by Benn Steil
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PRAISE FOR
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THE MARSHALL PLAN
“Benn Steil’s fascinating book places the transformative design and huge impact of the Marshall Plan in the context of the early Cold War drama. Engaging, detailed, and well-researched, it takes us behind closed doors in both Europe and the United States, illuminating how the plan was created and how it changed the world. The book’s relevance extends well beyond its new historical insights, showing how offshoots of the plan continue to shape modern-day Europe. It also sheds light on how open mind-sets and intelligent economic architecture can help anchor an increasingly fluid and uncertain global economy.”
—Mohamed El-Erian, Chief Economic Advisor at Allianz and author of The Only Game in Town
“Benn Steil’s carefully researched new book reminds us of the economic uncertainties and political turmoil that surrounded U.S. foreign policy-making in the aftermath of World War II. In the end, the right choices were made, first in developing the Marshall Plan, which provided economic support for economically devastated European allies, and then in building NATO, a strong Western military alliance. Here we are seventy years later in very different circumstances, economic and military. The United States and its allies are strongly challenged to find new approaches to renewing the alliances. May our leaders benefit from the practical wisdom and ideas of seventy years ago.”
—Paul Volcker, former Chairman of the Federal Reserve
“The Marshall Plan is one of the great success stories of U.S. foreign policy. Benn Steil’s well-researched and insightful account reminds us that this iconic example of strategic foresight and imagination was anything but inevitable. On the contrary, his book shows that the Plan’s creation, refinement, implementation, and eventual success required perseverance, political savvy, and plenty of plain good luck. The moral for our era is clear: successful foreign policies require creative and dedicated public servants and do not emerge without them.”
—Stephen Walt, Robert and Renee Belfer Professor of International Affairs, Harvard Kennedy School
“Compelling and authoritative, The Marshall Plan is a first-rate work of history. But it also bears powerfully on the present, reminding us that if soft power is the power to attract, the Marshall Plan is a stunningly successful example of it.”
—Fredrik Logevall, Laurence D. Belfer Professor of International Affairs, Harvard University
“The Marshall Plan has become a favorite analogy for policy-makers. Yet few know much about it. Finally, Benn Steil provides a readable, authoritative account of what it was, what it did, and what it achieved.”
—Graham T. Allison, Douglas Dillon Professor of Government, Harvard Kennedy School
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CONTENTS
Foreword
1. PROLOGUE
2. CRISIS
3. RUPTURE
4. PLAN
5. TRAP
6. UNITY
7. PERSUASION
8. SAUSAGE
9. SUBVERSION
10. PASSAGE
11. SHOWDOWN
12. DIVISION
13. SUCCESS?
14. ECHOES
Photographs
Acknowledgments
Cast of Characters
Appendix A: Truman Doctrine Speech
Appendix B: Marshall’s Harvard Speech
Appendix C: Data
Appendix D: Maps
About the Author
References
Notes
Index
Illustration Credits
For my precious
MOM and DAD,
and
GLORIA, ETHAN, and OWEN
FOREWORD
IN 1944, FRANKLIN D. ROOSEVELT set out to Forge a New, Cooperative postwar order. In it, the Soviet Union would, he believed, become a major power with its own peculiar interests. Yet it would be shepherded by a new United Nations and International Monetary Fund into collaboration with an agenda conducive to American security and prosperity—an agenda founded on free trade and respect for the independence of weaker neighbors.
Not long after Roosevelt’s death in April 1945, however, it became clear that Joseph Stalin had an agenda all his own, and that he was not going to play by American rules. Just before New Year’s Day 1946, at the deadline for ratification of the IMF agreement, he pulled out. He had, in fact, never intended to adapt Soviet policies to the requirements of membership. He had simply sought two benefits from cooperation in creating the new body. The first was a return by others to a monetary system that would boost the value of Soviet gold stocks. He got that, with no need to participate. The second was more unconditional U.S. financial aid for his country, as it had received during the war. When it became clear that none was forthcoming, he lost interest. As for the United Nations, the United States granted his priority demand: a veto on the Security Council. With it, he saw Soviet membership as no bar to extending his frontiers—which he set out to do in 1946.
Meanwhile, America’s natural allies in western Europe looked to be teetering on the edge of economic, social, and political collapse. The U.N. and IMF, which had been founded to maintain peace and stability rather than manufacture it, were powerless to reverse this slide. In 1947, therefore, President Harry S. Truman’s State Department, now under the leadership of General George C. Marshall, disowned FDR’s “One World” vision. Under formidable time constraints, they set out to formulate a new economic and security architecture appropriate to a Europe divided into Two Worlds: a capitalist and a communist one.
