The Marshall Plan — Rebuilding Europe

Blueprint for Recovery

 By Michael J. Hogan

On June 5, 1947, U.S. Secretary of State George C. Marshall rose to address the graduating class of Harvard University. Former wartime chief of staff, the first career soldier to become secretary of state, Marshall was one of the most respected global leaders of the day.

The secretary’s address set the stage for a massive American aid program to revitalize the war-devastated economies of Europe. It would become the largest such program in America’s history and one widely regarded as the most successful peacetime foreign policy launched by the United States in the 20th century.

British Foreign Secretary Ernest Bevin was among the many Europeans to praise what came to be known as the Marshall Plan. He called it “a lifeline to sinking men,” a ray of hope where none had existed before, an act of “generosity ... beyond belief.”

The Situation in Europe

Although V-E Day brought the struggle against Nazi Germany to an end, the peace still had to be won, and this required, above all, the reconstruction of economic and political systems badly damaged by World War II.

The Europeans strove mightily to mend the damage. But even as Marshall spoke at Harvard, capital equipment remained hopelessly obsolete or in need of wholesale repair. The depletion of gold and dollar reserves made it difficult to import essential items and use existing facilities efficiently. Food shortages and inflation discouraged maximum efforts by a demoralized work force; shortages of coal, steel, and other basic resources further restrained production; and the severe winter of 1946-47, the worst in modern memory, nearly wiped out earlier economic gains. In 1947, Western Europe’s agricultural production averaged only 83 percent of its prewar volume, industrial production only 88 percent, and exports a bare 59 percent. Making matters worse, the economic crisis worked like a superheated crucible to inflame already serious political and diplomatic problems. In France and Italy, worsening economic conditions undermined governmental authority. In Britain, the winter crisis and the drain on reserves triggered a decision to withdraw British forces from Greece, a country racked by a bitter civil conflict that compounded the economic dislocations growing out of the war. The situation was the same in Germany. Economic conditions there remained the worst in Western and Central Europe, prompting the American occupation authorities to warn that widespread poverty was fostering a popular discontent upon which the Communists were capitalizing.

The German problem exacerbated existing divisions between the former Allies, particularly those between the United States and the Soviet Union. According to wartime agreements, Germany had been divided into American, British, French, and Soviet occupation zones. The zones were to be treated as an economic unit and were to give way to a central administration and then to a new German government. Progress in this direction, however, had foundered on the incompatible interests of the victorious powers. They could not resolve their differences over the amount and form of reparations or over the level of industry and the degree of central administration to be accorded a united Germany. Nor could they agree on arrangements for international control of the Ruhr, where the great coal and steel industries constituted the basis of Germany’s economic and military might.

These and other differences came to a head at the foreign ministers conference that convened in Moscow between January and April 1947. The negotiators were unable to agree on the terms of a German settlement. Secretary of State Marshall, who headed the American delegation, left the conference convinced that Soviet leaders hoped to gain politically from a deadlock that would deepen the economic crisis in Central and Western Europe, pave the way to victory for the Communist parties in France, Italy, and Germany, and thereby open the door to an expansion of Soviet influence in an area deemed vital to American security.

Origins of a Recovery Plan

After returning from Moscow, Marshall set the wheels of American recovery planning in motion. He instructed the State Department’s Policy Planning Staff and other agencies to report on Europe’s need for economic assistance and on the conditions that should govern American aid.

These reports were then combined with recommendations coming from other quarters to lay the foundation for the proposal that Marshall would announce at Harvard University. In this and subsequent pronouncements, Marshall and his colleagues urged the Europeans to take the initiative and assume the responsibility for drafting a program of economic recovery. The Americans would provide “friendly aid” in the drafting process and financial support for a workable program—a regional program, not a collection of disparate national schemes—that was founded on such principles as self-help, resource sharing, and German reintegration.

This was the “lifeline” that the Europeans needed, and most of them, as British Foreign Secretary Bevin recalled, “grabbed” it “with both hands.” Bevin and French Foreign Minister Georges Bidault first met to discuss Marshall’s proposal with Soviet Foreign Minister Vyacheslav M. Molotov, who said that a regional recovery program would violate national sovereignties. The meeting broke down when Molotov refused to approve a program organized on this basis, whereupon Bevin and Bidault convened a second conference that opened in Paris on July 12, 1947. The Soviets declined to participate, and they prevented the Poles and the Czechs from attending as well.

At the conference, the occupation authorities represented the western zones of Germany. Joining them were the delegates of 16 European nations: Austria, Belgium, Denmark, France, Great Britain, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Sweden, Switzerland, and Turkey.

The conferees spent two months drafting a comprehensive recovery plan that came close to what the Americans had in mind. As modified by subsequent deliberations in Washington, this plan became the basis for the European Recovery Program that President Harry S Truman presented to Congress in December 1947 and that Congress passed as the Economic Cooperation Act in the spring of the following year. The act provided more than $5 billion for the first 18 months of what eventually became a four-year program that would cost the American people approximately $13 billion before it ended in 1952. This sum amounted to between 5 and 10 percent of the federal budget over the life of the recovery program, or about 2 percent of the gross national product over the same period.

Next>>> Blueprint for Recovery, part 2