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

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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

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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

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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 Lend-

Lease 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.

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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,

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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

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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

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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.

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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

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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

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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

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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.

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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 pro-

Marshal 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.

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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.

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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).

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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

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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.

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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

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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

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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

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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

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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

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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

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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

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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

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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.

Conclusion

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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

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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

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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.

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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.

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.

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

Hitchens, Harold L. and Virginia Arlington. 1968. Influences on the Congressional

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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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