![George C](https://upload.wikimedia.org/wikipedia/commons/b/b7/George_C._Marshall%2C_U.S._Secretary_of_State.jpg)
The Marshall Plan (officially the European Recovery Program, ERP) was an American initiative enacted in 1948 to provide foreign aid to
Western Europe
Western Europe is the western region of Europe. The region's countries and territories vary depending on context.
The concept of "the West" appeared in Europe in juxtaposition to "the East" and originally applied to the ancient Mediterranean ...
. The
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
transferred over $13 billion (equivalent of about $ in ) in economic recovery programs to Western European economies after the end of
World War II
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the World War II by country, vast majority of the world's countries—including all of the great power ...
. Replacing an earlier proposal for a
Morgenthau Plan
The Morgenthau Plan was a proposal to eliminate Germany following World War II and eliminating its arms industry and removing or destroying other key industries basic to military strength. This included the removal or destruction of all industr ...
, it operated for four years beginning on April 3, 1948. The goals of the United States were to rebuild war-torn regions, remove
trade barrier
Trade barriers are government-induced restrictions on international trade. According to the theory of comparative advantage, trade barriers are detrimental to the world economy and decrease overall economic efficiency.
Most trade barriers work o ...
s, modernize
industry, improve European prosperity and prevent the spread of
communism
Communism (from Latin la, communis, lit=common, universal, label=none) is a far-left sociopolitical, philosophical, and economic ideology and current within the socialist movement whose goal is the establishment of a communist society, ...
. The Marshall Plan proposed the reduction of interstate barriers and the economic integration of the European Continent while also encouraging an increase in
productivity
Productivity is the efficiency of production of goods or services expressed by some measure. Measurements of productivity are often expressed as a ratio of an aggregate output to a single input or an aggregate input used in a production proces ...
as well as the adoption of modern business procedures.
The Marshall Plan aid was divided among the participant states roughly on a per capita basis. A larger amount was given to the major industrial powers, as the prevailing opinion was that their resuscitation was essential for the general European revival. Somewhat more aid per capita was also directed toward the
Allied nations
The Allies, formally referred to as the United Nations from 1942, were an international military coalition formed during the Second World War (1939–1945) to oppose the Axis powers, led by Nazi Germany, Imperial Japan, and Fascist Ita ...
, with less for those that had been part of the
Axis or
remained neutral. The largest recipient of Marshall Plan money was the
United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and ...
(receiving about 26% of the total). The next highest contributions went to
France
France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of Overseas France, overseas regions and territories in the Americas and the Atlantic Ocean, Atlantic, Pacific Ocean, Pac ...
(18%) and
West Germany
West Germany is the colloquial term used to indicate the Federal Republic of Germany (FRG; german: Bundesrepublik Deutschland , BRD) between its formation on 23 May 1949 and the German reunification through the accession of East Germany on 3 ...
(11%). Some eighteen European countries received Plan benefits. Although offered participation, the
Soviet Union
The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...
refused Plan benefits and also blocked benefits to
Eastern Bloc
The Eastern Bloc, also known as the Communist Bloc and the Soviet Bloc, was the group of socialist states of Central and Eastern Europe, East Asia, Southeast Asia, Africa, and Latin America under the influence of the Soviet Union that existed du ...
countries, such as
Romania
Romania ( ; ro, România ) is a country located at the crossroads of Central Europe, Central, Eastern Europe, Eastern, and Southeast Europe, Southeastern Europe. It borders Bulgaria to the south, Ukraine to the north, Hungary to the west, S ...
and
Poland
Poland, officially the Republic of Poland, is a country in Central Europe. It is divided into 16 administrative provinces called voivodeships, covering an area of . Poland has a population of over 38 million and is the fifth-most populou ...
. The United States provided similar aid programs in Asia but they were not part of the Marshall Plan.
Its role in rapid recovery has been debated. The Marshall Plan's accounting reflects that aid accounted for about 3% of the combined
national income
A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region, including gross domestic product (GDP), gross national product (GNP), net national income (NNI), and adjusted nat ...
of the recipient countries between 1948 and 1951, which means an increase in
GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
growth of less than half a percent.
Graham T. Allison states that "the Marshall Plan has become a favorite analogy for policy-makers. Yet few know much about it." Some new studies highlight not only the role of economic cooperation but approach the Marshall Plan as a case concerning strategic thinking to face some typical challenges in policy, as problem definition, risk analysis, decision support to policy formulation, and program implementation.
In 1947, two years after the end of the war, industrialist
Lewis H. Brown
Lewis Herold Brown (February 13, 1894February 27, 1951) was an industrialist and former Chairman of Johns-Manville, once the world's largest manufacturer of asbestos and asbestos products.
Early life and career
Born in Creston, Iowa on February ...
wrote, at the request of General
Lucius D. Clay, ''
A Report on Germany
After World War II, in 1947 Lewis H. Brown wrote at the request of General Lucius D. Clay ''A Report on Germany'', which served as a detailed recommendation for the reconstruction of post-war Germany, and served as a basis for the Marshall Plan. ...
'', which served as a detailed recommendation for the reconstruction of post-war Germany, and served as a basis for the Marshall Plan. The initiative was named after
United States Secretary of State
The United States secretary of state is a member of the executive branch of the federal government of the United States and the head of the U.S. Department of State. The office holder is one of the highest ranking members of the president's Ca ...
George C. Marshall. The plan had bipartisan support in Washington, where the
Republicans controlled
Congress
A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of ...
and the
Democrats controlled the White House with
Harry S. Truman as president. The Plan was largely the creation of
State Department
The United States Department of State (DOS), or State Department, is an executive department of the U.S. federal government responsible for the country's foreign policy and relations. Equivalent to the ministry of foreign affairs of other na ...
officials, especially
William L. Clayton and
George F. Kennan
George Frost Kennan (February 16, 1904 – March 17, 2005) was an American diplomat and historian. He was best known as an advocate of a policy of containment of Soviet expansion during the Cold War. He lectured widely and wrote scholarly hist ...
, with help from the
Brookings Institution
The Brookings Institution, often stylized as simply Brookings, is an American research group founded in 1916. Located on Think Tank Row in Washington, D.C., the organization conducts research and education in the social sciences, primarily in e ...
, as requested by Senator
Arthur Vandenberg
Arthur Hendrick Vandenberg Sr. (March 22, 1884April 18, 1951) was an American politician who served as a United States senator from Michigan from 1928 to 1951. A member of the Republican Party, he participated in the creation of the United Natio ...
, chairman of the
United States Senate Committee on Foreign Relations
The United States Senate Committee on Foreign Relations is a standing committee of the U.S. Senate charged with leading foreign-policy legislation and debate in the Senate. It is generally responsible for overseeing and funding foreign aid ...
. Marshall spoke of an urgent need to help the European recovery in his address at
Harvard University
Harvard University is a private Ivy League research university in Cambridge, Massachusetts. Founded in 1636 as Harvard College and named for its first benefactor, the Puritan clergyman John Harvard, it is the oldest institution of highe ...
in June 1947. The purpose of the Marshall Plan was to aid in the economic recovery of nations
after World War II and secure US geopolitical influence over Western Europe. To combat the effects of the Marshall Plan, the USSR developed its own economic recovery program, known as the
Molotov Plan
The Molotov Plan was the system created by the Soviet Union in 1947 in order to provide aid to rebuild the countries in Eastern Europe that were politically and economically aligned to the Soviet Union (aka satellite state). It was originally call ...
.
The phrase "equivalent of the Marshall Plan" is often used to describe a proposed large-scale economic rescue program.
In 1951 the Marshall Plan was largely replaced by the
Mutual Security Act
The Mutual Security Act of 1951 launched a major American foreign aid program, 1951–61, of grants to numerous countries. It largely replaced the Marshall Plan. The main goal was to help poor countries develop and to contain the spread of commu ...
.
Development and deployment
The reconstruction plan, developed at a meeting of the participating European states, was drafted on June 5, 1947. It offered the same aid to the
Soviet Union
The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...
and
its allies, but they refused to accept it, under Soviet pressure (as was the case for Finland's rejection) as doing so would allow a degree of US control over the communist economies. The Soviet Union prevented its
satellite state
A satellite state or dependent state is a country that is formally independent in the world, but under heavy political, economic, and military influence or control from another country. The term was coined by analogy to planetary objects orbitin ...
s (i.e., East Germany, Poland, etc.) from accepting. Secretary Marshall became convinced Stalin had no interest in helping restore economic health in Western Europe.
![Marshall Plan](https://upload.wikimedia.org/wikipedia/commons/d/dc/Marshall_Plan.svg)
President Harry Truman signed the Marshall Plan on April 3, 1948, granting $5 billion in aid to 16 European nations. During the four years, the plan was in effect, the United States donated $17 billion (equivalent to $ billion in ) in economic and technical assistance to help the recovery of the European countries that joined the
Organisation for European Economic Co-operation. The $17 billion was in the context of a US GDP of $258 billion in 1948, and on top of $17 billion in American aid to Europe between the end of the war and the start of the Plan that is counted separately from the Marshall Plan. The Marshall Plan was replaced by the
Mutual Security Plan at the end of 1951; that new plan gave away about $7.5 billion annually until 1961 when it was replaced by another program.
The ERP addressed each of the obstacles to postwar recovery. The plan looked to the future and did not focus on the destruction caused by the war. Much more important were efforts to modernize European industrial and business practices using high-efficiency American models, reducing artificial trade barriers, and instilling a sense of hope and self-reliance.
By 1952, as the funding ended, the economy of every participant state had surpassed pre-war levels; for all Marshall Plan recipients, output in 1951 was at least 35% higher than in 1938. Over the next two decades, Western Europe enjoyed unprecedented growth and prosperity, but economists are not sure what proportion was due directly to the ERP, what proportion indirectly, and how much would have happened without it.
A common American interpretation of the program's role in European recovery was expressed by Paul Hoffman, head of the Economic Cooperation Administration, in 1949 when he told Congress Marshall aid had provided the "critical margin" on which other investment needed for European recovery depended. The Marshall Plan was one of the first elements of
European integration
European integration is the process of industrial, economic, political, legal, social, and cultural integration of states wholly or partially in Europe or nearby. European integration has primarily come about through the European Union and its ...
, as it erased trade barriers and set up institutions to coordinate the economy on a continental level—that is, it stimulated the total political reconstruction of Western Europe.
Belgian economic historian
Herman Van der Wee concludes the Marshall Plan was a "great success":
Wartime destruction
By
the end of World War II, much of Europe was devastated. Sustained
aerial bombardment during the war had badly damaged most major cities, and industrial facilities were especially hard-hit. Millions of refugees were in temporary camps. The region's trade flows had been thoroughly disrupted; millions were in refugee camps living on aid from the United States, which was provided by the
United Nations Relief and Rehabilitation Administration
United Nations Relief and Rehabilitation Administration (UNRRA) was an international relief agency, largely dominated by the United States but representing 44 nations. Founded in November 1943, it was dissolved in September 1948. it became part o ...
and other agencies. Food shortages were severe, especially in the harsh
winter of 1946–47. From July 1945 through June 1946, the United States shipped 16.5 million tons of food, primarily wheat, to Europe and Japan. It amounted to one-sixth of the American food supply and provided 35 trillion calories, enough to provide 400 calories a day for one year to 300 million people.
Especially damaged was transportation infrastructure, as railways, bridges, and docks had been specifically targeted by airstrikes, while much merchant shipping had been sunk. Although most small towns and villages had not suffered as much damage, the destruction of transportation left them economically isolated. None of these problems could be easily remedied, as most nations engaged in the war had exhausted their treasuries in the process.
The only major powers whose infrastructure had not been significantly harmed in World War II were the United States and Canada. They were much more prosperous than before the war but exports were a small factor in their economy. Much of the Marshall Plan aid would be used by the Europeans to buy manufactured goods and raw materials from the United States and Canada.
Initial post-war events
Slow recovery
Most of Europe's economies were recovering slowly, as unemployment and food shortages led to strikes and unrest in several nations. Agricultural production was 83% of 1938 levels, industrial production was 88%, and exports 59%. Exceptions were the United Kingdom, the Netherlands and France, where by the end of 1947 production had already been restored to pre-war levels before the Marshall Plan. Italy and Belgium would follow by the end of 1948.
