Abstract: Seventy-five years ago, former U.S. General and Secretary of State George C. Marshall initiated a diplomatic programme led by himself and George F. Kenan to economically revitalise Germany and Europe. The plan was not only to entice Europeans to cooperate more closely but also to revitalise transatlantic relations, which had lapsed with the end of World War II. Wilfried Loth divides European reconstruction via two premises: one is the revisionist theory, which claims that the USA revived a reconstruction programme purely out of economic self-interest, and the other is the traditional one, which says that George E. Marshall saw very well that Europe would only survive again economically and socially if the USA and Great Britain also gave it an economic perspective.
Problem statement: Were Marshall’s actions purely focused on reconstructing the European economy, or were they executed in pursuit of the U.S.’s national interests?
So what?: Arguably, the Marshall Plan shows that international-strategic cooperation, especially development cooperation, can initiate prosperous developments that might also help develop countries today. The focused economic support of specific states can also lead to an entire region not only beginning to cooperate. It can also lead to the prosperity of the supraregional economy. Such a programme to rebuild states that have collapsed, such as Yemen or Libya, would perhaps stabilise the civil war-torn countries again and prevent them from falling into the clutches of despots such as China.
Source: shutterstock.com/spatuletail
A Plan for East and West?
The Marshall Plan, which primarily favoured the reconstruction of Western Europe, was not intended to exclude the states in the Soviet sphere of power from the outset. Rather, the states in the Soviet zone of influence were also to be allowed to participate in the economic reconstruction programme. At the same time, however, they demanded democratic changes. The Second World War ended with Germany’s surrender in May and Japan’s in September 1945. Most German cities were bombed to the ground, especially the industrial ones. Basic supplies like food, drinking water and medical aid could not be guaranteed. Millions of people were homeless, and Germany was divided into four occupation zones.
At first glance, the U.S. initiative shows an unprecedented generosity in history, saving sixteen Western European states from starvation and dictatorship.[1] The states received around 13 billion dollars from 1948 to 1952. In his speech at Harvard University, George Catlett Marshall announced the European Recovery Program, better known as the “Marshall Plan”:
“Our policy is not directed against any country or any doctrine, but against hunger, misery, despair and chaos. Its aim is to revive a functioning world economy so as to allow the emergence of political and social conditions under which free institutions can exist.”[2]
Our policy is not directed against any country or any doctrine, but against hunger, misery, despair and chaos.
Due to the political and socio-economic scale of this aid programme as well as the enormous financial aid, the Marshall Plan was thus, and still is, considered the epitome of economic and humanitarian aid 75 years after its introduction.[3] Not long after its introduction, the first historians criticised the instrumentalisation of the needs of the people in Europe. The initiative seemed to be driven much more by the motivation to contain the communist regime than the seemingly exploited need in Europe that moved the USA to act.[4]
Protectionism and Autarky
It is important to look at the extent to which protectionism influenced policy decisions, such as the Marshall Plan. The levying of tariffs on imported and exported goods alone leads to the de-liberalisation of the world market. Logically, imposing tariffs on goods raises the price of the respective good, which can lead to less demand or inability to demand the respective goods. However, this also discriminates against the foreign producers who want to import their goods into the respective country X. This reduces the demand of the respective country. As a result, the domestic demand for the respective goods decreases. In Eastern Europe, for example, certain goods could no longer be bought at the time of the Cold War, especially due to the economics of scarcity.[5]
The tariff, as the simplest form of protection, was also part of the Marshall Plan in terms of European economic recovery, but this also changed the exchange rate balance and ultimately affected the entire world currency.[6] The liberalisation of world trade, especially during the restructuring period, was all the more important in order to be able to maintain the associated standard of living in the Western and perhaps Eastern hemispheres. The impact of protectionist policies on the global economy can best be seen in economic growth and employment. Certainly, the idea of the then USSR and its bloc allies, as well as its satellite states, was precisely to strengthen its own economic growth base through the protectionist planned economy and thereby appear to alleviate the problem of unemployment.
