This is my second opportunity to commemorate the Marshall Plan. Twenty-five years ago I received an honorary degree and gave the Harvard commencement address from the same spot where George Marshall had delivered his reverberating oration on June 5, 1947. There are those who argue that the plan he unveiled that day made little difference to Europe's recovery. The rebuilding of the continent began before aid started to flow, they say, and would have gone ahead in any event. As with any reasonable theory, this one has some evidence on its side -- but not nearly enough.

The United States had, with little publicity, sent Europe large amounts of aid, mainly in the form of loans, in 1945 and 1946. Postwar American assistance reached a trough in 1947, coinciding with, though not causing, the economic and political crises of that year. These economic troubles and the falloff in aid were particularly dangerous in France and Italy, where, if not for the fortuitous presence of strong interior ministers, the pro-Western governments might have given way to powerful domestic communist parties. Britain was free of that threat, but fuel shortages during that particularly severe winter shut down much of the country's industry, and the unemployment rate temporarily soared.

The next year the economies of Western Europe picked up significantly, even before they received Marshall aid. But the governments knew the funds were coming. Europe may have jump-started its recovery before American assistance began to flow, but the Marshall Plan provided a critical element without which the continent's rehabilitation would have stalled: relative freedom from balance-of-payments restraints. Since the end of the war, Europe had lived from hand to mouth; its limited recovery had been stimulated by the desperate need for short-term supplies. Marshall aid enabled Europe to plan more securely and to embark on an essential program of fixed investment. If the Marshall Plan did not prompt the recovery, it served as the crucial underpinnings.

UNRAVELING ALLIES

Aside from the direct economic effects and the free transatlantic transfer of billions of dollars (these were certainly not negligible), the Marshall Plan had several long-lasting political consequences. Perhaps most important, it healed the breach between Britain and the United States that had been threatening their relationship since late 1945. Immediately after the war, the North Atlantic partnership suffered numerous buffets. To American leaders, the British appeared tiresomely sensitive as they clung, with increasing difficulty, to their status as a great power. Britain refused to fall in line with American foreign policy, and the rift between the countries grew over relations with the Soviet Union. First Franklin Roosevelt and then Harry Truman sought to avoid appearing closer to Winston Churchill than to Joseph Stalin. Although the American government's position would soon change, it was initially more hopeful of Soviet cooperation than were either Tory or Labour leaders. When Churchill delivered his "iron curtain" speech in March 1946, Truman was less enthusiastic about it than were the Labour Prime Minister Clement Attlee and Foreign Secretary Ernest Bevin. And a week later, Secretary of State James Byrnes offered the hardly heartwarming comment that the United States was no more interested in an alliance with Britain against the Soviet Union than in an alliance with the Soviet Union against Britain. Such an even-handed approach would have been unthinkable under the team of Marshall and Dean Acheson, but, while it lasted, it put a considerable damper on any "union of hearts" hopes in the British government.

Washington dealt Attlee's Labour government three heavy blows in its first six months. First was Truman's abrupt, unilateral, and almost unintentional termination of lend-lease a week after the end of the Pacific war. Then came the failure of the great economist-diplomat John Maynard Keynes to negotiate a reasonable replacement for the program. Keynes had believed the United States would offer a grant or an interest-free loan of $5 billion to sustain Britain, whose overseas assets had been liquidated and whose exports had fallen by two-thirds as a result of the war effort. But he was able to get only a $3.75 billion loan, payable over 50 years at two percent interest, and a stipulation requiring premature sterling convertibility meant that a large part of this aid whooshed away to third countries as soon as the clause took effect in the summer of 1947. But the British government was too desperate to refuse these terms. Unlike the Marshall aid, which was a gift and not a loan, this assistance package created more dissension than gratitude and was not supported in Parliament, even by the Conservative Party.

Finally, with the severance of the full exchange of information on atomic weaponry, which the British believed had been secured by the Quebec Agreement of 1943, relations between the two countries became still worse. Attlee had a reasonably satisfactory discussion on the matter with Truman in November 1945, but this private understanding was not a public commitment. The United States refused a formal British request for specific information in April 1946, as Truman pleaded that he was bound by the McMahon Act, which restricted the sharing of atomic secrets with other countries. No bitter public recriminations followed: Britain was too dependent on the United States, and Attlee was not a man to indulge in luxuries he could not afford. But at the beginning of 1947, the relationship had little warmth, particularly as the United States and Britain clashed over Palestine, where the United States supported the creation of a new state of Israel to replace the British mandate.

The Marshall Plan was the first step in transforming this atmosphere. It was followed and supplemented by a joint role in the creation of the North Atlantic Treaty Organization in 1949, the common airlift to overcome the Soviet blockade of Berlin in 1948-49, and the two countries' embroilment in the Korean War in 1950. But the plan laid the foundation for the Anglo-American "special relationship." Marshall's gesture of generosity -- or, more cynically, his offer based on exceptionally enlightened self-interest -- became a reality largely because of the rapid response of Bevin and his French counterpart, Georges Bidault. The prompt, effective reaction turned Britain, at least in its own eyes, into an enthusiastic joint parent of the Marshall Plan. The plan also changed the attitude toward the United States of the British moderate left, which had, with the end of the war, come to regard the United States as a hard, self-interested capitalist power. Although the nuclear brinkmanship of President Eisenhower's secretary of state, John Foster Dulles, created strains, the right and center of the Labour Party and the entire Conservative Party, except for a chauvinist fringe, were instinctively pro-American for the rest of their political lives.

