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The Marshall Plan – I

Its History and Development

(March 1948)

From Fourth International, Vol. 9 No. 2, March–April 1948, pp. 51–55.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

A Marshall “idea” came first before there was actually a Marshall “plan.” The latter took form only as events compelled Washington to eliminate empirical groping and to formulate a policy upon the close of this war consistent with its role as the leading power in the capitalist world. This role conferred upon the United States by the imperialist struggle and by present conditions in the capitalist world demanded a more coherent strategy corresponding not only to the immediate interests of Yankee imperialism, but also to its long-term interests.

The evolution of American policy between 1946 and 1948, from Byrnes to the Marshall Plan via the “Truman Doctrine” as formulated in the speech of March 12, 1947 and applied in Greece and Turkey, is distinguished in its rise from empiricism and instinctive reaction to a political and military doctrine reflecting a clearer and more serious awareness of the facts of international reality by the present leaders of the American capitalist class and their development of a method of dealing with this reality. The conception of the Marshall Plan, as it emerges on the eve of its discussion in Congress, is based on economic, political and military considerations. It pursues two aims:

1. To contain a new Soviet thrust in the near future by supporting the capitalist structure of Western Europe which is on the verge of collapse.
2. To give this support a content that can, at the same time, assure what Truman calls in his statement of January 14, 1948, “long-term prosperity” for American economy. This means, to rebuild shattered European capitalism under American control, which will prevent an independent development of productive forces in Europe capable of competing with American economy, and yet assure the latter a maximum of possible markets. This would permit the maintenance of the present level of production in the United States, the postponement of the outbreak of the economic crisis, and limit the scope of the crisis in case it should come.

These economic aims of the Marshall Plan are interlaced with more specifically political and military objectives. Success of the plan would bring in the immediate future, with the consolidation of the economic situation of Western Europe, the political stabilization of regimes subsidized by American imperialism, and capable of effectively backing it, in a more distant perspective, in event of a conflict with the USSR.

On the other hand, from the purely military point of view, the Marshall Plan corresponds to the evolution of American strategy which is increasingly oriented towards the utilization of its superiority in Atomic weapons. These are to be employed by its naval and aerial forces operating from bases located outside the European continent, with !he objective of directing the attack immediately against the very heart of the USSR, to the vital centers of its economic and industrial power. From this point of view, the Marshall Plan is really a step beyond the “Truman Doctrine” – at least in its original form of the speech of March 12, 1947, and as applied to Greece and Turkey – to a political conception of greater scope and concreteness.

In this study we shall examine the history of the elaboration of the Marshall Plan and appraise the concrete facts regarding it, as well as its possible repercussions on the perspectives of European capitalism.
 

From the “Marshall Idea” to the Report of the Sixteen

Before it took shape in the speech of June 1947, the Marshall “idea” had occupied the minds of the most informed advisers of America’s big businessmen, who were uneasy over the immediate future of European capitalism and the catastrophic repercussions which its crash would, in the long run, have for American capitalism itself.

In addition to the warnings of Walter Lippmann, in June 1947, just prior to the Harvard speech, Fortune, a magazine specifically addressed to the “boards of directors of American Business,” contained an appeal to these gentlemen to reflect upon the immediate and long-term advantages involved in a foreign “investment of 100 billion dollars,” spread over 50 years, especially in Europe. Fortune hastened to stress that naturally this amount, relatively very small compared with the 341 billion dollars that three and a half years of war cost the United States, would be placed at the disposal of foreign countries not “for purposes of altruism, but of world policy and for profit.” It would be a matter of proceeding, under American leadership and control, to “world reconstruction through a businessman’s concept of peace” which can assure a long prosperity for American economy and can prevent Soviet expansion. Fortune gave precision to its program in this way:

“To cut prices (in the United States); to encourage loans; to foster imports; to send engineering missions into the far places, that is our specific four-point proposal for applying a businessman’s theory of Peace with profit via Plenty.”

At Harvard, Marshall spoke in a similar vein. His “historical” speech contained the following ideas:

a) The reconstruction of Europe would require more time and effort than was at first believed.

b) Visible destruction was less important than the organic dislocation of Europe’s productive apparatus.

c) American aid was absolutely indispensable for European reconstruction.

d) However, it was no longer a question of dealing with each European nation separately, but it was essential to start with Europe, or a part of Europe as an economic unit.

