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Marshall Plan

2007 Schools Wikipedia Selection. Related subjects: Recent History; World War
II

   Map of Cold-War era Europe showing countries that received Marshall
   Plan aid. The red columns show the relative amount of total aid per
   nation.
   Enlarge
   Map of Cold-War era Europe showing countries that received Marshall
   Plan aid. The red columns show the relative amount of total aid per
   nation.

   The Marshall Plan (from its enactment, officially the European Recovery
   Program (ERP)) was the primary plan of the United States for rebuilding
   the allied countries of Europe and repelling communism after World War
   II. The initiative was named for United States Secretary of State
   George Marshall and was largely the creation of State Department
   officials, especially William L. Clayton and George F. Kennan.

   The reconstruction plan was developed at a meeting of the participating
   European states in July 12 1947. The Marshall Plan offered the same aid
   to the Soviet Union and its allies, if they would make political
   reforms and accept certain outside controls. In fact, America worried
   that the Soviet Union would take advantage of the plan and therefore
   made the terms deliberately hard for the USSR to accept. The plan was
   in operation for four fiscal years beginning in July 1947. During that
   period some $13 billion of economic and technical assistance—equivalent
   to around $130 billion in 2006—was given to help the recovery of the
   European countries that had joined in the Organization for Economic
   Co-operation and Development.

   By the time the plan had come to completion, the economy of every
   participant state, with the exception of Germany, had grown well past
   pre-war levels. Over the next two decades, Western Europe as a whole
   would enjoy unprecedented growth and prosperity. The Marshall Plan has
   also long been seen as one of the first elements of European
   integration, as it erased tariff trade barriers and set up institutions
   to coordinate the economy on a continental level. An intended
   consequence was the systematic adoption of American managerial
   techniques.

   In recent years historians have questioned both the underlying
   motivation and the overall effectiveness of the Marshall Plan. Some
   historians contend that the benefits of the Marshall Plan actually were
   also resulted from new laissez faire policies that allowed for markets
   to stabilize through economic growth. It is now acknowledged that the
   United Nations Relief and Rehabilitation Administration, which helped
   millions of refugees from 1944 to 1947, also laid the foundation for
   European postwar recovery without ideological motivation.

Before the Marshall Plan

   After six years of war, much of Europe was devastated with millions
   killed or injured. Fighting had occurred throughout much of the
   continent, encompassing an area far larger than that in the First World
   War. Sustained aerial bombardment meant that most major cities had been
   badly damaged, with industrial production especially hard-hit. Many of
   the continent's greatest cities, including Warsaw and Berlin, lay in
   ruins. Others, such as London and Rotterdam, had been severely damaged.
   The region's economic structure was ruined, and millions had been made
   homeless. Although the Dutch famine of 1944 had abated with an influx
   of aid, the general devastation of agriculture had led to conditions of
   starvation in several parts of the continent, which was to be
   exacerbated by the particularly harsh winter of 1946-1947 in
   northwestern Europe. Especially damaged was transportation
   infrastructure, as railways, bridges, and roads had all been heavily
   targeted by air strikes, while much merchant shipping had been sunk. By
   and large the small towns and villages in Western Europe had suffered
   little damage, but 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.

   After the First World War the European economy had also been greatly
   damaged, and a deep recession lasted well into the 1920s, leading to
   instability and a general global downturn. The United States, despite a
   resurgence of isolationism, had attempted to promote European growth,
   mainly through partnerships with the major American banks. When Germany
   was unable to pay its reparations, the Americans also intervened by
   extending a large loan to Germany, a debt the Americans were left with
   when war was declared in 1941.

   In Washington there was a consensus that the events after the First
   World War should not be repeated. The State Department under Harry S.
   Truman was dedicated to pursuing an activist foreign policy, but the
   Congress was somewhat less interested. Originally, it was hoped that
   little would need to be done to rebuild Europe and that the United
   Kingdom and France, with the help of their colonies, would quickly
   rebuild their economies. By 1947 there was still little progress,
   however. A series of cold winters aggravated an already poor situation.
   The European economies did not seem to be growing as high 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%.

