DANIEL M.

FOX

The Administration of the Marshall Plan

and British Health Policy
The United States made Marshall aid to European countries (1947–51)
contingent upon bilateral agreements about major issues of economic
and social policy. Because the implementation of the Marshall Plan in
Britain coincided with the inception of the National Health Ser-vice
(NHS), the bilateral agreements negotiated between Britain and the
United States addressed the relationship between economic re-covery
and a new health policy that offered universal coverage for services
that were fully funded from tax receipts.
This article uses primary sources to explore in more detail than
has previously been done the effects of the administration of Marshall
aid on the NHS.1 These sources suggest that the contentious poli-tics of
health policy within the United States had scant influence on the
administration of Marshall aid to Britain. On the contrary: between
1947 and early 1949, American officials responsible for for-eign and
international economic policy were usually supportive of British health
and social policy, in public and private. However, later in 1949 and in
1950, the last year of Marshall aid to Britain, Ameri-can officials
pressed their British counterparts to reduce spending for health and
social services. This pressure was mainly the result of U.S. concerns
about defense policy. Moreover, powerful members of the British
Cabinet and their officials agreed with the Americans. Other British
leaders, however, resented what they described as American intrusion
in policy for the NHS.

The Stakes of the Marshall Plan

Eighteen European countries received about $14 billion in Marshall aid

between 1948 and 1951. Britain received the largest share of this
THE JOURNAL OF POLICY HISTORY, Vol. 16, No. 3, 2004.
Copyright © 2004 The Pennsylvania State University, University Park, PA.
192 THE MARSHALL PLAN AND BRITISH HEALTH POLICY

support ($3.2 billion); the next largest amounts went to France ($2.7),
Italy ($1.5), West Germany ($1.1), and the Netherlands ($1.1). These
funds comprised about 2.5 percent of the aggregate national income of
European countries over the four years. They were 1.2 percent of the
total gross national product of the United States.2

Although most Marshall aid was spent by European firms to

purchase American goods, American officials made significant de-
mands on foreign governments. Negotiations over the bilateral agree-
ments that annually preceded the flow of funds from the United States
addressed major issues of policy for taxation, budgeting, money, labor
markets, and trade. Britain, for example, agreed in 1948 to balance its
budget annually, maintain currency reserves at particular levels, and
restrict tariffs.
The legislation authorizing Marshall aid required each recipi-ent
country to establish “counterpart funds,” pools of local currency
equivalent to the dollar value of exports approved by the Ameri-cans.
The Economic Cooperation Administration (ECA), the U.S. agency
that administered Marshall aid, used 5 percent of these funds for its in-
country administrative costs; the remainder was allocated, mainly for
economic development, as a result of negotiations be-tween officials of
the ECA and of each European government.
Bilateral negotiations enabled American officials to influence
social policy in European countries mainly, most historians agree,
through their views about fiscal and monetary policy. For example,
limits on budgets or the allocation of funds for capital projects and
industrial subsidies influenced the availability of public funds for
health care and social services. Similarly, monetary policy influenced
how much disposable income consumers would have, and how much
government could require them to share the cost of subsidized health
and social services.
U.S. officials designed and implemented the Marshall Plan dur-
ing the eighteen months that preceded the national elections of 1948.
During these months there was considerable bipartisan agreement
about foreign policy but stalemate on domestic policy between the
Republican congressional majority elected in 1946 and the Demo-
cratic president. The crafting of policy for the Marshall Plan reflected
both bipartisanship and the tensions over domestic social and eco-
nomic policy. These tensions were not resolved by the restoration of
narrow Democratic majorities in Congress in 1948.
 DANIEL M. FOX 193

When Secretary of State George C. Marshall proposed massive

U.S. economic assistance to European nations in June 1947, the
implications of his proposal for health and social policy were minor
issues for policymakers and voters in either the United States or Brit-
ain. In both countries, the most powerful leaders and, according to
opinion polls at the time, a large percentage of citizens endorsed
American aid for European economic recovery. Moreover, there was
broad agreement that Marshall aid would help to contain the ex-
pansion of the Soviet Union. Whether American aid would influ-ence
health and social policy in Britain, or any other country, was only of
interest, and then casually, to a few leaders and some of their
constituents in each country.

Mutual Accommodation: The United States and the United

Kingdom, 1947–1949

American and British leaders initially avoided calling attention to

differences in each country’s approach to health and social policy
when they negotiated the implementation of Marshall aid. When
Marshall prepared his speech for Harvard’s commencement announc-
ing the Plan, he rejected advice from senior state department offi-cials
that the “United States must run the show” in a new aid program.
According to his biographer, moreover, he accepted the suggestion of
Dean Acheson, Undersecretary in 1947 and his successor as Sec-retary
in 1949, that the speech should state the European economic problem
“not as an ideological one but as a material one.”3
Several months after Marshall’s speech, the State Department’s
Policy Planning Staff recommended an official attitude of tolerant
ambiguity toward the domestic policy, and especially the health and
social policy, of European countries. This staff, directed by George
Kennan, explored the possibility that the “United States might in-sist
that the Europeans arrive at a better . . . allocation of resources than
their current economic plans envisage.” An improved alloca-tion might
include, they wrote, reduced “spending on social pro-grams.”4

The Policy Planning Staff considered “two extremes, both clearly

to be avoided.” At one extreme, “preoccupation with the domestic
problems of the receiving governments would . . . lend substance to
charges that this Government was seeking a degree of dictation over
the policies and acts of other governments.” At the other, to “ig-
194 THE MARSHALL PLAN AND BRITISH HEALTH POLICY

