The Pandemic Depression
The Global Economy Will Never Be the Same
"The initiative, I think, must come from Europe." That was the crux of George Marshall's speech at Harvard on June 5, 1947. Only if the Europeans helped themselves could the Truman administration persuade Congress and the American public that Europe was worth helping, and only a plan designed by Europeans for the rebuilding of their continent would promote Washington's larger goal of European integration while avoiding the impression that America had dictated the terms of the project. But who were the Europeans, and how should their problems and needs be defined? The transatlantic debate on these questions between 1947 and 1950 determined the shape and fate of Europe for half a century.
To appreciate the significance of the Marshall Plan, we must shed the assumption that the Cold War outlines of Europe were already clear in the immediate aftermath of the defeat of Hitler's Third Reich. Although Winston Churchill privately wrote of the "iron curtain" to Truman in May 1945 and popularized the term the following March in a speech at Westminster College in Fulton, Missouri, Europe was not yet irrevocably polarized. The whole continent had swung leftward, blurring any rigid ideological lines between the communist and capitalist worlds. The success of left-wing parties in postwar elections made clear that Europe's experiences in the depression of the 1930s and the war that followed had discredited capitalism as well as fascism. In Eastern Europe peasant and socialist parties cooperated with communists to redistribute land and bring heavy industry under government control. Further west, the Labour Party surged to power in Britain, social democrats predominated in Norway and Sweden, and center-left coalitions, including the communists who had been in the vanguard of wartime resistance, governed France, Italy, and Belgium. Europeans viewed the United States as the epitome of unreconstructed capitalism: in February 1946 Ernest Bevin, the British foreign secretary, spoke of Britain as "the last bastion of social democracy . . . against the red tooth and claw of American capitalism and the Communist dictatorship of Soviet Russia." Western Europeans remained skeptical of American diplomacy, remembering how Woodrow Wilson's crusading internationalism had degenerated into economic nationalism and political isolation after the previous world war.
Many in Europe hankered after a "third force" strategy that would avoid close alignment with either of the new superpowers. American aid had been available after the war on a bilateral basis to countries ranging from France to Poland. But then came Marshall's promise of more comprehensive aid if "Europe" would define its collective needs, and the offer forced the Europeans to choose sides. Over the next month, critical decisions in Paris, London, and Moscow determined the geographical scope of the Marshall Plan -- and the postwar cast of international politics.
DIVIDING THE CONTINENT
France was among Washington's principal anxieties. Essential commodities such as wheat could be purchased only from the United States, and the French lacked the dollar or gold reserves to acquire them. With the communists polling a quarter of the French vote, Washington feared that continued economic distress would play directly into Moscow's hands, and in May 1947 French Premier Paul Ramadier and Italian Prime Minister Alcide de Gasperi were both trying to construct new coalitions without the communists. Although Italy was in a similar situation to France both economically and politically, it was an underdeveloped former enemy, still striving to regain its sovereignty after the war. France, by contrast, remained among the most powerful nations in Europe and was one of the four occupiers of the defeated Germany. Any effort to help Europe recover from the devastation of the war would have to center around France and take account of its objectives and aspirations.
As after the First World War, France aimed to restrict Germany's recovery and divert its resources, particularly coal from the Ruhr and Saar regions, for the benefit of French industry. Yet Washington saw Germany's economic revival as vital to the health of Europe and was determined to overcome France's opposition. Resolving this deadlock would be a critical issue in the months ahead. But France also offered a more positive contribution to the recovery effort. Although the modernization plan approved by the French cabinet in January 1947 and named for its architect Jean Monnet was not entirely to America's liking, its bold concept of directing capital and resources to a few key sectors, like coal, electricity, and steel, paralleled thinking in Washington. A few days after his famous speech, Marshall noted that the program might be "somewhat along [the] lines [of the] Monnet Plan but on [a] much larger scale involving several countries."
