The Marshall Plan: Lessons Learned for the 21st Century


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About this product. Stock photo. Brand new: lowest price The lowest-priced, brand-new, unused, unopened, undamaged item in its original packaging where packaging is applicable. Author:-Eliot Sorel M. Read full description. The article also looks at postwar reconstruction, trade and the process of European integration, the international monetary system in Western Europe, and the end and the long-term impact of the Golden Age.

Previous academic appointments have included full-time positions at London School of Economics and Oxford University, and visiting positions at UC Berkeley and Stanford. His main fields of interest are long-run economic growth, British economic performance and policy in the twentieth century, the Industrial Revolution, and the historical geography of industrial location.

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The Americans were pushing the importance of free trade and European unity to form a bulwark against communism. The Truman administration, represented by William L. Clayton , promised the Europeans that they would be free to structure the plan themselves, but the administration also reminded the Europeans that implementation depended on the plan's passage through Congress. A majority of Congress members were committed to free trade and European integration, and were hesitant to spend too much of the money on Germany.

Agreement was eventually reached and the Europeans sent a reconstruction plan to Washington, which was formulated and agreed upon by the Committee of European Economic Co-operation in Attempting to contain spreading Soviet influence in Eastern Bloc, Truman asked Congress to restore a peacetime military draft and to swiftly pass the Economic Cooperation Act, the name given to the Marshall Plan. Of the Soviet Union Truman said, "The situation in the world today is not primarily the result of the natural difficulties which follow a great war.

It is chiefly due to the fact that one nation has not only refused to cooperate in the establishment of a just and honorable peace but—even worse—has actively sought to prevent it. Members of the Republican-controlled 80th Congress — were skeptical. Others thought he had not been forceful enough to contain the USSR. ECA was headed by economic cooperation administrator Paul G. The first substantial aid went to Greece and Turkey in January , which were seen as the front line of the battle against communist expansion, and were already receiving aid under the Truman Doctrine.

Initially, Britain had supported the anti-communist factions in those countries, but due to its dire economic condition it decided to pull out and in February requested the US to continue its efforts. The ECA's official mission statement was to give a boost to the European 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 US 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.

What Was the Marshall Plan? - History

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. Also established were counterpart funds , which used Marshall Plan aid to establish funds in the local currency. This was prominent in Germany, where these government-administered funds played a crucial role in lending money to private enterprises which would spend the money rebuilding.

These funds played a central role in the reindustrialization of Germany. The companies were obligated to repay the loans to the government, and the money would then be lent out to another group of businesses. In it was worth DM 23 billion. Through the revolving loan system, the Fund had by the end of made low-interest loans to German citizens amounting to around DM billion.

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. However, in January , the American government suspended this aid in response to the Dutch efforts to restore colonial rule in Indonesia during the Indonesian National Revolution , and it implicitly threatened to suspend Marshall aid to the Netherlands if the Dutch government continued to oppose the independence of Indonesia.

At the time the United States was a significant oil producing nation — one of the goals of the Marshall Plan was for Europe to use oil in place of coal, but the Europeans wanted to buy crude oil and use the Marshall Plan funds to build refineries instead. However, when independent American oil companies complained, the ECA denied funds for European refinery construction. A high priority was increasing industrial productivity in Europe, which proved one of the more successful aspects of the Marshall Plan. The United States Congress passed a law on June 7, that allowed the BLS to "make continuing studies of labor productivity" [85] and appropriated funds for the creation of a Productivity and Technological Development Division.

The BLS could then use its expertise in the field of productive efficiency to implement a productivity drive in each Western European country receiving Marshall Plan aid. Counterpart funds were used to finance large-scale tours of American industry. France, for example, sent missions with businessmen and experts to tour American factories, farms, stores, and offices. They were especially impressed with the prosperity of American workers, and how they could purchase an inexpensive new automobile for nine months work, compared to 30 months in France. By implementing technological literature surveys and organized plant visits, American economists, statisticians, and engineers were able to educate European manufacturers in statistical measurement.

The goal of the statistical and technical assistance from the Americans was to increase productive efficiency of European manufacturers in all industries. To conduct this analysis, the BLS performed two types of productivity calculations. First, they used existing data to calculate how much a worker produces per hour of work—the average output rate.

