Three dimensions of the Marshall Plan increase in significance with the passage of time. The first is the plan's role in producing a postwar global economy that would avoid the problems that plagued the West between the two world wars, including those that led to the Great Depression. The best economists of the United States and Europe felt that severe unemployment was the major danger in the wake of the war. Moreover, many feared that countries might again embrace protectionism as the world spiraled into the grasp of economic nationalism. To build a trade and monetary system that would bring their hopes to life, American planners tied their aid to the liquidation of the wartime debt that Western European countries had incurred with their colonies and other developing nations.

Second, the Marshall Plan helped shape the military and political events of the late 1940s and early 1950s and was in turn shaped by them. These included the communist pressure on Greece and Turkey, which led to the Truman Doctrine in March 1947 and Marshall's more constructive proposal in June of that year; the decolonization crises experienced notably by France, the Netherlands, and Belgium, which strained those countries' economies; the Soviet blockade of West Berlin and the creation of the North Atlantic Treaty Organization, which flowed directly from the extension of West German currency reform to West Berlin; and the Korean War, which led the United States to commit four divisions to NATO, raised the question of West German disarmament, and converted the Marshall Plan into a military support program.

The final aspect is the Marshall Plan's role in promoting the move toward European unity. Europeans took the lead in this effort, but they received critical support from both major parties in the United States, despite integration's implicit anti-American rationale. This anti-American undertone may surprise some today, but it was at the time understood with some subtlety on both sides of the Atlantic. Nevertheless, Americans undertook the Marshall Plan as a national effort. It involved the executive branch and Congress, Democrats and Republicans, the private sector and trade unions, farmers, and a significant portion of the electorate. Only the major war that had preceded it had more fully mobilized American society.

Early in 1946, while serving in the German-Austrian Economic Division of the Department of State, I concluded that if the United States restricted itself to housekeeping tasks within the American zone of Germany and of Berlin, it would ultimately preside over the split of Germany and Europe and harm the prospects for a sound European recovery. Consequently I wrote a memorandum advocating a concerted approach to the continent's economic and security problems, which envisaged an offer of assistance to all of Europe, including the U.S.S.R., and was committed to proceeding in the west if Moscow's response was negative. This plan gained the backing of top State Department officials including Dean Acheson and William Clayton, but James Byrnes, then secretary of state, rejected it, preferring to present the Russians with a proposal for a 50-year disarmament of Germany. Byrnes did, however, endorse the proposed Economic Commission of Europe, in which I later served within the office of the executive secretary. The ECE had members from both blocs and might have been the institutional home for the future Marshall Plan if Stalin had permitted Eastern European participation. These early proposals helped set in motion work among like-minded staff at the State Department that proved operationally useful a year later when George Marshall set forth a similar plan at Harvard's commencement in June 1947.

THE VISIBLE HAND

Seen from a broad perspective, the Marshall Plan reflected the conviction, shared by a good many -- though not all -- Americans, that the isolationism and acute nationalism that had flourished from the presidential election of 1920 until Pearl Harbor, especially during the Great Depression, must not again hold sway. American leaders who held these views tried to make sure that there would be no repeat of such episodes as the U.S. withdrawal of short-term loans to Europe in 1928 so as to take a profit on the stock market. An international conference held at the New Hampshire resort of Bretton Woods in 1944 created the International Monetary Fund to assure that short-term lending would not be determined by short-term private considerations. To provide similar guarantees in long-term lending, the conference created the World Bank.

The Bretton Woods conference also set out to tackle the problem of protectionism. Agreeing that tariffs had proved an illusory device for shielding nations from the vicissitudes of international trade, the conference participants committed their countries to negotiate an approximation of worldwide free trade. But the postwar period was marked by a dramatic shift in the terms of trade, the prices of a country's or region's exports in relation to the prices of imports; the terms of trade had declined modestly between 1933 and 1938 for Britain, Western Europe, and the United States but fell precipitously by some 30 percent for all three in the late 1940s. Thus in 1947 Western Europe confronted an awkward combination of unfavorable terms of trade and a related shortage of dollars. The essential foodstuffs and raw materials European recovery required -- grain, cotton, vegetable oil, meat, dairy products, petroleum, and metals -- could be acquired only from the United States, given the levels of output elsewhere. The postwar pressures for protection in Europe were, not surprisingly, intense.

