Policy Analysis by Eddie Terrenzi THE MARSHALL PLAN

Introduction The Marshall Plan, also known as the European Recovery Plan, was the largest economic aid package ever delivered. There has been dispute as to the motives of the plan. These motives range from countering communism to rebuilding a war torn Europe. It may even have been a mechanism to bring the United States to a position of world economic domination. However, one cannot accurately predict an outcome; therefore, there may have been a motive that resulted in favorable outcomes. The Marshall Plan was said to have originated from America’s desire for peace and prosperity (Paterson 1998, 32). The United States had assessed Europe’s post war economic and political conditions and came to the conclusion that Europe needed help in both rebuilding its infrastructure and boosting its faltering economy. The Marshall Plan was the solution that would provide both. The Marshall Plan needed public and congressional support from America to get underway. The European Recovery Plan legislation was signed into law by President Truman April 2nd 1948. This was almost 1 year from Under Secretary of Economic Affairs William Clayton’s “first concrete” outline for the Marshall Plan was written in May of 1947 (Acheson 1969, 228). The Marshall plan was promoted as being a policy of communist containment vital to our national security. However, it was also promoted as an economic policy that would secure markets for American goods and expand the


Policy Analysis by Eddie Terrenzi U.S. economy. Looking at both of these promotion mechanisms, one can see that both were in the national interests of the U.S. Therefore, both were viable reasons for the formulation of such a policy. It is also important to note that poor economic situations can lead to often hostile governments. Poor economic situations can open up the doors to challenger of the current government. In the case of Europe this meant that current government could be challenged by communist factions. The reverse is true as well. Bad governance, or communism, can lead to poor economies. Poor economies don’t do much good for U.S. producers or the U.S. economy. The solution to Europe’s problem, in accordance with U.S. interests, was to fix both political and economic situations because one would topple the other. The U.S. can’t trade with an unstable economy and also can’t trade with a communist run economy. Looking at the situation in Europe from this perspective would lead us to believe that the policy of the Marshall Plan was directed at both goals; communist containment and economic stability. I believe that the Marshall Plan was a policy designed protect U.S. interests, national security and economic, in Europe by targeting both European economic stability and communist containment. The following analysis will examine international environment which led to such a policy. This will include the key players and decision makers of the U.S. and Europe who contributed to the formulation of the Marshall Plan. The analysis also looks at the economic status of the U.S. and Europe to see why such a policy was needed. The development and support for the Marshall plan is examined for its unique building of support and passage through Congress. The


Policy Analysis by Eddie Terrenzi analysis will then look at both potential motives behind the Marshall Plan to see how both may have played a role in the reason why the policy was adopted.

President Truman and Secretary of State Byrnes Though the beginning of ideas for the Marshal Plan may have started with Acheson and Clayton the problems in Europe had been noticed before. When the Germans surrendered on May 8th 1945, Germany was broken up into 4 zones that were controlled by the United States, Britain, France and Russia. The result of the Potsdam Conferences was the Potsdam Accord. This accord was the agreement that each state controlling a zone of Germany was to receive reparations from Germany for their losses. The Potsdam Accord also included demilitarizing and denazifying of Germany and restructuring German political life. The agreement included maintaining Germany’s economy. The United States saw the recovery of Germany as of vital importance to the recovery and reconstruction of Europe (Arkes 1972, 26). It was at this time that U.S.-Russian relations began to take a bad turn. The Russians and Americans had different approaches to the German situation. The Russians refused to declare their reparations from Germany. These reparations were capital they was removed from Germany to replace Russian capital that was damaged by the Germans. This was agreed upon in the Potsdam Accord. Each country of Europe was to replace parts of its industry that was destroyed by Germany with German industry. However the agreement was that no reparations would be taken out of Germany until Germany had recovered. The U.S. and Europe was in agreement


Policy Analysis by Eddie Terrenzi that Germany’s economy was important to the strength of the rest of Europe’s economy. Russia was secretly taking capital out and not following the agreement to wait. In doing this they were in thought to be exploiting Germany (Arkes 1972, 33). The disagreements began between Secretary of State James Byrnes and Russian Foreign Minister Vyacheslav Molotov. Molotov rejected American participation in the security of Germany, as well as Britain handing over their zone to the U.S. Russia felt that American interests were superseding the interests of Europe. They also feared that U.S. influence was being increased in Europe thereby challenging Russia’s power in Europe. Byrnes made the decision that Russia would not receive any of the areas in the Ruhr which they were asking for. The Ruhr was the most industrial area of Germany that was not in the Russian zone. The first talks were to allow Russia to take in-kind reparations from this area because the Russian zone was not industrialized. This along with General Clay’s decision to end deliveries to Russia from the American zone fueled Russian frustrations. The Russians wanted $10 billion in reparations from Germany as well. However, the U.S. had been giving Russia $9 billion in LendLease aid during the war (Arkes 1972, 34). All of the these actions led to tension between the U.S. and Russia, which eventually led two approaches of aid plans. This was accomplished by the Russia COMINFORM plan which aided communist economies, and the Marshall Plan which aided non-communist Europe. The Russian motives were now in question by the United States. It was clear that the Russian and Americans had conflicting national interests.


