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Marshall Plan

Marshall Plan



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The Marshall Plan, also known as the European Recovery Program, was a U.S. program providing aid to Western Europe following the devastation of World War II. It was enacted in 1948 and provided more than $15 billion to help finance rebuilding efforts on the continent. The brainchild of U.S. Secretary of State George C. Marshall, for whom it was named, it was crafted as a four-year plan to reconstruct cities, industries and infrastructure heavily damaged during the war and to remove trade barriers between European neighbors—as well as foster commerce between those countries and the United States.

In addition to economic redevelopment, one of the stated goals of the Marshall Plan was to halt the spread communism on the European continent.

Implementation of the Marshall Plan has been cited as the beginning of the Cold War between the United States and its European allies and the Soviet Union, which had effectively taken control of much of central and eastern Europe and established its satellite republics as communist nations.

The Marshall Plan is also considered a key catalyst for the formation of the North Atlantic Treaty Organization (NATO), a military alliance between North American and European countries established in 1949.

Europe After World War II

Post-war Europe was in dire straits: Millions of its citizens had been killed or seriously wounded in World War II, as well as in related atrocities such as the Holocaust.

Many cities, including some of the leading industrial and cultural centers of Great Britain, France, Germany, Italy and Belgium, had been destroyed. Reports provided to Marshall suggested that some regions of the continent were on the brink of famine because agricultural and other food production had been disrupted by the fighting.

In addition, the region’s transportation infrastructure – railways, roads, bridges, and ports – had suffered extensive damage during airstrikes, and the shipping fleets of many countries had been sunk. In fact, it could easily be argued that the only world power not structurally affected by the conflict had been the United States.

The reconstruction coordinated under the Marshall Plan was formulated following a meeting of the participating European states in the latter half of 1947. Notably, invitations were extended to the Soviet Union and its satellite states.

However, they refused to join the effort, allegedly fearing U.S. involvement in their respective national affairs.

President Harry Truman signed the Marshall Plan on April 3, 1948, and aid was distributed to 16 European nations, including Britain, France, Belgium, the Netherlands, West Germany and Norway.

To highlight the significance of America’s largesse, the billions committed in aid effectively amounted to a generous 5 percent of U.S. gross domestic product at the time.

What Was the Marshall Plan?

The Marshall Plan provided aid to the recipients essentially on a per capita basis, with larger amounts given to major industrial powers, such as West Germany, France and Great Britain. This was based on the belief of Marshall and his advisors that recovery in these larger nations was essential to overall European recovery.

Still, not all participating nations benefitted equally. Nations such as Italy, who had fought with the Axis powers alongside Nazi Germany, and those who remained neutral (e.g., Switzerland) received less assistance per capita than those countries who fought with the United States and the other Allied powers.

The notable exception was West Germany: Though all of Germany was damaged significantly toward the end of World War II, a viable and revitalized West Germany was seen as essential to economic stability in the region, and as a not-so-subtle rebuke of the communist government and economic system on the other side of the “Iron Curtain” in East Germany.

In all, Great Britain received roughly one-quarter of the total aid provided under the Marshall Plan, while France was given less than one fifth of the funds.

Impact of the Marshall Plan

Interestingly, in the decades since its implementation, the true economic benefit of the Marshall Plan has been the subject of much debate. Indeed, reports at the time suggest that, by the time the plan took effect, Western Europe was already well on the road to recovery.

And, despite the significant investment on the part of the United States, the funds provided under the Marshall Plan accounted for less than 3 percent of the combined national incomes of the countries that received them. This led to relatively modest growth of GDP in these countries during the four-year period the plan was in effect.

That said, by the time of the plan’s last year, 1952, economic growth in the countries that had received funds had surpassed pre-war levels, a strong indicator of the program’s positive impact, at least economically.

