Marshall plan

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MINISTRY OF EDUCATION AND SCIENCE OF UKRAINE

National University of Food Technologies

International Economics Department

Report of educational practice on topic "Marshall plan"

made by student of 1st course 5th group

Kon'kova Irina Sergeevna

major 6.030503 "International Economics"

Practice leader from university dr. of e. s. Hutkevych S.O.

Kyiv 2014

Table of contents

1. References

2. References (NUFT library)

3. Introduction

4. Development and deployment

5. Wartime destruction

6. Initial post-war events

7. Rejection by the Soviets

8. Expenditures

9. Effects and legacy

10. Repayment

11. Criticism

12. Areas without the Plan

13. Conclusion

1. References

economic war communism europe

1. Charles L. Menthe Marshall Plan. New York: Simon & Schuster. 2011. p. 99.

2. De Long, J., Barry Eichengreen.The Marshall Plan. 2003. p. 49.

3. Detlef Junker. The United States in the Era of the Cold War. 2000. p. 306.

4. Erik Reinert. The Marshall Plan: The General's Successful War. 2009. p. 304.

5. Harry Bayard Price. The Marshall Plan and its Meaning. 2009. p. 106.

6. John Agnew, J. Nicholas Entrikin. The Marshall Plan today: model and metaphor. 2012. p. 110.

7. Michael J. Hogan. The Marshall Plan. 2008. p. 36.

8. Michael J. Hogan. The Marshall Plan: America, Britain, and the Reconstruction of Western Europe, 1947-1952. Cambridge University. 2010. p. 34.

9. Mills, Nicolaus. Winning the peace: the Marshall Plan and America's coming of age as a superpower. Wiley. 2008. p. 195.

10. Palgrave MacMillan. The Marshall Plan Fifty Years Later. 2001. p. 69.

11. Tony Judt. The Marshall Plan: Fifty Years After. 2010. p. 4.

2. References (NUFT) library

1. Бутенко О. Організація регулювання процесів споживчого кредитування у країнах Центральної та Східної Європи / О. Бутенко // Банківська справа. 2007. № 1. С. 18-23.

2. Гузенко О.П. До питання законодавчого забезпечення процесу банківського кредитування інвестиційних проектів / О.П. Гузенко // Економіка. Фінанси. Право. 2006. № 5. С. 9-14.

3. Загорудній А.Г. Система недержавного гарантування у сфері іноземного капіталу / А.Г. Загорудній, Т.Т. Гринів // Фінанси України. 2006. № 11. С. 122-132.

4. Зимовець В. Про інтеграційні процеси у світовому фінансовову секторі / ВА. Зимовець // Економіка України. 2006. № 1. С. 80-87.

5. Карпенко Г.В. Кредитна діяльність вітчизняних банків та можливості їх інтеграції до світової фінансової системи. / Г.В. Карпенко // Фінанси України. 2007. № 2. С. 89-96.

3. Introduction

The Marshall Plan (officially the European Recovery Program, ERP) was the American initiative to aid Europe, in which the United States gave economic support to help rebuild European economies after the end of World War II in order to prevent the spread of Soviet Communism. The plan was in operation for four years beginning in April 1948.The goals of the United States were to rebuild war-devastated regions, remove trade barriers, modernize industry, and make Europe prosperous again. The phrase "equivalent of the Marshall Plan" is often used to describe a proposed large-scale rescue program. So the aim of this work is to find and investigate the information on the topic «The Marshall Plan», to understand the purpose of its creation, the problems and consequences after years.

The initiative was named after Secretary of State George Marshall. The plan had bipartisan support in Washington, where the Republicans controlled Congress and the Democrats controlled the White House. The Plan was largely the creation of State Department officials, especially William L. Clayton and George F. Kennan, with help from Brookings Institution, as requested by Senator Arthur H. Vandenberg, chairman of the Senate Foreign Relations Committee. Marshall spoke of an urgent need to help the European recovery in his address at Harvard University in June 1947.

