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"The modern system of the division of labor upon which the exchange of products is based is in danger of breaking down. The truth of the matter is that Europe's requirements for the next three or four years of foreign food and other essential products -- principally from America -- are so much greater than her present ability to pay that she must have substantial additional help or face economic, social, and political deterioration of a very grave character."
- Secretary of State George C. Marshall describing the goals of the Economic Recovery Plan,
June 5, 1947 at Harvard University.
The United States and its allies, the victors of World War II, took steps to reverse mass disintegration among the people of Europe, including Turkey. To clear away the damage in those areas as quickly as possible and to begin economic reconstruction, the Economic Cooperation Act of 1948 (Marshall Plan) was implemented. The United States included the former enemies, Germany and Italy, in its plan — thereby preventing a reprise of the worldwide economic depression of 1929. The Marshall Plan also laid the foundation for the North Atlantic Treaty Organization (NATO) and the eventual unification of European countries (European Economic Union).Europe in 1945 lay in ruins, many of its cities demolished, its economies devastated. Its war survivors, millions of them displaced, faced famine. The period also marked the inception of The Domino Theory (the fall of one country after another to communism) and the resultant attempts to “contain” communism in the Cold War. The Soviet Union's hegemony over Eastern Europe, and the vulnerability of Western European countries to continued Soviet expansionism, sharpened the sense of crisis. Rooted in FDR's Four Freedoms Speech, the Marshall Plan was not originally intended to be a weapon to fight communism, but it became a bulwark of American foreign policy to manage communist containment on the Continent, as outlined in the Truman Doctrine, during the Cold War.Instrumental in crafting the Marshall Plan was George Kennan, leader of the State Department's Policy Planning Staff under Marshall and Acheson. Kennan was charged with the responsibility for long-term planning.
The demise of Axis political and military power left a vacuum in the areas of international life where that power had asserted itself. The Allies got nowhere with Russia on peace treaties, because they had been unable to agree on how that vacuum should be filled. The American view was that new and liberalized political governments should rise from the totalitarian rubble. The former Axis countries would remain demilitarized and under close allied supervision, but would otherwise enjoy national independence. The Soviets under Stalin were determined to see new regimes emerge that would be dominated by communists subservient to Moscow. That would give the Kremlin effective control over the military and industrial power of those countries, and it would help them to dominate surrounding regions as well.
The Economic Cooperation Act
In a speech on June 5, 1947, U.S. Secretary of State George Marshall proposed that European nations should create a plan for their economic reconstruction and that the United States would provide economic assistance. In practical application, the proposal involved the constructive solution of thousands of detailed problems of international life. While attempting to go ahead with the program, the American government found itself temporarily blocked by the inability of the other Allies to reach agreement on the terms of treaties of peace with the major axis countries: Germany and Japan. On December 19, 1947, President Harry S. Truman sent a message to Congress that followed Marshall’s ideas to provide economic aid to Europe. After lengthy hearings in the House Foreign Affairs Committee — and an alarming Soviet-backed coup in Czechoslovakia on February 25, 1948 — the Economic Cooperation Act was resoundingly passed by a vote of 329 to 74. On April 3, 1948, President Truman signed the act that became known as the Marshall Plan.
Participating countries included Austria, Belgium, Denmark, France, West Germany, Great Britain, Greece, Iceland, Italy, Luxembourg, the Netherlands, Norway, Sweden, Switzerland, and Turkey.Congress appropriated $13.3 billion during the life of the plan for European recovery. That aid provided much-needed capital and materials that enabled Europeans to rebuild the European continent’s economy. The Marshall Plan provided markets for American goods, created reliable trading partners, and supported the development of stable democratic governments in Western Europe. Congress’s approval of the Marshall Plan signaled an extension of the multilateralism of World War II into the postwar years. The plan was to terminate on June 30, 1952, with a possible 12-month extension. The plan was not a simple cash handover, but the temporary creation of an entire bureaucratic structure and extension of American government management in Europe. The generosity and commitment of the United States to its European allies during World War II, plus the Marshall Plan, made the European Union of today possible.
To become eligible for assistance under the act, each participating country was required to conclude an agreement with the United States Government that committed it to the act's purposes. Participants stabilized their currency, promoted production, cooperated with other participating countries in the interchange of goods, furnished the United States with needed materials, submitted progress reports and took other measures to expedite a return to economic self-sufficiency.
Non-European countries affected
Under provisions of title IV of the Foreign Assistance Act of 1948, China and Korea, although not participants in the Marshall Plan, were furnished assistance in a similar manner. After January 1, 1949, the ECA took over from the U.S. Army the administration of the program for relief and economic rehabilitation of Korea. The view by the Truman Administration in the spring of 1948, of the on-going Chinese revolution was that the Communists under Mao Zedong would fail to control China with one government, if they won over the Nationalists under Chiang Kai-shek at all. In either case, non-industrialized China still struggled to shed centuries of feudalism and was judged incapable of mounting any threat to the western hemisphere.