Policy Analysis by Eddie Terrenzi Containment The fear of Soviet aggression was felt by the U.S. after the attempted negotiations with Russia. The fear of the spread of communism in Europe was a main concern for the U.S. In May 1947 President Truman signed the Truman Doctrine that stated the U.S. would assist governments resisting communism. This came after the fear that if Turkey and Greece fell to communism there could be a domino effect in Europe. Congress granted $400 million to be given to Greece and Turkey to strengthen them militarily and economically in order to resist communism (Crabb and Mulcahy 1986. 124). This would be the beginning for containment of communism. The spread of communism fear was now real, countries with poor economic situations were giving rise to communist factions which threatened take over of governments. The U.S. was beginning to see that the poor economic situation was leading to political problems.

The American Economy During the war the United States had depleted much of its resources. However, the U.S. was able to shift from production of wartime goods to consumer goods quickly which resulted in a boom of consumer spending. The United States had an advantage over others engaged in World War II. The U.S. had only been attacked in Hawaii at Pearl Harbor and in the Philippines. There was far less damage to the U.S. economy and infrastructure than that of its European allies. According to President Truman the U.S. had surpluses of fruits, potatoes, eggs, dairy products, wheat, rice, cotton and tobacco (Paterson 1988,


Policy Analysis by Eddie Terrenzi 22). The agricultural sector of the U.S. economy was generating surpluses mostly because of lack of exporting (Arkes 1972, 49). The U.S. had fears of being unable to develop atomic energy due to lack of raw materials (Paterson 1988, 24). The U.S. economy had other key industries such as automobiles, coal, steel, and farm machinery that relied mostly on exporting. The problem was that the U.S. main trading partner, Europe, was unable to buy or trade with the U.S. due to their poor economies and dollar shortages. Americans feared that there could be another recession due to lack of exports which would result in a decline in production. Many feared a decline in American economic power could jeopardize the containment of communism and disrupt world peace (Paterson 1988, 25).

The European Economy The most devastation from the war had fallen on Europe where most of the battles were fought. Transportation and factories were badly damaged as well as water and food sources contaminated (Arkes 1972, 49; Paterson 1988, 39). The Europeans had to heavily rely on imports due to lack of domestic production. Unemployment had risen and so had poverty and famine. The U.S. had been giving aid in the forms of food and loans to Europe during the war and after. The aid had not been enough to get Europe back on its feet but rather just enough to keep Europe going. Europe had a dollar shortage and was not able to buy American raw materials (Kunz 1997, 164). Reconstruction could not begin until Europe obtained the raw materials and capital it needed to start increasing


Policy Analysis by Eddie Terrenzi production. Another indication of Europe’s troubles was seen in the decolonization that was taking place. The British withdrew from India, Ceylon and Burma, the French from Indochina, the Dutch from Indonesia and even the United States withdrew from the Philippines (Paterson 1988, 41). Europe had also seen one of the worst winters in 1947-48. During this time Europe had droughts, storms, and floods that further damaged production and shortened food supplies (Arkes 1972, 47). The working railroad cars had frozen on the tracks. Business and homes were unable to heat themselves because coal could not be transported out of the mines (Kunz 1997, 163). Many people in Europe froze to death in their homes. The widespread poverty had people looking towards alternatives. At the time there was a rise in communist parties in France and Italy that was building support from desperate citizens (Jenkins 1997). Western Europe was in desperate need of aid, without it communism could infiltrate Western Europe and further threaten global peace and U.S. security. I noted earlier that Russia had established COMINFORM, the International Communist Information Bureau, in September of 1947 to secure trade agreements with neighboring countries and to use propaganda against the U.S. (Paterson 1988, 30).

Development of the Marshall Plan The first real assessment of the damage in Europe had been undertaken by Theatre Commander and Governor of Germany General Lucius Clay, Undersecretary of Economic Affairs William Clayton, and Secretary of State


Policy Analysis by Eddie Terrenzi George Marshall. Acheson, as well as others believed that European and American livelihoods were closely intertwined and the effects of dollar shortages by the Europeans would greatly affect U.S. exports. He also believed that U.S. national security was at stake and it was the duty of the U.S. to help Europe (Chase 1997, 193). General Clay had been active in trying to dissolve the U.S.-Soviet disagreements after the war. He was in Europe and wrote back about the lack of progress in Europe’s recovery. Marshall had also made a trip to Europe for discussions with Russia in April of 1947 and came back and reported that Europe’s people were suffering and recovery was “far slower than had been expected (Department of State Bulletin 1947). A month later Clayton returned from a trip to Europe and said there was a need for urgent action in Europe (Acheson 1969, 228). On the plane ride home Clayton also had written a letter which was the first outline for the Marshall Plan. Undersecretary of State Dean Acheson had written a speech that was called by the President “the prologue to the Marshall Plan” that was to be given at an off the record luncheon to the League of Women Voters (Acheson 1969, 228). This was a trial for the draft that was to be presented at the Delta Council on May 6th 1947. The speech outlined the devastation to Europe and Asia from the war, the fact that Germany and Japan who had been largely industrialized had not recovered, and Acheson spoke of the disastrous winters that had struck most of Europe. At this point in time the press had little coverage and knowledge of the Marshall Plan development.