4. Development and deployment

The reconstruction plan, developed at a meeting of the participating European states, was established on June 5, 1947. It offered the same aid to the Soviet Union and its allies, but they did not accept it, as to do so would be to allow a degree of US control over the Communist economies. During the four years that the plan was operational, US $15 billion in economic and technical assistance was given to help the recovery of the European countries that had joined in the Organization for European Economic Co-operation. In 2013, the equivalent sum reflecting currency inflation since 1948 totalled roughly $148 billion. The $15 billion was in the context of a US GDP of $258 billion in 1948, and was on top of $15 billion in American aid to Europe between the end of the war and the start of the Plan that is counted separately from the Marshall Plan. The Marshall Plan was replaced by the Mutual Security Plan at the end of 1951.

The ERP addressed each of the obstacles to postwar recovery. The plan looked to the future, and did not focus on the destruction caused by the war. Much more important were efforts to modernize European industrial and business practices using high-efficiency American models, reducing artificial trade barriers, and instilling a sense of hope and self-reliance.

By 1952, as the funding ended, the economy of every participant state had surpassed pre-war levels; for all Marshall Plan recipients, output in 1951 was at least 35% higher than in 1938. Over the next two decades, Western Europe enjoyed unprecedented growth and prosperity, but economists are not sure what proportion was due directly to the ERP, what proportion indirectly, and how much would have happened without it. A common American interpretation of the program's role in European recovery is the one expressed by Paul Hoffman, head of the Economic Cooperation Administration, in 1949, when he told Congress that Marshall aid had provided the "critical margin" on which other investment needed for European recovery depended. The Marshall Plan was one of the first elements of European integration, as it erased trade barriers and set up institutions to coordinate the economy on a continental level -- that is, it stimulated the total political reconstruction of western Europe.

Belgian economic historian Herman Van der Wee concludes the Marshall Plan was a "great success":

"It gave a new impetus to reconstruction in Western Europe and made a decisive contribution to the renewal of the transport system, the modernization of industrial and agricultural equipment, the resumption of normal production, the raising of productivity, and the facilitating of intra-European trade."

5. Wartime destruction

By the end of World War II, much of Europe was devastated. Sustained aerial bombardment during the war had badly damaged most major cities, and industrial facilities were especially hard-hit. The region's trade flows had been thoroughly disrupted; millions were in refugee camps living on aid from United Nations Relief and Rehabilitation Administration and other agencies. Food shortages were severe, especially in the harsh winter of 1946-1947.

Especially damaged was transportation infrastructure, as railways, bridges, and docks had been specifically targeted by air strikes, while much merchant shipping had been sunk. Although most small towns and villages had not suffered as much damage, the destruction of transportation left them economically isolated. None of these problems could be easily remedied, as most nations engaged in the war had exhausted their treasuries in its execution.

The only major powers whose infrastructure had not been significantly harmed in World War II were the United States and Canada. They were much more prosperous than before the war but exports were a small factor in their economy. Much of the Marshall Plan aid would be used by the Europeans to buy manufactured goods and raw materials from the United States and Canada.

6. Initial post-war events

Europe's economies were recovering slowly, as unemployment and food shortages led to strikes and unrest in several nations. In 1947 the European economies were still well below their pre-war levels and were showing few signs of growth. Agricultural production was 83% of 1938 levels, industrial production was 88%, and exports only 59%. In Britain the situation was not as severe.

In Germany in 1945-46 housing and food conditions were bad, as the disruption of transport, markets and finances slowed a return to normality. In the West, bombing had destroyed 5,000,000 houses and apartments, and 12,000,000 refugees from the east had crowded in. Food production was only two-thirds of the pre-war level in 1946-48, while normal grain and meat shipments no longer arrived from the East. Furthermore, the large shipments of food stolen from occupied nations during the war no longer reached Germany. Industrial production fell more than half and reached pre-war levels only at the end of 1949.

In May 1947 communist ministers were abruptly expelled from the French and Italian governments.

During the first three years of occupation of Germany the UK and US vigorously pursued a military disarmament program in Germany, partly by removal of equipment but mainly through an import embargo on raw materials, part of the Morgenthau Plan approved by President Franklin D. Roosevelt.

Nicholas Balabkins concludes that "as long as German industrial capacity was kept idle the economic recovery of Europe was delayed." By July 1947 Washington realized that economic recovery in Europe could not go forward without the reconstruction of the German industrial base, deciding that an "orderly, prosperous Europe requires the economic contributions of a stable and productive Germany." In addition, the strength of Moscow-controlled communist parties in France and Italy worried Washington.

