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The Marshall Plan (officially the European Recovery Program, ERP) was an American initiative to aid Europe, in which the United States gave $13 billion (approximately $120 billion in current dollar value) in economic support to help rebuild European economies after the end of World War II. The plan was in operation for four years beginning in April 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, a dropping of many petty regulations constraining business, and encouraged an increase in productivity, labour union membership, as well as the adoption of modern business procedures.
The Marshall Plan aid was divided amongst the participant states roughly 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.[3] Although offered participation, the Soviet Union refused Plan benefits, and also blocked benefits to Eastern Bloc countries, such as East Germany and Poland. The United States provided similar aid programs in Asia, but they were not called "Marshall Plan".
The initiative is named after Secretary of State George Marshall. The plan had bipartisan support in Washington, where the Republicans controlled Congress and the Democrats controlled the White House with Harry S. Truman as president. The Plan was largely the creation of State Department officials, especially William L. Clayton and George F. Kennan, with help from Brookings Institution, as requested by Senator Arthur H. Vandenberg, chairman of the Senate Foreign Relations Committee.[4] Marshall spoke of an urgent need to help the European recovery in his address at Harvard University in June 1947.[1][5]
The phrase "equivalent of the Marshall Plan" is often used to describe a proposed large-scale economic rescue program.[6]
Contents
1 Development and deployment
2 Wartime destruction
3 Initial post-war events
3.1 Slow recovery
4 Soviet negotiations
5 Marshall's speech
6 Rejection by the Soviets
6.1 Initial reactions
6.2 Compulsory Eastern Bloc rejection
6.3 Yugoslavia
6.4 Szklarska Poręba meeting
7 Negotiations
8 Implementation
8.1 Technical Assistance Program
8.2 German level of industry restrictions
9 Expenditures
10 Loans and grants
11 Effects and legacy
12 Repayment
13 Areas without the Plan
13.1 Aid to Asia
13.2 Canada
13.3 World total
14 Criticism
14.1 Laissez-faire criticism
14.2 Modern criticism
15 In popular culture
16 See also
17 Notes
18 References
19 Further reading
20 External links
Development and deployment
The reconstruction plan, developed at a meeting of the participating European states, was drafted on June 5, 1947. It offered the same aid to the Soviet Union and its allies, but they refused to accept it,[7][8] as to do so would be to allow a degree of US control over the Communist economies.[9] In fact, the Soviet Union even prevented its satellite states (i.e. East Germany, Poland, etc.) from accepting. Secretary Marshall became convinced that Stalin had absolutely no interest in helping restore economic health in Western Europe.[10] President Harry Truman signed the Marshall Plan on April 3, 1948, granting $5 billion in aid to 16 European nations. During the four years that the plan was operational, US donated $13 billion in economic and technical assistance to help the recovery of the European countries that had joined in the Organization for European Economic Co-operation. In 2013, the equivalent sum reflecting currency inflation since 1948 totalled roughly $148 billion.[11] The $13 billion was in the context of a US GDP of $258 billion in 1948, and was on top of $13 billion in American aid to Europe between the end of the war and the start of the Plan that is counted separately from the Marshall Plan.[12] The Marshall Plan was replaced by the Mutual Security Plan at the end of 1951; that new plan gave away about $7 billion annually until 1961 when it in turn was replaced by new program.[13]
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, reducing artificial trade barriers, and instilling a sense of hope and self-reliance.[14]
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 at least 35% higher than in 1938.[15] 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. A common American interpretation of the program's role in European recovery is the one expressed by Paul Hoffman, head of the Economic Cooperation Administration, in 1949, when he told Congress that Marshall aid had provided the "critical margin" on which other investment needed for European recovery depended.[16] 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 level—that is, it stimulated the total political reconstruction of western Europe.[17]
Belgian 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."[18]
European Recovery Program expenditures by country
Wartime destruction
By the end of World War II, much of Europe was devastated. Sustained aerial bombardment during the war had badly damaged most major cities, and industrial facilities were especially hard-hit.[19] The region's trade flows had been thoroughly disrupted; millions were in refugee camps living on aid from United Nations Relief and Rehabilitation Administration and other agencies. Food shortages were severe, especially in the harsh winter of 1946–1947. From July 1945 through June 1946, the United States shipped 16.5 million tons of food, primarily wheat, to Europe and Japan. It amounted to 1/6 of the American food supply, and provided 35 trillion calories, enough to provide 400 calories a day for one year to 300 million people.[20]
Especially damaged was transportation infrastructure, as railways, bridges, and docks had been specifically targeted by air strikes, while much merchant shipping had been sunk. Although most small towns and villages had not suffered as much damage, the destruction of transportation left them economically isolated. None of these problems could be easily remedied, as most nations engaged in the war had exhausted their treasuries in its execution.[21]