The liberalisation of world trade, especially during the restructuring period, was all the more important in order to be able to maintain the associated standard of living in the Western and perhaps Eastern hemispheres.
With protectionist policies in general, welfare in a country also decreases, as more money per unit has to be paid for goods that are actually duty-free. It is impossible to quantify exactly to what extent the tariffs and fees levied on imported goods affect a country’s growth. However, it is interesting to note that it is precisely in the weakened sector that most tariffs are levied to strengthen this economic sector. For the Eastern bloc countries of the time, this was mostly the agricultural sector, or more precisely, the food industry, which had suffered the most during the Second World War due to the scorched earth policy of the German Wehrmacht.[7]
However, this usually also clouds structural change in other sectors and inhibits overall economic growth. At the same time, monopolies and monopoly profits naturally form as a result of such an extreme autarkic policy. Thus those producers who work in the protectionist sector win. Also worth noting about the time, the USA and its allies were naturally paranoid about another world economic crisis. They knew that the autarchic protectionist and planned monopolistic policy that Stalin and his leadership circle had in mind would not only discredit the global economic-international division of labour, but would bring the global growth balance to a standstill.
The Revisionist vs the Traditional Perspective
Wilfried Loth looks at the whole East-West confrontation, both politically and economically, in two ways. First, he addresses the traditional historical view that the Cold War arose from Marxist ideology and the idea of world revolution and worldwide class struggle because the USSR faced increasingly hostile attitudes at home and abroad since its emergence and revolutionisation in 1918 and 1921.[8] This ultimately means that the party oligarchs were always interested in maintaining and strengthening their power, which means that this form of state maintenance must also be seen as a mobilisation and development dictatorship, both economically and politically. Thus, the Soviet leadership committed itself to a principled hostile-oriented policy towards the capitalist states of the West very early on and well before the East-West confrontation.[9]
At the same time, it periodically sought peaceful cooperation based on the doctrine of co-existence. Nevertheless, this must be seen as part of the Soviet policy of insecurity towards the Western world. Especially at the beginning of the Cold War, it became increasingly clear that Stalin was not willing to seek cooperation but to slowly and steadily build up the Iron Curtain vis-à-vis the West to structurally stabilise the Soviet sphere of power. At the same time, he tried to socially unsettle the West European states and cause unrest. With this attitude of Soviet refusal to cooperate, Europe was divided politically and economically.[10]
Stalin was not willing to seek cooperation but to slowly and steadily build up the Iron Curtain vis-à-vis the West to structurally stabilise the Soviet sphere of power.
The other historical theory that Wilfried Loth points to is: that the Soviet Union cannot be held solely responsible for the emergence of the Cold War and the division of Europe and the world. The USSR was a great power that only narrowly escaped a military and economic catastrophe in the Second World War. It had the highest number of human casualties, and its resources were virtually exhausted. In addition, Stalin and his administration realised with great shock that the real superpower, which also possessed a nuclear weapon and had enormous resources and economic know-how, was the USA. It enabled the USA to continuously open up new trade and sales markets to strengthen its political sphere of influence. With this, the US was also able to increase the pressure and demand open borders in the economic sense to completely undermine equal treatment on their own sales markets and de facto the protective tariff and tariff preference system.[11]
These events dissolved all forms of trade autarky without ifs and buts. Of course, this did not apply to the Stalinist sphere of power, which remained isolated. Similarly, bilateralism or regionalism was dissolved, which led to the USA gaining unrestricted access to raw materials instead of the Soviet Union. While the USA enjoyed unrestricted freedom of investment and could freely exchange its products and services, the Soviet Union suffered from a lack of raw materials and product shortages in all areas, especially seeds and the import of machinery. The U.S., therefore, took full advantage of its equal opportunities as the strongest economic power in world trade.[12] The Soviet leadership could only see this as a threat to all its security interests. It was also clear that it could not accept this because of the “open door policy” that the U.S. and the Western Allies were pursuing.
