The Marshall Plan was a massive program of aid from the United States to sixteen western and southern European countries, aimed at helping economic renewal and strengthening democracy after the devastation of World War II. It was started in 1948 and was officially known as the European Recovery Program, or ERP, but is more commonly known as the Marshall Plan, after the man who announced it, US Secretary of State George C. Marshall.

The Need for Aid

The Second World War severely damaged the economies of Europe, leaving many in a parlous state: cities and factories had been bombed, transport links had been severed and agricultural production disrupted. Populations had been moved or destroyed, and a tremendous amount of capital had been spent on weapons and related products. It's not an exaggeration to say the continent was a wreck. 1946 Britain, a former world power, was close to bankruptcy and had to pull out of international agreements while in France and Italy there was inflation and unrest and the fear of starvation. Communist parties across the continent were benefiting from this economic turmoil, and this raised the chance Stalin could conquer the west through elections and revolutions, instead of having lost the chance when Allied troops pushed the Nazis back east. It looked like the defeat of the Nazis might cause the loss of the European markets for decades. Several ideas to aid the rebuilding of Europe had been proposed, from inflicting harsh reparations on Germany—a plan that had been tried after World War I and which appeared to have failed utterly to bring peace so wasn't used again —to the US giving aid and recreating someone to trade with.

The Marshall Plan

The US, also terrified that communist groups would gain further power—the Cold War was emerging and Soviet domination of Europe seemed a real danger—and wishing to secure European markets, opted for a program of financial aid. Announced on June 5th, 1947 by George Marshall, the European Recovery Program, ERP, called for a system of aid and loans, at first to all nations affected by the war. However, as plans for the ERP were being formalized, Russian leader Stalin, afraid of US economic domination, refused the initiative and pressured the nations under his control into refusing aid despite a desperate need.

The Plan in Action

Once a committee of sixteen countries reported back favorably, the program was signed into US law on April 3, 1948. The Economic Cooperation Administration (ECA) was then created under Paul G. Hoffman, and between then and 1952, over $13 billion worth of aid was given. To assist in coordinating the program, the European nations created the Committee of European Economic Cooperation which helped form a four-year recovery program.

The nations receiving were: Austria, Belgium, Denmark, France, Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland, Turkey, United Kingdom, and West Germany.

Effects

During the years of the plan, receiving nations experienced economic growth of between 15%-25%. Industry was quickly renewed and agricultural production sometimes exceeded pre-war levels. This boom helped push communist groups away from power and created an economic divide between the rich west and poor communist east as clear as the political one. The shortage of foreign currency was also alleviated allowing for more imports.

Views of the Plan

Winston Churchill described the plan as “the most unselfish act by any great power in history” and many have been happy to stay with this altruistic impression. However, some commentators have accused the United States of practicing a form of economic imperialism, tying the western nations of Europe to them just as the Soviet Union dominated the east, partly because acceptance into the plan required those nations to be open to US markets, partly because a great deal of the aid was used to purchase imports from the US, and partly because the sale of ‘military’ items to the east was banned. The Plan has also been called an attempt to "persuade" European nations to act continentally, rather than as a divided group of independent nations, prefiguring the EEC and the European Union. In addition, the success of the plan has been questioned. Some historians and economists attribute great success to it, while others, such as Tyler Cowen, claim the plan had little effect and it was simply the local restoration of sound economic policy (and an end to vast warfare) which caused the rebound.