In Germany in 1945–46 housing and food conditions were bad, as the disruption of transport, markets, and finances slowed a return to normality. In the West, the bombing had destroyed 5,000,000 houses and apartments, and 12,000,000 refugees from the east had crowded in.
Food production was two-thirds of the pre-war level in 1946–48, while normal grain and meat shipments no longer arrived from the East. The drop in food production can be attributed to a drought that killed a major portion of the wheat crop while a severe winter destroyed the majority of the wheat crop the following year. This caused most Europeans to rely on a 1,500 calorie per day diet. Furthermore, the large shipments of food stolen from occupied nations during the war no longer reached Germany. Industrial production fell more than half and reached pre-war levels at the end of 1949.
While Germany struggled to recover from the destruction of the War, the recovery effort began in June 1948, moving on from emergency relief. The
currency reform in 1948 was headed by the military government and helped Germany to restore stability by encouraging production. The reform revalued old currency and deposits and introduced new currency. Taxes were also reduced and Germany prepared to remove economic barriers.
During the first three years of occupation of Germany, the UK and US vigorously pursued a
military disarmament program in Germany, partly by removal of equipment but mainly through an import embargo on raw materials, part of the
Morgenthau Plan
The Morgenthau Plan was a proposal to eliminate Germany following World War II and eliminating its arms industry and removing or destroying other key industries basic to military strength. This included the removal or destruction of all industr ...
approved by President
Franklin D. Roosevelt.
Nicholas Balabkins concludes that "as long as German industrial capacity was kept idle the economic recovery of Europe was delayed." By July 1947 Washington realized that economic recovery in Europe could not go forward without the reconstruction of the German industrial base, deciding that an "orderly, prosperous Europe requires the economic contributions of a stable and productive Germany." In addition, the strength of Moscow-controlled communist parties in France and Italy worried Washington.
In the view of the State Department under President
Harry S Truman
Harry may refer to:
TV shows
* ''Harry'' (American TV series), a 1987 American comedy series starring Alan Arkin
* ''Harry'' (British TV series), a 1993 BBC drama that ran for two seasons
* ''Harry'' (talk show), a 2016 American daytime talk show ...
, the United States needed to adopt a definite position on the world scene or fear losing credibility. The emerging doctrine of
containment
Containment was a geopolitical strategic foreign policy pursued by the United States during the Cold War to prevent the spread of communism after the end of World War II. The name was loosely related to the term '' cordon sanitaire'', which ...
(as opposed to
rollback) argued that the United States needed to substantially aid non-communist countries to stop the spread of Soviet influence. There was also some hope that the Eastern Bloc nations would join the plan, and thus be pulled out of the emerging Soviet bloc, but that did not happen.
Need to rebuild Germany
In January 1947, Truman appointed retired General
George Marshall
George Catlett Marshall Jr. (December 31, 1880 – October 16, 1959) was an American army officer and statesman. He rose through the United States Army to become Chief of Staff of the United States Army, Chief of Staff of the US Army under Pre ...
as Secretary of State. In July 1947 Marshall scrapped
Joint Chiefs of Staff Directive 1067, which was based on the
Morgenthau Plan
The Morgenthau Plan was a proposal to eliminate Germany following World War II and eliminating its arms industry and removing or destroying other key industries basic to military strength. This included the removal or destruction of all industr ...
which had decreed "take no steps looking toward the economic rehabilitation of Germany
rdesigned to maintain or strengthen the German economy." The new plan JCS 1779 stated that "an orderly and prosperous Europe requires the economic contributions of a stable and productive Germany." The restrictions placed on German heavy industry production were partly ameliorated; permitted steel production levels were raised from 25% of pre-war capacity to a new limit placed at 50% of pre-war capacity.
With a
communist, although non-Soviet, insurgency threatening Greece, and Britain financially unable to continue its aid, the President announced his
Truman Doctrine
The Truman Doctrine is an American foreign policy that pledged American "support for democracies against authoritarian threats." The doctrine originated with the primary goal of containing Soviet geopolitical expansion during the Cold War. It wa ...
on March 12, 1947, "to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures", with an aid request for consideration and decision, concerning Greece and Turkey.
Herbert Hoover
Herbert Clark Hoover (August 10, 1874 – October 20, 1964) was an American politician who served as the 31st president of the United States from 1929 to 1933 and a member of the Republican Party, holding office during the onset of the Gre ...
noted that "The whole economy of Europe is interlinked with German economy through the exchange of raw materials and manufactured goods. The productivity of Europe cannot be restored without the restoration of Germany as a contributor to that productivity."
Hoover's report led to a realization in Washington that a new policy was needed; "almost any action would be an improvement on current policy." In Washington, the Joint Chiefs declared that the "complete revival of German industry, particularly coal mining" was now of "primary importance" to American security.
The United States was already spending a great deal to help Europe recover. Over $14 billion was spent or loaned during the postwar period through the end of 1947 and is not counted as part of the Marshall Plan. Much of this aid was designed to restore infrastructure and help refugees. Britain, for example, received an emergency loan of $3.75 billion.
The
United Nations
The United Nations (UN) is an intergovernmental organization whose stated purposes are to maintain international peace and security, develop friendly relations among nations, achieve international cooperation, and be a centre for harmoni ...
also launched a series of humanitarian and relief efforts almost wholly funded by the United States. These efforts had important effects, but they lacked any central organization and planning, and failed to meet many of Europe's more fundamental needs. Already in 1943, the United Nations Relief and Rehabilitation Administration (UNRRA) was founded to provide relief to areas liberated from Germany. UNRRA provided billions of dollars of rehabilitation aid and helped about 8 million refugees. It ceased operation of
displaced persons camp
A refugee camp is a temporary settlement built to receive refugees and people in refugee-like situations. Refugee camps usually accommodate displaced people who have fled their home country, but camps are also made for internally displaced peo ...
s in Europe in 1947; many of its functions were transferred to several UN agencies.
Soviet negotiations
After Marshall's appointment in January 1947, administration officials met with Soviet Foreign Minister
Vyacheslav Molotov
Vyacheslav Mikhaylovich Molotov. ; (;. 9 March Old_Style_and_New_Style_dates">O._S._25_February.html" ;"title="Old_Style_and_New_Style_dates.html" ;"title="nowiki/>Old Style and New Style dates">O. S. 25 February">Old_Style_and_New_Style_dat ...
and others to press for an economically self-sufficient Germany, including a detailed accounting of the industrial plants, goods and infrastructure already removed by the Soviets in their occupied zone. Molotov refrained from supplying accounts of Soviet assets. The Soviets took a punitive approach, pressing for a delay rather than an acceleration in economic rehabilitation, demanding unconditional fulfillment of all prior reparation claims, and pressing for progress toward nationwide socioeconomic transformation.
After six weeks of negotiations, Molotov rejected all of the American and British proposals. Molotov also rejected the counter-offer to scrap the British-American "Bizonia" and to include the Soviet zone within the newly constructed Germany. Marshall was particularly discouraged after personally meeting with Stalin to explain that the United States could not possibly abandon its position on Germany, while Stalin expressed little interest in a solution to German economic problems.
Marshall's speech
After the adjournment of the Moscow conference following six weeks of failed discussions with the Soviets regarding a potential German reconstruction, the United States concluded that a solution could not wait any longer. To clarify the American position, a major address by Secretary of State
George Marshall
George Catlett Marshall Jr. (December 31, 1880 – October 16, 1959) was an American army officer and statesman. He rose through the United States Army to become Chief of Staff of the United States Army, Chief of Staff of the US Army under Pre ...
was planned. Marshall gave the address at Harvard University on June 5, 1947. He offered American aid to promote European recovery and reconstruction. The speech described the dysfunction of the European economy and presented a rationale for US aid.
The modern system of the division of labor upon which the exchange of products is based is in danger of breaking down. ... Aside from the demoralizing effect on the world at large and the possibilities of disturbances arising as a result of the desperation of the people concerned, the consequences to the economy of the United States should be apparent to all. It is logical that the United States should do whatever it is able to do to assist in the return of normal economic health to the world, without which there can be no political stability and no assured peace. Our policy is not directed against any country, but against hunger, poverty, desperation and chaos. Any government that is willing to assist in recovery will find full co-operation on the part of the United States. Its purpose should be the revival of a working economy in the world so as to permit the emergence of political and social conditions in which free institutions can exist.
Marshall was convinced that economic stability would provide political stability in Europe. He offered aid, but the European countries had to organize the program themselves.
The speech, written at Marshall's request and guidance by
Charles Bohlen
Charles "Chip" Eustis Bohlen (August 30, 1904 – January 1, 1974) was an American diplomat, ambassador, and expert on the Soviet Union. He helped shape US foreign policy during World War II and the Cold War and helped develop the Marshall Pla ...
contained virtually no details and no numbers. More a proposal than a plan, it was a challenge to European leaders to cooperate and coordinate. It asked Europeans to create their own plan for rebuilding Europe, indicating the United States would then fund this plan. The administration felt that the plan would likely be unpopular among many Americans, and the speech was mainly directed at a European audience. In an attempt to keep the speech out of American papers, journalists were not contacted, and on the same day, Truman called a press conference to take away headlines. In contrast,
Dean Acheson
Dean Gooderham Acheson (pronounced ; April 11, 1893October 12, 1971) was an American statesman and lawyer. As the 51st U.S. Secretary of State, he set the foreign policy of the Harry S. Truman administration from 1949 to 1953. He was also Truma ...
, an Under Secretary of State, was dispatched to contact the European media, especially the British media, and the speech was read in its entirety on the
BBC.
In the audience at Harvard was International Law and Diplomacy graduate student Malcolm Crawford, who had just written his Master's thesis entitled "A Blueprint for the Financing of Post-War Business and Industry in the United Kingdom and Republic of France." Crawford's thesis was read by future Supreme Court Justice Abe Fortas and presented to President Truman as the solution for Marshall's proposal. It was Crawford's thesis which provided the key to selling the Marshall Plan to Congress by laying out the idea of "strategic partnerships." Instead of the Federal government granting money directly to Europe, American businesses would provide technology, expertise, and materials to Europe as a strategic partner, and in exchange, the Federal government would purchase stock in the US businesses to reimburse them. In this way, Europe would receive the aid it needed, American businesses would receive capital investment, and the federal government would make a profit when the stock was sold.
Rejection by Stalin
British Foreign Secretary
Ernest Bevin
Ernest Bevin (9 March 1881 – 14 April 1951) was a British statesman, trade union leader, and Labour Party (UK), Labour Party politician. He co-founded and served as General Secretary of the powerful Transport and General Workers' Union in th ...
heard Marshall's radio broadcast speech and immediately contacted French Foreign Minister
Georges Bidault
Georges-Augustin Bidault (; 5 October 189927 January 1983) was a French politician. During World War II, he was active in the French Resistance. After the war, he served as foreign minister and prime minister on several occasions. He joined the ...
to begin preparing a quick European response to (and acceptance of) the offer, which led to the creation of the
Committee of European Economic Co-operation
The Committee of European Economic Co-operation (CEEC) was a joint European conference to determine the priorities for the recovery of the European economy after World War II, and to assist in the administration of the Marshall Plan. The committee ...
. The two agreed that it would be necessary to invite the Soviets as the other major allied power. Marshall's speech had explicitly included an invitation to the Soviets, feeling that excluding them would have been a sign of distrust. State Department officials, however, knew that
Stalin
Joseph Vissarionovich Stalin (born Ioseb Besarionis dze Jughashvili; – 5 March 1953) was a Georgian revolutionary and Soviet political leader who led the Soviet Union from 1924 until his death in 1953. He held power as General Secretar ...
would almost certainly not participate and that any plan that would send large amounts of aid to the Soviets was unlikely to get Congressional approval.