The Road to the Marshall Plan and the Change in German Policy
While the Second World War was still not over, the American State Department was already working on plans for a post-war order in Europe. However, since no agreement had yet been reached on both the German and European issues and in the context of the global struggle, it was bound to lead to chaotic conditions after the war. Above all, the consequences of an extreme winter in 1947 brought Western Europe virtually to a standstill. Coal shortages, production losses, and lack of equipment and food were the main reasons for a demoralised Germany. Unemployment and misery in Italy, a civil war in Greece that later led to the Truman Doctrine, and coal shortages in France show the political and economic threat to Europe at the turn of 1946/47. The Hoover Report, presented to President Truman in March 1947, recommended a fundamental reorientation of occupation policy. It presented the American government with the dilemma of either focusing primarily and exclusively on German reconstruction or dealing with the complex problems of the other states in Europe. The decision was made to reconstruct the German economy to stabilise the rest of Europe. On January 01, 1947, the U.S. and the United Kingdom decided to merge their occupation zones into the Bizone. This meant, first and foremost, a unification on an economic level, but secondly, also a protective measure against the spread of communism in these regions economically. Although the French did not like the merger into the Bizone because of their historical experiences with their German neighbour, they participated in merging the zones into the Trizone a little later.
On January 01, 1947, the U.S. and the United Kingdom decided to merge their occupation zones into the Bizone.
The Trizone seemed more of a threat to the USSR, as it had to fear that countries from its territory, e.g. Hungary or Czechoslovakia, would sooner or later join the Western European states. This was especially true for the German Democratic Republic, a vassal state of the former USSR. George C. Marshall had the task of working out a solution for the reconstruction of Germany, which at the same time had to be compatible with the security interests of neighbouring countries. This clear signal caused the U.S. to abandon the pursuit of cooperation with the Soviet Union.
The Truman Doctrine – The Birth of the Marshall Plan
In the spring of 1947, then U.S. President Harry S. Truman announced the so-called Truman Doctrine. It stated that the U.S. would protect free peoples from subjugation by armed minorities or communist forces.[13] Truman’s immediate motivation was the imminent communist danger in the Greek civil war. This underpinned the revisionist perspective, which holds that the U.S. wanted to extend its economic and political dominance over the Soviet occupation zone. In the following months, it became apparent that the economic crisis and the resulting hardship in the other countries served as a breeding ground for the imminent communist danger.
At that time, the only supplier and investor could only be the U.S. for financial reasons, as it was the only power with access to all resources and raw materials worldwide. Nevertheless, the efforts of the U.S. as a superpower were not enough to constitute the world economy and world trade. The rest of the world was either economically exhausted or still in a state of colonial underdevelopment. This meant that American power was so great economically, militarily and politically that it could provide enormous sums of money through the Government Aid and Relief in Occupied Areas (GARIOA programme) and the United Nations Relief and Rehabilitation Administration (UNRRA aid), which also demonstrated their capabilities. Still, the resources of these aid programmes were limited to alleviating immediate needs. Due to the provisions of the Truman Doctrine, United Nations Relief and Rehabilitation Administration (UNRRA) funds could only be used in certain regions, such as West Germany and Austria. The Truman Doctrine’s goal of financial support for Europe was unfortunately not effective in the long term because the damage caused by the destruction was too great. In order to force a complete economic and social reconstruction in the shortest possible time, the US administration strengthened the most competitive country, believing that it would then be able to assert itself in an increasingly global world economic order. Thus, with its hyper-productivity, the United States has gained more economically than the less competitive countries. Liberalisation policies always have a competitive advantage, especially in times of great de-structuring.
To force a complete economic and social reconstruction in the shortest possible time, the US administration strengthened the most competitive country, believing that it would then be able to assert itself in an increasingly global world economic order.