Political Legacy of the Marshall Plan

Politically, however, the legacy of the Marshall Plan arguably tells a different story. Given the refusal to participate on the part of the so-called Eastern Bloc of Soviet states, the initiative certainly reinforced divisions that were already beginning to take root on the continent.

It’s worth noting, too, that the Central Intelligence Agency (CIA), the secret service agency of the United States, received 5 percent of the funds allocated under the Marshall Plan. The CIA used these funds to establish “front” businesses in several European countries that were designed to further U.S. interests in the region.

The agency also, allegedly, financed an anti-communist insurgency in Ukraine, which at the time was a Soviet satellite state.

By and large, though, the Marshall Plan was generally lauded for the desperately needed boost it gave America’s European allies. As the designer of the plan, George C. Marshall himself said, “Our policy is not directed against any country, but against hunger, poverty, desperation and chaos.”

Still, efforts to extend the Marshall Plan beyond its initial four-year period stalled with the beginning of the Korean War in 1950. The countries that received funds under the plan didn’t have to repay the United States, as the monies were awarded in the form of grants. However, the countries did return roughly 5 percent of the money to cover the administrative costs of the plan’s implementation.

Sources

Department of State. Office of the Historian. Marshall Plan, 1948. History.state.gov.

The George C. Marshall Foundation. History of the Marshall Plan. MarshallFoundation.org.

Harry S Truman Presidential Library and Museum. The Marshall Plan and the Cold War. TrumanLibrary.org.


Essay: The Marshall plan

The Marshall plan was a US program introduced to recover the Western European countries after WW2. The motives behind the plan come down to three broad strands that are economic, political and humanitarian. Each interpretation focuses on one or more of these aspects. In the Kolko’s argument they outline that the Americans economy and prosperity was the most important motive behind the introduction of the Marshall plan. That it was introduced as the US relied on the European countries trade to expand. A varied argument comes from David Rees, he claims that the plan was simply to defend Europe from communism and to rehabilitate the countries. Finally, Daniel Yergins key argument is one where economics and politics were motives. He argues that the plan was to consolidate the Western sphere by rebuilding the economy, which at the same time would keep the communists out. The motives each have different impacts on the Marshall plans introduction.


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 Archives.gov)

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 consequences

Marshall as Secretary of State 1948 (Photo: Truman Library)

The conception

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.

Bill promoting the Marshall Plan (Photo: German Federal Archives - Registration code: Plak 005-002-008/ N.N.)

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.


Marshall Plan

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.


Overriding needs

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.


The name of the program was to honor the US Army Chief of Staff during the Second World War. His name was George Marshall who served as the US Secretary of State.

Facts about Marshall Plan 8: the support

In Washington DC, Marshall Plan earned bipartisan support. The US president was Harry S. Truman who controlled the White House. He was a Democrat. On the other hand, the Congress was controlled by the Republicans.

Facts about Marshall Plan


IMPLEMENTING THE MARSHALL PLAN

It was in this context that Secretary of State Marshall accepted an invitation to speak at Harvard’s commencement exercises in June 1947. There he outlined what came to be called the Marshall Plan, one of the three essential elements of containment, along with the Truman Doctrine and the North Atlantic Treaty Organization, which would be established two years later.

The European Recovery Program (ERP) proposed by Marshall was economic in its means but political as to its ends. The ERP’s purpose was “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.” As Truman later explained, “the world now realizes that without the Marshall Plan it would have been difficult for Western Europe to remain free from the tyranny of communism.”

The United States offered the twelve billion dollars of the Marshall plan in the form of grants, not loans, to all of Europe. Stalin quickly rejected the ERP and directed the Soviet satellite countries not to participate, further dividing Europe and setting in motion forces that would create a dangerous bipolar world.