The communists did win the civil war in China. Mao declared formation of the People's Republic of China on October 1, 1949. The Soviet Union was the first country to recognize the PRC. While other countries recognized the new government, the United States, vigilant against the spread of communism, refused to formally recognize the People's Republic until three decades later with the visit of President Richard M. Nixon. Until that visit, the American government recognized only the Nationalist government on Taiwan as the legitimate government of China.
The Marshall Plan benefited the American economy as well. Marshall Plan money was used to buy goods from America, and the goods had to be shipped across the Atlantic on American merchant vessels. By 1953 America had pumped in $13 billion, and Europe was on the way to standing on its feet again. The aid was economic in nature; it did not include military aid until after the Korean War.
Japan, the World War II adversary of the U.S. in the Far East, had to be rescued from the threat of communist revolution. Under the administrative leadership of Douglas MacArthur and American economic aid, it was put back on its feet. The same consideration applied to South Korea and Taiwan. The former had communist North Korea as its neighbor. The latter was considered by China to be a province. In addition, both North Korea and China were allies of the Soviet Union. Accordingly, the Truman Doctrine had to apply both to Western Europe and the Asian Far East. Logically, the Far East had to have its own version of a Marshall Plan.
Secretary of State George Marshall said the following about Soviet aggression in February 1948:
“Thus, the Soviet effort to fill these, (Germany, Japan, Greece, Turkey), power vacuums is not primarily a military effort. It is aggression, if you will. But it is not horizontal aggression, accomplished by the movement of armed forces laterally over frontiers. It is vertical aggression, accomplished by the use of forces within the victim countries, communist parties and others who rise up to seize control in those countries and to exercise it on behalf of the international communist movement. This technique, namely the use of factions within a country to gain control over that country, is referred to by various names. When Hitler used it, it was called the technique of “infiltration and penetration." It can, perhaps, best be described as indirect aggression.”
To make the Marshall Plan acceptable to the governments of so many countries, several unique sub-plans were offered by some countries to resolve local issues. One was the proposal of the Schuman Plan, which was the basis for the European Coal and Steel Community (ECSC) established in 1952. Six countries: Belgium, France, Italy, Luxembourg, the Netherlands and West Germany, pooled its coal and steel resources. Another was the European Atomic Energy Community (Euratom) Treaty, designed to ensure the establishment of the basic installations necessary for the development of nuclear energy in the Community, and to ensure that all users in the Community receive a regular and equitable supply of ores and nuclear fuels.
In many ways, the Marshall Plan satisfied both those who wanted American foreign policy to be generous and idealistic and those who demanded practical solutions. It helped to feed the starving and shelter the homeless, and at the same time helped stem the spread of communism and put the European economy back on its feet.
The Marshall Plan
In the ideological battlefield of the recovery and reshaping of Europe, a plan was developed between the US and European Nations on 5 June 1947.
Above all, the Soviet Union made clear at the Moscow Conference of March 1947, held to discuss Germany's future, that it did not want to see its recently vanquished enemy, whose conquest had cost Russian lives so dear, helped by the West to regain its pre-war strength. The Soviet leader considered the establishment of a sympathetic buffer zone in Eastern Europe a legitimate and hard-won outcome of the devastation and loss endured by his country. Choosing his own interpretation of the Allied wartime `agreements' on spheres of influence, first mooted at the Teheran Conference of 1943, by mid-1947 he had installed Soviet-controlled governments in Poland, Romania, Bulgaria and Hungary (with Czechoslovakia soon to follow).
Kolko’s analysis and explanation
Joyce and Gabriel Kolko, writing in ‘The limits of power’, make it clear that they had a straightforward view on the motives behind the introduction of the Marshall plan. They openly imply the main factor behind it was that the US wanted to re-establish the American economy by which they would “subsidize United States exports” and “permanently influence and shape Western Europe’s internal economic policy”.
The most significant argument that the Kolkos present is that of economic self-interest and expansion in Europe. A point that they make early on in the work is the plan was the “outcome of real alarm with which Washington viewed the direction of the world economy”. The Kolkos argue that the USAs prosperity was dependant on the plan. They claim the US is “a powerful nation rebuilding its potential economic competitors from the ruins of war”. This aim, the Kolkos say, was key as they saw it is an attempt by the US “to expand their market to avoid internal crisis” and also “secure their own immediate gains” by introducing the Marshall plan. This internal crisis they believe was the dollar gap and export surplus, as after the war there wasn’t enough dollars in Europe to purchase American goods, therefore their exports were building up with no one to buy them. Henry G Aubrey, a US economist noted “dollars were so scarce that the economists were talking about a permanent dollar shortage”. Kolko saw this as an immediate motive as without the dollars in Europe it would “further isolate” the US economy. Therefore, the Kolkos claim the motive behind the plan is to “re-establish normal trading patterns through which the entire world would realise prosperity and peace”. The Kolkos further expand this point of internal crisis by saying that a prominent danger to the US was that the trade set up by European countries to provide their countries with basis needs would stick, therefore permanently excluding the US and halting their expansion.
