War

Marshall Plan Digital History ID 4077

Date:1947

Annotation: Proposal for U.S. aid to reconstruct post-World War II Europe.

In June 1947, George C. Marshall proposed to give financial aid to European countries. He

called on Europeans to collectively agree on what kind of assistance they needed. Even the

Soviet Union was invited to participate in the planning.

The Soviet delegation abruptly quit the summit in Paris to discuss the Marshall offer. When two

Soviet satellites--Czechoslovakia and Poland--indicated that they wanted to take part in the

Marshall Plan, the Soviet Union said no. The Soviet refusal to participate made it easier to secure

congressional passage for the plan. When the Czechoslovakian government was overthrown in a

Communist coup, congressional passage was assured.

The Marshall Plan committed more than 10 percent of the federal budget and almost 3 percent of

the United States' gross national product to rebuilding Western Europe. Over the next 40 months,

Congress authorized $12.5 billion in aid to restore Western Europe's economic health and to halt

the spread of communism. Marshall's plan actually cost the United States very little, since it was

largely paid for by European purchases of American coal, agricultural crops, and machinery.

Document: The Marshall Plan

I need not tell you gentlemen that the world situation is very serious. That must be apparent to all

intelligent people. I think one difficulty is that the problem is one of such enormous complexity

that the very mass of facts presented to the public by press and radio make it exceedingly

difficult for the man in the street to reach a clear appraisement of the situation. Furthermore, the

people of this country are distant from the troubled areas of the earth and it is hard for them to

comprehend the plight and consequent reaction of the long-suffering peoples, and the effect of

those reactions on their governments in connection with our efforts to promote peace in the

world.

In considering the requirements for the rehabilitation of Europe the physical loss of life, the

visible destruction of cities, factories, mines, and railroads was correctly estimated, but it has

become obvious during recent months that this visible destruction was probably less serious than

the dislocation of the entire fabric of European economy. For the past 10 years conditions have

been highly abnormal. The feverish maintenance of the war effort engulfed all aspects of

national economics. Machinery has fallen into disrepair or is entirely obsolete. Under the

arbitrary and destructive Nazi rule, virtually every possible enterprise was geared into the

German war machine. Long-standing commercial ties, private institutions, banks, insurance

companies and shipping companies disappeared, through the loss of capital, absorption through

nationalization or by simple destruction. In many countries, confidence in the local currency has

been severely shaken. The breakdown of the business structure of Europe during the war was

complete. Recovery has been seriously retarded by the fact that 2 years after the close of

hostilities a peace settlement with Germany and Austria has not been agreed upon. But even

given a more prompt solution of these difficult problems, the rehabilitation of the economic

structure of Europe quite evidently will require a much longer time and greater effort than had

been foreseen.

There is a phase of this matter which is both interesting and serious. The farmer has always

produced the foodstuffs to exchange with the city dweller for the other necessities of life. This

division of labor is the basis of modern civilization. At the present time it is threatened with

breakdown. The town and city industries are not producing adequate goods to exchange with the

food-producing farmer. Raw materials and fuel are in short supply. Machinery is lacking or worn

out. The farmer or the peasant cannot find the goods for sale which he desires to purchase. So the

sale of his farm produce for money which he cannot use seems to him unprofitable transaction.

He, therefore, has withdrawn many fields from crop cultivation and is using them for grazing. He

feeds more grain to stock and finds for himself and his family an ample supply of food, however

short he may be on clothing and the other ordinary gadgets of civilization. Meanwhile people in

the cities are short of food and fuel. So the governments are forced to use their foreign money

and credits to procure these necessities abroad. This process exhausts funds which are urgently

needed for reconstruction. Thus a very serious situation is rapidly developing which bodes no

good for the world. The modern system of the division of labor upon which the exchange of

products is based is in danger of breaking down.

The truth of the matter is that Europe's requirements for the next 3 or 4 years of foreign food and

other essential products -- principally from America -- are so much greater than her present

ability to pay that she must have substantial additional help, or face economic, social, and

political deterioration of a very grave character.

The remedy lies in breaking the vicious circle and restoring the confidence of the European

people in the economic future of their own countries and of Europe as a whole. The

manufacturer and the farmer throughout wide areas must be able and willing to exchange their

products for currencies the continuing value of which is not open to question.

Aside from the demoralizing effect on the world at large and the possibilities of disturbances

arising as a result of the desperation of the people concerned, the consequences to the economy

of the United States should be apparent to all. 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 working economy in the world so as to permit the emergence of political and

social conditions in which free institutions can exist. Such assistance, I am convinced, must not

be on a piecemeal basis as various crises develop. Any assistance that this Government may

render in the future should provide a cure rather than a mere palliative. Any government that is

willing to assist in the task of recovery will find full cooperation, I am sure, on the part of the

United States Government. Any government which maneuvers to block the recovery of other

countries cannot expect help from us. Furthermore, governments, political parties, or groups

which seek to perpetuate human misery in order to profit therefrom politically or otherwise will

encounter the opposition of the United States.

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 its 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 efficacious for this

Government to undertake to draw up unilaterally a program 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

program so far as it may be practical for us to do so. The program should be a joint one, agreed

to by a number, if not all European nations.

An essential part of any successful action on the part of the United States is an understanding on

the part of the people of America of the character of the problem and the remedies to be applied.

Political passion and prejudice should have no part. With foresight, and a willingness on the part

of our people to face up to the vast responsibilities which history has clearly placed upon our

country, the difficulties I have outlined can and will be overcome.

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