UK Prime Minister Keir Starmer has promised a return to “responsible global leadership,” hinting that there might be appetite for renewed ambition as a foreign aid donor. But few realise that the UK was itself a recipient of substantial overseas aid. As President Trump takes office, there is an opportunity to reassess the US approach to international partnerships based on interests. In this blog, we look at the foundations of the so-called “special relationship” between the US and the UK and undertake new analysis of US non-military financial assistance to the UK following the Second World War.
We find that the UK received a loan from the United States in 1947 that was the largest ever single-year financial transfer (in inflation-adjusted terms) that the United States has ever made. That support topped all other US Government foreign assistance for decades, and it took nearly sixty years to pay it off. We also look back at the United States's rationale for giving over $3.75 billion ($36 billion in 2019 terms).
We conclude that—even at a time when the United States was facing domestic challenges, it was able to invest substantially in an international partner that went on to become arguably its closest ally. These opportunities still exist today, and we urge both the UK and US to take a long-term view on the value of non-military investments in international partners.
The history of US foreign assistance
When considering international support, most analysts focus on Official Development Assistance (ODA). But this concept only came into being in 1969. There were substantial international financial efforts before then. The US captures its own foreign assistance going back to the 1940s through foreignassistance.gov, using the U.S. Overseas Loans and Grants data. Even this wasn’t the earliest example of international effort by the US. From the end of the 18th century, the United States committed to provide assistance in various forms, including pre-Constitution commitments to Algiers, Tunis, and Tripoli which included commitments to provide tribute. Ironically, following US independence, these early payments were necessary to counter Britain’s encouragement of state-sponsored piracy against US vessels (as they no longer enjoyed British Naval protection).
Post World War II support to UK and others
The modern era of US foreign assistance starts after World War II, and begins with significant economic assistance to the European powers (UK, France, and Italy) and Japan and Taiwan. But no country received more assistance than the UK.
The initial loan to the UK was one (loan) payment of $3.75 billion ($36 billion in 2019 prices). The initial loan was worth 1.5 percent of US GDP at the time and with the UK economy a quarter of the size of the US’ (in terms of spending power), this effectively added over 6 percent to the UK’s total expenditure. If the loan’s terms were similar to those of a World Bank IDA loan, the grant-equivalent would be around half of the face-value.
It would be over 50 years before another country would match or exceed even the nominal value of this early contribution, when the United States provided $3.8 billion to Poland in 2003 (though this was military rather than economic worth $5.2 billion in 2019 terms) and a year later the United States provided $3.86 billion ($5.1 billion in 2019 terms) in economic assistance to Iraq (data here).
Figure 1: US Economic Assistance to the UK by Instrument (Constant 2019 USD billions)
Source: US Overseas Loans & Grants (Greenbook), prepared by USAID Data Services on 14th July 2021
Notes: (a) Instruments (i.e. grants, loans) were determined where possible from the funding account name. (b) Years refer to US government fiscal years (which were July to June before 1976).
The support to the UK would have qualified as ODA had the concept existed at that time. The UK’s GDP per head was well under ten thousand pounds per head in 1950 (in 2023 terms), and so under the threshold to be classified as a high income country today (the high income threshold is $14 thousand (£11.5 thousand).
Over a longer time-frame, the total cumulative support to the UK since 1946 was $69.5bn (in 2019 prices), with nearly all of it in the first decade, and putting the UK among the top five cumulative recipients of US assistance.
Figure 2: Top 5 recipients cumulative recipients of US economic assistance (Constant 2019 USD billions)
|
Country |
Total assistance 1946-2019 |
|---|---|
|
India |
71.9 |
|
Israel |
71.8 |
|
United Kingdom |
69.5 |
|
Egypt |
68.5 |
|
Pakistan |
52.2 |
Source: US Overseas Loans & Grants (Greenbook) as above.
Note: This excludes assistance to unspecified recipients, which is the largest category.
Recent US economic support to Ukraine is not included in this analysis but it is approaching the value of the UK’s post-war support, and cumulatively Ukraine seems likely to enter the top five in the coming years. According to Kiel’s Ukraine Support Tracker, in the nearly three years to October 2024, the US had committed financial and humanitarian support of $57 billion (roughly $50 billion in 2019 terms), with around two thirds allocated (it has committed a further $71 billion in military support). Until 2019, US economic support to Ukraine totalled almost $6 billion in 2019 terms.
Political context of foreign aid and Marshall Plan
In 1944, the US and its allies created the World Bank and IMF; but the above amounts show that the US was also highly active in supporting post-war allies. President Truman and his team were intimately concerned with the economic collapse of their Western allies and took a number of steps to shore them up. Undersecretary of State for Economic Affairs William Clayton, Undersecretary of State Dean Acheson, and Secretary of State George Marshall made significant efforts to get the loan negotiated and passed by Congress. Winston Churchill, now out of office, even came to the United States to sell the loan. Assistance of this magnitude was unheard of for the United States. This single loan was greater than all assistance, of all kinds that the United States provided in the previous year. President Truman saw the direct link between the loan, and financial strain, to the UK and the post-War order. He even said in his 1947 address to Congress in support of more assistance to Greece and Turkey, “The British Government, which has been helping Greece, can give no further financial or economic aid after March 31. Great Britain finds itself under the necessity of reducing or liquidating its commitments in several parts of the world, including Greece.” Dean Acheson, in his famous speech to the Delta Council linked the loan to the United Kingdom to the expansion of the Export-Import Bank, IMF, the International Bank for Reconstruction and Development and to Truman’s words to Congress just a few months before. The link seemed obvious to those in the U.S. Congress defending the deal. House Majority Leader John W. McCormack (here) said, “In other words, to abdicate our necessary role in world affairs-adopt the attitude of economic and political isolationism-the policy of appeasement, and thereby leave practically all of the other nations of the world, against their will and desires, subject to the influence, gravity, and the orbit of the Soviet Union.”
A further lesson from this period (sometimes overlooked), is that along with the financial support, the Marshall plan was able to catalyse economic integration, the removal of trade barriers, and establish The Organization for European Economic Cooperation (OEEC, which later became the OECD). These were critical to European economies’ recovery and embrace of capitalism.
What does this mean for today?
The 80th anniversary of the Marshall Plan—which marks the modern era of U.S. assistance—is fast approaching. In this time, total US economic assistance to only India and Israel has surpassed that to the UK and the 1947 Anglo-American loan remains the US’ largest ever transfer in real terms. It is hard to believe any contribution at this scale was made, and at such economic and political risk to the US. But this loan kicked off a nearly century-long partnership between the United States and United Kingdom as their economic success, and the recovery of all of Europe, became intertwined.
Then, as now, there was concern about countries “subject to the influence, gravity, and the orbit” of rivals with a vision for the world that is less free. We urge the US and UK, building on their own shared history of success in this space, to see the value of investing in international partnerships to deliver both economic and security gains.
The UK should reflect on the fact that it has been a substantial recipient of aid. This may fit well with the Prime Minister and Foreign Secretary’s commitment to listen more to partners. It may also help to counter the view that supporting UK interests should only mean action at home; and to show that current aid recipients can be tomorrow’s trade and security partners.
Roman Napoli is Chief Financial Officer at the United States Agency for Global Media and former Deputy Assistant Administrator at USAID. The authors are grateful for comments on an earlier draft of this blog from Erin Collinson.
Disclaimer
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
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