Another element to the Kolkos argument is that the US couldn’t relieve the economic problem they were facing in their country by themselves as the Kolkos claim they were a “capitalist nation unable to expand its internal market”. The Kolkos have little sympathy for the US and argue that because of the “vast unsalable surplus” that had built up, the aim of American prosperity was dependant to the rebuilding of European cities, with no interest of the people or resolving their issues. They suggest that the rebuilding was crucial and a principal motive behind the Marshall plan as it was this that would allow prosperity in the countries to return to normal levels and hence have the money to pay for the US goods, and fuel their aim of an American empire.
In the Kolko’s book, they are clearly anti-US, which is seen in their criticisms of the plan and its aim. This could be because around the time they were writing in 1972, American foreign policy was heavily under scrutiny from America, this is evident as during this time troops were being withdrawn from Vietnam due to the persistent backlash from the American public Kolko addressed the issues of the foreign policy as inapplicable and was notoriously anti-capitalist. Historians have said it was “no surprise: Kolko had been a socialist” which explain his views of the Americans selfish self-interest.
The Marshall Plan
Europe was devastated by years of conflict during World War II. Millions of people had been killed or wounded. Industrial and residential centers in England, France, Germany, Italy, Poland, Belgium and elsewhere lay in ruins. Much of Europe was on the brink of famine as agricultural production had been disrupted by war. Transportation infrastructure was in shambles. The only major power in the world that was not significantly damaged was the United States.
Aid to Europe
From 1945 through 1947, the United States was already assisting European economic recovery with direct financial aid. Military assistance to Greece and Turkey was being given. The newly formed United Nations was providing humanitarian assistance. In January 1947, U. S. President Harry Truman appointed George Marshall, the architect of victory during WWII, to be Secretary of State. In just a few months the State Department, under his leadership, with expertise provided by George Kennan, William Clayton and others crafted the Marshall Plan concept, which George Marshall shared with the world in a speech on June 5, 1947, at Harvard University. Read more
Marshall Plan History
The history and chronology of the plan. Studies prior to the plan. Committee reports and funding statistics about the plan. The Marshall Plan Volume and the plan's relevance today.
Marshall Plan Speech
See records and texts about the speech. Listen to the speech and read information about the drafting of the speech. Discover the European Response.
Foreign Assistance Act of 1948
Documents about the support for and the opposition of the Marshall Plan. Also included is documentation about how it worked and how it was administered.
Interviews with individuals whose work related to ECA, State Department officials and Congressional Testimonies.
Marshall Plan Posters
Based on the theme “Intra-European Cooperation For A Better Standard of Living”, the following twenty-five posters were chosen as the most outstanding.
The Marshall Plan
The Marshall Plan was the population name for the European Recovery Program (ERP), a massive program of foreign aid rolled out by the United States between 1948 and 1951. It involved more than $12 billion of aid, the equivalent of $130 billion today. Marshall Plan aid was intended to assist with post-war reconstruction, though it came with clear conditions that shaped the development of recipient nations.
First post-war aid
Members of the US government viewed the economic reconstruction of Europe as a matter of great urgency. There were two reasons for this. Firstly, economic instability would generate political instability and may lead to communist revolutions. Secondly, the future of US trade was dependent on a productive and prosperous Europe.
In March 1947, United States president Harry Truman unveiled what became known as the Truman Doctrine, pledging US support for European countries so they could exercise self-determination and resist a communist takeover.
The first practical elements of this policy came in May 1947, with the approval of aid packages for Greece ($400 million) and Turkey ($100 million). Both nations were highly unstable in the years following World War II and were at risk of Soviet infiltration and/or communist revolution.
The plan unveiled
The European Recovery Program (ERP) was promulgated in June 1947. It became known as the ‘Marshall Plan’ after its chief promoter, Secretary of State George Marshall.
Marshall explained the ERP in a June 1947 speech to Harvard University students:
“Aside from the demoralising effect on the world at large and the possibilities of disturbances arising as a result of the desperation of the [European] 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 of America. 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.”
Negotiating with Europe
American leaders scheduled a conference for July 1947 in Paris, to negotiate an aid package for rebuilding Europe and its economies. Delegates attended from 16 European countries the Soviet Union, Poland, Czechoslovakia and Hungary did not attend, the latter three withdrawing under pressure from Moscow.
The European delegates drafted a reconstruction plan that required $22 billion of credit. Truman whittled this down to $17 billion and sent draft legislation to Congress in early 1948.
Isolationists in Congress attempted to block funding for the Marshall Plan. They resented the expenditure of American taxpayers’ money on foreign countries, several of which had defaulted on their wartime debts to the US. Many American businesses weren’t keen on reconstructing European industries that might grow to compete with their own. Some suggested giving food and material only, rather than credit.