Initial reactions
Speaking at the Paris Peace Conference on October 10, 1946, Molotov had already stated Soviet fears: "If American capital was given a free hand in the small states ruined and enfeebled by the war
twould buy up the local industries, appropriate the more attractive Romanian, Yugoslav ... enterprises and would become the master in these small states." While the Soviet ambassador in Washington suspected that the Marshall Plan could lead to the creation of an anti-Soviet bloc, Stalin was open to the offer. He directed that—in negotiations to be held in Paris regarding the aid—countries in the Eastern Bloc should not reject economic conditions being placed upon them. Stalin only changed his outlook when he learned that (a) credit would only be extended under conditions of economic cooperation, and (b) aid would also be extended to Germany in total, an eventuality which Stalin thought would hamper the Soviets' ability to exercise influence in western Germany.
Initially, Stalin maneuvered to kill the Plan, or at least hamper it using destructive participation in the Paris talks regarding conditions. He quickly realized, however, that this would be impossible after Molotov reported—following his arrival in Paris in July 1947—that conditions for the credit were non-negotiable. Looming as just as large a concern was the Czechoslovak eagerness to accept the aid, as well as indications of a similar Polish attitude.
Compulsory Eastern Bloc rejection
Soviet Foreign Minister
Vyacheslav Molotov
Vyacheslav Mikhaylovich Molotov. ; (;. 9 March Old_Style_and_New_Style_dates">O._S._25_February.html" ;"title="Old_Style_and_New_Style_dates.html" ;"title="nowiki/>Old Style and New Style dates">O. S. 25 February">Old_Style_and_New_Style_dat ...
left Paris, rejecting the plan. After that, statements were made suggesting a future confrontation with the West, calling the United States both a "fascizing" power and the "center of worldwide
reaction
Reaction may refer to a process or to a response to an action, event, or exposure:
Physics and chemistry
*Chemical reaction
*Nuclear reaction
* Reaction (physics), as defined by Newton's third law
*Chain reaction (disambiguation).
Biology and m ...
and anti-Soviet activity", with all U.S.-aligned countries branded as enemies. The Soviets blamed the United States for communist losses in elections in Belgium, France, and Italy months earlier, in the spring of 1947. It claimed that "marshallization" must be resisted and prevented by any means and that French and Italian communist parties were to make maximum efforts to sabotage the implementation of the Plan. In addition, Western embassies in Moscow were isolated, with their personnel being denied contact with Soviet officials.
On July 12, a larger meeting was convened in Paris. Every country in Europe was invited, with the exceptions of Spain (a World War II neutral that had sympathized with the
Axis powers
The Axis powers, ; it, Potenze dell'Asse ; ja, 枢軸国 ''Sūjikukoku'', group=nb originally called the Rome–Berlin Axis, was a military coalition that initiated World War II and fought against the Allies. Its principal members were ...
) and the small states of
Andorra
, image_flag = Flag of Andorra.svg
, image_coat = Coat of arms of Andorra.svg
, symbol_type = Coat of arms
, national_motto = la, Virtus Unita Fortior, label=none (Latin)"United virtue is stro ...
,
San Marino
San Marino (, ), officially the Republic of San Marino ( it, Repubblica di San Marino; ), also known as the Most Serene Republic of San Marino ( it, Serenissima Repubblica di San Marino, links=no), is the fifth-smallest country in the world an ...
,
Monaco
Monaco (; ), officially the Principality of Monaco (french: Principauté de Monaco; Ligurian: ; oc, Principat de Mónegue), is a sovereign city-state and microstate on the French Riviera a few kilometres west of the Italian region of Lig ...
, and
Liechtenstein
Liechtenstein (), officially the Principality of Liechtenstein (german: link=no, Fürstentum Liechtenstein), is a German language, German-speaking microstate located in the Alps between Austria and Switzerland. Liechtenstein is a semi-constit ...
. The Soviet Union was invited with the understanding that it would likely refuse. The states of the future
Eastern Bloc
The Eastern Bloc, also known as the Communist Bloc and the Soviet Bloc, was the group of socialist states of Central and Eastern Europe, East Asia, Southeast Asia, Africa, and Latin America under the influence of the Soviet Union that existed du ...
were also approached, and
Czechoslovakia
, rue, Чеськословеньско, , yi, טשעכאסלאוואקיי,
, common_name = Czechoslovakia
, life_span = 1918–19391945–1992
, p1 = Austria-Hungary
, image_p1 ...
and
Poland
Poland, officially the Republic of Poland, is a country in Central Europe. It is divided into 16 administrative provinces called voivodeships, covering an area of . Poland has a population of over 38 million and is the fifth-most populou ...
agreed to attend. In one of the most evident signs and reflections of tight Soviet control and domination over the region,
Jan Masaryk
Jan Garrigue Masaryk (14 September 1886 – 10 March 1948) was a Czech diplomat and politician who served as the Foreign Minister of Czechoslovakia from 1940 to 1948. American journalist John Gunther described Masaryk as "a brave, honest, turbul ...
, the foreign minister of Czechoslovakia, was summoned to Moscow and berated by Stalin for considering Czechoslovakia's possible involvement with and joining of the Marshall Plan. The prime minister of Poland,
Józef Cyrankiewicz
Józef Adam Zygmunt Cyrankiewicz (; 23 April 1911 – 20 January 1989) was a Polish Socialist (PPS) and after 1948 Communist politician. He served as premier of the Polish People's Republic between 1947 and 1952, and again for 16 years between ...
, was rewarded by Stalin for his country's rejection of the Plan which came in the form of the Soviet Union's offer of a lucrative
trade agreement
A trade agreement (also known as trade pact) is a wide-ranging taxes, tariff and trade treaty that often includes investment guarantees. It exists when two or more countries agree on terms that help them trade with each other. The most common tr ...
lasting for five years, a grant amounting to the approximate equivalent of $450 million (in 1948; the sum would have been $4.4 billion in 2014 ) in the form of long-term credit and loans and the provision of 200,000 tonnes of grain, heavy and manufacturing machinery and factories and heavy industries to Poland.
The Marshall Plan participants were not surprised when the Czechoslovakian and Polish delegations were prevented from attending the Paris meeting. The other
Eastern Bloc
The Eastern Bloc, also known as the Communist Bloc and the Soviet Bloc, was the group of socialist states of Central and Eastern Europe, East Asia, Southeast Asia, Africa, and Latin America under the influence of the Soviet Union that existed du ...
states immediately rejected the offer.
Finland
Finland ( fi, Suomi ; sv, Finland ), officially the Republic of Finland (; ), is a Nordic country in Northern Europe. It shares land borders with Sweden to the northwest, Norway to the north, and Russia to the east, with the Gulf of Bot ...
also declined, to avoid antagonizing the Soviets (see also
Finlandization
Finlandization ( fi, suomettuminen; sv, finlandisering; german: Finnlandisierung; et, soomestumine; russian: финляндизация, finlyandizatsiya) is the process by which one powerful country makes a smaller neighboring country refrai ...
). The Soviet Union's "alternative" to the Marshall plan which was purported to involve Soviet subsidies and trade with western Europe, became known as the
Molotov Plan
The Molotov Plan was the system created by the Soviet Union in 1947 in order to provide aid to rebuild the countries in Eastern Europe that were politically and economically aligned to the Soviet Union (aka satellite state). It was originally call ...
, and later, the
Comecon
The Council for Mutual Economic Assistance (, ; English abbreviation COMECON, CMEA, CEMA, or CAME) was an economic organization from 1949 to 1991 under the leadership of the Soviet Union that comprised the countries of the Eastern Bloc#List of s ...
. In a 1947 speech to the United Nations, Soviet deputy foreign minister
Andrei Vyshinsky
Andrey Yanuaryevich Vyshinsky (russian: Андре́й Януа́рьевич Выши́нский; pl, Andrzej Wyszyński) ( – 22 November 1954) was a Soviet politician, jurist and diplomat.
He is known as a state prosecutor of Joseph S ...
said that the Marshall Plan violated the principles of the United Nations. He accused the United States of attempting to impose its will on other independent states while at the same time using economic resources distributed as a relief to needy nations as an instrument of political pressure.
Yugoslavia
Although all other communist European countries had deferred to Stalin and rejected the aid, the Yugoslavs, led by Josip Broz (Tito), initially went along and rejected the Marshall Plan. However, in 1948
Tito broke decisively with Stalin on other issues, making Yugoslavia an independent communist state. Yugoslavia requested American aid. American leaders were internally divided, but finally agreed and began sending money on a small scale in 1949 and on a much larger scale in 1950–53. The American aid was not part of the Marshall Plan.
Szklarska Poręba meeting
In late September, the Soviet Union called a meeting of nine European communist parties in southwest Poland. A
Communist Party of the Soviet Union
" Hymn of the Bolshevik Party"
, headquarters = 4 Staraya Square, Moscow
, general_secretary = Vladimir Lenin (first) Mikhail Gorbachev (last)
, founded =
, banned =
, founder = Vladimir Lenin
, newspape ...
(CPSU) report was read at the outset to set the heavily
anti-Western tone, stating now that "international politics is dominated by the ruling clique of the American imperialists" which have embarked upon the "enslavement of the weakened capitalist countries of Europe".Communist parties were to struggle against the US presence in Europe by any means necessary, including sabotage. The report further claimed that "reactionary imperialist elements throughout the world, particularly in the United States, in Britain and France, had put particular hope on Germany and Japan, primarily on Hitlerite Germany—first as a force most capable of striking a blow at the Soviet Union".
Referring to the Eastern Bloc, the report stated that "the Red Army's liberating role was complemented by an upsurge of the freedom-loving peoples' liberation struggle against the fascist predators and their hirelings."It argued that "the bosses of Wall Street" were "tak
ngthe place of Germany, Japan, and Italy". The Marshall Plan was described as "the American plan for the enslavement of Europe".It described the world now breaking down "into basically two camps—the imperialist and antidemocratic camp on the one hand, and the anti-imperialist and democratic camp on the other".
Although the Eastern Bloc countries, except Czechoslovakia, had immediately rejected Marshall Plan aid, Eastern Bloc communist parties were blamed for permitting even minor influence by non-communists in their respective countries during the run-up to the Marshall Plan. The meeting's chair, Andrei Zhdanov, who was in permanent radio contact with the Kremlin from whom he received instructions, also castigated communist parties in France and Italy for collaboration with those countries' domestic agendas. Zhdanov warned that if they continued to fail to maintain international contact with Moscow to consult on all matters, "extremely harmful consequences for the development of the brother parties' work" would result.
Party rules prevented Italian and French communist leaders from pointing out that it was Stalin who had directed them not to take opposition stances in 1944.The French communist party, like others, was then to redirect its mission to "destroy capitalist economy" and that the Soviet Communist Information Bureau (
Cominform
The Information Bureau of the Communist and Workers' Parties (), commonly known as Cominform (), was a co-ordination body of Marxist-Leninist communist parties in Europe during the early Cold War that was formed in part as a replacement of the ...
) would take control of the French Communist Party's activities to oppose the Marshall Plan. When they asked Zhdanov if they should prepare for armed revolt when they returned home, he did not answer. In a follow-up conversation with Stalin, he explained that an armed struggle would be impossible and that the struggle against the Marshall Plan was to be waged under the slogan of national independence.
Passage in Congress
Congress, under the control of conservative Republicans, agreed to the program for multiple reasons. The 20-member conservative isolationist Senate wing of the party, based in the rural Midwest and led by Senator
Kenneth S. Wherry
Kenneth Spicer Wherry (February 28, 1892November 29, 1951) was an American businessman, attorney, and politician. A member of the Republican Party, he served as a U.S. Senator from Nebraska from 1943 until his death in 1951; he was the minority ...
(R-Nebraska), was outmaneuvered by the emerging internationalist wing, led by Senator
Arthur H. Vandenberg
Arthur Hendrick Vandenberg Sr. (March 22, 1884April 18, 1951) was an American politician who served as a United States senator from Michigan from 1928 to 1951. A member of the Republican Party, he participated in the creation of the United Nati ...
(R-Michigan). The opposition argued that it made no sense to oppose communism by supporting the socialist governments in Western Europe; and that American goods would reach Russia and increase its war potential. They called it "a wasteful 'operation rat-hole'" Vandenberg, assisted by Senator
Henry Cabot Lodge Jr.
