The Marshall Plan

World War II, which started with the German invasion of Poland in September 1939, was a global struggle to defeat Adolf Hitler’s Third Reich and its Axis allies, Italy and Japan. It was the most devastating conflict in human history. By the time it ended in May 1945, the fighting had ravaged the European continent and claimed an estimated 75 million lives, both civilian and military.

Yet this destructive, eight-year-long nightmare was soon followed by an era of strong economic growth that provided Europe with gleaming new industries and infrastructure, increased its standard of living, and set the continent on a path to a goal that used to be considered impossible: a borderless unification.

This post-war “miracle” was made possible by American leadership, particularly its key component—American economic aid. The Marshall Plan, formally titled the United States’ European Recovery Program (ERP), was the biggest and most successful political and economic venture ever undertaken in the Old World.

The War’s Ruinous Toll

Speedy recovery from the war’s enormous wreckage was beyond anyone’s imagination when the armies of the victorious Allies—the United States, Britain, the USSR, and France—conquered Germany and fired the last shot. The war’s survivors, including millions of civilians, prisoners of war, inmates of German concentration camps, slave laborers, and refugees from Eastern Europe faced unprecedented privation and misery.

The air raids conducted by American and British bombers, heavy artillery, tanks, and street fighting had reduced large German cities to heaps of rubble. In Western Europe alone, five million houses and apartments were demolished. The destruction of power plants, railroads, bridges, and docks had all but halted Europe’s industry, commerce, and food production, and the lack of equipment and raw materials made the continent’s reconstruction painfully slow.

Three years after the war ended, Europe’s industrial production was still below the pre-war level, exports were lagging, and food was in such short supply that most Europeans were surviving on 1,500 calories a day.

The U.S. Takes Charge

To ease this massive hardship, the United States shipped 16.5 million tons of food to Europe and Japan in 1945 and 1946. Though this was one-sixth of America’s own food supply, it was not enough to prevent hunger riots and chaos from breaking out in the impoverished Germany. The crisis only took a turn for the better in June of 1947, when the U.S. called on the Europeans to work together and promised to help them in restoring their continent.

The historic proposal was made by George Marshall, the U.S. Secretary of State and former Chief of Staff of the U.S. Army. The British Prime Minister Winston Churchill called Marshall the “organizer of victory” in WWII. In a commencement address delivered on the steps of Memorial Church in Harvard Yard, Marshall urged the nations of the Old World to collectively create their own recovery plan. Speaking about the role of his country, he added that “It is logical that the United States should do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability and no assured peace.”

The war-weary and disorganized Europeans couldn’t meet Marshall’s request by designing their own blueprint for recovery. But, in short order, 17 countries (Austria, Belgium, Denmark, France, West Germany, United Kingdom, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Sweden, Switzerland and Turkey) eagerly embraced a plan prepared by the U.S. Department of State.

Authorized by Congress as the “Act to Promote World Peace and the Overall Welfare, National Interest, and Foreign Policy of the United States,” the Marshall plan required participating nations—including the U.S.—to ease cross-border trade; do away with red tape and many regulations; increase productivity and labor union membership; and adopt modern business procedures.

To facilitate these far-reaching changes, the U.S. divided among its wartime allies $13 billion (approximately $130 billion in current dollar value). Most of the money was earmarked for the biggest industrial nations because of their importance for the region’s recovery, but another important benchmark was each nation’s contribution to the defeat of Hitler’s Germany. The recipients of the greatest portion of the Marshall Plan money were the United Kingdom (about 26% of the total), and France (18%). West Germany—the biggest part of which was occupied by the armies of the U.S., Britain, and France—received 11%.

The plan was in operation for four years beginning in April 1948, and provided the continent with $3.4 billion in raw materials and semi-manufactured products; $3.2 billion in food, feed, and fertilizer; $1.9 billion in machines, vehicles, and equipment; and $1.6 billion in fuel—almost all of which was provided by the U.S.

The result was the fastest period of growth ever observed in European history. In June 1948, Germany replaced its nearly worthless currency with a new German mark that almost overnight unleashed vigorous economic activity. The store windows that had been empty or boarded over for years began displaying merchandise that had been unavailable since the start of the war. The wartime food rationing ended, employment picked up, and Industrial production increased by 35% within two years. Farm output rose substantially above the pre-war levels and vanquished the widespread starvation during and after the war.

Western Europe—the countries that had joined the Marshall plan—went on to experience two decades of record economic growth and enhanced standard of living.

The Plan’s Main Problem

The Marshall Plan’s success was marred by only one significant failure: it was rejected by the Soviet Union, whose leader, Josef Stalin, regarded cooperation with Western democracies as a threat to the totalitarian rule of his Communist party. Aware of Stalin’s suspicions and antagonism, Marshall made a special effort to emphasize that the U.S. aid was being offered to all Europe. “Our policy is not directed against any country, but against hunger, poverty, desperation and chaos,” he said in his Harvard speech.

His offer held strong appeal for the Eastern European countries that, at the end of war, were occupied by the Red Army and came under Soviet influence. But when one of them, Czechoslovakia, was about to apply for membership, Stalin summoned its foreign minister to Moscow and ordered him to cancel the move.

Progress Toward European Union

The lack of participation among Eastern European nations was a setback for the emerging U.S. efforts to prevent the spread of communist dictatorships and Soviet influence, but it did not impede economic and political progress in Western Europe. By reducing the post-war austerity measures, the influence of communist parties, and popular discontent, the Marshall plan strengthened political stability that encouraged ever-closer European integration and alliance with the U.S. The process was highlighted by two historic steps:

In 1948, members of the Marshall Plan joined the United States in forming the Organization for European Economic Cooperation, a master financial-aid- coordinating agency.

In 1951, Belgium, France, the Netherlands, West Germany, Italy and Luxembourg established the European Coal and Steel Community, the first international organization subject to the combined authority of its members.

In 1993, this unprecedented progress climaxed in the creation of the European Union – a body that today includes 27 member states with a population of more than 430 million. Even after Britain’s withdrawal from the E.U. in August 2016, it continues to provide the best assurance that Europe will never again launch another World War.

George Marshall’s central role in bringing about the European recovery was formally recognized In 1953, when he received the Nobel Peace Prize, the world’s most prestigious award, which is given annually to those who have “done the most or the best work for fraternity between nations.”