   The shortage of food was one of the most acute problems. Before the
   war, Western Europe had depended on the large food surpluses of Eastern
   Europe, but these routes were largely cut off by the Iron Curtain. The
   situation was especially bad in Germany where in 1946 – 47 the average
   kilocalorie intake per day was only 1,800, an amount insufficient for
   long-term health. William Clayton reported to Washington that "millions
   of people are slowly starving." As important for the overall economy
   was the shortage of coal, aggravated by the cold winter of 1946-47. In
   Germany, homes went unheated and hundreds froze to death. In Britain,
   the situation was not as severe, but domestic demand meant that
   industrial production came to a halt. The humanitarian desire to end
   these problems was one motivation for the plan.

   The only major power whose infrastructure had not been significantly
   harmed was the United States. It had entered the war later than most
   European countries, and had only suffered limited damage to its own
   territory. American gold reserves were still intact as was its massive
   agricultural and manufacturing base, the country enjoying a robust
   economy. The war years had seen the fastest period of economic growth
   in the nation's history, as American factories supported both its own
   war effort and that of its allies. After the war, these plants quickly
   retooled to produce consumer goods, and the scarcity of the war years
   was replaced by a boom in consumer spending. The long term health of
   the economy was dependent on trade, however, as continued prosperity
   would require markets to export these goods. Marshall Plan aid would
   largely be used by the Europeans to buy manufactured goods and raw
   materials from the United States.

   Another strong motivating factor for the United States, and an
   important difference from the post World War I era, was the beginning
   of the Cold War. Some in the American government had grown deeply
   suspicious of Soviet actions. George Kennan, one of the leaders in
   developing the plan, was already predicting a bipolar division of the
   world. To him the Marshall Plan was the centerpiece of the new doctrine
   of containment. It should be noted that when the Marshall Plan was
   initiated, the wartime alliances were still somewhat intact and the
   Cold War had not yet truly begun, and for most of those who developed
   the Marshall Plan, fear of the Soviet Union was not the overriding
   concern it would be in later years.

   Still, the power and popularity of indigenous communist parties in
   several Western European states was worrisome. In both France and
   Italy, the poverty of the postwar era had provided fuel for their
   communist parties, which had also played central roles in the
   resistance movements of the war. These parties had seen significant
   electoral success in the postwar elections, with the Communists
   becoming the largest single party in France. Though today most
   historians feel the threat of France and Italy falling to the
   communists was remote, it was regarded as a very real possibility by
   American policy makers at the time. The American government of Harry
   Truman began to show awareness of these problems in 1946, notably with
   Churchill's Iron Curtain speech, given in Truman's presence. The United
   States needed to adopt a definite position on the world scene or fear
   losing credibility. The emerging doctrine of containment 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.

   In view of increased concerns by General Lucius D. Clay and the Joint
   Chief of Staff over growing communist influence in Germany, as well as
   of the of the failure of the rest of the European economy to recover
   without the German industrial base on which it previously had been
   dependent, in the summer of 1947 Secretary of State General George
   Marshall, citing "national security grounds" was finally able to
   convince President Harry S. Truman to rescind the punitive U.S.
   occupation directive JCS 1067, and replace it with JCS 1779. In July
   1947 JCS 1067, which had directed the U.S. forces of occupation in
   Germany to "…take no steps looking toward the economic rehabilitation
   of Germany", was thus replaced by JCS 1779 which instead stressed that
   "An orderly, prosperous Europe requires the economic contributions of a
   stable and productive Germany.” JCS 1067 had then been in effect for
   over two years.

   Even before the Marshall Plan, the United States was spending a great
   deal to help Europe recover. An estimated $9 billion was spent during
   the period from 1945 to 1947. Much of this aid was indirect, coming in
   the form of continued lend-lease agreements, and through the many
   efforts of American troops to restore infrastructure and help refugees.
   A number of bilateral aid agreements had been signed, perhaps the most
   important of which was the Truman Doctrine's pledge to provide military
   assistance to Greece and Turkey. The infant United Nations also
   launched a series of humanitarian and relief efforts almost wholly
   funded by the United States. These efforts had important effects, but
   they lacked any central organization and planning, and failed to meet
   many of Europe's more fundamental needs.

