A $3.75 billion loan to the British in 1946 and the $400 million loan to Greece and Turkey in 1947 were mere preludes to the much larger foreign assistance program known as the Marshall Plan. Initially after the war Britain, France, and Italy began to recover from the war's devastation, but they suffered major setbacks as a result of the severe winter of 1946/47. Further, economic recovery in 1946 was shaped by a return to the nationalist economic policies of the prewar years, policies that reinforced trade restrictions. However, post-war policies which kept wages low and prices high in these countries were generating increasing opposition from workers, particularly in continental Europe. Due to the economic disruptions of the winter of 1946/47, rising labor militancy, fears of the spread of ideas supporting European independence, and the general shortage of dollar reserves, the United States developed the policy of providing massive doses of foreign assistance to European countries. After two-months of planning among State Department personnel, business leaders, and politicians, Secretary of State George Marshall announced a new aid policy, claiming its prime motivation to be humanitarian:
It is logical that the United States should do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability and no assured peace. Our policy is directed not against any country or doctrine but against hunger, poverty, desperation, and chaos. Its purpose should be the revival of a working economy in the world so as to permit the emergence of political and social conditions in which free institutions can exist (Graebner,154).
After the official announcement of US intentions, capitalist elites in Europe met to endorse the Marshall proposal which called for a four-year assistance program of $22.4 billion. After almost a year of political conflict within the United States, featuring President Truman's call for a struggle against the threat of communism, the Marshall Plan was authorized by Congress. The final appropriation consisted of $13.2 billion. A US agency, the Economic Cooperation Administration (ECA), was created to administer funds, and in Europe the recipient countries added the Organization for European Economic Cooperation (OEEC) to carry out the program.
Legislation and administration of the Marshall Plan funds included numerous internal and external requirements to be fulfilled by OEEC countries. First, the ECA pressured the European nations to adopt economic policies that today would be called “neoliberal.” The ECA demanded balanced budgets, stable currencies, high profit margins, low wages, and non-egalitarian tax structures. The impact of the kind of recovery plan mapped out for Europe was to revitalize the prewar capitalist systems. The policies would stimulate economic recovery but at the expense of European workers. The United States Central Intelligence Agency funneled money to anti-communist trade unions and prominent intellectuals to reduce the appeal of European communist parties which were correctly believed to be in a good position to win contested parliamentary elections. The economic assistance programs, the institutionalization of capitalist economics, and the political penetration of European institutions reduced the power of the organized working classes that had shown signs of strength directly after the war. Joyce Kolko and Gabriel Kolko write of the impact of these policies in France:
It was ultimately cheaper to crush a strike, split the unions, and repress the workers than to pay the price of a higher standard of living which the French government and the ECA saw as an unacceptable inflationary thrust that would shatter their plans for a balanced budget, trade surplus, high profit, and "reconstruction" conforming to their capitalist model. (Kolko and Kolko 442)
Later the Kolkos assessed the impact of the Marshall Plan (formally designated the European Recovery Program) on European workers:
But for the working class of Europe the ERP experience of capitalist reconstruction was an unequivocal calamity. This class was required to increase its effort in the production process, to abstain from asserting demands, and to reap a falling standard of living and unemployment. A full appreciation of this fact as a crucial dimension for the ERP is essential to understanding the real meaning of the Marshall Plan. (Kolko and Kolko 452).
Marshall Plan pressures on European domestic policies were paralleled by demands on European international economic policy as well. European purchases were circumscribed by pressures from US industrialists and their representatives in Congress and in ECA administrative circles. Some European food requests were denied because U.S. agriculture did not have surpluses to sell and others were added which Europeans did not want. The Kolkos report that the United States shipped 177 million pounds of spaghetti to Italy in 1948. One-fourth of Europe's 1948 request for wheat was shipped as flour, which added an estimated $8 million to its cost. Requisitions for tractors were cut in half to limit Europe's potential as a competitive agricultural producer to the United States. The United States shipped 65,000 unwanted trucks to Europe and drastically cut the requests made by Europeans for railroad cars. Marshall Plan policies like these discouraged the use of domestic energy sources and increased escalating oil dependence, which led to a drastic reduction in their use of coal as a prime energy source. Other measures of benefit to the US economy included provisions whereby fifty percent of all aid had to be transmitted in U.S. ships and insured by US insurance companies.
Perhaps the aid provision most beneficial to U.S. economic interests was the so-called "counterpart" clause, which increased U.S. control of currencies within debtor nations. The Kolkos discuss the clause and its significance for the U.S. economy:
An important tool in influencing the economic policies of the European states during the period of the ERP, counterpart thereafter became a provision of all American aid, assuming vast proportions in countries like India. Counterpart required the recipients of United States aid to establish a fund in their own currency equivalent to the sums received in dollars. The United States would own 5 percent of this fund and could use it for various purposes, but primarily to purchase strategic material for its own stockpile. The recipient government could use the remaining ninety-five percent for projects America sanctioned. Hence the United States had the right not only to control how the dollars were spent but also to approve the expenditure of an equivalent amount of the local currency. This gave Washington substantial power to exercise over the internal economic plans and programs of the European states and attained one of the most fundamental aims of American policy. (Kolko and Kolko 380-381).
The collective impact of the Marshall Plan was to incorporate the European nations into a global economic system dominated by the United States. The IMF, World Bank, and GATT set the institutional parameters for international economic interchanges based on free trade and access by the United States to markets in the non-socialist world; the foreign assistance program structured the economic systems of the European nations such that they would evolve in ways most conducive to U.S. investment and trade. Without Marshall Plan assistance, Europe might have chosen an economic course that would have restricted external investment, reduced trade on the Continent and particularly with the United States, and, most importantly, might have moved in the direction of building planned socialist societies guided by the criterion of fulfilling human needs. Since European communist parties were popular in the 1940s due to the leading role they played in resistance movements against Nazi occupation and their socialist vision, the Marshall Plan was developed in part as a way to reduce their influence in parliamentary elections. Communist party victories would have had dire effects on the economic and social system of the United States and its world position.
Subsequent to the Marshall Plan years, European nations established institutions to coordinate the production of coal and steel and atomic energy. With their success, European integration led to the creation of a common market, the European Union, and the common currency and banking institutions of the twenty-first century. The thrust of economic and political development from the end of World War II to the present was designed to create a regional capitalist political economy that would lead to the global finance capital of our own day. The Greek crisis today is one outcome of this long history of economic development and underdevelopment in Europe.
Joyce and Gabriel Kolko, The Limits of Power: The World and United States Foreign Policy, 1945-54, New York, Harpers, 1972.
Norman A, Graebner, Cold War Diplomacy: 1945-1960, Princeton, Van Nostrand, 1962.
(Part l discussed the Greek Civil War. The materials for the two essays come in part from prior blogs and Harry Targ “Strategy of an Empire in Decline: Cold War II,” MEP Publications, 1986).