In addition to ERP grants, the Export-Import Bank (an agency of the US government) at the same time made long-term loans at low interest rates to finance major purchases in the US, all of which were repaid. In the case of Germany, there also were 16 billion marks of debts from the 1920s which had defaulted in the 1930s, but which Germany decided to repay to restore its reputation.
In addition to ERP grants, the Export-Import Bank (an agency of the US government) at the same time made long-term loans at low interest rates to finance major purchases in the US, all of which were repaid. In the case of Germany, there also were 16 billion marks of debts from the 1920s which had defaulted in the 1930s, but which Germany decided to repay to restore its reputation.
Much more important were efforts to modernize European industrial and business practices using high-efficiency American models, reducing artificial trade barriers, and instilling a sense of hope and self-reliance. By 1952, as the funding ended, the economy of every participant state had surpassed pre-war levels; for all Marshall Plan recipients, output in 1951 was at least 35% higher than in 1938.
Agricultural production was 83% of 1938 levels, industrial production was 88%, and exports 59%.
The United States Congress passed a law on June 7, 1940 that allowed the BLS to "make continuing studies of labor productivity" and appropriated funds for the creation of a Productivity and Technological Development Division.
Already in 1943, the United Nations Relief and Rehabilitation Administration (UNRRA) was founded to provide relief to areas liberated from Germany.
Zhdanov warned that if they continued to fail to maintain international contact with Moscow to consult on all matters, "extremely harmful consequences for the development of the brother parties' work" would result. Italian and French communist leaders were prevented by party rules from pointing out that it was actually Stalin who had directed them not to take opposition stances in 1944.
Belgium, the country that relied earliest and most heavily on free-market economic policies after its liberation in 1944, experienced swift recovery and avoided the severe housing and food shortages seen in the rest of continental Europe. Former US Chairman of the Federal Reserve Bank Alan Greenspan gives most credit to German Chancellor Ludwig Erhard for Europe's economic recovery.
From July 1945 through June 1946, the United States shipped 16.5 million tons of food, primarily wheat, to Europe and Japan.
Italy and Belgium would follow by the end of 1948. In Germany in 1945–46 housing and food conditions were bad, as the disruption of transport, markets, and finances slowed a return to normality.
All this aid was separate from the Marshall Plan. ===Canada=== Canada, like the United States, was damaged little by the war and in 1945 was one of the world's richest economies.
In a review of West Germany's economy from 1945 to 1951, German analyst Werner Abelshauser concluded that "foreign aid was not crucial in starting the recovery or in keeping it going".
Economic Growth in Europe Since 1945 (Cambridge UP, 1996). Erhard, Ludwig, "Veröffentlichung von Wilhelm Röpke", in In Memoriam Wilhelm Röpke, Ed., Universität Marburg, Rechts-und-Staatswissenschaftlice Fakultät, Gaddis, John Lewis.
The Reconstruction of Western Europe, 1945–51.
Foreign Policy and the Politics of Reconstruction of West Germany's Shipbuilding Industry, 1945–1955 (2001) online version Weissman, Alexander D.
Food shortages were severe, especially in the harsh winter of 1946–47.
From July 1945 through June 1946, the United States shipped 16.5 million tons of food, primarily wheat, to Europe and Japan.
Food production was two-thirds of the pre-war level in 1946–48, while normal grain and meat shipments no longer arrived from the East.
Britain received an emergency loan of $3.75 billion in 1946; it was a 50-year loan with a low 2% interest rate.
These reparation payments meant the Soviet Union itself received about the same as 16 European countries received in total from Marshall Plan aid. In accordance with the agreements with the USSR, shipment of dismantled German industrial installations from the west began on March 31, 1946.
The Marshall Plan's accounting reflects that aid accounted for about 3% of the combined national income of the recipient countries between 1948 and 1951, which means an increase in GDP growth of less than half a percent. After World War II, in 1947, industrialist Lewis H.
Marshall spoke of an urgent need to help the European recovery in his address at Harvard University in June 1947.