The Cornerstone of the Economic Recovery of Germany and Europe
After Marshall’s speech at Harvard University, there was spontaneous approval in most European countries, even in the Eastern Bloc. It is undisputed (and has already been pointed out several times at the beginning of the Marshall Plan) that the economic dominance of the U.S. was not only a demonstration of power, but it certainly had expansionist elements that were coupled with the expansion of military bases and bilateral security treaties.[14] All American commitments, including the Marshall Plan, can thus be institutional as a reaction to certain political developments during the Cold War. As such, the administrative institutionalization of the Marshall Plan was much like a replica of the isolation of the Soviet sphere of power, in which American policy was only able to exert a little influence.
At the Paris Conference, the two major European powers -France and Great Britain-, could not agree with the Soviet Union on a common European plan, which is why the “European Economic Co-operation Conference” issued an organisation plan for “only” 16 nations on July 13, 1947. Poland, Albania, Bulgaria, Finland, Yugoslavia, Romania, Czechoslovakia and Hungary were denied participation in the ERP (European Recovery Programme), due to Soviet objection, during the emerging Cold War.[15]
Four committees were established for food and agriculture, fuel and power, iron and steel and transport. Although some 20 billion U.S. dollars had already flowed into Europe through various channels since the end of the war, the Marshall Plan now tried to use the money more wisely through constructive reconstruction policies.[16] The participating states had to adhere to the conditions imposed by the U.S. In detail, this meant that they were already outgunned by the fact that the U.S. was able to play out its market strength in a quasi-monopoly form, and the foreign currencies not only came under massive pressure from the U.S. dollar but had to subordinate themselves to the U.S. dollar.[17] The clout of this economic and financial pressure is highlighted by the fact that the British could only escape this imperial fiscal pressure through great effort. It must also be emphasised that the Soviet Union did not allow certain states to submit to this European aid programme as it recognised the danger of not being able to withstand the financial pressure.
Direct and Indirect Aid by the U.S. in the Spectrum of its Foreign Policy
The Marshall Plan sent aid and reconstruction payments totalling almost 14 billion U.S. dollars in the following four years. As a result, West Germany received the fourth-highest share from the ERP after Italy and the two occupying powers, Great Britain and France. This could be categorised into direct and indirect aid.[18]
The Marshall Plan sent aid and reconstruction payments totalling almost 14 billion U.S. dollars in the following four years.
Direct aid” mainly included food and raw materials such as steel and oil. Mainly products that the European states could not produce themselves due to their geographical location or poor industrial infrastructure. It is a fact that at the end of the Second World War, the U.S. was not only a military power but also an economic power. It was clearly illustrated by the following figures: Industry expanded by 15% per year between 1940 and 1945, although most of the growth went into war production. The production of goods for civilian needs had skyrocketed to 40% in 1939-1943.[19]
The rapid growth in the civilian sector was due to the fact that said sector had hardly been affected. The standard of living and productivity per capita had logically risen steadily and were thus higher than in any other country.[20] The result was that the U.S. had become richer and the other states poorer as a result of the war. This is also clear from the gold reserves. At the war’s end, they comprised 20 billion U.S. dollars and thus 2/3 of the total gold reserves on earth, which stood at 33 billion dollars. More than half of the world’s industrial production came from the U.S. and 1/3 of the world’s production of goods of all kinds also. Thus the U.S. was the largest exporter at the end of the war, and a few years later, with the Marshall Plan programme, it accounted for 1/3 of world exports. This is also reflected in the shipbuilding capacity, whereby American shipping companies owned half of the ships. Thus, through the Marshall Plan programme, the world was economically Washington’s melting pot.[21]
In addition to the most necessary goods, the participating states were also granted “indirect aid” by dismantling trade barriers and establishing free trade agreements. These new arrangements promised a boost in the European economy due to lighter constraints. The economic interest and aspirations of the U.S. in the world, especially during the Cold War, can only be explained by a balance in the U.S.-American sense. For the U.S., at that time, a global loss-and-profit calculation applied. It was, and this can be seen especially in the Marshall Programme, about the distribution of the power structure within the world economic system. As soon as a crisis threatened, which is made clear by the Truman Doctrine, the U.S. tried to turn the problems it saw threatening its global power into a global problem, partly explaining economic interventionism.[22] Therefore, it was and still is the primary goal of the United States to guarantee the stability of the world economy and to eliminate everything that stands in the way of this interest.
