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Marshall Plan Changed the Face of Europe

50 Years Ago, America's Postwar Aid Program Planted Seeds for Continental Union

By Anne Swardson
The Washington Post, May 25, 1997

"In all the history of the world, we are the first great nation to feed and support the conquered."
-- President Harry S. Truman, April 1948

STEIN, Germany -- With practiced ease, a worker slices open the cardboard box, pulls out the hand-size panels of California cedar and stacks them at the head of the assembly line.

In just a few minutes, the thin blocks make their way down what is known in the factory as Pencil Street, where they are swiftly grooved, inlaid with graphite cores, covered, cut and shaped into some of the 1.2 million pencils that roll out of Faber-Castell's factory here each year. The California cedar is the key; no other wood does so well for quality pencils.

Ludwig Lihl, 76, a retiree who first came to work at Faber-Castell GmbH & Co. in 1950, knows why this company was able to begin importing cedar from Stockton, Calif., after World War II.

"It would not have been possible without the Marshall Plan," he said.

When President Clinton and the leaders of three dozen European nations gather Wednesday in the Netherlands to commemorate the 50th anniversary of the Marshall Plan, they will hail an extraordinary act of generosity by the United States. Winston Churchill once called it "the most unsordid act in history."

From 1948 to 1951, the United States gave $13 billion worth of money, goods and services to the war-devastated nations of Western Europe. That amount is equivalent to at least $88 billion today. For more than three years, Americans, who wanted nothing more than to throw away their ration cards, buy consumables and enjoy the peace, instead turned over as much as 3 percent of what they produced to Europe.

Ships filled with crates of food and sacks of grain pulled into Rotterdam, Bordeaux and other ports along Europe's Atlantic coast. Tractors, fertilizer, turbines, lathes and other equipment quickly followed. European executives and workers traveled across the Atlantic to learn the ways of American business. Loans were made, dams were built, new equipment was installed, and currencies were supported.

For Americans who were alive then, the Marshall Plan is a warm but fading memory of a time when the United States -- inspired in part by a large injection of anti-communism -- meant more than an unwelcome Yankee. But here in Europe, the legacy of the Marshall Plan is visible for all to see: in high-tech railways and highways, in prosperous, modern cities, in products from perfume to fighter jets. Four of the seven richest nations on Earth are European recipients of Marshall Plan assistance.

In addition to stimulating the creation of wealth, Secretary of State George C. Marshall and the group of American advisers who crafted the Marshall Plan helped implant a vision of a Europe whose nations traded freely with each other in peace, whose currencies were fully exchangeable, that ceded sovereignty to joint institutions for the sake of greater prosperity. All of those elements are embodied in what is now the 15-member European Union.

"The United States ought not to forget that the emerging European Union is one of its own greatest achievements: It would never have happened without the Marshall Plan," former German chancellor Helmut Schmidt wrote in the current issue of Foreign Affairs magazine.

But the legacy of the Marshall Plan also is visible in what Europe is not. The economic rise of this continent in the 1950s and 1960s, jump-started by Marshall aid, was built on smokestack industries and infrastructure. It was built on products, not processes. It did not prepare Europe to move beyond pencils to personal computers.

So today, 50 years after Marshall said of Europe that "the patient is sinking while the doctors deliberate," Europe is again facing economic crisis. The wealth it has created has left its companies saddled with high costs and bound by inflexibility, many believe. Generous social protections have eased the lives of many but have become too expensive. Business innovation is lacking. And the notion of the free market, with little government involvement, still frightens many here.

"We are in the process of liberalizing, but there is still a tradition of state intervention that goes back to 200 years before the French Revolution," said Rostislaw Donn, who supervised educational visits by French management and labor to American factories under the auspices of the Marshall Plan in the 1950s.

