The popular name for the European Recovery Program, a scheme for large-scale, medium-term US aid to war-ravaged Europe, announced in 1947 by US secretary of state, George Marshall. Marshall Aid was rejected by the USSR and the Eastern bloc, but during 194850 it materially assisted W Europe's economic revival, particularly in West Germany. Reasons for US aid included the importance of the European market for US goods; US fears that communism would spread in Europe; and the integration of West Germany (a vital industrial nation and twice in one century a major aggressor) into Europe.
The Marshall Plan (from its enactment, officially the European Recovery Program (ERP)) was the primary plan of the United States for rebuilding the allied countries of Europe and repelling communism after World War II. The initiative was named for United States Secretary of State George Marshall and was largely the creation of State Department officials, especially William L.
The reconstruction plan was developed at a meeting of the participating European states in July 12 1947. The Marshall Plan offered the same aid to the Soviet Union and its allies, if they would make political reforms and accept certain outside controls. In fact, America worried that the Soviet Union would take advantage of the plan and therefore made the terms deliberately hard for the USSR to accept. The plan was in operation for four fiscal years beginning in July 1947. During that period some $13 billion of economic and technical assistance—equivalent to around $130 billion in 2006—was given to help the recovery of the European countries that had joined in the Organization for Economic Co-operation and Development.
By the time the plan had come to completion, the economy of every participant state, with the exception of Germany, had grown well past pre-war levels. The Marshall Plan has also long been seen as one of the first elements of European integration, as it erased tariff trade barriers and set up institutions to coordinate the economy on a continental level.
In recent years historians have questioned both the underlying motivation and the overall effectiveness of the Marshall Plan. Some historians now believe that the benefits of the Marshall Plan actually were the result of new laissez faire policies that allowed for markets to stabilize through economic growth. Furthermore, some criticize the plan for establishing a precedent of solving the problem of failing economies abroad by offering aid from US taxpayers.
Before the Marshall Plan
After six years of war, much of Europe was devastated with millions killed or injured.
After the First World War the European economy had also been greatly damaged, and a deep recession lasted well into the 1920s, leading to instability and a general global downturn. Originally, it was hoped that little would need to be done to rebuild Europe and that the United Kingdom and France, with the help of their colonies, would quickly rebuild their economies. The humanitarian desire to end these problems was one motivation for the plan. The war years had seen the fastest period of economic growth in the nation's history, as American factories supported both its own war effort and that of its allies. Marshall Plan aid would largely be used by the Europeans to buy manufactured goods and raw materials from the United States.
Another strong motivating factor for the United States, and an important difference from the post World War I era, was the beginning of the Cold War. George Kennan, one of the leaders in developing the plan, was already predicting a bipolar division of the world. To him the Marshall Plan was the centerpiece of the new doctrine of containment. It should be noted that when the Marshall Plan was initiated, the wartime alliances were still somewhat intact and the Cold War had not yet truly begun, and for most of those who developed the Marshall Plan, fear of the Soviet Union was not the overriding concern it would be in later years.
Still, the power and popularity of indigenous communist parties in several Western European states was worrisome. There was also some hope that the Eastern European nations would join the plan, and thus be pulled out of the emerging Soviet bloc. Clay and the Joint Chief of Staff over growing communist influence in Germany, as well as of the of the failure of the rest of the European economy to recover without the German industrial base on which it previously had been dependent, in the summer of 1947 Secretary of State General George Marshall, citing "national security grounds" was finally able to convince President Harry S. In July 1947 JCS 1067, which had directed the U.S. forces of occupation in Germany to "…take no steps looking toward the economic rehabilitation of Germany", was thus replaced by JCS 1779 which instead stressed that "An orderly, prosperous Europe requires the economic contributions of a stable and productive Germany.” JCS 1067 had then been in effect for over two years.
Even before the Marshall Plan, the United States was spending a great deal to help Europe recover. These efforts had important effects, but they lacked any central organization and planning, and failed to meet many of Europe's more fundamental needs.