If not for British initiative and support, however, the Marshall Plan might not have come to fruition. It remains a hallowed British myth that only Foreign Secretary Bevin grasped the importance of Marshall's speech, primed not by his officials but by a BBC broadcast. In fact, the Foreign Office expected a novel, large-scale U.S. aid proposal and knew that steps toward integration of the Western European economies were likely to be required. But Whitehall did not take up the Harvard speech itself as urgently as did Bevin. Indeed, the speech was vague -- deliberately so -- but it had implied that specifics would follow in public or should be elicited in private. Bevin, however, was a former union leader with a healthy skepticism for protocol, and he swung into action the next morning. "I never asked him for particulars," he told the House of Commons on June 19. "I said to myself at once -- and the Cabinet agreed immediately -- 'It is up to us to tell them what we want; it is up to us to produce the plan.'"
Bevin's rapid response had two important consequences. First, Britain took a leading role in the Marshall Plan right from the start. Marshall had left the boundaries of "Europe" undefined, and an earlier influential memo by George Kennan's Policy Planning Staff had implied that a plan for Britain's economic problems might be separate from, though linked with, the overall European program. Had the British taken the time to clarify Marshall's intent, the plan might have been shaped primarily by France. Second, Bevin's initiative strengthened the hand of those in Paris favoring a decisive French response. Although the French foreign minister, Georges Bidault, was ready to risk an open breach with Moscow, other policymakers, including Paul Ramadier and President Vincent Auriol, were more hesitant. While the Soviets continued to dangle the offer of a common punitive policy toward Germany, they feared that the acceptance of American aid might inflame the French left. Bevin's early involvement gave Bidault valuable support in the internal French struggle about whether to rely on the "Anglo-Saxons" who had failed them so conspicuously after the Great War.
France and Britain were both, therefore, at the head of the European reaction to Marshall's speech. Through prior leaks to their embassy in Washington, the French were at least as well prepared as the British, and Paris was the first to submit a formal proposal to the United States just eight days later. Although ready for consultation with London, Bidault was privately "not too happy" when Bevin made a public gesture by deciding to fly to Paris on June 17. The American ambassador in Paris told Marshall that "Bidault wanted to steal the show and Bevin beat him by a day or two." Bevin's high-profile move helped ensure that when Under Secretary for Economic Affairs, Will Clayton, came to Europe in late June, his main talks were in London, not Paris.
Bidault extracted from Bevin two important concessions. First, the upcoming conference would be held in Paris rather than London, and second, any invitation to the rest of Europe would include the Soviets. Neither Bevin nor Bidault wanted Soviet participation, but the invitation was vital for French domestic politics; in return the British foreign secretary secured a firm commitment from his French counterpart that they would go ahead even if Moscow delayed or opposed their action. Despite their rivalry, Bevin and Bidault shared a determination to keep the recovery program in their hands. They envisaged a series of technical committees to deal with requirements such as transport, energy, and food, supervised by an executive committee controlled by their two countries. In this way they hoped to minimize the integrationist thrust of Marshall's speech and keep the smaller European states in line. In the months ahead, many battles would be fought along these two fronts.
THE VIEW FROM THE EAST
In June 1947, however, the overriding question was whether the Soviets would participate. Recently declassified documents indicate that Moscow attributed the Marshall Plan to America's need to extend credits to a dollar-less world so as to sell its surplus production.> This claim was often made, in non-Marxist language, in Britain and France as well, but Soviet analysts reckoned that America's underlying intent was political -- to build on the rhetoric of the Truman Doctrine and establish an anti-Soviet Western European bloc. The Bevin-Bidault talks and Clayton's visit to London strengthened these suspicions. Nevertheless, Vyacheslav Molotov, the Soviet foreign minister, agreed to join Bidault and Bevin to discuss Marshall's offer. He arrived in Paris on June 27 with a delegation of around 100 officials, suggesting a readiness to talk seriously.
Molotov's brief, approved by Stalin, had three main themes: to ascertain the type and amount of aid, to avoid a Europe-wide program and instead secure assistance on a country-by-country basis, and, finally, to permit German involvement only if Soviet demands regarding Germany, particularly for reparations, were satisfied. Ironically, these basic aims were not dissimilar to those of France, which also wanted to maximize American aid, minimize the supranational framework, and exploit German resources as much as possible.