Passage of the ERP in Congress was never in doubt, but passage by a large majority was assured on February 24, 1948, when communists carried out a coup d’état in Czechoslovakia. With the Soviet army poised on the border, communist “action committees” roamed the country, suppressing all political opposition. Klement Gottwalk formed a new cabinet dominated by communists, and the Czechoslovak Republic, which had been a symbol of democracy in Central Europe since the end of World War I, was transformed overnight into a communist satellite. The Czech coup shocked the West from Paris to London to Washington, casting what James Forrestal called a new and frightening light “upon the power, ferocity, and scope of communist aggression.”

On April 2, in an act of historic bipartisanship, Congress overwhelmingly passed the European Recovery Program. In little more than a year, the Republican Eightieth Congress had approved the Truman Doctrine, establishing that international peace and U.S. security were intertwined, and the Marshall Plan, committing America to the economic and political well-being of Western Europe. It would next approve the most controversial component of U.S. foreign policy in the postwar period—the Vandenberg Resolution, which prepared the way for NATO.

This article is from Lee Edwards and Elizabeth Edwards Spalding’s book A Brief History of the Cold War. It is available to order now at Amazon and Barnes & Noble.

You can also buy the book by clicking on the buttons to the left.


Participating Nations

Although the Soviet Union was not excluded from participating in the Marshall Plan, the Soviets and their allies were unwilling to meet the terms established by the Plan. Ultimately, 17 countries would benefit from the Marshall Plan. They were:

  • Austria
  • Belgium
  • Denmark
  • France
  • Greece
  • Iceland
  • Ireland
  • Italy (including the Trieste region)
  • Luxembourg (administered jointly with Belgium)
  • Netherlands
  • Norway
  • Portugal
  • Sweden
  • Switzerland
  • Turkey
  • United Kingdom

It is estimated that over $13 billion dollars in aid was distributed under the Marshall Plan. An exact figure is difficult to ascertain because there is some flexibility in what is defined as official aid administered under the plan. (Some historians include the “unofficial” aid which began after Marshall’s initial announcement, while others only count aid administered after the legislation was signed in April 1948.)


The Significance of the Marshall Plan

70 years ago this month, the United States implemented the European Recovery Program, better known as the Marshall Plan, in an effort to stabilize war-shattered Europe, and help it restore its industrial and agricultural production.

The Significance of the Marshall Plan

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70 years ago this month, the United States implemented the European Recovery Program, better known as the Marshall Plan, in an effort to stabilize war-shattered Europe, and help it restore its industrial and agricultural production. Between April 1948 and December 1951, the United States poured 13 billion dollars in direct investment into 17 Western European countries, including former foes Germany and Italy. In today’s money, that’s around 130 billion dollars. It was one of the most successful U.S. foreign policy moves of the 20th century.

The Marshall Plan, named after then-Secretary of State George Marshall, was even more remarkable when viewed in the context of what took place after other wars, said Assistant Secretary for European and Eurasian Affairs Wes Mitchell at the Marshall Plan 70th Anniversary Commemoration. “In most of history’s previous wars, the victor had sought to either extinguish the vanquished or to restore its own national strength by drawing upon the resources of the conquered”:

“Rather than punishing our enemies or retreating from Europe’s problems as we had done after 1918, America’s leaders chose to remain in Europe—and to use our great national wealth to nourish and rebuild its shattered societies. As Secretary Marshall said in 1947 the United States would “do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability or assured peace.”

“After 1945, the task was one of creation – to forge new relationships and to bring fruition to a new reality that could not have previously been imagined. Today our task is preservation – to rally and conserve the West as a realm of ordered liberty against threats that few would have dreamed possible in the heady days after the fall of Communism,” said Assistant Secretary Mitchell.

“Commemorations …are important for reminding both sides of the Atlantic that allied cohesion is of inestimable valuable, but also that it requires sacrifice to maintain. Our grandparents’ …generation grasped that fact after the Second World War. It is up to us to ensure that the peace and prosperity they helped to broker, and from which we have benefited in our lifetimes, is extended to future generations.”


Watch the video: Awal Mula Perang Dingin?! - Marshall Plan Part 1 (August 2022).