Early ideas
Long before Marshall's speech a number of figures had raised the notion of a reconstruction plan for Europe. Byrnes presented an early version of the plan during a speech, "Restatement of Policy on Germany" held at the Stuttgart Opera House on September 6, 1946.
The main alternative to large quantities of American aid was to take it from Germany. In 1944 this notion became known as the Morgenthau plan, named after U.S. Treasury Secretary Henry Morgenthau, Jr. Closely related was the Monnet plan of French bureaucrat Jean Monnet that proposed giving France control over the German coal areas of the Ruhr and Saar and using these resources to bring France to 150% of pre-war industrial production. The first German industrial plan, also known as the "level of industry agreement", was signed in early 1946 and stated that German heavy industry was to be reduced to 50% of its 1938 levels by the destruction of 1,500 listed manufacturing plants The problems inherent in this plan became apparent by the end of 1946, and the agreement was revised several times, the last time in 1949. Some of their ideas, however, did partly live on in Joint Chiefs of Staff Directive 1067, a plan which was effectively the basis for US Occupation policy until July 1947. By April of 1947, however, Truman, Marshall and Undersecretary of State Dean Acheson were convinced of the need for substantial quantities of aid from the United States.
The idea of a reconstruction plan was also an outgrowth of the ideological shift that had occurred in the United States in the Great Depression. The economic calamity of the 1930s had convinced many that the unfettered free market could not guarantee economic well-being. Many who had worked on designing the New Deal programs to revive the American economy now sought to apply these lessons to Europe.
The speech
Wikisource has original text related to this article: The Marshall Plan SpeechThe earlier public discussions of the need for reconstruction had largely been ignored, as it was not clear that it was establishing official administration policy. The most important element of the speech was the call for the Europeans to meet and create their own plan for rebuilding Europe, and that 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.
Rejection by the Soviets
British Foreign Secretary Ernest Bevin heard Marshall's radio broadcast speech and immediately contacted French Foreign Minister Georges Bidault to begin preparing a European response to the offer. State Department officials, however, knew that Stalin would almost certainly not participate, and that any plan that did send large amounts of aid to the Soviets was unlikely to be approved by Congress.
Stalin was at first cautiously interested in the plan. The most important condition was that every country to join the plan would need to have its economic situation independently assessed, scrutiny the Soviets could not agree to. Bevin and Bidault also insisted that any aid be accompanied by the creation of a unified European economy, something incompatible with the strict Soviet command economy. Molotov left Paris, rejecting the plan. In one of the clearest signs of Soviet control over the region, the Czechoslovak foreign minister, Jan Masaryk, was summoned to Moscow and berated by Stalin for thinking of joining the Marshall Plan. Stalin saw the Plan as a significant threat to Soviet control of Eastern Europe and believed that economic integration with the West would allow these countries to escape Soviet domination. The Americans shared this view and hoped that economic aid could counter the growing Soviet influence. The Soviet Union's "alternative" to the Marshall plan, which was purported to involve Soviet subsidies and trade with eastern Europe, became known as the Molotov Plan, and later, the COMECON.
Negotiations
Turning the plan into reality required negotiations both among the participating nations, and also to get the plan through the United States Congress. The Truman administration, represented by William Clayton, promised the Europeans that they would be free to structure the plan themselves, but the administration also reminded the Europeans that for the plan to be implemented, it would have to pass Congress.
Agreement was eventually reached and the Europeans sent a reconstruction plan to Washington. The plan met sharp opposition in Congress, mostly from the portion of the Republican Party that advocated a more isolationist policy and was weary of massive government spending. The plan also had opponents on the left, with Henry A. Wallace saw the plan as a subsidy for American exporters and sure to polarize the world between East and West. The Congress would eventually donate $12.4 billion in aid over the four years of the plan.
