Schedvin.

In March 1945 the Lend Lease act was amended to exclude post war relief, rehabilitation and reconstruction. The US terminated Lend Lease on 17 August 1945 with minimal domestic criticism. As of V-J day it was back to cash. There had been some moves about settlements given the end of the European part of the war but Japan was expected to fight on into 1946. The initial pressure was to settle civil use goods, like agricultural machinery and vehicles. The Australians decided to go it alone, in December 1945 the British managed a settlement of around a tenth the book cost for items in Britain plus a $3,750,000,000 loan, payments deferred until 1951. In May 1946 the Australians paid US$20,000,000, plus the equivalent of US$7,000,000 to be retained in Australia for programs of mutual benefit.

The RAAF likes to say for a few weeks in 1945 it was the world number 4 air force, the RCAF had begun demobilising earlier, the RAAF had already started shrinking, down to 171,095 men and women 31 August 1945, the post war Plan D saw personnel strength around 8,000 in the second half of 1948. That meant as of mid 1949, 1 fighter squadron on Japan, 2 in Australia, plus 4 Citizen Air Force fighter squadrons, 3 heavy bomber squadrons, 2 transport squadrons, 2 GR squadrons, 1 each Tac/R, Target Tow, Survey, Communication squadron with squadron strengths well below those of 1945. Plan D had been given to the RAAF in early 1946, smaller than what the RAAF wanted there was push back for a time. The planned 1947/48 force level included 5 B-24, 90 US built P-51 and 57 C-47, out of a total front line strength of 279 plus reserves The B-24 and US built P-51 going in 1948/49.

The RAAF had 817 personnel on 1 April 1934, growing to 3,489 on 3 September 1939, the front line inventory on 1 September being 54 Demon, 21 Seagull and 82 Anson, total 155, no reserves.

The article has RAAF WWII Aircraft supply as 8,694, the RAAF thinks September 1939 to August 1945, 3,482 local supply, 2,648 US supply, 2,818 UK supply, total 8,948, with the usual crop of special cases, borrowed aircraft, arrived damaged beyond repair, diversions from other shipments and so on. Post war arrivals were 2 B-24 and 36 P-51. When it comes to Lend Lease the Vengeance came from British as well as Lend-Lease contracts, on 30 August 1945 the RAAF had 5,631 aircraft on inventory, including 436 P-40, 287 P-51 (including up to 18 locally made), 254 B-24, 37 B-25, 115 Catalina, 13 Kingfisher, 115 C-47, 12 Mariner, 12 C-61 and 251 Vengeance, total 1,533. Not sure what types are supposed to constitute the reported 37% commercial types. Three years later, on 1 September 1948 it was 5 P-40, 200 US built P-51, 237 B-24, 32 B-25, 31 Catalina, 5 Kingfisher, 67 C-47, 5 C-61 and 50 Vengeance, total 632.

The big P-40 cull was in June 1948, from 291 to 5 (Spitfires from 339 to 39 same month), 30 Catalina went in the final quarter of 1946, another 20 a year later (As of 1 April 1947 32 had been sold out of 81 offered for sale), Vengeance was 40 gone in early 1948 then another 140 in June 1948. C-47 numbers gradually declined, including at least 18 sold. Officially the RAAF went from 3,613 to 1,983 aircraft in June 1948. The P-40 and Spitfires were listed surplus/for disposal in September/October 1946.

As for local airlines sales were made to Qantas, Trans Australia Airlines and other smaller companies. Australian Lend Lease requests went through Douglas MacArthur and while Australia building heavy bombers was a nice idea in 1943, by end 1944 the US had a big surplus of the type. Despite the claims of detailed Australian records items sent to the civil economy were hard to inventory to see what remained.

The article talks about Lend Lease aircraft orders being cancelled as early as August 1944, citing the A-25 Shrike, the RAAF cancelled 142 dive bombers in January 1944, mostly A-25, it received 10 and only assembled one of them. In March 1944 came the cancellation of the Vengeance order. Not sure what the 466 surplus aircraft reported returned to the US in Australia were, certainly there was a collection of odd items from the 1942 period, like P-43, but not 466 aircraft. The RAAF made further Lend Lease orders in 1945.

Looks like there were 31 not 40 Care and Maintenance Units, usually the renamed remnants of the wartime unit occupying the base, some used as aircraft stores.