Henry Cabot Lodge Jr. (July 5, 1902 – February 27, 1985) was an American diplomat and Republican United States senator from Massachusetts in both Senate seats in non-consecutive terms of service and a United States ambassador. He was considered ...
(R-Massachusetts) admitted there was no certainty that the plan would succeed, but said it would halt economic chaos, sustain Western civilization, and stop further Soviet expansion. Senator
Robert A. Taft
Robert Alphonso Taft Sr. (September 8, 1889 – July 31, 1953) was an American politician, lawyer, and scion of the Republican Party's Taft family. Taft represented Ohio in the United States Senate, briefly served as Senate Majority Leade ...
(R-Ohio) hedged on the issue. He said it was without economic justification; however, it was "absolutely necessary" in "the world battle against communism." In the end, only 17 senators voted against it on March 13, 1948 A bill granting an initial $5 billion passed Congress with strong bipartisan support. Congress eventually allocated $12.4 billion in aid over the four years of the plan.
Congress reflected public opinion, which resonated with the ideological argument that communism flourishes in poverty. Across America, multiple interest groups, including business, labor, farming, philanthropy, ethnic groups, and religious groups, saw the Marshall Plan as an inexpensive solution to a massive problem, noting it would also help American exports and stimulate the American economy as well. Major newspapers were highly supportive, including such conservative outlets as
''Time'' magazine. Vandenberg made sure of bipartisan support on the Senate Foreign Relations Committee. The Solid Democratic South was highly supportive, the upper Midwest was dubious, but heavily outnumbered. The plan was opposed by conservatives in the rural Midwest, who opposed any major government spending program and were highly suspicious of Europeans. The plan also had some opponents on the left, led by
Henry A. Wallace
Henry Agard Wallace (October 7, 1888 – November 18, 1965) was an American politician, journalist, farmer, and businessman who served as the 33rd vice president of the United States, the 11th U.S. Secretary of Agriculture, and the 10th U.S. ...
, the former vice president. He said the Plan was hostile to the Soviet Union, a subsidy for American exporters, and sure to polarize the world between East and West. However, opposition against the Marshall Plan was greatly reduced by the shock of the
communist coup in Czechoslovakia in February 1948. The appointment of the prominent businessman
Paul G. Hoffman as director reassured conservative businessmen that the gigantic sums of money would be handled efficiently.
Negotiations
Turning the plan into reality required negotiations among the participating nations. Sixteen nations met in Paris to determine what form the American aid would take, and how it would be divided. The negotiations were long and complex, with each nation having its own interests. France's major concern was that Germany not be rebuilt to its previous threatening power. The
Benelux
The Benelux Union ( nl, Benelux Unie; french: Union Benelux; lb, Benelux-Unioun), also known as simply Benelux, is a politico-economic union and formal international intergovernmental cooperation of three neighboring states in western Europe: B ...
countries (Belgium, Netherlands, and Luxembourg), despite also suffering under the Nazis, had long been closely linked to the German economy and felt their prosperity depended on its revival. The Scandinavian nations, especially
Sweden
Sweden, formally the Kingdom of Sweden,The United Nations Group of Experts on Geographical Names states that the country's formal name is the Kingdom of SwedenUNGEGN World Geographical Names, Sweden./ref> is a Nordic country located on ...
, insisted that their long-standing trading relationships with the Eastern Bloc nations not be disrupted and that their neutrality not be infringed.
The United Kingdom insisted on special status as a longstanding belligerent during the war, concerned that if it were treated equally with the devastated continental powers it would receive virtually no aid. The Americans were pushing the importance of free trade and European unity to form a bulwark against communism. The Truman administration, represented by
William L. Clayton, promised the Europeans that they would be free to structure the plan themselves, but the administration also reminded the Europeans that implementation depended on the plan's passage through Congress. A majority of Congress members were committed to free trade and European integration, and were hesitant to spend too much of the money on Germany. However, before the Marshall Plan was in effect, France, Austria, and Italy needed immediate aid. On December 17, 1947, the United States agreed to give $40 million to France, Austria, China, and Italy.
Agreement was eventually reached and the Europeans sent a reconstruction plan to Washington, which was formulated and agreed upon by the
Committee of European Economic Co-operation
The Committee of European Economic Co-operation (CEEC) was a joint European conference to determine the priorities for the recovery of the European economy after World War II, and to assist in the administration of the Marshall Plan. The committee ...
in 1947. In the document, the Europeans asked for $22 billion in aid. Truman cut this to $17 billion in the bill he put to Congress.
On March 17, 1948, Truman addressed European security and condemned the Soviet Union before a hastily convened
Joint Session of Congress
A joint session of the United States Congress is a gathering of members of the two chambers of the bicameral legislature of the federal government of the United States: the Senate and the House of Representatives. Joint sessions can be held on a ...
. Attempting to contain spreading Soviet influence in the Eastern Bloc, Truman asked Congress to restore a peacetime military draft and to swiftly pass the Economic Cooperation Act, the name given to the Marshall Plan. Of the Soviet Union Truman said, "The situation in the world today is not primarily the result of the natural difficulties which follow a great war. It is chiefly due to the fact that one nation has not only refused to cooperate in the establishment of a just and honorable peace but—even worse—has actively sought to prevent it.
Members of the
Republican-controlled 80th Congress
The 80th United States Congress was a meeting of the legislative branch of the United States federal government, composed of the United States Senate and the United States House of Representatives. It met in Washington, DC from January 3, 1947, ...
(1947–1949) were skeptical. "In effect, he told the Nation that we have lost the peace, that our whole war effort was in vain.", noted Representative
Frederick Smith of Ohio. Others thought he had not been forceful enough to contain the USSR. "What
ruman Ruman may refer to:
* Ruman (surname)
* Ruman Ahmed, Bangladeshi cricketer
* Operation RUMAN
See also
* Rumman (disambiguation)
* Rumana (disambiguation)
*Tell Ruman
Tell Ruman Tahtani ( ar, تل رمان), also known as Mazra (), is a village ...
said fell short of being tough", noted Representative
Eugene Cox, a Democrat from Georgia, "there is no prospect of ever winning Russian cooperation." Despite its reservations, the 80th Congress implemented Truman's requests, further escalating the Cold War with the USSR.
Truman signed the Economic Cooperation Act into law on April 3, 1948; the Act established the
Economic Cooperation Administration
The Economic Cooperation Administration (ECA) was a U.S. government agency set up in 1948 to administer the Marshall Plan. It reported to both the State Department and the Department of Commerce. The agency's first head was Paul G. Hoffman, a form ...
(ECA) to administer the program. ECA was headed by economic cooperation administrator
Paul G. Hoffman. In the same year, the participating countries (Austria,
Belgium
Belgium, ; french: Belgique ; german: Belgien officially the Kingdom of Belgium, is a country in Northwestern Europe. The country is bordered by the Netherlands to the north, Germany to the east, Luxembourg to the southeast, France to th ...
, Denmark, France, West Germany, the United Kingdom, Greece,
Iceland
Iceland ( is, Ísland; ) is a Nordic island country in the North Atlantic Ocean and in the Arctic Ocean. Iceland is the most sparsely populated country in Europe. Iceland's capital and largest city is Reykjavík, which (along with its s ...
, Ireland, Italy,
Luxembourg
Luxembourg ( ; lb, Lëtzebuerg ; french: link=no, Luxembourg; german: link=no, Luxemburg), officially the Grand Duchy of Luxembourg, ; french: link=no, Grand-Duché de Luxembourg ; german: link=no, Großherzogtum Luxemburg is a small lan ...
, the
Netherlands
)
, anthem = ( en, "William of Nassau")
, image_map =
, map_caption =
, subdivision_type = Sovereign state
, subdivision_name = Kingdom of the Netherlands
, established_title = Before independence
, established_date = Spanish Netherl ...
, Norway, Sweden,
Switzerland
). Swiss law does not designate a ''capital'' as such, but the federal parliament and government are installed in Bern, while other federal institutions, such as the federal courts, are in other cities (Bellinzona, Lausanne, Luzern, Neuchâtel ...
, Turkey, and the United States) signed an accord establishing a master financial-aid-coordinating agency, the
Organisation for European Economic Co-operation
The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organisation with 38 member countries, founded in 1961 to stimulate e ...
(later called the Organisation for Economic Co-operation and Development or
OECD
The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organisation with 38 member countries, founded in 1961 to stimulate e ...
), which was headed by Frenchman
Robert Marjolin
Robert Marjolin (27 July 1911 – 15 April 1986) was a French economist and politician involved in the formation of the European Economic Community.
Early life and education
Robert Majolin was born in Paris, the son of an upholsterer. He lef ...
.
Implementation
![Marshall plan page 1](https://upload.wikimedia.org/wikipedia/commons/1/1e/Marshall_plan_page_1.jpg)
According to Armin Grünbacher:
The ECA's official
mission statement
A mission statement is a short statement of why an organization exists, what its overall goal is, the goal of its operations: what kind of product or service it provides, its primary customers or market, and its geographical region of operation ...
was to give a boost to the European economy: to promote European production, to bolster European currency, and to facilitate international trade, especially with the United States, whose economic interest required Europe to become wealthy enough to import US goods. Another unofficial goal of ECA (and of the Marshall Plan) was the containment of growing Soviet influence in Europe, evident especially in the growing strength of
communist parties
A communist party is a political party that seeks to realize the socio-economic goals of communism. The term ''communist party'' was popularized by the title of ''The Manifesto of the Communist Party'' (1848) by Karl Marx and Friedrich Engels. A ...
in France, and Italy.
The Marshall Plan money was transferred to the governments of the European nations. The funds were jointly administered by the local governments and the ECA. Each European capital had an ECA envoy, generally a prominent American businessman who would advise on the process. The cooperative allocation of funds was encouraged, and panels of government, business and labor leaders were convened to examine the economy and see where aid was needed. The recipient nations were represented collectively by the
Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organization, intergovernmental organisation with 38 member countries ...
(OECD), headed by British statesman
Oliver Franks
Oliver Shewell Franks, Baron Franks (16 February 1905 – 15 October 1992) was an English civil servant and philosopher who has been described as 'one of the founders of the postwar world'.
Franks was involved in Britain's recovery after the S ...
.
The Marshall Plan aid was mostly used for goods from the United States. The European nations had all but exhausted their
foreign-exchange reserves
Foreign exchange reserves (also called forex reserves or FX reserves) are cash and other reserve assets such as gold held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence ...
during the war, and the Marshall Plan aid represented almost their sole means of importing goods from abroad. At the start of the plan, these imports were mainly much-needed staples such as food and fuel, but later the purchases turned toward reconstruction needs as was originally intended. In the latter years, under pressure from the United States Congress and with the outbreak of the
Korean War
, date = {{Ubl, 25 June 1950 – 27 July 1953 (''de facto'')({{Age in years, months, weeks and days, month1=6, day1=25, year1=1950, month2=7, day2=27, year2=1953), 25 June 1950 – present (''de jure'')({{Age in years, months, weeks a ...
, an increasing amount of the aid was spent on rebuilding the militaries of Western Europe. Of the some $13 billion allotted by mid-1951, $3.4 billion had been spent on imports of raw materials and semi-manufactured products; $3.2 billion on food, feed, and fertilizer; $1.9 billion on machines, vehicles and equipment; and $1.6 billion on fuel.
Also established were
counterpart funds, which used Marshall Plan aid to establish funds in the local currency. According to ECA rules, recipients had to invest 60% of these funds in industry. This was prominent in Germany where these government-administered funds played a crucial role in lending money to private enterprises which would spend the money rebuilding. These funds played a central role in the reindustrialization of Germany. In 1949–50, for instance, 40% of the investment in the German coal industry was by these funds.
The companies were obligated to repay the loans to the government, and the money would then be lent out to another group of businesses. This process has continued to this day in the guise of the state-owned
KfW
The KfW, which together with its subsidiaries DEG, KfW IPEX-Bank and FuB forms the KfW Bankengruppe ("banking group"), is a German state-owned investment and development bank, based in Frankfurt. As of 2014, it is the world's largest national d ...
bank, (Kreditanstalt für Wiederaufbau, meaning Reconstruction Credit Institute). The Special Fund, then supervised by the Federal Economics Ministry, was worth over DM 10 billion in 1971. In 1997 it was worth DM 23 billion. Through the revolving loan system, the Fund had by the end of 1995 made low-interest loans to German citizens amounting to around DM 140 billion. The other 40% of the counterpart funds were used to pay down the debt, stabilize the currency, or invest in non-industrial projects. France made the most extensive use of counterpart funds, using them to reduce the budget deficit. In France, and most other countries, the counterpart fund money was absorbed into general government revenues, and not recycled as in Germany.
