Monday, April 03, 2006

The Marshall Plan

General George Marshall - author of the Marshall PlanToday, 58 years ago, President Truman signed into law the European Recovery Programme, better known as the Marshall Plan. It had been approved the previous day by the House of Representatives with a massive 329-74 majority, which authorised the first tranche of aid to Europe, amounting to $5.3 billion. The total sum paid over the following four years amounted to $13 billion in economic and technical assistance — equivalent to around $130 billion in 2006 figures.

Although described by Winston Churchill the "most unsordid act of history," to which is attributed the post-war recovery of Europe, this was, in fact, the first attempt to create a united Europe. The following, taken from The Great Deception, describes the background and motivation to the plan.

The trigger for this act was primarily its fear of Communist take-overs in Italy, and France, where the Communists briefly became the largest single party in the Assembly. At its root was the economic dislocation caused by the unusually severe winter of 1946-7, which undermined that initial post-war optimism about the potential for recovery of western Europe's economies. Washington began to sense serious concern over Communist ambitions in Europe.

Ironically, however, the first country to run into real economic crisis was Britain: over-stretched by her still enormous military commitments and by the efforts her people had made through six years of war, much of it financed by huge American loans under the wartime "Lend-Lease" programme which had cost the USA $48.5 billion.

No sooner had the Japanese war come to an end in August 1945 than the US government abruptly terminated Lend-Lease. The impact on Britain's economy was compared by John Maynard Keynes to that of "a financial Dunkirk". Keynes himself, then the most respected economist in the western world, was dispatched to America to negotiate a replacement. In December 1945, he managed to secure loans of $3.75 billion from the US and a further $1.25 billion from Canada. But the terms were harsh, demanding that sterling be made freely convertible with the dollar, thus seriously undermining Britain’s special trading relationships with her colonies and Commonwealth.

In the first year after the war, Britain's adverse trade balance soared to a then-enormous £298 million (the following year it was to rise still further, to £443 million). So grave did the situation become that, over that freezing winter of 1946-7, the Labour government was forced to export coal to reduce the balance of payment crisis. Yet fuel stocks in England were so low that power stations had to cut back drastically on generating hours or shut down altogether. Factories producing goods for export had to stop work or curtail production. For the ordinary citizen, the austerities of everyday life were now even more exacting than they had been during the war, the drastic rationing of clothing and food now being extended even to bread.

Already, as this financial crisis mounted, a government committee had reported in July 1946 that the cost of supporting the British zone of Germany in the year 1946-7 would be over £80 million, a sum Britain could not afford. The only remedy was economic integration of the occupation zones. The British and US authorities had already begun the rebuilding of German self-government centred on the Länder, the regional divisions of Germany dating back to the Weimar Republic. They now agreed that the British and American zones should be fused, creating the so-called "bizone" from 1 January 1947, with the US paying for three-quarters of its financing.

Further burdened by the costs of her military and political responsibilities in the Eastern Mediterranean, Britain then informed Washington on 21 February 1947 that she could no longer continue providing financial aid to the governments of Greece and Turkey (in addition to her substantial military commitment to Palestine, where the British mandate was now coming under severe strain from the campaign by Jewish nationalists and terrorist groups to set up a state of Israel).

This precipitated crisis meetings between members of Congress and State Department officials. Their outcome was a statement by Truman's Under-Secretary of State Dean Acheson propounding what would later become known as the "domino theory". Facing the possibility of a Communist take-over in both Greece and Turkey, he declared that more was at stake than just those countries. It they fell, Communism might spread south to Iran and even perhaps to India.

A support package was hastily devised and, addressing a joint session of Congress on 12 March 1947, Truman asked for approval for $400 million in military and economic assistance for Greece and Turkey. "It must be the policy of the United States" he declared, "to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures". He thus established what became known as the "Truman Doctrine", which was to guide US diplomacy for the next forty years.

This also marked the beginning of America's cold war foreign policy, at a time when the fragile détente between the Western allies and the Soviet Union was visibly crumbling. The events of 1947 were to mark a decisive turning point in the relations between Communist "East" and non-Communist "West". As local Communist parties registered significant gains in elections in Romania, Hungary and Czechoslovakia, it had become clear that Stalin had every intention of turning the countries of central Europe into a Soviet empire. In October a Warsaw conference was to set up the "Cominform" (Communist Information Bureau), to co-ordinate the activities of all Europe's Communist parties. The so-called "Big Three" negotiations between America, the Soviet Union and Britain on the future of Germany were getting nowhere, and in December 1947 the talks were to collapse irrevocably, over Soviet demands that Germany should pay massive reparations.