Policy Analysis by Eddie Terrenzi Clayton had written a second letter to Marshall examining at more depth the destruction to Europe and proposed two and a half billion dollars annually in coal, grain, and shipping services to be provided until restoration of Europe’s shipping and production has been rebuilt (Acheson 1969, 231). Clayton also proposed that this carry for 3 years and be based on a European plan. There had been reluctance on the State Department to disclose any of its proposals publicly. This was in part because no formal plan was in place, this letters were mere observations with recommendations. Clayton, Acheson, and Marshall agreed that there should be no proposals suggested until there people had been informed of the problem and its extent in Europe. On June 5th 1947 Marshall made a famous speech, written by Charles Bohlen, at Harvard for the graduating class. In this speech Marshall suggested that the U.S. should help Europe start recovering. He had also made it clear that the initiative should come from Europe as well as the plan. The major target of the Marshall Plan was to rebuild Europe politically and economically. Those focusing on the political stability were State Department Official George Kennan, whose main fear was the spread of communism. Kennan saw the Marshall Plan as a tool for containment (Kunz 1997, 162). Others, such as Secretary of the Department of Agriculture Clinton Anderson and Secretary of the Department of Commerce W. Averell Harriman, saw the Marshall Plan as a way to benefit the U.S. by strengthen Europe’s economy for it to be a trading partner with the U.S. The speech given by Marshall had little coverage by the media. The State Department also did not speak publicly about the speech. However, immediately


Policy Analysis by Eddie Terrenzi following the speech Acheson delivered the speech to Britain to be played on the BBC radio station. Acheson also contacted British Foreign Secretary Ernest Bevin who then contacted French Foreign Minister Georges Bidault. Shortly thereafter a meeting was arranged between Bevin, Bidault and Russian Foreign Minister Vyacheslav Molotov, called the ‘Big Three Conference’. The idea was to invite Russia to keep peace. The Russians attended merely to find out what the Americans were planning (Wexler 198, 11). The result of this meeting was that Europe would form a steering committee to draft a final report on the European plan for recovery. Clayton and U.S. Ambassador to Britain Lewis Douglass were sent to Britain to inform the British of what the U.S. was expecting for a recovery plan. The next conference to be held was on July 12th 1947 where 16 European countries attended and set up the Committee of European Economic Cooperation (CEEC). This organization was to be in charge of the preparation of the report, the goals, and the needs of a four year recovery program (Wexler 1983, 12). The CEEC also set a deadline of September 15th 1947 for the report to be complete. The U.S. had done its own calculations in how much it could aid Europe. Paul Nitze, the Deputy Director of the State Departments Office of International Trade Policy, had done calculations on the U.S. balance of payment surpluses. Nitze projected that U.S. balance of payment surpluses over the next five years would be $20 to $25 billion (Wexler 1983, 14). Sir Oliver Franks, the Chairman of the CEEC, had originally had higher figures but agreed that $5 billion a year was workable. The Treasury and State Departments did their own calculation, both of


Policy Analysis by Eddie Terrenzi which closely resembled each other. However, the State Departments was closer to that of the CEEC. The original plan started with a 15 month first year but was eventually reduced to 12 months with the thought that it would be more accepting to Congress. Two additional committees were established to examine the possible impacts on America of such a large scale economic aid package. The Harriman Committee headed by Economist Edwin Nourse was set up to report implications of the plan for domestic supply availability and prices (Wexler 1983, 26). Some Americans feared that a large demand on American good by the Europeans in the plan would cause inflation. The Krug Committee headed by Secretary of the Interior Julius Krug was to analyze the impact of the plan on natural resources and physical capabilities of the U.S. (Wexler 1983, 26). The Presidents Committee of Foreign Aid headed by Secretary of Commerce W. Averell Harriman was to concern itself mostly with the formulation and implementation problems. There was also the recognition of a need to have a body that would implement the Marshall Plan, which would later be established as the Economic Cooperation Administration. The majority of the development of the Marshall Plan can be attributed to Marshall, Acheson, and Clayton. Acheson retired in June 30th 1947 and his successor was Robert A. Lovett. Lovett played an important role in the final development of the Marshall Plan. Lovett oversaw closely followed the European governments progress in drafting the proposal. Kennan and Military Commander Charles Bonesteel, French Ambassador Jefferson Caffery along with Clayton put pressure on France to organize and calculate their damage. They also were