   Already in 1943, the United Nations Relief and Rehabilitation
   Administration (UNRRA) was founded to provide relief to areas liberated
   from Axis powers after World War II. UNRRA provided billions of dollars
   of rehabilitation aid, and helped about 8 million refugees. It ceased
   operations in the DP camps of Europe in 1947, in anticipation of the
   American-directed Marshall Plan. Many of its functions were transferred
   to several UN agencies, including the International Refugee
   Organization.

Early ideas

   Long before Marshall's speech a number of figures had raised the notion
   of a reconstruction plan for Europe. U.S. Secretary of State James F.
   Byrnes presented an early version of the plan during a speech, "
   Restatement of Policy on Germany" held at the Stuttgart Opera House on
   September 6, 1946. In a series of reports called The President's
   Economic Mission to Germany and Austria, commissioned by Harry S.
   Truman, former President Herbert Hoover presented a very critical view
   of the result of current occupation policies in Germany. In the reports
   Hoover provided proposals for a fundamental change of occupation
   policy. In addition, General Lucius D. Clay asked industrialist Lewis
   H. Brown to inspect postwar Germany and draft " A Report on Germany" in
   1947, containing basic facts relating to the problems in Germany with
   recommendations for reconstruction. Undersecretary of State Dean
   Acheson had made a major speech on the issue, which had mostly been
   ignored, and Vice President Alben W. Barkley had also raised the idea.

   The main alternative to large quantities of American aid was to take it
   from Germany. In 1944 this notion became known as the Morgenthau plan,
   named after U.S. Treasury Secretary Henry Morgenthau, Jr. It advocated
   extracting massive war reparations from Germany to help rebuild those
   countries it had attacked, and also to prevent Germany from ever being
   rebuilt. Closely related was the Monnet plan of French bureaucrat Jean
   Monnet that proposed giving France control over the German coal areas
   of the Ruhr and Saar and using these resources to bring France to 150%
   of pre-war industrial production. In 1946 the occupying powers agreed
   to put strict limits on how quickly Germany could reindustrialize.
   Limits were placed on how much coal and steel could be produced. The
   first German industrial plan, also known as the "level of industry
   agreement", was signed in early 1946 and stated that German heavy
   industry was to be reduced to 50% of its 1938 levels by the destruction
   of 1,500 listed manufacturing plants The problems inherent in this plan
   became apparent by the end of 1946, and the agreement was revised
   several times, the last time in 1949. Dismantling of factories
   continued however into 1950. Germany had long been the industrial giant
   of Europe, and its poverty held back the general European recovery. The
   continued scarcity in Germany also led to considerable expenses for the
   occupying powers, which were obligated to try to make up the most
   important shortfalls. These factors, combined with widespread public
   condemnation of the plans after their leaking to the press, led to the
   de facto rejection of the Monnet and Morgenthau plans. Some of their
   ideas, however, did partly live on in Joint Chiefs of Staff Directive
   1067, a plan which was effectively the basis for US Occupation policy
   until July 1947. The mineral-rich industrial centers Saar and Silesia
   were removed from Germany, a number of civilian industries were
   destroyed in order to limit production, and the Ruhr Area was in danger
   of being removed as late as 1947. By April of 1947, however, Truman,
   Marshall and Undersecretary of State Dean Acheson were convinced of the
   need for substantial quantities of aid from the United States.

   The idea of a reconstruction plan was also an outgrowth of the
   ideological shift that had occurred in the United States in the Great
   Depression. The economic calamity of the 1930s had convinced many that
   the unfettered free market could not guarantee economic well-being.
   Many who had worked on designing the New Deal programs to revive the
   American economy now sought to apply these lessons to Europe. At the
   same time the Great Depression had shown the dangers of tariffs and
   protectionism, creating a strong belief in the need for free trade and
   European economic integration.