So the US retained official ownership of several hundred WWII combat types often sitting in the Australian sun, but was forbidden to re-import them, the article does not say who ended up with the money for their sale or scrapping, also what happened when say a US built P-51 was lost in service, most of which were in Japan. Australia was replacing its US built P-51 with local production, the B-24 with Lincoln.

The rushed negotiations in a changing landscape were clearly messy, not helped by the death of an Australian chief negotiator in Washington. If the article is correct the amount in question was as high as US$1,000,000,000 and at least US$350,000,000, the Australians paid $20,000,000 plus spent $US7,000,000 locally and this is a bad deal for the Australians? Because the US might exercise ownership rights over a diminishing percentage of RAAF aircraft? Did they ever? With new much better jet fighters on order as of mid 1946?

Butlin and Schedvin make the case on pages 611/612 Lend Lease was imperfect but better than what had gone before and Australia ended the war with less foreign debt that it started with.

 

[bauple58]

Geoffrey, thanks for taking the trouble to read and comment. I have relied mostly on unpublished primary source data, rather than published secondary sources (e.g. Butlin et.al.). This may help explain some of differences you mentioned.

 

[Geoffrey Sinclair]

As Butlin and Schedvin note the difference in the balance between US Lend Lease and Australian Reverse Lend Lease varies according to source and is ultimately a matter of judgement. At the start of the article Lend Lease to Australia is given as $2,000,000,000 but around reference 82 the article puts the difference between the two flows of aid as $100,000,000, so either reverse aid was much more that the official history states or the book value of the assets in question had been written down, from somewhere between $350,000,000 and $1,000,000,000 but how that happened is not given. Also how did $2 billion of total Lend Lease aid become $2 billion of modern aircraft in the paragraph before conclusions?

So the US makes an initial offer of $100,000,000, privately thought they could settle for $15,000,000 finally settled for $20,000,000+$7,000,000 and the Australians are not entitled to note how they ended up with a big discount from the initial offer? Also is that 78 million pounds or dollars? There is a big difference between the two. On 7 May 1946 the Australian Prime Minister reached Washington, to see the US offer dropped to $33,000,000, counter offer $20,000,000, difference split on 9 May to reach the final settlement. The consequences to Australia's air defences was nil, if later payments were made to the US for the aircraft then the settlement figure is misleading.

Lend Lease ended up too broad, for example the British asked in 1944 I think for some items to be removed so they could restart some of their export industries and being so big a sudden stop was going to cause problems.

The article has in March 1946 the US says it is abandoning the Lend Lease aircraft in Australia, do with them what you want, in May they assert title and the RAAF has to await permission to dispose of the aircraft and hand over any proceeds? It that correct? If the US did retain title to the aircraft then there should be a record of payment to the US as the aircraft were sold, I have never tried to find this so have no idea. If the US did retain ownership then they missed a chance to reclaim 2 squadrons worth of P-51 in Japan in October 1948 when the RAAF force was reduced to 1 squadron and shipped the surplus aircraft to Australia. At a time when the local USAAF was still using the type.

The main problem I have with the article is the conclusion the ultimate price paid by Australia represented a bad deal, that is not supported by the information provided. The RAAF might have wanted to keep a lot of US types in service post war but the government did not want that big an air force, and needed to make room for local production, 80 Mustang and 8 Lincoln by end 1946, plus continued Mosquito output. The British contribution to the RAAF aircraft pool goes like this, almost all trainers were RAF property, hence why they retained RAF serials, as far as I am aware the Australians paid for the Beaufighters and Mosquitoes but not the Spitfires, at the end of the war the British wrote off the aircraft in Australia, leaving it to the RAAF to dispose of them, sound familiar? So when it comes to fighters the post war RAAF had the Spitfires available. Essentially the RAAF was going to be local P-51, local Mosquito, local Lincoln with mostly local trainers, Wirraways and Tiger Moths, but US C-47 transports and Catalinas. It would require US P-51 and B-24 in service for a while to get there. Regardless of how good they were the small numbers of various US and other types on strength, like C-60, were not viable in the post war air force given maintenance requirements. When it came to local civil use the C-47 was much desired but there were lots more British types, Ansons etc. and better spare parts supply, the RAAF did not need nearly 900 of them, plus 300 Oxfords.