In the view of the State Department under President Harry S. Truman, the United States needed to adopt a definite position on the world scene or fear losing credibility. The emerging doctrine of containment (as opposed to rollback) argued that the United States needed to substantially aid non-communist countries to stop the spread of Soviet influence. There was also some hope that the Eastern European nations would join the plan, and thus be pulled out of the emerging Soviet bloc, but that was not to happen.

In January 1947, Truman appointed retired General George Marshall as Secretary of State. In July 1947 Marshall scrapped Joint Chiefs of Staff Directive 1067 implemented as part of the Morgenthau Plan under the personal supervision of Roosevelt's treasury secretary Henry Morgenthau, Jr., which had decreed "take no steps looking toward the economic rehabilitation of Germany [or] designed to maintain or strengthen the German economy." Thereafter, JCS 1067 was supplanted by JCS 1779, stating that "an orderly and prosperous Europe requires the economic contributions of a stable and productive Germany." The restrictions placed on German heavy industry production were partly ameliorated; permitted steel production levels were raised from 25% of pre-war capacity to a new limit placed at 50% of pre-war capacity.

With a Communist insurgency threatening Greece, and Britain financially unable to continue its aid, the President announced his Truman Doctrine on 12 March 1947, "to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures", with an aid request for consideration and decision, concerning Greece and Turkey. Also in March 1947, former US President Herbert Hoover, in one of his reports from Germany, argued for a change in US occupation policy, amongst other things stating: "There is the illusion that the New Germany left after the annexations can be reduced to a 'pastoral state' (Morgenthau's vision). It cannot be done unless we exterminate or move 25,000,000 people out of it." Hoover further noted that, "The whole economy of Europe is interlinked with German economy through the exchange of raw materials and manufactured goods. The productivity of Europe cannot be restored without the restoration of Germany as a contributor to that productivity." Hoover's report led to a realization in Washington that a new policy was needed; "almost any action would be an improvement on current policy." In Washington, the Joint Chiefs declared that the "complete revival of German industry, particularly coal mining" was now of "primary importance" to American security.

The United States was already spending a great deal to help Europe recover. Over $14 billion was spent or loaned during the postwar period through the end of 1947, and is not counted as part of the Marshall Plan. Much of this aid was designed to restore infrastructure and help refugees. Britain, for example, received an emergency loan of $3.75 billion.

The United Nations also launched a series of humanitarian and relief efforts almost wholly funded by the United States. These efforts had important effects, but they lacked any central organization and planning, and failed to meet many of Europe's more fundamental needs. Already in 1943, the United Nations Relief and Rehabilitation Administration (UNRRA) was founded to provide relief to areas liberated from Germany. UNRRA provided billions of dollars of rehabilitation aid, and helped about 8 million refugees. It ceased operations in the Displaced persons camp of Europe in 1947; many of its functions were transferred to several UN agencies.

After Marshall's appointment in January 1947, administration officials met with Soviet Foreign Minister Vyacheslav Molotov and others to press for an economically self-sufficient Germany, including a detailed accounting of the industrial plants, goods and infrastructure already removed by the Soviets in their occupied zone. The Soviets took a punitive approach, pressing for a delay rather than an acceleration in economic rehabilitation, demanding unconditional fulfillment of all prior reparation claims, and pressing for progress toward nationwide socioeconomic transformation.

After six weeks of negotiations, Molotov rejected all of the American and British proposals. Molotov also rejected the counter-offer to scrap the British-American "Bizonia" and to include the Soviet zone within the newly constructed Germany. Marshall was particularly discouraged after personally meeting with Stalin to explain that the United States could not possibly abandon its position on Germany, while Stalin expressed little interest in a solution to German economic problems.

7. Rejection by the Soviets

British Foreign Secretary Ernest Bevin heard Marshall's radio broadcast speech and immediately contacted French Foreign Minister Georges Bidault to begin preparing a quick European response to (and acceptance of) the offer. The two agreed that it would be necessary to invite the Soviets as the other major allied power. Marshall's speech had explicitly included an invitation to the Soviets, feeling that excluding them would have been a sign of distrust. State Department officials, however, knew that Stalin would almost certainly not participate, and that any plan that would send large amounts of aid to the Soviets was unlikely to be approved by Congress.

