Watch on the West
A Newsletter of FPRI’s Center for the Study of America and the West

America and the West: Lessons from the Marshall Plan

Volume 1, Number 3
January 1998

By Harvey Sicherman

This bulletin is a summary of a talk given on September 25, 1997, commemorating the 50th anniversary of the Marshall Plan. The program was sponsored by the Austrian Consulate of Pennsylvania also to recognize the anniversary of the Vienna meeting of representatives of the nine Austrian federal states on September 26, 1945. That meeting led to the formation of the Provisional Austrian Government and to the first free elections in Austria. Thus, September 26 is celebrated as Austrian-American day. The law firm of Montgomery McCracken Walker and Rhoads, LLP hosted the event. If your organization would like to sponsor an FPRI lecture, please call 215-732-3774, ext. 105.

Harvey Sicherman is President of the Foreign Policy Research Institute and a former aide to three U.S. secretaries of state. He is co-author, with General Alexander M. Haig, Jr., of New Directions in U.S.-China Relations (FPRI, 1997).

The Marshall Plan was described by Winston Churchill as the “most unsordid act in history.” By linking the United States and the economic recovery of Western Europe through a formal program that required a joint European approach, the plan inaugurated the “modern” era. The new Europe would have two new European powers— the United States and what was to become the European Union.

A few facts about the origin of the plan are worth a review. After 1945, the United States aided Europe to the tune of over $9 billion in emergency food aid through the United Nations. The impetus for the Marshall Plan came in part from impatience with this seemingly endless “emergency;” the breakdown of U.S.-Soviet cooperation at the March 1947 Moscow conference; and Great Britain’s bankruptcy, which led to the Truman Doctrine, i.e. Washington’s assumption of London’s responsibilities for security in the Eastern Mediterranean area.

Undersecretary of State for Economic Affairs William Clayton was the intellectual source of the plan. A wealthy former commodities trader, Clayton saw Europe as a large market rather than as a set of bickering nation-states; it was vital, in his view, to avoid a return of the old “beggar thy neighbor” economic policies. Clayton persuaded both Secretary of State George C. Marshall and Deputy Secretary of State Dean Acheson that a European economic recovery plan sponsored by the U.S. was necessary but, unlike UN food aid, it should be administered by a pan-European organization. The key need: U.S. dollars so that European industry could resume imports necessary to restart their economies.

Despite very different personalities, Marshall and Acheson worked well together because of mutual respect and well-delineated spheres of administration. In those years, before the expansion of the White House national security organization, the secretary of state was also, in effect, the president’s “staff man” on foreign policy. Truman approved of the initiative but never reviewed the speech, which Marshall himself edited even on the plane ride to Harvard, where he was to receive an honorary degree at graduation ceremonies. Among others honored with Marshall that day were the nuclear scientist J. Robert Oppenheimer, the poet T.S. Eliot, and General Omar Bradley. A photograph of the occasion shows Eliot and Bradley sitting close together; their body language, however, is a study in distance.

The speech on June 5, 1947, took twelve minutes — two minutes longer than Marshall originally wanted — and it left little impression on the graduates, many of whom were surprised to learn years later of the significance of the occasion. Stalin was surprised, too; he regarded the plan’s requirements for an open economy to be a plot and kept both the USSR and its European satellites out.

Following Marshall’s call— “the initiative, I think, must come from Europe”— the Europeans met to decide how much European recovery would cost. Given information available at the time, this was mostly guesswork, but by August, the guesses amounted to $28 billion ($160 billion in today’s dollars). When New York Times columnist James Reston leaked the number to Republican Senate Majority Leader Arthur Vandenberg, the Senator declared that Congress wouldn’t spend that kind of money to save itself! Politically sharper pencils were applied, and on December 19, 1947, Truman, despite extremely low political polls, proposed a $17 billion European Recovery Program to the Congress. Marshall toured the country to rally support, and found the women’s groups in particular very effective (“electric”) in persuading Congress to spend some money rather than risk another war. In March 1948 the Senate authorized $14 billion over four years, $5.3 of which was spent in the first year. This was equivalent to $80 billion today, and was 3% of U.S. GNP then, but, most significantly, over 10% of the federal budget in a bad year for the U.S. economy.

The plan broke decisively with the past in two ways. First, unlike 1919, the U.S. became a “European power.” Between the Marshall Plan and NATO, the U.S. committed itself to permanent links with European security. Second, the West Europeans also moved beyond the old balance-of-power model in the name of economic need. The Germans and Italians, losers of the war, were also included. While the real economic impact of the plan was modest after the first year, these two developments— both essentially political— have continued.

The Marshall Plan thus created a formula for successful U.S.-European relations that is still valid. It contains three elements: 1) the U.S., as the articulator of the common interest; 2) a joint political/economic framework that entails mutual burden-sharing; and 3) a European “initiative” that is often indirect.

This “indirection” is an important element in the history of the European Union. All of the participants in the Marshall Plan knew well that it carried supra-national political consequences; so did those who created the European Coal and Steel Community, the Treaty of Rome, Maastricht, and the current European currency unification. By harnessing the engine of economic expediency, the Europeans had advanced in a way that could not have been possible if they had announced their real political intentions. Nations will vote for joint economic projects faster than they will vote for federalism, although a federalism of sorts is clearly the objective of the European Union.

Three recent transatlantic developments bear out the formula. In the case of the euro, despite all the recent tumult, the Europeans are going ahead, true to the “indirect approach” launched in the Marshall Plan era. Aside from economic efficiencies, everyone understands that the euro is the way to encase a unified Germany in a European framework by placing one of the chief indices of sovereignty— the currency— into a multilateral setting. In the case of the Balkans crisis, all key elements were missing at the outset, and only disaster brought about the Dayton Plan: a U.S.-articulated “common interest” supported by a NATO- and pan-European force. Finally, NATO expansion also relies upon a U.S. articulation, although Germany especially supported it before the Clinton administration decided to push ahead.

As the U.S. and a unifying Europe contemplate the future, it would be wise to recall the successful diplomacy of the Marshall Plan. Great projects remain to be achieved: an expanded EU and a larger NATO that still allow for a constructive relationship with Russia; a sustained U.S.-European security and economic framework that outlives the Cold War. As these projects are pursued, the lesson of the Marshall Plan may very well be, “Make no small plans.” Or as Senator Vandenberg said to Senator Taft, “When a man is drowning in 20 feet of water, there is no use in throwing him 15 feet of rope.”

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