The only major powers whose infrastructure had not been significantly harmed in World War II were the United States and Canada. They were much more prosperous than before the war but exports were a small factor in their economy. Much of the Marshall Plan aid would be used by the Europeans to buy manufactured goods and raw materials from the United States and Canada.[22]
Initial post-war events
Slow recovery
Europe's economies were recovering slowly, as unemployment and food shortages led to strikes and unrest in several nations. In 1947 the European economies were still well below their pre-war levels and were showing few signs of growth. Agricultural production was 83% of 1938 levels, industrial production was 88%, and exports only 59%.[23] In Britain the situation was not as severe.[24]
In Germany in 1945–46 housing and food conditions were bad, as the disruption of transport, markets and finances slowed a return to normality. In the West, bombing had destroyed 5,000,000 houses and apartments, and 12,000,000 refugees from the east had crowded in.[24] Food production was only two-thirds of the pre-war level in 1946–48, while normal grain and meat shipments no longer arrived from the East. Furthermore, the large shipments of food stolen from occupied nations during the war no longer reached Germany. Industrial production fell more than half and reached pre-war levels only at the end of 1949.[25]
While Germany struggled to recover from the destruction of the War, the recovery effort began in June of 1948, moving on from emergency relief. The currency reform in 1948 was headed by the military government and helped Germany to restore stability by encouraging production. The reform revalued old currency and deposits and introduced new currency. Taxes were also reduced and Germany prepared to remove economic roadblocks.[26]
During the first three years of occupation of Germany the UK and US vigorously pursued a military disarmament program in Germany, partly by removal of equipment but mainly through an import embargo on raw materials, part of the Morgenthau Plan approved by President Franklin D. Roosevelt.[27]
Nicholas Balabkins concludes that "as long as German industrial capacity was kept idle the economic recovery of Europe was delayed."[28] By July 1947 Washington realized that economic recovery in Europe could not go forward without the reconstruction of the German industrial base, deciding that an "orderly, prosperous Europe requires the economic contributions of a stable and productive Germany."[29] In addition, the strength of Moscow-controlled communist parties in France and Italy worried Washington.[30]
In the view of the State Department under President Harry S. Truman, the United States needed to adopt a definite position on the world scene or fear losing credibility. The emerging doctrine of containment (as opposed to rollback) argued that the United States needed to substantially aid non-communist countries to stop the spread of Soviet influence. There was also some hope that the Eastern European nations would join the plan, and thus be pulled out of the emerging Soviet bloc, but that did not happen.
The hunger-winter of 1947, thousands protest in West Germany against the disastrous food situation (March 31, 1947). The sign says: We want coal, we want bread
In January 1947, Truman appointed retired General George Marshall as Secretary of State. In July 1947 Marshall scrapped Joint Chiefs of Staff Directive 1067 implemented as part of the Morgenthau Plan under the personal supervision of Roosevelt's treasury secretary Henry Morgenthau, Jr., which had decreed "take no steps looking toward the economic rehabilitation of Germany [or] designed to maintain or strengthen the German economy." Thereafter, JCS 1067 was supplanted by JCS 1779, stating that "an orderly and prosperous Europe requires the economic contributions of a stable and productive Germany."[31] The restrictions placed on German heavy industry production were partly ameliorated; permitted steel production levels were raised from 25% of pre-war capacity to a new limit placed at 50% of pre-war capacity.[32]
With a Communist insurgency threatening Greece, and Britain financially unable to continue its aid, the President announced his Truman Doctrine on 12 March 1947, "to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures", with an aid request for consideration and decision, concerning Greece and Turkey. Also in March 1947, former US President Herbert Hoover, in one of his reports from Germany, argued for a change in US occupation policy, amongst other things stating:
"There is the illusion that the New Germany left after the annexations can be reduced to a 'pastoral state' (Morgenthau's vision). It cannot be done unless we exterminate or move 25,000,000 people out of it."[33]
Hoover further noted that, "The whole economy of Europe is interlinked with German economy through the exchange of raw materials and manufactured goods. The productivity of Europe cannot be restored without the restoration of Germany as a contributor to that productivity."[34] Hoover's report led to a realization in Washington that a new policy was needed; "almost any action would be an improvement on current policy."[35] In Washington, the Joint Chiefs declared that the "complete revival of German industry, particularly coal mining" was now of "primary importance" to American security.[31]
The Marshall Plan aid was divided amongst the participant states roughly 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.[3] Although offered participation, the Soviet Union refused Plan benefits, and also blocked benefits to Eastern Bloc countries, such as East Germany and Poland. The United States provided similar aid programs in Asia, but they were not called "Marshall Plan".