The Netherlands received US aid for economic recovery in the Netherlands Indies. However, in January 1949, the American government suspended this aid in response to the Dutch efforts to restore colonial rule in Indonesia during the
Indonesian National Revolution
The Indonesian National Revolution, or the Indonesian War of Independence, was an armed conflict and diplomatic struggle between the Republic of Indonesia and the Dutch Empire and an internal social revolution during Aftermath of WWII, postw ...
, and it implicitly threatened to suspend Marshall aid to the Netherlands if the Dutch government continued to oppose the independence of
Indonesia
Indonesia, officially the Republic of Indonesia, is a country in Southeast Asia and Oceania between the Indian and Pacific oceans. It consists of over 17,000 islands, including Sumatra, Java, Sulawesi, and parts of Borneo and New Guine ...
.
At the time the United States was a significant oil producing nation—one of the goals of the Marshall Plan was for Europe to use oil in place of coal, but the Europeans wanted to buy crude oil and use the Marshall Plan funds to build refineries instead. However, when independent American oil companies complained, the ECA denied funds for European refinery construction.
Technical Assistance Program
![MarshallDonkey](https://upload.wikimedia.org/wikipedia/commons/6/6b/MarshallDonkey.jpg)
A high priority was increasing industrial productivity in Europe, which proved one of the more successful aspects of the Marshall Plan. The US
Bureau of Labor Statistics
The Bureau of Labor Statistics (BLS) is a unit of the United States Department of Labor. It is the principal fact-finding agency for the U.S. government in the broad field of labor economics and statistics and serves as a principal agency of t ...
(BLS) contributed heavily to the success of the Technical Assistance Program. The United States Congress passed a law on June 7, 1940 that allowed the BLS to "make continuing studies of labor productivity" and appropriated funds for the creation of a Productivity and Technological Development Division. The BLS could then use its expertise in the field of productive efficiency to implement a productivity drive in each Western European country receiving Marshall Plan aid. Counterpart funds were used to finance large-scale tours of American industry. France, for example, sent 500 missions with 4700 businessmen and experts to tour American factories, farms, stores, and offices. They were especially impressed with the prosperity of American workers, and how they could purchase an inexpensive new automobile for nine months work, compared to 30 months in France.
By implementing technological literature surveys and organized plant visits, American economists, statisticians, and engineers were able to educate European manufacturers in statistical measurement. The goal of the statistical and technical assistance from the Americans was to increase productive efficiency of European manufacturers in all industries.
To conduct this analysis, the BLS performed two types of productivity calculations. First, they used existing data to calculate how much a worker produces per hour of work—the average output rate. Second, they compared the existing output rates in a particular country to output rates in other nations. By performing these calculations across all industries, the BLS was able to identify the strengths and weaknesses of each country's manufacturing and industrial production. From that, the BLS could recommend technologies (especially statistical) that each individual nation could implement. Often, these technologies came from the United States; by the time the Technical Assistance Program began, the United States used statistical technologies "more than a generation ahead of what
he Europeans
He or HE may refer to:
Language
* He (pronoun), an English pronoun
* He (kana), the romanization of the Japanese kana へ
* He (letter), the fifth letter of many Semitic alphabets
* He (Cyrillic), a letter of the Cyrillic script called ''He'' in ...
were using".
The BLS used these statistical technologies to create Factory Performance Reports for Western European nations. The American government sent hundreds of technical advisers to Europe to observe workers in the field. This on-site analysis made the Factory Performance Reports especially helpful to the manufacturers. In addition, the Technical Assistance Program funded 24,000 European engineers, leaders, and industrialists to visit America and tour America's factories, mines, and manufacturing plants. This way, the European visitors would be able to return to their home countries and implement the technologies used in the United States. The analyses in the Factory Performance Reports and the "hands-on" experience had by the European productivity teams effectively identified productivity deficiencies in European industries; from there, it became clearer how to make European production more effective.
Before the Technical Assistance Program even went into effect,
United States Secretary of Labor
The United States Secretary of Labor is a member of the Cabinet of the United States, and as the head of the United States Department of Labor, controls the department, and enforces and suggests laws involving unions, the workplace, and all ot ...
Maurice Tobin
Maurice Joseph Tobin (May 22, 1901July 19, 1953) was an American politician serving as Mayor of Boston, Massachusetts, the Governor of Massachusetts, and United States Secretary of Labor. He was a member of the Democratic Party and a liberal tha ...
expressed his confidence in American productivity and technology to both American and European economic leaders. He urged that the United States play a large role in improving European productive efficiency by providing four recommendations for the program's administrators:
# That BLS productivity personnel should serve on American-European councils for productivity;
# that productivity targets (based on American productivity standards) can and should be implemented to increase productivity;
# that there should be a general exchange and publication of information; and
# that the "technical abstract" service should be the central source of information.
The effects of the Technical Assistance Program were not limited to improvements in productive efficiency. While the thousands of European leaders took their work/study trips to the United States, they were able to observe a number of aspects of American society as well. The Europeans could watch local, state, and federal governments work together with citizens in a pluralist society. They observed a democratic society with open universities and civic societies in addition to more advanced factories and manufacturing plants. The Technical Assistance Program allowed Europeans to bring home many types of American ideas.
Another important aspect of the Technical Assistance Program was its low cost. While $19.4 billion was allocated for capital costs in the Marshall Plan, the Technical Assistance Program only required $300 million. Only one-third of that $300 million cost was paid by the United States.
United Kingdom
In the aftermath of the war Britain faced a deep financial crisis, whereas the United States enjoyed an economic boom. The United States continued to finance the British treasury after the war. Much of this aid was designed to restore infrastructure and help refugees. Britain received an
emergency loan of $3.75 billion in 1946; it was a 50-year loan with a low 2% interest rate. The Marshall Plan provided a more permanent solution as it gave $3.3 billion to Britain. The Marshall money was a gift and carried requirements that Britain balance its budget, control tariffs and maintain adequate currency reserves. The
British Labour government under Prime Minister
Clement Attlee
Clement Richard Attlee, 1st Earl Attlee, (3 January 18838 October 1967) was a British politician who served as Prime Minister of the United Kingdom from 1945 to 1951 and Leader of the Labour Party from 1935 to 1955. He was Deputy Prime Mini ...
was an enthusiastic participant.
The American goals for the Marshall plan were to help rebuild the postwar British economy, help modernize the economy, and minimize trade barriers. When the Soviet Union refused to participate or allow its satellites to participate, the Marshall plan became an element of the emerging Cold War.
There were political tensions between the two nations regarding Marshall plan requirements. London was dubious about Washington's emphasis on European economic integration as the solution to postwar recovery. Integration with Europe at this point would mean cutting close ties to the emerging Commonwealth. London tried to convince Washington that that American economic aid, especially to the sterling currency area, was necessary to solve the dollar shortage. British economist argued that their position was validated by 1950 as European industrial production exceeded prewar levels. Washington demanded convertibility of sterling currency on 15 July 1947, which produced a severe financial crisis for Britain. Convertibility was suspended on 20 August 1947. However, by 1950, American rearmament and heavy spending on the Korean War and Cold War finally ended the dollar shortage. The balance of payment problems the trouble the postwar government was caused less by economic decline and more by political overreach, according to Jim Tomlinson.
West Germany and Austria
![DBP 1960 344 George C](https://upload.wikimedia.org/wikipedia/commons/7/7e/DBP_1960_344_George_C._Marshall.jpg)
The Marshall Plan was implemented in West Germany (1948–1950), as a way to modernize business procedures and utilize the best practices. The Marshall Plan made it possible for West Germany to return quickly to its traditional pattern of industrial production with a strong export sector. Without the plan, agriculture would have played a larger role in the recovery period, which itself would have been longer. With respect to Austria, Günter Bischof has noted that "the Austrian economy, injected with an overabundance of European Recovery Program funds, produced "miracle" growth figures that matched and at times surpassed the German ones."
Marshall Aid in general and the counterpart funds in particular had a significant impact in Cold-War propaganda and economic matters in Western Europe, which most likely contributed to the declining appeal of domestic communist parties.
Expenditures
The Marshall Plan aid was divided among the participant states on a roughly per capita basis. A larger amount was given to the major industrial powers, as the prevailing opinion was that their resuscitation was essential for general European revival. Somewhat more aid per capita was also directed toward the
Allied nations
The Allies, formally referred to as the United Nations from 1942, were an international military coalition formed during the Second World War (1939–1945) to oppose the Axis powers, led by Nazi Germany, Imperial Japan, and Fascist Ita ...
, with less for those that had been part of the
Axis
An axis (plural ''axes'') is an imaginary line around which an object rotates or is symmetrical. Axis may also refer to:
Mathematics
* Axis of rotation: see rotation around a fixed axis
* Axis (mathematics), a designator for a Cartesian-coordinat ...
or remained neutral. The exception was Iceland, which had been
neutral during the war, but received far more on a per capita basis than the second highest recipient.
The table below shows Marshall Plan aid by country and year (in millions of dollars) from ''The Marshall Plan Fifty Years Later.'' There is no clear consensus on exact amounts, as different scholars differ on exactly what elements of American aid during this period were part of the Marshall Plan.
Loans and grants
The Marshall Plan, just as
GARIOA Government Aid and Relief in Occupied Areas (GARIOA) was a program under which the United States after the 1945 end of World War II from 1946 onwards provided emergency aid to the occupied nations of Japan, Germany, and Austria. The aid was predomi ...
, consisted of aid both in the form of grants and in the form of loans. Out of the total, US$1.2 billion were loan-aid.
Ireland which received US$146.2 million through the Marshall Plan, received US$128.2 million as loans, and the remaining US$18 million as grants. By 1969 the Irish Marshall Plan debt, which was still being repaid, amounted to 31 million pounds, out of a total Irish foreign debt of 50 million pounds. The UK received US$385 million of its Marshall Plan aid in the form of loans. Unconnected to the Marshall Plan the UK also received direct loans from the US amounting to US$4.6 billion. The proportion of Marshall Plan loans versus Marshall Plan grants was roughly 15% to 85% for both the UK and France.
Germany, which up until the 1953
debt agreement had to work on the assumption that all the Marshall Plan aid was to be repaid, spent its funds very carefully. Payment for Marshall Plan goods, "counterpart funds", were administered by the
Reconstruction Credit Institute, which used the funds for loans inside Germany. In the 1953 debt agreement, the amount of Marshall Plan aid that Germany was to repay was reduced to less than US$1 billion. This made the proportion of loans versus grants to Germany similar to that of France and the UK. The final German loan repayment was made in 1971. Since Germany chose to repay the aid debt out of the German Federal budget, leaving the German ERP fund intact, the fund was able to continue its reconstruction work. By 1996 it had accumulated a value of 23 billion Deutsche Mark.
Funding for CIA fronts
The
Central Intelligence Agency
The Central Intelligence Agency (CIA ), known informally as the Agency and historically as the Company, is a civilian foreign intelligence service of the federal government of the United States, officially tasked with gathering, processing, ...
received 5% of the Marshall Plan funds (about $685 million spread over six years), which it used to finance secret operations abroad. Through the
Office of Policy Coordination
The Office of Policy Coordination (OPC) was the covert operation wing of the United States Central Intelligence Agency (CIA). Created as a department of the CIA in 1948, it actually operated independently until October 1950. OPC existed until 1 A ...
money was directed toward support for labor unions, newspapers, student groups, artists and intellectuals, who were countering the anti-American counterparts subsidized by the communists. The largest sum went to the
Congress for Cultural Freedom
The Congress for Cultural Freedom (CCF) was an anti-communist advocacy group founded in 1950. At its height, the CCF was active in thirty-five countries. In 1966 it was revealed that the CIA was instrumental in the establishment and funding of the ...
