Triumph for U.S. : Marshall Plan: Savior of Europe

WASHINGTON —  It was, says former Democratic Rep. Henry S. Reuss of Wisconsin, “the finest hour in the golden age of American foreign policy.”

To Richard M. Bissell Jr., a former deputy CIA director, it deserves “major . . . responsibility for the relative prosperity of modern Europe and the stability . . . of the Atlantic Alliance.”

Forty years ago this summer, under threat of the economic disintegration and political chaos stirred by World War II, the nations of Western Europe joined the United States in a calculated risk that changed the face of the postwar world.

They gambled on the Marshall Plan, a cooperative venture that set as its goal the wholesale rebuilding of a continent left in ruins by World War II. No foreign policy undertaking of such grand pretensions had ever been attempted in modern times. None has been attempted since. None can boast of its results.

A Simple, Ambitious Goal

The plan, which bore the name of its chief architect, George Catlett Marshall, President Harry S. Truman’s secretary of state, had a simple, ambitious goal: to use careful infusions of American aid to stimulate the shattered economies of more than a dozen nations whose factories had been bombed, whose business structures were in shambles and whose immediate prospect was starvation and political upheaval.

The amount to be expended was stunning for the time--$13.3 billion, equivalent to about $60 billion in today’s inflated dollars. The idea was unprecedented--that a country, weary from four years of fighting abroad, should deeply tap its hard-won prosperity to revive some of the very nations that had cost it so many lives during the war.

Amazingly, the plan succeeded, and with breathtaking speed.

Foreign Policy Landmark

In the process, the Marshall Plan became much more than an acute financial investment that paid off. It became a foreign policy landmark for the century.

Symbolically, it represented a renunciation of the centuries-old traditions of warfare--that after victory was won, the victors would exact tribute and leave the vanquished and other parties to put themselves back together as best they could.

And historically, it largely redefined the United States’ view of its role in the Western Hemisphere and the modern world.

The plan forged economic bonds that developed into mutual defense partnerships and laid the foundation for the modern geopolitical world--a Western society counterbalanced by an Eastern adversary, each dominated by a superpower.

“The legacy has been immense,” said Robert L. Frost, professor of history at American University. “. . . The wisdom of the Marshall Plan was the recognition that a debt cycle would fundamentally weaken the political and economic structures of Western Europe.”

The Treaty of Versailles, which ended World War I, had taught a painful lesson. From Germany, the loser, the United States demanded traditional war reparations; and from France and England, the victors, it sought compensation for the American support they had received. None could pay. Subsequently, overseas markets for U.S. goods collapsed, a major factor in the onset, depth and duration of the Great Depression.

The genius of the Marshall Plan, Frost said, was providing “a way to take the taxpayers’ money and give it to the Europeans so the Europeans could buy American products and employ Americans in the process.”

Funds Sent to 17 Nations

They did. Between 1947 and 1951, American funds were funneled to 17 nations so crippled that they were doomed to become financial wards of the United States--vitally dependent on U.S. food and supplies to subsist, but with no hope of paying for them.

Likened by many observers to “priming a pump,” the aid bolstered factories and farms that could use their production to pay for more investment, more expansion and more employment in the beneficiary nations.

Soon, most of the countries were well on their way to economic self-sufficiency. In a three-year period, their per capita gross national product increased by fully a third.

Inside the United States, the success of the ambitious venture has left an imprint on a people and a government that remains clear today. The Marshall Plan’s record of achievement provides a tantalizing example of what the government can do if it addresses a problem directly and takes action.

In recent years, there have been recurring demands for new “Marshall Plans” to invigorate urban slums, boost poverty-stricken Third World economies and rebuild war-torn regions.

The result has been only frustration. The Marshall Plan has not been duplicated or equaled.

‘Superbly Suited’ Program

“It was a program superbly suited to a particular moment of history,” wrote Truman biographer Robert J. Donovan in “The Second Victory,” a forthcoming book marking the plan’s anniversary.