The initiative is named after Secretary of State George Marshall. The plan had bipartisan support in Washington, where the Republicans controlled Congress and the Democrats controlled the White House with Harry S. Truman as president. The Plan was largely the creation of State Department officials, especially William L. Clayton and George F. Kennan, with help from Brookings Institution, as requested by Senator Arthur H. Vandenberg, chairman of the Senate Foreign Relations Committee.[4] Marshall spoke of an urgent need to help the European recovery in his address at Harvard University in June 1947.[1][5]
The phrase "equivalent of the Marshall Plan" is often used to describe a proposed large-scale economic rescue program.[6]
Contents
1 Development and deployment
2 Wartime destruction
3 Initial post-war events
3.1 Slow recovery
4 Soviet negotiations
5 Marshall's speech
6 Rejection by the Soviets
6.1 Initial reactions
6.2 Compulsory Eastern Bloc rejection
6.3 Yugoslavia
6.4 Szklarska Poręba meeting
7 Negotiations
8 Implementation
8.1 Technical Assistance Program
8.2 German level of industry restrictions
9 Expenditures
10 Loans and grants
11 Effects and legacy
12 Repayment
13 Areas without the Plan
13.1 Aid to Asia
13.2 Canada
13.3 World total
14 Criticism
14.1 Laissez-faire criticism
14.2 Modern criticism
15 In popular culture
16 See also
17 Notes
18 References
19 Further reading
20 External links
Development and deployment
The reconstruction plan, developed at a meeting of the participating European states, was drafted on June 5, 1947. It offered the same aid to the Soviet Union and its allies, but they refused to accept it,[7][8] as to do so would be to allow a degree of US control over the Communist economies.[9] In fact, the Soviet Union even prevented its satellite states (i.e. East Germany, Poland, etc.) from accepting. Secretary Marshall became convinced that Stalin had absolutely no interest in helping restore economic health in Western Europe.[10] President Harry Truman signed the Marshall Plan on April 3, 1948, granting $5 billion in aid to 16 European nations. During the four years that the plan was operational, US donated $13 billion in economic and technical assistance to help the recovery of the European countries that had joined in the Organization for European Economic Co-operation. In 2013, the equivalent sum reflecting currency inflation since 1948 totalled roughly $148 billion.[11] The $13 billion was in the context of a US GDP of $258 billion in 1948, and was on top of $13 billion in American aid to Europe between the end of the war and the start of the Plan that is counted separately from the Marshall Plan.[12] The Marshall Plan was replaced by the Mutual Security Plan at the end of 1951; that new plan gave away about $7 billion annually until 1961 when it in turn was replaced by new program.[13]
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, reducing artificial trade barriers, and instilling a sense of hope and self-reliance.[14]
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 at least 35% higher than in 1938.[15] 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. A common American interpretation of the program's role in European recovery is the one expressed by Paul Hoffman, head of the Economic Cooperation Administration, in 1949, when he told Congress that Marshall aid had provided the "critical margin" on which other investment needed for European recovery depended.[16] 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 level—that is, it stimulated the total political reconstruction of western Europe.[17]
Belgian 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."[18]
European Recovery Program expenditures by country
Wartime destruction
By the end of World War II, much of Europe was devastated. Sustained aerial bombardment during the war had badly damaged most major cities, and industrial facilities were especially hard-hit.[19] The region's trade flows had been thoroughly disrupted; millions were in refugee camps living on aid from United Nations Relief and Rehabilitation Administration and other agencies. Food shortages were severe, especially in the harsh winter of 1946–1947. From July 1945 through June 1946, the United States shipped 16.5 million tons of food, primarily wheat, to Europe and Japan. It amounted to 1/6 of the American food supply, and provided 35 trillion calories, enough to provide 400 calories a day for one year to 300 million people.[20]
Especially damaged was transportation infrastructure, as railways, bridges, and docks had been specifically targeted by air strikes, while much merchant shipping had been sunk. Although most small towns and villages had not suffered as much damage, the destruction of transportation left them economically isolated. None of these problems could be easily remedied, as most nations engaged in the war had exhausted their treasuries in its execution.[21]
The only major powers whose infrastructure had not been significantly harmed in World War II were the United States and Canada. They were much more prosperous than before the war but exports were a small factor in their economy. Much of the Marshall Plan aid would be used by the Europeans to buy manufactured goods and raw materials from the United States and Canada.[22]
Initial post-war events
Slow recovery
Europe's economies were recovering slowly, as unemployment and food shortages led to strikes and unrest in several nations. In 1947 the European economies were still well below their pre-war levels and were showing few signs of growth. Agricultural production was 83% of 1938 levels, industrial production was 88%, and exports only 59%.[23] In Britain the situation was not as severe.[24]