The Marshall Plan helped cover the shortage of dollars while Western Europe expanded its agricultural production and shifted, wherever possible, from dollar to non-dollar imports. By 1951 grain production in Western Europe, except in Britain, which had expanded agriculture during the war, was not yet back to where it had been in the 1930s, but it was rising, and the postwar dependence on dollar imports was falling. The consequences for the developing world were dramatic. From 1945 to 1951, Third World countries, especially overseas exporters of foodstuffs and raw materials, were able to acquire a relatively greater quantity of European manufactured imports for a given quantity of their exports. This tendency was enhanced in some cases by a country's ability to increase imports by drawing down sterling balances and other reserves built up during the war. For example, the volume of Argentine exports actually declined slightly between the periods 1940-44 and 1945-49, but imports increased 90 percent.

By 1950 the upshot of the European recovery, facilitated by Marshall Plan aid that narrowed the dollar gap, was clear: exports from Western Europe, except from Germany, had surged; European imports had expanded at a slower rate; Third World countries, which enjoyed favorable terms of trade, had seen a disproportionate rise in exports; and, above all, world trade had experienced a remarkable resurgence, which lifted it for the first time above the levels of 1929. These benign outcomes were among the least noted consequences of the Marshall Plan as it was implemented in the form of the European Recovery Program. The program not only revived Europe, but reestablished a vital triangular trade between Western Europe, the United States, and their trading partners in the developing world.

BUTTER TO GUNS

The European Recovery Program did not, of course, proceed in a vacuum. The world changed a great deal between the end of the Second World War and the death of Stalin in early 1953, soon followed by the end of the Korean War. Nationalist sentiment grew more pronounced in restive colonial areas, and colonial and quasi-colonial relations were succeeded by independence in Asia, the Middle East, and Africa. This sea change yielded communist-backed guerrilla wars in places like Indochina and Malaysia, and at times catapulted into power local figures, fresh from struggles against colonial rulers, for whom economic development was at best a secondary concern, such as Indonesia's Sukarno and Ghana's Nkrumah. Just as Marshall aid started flowing, France, the Netherlands, and Belgium became caught up in colonial crises, as local groups demanded independence from their European rulers. These crises strained the European states' economies and drove them to seek military and other help from the United States.

More directly linked to the European Recovery Program was the 1948-49 Berlin crisis, a confrontation that arose from efforts to reform the West German currency and lay the foundation for Germany's comeback. When the new currency was extended to West Berlin, Stalin responded by laying down a blockade of that besieged city. The postwar allies, notably the United States and Britain, supplied West Berlin with food and fuel via an airlift. Neither side wanted a major war over this matter, and the success of the airlift ultimately compelled Stalin to back down. The communist invasion of South Korea on June 25, 1950, came as a shock. It was programmed to exploit gaps in American military thinking and policy that had developed after 1945. Only after the attack in Korea was National Security Council directive 68, which envisaged a tremendous increase in conventional U.S. capabilities, implemented.

Against this background, the difficult question of German rearmament arose. An immense ground force was needed in Western Europe to deter the Soviet infantry potential, backed after 1949 by a nuclear capability, and Britain, France, Italy, and the United States were all under political and economic constraints that precluded the development of a sufficient European force without a substantial German contribution. German opinion was divided for several reasons. Some feared that the Soviets would regard the arming of West Germany as sufficient provocation for beginning a war. Others were concerned that it would foreclose the possibility of negotiations with the Russians on German unity. On another front, some felt that the rearmament would revive the German martial spirit and that this reawakened militarism might set back democratic, pro-Western forces in West Germany. All Marshall Plan participants recognized that the economic and political stability of Germany was fundamental to the future of the continent, and the effects of rearmament on the German domestic situation were naturally of great concern. In France, the reemergence of German military strength generated profound instinctive opposition. Partly to ease those fears, the United States, after a searching congressional and public debate, committed itself in 1951 to maintaining four divisions in Europe -- a momentous decision, especially considering previous American reactions to French requests for a security guarantee, stretching back to Versailles in 1919.