The left-wing in America and elsewhere condemned the Marshall Plan as an attempt to strengthen the grip of US-led capitalism on Western Europe. A few economic purists complained because of the plan’s significant interference in European markets. Despite these objections, Congress approved the Marshall Plan and authorised an initial payment of $5.3 billion in April 1948.
Conditions on aid
By no means was Marshall Plan aid a ‘blank cheque’ for European governments. The US was determined to fund essential areas of development and avoid corruption or ‘skimming’. The Americans set rigorous conditions on Marshall Plan funding, reserving the right to cease this funding if recipient nations did not follow certain directives.
The US Congress established the Economic Cooperation Administration (ECA) to oversee the distribution of its funds. ECA representatives were stationed in European countries and played a pivotal role in approving, directing and monitoring Marshall Plan money. Local governments were required to adopt certain economic policies ECA bureaucrats studied their economies and decided where and how funds were needed most. Countries importing certain raw materials or manufactured goods were required to buy them from American suppliers.
The ECA also provided advice on management and productivity, as noted by Duignan:
“The Americans also delivered know-how. For example, at the Doboelman soap works in Holland, American experts showed the Dutch how to cut processing time from five days to two hours with new machinery. In Norway, fishermen used a new type of net made from yarn spun in Italy. In Offenbach in West Germany, Marshall Plan leather revived the handbag industry. In Lille, Marshall Plan coal kept a steel factory in business. And in Roubaix, Marshall Plan wood maintained one of the world’s largest textile mills. In 1945, only twenty-five thousand tractors were in use on French farms – four years later, Marshall Plan aid had put another two hundred thousand tractors in the field. Overall, American investment in Western Europe grew apace, and more and more U.S. patents found customers abroad.”
Advantages for the US and Europe
The Marshall Plan would run for four years and cost more than $US13 billion. This aid not only facilitated the recovery of Europe’s national economies, it had obvious advantages for the United States.
Not only was the Marshall Plan successful in stabilising many European governments and blocking Soviet expansion, it built a ‘new Europe’ with a political economy was based on open markets and free trade, rather than protectionism and self-interest. This allowed American exporters to enter European markets more easily than was possible before World War II.
Other advantages for the United States included:
Soviet containment. The Marshall Plan stabilised the economies and political systems in several European nations bordering the Soviet sphere of influence. This reduced the likelihood of communist takeovers in these countries. Political instability in these countries might also have given Moscow an excuse to annex them.
Liberalisation. The Marshall Plan encouraged the development of liberal-democratic systems of government in Europe. Since some European countries had no positive experience of democracy, particularly Germany and Austria, it was important to create conditions of prosperity under which liberalism and democracy could survive.
Profit for American companies. Most of the resources and goods purchased with Marshall Plan funds came from the United States itself. This had obvious benefits for American exporters and domestic industries. Marshall Plan spending allowed the US to recover from a short-term economic slump in 1946-7 and enter a period of economic boom. American corporations built networks and established trade links in Europe that continued well after the ERP had run its course.
Encouragement of free trade. Prior to World War II most European nations had protectionist economic policies – in other words, it was difficult for foreign traders to export to European markets. The conditions placed on Marshall Plan aid injected free trade policies and practices into European economics. As mentioned above, these reforms would prove beneficial and profitable for American producers and manufacturers.
Propaganda value. The Marshall Plan was cleverly marketed by the American government as a generous and visionary policy, to allow the rebuilding of Europe. The conditions on Marshall Plan funds, however, were not publicly advertised. Washington also offered ERP aid to the Soviet Union and Soviet-bloc countries, knowing that the conditions would make it impossible for them to accept.
Top eight recipient nations of Marshall Plan funds (US dollars)
A historian’s view:
“What the Machiavellis among us never understood was why the Soviet Union did not join the Marshall Plan and disrupt it, as they have done with many organisations. It would not cost anything. It would be simple to agree in principle and object in practice. The fear in Washington was that the Soviet bear might hug the Marshall Plan to death. Soviet abstention left the West free to operate its own recovery programme, with the Soviet Union excluded at its own insistence.”
Charles Kindleberger, historian
1. The Marshall Plan was another name for the European Recovery Plan (ERP). The ERP was an extensive aid program for post-war Europe, approved by Harry Truman in 1947.
2. In the four-year period between 1947 and 1951, more than $13 billion of American aid was advanced to European nations for post-war reconstruction.
3. Marshall Plan aid was overseen by the ECA and remitted with strict conditions. Among them were the adoption of free-market economic policies and liberal-democratic political systems.
4. This aid enabled the post-war reconstruction of Europe. It also advanced American commercial interests by stimulating the US economy and opening up Europe for future trade.
5. In the context of the Cold War, the Marshall Plan helped weak and war-ravaged governments and economies to recover and avoid falling prey to communist infiltration or revolution. It was also a significant propaganda device for the US.
Marshall Plan (1948)
Citation: Act of April 3, 1948, European Recovery Act [Marshall Plan] Enrolled Acts and Resolutions of Congress, 1789-1996 General Records of the United States Government Record Group 11 National Archives.