In Germany in 1945–46 housing and food conditions were bad, as the disruption of transport, markets and finances slowed a return to normality. In the West, bombing had destroyed 5,000,000 houses and apartments, and 12,000,000 refugees from the east had crowded in.[24] Food production was only two-thirds of the pre-war level in 1946–48, while normal grain and meat shipments no longer arrived from the East. Furthermore, the large shipments of food stolen from occupied nations during the war no longer reached Germany. Industrial production fell more than half and reached pre-war levels only at the end of 1949.[25]
While Germany struggled to recover from the destruction of the War, the recovery effort began in June of 1948, moving on from emergency relief. The currency reform in 1948 was headed by the military government and helped Germany to restore stability by encouraging production. The reform revalued old currency and deposits and introduced new currency. Taxes were also reduced and Germany prepared to remove economic roadblocks.[26]
During the first three years of occupation of Germany the UK and US vigorously pursued a military disarmament program in Germany, partly by removal of equipment but mainly through an import embargo on raw materials, part of the Morgenthau Plan approved by President Franklin D. Roosevelt.[27]
Nicholas Balabkins concludes that "as long as German industrial capacity was kept idle the economic recovery of Europe was delayed."[28] By July 1947 Washington realized that economic recovery in Europe could not go forward without the reconstruction of the German industrial base, deciding that an "orderly, prosperous Europe requires the economic contributions of a stable and productive Germany."[29] In addition, the strength of Moscow-controlled communist parties in France and Italy worried Washington.[30]
In the view of the State Department under President Harry S. Truman, the United States needed to adopt a definite position on the world scene or fear losing credibility. The emerging doctrine of containment (as opposed to rollback) argued that the United States needed to substantially aid non-communist countries to stop the spread of Soviet influence. There was also some hope that the Eastern European nations would join the plan, and thus be pulled out of the emerging Soviet bloc, but that did not happen.
The hunger-winter of 1947, thousands protest in West Germany against the disastrous food situation (March 31, 1947). The sign says: We want coal, we want bread
In January 1947, Truman appointed retired General George Marshall as Secretary of State. In July 1947 Marshall scrapped Joint Chiefs of Staff Directive 1067 implemented as part of the Morgenthau Plan under the personal supervision of Roosevelt's treasury secretary Henry Morgenthau, Jr., which had decreed "take no steps looking toward the economic rehabilitation of Germany [or] designed to maintain or strengthen the German economy." Thereafter, JCS 1067 was supplanted by JCS 1779, stating that "an orderly and prosperous Europe requires the economic contributions of a stable and productive Germany."[31] The restrictions placed on German heavy industry production were partly ameliorated; permitted steel production levels were raised from 25% of pre-war capacity to a new limit placed at 50% of pre-war capacity.[32]
With a Communist insurgency threatening Greece, and Britain financially unable to continue its aid, the President announced his Truman Doctrine on 12 March 1947, "to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures", with an aid request for consideration and decision, concerning Greece and Turkey. Also in March 1947, former US President Herbert Hoover, in one of his reports from Germany, argued for a change in US occupation policy, amongst other things stating:
"There is the illusion that the New Germany left after the annexations can be reduced to a 'pastoral state' (Morgenthau's vision). It cannot be done unless we exterminate or move 25,000,000 people out of it."[33]
Hoover further noted that, "The whole economy of Europe is interlinked with German economy through the exchange of raw materials and manufactured goods. The productivity of Europe cannot be restored without the restoration of Germany as a contributor to that productivity."[34] Hoover's report led to a realization in Washington that a new policy was needed; "almost any action would be an improvement on current policy."[35] In Washington, the Joint Chiefs declared that the "complete revival of German industry, particularly coal mining" was now of "primary importance" to American security.[31]
Comments
The first section of the Manifesto, "Bourgeois and Proletarians", elucidates the materialist conception of history, that "the history of all hitherto existing society is the history of class struggles". Societies have always taken the form of an oppressed majority living under the thumb of an oppressive minority. In capitalism, the industrial working class, or proletariat, engage in class struggle against the owners of the means of production, the bourgeoisie. As before, this struggle will end in a revolution that restructures society, or the "common ruin of the contending classes". The bourgeoisie, through the "constant revolutionising of production [and] uninterrupted disturbance of all social conditions" have emerged as the supreme class in society, displacing all the old powers of feudalism. The bourgeoisie constantly exploits the proletariat for its labour power, creating profit for themselves accumulating capital. However by doing so the bourgeoisie "are its own grave-diggers"; the proletariat inevitably will become conscious of their own potential and rise to power through revolution, overthrowing the bourgeoisie.
