The Marshall Plan and the Cold War

The Marshall Plan and the Cold War - History Extra

"Very important figure who sadly, is largely forgotten today is a man named Will Clinton, who was Undersecretary of Economic Affairs in the State Department. And he, in many ways can be considered one of the founding fathers of the European Union. Integrating Western Europe economically, politically and later militarily was actually a vital component of the Marshall Plan. It was seen as being necessary to revitalize the European economies as quickly as possible, and to ensure that they could cohere and act as one in the face of any potential aggression. Either from the Soviet union, or perhaps down the road, Germany...

Stalin had early on, actually considered trying to participate in the Marshall Plan because he was a Marxist ideologue and really believed that the United States had to give billions of dollars to Europe in order to prop up its own industry, which was of course, suffering from some overcapacity after the war. But he believes the inevitable crisis of capitalism had come and that perhaps he could get unconditional aid from the United States just as he had through Lend Lease during the war. He also wanted to participate in order to try to undermine it from within and make sure that the United States could not impose terms.

And initially, he actually told the satellite states in Eastern Europe to participate in discussions in order to encourage them to storm out and make clear that the American conditions would be unacceptable. In particular the revival of Western Germany. The problem Stalin faced was that the Czechs in particular were so enthusiastic that he did not actually trust them. He did not believe that they would actually storm out of an aid conference and he reversed himself entirely, insisting that they could not participate in any means even in order to show their displeasure with aspects of the American initiative.

And I argue in the book that the Cold War really did begin after the Marshall Plan, because it wasn't until that point that both sides, the United States and the Soviet Union, had decided to abandon the Alta Pop Stem framework for collaboration and to pursue their interests unilaterally. And in particular Stalin cracked down on Eastern Europe violently after announcement of the Marshall Plan. Prior to the Marshall Plan, he was willing to tolerate a coalition governments of sorts in Poland and Czechoslovkia, in Romania and Hungary. But after the Marshall Plan, he pushed out all the remaining democratic forces in Eastern Europe and imposed a strict regime of fealty to Moscow...

The French in particular were furious about this [the Marshall Plan]. In fact, the French were just about as ruthless in their occupation of Germany as the Soviets were. They were ripping up factories and bringing them back to France as reparations and they were very, very concerned about the United States reversing the so called Morgenthau Plan. This was a plan in 1944 to deindustrialize Germany - effectively to pastoralise it, to make sure it could never threaten its neighbors again. And so France really had to be drawn, kicking and screaming into the Marshall Plan because of their concerns about the US focus on reviving the West German economy as quickly as possible.

And I should emphasize that the Marshall Plan would never have succeeded unless the United States had given France and Britain firm security guarantees because they were very concerned about Germany, not just the Soviet Union, in the form of NATO, which was created in 1949 and the creation of NATO I believe, should be credited first and foremost to the British Prime Minister Ernest Bevin who convinced the United States that these security guarantees were were going to be fundamental.

In particular because the United States was demanding Western European economic integration. And that meant that these countries would no longer be self sufficient. If they were going to have to depend on each other economically that meant for example, that Germany could cut off coal supplies at any point in time, or the Soviets might come to control Germany and cut off coal supply. So it was going to be vital that the United States not just provide economic aid, but provide clear cut security guarantees...

Something was indeed going on here. There was an enormous recovery in output between the time that the Marshall Plan was announced in 47 and the time it was wrapped up in mid 1952. Industrial output increased by about 60%. To put that in perspective, EU in the five years before the financial crisis in 2008 saw output increase by 15%. So something was clearly going on. But when they looked at the expected Keynesian mechanisms by which this recovery could have been affected, for example, the ability to import more because these countries were short of dollars, they didn't find a large effect. Was it that government spending was higher than it would have been? Well actually no. Government spending as a percentage of GDP fell across the Marshall countries during those years.

So I think the effect came from two factors in particular that were more difficult to quantify. The first was that George Kennan had always emphasized that the most important effect of the Marshall Plan would be psychological. That is convincing the Europeans that the Americans were not going home, would not retreat into isolationism, would provide for their security. I think that had an enormous stimulative fact on private enterprise. As emphasized earlier, Kennan was very anxious that this be a multi year program in order to make this clear that this was not the United States just giving us a sum of money and retreating into isolationism again.

The second most critical factor was the reintegration of Germany into the West European economy. Before the war, Germany had been the primary capital goods supplier for Europe, Germany basically traded capital goods for food and other commodities. But after the war, the United States was the primary capital goods supplier in Europe. And this was running down critically the stash of dollar foreign reserves in Western Europe. So one of the ambitions of the United States was to replace itself as the primary capital goods supplier to Europe with Western Germany. So Western Germany would be put back into its old role as quickly as possible, and this was enormously successful...

Consider American reconstruction aid in Iraq and Afghanistan. The United States has spent over $200 billion on reconstruction in Iraq and Afghanistan, and in current dollars that's more than 50% more than the entirety of Marshall aid. Yet the United States has almost nothing to show for it. And I think the primary reason is the complete absence of internal and external security"