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Europe was left devastated by World War II with most of its human and economic infrastructure
left rendered non-functional. A large section of the continent was left on the brink of famine as a
result of war as it dragged on for years. What is more, most nations that are within the continent
were left with their economic state in ruins while political instability spread very fast. The U.S,
in order to salvage the population undergoing suffering initiated what came to be known as the
Marshal Plan. It was a recovery program officially referred to as the European Recovery
Program (EAC). The initiation of the program was aimed at offering help towards the
reconstruction of Europe, destroyed by war and which was sinking fat in humanitarian crisis,
political instability as well as economic turmoil. The renaming of the program to Marshal Plan
by the speech made by the serving Secretary of State at that time, George Marshall at University
of Harvard for the necessity of a self-help European program that would assist in reconstruction
of Europe.
Though the Marshal Plan design included the Soviet Union and its allies, the conditions set
within it ensure the Soviet Union would ascent to the plan. It included disclosure of economic
collaboration as well as information. As such, the Soviet Union together with the allies was not
part of the formation of the Organization for European Economic Cooperation. The mandate of
the committee was coordination of proposals on the basis of national needs in tandem with the
United States goal on economic trade and cooperation among the recipient countries. Later, the
committee developed and also led formation of European Union.
such as Germany and Greece (Grunbacher 2012, p. 698; Hatszivassilious 2010, p. 2). Such
critics claimed the process of reconstruction was involved already in the motion before Marshal
Plan initiation with restoration of dented private and public capital stocks almost complete. There
are others, on the other hand who considered the Marshal Plan instrumental towards Europe
reconstruction. Further, such proponents saw it as the foundation for the road map that would
lead to European Unity. However, when critically analyzed, how instrumental was the Plan
towards Europe reconstruction in the wake of World War II?
The environment of post war was prevalent with financial instability throughout Europe.
Predominantly, most governments retained their control due to budget deficits they were dealing
with. This opened grounds for black market deals to thrive and also discouraged trade at official
prices. Additionally, majority of the farmers refused to market their production taking into
consideration restrictions set by the governments. Therefore, throughout Europe, farmers and
manufacturers horded goods because of food shortage and price control of by governments. In
order to ease state of things, it became important for farmers and manufacturers to deliver their
results to the markets.
The spiral effect of this state was sacrifice among renters, workers and the taxpayers bearing
more liabilities. The Marshal Plan also proved instrumental in easing state of things as they were
at that time. While this might not have alleviated the need for different segments within
economic environment, it provided a small division of labor percentage for financial stability for
a couple of groups interested. The Marshal Plan, according to Delong contributed 2.5% of the
overall Gross Domestic Product of recipient nations. However, if the sum of notional demands
exceeded aggregate supply by five or seven-and-a half percent, Marshal Plan transfers could
reduce the sacrifices needed to compete distributional interests by a third or as much as a half.
Therefore, presence of Marshal Plan aid significantly lead to a reduction of costs at a
compromise level relative to benefits (De Long & Eichengreen 1991, p. 45).
A specific example of financial stability attained via the strategy was seen in Greece. The Plan in
that case was named American Mission for Aid to Greece (AMAG) (Vetsopoulos 2009, p. 281).
AMAG introduced trade controls in Greece through formation of foreign Trade Administration
in Greece. Therefore, all trade was channeled via this administration and in addition to missions
focus of the countrys convertibility currency, the banking system, public finance and wages.
Among the first AMAG actions was implementing and devising a price control policy that was
compliant with and restricting free sale of gold. What is more, A peculiar market exchange
system, controlled by the Bank of Greece, dealt with the currency issue, resulting in the indirect
devaluation of the drachma through the implementation of the Exchange Certificate Plan (ECP),
which offered a realistic rate of exchange for the drachma (Vetsopoulos 2009, p 281).
In Greece there was also the introduction of tax reforms series which helped increase revenue
within the country. This was inclusive of reduction of consumption taxes and increase of small
direct taxes. What is more, the program also instituted laws that prescribed the benchmark for
maintenance of a business record with penalties set for transgressors. The stabilization program
instituted by AMAG, according to Vetsopoulos encouraged agricultural rehabilitation (282).
AMAG through financial aid therefore was specifically responsible for decreased payment
While there are numerous critics whose opinion is that the Marshal Plan failed to achieve much
in helping towards stabilization of European economy after World War II, evidence portrays a
picture contrary to this. Greece is one of the countrys whose testimony is indicative of the
benefits that were accrued from the financial aid. The small percentage of aid that was given to
each country and the little effect it had on a countrys GNP could in large be the reason for
skeptic critics to state the plan did not have any far reaching effects. It was born from the
necessity of reconstructing Europe as well as stopping the spread of communism which was
architected by Soviet Union. What is more, America also had its economic and political reasons
for advancing financial assistance to Europe. However, conclusively, while Europe was on the
path to reconstruction already, the Marshal Plan managed to bring with it economic and financial
policy discipline and what is more, it also hastened the road to reconstruction throughout Europe
and especially after the end of World War II.
5.0 Reference
Burk, Kathleen. 2001. The Marshal Plan: Filling in Some of the Blanks. Contemporary
European History, Vol. 10 no. 2, pp. 267-294
De Long, J. Bradford & Eichengreen, Barry. 1991. The Marshall Plan: Historys Most
Successful Structural Adjustment Program. NBER
Grnbacher, Armin.2012. Cold War Economics: The Use of Marshal Plan Counterpart Funds
in Germany, 1948-1960. Central European History, Vol. 45, pp. 697716
Hatzivassiliou, Evanthis. 2010. Greek Reformism and its Models: The Impact of the Truman
Doctrine and the Marshal Plan. Journal of Modern Greek Studies, Vol. 28, pp. 1-25
Vetsopoulos, Apostolos.2009. Efforts for the Development and Stabilization of the Economy
During the Period of the Marshall Plan. Journal of Modern Greek Studies, Vol. 27, pp. 275302
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