The speech

   U.S. Secretary of State George Marshall
   Enlarge
   U.S. Secretary of State George Marshall

   The earlier public discussions of the need for reconstruction had
   largely been ignored, as it was not clear that it was establishing
   official administration policy. It was decided that all doubt must be
   removed by a major address by Secretary of State George Marshall.
   Marshall gave the address to the graduating class of Harvard University
   on June 5, 1947. Standing on the steps of Memorial Church in Harvard
   Yard, he outlined the U.S. government's preparedness to contribute to
   European recovery. The speech, written by Charles Bohlen, contained
   virtually no details and no numbers. The most important element of the
   speech was the call for the Europeans to meet and create their own plan
   for rebuilding Europe, and that the United States would then fund this
   plan.

   The administration felt that the plan would likely be unpopular among
   many Americans, and the speech was mainly directed at a European
   audience. In an attempt to keep the speech out of American papers
   journalists were not contacted, and on the same day Truman called a
   press conference to take away headlines. By contrast Acheson was
   dispatched to contact the European media, especially the British media,
   and the speech was read in its entirety on the BBC.

Rejection by the Soviets

   British Foreign Secretary Ernest Bevin heard Marshall's radio broadcast
   speech and immediately contacted French Foreign Minister Georges
   Bidault to begin preparing a European response to the offer. The two
   agreed that it would be necessary to invite the Soviets as the other
   major allied power. Marshall's speech had explicitly included an
   invitation to the Soviets, feeling that excluding them would have been
   too clear a sign of distrust. State Department officials, however, knew
   that Stalin would almost certainly not participate, and that any plan
   that did send large amounts of aid to the Soviets was unlikely to be
   approved by Congress.

   Stalin was at first cautiously interested in the plan. He felt that the
   Soviet Union stood in a good position after the war and would be able
   to dictate the terms of the aid. He thus dispatched foreign minister
   Vyacheslav Molotov to Paris to meet with Bevin and Bidault. The British
   and French leadership shared the American lack of genuine interest in
   Soviet participation, and they presented Molotov with conditions that
   the Soviets could never accept. The most important condition was that
   every country to join the plan would need to have its economic
   situation independently assessed, scrutiny the Soviets could not agree
   to. Bevin and Bidault also insisted that any aid be accompanied by the
   creation of a unified European economy, something incompatible with the
   strict Soviet command economy. Molotov left Paris, rejecting the plan.

   On July 12, a larger meeting was convened in Paris. Every country of
   Europe was invited, with the exceptions of Spain (which had stayed out
   of World War II but had sympathized with the Axis powers) and the small
   states of Andorra, San Marino, Monaco, and Liechtenstein. The Soviet
   Union was invited with the understanding that it would refuse. The
   states of the future Eastern Bloc were also approached, and
   Czechoslovakia and Poland agreed to attend. In one of the clearest
   signs of Soviet control over the region, the Czechoslovak foreign
   minister, Jan Masaryk, was summoned to Moscow and berated by Stalin for
   thinking of joining the Marshall Plan. Stalin saw the Plan as a
   significant threat to Soviet control of Eastern Europe and believed
   that economic integration with the West would allow these countries to
   escape Soviet domination. The Americans shared this view and hoped that
   economic aid could counter the growing Soviet influence. They were not
   too surprised, therefore, when the Czechoslovakian and Polish
   delegations were prevented from attending the Paris meeting. The other
   Eastern European states immediately rejected the offer. Finland also
   declined in order to avoid antagonizing the Soviets. The Soviet Union's
   "alternative" to the Marshall plan, which was purported to involve
   Soviet subsidies and trade with eastern Europe, became known as the
   Molotov Plan, and later, the COMECON.

Negotiations

   Turning the plan into reality required negotiations both among the
   participating nations, and also to get the plan through the United
   States Congress. Thus sixteen nations met in Paris to determine what
   form the American aid would take, and how it would be divided. The
   negotiations were long and complex, with each nation having its own
   interests. France's major concern was that Germany not be rebuilt to
   its previous threatening power. The Benelux countries, despite also
   suffering under the Nazis, had long been closely linked to the German
   economy and felt their prosperity depended on its revival. The
   Scandinavian nations, especially Sweden, insisted that their
   long-standing trading relationships with the Eastern Bloc nations not
   be disrupted and that their neutrality not be infringed. Britain
   insisted on special status, concerned that if it were treated equally
   with the devastated continental powers it would receive virtually no
   aid. The Americans were pushing the importance of free trade and
   European unity to form a bulwark against communism. The Truman
   administration, represented by William Clayton, promised the Europeans
   that they would be free to structure the plan themselves, but the
   administration also reminded the Europeans that for the plan to be
   implemented, it would have to pass Congress. The majority of Congress
   was committed to free trade and European integration, and also were
   hesitant to spend too much of the money on Germany.

