Marshall Plan

The Marshall Plan, known officially following its enactment as the European Recovery Program (ERP), was the main plan of the United States for the reconstruction of Europe following World War II. The initiative was named for United States Secretary of State George Marshall and was largely the creation of State Department officials including William L. Clayton and George F. Kennan.

Implementation

The first substantial aid went to Greece and Turkey in January 1947, which were seen as being on the front lines of the battle against communist expansion and were already being aided under the Truman Doctrine. Initially the UK had supported the anticommunist factions in those countries, but due to its economic condition it requested the U.S. to continue its efforts. The ECA formally began operation in July 1948.

Related Topics:
Greece - Turkey - Truman Doctrine

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

The official mission statement of ECA was to give a boost to the Europe economy: to promote European production, to bolster European currency, and to facilitate international trade, especially with the United States, whose economic interest required Europe to become wealthy enough to import U.S. goods. Another unofficial goal of ECA (and of the Marshall Plan) was the containment of growing Soviet influence in Europe, evident especially in the growing strength of communist parties in Czechoslovakia, France, and Italy.

Related Topics:
Mission statement - Communist parties

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

The Marshall Plan money was transferred to the governments of the European nations. The funds were jointly administered by the local governments and the ECA. Each European capital had an ECA envoy, generally a prominent American businessman, who would advise on the process. The cooperative allocation of funds was encouraged, and panels of government, business, and labor leaders were convened to examine the economy and see where aid was needed.

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

The Marshall Plan aid was mostly used for buying goods from the United States. The European nations had all but exhausted their foreign reserves during the war, and the Marshall Plan aid was their sole means of importing goods from abroad. At the start of the plan these imports were mainly much-needed staples such as food and fuel, but later the purchases turned towards reconstruction needs as was originally intended. In the later years, under pressure from the United States Congress and with the outbreak of the Korean War, an increasing amount of the aid was spent on rebuilding the militaries of Western Europe. Of the some $13 billion allotted by mid-1951, $3.4 billion had been spent on imports of raw materials and semi-manufactured products; $3.2 billion on food, feed, and fertilizer; $1.9 billion on machines, vehicles, and equipment; and $1.6 billion on fuel.{{ref|imports}}

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

Also established were counterpart funds, which used Marshall Plan aid to establish funds in the local currency. According to ECA rules 60% of these funds had to be invested in industry. This was prominent in Germany, where these government-administered funds played a crucial role loaning money to private enterprises which would spend the money rebuilding. These funds played a central role in the reindustrialization of Germany. In 1949–50, for instance, 40% of the investment in the German coal industry was by these funds.{{ref|coal}} The companies were obligated to repay the loans to the government, and the money would then be lent out to another group of businesses. This process has continued to this day. The Special Fund, then supervised by the Federal Economics Ministry, was worth over DM 10 billion in 1971. In 1997 it was worth DM 23 billion. Through the revolving loan system, the Fund had by the end of 1995 made low-interest loans to German citizens amounting to around DM 140 billion. The other 40% of the counterpart funds were used to pay down the debt, stabilize the currency, or invest in nonindustrial projects. France made the most extensive use of counterpart funds, using them to reduce the budget deficit. In France, and most other countries, the counterpart fund money was absorbed into general government revenues, and not recycled as in Germany.

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

A far less expensive, but also quite effective, ECA initiative was the Technical Assistance Program. This program funded groups of European engineers and industrialists to come to the United States and tour mines, factories, and smelters so that they could then copy the American advances at home. At the same time several hundred American technical advisors were sent to Europe.

~ ~ ~ ~ ~ ~ ~ ~ ~ ~