Celebrating the Marshall Plan

Seventy years ago today, on April 3, 1948, President Harry Truman signed into law the most sweeping non-military foreign policy achievement of the 20th Century, perhaps in all of American history. That success, colloquially known as the Marshall Plan, helped revitalize Europe, set the stage for the next 50 years of American relations with the continent, and largely shaped the Europe we know today.


World War II devastated Europe and left no truly functional economies on the continent, mainly due to the fierce fighting, unrelenting aerial bombardment, and subsequent destruction of industrial capacity unleashed during that hellish conflict. Post-war Europe was a shambles of its former self, with countries as disparate as the United Kingdom, Italy, and Sweden all feeling the pain that a lengthy and casualty-filled war inflicted on their citizenry. The Marshall Plan, conceived of in 1947 as a financial aid program to help bolster the economies of all of Europe, turned out to shape the common institutions and capitalistic systems which drive the continent’s politics through this day.

Although the monetary aid which was granted to the 16 participating nations (Austria, Belgium/Luxembourg, Denmark, France, West Germany, Greece, Iceland, Ireland, Italy/Trieste, the Netherlands, Norway, Portugal, Sweden, Switzerland, Turkey, and the United Kingdom) was significant, tallying $17 billion over 4 years ($193.5 billion in 2017 dollars), the real impact of the plan was to build a common European spirit, join the countries in multilateral institutions, and force the nations to accept and promote a more capitalist, free-market-based governing ideology. What may have mattered most to the Europeans affected by the Marshall Plan was the concrete feeling that the United States was not leaving them to their fate, as we did after World War I (with disastrous consequences), but instead investing heavily in the future of the continent and working to combat increasing Soviet influence. The plan, which was the brainchild of Secretary of State George C. Marshall, proposed to grant reconstruction aid to all European states, including the Soviet-led Eastern Bloc, on the conditions that those economies remove interstate barriers to trade, reduce regulations which stymied productivity, push to improve union membership rates, and adopt modern (read: American) business practices.

George Marshall
Secretary of State George C. Marshall in military uniform.      Image Credit: Atomic Heritage Foundation

Marshall and the other prominent supporters of what became known as the European Recovery Program (ERP), including Senators Henry Cabot Lodge Jr. (R – MA) and Arthur Vandenberg (R – MI), State Department officials George Kennan and William Clayton, and the Brookings Institution, intended the proposal to rebuild the war-torn cities of Europe, modernize and increase industrial capacity, improve European prosperity in general, create an industrial power in West Germany, and counter the rising Soviet tide. A positive side effect for Americans would be the use of ERP funds to purchase American exports, as the native capacity for production was still at that point too little to satisfy the needs of a recovering Europe. Soviet participation was invited, but the framers of the proposal knew all too well that the USSR had no choice but to decline the funds, and force their satellites in Eastern Europe to do the same. The reasoning for this given by the Communists was that the ERP was essentially a front for ‘American imperialism’; the actual reasoning was that the Soviets could not allow the loss of complete control over the economies of its member and allied states. Some Eastern Bloc countries, notably Poland and Czechoslovakia (as well as Yugoslavia a few years later), were very much interested in receiving the aid but were prevented from doing so by the leaders in Moscow.

The Plan was a complete success, as it assisted European nations in rebuilding their own economies, while establishing multilateral organizations (like the Organization for Economic Cooperation and Development [OECD]) and common financial practices that would link Western Europe for more than 50 years and spur creation of the European Union. In 1951, the final year of specific Marshall Plan aid, all of the participating economies had surpassed their pre-war heights; every country had at least a 35% increase in productive output over 1938 levels during that year. The creation and support of a strong, democratic state in West Germany was another major success of the ERP, leading to a continent where the German industrial powerhouse could be marshaled (pun intended) to benefit its neighbors. The Marshall Plan had non-economic effects as well, and these may have been more important to the successful recovery of Europe than anything else the plan achieved. The aid given by the United States significantly stabilized the politics of European nations by reducing the hunger and deprivation experienced shortly after the war, thus cutting the legs out from under the nascent Communist movements in countries like Italy and France. The Plan built lasting ties of trade between the United States and Europe, most of which continue to this day, which bolstered the American economy nearly as much as it did that of Europe as a whole. The creation of common institutions like the OECD (then called the OEEC) paved the way for further European integration into organizations like the European Union. There has not been a major military conflict between any of the Marshall Plan recipients in the following 7 decades (Turkey and Greece have somewhat bucked that trend), whereas there were myriad wars between the participants in the preceding 70 years. Although the Marshall Plan may not have spurred the recovery of post-war Europe in its entirety, it cemented that successful bounce-back and helped lead to lasting peace and prosperity in the region.

Marshall Poster
A European poster to promote the Marshall Plan.     Image Credit: George C. Marshall Foundation

Given the great success of the Marshall Plan in general, what can we take away from its implementation and conception that would help us deal with the problems facing the world today?

It is clear that the promotion of free-market, capitalistic economies with strong protections for workers and (relatively) low regulatory burdens, especially when it comes to trade, helped create the post-war European boom. The United States should use the example of this incredible accomplishment to inform and drive our current foreign policy by pushing for free trade agreements, increased development aid, and closer ties with the developing world of today. It is an overused cliche by this point, but we should seriously consider establishing a new ‘Marshall Plan’ for regions like Africa, South and Southeast Asia, and Latin America. Increasing the economic development of the countries in these parts of the world would not only boost American fortunes, but also prove critical for US national security. The multilateral organizations founded in the wake of the original Marshall Plan have led to long-lasting security ties between the US and the participating nations, most notably in the form of the North Atlantic Treaty Organization, otherwise known as NATO. Creating similar institutions in Africa (in support of the African Union), Southeast Asia, and Latin America would serve to protect our international interests from anti-democratic and authoritarian interlopers like China and Russia.

TPP Leaders
Leaders of the prospective TPP countries, 2010.        Image Credit: Wikipedia

In the case of Latin America, a new ‘Marshall Plan’ could reduce the impact of illegal immigration to the United States (largely driven by violence and economic insecurity), forge better ties between the nations affected, and clear the air of the (sometimes) poorly implemented, and near-universally poorly received, Monroe Doctrine. With respect to Africa, greater US investment and involvement could help counter the rising Chinese influence on the continent and promote market-based solutions to common problems. The Chinese approach of mercantilism will only serve to enhance Chinese interests at the expense of African ones, and a trade-based, free-market approach could reverse that growing impact. In Asia, we were this close to establishing what could have been considered a modern-day version of the Marshall Plan: the Trans-Pacific Partnership (TPP). This free-trade pact would have had a similar effect to the Marshall Plan, without the direct aid, by promoting free-market practices, open economies, and fair rules for important considerations like intellectual property and labor rights. This agreement, which specifically excluded China (in a throwback to the Soviet refusal to participate in the Marshall Plan), could have formed vibrant, market-based economies in countries like Vietnam and Malaysia, all the while countering Chinese mercantilism. Alas, President Trump (as well as every other moderately successful candidate on both sides) campaigned hard against the TPP as being detrimental to American interests, and withdrew the US from the agreement as one of his first moves in the White House. This was an error, and could end up being a catastrophic mistake if the Chinese are able to exert their substantial power in the region without pushback.

We as Americans need to remember both the successes and failures of past policies so as to avoid making future blunders and to ensure that we apply the lessons of history to the modern day in positive ways. The Marshall Plan was one such great achievement which we should both celebrate and remember when considering our relations with the rest of the world going forward.

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