Or, as Imanuel Wexler, economics professor emeritus at the University of Connecticut, put it: "The economic success Western European countries achieved as a result of the Marshall Plan created a situation where governments overextended themselves in terms of social benefits, welfare, unemployment programs that may have overtaxed their resources. . . . The populations of European countries have become accustomed to a great deal of social benefits."

The nightmare seems far away now, but when Americans began examining European living conditions in postwar 1945, they found devastation. The coal mines that heated the homes and powered the factories of Europe were in disrepair, producing little. Some 5,000 bridges were destroyed. Lacking the reserves to exchange currencies, the nations of Europe could not even trade with one another.

Cities in Ruins

Whole cities, particularly in Germany, were reduced to rubble. Farmers grew food only for their families. American soldiers occupying Germany often found, when they went to discard their uneaten rations, a German begging for the scraps.

Schmidt wrote: "There were days during the winter of 1946-1947 when we stayed in bed because there was nothing to eat and nothing to burn for warmth." Before that terrible winter, the Germans dug thousands of graves for the number of people they knew would starve to death before the earth had thawed.

All basic products were rationed. The daily ration of bread -- a dietary staple -- in France was 200 grams a day, less than a long baguette loaf. To buy a coat in Germany, you had to request a permit; it was often denied. A pack of Chesterfield cigarettes cost 100 marks on the black market, a third of one month's average wage.

Vernon Walters, later ambassador to Germany and now honorary chairman of the George C. Marshall International Center in Leesburg, came to Paris in 1948 as an assistant to Averell Harriman, who was administrator of the Marshall Plan. Even by then, only every other street light was lit, and there were virtually no automobiles in the streets.

"The business sector didn't exist pretty much everywhere. Very little was left of the prewar structure," Walters said.

Marshall, a former general, and the great minds that worked for and with him -- Dean Acheson, George Kennan, Charles Bohlen, William Clayton -- were deeply disturbed by the reports of devastation and began talking soon after the war of a massive aid program. During the spring of 1947, with Truman's acquiescence, they began drafting a plan.

There was more than altruism in their work. In February 1946, Kennan, the charge d'affaires at the U.S. Embassy in Moscow, sent his famous "Long Telegram" assessing the Soviets under Joseph Stalin as obsessed with expansion wherever there was a power void. A year later, the United States stepped in to send massive aid to Greece and Turkey, both perceived for different reasons as under Communist threat.

As Truman explained it to Congress in what became known as the Truman Doctrine, "It must be the policy of the United States to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures."

The legislatures of both France and Italy included substantial numbers of Communists, and unions in both countries were under the sway of Stalin. In the minds of Marshall's advisers, there was little doubt that Western Europe was under Communist threat.

On June 5, 1947, Marshall spoke at Harvard University's commencement. There was little memorable about his words, and it took U.S. newspapers several days to grasp their import. But it was this speech that laid out the goals of what became the Marshall Plan. Europe needed "substantial additional help," Marshall said, or it faced "economic, social and political deterioration of a very grave character."

Marshall said something else important: "The initiative, I think, must come from Europe." He was inviting the nations of Western Europe to draw up a shopping list -- but, crucially, a joint shopping list. Europe, in other words, would get nothing unless its nations sat down together and proposed a cooperative plan.

Even occupied Germany was to be included. The French had been in favor of a more repressive approach. Americans, mindful of how Nazi leader Adolf Hitler used resentment of Germany's treatment after World War I to win power, believed otherwise. Jacques Delors, former president of the European Union's chief administrative body, describes the inclusion of Germany as one of the "masterpieces" of the Marshall Plan.

British Foreign Minister Ernest Bevin reacted quickly to Marshall's speech, saying later that it "seemed to bring hope where there was none. . . . We grabbed the lifeline with both hands." Within days Marshall was on a plane to Paris. On July 12, 1947, 16 nations began meeting in the Grand Dining Room of the French Foreign Ministry, as the Committee for European Economic Cooperation.