Photograph: West Berlin, Germany. NWDNS-286-ME-6 (2) ARC #541691 Records of the Agency of International Development [AID] Record Group 286 National Archives.
How to use citation info.
On April 3, 1948, President Truman signed the Economic Recovery Act of 1948. It became known as the Marshall Plan, named for Secretary of State George Marshall, who in 1947 proposed that the United States provide economic assistance to restore the economic infrastructure of postwar Europe.
When World War II ended in 1945, Europe lay in ruins: its cities were shattered its economies were devastated its people faced famine. In the two years after the war, the Soviet Union’s control of Eastern Europe and the vulnerability of Western European countries to Soviet expansionism heightened the sense of crisis. To meet this emergency, Secretary of State George Marshall proposed in a speech at Harvard University on June 5, 1947, that European nations create a plan for their economic reconstruction and that the United States provide economic assistance. On December 19, 1947, President Harry Truman sent Congress a message that followed Marshall’s ideas to provide economic aid to Europe. Congress overwhelmingly passed the Economic Cooperation Act of 1948, and on April 3, 1948, President Truman signed the act that became known as the Marshall Plan.
Over the next four years, Congress appropriated $13.3 billion for European recovery. This aid provided much needed capital and materials that enabled Europeans to rebuild the continent’s economy. For the United States, the Marshall Plan provided markets for American goods, created reliable trading partners, and supported the development of stable democratic governments in Western Europe. Congress’s approval of the Marshall Plan signaled an extension of the bipartisanship of World War II into the postwar years.
For more information, visit The National Archives' Treasures of Congress Online Exhibit, and the George C. Marshall Foundation website.
The Marshall Plan and its consequencesMarshall as Secretary of State 1948 (Photo: Truman Library)
A General now statesman, Secretary of State George C. Marshall would give a speech only a few months later that would again change the world. On June 5, 1947, on the steps of Memorial Church at Harvard University, he outlined an ambitious European Recovery Program (ERP) that would soon carry his name, the Marshall Plan.
He stated: "The modern system of the division of labor upon which the exchange of products is based is in danger of breaking down. 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."
Although the plan was designed primarily by William L. Clayton and George F. Kennan, both members of the State Department, it was Marshall who presented the concept to the American people and Congress, in such a manner, as to avoid the mistakes that had been made in post-World War One Europe from re-occurring. It was the policy of American isolationism that had allowed the Treaty of Versailles to endanger Europe and brought forth a second bitter war to the continent. Marshall realized this mistake must not repeat itself.
Sixteen nations met in Paris, outlining the assistance that each required and how this aid was to be divided. The final proposal agreed upon by delegates asked for $22 billion in aid a figure that President Truman could not justify in Congress. Although Truman cut the request to $17 billion, the plan still met with strong opposition and after much filibustering, Congress approved $12.4 billion. President Truman officially signed the Marshall Plan into law on April 3, 1948.Not only Berlin was rebuilt with help from the Marshall Plan (Photo: Truman Library)
Execution and consequences
The Economic Cooperation Administration (ECA), headed by Paul G. Hoffman, was formed to administer the funds. The first aid had already been provided to Greece and Turkey in January 1947, prior to the official signing of the program. Italy followed in July 1948.
The majority of the funds provided, went to purchase goods, mainly manufactured or produced in the United States. At the beginning, this was primarily food and fuel. Although this may also be considered the main criticism of the program in that America was following a concept for economic imperialism, in an attempt to gain economic control of Europe. But in reality, the amounts that America donated as part of the Marshall Plan, can hardly be considered "imperialism", in that they represent only a small fraction of the GNP, and the duration of the program was limited from the start.
Beginning in April 1948, the United States provided these funds for economic and technical assistance to those European countries that had joined the Organization for European Economic Co-operation.
In Germany, a vast amount of money was invested in the rebuilding of industry, with the coal industry alone receiving 40% of these funds.
The concept was simple enough, companies that were provided such funds, were obliged to repay these "loans" to their government, so that these same funds could be used to assist other businesses and industries.
Post-war Germany had been forced to dismantle a great deal of its major factories and industries, according to guidelines enforced by the Allied Control Council. Figures for car production alone had been set to levels that represented only 10% of pre-war numbers. With the introduction by the Western Allies of the German "Mark" as the new official currency, on June 21, 1948, a new economic era was signalled within Europe and especially Germany. The Petersberg Agreement, signed in November 1949, increased these production figures for Germany dramatically.
Therefore, Germany in particular was keen on maintaining this concept, even after the Marshall Plan had officially terminated, so that this process continues today. The KfW Bank (Kreditanstalt für Wiederaufbau) headquartered in Frankfurt, has since 1948, administrated these funds. Under the leadership of Dr. Hermann-Josef Abs and Dr. Otto Schniewind, the KfW Bank continued to work "miracles", during the "Wirtschaft Wunder" years, playing an important role in getting the German economy going. By 1950, 12% of their loans were used for housing construction. With the unification of Germany, the KfW helped pay, between 1990 and 1997, for the modernisation of 3.2 million apartments in the former East Germany, nearly one half of all existing housing structures in the new States.