Throughout its history, the Soviet Union had a state-controlled, Communist economy; the centrally planned economy regulated collective farming, industrial manufacturing, and the means of production. This was one main source of the Soviet government's power over its citizens. By controlling the economy, the USSR leaders could effectively dictate the other facets of Soviet policy and life. George Kennan, the United States' ambassador to the Soviet Union, articulated this point in his 1946 "Long Telegram." Kennan concluded, "Soviet [economic] policy will really be dominated by pursuit of autarchy for Soviet Union and Soviet-dominated adjacent areas taken together," meaning that the Soviet government wanted economic independence for the USSR in order to protect its sphere of influence. Consequently, accepting American aid from the Marshall Plan posed a potential threat to the Soviet government's ability to keep the Eastern Bloc together.

While the Soviet ambassador in Washington suspected that the Marshall Plan could lead to the creation of an anti-Soviet bloc, Stalin was open to the offer. He directed that--in negotiations to be held in Paris regarding the aid--countries in the Eastern Bloc should not reject economic conditions being placed upon them. Stalin only changed his outlook when he learned that (a) credit would only be extended under conditions of economic cooperation and,(b) aid would also be extended to Germany in total, an eventuality which Stalin thought would hamper the Soviets' ability to exercise influence in western Germany.

Initially, Stalin maneuvered to kill the Plan, or at least hamper it by means of destructive participation in the Paris talks regarding conditions. He quickly realized, however, that this would be impossible after Molotov reported--following his arrival in Paris in July 1947--that conditions for the credit were non-negotiable. Looming as just as large a concern was the Czechoslovak eagerness to accept the aid, as well as indications of a similar Polish attitude.

Stalin suspected a possibility that these Eastern Bloc countries might defy Soviet directives not to accept the aid, potentially causing a loss of control of the Eastern Bloc. In addition, the most important condition was that every country choosing to take advantage of the plan would need to have its economic situation independently assessed--a level of scrutiny to which the Soviets could not agree. Bevin and Bidault also insisted that any aid be accompanied by the creation of a unified European economy, something incompatible with the strict Soviet command economy.

Soviet Foreign Minister Vyacheslav Molotov left Paris, rejecting the plan. Thereafter, statements were made suggesting a future confrontation with the West, calling the United States both a "fascizing" power and the "center of worldwide reaction and anti-Soviet activity," with all U.S.-aligned countries branded as enemies. The Soviets also then blamed the United States for communist losses in elections in Belgium, France and Italy months earlier, in the spring of 1947. It claimed that "marshallization" must be resisted and prevented by any means, and that French and Italian communist parties were to take maximum efforts to sabotage the implementation of the Plan. In addition, Western embassies in Moscow were isolated, with their personnel being denied contact with Soviet officials.

On July 12, a larger meeting was convened in Paris. Every country of Europe was invited, with the exceptions of Spain (a World War II neutral that had sympathized with Axis powers) and the small states of Andorra, San Marino, Monaco, and Liechtenstein. The Soviet Union was invited with the understanding that it would likely refuse. The states of the future Eastern Bloc were also approached, and Czechoslovakia and Poland agreed to attend. In one of the clearest signs of Soviet control over the region, the Czechoslovakian foreign minister, Jan Masaryk, was summoned to Moscow and berated by Stalin for thinking of joining the Marshall Plan. Polish Prime minister Jуzef Cyrankiewicz was rewarded by Stalin for the Polish rejection of the Plan. Russia rewarded Poland with a lucrative five-year trade agreement, the equivalent of 450 million 1948 dollars in credit, 200,000 tons of grain, heavy machinery, and factories.

The Marshall Plan participants were not surprised when the Czechoslovakian and Polish delegations were prevented from attending the Paris meeting. The other Eastern European states immediately rejected the offer. Finland also declined in order to avoid antagonizing the Soviets (see also Finlandization). The Soviet Union's "alternative" to the Marshall plan, which was purported to involve Soviet subsidies and trade with western Europe, became known as the Molotov Plan, and later, the COMECON. In a 1947 speech to the United Nations, Soviet deputy foreign minister Andrei Vyshinsky said that the Marshall Plan violated the principles of the United Nations. He accused the United States of attempting to impose its will on other independent states, while at the same time using economic resources distributed as relief to needy nations as an instrument of political pressure.