Second, they compared the existing output rates in a particular country to output rates in other nations. By performing these calculations across all industries, the BLS was able to identify the strengths and weaknesses of each country's manufacturing and industrial production. From that, the BLS could recommend technologies especially statistical that each individual nation could implement.

Often, these technologies came from the United States; by the time the Technical Assistance Program began, the United States used statistical technologies "more than a generation ahead of what [the Europeans] were using". The American government sent hundreds of technical advisers to Europe to observe workers in the field. This on-site analysis made the Factory Performance Reports especially helpful to the manufacturers. In addition, the Technical Assistance Program funded 24, European engineers, leaders, and industrialists to visit America and tour America's factories, mines, and manufacturing plants.

The analyses in the Factory Performance Reports and the "hands-on" experience had by the European productivity teams effectively identified productivity deficiencies in European industries; from there, it became clearer how to make European production more effective. Before the Technical Assistance Program even went into effect, United States Secretary of Labor Maurice Tobin expressed his confidence in American productivity and technology to both American and European economic leaders.

He urged that the United States play a large role in improving European productive efficiency by providing four recommendations for the program's administrators:. The effects of the Technical Assistance Program were not limited to improvements in productive efficiency. The Europeans could watch local, state, and federal governments work together with citizens in a pluralist society.

They observed a democratic society with open universities and civic societies in addition to more advanced factories and manufacturing plants.


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Another important aspect of the Technical Assistance Program was its low cost. Even while the Marshall Plan was being implemented, the dismantling of ostensibly German industry continued; and in Konrad Adenauer , an opponent to Hitler's regime and the head of the Christian Democratic Union, [90] wrote to the Allies requesting the end of industrial dismantling, citing the inherent contradiction between encouraging industrial growth and removing factories, and also the unpopularity of the policy.

Thanks to the Plan, during , it went up 35 percent of the industrial and agricultural. In January the Allied Control Council set the foundation of the future German economy by putting a cap on German steel production. Steel plants thus made redundant were to be dismantled. Germany was to be reduced to the standard of life it had known at the height of the Great Depression The first " German level of industry " plan was subsequently followed by a number of new ones, the last signed in By , after the virtual completion of the by then much watered-down "level of industry" plans, equipment had been removed from manufacturing plants in western Germany and steel production capacity had been reduced by 6,, tons.

The Marshall Plan : lessons learned for the 21st century

This meant that some of the economic restrictions on production capacity and on actual production that were imposed by the International Authority for the Ruhr were lifted, and that its role was taken over by the ECSC. The Marshall Plan aid was divided among the participant states on a roughly per capita basis. The exception was Iceland, which had been neutral during the war , but received far more on a per capita basis than the second highest recipient.

Ireland which received Germany, which up until the Debt agreement had to work on the assumption that all the Marshall Plan aid was to be repaid, spent its funds very carefully. Payment for Marshall Plan goods, "counterpart funds", were administered by the Reconstruction Credit Institute , which used the funds for loans inside Germany. In the Debt agreement, the amount of Marshall plan aid that Germany was to repay was reduced to less than 1 billion USD.

By it had accumulated a value of 23 billion Deutsche Mark. Through the Office of Policy Coordination money was directed towards support for labor unions, newspapers, student groups, artists and intellectuals, who were countering the anti-American counterparts subsidized by the Communist.

The largest sum went to the Congress for Cultural Freedom. There were no agents working among the Soviets or their satellite states. There were conservatives among the participants, but non-Communist or former Communist left-wingers were more numerous. The Marshall Plan was originally scheduled to end in Any effort to extend it was halted by the growing cost of the Korean War and rearmament.

American Republicans hostile to the plan had also gained seats in the Congressional elections , and conservative opposition to the plan was revived. Thus the plan ended in , though various other forms of American aid to Europe continued afterwards. The years to saw the fastest period of growth in European history. Agricultural production substantially surpassed pre-war levels. Additionally, the long-term effect of economic integration raised European income levels substantially, by nearly 20 percent by the mids.

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. Many argue that the structural adjustments that it forced were of great importance.

Economic historians J.

‘Les Trente Glorieuses’: From the Marshall Plan to the Oil Crisis - Oxford Handbooks

Bradford DeLong and Barry Eichengreen call it "history's most successful structural adjustment program. 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. At the same time, the nonparticipation of the states of the Eastern Bloc 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 that would later be used by the European Economic Community.

