Marshall Plan Provides Aid to Europe Summary

  • Last updated on November 10, 2022

The Marshall Plan was an American economic aid program for Europe. Meant both to relieve suffering resulting from World War II’s economic devastation and to contain the Soviet Union by strengthening Western Europe’s ability to resist Soviet expansion, the plan was largely successful on both counts.

Summary of Event

In the winter of 1946-1947, European nations struggled to recover from the widespread devastation of World War II. The conflict had leveled cities, destroyed thousands of factories, disrupted transportation and communication systems, and rendered machinery for extracting raw materials useless. The European standard of living had fallen drastically below prewar levels, even in nations that had not borne the brunt of the fighting. In the spring of 1947, two million British industrial workers were unemployed, and many others were underemployed because of shortages in raw materials. In Italy, industrial production stood at 20 percent of prewar levels. In Germany’s Ruhr region, coal production had dropped to 45 percent of its previous level, and similar declines elsewhere affected industrial production and transportation systems throughout Europe. Millions of homeless and displaced citizens strained the existing social services beyond their limits. Marshall Plan Foreign aid, U.S.;Marshall Plan World War II (1939-1945)[World War 02];reconstruction European Recovery Act (1948) [kw]Marshall Plan Provides Aid to Europe (Apr. 3, 1948) [kw]Aid to Europe, Marshall Plan Provides (Apr. 3, 1948) [kw]Europe, Marshall Plan Provides Aid to (Apr. 3, 1948) Marshall Plan Foreign aid, U.S.;Marshall Plan World War II (1939-1945)[World War 02];reconstruction European Recovery Act (1948) [g]North America;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [g]Europe;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [g]Western Europe;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [g]United Kingdom;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [g]Germany;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [g]West Germany;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [g]France;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [g]Italy;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [g]Austria;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [g]Netherlands;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [g]Iceland;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [g]Norway;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [g]United States;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [c]Diplomacy and international relations;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [c]Economics;Apr. 3, 1948: Marshall Plan Provides Aid to Europe[02420] [c]Banking and finance;Apr. 3, 1948: Marshall Plan Provides Aid toEurope[02420] Marshall, George C. [p]Marshall, George C.;European Recovery Program Kennan, George F. Truman, Harry S. [p]Truman, Harry S.;Marshall Plan Bevin, Ernest Stalin, Joseph [p]Stalin, Joseph;Cold War Molotov, Vyacheslav Mikhailovich

General George C. Marshall.

(Library of Congress)

The unusually severe European winter of 1946-1947 exacerbated the hardships brought through war. Food shortages existed in most nations and, consequently, food rationing was widely instituted. Politically, France and Italy faced growing leftist movements whose popularity increased as a result of these economic hardships. European governments that had managed vast colonial regions before the war could no longer adequately manage even their internal affairs. These harsh conditions produced despondency that only increased the nations’ economic problems.

European industrial workers witnessed a diminished standard of living, as postwar inflation significantly outpaced wage increases. Worker productivity declined. Farmers, unable to purchase fertilizer and farm equipment, converted their fields to pastureland, resulting in a sharp decrease in agricultural productivity. Meanwhile, although the United States had lost many soldiers and much wartime equipment, the land and its civilian population had been left untouched by the destruction of World War II. The U.S. economic picture was therefore one of prosperity and rapid growth. Despite a large postwar debt, the economy quickly responded to the release of pent-up demand for goods and services following the war. There was, however, concern within the government about the postwar settlement in Europe and particularly about the Soviet role and influence in Europe.

Soviet positions on the withdrawal of their forces from countries such as Iran, on the nature of Eastern European governments, and on war reparations from Germany created apprehension within the administration of President Harry S. Truman. Political unrest on the fringes of Europe, especially in Greece and Turkey, became America’s concern after the United Kingdom took the position that it could no longer afford to aid those countries’ governments against communist-backed guerrilla insurgencies. Truman addressed Congress on March 12, 1947, in an appeal for more than $300 million in aid to these nations. The occasion marked the inauguration of what became known as the Truman Doctrine, which committed the United States to defend governments throughout the world when they were threatened with communist subversion.