It was against this background of a Europe rapidly polarising between Communist and Western camps that the US Secretary of State George Marshall early in 1947 organised a team of officials, led by one of his most senior advisers, George Kennan. His task was to map out an ambitious new strategy for Europe’s economic support. Three of the key figures in putting together this study were members of the Council of Foreign Relations, Dean Acheson, Will Clayton, and George Kennan. In particular Kennan and Clayton had extensive consultations with the man now in charge of France’s economy, their wartime Washington friend Jean Monnet. From their combined efforts came the European Recovery Programme, better known as the ‘Marshall Plan’. This was announced by Marshall on 5 June 1947, in a speech at Harvard University. Crucially, to avoid any appearance of the US dictating European policy, Marshall couched the offer of help in these terms:

It is already evident that, before the United States government can proceed much further in its efforts to alleviate the situation and help start the European world on the way to recovery, there must be some agreement among the countries of Europe as to the requirements of the situation and the part those countries themselves will take in order to give proper effect to whatever action might be undertaken by this government. It would be neither fitting nor proper for this government to undertake to draw up unilaterally a programme designed to place Europe on its feet economically. This is the business of the Europeans. The initiative, I think, must come from Europe. The role of this country should consist of friendly aid in the drafting of a European programme and the later support of such a programme so far as it may be practical for us to do so. The programme should be a joint one, agreed by a number, if not all of the European nations.
In response to Marshall's declaration, sixteen European nations agreed to attend a conference in Paris on 12 July 1947, to form a group known as the Committee for European Economic Co-operation (CEEC). The CEEC's chairman was a British civil servant, Oliver Franks. But its key figure was his vice-chairman Jean Monnet, aided by his deputy Robert Marjolin and his former Washington lawyer George Ball, who had come to Paris in August to work for Monnet, advising how the CEEC case for economic aid could most effectively be presented to Washington. The result of their work was a report on 12 December that, to cover the period 1948-51, the sixteen nations would need $19.1 billion. Seven days later, on 19 December, after making provision for emergency aid to France, Italy and Austria, President Truman submitted to Congress his "European Recovery Bill", requesting $17 billion over four years.

The Marshall Plan has generally been viewed as an altruistic gesture by the USA to help its impoverished Western allies in their hour of need. However, also underlying it were strong commercial interests. Europe represented for America ‘an enormous market, of several hundred million persons’ which she could not afford to lose. Economic support for Europe thus represented an opportunity for US manufacturers and suppliers desperate to find outlets for their production after orders for war materiel had dried up. As with the earlier Truman package for Greece and Turkey, the proffered aid was by no means solely financial. It included grain, machinery and vehicles produced in America.

Additionally, US corporations had recognised that there was an opportunity to buy up valuable European assets at knock-down prices: a form of intervention at which de Gaulle expressed particular alarm. Europe's economic weakness might also enable the US government to exert pressure on European governments to adopt more "liberal" trading rules, thus easing the path for American exports.

An even more significant element in the Marshall Plan, however, was that, from the outset, it included a major political component. Despite its apparent "hands off" approach, the conditions imposed on recipient countries were deliberately designed to promote a federal Europe, the creation of which had for the State Department now become a Holy Grail. At one bound, thanks not least to effective lobbying by the CEEC's vice-chairman Monnet, the most enthusiastic integrationist power in post-war Europe had become the United States.

No sooner had the Marshall Plan been announced than it was greeted with particular excitement by many groups which, since Churchill's Zurich speech in September 1946, had been evangelising for the cause of European political and economic unity. In Britain itself, on 14 May 1947, Churchill had launched at the Albert Hall his all-party United Europe Movement, with his son-in-law, Duncan Sandys MP, as its president, and a committee which included two members of the Labour Cabinet and several future Conservative Cabinet ministers, among them Macmillan. Churchill repeated his call for a "United States of Europe", of which the USA, the Soviet Union and Britain could be sponsors, and advocated the re-integration of Germany into the Western world.

