Lifeline to a Sinking Continent

Secretary Of State George C. Marshall received an honorary Doctor of Laws degree at the Harvard commencement exercise on the morning of June 5, 1947. That afternoon, he spoke to a group of alumni. His message was short and grim. World War II and its aftermath had brought Europe to the brink of disaster. The Continent’s requirements for the next three or four years were so much greater than its ability to pay that only “substantial” assistance from the United States could prevent “economic, social and political deterioration of a very grave character.” Since the piece-meal help already being given was inadequate, Marshall called upon the European nations to get together to draw up a comprehensive aid package that the United States would do its best to implement. His speech unveiled what would become the European Recovery Program, better known as the Marshall Plan. It was the most momentous and successful peacetime foreign policy initiative in American history.

Marshall’s offer gained immediate attention. MARSHALL PLEADS FOR EUROPEAN UNITY, ran a New York Times headline, and British Foreign Secretary Ernest Bevin later recalled his intense gratification when he heard of Marshall’s speech on a BBC broadcast. “It was like a lifeline to a sinking man,” he remembered. “It seemed to bring hope where there was none.” Bevin hurried to Paris, where he secured French support for a European conference like that which Marshall had proposed. Time was running short.

Marshall had not exaggerated Europe’s distress. To the former British prime minister Winston Churchill, Europe was “a rubble heap, a charnel house, a breeding ground of pestilence and hate.” The war had caused enormous damage to cities, factories, mines, and railroads. In the countryside a great deal of livestock had been killed and farm equipment destroyed. And as if nature itself were conspiring to retard recovery, droughts during the summers of 1946 and 1947 had drastically reduced crops, and the winter of 1946–47 had been a disaster. The greatest blizzard in centuries had combined with freezing temperatures to paralyze whole regions of Europe for months.

As Marshall pointed out in his speech, more important even than the physical damage was the “dislocation of the entire fabric” of the European economy. Cities, lacking fuel and raw materials for what machinery still functioned, could not produce goods to sell to farmers. Farmers, for their part, were unwilling to exchange foodstuffs for unstable currency they could not dependably spend to purchase the products they desired. They therefore used much of their land for grazing rather than crop production and kept what they did grow for themselves. This in turn forced governments to spend money purchasing necessities from abroad, instead of using it for reconstruction.

There were further impediments to economic rehabilitation. At war’s end, the Soviet Union occupied Eastern Europe and part of Central Europe, including half of Germany. Relations between the United States and Great Britain on the one hand and the Soviets on the other had begun to deteriorate even before the fighting stopped. By 1946, as Churchill famously put it in a speech he gave in Fulton, Missouri, an Iron Curtain had descended across the Continent. In March 1947, President Harry S. Truman had proclaimed what became known as the Truman Doctrine, pledging American support for “free peoples” threatened by outside pressure or subversion. Everyone understood that the doctrine was aimed at the Soviet Union and its allies. Trade between Eastern and Western Europe could not revive under such conditions.

Marshall later recalled that he had become convinced of the need for decisive action during a trip to Moscow for a foreign ministers’ conference two months before his Harvard speech. That conference, called to draw up a peace treaty with Germany, had quickly stalemated. Marshall met with Joseph Stalin on April 15 in a vain effort to break the impasse and came away with the impression that the Soviets hoped to profit from continued drift and dislocation. Visits to Germany and France on his way home impressed Marshall with how bad the situation was. He conveyed his sense of urgency to a receptive Truman and a few days later went on national radio to speak to the American people about Europe’s terrible straits. “The patient is sinking,” he told his listeners, “while the doctors deliberate.”

The Harvard speech was a synthesis of ideas put forward by various individuals and groups. Two sources were most influential: a memorandum by Undersecretary of State for Economic Affairs William L. Clayton, who had been advocating something like the Marshall Plan for months, and a report from the State Department’s recently formed Policy Planning Staff, headed by the career diplomat George F. Kennan. Charles E. Bohlen, a Soviet expert, drafted the speech, and Marshall worked on it during his trip to Harvard.

Truman deserves the ultimate credit for approving the plan. George Marshall had gained immense stature at home and abroad as the U.S. Army chief of staff during the war, and Truman insisted that it be referred to as the Marshall Plan instead of the Truman Plan, as some suggested. As the president told an aide, Marshall was “the greatest living American,” and a program bearing his name rather than Truman’s would do “a whole hell of a lot better in Congress.”