Its “rare combination of elements,” he noted, included “the enormous wealth of postwar America, the productive skills and natural resources of Europe (and a) similarity of laws, government institutions and culture.”

Now the Marshall Plan’s very success is boomeranging on the United States as it struggles to cope with the immense momentum that the economic revival spurred. The chief domestic issue in Congress--”competitiveness”--is rooted in the inability of many U.S. industries to compete in world markets with many of the foreign producers the Marshall Plan helped to rebuild.

In 1947, West Germany, bomb-battered and near destitution, was half a divided nation that desperately needed help to feed itself. Now, its industrial plant revitalized, it exports about twice as much to the United States as it buys in American products, contributing more than $11 billion to last year’s U.S. trade deficit.

Despite the few frustrations and ironies, however, the Marshall Plan’s vision of a Western community of nations has been its unshakable legacy.

Impact on Memories

Even at its birth, before its details had been developed and its impact could be imagined, the approach was so ambitious--and the goals so desperately hoped for--that some still remember where they were when they learned of it.

To the late Ernest Bevin, the British foreign minister in the war’s bleak aftermath, the word came over a bedside radio in London, and it felt “like a lifeline to a sinking man,” he later said.

Marshall set the mold for the plan that bears his name in a brief address on June 5, 1947, as he accepted an honorary degree from Harvard University. He began the low-keyed talk by noting that the war’s “visible destruction was probably less serious than the dislocation of the entire fabric of the European economy.”

” . . . The truth of the matter,” Marshall said, “is that Europe’s requirements for the next three or four years of foreign food and other essential products--principally from America--are so much greater than her present ability to pay that she must have substantial additional help or face economic, social and political deterioration of a very grave character.

“The remedy lies in breaking the vicious circle and restoring the confidence of the European people in the economic future of their own countries and of Europe as a whole. . . .”

Marshall’s Aim

What Marshall had in mind was not creating a plan unilaterally to put Europe back on its feet. “This is the business of the Europeans,” he said.

But he said the United States should be there to offer “friendly aid” and to support the Europeans’ efforts “so far as it may be practical.”

At the time accounts of Marshall’s 1,300-word speech began to spread worldwide, the search for a lifeline had become desperate for Britain’s Bevin and other European leaders.

Western Europe was thawing out from a second successive winter of blizzards and record cold that had paralyzed transportation, blocked coal production and killed livestock.

The terrible winter was to be followed by a summer of drought. Industrial production was only two-thirds of the prewar level and the 1947 harvest was half the subnormal 1946 total.

Adding urgency was the vulnerability of the region to Communist expansion. There was concern that without the creation of more jobs and a better livelihood for residents, upcoming elections in France and Italy would lead to Communist takeovers.

No Help from Britain

Britain, its resources shrunk to near the bone, already had notified Washington that it could no longer help Greece deal with a Communist revolution or strengthen Turkey’s resistance to Soviet pressures.

With a goal identified, enthusiasm for a reconstruction effort developed quickly, both in Washington and abroad, and produced a momentum rarely seen in government processes.

Already, Congress had approved a $400-million emergency package of economic and military aid to fill the void for Greece and Turkey.

Soon, Marshall’s State Department began sketching out what more the Administration believed was needed. Under Secretary of State Dean Acheson ordered a continent-wide economic study and later estimated that the world needed $16 billion in U.S. exports in 1947, but could pay for only half that. He called for new financing and early action to boost economic growth.

Will L. Clayton, undersecretary of state for economic affairs, submitted a memorandum that ticked off Europe’s needs and proposed outlays of about $6 billion a year for three years for food, fuel and transportation. George F. Kennan, chief of State’s policy planning staff, completed a thorough study at Marshall’s direction in less than two weeks that allocated to the European nations themselves the responsibility for developing a recovery plan.

