The Marshall Plan, officially known as the European Recovery Program (ERP), was an American initiative to help Western Europe rebuild its economies in the aftermath of World War II. It was named after the United States Secretary of State, George C.. Marshall and consisted of aid both in the form of grants and loans. The Plan was in effect for four years, starting on 3 April 1948. It was based on a report written by Lewis H. Brown at the request of General Lucius D. Clay. The report was entitled “A Report on Germany.”
Purpose of the Marshall Plan
The purpose of the Plan was not to counteract the destruction caused by WWII as much as it looked toward the future. The Marshall Plan was designed to stimulate economic recovery of the nations severely impacted by the war. Plan proponents believed that modernization of industrial and business practices was needed along with removal of trade barriers, increased productivity and prevention of the spread of Communism.
General George C. Marshall, author of the Marshall Plan, photo taken in 1947, courtesy of Wikimedia Commons. www.walled-in-berlin.com
Recipients of Marshall Plan Aid
The United States provided in excess of $12 billion in economic assistance. Of the eighteen countries receiving aid, the largest recipient was the United Kingdom securing $3,297 billion. France received $2,296 billion, West Germany received $1,448 billion, Italy $1,203 billion and the Netherlands $1,128 billion. Although eligible for aid, the Soviet Union chose not to participate because it did not want the US to get any kind of control over communist economies. The Soviet Union also denied Eastern Bloc countries the opportunity to participate.
Effectiveness of the Plan
By 1952, the year the funding ended, the economy of every participating country had surpassed pre-war levels. Output was at least 35% higher than in 1938. However, most historians reject the idea that the Marshall Plan alone was responsible for European recovery. Most believe that it sped European recovery, but did not initiate it.
Germany and the Marshall Plan
In West Germany, bombing had destroyed 5,000,000 houses and apartments, and 12,000,000 refugees from former eastern territories added to the crisis. In 1945–1946 housing and food were difficult to impossible to obtain. And the disruption of transportation, infrastructure, markets and finances slowed a return to normality even more. In addition, in January 1946, the Allied Control Council placed a cap on German steel production. The maximum allowed was set at about 5,800,000 tons of steel per year, the equivalent to 25% of the pre-war production level. Many steel plants were dismantled. The plan was to reduce Germany to the standard of living it had known at the height of the Great Depression in 1932.
Germany Linked to Recovery of All of Western Europe
By mid-1947, the U.S. realized that economic recovery in Europe could not go forward without the reconstruction of the German industrial base because the entire economy of Europe was interlinked. To reduce Germany to a “pastoral state,” as proposed by Henry Morgenthau, would be a mistake. Instead, the “complete revival of German industry, particularly coal mining” became of primary importance to American security. Former US Chairman of the Federal Reserve Bank, Alan Greenspan, gives most credit to German Chancellor Ludwig Erhard for Europe’s economic recovery.
The Soviet Union and the Marshall Plan
The Soviet Union had been ravaged by WWII as much as Western Europe and imposed large reparation payments on Austria, Finland, Hungary, Romania and especially East Germany. These countries were forced to pay vast cash sums and ship large amounts of supplies to the USSR. In essence, the Soviet Union received reparations in the form of monies and goods that were equivalent in value to what the eighteen Western European countries received in the form of Plan aid. To reduce the effects of the Marshall Plan, the USSR developed its own economic plan, known as the Molotov Plan.
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Tags: A Report on Germany, Alan Greenspan, Allied Control Council, European Recovery Program, George Marshall, Henry Morgenthau, Lewis H. Brown, Lucius D. Clay, Ludwig Erhard, Marshall Plan, Molotov Plan
