The Marshall Plan — Rebuilding Europe

Blueprint for Recovery, continued ...

The U.S. Domestic Debate

Coming on top of the $9 billion already expended on a variety of postwar programs in aid of Europe, the Marshall Plan appropriation was bound to raise objections in Congress. Senator Robert A. Taft of Ohio led a group of economy-minded legislators who were convinced that Marshall aid would aggravate existing shortages in the United States. It would drive up the wholesale price index, they argued, and end in new government controls over the economy.

Nor did economic issues exhaust the list of objections. Taft and his allies, who represented an older, isolationist tradition in American diplomacy, also worried lest the Marshall Plan entangle the United States in the affairs of Europe at a time when tensions there could spark another world war.

These were serious reservations, but in the ensuing debate supporters of the Marshall Plan organized a mighty offensive that overturned the arguments mounted by their opponents. Spokespersons for the Truman administration led the offensive, testifying before congressional committees, speaking at public meetings across the country, and organizing three presidential commissions to explain how the United States could manage an expensive foreign aid program without wrecking its economy. In collaboration with their government counterparts, a variety of private groups also threw their support behind the Marshall Plan. These included the major trade unions, the leading farm associations, and powerful elements in the business community. In public and private forums alike, the spokespersons for these groups joined the Truman administration to defend the Marshall Plan as an act of creative statesmanship, an instrument of American as well as European interests.

After four months of deliberation, the U.S. Congress passed the Economic Cooperation Act in the spring of 1948. The vote in the House of Representatives was 329 in favor and 74 opposed, while that in the Senate was 69 in favor and 17 opposed—margins that belied the intensity of the debate and the inveterate opposition of the measure’s critics.

Enlisting the Private Sector

To administer the Marshall Plan, Congress established the Economic Cooperation Administration (ECA), complete with an administrator in Washington, D.C., a special representative in Paris, and local missions in each of the participating countries. The ECA had complete control over operational matters and shared with the U.S. Department of State responsibility for shaping policy. Undergirding this organizational arrangement was the assumption, widely held in Washington, that revitalizing production, solving complicated trade and financial problems, and managing the other tasks involved in Europe’s recovery required a special administration staffed by the “best brains” from the areas of business, labor, agriculture, and the professions.

These arguments convinced President Truman. He promptly appointed Paul G. Hoffman, president of the Studebaker automotive corporation, as the ECA’s administrator in Washington, and W. Averell Harriman, a prominent figure in the business and banking communities, as the special representative in Paris. Hoffman and Harriman filled their offices with top men from the academic and corporate worlds. The major farm groups donated members to the private advisory committees established by the ECA, worked closely with its overseas missions, and helped to staff its food and agriculture divisions. Much the same was true of the American Federation of Labor, the Congress of Industrial Organizations, and the other trade unions. In these and other ways, the ECA became the center of a vast network of cooperation between public policy makers and private leaders, whose skills contributed immeasurably to an efficient and bipartisan administration of the recovery program.

This administrative system did not stop at the water’s edge. In accordance with the principles of maximum self-help, mutual aid, and shared responsibility, Marshall and other officials insisted from the start that participating countries take the initiative and play a major role in their own recovery. This required a regional authority that could speak for Europe with a single voice.

The participating countries met this requirement by establishing the Organization for European Economic Cooperation (OEEC). Headquartered in Paris, the OEEC worked in tandem with the ECA to devise annual recovery plans, allocate American aid, make currencies convertible, and loosen the restraints on production and trade. The two agencies had their differences, of course. But their cooperation never broke down, nor did their dogged pursuit of European recovery.

The OEEC quickly assembled a distinguished staff in Paris, arguably the most impressive assembly of economic and financial talent anywhere in the world. Belgian Prime Minister Paul-Henri Spaak, one of the great champions of Western European unity, chaired the OEEC Council, which comprised national representatives from each country. Robert Marjolin of France, another advocate of European unification and a prime mover behind the French Monnet Plan, headed the OEEC’s international secretariat. For the most part, equally impressive figures stood in for government ministers at the head of their national delegations. The OEEC, under the leadership of able men, proved to be an effective instrument of economic cooperation with an increasingly European identity and a burgeoning staff of international public servants.

The network of cooperation stretched from the OEEC’s headquarters in Paris across the map of Western Europe, involving at every level a pattern of power-sharing between public officials and private leaders much like the one that took shape around the Economic Cooperation Administration. Each of the participating governments established its own recovery agency, many of which, like the central planning commission in France, involved the active participation of business, labor, and farm groups. The same groups established links with the ECA’s missions in the participating countries, as well as with the OEEC. They also joined forces in the national production centers and productivity teams that were established with American support to improve industrial efficiency and maximize output.

Partners in Reconstruction

The Marshall Plan was fundamentally a joint enterprise. The major American contribution took the form of primary products and manufactured goods in short supply on the Continent or in the overseas territories of the participating countries. Approximately $12 billion in Marshall Plan aid had been expended by the middle of 1951, much of which helped member states to finance essential imports of fuel ($1.5 billion); food, feed, and fertilizers ($3.4 billion); and machines, vehicles, and equipment ($1.8 billion).

These imports combined with other forms of American assistance to bring a high degree of economic progress and stability to Western Europe. Inflation had been contained in most of the participating countries by 1950, and both intra-European and extra-European trade had recovered to levels well above those anticipated at the start of the Marshall Plan.

Something similar can be said of the recovery of Western European production. During the Marshall Plan period, Western Europe’s aggregate gross national product jumped by more than 32 percent, from $120 billion to $159 billion. Agricultural production climbed 11 percent above the prewar level, and industrial output increased by 40 percent against the same benchmark.

The designers of the Marshall Plan cannot take all of the credit for this remarkable record of success. Local resources accounted for 80 to 90 percent of capital formation in the major European economies during the first two years of the recovery program. Compared to this effort at self-help, some might conclude, the American contribution was marginal, measured in quantitative terms and actually declined in the years after 1949. In truth, however, American aid and European effort were linked inextricably. The Marshall Plan, as Paul Hoffman once explained, provided the “critical margin” of support that made European self-help possible. It facilitated essential imports, eased production bottlenecks, encouraged higher rates of capital formation, and helped to suppress inflation — all of which led to gains in productivity, to improvements in trade, and to an era of social peace and prosperity more durable than any other in modern European history.

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