Six years after the end of the war, half of Europe was still struggling to recover from the millions of dead and wounded. The fighting spread over most of the continent, covering a much larger geographical area than the First World War. Continued bombing had devastated most of the major cities, especially their industrial production. Many of the continent's most famous cities, such as Warsaw and Berlin, lay in ruins. Other cities, such as London and Rotterdam, also suffered severe damage. Most of the buildings associated with economic production in these areas were reduced to rubble and millions of people were left homeless. Although foreign aid helped to alleviate the Dutch famine in 1944, the war's agricultural devastation led to widespread starvation in many parts of the continent, which was exacerbated by a rare cold winter in northwestern Europe in 1946-1947. Transportation was the most severely damaged, with railroads, bridges, and roads targeted by air raids and merchant ships often sunk. Small and medium-sized towns and villages in Western Europe suffered less damage, but the destruction of transportation left these areas economically isolated from the outside world. These problems were costly to solve at a time when the coffers of most of the countries caught up in the war were already depleted.
The post-World War I European economy also suffered greater damage, with the Great Recession lasting into the 1920s and also causing economic instability and a global economic downturn. The United States at this time, although experiencing an awakening of isolationism, attempted to promote economic growth in Europe, particularly through partnerships with several major U.S. banks. When Germany was unable to pay back their reparations, the US intervened by greatly increasing the amount of loans to them, a debt that remained unpaid until the two sides were officially at war in 1941.
There is therefore a majority opinion in Washington that this post-World War I history should not be repeated. While Harry S. Truman and the State Department still continued their pragmatic foreign policy on the need for aid, there was little congressional interest. At first, it was widely believed that the reconstruction of Europe, especially Britain and France, would not need to be costly, and that they could rely entirely on their colonies to quickly restore their economies. By 1947, however, the economies of these regions were still not on the upswing. A cold winter that lasted several years further aggravated the situation. With high and growing unemployment, successive strikes due to food shortages, and social unrest in some countries, economic growth in Europe was virtually impossible. By 1947, the European economy was still hovering below pre-war levels and showed little sign of growth. Agricultural production was at 83 percent of its 1938 level, industrial production at 88 percent, and total exports at only 59 percent.
The Iron Curtain across the continent blocked Western Europe's food import lines from Eastern Europe, exacerbating the postwar food shortages in Western Europe. Food shortages became the most pressing problem. Before the war, Western Europe's food supply was largely dependent on surplus food exported from Eastern Europe, but this trade route had been almost completely blocked by the Iron Curtain. The situation was particularly acute in Germany, where per capita caloric intake in 1946-47 was only 1,800 kilocalories per day, a value that was totally inadequate to support long-term human health. William Clayton reported to Washington that "millions of people are slowly starving to death." (Millions of people are slowly starving.) And most deadly to the overall economy was the shortage of coal, exacerbated by the brutally cold winter of 1946-1947. During this period many homes in Germany were left unheated and hundreds of people froze to death. The situation in Britain was not as serious, but industrial production had to be halted in order to meet the domestic demand for coal for civilian use. So humanitarian considerations were one of the key motives for proposing the program.
And the only country whose infrastructure was not significantly damaged during the war was the United States. It entered the war later than most European countries and suffered relatively limited damage on the home front. America's official gold reserves, the solid bedrock of its agriculture and industry, remained intact, and its economy remained vibrant. During the war U.S. industry supported the war machine at home and for its allies, and as a result the U.S. economy experienced its fastest period of growth since the founding of the nation. After the war, these factories were quickly converted to civilian production, and the wartime shortages of supplies were soon replaced by an explosion of consumer spending. But the long-term health of the economy also depended on trade, and long-term prosperity required markets to export these goods. And it was a large part of the aid provided by the Marshall Plan that was used by the Europeans to import industrial goods and raw materials from the United States.
And another important factor for the United States, and the biggest difference from the situation it faced after World War I, was the beginning of the Cold War. Skepticism about Soviet actions was growing among many in the U.S. government. George Kennan, one of the advocates of the Marshall Plan, had by this time predicted a bipolar future for the world. For him, the Marshall Plan was the very centerpiece of his new doctrine, the policy of containment against the Soviet Union. It should be emphasized that when the Marshall Plan began to be implemented, the wartime alliance between the Soviet Union and the United States had not yet ended and the Cold War had not really begun. And for those who drafted the Marshall Plan, their fear of the Soviet Union was not as extreme and intense as it would later become, even to the point of overriding all other factors.