nore” domestic policy “altogether would . . . constitute an open invi-

tation to the abuse of U.S. readiness to assist . . . as well as a lack of
respect for the need for conserving the resources of this country.” The
staff report recommended that the United States “respect” the “freely
expressed decisions of European countries “as to the economic and
social systems which they hold to be best for themselves.”5 Ac-cording
to Michael Hogan, the basis for this recommendation was Kennan’s
belief that the “Communist challenge remained princi-pally an
economic and political one, to be matched by economic and diplomatic
initiatives like the Marshall Plan.”6
Moreover, the recently established Central Intelligence Agency
(CIA) explicitly recommended support for British domestic policies. A
scholar who read extensively in CIA sources concluded that its
officials repeatedly “spoke highly of the British Labour Government,”
emphasizing that a “socialist government was less vulnerable to Com-
munist propaganda.”7
At least one influential statesman disagreed with the Policy Plan-
ning Staff and the CIA. W. Averell Harriman, soon to become a senior
ECA official, told Marshall and Secretary of the Treasury John Snyder
in August 1947 that the policy of the British government to “carry out
the domestic program of nationalization and socialization of industry
could not be underwritten by Americans.”8 Harriman did not address
health and social policy, however.
British domestic policy was a secondary issue during congres-
sional hearings, in January and February 1948, on bills that became the
Economic Cooperation Act. Although witnesses from right-wing
organizations testified that no aid should go to countries in which
socialists held power, none of them specifically attacked welfare-state
policies in Britain or other countries.9 Several members of Congress
did, however, criticize subsidies, even if indirect, for Brit-ish social
policy, notably Senator Kenneth Wherry (R-Neb.), who deplored
Britain’s “socialistic welfare state . . . fastening a tighten-ing grip on
the country.”10
Few members of Congress agreed with their colleagues on the
right. For example, Representative Francis E. Walter (R-Pa.) told his
colleagues on the House Foreign Relations Committee that it “would
be a grave mistake if we would dictate to the British people that we do
not approve . . . of their politics.”11
Senior officials of the ECA publicly agreed with Congressman
Walter but had private reservations about U.S. neutrality toward all
British social policy. In May 1948, for instance, Thomas K. Finletter,
 DANIEL M. FOX 195

chief of the ECA mission in the United Kingdom, told Harriman, now
the ECA’s Special Representative in Europe, that “I do not sug-gest
that we should interfere in . . . health services, old age pensions and
unemployment insurance . . . [but] in matters of housing, which
absorbs critical raw materials and social services of a similar charac-ter
we have an interest [and] may judiciously make suggestions.”
Moreover, Finletter feared that social services were “an inflationary
force” and that they could “diminish the compulsions to work. The
same criticisms, of course, applied to health services and pensions. But
Finletter also recognized that the “British are extraordinarily sensitive
to interference.”12
A State Department policy statement of June 1948 articulated a
consensus in the executive branch and Congress about British do-
mestic policy that sought both to placate domestic critics of an
American welfare state and reassure the British. The department
accepted the recommendation of the Policy Planning Staff, but em-
phasized that British social policy was not applicable to this coun-try:
“The United States would not adopt for her own certain of the internal
economic and social legislation which the British have adopted.”
Nevertheless, the department’s statement continued, “[it] is not our
policy to interfere with or attempt to direct the domestic legislation or
policies of the democratically elected representatives of the British
people.” Despite the evenhandedness of this policy, the department
was sufficiently concerned about adverse reaction to it that it remained
an official secret.13
The tolerance toward British domestic arrangements among
members of Congress and State Department officials encouraged some
of their British colleagues to consider whether the two countries could
collaborate in pressing for changes in social policy in other coun-tries
receiving Marshall aid. In March 1948, for example, the For-eign
Office convened a committee of officials from various ministries to
explore the interest of the Foreign Minister, Ernest Bevin, in “at-
taining a common level of social services in the Western European
countries” in order to “equalize costs of production” and “promote
closer understanding.”14
The committee assigned staff to report on the “difficulties aris-ing
from different levels of social services” among American states. A
month later the committee concluded that regional differences in social
expenditures “do not themselves constitute an insuperable barrier to
political federation.”15 Whether as a result of this analysis or of a
decision not to overestimate American tolerance of British
196 THE MARSHALL PLAN AND BRITISH HEALTH POLICY

health and social policy, what had begun as potential collaboration

ended as British concurrence in the American policy of tolerance of
policy differences among countries.
In October 1948, Prime Minister Clement Attlee chose to avoid
provoking potential American critics of British social policy when he
refused to permit Aneurin Bevan, Minister of Health and Hous-ing and
a leader of the Labour Party’s Tribune faction, to address a convention
of the United Automobile Workers (UAW) in Milwau-kee.16 A few
months earlier, UAW president Walter Reuther, testi-fying to Congress
on the bill to create the ECA, urged the United States to go beyond
mere tolerance of European health and social policy and embrace
pluralism. He warned the Senate Foreign Rela-tions Committee
“against imposing conditions on the European na-tions which might
indicate we are attempting to get a first mortgage on their freedom of
selection in either political or economic sys-tems.”17

Protesting Attlee’s decision that it would be imprudent for him to

speak to the UAW, Bevan described British health and social policy as
a matter of national pride. “I do not see how it would do other than
good for a British Minister to explain what we have done in health and
housing, where we clearly lead the Americans,” Bevan wrote.
Moreover, Americans deserved such instruction in retalia-tion for their
industrialists coming “to this country to tell you how to bring our
manufacturing technique up to date.” Attlee denied his appeal.18

Unlike Bevan, British officials responsible for foreign policy, and

especially Attlee and Foreign Minister Ernest Bevin, understood the
fragility of American support for all their domestic policy and espe-
cially the NHS. In 1947 and 1948 they spent considerable time, and
assigned other ministers and civil servants to spend even more, with
visiting administration officials and members of Congress and their
staffs. They may have been both surprised and relieved when a visit to
study the NHS by Oscar W. Ewing, administrator of the Federal
Security Agency and the leading advocate of a national health in-
surance program in the Truman administration, attracted no nega-tive
publicity in the American press. Similarly, although Representative
Walter had called for tolerance about British domes-tic policy, the
British embassy in Washington transmitted his subse-quent conclusion
in a report to Congress that “nationalization is a mistake.”19 In the
summer and fall of 1948 a staff member of the Joint Committee of
Congress on Foreign Economic Cooperation vis-
 DANIEL M. FOX 197