The open-ended nature of Truman’s commitment to fight communist insurgency internationally left many in Congress and the State Department bewildered, since militarily the United States had demobilized and was in no position to make such a global military commitment. Within the State Department, moreover, diplomats had already begun to formulate the concept that in the looming East-West conflict, American economic power would prove to be the decisive factor. In the same month Truman made his speech, the newly appointed secretary of state, General George C. Marshall, led an American delegation to the Moscow Conference of Allied Leaders Moscow Conference of Allied Leaders (1947) to negotiate the future of Germany. After weeks of futile discussions, Marshall on April 15 took the American proposals directly to Joseph Stalin, the Soviet premier.

Since he had known Stalin during the war and had earned the premier’s respect, Marshall believed that personal diplomacy had a reasonable chance of success. He found Stalin polite but vague and noncommittal, however, and he left the meeting with the view that Stalin saw no need for compromise. The Soviet leader seemed to think that time was on his side in Europe. After returning to the United States, Marshall established a strategic think tank within the State Department called the Policy Planning Staff Policy Planning Staff . The staff was headed by George F. Kennan, who had recently earned recognition in the inner circles of government as an expert on the Soviet Union. Within eight weeks, the staff produced a general policy statement that addressed the economic crisis in Europe.

Kennan’s policy statement proposed to return the European standard of living to its prewar level and to ensure that the European economic system would be capable of sustained growth. The idea was to work in cooperation with existing European governments by offering aid that would restore a measure of prosperity—not by providing direct relief to suffering people but by attacking the problems of those people through improving their national economies. Not content to require government-to-government cooperation between the United States and other nations, moreover, the policy makers devised a procedure that would require a measure of cooperation among the European nations themselves.

On June 5, General Marshall, in a commencement address at Harvard University, delivered the essence of the Marshall Plan. Since he had the complete confidence of the president, Marshall made the proposal on his own without prior clearance. After describing the effects of war on European economies—pointing out that food and fuel shortages in European cities were severe and people there were badly undernourished—he proposed that the United States should aid all European nations, even those in Eastern Europe, provided that they presented a joint plan clarifying their needs and explaining their priorities. From the American standpoint, this proposal had the advantage of avoiding a piecemeal economic solution that evaluated the needs of each nation on an ad hoc basis. It also required a degree of cooperation among European nations that Americans believed essential to Europe’s long-term economic health.

In response to Marshall’s proposal, Ernest Bevin, the British foreign minister, arranged a meeting of European ministers to plan a response. Nothing in Marshall’s speech excluded the Soviet Union or its satellites, and at the first European planning session in June the Soviets were represented by Vyacheslav Mikhailovich Molotov, the Soviet foreign minister. However, rather than disclose details of their national economic condition and needs, the Soviets quickly withdrew from the meeting, as the Americans, British, and French had hoped they would. After long negotiations, which were made more difficult by the concerns of France over the inclusion of aid to West Germany, the European nations presented a plan to the United States. Following revisions suggested by American officials, the plan became the basis for the European Recovery Act of 1948.

The act created the European Recovery Program (ERP), popularly known as the Marshall Plan, providing approximately $13.3 billion over a period of four years for European economic relief in seventeen nations. Since the American federal budget was less than $100 billion at the time, this sum represented a substantial commitment. Over the nearly four years of the plan’s existence, the aid provided to Europe annually amounted to 1.2 percent of the total U.S. gross national product (GNP).

Once the ERP had been formulated, the president, the cabinet, and many other officials threw their support behind it. The program provided that most food, raw materials, and machinery would be purchased in America and thus promised a substantial increase in American exports. For this reason, the program also found widespread support among business and agricultural leaders. Many political leaders viewed it as a means of containing communism through the use of American economic strength. Their reasoning became more compelling after heavy-handed Soviet intervention and repression in Czechoslovakia in the fall of 1947. Polls taken at the time, however, showed that a majority of the American people supported the ERP primarily on humanitarian grounds. Whatever the reason, Congress was swayed, and the European Recovery Act passed overwhelmingly on April 3, 1948.