Nevertheless, the growth of ****productive power and prestige in some Western European countries was more disturbing. In France and Italy, the widespread poverty of the post-war period provided ample sustenance for the growth of ****proletarian power. In turn, the important role played by the ****productions in these countries in the resistance struggles during the wars in their own countries led to a sharp increase in their prestige. In the post-war elections in these countries, the ****anist parties were universally successful. In France, the French ****production party even became the number one party in parliament for a time. While most historians agree that this alone is far from enough to conclude that France and Italy would slide into the ****productionist camp, American policymakers of the time did, in fact, seriously consider the possibility.From 1946 onward, Harry Truman and his administration began to hint that they had taken notice of the problem, notably through his appearance in Winston Churchill's famous "Iron Curtain Speech" by Winston Churchill. At this point, the United States had to stand firm before the world in order not to lose its credibility. The policy of containment also demanded that the United States must provide assistance to non-***producing countries in order to serve as a deterrent to Soviet influence and expansion. Still, there was hope at the time that the Eastern European countries would join the program, thus separating them from the emerging Soviet bloc. There had been a number of opinions and calls for the need for an aid reconstruction program for Europe long before Marshall delivered his famous speech, and the idea of aid was first raised in a speech by then U.S. Secretary of State James F. Byrnes at an opera house in Stuttgart on September 6, 1946.1 The idea of an aid reconstruction program for Europe was also raised in a speech by then U.S. Secretary of State James F. Byrnes at the Stuttgart Opera House. In addition, General Lucius D. Clay asked industrialist Lewis H. Brown to investigate and draft a Report on Germany after the war in 1947. The report listed the various conditions facing Germany after the war and made some recommendations for reconstruction. Dean Acheson, who was then undersecretary of state, gave a speech on the subject, and although his recommendations were not highly regarded at the time, then Vice President Alben Barkley was in favor of them.
An alternative to massive U.S. aid was thought at the time to be obtaining the materials and funds necessary for reconstruction from defeated Germany. As early as 1944, this idea had already been planned, in the form of the Morgenthau Plan, proposed by then U.S. Secretary of the Treasury Henry Morgenthau, Jr. In this plan, Morgenthau proposed to help other European countries that were attacked by the Axis powers in the war to rebuild by making Germany pay huge reparations after the war, and at the same time, this kind of almost extractive huge claims on Germany could also curb Germany's re-emergence. Similarly, the "Monnet Plan" was proposed by French official Jean Monnet. The plan envisioned French control of Germany's Saarland and Ruhr industrial zones and allowed France to use the mineral wealth of the two regions to restore French industrial output to at least 150 percent of its pre-war level.
In 1946, the occupation authorities against Germany introduced severe restrictions on Germany's return to industrialization. These limits strictly regulated German coal and steel production. The first plan to reindustrialize Germany was signed in early 1946, known as the level of industry agreement. It maintained Germany at roughly 50% of its pre-war (1938) industrial level by dismantling more than 1,500 factories. Since the drawbacks of this agreement became immediately apparent, the program was changed several times until 1949. The entire dismantling was not completed until 1950. Germany had long been the industrial powerhouse and economic center of Europe, so an excessive weakening of Germany would inevitably lead to an impediment to the economic recovery of Europe as a whole, and the occupying authorities against Germany would have to raise the cost of their occupation considerably in order to solve the contradiction between Germany's growing needs of all kinds and the shortage of materials.
One of the masterminds of the Marshall Plan, George Kennan. These shortcomings and the public criticism that ensued from the exposure of the two plans led to a reconsideration of the Monet and Morgenthau Plans. In fact, many of the amendments were similar to the Joint Chiefs of Staff Directive 1067, the foundational document guiding the U.S. occupation of Germany and its reconstruction until July 1947 (the Directive). The Joint Chiefs of Staff Directive 1067 (which "crippled Germany's major industrial output through strict qualifications") had similarities. After the war, the Saarland and Silesia, Germany's major mineral resources, were no longer under German control, while the Allies destroyed a large number of factories to limit German industrial output. By 1947, even the Ruhr, Germany's industrial center, was in danger of being completely dismantled. In short at that time, faced with a Germany that had been almost completely stripped of its productive capacity, Truman, Marshall, and Acheson agreed on the need for immediate, substantial, and unceasing aid to Germany.