ited the United Kingdom to assess, among other issues, the accusa-tion
by some American critics that the British government was “press-ing
internal social goals at the expense of the American taxpayer.” The
agent even worried whether “any of our funds are being used to
provide [British consumers with] subsidy which makes low prices of
food possible.”20
Truman’s election victory assured British leaders of continuity in
the administration of Marshall aid and diminished ECA officials’
anxiety about the concerns of right-wing Republican congressmen.
These officials presented a new attitude toward the NHS when the
Senate Foreign Relations Committee, under Democratic control for the
first time since 1946, convened oversight hearings on the ECA in
February 1949. The officials began by emphasizing that the Brit-ish
government had restrained the growth of spending for health and social
services. Then, in response to questions from members of Congress,
they abandoned the previous policy of toleration and be-came
advocates of the British welfare state. The hearings were in executive
session, which may have accounted for some of the can-dor of what
was said.
The committee heard testimony about British health and social
policy from the most senior ECA officials: Paul Hoffman, the Ad-
ministrator, and Finletter and Harriman. Senator Alexander Wiley (R-
Wis.) asked Hoffman about the adequacy of the 1948 American policy
of tolerance toward British policy on health and social ser-vices. It is
“ordinarily . . . none of our business,” Wiley said that the “British
socialized their medicine and that that resulted in a defi-cit.” But, he
continued, “we cannot keep on financing deficits.”21
In reply, Hoffman emphasized that the welfare state policy of the
Labour government was neither recent nor partisan nor inflex-ible.
Moreover, British leaders agreed with the ECA that “they could not
expand social services any further.” He reminded the senators that the
British had “cut back . . . promises made [by the three major parties]
before the Labour Government took over that there would be a
considerable expansion in those services.”22
Harriman emphasized the historical legitimacy of the Labour
Party and did not repeat his previous reservations about British do-
mestic policy. The Labour movement and its Party was “very old . . .
[it] goes back many decades.” The “British people elected the Labour
Party. . . . It is for the British people to decide what their economic
organization should be,” he continued. More important, the priority in
administering Marshall aid should be protecting democratic in-
198 THE MARSHALL PLAN AND BRITISH HEALTH POLICY

stitutions, not criticizing welfare state policy. In administering the

Marshall Plan, the United States must, he insisted, “avoid the con-
fusion of the question of how far nationalization should go with the
fundamental question of the democratic system of government.”23
Finletter then went beyond defending ECA policy to endorse the
priorities of British health policy when he responded to ques-tions
about the extent to which the British should reduce spending on social
programs. He even lectured the committee about the need for more
spending on the National Health Service. The British needed
“additional hospital accommodation” and an “increase in the number
of women in the nursing profession,” in part because the “numbers of
doctors and dentists cannot be quickly increased.”24
Moreover, Finletter emphasized the macroeconomic benefits of
government health spending, an opinion that he knew would out-rage
the American Medical Association and the United States Cham-ber of
Commerce. NHS expenditures, he insisted, would be offset by a
“lessening of the amount of work time lost through sickness.” In
addition, transfer payments “are more of a charge on the budget than
they are on the materials and services of the United Kingdom” and
hence would not restrain economic growth.25
But Finletter then retreated to the cautious ECA/State Depart-
ment policy of 1948, conceding that “there is a real fiscal problem
because [of] a real increase of 27%” in the social services budget.
Moreover, he agreed with Senator Wiley that high taxes in the U.K.
were a “substantial interference with incentives.” Nevertheless, ev-ery
Labour politician would have applauded his concluding remark: the
“British workman believes what is the fact, that this is his Gov-
ernment.”26

Resolving Ambiguities, 1949–1950

Conflict within the British government soon embarrassed the Ameri-

can officials who endorsed as well as those who merely tolerated
British health and social policy. This conflict, combined with Ameri-
can pressure on Britain to increase appropriations for defense and
reduce welfare state and especially health spending, became increas-
ingly public during 1949. Left-wing Labour Members of Parliament
resented what they considered American interference with British
sovereignty. In late January 1949, for example, Aneurin Bevan made
an unusually curt—for any British minister but especially for him—
 DANIEL M. FOX 199

reply to a Parliamentary Question: “To ask the Minister of Health what

will be the effect of proposals for capital expenditure . . . sub-mitted to
the Organization for European Economic Recovery [which
administered the ECA] on the housing program for 1949.” Bevan’s
angry reply: “None.”27
A few days later, soon after ECA officials had endorsed the Brit-
ish welfare state before a congressional committee, a British minis-ter
from Aneurin Bevan’s faction of the Labour Party declared in a speech
in New York that the “purpose of Marshall aid is to set us free from
dependence on America.” Christopher P. Mayhew, Parliamen-tary
Undersecretary of State for Foreign Affairs, speaking in a de-bate at
the United Nations Economic and Social Council, continued that “we
have not the slightest intention of modifying our economic, our social,
or our political plans in order to qualify for this aid.” Moreover, British
economic recovery was a result of according pri-ority to “human
welfare and social progress,” including a “complete national health
service” and “public ownership of industry.” Mayhew concluded that
“our health as a nation is better than it ever was” because “we regard
social welfare and socialist experiment as an in-tegral part of our
successful production drive.”28
Many Americans reacted furiously. The Chicago Tribune head-
lined its story on the speech, “British Socialism Runs on United States
Money.” Papers across the country covered the story. ECA
Administrator Hoffman telephoned the British Ambassador to threaten
reduced appropriations for the second year of Marshall aid.29 Dean
Acheson, now Secretary of State, and Senator Robert A. Taft (R-Ohio)
ritually asserted the principle of bipartisanship in foreign policy and
endorsed continuing Marshall aid to Britain.30
Then another British minister who was close to Bevan, Hector
McNeill, speaking at what “he thought was a private meeting,” in-
sisted that “Mr. Mayhew’s only fault was that he had ‘blurted out the
truth at the wrong moment.’”31 Hoffman told Ambassador Franks that
McNeill’s remarks made the situation worse. Franks predicted in a
dispatch to the Foreign Office that, although Hoffman and his
colleagues “have all worked with single minded devotion” to pre-serve
Marshall aid, Congress would reduce the appropriation for Brit-ain by
at least 5 percent.32 The Economist editorialized that “Parliament ought
to react as strongly as Congress” to punish the breach of collective
responsibility by the two ministers.”33
Mayhew again displayed anti-Americanism in a letter to For-eign
Minister Ernest Bevin apologizing for his speech. “I had greatly
200 THE MARSHALL PLAN AND BRITISH HEALTH POLICY

underestimated the sensitiveness of Washington,” Mayhew wrote.

