In October 1937, the United States was already moving away from neutrality, with President Franklin D. Roosevelt, in his “Quarantine Speech”, calling for an international “quarantine” of the “epidemic of world lawlessness” against unnamed countries, but which ostensibly were Germany, Italy, and Japan. Roosevelt proposed imposing economic measures against them, rather than using outright aggression.
(Taken from Wars of the 20th Century – World War II in Europe)
United States in the interwar period In the period after World War I, the United States exerted strong influence on the economic recovery of Europe. Using American loans, changes were introduced to the German economy, allowing the Weimar government to restructure its war reparations obligations to the Allied nations. In turn, the latter repaid their war loans to U.S. creditors. By the mid-1920s, prosperity had returned to Western Europe.
In October 1929, the U.S. stock market crashed, ushering in the massive economic crisis called the Great Depression, first in the United States and spreading later to many parts of the world. The U.S. economy was hit hard, with unemployment reaching 25%, hundreds of thousands of people becoming homeless, some 5,000 banks (50% of the total number) failing, and many industries badly hit, including construction, mining, agriculture, logging, and shipping. The U.S. government reversed its foreign policy and turned inward-looking to confront its severe domestic problems. The effects of the Great Depression would be felt throughout the 1930s, and the U.S. economy would not fully recover until the early 1940s.
In the mid-1930s, with mounting tensions in Europe caused by an increasingly belligerent Nazi Germany, the United States passed the Neutrality Act in August 1935, where the United States would not sell weapons to any party in a war, which reflected the U.S. move toward isolationism and non-involvement in European affairs. By 1937, U.S. President Franklin D. Roosevelt felt increasingly drawn to the side of the western democracies, Britain and France, and with his lobbying efforts, U.S. Congress extended the Neutrality Act in May 1937, but which included the “cash and carry” provision, in that the United States would sell war materials to belligerents in a European war, on condition that the buyers pay for the goods in cash and make arrangements and bear full responsibility for their shipment. Ostensibly, all countries could avail of this provision; however, in reality, only Britain and France, with their large powerful navies, could purchase U.S. weapons, while Germany, yet in the early stages of building a navy, could not. The Neutrality Act was further extended in November 1939. However, in October 1937, the United States was already moving away from neutrality, with President Roosevelt, in his “Quarantine Speech”, calling for an international “quarantine” of the “epidemic of world lawlessness” against unnamed countries, but which ostensibly were Germany, Italy, and Japan. Roosevelt proposed imposing economic measures against them, rather than direct aggression.
After World War I, the United States adopted a pacifist foreign policy, demobilizing most of its armed forces, cooperating with the League of Nations, and participating in disarmament conferences and signing diplomatic treaties. In the 1930s, its neutralist and isolationist position made the United States unprepared for another war, and in 1938, the defense budget amounted to only 1% of GDP. But by 1940, U.S. involvement as a non-combatant in the ongoing European conflict was growing, and a perception grew that the country would eventually be drawn into war. As a result, defense spending rose dramatically to 13% of GDP, and many aspects of the civilian economy were set to be converted to war readiness.