This institution has an annual revenue of 70 billion Euro. The KfW is Europe's largest promotional bank, promoting the legacy of the Marshall Plan in third world countries today, in much the same way, with a new primary emphasis on microfinance the loaning of small amounts to impoverished third world individuals, to start a small business.
Marshall receives a documentation of the plan which was named after him, 1950 (Photo: Truman Library)
The other European countries, over the years, have absorbed these "repaid" funds into their national budgets, thereby "disappearing". It was never intended that these funds were to be repaid to the American government.
The Marshall Plan also included a Technical Assistance Program, which funded engineers and industrialists to visit the United States, to gain first-hand experience of industrial capitalism and technological transfer. Under the same program, American engineers came to Europe, to advise and provide technical support to developing industries.
After four years, the program had surpassed all expectations, with each member country achieving a larger GNP (Gross National Product) than pre-war levels.
On December 11, 1953, George Marshall was awarded the coveted Nobel Peace Prize, for his work. In his speech, he stated: "There has been considerable comment over the awarding of the Nobel Peace Prize to a soldier. I am afraid this does not seem as remarkable to me as it quite evidently appears to others. I know a great deal of the horrors and tragedies of war. Today, as chairman of the American Battle Monuments Commission, it is my duty to supervise the construction and maintenance of military cemeteries in many countries overseas, particularly in Western Europe. The cost of war in human lives is constantly spread before me, written neatly in many ledgers whose columns are gravestones. I am deeply moved to find some means or method of avoiding another calamity of war. Almost daily I hear from the wives, or mothers, or families of the fallen. The tragedy of the aftermath is almost constantly before me."
A train promoting the ERP. The poster reads: America supports the rebuilding of Europe - This freight car was provided by the Marshall Plan (Photo: German Federal Archives, Registration code: 183-R83460, N.N.)
Balance - the European perspective
Within the short period between 1948 and 1952, Europe experienced a dramatic increase in economic production. The hunger and starvation experienced by so many displaced persons, literally disappeared overnight. Whether or not, the Marshall Plan alone can be accredited for this achievement is a question that historians may never be fully able to answer. For sure, the Marshall Plan acted to expedite the developmental process.
The Soviets and the Eastern Bloc naturally turned down any such aid offered by the Americans, thereby causing yet another wedge between the two political systems, which was followed by the introduction of an East German Mark in July 1948, the blockade of Berlin and the ensuing Berlin Airlift in 1948/49.
For Finland, Hungary, Romania and especially East Germany the Soviets demanded large reparation sums and goods, which in turn slowed down their economic development after the war dramatically.
Without question, the Marshall Plan laid the foundation of European integration, easing trade between member nations, setting up the institutions that coordinated the economies of Europe into a single efficient unit. It served as a prelude to the creation of the United Europe that we have today. Only a few years after the Marshall Plan Program Belgium, France, Italy, Luxembourg, the Netherlands and West Germany, joined together and formed the European Economic Community (EEC), with the signing of the Treaties of Rome, in 1957. A development within Europe that continued to expand it's membership, culminating in the Maastricht Treaty of November 1, 1993, forming the European Union, that resulted in the new European-wide currency, the "Euro", which replaced all national legal tender of member countries, in 2002.
A Global Marshall Plan
Former U.S. Vice President Al Gore has also suggested a "Global Marshall Plan", intended to allocate funds from wealthy nations, to assist in the development of environmentally based industries in Third World Countries.
When one considers that 15 million children die of hunger each year that 1 in 12 people on this earth are undernourished or that 1 in 4 live on less than $1 per day perhaps such a program would be money well spent. But this is a phenomena no longer restricted to developing countries when we see that 1 out of every 8 children in the United States under the age of 12, is hungry or that 17 percent German children live near or under the poverty levels today.
Although the ERP concept has proven itself, the world needs a statesman whose respect is worldwide and indubitable, as that of George Marshall.
The Marshall Plan (officially the European Recovery Program, ERP) was an American initiative to aid Western Europe, in which the United States gave over $12 billion (approximately $120 billion in value as of June 2016) in economic support to help rebuild Western European economies after the end of World War II. The plan was in operation for four years beginning April 8, 1948. The goals of the United States were to rebuild war-devastated regions, remove trade barriers, modernize industry, make Europe prosperous again, and prevent the spread of communism. The Marshall Plan required a lessening of interstate barriers, saw a decrease in regulations, and encouraged an increase in productivity, labor union membership, and the adoption of modern business procedures.
The Marshall Plan aid was divided among the participant states 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 general European revival. Somewhat more aid per capita was also directed towards the Allied nations, 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 (receiving about 26% of the total), followed by France (18%) and West Germany (11%). Some 18 European countries received Plan benefits. Although offered participation, the Soviet Union refused Plan benefits and blocked benefits to Eastern Bloc countries such as East Germany and Poland.