The Containment Doctrine as Part of the Marshall Plan
While the European programme was being set up, the American and British governments initiated a new policy towards Germany to integrate the West German economy into the West European reconstruction. To understand this policy path of the U.S. and the other world powers, one has to analyse Stalinist policies in more detail.
Russian power under Stalin was based on an emphasis on internal discipline and absolute conformity since the late 1930s. This is essential because Stalinist politics was not built on plurality and economic diversification. From the very beginning, it was built on autarky and a planned economy, and thus also on the militarist world-revolutionary expansion of the Stalinist sphere of power. Paul Kennedy, therefore, rightly writes that this US-led economic policy may also have contributed to a certain paranoia as foreign policy for the USSR and its view, which in turn supports Wilfried Loth’s traditional theory. However, it cannot be said with absoluteness whether it was just paranoia or a matter of maintaining dictatorial power.[23] The extent to which this conformity went can ultimately be seen in the collectivisation of agriculture, which naturally had to increase tensions in the Cold War since the Marshall Plan was based on liberalisation and not collectivisation.[24] The fear that this totalitarian process would take hold of the West European states not only in the political but also in the economic sense was thus justified on the part of the U.S. due to the world economic situation in 1946/47.[25]
Russian power under Stalin was based on an emphasis on internal discipline and absolute conformity since the late 1930s. This is essential because Stalinist politics was not built on plurality and economic diversification.
The authoritarian policy of the USSR became clear not only in the elimination of rival parties or the suspension of individual rights but also in the revision of private property.[26] It was precisely this process in the economic sense that contradicted the principles of liberal economic policy. In the absence of private property, there is also no free trade.[27] The fear that the huge Eurasian Soviet empire, with its resources and planned economic control, could upset the global balance of power not only politically-militarily, but also economically, was well known to the U.S. administration at the time of the Marshall Plan.[28]
Conclusion
The Marshall Plan went far beyond the previous dimensions of international economic policy. The American government used foreign aid as an instrument to influence international economic relations. The Marshall Plan, as the beginning of antagonism between East and West, was seen by Marshall himself as a tactical tool and, thus, part of the containment policy. In support of the revisionist theory, securing free trade through the Marshall Plan was a way by which the American leadership ostensibly intended the containment of communism. The containment rhetoric was aimed at politically enforcing the open-door policy in Europe. Still, this in no way contradicts Marshall’s offer to the Soviet Union and Eastern European states to integrate them into the Marshall Programme. Rather, the calculation of American economic policy was to make this offer to put the Soviet Union under pressure for its collectivisation policy and to make it responsible for the division of Europe and, in the end, minimise, perhaps even reduce, the influence of the USSR on the Eastern European states.[29]
In support of the revisionist theory, securing free trade through the Marshall Plan was a way by which the American leadership ostensibly intended the containment of communism.
If the Soviet Union had accepted Marshall’s conditions, this would certainly have had the consequence, on the one hand, that the pro-Soviet economic policy orientation in the Eastern European countries would not only have had to be relaxed. It would have had to be feared that it could lead to the detachment of the Eastern European countries from the political sphere of influence of the Soviet Union. However, this could no longer be reversed due to the advanced stage of East-West antagonism. Therefore, the USSR speculated that the Western European states, which were in no way willing to be politically subjugated by economic aid, could still turn towards the USSR. What the Marshall Plan was aimed at, whether the containment of communism or the prevention of the division of Europe, depended on the attitude of the Soviet Union.