Exceptions were the United Kingdom, the Netherlands and France, where by the end of 1947 production had already been restored to pre-war levels before the Marshall Plan.
There was also some hope that the Eastern Bloc nations would join the plan, and thus be pulled out of the emerging Soviet bloc, but that did not happen. ====Need to rebuild Germany==== In January 1947, Truman appointed retired General George Marshall as Secretary of State.
Over $14 billion was spent or loaned during the postwar period through the end of 1947 and is not counted as part of the Marshall Plan.
It ceased operation of displaced persons camps in Europe in 1947; many of its functions were transferred to several UN agencies. ==Soviet negotiations== After Marshall's appointment in January 1947, administration officials met with Soviet Foreign Minister Vyacheslav Molotov and others to press for an economically self-sufficient Germany, including a detailed accounting of the industrial plants, goods and infrastructure already removed by the Soviets in their occupied zone.
Marshall gave the address at Harvard University on June 5, 1947.
He quickly realized, however, that this would be impossible after Molotov reported—following his arrival in Paris in July 1947—that conditions for the credit were non-negotiable.
The Soviets also then blamed the United States for communist losses in elections in Belgium, France and Italy months earlier, in the spring of 1947.
In a 1947 speech to the United Nations, Soviet deputy foreign minister Andrei Vyshinsky said that the Marshall Plan violated the principles of the United Nations.
On December 17, 1947, the United States agreed to give $40 million to France, Austria, China, and Italy. Agreement was eventually reached and the Europeans sent a reconstruction plan to Washington, which was formulated and agreed upon by the Committee of European Economic Co-operation in 1947.
Washington demanded convertibility of sterling currency on 15 July 1947, which produced a severe financial crisis for Britain.
Convertibility was suspended on 20 August 1947.
Finland, which the USSR forbade to join the Marshall Plan and which was required to give large reparations to the USSR, saw its economy recover to pre-war levels in 1947.
A Gallup Poll taken between the months of July and December 1947 shows the percentage of Americans unaware of the Marshall Plan fell from 51% to 36% nationwide.
Political scientist Ralph Levering points out that: Mounting large public relations campaigns and supporting private groups such as the Citizens Committee for the Marshall Plan, the administration carefully built public and bipartisan Congressional support before bringing these measures to a vote. Public opinion polls in 1947 consistently showed strong support for the Marshall plan among Americans.
Erhard put Röpke's theory into practice and would later credit Röpke's influence for West Germany's preeminent success. Henry Hazlitt criticized the Marshall Plan in his 1947 book Will Dollars Save the World?, arguing that economic recovery comes through savings, capital accumulation, and private enterprise, and not through large cash subsidies.
The Marshall Plan: America, Britain, and the Reconstruction of Western Europe, 1947–1952 (Cambridge UP, 1987). Knapp, Manfred, et al.
New York: Palgrave, 2001. Stern, Susan, Marshall Plan 1947–1997 A German View Stueck, William Whitney, ed.
'Marshall Aid as a Catalyst in the Decolonisation of Indonesia 1947-1949', Journal of Southeast Asian Studies, 19: 335–352. von Mises, Ludwig, "Profit and Loss" presented to the Mont Pèlerin Society held in Beauvallon, France, September 9 to 16, 1951; reprinted in Planning for Freedom, South Holland, Ill., Libertarian Press, 1952 ==Further reading== Agnew, John and Entrikin, J.
1 (Winter 2005) Speech by George Marshall on June 5, 1947 at Harvard University (original recording) As delivered transcript of Marshall Plan speech on June 5, 1947 at Harvard University 1940s economic history 1950s economic history 1948 in law Aftermath of World War II in the United States Cold War history of the United States Economic development programs Presidency of Harry S.
The Marshall Plan (officially the European Recovery Program, ERP) was an American initiative passed in 1948 for foreign aid to Western Europe.
Replacing an earlier proposal for a Morgenthau Plan, it operated for four years beginning on April 3, 1948.