Significance

The Marshall Plan had a significant impact on European economic and cultural history, although scholars continue to disagree about the precise nature of that impact. For one thing, economic results varied considerably from nation to nation. During its first year, the ERP added more than 10 percent to the GNP of two nations, Austria and the Netherlands, and more than 5 percent to the GNP in five other nations, France, Iceland, Ireland, Italy, and Norway. In nations that suffered acute food shortages—West Germany, Austria, and the United Kingdom—more than one-third of Marshall Plan aid went for food supplies. In other nations, funding for raw materials, energy, and machinery surpassed that for food imports.

By bringing significant quantities of American capital and goods into Europe, the ERP contributed to a 32 percent rise in the GNP of the participating nations between 1948 and 1951. Food rationing disappeared, and the standard of living rose rapidly throughout the four years of the program. By 1950, most European nations had exceeded their prewar agricultural production levels. The ERP stimulated American investments and influence in Europe. American corporate investments increased more than twice as rapidly in Europe as in any other area. In addition to the large exports of machinery and supplies, the United States sent thousands of experts overseas. A major objective of the plan was to increase the productivity of the economies by increasing their efficiency. In the American view, it was necessary to increase efficiency, which lagged far behind that of the United States, in order to prevent a rapid rise in inflation while external aid was stimulating economic growth.

The Marshall Plan aided people indirectly, using a systems approach, and its objectives were for the long term. By providing raw materials from the United States for British factories, it enabled British workers to remain productively employed. Through promoting a fourfold increase in the number of tractors in France, it contributed to the elimination of hunger in France and in other countries as well. Through providing the machinery and transportation necessary for German coal production, it ensured that affordable energy was available during periods of inclement weather. By making labor more efficient, American experts helped retard inflation during a period of economic expansion, thus enabling European workers to retain their purchasing power.

From a broader policy perspective, the American consultants sought to decrease the power of industrial cartels, to increase the productive efficiency of European workers, and to promote free trade. These objectives were partially achieved, though the measure of success depended heavily on conditions in each nation. West Germany, for example, was still under American military government, so breaking the power of cartels in that country was relatively easy.

The ERP was by no means the sole cause of European postwar recovery, for economies as depressed as those of Europe were almost certain to improve, given existing conditions. Most scholars agree, however, that the ERP provided a powerful stimulus that hastened the recovery and alleviated human suffering. In addition, American influence furthered policies that American politicians believed were in the interest of the long-term economic health of the region. Politically, in nation after nation, economic resurgence had the effects that American planners had desired. As hopes for prosperity became reality, elections produced centrist and rightist governments at the expense of communists and their allies. Although these governments did not invariably assure all the freedoms found in the United States, they provided greater freedoms to their citizens than did the governments of Eastern Bloc nations. On the whole, they preserved freedoms of speech, religion, and the press.

In this respect, the ERP contributed to the American policy of containment and to the American view of a world order that assured fundamental political and economic freedoms. In another respect, the ERP benefited both the United States and Europe by establishing a mode of cooperation that made mutual defense more palatable. The cooperation and mutual planning mandated by the ERP contributed significantly to the formation of the North Atlantic Treaty Organization (NATO)in 1949. On the downside, the ERP leaders tacitly acknowledged the split in Europe between West and East and prompted the Soviet government to consolidate Eastern Europe into its own economic and defense plans and to refuse the extension of Marshall Plan benefits to areas under its control. Marshall Plan Foreign aid, U.S.;Marshall Plan World War II (1939-1945)[World War 02];reconstruction European Recovery Act (1948)