   Agreement was eventually reached and the Europeans sent a
   reconstruction plan to Washington. In this document the Europeans asked
   for $22 billion in aid. Truman cut this to $17 billion in the bill he
   put to Congress. The plan met sharp opposition in Congress, mostly from
   the portion of the Republican Party that advocated a more isolationist
   policy and was weary of massive government spending. This group's most
   prominent representative was Robert A. Taft. The plan also had
   opponents on the left, with Henry A. Wallace a strong opponent. Wallace
   saw the plan as a subsidy for American exporters and sure to polarize
   the world between East and West. This opposition was greatly reduced by
   the shock of the overthrow of the democratic government of
   Czechoslovakia in February 1948. Soon after a bill granting an initial
   $5 billion passed Congress with strong bipartisan support. The Congress
   would eventually donate $12.4 billion in aid over the four years of the
   plan.

   Truman signed the Marshall Plan into law on April 3, 1948, establishing
   the Economic Cooperation Administration (ECA) to administer the
   program. ECA was headed by economic cooperation administrator Paul G.
   Hoffman. In the same year, the participating countries (Austria,
   Belgium, Denmark, France, West Germany, Great Britain, Greece, Iceland,
   Italy, Luxembourg, the Netherlands, Norway, Sweden, Switzerland,
   Turkey, and the United States) signed an accord establishing a master
   coordinating agency, the Organization for European Economic Cooperation
   (later called the Organization for Economic Cooperation and
   Development, OECD), which was headed by Frenchman Robert Marjolin.

Implementation

   The first substantial aid went to Greece and Turkey in January 1947,
   which were seen as being on the front lines of the battle against
   communist expansion and were already being aided under the Truman
   Doctrine. Initially the UK had supported the anti-communist factions in
   those countries, but due to its dire economic condition it requested
   the U.S. to continue its efforts. The ECA formally began operation in
   July 1948.
   First page of the Marshall Plan
   Enlarge
   First page of the Marshall Plan

   The official mission statement of ECA was to give a boost to the Europe
   economy: to promote European production, to bolster European currency,
   and to facilitate international trade, especially with the United
   States, whose economic interest required Europe to become wealthy
   enough to import U.S. goods. Another unofficial goal of ECA (and of the
   Marshall Plan) was the containment of growing Soviet influence in
   Europe, evident especially in the growing strength of communist parties
   in Czechoslovakia, France, and Italy.

   The Marshall Plan money was transferred to the governments of the
   European nations. The funds were jointly administered by the local
   governments and the ECA. Each European capital had an ECA envoy,
   generally a prominent American businessman, who would advise on the
   process. The cooperative allocation of funds was encouraged, and panels
   of government, business, and labor leaders were convened to examine the
   economy and see where aid was needed.

   The Marshall Plan aid was mostly used for the purchase of goods from
   the United States. The European nations had all but exhausted their
   foreign exchange reserves during the war, and the Marshall Plan aid
   represented almost their sole means of importing goods from abroad. At
   the start of the plan these imports were mainly much-needed staples
   such as food and fuel, but later the purchases turned towards
   reconstruction needs as was originally intended. In the latter years,
   under pressure from the United States Congress and with the outbreak of
   the Korean War, an increasing amount of the aid was spent on rebuilding
   the militaries of Western Europe. Of the some $13 billion allotted by
   mid-1951, $3.4 billion had been spent on imports of raw materials and
   semi-manufactured products; $3.2 billion on food, feed, and fertilizer;
   $1.9 billion on machines, vehicles, and equipment; and $1.6 billion on
   fuel.

