This investigation evaluates the questions "To what extent did the Marshall Plan entirely recover the economy of post war Europe in 1947-51?" The investigation will focus on the role of the United States after World War II and the reasons why the decision was made to aid Europe. It will be argued that the aim of the Marshall Plan was to create credible political commitments to Europe's economic integration, whereas U.S. resource transfers to Western Europe were mostly an initial pump primer and did not form the economic centerpiece of the plan.
In the years of 1947-51, the Marshall Plan played a key role in the recovery of European economy. The end of World War II left most European countries in a state of turmoil. US sent about $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. The plan looked into the future, to look past the destruction and focus on new high efficiency American models of business and to reduce the artificial trade barriers present at the time. Throughout Europe, economies were below their pre-War levels. The Marshall Plan helped those economies develop through agricultural and industrial goods from the USA.
Finally, it will conclude that the Marshall Plan only enhanced the speed at which Europe's economy grew. It did not entirely recover the economy, but it gave Europe a base to complete its recuperation and through that, the super powers that were once at large (Britain and France) were reborn.
Introduction
"The economy depends about as much on economists as the weather does on weather forecasters." The Marshall Plan and its extent of effect on Europe's economic miracle in 1947-51 is still controversial to this day. There are two polar opposite sides of looking at this topic. One side is the public opinion and traditional economic history in Europe, which states that the Marshall Plan was only the beginning of the recovery of post-war Europe. The opposite side is: "war reconstruction both in Germany and throughout Europe was largely dependent of the Marshall Plan." These two sides are the basis of this investigation, which evaluates the question "To what extent did the Marshall Plan entirely recover the economy of post war Europe from 1947-51?" For the purposes of this investigation, "European economy" can be considered as the economy of those countries that participated.
The defeat of Germany and the exhaustion of Britain and France after the second World War had left a power vacuum in Central and Western Europe. The agricultural production levels deteriorated and various industrial and residential centers in England, France, Germany, Italy, Poland, Belgium and elsewhere lay ruined. WWII had not only immense political and economical impact in Europe; it also affected the daily social life and psychology of the people.
The motivations considered for choosing this question are its importance for a superior understanding of the Marshall Plan and the stability of European Economy. The topic chosen is significant and worthy of investigation because by looking at George C. Marshall's influence on establishing the Marshall Plan in post war Europe, the understanding of the effect of international aid is enhanced. It improves the understanding of the importance of the Truman Doctrine and clarifies the motives for Europe accepting the plan. Furthermore, it aids the understanding of the effects of banning sales to the east of military items and how this plan could have leaded the United States into the Cold War. Finally, focusing on the debate surrounding this topic, all sources agree the implementation of the Marshall Plan by Marshall benefitted European economy, but contradict each other when stating to which extent.
Evaluation of main sources
The speech delivered by George Marshall, the Secretary of State from January 21, 1947 to January 20, 1949, at Harvard University called "The Marshall Plan" was an essential primary source for the investigation of the question "To what extent did the Marshall Plan entirely recover the economy of post war Europe in 1947-51?"
This speech was delivered on June 5, 1947 with the purpose of presenting a new plan to aid Europe to the graduating class of Harvard University. This primary source provides valuable information on what was originally proposed in how to help European economy. It also observes the many possibilities the USA will have if the plan travels in a successful direction. This information is also important when analyzing why the USA wanted to "give $13 billion to reconstruct Europe." Another value that can be brought about by this source is the amount of detail that has been put into every aspect of aid required. Marshall mentions food, foreign goods, business upbringing, and directly related to the question, he states, "Any assistance that this Government [USA] may render in the future should provide a cure rather than a mere palliative." Therefore, it is clear that the Marshall Plan was meant to be a complete treatment of the economic disaster in Europe rather than a sedative to numb the pain.