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 during which standards of living increased dramatically. 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.
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.
Marshall Plan: One of a number of posters created to promote the Marshall Plan in Europe. Note the pivotal position of the American flag.
According to Whitehall documentation of the time, Britain's 'overriding need' in regard to the Marshall Aid was to keep up the Bank of England's reserves of gold and dollars, so that Britain could go on acting as banker to the Sterling Area. But then again, it was also stated in the documentation that the 'primary purpose' must be to keep up imports, especially of food and tobacco, to say nothing of timber for the Labour Government's ambitious programme of council-house building. As for capital investment in industrial modernisation, that was relegated in the British tender to the mere category of 'clearly of great importance'.
. gold payments in Persia, purchase of petrol for our troops . every conceivable thing.
The plain truth is that the Labour Government in the late 1940s sought to use Marshall Aid much as the Conservatives used the rake-off from North Sea oil in the 1980s - as a general subsidy for whatever they wished to do, like clinging on to the dream of a world power role. As a Cabinet Office memorandum in 1948 put it:
'It is perfectly true that if Marshall Aid covers our dollar drain, then all our payments of gold and dollars can be regarded as financed by Marshall Aid - expenses of HM Embassy in Washington, gold payments in Persia, purchase of petrol for our troops in the Middle East, every conceivable thing.'
And so we find - surprise, surprise - that during the four-year period of Marshall Aid, Britain planned to devote to net fixed investment in industry and infrastructure a proportion of GNP that was a third less than West Germany's proportion.
In June 1947, Gen. George C. Marshall — revered as the “organizer of victory” and Army Chief of Staff during World War II and now five months into his tenure as President Harry S. Truman’s Secretary of State — addressed the Commencement audience in Harvard Yard. Describing the devastation of Europe’s economies and societies, Marshall pledged the United States would do “whatever it is able” to help rebuild the continent and restore its “normal economic health,” without which there could be “no political stability and no assured peace” throughout the world.
His speech marked a historic departure in American foreign policy.
Marshall invoked no self-deprecating anecdotes or poetic metaphors to illustrate the importance of the occasion. Not for him were adjectives to describe the attributes the graduating students were expected to display. Duty was its own justification it could only be impaired by embellishment.
After a brief preface recalling that, as the graduates knew well, “the world situation is very serious,” Marshall outlined “the requirements for the rehabilitation of Europe.” Rarely looking up from the text he had carried to the podium in his jacket pocket, he offered a revolution in American foreign policy in the guise of a practical economic program. Toward the end of the speech, he apologized for entering into a “technical discussion” that had likely bored his listeners. Indeed, Commencement attendees, including Harvard President James B. Conant, would later confess they had not immediately understood the historical significance of what Marshall had outlined. He had in fact proposed a new design for American foreign policy.
“Marshall’s premise was straightforward: Economic crisis, he observed, produced social dissatisfaction, and social dissatisfaction generated political instability,” writes Henry A Kissinger. File photo by Stephanie Mitchell/Harvard Staff Photographer
Marshall’s premise was straightforward: Economic crisis, he observed, produced social dissatisfaction, and social dissatisfaction generated political instability. The dislocations of World War II posed this challenge on a massive scale. European national debts were astronomical currencies and banks were weak. The railroad and shipping industries were barely functional. Mines and factories were falling apart. The average farmer, unable to procure “the goods for sale which he desires to purchase,” had “withdrawn many fields from crop cultivation,” creating food scarcity in European cities.
At the same time, a political and strategic challenge to democratic societies had come into being. Moscow established Communist dictatorships in every territory its forces occupied at the close of the war — up to the River Elbe in the center of historic Europe. Beyond the satellite states, Soviet-backed political factions were probing Western Europe’s political cohesion. To safeguard their political future, European democracies needed, above all, to restore hope in their economic prospects. “The remedy,” Marshall offered, was a partnership between the United States and its European allies to rehabilitate “the entire fabric” of their economies. To address the most immediate crisis, America would send its friends food and fuel. Later, it would subsidize modernizing and expanding industrial centers and transportation systems.
Marshall’s so-called “technical discussion” was in fact a clarion call to a permanent role for America in the construction of international order. Historically, Americans had regarded foreign policy as a series of discrete challenges to be solved case by case, not as a permanent quest. At the conclusion of World War I, domestic support for the fledgling League of Nations foundered and the country turned inward. Declining to involve itself in the latent crises in Europe, American isolationism contributed to the outbreak of World War II. But America’s traditional attitude was up for debate again following the Allied victory.
In his speech at Harvard, Marshall put an end to isolationist nostalgia. Declaring war on “desperation and chaos,” he invited the United States to take long-term responsibility for both restoring Western Europe and recreating a global order.