. There were no agents working among the Soviets or their satellite states. The founding conference of the Congress for Cultural Freedom was held in Berlin in June 1950. Among the leading intellectuals from the US and Western Europe were writers, philosophers, critics and historians:
Franz Borkenau
Franz Borkenau (December 15, 1900 – May 22, 1957) was an Austrian writer. Borkenau was born in Vienna, Austria, the son of a civil servant. As a university student in Leipzig, his main interests were Marxism and psychoanalysis. Borkenau is kno ...
,
Karl Jaspers
Karl Theodor Jaspers (, ; 23 February 1883 – 26 February 1969) was a German-Swiss psychiatrist and philosopher who had a strong influence on modern theology, psychiatry, and philosophy. After being trained in and practicing psychiatry, Jasper ...
,
John Dewey
John Dewey (; October 20, 1859 – June 1, 1952) was an American philosopher, psychologist, and educational reformer whose ideas have been influential in education and social reform. He was one of the most prominent American scholars in the f ...
,
Ignazio Silone
Secondino Tranquilli (1 May 1900 – 22 August 1978), known by the pseudonym Ignazio Silone (, ), was an Italian political leader, novelist, and short-story writer, world-famous during World War II for his powerful anti-fascist novels. He was no ...
,
James Burnham
James Burnham (November 22, 1905 – July 28, 1987) was an American philosopher and political theorist. He chaired the New York University Department of Philosophy; his first book was ''An Introduction to Philosophical Analysis'' (1931). Burn ...
,
Hugh Trevor-Roper
Hugh Redwald Trevor-Roper, Baron Dacre of Glanton (15 January 1914 – 26 January 2003) was an English historian. He was Regius Professor of Modern History at the University of Oxford.
Trevor-Roper was a polemicist and essayist on a range of ...
,
Arthur Schlesinger Jr.
Arthur Meier Schlesinger Jr. (; born Arthur Bancroft Schlesinger; October 15, 1917 – February 28, 2007) was an American historian, social critic, and public intellectual. The son of the influential historian Arthur M. Schlesinger Sr. and a spe ...
,
Bertrand Russell
Bertrand Arthur William Russell, 3rd Earl Russell, (18 May 1872 – 2 February 1970) was a British mathematician, philosopher, logician, and public intellectual. He had a considerable influence on mathematics, logic, set theory, linguistics, ...
,
Ernst Reuter
Ernst Rudolf Johannes Reuter (29 July 1889 – 29 September 1953) was the mayor of West Berlin from 1948 to 1953, during the time of the Cold War.
Biography
Early years
Reuter was born in Apenrade (Aabenraa), Province of Schleswig-Holstein ...
,
Raymond Aron
Raymond Claude Ferdinand Aron (; 14 March 1905 – 17 October 1983) was a French philosopher, sociologist, political scientist, historian and journalist, one of France's most prominent thinkers of the 20th century.
Aron is best known for his 19 ...
,
Alfred Ayer
Sir Alfred Jules "Freddie" Ayer (; 29 October 1910 – 27 June 1989), usually cited as A. J. Ayer, was an English philosopher known for his promotion of logical positivism, particularly in his books '' Language, Truth, and Logic'' (1936) ...
,
Benedetto Croce
Benedetto Croce (; 25 February 1866 – 20 November 1952)
was an Italian idealist philosopher, historian, and politician, who wrote on numerous topics, including philosophy, history, historiography and aesthetics. In most regards, Croce was a lib ...
,
Arthur Koestler
Arthur Koestler, (, ; ; hu, Kösztler Artúr; 5 September 1905 – 1 March 1983) was a Hungarian-born author and journalist. Koestler was born in Budapest and, apart from his early school years, was educated in Austria. In 1931, Koestler join ...
,
Richard Löwenthal
Richard Löwenthal (April 15, 1908 – August 9, 1991) was a German journalist and professor who wrote mostly on the problems of democracy, communism, and world politics.
Life
Löwenthal was born in Berlin, Germany, the son of Ernst and Anna L ...
,
Melvin J. Lasky
Melvin Jonah Lasky (15 January 1920 – 19 May 2004) was an American journalist, intellectual, and member of the anti-Communist left. He founded the German journal '' Der Monat'' in 1948 and, from 1958 to 1991, edited ''Encounter'', one of many ...
,
Tennessee Williams
Thomas Lanier Williams III (March 26, 1911 – February 25, 1983), known by his pen name Tennessee Williams, was an American playwright and screenwriter. Along with contemporaries Eugene O'Neill and Arthur Miller, he is considered among the thre ...
,
Irving Brown
Irving Brown (Bronx, November 20, 1911 – Paris, February 10, 1989) was an American trade unionist and leader in the American Federation of Labor (AFL) and subsequently the AFL-CIO. Brown played a prominent role in Western Europe and Africa du ...
, and
Sidney Hook
Sidney Hook (December 20, 1902 – July 12, 1989) was an American philosopher of pragmatism known for his contributions to the philosophy of history, the philosophy of education, political theory, and ethics. After embracing communism in his youth ...
. There were conservatives among the participants, but non-communist (or former communist) leftists were more numerous.
Effects and legacy
![Marshall Plan poster](https://upload.wikimedia.org/wikipedia/commons/b/b3/Marshall_Plan_poster.JPG)
The Marshall Plan was originally scheduled to end in 1953. Any effort to extend it was halted by the growing cost of the
Korean War
, date = {{Ubl, 25 June 1950 – 27 July 1953 (''de facto'')({{Age in years, months, weeks and days, month1=6, day1=25, year1=1950, month2=7, day2=27, year2=1953), 25 June 1950 – present (''de jure'')({{Age in years, months, weeks a ...
and rearmament. American Republicans hostile to the plan had also gained seats in the
1950 Congressional elections, and conservative opposition to the plan was revived. Thus the plan ended in 1951, though various other forms of American aid to Europe continued afterward.
The years 1948 to 1952 saw the fastest period of growth in European history. Industrial production increased by 35%. Agricultural production substantially surpassed pre-war levels. The poverty and starvation of the immediate postwar years disappeared, and Western Europe embarked upon an unprecedented two decades of growth that saw standards of living increase dramatically. Additionally, the long-term effect of economic integration raised European income levels substantially, by nearly 20 percent by the mid-1970s. There is some debate among historians over how much this should be credited to the Marshall Plan. Most reject the idea that it alone miraculously revived Europe, as evidence shows that a general recovery was already underway. Most believe that the Marshall Plan sped this recovery, but did not initiate it. Many argue that the structural adjustments that it forced were of great importance. Economic historians
J. Bradford DeLong
James Bradford "Brad" DeLong (born June 24, 1960) is an economic historian who is a professor of economics at the University of California, Berkeley. DeLong served as Deputy Assistant Secretary of the U.S. Department of the Treasury in the Clinto ...
and
Barry Eichengreen
Barry Julian Eichengreen (born 1952) is an American economist and economic historian who holds the title of George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley, where he ha ...
call it "history's most successful structural adjustment program." One effect of the plan was that it subtly "Americanized" European countries, especially Austria, through new exposure to American popular culture, including the growth in influence of Hollywood movies and rock n' roll.
The political effects of the Marshall Plan may have been just as important as the economic ones. Marshall Plan aid allowed the nations of Western Europe to relax austerity measures and rationing, reducing discontent and bringing political stability. The communist influence on Western Europe was greatly reduced, and throughout the region, communist parties faded in popularity in the years after the Marshall Plan. The trade relations fostered by the Marshall Plan helped forge the North Atlantic alliance that would persist throughout the Cold War in the form of NATO. At the same time, the nonparticipation of the states of the Eastern Bloc was one of the first clear signs that the continent was now divided.
The Marshall Plan also played an important role in European integration. Both the Americans and many of the European leaders felt that European integration was necessary to secure the peace and prosperity of Europe, and thus used Marshall Plan guidelines to foster integration. In some ways, this effort failed, as the
OEEC never grew to be more than an agent of economic cooperation. Rather, it was the separate
European Coal and Steel Community
The European Coal and Steel Community (ECSC) was a European organization created after World War II to regulate the coal and steel industries. It was formally established in 1951 by the Treaty of Paris, signed by Belgium, France, Italy, Luxembo ...
, which did not include Britain, that would eventually grow into the
European Union
The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...
. However, the OEEC served as both a testing and training ground for the structures that would later be used by the
European Economic Community
The European Economic Community (EEC) was a regional organization created by the Treaty of Rome of 1957,Today the largely rewritten treaty continues in force as the ''Treaty on the functioning of the European Union'', as renamed by the Lisb ...
. The Marshall Plan, linked into the
Bretton Woods system
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bretto ...
, also mandated free trade throughout the region.
![Netherlands 10 gulden Marshall Plan](https://upload.wikimedia.org/wikipedia/commons/b/b0/Netherlands_10_gulden_Marshall_Plan.jpg)
While some historians today feel some of the praise for the Marshall Plan is exaggerated, it is still viewed favorably and many thus feel that a similar project would help other areas of the world. After the fall of communism, several proposed a "Marshall Plan for Eastern Europe" that would help revive that region. Others have proposed a Marshall Plan for Africa to help that continent, and US
Vice President Al Gore suggested a
Global Marshall Plan
The Global Marshall Plan is a plan first devised by former American Vice-President Al Gore in his bestselling book ''Earth in the Balance'', which gives specific ideas on how to save the global environment.
Gore states: "The model of the Marshal ...
. "Marshall Plan" has become a metaphor for any very large-scale government program that is designed to solve a specific social problem. It is usually used when calling for federal spending to correct a perceived failure of the private sector.
Nicholas Shaxson
Nicholas Shaxson (born 1966) is a British author, journalist and investigator. He is best known for his investigative books ''Poisoned Wells'' (2007) and '' Treasure Islands'' (2011). He has worked as a part-time writer and researcher for the Tax ...
comments: "It is widely believed that the plan worked by offsetting European countries' yawning deficits. But its real importance ... was simply to compensate for the US failure to institute controls on inflows of hot money from Europe. ... American post-war aid was less than the money flowing in the other direction." European hot money inflated the US dollar, to the disadvantage of US exporters.
Repayment
The
Organisation for European Economic Co-operation took the leading role in allocating funds, and the OEEC arranged for the transfer of the goods. The American supplier was paid in dollars, which were credited against the appropriate European Recovery Program funds. The European recipient, however, was not given the goods as a gift but had to pay for them (usually on credit) in local currency. These payments were kept by the European government involved in a special counterpart fund. This counterpart money, in turn, could be used by the government for further investment projects. Five percent of the counterpart money was paid to the US to cover the administrative costs of the ERP. In addition to ERP grants, the
Export-Import Bank (an agency of the US government) at the same time made long-term loans at low interest rates to finance major purchases in the US, all of which were repaid.
In the case of Germany, there also were 16 billion marks of debts from the 1920s which had defaulted in the 1930s, but which Germany decided to repay to restore its reputation. This money was owed to government and private banks in the US, France, and Britain. Another 16 billion marks represented postwar loans by the US. Under the
London Debts Agreement of 1953, the repayable amount was reduced by 50% to about 15 billion marks and stretched out over 30 years, and compared to the fast-growing German economy were of minor impact.
Areas excluded from the Plan
Large parts of the world devastated by World War II did not benefit from the Marshall Plan. The only major Western European nation excluded was
Francisco Franco's Spain, which was highly unpopular in Washington. With the escalation of the Cold War, the United States reconsidered its position, and in 1951 embraced Spain as an ally, encouraged by Franco's aggressive
anti-communist
Anti-communism is Political movement, political and Ideology, ideological opposition to communism. Organized anti-communism developed after the 1917 October Revolution in the Russian Empire, and it reached global dimensions during the Cold War, w ...
policies. Over the next decade, a considerable amount of American aid would go to Spain, but less than its neighbors had received under the Marshall Plan.
The Soviet Union had been as badly affected as any part of the world by the war. The Soviets imposed large
reparations
Reparation(s) may refer to:
Christianity
* Restitution (theology), the Christian doctrine calling for reparation
* Acts of reparation, prayers for repairing the damages of sin
History
*War reparations
**World War I reparations, made from G ...
payments on the Axis allies that were in its sphere of influence.