The Marshall Plan's accounting reflects that aid accounted for about 3% of the combined national income of the recipient countries between 1948 and 1951, which means an increase in GDP growth of less than half a percent. After World War II, in 1947, industrialist Lewis H.
Secretary Marshall became convinced Stalin had no interest in helping restore economic health in Western Europe. President Harry Truman signed the Marshall Plan on April 3, 1948, granting $5 billion in aid to 16 European nations.
The $17 billion was in the context of a US GDP of $258 billion in 1948, and on top of $17 billion in American aid to Europe between the end of the war and the start of the Plan that is counted separately from the Marshall Plan.
Italy and Belgium would follow by the end of 1948. In Germany in 1945–46 housing and food conditions were bad, as the disruption of transport, markets, and finances slowed a return to normality.
Industrial production fell more than half and reached pre-war levels at the end of 1949. While Germany struggled to recover from the destruction of the War, the recovery effort began in June 1948, moving on from emergency relief.
The currency reform in 1948 was headed by the military government and helped Germany to restore stability by encouraging production.
However, in 1948 Tito broke decisively with Stalin on other issues, making Yugoslavia an independent communist state.
He said it was without economic justification; however, it was "absolutely necessary" in "the world battle against communism." In the end, only 17 senators voted against it on March 13, 1948 A bill granting an initial $5 billion passed Congress with strong bipartisan support.
Truman's own prestige and power had been greatly enhanced by his stunning victory in the 1948 election.
However, opposition against the Marshall Plan was greatly reduced by the shock of the communist coup in Czechoslovakia in February 1948.
Truman cut this to $17 billion in the bill he put to Congress. On March 17, 1948, Truman addressed European security and condemned the Soviet Union before a hastily convened Joint Session of Congress.
"What [Truman] said fell short of being tough", noted Representative Eugene Cox, a Democrat from Georgia, "there is no prospect of ever winning Russian cooperation." Despite its reservations, the 80th Congress implemented Truman's requests, further escalating the Cold War with the USSR. Truman signed the Economic Cooperation Act into law on April 3, 1948; the Act established the Economic Cooperation Administration (ECA) to administer the program.
Thus the plan ended in 1951, though various other forms of American aid to Europe continued afterward. The years 1948 to 1952 saw the fastest period of growth in European history.
In 1948, the US allowed ERP aid to be used in purchasing goods from Canada.
The Marshall Plan grants were provided at a rate that was not much higher in terms of flow than the previous UNRRA aid and represented less than 3% of the combined national income of the recipient countries between 1948 and 1951, which would mean an increase in GDP growth of only 0.3%.
America's Feeble Weapon: Funding the Marshall Plan in France and Italy, 1948–1950 (1994) online version Djelic, Marie-Laure A.
Industrial production fell more than half and reached pre-war levels at the end of 1949. While Germany struggled to recover from the destruction of the War, the recovery effort began in June 1948, moving on from emergency relief.
American leaders were internally divided, but finally agreed and began sending money on a small scale in 1949, and on a much larger scale in 1950–53.
In 1949–50, for instance, 40% of the investment in the German coal industry was by these funds. The companies were obligated to repay the loans to the government, and the money would then be lent out to another group of businesses.
France, which received billions of dollars through the Marshall Plan, similarly saw its average income per person return to almost pre-war level by 1949.
American leaders were internally divided, but finally agreed and began sending money on a small scale in 1949, and on a much larger scale in 1950–53.
British economist argued that their position was validated by 1950 as European industrial production exceeded prewar levels.
However, by 1950, American rearmament and heavy spending on the Korean War and Cold War finally ended the dollar shortage.
The founding conference of the Congress for Cultural Freedom was held in Berlin in June 1950.
American Republicans hostile to the plan had also gained seats in the 1950 Congressional elections, and conservative opposition to the plan was revived.
The Marshall Plan's accounting reflects that aid accounted for about 3% of the combined national income of the recipient countries between 1948 and 1951, which means an increase in GDP growth of less than half a percent. After World War II, in 1947, industrialist Lewis H.