George C. Marshall on Commencement Day, 1947
Many of the Marshall Plan’s proposals were based on lessons learned in overcoming the depression of the 1930s by closing the gap between economic expectations and reality in America. In that sense, the plan represented the global application of the New Deal. But it succeeded because it transformed common necessities into partnership. Marshall stressed that it would be “neither fitting nor efficacious” for America to try to direct Europe’s economic recovery “unilaterally.” Common objectives were necessary — and they had to reflect a broader vision of political order for Europe, the Atlantic region and, ultimately, the world. The Marshall Plan inspired a new international order by enabling the nations of Europe first to rediscover their own identities in its pursuit, then to go on to build systems transcending national sovereignty, such as the Coal and Steel Community and, eventually, the European Union.
Luckily, Europe had leaders whose formative experience predated World War I, the most blighting impact of which was the continent’s loss of confidence in itself. But Konrad Adenauer (in Germany), Alcide De Gasperi (in Italy), and Robert Schuman (in France) had preserved the conviction that had characterized Europe’s life before these self-inflicted catastrophes. They viewed their challenge not in technical terms, but as the fulfilment of a political vision based on a common cultural heritage.
To British Foreign Secretary Ernest Bevin, the Marshall Plan was “a lifeline to sinking men” that brought “hope where there was none” by giving recipients permission not only to overcome their present difficulties, but to imagine their future prosperity in cooperation with the United States. Paul-Henri Spaak, the Prime Minister of Belgium, called it “a striking demonstration of the advantages of cooperation between the United States and Europe, as well as among the countries of Europe themselves.” For this reason, French Foreign Minister Georges Bidault said, “The noble initiative of the Government of the United States is for our peoples an appeal which we cannot ignore.” And Dutch Foreign Minister Dirk Stikker anticipated the plan’s far-reaching impact, saying, “Churchill’s words won the war, Marshall’s words won the peace.”
Not the least significant aspect of Marshall’s speech was that it facilitated Germany’s reentrance into the community of nations as an equal partner. This is why in 1964, Adenauer, concluding his tenure as West German Chancellor, praised Truman for extending the plan’s provisions to Germany “in spite of her past.” The Marshall Plan, Adenauer said, made Germany “equal” to “other suffering countries,” countering for the first time the notion among the Allied powers “simply to efface Germany from history.” The plan gave Germany economic assistance but, more importantly, “new hope.” “Probably for the first time in history,” Adenauer said of Marshall’s speech, “a victorious country held out its hand so that the vanquished might rise again.”
An ingenious aspect of Marshall’s design was that aid was offered to all Europe, including the Soviet Union and its occupied satellites. Some of them — especially Czechoslovakia — were tempted. But Soviet leader Joseph Stalin rejected the offer on ideological grounds. He denounced the plan as economic imperialism — a “ploy” to “infiltrate European countries” — and forced his satellites to follow suit, thereby defining the fault lines along which the basic Cold War strategy of containment was to occur. As Moscow forcibly imposed its ideology on its sphere of influence, the Marshall Plan’s goals merged into a broader political one: the expansion of the concept of human dignity as a universal principle, and self-reliance as the recommended method of promoting it. While the Soviet system eroded gradually, Adenauer, De Gasperi, and Schuman helped to inspire the formation of the North Atlantic Alliance, the European Coal and Steel Community and, with the passage of decades, the European Union.
Every generation requires a vision before it can build its own reality. But no generation can rest on the laurels of its predecessors each needs to make a new effort adapted to its own conditions. In Europe, the Marshall Plan helped consolidate nations whose political legitimacy had evolved over centuries. Once stabilized, those nations could move on to designing a more inclusive, cooperative order.
But subsequent generations occasionally took too literally Marshall’s description of the plan as “technical,” emphasizing its economic aspects above all else. In the process, they ran the risk of missing its political, indeed its spiritual, component. When America engaged in nation building in other countries, it found that political legitimacy had different foundations. As the United States tried to establish international order beyond Europe, economies remained vital. But the resolution of civil conflicts followed a rhythm beyond, and more complicated than, economic development. At times, attempts to apply literally the maxims of the Marshall Plan fractured the unity of America at home. Civil wars cannot be ended by economic programs alone. They must be transcended by a more comprehensive political vision.
The complexity of this challenge gives Marshall’s speech new significance today. In a moment of crisis, he stood up, boldly outlining a vision of reconciliation and hope and calling on the West to have the courage to transcend national boundaries. Now, the challenge of world order is even wider. Instead of strengthening a singular order on a continent with established political systems, the task has become global. The challenge is to devise a system in which a variety of societies can approach common problems in a way that unites their diverse cultures. This is why there is a special significance for the sons and daughters of Harvard of a speech delivered almost two generations ago. Universities are the residuaries of cultures and, in a way, the bridge between them. Twin calls to duty have emerged after almost 70 years from Marshall’s Commencement speech: that America should cultivate, with Western Europe, a vital Atlantic partnership and that this partnership should fulfill its meaning by raising its sights to embrace the cultures of the universe.