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The Marshall Plan, linked into the Bretton Woods system , also mandated free trade throughout the region. While some historians today feel some of the praise for the Marshall Plan is exaggerated, it is still viewed favorably and many thus feel that a similar project would help other areas of the world. After the fall of communism, several proposed a "Marshall Plan for Eastern Europe" that would help revive that region.

It is usually used when calling for federal spending to correct a perceived failure of the private sector. But its real importance … was simply to compensate for the US failure to institute controls on inflows of hot money from Europe. The Marshall Plan money was in the form of grants from the U.

Treasury that did not have to be repaid. 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 usually on credit in local currency. These payments were kept by the European government involved in a special counterpart fund.

This counterpart money, in turn, could be used by the government for further investment projects. Five percent of the counterpart money was paid to the US to cover the administrative costs of the ERP. In the case of Germany, there also were 16 billion marks of debts from the s which had defaulted in the s, but which Germany decided to repay to restore its reputation.

This money was owed to government and private banks in the US, France, and Britain. Another 16 billion marks represented postwar loans by the US. The only major Western European nation excluded was Francisco Franco's Spain, which was highly unpopular in Washington. With the escalation of the Cold War, the United States reconsidered its position, and in embraced Spain as an ally, encouraged by Franco's aggressive anti-communist policies. 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.

The Soviet Union had been as badly affected as any part of the world by the war. The Soviets imposed large reparations payments on the Axis allies that were in its sphere of influence. These reparation payments meant the Soviet Union itself received about the same as 16 European countries received in total from Marshall Plan aid. In accordance with the agreements with the USSR, shipment of dismantled German industrial installations from the west began on March 31, Under the terms of the agreement, the Soviet Union would in return ship raw materials such as food and timber to the western zones.

In view of the Soviet failure to do so, the western zones halted the shipments east, ostensibly on a temporary basis, although they were never resumed. It was later shown that the main reason for halting shipments east was not the behavior of the USSR but rather the recalcitrant behavior of France. The members of Comecon looked to the Soviet Union for oil; in turn, they provided machinery, equipment, agricultural goods, industrial goods, and consumer goods to the Soviet Union.

Economic recovery in the East was much slower than in the West, resulting in the formation of the shortage economies and a gap in wealth between East and West. Canada, like the United States, was damaged little by the war and in was one of the world's richest economies. It operated its own aid program. Canada made over a billion dollars in sales in the first two years of operation. It was not large enough to have significantly accelerated recovery by financing investment, aiding the reconstruction of damaged infrastructure, or easing commodity bottlenecks.

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. Prior to passing and enacting the Marshall Plan, President Truman and George Marshall started a domestic overhaul of public opinion from coast to coast. The purpose of this campaign was to sway public opinion in their direction and to inform the common person of what the Marshall Plan was and what the Plan would ultimately do.

They spent months attempting to convince Americans that their cause was just and that they should embrace the higher taxes that would come in the foreseeable future. A copious amount of propaganda ended up being highly effective in swaying public opinion towards supporting the Marshall Plan. During the nationwide campaign for support, "more than a million pieces of pro-Marshall Plan publications-booklets, leaflets, reprints, and fact sheets", were disseminated.

The Marshall Plan: Lessons Learned for the 21st Century The Marshall Plan: Lessons Learned for the 21st Century
The Marshall Plan: Lessons Learned for the 21st Century The Marshall Plan: Lessons Learned for the 21st Century
The Marshall Plan: Lessons Learned for the 21st Century The Marshall Plan: Lessons Learned for the 21st Century
The Marshall Plan: Lessons Learned for the 21st Century The Marshall Plan: Lessons Learned for the 21st Century
The Marshall Plan: Lessons Learned for the 21st Century The Marshall Plan: Lessons Learned for the 21st Century
The Marshall Plan: Lessons Learned for the 21st Century The Marshall Plan: Lessons Learned for the 21st Century
The Marshall Plan: Lessons Learned for the 21st Century The Marshall Plan: Lessons Learned for the 21st Century
The Marshall Plan: Lessons Learned for the 21st Century The Marshall Plan: Lessons Learned for the 21st Century

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