Truman signed the Marshall Plan into law on April 3, 1948, establishing the Economic Cooperation Administration (ECA) to administer the program. In the same year, the participating countries (Austria, Belgium, Denmark, France, West Germany, Great Britain, Greece, Iceland, Italy, Luxembourg, the Netherlands, Norway, Sweden, Switzerland, Turkey, and the United States) signed an accord establishing a master coordinating agency, the Organization for European Economic Cooperation (later called the Organization for Economic Cooperation and Development, OECD), which was headed by Frenchman Robert Marjolin.
Implementation
The first substantial aid went to Greece and Turkey in January 1947, which were seen as being on the front lines of the battle against communist expansion and were already being aided under the Truman Doctrine.
The official mission statement of ECA was to give a boost to the Europe economy: to promote European production, to bolster European currency, and to facilitate international trade, especially with the United States, whose economic interest required Europe to become wealthy enough to import U.S. 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 in Czechoslovakia, France, and Italy.
The Marshall Plan money was transferred to the governments of the European nations. 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 Marshall Plan aid was mostly used for the purchase of goods from the United States. The European nations had all but exhausted their foreign exchange reserves 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 towards 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, an increasing amount of the aid was spent on rebuilding the militaries of Western Europe.
Also established were counterpart funds, which used Marshall Plan aid to establish funds in the local currency.
Expenditures
The Marshall Plan aid was divided among the participant states on a roughly per capita basis. 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 was part of the Marshall Plan.
| Country |
1948/49 ($ millions) |
1949/50 ($ millions) |
1950/51 ($ millions) |
Cumulative ($ millions) |
|---|---|---|---|---|
| Austria | 232 | 166 | 70 | 488 |
| Belgium and Luxembourg | 195 | 222 | 360 | 777 |
| Denmark | 103 | 87 | 195 | 385 |
| France | 1,085 | 691 | 520 | 2,296 |
| Germany | 510 | 438 | 500 | 1,448 |
| Greece | 175 | 156 | 45 | 366 |
| Iceland | 6 | 22 | 15 | 43 |
| Ireland | 88 | 45 | — | 133 |
| Italy and Trieste | 594 | 405 | 205 | 1,204 |
| Netherlands | 471 | 302 | 355 | 1,128 |
| Norway | 82 | 90 | 200 | 372 |
| Portugal | — | — | 70 | 70 |
| Sweden | 39 | 48 | 260 | 347 |
| Switzerland | — | — | 250 | 250 |
| Turkey | 28 | 59 | 50 | 137 |
| United Kingdom | 1,316 | 921 | 1,060 | 3,297 |
Effects
The Marshall Plan ended in 1951, as originally scheduled. 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 afterwards. There is some debate among historians over how much this should be credited to the Marshall Plan. Most believe that the Marshall Plan sped this recovery, but did not initiate it.
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 help forge the North Atlantic alliance that would persist throughout the Cold War.
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. The Marshall Plan, linked into the Bretton Woods system, also mandated free trade throughout the region.
While some modern 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 U.S. vice president Al Gore suggested a Global Marshall Plan.
The Marshall "Help" Plan almost ended in 1950 for the Netherlands, when the United States of America announced the "decisive battle against communism" in Korea and asked the Dutch government to sent troops and when the Dutch government refused, the United States of America threatened to recall the Marshall help.
Effects in Germany
The West German economic recovery was partly due to the economic aid provided by the Marshall Plan, but mainly it was due to the currency reform of 1948 which replaced the Reichsmark with the Deutsche Mark as legal tender, halting rampant inflation.
Contrary to popular belief, the Marshall Plan, which was extended to also include the newly formed West Germany in 1949, was not the main force behind the German recovery. Had that been the case, other countries such as Great Britain and France (which both received more economic assistance than Germany) should have experienced the same phenomenon. In fact, the amount of monetary aid received by Germany through the Marshal plan was by far overshadowed by the amount the Germans meanwhile had to pay as reparations and by the charges the Allies made on the Germans for the cost of occupation ($ 2.4 billion per year).