Similar associations had been formed in France and Germany. A European Union of Federalists had been set up, under the chairmanship of a leading Dutch Socialist and pacifist, Dr. Henri Brugmans. Its objective was to bring together groups in Britain, Belgium, France, Italy, Luxembourg, the Netherlands and Switzerland, under the aegis of a new committee, the International Co-ordination of Movements for the Unification of Europe Committee.

When Marshall announced his Plan in June, support for it was quickly orchestrated across western Europe. Among those most active in this operation were several figures who had been enthusiasts for the integrationist cause since they were wartime exiles in London. These included Paul van Zeeland, more than once Belgium’s prime minister, and Joseph Retinger, a Polish émigré, who early in 1947 had formed an Independent League for Economic Co-operation (ELEC). In March 1947, ELEC’s leaders, headed by Van Zeeland, had already met in New York to discuss closer links with the United States, and they were now recruited to promote the Marshall Plan. A memorandum supporting the Plan was approved by ELEC on 30 June 1947 in Paris and sent to all European governments.

Another prominent advocate for the Plan was Brugmans, who, addressing a conference of his Union in August 1947, said, after referring to the Marshall Plan:

More than ever we are convinced that we are right in proclaiming the necessity for complete European Union. But… it is a disgrace that Europe had to work for a word of command from the other side of the Atlantic before she realised where her own duty and interest lay.
Within months Brugmans' speech was being widely circulated among "European federalists", updated with a reference to the three events of 1947 which had "determined international life": the Marshall Plan, the breakdown of the Conference of the Big Three and the setting up of "Cominform".

Citing Proudhon's plea of 1866 that "to end the irreparable abuse of sovereignty" what was needed above all was "the dismemberment of sovereignty", Brugmans called for the setting up of "supranational" authorities. They would administer hydro-electric power from the Alps, the European railway system and "the first nucleus of autonomous European administration of coal and heavy industry". This call was echoed in a foreword to the British edition of Brugman's speech by Arthur Salter's friend Lord Layton, who wrote that "the whole of Western Europe can in fact be regarded as a single, highly interdependent industrial unit" crying out for supranational control.

Despite this orchestrated support from Europe and intense lobbying in Washington, the US Congress remained hostile to Marshall's proposal. Again it was pressure from events elsewhere which turned the tide. In February 1948, the "Prague coup" established complete Communist control over Czechoslovakia. This event had profound repercussions throughout the Western world, lending substance to Acheson's "domino theory". Congressional resistance to the Marshall Plan collapsed. On 13 March, it was supported by the Senate and on 2 April it was approved by the House of Representatives with a massive 329-74 majority. Nevertheless, Congress refused to write a blank cheque. Aid was limited to $5.3 billion for one year, at the end of which approval had to be sought for continued funding.

For pro-integrationist lobbyists on both sides of the Atlantic, an important lesson had been learned: rhetoric on protecting Western Europe from the threat of Communism was likely to be the most effective shaping American opinion. John McCloy, soon to become US High Commissioner for Germany (and later chairman of the CFR, from 1953 to 1970), admitted: "one way to assure that a viewpoint gets noticed is to cast it in terms of resisting the spread of Communism". The French also found the Communist threat highly advantageous. Mendès-France commented: "The Communists are rendering us a great service. Because we have a 'Communist danger", the Americans are making a tremendous effort to help us. We must keep up this indispensable Communist scare".

The chief instrument chosen by Washington to promote its new policy of European integration was a new organisation, formed on 16 April 1948, to administer the distribution of Marshall Plan funding. This was the Organisation of European Economic Co-operation (OEEC). The French government, heavily influenced by Monnet, pushed for the new body to be given an executive council with supranational powers and a permanent secretariat. The committed integrationist Paul Henri-Spaak, now once again Belgium's prime minister, was appointed its director general. This was vociferously opposed by the British Foreign Secretary, Ernest Bevin, supported by Sweden and Switzerland, who also had serious reservations about the "political" components of the plan.

Through their efforts, the OEEC remained strictly intergovernmental, controlled by a "Council of Ministers" making decisions on the basis of unanimity. Monnet's verdict could not have been more withering: "the OEEC's nothing: it's only a watered-down British approach to Europe – talk, consultation, action only by unanimity. That's no way to make Europe".

Thus passed the first serious attempt to set up a large-scale supranational European organisation. Its failure, however, was simply to spur on the integrationalists to further efforts.

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