This book situates the Marshall Plan more directly at the center of the emerging Cold War than earlier accounts, highlighting the seriousness with which Stalin treated the threat it represented to his new, hard-won buffer zone in central and eastern Europe. The Soviet leader’s blueprint for postwar Europe assumed the Americans would withdraw, leaving behind a weak, pastoralized Germany, ongoing reparations from which would fund Soviet reconstruction and development. The Marshall Plan, however, promised a continuing energetic U.S. presence, underwritten by a reindustrialized capitalist western Germany at the heart of an integrated, capitalist western Europe. Many of the most dramatic episodes of the early Cold War, such as the Prague coup and the Berlin blockade, were driven by Stalin’s determination to undermine the Marshall Plan and American influence in Europe broadly. On the flip side, Washington’s support for a new transatlantic military alliance represented a reluctant acknowledgment that economic security would not take hold in western Europe without physical security.
Institutions that were outgrowths of the Marshall Plan, in particular the European Union and NATO, remain important elements of the postwar liberal international order—even as they are subjected to more critical scrutiny than at any time since their founding. In showing how the Plan evolved, I have brought to bear new material from American, Russian, German, and Czech sources that I hope will make an important story even more resonant. And given the enduring passion for creating new “Marshall Plans” to solve the world’s problems, the story of the old, original one is, I believe, a story well worth telling.
American, British, and Soviet leaders gather at Potsdam to discuss the future of Germany and postwar Europe, July 17, 1945. Foreground: British Foreign Secr
etary Anthony Eden (left) and Prime Minister Clement Attlee (right). Background: Soviet leader Joseph Stalin (center) and Foreign Minister Vyacheslav Molotov (left).
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ONE
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PROLOGUE
THE GREATEST ACT OF GEORGE Washington’s presidency was his leaving of it. Having defeated the world’s most powerful nation in war, the celebrated general could have led his country like a European monarch—till his death. Yet determined to set the United States apart from the political order of the mother continent, he refused to serve a third four-year term. In a farewell address on September 19, 1796, he urged his countrymen “to steer clear of permanent alliances with any portion of the foreign world,” above all Europe. “Europe,” he said, “has a set of primary interests which to us have . . . a very remote relation. Hence she must be engaged in frequent controversies . . . foreign to our concerns.” It was therefore “unwise . . . to implicate ourselves” in the “combinations and collisions of her friendships or enmities.”1 Generations of American statesmen would recall his warning with reverence and, at times, forboding.
Yet a century and a half later, in 1945, the reflections of America’s first president seemed idyllic. The United States had just fought two world wars in the space of thirty years, at a cost of 522,000 American lives, both of which had been started four thousand miles from its shores. When Germany surrendered on May 7, 3,077,000 American troops were in Europe.
After the First World War ended in 1918, there took root in the United States a deep-seated popular desire to disengage from Europe—to re-embrace Washington’s injunction. This sentiment has been called, simply, “isolationism,” but it encompassed many strains. In the 1930s it included pacifists, pro-Communists, and pro-Fascists; it included those sympathetic to Germany and those who believed French and British resistance hopeless. In 1939, less than 3 percent of the American public supported the United States entering the latest European conflagration on the side of France and Britain; 30 percent were against even trading with any warring country.2 A series of Neutrality Acts, enacted to keep the United States from becoming entangled with warring nations on either side, channeled such sentiment. Legislation in 1935 instituted an embargo on trading in arms and other war materials. The following year Congress added a ban on loans or credits to belligerents, reflecting the findings of the so-called Nye Committee, which held that bankers had pushed the nation into the previous European catastrophe.
It took a devastating Japanese attack on the U.S. Pacific Fleet at Pearl Harbor in December 1941 to rupture this powerful inertia. The United States returned to war, both in Asia and in Europe, this time with the conviction in the White House that structures had to be put in place to prevent future conflict. There would be a United Nations with a muscular Security Council to prevent military aggression, and an International Monetary Fund (IMF) and International Trade Organization (ITO) to prevent what Treasury Secretary Henry Morgenthau called “economic aggression.” Pressure would be placed on the country’s ally of choice, Great Britain, to dismantle its imperial institutions, which were a moral and practical affront to this vision. Awkward accommodations would be made to its new and much stronger ally of necessity, the Soviet Union, to secure its cooperation. In concert with a liberated China, President Franklin D. Roosevelt’s “Four Policemen” would oversee their respective quadrants of the globe, a stratagem that uncomfortably blended Wilsonian internationalism with Monroevian spheres of influence.
Roosevelt had publicly declared his hopes for “a peace loving” Soviet Union “shattered” after its brutal and unprovoked invasion of Finland in November 1939, motivated partly by Stalin’s fear that Germany or Britain might use the country as a base to attack Leningrad. FDR condemned Stalin’s government as “a dictatorship as absolute as any other in the world.”3 Yet he remained acutely aware that George Washington’s apprehensions on European entanglement had never left his nation’s psyche. Certain that the American public would not tolerate a lengthy European occupation, Roosevelt was determined to withdraw troops from Europe quickly after Germany’s surrender—within two years. This priority drove his steadfast efforts to cooperate with Stalin, despite his harboring none of the romantic illusions about Communist authoritarianism held by some in his administration. But it also explains the constant tension between the White House and the State Department, including diplomatic staff in Moscow, who found the president’s unwillingness to confront the Kremlin an ominous sign for the postwar landscape—one in which Stalin would be free to impose his will on Soviet-occupied territories.