Australian Archives Series A11252, the RAAF Chiefs of Staff reports, weekly during WWII, monthly afterwards, around 15,500 pages of what the RAAF was up to. The RAAF makes a nice study, big enough to have a wide force mix, but much smaller than the RAF and USAAF. And the A11252 files are readable online and downloadable. They contain the inventory reports.

Next complication Lend Lease provided spare parts as well as whole aircraft, for example spares for the Hudsons the RAAF ordered and paid for in dollars in 1939/40, by 1945 there would be a lot of Lend Lease in the survivors. As the article points out trainers like Tiger Months had a higher post war market price than fighter aircraft, the former could be flown by civilians, the latter were for scrap merchants. Transports were in high demand, and the fuselages of the larger bomber types made good sheds etc. When it comes to residual price not all Lend Lease aircraft were sent new, the 12 RAAF Martin Mariners had between 229.2 and 1,385 airframe hours in prior US service, the engines between 23.6 and 890.8 hours on them.

The article states assurances were given about not expecting repayments, the reference for that actually states the debts cannot be repaid in US dollars, at least in 1945.

Airlines, Qantas, Australian National Airways, Trans Australia (Postwar), MacRobertson-Miller and so on. The Wiki article on TAA notes 16 airlines pre war. Now you can argue few of them were national, operating in all states, but they existed. Perth Western Australia had 216,000 people and its isolation made it an expensive flight, the RAAF tended to do multi stage hops when moving aircraft there, Hobart Tasmania, 61,000 Darwin, Northern Territory had 1,000 people, not a lot of customers, then post war, even with a bigger population, there was a legislated 2 national airlines policy for quite a while. Australia was one of the world leaders in aviation use in the 1930's, using national airlines as a measure does not reflect that. See also List of defunct airlines of Australia - Wikipedia

Why did Australia's decision to build heavy bombers cause such a strain on US relations, the more Australia built the less the US had to build or finance? The associated reference newspaper article states Australia tried to license build the C-47, trying to track this down in the Australian Archives and RAAF documents comes up blank so far, while there are files on the planned post war Avro Tudor program that was ultimately cancelled. Also Australia's engine production was inadequate for the Beaufort and Boomerang it built, so any C-47 would require imported engines or fewer Australian built combat types. All up 870 Twin wasp built, 1,650 required for the Beauforts and Boomerangs, plus spares. The need for transports saw De Havilland build 87 DH.84 October 1942 to June 1943. Australian built 1,300 Gypsy Major Engines for its DH.84 (184 engines) and 1,070 Tiger Moths but exported Tiger Moth airframes only to South Africa. Minor issue, the Lancaster III used US built Merlin engines, the Lancaster I British built Merlins. MacArthur certainly wanted more aircraft repair facilities but he was not the US government.

On 31 August 1944 RAAF holdings of US types were 403 P-40 Kittyhawk, 39 B-24, 276 Vengeance, 10 A-26 Shrike, 33 B-24, 23 A-20 Boston, 72 Ventura, 71 Catalina, 15 Kingfisher, 1 P-38, 10 C-60, 55 C-47, 4 DC-2, 57 Hudson, 12 Mariner, 13 C-61 Norseman, 25 Ryan, plus another 13 C-47 and 5 C-60 on loan from either the Dutch or Americans. Ignoring the loans that is 1,048 aircraft, and the RAAF handed back 466 which were surplus? When? What types? The Hudsons were not Lend Lease, the Kingfisher and Ryans a Dutch order, the DC-2 cash purchases, a number of the Vengeances were British cash purchases, while some of the P-40 were British and Dutch Lend Lease orders transferred. In the final quarter of 1943 the RAAF handed back to the US forces the small numbers of P-39 Airacobra, Brewster Buffalo and P-43 Lancer it had picked up in 1942. While 20 P-40 were transferred in late 1944 to partially repay a "loan" from 1942.

On 28 July 1944 the Chiefs of Staff report total orders for US types were 800 P-40, 178 B-24, 135 Catalina, 67 C-47 and 15 Mariner, they do not mention the P-51 order for 285 from the US until 29 December, though it was approved earlier than that. As of 27 July 1945 the total P-51 order was for 499 as 1 had crashed in the US, along with 60 B-25, 393 B-24, 197 Catalina and 144 C-47. That is not a cut back of Lend Lease aircraft.

