The Marshall Plan

Of all the world’s nations, only the United States emerged from the war in a strong economic position, and thus the responsibility to end the suffering of its allies – and even of its former enemy – fell to the U.S. Two years after Germany’s defeat, the devastation of World War II was still exacting its toll throughout Europe. Factories that had been bombed or shuttered were still closed down. Raw materials were unavailable. There seemed to be no way out of the economic swamp left by the war.

On June 5, 1947, Secretary of State George Catlett Marshall, speaking at Harvard University, proposed an economic stimulus plan for Europe that was unprecedented in its scope and intent. Known officially as the European Economic Recovery Program, but immediately called “The Marshall Plan,” the United States was offering Europe $13 billion – an almost unimaginable sum in 1947 – to reconstruct its economy and feed and house its people.

“Our policy is directed not against any country or doctrine but against hunger, poverty, desperation, and chaos,” Marshall said. “Its purpose should be the revival of a working economy in the world so as to permit the emergence of political and social conditions in which free institutions can exist.”

Although Marshall invited all European countries to participate in the new rebuilding program, the Soviet Union almost immediately reacted angrily to the idea, rejecting economic assistance as no more than an American plot to undermine European independence.

The plan actually had many authors. Besides Marshall, its main architects were Under Secretary of State Dean Acheson, and President Truman himself. As developed, the plan had three main purposes:

  • to aid in the financial recovery of Western European countries (including Germany), all of whose economies were reeling;
  • to ensure a demand for American goods overseas;
  • to prevent the expansion of pro-Soviet governments in Europe.


As both a public official and a private citizen, Alger Hiss frequently took anti-Soviet positions. In 1939, in response to the Nazi Soviet Pact – in which Germany and Russia pledged not to invade each other – Hiss argued for immediate assistance to Britain and France so they could prepare for war against Hitler. Later, at the Yalta Conference, Hiss opposed a 1945 Soviet scheme to give themselves two extra votes in the United Nations (President Roosevelt overruled him).  After leaving the State Department in early 1947, Hiss quickly became a leading proponent of the Marshall Plan to rebuild Europe. He was enthusiastic about the plan’s broad humanitarian purposes – and this once again brought him into direct conflict with Soviet views.

In 1947, the Marshall Plan faced not only Soviet bitterness and suspicion but also strong opposition in Congress. Members of Congress were not inclined to back major spending bills, especially at a time when isolationist feeling was on the rise.

The Truman administration lobbied hard for congressional support. In the last week of November 1947, an article appeared in the New York Times Magazine, setting out the administration’s arguments. The plan’s potential, as the article stressed, included putting Europe on a firm anti-communist footing. The article’s author was Alger Hiss, by then president of the Carnegie Endowment for International Peace.

The article was introduced as a defense exhibit at Hiss’s perjury trial to give the jury some insight into Hiss’s political outlook (Whittaker Chambers had testified that Hiss might still be a communist). It was placed in evidence during the direct examination of Clark M. Eichelberger, a former colleague of Hiss’s in the State Department, who was then working for the United Nations. Eichelberger testified that he, former Secretaries of War Robert Patterson and Henry L. Stimson, and Hiss had formed the Committee to Aid the Marshall Plan in order to garner popular support for the bill. Hiss’s article was subsequently distributed by the committee.

After congressional debate in November 1947, the bill was approved by Congress in the spring of 1948. Over the next four years, the Marshall Plan proved a resounding success, providing vital funds for Europe’s recovery and reaffirming the continent’s economic and political ties to the United States. In 1953, Marshall was awarded the Nobel Peace Prize. In awarding the prize, the Nobel Committee said, “The organs which have grown from the Marshall Aid have, more than anything else in these difficult years, contributed to what Nobel termed ‘the idea of a general peace in Europe’ and to a realistic materialization of the idea Nobel in his testament called brotherhood among nations.”

The spirit of the Marshall Plan lives on: cooperation among the 16 countries that received Marshall Plan aid led first to the European Common Market, which was set up in the 1950s, and, decades later, to today’s European Union, a unique partnership which now unites 28 nations.


