Economic Cooperation Act of 1948 (Marshall Plan)
Economic Cooperation Act of 1948 (Marshall Plan)
Charles M. Dobbs
On June 5, 1947, Secretary of State George C. Marshall spoke after lunch to graduates on commencement day for Harvard College. Speaking outdoors in the famed Harvard Yard, to an audience of privileged young men and their equally privileged families, this distinguished American soldier and statesman—who President Harry S. Truman called "the greatest living American"—discussed the dire situation in Europe and its consequences for the American people.
Marshall stated, "I need not tell you gentlemen that the world situation is very serious." After reminding them of the destruction that the fighting in the Second World War had caused, Marshall noted, "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." He warned that action was needed "to end poverty, desperation, and chaos" and to "permit the emergence of political and social conditions in which free institutions can exist." He concluded by calling upon the nations of Europe to review their needs and capacities, draw up a series of plans and he urged the American people to provide the resources to help meet the challenge.
The situation in Europe was, indeed, desperate. World War II not only took more than 50 million lives, it also destroyed factories, mines, transportation systems, water control systems, communication systems, and power grids. The suffering continued into the postwar era, for the 1946 European harvest was weak, and the winter of 1946–47 was one of the harshest in memory.
It appeared that this human suffering provided great opportunities for a Soviet-controlled, communist takeover in Europe and perhaps elsewhere. The Cold War was beginning, and Soviet leader Josef Stalin and his advisors may have feared the overwhelming economic power of the United States (which emerged from the war with some 45 percent of the world's industrial capacity). Western leaders watched the Soviets establish friendly regimes in Poland, the Baltic States, Rumania, Hungary, and Bulgaria. It also appeared that the Soviets were setting up a separate regime in eastern Germany. Communist parties in Italy and France were large, well-supported, and seemed on the verge of coming to power, perhaps thereby surrounding the western occupation zones in Germany and handing the entire continent to the Soviet Union.
As a reflection of a long-standing humanitarian and charitable impulse in American life, the United States had provided billions of dollars in postwar relief to help the peoples of Europe through the United Nations and other newly formed international organizations, but it was not enough. That is, providing food, clothing, medical and heating supplies, especially during the difficult winter and early spring months could not restore the economies and rebuild the societies so that Europe could return once again to a viable system of nations and states. Moreover, the ongoing relief costs were significant, and many in and out of government questioned this continuing expense to American taxpayers. By spring, 1947, the troubled British economy might force America to bear the entire cost of relief for Europe.
Marshall at Harvard had called for European nations to meet for the purpose of determining needs and plans for recovery. The British and French foreign ministers, Ernest Bevin and Georges Bidault, issued a call on June 19, only two weeks later, inviting twenty-two European nations to send representatives to a meeting in Paris. The Soviet Union did not participate (although Soviet Foreign Minister Vyacheslav Molotov did briefly stay in Paris) and pressured its Eastern European satellites to stay away. Two months after that initial meeting, in September, 1947, the Committee of European Economic Cooperation submitted a plan to the U.S. government.
The Truman Administration had followed a script of a sort. It began with Marshall's earlier trip to Moscow. A proposal by William Clayton became the genesis of the plan, and staff work coordinated by George Kennan, head of the newly established Policy Planning Staff created support for an ambitious aid program while providing few details of that program.
As the majority of European nations embraced Marshall's call to action, the drama moved to the halls of the Congress, where the outcome was not certain. In the 1946 Congressional elections, the Republicans gained control of both houses of Congress, and already many people were predicting with an unwarranted certainty that Truman, who came to the presidency after Franklin Roosevelt died in April 1945, would lose the presidential election in 1948.
One prominent Democrat, Henry A. Wallace, who had been Roosevelt's vice president and then served as secretary of commerce, opposed the Marshall Plan because it threatened the Soviet Union and seemed to divide the world into hostile camps. Wallace called it a "martial plan" and believed it would end any chance for postwar cooperation between the former wartime allies. He also feared the plan would provide for greater business influence in American life, and would exacerbate economic inequalities at home. Wallace would resign from the Truman administration and ultimately run for president in 1948, polling more than one million votes.
The more serious opposition came from the right wing of the Republican Party. Republican senator Robert Taft of Ohio, who thought he would head his party's ticket in 1948, opposed this expanded aid program for many reasons, including a dislike of nationalized industries and centralized planning in many European countries, concern about spending so many American tax dollars, fear of expanding presidential power, and the longstanding doubts about foreign entanglements. Taft and former president Herbert Hoover, who had strongly opposed most of the New Deal agencies his successor, Roosevelt, had established, also feared, as Hoover noted in testimony, that such great economic aid would bring about "serious taxation on our own people" and would create "scarcity and high prices and economic unrest at home." Henry Hazlitt, a conservative media commentator, told Congress to insist that European countries first dismantle programs for nationalization of industry, government control of trade, and social-welfare as a condition of receiving Marshall Plan aid. Others, including Republican senator James Kem of Missouri and Democratic senator Walter George of Georgia, feared the amount of government involvement and wanted a return to a more laissez-faire system in Europe.