Along these lines, he appealed for European collaboration so that it could benefit from American aid.

In reality, American aid, especially for Europe, has not stopped since the beginning of the Imperialist conflict. It first took the form of wartime “lend-lease” and subsequently the form of UNRRA deliveries, loans, etc. The total “amount of this aid, according to a recent report [1], amounts of 5,908 million dollars for the year 1945; 5,354 millions for the year 1946; 6,768 millions for the year 1947. In addition, the United States has invested 3,386 million dollars in the International Bank and the International Monetary Fund, which, in practice, constitutes another form of “aid” to foreign countries.

Of this aid, the greater part, over 11 billion dollars, was given to the countries of Europe between 1945 and 1947. Thanks to this aid, these countries were able to feed their populations to some degree or other, as well as provide law materials and means of production for their industries.

But up to now this aid was given sporadically and without coordination. Marshall suggested in his Harvard speech that it be replaced! by a “planned” aid designed to restore European economy and to render it capable, in the near future, of being self-sufficient.

Despite its vagueness, the Marshall proposal, which contained the promise of a new injection of dollars into the sclerotic veins of European economy, provoked delirious enthusiasm from Rome to London. Italians, French and British were all three writhing at the time, in the throes of a “dollar crisis.” Bevin rushed to grab the life-line thrown out by “generous” America. After an initial consultation with the French, he organized the “Conference of Three,” which took place in Paris at the end of June 1947, with the participation of Molotov, representing the Soviet Union. As no agreement could be reached among these three in appraising and utilizing the “Marshall offer,” for reasons that we shall examine separately, the British and French decided on the principle of a European conference that would include all the European countries agreeing to participate in “European reconstruction” under American auspices.

In August 1947, when the conference of sixteen European nations took place, all the countries of Europe with the exception of the Soviet “buffer-zone” were represented. Thus the “Western Bloc” took shape, this time under American auspices. Economic necessity compelled British as well as French imperialism to bury their original policy which envisaged, right after the war, the creation of such a bloc to oppose both Soviet and American expansion. On the political plane, the Marshall “idea” thus achieved its first victory over the USSR, calling forth from the very start a regroupment of the capitalist world behind Washington’s golden chariot.

The main points in the labors of the Conference of Sixteen on the economic character that American aid should assume have been given in the reports of its technical commissions, which we shall now examine.
 

The Report of the Sixteen

The Sixteen reached their first conclusion, towards the end of August 1947, that American aid for the four year period, 1948-1951, ought to total 29 billion dollars.

This figure was immediately considered excessive by Washington which, through Assistant Secretary of State Lovett, advised the participants to be “reasonable and realistic.” Washington sent G. Kennan and Charles Bonsteel to Paris in order to modify the picture of bankruptcy of European economy established by the experts of the Sixteen, and to reduce the dimensions of the requested aid. It became known that the two American envoys, assisted by Ambassadors Douglas and Caffery, were dissatisfied with the first projected report prepared by the Sixteen. They formulated two principal criteria for such a report:

1. It had to show clearly that the European nations benefitting from American aid pledged themselves to become self-sufficient by 1952 without further dollar credits.
2. The report was not to be a simple list of demands to be met by American dollars, but had rather to indicate a real effort toward effective economic cooperation among the sixteen nations.

These criteria were repeated more clearly by the new American envoy Clayton, who arrived in Paris at the beginning of September 1947 in order to revise the report of the Sixteen for the second time before it was sent to Washington. The Sixteen having already conceded a reduction from the 29 billion dollars initially forecast to 21 billions, Clayton set forth six tests, the principal ones involving domestic policy of the Sixteen and cooperation among them. Clayton, too, insisted that nations benefiting from American aid had first to stabilize their currencies and cooperate more thoroughly with each other.