The Basic Question in The Great Debate

By Alger Hiss, The New York Times Sunday Magazine, November 16, 1947

The great debate over the Marshall Plan is about to begin – a debate comparable in importance and intensity with the discussions of the neutrality and lend-lease issues. It will take place in the Congress which convenes tomorrow and it will echo to all corners of the country.

The plan – officially called the European Recovery Program – merits all the consideration it will receive. It involves great issues and the expenditure of billions of dollars to purchase the economic and political health of Europe, on which depends world well-being and hence our own peace and prosperity.

Despite evidence of general support for the basic ideas behind the program, there are substantial sectors of the nation in which deep doubts exist. Many questions are being asked and with increasing insistence. Of the questions raised these five are the fundamental ones:

  1. Won’t American aid to Europe be pouring money down a rat hole?
  2. Isn’t Europe’s trouble simply that Europeans don’t want to work?
  3. Can we afford to give more billions to Europe without wrecking our economy?
  4. Can’t we get along without Europe anyway?
  5. Why should we support socialist governments?


Economic and fiscal experts will ask many other questions. How many dollars will be needed to provide food and fuel for Europe this winter? How many for the materials required over a longer period for the restoration of European economy? How much wheat, steel, coal and fertilizer can the United States spare without jeopardizing its economic stability? What controls can be devised to insure that the funds made available will not bring inflation here and will not be wasted abroad? How rigid shall be our supervision?

Congress must seek answers to such questions before a practicable program of aid can be worked out. But large sections of the general public demand simple answers to the five simple questions cited above. These are not concerned with the details of effective help but with underlying uncertainties as to whether any aid should be given. What follows is an attempt to answer these questions.

Won’t American Aid to Europe Be Pouring Money Down a Rat Hole?

Those who ask this question either assume that Europe is finished economically and beyond repair or that European governments will waste whatever aid is given them. Those who make the first assumption point to the economic havoc done to Europe by two world wars. They conclude that this damage is irreparable, even with the vast resources at the command of the United States.

But these questioners ignore the resources of Europe and the strides toward recovery already made.

The 16 European countries included in the Marshall Plan, together with western Germany, contain 270 million of the world’s most highly industrialized and industrious people. Before World War II these people had, despite the losses of World War I, achieved a standard of living comparable with our own. Their international trade in 1938 accounted for almost half of the world’s total trade: they had over 60 per cent of the world’s shipping tonnage.

Unless we assume that all the world outside our borders is beyond hope of future economic health, surely Europe is not incapable of revival.

Moreover, Europe has already demonstrated its capacity to recover. In spite of war fatigue, restricted rations and unparalleled devastation, the countries of Western Europe have made a better record of regained production than they did in the first two years after the First World War. Pre-war production in Europe after World War I was not reached for six years. Today, production in France, Belgium and the Netherlands has climbed to approximately 90 per cent of 1938 levels. Scandinavian production is above the 1938 level; so is British, except for certain critical items, such as coal.

Those who speak of “chronic European waste” point to the billions we have made available in recent years for relief and reconstruction – through UNRRA, the American Military Government in occupied areas, the British loan, the International Bank, the Export-Import Bank, lend-lease settlements and disposal of surplus property, and direct appropriations. If this aid has not averted crisis, the argument runs, it must have been wasted.

Like those who believe Europe is finished, these critics overlook the really substantial recovery in Europe. This recovery is strong proof that our aid has been put to effective use. These critics likewise overlook the extent of Europe’s devastation. And they disregard her wartime increase of 24,000,000 in population, her unforeseeable blizzards and droughts.

Another factor is also overlooked – that recent rises in our own prices have greatly reduced the value of our past aid to Europe. Our loan to Britain is a case in point. By last summer its value had been reduced by nearly 40 per cent.

In terms of Europe’s demonstrated needs in recent years, our aid to date has been inadequate rather than excessive.

Finally, there is no reason to assume the impossibility of contriving reasonable and adequate safeguards to insure proper use of future relief funds. It is our responsibility to devise such safeguards. This problem will undoubtedly receive the most careful scrutiny of a Congress not distinguished for improvidence. Aid to Europe in our own interest need not be palsied by the fear of European profligacy.