But the French and British were both closer to the United States and more dependent upon it. They decided to defend their interests from within any American plan, but Molotov terminated the discussions on July 2 when it became clear that the program still had no content and that the last two Soviet conditions would not be met. Bidault confessed his puzzlement at Soviet tactics. By walking out, he later said, Molotov "had chosen the only way to lose for sure." Had he stayed, the Soviets might have extracted some economic aid or, more probably, ensured the plan's defeat in Congress. But such tactics would have required a combination of persuasive charm and subtle propaganda totally out of character for the man known in the West as "Mr. Nyet."
At the time, Moscow's policy, like Washington's, was in flux. In 1945-46 Stalin had probably hoped to advance Soviet interests without open conflict with the West. He understood the Yalta agreements to mean a free hand for him in Eastern Europe, and he was intent on securing a satisfactory German settlement. The Soviet Union, after all, had lost some 28 million in the war -- over 14 percent of its 1939 population -- compared with 350,000 British (.75 percent) dead and 300,000 Americans (.25 percent); its industry was still underdeveloped relative to the other Allies, and its civilian economy had been shattered. Stalin was not posturing when he told Marshall in April 1947 that the "United States and England might be willing to give up reparations; the Soviet Union could not." He probably concluded from the Truman Doctrine and the deadlocked Four-Power Moscow conference that the rift between the superpowers was now unbridgeable.
On July 4 Bidault and Bevin issued an invitation to all European governments (except Franco's Spain, which was ideologically beyond the pale) to convene in Paris to discuss Marshall's proposal. The Soviet Union had ruled itself out, but the position of the Eastern European states was unclear. Their coalition governments had been keen to participate, and in June Moscow had encouraged them to do so. As late as July 5, Molotov had told all Communist Party leaders in Eastern Europe to go to Paris, reject the American plan, and try to dissuade other delegations from participating. But just two days later, the signals from Moscow changed, and the Eastern European leaders were ordered not to go. In the interim, however, the Czech coalition government had publicly announced its intention to attend, as had the Poles in private. Late on July 9, Czech leaders met Stalin and Molotov at the Kremlin. This was not an abrupt summons (the meeting had been arranged on July 4), and Foreign Minister Jan Masaryk pressed his country's case hard, noting that two-thirds of the country's raw materials came from the West. But Stalin was adamant: "If you go to Paris, you will show that you want to cooperate in an action aimed at isolating the Soviet Union." The rest of Eastern Europe had rejected the invitation. "I believe that the sooner you do that, the better," added Stalin. After stormy discussions the next day in Prague, the Czech government complied.
In the first week of July, Stalin had concluded that Marshall's initiative was aimed not merely at creating a Western bloc, but at detaching Eastern Europe from the Soviet sphere. Bevin himself had told Clayton that he thought the Marshall Plan was "the quickest way to break down the iron curtain." Ironically, however, it was in July 1947 that the iron curtain fell irrevocably across Europe. Over the next few months Moscow whipped the national communist parties into line through the newly established Cominform and accelerated the Stalinization of the Eastern European economies to counter commercial dependence on the West. The Soviet response to Marshall's speech defined the geography of the Marshall Plan. Its content would now be decided by the United States and the countries of Western Europe.
A PLAN COMES TOGETHER
Delegates from 16 countries convened in the Grand Palais in Paris on July 12. In return for the venue, France accepted a British chairman, but Bevin himself stayed only to open the proceedings before leaving the working conference -- renamed the Committee of European Economic Cooperation (CEEC) -- in the hands of Oliver Franks, an academic turned wartime civil servant. His charge, to determine "European availabilities and requirements" for 1948-51 within six weeks, was a monumental task.
The State Department's premise was that a Europe-wide problem required a Europe-wide solution, yet, even without the Soviet Union and its satellites, the CEEC's diversity cast doubt on that assumption. The committee's "Western European" membership included Norway, Sweden, and even Iceland, out in the Atlantic to the northwest, as well as Greece and Turkey on the continent's southeastern flank. Five still had large colonial empires (Britain, France, Belgium, Portugal, and the Netherlands), one was under four-power occupation (Austria), and three were resolute neutrals (Sweden, Switzerland, and Ireland). Britain and France were both relatively rich, advanced economies, while, at the other end of the spectrum, Ireland, Greece, Turkey, and Portugal were backward and agrarian. Even Belgium, the Netherlands, and Luxembourg -- which had agreed to form their own Benelux customs union -- were not in the same boat: Belgium had been speedily liberated in 1944 and was exporting vigorously to its shattered neighbors, whereas the Netherlands had been a bloody battleground during the war's final winter and was presently engaged in a ruinous colonial war in the East Indies. Common problems, let alone common solutions, were hard to discern.