However, the UN Economic and Social Council meeting at which he
spoke included delegates from countries “which look to us for a
confident political lead against the Communist campaign.” There-fore
he sought to “rebut allegations of British subservience to U.S.
imperialism.”34
Leaders of the dominant faction in the Labour government had
different views about both the priority of social policy and the alli-ance
with the United States. Sir Stafford Cripps, Chancellor of the
Exchequer, speaking to the press the same week, described British
priorities that differed from Mayhew’s: “first are exports, second is
capital investment in industry, and last are the needs, comforts and
amenities of the family.” Cripps “repudiated” Mayhew’s speech in a
telegram to Hoffman.” Similarly, Hugh Gaitskell, who succeeded
Cripps as Chancellor and in 1955 became Labour’s leader, worried
about American disappointment with the early results of Marshall aid
because “Britain’s large expenditure on social welfare . . . made her a
high cost producer.”35
The underlying tensions revealed by the Mayhew incident pre-
vented relations between the two countries over Marshall aid from
being as cordial as they had been in 1948. After he resigned as head of
the ECA mission to the U.K. in mid-1949, Finletter told an inter-
viewer, “Never before in history have the representatives of one coun-
try been given the duty of reviewing in detail and in public the acts of
another country in dealing with its own affairs.”36 But a few weeks
earlier, according to Ernest Bevin’s biographer, Hoffman had “roused
Bevin’s wrath” with “self-righteous” comments about cutting “wages
and the benefits of the welfare state.” Then “with a sovereign indif-
ference to protocol and the agitation of the rest of the British del-
egation [Bevin] proceeded to ‘ave a go’ and read Hoffman a lesson in
return.”37
British officials in Washington became increasingly discouraged
about American attitudes toward their country’s domestic policy in the
second half of 1949. In July an official in the Washington em-bassy
reported to the Foreign Office that Arthur Krock, Washington
columnist for the New York Times, had told him at a dinner that
“people in London did not realize how much feeling there was in
Congress and elsewhere . . . that a large part of the United Kingdom’s
difficulties were due to ‘socialist’ experiments of the Government in
domestic affairs.” The diplomat continued that “it is, I am afraid true,
that there is an increasing tendency . . . in the newspapers to
 DANIEL M. FOX 201

put the blame for our present difficulties on the Government’s insis-
tence on nationalization, socialized medicine, etc.” As a result, he
wrote, Britain was criticized by “moderate people” as well as by “Con-
gressional conservatives.” Although “not many people really think that
American dollars are being used directly to finance the Health
Scheme,” critics of Britain had grounds to argue that without Ameri-
can financial assistance the government “would never have felt able to
embark on all these expensive ventures in the domestic field.” He
lamented, “I am never very sure what the proper answer to that ar-
gument is.”38
American officials amplified the American attitudes that dis-
couraged British diplomats. In the same month, July 1949, accord-ing
to Hogan, U.S. Treasury Secretary Snyder, Lewis Douglas, the
Ambassador to Britain, and Harriman demanded that Britain, in the
midst of a sterling valuation crisis, adopt a policy of “deflation, de-
valuation [and] cuts in social services.”39
Senior British leaders had considerable sympathy for these de-
mands. A month later, the Cabinet began a spending review that led to
a reduction of 5 percent in the rate of expenditure. Treasury officials,
moreover, insisted that devaluation of the pound required substantial
reductions in spending for social services. When Hoffman again
irritated Ernest Bevin, in September 1949, by pressing for a transfer of
resources from welfare state programs to production for export, the
British government was in deep conflict on the issue.40

Health Policy and the End of Marshall Aid to Britain, 1950–

1951

British and American negotiations about Marshall aid remained

strained throughout 1950. In January the second ranking official in the
U.S. embassy in London described to Secretary Acheson a “steady
stream of American visitors, public and private, demanding to see top
leaders of Government, asking impertinent or intrusive ques-tions,
raising the specter of what Congress may do to the ECA aid unless the
Brits agree to this or that case of special pleading.”41 The same month,
the British Ambassador in Washington, prior to a meet-ing of ECA and
European leaders in Paris, pleaded with Hoffman to “avoid references
which would raise charges of dollar dictatorship and inject Anglo
American difficulties into the British General Elec-tion.”42
202 THE MARSHALL PLAN AND BRITISH HEALTH POLICY

A few American officials tried to reassure British leaders that the

tension was temporary and that the United States still tolerated their
health and social policy. Paul Nitze, now head of the State
Department’s Policy Planning Staff, told the Economic Adviser to the
British Government that, despite American pressure on Britain to
increase defense spending, “it was more important . . . to maintain full
employment and the level of social services if [Britain] was to be an
active and useful partner in the Cold War.”43
Between March and May 1950, British officials also tried to re-
duce the tension created by their country’s domestic policy. A Trea-
sury memorandum of 9 March on “Fundamental Discussion with the
United States” insisted that “there is no reason why we should ban
anything from discussion, particularly [the] internal policy” of both
countries. U.S. policy on full employment was relevant to Britain and
“we should not get very far if we refuse to discuss our internal policy
subject, of course, to maintaining Budget secrecy in the nar-rower
sense.” Several days later, Treasury sent the Foreign Office an analysis
of the proposed supplemental budget for the National Health Service
for use by the embassy in Washington to counter “adverse U.S.
publicity.” Higher costs, the Treasury insisted in its covering
memorandum, were the result of “pent-up demand” rather than of
“overpaying for services.”44
Prominent American supporters of Britain also intervened. Af-ter
visiting London in early March, Averell Harriman reported to President
Truman that, in talks with people of all parties with whom he had
“worked . . . intimately during the war,” he found cross-party and
popular support for Labour’s domestic policy. If the Tories re-turned to
power in the imminent election, “they would maintain the social
programs already adopted but would make them more effi-cient and
less wasteful.” Fully recanting his antagonism to Labour policy of
1947, Harriman told the president that the source of Labour’s popular
support “is the full employment that has existed in Britain since the end
of the war.” (Harriman ignored the evidence that this popular support
was eroding.) Truman thanked him for the “best analysis of the British
political situation that I have read.”45
But Harriman reverted to his earlier position six weeks later,
declaring that Britain’s strategic interests required reduced domestic
spending, especially on health and social services. In late April,
Acheson had telegraphed Ambassador Douglas that he anticipated
questions at a congressional hearing on mutual defense assistance
about the “effect [of] welfare programs . . . on [the] defense effort” of
 DANIEL M. FOX 203

