Origins

Though it grew into an ambitious project for European recovery, the Marshall Plan emerged primarily from the evident failures of American policy in occupied Germany. At the Potsdam Conference of July 1945, the United States, Britain, and the Soviet Union had agreed to govern defeated and occupied Germany as a single economic unit, even though they also agreed that Germany was to be divided into four zones (the fourth going to France). This contradiction, obvious even then, nonetheless was accepted as a workable program to guide a slow and carefully constrained German economic recovery while also ensuring that no central German administration would emerge to threaten the peace of Europe again. The problem with this plan was that German economic growth was vital to European economic recovery as a whole; without German coal, steel, manufacturing, and trade, the whole European network of industrial life did not have a remote chance of revival. How could the United States square the need for German economic growth with the geopolitical requirement that Germany be occupied, divided, and controlled? Until the Moscow meeting of the Council of Foreign Ministers in March-April 1947, American administrators in Washington and Germany tried to find a middle ground between punishment and reconstruction. They failed, not least because two of their partners, the Soviet Union and France, insisted on a harsh occupation arrangement that was designed to hobble German industry permanently, while their British ally, with whom the United States fused its zone of occupation into a jointly run bizone, was calling for an easing of industrial restrictions so as to lower the costs that the overstretched British Exchequer was paying for the occupation. Between these two competing views, the Americans themselves were torn between a desire to impose a tough occupation regime and a growing anxiety that to do so might make Germany vulnerable to political instability, Communist subversion, and Soviet machinations.

By the beginning of 1947, Secretary of State George C. Marshall, prodded by a number of his immediate advisers, notably Under Secretary of State Dean G. Acheson, Policy Planning Staff director George F. Kennan, and Under Secretary of State for Economic Affairs William L. Clayton, began to see the need for a clear break with the ambivalent policies that the Potsdam agreement had generated. This was not only because Germany’s own fate seemed to hang in the balance, but also because the overall European picture was threatening to American interests. The Truman Doctrine of March 1947 had announced an aid policy to Greece and Turkey in defiant tones: the

United States must be willing, President Harry S. Truman told the US Congress, "to help free peoples to maintain their free institutions and their national integrity against aggressive movements that seek to impose upon them totalitarian regimes. This is no more than a frank recognition that totalitarian regimes imposed on free peoples, by direct or indirect aggression, undermine the foundations of international peace and hence the security of the United States."201 This assertion echoed across the continent. In France and Italy, powerful Communist Parties organized strikes and protests against the reigning centrist governments, while the economic health of these European states had not apparently improved since the end of the war. Foodstuffs and coal were in short supply throughout Europe, and the piecemeal aid the Americans and British had offered through the United Nations Relief and Rehabilitation Administration (UNRRA) and short-term grants had failed to generate self-sustaining recovery. It was time, Marshall believed, to use Germany as an engine to power a broader European recovery. "The recovery of Europe," he told the American people in his radio address of April 28,1947, upon returning from the Moscow meeting of the Council of Foreign Ministers, "has been far slower than expected. Disintegrating forces are becoming evident. The patient is sinking while the doctors deliberate. So I believe that action cannot await compromise through exhaustion. New issues arise daily. Whatever action is possible to meet these pressing problems must be taken without delay."202

Bolstered by reports from his Policy Planning Staff and Under Secretary Clayton - whose May 27 memorandum to the secretary declared that "we grossly underestimated the destruction of the European economy by the war" - Marshall decided to go public.203 On June 5, 1947, Marshall delivered a brief speech at the commencement exercises at Harvard University. What is notable about this address is its emphasis on an integrated, coherent solution to Europe’s economic problems. "The remedy," Marshall said, "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.” Carefully avoiding the specific issue of Germany, he said that the United

States’ purpose was "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." The Americans wanted to "find a cure rather than a palliative"; and to this end would help Europeans in drafting a Europe-wide plan for recovery.204