Thus the Korean War brought about a shift in American military and political strategy, raised the irrepressible issue of German rearmament, and reshaped European security. It brought to the fore a range of new issues and responsibilities for Washington, including expanded U.S. military aid to Europe. But by that time, only four years after the beginning of the Marshall Plan, Europe had recovered and was on its way.

BINDING GERMANY

In the relative quiet that followed the post-1951 improvement in Europe's terms of trade, the death of Stalin, and the conclusion of the Korean War, Europe, including Germany, began to prosper, and thought naturally turned to the long run. The Marshall Plan had given Europe a start on dealing with two abiding problems: the acceptance of a vital Germany in a Europe that would not fear its revival -- a central problem in European security since German unification in 1870 -- and the maintenance of ties, however tenuous, to the Soviet Union and Eastern Europe, looking to the day when Stalin's empire would collapse. Europe's own efforts to address these issues revolved around what had been a minor Marshall theme compared with the economic recovery of the individual countries: European integration. After 1950 movement toward a greater sense of fraternity in Western Europe focused on the relations between France and Germany. The epic meeting in May 1950 between Jean Monnet of France and Konrad Adenauer of Germany was an authentic turning point in modern European history.

During a solitary two-week holiday in the Alps just before the meeting, Monnet worked out a grand European strategy to present to the West German leader. The rationale for European integration stemmed from two sources. First, as West German recovery proceeded and the increasingly intense Cold War demanded a more active German military contribution, Franco-German tensions were bound to rise. Within the existing framework, France could maintain the existing constraints on German power only through indefinite allied control, but this was inevitably a losing game as West Germany moved toward an equal role in an American-led anti-Soviet coalition. Second, neutralism had become increasingly popular in France and elsewhere in the West, but that path had to be rejected. A neutral Western Europe would be powerless to affect the course of the conflict between the two non-European superpowers. A united Europe with its own voice in the great affairs of the world could exert influence over the Cold War.

For Europe to unite, France and Germany first had to find firm common ground, and only France could initiate that process. In his memoirs, Monnet described the ensuing conversation with Adenauer:

'We want to put Franco-German relations on an entirely new footing,' I said. 'We want to turn what divided France from Germany -- that is, the industries of war -- into a common asset, which will also be European. In this way Europe will rediscover the leading role which she used to play in the world and which she lost because she was divided . . . The aim of the French proposal, therefore, is essentially political. It even has an aspect which might be called moral.'

Adenauer listened attentively and answered with warmth: 'For me, like you, this project is of the highest importance; it is a matter of morality. We have a moral and not just a technical responsibility to our people, and that makes it incumbent upon us to fulfill this great hope . . . I have waited 25 years for a move like this. In accepting it, my government and my country have no secret hankerings after hegemony. History since 1933 has taught us the folly of such ideas. Germany knows that its fate is bound up with that of Western Europe as a whole.'

When we had finished, Adenauer rose to his feet. 'Monsieur Monnet,' he said, 'I regard the implementation of the French proposal as my most important task. If I succeed, I believe that my life will not have been wasted.'

On January 11, 1952, the West German Bundestag ratified the Schuman Plan for a transnational coal and steel community. A series of European institutions were created in the years that followed, culminating in the 1957 Treaty of Rome and the resulting European Economic Community. Nationalism in Europe was still alive and well, as indicated by the failure of a "European Army" in the French Parliament in 1953 and the preeminence of General Charles de Gaulle in the decade after 1958. But the emergence of the European Community and the continued presence of American ground forces in NATO provided Europeans with greater security than they had ever enjoyed in the past.

However, a paradox persisted even as American administrations of both parties supported and cheered on the movement toward European unity, for that movement had a distinctly anti-American cast. Europe's leaders wanted their united continent to be accorded dignity in dealings with both the Soviet Union and the United States. Fratricidal warfare in Europe had twice required the intervention of two extra-European powers, the United States and the Soviet Union, to salvage democracy on the continent, and the Europeans did not want to permit either state such influence again.

The progress toward European integration in the 1950s owed something to the Marshall Plan, but it was carried forward primarily by the Europeans who remembered life on the continent before 1914: Adenauer, Monnet, Italy's Alcide de Gasperi, and France's Robert Schuman. They were proud men, the product of a great civilization. They were determined that Europe, brought low by the wars of the twentieth century, would rise again. And they made common cause, not with their sons who had failed between the wars, but with their grandsons who had fought with courage in the Resistance and on the battlefields of the Second World War. That connection between grandfathers and grandsons was the key to Europe's revival.