Stalin immediately sought to take stronger control over the Eastern Bloc countries, abandoning the prior appearance of democratic institutions. When it appeared that, in spite of heavy pressure, non-communist parties might receive in excess of 40 percent of the vote in the August 1947 Hungarian elections, an all-out repression was instituted to suppress independent political forces. In that same month, total annihilation of the opposition in Bulgaria began on the basis of continuing instructions by Soviet cadres.

In late September, the Soviet Union called a meeting of nine European Communist parties in southwest Poland. A Communist Party of the Soviet Union (CPSU) report was read at the outset to set the heavily anti-Western tone, stating now that "international politics is dominated by the ruling clique of the American imperialists" which have embarked upon the "enslavement of the weakened capitalist countries of Europe." Parties were to struggle against the U.S. presence in Europe by any means necessary, including sabotage. The report further claimed that "reactionary imperialist elements throughout the world, particularly in the U.S.A., in Britain and France, had put particular hope on Germany and Japan, primarily on Hitlerite Germany--first as a force most capable of striking a blow at the Soviet Union."

Referring to the Eastern Bloc, the report stated that "the Red Army's liberating role was complemented by an upsurge of the freedom-loving peoples' liberation struggle against the fascist predators and their hirelings." It argued that "the bosses of Wall Street" were "tak[ing] the place of Germany, Japan and Italy." The Marshall Plan was described as "the American plan for the enslavement of Europe". It described the world now breaking down "into basically two camps--the imperialist and antidemocratic camp on the one hand, and the antiimperialist and democratic camp on the other".

Although the Eastern Bloc countries except Czechoslovakia had immediately rejected Marshall Plan aid, Eastern Bloc communist parties were blamed for permitting even minor influence by non-communists in their respective countries during the run up to the Marshall Plan. The meeting's chair, Andrei Zhdanov, who was in permanent radio contact with the Kremlin from whom he received instructions, also castigated communist parties in France and Italy for collaboration with those countries' domestic agendas. Zhdanov warned that if they continued to fail to maintain international contact with Moscow to consult on all matters, "extremely harmful consequences for the development of the brother parties' work" would result.

Italian and French communist leaders were prevented by party rules from pointing out that it was actually Stalin who had directed them not to take opposition stances in 1944. The French communist party, as others, was then to redirect its mission to "destroy capitalist economy" and that the Soviet Communist Information Bureau (Cominform) would take control of the French Communist Party's activities to oppose the Marshall Plan. When they asked Zhdanov if they should prepare for armed revolt when they returned home, he did not answer. In a follow-up conversation with Stalin, he explained that an armed struggle would be impossible and that the struggle against the Marshall Plan was to be waged under the slogan of national independence.

8. Expenditures

The Marshall Plan aid was divided amongst the participant states on a roughly per capita basis. A larger amount was given to the major industrial powers, as the prevailing opinion was that their resuscitation was essential for general European revival. Somewhat more aid per capita was also directed towards the Allied nations, with less for those that had been part of the Axis or remained neutral. The table below shows Marshall Plan aid by country and year (in millions of dollars) from The Marshall Plan Fifty Years Later. There is no clear consensus on exact amounts, as different scholars differ on exactly what elements of American aid during this period were part of the Marshall Plan.

The Marshall plan, just as GARIOA, consisted of aid both in the form of grants and in the form of loans. Out of the total, 1.2 billion USD were loan-aid.

Ireland which received 146.2 million USD through the Marshall plan, received 128.2 million USD as loans, and the remaining 18 million USD as grants. By 1969 the Irish Marshal plan debt, which was still being repaid, amounted to 31 million pounds, out of a total Irish foreign debt of 50 million pounds.

The UK received 385 million USD of its Marshall plan aid in the form of loans. Unconnected to the Marshall plan the UK also received direct loans from the US amounting to 4.6 billion USD. The proportion of Marshall plan loans versus Marshall plan grants was roughly 15% to 85% for both the UK and France.

Germany, which up until the 1953 Debt agreement had to work on the assumption that all the Marshall plan aid was to be repaid, spent its funds very carefully. Payment for Marshall plan goods, "counterpart funds", were administered by the Reconstruction Credit Institute, which used the funds for loans inside Germany. In the 1953 Debt agreement the amount of Marshall plan aid that Germany was to repay was reduced to less than 1 billion USD. This made the proportion of loans versus grants to Germany similar to that of France and the UK. The final German loan repayment was made in 1971. Since Germany chose to repay the aid debt out of the German Federal budget, leaving the German ERP fund intact, the fund was able to continue its reconstruction work. By 1996 it had accumulated a value of 23 billion Deutsche Mark.