In reality, these criteria clarified one aspect of the direction of American aid. The businessmen from across the Atlantic expected to invest their funds in Europe in fertile and propitious territory for American business and trade, thanks to the prior execution of a series of (a) deflationary measures – to check inflation; and (b) anti-protectionist measures – lowering tariff barriers and making all Western Europe into a space relatively free for the circulation of American goods. In the light of these considerations, we can understand the whole series of measures taken by the capitalist governments of Europe and primarily by Italy, France and England, in order to prepare the ground for the adoption of the Marshall plan by Congress and for its application: the customs agreements of Geneva, the deflation policy of de Gasperi and of Schuman, the devaluation of the lira and the franc. All that was already implied in the final report of the Conference of the Sixteen.

This report, published in the last week of September 1947, contains a series of fundamental facts regarding the present economic unbalance of the European capitalist system and the means envisaged for surmounting it. It is divided into seven chapters treating in succession the following questions:

1. Historical introduction and present situation of European economy.
2. The program for European economic reconstruction.
3. Production efforts that must be made.
4. Analysis of the financial condition of the European countries and means to be employed to attain monetary stabilization.
5. Economic cooperation among the countries benefit-ting from American aid.
6. The program of necessary imports for the period of the plan (1948–1951).
7. The problem of payments in order to attain a favorable balance by 1952, making it unnecessary for Europe to resort to new American credits.

It is naturally difficult to proceed to a critical analyses of the entire report. We will limit ourselves to examining its essential points.

The historical introduction of the report points out the causes for the present economic unbalance and for the imperative need of American aid. Since a fundamental factor is treated there, an understanding of it will enable us to obtain a clearer picture of the Marshall Plan.

The basis for the present crisis of European capitalism lies in the breakdown of the pre-war economic equilibrium. Before the war, Europe and the principal countries comprising it (England, Germany, France, Italy, Belgium, Holland) had an adverse trade balance but a favorable payment balance. The trade deficit was covered by the returns from capital invested abroad and from various services (shipping, commissions, etc.). Their “prosperity,” as the report puts it, depended on the maintenance of the following conditions:

1. Adequate trade with overseas countries;
2. Revenue deriving from the profits of their merchant marine and from their foreign investments;
3. Exchanges of coal and various steel and chemical products among themselves and with Germany;
4. The possibility of supplying themselves with machines, livestock fodder, and fertilizer, necessary for maintaining a specialized and intensive agriculture at a high level, in return for exports to other countries in the plan and to Germany.
   
   The results of the war have upset these conditions. The report enumerates them; heavy destruction of the productive apparatus, transportation and housing by the war; reduction of soil fertility and of other natural resources (coal); liquidation of foreign investments; dislocation of normal routes of international trade, disappearance of the world trade of Germany, economic upheavals in vast Asiatic regions, rise of the United States as principal agricultural and industrial supplier to the other countries.

All this has led to a fundamental unbalance. Goods and services move almost in a single direction, from the United States to Europe, while credits accumulate in the United States!

The report sums up the efforts made since the liquidation of the war in order to overcome this situation. However, despite the progress registered in restoring production and world economic cooperation, and despite the 7,746 million dollars granted by America from 1945 up to August 1947 to the sixteen participating countries, “it became evident in the Spring of 1947 that there would be a shortage of dollars, and that the entire reconstruction of Europe was thereby, endangered.”

On what considerations does the report base its outlook for overcoming this situation? On a productive effort based on the renewal and modernization of the productive apparatus of the participating countries, backed up by American imports of agricultural and industrial products. In order for Western Europe to achieve its own economic level of 1938, it must, starting from its present level, accomplish a productive effort equal to that realised by the United States in the mobilisation years 1940–1944, which increased coal production by 34%, steel by 31%, electrical energy by 61%. The respective figures set by the report for Western Europe are: 33%, 60%, 44%.

The report, therefore, has no greater ambitions than a simple restoration of the economic level of 1938, if we bear in mind that the slight increases for coal, steel and even electric power would be balanced on the one hand by the need for renewing the destroyed, outworn or antiquated European productive apparatus, and on the other hand by the anticipated increase of 11% in population for Western Europe by 1951. Agricultural production, except for sugar and potatoes, which will increase slightly, will not even surpass the level of 1938 by 1951, despite the increase in population. The same forecast is made concerning the merchant fleet.