There were also concerns from the broad middle of the political spectrum. Such legislative leaders as Sam Rayburn, Democratic House minority leader, and Charles Halleck, Republican House majority leader, noted that the American people were tired of the billions of dollars in never-ending relief. There were many in Congress who wondered about the impact on the U.S. economy of such large spending on assistance to Europe, and business people questioned the wisdom of strengthening European industries to compete with American ones. Indeed, President Truman was in such a weak position politically that he asked Secretary Marshall to be the administration's point person in hearings before Congress and in the resulting debate, which the great soldier agreed to do. The ensuing success in Congress also owed a great deal to the advice and assistance of Republican senator Arthur Vandenberg, chair of the powerful Senate Foreign Relations Committee. Marshall was the leadoff witness in hearings before the Senate Foreign Relations Committee on January 8, 1948, insisting that the European Recovery Program would reduce the expansion of Soviet power. He also made the opening statement on January 12, 1948, before the House Foreign Affairs Committee. Marshall then followed up with speeches to the Pittsburgh Chamber of Commerce, the National Cotton Council in Atlanta, the National Farm Institute in Des Moines (by long distance call since poor weather grounded his flight), to the Federal Council of Churches in Washington, D.C., and the General Federation of Women's Clubs in Portland, Oregon.
Senator Vandenberg helped shape the Truman Administration's proposal into something his fellow Republicans could support. Vandenberg came to Washington as an isolationist, but over the years he had become his party's leading internationalist and advocate for a bipartisan foreign policy. He helped to tighten the proposal, reducing the amount of the aid request, insisting that, after four years of aid, the participating European countries should be back on their feet. Vandenberg also helped to write the act's preamble calling for more inter-European cooperation than the State Department proposed and thus ultimately leading to the European Common Market. Lastly, he made the administration set up a separate agency, later called the Economic Cooperation Agency, headed by a non-State Department official, Studebaker Corporation CEO Paul Hoffman, to oversee the vast recovery program.
Vandenberg helped defend the administration's request. In a famous exchange, Senator Taft proposed reducing the first year request from $4 billion to $3 billion. Senator Vandenberg responded, "when a man is drowning 20 feet away, it's a mistake to throw him a 15-foot rope." Taft's motion to cut the first twelve-month authorization lost 56 to 31, and the final Senate vote would be 69 to 17 in favor of the plan. There were other issues, including discussions how to establish the values, in terms of aid dollars, of commodities provided and sold.
Other members of Congress supported the administration's proposal given the gravity of the situation. Representative Everett Dirksen posed three options for Congress: to withdraw from Europe, to give minimal aid, or, "the choice we must make ... Do it—do it now—and do it right." A committee led by Representative Christian Herter returned from a trip to Europe and, as a consequence of what they found, most members returned as committed supporters of the Marshall Plan.
Soviet actions in Eastern Europe certainly assisted the administration's effort to secure passage of the legislation. In February 1948, Soviet agents killed the leader of democratic Czechoslovakia, Jan Masaryk, and that little country soon passed into the Soviet orbit. Combined with Soviet intransigence in occupied Germany (and Austria), the establishment of the Cominform, the continuing division of Korea into Soviet and America zones, and the likelihood of a great communist military victory in Manchuria in the Chinese civil war, Stalin's seemingly aggressive expansionism helped convince doubtful Republicans to support the legislation. Resisting the spread of international communism was far more acceptable than supporting the spending of American funds for economic assistance to Europe.
The administration worked hard to build public support for its plan and to press Congress to approve it. To help garner business support, and thus to mitigate Republican opposition, Truman created the Committee on Foreign Aid, chaired by Averell Harriman, with heavy business membership, to study the Marshall Plan's impact on business. Attorney General Tom Clark and FBI Director J. Edgar Hoover helped lead a campaign for patriotic sentiment that would indirectly help. Along with reports from the newly formed Council of Economic Advisors and a Committee for the Marshall Plan to aid European Recovery, this propaganda offensive made the case that the plan would protect America's "vital interests—humanitarian, economic, strategic, and political."
The lobbying and public relations effort proved successful. The Truman administration agreed to include China in the plan, and that won over some conservative Republicans who also were staunch members of the China lobby for Jiang Jieshr's (failing) nationalist regime. Congress approved the European Recovery Plan by a vote of 69 to 17 in the Senate and 329 to 74 in the House in March, 1948, President Harry Truman held a White House signing ceremony on April 3, 1948, and the Economic Cooperation Act became law.
Over the next four years, the United States provided $13.3 billion (more than $120 billion in current dollars) and the European economy revived. Britain, France, and Italy avoided collapse; the western zones of Germany, known as the Federal Republic of Germany, recovered from wartime devastation and postwar troubles. Although historians have debated and will continue to debate the measurable effectiveness of the Marshall Plan, most observers agreed it was needed and it helped achieve the revival of the western European economy and consequently of western European society.
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Fossedal, Gregory A. Our Finest Hour: Will Clayton, the Marshall Plan, and the Triumph of Democracy. Stanford, CA: Hoover Institution Press, 1993.
Hogan, Michael J. The Marshall Plan: America, Britain, and the Reconstruction of Western Europe, 1947–1952. New York: Cambridge University Press, 1987.
Levering, Ralph B. The Cold War: A Post-Cold War History. Arlington Heights, IL: Harland Davidson, 1994.
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