Marshall had already concluded that Germany would have to be mobilized in the effort of European recovery; and he anticipated that the only way to persuade France and other Europeans to accept this strategy was to create new institutions that would oversee and shape a balanced European recovery. An integrated approach, involving European cooperation, was also the best way to persuade Congress to increase funding for European recovery. Obviously, the Soviet Union would object; Marshall knew this because the Soviets had objected steadily to American proposals for an upward revision of German industrial activity and to the creation of any central German political institutions. Marshall could have had no illusions that the Soviet Union would perceive his European aid plan as an affront and an open break with four-power policies in Germany, which it was. Potsdam was dead; the Marshall Plan era had begun.

Of course, a number of crucial battles remained to be fought, both international and bureaucratic. Marshall’s ideas had to be presented to the Europeans; they had to take up his invitation to act; and Congress had to create legislation giving life to Marshall’s proposals. These multiple lines of action occupied the period from July 1947 to April 1948. In a hastily arranged conference in Paris in late June, British foreign minister Ernest Bevin, French foreign minister Georges Bidault, and Soviet foreign minister Viacheslav Molotov convened to discuss a European response to Marshall’s June 5 speech. Bevin and Bidault were eager to make Marshall’s plan work, even though they each had concerns about precisely what "integration" meant. But Molotov was wholly, indeed ideologically, opposed to the underlying premise of economic integration, common purpose, and transparency in his dealings with capitalist states. After a few days of trying to divide the French from the British, Molotov realized the Soviets were facing a common front: the Europeans wanted American help, and were willing to let Washington lead. Molotov and his legions of advisers withdrew from the Paris meetings and, in a massive strategic blunder, announced that the Soviet Union would not participate in the plan.

Molotov’s withdrawal opened the way for Bevin and Bidault to arrange a meeting of sixteen European nations that did wish to participate in a European recovery plan.205 Opening on 12 July, the meeting quickly created the Committee on European Economic Cooperation (CEEC). The CEEC was a cockpit ofcompeting national economic interests, as the major states began to fight over precisely how much aid they needed, and how their own national recovery programs would deploy that aid in the common cause of European recovery. Nonetheless, throughout the summer of 1947, Europeans were talking openly and passionately about a plan for continental recovery in which CEEC states would work together: this marked a major turning point in the history of postwar Europe.

The CEEC final report requested $19.3 billion in aid over four years; the Truman administration in turn sought $17 billion; but Congress in the end appropriated $5.3 billion for the first year and asked the administration to return for subsequent requests on an annual basis. This came only after a good deal of bargaining between the Truman administration and Congress, in which a small but vocal band of critics, on both Left and Right, assailed the plan. The Economic Cooperation Act of April 1948 authorized the European Recovery Program (ERP) and created the Economic Cooperation Administration (ECA) to implement it. The European participants were grouped together in the Organization for European Economic Cooperation (OEEC), designed to coordinate progress toward the goals of the ERP. It is worth noting the language of the act that authorized the Marshall Plan, because it contains nomenclature that would become part of the fabric of postwar international relations, thanks to Marshall’s initiative. The act stated that "the restoration or maintenance in European countries of principles of individual liberty, free institutions, and genuine independence rests largely upon the establishment of sound economic conditions, stable international economic relationships, and the achievement by the countries of Europe of a healthy economy independent of extraordinary outside assistance." European recovery required a "strong production effort, the expansion of foreign trade, the creation and maintenance of internal financial stability, and the development of economic cooperation, including all possible steps to establish and maintain equitable rates of exchange and to bring about the progressive elimination of trade barriers.”206 What had begun as a short speech at Harvard in June 1947, calling for a plan for European recovery, had emerged by April 1948 as a massive undertaking: in Michael Hogan’s words, the United States now undertook "nothing less than a major reorganization of the European state system into a more viable framework for controlling the Germans, containing the Soviets and putting the continental countries on the road to economic recovery and multilateral trade. ”207