The main similarity was a shortage of dollars or gold to purchase vital imports from the United States, which in 1945 produced half the world's manufactured goods and held half its gold and currency reserves. Even that generalization needs qualification: Belgium's dollar gap was tolerable, and Norway's was not serious until September 1947. Moreover, the problem was not confined to the European continent but was global in scope, reflecting the vast economic imbalances in the wake of a war that had ravaged Europe and much of Asia while leaving the continental United States unscarred. Most CEEC countries saw America, not Europe, as the source of the problem: given its vast payments surplus, the United States, like Britain in the nineteenth century, had to provide credits to sell its goods. They resisted Washington's argument that the dollar gap was not the cause of Europe's difficulties, but rather a symptom of productive bottlenecks which called for American-style integration. As shown by programs like the Monnet Plan, they wished to arrange their own modernization without interference from the United States.
The British were particularly outspoken in resisting Washington's conditions, having had both the wartime lend-lease program and a 1945 loan encumbered with American requirements to move from regional to multilateral trade. They saw the British Commonwealth and the sterling area as the basis for their recovery, certainly not continental Europe with which British commerce was much less significant. Nevertheless, on July 15, 1947, the day the CEEC got down to details, Britain honored the terms of the 1945 loan and made sterling freely convertible into dollars. The result was a financial hemorrhage, stanched only when convertibility was ended on August 20, and a diplomatic crisis that overshadowed the CEEC’s deliberations. Whitehall mismanagement was partly to blame, but the sterling crisis also strengthened Britain's aversion to what it deemed unrealistic and unfair American conditions for future aid.
Also plaguing the CEEC’s work was the ghost at the feast. Germany, Europe's most important economy, was not represented in Paris. Moreover, any estimate of its needs and potential depended on political decisions still to be made about reparation scales, plant dismantling, and production levels. Although Bidault had told Marshall in April that "Germany is in the West, Germany constitutes part of Europe," he did not mean that France had abandoned its hopes of restricting Germany's recovery, especially through control of the Ruhr. "We have 180 Communists" in the National Assembly, Bidault warned, "who say, the Marshall Plan means Germany first." If they were not effectively contradicted, he claimed, "the government will not survive." The CEEC could make no progress until the United States, Britain, and France had reached an accommodation on Germany. That August, the three agreed to an international authority to allocate the Ruhr's output of coal and steel, providing that France accepted higher production levels for German industry and promised to start negotiating the fusion of its occupation zone with those of Britain and America. The agreement was vague, but it was sufficient to allow the CEEC to move toward a conclusion.
A final complication was the smaller powers' resentment of British and French direction. Three -- Italy, Norway, and the Netherlands -- were represented on the executive committee through which Bevin and Bidault had hoped to exercise control. Their governments favored the American integrationist agenda as a way for the smaller powers to check the authority of the great. Italy, still an agrarian economy with a large labor surplus, wanted freer movement of manpower within Western Europe. It also had a strong economic interest in Germany's recovery, as did Belgium, the Netherlands, and Luxembourg, placing these countries in clear opposition to France. The Scandinavians were unhappy about making the CEEC into a permanent organization to manage Marshall aid and promote integration. Anxious to continue "bridge-building" with the East, they preferred using the Economic and Social Commission for Europe. Since the Soviets and their satellites had 6 of the 17 seats on that body, the idea was unacceptable to Britain, France, and the United States, but the Scandinavians kept pressing their point.
