Being twinned with the Truman doctrine earlier that year, the Marshall Plan had further political implications. Great Britain’s economic situation and the withdrawal from Greece were the first warnings of a need for a more aggressive use of American resources. There was also political turmoil in France and Italy where “worsening economic conditions brought on by the winter crisis were undermining governmental authority and strengthening Communist parties”. Economic integration in Western Europe “could play an active role in the global containment of Soviet expansion”. It was thought that economic growth would be the key to social harmony and would preserve political democracy; as Hogan puts it, there was “the conviction that economic growth was the way to ameliorate social divisions”. It was no surprise that although desperate for help, the Soviet satellites in the eastern bloc would only decline economic aid from America by Soviet leader Stalin “claiming that the conditions were not appropriate”.
Although many thought that significant funding didn’t come until the 1947 Marshall Plan was implemented, in the two years following the 1945 peace, all European nations had increased their industrial output beyond pre-war levels with the exception of Austria, France, Italy and the Netherlands. This was due, in no small part, to US dollars channelled through a number of different programmes across Europe mainly in an attempt to increase food supply and aid rapid reconstruction. The Government and Relief in Occupied Areas (GARIOA) programme gave Germany $1.6 billion in the form of food, goods and services up to 1950. It was countries such as Poland, Hungary, Czechoslovakia and Albania who cherished the relief given through the United Nations Relief and Recovery Agency (UNRRA). In fact, this funding made up 11 per cent of Poland’s national income but this funding was short lived as those countries under the influence of the East missed out on Marshall Aid.
The early European recovery, funded by US dollars in the projects aforementioned, had created balance of payments problems for many countries due to imports being bought at a far greater rate than exports could compensate for. The combined trade deficits of the western European nations averaged at around $5 billion per annum over the three years after war and already in terms of deficit with America, Britain alone owed £655million. The struggle for Europe to capture American markets for their goods led to the US solution of providing Europe with dollars as grants not loans.
Between August 1948 and June 1952 a total of $12,817 million was provided by America to the following countries:
Source: Foreman-Peck, 1983, 273.
This type of aid was different to those previous as it was not a Lend-Lease agreement such as during the war but it seemed a multi-clausal agreement had to be entered by those receiving the aid or what Mark Mazower called a “solid economic, political and military commitment”. It was the political and military dimension that had thrown the issue of Europe’s dependency on US aid into question as the Americans, fearful of a weak Europe being overrun by communism, had a vested interest in aiding Europe whether it was economically necessary or not. The economic results of the Marshall Plan seemed to speak for themselves despite this criticism. Those countries that accepted Marshall aid, on average, saw Gross National Product (GNP) rise by 25 per cent, agricultural output up by 24 per cent, and industrial output up by 64 per cent. This confirmed that the aid was effective and ultimately necessary, emphasising European reliance on American funds.
On a political front, American aid had an immense impact on Western Europe and could unquestionably be seen as a total success. Americans helped change European capitalism “transforming industrial relations, preaching the gospel of scientific management and modernizing working practises and equipment”, as Mark Mazower puts it. American approaches were adopted to encourage faster capitalist attitudes in the production process, and big campaigns were orchestrated. The conviction of enforcing economic growth meant that living standards also improved and so, therefore, there was no need to succumb to a communist take-over. It is my opinion that US aid, in the form of the “Truman doctrine” and as we have seen the Marshall Plan, fuelled the beginnings of the cold war, a war which would only be fully over by as late as 1991.
Ultimately, a European recovery was inevitable; US aid simply acted as a catalyst to speed up the rate at which the recovery was achieved. The degree to which the European recovery relied on US aid is actually quite exaggerated. The majority of European nations were very successful in generating domestic investment and when compared to their eastern counterparts, growth rates in western Europe were roughly on a par. Marshall Plan funds were used to “ease foreign-exchange bottlenecks, providing scarce dollars, and allowing growth to continue” at an accelerated rate. However, Barry Eichengreen points out that “Marshall-Plan-Financed imports of US goods limited the market power of European producers”. Another factor that influenced the recovery was the fact that there was tight government control exercised on credit and investment, which conveyed a general willingness for authorities to exert their power. There were two clear motives why America stepped in to aid Europe’s recovery. In economic terms they simply wanted to develop a market place, i.e. Europe, where they could continue to sell to. Simultaneously there were political significances with this help, as it was America’s foreign policy objective to contain Soviet expansion, and later see the destruction of communism.
Bibliography
Barry Eichengreen, Reconstructing Europe’s trade and payments, (Manchester, 1993).
M. W. Flinn, Readings in Economic and Social History, (London, 1964), Part 60 and 90.
James Foreman-Peck, A History of the World Economy, (Hertfordshire, 1995).
Michael J. Hogan, The Marshall Plan, (New York, 1989).
Mark Mazower, Dark Continent, (London ,1999).
Alan Sked and Chris Cook, Post-War Britain: A Political History.
Anthony Sutcliffe, An Economic and Social History of Western Europe Since 1945, (Essex, 1996).
Anthony Sutcliffe, An Economic and Social History of Western Europe Since 1945, Page 15.
Anthony Sutcliffe, An Economic and Social History of Western Europe Since 1945, Page 16.
James Foreman-Peck, A History of the World Economy, Page 245.
Anthony Sutcliffe, An Economic and Social History of Western Europe Since 1945, Page 13.
Michael J. Hogan, The Marshall Plan, Page34.
Anthony Sutcliffe, An Economic and Social History of Western Europe Since 1945, Page 20.
Michael J. Hogan, The Marshall Plan, Page33.
Michael J. Hogan, The Marshall Plan, Page34.
Michael J. Hogan, The Marshall Plan, Page432.
Anthony Sutcliffe, An Economic and Social History of Western Europe Since 1945, Page 19.
Anthony Sutcliffe, An Economic and Social History of Western Europe Since 1945, Page 20
Alan Sked and Chris Cook, Post-War Britain: A Political History, Page 34.
Anthony Sutcliffe, An Economic and Social History of Western Europe Since 1945, Page 20
Mark Mazower, Dark Continent, Page 298.
Mark Mazower, Dark Continent, Page 299.
Mark Mazower, Dark Continent, Page 299.
Barry Eichengreen, Reconstructing Europe’s trade and payments, Page 114.