The Marshall Plan was replaced by the Mutual Security Plan at the end of 1951; that new plan gave away about $7.5 billion annually until 1961 when it was replaced by another program. The ERP addressed each of the obstacles to postwar recovery.
Much more important were efforts to modernize European industrial and business practices using high-efficiency American models, reducing artificial trade barriers, and instilling a sense of hope and self-reliance. By 1952, as the funding ended, the economy of every participant state had surpassed pre-war levels; for all Marshall Plan recipients, output in 1951 was at least 35% higher than in 1938.
Thus the plan ended in 1951, though various other forms of American aid to Europe continued afterward. The years 1948 to 1952 saw the fastest period of growth in European history.
With the escalation of the Cold War, the United States reconsidered its position, and in 1951 embraced Spain as an ally, encouraged by Franco's aggressive anti-communist policies.
Austrian School economist Ludwig von Mises criticized the Marshall Plan in 1951, believing that "the American subsidies make it possible for [Europe's] governments to conceal partially the disastrous effects of the various socialist measures they have adopted".
The Marshall Plan grants were provided at a rate that was not much higher in terms of flow than the previous UNRRA aid and represented less than 3% of the combined national income of the recipient countries between 1948 and 1951, which would mean an increase in GDP growth of only 0.3%.
In a review of West Germany's economy from 1945 to 1951, German analyst Werner Abelshauser concluded that "foreign aid was not crucial in starting the recovery or in keeping it going".
'Marshall Aid as a Catalyst in the Decolonisation of Indonesia 1947-1949', Journal of Southeast Asian Studies, 19: 335–352. von Mises, Ludwig, "Profit and Loss" presented to the Mont Pèlerin Society held in Beauvallon, France, September 9 to 16, 1951; reprinted in Planning for Freedom, South Holland, Ill., Libertarian Press, 1952 ==Further reading== Agnew, John and Entrikin, J.
Much more important were efforts to modernize European industrial and business practices using high-efficiency American models, reducing artificial trade barriers, and instilling a sense of hope and self-reliance. By 1952, as the funding ended, the economy of every participant state had surpassed pre-war levels; for all Marshall Plan recipients, output in 1951 was at least 35% higher than in 1938.
Thus the plan ended in 1951, though various other forms of American aid to Europe continued afterward. The years 1948 to 1952 saw the fastest period of growth in European history.
'Marshall Aid as a Catalyst in the Decolonisation of Indonesia 1947-1949', Journal of Southeast Asian Studies, 19: 335–352. von Mises, Ludwig, "Profit and Loss" presented to the Mont Pèlerin Society held in Beauvallon, France, September 9 to 16, 1951; reprinted in Planning for Freedom, South Holland, Ill., Libertarian Press, 1952 ==Further reading== Agnew, John and Entrikin, J.
The proportion of Marshall Plan loans versus Marshall Plan grants was roughly 15% to 85% for both the UK and France. Germany, which up until the 1953 Debt agreement had to work on the assumption that all the Marshall Plan aid was to be repaid, spent its funds very carefully.
In the 1953 Debt agreement, the amount of Marshall plan aid that Germany was to repay was reduced to less than US$1 billion.
There were conservatives among the participants, but non-communist (or former communist) leftists were more numerous. ==Effects and legacy== The Marshall Plan was originally scheduled to end in 1953.
Under the London Debts Agreement of 1953, the repayable amount was reduced by 50% to about 15 billion marks and stretched out over 30 years, and compared to the fast-growing German economy were of minor impact. ==Areas without the Plan== Large parts of the world devastated by World War II did not benefit from the Marshall Plan.
By mid-1948 industrial production in Poland, Hungary, Bulgaria, and Czechoslovakia had recovered to a level somewhat above pre-war level. ===Aid to Asia=== From the end of the war to the end of 1953, the US provided grants and credits amounting to $5.9 billion to Asian countries, especially Rep.
In addition, there is no correlation between the amount of aid received and the speed of recovery: both France and the United Kingdom received more aid, but West Germany recovered significantly faster. Criticism of the Marshall Plan became prominent among historians of the revisionist school, such as Walter LaFeber, during the 1960s and 1970s.
