Marshall Plan

Marshall Plan Definition

As Europe was the theatre for WWII warfare, vast areas of European land were destroyed by frontline combat. Due to the strategic use of civilian bombing, many countries' areas of industry, transport infrastructure, factories, power plants and agricultural land was destroyed.

The European economy was brought to its knees by WWII, and the United States was the only country economically stable enough to help. Let's see how this led to the implementation of the Marshall Plan.

A 1944 photograph of the remains of a church in Coutances, France. Large areas of Europe were destroyed by the warfare of WWII, requiring a vast amount of financial aid to rebuild its economies. Source: Wikimedia Commons

Marshall Plan Dates

The Truman Doctrine and the Marshall Plan

Harry Truman was elected as vice-president of the United States in January 1945 and took office as President in April 1945 when Franklin Roosevelt died. Truman represented the US at the Potsdam Conference in July 1945 and introduced a harder line of international affairs against the USSR and communism.

The effect of the Truman Doctrine

Truman issued the Truman Doctrine in 1947, introducing a new approach to international relations with the USSR. Source: Wikimedia Commons

The Truman Doctrine was a key American initiative after the Second World War and signalled the development of the United States' foreign policy.

• The Truman Doctrine was issued by US President Harry Truman on 12 March 1947 as an official US policy of containment, influenced by the growing culture of anti-communist expansion initiated by Ambassador George Kennan's 1946 "Long Telegram".
• The key aim of the Truman Doctrine was to provide foreign aid to Greece and Turkey to stop communist insurgencies and therefore halt the domino effect. Britain had been previously providing assistance but could no longer due to its dire financial situation post-WWII.
• The Truman Doctrine provided $400 million of aid to the two countries and thus established the US policy of containment against the spread of communism.

Truman declared in his closing remarks:

Following the Truman Doctrine, United States foreign policy became increasingly concerned with European politics.

The Origins of the Marshall Plan

George C. Marshall was the US Secretary of State who created and helped to implement the European Recovery Program (ERP) in June 1947. It was later dubbed the "Marshall Plan" in recognition of his efforts. Source: Wikimedia Commons

In the wake of the destruction of WWII, the economic hardship of most of Europe was seen as a breeding ground for possible communist uprisings, especially with the USSR's continued military occupation of much of Eastern Europe. Thus European economic recovery became intrinsically linked to the US policy of containment.

• US Secretary of State George Marshall announced his proposal for US foreign aid to kickstart the European economy in a speech made at Harvard University on 5 June 1947.
• British and French foreign ministers met in June 1947 to discuss the economic requirements of Europe based on Marshall's proposal.
• European economic cooperation was required to receive US support. This meant that participating countries would open up reliable trade with the US, increase production, uphold capitalism, and quash communist parties.
• Between June and July 1947, Britain, France, and the USSR discussed the proposed European Recovery Program (ERP). Discussions broke down in early July, and the Conference of European Economic Cooperation was organised without the USSR's support.

Conference of European Economic Cooperation

On 12 July 1947, the Conference met in Paris to discuss the terms of the Marshall Plan. Invitations to the Conference were sent to 22 European nations, including the Soviet Union and its satellite states such as Poland and Hungary.

The USSR refused the invitation and pressured its satellite states to also decline the invitation. A total of 16 nations met at the Conference.

The attendees at the Conference of European Economic Cooperation were:

The Conference led to the creation of the Committee of European Economic Cooperation (CEEC) which calculated the amount of American aid needed for each country.

Implementing the Marshall Plan Benefits

The CEEC sent their report to the US in September 1947, and the European Recovery Program was worked out by American Congress. Two organisations were established to implement the Marshall Plan, and Truman authorised it on 3 April 1948.

The Economic Cooperation Administration (ECA)

This poster was created by the Economic Cooperation Administration in 1950 to gather support for the Marshall Plan and its benefits. Notice the significance of the US flag guiding the windmill of the European flags. Source: Wikimedia Commons

The ECA was established in early 1948 and decided how the Marshall Plan funds were allocated. This was often with political motivations in mind. An estimated total of $13.3 billion was provided by the Marshall Plan to 16 countries to aid their recovery.² Each of the 16 countries of the CEEC had an ECA office that would organise the administration of the Marshall Plan benefits.