Even so, in Germany the myth of the Marshall plan is still alive. Many Germans believe that Germany was the exclusive beneficiary of the plan, that it consisted of a free gift of vast sums of money, and that it was solely responsible for the German economic recovery in the 1950’s.
Repayment
The Organization for European Economic Cooperation had taken the leading role in allocating funds, and the ECA arranged for the transfer of the goods.
Areas without the Marshall Plan
Large parts of the world devastated by the Second World War did not benefit from the Marshall Plan. 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.
While the western portion of the Soviet Union had been as badly affected as any part of the world by the war, the eastern portion of the country was largely untouched and had seen a rapid industrialization during the war. These reparation payments meant that the Soviet Union received almost as much as any of the countries receiving Marshall Plan aid.
Eastern Europe saw no Marshall Plan money, as their communist governments refused aid, and moreover received little help from the Soviets. The Soviets did establish COMECON as a rebuttal to the Marshall Plan, but it was far less generous, with many economists arguing it was mostly a one way transfer of resources - from Soviet satellites to the Soviet Union. Economic recovery in the east was much slower than in the west, and some feel the economies never fully recovered in the communist period, resulting in the formation of the shortage economies and a gap in wealth between East and West. One Eastern European state, Yugoslavia, did receive some aid from the United States during this period, but this is generally not considered Marshall Plan aid. Japan was also not considered to have as great a strategic or economic importance to the United States. Thus no grand reconstruction plan was ever created, and the Japanese economic recovery before 1950 was slow. During the four years of the Korean War, the Japanese economy saw a substantially larger infusion of cash than had any of the Marshall Plan nations.
Canada, like the United States, was little damaged by the war and in 1945 was one of the world's largest economies. However, the Canadian economy had long been more dependent than the American one on trade with Europe, and after the war there were signs that the Canadian economy was struggling. In April 1948, the US Congress passed the provision in the plan that allowed the aid to be used in purchasing goods from Canada. This contrasted heavily with the treatment Argentina, another major economy dependent on its agricultural exports with Europe, received from the ECA, as the country was deliberately excluded from participation in the Plan due to political differences between the US and then-president Perón.
Hong Kong, despite being seriously damaged by Japanese action and occupation in World War II, received no aid from other countries.
Criticism
The early students of the Marshall Plan saw it as an unmitigated success of American generosity. Criticism of the Marshall Plan, however, became prominent among historians of the revisionist school, such as Walter LaFeber, during the 1960s and 1970s. They argued that the plan was American economic imperialism, and that it was an attempt to gain control over Western Europe just as the Soviets controlled Eastern Europe. Far from generosity, the plan was the result of the United States' geopolitical goals.
Other historians emphasize the benefits of the plan to U.S. industry. The U.S., therefore, began to create dollar credits in Europe, by various routes of which the Marshall Plan was one.
In the 1980s, a new school developed with some historians arguing that the Marshall Plan might not have played as decisive a role in Europe's recovery as was previously believed. Such critics have pointed out that economic growth in many European countries revived before the large-scale arrival of U.S. aid, and was fastest among some of the lesser recipients. While aid from the Marshall Plan eased immediate difficulties and contributed to the recovery of some key sectors, growth from the postwar nadir was largely an independent process. (European socialists argue that a similar amount of reconstruction money could have been obtained by nationalizing the holdings of wealthy Europeans who deposited their money in U.S. banks during World War II.)
Tyler Cowen, economists, has stated that nations recieving the most aid from the Marshall Plan (Britain, Sweden, Greece) saw the least returns and grew the least between 1947 &
In 1942 Committee for Economic Development was elevated into a think tank for the economic counterpart to the Council on Foreign Relations. Its membership often shared with the National Planning Association which was blatantly and unabashedly National Socialist in ideological orientation.
Corporate economic interests, then, overlapped with President Trumans political interests (those often criticized leanings towards a "big-government"), and an alliance between business and government was born.
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