How did the marshall plan help countries in western europe?

In a now-celebrated speech delivered at the Harvard University commencement on June 5, 1947, Secretary of State George Catlett Marshall (1880–1959) proposed a solution to the wide-spread hunger, unemployment, and housing shortages that faced Europeans in the aftermath of World War II. Marshall's address was the culmination of increasing U.S. concern over the disintegrating European situation. The physical destruction of the war and the general economic dislocation threatened a breakdown of moral, social, and commercial life. Raw materials and food were in short supply, and war-damaged industries needed machinery and capital before production could be resumed.

Marshall suggested that the European nations themselves set up a program for reconstruction, with United States assistance. This speech marked the official beginning of the Economic Recovery Program (ERP), better known as “The Marshall Plan.” Under the plan, the United States provided aid to prevent starvation in the major war areas, repair the devastation of those areas as quickly as possible, and begin economic reconstruction. The plan had two major aims: to prevent the spread of communism in Western Europe and to stabilize the international order in a way favorable to the development of political democracy and free-market economies.

European reaction to Marshall's speech was quick and positive. The British and French foreign ministers met and issued a joint communiqué inviting twenty-two European nations to send representatives to Paris to draw up a cooperative recovery plan. Sixteen of the invited countries accepted—all except the Soviet Union and areas under its power—and met in Paris in July 1947. The Paris Conference led to the establishment of the Committee for European Economic Cooperation that drew up a proposal for the planned European reconstruction and presented it to the U.S. government in September 1947.

Although others helped draft the Economic Assistance Act of 1948 that established the ERP, the plan was named for George C. Marshall because of his indispensable role, his influence, and his extraordinary prestige with Congress and the American people. A graduate of the Virginia Military Institute, Marshall was by World War II army chief of staff, a post he held throughout the war. He exerted tremendous influence during the war years and afterwards assumed key civilian posts in the Truman Administration. He became secretary of state in 1947 and later served as secretary of defense. For his efforts in reviving Europe, Marshall won the 1953 Nobel Peace Prize, the first professional soldier to receive it.

Over the four-years during which the Marshall Plan was formally in operation, Congress appropriated $13.3 billion for European recovery. Although modest in terms of Europe's total gross national product, the aid supplied critically needed materials to get production operating again. The United States also benefitted from the plan by developing valuable trading partners and reliable allies among the West European nations. Even more important were the many ties of individual and collective friendship that developed between the United States and Europe.

The plan was the boldest, most successful, and certainly the most expensive foreign policy initiative ever attempted in peacetime. A milestone in the growth of U.S. world leadership, the Marshall Plan has had far-reaching consequences. In the short run, it relieved widespread privation and averted the threat of a serious economic depression. In the long run, it enabled the West European nations to recover and maintain not only economic but political independence. It also paved the way for other forms of international cooperation such as the Organization for Economic Cooperation and Development (OCED), the North Atlantic Treaty Organization (NATO) and today's European Union.

The Marshall Plan was a U.S.-sponsored program that was implemented following the end of World War II. It was intended to aid European countries that had been destroyed as a result of the war, and it was laid out by U.S. Secretary of State George Marshall during an address at Harvard University in 1947. The plan was authorized by Congress as the European Recovery Program (ERP).

Key Takeaways

• The Marshall Plan was a U.S.-sponsored program implemented following the end of World War II, granting $13 billion in foreign aid to European countries that had been devastated physically and economically by World War II.
• U.S. Secretary of State George Marshall, who laid out the Marshall Plan, believed that the stability of European governments depended on the economic stability of the people.
• By the time the Marshall Plan ended, in 1951, all the countries who received aid saw their economies grow to better than prewar levels.
• The Soviet Union believed that the Marshall Plan was a way to meddle in the internal affairs of European countries; this belief prevented Soviet satellite countries from accepting assistance from the United States.

Understanding the Marshall Plan

The Marshall Plan gave more than $13 billion in aid to European nations—including its World War II enemies, Germany and Italy—and was crucial in revitalizing their post-war economies. By the time U.S. funding ended, in 1951, the economies of all the European recipients had surpassed prewar levels. For this reason, the Marshall Plan was considered a success.

Marshall believed that the stability of European governments depended on the economic stability of the people. Europe needed to rebuild transportation hubs, roads, agriculture, factories, and cities that suffered major losses during the long war. The United States was the only major power that had not suffered damage during the war. It made sense that America was the country that should help these other countries rebuild. 

The U.S. proposed the Marshall Plan because it was the only country in World War II that had not suffered damage as a result of the fighting.

History of the Marshall Plan

Marshall saw communism as a threat to European stability. The Soviet Union’s sphere of influence increased during World War II, and tensions between Eastern and Western Europe intensified. The Soviet Union believed that the Marshall Plan was a way to meddle in the internal affairs of European countries. That belief prevented Soviet satellite countries, such as Poland and Czechoslovakia, from accepting assistance from the United States. It also caused, at least in part, the Soviet Union’s economy to be significantly outpaced by those of Western Europe and the U.S.

The $13 billion plan started with shipments of food and staples to European ports in the Netherlands and France. Tractors, turbines, lathes, and other industrial equipment, plus the fuel to power the machines, arrived soon afterward. Between 1948 and 1951, the billions committed in aid to European countries effectively amounted to 5% of U.S. gross domestic product (GDP) at the time.

