Marshall Plan
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The Marshall Plan, known officially following its enactment as the European Recovery Program (ERP), was the main plan of the United States for the reconstruction of Europe following World War II. The initiative was named for United States Secretary of State George Marshall.
Between 1948 and 1951, the United States contributed more than $13 billion (equivalent to nearly $100 billion in 2005 when adjusted for inflation) of economic and technical assistance toward the recovery of 16 European countries which had joined in the Organization for European Economic Cooperation (OEEC, forerunner to today's OECD) in response to Marshall's call for a joint scheme for European reconstruction.
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Background
After six years of war much of the European continent was devastated. Battles had been fought throughout the continent, covering a far larger area than in the First World War. The economies of the region were ruined, millions were homeless, and the destruction of agriculture had led to conditions nearing starvation in much of the continent. Many of the continent's greatest cities, including Warsaw and Berlin were in ruins, and others, such as London, were severely damaged. Especially damaged was the transportation industry as railways, bridges, and roads had been heavily targeted by airstrikes, while many merchant shipping boats had been sunk. None of these problems could be easily fixed, as the nations engaged in the war had exhausted their treasuries in its prosecution.
The one country whose infrastructure had not been significantly harmed was the United States. It had entered the war later than most European countries and had been attacked only twice during the conflict, the surprise attack on Pearl Harbor in Hawaii and a diversionary attack on the Aleutian Islands of Alaska. The American gold reserves were still intact as was its massive agricultural and manufacturing base, and the country was enjoying a robust economy.
The catalyst
Secretary of State Marshall was in Moscow meeting with the Council of Foreign Ministers when President Truman declared the Truman Doctrine on March 12, 1947. It amounted to a declaration of Cold War, promising to support "... free peoples who are resisting attempted subjugation by armed minorites or outside pressures."
But what were they to do about Germany, now divided into Soviet, French, British and American zones of occupation? Marshall's translator Charles Bohlen made the following observations:
- During our visit ... Stalin took a relaxed attitude ...
- Stalin's seeming indifference to what was happening in Germany made a deep impression on Marshall. ... Economic conditions were bad. Europe was recovering slowly ... Little had been done to rebuild ... Unemployment was widespread. Millions of people were on short rations. There was danger of epidemics. This was the kind of crisis Communism thrived on. [Traveling back to Washington], Marshall talked of the importance of finding some initiative to prevent the complete breakdown of Western Europe.
Debate
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Originally, it was hoped that little would need to be done to rebuild Europe. It was hoped that the United Kingdom and France, with the help of their colonies, would quickly rebuild their economies. By 1947 there was still little progress, however. Drought in 1947 and a cold winter in 1947-48 aggravated an already poor situation.
One of the strongest motivating factors was the beginning of the Cold War. The American government had grown very suspicious of Soviet actions and concerned about possible communist domination of Europe. In both France and Italy the poverty of the post-war era had provided fuel for the communist parties who had seen significant electoral success. Furthermore, in both those countries, Communists had fought the German occupation and fascist governments, while much of the right had been discredited by policies of collaboration.
The American government of Harry Truman began to be aware of these problems in 1946. The emerging doctrine of containment argued that the United States needed to substantially aid non-communist countries to stop the spread of Soviet influence.
An early concept of the plan had been presented by US Secretary of State James F. Byrnes during a speech held at the Stuttgart Opera House (Germany) on September 6, 1946. In addition, General Lucius D. Clay asked industrialist Lewis H. Brown to inspect post-war Germany and draft "A Report on Germany" in 1947, containing basic facts relating to the problems in Germany, with recommendations for reconstruction.
The first substantial aid went to Greece and Turkey in January of 1947, who were seen as being on the front lines of the battle against communist expansion. In February Britain desperately requested aid from the States to shore up its economy.
The main alternative to large quantities of American aid was to take it from Germany. This notion became known as the Morgenthau plan, named after US Treasury Secretary Henry Morgenthau, Jr. It advocated extracting massive war reparations from Germany to help rebuild those countries it had attacked, and also to prevent Germany from ever being rebuilt.
This plan was rejected, however, as many drew parallels between German dissonance due to reparation claims following World War I and allowing for the rise of Nazism. By April 1947 Truman, Marshall and Undersecretary of State Dean Acheson were convinced of the need for substantial quantities of aid from the United States.
The final plan was announced by Marshall in a speech at Harvard University on June 5, 1947 where he outlined the US government's preparedness to contribute to European recovery.
Implementation
After Marshall's speech a meeting was convened in Paris on July 12. The states of the future Eastern Bloc, and even the Soviet Union, were invited; only Czechoslovakia and Poland attended. The plan was rejected by Stalin owing to US insistence on economic liberalization and pan-European coordination of recovery efforts. Stalin soon ordered the leaders of its European satellite states not to continue with negotiations, which could in the long run weaken Soviet influence over those countries. His order, backed up with constant NKVD scrutiny and the ever-present threat of Red Army intervention, made those governments abandon the negotiations. This became one of the reasons why communist economies of those countries have fallen further and further behind, compared to Western capitalist economies.