As these policy arguments impeded the CEEC’s work, a lack of hard information on European "availabilities," let alone "requirements," made the committee's task still more demanding. It is difficult today to appreciate just how rudimentary was the knowledge of most postwar governments about the operation of their economies. National income accounting was still in its infancy, with wartime Britain and Norway among the pioneers, but even the British Treasury lacked its own planning staff or statistical unit until after the sterling crisis of 1947. Other countries were even less able to analyze their economies, let alone forecast their needs. The technical committees tried to help by forcing them to answer detailed questionnaires. These requested a vast range of data going back to 1929, as well as projections for the future. Sophisticated governments found the questions challenging; for the others, the task was pure guesswork. A British official, Eric Roll, remembered finding a Greek delegate still at his desk one night at 2 a.m., laboriously filling out the questionnaires. Roll told him that these should have been sent home. "You don't really think that anybody in Athens will know anything about this," the Greek official replied scornfully. "I can just invent the figures myself."
Given the difficulties, it was remarkable that the CEEC achieved anything by its deadline. But its recommended figure, approximately $28 billion over four years, was far beyond what the State Department judged acceptable to Congress. Nor was Washington happy with the essentially national approach -- what was termed "sixteen shopping lists" -- rather than a coherent plan for mutual help and structural change. In early September the Americans pressed for a revised report, and the CEEC dug in its heels, prompting Clayton to storm out of one meeting. But both sides understood that any European aid program would have to be scaled back if it was to pass a Republican Congress suspicious of piecemeal handouts. After frantic negotiations, the figures were massaged down to $19.2 billion, and vague commitments were made to increase production, reduce trade barriers, and establish a continuing organization. The report was signed on September 22, 1947.
Although a CEEC delegation visited Washington in October, there was relatively little European input during the next phase of the Marshall Plan, which revolved around Capitol Hill. The preamble to the CEEC report had incorporated the significant Washington buzzwords; the report was "in no sense a 'shopping list'" but "an examination of what the participating countries can do for themselves and for each other to work towards a lasting solution" -- in short, "the advent of a new stage of European economic cooperation." These ringing phrases, and not the more nebulous content of the report itself, shaped much of the American congressional and media comment. By Christmas Truman had secured an interim aid package of $522 million to help France, Italy, and Austria through March 1948. In France, the communist unions had now embarked on a wave of strikes to bring down the government, and the Italian communist party was bidding for power in the April 1948 elections. On December 19 the president sent a full-scale European Recovery Program (ERP) to the Hill, asking for $17 billion over the next four years. Congress insisted on annual appropriations, rather than a four-year package, and the new Economic Cooperation Administration (ECA) became an independent agency rather than an arm of the State Department. Events in Europe, notably the communist take over in Czechoslovakia and the Italian election campaign, eased the bill's passage in Congress, and Truman signed the Economic Cooperation Act into law on April 3, 1948. A total of $5.3 billion was allocated to the ECA for its first year.
Two weeks later, the Christian Democrats won a clear majority in the Italian Chamber of Deputies, with 48.5 percent of the popular vote. The Socialist-Communist Popular Front slipped to 30 percent, as the right and the Vatican -- not to mention the newly established Central Intelligence Agency -- whipped up fear of a communist takeover. But the prospect of Marshall aid was also a powerful inducement. A month before, Marshall had publicly stated that if Italians elected a government hostile to the ERP, the United States would have to conclude that Italy had ruled itself out of the program. To encourage Italians to vote for the Christian Democrats, Washington also approved the use of interim aid for well-publicized development projects rather than for currency stabilization as had initially been intended. Here, it seemed, was a foretaste of the goodies to come.
IMPLEMENTING THE PROGRAM
It had taken ten months to move from Marshall's Harvard commencement speech to the European Recovery Program; given the scope and uniqueness of the project, this was speedy work. But even before aid began to flow in the spring of 1948, the context had changed dramatically. After the communist coup in Czechoslovakia in February, Europe seemed to require military aid from the United States more urgently than it did economic help. In March Britain, France, and the Benelux states concluded the Brussels Pact, a military alliance that was also intended to further Western European economic and cultural integration along the intergovernmental lines that Bevin desired, rather than the grander "United States of Europe" that the out-of-office Winston Churchill had advocated in a speech in Zurich in September 1946. Talks then began in Washington to link the Brussels Pact with North America in a transatlantic alliance. Stalin's blockade of Berlin from the end of June gave the negotiations further impetus, and they resulted in the North Atlantic Treaty of April 1949. Finally, at meetings in London in the spring of 1948, the Americans and British forced the French to accept the first steps toward a West German government. Bidault warned his colleagues that, if they refused, the British would go ahead anyway and France would probably lose Marshall aid. A year before the Federal Republic of Germany came into existence, even before Robert Schuman replaced Bidault as foreign minister in July 1948, French policymakers saw the mechanism of European integration as a way to control German power.
