The Marshall Plan

The Marshal l Plan, formally known as the European Recovery Program (ERP) was first reconstruction plan developed by the United States and for European allies in World War II. On June 5, 1947 in a speech in the Hall of Harvard University, Secretary of State George Marshall announced a broad program of economic assistance for the recovery of European economies in order to restrain expansion of communism, which he considered phenomenon related to economic issues. On June 19, 1947 French Foreign Ministers (Georges Bidault) and British (Ernest Bevin) signed a statement calling on the 22 European countries to send representatives to Paris to sketch a plan for European reconstruction. Labeling the Marshall Plan as "U.S. economic imperialism" Moscow has banned satellite countries to attend the Paris conference. The Soviets felt that accepting the plan would have led to the separation of the USSR in its sphere of influence countries and loss of political and strategic advantages gained by the Kremlin in Central and Eastern Europe to end World War II. The Marshall Plan is the economic extension of the Truman Doctrine. The ERP addressed each of the obstacles to postwar recovery. The plan looked to the future, and did not focus on the destruction caused by the war. Much more important were efforts to modernize European industrial and business practices using high-efficiency American models, reduce artificial trade barriers, and instill a sense of hope and self-reliance. From 1948 to 1952, the United States gave $13 billion worth of money, goods and services to the countries of Western Europe. Today, this amount is worth about $88 billion. The amount of money was distributed between ERP between April 3 1948 and June 30 1952 in the following proportions: United Kingdom France Italy Germany(West) $3,189.8 millions $2,713.6 millions $1,508.8 millions $1,390.6 millions

The remaining sum of money went to Netherlands ($1,083.5 million), Greece ($706.7 million), Austria ($677.8 million), Belgium, Luxemburg ($559.3 million), Denmark ($273 million), Norway ($255.3 million), Turkey ($225.1 million), Ireland

($147.3 million), Sweden ($107.3 million), Portugal ($51.2 million), and Iceland ($29.3 million). By 1952 as the funding ended, the economy of every participant state had surpassed pre-war levels; for all Marshall Plan recipients, output in 1951 was 35% higher than in 1938. Over the next two decades, Western Europe enjoyed unprecedented growth and prosperity, but economists are not sure what proportion was due directly to the ERP, what proportion indirectly, and how much would have happened without it. The Marshall Plan was one of the first elements of European integration, as it erased trade barriers and set up institutions to coordinate the economy on a continental levelthat is, it stimulated the total political reconstruction of Western Europe. Dutch economic historian Herman Van der Wee concludes the Marshall Plan was a "great success": "It gave a new impetus to reconstruction in Western Europe and made a decisive contribution to the renewal of the transport system, the modernization of industrial and agricultural equipment, the resumption of normal production, the raising of productivity, and the facilitating of intra-European trade. In the five years of the Marshall Plan, industrial production in Europe rose 36 percent. Much of this would have happened without American aid, which accounted for a fraction of total European investment, but scholars say it would not have happened so fast, or in the way it did.

The War for Minds

The Marshall Plan was very much a war for minds. The enemy's ideology after World War II was international communism, a system based on the premise that a Communist Party elite knew better than the people what was best for the people. We were fighting for the minds of Europeans for whom Communism seemed to offer a solution to problems of poverty and unemployment. Today we are fighting for the minds of those throughout the world who are inclined to support and sympathize with international terrorists. Just as the aim of the Marshall Plan was to "drain the swamps" where communism was drawing support, so we today must "drain the swamps" where international terrorism recruits and draws its support. In the battle to change minds, one of the most powerful features of the Marshall Plan was its technical assistance program, which brought over 24,000 European leaders to the U.S.

On these work/study trips they saw democratic institutions at work effective state and local governments, open universities, voluntary associations, civic societies and religious communities actively engaged in helping neighbors. They came face to face with pluralism at work in a society of empowered citizens and multi-level government. Similar travel/study trips to America, Europe and Japan by Afghanistan's workers and leaders, including their religious leaders and young people, could help to demonstrate that "modernity" is not a threat to their culture and religion. First person contacts and dialogue will help to break down the mistrust and misunderstanding which the terrorists have exploited, and will bolster support for freedom and tolerance as a way of life. To the extent that foreign experts are needed to help and advise in Afghanistan, these consultations should be planned to maximize personal contacts and dialogue, rather than simply to produce voluminous reports at minimum cost. What will count most in every new foreign consultation, as was true also in Europe, will be the knowledge and ideas that are actually transplanted to the minds of the people they work with, not the words left in a report on a bookshelf when the foreign expert consultant goes home.

Workfare Rather than Welfare

The objective of the Marshall Plan was not to solve the problem of poverty by handouts and welfare systems, but rather to foster successful enterprises which would create productive jobs with a genuine future. Jobs and a strong middle class were key to fighting communism. They were key for Europeans to rebuild from the rubble and offer hope for their youth who were the most susceptible to the message of international communism. The same will be true for the youth in Afghanistan, for whom lack of opportunity and a sense of powerlessness will otherwise provide fertile ground for terrorist recruiting. Many of the top Marshall Plan executives came from the private sector and tried to

structure decisions to favor market based solutions rather than government top-down decisions. They expected to return to the private sector when their job was done, and thus tended to be "task focused" rather than "career focused" in their decision-making. They had a unique management style which produced results and did not bend to the desires of European politicians who wanted to use aid funds for social services instead of economic development. Furthermore, and contrary to what many may think, the Marshall Plan was not a giveaway program. European businesses and citizens had to pay for what they used to rebuild their economies, albeit in their own local currency. These local currency "counterpart" funds were then used to pay the local costs for reconstruction and program administration.