The most worrisome aspect of Marshall’s proposal was how the Soviet Union would respond. Those who collaborated on the speech agreed that the United States should not bear responsibility for further dividing Europe by restricting the offer to nations outside the Soviet bloc. Soviet conduct thus far, however, raised the fear that Russia might participate in the program only in order to sabotage it. Moreover, anti-Soviet attitudes among the public and in Congress ran strong enough to doom appropriations for any program that assisted Communist nations.

The Soviets soon revealed their intentions. Bevin and his French counterpart, Georges Bidault, invited Soviet Foreign Minister V. M. Molotov to meet with them in Paris in late June. Molotov raised an immediate objection to the idea of an integrated program, saying that each nation should decide on its own priorities. He furthermore demanded that the United States declare how much money it was prepared to make available and guarantee its appropriation by Congress. When the British and French replied that they intended to follow the cooperative approach suggested by Marshall and that no prior guarantee of legislative action was possible in a democracy, Molotov bitterly denounced the program as an imperialist plot, and returned to Moscow. This was not bad news. “He could have killed the Marshall Plan by joining it,” an American official later observed.

Following Molotov’s departure, Bevin and Bidault issued invitations to nearly all the European nations to a conference on economic cooperation. Spain was excluded because of its pro-German sympathies during the war, Germany because it was occupied by the Allied powers (it would be eligible for aid, however, because its recovery was deemed crucial to European recovery), and the Soviet Union for obvious reasons. Some members of the Soviet bloc responded favorably, but Moscow prevented them from attending. Delegations from sixteen nations met in Paris on July 12 to begin deliberations. Although the United States did not formally participate, various American officials such as Clayton served as conduits from Washington.

The conference was marred by a great deal of bickering when it first got under way. Some nations were reluctant to give up control over their currencies and trade to the kinds of joint agencies the United States insisted were necessary for rehabilitation. The British were—as today —wary of becoming tied too economically to the Continent and wished to retain what they called their “special relationship” with the United States. The French sought arrangements that would expedite their recovery at the expense of Germany, which they wished to keep weak.

The severity of conditions in Europe ultimately compelled the participants to resolve their differences and reach general agreements that would be worked out in more detail later. Drought during the very months the negotiations were being held ensured that crop shortages would make the situation even worse than the one Marshall had described at Harvard. The conference’s General Report, signed on September 22, expressed alarm over what would happen if matters were allowed to drift: “Life in Europe will become increasingly unstable and uncertain industries will grind to a gradual halt for lack of materials and fuel, and the food supply of Europe will diminish and begin to disappear.”

The U.S. Administration moved ahead on two tracks during the autumn of 1947. While officials made countless speeches to gain support, Truman appointed several committees to determine what resources the United States could make available for the program and to assure the public that it would not disrupt the American economy. The most important of these, the President’s Committee on Foreign Aid, was headed by Secretary of Commerce W. Averell Harriman and consisted of prominent representatives from business, labor, and agriculture. The committee reported on November 8 that the United States “has a vital interest—humanitarian, economic, strategic, and political”—in European recovery. It recommended appropriations of between $12.7 and $17.2 billion over the next four years. Meanwhile, Truman called a special session of Congress, in which he asked for $597 million in immediate aid to prevent France, Italy, and Austria from going under. Congress approved $522 million.

On December 19, he sent a message to Congress asking for approval of the Marshall Plan. “We must decide,” he stated, “whether or not we will complete the job of helping the free nations of Europe to recover from the devastation of war.” In addition to his humanitarian appeal, Truman emphasized that the American economy would benefit by European recovery and that continued dislocation would bolster Communist parties, which were already strong in some of the European nations. He asked for a total of $17 billion over a four-year period beginning in 1948.

