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The Two Giants: The USSR and the USA.
The two remaining elephants (or giants, if you want to mix your metaphors) in the room were the USSR and the United States of America. Both had been committed to neutrality for completely different reasons, but now the former was shifting gears while the later had steadfastly remained neutral.
The Gentle Giant - USA:
America continued her role as the piggybank of the world. American banks lent to both the Axis and Entente. American firms sold raw materials and finished goods to both sides of the conflict. American agriculture fed Japanese, British and German mouths. The American government basically guaranteed the stability of the loan agreements and used the promise of repayment to fuel an ambition public works and rearmament program. The Depression years had been firmly put in the past and with that, the Democrats looked politically dominant.
It was a good time to be American. But while America bankrolled the powers, she also prepared for war herself. The American military was over 3 million strong by the end of 1941 and expanding further. American industrial production was unrivaled, even by the USSR. The American bounty of seemingly limitless natural resources, the safety of two oceans, an educated population and gigantic industry meant that America did not have to choose between beating swords into plowshares or beating plowshares into swords - she could do both.
But the prospect of American intervention on either side was remote. German atrocities across Belgium and her deportation of German Jews was countered by Japanese atrocities across North Manchuria and British carpet-bombing of German and Chinese cities. There was a genuine element of 'a plague on both your houses.' with public sympathy being on neither side. Despite the strong anti-war feelings, the American public knew that the war had effectively financed American recovery, so there was an unwillingness to take any concrete steps to address the issue. It was common sentiment at the time was that America was not the "World Police" and there was a widespread feeling that American intervention in the last Great War had produced the conditions that made the Second Great War possible. As 1942 dawned across America, the gentle giant continued her peaceful slumber.
The USSR:
The biggest reason for Soviet neutrality was that at the highest echelons of the Soviet elite, there was a widespread belief that it was necessary to let the 'capitalists and fascists' to fight among themselves. The USSR would continue to implement five year plans, building it's industrial capacity, infrastructure and re-arming at a breathless pace while the Entente and Axis powers mutually exhausted themselves.
Manchurian-Japanese air power was a decisive factor in the victory at Khalkin Gol. Pictured is the wreckage of Soviet Aircraft (most likely a Polikarpov I-16) (1)
Another factor in the USSR's decision to remain neutral was the poor performance of her armed forces. Her defeat in the Battle of Khalkim Gol in 1939 and phyrric victory during the Winter War in 1940 was blamed on 'counter-revolutionary sabotage which has sapped the morale, organization and will of the Soviet Armed Forces' and led to the rehabilitation of many purged professional officers and the purge of the NKVD. The period of 1940-41 was characterized by an increasing level of professionalization and training by the Soviet Armed forces, however, the damage inflicted by the Great Purge was still evident in many military units. A lot of officers were not in a position to be 'un-purged,' as Soviet Science had not yet advanced to the point of being able to bring the dead back to life yet.
Soviet industrial production and potential was enormous. The Soviet Union produced more tanks that all of the Axis powers combined in 1941. Pictured above are T-34s about to roll off the assembly line. (2)
Despite this, the Soviet Armed Forces was regarded as a huge potential threat. By December 1941, there were 8 million men under arms. There were also 40,000 tanks and 50,000 aircraft in the Soviet Army's inventory. Despite the relative newness of Soviet industry, the Soviet Union was able to produce outstanding, simple and rugged design, particularly in the field of tanks. The T-34 was an outstanding tank which would be produced throughout the war. The combination of mobility, sloped armor and firepower would be the bane of many Romanian and Polish troops (along with Italo-German volunteers) during the border skirmishes of 1941-42.
Soviet Industry was another huge threat. 20,000 Armoured fighting vehicles of different types were produced, just in 1941, eclipsing the combined total production of all the Axis powers. 25,000 aircraft were also produced during that year. It was clear that the Soviet Union's intervention was potentially war-winning - a fact not lost on any of the powers, particularly Germany, which was moving troops from the Western Front rapidly to the German-Polish border in order to rapidly reinforce her Polish ally. But as 1941 finished, it was clear that Stalin was willing to wait until the "forces of reaction" bled themselves out a little bit further. He would get his wish in 1942.
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Sources:
(1)
http://fly.historicwings.com/2012/06/the-khalkhin-gol-incident/
(2)
http://en.wikipedia.org/wiki/T-34#mediaviewer/File:RIAN_archive_1274_Tanks_going_to_the_front.jpg
http://en.wikipedia.org/wiki/Five-y...Soviet_Union#Second_plan.2C_1933.E2.80.931937
http://en.wikipedia.org/wiki/Great_Purge
http://ww2-weapons.com/History/Production/Russia/
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Next update: The Asian Front (1941)