Born in 1981, Ilya Zarrouk studied modern history, economic and social history and political science in Mannheim, Heidelberg and Tunis. Zarrouk has been a lecturer at various evening academies in the Rhine-Neckar region since 2013, where he continues to lecture on security and military policy issues. The views contained in this article are the author’s alone.
[1] Charles Steven Maier; Günter Bischof (Eds.), Deutschland und der Marshall-Plan, (Baden-Baden 1992), 13.
[2] Marshall Plan speech, http://www.globalmarshallplan.org/sites/default/files/imce/download_files/george_marshall_speech_de_ger.pdf, last checked 20.08.2016, 2.
[3] Maria Wirth, Der Marshall-Plan: Das Wiederaufbauprogramm für Europa nach 1945, (www.demokratiezentrum.org, 2004)
[4] Charles Steven Maier; Günter Bischof (Eds.), Deutschland und der Marshall-Plan, (Baden-Baden 1992), 13.
[5] Hans H. Glismann, Weltwirtschaftslehre. Probleme der internationalen Handelspolitik, Entwicklungspolitik, Währungspolitik und Beschäftigungspolitik, (München 1980), 22-25.
[7] Idem.
[8] Wilfried Loth, Die Teilung der Welt. Geschichte des Kalten Krieges 1941 – 1955, (München 2002), 15-20.
[9] Idem.
[10] Idem.
[11] Idem.
[12] Idem.
[13] Charles Steven Maier; Günter Bischof (Eds.), Deutschland und der Marshall-Plan, (Baden-Baden 1992), 18.
[14] Paul M. Kennedy, Aufstieg und Fall der großen Mächte. Ökonomischer Wandel und militärischer Konflikt von 1500 bis 2000, (Frankfurt am Main 2000), 533-535.
[15] Maria Wirth, Der Marshall-Plan: Das Wiederaufbauprogramm für Europa nach 1945, (www.demokratiezentrum.org, 2004), 2.
[16] Herbert Gross, Der Marshall-Plan – Deutschlands Chance, (Essen-Kettwig 1948), 11-15.
[18] Maria Wirth, Der Marshall-Plan: Das Wiederaufbauprogramm für Europa nach 1945, (www.demokratiezentrum.org, 2004), 2.
[19] Herbert Gross, Der Marshall-Plan – Deutschlands Chance, (Essen-Kettwig 1948), 11-15.
[20] Wilfried Loth, Die Teilung der Welt. Geschichte des Kalten Krieges 1941 – 1955, (München 2002), 68-70.
[21] Paul M. Kennedy, Aufstieg und Fall der großen Mächte. Ökonomischer Wandel und militärischer Konflikt von 1500 bis 2000, (Frankfurt am Main 2000), 533-535.
[22] Ibid.
[23] Paul M. Kennedy, Aufstieg und Fall der großen Mächte. Ökonomischer Wandel und militärischer Konflikt von 1500 bis 2000, (Frankfurt am Main 2000), 543.
[24] Hans H. Glismann, Weltwirtschaftslehre. Probleme der internationalen Handelspolitik, Entwicklungspolitik, Währungspolitik und Beschäftigungspolitik, (München 1980), 22-25.
[25] Paul M. Kennedy, Aufstieg und Fall der großen Mächte. Ökonomischer Wandel und militärischer Konflikt von 1500 bis 2000, (Frankfurt am Main 2000), 537.
[26] Idem.
[27] Gerd Hardach, Der Marshall-Plan. Auslandshilfe und Wiederaufbau in Westdeutschland 1948 – 1952, (München 1994), 11.
[28] Wilfried Loth, Die Teilung der Welt. Geschichte des Kalten Krieges 1941 – 1955, (München 2002), 168-178.
[29] Idem.