In April 1948 a permanent Organization for European Economic Cooperation was formed. With support from some of the smaller states, particularly the Benelux countries, Washington wanted the OEEC to be the instrument of European economic integration as well as the organizer of Marshall aid. But its structure differed little from the earlier CEEC. The venue was Paris, the chairman was British, and Anglo-French control was perpetuated through an executive committee (though its membership had been enlarged to seven). In August 1948 and again a year later, unseemly rows broke out over the allocation of aid. The "shopping list" approach was as evident as in 1947, and in September 1949 ECA Administrator Paul Hoffman decided that henceforth his office, not the national governments, would determine the allotment of assistance.
Britain and France both feared a powerful OEEC, and they cooperated to weaken its potential impact. The British still felt that their commercial and military interests demanded a global role -- Britain "was not a part of Europe; she was not simply a Luxembourg," as Bevin put it later and the French were equally opposed to a strong OEEC as a potential agent of American control. They blocked the appointment of Paul-Henri Spaak, the Belgian foreign minister and ardent integrationist who was the American choice and would have served as an energetic leader, as the agency's director-general, eventually compromising on Dirk Stikker, the Dutch foreign minister, who would play an anodyne role as a political conciliator. The Paris-London axis also resisted American pressure for the OEEC to sponsor a free-trade customs union. While both the Benelux and Scandinavian groups, which derived around one-fifth of their national income from Western European trade, were interested, Britain and France participated in more global commerce, and both countries envisaged recovery through protectionist regional groupings such as Britain's sterling area or France's "Little Europe."
The ECA Administrator Hoffman's campaign for a multilateral payments system, which would break Western Europe's postwar bilateral trade structure, met with even more widespread resistance. Britain, anxious to safeguard sterling's position as an international currency, naturally opposed the proposal, but Belgium, a creditor nation, also voiced strong doubts. What secured agreement on a European Payments Union in September 1950 was Hoffman's tactic of earmarking $600 million of the year's Marshall aid to back the scheme -- some 15 percent of the total funds committed that year. The payments union lasted eight years, until full currency convertibility was achieved, and it was one of the most significant institutional legacies of the Marshall Plan.
Nevertheless, by 1950 the ERP and the OEEC had been pushed to the margins of transatlantic diplomacy. American attention was now focused on military rather than economic aid: the Mutual Defense Assistance Act of 1949 approved $1.3 billion in weapons and equipment for friendly countries, mostly in the North Atlantic Treaty Organization. After the Korean War began in June 1950, Marshall aid -- and U.S. aid in general -- increasingly meant military hardware. Meanwhile, in September 1949, Britain had devalued the pound by 30 percent, prompting similar action by most other European currencies. Together with the boom in world raw-materials prices after the outbreak of the Korean War, the devaluation helped Britain narrow the dollar gap, seeming to vindicate its doubts about America's remedy for Europe's problems. But the lack of consultation over devaluation upset the continent, encouraging French Foreign Minister Robert Schuman and the new West German Chancellor Konrad Adenauer to move toward a Franco-German entente -- a pact of coal and steel to end the wars of blood and iron.
By autumn 1949 Schuman knew senior policymakers in Washington looked to France, not Britain, to facilitate the Franco-German rapprochement on which the future of Western Europe was seen to depend. The Schuman Plan for a European Coal and Steel Community was announced in May 1950, and henceforth these talks between France, West Germany, Italy, and the Benelux states became the focus for European integration.
ASSESSING THE IMPACT
Western Europe's economic and security situation changed dramatically between 1948 and 1951 -- partly, but not only, as a result of the Marshall Plan. Early histories lauded the plan's economic effect in extravagant terms; it was Europe's "great leap forward" that had saved the continent "from imminent economic ruin" and had laid "the real foundations of later prosperity." Of late, a more nuanced tone has been adopted, particularly by European economic historians but even by some American participants. As these more balanced histories recognize, ERP aid did not begin to flow until well into 1948, by which time European recovery was under way, not least in Germany. In Charles Maier's felicitous metaphor, American aid served like "the lubricant in an engine -- not the fuel -- allowing a machine to run that would otherwise buckle and bind."