The Europeans asked for $22 billion in aid. Truman cut this to $17 billion in a bill he put to Congress. The Republican Party, who controlled Congress, was still unconvinced and worked to limit the amount of aid advocating a more isolationist policy. The shock of the overthrow of the democratic government of Czechoslovakia in February 1948 spurred Congress to pass a bill granting $12.4 billion in aid. Truman signed the Marshall Plan into law on April 3, 1948, establishing the Economic Cooperation Administration (ECA) to administer the program. ECA was headed by economic cooperation administrator, Paul G. Hoffman. In the same year, the participating countries (Austria, Belgium, Denmark, France, West Germany, Great Britain, Greece, Iceland, Italy, Luxembourg, the Netherlands, Norway, Sweden, Switzerland, Turkey, and the United States) signed an accord establishing the Organization for European Economic Cooperation (later called the Organization for Economic Cooperation and Development, OECD) as the master coordinating agency.
The official mission statement of ECA was to give a boost to the Europe economy: to promote European production, to bolster European currency, and to facilitate international trade, especially with United States, whose very economic interest required Europe to became wealthy enough to import US goods if US economy were to keep on growing. Another, unofficial goal of ECA (and of Marshall Plan) was the containment of growing Soviet influence in Europe, evident especially in growing strength of communist parties in Czechoslovakia, France, and Italy.
Expenditures
Economic assistance provided April 3, 1948 to June 30, 1952 according to the Statistics and Reports division of the Agency for International Development as of November 17, 1975, (in millions of dollars).
| COUNTRY | Total | Grants | Loans |
| Austria | 677.8 | 677.8 | -- |
| Belgium-Luxembourg | 559.3 | 491.3 | 68.0a |
| Denmark | 273.0 | 239.7 | 33.3 |
| France | 2,713.6 | 2,488.0 | 225.6 |
| Germany, Federal Republic of | 1,390.6 | 1,173.7 | 216.9b |
| Greece | 706.7 | 706.7 | -- |
| Iceland | 29.3 | 24.0 | 5.3 |
| Ireland | 147.5 | 19.3 | 128.2 |
| Italy (including Trieste) | 1,508.8 | 1,413.2 | 95.6 |
| Netherlands (*East Indies)c | 1,083.5 | 916.8 | 166.7 |
| Norway | 255.3 | 216.1 | 39.2 |
| Portugal | 51.2 | 15.1 | 36.1 |
| Sweden | 107.3 | 86.9 | 20.4 |
| Turkey | 225.1 | 140.1 | 85.0 |
| United Kingdom | 3,189.8 | 2,805.0 | 384.8 |
| Regional | 407.0d | 407.0d | -- |
| Total for all countries | $13,325.8 | $11,820.7 | $1,505.1 |
Notes:
- Loan total includes $65.0 million for Belgium and $3.0 million for Luxembourg: grant detail between the two countries cannot be identified.
- Includes an original loan figure of $16.9 million, plus $200.0 million representing a pro-rated share of grants converted to loans under an agreement signed February 27, 1953.
- Marshall Plan aid to the Netherlands East Indies (now Indonesia) was extended through the Netherlands prior to transfer of sovereignty on December 30, 1949. The aid totals for the Netherlands East Indies are as follows:
Total $101.4 million, Grants $84.2 million, Loans $17.2 million. - Includes US contribution to the European Payments Union (EPU) capital fund, $361.4 million; General Freight Account, $33.5 million; and European Technical Assistance Authorizations (multi-country or regional), $12.1 million.
Effects
The effects of the Marshall Plan were surprising to even its most optimistic of supporters. The years 1948 to 1952 saw the fastest period of growth in European history. Industrial Production increased by 35%. Agriculture had substantially surpassed pre-war levels. The poverty and starvation of the immediate post-war years disappeared and Western Europe embarked upon an unprecedented two decades of growth that saw standards of living increase dramatically. The communist threat to western Europe was greatly reduced as throughout the region the communist parties faded in popularity.
The plan was thus implemented by the states of Western Europe acting in concert. This cooperation gave important impetus to the formation in the west of the North Atlantic Treaty Organization and later to the European Economic Community and today's European Union.
The free trade between the nations involved in the plan led to the introduction of the modern international system of finance with the General Agreement on Tariffs and Trade.
Historiography
The early students of the Marshall Plan saw it as an unmitigated success of American generosity. Criticism of the Marshall Plan became prominent among historians of the revisionist school during the 1960s and 1970s, however. They argued that the plan was American economic imperialism, and that it was an attempt to gain control over Western Europe just as the Soviets controlled Eastern Europe. This school agreed that the plan was highly effective.
In the 1980s, some historians began to argue that the Marshall Plan might not have played as decisive a role in Europe's recovery as was previously believed. The first person to make this argument was the economic historian Alan S. Milward. These critics have pointed out that growth in many European countries revived before the large-scale arrival of US aid, and was fastest among some of the lesser recipients. While aid from the Marshall Plan eased immediate difficulties and contributed to the recovery of some key sectors, growth from the post-war nadir was largely an independent process. European socialists argue that a similar amount of reconstruction money could have been obtained by nationalizing the holdings of wealthy Europeans who deposited their money in US banks during World War II.
Today the general consensus has reverted to the earliest argument. It is acknowledged that the United States was acting in its own self-interest by aiding western Europe, but most believe the plan had an immensely beneficial effect on both Western Europe and the United States.
Because of its success, the Marshall Plan has often been cited as an example of how massive economic assistance can reduce poverty and how post war generosity by the victors on their defeated enemies can be more beneficial for all concerned. However, some have pointed out that post-war reconstruction of Europe was a far easier problem than the development or reconstruction of areas in today's Third World. In the case of Europe, despite being devastated by war, there was still significant physical infrastructure along with technical skill in the population. In the case of the Third World, the infrastructure and technical skills do not exist to the same extent.
External links
- Marshall Foundation (http://www.marshallfoundation.org/marshall_plan_information.html)
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