Finally, it has to be considered that the evaluation of "The Marshall Plan" is limited to the mere overall picture of what the plan was going to make happen and not what has happened. Meaning that there was no speech after the original to state what the Marshall Plan accomplished. This limitation leaves the candidate in search for information on the effects of the Marshall Plan. Also, the speech ignores which countries are participating in the plan. For the purposes of this investigation, it is required to know all the participating countries of Europe in order to successfully determine whether or not the Marshall Plan entirely recovered the economy.
The second primary source involved in this investigation is an article written in the New York Times in 1987. James Reston wrote this article. He is a journalist whose career spanned the mid 1930s to the early 1990s. The article is titled "Washington; The Marshall Plan" and it speaks about the problems in getting the Marshall Plan to work. Reston believed that "the congress was adamant on not allowing the Plan to spend $7 billion a year." However, Reston suggests that Marshall had to go behind congress' back and have it approved by the President himself. Once that was done, "the plan could move forward."
The article speaks very critically about the Soviets. Perhaps Reston has a bias towards them. However, there is information present that is ignored or missed in secondary sources. The Soviets in the beginning were willing to accept the Marshall Plan as long as the US was simply funding their plan. When they realized that the US had to take over their economy, they refused.
This article also answers the question stating, "If the Marshall Plan did not happen, Europe would be in a state of turmoil." The limitations of this source are it does not give a clear understanding as to the effects of the Marshall Plan.
The Repercussion
Europe after World War II was in complete chaos economically and politically. After the victory, in Great Britain, "the Labour and the Conservative politicians were deceived by the triumph into believing that it still belonged to same 'league' as United States." Although it almost went bankrupt, Britain's world role and international commitments could not be abruptly terminated because, as Keynes stated "a sudden and humiliating withdrawal from our [Britain] onerous responsibilities would lead great loss of prestige and the acceptance for the time being of position of second-class Power". Europe was surviving only due to the American subsidies and loans.
The USA after WWII had stated no help should be given to the Germans in rebuilding their economy. The only aid that would be given is to compensate for starvation. Everything else must come from their pocket. In 1946 Germany signed to dismantle 1,500 industrial manufacturing plants. Therefore, Germany's industry output was reduced by 50% of its 1938 level. Ironically, after lobbying occurred by Chief of Staff and George Marshall, the US realized Europe could not move forward unless the reconstruction of the German industrial plants reoccurred. Therefore, not only was the US already funding German reconstruction to an extent, the US was also funding the Greece Civil War that broke out in 1947 between Anglo-American royalist forces against Communist led forces. Eventually the Royalists won. After yet another victory, the US initiated and launched a "massive program of military and economic aid to Greece and to neighboring Turkey, arising from a fear of the Soviet Union and their attempts on the oil-rich Middle East."
"Especially damaged, was the transportation infrastructure, as railways, bridges, and docks were targeted by air strikes, while much merchant shipping had been sunk." Therefore, trading of goods and moving supplies were halted until rebuilding began. Supplies to home consumers were cut severely as the dollar reserves of Britain, France, Italy, Germany, and elsewhere became exhausted due to "increasing demands of American products in Europe."
Leaders of Europe, hence, concluded that there were three essential prerequisites without which it had not a hope of escaping a financial 'Dunkirk', these were "(a) an intense concentration on the expansion of exports (b) drastic and immediate economies on our (Europe's) overseas expenditure (c) substantial aid from the US."
The Speech
On June 5, 1947, Secretary of State George C. Marshall traveled to Harvard University to propose the idea of the Marshall Plan. It is possible that it was more a proposal then a plan because no numbers were presented. This speech was to inform the graduating class and the representatives of the respective countries present who required aid. "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." Marshall suggests that there can be no peace without political stability. This can be analyzed as a sign of fear in the United States. Perhaps the US does not want to help Europe on account of good morale, but instead in fear. The US was fearful of multiple communist governments arising further west from Eastern Europe. In order to guarantee a democratic, capitalist system in Europe, aid was required.