The Allied powers from WWII were allocated a higher proportion of funding, with Britain receiving 25% and France 20% of Marshall Plan aid. Former Axis powers, such as Italy, and neutral countries such as Switzerland, received less foreign aid than the Allies, indicating the United States' political stance whilst issuing the Marshall Plan. Neutral countries like Ireland could receive loans instead.³

West Germany received over 10% of Marshall Plan aid to rebuild its economy. The country's stability was seen as important to Western powers but also served to denounce Soviet-supported East Germany, another example of the political motivations behind the US's European funding. The US's Central Intelligence Agency (CIA) received 5% of Marshall Plan aid to set up "front" businesses in Europe to provide reliable trade with the United States. The CIA also reportedly supported anti-communist insurgencies in Soviet satellite states, such as the failed Ukrainian uprising, which ended in 1950.

Despite the blatant politics behind the Marshall Plan, George Marshall had stated that:

The Organisation of European Economic Cooperation (OEEC)

This map shows the proportion of Marshall Plan aid that European countries received. Britain and France's proportion was significantly higher than any other nation

The OEEC was established as the European counterpart to the ECA and made sure that Marshall Plan recipients implemented the economic cooperation with the US. The 16 participants received the American foreign aid as a grant rather than a loan, so it was not required to be paid back. Around 5% of the aid was sent back to the US to cover the administrative costs of implementing the Marshall Plan.

European countries were encouraged to develop trade with the US, which helped to increase the economies of both Europe and the US. Marshall Plan recipients also increased production in accordance with the OEEC, and the gross National Product rose by 15-25% in European countries between 1948-51, partly due to the Recovery Program. With increasingly more stable economies, European morale also rose and helped to develop stable democratic governments that were compatible with Western capitalism.

Although the Marshall Plan was initially supposed to decrease American military engagement in Europe, the Soviet-US divisions were deepened. Political tension arose from the Marshall Plan, and hence some historians attribute the American initiative for foreign aid as the starting pistol for the Cold War.

Consequences of the Marshall Plan

The economic and political accomplishments of the Marshall Plan worsened relations between the US and the USSR. One Soviet response was the Berlin Blockade in June 1948. Britain and the US airlifted supplies into West Berlin to avoid starvation. Source: Wikimedia Commons

So was the Marshall Plan a success? Let's look at some consequences of the American foreign aid initiative.

Successes

• The Marshall Plan significantly aided Europe's economic recovery after the Second World War and saved countries that were on the brink of famine and economic collapse. European steel, chemical and engineering industries were restarted.
• The spread of communism was stalled in some countries, such as Italy, which elected the Christian Democrat Party in its April 1948 elections rather than the prominent Italian Communist Party.
• American trade brought Europe into a new era of consumerism, increasing the availability of food, employment, and industry.
• The economic and political success of the Marshall Plan inspired United States foreign policy to extend throughout the world. The Point Four Program was announced in January 1949 and extended US foreign aid to "developing countries" in South America, the Middle East, South East Asia, and Africa.

Unintended failures

• The inclusion of West Germany in the Marshall Plan united the Allies for an economically stable Germany. They created Bizonia (union of US and British occupied Germany) in May 1947 and subsequently Trizonia in April 1949 (addition of French-occupied Germany) and proposed a unified currency to further boost Germany's economy. This angered the USSR, which then started the Berlin Blockade.
• Furthermore, the political and economic union of much of Western Europe furthered division with the USSR. The Marshall Plan and the formation of NATO had parallel Soviet responses in Cominform, the Molotov Plan, and Comecon.

Despite the significant economic success of the Marshall Plan, the political motivations had the effect of furthering divisions between the US and the USSR. The US policy to contain communism in Europe antagonised the USSR and helped to precipitate the conditions for the Cold War.

1. Speech of George Marshall at Harvard University, 5 June 1947.

2. Kamil Kowalski, 'American Economic Aid Plans on the Example of the Marshall Plan and the Alliance for Progress: Similarities and Differences', Humanities and Social Sciences, 22:24 (2017), pp 77-92.

3. Ibid., p. 86.