When debate in Congress began in January 1948, it soon became clear that the program enjoyed powerful bipartisan support. Sen. Arthur Vandenberg of Michigan, a Republican and former isolationist, helped guide the measure through. As chairman of the influential Senate Foreign Relations Committee, Vandenberg negotiated a number of compromises that smoothed ruffled senatorial feathers without seriously diluting the program. Some conservatives, who otherwise might have opposed what critics labeled a “giveaway” with the United States as Santa Claus, were impressed by arguments that the program would benefit American business interests and especially would help prevent the spread of communism. This latter threat was dramatically underscored partway through the debates when a Communist coup overthrew the government of Czechoslovakia.

The Czech coup and Soviet moves in occupied Germany raised the threat of war with the Soviet Union. “Will Russia move first?” Truman asked Marshall. “Who pulls the trigger? Then where do we go?” In this atmosphere the Marshall Plan passed easily, with support even from those who usually opposed foreign aid programs. Truman signed it into law on April 3, 1948, as administration officials and leading members of Congress looked on. The initial appropriation, which was for a period that ran between April 3, 1948, and June 30, 1949 (the end of the fiscal year), totaled $5.85 billion. Within weeks, freighters began leaving for Europe, and when the program became fully operational, there were, at any given time, about 150 ships at sea carrying Marshall Plan aid.

The Marshall Plan legislation provided for a new agency, the Economic Cooperation Administration (ECA), to help the Europeans administer the program. Paul Hoffman, a former president of the Studebaker automobile company, headed EGA/Washington, and Averell Harriman resigned as Secretary of Commerce to take over EGA/Europe. EGA missions were sent to each of the recipient nations.

In addition to distributing Marshall Plan aid, the ECA exercised approval over the use of what were called counterpart funds, sums European governments were required to set aside in their own currencies equal to the value of the goods they received free. The EGA administrators sought to have these funds provide investment capital for modernization and help stabilize currencies, with the ultimate goal of making Europe self-sufficient. They placed special emphasis on projects that would contribute to European economic integration.

The Marshall Plan contributed to and was affected by the growing hostility between the Soviet Union and the United States and its allies. In June 1948 the Soviets cut off rail and road access to the western sectors of Berlin, which lay deep within the Russian zone of occupied Germany. Stalin clearly hoped to obstruct German economic and political recovery in the threatened zones. Unwilling to abandon the Berliners, Truman avoided an armed confrontation by mounting a massive airlift that lasted ten months before the Soviets relented. The blockade hastened the formation of an independent German state, from what had been the western zones, and of the North Atlantic Treaty, whose signatories agreed that an attack on one must be considered an attack on all.

Events over the next two years drastically changed the nature of Marshall Plan aid. In September 1949, Truman announced that the Soviets had exploded their first atomic bomb, ending the American monopoly on nuclear weapons. Weeks later Chinese Communists proclaimed the formation of the People’s Democratic Republic of China, which many in the West perceived as an extension of Soviet power. Then, in June 1950, Communist North Korea invaded the Republic of Korea in what appeared to be a Soviet-sponsored probe of Western resolve and raised fear of a Soviet military thrust into Western Europe. This fear sped up a process that was already under way: shifting the emphasis of Marshall Plan aid from recovery to rearmament. The ECA went out of existence at the end of 1951, six months earlier than originally planned, and subsequent help to the “Marshall Plan countries” was dispensed by the Mutual Defense Aid Program.

Between 1948 and 1951, Congress had authorized a total of $13,348,800,000 in Marshall Plan aid, an amount of course worth many times that in today’s currency. Most of it went to Great Britain, France, Italy, and West Germany, in that order. The United States provided a bewildering variety of items over the years, from orange juice and coal to the most sophisticated machinery. The ECA’s technical assistance and productivity programs sent teams of American experts to help modernize European industry and brought European managers and workers to observe American methods. Opponents of the program, who had warned that it would bankrupt the economy, could not have been more mistaken. The United States went through a period of exceptional prosperity during those years.

The Marshall Plan’s overall impact on European rehabilitation is impossible to measure. By practically every gauge, productivity rose dramatically between 1948 and 1952, and substantial progress was made in resolving the problem of a fragmented Germany, achieving political stability, and promoting economic integration. No one can tell how much the Europeans themselves might have accomplished without the plan, but it can at least be said that in the short run it provided millions of people with badly needed food, medicine, and fuel. And, in so doing, it fulfilled unusually high intentions. American self-interest was involved, of course, but the Marshall Plan remains what one account refers to as a rare example of “power used to its best end.”