Austria
Austria, , bar, Östareich officially the Republic of Austria, is a country in the southern part of Central Europe, lying in the Eastern Alps. It is a federation of nine states, one of which is the capital, Vienna, the most populous ...
,
Finland
Finland ( fi, Suomi ; sv, Finland ), officially the Republic of Finland (; ), is a Nordic country in Northern Europe. It shares land borders with Sweden to the northwest, Norway to the north, and Russia to the east, with the Gulf of Bot ...
,
Hungary
Hungary ( hu, Magyarország ) is a landlocked country in Central Europe. Spanning of the Carpathian Basin, it is bordered by Slovakia to the north, Ukraine to the northeast, Romania to the east and southeast, Serbia to the south, Croatia a ...
,
Romania
Romania ( ; ro, România ) is a country located at the crossroads of Central Europe, Central, Eastern Europe, Eastern, and Southeast Europe, Southeastern Europe. It borders Bulgaria to the south, Ukraine to the north, Hungary to the west, S ...
, and especially
East Germany
East Germany, officially the German Democratic Republic (GDR; german: Deutsche Demokratische Republik, , DDR, ), was a country that existed from its creation on 7 October 1949 until its dissolution on 3 October 1990. In these years the state ...
were forced to pay vast sums and ship large amounts of supplies to the USSR. These reparation payments meant the Soviet Union itself received about the same as 16 European countries received in total from Marshall Plan aid.
In accordance with the agreements with the USSR, shipment of dismantled German industrial installations from the west began on March 31, 1946. Under the terms of the agreement, the Soviet Union would in return ship raw materials such as food and timber to the western zones. In view of the Soviet failure to do so, the western zones halted the shipments east, ostensibly on a temporary basis, although they were never resumed. It was later shown that the main reason for halting shipments east was not the behavior of the USSR but rather the recalcitrant behavior of France. Examples of material received by the USSR were equipment from the
Kugel-Fischer ballbearing plant at
Schweinfurt
Schweinfurt ( , ; ) is a city in the district of Lower Franconia in Bavaria, Germany. It is the administrative centre of the surrounding district (''Landkreis'') of Schweinfurt and a major industrial, cultural and educational hub. The urban agg ...
, the
Daimler-Benz
The Mercedes-Benz Group Aktiengesellschaft, AG (previously named Daimler-Benz, DaimlerChrysler and Daimler) is a German Multinational corporation, multinational automotive corporation headquartered in Stuttgart, Baden-Württemberg, Germany. It ...
underground aircraft-engine plant at
Obrigheim
Obrigheim ( South Franconian: ''Owweringe'') is a town in the district of Neckar-Odenwald-Kreis, in Baden-Württemberg, Germany.
It is the location of the Obrigheim Nuclear Power Plant
Obrigheim Nuclear Power Plant (KWO) is a mothballed nucl ...
, the
Deschimag
Deutsche Schiff- und Maschinenbau Aktiengesellschaft (abbreviated Deschimag) was a cooperation of eight German shipyards in the period 1926 to 1945. The leading company was the shipyard AG Weser in Bremen.
History
The Deschimag was founded in 1 ...
shipyards at
Bremen-Weser, and the
Gendorf powerplant.
The USSR did establish
COMECON
The Council for Mutual Economic Assistance (, ; English abbreviation COMECON, CMEA, CEMA, or CAME) was an economic organization from 1949 to 1991 under the leadership of the Soviet Union that comprised the countries of the Eastern Bloc along wi ...
as a riposte to the Marshall Plan to deliver aid for Eastern Bloc countries, but this was complicated by the Soviet efforts to manage their own recovery from the war. The members of Comecon looked to the Soviet Union for oil; in turn, they provided machinery, equipment, agricultural goods, industrial goods, and consumer goods to the Soviet Union. Economic recovery in the East was much slower than in the West, resulting in the formation of the
shortage economies
In economics, a shortage or excess demand is a situation in which the demand for a product or service exceeds its supply in a market. It is the opposite of an excess supply ( surplus).
Definitions
In a perfect market (one that matches a sim ...
and a gap in wealth between East and West. Finland, which the USSR forbade to join the Marshall Plan and which was required to give large reparations to the USSR, saw its economy recover to pre-war levels in 1947. France, which received billions of dollars through the Marshall Plan, similarly saw its average income per person return to almost pre-war level by 1949. By mid-1948 industrial production in Poland, Hungary,
Bulgaria
Bulgaria (; bg, България, Bǎlgariya), officially the Republic of Bulgaria,, ) is a country in Southeast Europe. It is situated on the eastern flank of the Balkans, and is bordered by Romania to the north, Serbia and North Macedon ...
, and
Czechoslovakia
, rue, Чеськословеньско, , yi, טשעכאסלאוואקיי,
, common_name = Czechoslovakia
, life_span = 1918–19391945–1992
, p1 = Austria-Hungary
, image_p1 ...
had recovered to a level somewhat above pre-war level.
Aid to Asia
From the end of the war to the end of 1953, the US provided grants and credits amounting to $5.9 billion to Asian countries, especially Rep. Of China (Taiwan) ($1.051 billion), India ($255 million), Indonesia ($215 million), Japan ($2.444 billion), South Korea ($894 million), Pakistan ($98 million) and the Philippines ($803 million). In addition, another $282 million went to Israel and $196 million to the rest of the Middle East. All this aid was separate from the Marshall Plan.
Canada
Canada's infrastructure was damaged little by the war (as most of the war was fought in Europe, Asia and pacific region). In 1945 it had one of the world's richest economies and operated its own aid program. In 1948, the US allowed ERP aid to be used to buy goods from Canada. In the first two years of operation, ERP funded over a billion dollars worth of trade with Canada
World total
The total of American grants and loans to the world from 1945 to 1953 came to $44.3 billion.
Opinion
Bradford DeLong
James Bradford "Brad" DeLong (born June 24, 1960) is an economic historian who is a professor of economics at the University of California, Berkeley. DeLong served as Deputy Assistant Secretary of the U.S. Department of the Treasury in the Clin ...
and
Barry Eichengreen
Barry Julian Eichengreen (born 1952) is an American economist and economic historian who holds the title of George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley, where he ha ...
conclude it was "History's Most Successful Structural Adjustment Program." They state:
It was not large enough to have significantly accelerated recovery by financing investment, aiding the reconstruction of damaged infrastructure, or easing commodity bottlenecks. We argue, however, that the Marshall Plan did play a major role in setting the stage for post-World War II Western Europe's rapid growth. The conditions attached to Marshall Plan aid pushed European political economy in a direction that left its post World War II "mixed economies" with more "market" and less "controls" in the mix.
Domestic campaign for support
Prior to passing and enacting the Marshall Plan, President Truman and George Marshall started a domestic overhaul of public opinion from coast to coast. The purpose of this campaign was to sway public opinion in their direction and to inform the common person of what the Marshall Plan was and what the Plan would ultimately do. They spent months attempting to convince Americans that their cause was just and that they should embrace the higher taxes that would come in the foreseeable future.
A copious amount of propaganda ended up being highly effective in swaying public opinion toward supporting the Marshall Plan. During the nationwide campaign for support, "more than a million pieces of pro-Marshall Plan publications-booklets, leaflets, reprints, and fact sheets", were disseminated. Truman's and Marshall's efforts proved to be effective. A Gallup Poll taken between the months of July and December 1947 shows the percentage of Americans unaware of the Marshall Plan fell from 51% to 36% nationwide. By the time the Marshall Plan was ready to be implemented, there was a general consensus throughout the American public that this was the right policy for both America, and the countries who would be receiving aid.
Change in American ideology
During the period leading up to World War II, Americans were highly isolationist, and many called The Marshall Plan a "milestone" for American ideology. By looking at polling data over time from pre-World War II to post-World War II, one would find that there was a change in public opinion in regards to ideology. Americans swapped their isolationist ideals for a much more global internationalist ideology after World War II.
Polling data
In a
National Opinion Research Center
NORC at the University of Chicago is one of the largest independent social research organizations in the United States. Established in 1941 as the National Opinion Research Center, its corporate headquarters is located in downtown Chicago, with o ...
(NORC) poll taken in April 1945, a cross-section of Americans were asked, "If our government keeps on sending lendlease materials, which we may not get paid for, to friendly countries for about three years after the war, do you think this will mean more jobs or fewer jobs for most Americans, or won't it make any difference?" 75% said the same or more jobs; 10% said fewer.
Before proposing anything to Congress in 1947, the Truman administration made an elaborate effort to organize public opinion in favor of the Marshall Plan spending, reaching out to numerous national organizations representing business, labor, farmers, women, and other interest groups. Political scientist Ralph Levering points out that:
Mounting large public relations campaigns and supporting private groups such as the Citizens Committee for the Marshall Plan, the administration carefully built public and bipartisan Congressional support before bringing these measures to a vote.
Public opinion polls in 1947 consistently showed strong support for the Marshall plan among Americans. Furthermore, Gallup polls in England, France, and Italy showed favorable majorities over 60%.
Criticism
Laissez-faire criticism
Laissez-faire
''Laissez-faire'' ( ; from french: laissez faire , ) is an economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies) deriving from special interest groups. ...
criticism of the Marshall Plan came from a number of economists.
Wilhelm Röpke
Wilhelm Röpke (October 10, 1899 – February 12, 1966) was a German economist and social critic, best known as one of the spiritual fathers of the social market economy. A Professor of Economics, first in Jena, then in Graz, Marburg, Ist ...
, who influenced
German Minister for Economy Ludwig Erhard
Ludwig Wilhelm Erhard (; 4 February 1897 – 5 May 1977) was a German politician affiliated with the Christian Democratic Union (CDU), and chancellor of West Germany from 1963 until 1966. He is known for leading the West German postwar economic ...
in his
economic recovery program, believed recovery would be found in eliminating
central planning
A planned economy is a type of economic system where investment, production and the allocation of capital goods takes place according to economy-wide economic plans and production plans. A planned economy may use centralized, decentralized, pa ...
and restoring a market economy in Europe, especially in those countries which had adopted more
fascist
Fascism is a far-right, Authoritarianism, authoritarian, ultranationalism, ultra-nationalist political Political ideology, ideology and Political movement, movement,: "extreme militaristic nationalism, contempt for electoral democracy and pol ...
and
corporatist
Corporatism is a collectivist political ideology which advocates the organization of society by corporate groups, such as agricultural, labour, military, business, scientific, or guild associations, on the basis of their common interests. The ...
economic policies. Röpke criticized the Marshall Plan for forestalling the transition to the free market by subsidizing the current, failing systems. Erhard put Röpke's theory into practice and would later credit Röpke's influence for West Germany's preeminent success.
Henry Hazlitt
Henry Stuart Hazlitt (; November 28, 1894 – July 9, 1993) was an American journalist who wrote about business and economics for such publications as ''The Wall Street Journal'', ''The Nation'', ''The American Mercury'', ''Newsweek'', and '' ...
criticized the Marshall Plan in his 1947 book ''Will Dollars Save the World?'', arguing that economic recovery comes through savings, capital accumulation, and private enterprise, and not through large cash subsidies.
Austrian School
The Austrian School is a heterodox school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result exclusively from the motivations and actions of individuals. Austrian school ...
economist
Ludwig von Mises
Ludwig Heinrich Edler von Mises (; 29 September 1881 – 10 October 1973) was an Austrian School economist, historian, logician, and Sociology, sociologist. Mises wrote and lectured extensively on the societal contributions of classical liberali ...
criticized the Marshall Plan in 1951, believing that "the American subsidies make it possible for
urope'sgovernments to conceal partially the disastrous effects of the various socialist measures they have adopted". Some critics and Congressmen at the time believed that America was giving too much aid to Europe. America had already given Europe $9 billion in other forms of help in previous years. The Marshall Plan gave another $13 billion, equivalent to about $100 billion in 2010 value.