European countries. Harriman, in Paris, decided that the London

embassy’s draft reply to the telegram was too supportive of British
policy. His proposed revision began: “Social insurance collections are
not directly available to government for other purposes.” More-over,
because “such transfers involve taxing high income groups for [the]
benefit [of] low income groups they may represent draining funds
otherwise available [for] private investment and increasing demand for
consumer goods.”46 According to Harriman’s biographer, he was
focusing more on foreign policy in general than on the work of the
ECA during the spring of 1950.47
Six days later, on 9 May 1950, Secretary Acheson and Ambas-
sador Douglas used Harriman’s reasoning in an explicit Cold War
context at a meeting in London with Attlee and Ernest Bevin. Pri-
orities had changed, Acheson claimed. The “US and UK govern-ments
should get their peoples to realize that resistance to the Russians must
have absolute priority and furthermore that we had only got a few
years in which to organize and strengthen ourselves.” Like Britain, the
United States had “many things [we] would like to do in the domestic
field and others which [we] would be strongly pressed to do [for
example, he said, increased benefits for veterans] which were just not
possible if Defense was to be given first prior-ity.” Moreover, it would
be “very difficult to get the US Administra-tion and the American
people to make the necessary sacrifices unless they saw that it was part
of a general organized effort of the Western nations . . . to stand up to
the Communist threat.”48
Ernest Bevin did not share the new American priorities, how-ever.
He promised only a “relatively small additional expenditure for
defense” and then only if productivity could be increased.49
A few weeks later, in June 1950, North Korean troops invaded
South Korea, precipitating a United Nations police action led by the
United States. American officials now demanded that Britain increase
its defense spending, reducing spending for health and so-cial policy if
necessary. They could no long maintain any of the tol-erance of the
British welfare state that had been policy since 1948.
But the Labour government had now lost its ability to exchange
economic aid from the United States for restraints on the growth of
expenditures for health and social policy. Labour’s parliamentary
majority had been reduced to a few votes at the general election on 23
February. The government was obliged to placate Aneurin Bevan and
his supporters among Members of Parliament in order to avoid their
defection in a vote of confidence, which would precipitate a
204 THE MARSHALL PLAN AND BRITISH HEALTH POLICY

new election. Hugh Gaitskell, Chancellor of the Exchequer, believed

that abandonment of the British economy by the United States would
“be the end for us.” He hoped to cap the NHS budget, increase de-
fense spending, and raise Old Age Pensions. But he worried about
“lack of understanding and anti-Americanism displayed in the Cabi-
net,” especially by Aneurin Bevan, a rival aspirant to party leader-ship,
who, in what he called Attlee’s “worst appointment,” had been retained
at the Ministry of Health after the election.50
Gaitskell led a British delegation to Washington in October 1950
to negotiate an extension of Marshall aid. He assured State Depart-
ment officials that British public opinion would “accept the neces-sity
for further sacrifices in the interests of the defense of the West.” The
British burden should be “equitable,” he said, referring to a
memorandum by Paul Nitze on distributing the burdens of paying for
defense. The next day, meeting with William Foster, a Republi-can
who had replaced Paul Hoffman as ECA administrator, Gaitskell
acknowledged that it was “impossible . . . to avoid pressure from Con-
gress . . . to modify policies in particular directions,” especially, the
context of the quote strongly suggests, health and social, as distinct
from defense, policy. He went on to describe the “sensitiveness of
British Parliamentary and other public feeling on the subject of ap-
parent interference by the United States in British affairs,” making
plain that he distinguished between social policy and matters of con-
cern to the alliance between Britain and the United States.51
Foster agreed to “resist attempts by Congress to impose special
obligations on the receipt of military assistance.” Then he elimi-nated
Gaitskell’s hope for continuing American tolerance of British domestic
policy: “The largest contributor to any joint enterprise was bound to
have the largest share of influence,” Foster said.52
Ten days later, the Foreign Office told the embassy in Washing-
ton that a senior ECA official, Richard Bissell, had confided that the
ECA had lost its ability to prevent termination of Marshall aid,
principally as a result of Britain’s overall economic position. How-
ever, Bissell went on to say that “the ECA was always under suspi-cion
of not being sufficiently tough” in challenging British resistance to
American advice about many of its policies. Pressure from Con-gress
and within the administration to terminate Marshall aid was increasing
in response mainly to “extreme difficulties as a result of defense
spending.”53 The sources are not clear about how strongly ECA
officials defended continuation of aid to Britain; the best in-ference is
that, taking account of national and international poli-
 DANIEL M. FOX 205

tics, they preferred to defend continuing aid to countries more at risk

from the Soviet Union.
Both governments soon announced that Britain, alone of the
sixteen countries participating in the Organization for European
Economic Cooperation, had “reached a position in which it required no
more Marshall aid.” On 10 December 1950, Attlee wrote pri-vately to
Bevin: “The UK was lifted out of the European queue and we were
treated as partners, unequal no doubt in power, but equal in counsel.”54
Attlee’s irony was intended to be about international affairs and
especially the use of nuclear weapons. But if pressed, he might have
agreed that the United States and Britain would con-tinue to be
unequal in the role of the public sector in health policy.

Does This Story Matter?

Available sources do not permit a precise statement about the ex-tent

to which tension between the two countries over health and social
policy contributed to the termination of Marshall aid to Brit-ain. But
the tension contributed to subsequent political events in Britain and,
indirectly, to U.S. foreign policy during the Cold War and after.