The Marshall Plan was more than an economic plan. The Secretary of State thought that the cooperation of all European nations would lead to greater unity. The foundation of the plan led to the creation of The North Atlantic Treaty Organization (NATO) as a defensive alliance against any future aggressors. NATO is an intergovernmental military alliance between 30 European and North American countries. The treaty was signed on April 4, 1949.

Marshall earned the Nobel Peace Prize in 1953 for his efforts, but the lasting effects of the plan went well into the future. The reliance on American aid opened up trading avenues between Europe and the United States. The call for unity among European nations formed the basic idea behind the European Union. Without American intervention, Europe’s vast network of railroads, highways, and airports would not exist in contemporary society. As President Harry Truman said, the United States was the “first great nation to feed and support the conquered.” The Marshall Plan is widely considered one of America's more successful foreign policy initiatives and its most effective foreign aid programs. 

Examples of the Marshall Plan

The Marshall Plan had set out several objectives in order to accomplish its goal of preventing the spread of communism and encouraging the development of a healthy and stable world economy. These objectives included the expansion of European agricultural and industrial production, restoring a system of sound currencies, budgets, and finances in individual European countries, and encouraging international trade among European countries and between Europe and the rest of the world.

Two agencies were in charge of implementing the Marshall Plan: the U.S.-managed Economic Cooperation Administration (ECA) and the European-run Organization for European Economic Cooperation.

The ECA provided outright grants to countries that were intended to pay for the cost and freight of commodities and services, primarily from the United States. Countries were required to match these U.S. grants with their own currency: for every dollar of grant aid that they received from the U.S., a dollar's worth of the country's own currency was placed in a counterpart fund that could be used for infrastructure projects that would benefit the country, such as roads, power plants, housing projects, and airports. Counterfund projects had to first be approved by the ECA.

Many historians consider the Marshall Plan to be one of the first steps towards the integration of European countries. The Truman administration envisioned a system similar to the United States, a kind of “United States of Europe.” Many of the 16 participating European nations signed the Brussels Treaty of 1948 on mutual defense, which was the precursor to the formation of NATO in the following year.

In Great Britain, $2 billion of these counterpart funds was used for debt reduction. An additional $4.8 billion was invested in infrastructure projects: 39% went towards utilities, transportation, and communication facilities, including electric power projects and railroads; 14% was invested in agriculture; 16% was invested in manufacturing; 10% was invested in coal mining and other extractive industries, and 12% was invested in low-cost housing facilities.

A small percentage of the counterpart funds could also be used to purchase raw materials needed by the United States—or to develop sources of supply for such materials. This led to various enterprises being set up, including the development of nickel in New Caledonia, chromite in Turkey, and bauxite in Jamaica.

Another program of the Marshall Project provided Europeans with technical training in U.S. production methods. By the end of 1951, over 6,000 Europeans had traveled to the U.S. to study methods for increasing production and stability.

Marshall Plan FAQs

How Did the Marshall Plan Generate Economic Growth?

The Marshall Plan generated economic growth by providing the necessary funds for many European countries and Japan to rebuild themselves. Much of Western Europe was impoverished at the end of World War II. There were acute food and fuel shortages across Europe, and many countries lacked the funds to purchase imported goods from the U.S. The Marshal Plan was intended to bolster production and encourage international trade among European countries and between Europe and the rest of the world. Between 1948 and 1952, the U.S. provided more than $13 billion in aid to 16 nations.

Was the Marshall Plan Successful?

The aid programs included in the Marshall Plan were considered both unprecedented and successful. Under the first three years of the Marshall Plan, gross national product (GNP) in Austria, West Germany, and Italy grew 33.5%. (In prior years, during World War II, Europe's standard of living had rapidly declined.) Furthermore, over the next three decades, the standard of living in the participating countries grew almost 150%. Once on the brink of an economic collapse, the participants in the Marshall Plan embarked on a golden age of economic growth in the decades that followed. 

How Did the Marshall Plan Impact the World Bank?

The Bretton Woods Agreement created the International Monetary Fund and the World Bank near the end of World War II. Under the Bretton Woods System, gold was the basis for the U.S. dollar, and other currencies were pegged to the U.S. dollar’s value. While the Bretton Woods System was dissolved in the 1970s, both the IMF and World Bank have remained strong pillars for the exchange of international currencies.

The World Bank was originally created in order to provide aid to European countries in the postwar reconstruction period. However, the role of the bank was quickly replaced after the establishment of the Marshall Plan because Marshall Plan institutions drove postwar international monetary relations.

What Was the Molotov Plan?

The Soviet Foreign Minister V. M. Molotov walked out of negotiations with the British and French governments and, ultimately, ended up rejecting the extension of aid to the Soviet Union that was offered through the Marshall Plan. The Soviet objections to the Marshall Plan were many, but above other things, they were adamant that Germany not receive any aid through the plan. Unfortunately, British and French representatives did not share the same objections.

The Soviet Union then pressured its Eastern European allies to reject all Marshall Plan assistance. In the end, they were successful because none of the Soviet satellites participated in the Marshall Plan. 

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