LESSONS OF THE PAST

As the world faces the challenges of the next half-century, it must remember that the Marshall Plan was the right policy for its time and place but that those circumstances are not likely to recur. The success of the Marshall Plan has generated the false hope that the application of capital and technology could do for Third World countries, inner cities, and post-communist Eastern Europe what was achieved in Western Europe in the wake of World War II. Unlike these areas, Western Europe did not need to be invented, it simply had to be recalled. With its skilled and educated work force, its market experience, and its mature political structures, modern Europe is not easy to replicate. At their best, the developing countries, such as South Korea and Taiwan, took two or three decades to catch up with the advanced industrialized world. At the other end of the spectrum, sub-Saharan Africa has not mounted a takeoff after more than 30 years of independence.

Furthermore, the United States, undamaged and at full employment, was a great power in absolute and relative terms after the Second World War. Now Europe has recovered, as has Japan; medium and large new powers have emerged in Asia; Argentina, Brazil, and Mexico are likely to make great progress in Latin America. Power has greatly diffused in the past 50 years, and, over the next 50, a good many nations may acquire the most sophisticated new technologies. The United States is likely to be the "critical margin" in this world but certainly not the last remaining superpower.

The Marshall Plan deserves an honored place in history, but it cannot be blindly or rigidly applied to efforts to solve the challenges of today and the future. However, the experience of the Marshall Plan offers helpful insights as we attempt to deal with the world emerging in the wake of the Cold War. India and China are moving toward full industrialization, and Latin America will see the further development of its considerable powers. Africa's population will surge, even as the continent's economies stagnate. Food prices will rise along with allocations to protect the environment, as the global population levels off at ten billion.

Simultaneously, the industrialized world must cope with declining birth rates. The populations of European Russia and Germany are already falling; Japan and Italy are aging rapidly. Other advanced industrial societies will follow soon enough. Among the developing nations, Taiwan and South Korea already show a fertility rate below 2.1 children per couple, which promises a stagnant or falling population. In the industrialized West, the ratio of the work force to the retired elderly is about five to one. This is estimated to fall to two or three to one by the middle of the 21st century, thus jeopardizing existing social welfare systems.

The world will require a new political economy to deal with the strains imposed by the full industrialization of the developing states, and the stagnant or falling birth rates and aging populations of the older industrialized states and the more precocious developing countries. This is not the occasion to lay out comprehensive thoughts on how to deal with the problems of the next century. But the political structure of the Marshall Plan embodied two principles that bear on them directly.

First, political support in the United States for the Marshall Plan was bipartisan and embraced most of the country's major interests. The United States should face the truly revolutionary problems that the next century will bring with an equally bipartisan and broad-based foundation. Second, the Marshall Plan's program was not worked out bilaterally by the United States and the individual countries of Europe but multilaterally. The behind-the-scenes influence of the United States was immense, and the staff work provided by the states differed considerably, but one cannot overestimate the importance of the Marshall Plan's multilateral character. It provided an essential element of dignity and partnership to even the smallest powers. In the 21st century, the diffusion of power makes it even more essential that plans of action be arrived at on a multilateral basis.

The 21st century will not be worth living if we neglect the lessons of the preceding century: efforts at regional or global hegemony end badly, as Germany, Japan, and the Soviet Union discovered. As China and India reach industrial maturity, the older industrial powers may be brought closer together, and Russia may be forced into closer association with the West. In short, as the architecture and the issues of the 21st century become clear, the West may face problems of integration on a scale larger than those of the Marshall Plan period. The Marshall Plan did not merely put the economies of Western Europe back on their feet. It was part of the effort to create a world unlike that of the failed interwar years; it was closely interwoven with the military and political campaign to deny communism's global vision; and it was the matrix within which the Europeans drew together and learned from a parochial past. This is indeed a story from which the world can garner a few lessons.

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  • Walt W. Rostow, the Rex G. Baker, Jr., Professor of Political Economy at the University of Texas at Austin, was Director of the State Department's Policy Planning Staff and National Security Adviser to the Kennedy and Johnson administrations.
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