This speech was for any country in Europe who needed to participate. Therefore, this included the USSR. However, even though there was "an explicit invitation for the USSR," Stalin refused immediately. Marshall felt that if there was not a direct mention of the Soviets "it would have been too clear a sign of distrust." He believed that if he accepted aid from the West the smaller communist government he was controlling could slip away and become capitalist. There is an ignored factor that is not stated within the speech. Originally, the speech of the Marshall Plan was going to be delivered by President Truman. Truman never delivered the speech due to a mythical belief that many would believe that this was a direct relation to the Truman Doctrine in 1947 and that he was using the plan to fund the doctrine.
Eight weeks after the speech at Harvard, the State Department wrote a memorandum "The Marshall Plan has been compared to a flying saucer- nobody knows what it looks like, how big it is, in what direction it is travelling, or whether it really exists." The end result is that the Marshall Plan was meant to entirely recover the European economy through "funding the self-initiated plans of Europe." The significance is that if a European country did not initiate an economic plan that originated in the respective country, the US would not offer appropriate funding.
So, following up with the US's request, Britain and France began to formalize a group of the sixteen nations participating called the Committee of European Economic Cooperation (CEEC). The early plans of postwar strategy were based on the expectation of a huge loan of $5 billion from the US. Plans from all sixteen countries were adapted to utilize the aid to "support the colonies as well as areas of strategic importance in order to 'contain' Communism." One of the proposals highlighted an increase in naval and military presence in the Mediterranean and Middle East by dividing the Commonwealth into four 'world zones' each with its own "coordinated command structure and inter-service headquarters."
The United States was willing help if it did not imply a further delay in their development. However, financial costs such as operations overseas utilized main resources similar to manpower, technological bases, research and development. By mid August 1947, Europe had been depleted of almost all the aid, which was meant to last until 1951. Not to say that Europe was spending its money irresponsibly, the Sterling Crisis resulted in drastically fallen exports and the European economy grew worse before it got better.
Winston Churchill referred to this Aid as "the most unselfish act by any great power in history." Rightfully so, life without the Marshall Plan meant a serious drain on the reserves that would "bring levels in Europe far below the danger point and would take away all chances of restoring a balance."
The Application
Many historians who defend the Marshall Plan have found it difficult to agree with the incident of uniform growth. They see it as a "series of nationwide aid and recovery schemes that can be analyzed independently." This provides an understanding, which shows that Europe did not grow mutually but independently. It is then clear that countries received aid from the Marshall Plan at different rates. Perhaps it could be because- as stated in chapter one- the amount of aid received is in direct relation to the economic growth plan developed in that country. This suggests there may be individual case studies that are presented to "pinpoint examples of Marshall Aid having helped to overcome strategic bottlenecks in a national economy." Overall, there were only sixteen countries that received and participated in the plan.
"The Marshall Plan was originally planned to end in 1953." Any effort to extend it was halted by the growing cost of the Korean War and rearmament. From 1947 to 52 Europe saw the fastest period of growth in history. Industrial production increased by 35%. Agricultural production substantially surpassed pre-war levels. The initial poverty that existed directly after World War II had disappeared. Historians such as Brogan and McCauley both tend to argue that this growth "did not alone miraculously revive Europe." Most believe that it sped up the process, but did not initiate it. At the time, "Europe was already in motion to recovery, Marshall and Truman did not see it this way however." There were too many obstacles for Europe to overcome in order to flourish.
As the Sterling Crisis became an economic disaster, the British argued that the only alternatives would be either to cut further the "present threadbare" living standards of the domestic population or "abandon the whole concept of multilateral trading and seek to eke out a painful existence". The American pressure at this time was too large for Europe to choose the second option. This meant that domestic and international modernization would be put on hold until the convertibility crisis and the payment shortages had been managed. Infrastructure and agriculture would have to go to its previous 1938 levels first before continuing to grow. A part of the Sterling Crisis was that the CEEC was focusing on expanding and trying to mass-produce rather than building up from the base. This lead to extremely low output of goods and standards of living did not increase very much in 1949.
