by Tony Judt
This unusual way of furnishing assistance carried innovative implications. The programme obliged European governments to plan ahead and calculate future investment needs. It laid upon them a requirement to negotiate and confer not just with the United States but with each other, since the trading and exchanges implied in the programme were intended to move from the bilateral to the multilateral as soon as possible. It constrained governments, businesses and labour unions to collaborate in planning increased rates of output and the conditions likely to facilitate them. And above all, it blocked any return to the temptations that had so stymied the inter-war economy: under-production, mutually destructive protectionism, and a collapse of trade.
Although the US administrators of the Plan made no secret of their expectations, they left it to Europeans to take responsibility for determining the level of aid and the manner of its distribution. European politicians—accustomed to the blunt self-interest of the US in earlier bilateral loan negotiations—were rather taken by surprise. Their confusion was understandable. Americans themselves were divided as to the goals of the Plan. Idealists in the New Deal mould—and there were many in post-war American administrations—saw an opportunity to reconstruct Europe in the American image, emphasizing modernization, infrastructural investment, industrial productivity, economic growth and labour-capital cooperation.
Thus ‘productivity missions’, funded by the Marshall Plan, brought to the US many thousands of managers, technicians and trade unionists to study the American way of business—five thousand from France alone (one in four of the overall total) between 1948 and 1952. One hundred and forty-five ‘European productivity teams’ arrived in the US just between March and July 1951—in most cases consisting of men (rarely women) who had never before set foot outside Europe. Meanwhile enthusiastic New Dealers in the Organization for European Economic Cooperation (OEEC), set up in 1948 as a conduit for ERP funds, urged upon their European colleagues the virtues of freer trade, international collaboration and inter-state integration.
These American urgings met, it must be said, with limited immediate success. Most European politicians and planners were not yet ready to contemplate grand projects of international economic integration. The Marshall Planners’ greatest achievement in this respect was perhaps the European Payments Union, proposed in December 1949 and inaugurated a year later. Its limited objective was to ‘multilateralize’ European trade by establishing a sort of clearing-house for debits and credits in European currencies. This was designed to overcome the risk that each European country might try to save badly needed dollars by restricting imports from other European countries, to everyone’s eventual disadvantage.
Using the Bank of International Settlements as their agent, European states were encouraged to secure credit lines proportional to their trading requirements. Then, instead of using up scarce dollars they could settle their obligations through an intra-European transfer of credits. All that mattered was not whom you traded with but the overall balance of credits and debits in European currencies. By the time it was wound up in 1958, the Payments Union had quietly contributed not merely to the steady expansion of intra-European trade but to an unprecedented degree of mutually advantageous collaboration—financed, it should be noted, by a substantial injection of US dollars to furnish the initial credit pool.
From a more conventional American perspective, however, free trade and its attendant benefits were themselves a sufficient objective and justification for the ERP programme. The United States had been particularly hard hit by the trading and export slump of the thirties and spared no effort to convince others of the importance to post-war recovery of liberalized tariff regimes and convertible currencies. Like English Liberals’ enthusiasm for free trade in the era before 1914, such American pleas for the unrestricted movement of goods were not altogether un-self-interested.
Nevertheless, this self-interest was distinctly enlightened. After all, as CIA Director Allen Dulles observed: ‘The Plan presupposes that we desire to help restore a Europe which can and will compete with us in the world markets and for that very reason will be able to buy substantial amounts of our products.’ In a few cases there were more immediate benefits: back in the US, organized labour’s backing for the Marshall Plan was secured through the promise that all in-kind transfers from America would be despatched in US-owned ships loaded by American dockworkers unionized in the AFL-CIO. But this was a rare case of direct and immediate advantage. For the most part Dulles was right: the Marshall Plan would benefit the USA by restoring her major trading partner, rather than by reducing Europe to an imperial dependency.
Yet there was more to it than that. Even if not everyone saw it at the time, Europe in 1947 faced a choice. One part of that choice was recovery or collapse, but the deeper question was whether Europe and Europeans had lost control of their destiny, whether thirty years of murderous intra-European conflict had not passed the fate of the continent over to the two great peripheral powers, the US and the Soviet Union. The Soviet Union was quite content to await such a prospect—as Kennan noted in his memoirs, the pall of fear hanging over Europe in 1947 was preparing the continent to fall, like a ripe fruit, into Stalin’s hands. But for American policymakers, Europe’s vulnerability was a problem, not an opportunity. As a CIA report argued in April 1947, ‘(t)he greatest danger to the security of the United States is the possibility of economic collapse in western Europe and the consequent accession to power of Communist elements’.
A Special Ad Hoc group of the State, War and Navy Departments’ coordinating committee spelled the point out more fully in a report dated April 21st 1947: ‘It is important to maintain in friendly hands areas which contain or protect sources of metals, oil and other natural resources, which contain strategic objectives or areas strategically located, which contain substantial industrial potential, which possess manpower and organized military forces in substantial quantities, or which for political or psychological reasons enable the US to exert a greater influence for world stability, security and peace.’ This is the broader context of the Marshall Plan, a lowering political and security landscape in which American interests were inextricably interwoven with those of a fragile and sickly European sub-continent.