   Also established were counterpart funds, which used Marshall Plan aid
   to establish funds in the local currency. According to ECA rules 60% of
   these funds had to be invested in industry. This was prominent in
   Germany, where these government-administered funds played a crucial
   role loaning money to private enterprises which would spend the money
   rebuilding. These funds played a central role in the
   reindustrialization of Germany. In 1949 – 50, for instance, 40% of the
   investment in the German coal industry was by these funds. The
   companies were obligated to repay the loans to the government, and the
   money would then be lent out to another group of businesses. This
   process has continued to this day in the guise of the state owned KfW
   bank. The Special Fund, then supervised by the Federal Economics
   Ministry, was worth over DM 10 billion in 1971. In 1997 it was worth DM
   23 billion. Through the revolving loan system, the Fund had by the end
   of 1995 made low-interest loans to German citizens amounting to around
   DM 140 billion. The other 40% of the counterpart funds were used to pay
   down the debt, stabilize the currency, or invest in non-industrial
   projects. France made the most extensive use of counterpart funds,
   using them to reduce the budget deficit. In France, and most other
   countries, the counterpart fund money was absorbed into general
   government revenues, and not recycled as in Germany.

   A far less expensive, but also quite effective, ECA initiative was the
   Technical Assistance Program. This program funded groups of European
   engineers and industrialists to visit the United States and tour mines,
   factories, and smelters so that they could then copy the American
   advances at home. At the same time several hundred American technical
   advisors were sent to Europe.

Expenditures

   The Marshall Plan aid was divided among the participant states on a
   roughly 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 table
   below shows Marshall Plan aid by country and year (in millions of
   dollars) from The Marshall Plan Fifty Years Later. There is no clear
   consensus on exact amounts, as different scholars differ on exactly
   what elements of American aid during this period was part of the
   Marshall Plan.
   Country 1948/49
   ^($ millions) 1949/50
   ^($ millions) 1950/51
   ^($ millions) Cumulative
   ^($ millions)
   Flag of Austria  Austria 232 166 70 488
   Flag of Belgium  Belgium and Flag of Luxembourg  Luxembourg 195 222 360
   777
   Flag of Denmark  Denmark 103 87 195 385
   Flag of France  France 1,085 691 520 2,296
   Flag of Germany  Germany 510 438 500 1,448
   Flag of Greece  Greece 175 156 45 366
   Flag of Iceland  Iceland 6 22 15 43
   Flag of Republic of Ireland  Ireland 88 45 — 133
   Flag of Italy  Italy and Trieste 594 405 205 1,204
   Flag of Netherlands  Netherlands 471 302 355 1,128
   Flag of Norway  Norway 82 90 200 372
   Flag of Portugal  Portugal — — 70 70
   Flag of Sweden  Sweden 39 48 260 347
   Flag of Switzerland  Switzerland — — 250 250
   Flag of Turkey  Turkey 28 59 50 137
   Flag of United Kingdom  United Kingdom 1,316 921 1,060 3,297

Effects

   One of a number of posters created to promote the Marshall Plan in
   Europe
   Enlarge
   One of a number of posters created to promote the Marshall Plan in
   Europe

   The Marshall Plan ended in 1951, as originally scheduled. Any effort to
   extend it was halted by the growing cost of the Korean War and
   rearmament. 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 help 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 modern 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.

   The Marshall "Help" Plan almost ended in 1950 for the Netherlands, when
   the United States of America announced the "decisive battle against
   communism" in Korea and asked the Dutch government to sent troops and
   when the Dutch government refused, the United States of America
   threatened to recall the Marshall help.

   Effects in Germany

   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 1950.

   Contrary to popular belief, the Marshall Plan, which was extended to
   also include the newly formed West Germany in 1949, was not the main
   force behind the German recovery. Had that been the case, other
   countries such as Great Britain and France (which both received more
   economic assistance than Germany) should have experienced the same
   phenomenon. In fact, the amount of monetary aid received by Germany
   through the Marshal plan was by far overshadowed by the amount the
   Germans meanwhile had to pay as reparations and by the charges the
   Allies made on the Germans for the cost of occupation ($ 2.4 billion
   per year).

