Marshall Plan

Post-war situation in Europe

Western Europe was making little progress toward prosperity and stability. Britain was exhausted and committed to the Labor government's extensive welfare programs. In France, Charles de Gaulle's postwar government quickly gave way to a Fourth Republic paralyzed by quarreling factions that included a large, disciplined Communist party. In Italy, too, Communists threatened to gain power by parliamentary means.

It was feared by the United States that in the pover and dislocated Europe communist parties appealed to voters in western Europe.

Greece and Turkey were strategically vital and highly vulnerable outposts on the southern flank of the USSR. By the end of 1947 the Communists in Greece had proclaimed a provisional government in the northern mountains. As the United States and the Soviet Union struggled to reach a balance of power during the Cold War that followed World War II, Great Britain announced in 1947 that because of its economical crisis it would pull out of the Balkans, since it could no longer afford to aid those Mediterranean countries, which the West feared were in danger of falling under Soviet influence. This horrified the US.

Other European countries were in need of help as well.

United States to the rescue

In March 1947, US president Truman accordingly told Congress that:

"at the present moment in world history nearly every nation must choose between alternative ways of life. The choice is too often not a free one. It must be the policy of the United States to support free people who are resisting attempted subjugation by armed minorities or by outside pressure."

He asked for $400,000,000 in aid specifically for Greece and Turkey, but the Truman Doctrine thus propounded universalized the American commitment to contain the spread of Communism. A Greek-Turkish Aid act was signed in May.

In an address at Harvard University on June 5, 1947, US Secretary of State George C. Marshall launched the idea of a massive US financed program of foreign aid to help the European states recover.

"Europe's requirements for the next three or four years of foreign food and other essential products are so much greater than her present ability to pay that she must have substantial additional help."

There were three conditions before help could be received under the European Recovery Program:

  • Aid must be systematic;
  • Europe must work out their needs and plans together;
  • Public opinion must endorse the policy.

In short, the Marshall Plan had two objectives:

  • Promoting European reconstruction;
  • Preventing communism to spread to the west.

Aid for all of Europe

Marshall aid was offered to almost all the European countries, including those under military occupation by the USSR, but Stalin denounced the plan as a capitalist plot. The one eastern European state not yet communized, Czechoslovakia, attempted to join the Marshall Plan, but Communist pressure forced it to back out.

This left 17 countries: Austria, Belgium, Denmark, France, Greece, Iceland, Ireland, Italy, Luxembourg, The Netherlands, Norway, Portugal, Sweden, Switzerland, Turkey, the United Kingdom, and western Germany. Stalin reinforced his attack on the Marshall Plan by escalating ideological warfare against the West.

Aid in effect

The British foreign secretary & Ernest Bevin — spoke for western Europe when he told Parliament, "When the Marshall proposals were announced, I grabbed them with both hands."

Marshall aid opened the way to some spectacular projects, ranging from land reclamation in Italy and The Netherlands to a dam in Austria harnessing water power from melting glaciers.

During the 1948 elections in Italy, the communist party was defeated, due to financial aid ($1 million of CIA funds) for the Christen Democrats. Under the Marshall Plan, the United States then transferred $13.6 billion — 5 percent of the national income — to the stricken economies of western Europe in addition to $9.5 billion in earlier loans and $500 million in private charity.

In Greece, the (second) Communist rebellion lasted until 1949, when the US-supplied and strengthened Greek Army managed to clear the rebel centers from the mountainous Greek interior. On October 16, 1949, the Greek Communist broadcasting station announced the end of open hostilities, and many of the remaining Communist fighters fled the country into neighboring Albania.

Over the next 4 years, $13 billion worth of economic aid by the Economic Cooperation Administration (ECA) — a specially created bureau — helped to re-establish industrial and agricultural production, financial stability and trade. Direct grants accounted for the vast majority of the aid, with the remainder in the form of loans.

The Marshall Plan succeeded; the participating countries experienced a rise in gross national products of 15 to 20 percent. Chemical, engineering and steel industries rose.

The Organization for European Economic Cooperation (OEEC) — inaugurated on April 16, 1948 — gradually reduced the quantitative and monetary barriers that had hamstrung intra-European trade. It failed, however, to remove tariffs. US pressure for a European customs union eventually came to nothing; although willing to consult and cooperate, Europeans were not yet ready for economic integration, still less political union.

This complicated a relationship of equals between European countries and the United States.

Extended Marshall aid

The Marshall Plan concept of economic aid was so successful that President Harry S. Truman extended it to less developed countries throughout the world under the Point Four Program, initiated in 1949.