The better-informed European recipients of Marshall Aid, notably Bevin and Georges Bidault, his counterpart at the French Foreign Ministry on the Quai d’Orsay, understood this perfectly well. But European domestic interest in the European Recovery Program itself, of course, and the uses to which it was put, varied considerably from country to country. In Belgium, where American assistance was probably least urgently needed, the Marshall Plan may even have had a long-term prejudicial impact, allowing the government to spend heavily on investment in traditional industrial plants and politically-sensitive industries like coal mining without counting the long-term cost.
In most cases, though, Marshall Aid was applied as intended. In the Plan’s first year, aid to Italy was largely devoted to urgently needed imports of coal and grain, together with help for struggling industries like textiles. But thereafter 90 percent of Italian counterpart funds went directly to investment: in engineering, energy, agriculture and transportation networks. In fact, under Alcide De Gasperi and the Christian Democrats, Italian economic planning at the end of the forties rather resembled its east European counterpart, with consumer goods deliberately disfavoured, food consumption held down to pre-war levels and resources diverted to infrastructural investment. This was almost too much of a good thing: American observers became nervous and tried unsuccessfully to encourage the government to introduce more progressive taxes, relax its austere approach, allow reserves to fall and avoid bringing about a recession. Here, as also in western Germany, American Marshal Planners would have liked to see social and economic policies slanted more to the Centre and away from traditional deflationist policies.
In France, Marshall Aid very much served the goals of the ‘planners’. As Pierre Uri, one of Monnet’s associates,
later acknowledged: ‘we used the Americans to impose on the French government what we deemed necessary’, ignoring the American desire for liberalization but responding enthusiastically to US exhortations to invest and modernize. ERP dollars—$1.3 billion in 1948-49 and a further $1.6 billion in the next three years—financed almost fifty percent of French public investment under the Monnet Plan during the Marshall years, and the country could never have managed without it. It is thus more than a little ironic that it was in France that the Marshall Plan faced the greatest popular criticism. In mid-1950 only one French adult in three acknowledged having even heard of the Marshall Plan and of these 64 percent declared it to be ‘bad’ for their country!
The Plan’s relatively poor image in France represented a partial public relations success for the French Communists, perhaps their greatest.20 In Austria the local Communists—backed by Soviet forces still occupying the eastern region of the country—never made any dent in the popularity of Americans and their aid; the latter put food in people’s mouths and this was what mattered most. In Greece the situation was clearer still. In the circumstances of a brutal civil war Marshall Aid, extended to Greece in April 1948, made the difference between survival and destitution. The $649 million of American aid to Greece under the ERP supported refugees and staved off hunger and disease: the mere delivery of mules to indigent farmers made the difference between life and death for thousands of peasant families. In 1950 Marshall Aid was credited with furnishing half of the country’s GNP.
How successful was the European Recovery Program? Western Europe indubitably recovered, and precisely over the period (1948-1951) of the Marshall Plan. By 1949 French industrial and agricultural production both exceeded 1938 levels for the first time. By the same criterion sustained recovery was achieved in 1948 by the Netherlands, in 1949 by Austria and Italy, in 1950 by Greece and West Germany. Of those countries occupied during the war, only Belgium, Denmark and Norway recovered sooner (in 1947). Between 1947 and 1951 the combined GNP of western Europe rose by 30 percent.
In the short-term the chief contribution of the Program to this recovery was surely the provision of dollar credits. These underwrote trade deficits, facilitated the large-scale importation of urgently needed raw materials and thus carried Western Europe through the crisis of mid-’47. Four-fifths of all the wheat consumed by Europeans in the years 1949-51 came from dollar-zone countries. Without Marshall Aid it is not clear how the fuel shortages, food shortages, cotton shortages and other commodity scarcities could have been overcome at a politically acceptable price. For while the economies of western Europe surely could have continued to grow without American assistance, this could only have been achieved by repressing home demand, cutting back on newly-introduced social services and further reducing the local standard of living.
This was a risk most elected governments were understandably reluctant to run. In 1947 the coalition governments of western Europe were trapped and they knew it. It is all very well for us to recognize in hindsight that Marshall Aid ‘merely’ broke a logjam born of renewed demand, that Washington’s new approach overcame a ‘temporary’ dollar shortfall. But no-one in 1947 could know that the $4.6 billion gap was ‘temporary’. And who at the time could be sure that the logjam was not sweeping the fragile European democracies over a roaring cataract? Even if the ERP did no more than buy time, that was a crucial contribution, for time was precisely what Europe appeared to lack. The Marshall Plan was an economic program but the crisis it averted was political.
