" European Recovery Program " redirects here. It is not to be confused with European Economic Recovery Plan. The Labeling used on Marshall Plan aid packages.
The Marshall Plan (officially the European Recovery Program, ERP) was the American program to aid Europe where the United Statesgave monetary support to help rebuild European economies after the end of World War II in order to prevent the spread of Soviet Communism.The plan was in operation for four years beginning in April 1948. The goals of the United States were to rebuild a war-devastated region, remove trade barriers, modernize industry, and make Europe prosperous again.
The reconstruction plan, developed at a meeting of the participating European states, was established on June 5, 1947. It offered the same aid to the Soviet Union and its allies but they did not accept it, as to do so would be to allow a degree of US control over the Communist economies. During the four years that the plan was operational, US $13 billion in economic and technical assistance was given to help the recovery of the European countries that had joined in theOrganization for European Economic Co-operation. This $13 billion was in the context of a U.S. GDP of $258 billion in 1948, and was on top of $13 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. The Marshall Plan was replaced by the Mutual Security Plan at the end of 1951.
The ERP addressed each of the obstacles to postwar recovery. The plan looked to the future, and did not focus on the destruction caused by the war. Much more important were efforts to modernize European industrial and business practices using high-efficiency American models, reduce artificial trade barriers, and instill 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. Over the next two decades, Western Europe enjoyed unprecedented growth and prosperity, but economists are not sure what proportion was due directly to the ERP, what proportion indirectly, and how much would have happened without it. The Marshall Plan was one of the first elements of European integration, as it erased trade barriers and set up institutions to coordinate the economy on a continental level—that is, it stimulated the total political reconstruction of western Europe.
Belgian economic historian Herman Van der Wee concludes the Marshall Plan was a "great success": "It gave a new impetus to reconstruction in Western Europe and made a decisive contribution to the renewal of the transport system, the modernization of industrial and agricultural equipment, the resumption of normal production, the raising of productivity, and the facilitating of intra-European trade."
The hunger-winter of 1947, thousands protest in West Germany against the disastrous food situation (March 31, 1947). Sign: We want coal, we want bread Europe's economies were recovering very slowly, as unemployment and food shortages led to strikes and unrest in several nations. In 1947 the European economies were still well below their pre-war levels and were showing few signs of growth. Agricultural production was 83% of 1938 levels, industrial production was 88%, and exports only 59%. In Britain the situation was not as severe.
In Germany in 1945-46 housing and food conditions were bad, as the disruption of transport, markets and finances slowed a return to normal. In the West, bombing had destroyed 5,000,000 houses and apartments, and 12,000,000 refugees from the east had crowded in. Food production was only two-thirds of the prewar level in 1946-48, while normal grain and meat shipments no longer arrived from the East. Furthermore the large shipments of food from occupied nations that had sustained Germany during the war ended. Industrial production fell more than half and reached prewar levels only at the end of 1949
In May 1947 communist ministers were abruptly expelled from the French and Italian governments.
During the first three years of occupation of Germany the UK and US vigorously pursued anindustrial disarmament program in Germany, partly by removal of equipment but mainly through an import embargo on raw materials and deliberate economic neglect.
As a consequence of the industrial disarmament of Germany, whose economy by mid-1947 was deteriorating rapidly, the economic stagnation of Europe became inevitable. By shutting down the German industry the Allies disrupted intra-European trade, a trade that was vital for European recovery, and they thereby delayed European economic recovery.
Nicholas Balabkins concludes that "as long as German industrial capacity was kept idle the economic recovery of Europe was delayed" and that "To nurse Europe back to economic health the Marshall Plan scrapped the early postwar economic chains of Germany." Vladimir Petrov concludes that as a result of the early punitive occupation of Germany the Allies "delayed by several years the economic reconstruction of the wartorn continent".
By July 1947 Washington realized that economic recovery in Europe could not go forward without the reconstruction of the German industrial base, deciding that an "orderly, prosperous Europe requires the economic contributions of a stable and productive Germany." Unless West Germany became the engine of growth the economic stagnation of Europe became inevitable.
In addition, the power and popularity of indigenous communist parties in several Western European states worried the United States. In both France and Italy, the crisis of the postwar era had provided fuel for their Communist Parties, which had become well organized in the resistance movements of the war. These parties had seen significant electoral success in the postwar elections. Though today many historians feel the possibility of France and Italy falling to the communists was remote, it was regarded as a very real possibility by American policy makers at the time.
The American administration of Harry Truman began to believe this possibility in early March 1946, with the Soviets' violation of the withdrawal deadline in Iran, and Churchill's Iron Curtain speech, given in Truman's presence a few days later. In the administration's view, the United States needed to adopt a definite position on the world scene or fear losing credibility. The emerging doctrine ofcontainment (as opposed to rollback) argued that the United States needed to substantially aid non-communist countries to stop the spread of Soviet influence. There was also some hope that the Eastern European nations would join the plan, and thus be pulled out of the emerging Soviet bloc, but that was not to happen.
In January 1947, Truman appointed retired General George Marshall as Secretary of State. In July 1947 Marshall scrapped JCS 1067 which had decreed "take no steps looking toward the economic rehabilitation of Germany [or] designed to maintain or strengthen the German economy." Thereafter, JCS 1067 was supplanted by JCS 1779, stating that "an orderly and prosperous Europe requires the economic contributions of a stable and productive Germany." The restrictions placed on German heavy industry production were partly ameliorated, permitted steel production levels were raised from 25% of pre-war capacity to a new limit placed at 50% of pre-war capacity.
With a Communist insurgency threatening Greece, and Britain financially unable to continue its aid, the President announced his Truman Doctrine on 12 March 1947, "to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures", with an aid request for consideration and decision, concerning Greece and Turkey. Also in March 1947, former U.S. President Herbert Hoover, in one of his reports from Germany, argued for a change in U.S. occupation policy, amongst other things stating:
There is the illusion that the New Germany left after the annexations can be reduced to a 'pastoral state'. It cannot be done unless we exterminate or move 25,000,000 people out of it.
Hoover further noted that, "The whole economy of Europe is interlinked with German economy through the exchange of raw materials and manufactured goods. The productivity of Europe cannot be restored without the restoration of Germany as a contributor to that productivity." Hoover's report led to a realization in Washington that a new policy was needed; "almost any action would be an improvement" on current policy." In Washington, the Joint Chiefs declared that the "complete revival of Germany industry, particularly coal mining" was now of "primary importance" to American security.
The United States was already spending a great deal to help Europe recover. 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. Much of this aid was designed to restore infrastructure and help refugees. Britain, for example, received an emergency loan of $3.75 billion.
The United Nations also launched a series of humanitarian and relief efforts almost wholly funded by the United States. These efforts had important effects, but they lacked any central organization and planning, and failed to meet many of Europe's more fundamental needs. Already in 1943, the United Nations Relief and Rehabilitation Administration (UNRRA) was founded to provide relief to areas liberated from Germany. UNRRA provided billions of dollars of rehabilitation aid, and helped about 8 million refugees. It ceased operations in the DP camps of Europe in 1947; many of its functions were transferred to several UN agencies.