Policy Analysis by Eddie Terrenzi frequently traveling to Europe to oversee the CEEC progress. It is important to note that the stance the Truman Administration had on the Marshall Plan was they made it clear to the Europeans that the CEEC draft would be considered and not immediately accepted. This may be speculations, but it would seem this was done to ensure that U.S. interests would not be negatively affected by the proposals of Europe. However, it may have also been so that cronyism did not occure and that aid went where it should. They had also taken steps to let it be known what the U.S. wanted in the proposal and that whatever was proposed could only be finalized by Congress. The end goal was determined to be a “workable self-sustaining European economy independent of outside aid” within three to four years (Wexler 1983, 18). President Truman made a speech to Congress on December 19th 1947 stating that the Administrations program was to make a European recovery in a set period of time, ensure that U.S. aid be used in the most effective way, minimize U.S. costs and preserve U.S. resources, and establish an effective administration to carry out the plan (Wexler 1982, 25).

Building Support Polls in the U.S. showed that in November of 1947 only half of those that heard about the plan were favorable to it (Arlington and Hitchens 1968, 52). However, proponents of the Marshall Plan used every means to influence Congress in passing the plan. The first step in influencing Congress was to gain public support. The Committee for the Marshall Plan (CMP) was established.


Policy Analysis by Eddie Terrenzi Henry Stimson was the national chairman. The CMP ran advertisements, speaker bureaus, and increased coverage of the Marshall Plan. Their main focus was to present the positive aspects of the plan to the public and build support through nationwide membership organizations (Arlington and Hitchens 1968, 60). The smaller organizations that developed from the CMP distributed pamphlets and organized meetings. The most important part of the CMP and the local chapters was that they had the support of the Marshall Plan developers. The CMP even developed a national council with Acheson and Winthrop Aldrich of Chase National Bank as members. Newspaper editors were members of proMarshal Plan organizations who in turn printed stories about it. The Marshall Plan had the support of labor unions, for they had much to benefit from increasing production and exporting to Europe (Wexler 1983, 36). Farmers played an important role in support. A large portion of the aid to be sent overseas was food. The second step in influencing Congress was to come from within Congress. Interest groups like the American Farm Bureau Federation, Americans for Democratic Action, the National Grange, and the National League of Women Voters, the VFW all spoke out to Congress. Some of these groups even spoke on the floor. The Marshall Plan developers now had public support and organizational support. The most important influence in Congress came from the members themselves. Senator Arthur Vandenberg (R-MI) was Chairman of the Senate Foreign Relations Committee. He was most important in the bi-partisan approach to the Marshall Plan (Arlington and Hitchens 1968, 61). Senator Vandenberg had met with Marshall many times during the development stages.


Policy Analysis by Eddie Terrenzi He was one of the most influential members in Congress and helped sway Republicans and Democrats to favor the plan. His efforts built Senate support and eventually helped the plan pass through the Senate with ease. The House was more difficult to convince to support the plan. The House Foreign Affairs Committee, chaired by Rep. Charles Eaton, had a large role. The House FAC structured the legislation so that it was presented with Greek-Turkish aid and China aid to make it more desirable to pass. Other committees such as the Harriman, Herter, and Krug Committees assured Congress that there had been much research done and all possible implications had been accounted for. This gave the Marshall Plan more credit with Congress. Support came from the Department of Defense and the Treasury where there was close relations to Secretary Marshall. President Hoover was initially in opposition to the plan, but later had changed his mind and expressed this to Speaker Martin which had a domino effect on the Republicans in the house for who originally opposed the plan (Arlington and Hitchens 1968, 64). The February 1948 coup in Czechoslovakia that overthrew the existing government and established a communist government was more of an incentive to speed up the pace of the legislative process (Paterson 1988, 29; Kunz 1997, 167). The coup along with the issues in Greece and Turkey brought a rush of urgency to the matters in Europe. Congress was now faced with clear communist uprising if action wasn’t taken soon to reverse Europe’s economic situation.


Policy Analysis by Eddie Terrenzi

Marshall Plan Approved The ERP was passed on March 13th 1948 by the Senate and March 31st 1948 by the House. The leadership, initiative, and presentation of the Marshall Plan are believed to be underlying cause for its success in Congress (Arlington and Hitchens 1968, 64). The Economic Cooperation Commission (ECA) was the organization to oversee and carry out the Marshall Plan and was to be headed by Paul Hoffman, president of Studebaker (Arkes 1972, 100). Vandenberg sought counsel from the Brookings Institution for advice on the form of the ECA (Wexler 1983, 30). The conclusion was that the ECA was not to be under the Secretary of States authority. The Marshall Plan aid came in the form of dollar grants, grants in kind, and loans. The total amount given out over the 4 year period was $12.5 billion as opposed to Marshall’s request of $17 billion (Kunz 1997, 167). It is also important to note that $5 billion was initially passed by Congress for interim aid to Europe. The results from the aid were an aggregate European GNP increase of 32% and above pre-war levels for agriculture and consumption (Wexler 1983. 94). One of the most important outcomes of the Marshall Plan was the development of a coalition security force in Europe to protect against the spread of communism. Some felt that an economic aid package alone was not enough to contain communism. This coalition was the North Atlantic Treaty Organization (NATO) which formed on April 4th 1949. The Marshall Plan also succeeded in the integration of Western Europe which later led to the European Commission (EC).