   Even so, in Germany the myth of the Marshall plan is still alive. Many
   Germans 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 1950’s.

Repayment

   The Organization for European Economic Cooperation had taken the
   leading role in allocating funds, and the ECA arranged for the transfer
   of the goods. The American supplier was paid in dollars, which were
   credited against the appropriate European Recovery Program funds. The
   European recipient, however, was not given the goods as a gift, but had
   to pay for them (though not necessarily at once, on credit etc.) in
   local currency, which was then deposited by the government in a
   counterpart fund. This money, in turn, could be used by the ERP
   countries for further investment projects.

   Most of the participating ERP governments were aware from the beginning
   that they would never have to return the counterpart fund money to the
   U.S.; it was eventually absorbed into their national budgets and
   "disappeared." Originally the total American aid to Germany (in
   contrast to grants given to other countries in Europe) had to be
   repaid. But under the London debts agreement of 1953, the repayable
   amount was reduced to about $1 billion. Aid granted after 1 July 1951
   amounted to around $270 million, of which Germany had to repay $16.9
   million to the Washington Export-Import Bank. In reality, Germany did
   not know until 1953 exactly how much money it would have to pay back to
   the U.S., and insisted that money was given out only in the form of
   interest-bearing loans — a revolving system ensuring the funds would
   grow rather than shrink. A lending bank was charged with overseeing the
   program. European Recovery Program loans were mostly used to support
   small- and medium-sized businesses. Germany paid the U.S. back in
   installments (the last check was handed over in June 1971). However,
   the money was not paid from the ERP fund, but from the central
   government budget.

Areas without the Marshall Plan

   Large parts of the world devastated by the Second World War did not
   benefit from the Marshall Plan. The only major Western European nation
   excluded was Francisco Franco's Spain. After the war, it pursued a
   policy of self-sufficiency, currency controls, and quotas, with little
   success. With the escalation of the Cold War, the United States
   reconsidered its position, and in 1951, embraced Spain as an ally. Over
   the next decade, a considerable amount of American aid would go to
   Spain, but less than its neighbors had received under the Marshall
   Plan.

   While the western portion of the Soviet Union had been as badly
   affected as any part of the world by the war, the eastern portion of
   the country was largely untouched and had seen a rapid
   industrialization during the war. The Soviets also imposed large
   reparations payments on the Axis allies that were in its sphere of
   influence. Finland, Hungary, Romania, and especially East Germany were
   forced to pay vast sums and ship large amounts of supplies to the USSR.
   These reparation payments meant that the Soviet Union received almost
   as much as any of the countries receiving Marshall Plan aid.

   Eastern Europe saw no Marshall Plan money, as their communist
   governments refused aid, and moreover received little help from the
   Soviets. The Soviets did establish COMECON as a rebuttal to the
   Marshall Plan, but it was far less generous, with many economists
   arguing it was mostly a one way transfer of resources - from Soviet
   satellites to the Soviet Union. Economic recovery in the east was much
   slower than in the west, and some feel the economies never fully
   recovered in the communist period, resulting in the formation of the
   shortage economies and a gap in wealth between East and West. The
   police states that emerged in much of Eastern Europe could enforce
   rationing and austerity measures that would have been impossible in the
   west, allowing some resources to be moved towards reconstruction. One
   Eastern European state, Yugoslavia, did receive some aid from the
   United States during this period, but this is generally not considered
   Marshall Plan aid.

   Japan too, had been badly damaged by the war. However, the American
   people and Congress were far less sympathetic towards the Japanese than
   they were to the Europeans. Japan was also not considered to have as
   great a strategic or economic importance to the United States. Thus no
   grand reconstruction plan was ever created, and the Japanese economic
   recovery before 1950 was slow. However, in 1950 the Korean War broke
   out and Japan became the main staging ground for the United Nations war
   effort, and a crucial supplier of material. One well known example is
   that of the Toyota company. In June 1950, the company produced 300
   trucks, and was on the verge of going out of business. The first months
   of the war saw the military order over 5000 vehicles, and the company
   was revived. During the four years of the Korean War, the Japanese
   economy saw a substantially larger infusion of cash than had any of the
   Marshall Plan nations.