The Reconstruction Plan was also influenced to some extent by the ideological fine-tuning that followed the economic crisis of the 1930s in the U.S. The Great Depression of the early 1930s convinced many Americans that a completely free market, devoid of government intervention, could not guarantee stable and healthy economic growth. Many of those who had initially formulated Roosevelt's New Deal policies believed that the experience of U.S. government intervention in the economy should be applied to post-war reconstruction in Europe. At the same time, the economic crisis of 1929 proved that tariffs and trade protectionism were harmful to the economy, reinforcing the need for economic integration and free trade in Europe.
With all this in mind, the Marshall Plan, a program designed to help America's European allies restore their economies to the devastation of World War II while curbing the further expansion of ****ist forces in Europe, was officially launched. Its official name was the European Recovery Program (ERP). It was named after its main proponent, then U.S. Secretary of State George C. Marshall. In fact, it was numerous officials in the U.S. Department of State, notably William L. Clayton and George F. Kennan, who actually planned the program. Then British Foreign Secretary Ernest Bevin heard Marshall's speech on the radio and immediately contacted then French Foreign Minister Georges Bidault. The two men exchanged views on the European side of the U.S. offer of aid to Europe and prepared an official response. The two foreign ministers also agreed on the need to invite the Soviet Union, an important ally in the war against fascism, to participate in the program. Since outright rejection of the Soviet Union's participation in the aid program would have implied open distrust of an ally, Marshall was nonetheless frank in his speech in welcoming the Soviet Union to participate in the Marshall Plan in order to receive U.S. aid. In fact, U.S. State Department officials knew in their hearts that Stalin would never agree to participate in the program, and that the U.S. Congress would never approve a program that contained huge amounts of aid to the Soviet Union.
At first, Stalin showed "cautious interest" in the aid program. He believed that the Soviet Union was in a very favorable international environment after the war, and that even conditional aid would not be out of the question. He sent the Soviet Foreign Minister, Vyacheslav Molotov, to Paris to meet with the British and French foreign ministers. By this time, Britain and France had grasped the true intentions of the United States in not wanting the Soviet Union to join the aid program. They therefore made a number of conditions that were unacceptable to the Soviet Union. The most important of these was that any country receiving aid would inevitably lose part of its economic sovereignty, which was simply unacceptable to the Soviet Union. At the same time, the British and French foreign ministers insisted that the aided country must incidentally participate in the construction of a single European market, which was clearly incompatible with the Soviet Union's highly centralized system of planned economies. Eventually Molotov rejected the aid program and left Paris.
Then a much larger conference was held in Paris. This conference invited virtually every country in Europe at the time, with the exception of Spain (because while that country had maintained ostensible neutrality during World War II, he had in fact pursued a pro-fascist line) and the pocket states of Andorra, San Marino and Liechtenstein. The Soviet Union, which had already indicated it would veto the plan even before the invitation was received, was followed by the members of the emerging Eastern European bloc, and in the end only Poland and Czechoslovakia expressed a willingness to participate in the conference. But Czechoslovakia's foreign minister, Jan Masaryk, was later summoned to Moscow and angrily reprimanded by Stalin for his support of his country's participation in the Marshall Plan, which was taken as a clear signal that the Soviet Union was beginning to tighten its overall control over Eastern Europe. Stalin saw the signing of the plan as a serious threat to Soviet control of Eastern Europe, and believed that the West would use the opportunity to disengage these countries from the Soviet Union's fledgling influence and control of the region through economic integration. The U.S. also recognized this and was happy to see the Eastern European countries participate in its economic aid programs to resist Soviet influence. Thus, when Czechoslovakia and Poland were prevented by the Soviet Union from traveling to Paris for the conference, the other Eastern European countries were also very pleased to refuse U.S. aid. Finland also refused to participate in the program in order to avoid an overly antagonistic relationship between the two countries and the neighboring Soviet Union. Soon after, the Soviet Union came up with an "alternative plan" to the Marshall Plan for Eastern Europe, which consisted of economic assistance to the Eastern European countries and the development of trade between them and the Soviet Union. ---- This was the famous Molotov Plan, which later became the Council for Mutual Economic Assistance ("COMECON"). COMECON). To turn the plan from a signature into a reality required not only the consultation of the participating countries, but also the approval of the U.S. Congress. Thus, representatives of the sixteen participating countries gathered in Paris to discuss the form and distribution of future U.S. aid. The negotiations were