Marshall Plan

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 after World War II. The initiative was named after American Secretary of State Gen. George Marshall.

Between 1948 and 1951, the United States contributed more than thirteen billion dollars (nearly $100bn at present-day U.S. prices) of economic and technical assistance toward the recovery of sixteen European countries which had joined in the Organization for European Economic Co-operation (OEEC, forerunner to today's OECD) in response to Marshall's call for a joint scheme.

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 regions were ruined, millions were homeless, and the destruction of agriculture had lead to conditions nearing starvation in much of the continent. Many of the 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 much merchant shipping 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 not significantly harmed was the United States. It had entered the war late and had only once been significantly attacked during the conflict. The American gold reserves were still intact as was its massive agricultural and manufacturing base.

Debate

Originally, it was hoped that little would need to be done to rebuild Europe. It was hoped that Britain 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 were the beginnings 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.

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.

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 their 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 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 of 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 at a speech at Harvard University on June 5, 1947 where he outlined the U.S. government's preparedness to contribute to European recovery.

Implementation

After Marshall's speech a meeting was organized in Paris on July 12 the states of Eastern Europe, and even the Soviet Union, were invited but they did not attend. The plan was rejected by Stalin owing to U.S. insistence on economic liberalization and pan-European co-ordination of recovery efforts. Pressure from the USSR convinced the leaders of its eastern European satellite states to not attend either.

The Europeans asked for 22 billion dollars U.S. in aid. Truman cut this to $17 billion in a bill he put to Congress. The Republican Party, who controlled Congress, were 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.

Marshall Plan expenditures

Economic Assistance, April 3, 1948 to June 30, 1952 (in millions of dollars)

Notes:

1. Loan total includes $65.0 million for Belgium and $3.0 million for Luxembourg: grant detail between the two countries cannot be identified.
2. 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.
3. 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.
4. Includes U.S. 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.

Source:

Statistics & Reports Division

Agency for International Development

November 17, 1975

http://www.marshallfoundation.org/about_gcm/marshall_plan.htm

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 lead 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.

In the 1980s some historians began to argue the Marshall Plan might not have played a decisive role in Europe's recovery developed. The first person to make this argument was the economic historian Alan S. Milward. These critics point out that growth in many European countries revived before the large-scale arrival of U.S. aid, and was fastest among some of the lesser recipients. While Marshall aid 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 produce prosperity. 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.