More than a Dole Needed

The expert consensus at the time was that the war-ravaged nations needed more than a dole; they needed a change in their economic machinery. To American eyes, Europe’s traditional economic nationalism, barnacled over with tariffs, quotas and cartels, was a major obstacle. The U.S. goal was integration of national economies to permit free-flowing trade and commerce on the American pattern.

Marshall’s Harvard speech left the door open for Soviet participation in a reconstruction effort, thus alarming some Americans. They need not have worried, for Soviet Foreign Minister Vyacheslav M. Molotov walked out of a June meeting on Marshall’s proposal, calling it an attempt to isolate the Soviet Union.

With the air thus cleared, representatives of 16 nations met in Paris at Bevin’s call on July 12, 1947, as the Committee for European Economic Cooperation (CEEC) and promptly began crash studies of Europe’s food and agriculture, iron and steel, fuel and power, and transportation.

The committee’s members were Austria, Belgium, Denmark, France, Greece, Britain, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Sweden, Switzerland and Turkey. The only Western European absentees were Spain, then headed by fascist dictator Francisco Franco, and the new Federal Republic of Germany. West Germany later was admitted as the 17th member in October, 1949.

Their finding was grim. In a September, 1947, report, the group estimated its members’ combined deficit in trade with the United States over the next four years at $15.8 billion. But it pinpointed areas where significant gains could be made--with help.

Special Congress Session

In Washington, President Truman was ready to act. He promptly called the 80th Congress into special session and obtained $542 million in interim aid for Italy, France and Austria, all of which faced immediate crises that could have led to political upheavals.

Truman then called for authorization of $17 billion over four years for the full Marshall Plan. Some groups in Congress were dubious about the scope and expense of the plan.

But in February, 1948, near the midpoint of the debate, a Communist coup ousted the democratic government of Czechoslovakia and wrenched that nation into the Soviet orbit. Nothing could have more effectively rallied majority Republicans to support the European Recovery Program, as it became known.

Congress voted a $6-billion first installment a scant 11 months after Marshall’s Harvard speech. It set up a government corporation, the Economic Cooperation Administration (ECA) to administer the aid. In the end, Congress appropriated $13.3 billion.

The effects were soon apparent.

‘Piraeus Was Alive Again’

In Greece, recalls former agency official Russell Hemenway, “recovery happened before your eyes: Buildings went up in what seemed like days, roads were repaired in weeks. Piraeus (the port for Athens) was alive again.”

In Essen, Germany, Col. Linscott A. Hall, assessing bomb damage for a military government survey in 1947, climbed to the steeple of a bombed-out church and concluded that it would take two generations to repair the damage caused by months of night bombing. When he viewed the same scene six years later, he recalled recently, “I had a hard time finding any sign of damage.”

Western Europe’s industrial output in 1949 reached a level 18% greater than in 1938, as member states invested a fifth of their gross incomes in new capital equipment. Agricultural production was up and inflation was down.

Meanwhile, the experience of the joint economic effort led to more far-reaching international cooperation. After the failure to reach agreement with Moscow on a German peace treaty, the non-Communist powers galvanized into a Western alliance which led late in 1949 to the formation of the North Atlantic Treaty Organization.

The Marshall Plan was no cure-all. Although farm production rose, enough eventually to end most of Western Europe’s dependence on food imports, it was at the price of heavily subsidized agriculture.

Foundation for Democracy

But the plan’s effects on the future stability of Europe were firm. Economist Lincoln Gordon cites as its greatest single feat the building of a solid foundation for pluralist democracy in West Germany.

“This transmutation of enemy into partner was the indispensable political basis for the 1950 concept of the European Defense Community, the 1954 reality of German entry into NATO and the later development of the European Communities,” he said.

To mark the plan’s 40th anniversary, Congress has proclaimed June to be George Catlett Marshall Month. President Reagan is expected to discuss the legacy of the Marshall Plan when he visits Italy and West Germany next week.

Times Staff Writer Mike Mills contributed to this story.