The Marshall Plan rested squarely on an American belief that European economic recovery was essential to the long term interests of the United States.

In the British government, however, there had been no resolution of the earlier disputes over the merits of an Anglo-Western European customs union.  Bevin remained alive to the political advantages of this idea, and in August Sir Edmund Hall-Patch, an under Secretary in the Foreign Office, suggested that European economic integration along lines ‘comparable to the vast industrial integration of the United States’ might ‘go far to solve our own economic difficulties.’  But policymakers in the economic ministries still thought this course more likely to worsen current difficulties than to solve them.  Repeating arguments rehearsed the previous January, they saw it leading to transnational economic coordination of a kind that would prevent the Labor government from pursuing an independent course at home.  Of particular concern was the government’s ability to harbor British labor and industry from the competitive currents of the marketplace.  This concern had led British policymakers to reject proposals, coming from the CEEC (Committee for European Economic Cooperation), for the coordination of national production.  The same concern prompted sepulchral predictions of the destructive dislocations that would ensue if national tariffs were lowered and British industries, particularly the steel, chemical, and textile industries, faced ruinous competition from lower cost producers on the continent.

Such a course meant scrapping the network of commercial and currency arrangement that tied the Commonwealth into a large multilateral market where British exporters had privileged advantages and where payments were made in sterling rather than in dollars.  It meant slowing down recovery at home, aggravating the Treasury’s already serious dollar drain, and increasing Britain’s dependence on American aid.  These conclusions, coming from the economic ministries and the Colonial Office, were reaffirmed in a report issued in August by the special committee of experts that Bevin had persuaded the Cabinet to establish the previous January.  The Foreign Office would seek to reverse these judgments in the weeks ahead.  But given the current opposition, neither Bevin nor the British delegation in Paris could do much to support the French proposal.

The British economy deteriorated in the second half of 1947.  The world wide scarcity of dollars, the fuel and grain shortages that followed the winter crisis, and the rising cost of imports from the United States combined to slow the pace of British recovery and confront the British Treasury with a major dollar crisis.  So did the Treasury’s decision in July to abide by the terms of the 1946 Anglo-American loan agreement and make sterling convertible into dollars.  By early August, Britain’s dollar reserves were dwindling at the rate of $176 million a week, a clip that would exhaust the balance of the American loan by October and force the Treasury to draw down its final reserves.  In these circumstances, the British delegation in Paris became more leery than ever of the Benelux proposal.  They were in no mood to multilateralize intra-European trade and payments at a time when their own government was considering new bilateral commercial and exchange-control arrangements in order to reverse Britain’s trade deficit and protect its shrinking reserves.

Now American leaders developed a full picture of what they wanted to accomplish in Europe.  By the end of 1948, they had taken great strides in the direction of a European neo-capitalism.  They had tried to strengthen the CEEC, which would later become the OEEC (Organization for European Economic Cooperation), to launch a new payments plan, and forge transnational networks of corporative collaboration and power sharing, all of which would supposedly help to integrate economies and set the stage for a new era of social peace and material abundance on the continent.  They had also encouraged a political unification of Western Europe and had opened negotiations for a North Atlantic military alliance that would eventually lead to the integration of a European defense system.  This alliance would be called NATO (North Atlantic Treaty Organization).

American goals remained the same, then, but the first half of 1949 did witness a shift in strategy.  Marshall Planners had always assumed that monetary and trade reforms should go hand in hand with programs to restore production and curb inflation.  The recovery of prewar production levels and the growing signs of financial stability therefore led inevitably to less emphasis on these initial priorities and greater pressure for the devaluation of currencies, the liberalization of trade, and the formation of a European payments union.  This change of course seemed particularly desirable because the recovery of production had done little to correct Western Europe’s trade and payments deficit with the dollar area, which actually grew worse in the first half of the New Year.  This deterioration raised the dreadful prospect that Western Europe would not be self-supporting at the end of the Marshall Plan.  Under these circumstances, the devaluation of currencies and the elimination of bilateral payments barriers became the keys not simplify into an integrated European economy but also into a multilateral pattern of international trade.

There were two of the three conditions attached to the British proposal, the third being an American decision to waive Article 9 of the Anglo-American loan agreement.  Article 9 permitted the British to discriminate against American imports only in cases where discrimination benefited ‘war-shattered’ economies.  If left standing, it would force the British to exclude the sterling Dominions from the advantages of the trade-liberalization proposal.  The British would have to discriminate in favor of the OEEC countries against the Dominion (as well as against the United States), and this action would disrupt the sterling bloc.  Once again, Britain’s interests in Europe had to be reconciled with it is commitments to the sterling area.

The Marshall Plan was a success if judged simply as a program to control inflation, revive trade, and restore production.  However, there is little doubt that the Marshall Plan helped to modernize budgetary systems in Western Europe or that it encouraged the spread of indicative economic planning, the rationalization of production, the development of corporative patterns of public-private power sharing, and the conviction that economic growth was the way to improve social divisions.  These had been American goals from the start.  They were parts of the New Deal synthesis and were pursued with particular vigor through the technical-assistance program, the productivity teams, and the national production centers that Marshall Aid helped to establish.

List of Works Cited

Arkes, Hadley. Bureaucracy, the Marshall Plan, and the National Interest. Princeton:

 Princeton U.P., 1972.

Gimbel, John. The Origins of the Marshall Plan. Stanford: Stanford U.P., 1976.

Hogan, Michael J. The Marshall Plan: America, Britain, and the Reconstruction of

Western Europe, 1947-1952. New York: Cambridge U.P., 1987.

Lutz, Frederick A. The Marshall Plan and European Economic Policy. Princeton:

Princeton U.P., 1972.

Pelling, Henry. Britain and the Marshall Plan. New York: St. Martin’s Press, 1988.

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