Policy Analysis by Eddie Terrenzi The integration was seen as a way for Europe to defend itself against communism. The goal of the Marshall Plan was to aid Europe’s post war recovery, however, it is suggested that Europe was already recovering and that U.S. aid merely helped them along (Paterson 1988).

Economic Rationale for the Marshall Plan Since the majority of WWII battles were fought in Europe most of the damage that occurred form the war fell on Europe. The economies in Europe as well as the United States had shifted production to the manufacturing of war related goods. These goods were to include all items that supported the war. Productivity had increased during the war, but mostly for the US. The U.S. economy had continued to grow during and after the war. When the war ended all countries had to make the shift back to production of goods that were non military related. Therefore, wars boost the economy until they end. This is because each economy’s biggest consumer is the government, more so today then back then. The market for military goods is huge during the time of was. The downside to this economic boom is that a country can not sustain economic growth over the long run by production of military goods. This is what was seen in Europe following the war. The U.S. was able to shift back to domestic consumer production where most of Europe was not able to. This was in part because of the devastation from the war that damaged to roadways, transportation, capital, and other types of infrastructure that is vital in maintaining economic productivity. The war also put most countries of Europe in to heavy


Policy Analysis by Eddie Terrenzi debt. By 1947 there was a dollar shortage in Europe. Most European countries were using their remaining dollars to purchase U.S. food to stock up for the winter. This heavy debt led to the decolonization of the old colonial powers in the late 1940’s. This is what the formulators of the Marshall Plan had seen when they visited Europe to make assessments on the damage. William Clayton had listed what he had observed in his 1947 memorandum that he wrote heading back from Europe after seeing just how severe the conditions were in Europe. The first observation in this memo said “It is now obvious that we grossly underestimated the European economy by the war. We understood the physical destruction, but we failed to take into account the effects of economic dislocation on production-nationalization of industries, drastic land reform, severance of long standing commercial ties, disappearance of private commercial firms through death or loss of capital” (Clayton 1963. 496). Clayton knew at this time that if Europe’s economy failed then the U.S. economy would suffer as well. The fact that U.S. aid to Europe represented almost 100% of its total exports to Europe shows just how closely the economies are connected. This means that the U.S. was financing its own export by giving aid to Europe to buy U.S. exports. Most economists would agree that this could be used as a short run solution but not a long run. So the U.S. government knew that it could not keep its economy going by this method of aid. The alternative was an aid package.


Policy Analysis by Eddie Terrenzi

State Department’s Perspective In order to fully understand that state departments perspective on the importance of Europe’s economy one needs to understand the officials who formulated the Marshall Plan. Background of them will give a good insight as to whether they were slanted toward a policy of anti-communism or economic expansion. One of the key members of the Marshall Plan construction was William Clayton, Undersecretary of State Of Economic Affairs. Clayton father was a cotton buyer which he himself engaged in when he was 15. At the age of 24 he owned his own cotton company called Anderson, Clayton and Company. His company grew to the largest cotton trading company in the world by WWII (Mee 1984. 79). Clayton’s company controlled 15% of the world’s cotton crop. In 1940 Clayton joined the government. Clayton’s positions on the importance of Europe’s markets was clear in a statement that he made saying “our objective has as its background the needs and interests of the people of the United States. We need markets-big markets- in which to buy and sell” (Mee 1984. 79). Clayton’s background is a possible explanation for his emphasis on the importance of foreign markets, especially European markets. In the late 1990’s there was the Asian financial crisis which affected Malaysia, Indonesia, South Korea, and Thailand to name a few. International organizations got involved, most notably the International Monetary Fund (IMF) to provide aid for economic stabilization. Why did they do this? The reason was the same as U.S. interests to stabilize Europe’s economy after WWII. To ensure markets for U.S. goods and to


Policy Analysis by Eddie Terrenzi protect American investments, future and present. I should also note that the IMF is an independent international organization. However, the U.S. has major influence in its policy and decision making (Stiglitz 2003). Stiglitz, as does the IMF, recognizes that domestic markets are affected by one another. The same was true after WWII. Although the global economy then wasn’t as open as it is now, Asian countries now are important for the U.S. just as the European markets were important to the U.S. in 1947. Any person involved in international trade, finance, or business would see the importance of this, as did Clayton.