Australian Archives A1695 18/205/EQ which covers some of the 1945 Lend Lease Aircraft is readable online.

There is at least 3 Archive copies on the RAF Post war strength Plan D, AWM123 485, A5954 1842/3, AA196 395 but not readable online. The RAAF planned to reduce its strength to around 35,000 personnel by June 1946, and have 59 B-24, 117 P-51, 53 C-47, 21 Catalina and 16 B-25 on strength, including reserves, to help equip 34 squadrons, in January 1946 the government instruction was 20,000 personnel at most, in May, 15,000, by end June actual strength was around 24,500, end of year 13,200. As of April 1947 the personnel section was reporting authorised establishment as 15,000 including non exempted civilians.

As for the US aviation industry being the biggest US employer where does that come from, the CAA notes employment in the airframe plants, the engine plants, the propeller plants, the glider plants, the modification centres, the subcontractors, the government furnished equipment plants plus the "special purpose" peaked at 2,101,552 people in November 1943, still at 1,237,300 in July 1945, down to about 242,000 in December. US military production in 1945 was 46,865 military plus 2,047 civil types, military output dropped to 1,417 in 1946, civil production 1946 to 1949 halves each year, 35,001 in 1946 then 15, 617 then 7,302 and finally 3,545. Military production excludes gliders and target types.

The tone of the article is one where I struggle to find a single compliment, but see plenty of negative character assessments. It reads along the lines of the marriage was never good because the divorce was ugly. The US rightly had to extract some money for retained goods, much was still valuable but some of the originally most expensive items were now near worthless, others depreciated, others not worth the cost of the US retaking control but useful locally, plus just how much stuff arrived and was still around was not totally clear to either side. Negotiation time.

You may want to check out how Britain helped finance and arm continental powers for fights against Napoleon.

 

[bauple58]

Geoffrey, thank you once again for your enthusiasm and interest, both of which exceed that encountered elsewhere. I would normally want to respond to each and every one of your points however, present circumstances do not allow me to do so, at least not until after August. That said, and in light of your keen interest, I would encourage you to consider working these two posts into a rebuttal or response, also suitable for publication in a peer-reviewed scholarly journal. As you clearly have a great knowledge of this field you will appreciate that there has been no scholarly interest in the subject - until now. Informed and reasonable discussion offer us the best hope of arriving at something, approximating the historical truth.

The often-repeated claim that aircraft manufacturing was then the largest U.S. industry is supported by U.S. official employment data, vide U.S. Department of Commerce Bureau of Census, Statistical Abstract of the United States: 1946, 67 ed. (Washington, D.C.: U.S. Government Printing Office, 1946), 203, Table no.14.

Regards,


Mark

 

[Geoffrey Sinclair]

The often-repeated claim that aircraft manufacturing was then the largest U.S. industry is supported by U.S. official employment data, vide U.S. Department of Commerce Bureau of Census, Statistical Abstract of the United States: 1946, 67 ed. (Washington, D.C.: U.S. Government Printing Office, 1946), 203, Table no.14.

The US Yearbooks are online. Statistical Abstracts Series

Statistical Abstract of the United States: 1946 you want part 3

https://www2.census.gov/library/publications/1946/compendia/statab/67ed/1946-03.pdf page 99 of the PDF.

I am assuming 203 is page 203 and table 14 is actually meant to be 214. The logic of using 1944 data for 1946 is a problem, it was well known the US aircraft industry would shrink. The section seems to only have work force figures from 1940, which shows many sectors of the economy had bigger than the 500,000 workers the aviation industry had in December 1945. The main problem is the table quoted is an index, not worker numbers, for every 100 people or every 100 dollars paid in wages in 1939 how many and how much for 1941 to 1944. If they were raw numbers then they are twice what the U.S. Department of Commerce - Civil Aeronautics Administration Office of Aviation Information - Division of Aviation Statistics U.S. Military Aircraft Acceptances 1940-1945. (Dated October 1946?) reports. A copy of the report is in US Archives Record Group 149 Box 2741.

Going to https://www2.census.gov/library/publications/1947/compendia/statab/68ed/1947-04.pdf there are work force figures for 1946, charting the rise of the civilian work force as the US military wound down, hitting 60 million in July 1946 (page 16 of PDF) the aircraft industry would be in the 10.5 million manufacturing workers. It looks like detailed break downs by sector are once every 10 years. The 1940 figures supplied in the yearbook can be compared to the CAA saying the industry had 97,600 employees in January and 227,789 in December.