The downside was that Britain became less amenable to its real status: an elder and maybe most-favored child, but not a liberated mother. It was a recipient, not a donor, yet it tried to behave as though the reverse were true. There was a mixture of the splendid and the ridiculous in the British attitude. London led Europe in responding to Marshall's speech, yet, having led the continent, the British government sought to detach itself from the rest. This was a remarkable and depressing precursor of Britain's relationship with Europe in subsequent decades. Throughout June 1947, British statesmen pushed for a special co-distributor status, but the ludicrous nature of their aim became clear in the decisive meeting held that month. Attlee, Bevin, President of the Board of Trade Stafford Cripps, and Chancellor of the Exchequer Hugh Dalton -- an array of ministers whom history has judged more impressive than most of their predecessors or successors -- assembled at Downing Street to argue their case before Under Secretary of State for Economic Affairs Will Clayton, who was no more than the third-ranking official in the State Department. Clayton held firm, but his interlocutors did not; they had no ground on which to stand, and, to their credit, they cooperated enthusiastically even though the terms were not to their liking.

The only practical result of this dispute was that, with compromise an important element in most international negotiations, the British were left a little more free than the continental Europeans in their use of "counterpart funds," the monies the assisted governments received from the sale of commodity aid in national markets. Paradoxically, the British, who relied on these funds mainly for the fiscally responsible but unimaginative purpose of paying off debt, probably got somewhat less benefit out of the Marshall Plan than did the others. The French used the counterpart funds for a bold program of investment in their national infrastructure, laying the groundwork for the preeminence of the French railway system from the 1950s on and, more generally, transforming the rather backward industrial society of the Third Republic into the advanced technological power of the Fifth. The counterpart funds allowed the Germans to pull themselves out of the mire by giving their manual laborers enough to eat for the first time since the war. At the time of the announcement of the American aid offer, German exports were only 19 per cent of their 1936 level and output per head was only 52 percent of that level. In 1950, one year after the devaluation of the European currencies against the dollar, German exports rose 162 percent; in the same period, Britain's exports rose only 12 percent.

By June 1947 European integration was already a major U.S. foreign policy goal, and the United States was willing to endure some trade discrimination to foster this political objective. The Marshall Plan's integrationist agenda opened a mild but persistent disagreement between Britain and America. The Attlee government could tolerate the European Payments Union, but the Schuman Plan for a European Coal and Steel Community went too far. The (failed) European Defense Community was too integrationist and supranational for the second Churchill government, as was the European Economic Community, or Common Market, for the short-lived Eden government. In these early years Britain set a policy of partial detachment from European integration that would last for decades. This caused irritation in Washington, particularly when London presented its policies as part of the British effort to be a faithful partner with America. Compared, however, with the more dangerous and basic differences of 1945 over the approach to the Soviet Union, this disagreement was relatively innocuous.

LUCKY GAMBLE

The Marshall Plan undoubtedly provided a major impetus toward European unity, and that was one of its great attractions for the United States. But as the Harvard speech approached, Marshall made an important decision, which might have imperiled this objective, and Truman took some persuading of its wisdom. Aid, Marshall concluded, must be offered to all of Europe, not merely to the noncommunist countries. If Europe was to become deeply divided, the deed must be done -- and must be seen as done -- by Moscow and not Washington. The Russians came to the initial Paris meeting and allowed their satellites to attend as well. But once there, they made it clear that they would be delighted to receive American money but only on a bilateral basis and without any commitment to economic coordination. When the United States refused these terms, the Soviet Union withdrew and took seven Eastern European countries with it. Marshall's calculated risk came off.

It was lucky that the Soviet foreign minister, Vyacheslav Molotov, did not remain in Paris, half cooperative and half sullen. Had he stayed, the venture would probably have led only to some limited transfer of funds from the United States to Europe and then run into the ground. Furthermore, had Marshall's gamble failed and had the Russians welcomed a full cooperative effort, the plan might have become an assuaging force in East-West relations, but it would not have served to help unify Western Europe, for a federation extending from Paris to Moscow was not remotely feasible. Such an impasse might have eased the problems of successive British governments in their efforts to keep their country half in and half out of Western Europe, but it would not have aided the remarkable economic resurgence of the 1950s and 1960s in Germany, France, and the countries clustered around them, or the almost miraculous Franco-German rapprochement in the 1970s. The Marshall Plan would have remained an exceptional example of the confluence of generosity and enlightened self-interest. But it would not have had the formative psychological and political impact that is its legacy.

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  • Lord Jenkins of Hillhead is Chancellor of Oxford University. He was Home Secretary and Chancellor of the Exchequer in two Labour governments between 1965 and 1976, and then served as President of the European Community.
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