Roughly two-thirds of Marshall aid went to four countries: nearly one-quarter to Britain, one-fifth to France, and roughly one-tenth each to Italy and West Germany. Yet in per capita terms, Norway and Austria were the greatest beneficiaries, with Marshall aid worth over $130 per head, compared with $19 for West Germans. The content of the assistance varied greatly. Forty percent of ERP imports into Britain was food, fuel, and fertilizer. Food also constituted a high proportion of Marshall aid to Germany, Austria, and Ireland, but, across much of continental Europe, over 20 percent of the assistance took the form of vehicles, machinery, iron, and steel. In general, food became less important after 1949. Countries also varied in the way they used counterpart funds, the receipts of national governments from the sale of ERP goods, which Washington wanted earmarked for specific purposes. Britain and Norway applied them almost entirely to debt retirement, but they were used largely for capital investment in Italy, West Germany, and above all France, where the Marshall Plan may be said to have saved the Monnet Plan.
Apart from recovery, the other great aim of the Marshall Plan was European integration. Here too its impact is neither simple nor clear. In 1947 it brought to a head the deepening crisis between the two superpowers and solidified the division of the continent. The successful inclusion of Austria within the ERP was of decisive importance in keeping that country, under four-power occupation, out of Stalin's control. While Prague (farther west than Vienna, as Austrians liked to observe, and traditionally linked to southern Germany) was pulled into the Soviet economic orbit, three-quarters of Austria's trade was brought within the OEEC. Within Western Europe, American aid was never used successfully as a lever of integration: the sums involved were too small and European diversity too great. On the other hand, the European Payments Union was a pioneering innovation. And the indirect effect of American pressure was considerable. It forced Western Europeans to think cooperatively, even if along different lines than the United States -- as indicated by Bevin's Western European Union and even the original CEEC. Above all, Marshall aid helped to buy French support for German recovery and to push Paris into a Franco-German solution to Europe's economic and security problems. For Bonn, this was handsome compensation for the fact that, in both absolute and relative per capita terms, West Germany did not do particularly well from the Marshall Plan.
The primary impact of Marshall aid was not economic or institutional but political. Europe's economies would have recovered from the war regardless. But to cover the dollar gap, imports would have been reduced and deflationary pressures imposed. The Marshall Plan was, therefore, vital politically because it promoted growth without depressing wages. All such reasoning is necessarily counterfactual, but it is reasonable to posit that continued austerity and dislocation would have increased alienation and the appeal of extremism. In the early 1930s the right had benefited from Europe's economic troubles; in 1947 it would be the communist left, particularly in the key countries of France and Italy. From this standpoint, the Marshall Plan was more important than Marshall aid, 1947 more decisive than the years that followed. The promise of American aid helped persuade the center-left in both of these countries to break with the communists and, in France's case, with Soviet foreign policy. Given America's isolationist record before 1939, a dramatic offer was necessary before the cautious and skeptical Europeans would embark on a gamble that went against their postwar swing to the left.
Marshall's offer was, therefore, as much about reassurance as recovery. Although this was especially true in 1947, public relations mattered throughout the program. The ERP spawned what may be the largest peacetime international propaganda operation, financed from counterpart funds. This involved the ECA office in every country but especially in France, West Germany, and Italy. Washington told Rome that it must use "every method possible . . . to reach Giuseppe in the factory and Giovanni in the fields." ECA officials sought to convince the average Italian "that the plan is his as well as Mr. Marshall's," especially by targeting labor and other key groups such as mothers and children ("Operation Bambi"). The intent was to publicize not merely Marshall aid but the gospel of productivity and growth that underpinned it. By the end of 1950, 40 films had been made, shown in town cinemas and by mobile projection units, and 6.7 million Italians had visited ECA exhibitions. There the intricacies of counterpart funds were explained by graphics of a huge safe, from which a conveyor belt poured a cascade of thousand-lira notes, which dissolved into models of the projects they funded.