9. Effects and legacy

The Marshall Plan was originally scheduled to end in 1953. Any effort to extend it was halted by the growing cost of the Korean War and rearmament. American Republicans hostile to the plan had also gained seats in the 1950 Congressional elections, and conservative opposition to the plan was revived. Thus the plan ended in 1951, though various other forms of American aid to Europe continued afterwards.

The years 1948 to 1952 saw the fastest period of growth in European history. Industrial production increased by 35%. Agricultural production substantially surpassed pre-war levels. The poverty and starvation of the immediate postwar years disappeared, and Western Europe embarked upon an unprecedented two decades of growth that saw standards of living increase dramatically. There is some debate among historians over how much this should be credited to the Marshall Plan. Most reject the idea that it alone miraculously revived Europe, as evidence shows that a general recovery was already underway. Most believe that the Marshall Plan sped this recovery, but did not initiate it. The United States worked to direct the Marshall Plan towards children and an increase of nutritional material for all citizens within western Europe so as to shed a positive light on its goals as it worked to effectively defeat communist threats. One effect of the plan was that it subtly "Americanized" countries, especially Austria, who embraced United States' assistance, through popular culture, such as Hollywood movies and rock n' roll (Bischof, Pelinka and Stiefel 174-175).

The political effects of the Marshall Plan may have been just as important as the economic ones. Marshall Plan aid allowed the nations of Western Europe to relax austerity measures and rationing, reducing discontent and bringing political stability. The communist influence on Western Europe was greatly reduced, and throughout the region communist parties faded in popularity in the years after the Marshall Plan. The trade relations fostered by the Marshall Plan helped forge the North Atlantic alliance that would persist throughout the Cold War. At the same time, the nonparticipation of the states of Eastern Europe was one of the first clear signs that the continent was now divided.

The Marshall Plan also played an important role in European integration. Both the Americans and many of the European leaders felt that European integration was necessary to secure the peace and prosperity of Europe, and thus used Marshall Plan guidelines to foster integration. In some ways this effort failed, as the OEEC never grew to be more than an agent of economic cooperation. Rather it was the separate European Coal and Steel Community, which notably excluded Britain, that would eventually grow into the European Union. However, the OEEC served as both a testing and training ground for the structures that would later be used by the European Economic Community. The Marshall Plan, linked into the Bretton Woods system, also mandated free trade throughout the region.

While some historians today feel some of the praise for the Marshall Plan is exaggerated, it is still viewed favorably and many thus feel that a similar project would help other areas of the world. After the fall of communism several proposed a "Marshall Plan for Eastern Europe" that would help revive that region. Others have proposed a Marshall Plan for Africa to help that continent, and U.S. vice president Al Gore suggested a Global Marshall Plan. "Marshall Plan" has become a metaphor for any very large scale government program that is designed to solve a specific social problem. It is usually used when calling for federal spending to correct a perceived failure of the private sector.

10. Repayment

The Organization for European Economic Cooperation took the leading role in allocating funds, and the ECA arranged for the transfer of the goods. The American supplier was paid in dollars, which were credited against the appropriate European Recovery Program funds. The European recipient, however, was not given the goods as a gift, but had to pay for them (usually on credit) in local currency. These payments were kept by the European government involved in a special counterpart fund. This counterpart money, in turn, could be used by the government for further investment projects. 5% of the counterpart money was paid to the U.S. to cover the administrative costs of the ERAP. The Marshall Plan money was in the form of grants that did not have to be repaid. In addition to ERP grants, the Export-Import Bank (an agency of the U.S. government) at the same time made long-term loans at low interest rates to finance major purchases in the US, all of which were repaid.

In the case of Germany there also were 16 billion marks of debts from the 1920s which had defaulted in the 1930s, but which Germany decided to repay to restore its reputation. This money was owed to government and private banks in the U.S., France and Britain. Another 16 billion marks represented postwar loans by the U.S. Under the London Debts Agreement of 1953, the repayable amount was reduced by 50% to about 15 billion marks and stretched out over 30 years, and compared to the fast-growing German economy were of minor impact.