The Soviet Union already had walked out of preliminary talks and declined to allow Poland or Czechoslovakia to participate, thereby unintentionally assuaging the most potent U.S. congressional objections to the plan. By November, a package of interim emergency aid was approved. The Soviet clampdown on Czechoslovakia in February 1948 gave Congress the final impetus. On April 3, Truman signed the Economic Cooperation Act implementing the Marshall Plan.

Industries Reborn

The relief efforts probably were the most visible for the average European. For Charles Pasqua, now a former interior minister of France, the Marshall Plan meant one thing: "white bread." Others describe the end of ration cards, or the return of eggs and butter to the stores, or their first new winter coat. Those who were children in Germany remember eating canned American soup; British infants drank American orange juice. Homemakers in Greece were given baby chicks.

But the longer-lasting effect of the Marshall Plan was on industry. Nearly all the great names of European business -- Renault, Pechiney and Dassault in France; Volkswagen and Daimler-Benz in Germany; Fiat in Italy; plus Norse Crown Canning in Norway -- were started or restarted with American assistance after the war.

Countless small businesses, merchants and farmers were put back on their feet. Ski lifts were restored in Austria. In a documentary on the Marshall Plan produced by Linda and Eric Christenson that will air on PBS June 6, Rotterdam resident Ivo Blom explains simply how the famous port was rebuilt: "When the Marshall aid came in, that's how we could buy new cranes."

Faber-Castell, unlike many German factories, was not in ruins at the end of the war. The plant in Stein had been converted to producing munitions, but the basic machinery to make pencils was still there. The company, in business in this small suburb of Nuremberg since 1761, also was still family-owned.

But there was no currency to support production of pencils, or anything else. The Nazi currency, the reichsmark, was losing more value by the day. It was replaced at a 10-to-1 ratio by the deutsche mark, backed by the American dollar. The exchange rate with the American dollar allowed Faber-Castell to buy the American cedar and bring it in for pencil casings.

In addition, the Marshall Plan created a mechanism that allowed each European nation to exchange its currency freely with all the others -- a commonplace occurrence now -- to replace the damaged system of bilateral exchange controls that had prevailed before the war. The European Payments Union, as it was called, was bolstered by $600 million in American support, and it was another way Americans helped Europeans to cooperate with each other.

So Faber-Castell pencils, encased in California cedar, were soon on their way to Spain, Sweden and Greece, to Iran and Saudi Arabia, to Latin America. They were trucked to the newly rebuilt ports on rebuilt roads, often courtesy of the Marshall Plan. Even the factory that makes the machines that make the pencils was rehabilitated in part through Marshall Plan money, factory retiree Ludwig Lihl said.

In the four years of the Marshall Plan, from 1948 to 1951, industrial production in Europe rose 36 percent. Much of this doubtless would have happened without American aid, which accounted for a fraction of total European investment. But scholars say it would not have happened so fast, or been shaped the way it was.

The shape was determined in part by a massive injection of American management and technological know-how. Although the labor force in most European countries was well trained and educated, two world wars had left production capabilities where they had been in 1910. In addition to furnishing factories with machines, the Marshall Plan sent delegations of thousands of European business people and labor union representatives to myriad companies in the United States to learn the American ways of modernization, management and productivity.

"The goal was to modify the psyche of people," said Donn, who supervised some of the French teams. "So many of them thought American productivity was due to things like natural resources, or your large population."

But was the psyche of Europe modified? The roots of the welfare state run deep on this continent, predating the Marshall Plan by centuries. For decades -- they are called the "30 glorious years" in France -- Europe created enough wealth to afford an ever-expanding pool of benefits, protections and regulations. Somewhere along the line, say those with long memories, the mentality changed.

"After the war, people went to church and thanked God for the opportunity to work," said a German official who asked not to be named. "Today, the attitude is to work as little as possible."