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Bonds, John Bledsoe. Bipartisan Strategy: Selling the Marshall Plan. Westport, Conn.: Praeger, 2002. Study of the U.S. domestic campaign to convince Congress to pass the Economic Recovery Act. Bibliographic references and index.
  • citation-type="booksimple"

    xlink:type="simple">Gimbel, John. The Origins of the Marshall Plan. Stanford, Calif.: Stanford University Press, 1976. This analytical book traces the origins of the ERP to American policy makers and to specific postwar events. Gimbel sees the East-West conflict as a minor influence on the development and implementation of the Marshall Plan. Includes notes on unpublished sources, extensive notes on published sources, and a good index.
  • citation-type="booksimple"

    xlink:type="simple">Hogan, Michael J. The Marshall Plan: America, Britain, and the Reconstruction of Western Europe, 1947-1952. New York: Cambridge University Press, 1987. In his carefully researched and comprehensive analysis of the ERP, Hogan takes into account the arguments of its critics and concludes that it achieved its major economic and political purposes. Very extensive but unannotated bibliography. Good index.
  • citation-type="booksimple"

    xlink:type="simple">Mee, Charles L., Jr. The Marshall Plan: The Launching of the Pax Americana. New York: Simon & Schuster, 1984. Mee provides a clearly written and balanced account of the formulation and adoption of the Marshall Plan, incorporating data and figures into the text. For the average reader, this book is perhaps the best introduction to the subject. Offers two useful appendixes including Truman’s address and Marshall’s Harvard speech as well as notes, bibliography, and index.
  • citation-type="booksimple"

    xlink:type="simple">Milward, Alan S. The Reconstruction of Western Europe, 1945-1951. Berkeley: University of California Press, 1984. A detailed study of all aspects of the European economic recovery, the book provides numerous tables showing progress of the recovery in detail. Milward gives the background of the Marshall Plan and assesses its effects. Useful bibliography focuses on international sources. Brief index.
  • citation-type="booksimple"

    xlink:type="simple">Pogue, Forrest C. George C. Marshall: Statesman, 1945-1959. New York: Viking Press, 1987. The fourth and final volume of the standard biography of Marshall, it gives an account of the formulation of the ERP. Pogue clarifies Marshall’s contribution, differentiating it from the roles of other prominent diplomats and officials. Useful appendix, bibliography, notes, and index. Illustrated.
  • citation-type="booksimple"

    xlink:type="simple">Price, Harry Bayard. The Marshall Plan and Its Meaning. Ithaca, N.Y.: Cornell University Press, 1955. A general and optimistic study of the ERP and its effects, the book places the Marshall Plan within the context of American aid throughout the world. Although many of Price’s findings encountered later challenges, this early volume is still useful. Bibliographic references and index.
  • citation-type="booksimple"

    xlink:type="simple">Schain, Martin, ed. The Marshall Plan: Fifty Years Later. New York: Palgrave, 2001. Compilation of essays devoted to revisiting the ERP, both to reevaluate its effects at the time and to examine its long-term impact on the Cold War and European economic history. Bibliographic references and index.
  • citation-type="booksimple"

    xlink:type="simple">Wexler, Imanuel. The Marshall Plan Revisited: The European Recovery Program in Economic Perspective. Westport, Conn.: Greenwood Press, 1983. Wexler places the Marshall Plan in broad economic context and traces factors other than American aid that promoted or hindered economic recovery. His assessment finds that the ERP achieved a large measure of success. Good notes, usefully divided bibliography, and brief index.

Truman Doctrine

General Agreement on Tariffs and Trade Is Signed

Benelux Customs Union Enters into Force

Soviet Bloc States Establish Council for Mutual Economic Assistance

North Atlantic Treaty Organization Is Formed

European Payments Union Is Formed

European Coal and Steel Community Is Established

United States Inaugurates Mutual Security Program

European Common Market Is Established

European Free Trade Association Is Established

Organization for Economic Cooperation and Development Forms

Birth of the European Monetary Union Project

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