11. Areas without the Plan

Large parts of the world devastated by World War II did not benefit from the Marshall Plan. The only major Western European nation excluded was Francisco Franco's Spain, which did not overtly participate in World War II. After the war, it pursued a policy of self-sufficiency, currency controls, and quotas, with little success. With the escalation of the Cold War, the United States reconsidered its position, and in 1951 embraced Spain as an ally, encouraged by Franco's aggressive anti-communist policies. Over the next decade, a considerable amount of American aid would go to Spain, but less than its neighbors had received under the Marshall Plan.

While the western portion of the Soviet Union had been as badly affected as any part of the world by the war, the eastern portion of the country was largely untouched and had seen a rapid industrialization during the war. The Soviets also imposed large reparations payments on the Axis allies that were in its sphere of influence. Austria, Finland, Hungary, Romania, and especially East Germany were forced to pay vast sums and ship large amounts of supplies to the USSR. These reparation payments meant the Soviet Union itself received about the same as 16 European countries received in total from Marshall Plan aid.

In accordance with the agreements with the USSR shipment of dismantled German industrial installations from the west began on March 31, 1946. Under the terms of the agreement the Soviet Union would in return ship raw materials such as food and timber to the western zones. In view of the Soviet failure to do so, the western zones halted the shipments east, ostensibly on a temporary basis, although they were never resumed. It was later shown that the main reason for halting shipments east was not the behavior of the USSR but rather the recalcitrant behavior of France. Examples of material received by the USSR were equipment from the Kugel-Fischer ballbearing plant at Schweinfurt, the Daimler-Benz underground aircraft-engine plant at Obrigheim, the Deschimag shipyards at Bremen-Weser, and the Gendorf powerplant.

The USSR did establish COMECON as a riposte to the Marshall Plan to deliver aid for Eastern Bloc countries, but this was complicated by the Soviet efforts to manage their own recovery from the war. The members of Comecon looked to the Soviet Union for oil; in turn, they provided machinery, equipment, agricultural goods, industrial goods, and consumer goods to the Soviet Union. Economic recovery in the east was much slower than in the west, and the economies never fully recovered in the communist period, resulting in the formation of the shortage economies and a gap in wealth between East and West. Finland, which did not join the Marshall Plan and which was required to give large reparations to the USSR, saw its economy recover to pre-war levels in 1947. France, which received billions of dollars through the Marshall Plan, similarly saw its average income per person return to almost pre-war level by 1949. By mid-1948 industrial production in Poland, Hungary, Bulgaria, and Czechoslovakia had recovered to a level somewhat above pre-war level.

From the end of the war to the end of 1953, the U.S. provided grants and credits amounting to $5.9 billion to Asian countries, especially China/Taiwan ($1.051 billion), India ($255 million), Indonesia ($215 million), Japan ($2.44 billion), South Korea ($894 million), Pakistan ($98 million) and the Philippines ($803 million). In addition, another $282 million went to Israel and $196 million to the rest of the Middle East. All this aid was separate from the Marshall Plan.

Canada, like the United States, was little damaged by the war and in 1945 was one of the world's largest economies. It operated its own aid program. In 1948, the U.S. allowed ERP aid to be used in purchasing goods from Canada. Canada made over a billion dollars in sales in the first two years of operation.

12. Criticism

Initial criticism of the Marshall Plan came from a number of economists. Wilhelm Rцpke, who influenced German Minister for Economy Ludwig Erhard in his economic recovery program, believed recovery would be found in eliminating central planning and restoring a market economy in Europe, especially in those countries which had adopted more fascist and corporatist economic policies. Rцpke criticized the Marshall plan for forestalling the transition to the free market by subsidizing the current, failing systems. Erhard put Rцpke's theory into practice and would later credit Rцpke's influence for West Germany's preeminent success.

Henry Hazlitt criticized the Marshall Plan in his 1947 book «Will Dollars Save the World?», arguing that economic recovery comes through savings, capital accumulation and private enterprise, and not through large cash subsidies. Neoliberal icon Ludwig von Mises of course criticized the Marshall Plan in 1951, believing that "the American subsidies make it possible for [Europe's] governments to conceal partially the disastrous effects of the various socialist measures they have adopted". Some critics and Congressmen at the time believed that America was giving too much aid to Europe. America had already given Europe $9 billion in other forms of help in previous years. The Marshall Plan gave another $13 billion, equivalent to about $100 billion in 2010 value. Critics did not think that it was necessary for Americans to be using so much money to help nations they had already assisted in many ways before.