"Proletarians and Communists", the second section, starts by stating the relationship of conscious communists to the rest of the working class. The communists' party will not oppose other working-class parties, but unlike them, it will express the general will and defend the common interests of the world's proletariat as a whole, independent of all nationalities. The section goes on to defend communism from various objections, such as the claim that communists advocate "free love", and the claim that people will not perform labour in a communist society because they have no incentive to work. The section ends by outlining a set of short-term demands—among them a progressive income tax; abolition of inheritances; free public education etc.—the implementation of which would be a precursor to a stateless and classless society.
The third section, "Socialist and Communist Literature", distinguishes communism from other socialist doctrines prevalent at the time—these being broadly categorised as Reactionary Socialism; Conservative or Bourgeois Socialism; and Critical-Utopian Socialism and Communism. While the degree of reproach toward rival perspectives varies, all are dismissed for advocating reformism and failing to recognise the pre-eminent revolutionary role of the working class. "Position of the Communists in Relation to the Various Opposition Parties", the concluding section of the Manifesto, briefly discusses the communist position on struggles in specific countries in the mid-nineteenth century such as France, Switzerland, Poland, and Germany, this last being "on the eve of a bourgeois revolution", and predicts that a world revolution will soon follow. It ends by declaring an alliance with the social democrats, boldly supporting other communist revolutions, and calling for united international proletarian action.
“ Working Men of All Countries, Unite! ”
—Closing line
The Marshall Plan was classic Keynesian economics. It saved Western Europe and stymied the commies
Good chit
If you think that was Keynesian...holy f*ck that is frightening...
If I were you I'd start by reading this:
http://www.amazon.com/The-Commanding-Heights-Battle-Economy/dp/068483569X
or get the cliffnotes and watch this:
http://www.pbs.org/wgbh/commandingheights/
Or maybe at least figure out who Ludwig Erhard is before you write off anything contradicting the fantasy in your head as a "villain in a Robert Ludlum novel"
Or keep spewing things factually incorrect and incredibly stupid and patting yourself on the back for it...I don't care really.
Using cash infusions to stimulate demand is pure Keynes. Tell me that it isn't.
Where is the Ludwig Erhard stamp?
If you don't like Keynes that's your prerogative, but you're swimming against the current of serious economic scholarship. The only reason fresh-water economists have any support is the subsidies thrown their way by right-wing wingnut welfare (oh, the irony!)
Economic historians J. Bradford DeLong and Barry Eichengreen call [the Marshall Plan] "history's most successful structural adjustment program."
But yeah, keep pretending that it wasn't in line with Keynesian theory.
BTW...he didn't live in a vacuum before becoming chancellor. And go read something other than Ludlum...you might actually learn something.
(econ prof at Berkeley)
http://www.nber.org/papers/w3899
"We examine the economic effects of the Marshall Plan, and find that it was not large enough to have significantly accelerated recovery by financing investment , aiding the reconstruction of damaged infrastructure, or easing commodity bottlenecks. We argue, however, that the Marshall Plan did play a major role in setting the stage for post-World War II Western Europe's rapid growth. The conditions attached to Marshall Plan aid pushed European political economy in a direction that left its post World War II "mixed economies" with more "market" and less "controls" in the mix. "
I.e. the guy you cited said it was "history's most successful structural adjustment program." by changing from a centrally planned economy to market economy (which is where Ludwig Erhard comes in) and not by throwing money at the problem.
Like I said, keep speaking in cliches without having a clue as to what you are talking about...maybe you just don't understand Keynesian...I'm not sure...but you are really out in left field on this one.
I also think you are just deflecting now.