Interest Groups It is well known that interest groups play a major role in policy development. Interests groups are contributors to congressional leaders. When elections come, funds are contributed and support is built through interests groups to ensure their candidate is elected. Congressional leaders are not only responsible to residents of their area but also to these interests groups that help to get them re-elected. It is no surprise then that the interests of unions and other groups are given considerable consideration when making policy decisions. I discussed earlier the support that the Marshall Plan received from various groups including the Steel Workers Association, various framers associations, and labor unions. All these groups had a lot to loose if U.S. production decreased because of lack international markets. A recession brought on by a collapse of the European economy would mean decreased U.S. production, higher


Policy Analysis by Eddie Terrenzi unemployment, and high interest rates. The business community was more aware of this danger than the general public. Different industries across the U.S. feared losses. One of the most influential groups was the farmer unions. These groups had the most to lose and the most to gain. It is important to remember the context of time. The U.S. farming sector is much smaller today then it was immediately after WWII. For the farmers, aid through the Marshall Plan would mean that surpluses could be bought by the government and sent to Europe. Ship builders knew that ship would have to be used to transport goods to Europe. Merchants proposed for U.S. vessels to be used to transport the goods. This was approved by Congress, where the provision was that 50% of the gross tonnage was to be delivered by U.S. flag vessels (Wexler 1983. 45). These interests groups lobbied in Congress to make sure their interests were taken in. It is not surprising that the Marshall Plan had the support of the Secretary of Agriculture, Secretary of Commerce, and the U.S. Chamber of Commerce. Congress would have to spend more to sustain the U.S. economy if Europe’s economy fell. This would come in the form of subsidies and financing of exports. So it would be in the interests of Congress, due to possible increased spending and a possible recession to take action to aid Europe’s economy.

U.S. Public The U.S. economy was used as a tool to instill fear in the public. The role of the CMP, as I mentioned earlier, was to promote the plan to the public. The


Policy Analysis by Eddie Terrenzi fear of communism approach was mostly taken but the fear of a recession was amplified. The CMP, Marshall’s speeches, and Acheson speeches all told the public of the crisis in Europe. Another approach was used here to appeal to the public which is rarely mentioned, humanitarianism. The talk of Europe situation would have captured American approval one of three ways. Firstly, the fear of soviet expansion was used which I will discuss later in this analysis. The second way was through the emphasis that Europe’s economy is closely tied to the U.S. and a collapse in Europe could mean a recession in the U.S. Much of the public knows how recessions affect them, remembering the Great Depression that occurred not so long ago. Then there is the third way American support was gained which was through regarding the policy as humanitarian. If either the threat of communism or threat of a recession didn’t win support than an act of humanitarianism would. Humanitarian policies are often condoned, for they are seen as duties to help others. This is one of the motives I believe Acheson had. Acheson traveled to many parts of Europe and saw the devastation. He had close relations with Bevin, the British Prime Minister; Bidault, the French Prime Minister; and other leaders of Europe. Acheson may have felt it was the duty to help Europe since it could. In Europe, Acheson saw the deceit of the Russians and distrusted them. That is why he is also may have had anti-communist motive as well which I will discuss later.

Containment Rationale


Policy Analysis by Eddie Terrenzi Russia left the first talks of the Marshall Plan with an “us vs. them” attitude. Russia felt that the U.S. was trying to gain control and influence in Europe through economic expansion. The Russians knew that any proposals were sure to have at the root American interests. The fear of communism over in the U.S. was matched with a fear of American global supremacy in Russia. This is why both sides were concerned, it seemed like a battle for power. The realists view in international relations supports this claim. Russia knew that U.S. power in Europe of any form would threaten them. One the same token the U.S. felt that Soviet expansion was a threat to them. This lies in the belief that communism is immoral, which is a belief that is embedded in American society. You can’t have containment without expansion. The Marshall Plan would expand U.S. influence and markets in Europe at the expense of Russia. The reason why the U.S. couldn’t risk Soviet expansion is because trading would become more difficult. If more countries in Europe were to fall to communism then markets would surely be shut off to the U.S. Unstable economies can indirectly lead to unstable governments. In Europe the people were starving and unemployment was high. The governments were doing all they could to keep control. The belief was that poverty would bread animosity towards the government. This anger would then lead to political instability and make the government more vulnerable to overthrow. The cases of France, Italy, Greece, and Turkey best support this notion. In France and Italy people were homeless, jobless, and dying from starvation. The people looked to the government to do something. The governments had done all they can with


Policy Analysis by Eddie Terrenzi what it had left to support the country. This opened the door for communist factions that would criticize the governments and build political platforms focusing on the lack of government action to help the people. Italy’s communist party was building public support for elections by instigating the police to attack them to show that the government was against the people. These groups fired at the police and provoked them in public to de-legitimize the government. The actions and propaganda did not win them seats in the government but did put fear in to the government that there could be a communist overthrow, with the support of the people, in the economic situation didn’t improve. The communist party in Italy even threatened to use violence to take over the government. The fear in Italy was that Northern Italy where the communist party was most provident could take over the North and divide Italy. The situation in France was not as severe. France had not had an uprising but did have severe poverty and feared worse was to come. Caffery reported that in France there were strikes which succeeded in shaping a positive public opinion of the communist party. France did manage to keep communist members out of government. The Czechoslovakia communist coup that overthrew the government only amplified this fear that communist could and would spread.

