China Confidential

An important anniversary today--six decades since the inception of the Marshall Plan. History worth repeating....

On June 5, 1947, the United States Secretary of State, George C. Marshall, addressed the graduating class at Harvard University in Cambridge, Massachusetts. His 12-minute speech changed the world.

The following month, European leaders met in Paris to discuss how they could cooperate regionally to qualify for Marshall’s offer of massive US financial assistance. Ten months after Marshall’s speech, the US Congress overwhelmingly approved the European Recovery Program.

On April 3, 1948, President Harry Truman signed the Economic Recovery Act of 1948. It became known as the Marshall Plan.

By the first anniversary of the Marshall Plan speech, American aid shipments were flooding into Europe, and European leaders were creating the first steps of coordination that would lead to the formation of the European Union.


US Invested Over $13 Billion

By the time the Marshall Plan ended in 1952, five years after Marshall’s speech, the United States had invested $13.3 billion, and the years 1948 to 1952 had recorded the fastest economic growth in European history. Industrial production and agriculture exceeded pre-World War II levels. Historians disagree on how large a role Marshall Plan funds played in European recovery. But most believe the Marshall Plan offered an important boost of morale at a critical moment. With Marshall’s plan, the US committed itself to helping Europe rebuild itself.

British Foreign Secretary Ernest Bevin called the plan “a lifeline to sinking men” and an act of “generosity … beyond belief.”

Marshall’s 12-minute speech did not include many ringing phrases, focusing, instead, on the details of trade imbalance and economic shortfalls. Europe had survived one of the worst winters in recorded history, and experts were predicting financial and social collapse.

“I need not tell you that the world situation is very serious,” Marshall--a former soldier widely respected for his honesty and administrative skills--began after a few introductory remarks. He then went on describe dire economic and social breakdowns that were bankrupting the European continent as it struggled desperately to recover from the devastation of World War II. Two years after the end of the war, Europeans had no products to sell for hard currency. Because of the money shortage, farmers were not able to sell their food. This resulted in a breakdown of economic society and fear of widespread starvation while families and governments rapidly drained their savings to buy necessities. In Germany, money was so worthless that most purchases were made by trading cigarettes.

“Thus, a very serious situation is rapidly developing which bodes no good for the world,” Marshall said. “The modern system of the division of labor upon which the exchange of products is based is in danger of breaking down.”

Massive Food Aid

Over the next three years to four years, Europe required massive amounts of imported food and essential products, but had no way to pay for them.

“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,” Marshall said. “… Our policy is directed not against any country or doctrine, but against hunger, poverty, desperation and chaos. Its purpose should be the revival of a working economy in the world so as to permit the emergence of political and social conditions in which free institutions can exist.”

Marshall’s speech offered few details. Before the US could move forward with large amounts of aid, “there must be some agreement among the countries of Europe” about how to spend the money, he said. “It would be neither fitting nor efficacious” for the US government to draw up a unilateral recovery plan for Europe,” he said. “This is the business of the Europeans,” Marshall continued, “The initiative, I think, must come from Europe.”

Within weeks, European governments, led by France and Great Britain, began drafting Marshall’s spending plan. The first request--for $29 billion in aid over four years--was rejected by the US government. Eventually, the parties cut the request in half. Congress funded the first $5 billion for 18 months, with the remaining money appropriated only after careful review. The spending plan actually concluded about six months early, in part because European economies benefited from a boost in business from the Korean War.

As European leaders first met to discuss the plan in July 1947, an editorial in LIFE , an influential US weekly magazine, stated: “What Americans like about the Marshall Plan is that it points toward the triumph of a rational idea.” While history often is far from rational, the editorial continued, “the Marshall Plan is a reminder that problems do have rational solutions, that some ideas are better than others, and that it is even possible to think them up well in advance of a crisis.”

POST SCRIPT: The Marshall Plan is also a reminder of how journalists and other observers often fail to see the true historical significance of current events as they occur. On the same day that Marshall was announcing his plan at Harvard, Truman, in Washington, was denouncing as an "outrage" a Communist coup that had just taken place in Hungary. It was the President's statement--not Marshall's speech--which dominated newspaper headlines the next morning.