Is Europe’s Trouble that Europeans Just Don’t Want to Work?

In its extreme form this question reveals a provincial outlook. It appeals to isolationist sentiments of scorn for the “furriner.” It is buttressed by the opinion of many observers that aspects of the social legislation of many European countries – the five day week, costly public housing schemes, generous health benefit systems – represent luxuries which impede recovery. Or in other words, that Europeans should forego some of the benefits of their social laws and work longer and harder.

It is apparent that European labor could produce more if more efficient machinery and work habits were adopted. Europeans should be enabled to work better. But this is a far cry from saying that the European economic crisis is the result of laziness. It is, indeed, apparent that the war left Europe with inadequate industrial capacity – even assuming maximum labor efficiency – to supply essential goods and materials needed for reconstruction.

It was not unwillingness to work which produced last winter’s blizzards, estimated to have cost England alone $800,000,000, or which caused two successive crop failures in Western Europe. It is not laziness that has made France’s current grain harvest the smallest since Napoleon’s time. The rate of recovery compared to World War I is evidence that there has been no serious slackening of effort.

Europe’s eventual recovery, of course, depends fundamentally upon European self-help. Yet, that self-help is impossible unless there is access to non-European sources for food and fuel to replace losses caused by natural disaster and unless there are forthcoming certain materials for reconstruction which only the United States can supply.

Can We Give Away Billions Without Wrecking Our Economy?

This is the most plausible of the questions. Our vast outpouring of national resources to stem Nazi and Japanese aggression severely strained our economy. Our burden of debt and consequently of taxation, the depletion of our minerals and soil fertility, the deferment of needed plant renovation, our unbalanced price structure, all testify to this. But what are our resources for if not for utilization? And what effective utilization can we foresee in a world in which economic chaos is the rule beyond our borders?

The test is not so much whether we can afford further strains upon our economy but whether we can from a long-range view afford not to give aid required to prevent a world situation that would seriously impair our own well-being.

Viewed in terms of Europe’s requests and of our resources, it is apparent that the question, when stated broadly, is an unreal one. Our national income is currently at a level of over $200 billion a year, the highest in our history. Our exports of goods and services in the first half of this year were at the rate of over $20.5 billion. The American people spend $8.75 billion annually for alcoholic beverages, about $3.5 billion for tobacco, about $1.68 billion for theatre and movie tickets, about $1.5 billion for jewelry and watches, and one billion dollars or more for cosmetics. Our standard of living is the highest we have ever known.

Assuming that the need for Marshall Plan dollars will range between $15 and $20 billion, this would mean an average of something like $4 billion a year for four years. Amounts well in excess of the average would, of course, be needed in the first year, with considerably less than the average needed in the fourth year. This is not aid of a magnitude to raise the specter of a wrecked United States economy. No net increase in our total exports, no great part of our product is required.

The real issue of what we can and cannot afford involves a few articles in great demand in Europe and in short supply here – wheat, coal, steel, fertilizer, for example. The basic problem is to find ways and means of protecting our price structure against continued demand for these articles.

It may be asked: aren’t dollars merely a hunting license for scarce commodities? Will not the dollar needs for such commodities continually mount as prices rise so that the cost of aid abroad and inflation at home will engage in a disastrous race?

These are very real questions. But they are manageable questions. They relate to details of the Marshall Plan, to techniques of aid to Europe, to measures for preventing additional inflationary pressures. They do not raise the issue of the feasibility of any assistance at all.

These questions have been the subject of exhaustive study by the Krug Norse and Harriman committees and by Congressional groups which recently visited Europe. They can safely be left to Congress.

Can’t We Get Along Without Europe Anyway?

To get along without Europe would in an economic sense come close to getting along without the rest of the world. In the first place, the 21 per cent of our imports which in 1938 came from the 16 Marshall-Plan countries include many manufactured articles we could not easily do without. More important, although Europe is not the source of many of our essential raw-material imports, its colonies are. Their exports to us would be disrupted in the event of a collapse of the mother countries.

