Marshall Plan

Marshall plan, or European Recovery Program (ERP), is a fund-aided program by the United States for the countries in Western Europe. The main purpose of Marshall plan was to provide financial help to the European countries affected due to the Second World War.

Through this program, agricultural production in Europe got boosted. Also, the industrial sector started performing and growing well. In addition, the balance of trade between Marshall plan countries improved. The relations between the U.S. and Europe enhanced extensively. However, some European countries faced huge bias in funding.

• Marshall Plan is financial help from the Federal government to European countries. The goal was to help these countries to overcome war losses.
• The U.S State Secretary, George C. Marshall, proposed this idea at Harvard University in 1947. President Harry Truman passed this program on April 3, 1948.
• The Federal government provided approximately $13.3 billion to European countries, including Germany and Italy.
• As a result of the Truman Doctrine and the European Recovery Program, a cold war arose between the United States and the Soviet Union.

Marshall plan, initiated by the United States, provided $13.3 billion in aid to European countries. In addition, the World War II enemies, mainly Germany and Italy, were also given financial help to aid them in recovering from the war's destruction. U.S., State Secretary George Marshall proposed the Marshall plan in 1947. During this time, most of the countries recovered from the war crisis. In short, it gave an overall acceleration to the disturbed economies.

The history of the Marshall plan dates back to the postwar situation in 1945. The Second World war ended and created a great famine in Europe. In addition, it brought several ruins and damage to European countries. Moreover, during this time, the influence of the Soviet Union and Communism increased. George Marshall noticed constant pressure on the European countries to accept communism. So, at Harvard University, on June 5, 1947, Marshall addressed the difficult situation of Europe and the need to rebuild it. Also, the U.S was the least affected country of all.

Thus, on December 19, 1947, -U.S. President Harry Truman forwarded Marshall's idea to Congress to provide financial aid to Europe. After getting Congress's approval, on April 3, 1948, President Truman signed the Economic Cooperation Act of 1948, also known as the Marshall Plan.

The Federal government (U.S.) provided financial aid of $13.3 billion to Europe for rebuilding its continent. During the negotiations, Europeans asked for $22 billion in funding. However, Truman agreed to fund $17 billion, and Congress provided the rest. The European nations used most of the funding amount to purchase goods from the U.S market. Out of $13 billion, $3.4 was spent on imports of raw materials, $3.2 billion on food, $1.9 billion on machines, and the rest on fuel.

During a meeting in Paris, sixteen countries participated in understanding the Marshall plan. However, France opposed the participation of Germany as it would again create a war-like situation. Likewise, other nations like Greece and Sweden did not want to disturb their relations with other powers, while Britain wanted a special status. Thus, Truman's representative, William L. Clayton, put forth certain terms and benefits of this plan. Let us look at them:

• Developing a two-sided (multilateral) trade agreement within Europe.
• Carrying a step towards currency convertibility.
• Discarding all policies against U.S. imports.
• Reduction in government spending.
• Free to structure their respective economies.
• Reduce government control and increase exports to the U.S.

The U.S government invested a certain amount in the Marshall plan cost. However, Iceland and Portugal received the least funding, $29.3 and $51.2, respectively. The following table describes the cost among major countries:

1. United Kingdom (U.K) = $3,189.8 
2. France = $2,713.6
3. Italy = 1,508.8
4. West Germany = $1,390.6
5. Netherlands = $1,083.5

During the Marshall plan date, the industrial sector saw a rise of 55% and 37% in agriculture production. As a result, the overall Gross Domestic Product (GDP) rose by 33% by the end of 1951. In addition, the estimated steel production reached 60 million. Also, oil production got boosted by four times. Lastly, the coal production plants targeted 584 million tons by the end of 1951.

Let us look at the examples of the Marshall plan and its implications:

Example #1

In an interview, the President of Open Society Foundations and United Nations Deputy Secretary General, Lord Mark Malloch-Brown, addressed the need for Marshall plan 2.0. He said the world had faced many global crises in the past decade. And this new plan would improve the exhausting conditions if developed economies like China and the U.S. took the initiative.

Example #2

Similarly, Lord Yulia Kiryanova, CEO of Smart Holding, addressed the need to launch projects within the European Recovery Program (ERP) plan framework to bring Ukraine out of the crisis. According to her, Ukraine will need financial aid to overcome the war losses and develop its economy again.

Marshall's plan contributed significantly to the development of western economies. First, the program tried to minimize the dollar gap between their currencies. As a result, efficient use of the dollar and trade got boosted. It helped Marshall plan countries to fulfill their objectives. Among them, the main purpose of the Marshall plan, which was to reduce communism, was successful. Marshall's plan almost reduced the communist power to one-third during its three years.

European nations could identify and remove hurdles to their growth and adopt sound investment levels. The trade got liberalized, and there was a free exchange of goods and services. Europeans used almost 70% of their dollars on purchasing items from the U.S. As a result, the relations between the U.S and Europe became more friendly.

The value of U.S. investment in Europe increased tremendously. Europeans got a chance to take part in the U.S. training sessions in the private sector. Because of this plan, the Atlantic Alliance (NATO) was possible. However, certain economists feel that aid alone will only improve the conditions if all nations work on their economies.

Although the Marshall Plan and Truman Doctrine focused on Europe, their purpose differed. U.S. State Secretary George Marshall proposed the former in 1947 but enacted it on April 3, 1948. While the latter was the sole idea that U.S. President Harry Truman proposed on March 12, 1947. The purpose of the former was to reduce war losses in the European nations. In contrast, the latter focused on avoiding the spread of communism all over Europe. However, it led to the cold war later.

This article has been a guide to Marshall Plan and its definition. We explain its use, agreement, examples, significance, and a comparison with the Truman doctrine. You may also find some useful articles here -

• Foreign Aid
• Development Economics
• Welfare Economics