Modern criticism
The Marshall Plan's role in the rapid recovery of Western Europe has been debated. Most reject the idea that it alone miraculously revived Europe since the evidence shows that a general recovery was already underway. The Marshall Plan grants were provided at a rate that was not much higher in terms of flow than the previous
UNRRA
United Nations Relief and Rehabilitation Administration (UNRRA) was an international relief agency, largely dominated by the United States but representing 44 nations. Founded in November 1943, it was dissolved in September 1948. it became part o ...
aid and represented less than 3% of the combined
national income
A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region, including gross domestic product (GDP), gross national product (GNP), net national income (NNI), and adjusted nati ...
of the recipient countries between 1948 and 1951, which would mean an increase in
GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
growth of only 0.3%. In addition, there is no correlation between the amount of aid received and the speed of recovery: both
France
France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of Overseas France, overseas regions and territories in the Americas and the Atlantic Ocean, Atlantic, Pacific Ocean, Pac ...
and the
United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and ...
received more aid, but
West Germany
West Germany is the colloquial term used to indicate the Federal Republic of Germany (FRG; german: Bundesrepublik Deutschland , BRD) between its formation on 23 May 1949 and the German reunification through the accession of East Germany on 3 ...
recovered significantly faster.
Criticism of the Marshall Plan became prominent among historians of the
revisionist school, such as
Walter LaFeber
Walter Fredrick LaFeber (August 30, 1933March 9, 2021) was an American academic who served as the Andrew H. and James S. Tisch Distinguished University Professor in the Department of History at Cornell University. Previous to that he served as t ...
, during the 1960s and 1970s. They argued that the plan was American economic
imperialism
Imperialism is the state policy, practice, or advocacy of extending power and dominion, especially by direct territorial acquisition or by gaining political and economic control of other areas, often through employing hard power (economic and ...
and that it was an attempt to gain control over Western Europe just as the Soviets controlled Eastern Europe economically through the
Comecon
The Council for Mutual Economic Assistance (, ; English abbreviation COMECON, CMEA, CEMA, or CAME) was an economic organization from 1949 to 1991 under the leadership of the Soviet Union that comprised the countries of the Eastern Bloc#List of s ...
. In a review of West Germany's economy from 1945 to 1951, German analyst
Werner Abelshauser
Werner Abelshauser (born 24 November 1944 in Wiesloch near Heidelberg) is a German economic historian.
Life
Abelshauser studied economics at the University of Mannheim and graduated in 1970. He received his PhD at Ruhr University Bochum in 197 ...
concluded that "foreign aid was not crucial in starting the recovery or in keeping it going". The economic recoveries of France, Italy, and Belgium, Cowen argues, began a few months before the flow of US money. Belgium, the country that relied earliest and most heavily on free-market economic policies after its liberation in 1944, experienced swift recovery and avoided the severe housing and food shortages seen in the rest of continental Europe.
Former US Chairman of the Federal Reserve Bank
Alan Greenspan
Alan Greenspan (born March 6, 1926) is an American economist who served as the 13th chairman of the Federal Reserve from 1987 to 2006. He works as a private adviser and provides consulting for firms through his company, Greenspan Associates LLC. ...
gives most credit to German Chancellor
Ludwig Erhard
Ludwig Wilhelm Erhard (; 4 February 1897 – 5 May 1977) was a German politician affiliated with the Christian Democratic Union (CDU), and chancellor of West Germany from 1963 until 1966. He is known for leading the West German postwar economic ...
for Europe's economic recovery. Greenspan writes in his memoir ''
The Age of Turbulence
''The Age of Turbulence: Adventures in a New World'' is a 2007 memoir of former Chairman of the Federal Reserve Alan Greenspan, co-authored by Peter Petre, a former executive editor at Fortune magazine. Published on September 17, 2007, the book de ...
'' that Erhard's economic policies were the most important aspect of postwar Western European recovery, even outweighing the contributions of the Marshall Plan. He states that it was Erhard's reductions in economic regulations that permitted Germany's miraculous recovery, and that these policies also contributed to the recoveries of many other European countries. Its recovery is attributed to traditional economic stimuli, such as increases in investment, fueled by a high savings rate and low taxes. Japan saw a large infusion of US investment during the
Korean War
, date = {{Ubl, 25 June 1950 – 27 July 1953 (''de facto'')({{Age in years, months, weeks and days, month1=6, day1=25, year1=1950, month2=7, day2=27, year2=1953), 25 June 1950 – present (''de jure'')({{Age in years, months, weeks a ...
.
Noam Chomsky
Avram Noam Chomsky (born December 7, 1928) is an American public intellectual: a linguist, philosopher, cognitive scientist, historian, social critic, and political activist. Sometimes called "the father of modern linguistics", Chomsky is ...
said the Marshall Plan "set the stage for large amounts of private U.S. investment in Europe, establishing the basis for modern
transnational corporations
A multinational company (MNC), also referred to as a multinational enterprise (MNE), a transnational enterprise (TNE), a transnational corporation (TNC), an international corporation or a stateless corporation with subtle but contrasting senses, i ...
".
The Marshall Plan has been recently reinterpreted as a public policy approach to complex and multi-causal problems (wicked problems) in search of building integrated solutions with multilevel governance.
In popular culture
Alfred Friendly
Alfred Friendly (December 30, 1911 – November 7, 1983) was an American journalist, editor and writer for ''The Washington Post''. He began his career as a reporter with the ''Post'' in 1939 and became Managing Editor in 1955. In 1967 he cover ...
, press aide to the US
Secretary of Commerce
The United States secretary of commerce (SecCom) is the head of the United States Department of Commerce. The secretary serves as the principal advisor to the president of the United States on all matters relating to commerce. The secretary rep ...
W. Averell Harriman, wrote a humorous operetta about the Marshall Plan during its first year; one of the lines in the operetta was: "Wines for Sale; will you swap / A little bit of steel for
Chateau Neuf du Pape?"
Spanish director
Luis García Berlanga
Luis García-Berlanga Martí (12 June 1921 – 13 November 2010) was a Spain , Spanish film director and screenwriter. Acclaimed as a pioneer of modern Spanish cinema, his films are marked by social satire and acerbic critiques of Spanish culture ...
co-wrote and directed the movie ''
Welcome Mr. Marshall!
''Welcome Mr. Marshall!'' ( es, link=no, ¡Bienvenido, Mister Marshall!) is a 1953 Spanish comedy film directed by Luis García Berlanga, and considered one of the masterpieces of Spanish cinema. The film highlights the stereotypes held by both ...
'', a comedy about the residents of a small Spanish village who dream about the life of wealth and self-fulfilment the Marshall Plan will bring them. The film highlights the stereotypes held by both the Spanish and the Americans regarding the culture of the other, as well as displays social criticism of 1950s
Francoist Spain
Francoist Spain ( es, España franquista), or the Francoist dictatorship (), was the period of Spanish history between 1939 and 1975, when Francisco Franco ruled Spain after the Spanish Civil War with the title . After his death in 1975, Spai ...
.
In the popular board game
Twilight Struggle
''Twilight Struggle: The Cold War, 1945–1989'' is a board game for two players, published by GMT Games in 2005. Players are the United States and Soviet Union contesting each other's influence on the world map by using cards that correspond to ...
the Marshall Plan is represented by a 4-point US Early War card of the same name. The card’s text reads: "Allows play of
NATO
The North Atlantic Treaty Organization (NATO, ; french: Organisation du traité de l'Atlantique nord, ), also called the North Atlantic Alliance, is an intergovernmental military alliance between 30 member states – 28 European and two No ...
. Add one US Influence in each of seven non-USSR Controlled Western European countries."
See also
*
Foreign policy of the United States
The officially stated goals of the foreign policy of the United States of America, including all the bureaus and offices in the United States Department of State, as mentioned in the ''Foreign Policy Agenda'' of the Department of State, are ...
*
Timeline of United States diplomatic history
The diplomatic history of the United States oscillated among three positions: isolation from diplomatic entanglements of other (typically European) nations (but with economic connections to the world); alliances with European and other military ...
*
World War II reparations
After World War II both West Germany and East Germany were obliged to pay war reparations to the Allies of World War II, Allied governments, according to the Potsdam Conference. Other Axis nations were obliged to pay war reparations according to t ...
*
Morgenthau Plan
The Morgenthau Plan was a proposal to eliminate Germany following World War II and eliminating its arms industry and removing or destroying other key industries basic to military strength. This included the removal or destruction of all industr ...
*
GITP (example of a company that was built with Marshall aid)
Footnotes
References
Notes
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Further reading
* Arkes, Hadley. ''Bureaucracy, the Marshall Plan, and the National Interest'' (1972), ISBN 0691646236.
* Bischof, Günter, and Hans Petschar. ''The Marshall Plan: Saving Europe, Rebuilding Austria'' (U of New Orleans Publishing, 2017) 336 pp
Online review* Bonds, John Bledsoe. ''Bipartisan Strategy: Selling the Marshall Plan'' (2002
online version* Bryan, Ferald J. "George C. Marshall at Harvard: A Study of the Origins and Construction of the 'Marshall Plan' Speech." ''Presidential Studies Quarterly'' (1991): 489–502
Online
* Djelic, Marie-Laure A. ''Exporting the American Model: The Post-War Transformation of European Business'' (1998
online version* Elwood, David, "Was the Marshall Plan Necessary?" in ''Alan S. Milward and a Century of European Change,'' ed. Fernando Guirao, Frances M. B. Lynch, and Sigfrido M. Ramírez Pérez, 179–98. (Routledge, 2012) ISBN 1138107530
* Esposito, Chiarella. ''America's Feeble Weapon: Funding the Marshall Plan in France and Italy, 1948–1950'' (1994
online version* Fossedal, Gregory A. ''Our Finest Hour: Will Clayton, the Marshall Plan, and the Triumph of Democracy.'' (1993). ISBN 0817992014
* Gimbel, John, ''The origins of the Marshall plan'' (1976)
reviewed
* Jackson, Scott. "Prologue to the Marshall Plan: The Origins of the American Commitment for a European Recovery Program," ''Journal of American History'' 65#4 (1979), pp. 1043–6
in JSTOR* Kipping, Matthias and Bjarnar, Ove. ''The Americanisation of European Business: The Marshall Plan and the Transfer of Us Management Models'' (1998
online version* Reynolds, David. "Marshall Plan Commemorative Section: The European Response: Primacy of Politics" ''Foreign Affairs'' (May/June 1997
online* Vickers, Rhiannon. ''Manipulating Hegemony: State Power, Labour and the Marshall Plan in Britain'' (2000
online edition* Wallich, Henry Christopher. ''Mainsprings of the German Revival'' (1955) ISBN 0837190177
* Wend, Henry Burke. ''Recovery and Restoration: U.S. Foreign Policy and the Politics of Reconstruction of West Germany's Shipbuilding Industry, 1945–1955'' (2001
online version* Weissman, Alexander D. "Pivotal politics – The Marshall Plan: A turning point in foreign aid and the struggle for democracy." ''History Teacher'' 47.1 (2013): 111–29
online for middle and high school students
External links
Marshall Plan from the National ArchivesGeorge C. Marshall FoundationThe German Marshall Fund of the United States The speech marked the turning point away from the
Morgenthau Plan
The Morgenthau Plan was a proposal to eliminate Germany following World War II and eliminating its arms industry and removing or destroying other key industries basic to military strength. This included the removal or destruction of all industr ...
philosophy of economic dismantlement of Germany and toward a policy of economic reconstruction.
Marshall Plan Commemorative Section: Lessons of the Plan: Looking Forward to the Next CenturyTruman Presidential Library online collection of original Marshall Plan documents from the year 1946 onward
"The Tragedy of American Diplomacy? Rethinking the Marshall Plan"by Michael Cox and Caroline Kennedy-Pipe an
Responseby Marc Trachtenberg, both published in the Journal of Cold War Studies, vol. 7, no. 1 (Winter 2005)
Speechby George Marshall on June 5, 1947 at Harvard University (original recording)
{{Authority control
1940s economic history
1950s economic history
1948 in law
Aftermath of World War II in the United States
Cold War history of the United States
Economic development programs
Presidency of Harry S. Truman
1948 in international relations
80th United States Congress
1948 in military history
Economic history of Europe
1948 in economics
United States–European relations
1960s economic history
Development in Europe
History of diplomacy