Counter-part funds are the funds in country's own currency that are collected by selling Marshall Aid supplies on its domestic market. Countries like France, Germany and Italy allotted these funds to major programs of modernization in industry or infrastructure but Britain, on the other hand, devoted all the billions of the counter-part funds to reduce the public debts. The result of such missed opportunity was that while other countries benefited by major technological developments, Britain just made "mere alteration of figures in a ledger" and had barely advanced itself.
Formation and expansion of NATO led to an earlier termination of the Marshall plan. The sudden NATO expansion had its origin particularly in the news of the first Soviet nuclear bomb test and the turn of events in the Korean War.
The Efficiency
Initially, Europeans were very enthusiastic to revive their economy and humbly accept the aid they were receiving from the US. Britain and France, the founders of the CEEC, were taking leadership roles in Europe as expected by the US. All sixteen countries participating in the Marshall Plan saw a significant growth in their economy. "Debts were beginning to be cleared and a multi-lateral trade saw an increase as compared to immediate post-War levels."
There were good exports, imports and a very different style of growth occurring in Europe. This was because, various statistics presented, for example, the government's General Memorandum to the OEEC on Britain's 1949-50 Marshall Aid program, where the index of export volume stood at 147% of the 1938 levels and the volume of exports in North America, "the key to solve the problem of Europe's huge dollar deficit, stood at 27% above 1938, were misleading." This is because the year 1938 for Europe was an economically poor year compared to the rate of growth in the years previous. The House of Commons depicts this information so highly because in 1938 the economy in actuality was only at 86% and not 100. Therefore, to say the economy of Europe had flourished by 27% is not a fair judgment. Now it is clear that in the years 1949-50 there was only a 133% rise in export volume and 13% rise in the economy. The House of Commons show an increase in various sectors internally and does not compare the results with previous years.
Efficiency must also be considered by evaluating domestic social life. After WWII strictly controlled food rationing, poor quality of products, American products in the market dominated the daily economic life. On the international scene, although the Marshall Plan was effective in protecting the economies enough to resist Communism, it was applied well enough to initiate and maintain a multilateral trade system as desired by the United States. This lack of European investment also cost Britain its imperial role. Massive debts to the colonial countries and the consequent dollar drain led to decreasing control and influence in these areas. India for example, held more than one-third of all sterling balances. Between 1945 and 1947 the Labor Government was conducting a series of extremely difficult negotiations with Indian political leaders, with the aim of giving the country its independence within a multiracial Commonwealth.
Conclusion
Finally, in order to answer the question "To what extent did the Marshall Plan entirely recover European economy from 1947-51?" one has to analyze what European economy was like before Marshall Aid and what it was like after. Based on the sources read and explored for this investigation, the answer can therefore be that the Marshall Plan was the enhancement Europe needed in order to successfully recover its economy, but not the reason entirely did so.
This becomes clear when observing the specific achievements Europe had already accomplished before the Marshall Plan. The two polar opposite sides mentioned in the introduction are not as opposite as perceived. The two agree that the Marshall Plan helped European economy but the argument, much like this investigation, is the argument of the extent of help and whether it was the plan that recovered the economy or whether it was the plan that sped up the growth of the already planted economic seeds after WWII.
However, it must also be considered that if NATO did not lead to the early termination of the Marshall Plan, would historians today argue whether or not the US had selfish motivations to helping Europe? In the long term, this influence might have resulted as a costly bond in which the US drained Europe of its resources. Thus meaning to prevent the whole point of the Marshall Plan. A very blatant reason for the Marshall Plan is the US was afraid of Communism. And if the US had left Europe to its slow recovery, Communism would have overrun the continent and that would have left the US against a very tough neighborhood.
Immediately after the US pulled out in 1950 to deal with NATO, Europe had reached above its pre-War levels as expected and was ready to move forward on its own. "You have to have a positive strategy to make more partners and fewer terrorists. Harry Truman and George Marshall took a little bit of our money to build a world that had more friends and better enemies. Foreign assistance is national security -- not charity. The Marshall Plan saw it that way and we have to do the same today."