   Canada, like the United States, was little damaged by the war and in
   1945 was one of the world's largest economies. However, the Canadian
   economy had long been more dependent than the American one on trade
   with Europe, and after the war there were signs that the Canadian
   economy was struggling. In April 1948, the US Congress passed the
   provision in the plan that allowed the aid to be used in purchasing
   goods from Canada. The new provision ensured the health of that
   nation's economy as Canada made over a billion dollars in the first two
   years of operation. This contrasted heavily with the treatment
   Argentina, another major economy dependent on its agricultural exports
   with Europe, received from the ECA, as the country was deliberately
   excluded from participation in the Plan due to political differences
   between the US and then-president Perón. This would damage the
   Argentine agricultural sector and help to precipitate an economic
   crisis in the country.

   Hong Kong, despite being seriously damaged by Japanese action and
   occupation in World War II, received no aid from other countries. Hong
   Kong initiated a series of reforms which called for deregulation,
   business tax cuts and a laissez-faire attitude towards business. As a
   result of these changes, Hong Kong developed into one of the most
   successful economic zones in the world.

Criticism

   The early students of the Marshall Plan saw it as an unmitigated
   success of American generosity. Criticism of the Marshall Plan,
   however, 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. Far from generosity, the plan was the result of the
   United States' geopolitical goals.

   Other historians emphasize the benefits of the plan to U.S. industry.
   One result of the destruction in Europe as a result of two world wars
   was that U.S. farming and industry had world superiority. American
   private enterprise thus could only gain financially from opening new
   markets and free trade policies. Yet while European reconstruction
   required products from the U.S., the Europeans in the immediate
   aftermath of the Second World War did not have the dollars to buy these
   supplies. That was, it is argued, the basic economic problem;
   essentially European capitalism suffered from a dollar shortage. The
   U.S. had large balance of trade surpluses, and U.S. reserves were large
   and increasing. The credit facilities of the IMF and the International
   Bank for Reconstruction and Development could not cope with Western
   Europe's large trade deficits, and the IMF was only supposed to grant
   loans for current-account deficits, not for capital finance and
   reconstruction purposes. The U.S., therefore, began to create dollar
   credits in Europe, by various routes of which the Marshall Plan was
   one.

   In the 1980s, a new school developed with some historians arguing that
   the Marshall Plan might not have played as decisive a role in Europe's
   recovery as was previously believed. The first person to make this
   argument was the economic historian Alan S. Milward and the analysis
   was developed by the German historian Gerd Hardach in Der Marshall Plan
   (1994). Such critics have pointed out that economic growth in many
   European countries revived before the large-scale arrival of U.S. aid,
   and was fastest among some of the lesser recipients. While aid from the
   Marshall Plan eased immediate difficulties and contributed to the
   recovery of some key sectors, growth from the postwar nadir was largely
   an independent process. (European socialists argue that a similar
   amount of reconstruction money could have been obtained by
   nationalizing the holdings of wealthy Europeans who deposited their
   money in U.S. banks during World War II.)

   Tyler Cowen, economist, has stated that nations receiving the most aid
   from the Marshall Plan ( Britain, Sweden, Greece) saw the least returns
   and grew the least between 1947 & 1955. Those nations who received
   little (Germany, Austria, and Italy) grew the most. It should pointed
   out the latter countries were also the most devastated, and thus had
   the most potential for recovery.

   In 1942 Committee for Economic Development was elevated into a think
   tank for the economic counterpart to the Council on Foreign Relations.
   The founders were heads of the steel, automotive, and electric
   industires in America who had benefitted from New Deal corporate
   subsidies and special wartime production subsidies. They owed their
   profit margins to government subsidies provided by the New Deal and
   wartime production subsidies. Faced with peace, they feared being
   forced to compete in a free-market basis.

   Corporate economic interests, then, overlapped with President Trumans
   political interests (those often criticized leanings towards a
   "big-government"), and an alliance between business and government was
   born. utilizing Europe's post war conditions for their own benefit in
   the name of "rebuilding" and providing "security" against inflated
   threats to American security such as the USSR.
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