Those benefits make employees costly, reducing hiring. Unemployment rates for the 16 Marshall Plan countries range from less than 8 percent in Britain to more than 20 percent in Spain. Half of those countries have unemployment in the double digits, while U.S. unemployment is less than 5 percent. Of the 10 most competitive countries in the world, according to the World Economic Forum, only two, Britain and Norway, are graduates of the Marshall Plan.

The evolution of Faber-Castell symbolizes the direction Europe has taken since the uplift following the Marshall Plan. The aging factory in Stein employs about 600 people, down from 1,500 10 years ago. The assembly line is mostly machines, run by relatively few workers. Its production is dwarfed by the number of pencils and other implements produced in Faber-Castell factories in Brazil, Malaysia and Indonesia. The Brazil factory alone has 2,800 employees and produces more than 1 billion pencils a year.

KEY EVENTS OF THE MARSHALL PLAN

May 7, 1945: Germany signs unconditional surrender, ending European phase of World War II

June 5, 1947: Secretary of State George C. Marshall calls for program of economic assistance to Europe in a speech at Harvard University.

June 27: British Foreign Secretary Ernest Bevin calls meeting to discuss Marshall's proposal. Soviet Foreign Minister Vyacheslav Molotov argues a regionalprogram would violate national sovereignties; he later withdraws.

July 12: Paris conference opens to devise recovery plan, with delegates from 16 European nations; Soviets decline to participate and prevent Poland and Czechoslovakia from attending. Participants spend several months drafting comprehensive recovery plan.

Dec. 19: President Truman sends draft bill to Congress authorizing European Recovery Program, later known as Marshall Plan.

March 1948: After fierce floor debate, U.S. House approves plan, 318 to 75; Senate approves it 69 to 17.

April 3, 1948: Truman signs bill into law

Dec. 12, 1953: Marshall awarded Nobel Peace Prize for contributions to economic rehabilitation of Europe.

SOURCE: Associated Press

OUT OF THE ASHES: EUROPE'S RECOVERY AFTER WORLD WAR II

The Marshall Plan channeled more than $13 billion -- more than $88 billion in today's dollars -- in reconstruction aid and technical assistance to 16 European countries between 1948 and 1951. What some historians refer to as the United States' most successful foreign policy endeavor in this century laid the foundations for a democratic, and eventually unified, Europe.

Millions of dollars distributed, 1948-51

IRELAND
$147.5

BRITAIN
$3,189.8

ICELAND
$29.3

FRANCE
$2,713.6

NETHERLANDS
$1,083.5

NORWAY
$255.3

AUSTRIA
$677.8

WEST GERMANY
$1,390.6

TURKEY
$225.1

ITALY

$1,508.8

PORTUGAL
$51.2

GREECE
$706.7

SWEDEN
$107.3

DENMARK
$273.0

BELGIUM-LUXEMBOURG
$559.3

Growth of gross national product 1950 to 1952

IN BILLIONS OF DOLLARS

West Germany
1950 $23
1951 $29
1952 $32

Britain
1950 $38
1951 $42
1952 $45

France
1950 $29
1951 $35
1952 $42

SOURCE: World Bank

With Marshall Plan aid, Western Europe's industrial production increased dramatically between 1948 and 1951.

Index, 1938=100

West Germany
1948 50
1951 106

Greece
1948 76
1951 130

Austria
1948 85
1951 148

Italy
1948 99
1951 143

France
1948 111
1951 138

Netherlands
1948 114
1951 147

Britain
1948 120
1951 145

Belgium
1948 122
1951 143

Norway
1948 125
1951 153

Denmark
1948 135
1951 160

Ireland
1948 113
1951 176

Luxembourg
1948 139
1951 168

Sweden
1948 149
1951 172

Turkey
1948 152
1951 163

All 16
1948 99
1951 135

SOURCE:The Second Victory, by Robert J. Donovan

U.S. foreign economic assistance reached a high in 1949 and has fallen ever since. During the Marshall Plan period of 1948 to 1951, total economic assistance averaged 1.51 percent of the gross national product.

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