In January 1951, when Prime Minister Attlee told the Cabinet that
its Defense Committee would consider proposals for rearma-ment,
Aneurin Bevan warned against making cuts in social and health
services to finance these proposals.”55 Three months later, Gaitskell
told the Cabinet that he would cap the NHS budget and impose charges
of half the cost of dentures and spectacles, precipi-tating Bevan’s
resignation from the Cabinet.
Bevan criticized the United States as a threat to socialist ideals in
his resignation speech to Parliament on 23 April 1951. As a re-sult of
American pressure, he said, the “Western world has embarked upon a
campaign of arms production upon [such] a scale . . . that the
foundations of political liberty and Parliamentary democracy will not
be able to sustain the shock.”56
He castigated the United States for interfering in British health
and social policy. “The British defense program,” Bevan told Parlia-
ment, “must always be consistent with the maintenance of the stan-
dard of life of the British people and the maintenance of the social
services.” Britain had a “message for the world which is distinct from
that of America or the Soviet Union. . . . Ever since 1945 we have
206 THE MARSHALL PLAN AND BRITISH HEALTH POLICY

been engaged . . . in the most remarkable piece of social reconstruc-

tion the world has ever seen.”57 Three years earlier, in contrast, Bevan
had been loyal to the Attlee-Bevin policy of accommodating the
United States; Arthur M. Schlesinger Jr. had reported to Harriman on
the “extent to which his anti-Americanism has disappeared.”58
For Bevan, and for many Britons who have made, implemented,
or studied British health policy in the past half century, creating the
NHS was a triumph for the Labour Party, its cross-party origins dur-
ing the war notwithstanding. Many of them have also believed that
what Bevan called “American competitive capitalism” in his resig-
nation speech replaced the Conservative Party as the greatest threat to
the principles underlying the NHS during the early years of the Cold
War. Because U.S. policy for Marshall aid forced the imposi-tion of
charges in the NHS, they have insisted, American capital-ism
subverted the fundamental principle that the NHS should be free at the
point of use.
Many British policy intellectuals have articulated this opinion
more strongly orally than in writing, as the author has noted during
seminars and personal conversations about health policy in the United
Kingdom over three decades.59 Criticism of American influ-ence on
NHS policy peaked in the late 1980s, when the Thatcher government
invited Alain Enthoven, a Stanford University econo-mist and theorist
of managed care, to help plan what became a new policy of an
“internal market” for publicly financed health care.
American pressure on Britain to increase defense spending was,
however, less of a threat to the NHS than Bevan and those who
sympathize with him have claimed. As early as 1945, John Maynard
Keynes, and the senior American officials with whom he negotiated
about postwar economic policy on behalf of the British Treasury,
agreed that the “Labour Party’s domestic programs depended on sub-
stantial American aid.” Keynes’s most recent biographer, Robert
Skidelsky, comments that the “grants-in-aid that Keynes had failed to
win in Washington in 1945 eventually came in the form of . . .
Marshall Aid. . . . Isolation and Anglophobia had finally been over-
come by the Cold War.”60
Moreover, there is strong evidence that the opinions about the
NHS held by American Marshall Plan officials coincided with the
views of the British Treasury. Between 1947 and 1950, Treasury offi-
cials, like their American ECA counterparts, insisted that the gov-
ernment spend more on industrial development and defense. The most
recent historian of the Treasury concludes that “contrary to
 DANIEL M. FOX 207

Correlli Barnett’s thesis, industrial investment [under Attlee’s Labour

governments] was not sacrificed to the ‘New Jerusalem’ of the wel-
fare state.” Under Treasury pressure, the government reduced spend-
ing for health centers, hospitals, housing, and schools in 1948 in order
to give the “highest priority” to investment in industry, trans-port, and
fuel.61
Similarly, a monetary crisis in 1949 involving the convertibil-ity
of pounds sterling to dollars “led the Treasury to undertake a study of
possible economies in the social services.” As a result of this study
Treasury officials pressured Aneuran Bevan as early as 1949 to im-
pose charges on prescription drugs. Bevan persuaded Attlee to defer
imposing charges on NHS patients until after the election in Febru-ary
1950. Treasury resumed its pressure after the election and con-tinued it
until Attlee and Gaitskell agreed to change policy. Thus the imposition
of charges was a Treasury, not necessarily an Ameri-can, victory that
was made easier by Gaitskell’s Keynesian view, as Chancellor of the
Exchequer, that charges on some NHS services would contribute to a
salutary “disinflationary budget surplus.”62
Practitioners of U.S. foreign policy during the Cold War appear to
have learned from the implementation of the Marshall Plan in Britain
to keep their opinions about the health and social policies of other
countries, particularly essential allies, to themselves. In Janu-ary 1952,
exemplifying this post–Marshall Plan attitude shortly be-fore the
inauguration of Dwight Eisenhower as president, senior civil servants
from the State and Treasury Departments and the ECA col-laborated
on a memorandum titled “The Long Term Economic Prob-lem of the
United Kingdom.” They agreed that “social services introduced or
expanded in the post war period are the fastest grow-ing element, aside
from rearmament, in the British budget [and] are expected to grow.”
Although the United States should not criticize “Britain’s social
service programs as such,” and even though these programs
“contribute to the productivity of labor,” further growth of these
programs was inappropriate. The current rate of growth in health and
social service programs is “quite unrelated to what the United
Kingdom can presently afford.” The Treasury draft of the
memorandum was even stronger, calling “health, education and na-
tional insurance” the “most important single source” of inflation.63
Official reticence about health policy in other countries re-mained
the norm (though not about such health-related policy as family
planning) among U.S. officials responsible for foreign policy. During
the second Clinton administration, the National Security
208 THE MARSHALL PLAN AND BRITISH HEALTH POLICY

Council (NSC) for the first time designated a health issue, HIV/ AIDS
in developing countries, as a national security issue. Discom-fort with
this NSC decision persists among practitioners of foreign affairs. In the
spring of 2000, for example, the Council on Foreign Relations
convened a meeting to review the results of the NSC’s insistence that
health, and other countries’ health policies, could be a priority of U.S.
foreign and international security policy. A coun-cil member and
former foreign policy official, protested, “Why is AIDS/HIV a national
security issue?” Richard Holbrooke, then Ambassador to the United
Nations, replied that “a national security issue is what we say it is.”64

There is no evidence that anyone currently engaged in making or

informing U.S. foreign policy knows that health policy in Britain was
briefly a national security issue just over half a century ago. The author
asked several recent state department and international aid officials if
they knew any of the history described in this article; they did not. But
today, as they did during the implementation of the Marshall Plan,
policymakers shift the boundaries of American foreign policy to
accommodate their perceptions of American inter-ests.