I would encourage you to consider working these two posts into a rebuttal or response, also suitable for publication in a peer-reviewed scholarly journal. As you clearly have a great knowledge of this field you will appreciate that there has been no scholarly interest in the subject - until now. Informed and reasonable discussion offer us the best hope of arriving at something, approximating the historical truth.

Think through that invitation, based on experience it would involve visits to archives in 3 different cities with associated elevated travel and accommodation costs, with writing it adds to weeks of my time, then find a journal that would take the output and let me pay affordable fees to publish.

Outline: Lend Lease and what it covered, the different ideas of the end balance, the original price of the items remaining, the estimated 1946 values of the items, pointing out the paradox of some of the most expensive items were now about the least valuable and gluts of items now unwanted by the military reduced their individual value to near scrap anyway, the costs of the US recovering and transporting items. The options for disposal, like commissioning the Australians to auction the items off, how to handle any items sold to the private sector during the war. The time line and offers made until the final settlement, what both sides privately thought was a good enough deal. Whether the US did or did not retain title to the Lend Lease aircraft and what that meant in practice, for example did the Commonwealth Disposals Commission pay the money received from such sales to the US, did the RAAF do likewise, did the RAAF have to ask permission for certain deployments. Proving either the positive case, records of financial payments or the negative case, there were none as none have been found. The C-47 are an obvious good initial check, next would be the arrangements for replacement P-51 for the RAAF in Korea, where did they come from and who paid.

I decline the invitation. Partly because of my most recent brush with Australian academia.

https://eprints.qut.edu.au/87976/6/James_Rorrison_Thesis.pdf

The head of the department says the university stands behind the thesis. Only one of the 3 academics named replied and it was along the lines the examiners passed it so no problems, there was no engagement with the material I presented, and yes the suggestion was I go away and publish my work somewhere. The central theme of the thesis is the Australians could have easily foreseen the need and then created an air striking force comparable or better in mix, quality and quantity to the USN at Midway, putting it in place in Darwin in February 1942 to counter attack the IJN Kido Butai. It would have to be US aircraft as the US industry delivered quality designs on time, and in 1939 had plenty of spare capacity, so could deliver the required aircraft in 1941, sort of like the PPE industry had spare capacity in 2019, so it must be similar in 2020 and 2021. The British industry considered hopeless, bad designs and never on time, an example is the Short Sunderlands, ordered in 1939, delivered in 1944, the fact there was a 1939 order delivered on time that stayed in Britain to equip 10 RAAF squadron in September 1939 and a second order for transport versions made in 1943 and delivered on time does not make the thesis. Nor does the order for US built dive bombers, deliveries planned to start in June 1941, the aircraft were never delivered.

Official documents being referenced do not support what the thesis is saying. Newspaper articles are a regular reference despite wartime censorship and the usual politician's use of media. The thesis has little idea of aircraft production numbers and costs, things like deciding Wirraway trainers being cheaper than Hawker Hurricane fighters. And so on and on and on, there were so many problems at times I was commenting on each page and I probably could have done more.

Since the thesis says the solution was so obvious and achievable there are few compliments for the people involved but plenty of negative comments. A thesis example of personal failure is on Page 115 the quote, "Flight Lt. Clive Caldwell (left), the leading Allied fighter exponent of the desert air war during Menzies' visit to North Africa in early 1941. Despite Caldwell's knowledge and experience, Menzies failed to consult any RAAF personnel about air defence" Pilot Officer Clive Caldwell was posted to the Advanced Headquarters of the Desert Air Force on 11 April 1941, joined 250 RAF squadron on 5 May 1941 flying Tomahawks, first victory claim on 26 June, promotion to Flight Lieutenant came later. Australian Prime Minister Menzies was in the Middle East in February, time machine required.

To repeat the head of the department says the university stands behind the thesis and my information went nowhere.

Australia does have an academic regulator, TEQSA Tertiary Education Quality and Standards Agency, "Generally, we will only take action on concerns where: there is a serious risk to students or to the quality or reputation of the higher education sector". One incredibly bad thesis enough? To encourage public interaction the final section of their complaints form "I understand that giving false or misleading information is a serious offence."