MARSHALL PLAN.

The Marshall Plan—officially known as the European Recovery Program (ERP)—was an ambitious and far-reaching U.S. initiative to sponsor the recovery and reconstruction of western and southern Europe in the aftermath of World War II. The plan was named after one of its creators, George Marshall (1880–1959), the U.S. secretary of state. Marshall first announced this scheme for the rehabilitation of European economies at the Harvard University commencement on 5 June 1947. The Marshall Plan was formally launched on 2 April 1948, when the U.S. Congress passed the Economic Cooperation Act. Over the next four years, roughly $13 billion of aid was distributed to sixteen European recipient countries, who organized themselves into the Organisation for European Economic Cooperation (OEEC) for this purpose. Great Britain, France, Italy, the Federal Republic of Germany, and the Netherlands received the largest sums.

The Marshall Plan has received significant interest, both because of its far-reaching objectives and its pivotal role in the intensifying Cold War between the former wartime allies, the United States and the Soviet Union. Debate among historians and economists has revolved primarily around three issues. First, scholars have disagreed about what U.S. motivations had given rise to the program. A second point of debate concerns the way in which the ERP was assessed in Europe, particularly by the Soviet authorities. Finally, the economic and political effects and long-term implications of the Marshall Plan remain in dispute.

CONTEXT

When World War II finally came to a close, it had left behind a trail of destruction and devastation throughout Europe. It seemed clear to observers that the extent of damage was much more serious than it had been in 1918. Widespread destruction of factories together with shortages in raw materials and food, so it was argued, had not only psychological but also lasting economic effects. Restricted industrial production severely limited what could be achieved in national reconstruction programs. Stagnation and crisis seemed unavoidable.

Historians have since suggested that the extent of the postwar crisis was exaggerated. Physical destruction was less severe than it seemed at first, and in most countries infrastructures could be repaired relatively quickly. By 1947, overall European industrial production had already risen to 87 percent of what it had been in 1938. Nonetheless, there were of course real problems ahead. Recovery was driven by national spending on the repair and extension of industrial capacities. But European countries produced only a small amount of the capital goods they needed to keep this process going. Importing these goods from the United States was made unfeasible by the largely exhausted European dollar reserves. Governments needed money to pay for imports, but their capacity to earn dollars through exports was limited. It was a vicious circle, which gave rise to large trade and payments deficits. Moreover, classical free trade solutions were made impossible by governments' continued strict control of prices and trade. Political uncertainty produced further doom and gloom.

Several different priorities shaped policymaking on the U.S. side. On one hand, the administration sought to end its financial commitments in Europe. Already in August 1945 all lend-lease arrangements had been terminated, primarily to reassure Congress that the financial burdens of the war years were now finally over. Other funding programs, such as the United Nations Relief and Rehabilitation Administration, were canceled by 1947. On the other hand, these assessments were modified by growing political concerns. Already in February 1946, George Kennan at the U.S. embassy in Moscow expressed concern about the Soviet authorities' aggressive hostility toward the Western world. Just a month later, Winston Churchill warned that as a result of expansionist Soviet policies an Iron Curtain had descended across Europe, against which Western democracies had to stand firm. Concerns about Soviet expansion were further fueled by the electoral successes of the Italian and French Communist parties.

The 1946 midterm elections brought both the U.S. Senate and House under the control of the Republican Party, an influential wing of which argued that the reconstruction of Western Europe had to take priority, if only temporarily, over retreat into isolationism. Democratic President Harry S. Truman cooperated closely with Republicans in questions of foreign policy. In his speech to Congress on 12 March 1947, Truman argued (in what was later known as the Truman Doctrine) that the United States had to support actively countries struggling against communism, and he proposed military and economic aid to Greece and Turkey to this end.

Marshall developed these ideas further. He was concerned that communists in Western Europe would take advantage of popular discontent, stirred by plummeting living standards. As the State Department moved toward a policy of active intervention in Europe, the notion that without U.S. support a European economic collapse was imminent and would, in turn, have serious consequences for the U.S. economy, proved useful to mobilizing political support. When Marshall announced the scheme to aid European recovery, this could thus be justified with established logic: it would not only salvage Europe but also protect the future of U.S. society and its economy.

SCOPE

While the Marshall Plan itself did not explicitly distinguish between Western and Eastern spheres, the logic behind it undoubtedly did. In fact, the plan developed a number of assumptions. First, the mistakes of World War I were not to be repeated. The inadequacy of the Treaty of Versailles was directly linked to the subsequent economic collapse, the rise of fascism and Nazism, and World War II. Second, the biggest threat to Western Europe came from the famished and disillusioned Europeans who brought their Communist parties into power (through elections or revolt), which would then be subservient to Moscow. Third, Germany had to be rearmed and prevented from falling under Soviet rule. In the face of strong French opposition, the best way of achieving this was by transforming Germany into a prosperous democratic nation. Fourth, Marshall Plan aid would not only help to jump-start European economies and remove the material basis of discontent, but also restore self-confidence in capitalist democracy and thereby provide a strong alternative to communism.

The ERP was designed to enable Western European countries to buy American exports, which would both expand the market for U.S. products and reduce the cost of aid to Europe. ERP planners' goal was to achieve 30 percent growth in industrial production. The program also sought to integrate Western Europe into a single economic and political area. Apart from trade benefits, integration had the important function of reconciling France to a revived and rearmed Germany. French reconstruction plans had until then focused on shifting the center of European heavy industry from Germany to France, and thus prioritized access to German coal and steel resources. The Marshall Plan now assured France both that Germany was locked safely into Europe and that if it dropped its claims on German reparations it would be rewarded with Marshall Plan aid.