Criticism of the Marshall Plan became prominent among historians of the revisionist school, such as Walter LaFeber, during the 1960s and 1970s. They argued that the plan was American economic imperialism, and that it was an attempt to gain control over Western Europe just as the Soviets controlled Eastern Europe. In a review of West Germany's economy from 1945 to 1951, German analyst Werner Abelshauser concluded that "foreign aid was not crucial in starting the recovery or in keeping it going". The economic recoveries of France, Italy, and Belgium, Cowen found, also predated the flow of U.S. aid. Belgium, the country that relied earliest and most heavily on free market economic policies after its liberation in 1944, experienced the fastest recovery and avoided the severe housing and food shortages seen in the rest of continental Europe.

Former US Chairman of the Federal Reserve Bank Alan Greenspan gives most credit to Ludwig Erhard for Europe's economic recovery. Greenspan writes in his memoir The Age of Turbulence that Erhard's economic policies were the most important aspect of postwar Western Europe recovery, far outweighing the contributions of the Marshall Plan. He states that it was Erhard's reductions in economic regulations that permitted Germany's miraculous recovery, and that these policies also contributed to the recoveries of many other European countries. Its recovery is attributed to traditional economic stimuli, such as increases in investment, fueled by a high savings rate and low taxes. Japan saw a large infusion of US investment during the Korean War.

Criticism of the Marshall Plan also aims at showing that it began a legacy of disastrous foreign aid programs. Since the 1990s, economic scholarship has been more hostile to the idea of foreign aid. For example, Alberto Alesina and Beatrice Weder, summing up economic literature on foreign aid and corruption, find that aid is primarily used wastefully and self-servingly by government officials, and ends up increasing governmental corruption. This policy of promoting corrupt government is then attributed back to the initial impetus of the Marshall Plan.

Noam Chomsky wrote that the amount of American dollars given to France and the Netherlands equaled the funds these countries used to finance their military actions against their colonial subjects in East Asia, in French Indochina and the Netherlands East Indies respectively. The Marshall Plan was said to have "set the stage for large amounts of private U.S. investment in Europe, establishing the basis for modern transnational corporations".The Netherlands received U.S. aid for economic recovery in the Netherlands Indies. In January 1949, the American government suspended this aid in response to the Dutch efforts to restore colonial rule in Indonesia during the Indonesian National Revolution, and it implicitly threatened to suspend Marshall aid to the Netherlands, if the Dutch government continued to oppose the independence of Indonesia.

14. Conclusion

The European Recovery Plan, commonly known as the "Marshall Plan" after Secretary of State George Marshall, was an ambitious American program to rebuild shattered European economies after the end of World War II. The need for such a program was considered urgent not only to support America's largest trade partners, but also to prevent the spread of communism from the Soviet Union. From 1948 to 1952, the U.S. pursued the restoration of Europe to prosperity through rebuilding of damaged housing, industry and infrastructure, removing trade barriers, and modernizing European business practices using high-efficiency American models.

In additions to billions in other aid programs, the U.S. contributed $13 billion in economic and technical assistance to European Counties that joined the Organization for European Economic Co-operation. Over half of the funding went to Europe's three largest economies, Germany, France and United Kingdom, on a largely per capita basis. Most of the funds from the Marshall Plan were used to import goods from the United States. In response to the onset of the Korean War, a greater amount of the money was used to rebuild European militaries. By the end of the plan, approximately $3.4 billion had been spent on the importation of raw materials and semi-manufactured products, $3.2 billion had been spent on food and agricultural needs, $1.9 billion had been spent on vehicles and machinery, and $1.6 billion had been spent on fuel. Counterpart funds were also established by individual countries to use Marshall Plan money to make loans to private enterprises.

The result was the fastest period of growth in European history, quickly restoring Western Europe to better than pre-war levels. Historians note that a slow European recovery was already underway, so it is impossible to know for certain how much of Europe sudden success can be attributed directly to the Marshall Plan. Additionally, U.S. assistance in training European engineers and establishing proper channels for cooperation between European countries had an inestimable influence on the economy of modern Europe.

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