Milbank Memorial Fund

Notes

1. There is substantial literature on both the Marshall Plan and the history of the
National Health Service. I draw heavily on the literature about the Plan in the general
discussion of Marshall aid in the first section; less so in the balance of the article. Two
books by Michael Hogan are essential for understanding Marshall aid in its broad
political and economic context: The Marshall Plan: America, Britain, and the
Reconstruction of Western Europe, 1947–52 (New York, 1987) and A Cross of Iron:
Harry S. Truman and the Origins of the National Security State, 1945–1954 (Cam-
bridge, 1998). Another important overview is Alan S. Milward, The European Res-cue
of the Nation State (Berkeley and Los Angeles, 1992). Two articles by Charles S. Maier
are important to understanding U.S./U.K. relations around the Marshall Plan:
“American Visions and British Interests: Hogan’s Marshall Plan,” Reviews in Ameri-
can History 18, no. 1 (1990): 102–11, and “Alliance and Autonomy: European Iden-tity
and the U.S. Foreign Policy Objectives in the Truman Years,” in Michael Lacey, ed.,
The Truman Presidency (Cambridge and New York, 1989). Other monographs that
provide useful details of Marshall Plan implementation from an American per-spective
include: Hadley Arkes, Bureaucracy, the Marshall Plan, and the National Interest
(Princeton, 1972), and Wilson D. Miscamble, George F. Kennan and the Making of
American Foreign Policy, 1947–1950 (Princeton, 1992). For a British per-spective on
Marshall aid, see Henry Pelling, Britain and the Marshall Plan (London, 1988); Peter
Burnham, The Political Economy of Postwar Reconstruction (New York,
 DANIEL M. FOX 209

1990); Anthony Carew, Labour Under the Marshall Plan: The Politics of Productivity
and the Marketing of Management Science (Detroit, 1987); and Martin Chick, Indus-
trial Policy in Britain, 1945–1951 (Cambridge, 1998). Burnham and Carew are criti-cal
of American motives and actions. Pelling and Chick generally agree with their
American colleagues and, by implication, Milward that on balance Marshall aid
hastened recovery and economic growth and that American intrusiveness in policy,
when it occurred, did not compromise the goals of the Attlee government. Donald
Sasson takes a more jaundiced view of American purposes and influence in One
Hundred Years of Socialism: The West European Left in the Twentieth Century (Lon-
don, 1996). Wendy Asbeek Brusse, in Tariffs, Trade, and European Integration (New
York, 1997), argues that, in the broad European context, Marshall aid assisted na-tional
recovery without compromising domestic consumption.
There is also a rich literature on the background and inception of the National
Health Service. The NHS was enacted in 1946 and began to serve patients in July 1948:
hence critical policy decisions had to be made at the same time that policymakers in the
United Kingdom and the United States were making critical decisions about Marshall
aid. This article takes the widely held view that by the end of the war there was a strong
cross-party consensus about many of the major policies that governed the NHS. That
view is articulated, among other places, in Rudolf Klein, The Politics of the National
Health Service, 4th ed. (New York, 2000), and Daniel M. Fox, Health Policies, Health
Politics: The British and American Experi-ence, 1911–1965 (Princeton, 1986). Charles
Webster emphasizes Labour’s unique contribution to the NHS more than Klein or I do,
in The Health Services Since the War, vol. 1, Problems of Health Care: The National
Health Service Before 1957 (Lon-don, 1988). All three authors have used most of the
same sources.
2. A useful brief history is Stephen F. Ambrose, “When the American Came
Back to Europe,” in “The Marshall Plan: A Legacy of 50 Years,” International Herald
Tribune, 28 May 1997, 5; see also Hogan, The Marshall Plan.
3. Forrest C. Pogue, George C. Marshall: Statesman, 1945–1959 (New York,
1989), 207.
4. Charles L. Mee Jr., The Marshall Plan (New York, 1984), 169; “Certain
Aspects of the European Recovery Problem from the US Standpoint,” Department of
State, Policy Planning Staff, probably summer of 1947, from the Clark Clifford Papers,
in Student Research File B, Box 1, Harry S Truman Library, Independence, Missouri.

5. “Certain Aspects” (n. 4 above), 32–33.

6. Hogan, n. 5 above, 293–94.
7. C. J. Bartlett, The Special Relationship: A Political History of Anglo-American
Relations Since 1945 (London and New York, 1992), 39.
8. Walter Millis, ed., The Forrestal Diaries (New York, 1951), 302.
9. U.S. Congress, House, Committee on Foreign Relations, 80th Congress,
Hearings on United States Foreign Policy for a . . . European Recovery Program, 17
December 1947, 12–29 January, 3–12 February 1948, 1275ff.
10. Lisle A. Rose, The Cold War Comes to Main Street: America in 1950
(Lawrence, Kan., 1999), 129.
11. U.S. Congress, House (n. 9 above), 1824.
12. Thomas K. Finletter to W. Averell Harriman, 11 May 1948, Harriman Pa-pers,
Library of Congress, Manuscript Division, Box 266.
13. Department of State Policy Statement, 11 June 1948, Foreign Relations of the
United States, vol. 3, Western Europe (Washington, D.C., 1974), 1092.
14. Minutes of committee on “Social Services in Western Europe,” 5 March 1948.
FO 371/71838, Public Record Office, Kew, U.K.
15. Ibid., 8 April 1948.
210 THE MARSHALL PLAN AND BRITISH HEALTH POLICY