Soviet negotiations After Marshall's appointment in January 1947, administration officials met with Soviet Foreign Minister Vyacheslav Molotov and others to press for an economically self-sufficient Germany, including a detailed accounting of the industrial plants, goods and infrastructure already removed by the Soviets in their occupied zone. During the Moscow session of the Council of Foreign Ministers in March and April 1947, it became clear that decisions on a future central government and an eventual final peace treaty with a re-formed Germany depended on solving economic issues. The United States, Britain and France sought a common basis for reconstruction and long-term demilitarization; Soviet-bloc countries were welcome to participate but Marshall thought their involvement was unlikely because they would have to set aside secrecy and disclose economic records to join. The Soviets took a punitive approach, looked forward to delaying rather than accelerating economic rehabilitation, demanded unconditional fulfillment of all prior reparation claims and wanted progress toward nationwide socioeconomic transformation.

Marshall and British Foreign Secretary Ernest Bevin wanted accords on food deliveries to their zones, higher levels of industry, joint management of export and imports, priority for both payment of imports and maintenance of a minimum living standard, termination of production equipment removals, limitation of Soviet reparation claims and free movement of people, goods, and ideas across zonal borders. They pushed for a German economy under quadripartite control,

including the Soviet zone and the Ruhr region. After six weeks of negotiations, Molotov rejected all of these requests. He blamed the British and Americans for having violated the Potsdam obligations for economic unity by merging their zones. Molotov also rejected the counter-offer to scrap the British-American "Bizonia" and to include the Soviet zone within the newly constructed Germany. Marshall and Bevin proposed that the western powers would agree to permit the Soviets to take reparations from current German production (contrary to Potsdam agreements) if the Soviets would accept the higher level of industry, allowing those higher industrial levels to essentially pay for the additional reparations, along with political unity under a democratic government with guarantees of human rights and fundamental freedoms. Molotov was prepared to begin to discuss the proposal only if "decartelization" eliminating private ownership of industry occurred, land reforms were enacted, "economic disarmament" occurred, and all "other" demands allegedly agreed upon at Potsdam would be fulfilled before Soviet troop withdrawals, which essentially meant that no compromise would be made on levels of industry or reparations. Thereafter, the Moscow talks were adjourned. Marshall was particularly discouraged after personally meeting with Stalin to explain that the United States could not possibly abandon its position on Germany, while Stalin expressed little interest in a solution to German economic problems.
The Marshall Plan was originally scheduled to end in 1953. Any effort to extend it was halted by the growing cost of the Korean War and rearmament. American Republicans hostile to the plan had also gained seats in the 1950 Congressional elections, and conservative opposition to the plan was revived. Thus the plan ended in 1951, though various other forms of American aid to Europe continued afterwards. 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 that saw standards of living increase 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. 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. The trade relations fostered by the Marshall Plan helped forge the North Atlantic alliance that would persist throughout the Cold War. At the same

time, the nonparticipation of the states of Eastern Europe was one of the first clear signs that the continent was now divided. The Marshall Plan also played an important role in European integration. Both the Americans and many of the European leaders felt that European integration was necessary to secure the peace and prosperity of Europe, and thus used Marshall Plan guidelines to foster integration. In some ways this effort failed, as the OEEC never grew to be more than an agent of economic cooperation. Rather it was the separate European Coal and Steel Community, which notably excluded Britain, that would eventually grow into the European Union. However, the OEEC served as both a testing and training ground for the structures and bureaucrats that would later be used by the European Economic Community. The Marshall Plan, linked into the Bretton Woods system, also mandated free trade throughout the region. While some historians today feel some of the praise for the Marshall Plan is exaggerated, it is still viewed favorably and many thus feel that a similar project would help other areas of the world. After the fall of communism several proposed a "Marshall Plan for Eastern Europe" that would help revive that region. Others have proposed a Marshall Plan for Africa to help that continent, and U.S. vice president Al Gore suggested a Global Marshall Plan. "Marshall Plan" has become a metaphor for any very large scale government program that is designed to solve a specific social problem. It is usually used when calling for federal spending to correct a perceived failure of the private sector. The West German economic recovery was partly due to the economic aid provided by the Marshall Plan, but mainly it was due to the currency reform of 1948 which replaced the Reichsmark with the Deutsche Mark as legal tender, halting rampant inflation. This act to strengthen the German economy had been explicitly forbidden during the two years that the occupation directive JCS 1067 was in effect. The Allied dismantling of the West German coal and steel industry finally ended in 1951. The Marshall Plan was only one of several forces behind the German recovery. Even so, in Germany the myth of the Marshall Plan is still alive. According to Marshall Plan 19471997 A German View by Susan Stern, many Germans still believe that Germany was the exclusive beneficiary of the plan, that it consisted of a free gift of vast sums of money, and that it was solely responsible for the German economic recovery in the 1950s.

Modern Criticism

Criticism of the Marshall Plan became prominent among historians of the revisionist school, such as Walter LaFeber, during the 1960s and 1970s. They argued that the plan was American economic imperialism, and that it was an

attempt to gain control over Western Europe just as the Soviets controlled Eastern Europe. In a review of West Germany's economy from 1945 to 1951, German analyst Werner Abelshauser concluded that "foreign aid was not crucial in starting the recovery or in keeping it going". The economic recoveries of France, Italy, and Belgium, Cowen found, also predated the flow of U.S. aid. Belgium, the country that relied earliest and most heavily on free market economic policies after its liberation in 1944, experienced the fastest recovery and avoided the severe housing and food shortages seen in the rest of continental Europe.

References

http://www.scribd.com/doc/15461261/The-Marshall-Plan-and-Its-Consequences http://en.wikipedia.org/wiki/The_marshal_plan http://www.cipe.org/publications/papers/pdf/mplan.pdf