And the non-colonial areas of South America, Africa and Asia have always carried on a large part of their foreign trade with Europe. The continent has taken large quantities of those of their primary products for which we have little need – or, in the case of raw materials important to us, of which even our large purchases represent only part of their total production. Thus, the collapse of Europe, which our “getting along without” would entail, would have grave repercussions in these non-European areas and impair the flow of the rest of our raw-material imports.

On the export side, getting along without Europe would mean pretty much getting along without exports. In the period 1921-1925, about 22 per cent of our exports went to the United Kingdom; approximately 20 per cent to Germany, France and Italy. The world-wide depression of the 1930s reduced our exports to Europe, but from 1936 to 1938 the United Kingdom, still our leading customer, took 17 per cent. And the Marshall Plan countries together took 35 per cent of our total exports in 1938.

The economic dislocation of Europe would also cut heavily our exports to non-European countries, whose ability to buy our products would be sharply reduced by the inability to acquire dollar exchange from the sale of commodities to Europe. It need hardly be said that an area normally responsible for more than half the world’s trade could not be eliminated without a major disruption in world economy – a disruption from which we would suffer.

From 1925 to 1937, more than half our cotton crop, 38 per cent of our refined copper, 35 per cent of our leaf tobacco, 31 per cent of our typewriters, 28 per cent of our crude sulphur, 24 per cent of our airplanes and airplane parts, 21 per cent of our lard, nearly 20 per cent of our agricultural implements and machinery, plus great quantities of automobiles, industrial machinery, wheat, rice, fruit and other products were sold abroad. Today, with our greatly expanded productive capacity, loss of export markets would have still greater impact on our economy than occurred when the vast surpluses and idle plants of the early 1930s produced economic stagnation.

From the political point of view, getting along without Europe would mean the jettisoning of our firmest and potentially strongest allies. It would mean abandoning the continent from which we drew our ideals of freedom and democracy, and the disappearance of a cultural center that enriches the world.

Strategically, our abandonment of Europe would expose 270 million people and the world’s second greatest industrial complex to absorption in the vast area already dominated by communist ideology and by Soviet interests.

Why Should We Support Socialist European Governments?

This is the least rational and therefore the most elusive of the basic questions, yet it is one to which answers readily suggest themselves.

First, because it is to our interest to assist the present governments of western Europe whether or not they are socialistic; second, because our traditional policy is that it is none of our business what form of government other peoples may freely choose for themselves.

Despite these ready answers, it is important that erroneous assumptions implicit in the question should be pointed out. No country of Western Europe is at present fully socialistic or even 50 per cent socialistic in its control of economic life. Moreover, our aid is quite as likely to reduce as to accelerate developments which have evoked certain measures of a socialistic nature.

Those who express doubt about the wisdom of aiding socialist governments most frequently cite England as their prime example. They forget the stark necessity, recognized by Conservatives as well as by Laborites, for governmental control of an economic nature. Were the Conservatives to come into power in England tomorrow, they would not denationalize the coal mines, which could not operate without government subsidy. Nor would they abandon rationing or export controls. Britain’s economic stringency compels a rigid conservation and allocation of assets.

The extensive controls in England are far from constituting full socialism. Coal and electric power are the only nationalized industries in England – apart from communication and transportation services which for long have been traditional areas for nationalization by European governments not remotely socialistic in outlook.

The recent municipal election victory of the Conservatives shows how little the English people relish controls, even though dictated by necessity. There is little evidence of popular appetite for doctrinaire application of socialist theory.

Essentially the answer to this fifth question lies in the fact that the freely chosen governments of western Europe are the governments with which we must deal if we are to prevent economic chaos. We have no alternative.

We want to make Europe self-sustaining as promptly as possible. We want our aid to be limited in amount and terminable in time, not a draft against us of indefinite duration and hence of indefinite size. Clearly there can be no stability for Europe unless the European peoples cooperate fully in the recovery effort. This can best be encouraged if European statesmen and business and financial leaders are relied upon to carry out details of activities financed by us and thus maintain the confidence of their countrymen.

Sound management practice and common sense as to the best means of accomplishing our objectives call for leaving operational methods in the hands of those who in the long run will necessarily be responsible for results. Back-seat driving is neither good business nor acceptable international conduct.