This campaign helps explain why the Marshall Plan seemed so momentous to contemporaries and why we still make a fuss about it today. These are not merely cynical points. Marshall aid was about hearts and minds, not just mouths and bellies; the appearance of success was as vital as success itself. And amid the fuzzy figures and revisionist rollback a clear contrast stands out. Between 1948 and 1951, the United States pumped about $13 billion into Western Europe. Between 1948 and Stalin's death in 1953, the Soviet Union extracted some $14 billion from Eastern Europe. These statistics are crude but telling. They deserve a place in any history of postwar Europe.
APPLYING THE LESSONS?
Historians, sensitive to the uniqueness of events, are reluctant to draw firm lessons from the past. Many have judged that the circumstances that made the Marshall Plan possible are almost impossible to reproduce. But policymakers are interested in the future, not the past. Historical situations are unique, but we may still elicit some general precepts for other times and places.
To launch anything as grand as a Marshall Plan, one must have enormous confidence. Most accounts suggest that U.S. policymakers shared a heady sense that the fate of the world was in their hands. Having won the war, as they saw it, America alone could save the peace. An essential weapon in their armory was the newfangled belief that economic growth could be managed by governments and could resolve political conflicts. Dean Acheson entitled his memoirs Present at the Creation. Not all American policymakers matched his self-assurance, but many in 1947 perceived the dawn of a new world.
At the same time, one needs humility. When Secretary Marshall said the initiative must come from Europe, this was not merely to satisfy Congress or prompt integration. It was also good psychology -- donors are usually less popular than their donations. Britain and France, two proud but declining empires, particularly resented having to accept American aid. In private, U.S. intervention was frequent, often insistent. But public appearances had to be preserved.
Confidence and humility are, of course, opposites. The trick was to manage the two in creative tension: prodding and cajoling, while also allowing the Europeans to save themselves. Stanley Hoffmann has observed that "there was enough disparity of power between the United States and Western Europe to simplify action, and enough of a community of values to make joint effort possible." This was particularly true of America and Britain, who were building on a successful wartime alliance. In fact, the structure of the CEEC -- an executive presiding over technical committees -- was modeled on the combined boards that had run the Anglo-American war effort. Many British and Americans bureaucrats in the OEEC (and some of the French) were veterans of those organizations.
Another broad precept: economic aid, by itself, has limited utility. The ERP assisted rather than prompted European recovery; Marshall aid was not large enough to force European compliance, except perhaps over the payments union. America, even at its postwar peak, could not reshape the world economy in its image. Rather, Marshall aid was most successful when targeted at particular areas, whether urgent food for central Europe or capital investment in Italy and France. And, in the latter case, that went against ECA preferences -- another instance where humility was the handmaiden to confidence.
Politics is as important as economics. In 1947 Marshall aid sought to foster a political realignment around the center-left. In 1948 it was Washington's main instrument in securing French acceptance of a West German state. And, throughout, a fundamental goal was wooing labor away from communist unions. American objectives were only partially realized. And there were costs as well: Washington's new Christian Democratic allies in Italy were often inefficient and corrupt, and France's strategy for industrial recovery was predicated on a protectionism ultimately inimical to American interests. Tying oneself to specific elites carries real dangers, but economic aid can be implemented only via local political groups.
Equally critical is public relations. Marshall hype was essential to Marshall aid on both sides of the Atlantic. It persuaded Europeans to gamble on America and Americans to gamble on Europe. Given the unprecedented nature of Washington's postwar international involvement, public support could not be taken for granted. High-profile evidence that Europe was both transformed and grateful helped convince Congress and the American people to continue voting for appropriations.
Finally, mounting an economic recovery program of that magnitude requires a sense of overwhelming threat. The Marshall Plan was more discreet than the Truman Doctrine -- the scare tactics used to drive aid for Greece and Turkey through Congress in March 1947 had caused a backlash at home and abroad -- but the basic anxiety remained the same, namely a Europe pushed by poverty into the hands of Moscow. Fear of communism, genuine and exaggerated, gave the Truman administration the political clout to ensure the passage of aid, and it polarized European politics along simple right-left lines. One cannot imagine Marshall's offer and Europe's response without the specter of communism. That is why, for many historians, the Marshall Plan is the defining moment of the early Cold War.