State Department’s Perspective George Kennan was a member of the State Departments whose views of communist were most negative. When Kennan graduated from Princeton he went into the Foreign Services. While in the Foreign Services he served in


Policy Analysis by Eddie Terrenzi Russia. During his time in Russia in the thirties he observed large amounts of corruption in the government. He saw that opponents of Stain were killed and cronyism played a big role in the government. He then suspected that classes were being persecuted and killed by the thousand. The resentment of the Russian people for the government was shared by Kennan himself. Kennan had answered a cable from Washington where he was asked about the situation there. He responded with all the information that he had observed and the told of the resentment of the people there for the government. He later was asked to join the Naval War College to teach officers about Russia. His expertise on Russia led him to a position in the State Department (Mee 1984. 84). Kennan’s position on communism and Russia was clear. He felt that communism was a plague that most effected citizens. It is no doubt that his view of communism found its way into the Marshall Plan. For Kennan, the Marshall Plan was a way to fight communism through economic power. He also saw it as a way to prevent Soviet expansion. Kennan’s view was held by other members of the State Department. Acheson saw first hand that the Russians couldn’t be trusted after the talks of rebuilding Europe. Containment of communism meant containment of Russia. For Acheson it was important to prevent Europe’s governments from falling to communism which would inadvertently contain Russian power. The position of Marshall was similar to that of other generals. Most military officers knew of Russia and communism and had distrust for them. This is not surprising since most of them fought and sat in on treaties with the Russian. Secretary of the


Policy Analysis by Eddie Terrenzi Navy Admiral Forrestal had been in Europe for a while after the Potsdam Accords. He witnessed the intentions of Russia and their concern for themselves over the rest of Europe. The State Department saw the need to contain communism to prevent a future war with Russia as well as to expand economic interests. If Russia controlled most of Europe through communism links then U.S. power in Europe would be limited. The Marshall Plan, therefore was a way to check Soviet power in Europe.

Congress and Interest Groups I mention Congress in this section because Senator Vandenberg did help formulate the policy. Vandenberg was head of the Senate Foreign Relations Committee and had much interest in Europe’s political stability. Vandenberg feared the expansion of the Soviet and their possible takeover of Europe. He was also opposed to letting Russia in on the talks for reconstruction and the Marshall Plan. Vandenberg’s role in the Marshall Plan was building support in Congress and helping structuring the bill in such a way so that most would approve it. Therefore, Vandenberg’s input as to the function of the Marshall Plan weighed heavily on its policy objectives. The reason why Russia was originally included in the Marshall Plan was so that U.S. actions would not be seen as a threat but rather as actions that held the interests of all of Europe foremost. When looking at the positions of the government officials above, this looks as if it might have been a ploy to reduce the perceived American threat on the Soviets. The interest groups shared this same view of communism. They knew that if communism


Policy Analysis by Eddie Terrenzi spread then markets would be shut off, regardless if they were stable or not. If the interest groups felt threatened by communism then Congress was had to act. The State Department knew that support had to be obtained from all aspects of American society. The concern of interest groups and Congress for communist containment surely meant that one of the strategies of the Marshall Plan was to contain it.

U.S. Public The U.S. public has less in a role of the development but more of a role in the passage of the Marshall Plan. The word communism had a negative connotation in American society. Therefore it was easy to cause chaos by mentioning communism and U.S. in the same sentence. If the Marshall Plan had no intentions of Soviet and communist containment then the support of the public would decrease. There were those supported the plan for its economic stabilization and those who supported it for its political stabilization. Those who saw looked at its containment effects viewed communism and the Soviets as a matter of national security and thus their own security. The CMP regional organizations trumped up the communist threat for the public. Those who didn’t see the economic benefits of the policy were sure to see the political and security benefits. The events in France, Italy, and Czechoslovakia made the threat of communism more real to the public.



Policy Analysis by Eddie Terrenzi The Marshall Plan was designed with two objectives in mind. The first was to rebuild Europe’s economy and to expand American markets. The second was to prevent the spread of communism and the containment of Russia. The second objective could only be achieved peacefully by reaching the first objective. On the other hand, economic stability could only be achieved by the containment of communism and Russia. Therefore, the two objectives came together in a package. It was impossible to have one without the other. Economic instability, as was seen in France and Italy, increases the likelihood political instability and communist takeover. So the Marshall Plan was used an economic aid package that would stabilize Europe’s economy and prevent communism expansion. The Marshall Plan was told to Congress that it was a “means to fight communism, a way to prevent postwar American depression, a way to to reduce the need for military spending, a humanitarian act, a way to rebuild the important German economy, a way to establish European economic and political union, and a way to restore France and Italy - to keep communists out of their governments” (Mee 1984. 239). Mee’s summarization of these goals was on target. The Marshall Plan did indeed target European economic stability and promote political stability. I believe the humanitarian aspect came from the close historical ties that the U.S. and Europe had making most Americans feel that it was their duty to help our fellow allies. The question of how much did the Marshall Plan target communism can be seen by the organizations that were formed to integrate Europe, such as NATO, the EC, and the CEEC. The CEEC later become the Organization for