British prime minister Winston Churchill shared these fears, particularly as regards Poland—a country he saw as a barrier to Soviet westward expansion, much as Stalin saw it as a barrier to Western encroachment.4 But FDR never bought into Churchill’s vision of Britain and America marching forward shoulder to shoulder into the postwar era. “The President shared a widespread American suspicion of the British Empire as it had once been,” noted Foreign Secretary Anthony Eden. And he had “no fear that other powers,” besides the United States, “might fill that role” after the war.5 Yet by 1947, such fear would concentrate minds in the State Department and Pentagon.
The Big Three wartime conference at Yalta in February 1945 was Roosevelt’s last face-to-face meeting with Stalin, a final chance to reconcile clashing interests over the shape of postwar Europe before the advancement of Soviet, American, and British troops settled matters on the ground. Washington and Moscow having nothing more in common than a soon-to-be-vanquished Nazi enemy (with whom Stalin connived from 1939 to 1941), the prospect for genuine agreement seemed remote. Conscious that a war-weary American public constrained his military and political leverage, the president had to rely on charms more than arms to persuade Stalin to permit genuine political independence in the East. Yet determined to secure Soviet membership in the new United Nations and entry into the war against Japan, he was willing to trade away much in Europe—not least Polish democracy and war reparations from the Western occupation zones of Germany—to get them. And what wiles he used in his cajoling were largely undermined by the ubiquity of Soviet listening devices in the American residence and directional microphones outside it.6 Given later Soviet behavior in the U.N. and imminent U.S. nuclear arms developments, Roosevelt would overpay for Stalin’s concessions.
Stalin also relied on charm, to evade commitments on territory the Red Army would soon control. “Don’t worry,” he told his alarmed foreign minister, Vyacheslav Molotov, after reading an American draft of the Declaration of Liberated Europe. “We can deal with it in our own way later. The point is the correlation of forces.”7 As for relations with the United States, which was bound to interpret the Yalta agreements differently, he was equally unconcerned. “The best friendships,” he offered, “are those founded on misunderstandings.”8
Indeed, “there was hope, as we left Yalta,” State Department Sovietologist Charles (Chip) Bohlen recalled, “of genuine cooperation with the Soviet Union on political questions after the war.”9 A “spirit of Yalta,” the press declared, was guiding the wartime allies.10 Yet problems under the surface bubbled up almost immediately. In late March 1945, furious at Moscow’s undermining of Polish independence and treatment of American prisoners of war (which was not terrible by Soviet standards) in territory liberated by the Red Army, Roosevelt banged his wheelchair: “We can’t do business with Stalin. He has broken every one of his promises he made at Yalta.”11 By 1947, in both the United States and much of Europe, Yalta would become “a synonym for betrayal of freedom and the appeasement of world communism.”12 There would be consequences.
ROOSEVELT’S SUDDEN DEATH IN APRIL 1945 shocked and distressed Stalin. Instinctively suspicious, he suspected foul play. His intelligence reports told him anti-Soviet hard-liners were gaining ground in Washington.13 Yet the president’s passing brought to power a man unprepared for the job, possessed of no desire or capacity to refashion the postwar foreign and security
policy blueprint passed down to him.
“Who the hell is Harry Truman?” asked FDR’s incredulous chief of staff, Admiral William Leahy, nine months earlier, after learning that the 1944 Democratic convention had chosen him as the president’s running mate.14 Upon ascending to the White House, Truman refused even to discuss Churchill’s pleadings that General George Patton advance on Berlin to create bargaining leverage with Stalin—so committed was he to staying on the cooperative path laid out by Roosevelt.
The diplomatic demeanor of the two presidents, however, was very different. Though FDR had privately been no less critical of Soviet behavior than Truman,15 and Truman no less desirous of good relations with Moscow than FDR, Truman rarely masked his frustrations the way FDR did. In his first meeting with Molotov in Washington on April 23, the new president gave the Russian a tongue-lashing over the creeping Sovietization of Poland. When the latter protested that he had “never been talked to” that way “in [his] life,” Truman doubled down: “Carry out your agreements,” he recalled responding, “and you won’t get talked to like that.”16
Molotov took Truman’s tone as clear evidence that American policy had taken a hard right turn. Stalin, for his part, had always expected the worst from Truman. As a senator in 1941, Truman had, just after Hitler invaded the Soviet Union, casually told a New York Times reporter that “if we see that Germany is winning we ought to help Russia, and if Russia is winning we ought to help Germany, and that way let them kill as many as possible.”17 Indeed, for every American who would die in the war thirteen Germans and seventy Russians would perish. And once the war was won, at enormous cost to the Soviet military, civilian population, and infrastructure, Truman as president would infuriate Stalin by terminating Lend-Lease matériel assistance. In talks with Truman’s liaison Harry Hopkins, Stalin condemned the aid cut as a “brutal” act against an ally. Truman repented of the bungle and resumed supply flows, but Stalin took his behavior as a sure sign of hostile intent.