extremely lengthy and complex because the issue was so closely related to the interests of each country. France's main concern was to prevent Germany from regaining its pre-war strength. As for the Benelux countries, although they had also suffered from Nazi aggression, they still hoped to promote their own economic prosperity and development by promoting the revival of Germany in view of their close economic ties with Germany. The Scandinavian countries, especially Sweden, on the other hand, always insisted on two principles. One was that their long-standing trade links with the countries of the Eastern camp should not be interrupted; the other was that their neutrality should not be violated. Britain, on the other hand, insisted that, in view of her own special circumstances, she could not be satisfied with a mere share of aid equal to that received by the other Continental European countries, for such a share would be of little or no material use to her. The United States, on the other hand, while vigorously advocating the principle of free trade, demanded that Europe should unite and build a bulwark against * * * obstructionism. William Clayton, a representative of the Truman administration, promised the European nations that they would be able to organize the plan freely on their own, yet he reminded the Europeans that if the plan was to be put into effect then it would have to pass through the U.S. Congress. And at this point, while most members of Congress agreed with the twin principles of free trade and European integration, they were hesitant to invest too many dollars in Germany.
After the parties reached an agreement, the European countries submitted a draft reconstruction plan to Washington. In this draft, the European side proposed aid totaling $22 billion. After Truman cut it to $17 billion, the draft was submitted to Congress for approval. This draft met with fierce opposition within Congress. The opponents were mainly *** and party legislators, most of whom advocated isolationist policies and were tired of large government expenditures. The most representative of them was Robert A. Taft. On the left, the bill was staunchly resisted by legislators represented by Henry Wallace. Wallace saw the plan as both a great subsidy to U.S. commodity export capital and a catalyst for accelerating the division of the world into East and West. Yet when the February Revolution in Czechoslovakia (with Czech **** in full control of power) followed in February 1948, all opposition quickly subsided. Shortly thereafter, with combined bipartisan support, Congress passed a government spending bill that included an initial $5 billion in aid. And in the plan that finally passed Congress for approval, **** included aid amounting to $12.4 billion over four years.
Truman signed the Marshall Plan on April 3, 1948, and at the same time he approved the creation of the Economic Cooperation Administration (ECA) to implement the plan. This agency was headed by Paul G. Hoffman. In the same year, the participating countries (Austria, Belgium, Denmark, France, West Germany, Great Britain, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Sweden, Switzerland, Turkey, and the United States) signed an agreement to establish an organization alongside the ECA, the Organization for European Economic Cooperation (OECC). European Economic Cooperation.) This organization was later renamed the Organization for Economic Cooperation and Development (OECD). Its first director was the Frenchman Robert Marjolin. A substantial aid shipment was delivered in January 1947, destined for Greece and Turkey. This was not only because it was seen there as the front line of resistance to ****ist expansion, but also because these two countries had already benefited from the Truman Doctrine by receiving a considerable amount of up-front aid. Initially, it was Britain that provided assistance to the anti-***** forces in these two countries. However, since its own economic situation was by this time quite bad and difficult to maintain, Britain requested the United States to carry on this responsibility.
The first page of the full text of the Marshall Plan In July 1948, the General Directorate of Economic Cooperation began to enter into formal operation. That same year, this organization issued its mission statement, which included advancing economic progress in Europe, promoting European production, providing support for the issuance of European currencies, and promoting international trade (especially with the United States, whose economic interests required Europe to be wealthy enough to have sufficient market capacity to import American goods). And another goal of the General Directorate of Economic Cooperation (and of the Marshall Plan) that has never been officially recognized was to provide a check on the expanding influence of Soviet power in Europe, targeting in particular the growth of Czechoslovakia, France, and Italian ****production party power.
Funds involved in the Marshall Plan were usually delivered to European governments first. All funds were administered by the host government and the Directorate General for Economic Cooperation*** together. A special envoy of the Directorate General for Economic Cooperation is stationed in the capital of each participating country. This position is usually filled by a reputable American businessman. Their role is to advise on the implementation of the program. In addition to encouraging cooperation in the distribution of aid, the AEC also organizes consultative groups of government, business and labor leaders to assess the economy and determine where the aid should go.