Policy Analysis by Eddie Terrenzi Economic Cooperation and Development (OECD), which included Canada and the U.S. Clearly the ideals of these organizations were in conflict with those of communism. The U.S knew that an economic aid package was not enough to contain communism, a military force needed to be formed. NATO was seen as the organization that would fulfill this duty. Also, there was concern about France and Italy political situation, caused by their economic situation. These are two clear examples that the Marshall Plan was to defeat communism. Russia was not included in the Marshall Plan by choice. However, even though the option was open to them the U.S. made structured the goals of the plan and distribution of aid in such a way that it was unlikely the Russians would participate. The U.S. wanted control over how the aid was to be used and also wanted the markets to open. Russia, on the other hand, did not want the U.S. involved in its economy nor did they want U.S. exports filling their store. The Marshall Plan was designed to keep Russia out and reduce Soviet, and communist, influence in Europe. Having a communist free Western Europe would mean that the U.S. could export and trade more with the Europe. Kennan and other military officials were to make sure that American national security and its political influence in Europe was not jeopardized by Soviet and communist expansion. Officials and the public’s fear of communism made communist containment part of the Marshall Plans objectives. The economic benefits to the plan resulted in a 10% increase in GNP in 1948 from the previous year. There was then a 7% increase, a 7.5% increase in 1949 and 1950 over the previous years (Wexler 1984. 251). The U.S. also did not see a recession either. The economic motive is most clear in the Marshall


Policy Analysis by Eddie Terrenzi Plan. The interconnectedness of the U.S. economy and the European economy made it impossible to ignore the situation without suffering consequences for both sides. That is why such an aid package was aimed at rebuilding what could possibly hurt the U.S. market in the long run. Claytons background, the labor unions, and farmer unions make it clear that one of the motives were for U.S. economic interest. The Marshall Plan formulation had insight of both political and economic global instability. The various government officials and interest groups knew of the importance of these stabilities. There is no question that Marshall, Acheson, and Clayton all knew the threats of economic and political instability in Europe. They also knew of Europe’s strategic as well was economic importance to the U.S. With only two global powers remaining in the world, the U.S. and Russia, if one expanded the other would be contained. The issues in Europe opened the door for expansion where the U.S. stepped in with the Marshall Plan. The formulators knew that a policy of containment would only disrupt the balance between the U.S. and Russia. So, economic stability would be used to contain communism. Therefore, the Marshall Plan’s economic aid was to stabilize the European economy, partly in the interests of the U.S. economy, thereby reducing the threat of communism. The end result would be stronger U.S. influence in Europe through the markets resulting in a decrease in Soviet influence and inherently decreases the threat of communism.


Policy Analysis by Eddie Terrenzi

REFERENCES Books: Acheson, Dean. 1969. Present at the Creation. London: Hamish Hamilton Ltd. Arkes, Hadley. 1972. Bureaucracy, the Marshall Plan, and National Interest. Princeton: Princeton University Review. Crabb Jr, Cecil V, and Kevin V. Mulcahy. 1986. Presidents and Foreign Policy Making. Baton Rouge: Louisiana State University Press. Mee Jr, Charles L. 1984. The Marshall Plan: The Launching of the Pax Americana. New York: Simon and Schuster Paterson, Thomas G. 1988. Meeting the Communist Threat: Truman to Reagan. Oxford and New York: Oxford University Press. Siglitz, Joseph E. 2003. Globalization and its Discontents. New York and London: W.W. Norton and Company. Wexler, Imanuel. 1983. The Marshall Plan Revisited: The European Recovery Program in Economic Perspective. Westport and London: Greenwood Press. Journals: Chace, James. 1997. An Extraordinary Partnership: Marshall and Acheson. Foreign Affairs 76: 191-3. Clayton, William L. 1963. GATT, The Marshall Plan, and OECD. Politcal Science Quarterly 78: 493 Kunz, Diane B. 1997. The Marshall Plan Reconsidered: A Complex Framework Of Motives. Foreign Affairs 76: 162-9. Hitchens, Harold L. and Virginia Arlington. 1968. Influences on the Congressional


Policy Analysis by Eddie Terrenzi Decision to Pass the Marshall Plan. The Western Political Quarterly 21: 51-68 Jenkins, Roy. 1997. Special Relationships: The Marshall Plans Impact. Foreign Affairs 76: 200-5. Public Papers: Public Papers of the President of the United States: Harry S. Truman, 1947. Washington D.C. U.S. Government Printing Office, 1963. 178-179


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