Eighty years ago this week Britain is confronted with a "financial Dunkirk"
The new Labour government was confronted with an immense economic challenge. Without prior warning or discussion the US stopped Lend-Lease aid with immediate effect. Maynard Keynes had just circulated a paper warning the government that Britain faced "financial Dunkirk" because its economy was now entirely dependent on US assistance and was geared overwhelmingly to fighting a war which had just ended far sooner than anticipated. Britain was in the wholly anomalous position of being one of the "big three" world powers with attendant military and diplomatic commitments but financially bankrupt. Keynes calculated that Britain would need $5bn from the US to avoid "Queer Street" and "a sudden and humiliating withdrawal from our onerous responsibilities with great loss of prestige and an acceptance for the time being of the position of a second-class Power, rather like the present position of France." The government hoped to avoid having to take this...