The Europeans used most of the aid money from the Marshall Plan to import goods produced in the United States. European countries had depleted almost all of their foreign exchange reserves in World War II, so the aid brought in by the Marshall Plan was almost their only source of foreign exchange for importing goods from abroad. In the early years of the program, the European countries used much of the aid to import much-needed necessities, such as food and fuel, but then the bulk of the imports were redirected to raw materials and products that they also needed initially for reconstruction. In the following years, under pressure from the U.S. Congress and the outbreak of the Korean War, the U.S. still invested a large amount of money in rebuilding the armaments of the European countries, and this figure increased year by year. According to statistics, by the middle of 1951, in providing ***13 billion dollars in aid funds, 3.4 billion dollars for the import of raw materials and semi-manufactured products, 3.2 billion dollars for the purchase of food, feed and fertilizer, 1.9 billion dollars for the import of machinery, vehicles and heavy equipment and other heavy industrial goods, and 1.6 billion dollars for the import of fuel.
The counterpart fund was also set up to convert Marshall Plan aid into local currency. According to the statute of the General Directorate of Economic Cooperation, no less than 60% of the fund should be invested in manufacturing. This was most prominent in Germany. Under the control of the local government, most of this fund was used to lend to private enterprises, thus enabling them to play an important role in promoting the reconstruction process. This fund also played a central role in Germany's reindustrialization process. In 1949-50, for example, 40 percent of the total investment in the German coal mining industry was provided by this fund. For the companies that took out the loans, they were required to repay them on schedule. And soon after repayment, the funds would be lent out again. At the time, this process was carried out under the name of the German state-owned bank KfW (Kreditanstalt für Wiederaufbau). The fund was later transferred to the Federal Economics Ministry. By 1971, it still amounted to 10 billion West German marks. In 1997, it amounted to DM 23 billion. Through this revolving credit system, by the end of 1995 some DM 140 billion of the fund had been lent to numerous German citizens in the form of low-interest loans. The remaining 40 per cent of the counterpart fund was used to repay foreign debt, stabilize the currency and invest in non-industrial projects. France made the most extensive use of counterpart funds. They used it mainly to offset budget deficits. Not only in France, but in fact within most of the other participating countries, the money in the counterpart fund is mostly used as general government revenue, rather than being used for repeated revolving loans to the private sector, as in Germany.
Another, less expensive but equally effective program is the Technical Assistance Program, also led by the Directorate General for Economic Cooperation. This program funds European technicians and entrepreneurs to visit U.S. plants and mines so that they can apply U.S. experience and systems to their own countries. Hundreds of U.S. technicians also traveled to Europe as technical advisers under the program. The amount of aid allocated to the participating countries by the Marshall Plan was roughly distributed according to the size of their populations. Several of the large industrialized nations received relatively large amounts of aid, and it is more widely believed that their revival played a key role in the economic recovery of Europe as a whole. At the same time the U.S. gave relatively more aid per capita to the Allies compared to the countries that had become Axis powers and to the neutral countries. The table below shows the specific amount of aid (in billions of dollars) that the Marshall Plan provided to each country each year. Scholarly opinion on the exact amount of aid is still divided. The debate among scholars centers on what portion of U.S. aid to these countries at the time was part of the Marshall Plan. Country 1948/49
(billion dollars) 1949/50
(billion dollars) 1950/51 (billion dollars) Total (billion dollars) Austria 2.32 1.66 0.70 4.88 Belgium & Luxembourg 1.95 2.22 3.60 7.77 Denmark 1.03 0.87 1.95 3.85 France 10.85 6.91 5.20 22.96 Germany 5.10 4.38 5.00 14.48 Greece 1.75 1.56 0.45 3.66 Iceland 0.06 0.22 0.15 0.43 Ireland 0.88 0.45 - 1.33 Italy & Trieste 5.94 4.05 2.05 12.04 Netherlands 4.71 3.02 3.55 11.28 Norway 0.82 0.90 2.00 3.72 Portugal - - 0.70 0.70 Sweden 0.39 0.48 2.60 3.47 Switzerland - - 2.50 2.50 Turkey 0.28 0.59 0.50 1.37 United Kingdom 13.16 9.21 10.60 32.97