16. Dai Smith, Aneurin Bevan and the World of South Wales (Cardiff, 1993),
255.
17. Memorandum from British Embassy, Washington, D.C., to the Foreign Of-
fice, 6 February 1948, quoting Reuther’s testimony of a day earlier. FO 371/68022-24,
Public Record Office.
18. Smith, Aneurin Bevan, 255.
19. Memorandum from British Embassy, Washington, D.C., to the Foreign Of-
fice, 13 February 1948, enclosing a U.S. congressional committee report. FO 371/
71747, Public Record Office. Ewing and the chief executive of the British Medical
Association, Charles Hall, made a joint broadcast on CBS during his visit to Lon-don.
Hall defended the goals and mechanisms of the NHS. There is no record in Ewing’s
files of any negative criticism of the broadcast in the United States: Papers of Oscar E.
Ewing, Box 30, Truman Library, Independence, Missouri.
20. F. A. Johnston to C. S. Dewey, 7 October 1948, AID/ECA/ Mission to U.K.,
Office of Chief of Mission U.K., Subject Files of Thomas K. Finletter, 1948–49, Box 2,
RG 469, National Archives of the United States, College Park, Md.
21. U.S. Congress, Senate, Committee on Foreign Relations, 81st Cong., 1st sess.,
A Bill to Amend the ECA of 1948, Executive Session, February 1949, 48.
22. Ibid., 49. Alan R. Raucher, Paul G. Hoffman: Architect of Foreign Aid (Lex-
ington, Ky., 1985), 71, implies that Hoffman was less than candid with Congress: “Of
all the participating governments, the British caused Hoffman the most trouble.”
23. U.S. Congress, Senate (n. 21 above), 124.
24. Ibid., 155, 170–71.
25. Ibid., 172. Finletter was kept well informed about the details of British budgets
for health and social services: for example, staff memorandum to TKF (Finletter), 2
April 1949, Box 3, in n. 39 above.
26. Ibid.
27. Minutes reporting Parliamentary Question to A. Bevan, 27 January 1949, FO
371/77835, Public Record Office.
28. Ibid. A copy of Mayhew’s speech is in this file, in UR 2287.
29. Telegram from Ambassador Oliver Franks to London, 25 February 1949,
1136, in ibid.
30. Peter G. Boyle, “Oliver Franks and the Washington Embassy, 1948–1952,” in
John Zametica, ed., British Officials and British Foreign Policy, 1945–1950 (Le-
icester, 1990), 196; also cited in Franks, n. 47 above.
31. The Economist, 5 March 1949, 408.
32. Oliver Franks to Ernest Bevin, 28 February 1949, Bevin Papers (micro-film),
FO 800/511, Public Record Office.
33. The Economist, n. 31 above. In fact, a memorandum to Ernest Bevin, 28
February 1949, in FO 800/511 (PRO) summarizing British newspaper commentary on
Mayhew, indicates that most press comment on the speech was favorable.
34. Christopher Mayhew to Ernest Bevin, “Personal,” 27 February 1949, in FO
371/77835, Public Record Office.
35. Philip M. Williams, ed., The Diary of Hugh Gaitskell, 1945–1956 (London,
1983), 139, and Carew, n. 16 above, 97.
36. The Economist, 25 June 1949, 1175–76.
37. Allen Bullock, Ernest Bevin: Foreign Secretary, 1945–1951 (London, 1984),
717.
38. F. R. Hoyar Miller to Roger M. Makins, 11 July 1949, FO 371/77839 (UR
7896), Public Record Office.
39. Hogan, The Marshall Plan, 227.
40. Ibid., 248–49.
41. Peter Hennessy, Never Again: Britain 1945–1951 (London, 1992), 397.
 DANIEL M. FOX 211

42. Boyle (n. 30 above), 197. See also Alex Danchev, Oliver Franks: Founding
Father (Oxford, 1993), 87, on Franks’s ability to “explain the welfare state to Wash-
ington in straightforward humanitarian terms.”
43. Kit Jones, An Economist Among Mandarins: A Biography of Robert Hall,
1901– 1988) (Cambridge, 1994), 100.
44. “Fundamental Discussions with the United States,” 9 March 1950, T232/ 199,
Public Record Office.
45. W. Averell Harriman to Harry S Truman, 13 March 1950; Harry S Truman to
W. Averell Harriman, 20 March 1950. Copy in papers of John W. Snyder, 1946– 52,
Box 35, Truman Library.
46. W. Averell Harriman, telegram to Chief of ECA Mission, London, 3 May
1950: AID/ECA Mission to the U.K., Office of the Chief of Mission, Subject Files of
John Kenney, 1949–50, Box 1; copy of telegram from Dean Acheson to Ambas-sador-
London, 20 April 1950, enclosed. National Archives.
47. Rudy Abramson, The Life of W. Averell Harriman, 1891–1986 (New York,
1992), 406–39.
48. “Notes on a conversation after lunch,” 9 May 1950, FO 800/517, E. Bevin
Papers, Public Record Office.
49. Ibid.
50. Williams, The Diary, 174, 231–32, 239.
51. Minutes of a meeting at the State Department, 10 October 1950, T232/ 198,
Public Record Office. See also Williams, The Diary of Hugh Gaitskell, 207.
52. Minutes (n. 51 above).
53. Telegram, Foreign Office to Washington Embassy, 21 October 1950, FO
371/87014, Public Record Office.
54. Bullock, Ernest Bevin, 824.
55. Pelling, Britain and the Marshall Plan, 116.
56. Mr. Aneurin Bevan (Statement), Parliamentary Debates (Hansard), 5th se-ries,
vol. 487, House of Commons Official Report, Session 1950–51 (487 H.C. Deb.
5) , Columns 35–43. (London, 1951).
57. Ibid.
58. Arthur M. Schlesinger Jr. to W. Averell Harriman, 20 September 1948,
Harriman Papers, Box 270, Library of Congress. This letter, marked “Secret,” was only
declassified in 1998.
59. At a seminar in London about my book, Health Policies, Health Politics, a
British colleague said, in an example typical of my point, “We know you, like all
Americans, are up to something. We just don’t know what it is.” See also Geoffrey
Goodman, ed., The State of the Nation: The Political Legacy of Aneurin Bevan (Lon-
don, 1997).
60. Robert Skidelsky, John Maynard Keynes, vol. 3, Fighting for Britain, 1937–
1946 (London, 2000), 492.
61. G. C. Peden, The Treasury and British Public Policy, 1906–1959 (Oxford,
2000), 418.
62. Ibid., 423.
63. “The Long Term Economic Problems of the UK,” memorandum prepared by
the Departments of State and Treasury and the European Cooperation Adminis-tration
with “concurrence at the staff level in the three agencies,” 5 January 1952, RG 469,
Records of the U.S. Foreign Assistance Agencies, 1948–61, Mission to the U.K., Office
of the Chief of Mission, Correspondence of Malcolm Hogg. National Archives.

64. Daniel M. Fox and Jordan S. Kassalow, “Making Health a Priority of U.S.
Foreign Policy,” American Journal of Public Health 91 (October 2001): 1554–56.