The ERP was directed by the Economic Cooperation Administration (ECA) in Washington, with an office in each receiving country. Because aid was made conditional on intra-European cooperation, a new body—the OEEC—was formed to coordinate the distribution of funds. Each country signed a bilateral treaty with the United States, committing itself to strong production, financial stability, and an expansion of foreign trade. Funds were provided in the form of dollar credits. European governments acted as purchasers of imports from the dollar area, which were then resold to consumers in their countries. Because consumers paid for these products in their national currencies, governments built up large balances of nondollar currencies—so-called counterpart funds—which could then be used for a range of purposes subject to the ECA's approval.

REACTIONS

Historians long assumed that the postwar division of Europe had been an inevitable result of expansionist Soviet policies, and that the Iron Curtain had been more or less in place by 1945. More recent assessments have suggested otherwise. Soviet policy in the immediate postwar period was more often reactive than proactively expansionist. Until 1947, the Soviet Union pursued a relatively moderate foreign policy. Popular Front–like coalition governments held power in most Eastern European states under Red Army control. In Germany, Soviet authorities maintained that the German problem could best be dealt with through multilateral Allied action. Scholars have argued that the Marshall Plan then changed Soviet calculations. The Soviet leadership identified the scheme as a U.S. attempt not just to consolidate the Western European bloc economically and politically, but also to intrude into its own sphere of influence, the buffer zone around the USSR, and thus to threaten Soviet security. As a result, Soviet policy shifted radically to contain and prevent American influence.

At any rate, the sincerity of the Western powers' offer for Soviet participation is questionable. Although Ernest Bevin and Georges Bidault, the foreign ministers of Britain and France, respectively, invited their Soviet counterpart Vyacheslav Molotov to discuss Marshall's scheme, this invitation was largely to preempt domestic criticism about excluding the Soviet Union. The Soviet leadership, in turn, hoped the scheme might be turned to their advantage. Molotov tried to gain agreement from other participants to forestall European integration and instead implement the recovery plan on a country-by-country basis. He failed, and the Soviet Union subsequently withdrew from the Paris Economic Conference and put pressure on the Eastern European countries that had been keen to benefit from the ERP. The Polish and Czechoslovak delegations soon gave in. Subsequently, the Soviet authorities developed more effective means of control over their Eastern European satellites. Joseph Stalin's reactions, in turn, persuaded the U.S. Congress that its assessment of the Soviet threat had been correct.

EFFECTS

The Marshall Plan's effects have been debated at length: to what degree did it contribute to the revival and reconstruction of Western Europe? At the height of the Cold War, scholars argued that the scheme was an act of U.S. benevolence in the face of the Soviet threat and the single most important cause of European economic recovery. Revisionist historians subsequently argued that the Marshall Plan was evidence of the imperialist policies of the United States in its efforts to turn Western European countries into economic and political satellites. Their assessment, however, did not actually revise earlier views of the plan's economic importance. For both orthodox and revisionist scholars, the ERP formed an indispensable starting point for Western European recovery from the brink of chaos and collapse.

Since the mid-1980s, several historians have argued that the ERP's direct impact on European developments has been overstated, as recovery was already well under way by the time ERP aid first arrived. Between 1948 and 1951, Marshall Plan aid amounted to only about 2 percent of the gross domestic product of recipient countries. As a result, the ERP did not give the United States sufficient leverage over the political reconstruction of Western Europe. Some historians also question the older emphasis on a homogenous impact of Marshall Plan aid and suggest instead that Western Europe was a patchwork of distinct national programs and ways of using Marshall funds. Different European governments found different strategies to neutralize or ignore specific U.S. requirements.

The Marshall Plan had several different results. Although its direct economic impact has been exaggerated, it seems clear that without this aid the speed of recovery would have been impeded. The Marshall Plan together with other U.S. aid programs reduced Europe's current account deficit with the United States, and allowed a much higher level of imports from the dollar area than would have been possible otherwise. The initial goal of 30 percent growth in industrial production was surpassed by a substantial margin. By 1951 the large dollar deficits had mostly disappeared, and projects for liberalizing trade could again be put on the agenda.

It also seems clear that the impact of the ERP cannot be understood in strictly quantitative terms. Even if the program was not as crucial to Americanization as had been claimed, it did appeal to forces within Europe who were eager to use U.S. aid as a lever to achieve their own objectives. The Marshall Plan also changed European attitudes toward production. Its "politics of productivity" (so called by Charles S. Maier) served as a new ideological yardstick for uniting a centrist political leadership and justifying a reliance on the private economy for growth. With the removal of communists from governing coalitions, the Marshall Plan helped to seal a division within the European labor movement between communist and noncommunist unions. The plan's psychological effects on the war-weary populations of Europe were perhaps most important of all. At a time of despair and uncertainty, it left no room for doubt about the commitment of the United States to the security of Western Europe.

See alsoOrganisation for European Economic Cooperation (OEEC).

BIBLIOGRAPHY

Primary Sources

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Kindleberger, Charles P. Marshall Plan Days. Boston, 1987.

Marshall, George. "Speech by the United States Secretary of State, General Marshall, at Harvard University: The Marshall Plan, 5 June 1947." Foreign Relations of United States 3 (1947): 237–239. Reprinted in Department of State Bulletin 16, no. 415 (15 June 1947): 1159–1160.

Secondary Sources

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De Long, J. Bradford, and Barry Eichengreen. "The Marshall Plan: History's Most Successful Structural Adjustment Program." In Postwar Economic Reconstruction and Lessons for the East Today, edited by Rudiger Dornbusch, Wilhelm Nölling, and Richard Layard, 189–230. Cambridge, Mass., 1993.

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Jessica Reinisch