The longer run benefits of the Marshall Plan are harder to assess. Some observers were disappointed at the Americans’ apparent failure to persuade Europeans to cooperate in integrating their planning as much as they had initially hoped. And it is true that whatever collaborative habits and institutions the Europeans did eventually acquire were only indirectly indebted to American efforts, if at all. But in the light of Europe’s recent past, any moves in this direction represented progress; and Marshall’s invitation did at least oblige the mutually-suspicious European states to sit down together and co-ordinate their responses and, ultimately, much else. The Times was not so very wide of the mark when it stated, in a leader on January 3rd 1949, that ‘(w)hen the cooperative efforts of the last year are contrasted with the intense economic nationalism of the inter-war years, it is surely permissible to suggest that the Marshall Plan is initiating a new and hopeful era in European history.’
The real benefits were psychological. Indeed, one might almost say that the Marshall Plan helped Europeans feel better about themselves. It helped them break decisively with a legacy of chauvinism, depression and authoritarian solutions. It made co-ordinated economic policy-making seem normal rather than unusual. It made the beggar-your-neighbour trade and monetary practices of the thirties seem first imprudent, then unnecessary and finally absurd.
None of this would have been possible had the Marshall Plan been presented as a blueprint for the ‘Americanization’ of Europe. On the contrary, post-war Europeans were so aware of their humiliating dependence upon American aid and protection that any insensitive pressure from that quarter would certainly have been politically counter-productive. By allowing European governments to pursue policies that had emerged from domestic compromises and experiences, and by avoiding a one-size-fits-all approach to recovery programmes, Washington actually had to forego some of its hopes for western European integration, at least in the short term.
For the ERP was not parachuted into a vacuum. Western Europe was able to benefit from American help because it was a long-established region of private property, market economics and, except in recent years, stable polities. But for just this reason, western Europe had to make its own decisions and would ultimately insist on doing so. As the British diplomat Oliver Franks put it: ‘The Marshall Plan was about putting American dollars in the hands of Europeans to buy the tools of recovery. ’ The rest—convertible currencies, good labour relations, balanced budgets and liberalized trade—would depend on Europeans themselves.
The obvious comparison, however, was not between American visions and European practices but between 1945 and 1918. In more respects than we now recall, the two post-war eras were uncannily alike. In the 1920s Americans were already encouraging Europeans to adopt US production techniques and labour relations. In the 1920s many American observers saw Europe’s salvation in economic integration and capital investment. And in the 1920s Europeans, too, looked across the Atlantic for guidance about their own future and for practical aid in the present.
But the big difference was that after World War One the US gave only loans, not grants; and these were nearly always supplied through the private capital market. As a result they carried a price tag and were usually short-term. When they were called in at the onset of the Depression, the effect was disastrous. The contrast in this respect is striking—after initial stumbles in 1945-47, American policymakers went to some lengths to correct the mistakes of the previous post-war era. The Marshall Plan is significant not just for what it did but for what it was careful to avoid.
There was one European problem, however, that the European Recovery Plan could neither solve nor avoid, yet everything else depended upon its resolution. This was the German Question. Without German recovery French planning would come to nought: France was to use Marshall counterpart funds to build huge new steel mills in Lorraine, for example, but without German coal these would be useless. Marshall credits with which to buy German coal were all very well; but what if there was no coal? In the spring of 1948 German industrial output was still only half that of 1936. The British economy would never recover while the country was spending unprecedented sums ($317 million in 1947 alone) just to sustain the helpless population of its zone of occupation in northwest Germany. Without Germany to buy their produce the trading economies of the Low Countries and Denmark were moribund.
The logic of the Marshall Plan required the lifting of all restrictions upon (West) German production and output, so that th
e country might once again make its crucial contribution to the European economy. Indeed, Secretary of State Marshall made clear from the outset that his Plan meant an end to French hopes of war reparations from Germany—the point, after all, was to develop and integrate Germany, not make of it a dependent pariah. But in order to avoid a tragic re-run of the events of the 1920s—in which frustrated efforts to extract war reparations from a prostrate Germany had led, as it seemed in retrospect, directly to French insecurity, German resentment and the rise of Hitler—it was clear to the Americans and their friends that the Marshall Plan would only work as part of a broader political settlement in which French and Germans alike could see real and lasting advantage. There was no mystery to this—a post-war settlement in Germany was the key to Europe’s future, and this was as obvious in Moscow as it was in Paris, London or Washington. But the shape such a settlement should take was an altogether more contentious matter.
IV
The Impossible Settlement
‘Those who were not alive at the time may find it difficult to appreciate the
extent to which European politics in the post-war years were governed by
the fear of a German revival and directed to making sure that this never
happened again’.
Sir Michael Howard
‘Make no mistake, all the Balkans, except Greece, are going to be
Bolshevised, and there is nothing I can do to prevent it. There is nothing I
can do for Poland, either’.
Winston Churchill, January 1945
‘Reminded me of the Renaissance despots—no principles, any methods,
but no flowery language—always Yes or No, though you could only count
on him if it was No’.
Clement Attlee on Stalin