The Marshall Plan was replaced by the Mutual Security Plan at the end of 1951; that new plan gave away about $7.5 billion annually until 1961 when it was replaced by another program. The ERP addressed each of the obstacles to postwar recovery.
By 1969 the Irish Marshall Plan debt, which was still being repaid, amounted to 31 million pounds, out of a total Irish foreign debt of 50 million pounds. The UK received US$385 million of its Marshall Plan aid in the form of loans.
In addition, there is no correlation between the amount of aid received and the speed of recovery: both France and the United Kingdom received more aid, but West Germany recovered significantly faster. Criticism of the Marshall Plan became prominent among historians of the revisionist school, such as Walter LaFeber, during the 1960s and 1970s.
The Special Fund, then supervised by the Federal Economics Ministry, was worth over DM 10 billion in 1971.
The final German loan repayment was made in 1971.
The Marshall Plan: America, Britain, and the Reconstruction of Western Europe, 1947–1952 (Cambridge UP, 1987). Knapp, Manfred, et al.
Through the revolving loan system, the Fund had by the end of 1995 made low-interest loans to German citizens amounting to around DM 140 billion.
By 1996 it had accumulated a value of 23 billion Deutsche Mark. ==Funding for CIA fronts== The Central Intelligence Agency received 5% of the Marshall Plan funds (about $685 million spread over six years), which it used to finance secret operations abroad.
Economic Growth in Europe Since 1945 (Cambridge UP, 1996). Erhard, Ludwig, "Veröffentlichung von Wilhelm Röpke", in In Memoriam Wilhelm Röpke, Ed., Universität Marburg, Rechts-und-Staatswissenschaftlice Fakultät, Gaddis, John Lewis.
In 1997 it was worth DM 23 billion.
New York: Oxford University Press, 1997 Hogan, Michael J.
The Big Chill: Canada and the Cold War (Toronto: Irwin Publishing Ltd., 1998). Chomsky, Noam, & Ruggiero, Greg, The Umbrella of U.S.
New Brunswick, NJ: Transaction, 2000.
policy, Seven Stories Press, 2002 Cini, Michelle, in Schain, Martin, (ed.) "From the Marshall Plan to the EEC", in The Marshall Plan: Fifty Years After, New York: Palgrave, 2001 Crafts, Nicholas, and Gianni Toniolo, eds.
New York: Palgrave, 2001. Stern, Susan, Marshall Plan 1947–1997 A German View Stueck, William Whitney, ed.
online, for middle and high school students Zmirak, John, Wilhelm Röpke: Swiss Localist, Global Economist (ISI Books, 2001) ==External links== Marshall Plan from the National Archives George C.
policy, Seven Stories Press, 2002 Cini, Michelle, in Schain, Martin, (ed.) "From the Marshall Plan to the EEC", in The Marshall Plan: Fifty Years After, New York: Palgrave, 2001 Crafts, Nicholas, and Gianni Toniolo, eds.
Lexington, Ky.: University Press of Kentucky, 2004. Van der Eng, Pierre (1988).
128, 2005 Wend, Henry Burke.
1 (Winter 2005) Speech by George Marshall on June 5, 1947 at Harvard University (original recording) As delivered transcript of Marshall Plan speech on June 5, 1947 at Harvard University 1940s economic history 1950s economic history 1948 in law Aftermath of World War II in the United States Cold War history of the United States Economic development programs Presidency of Harry S.
The largest recipient of Marshall Plan money was the United Kingdom (receiving about 26% of the total), but the enormous cost that Britain incurred through the "Lend-Lease" scheme was not fully re-paid to the USA until 2006.
The Marshall Plan gave another $13 billion, equivalent to about $100 billion in 2010 value. ===Modern criticism=== However, its role in the rapid recovery has been debated.
(Routledge, 2012) Fossedal, Gregory A.
The Marshall Plan: Saving Europe, Rebuilding Austria (U of New Orleans Publishing, 2017) 336 pp.
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