As for the increases forecast for coal, steel and electric energy, which must surpass the 1938 level [2], the calculations are made on the basis of replacing and modernizing the productive apparatus of England, France, Belgium and Italy. The report takes as an accepted fact that German production, despite important progress foreseen between now and the end of 1951, would remain considerably below its pre-war level.

Thus production of coal in England is forecast as passing from 231 million tons in 1938 to 249 million tons in 1951, and in France from 48 to 63 million tons. The respective figures for steel are: England, from 10.6 to 15 million tons; France from 6.2 to 12.7 million tons.

The volume of imports envisaged by the report remains that of a normal pre-war year, with this fundamental difference: American imports payable in dollars go from the pre-war 40% to two-thirds. We thus arrive at the crucial point in the report and in the Marshall Plan: that of payments. This involves the restoration “by other means” of the pre-war economic equilibrium, which would make it unnecessary for Europe after 1951 to seek new dollar credits. The report assumes, given a whole set of favorable foreign factors, that the present deficit in transactions with the American continent, principally with the United States, can change in the following way:

We therefore reach 1951 with a deficit of 2,800 million dollars against 1,750 millions in 1938. However, even in this most favorable case, the following conditions would have to be fulfilled:

a) Lowering of prices in the United States; b) restriction of present imports from the United States; c) increase in European production in accordance with the anticipated rhythm and percentages; d) imports from other parts of the world, especially from Eastern Europe and Asia; increased exports to the United States and the American continent generally, according to the following table:

But the United States is currently importing from Europe about one-half of its pre-war imports, and there is no reason to believe that it is going to increase its imports very much in the future.

American economy is evolving more and more along lines whereby it can not only get along without European imports, but is becoming the most formidable competitor of European production in all other available markets. For example, as the London Economist correctly observed, none of the principal products of British industry can seriously interest American demand.

On the other hand, as regards the Latin American market, for which the report of the Sixteen forecasts a constant increase for European exports, we must not forget that the United States has very greatly strengthened its own economic positions during and after the war in this region. The approach of the crisis in the United States will make it even more imperative to safeguard and extend its expansion in this market.

Thus, in reality, the optimistic forecasts in the report of the Sixteen regarding the re-establishment of an economic equilibrium between Western Europe and the American continent towards 1951 rest on the illusory calculation that the United States would consent to surrendering a part of its own domestic market and of the Latin American market, (not to mention the rest of the world market). It does not at all take into account that such a turn is very unlikely, even in the case of a normal development of American economy, and becomes absolutely impossible if we start from the perspective of the inevitable crisis in the United States, which would push it on the road of even more ruthless expansion in the entire world market.

We have deliberately left aside a series of other factors which enter into the report of the Sixteen but which arc no less uncertain. Here are the principal ones:

1. The Report is based on an American aid of 22 billion dollars (after having indicated the figure of 29 billions). It is known that there is no question any longer, even in the most favorable case, of having Congress agree to more than 17 billions, a reduction of about 22%. Under these conditions, how can the forecasts in the report Hoarding production levels and monetary stabilization he realized?
2. The report is predicated on the lowering of prices and, in any event, on their stabilization in the United States, and on a rapid monetary stabilization in the countries benefiting from the plan. Neither one nor the other are certainties, at least within the period required for success of the plan. On the contrary, the year 1948 is beginning with a new inflationary drive both in the United Slates and in Europe.
3. The report naturally ignores the class struggle and presupposes an atmosphere of “social peace” which will link the workers to productive conditions favorable for the capitalists. (No strikes, wage freezes, restrictions on food, increase in hours of work). It is enough to mention the workers’ struggles which broke out in France and Italy from the middle of 1947 on, and to evaluate them in the economic sphere in order to gauge the precarious character of these calculations.
4. The report does not envisage the outbreak of an economic crisis in the United States before the end of 1951 which, naturally, would upset the whole world economic and political situation.

Still another supplementary observation: the report gives no concrete answer to the principal question which is this: In the hypothetical event of increased production according to its forecasts, how can it guarantee the necessary foreign markets for the surpluses of this production, in view of the competition of the United States and the dislocation (conceded, by the way, in the report) of the natural pre-war world trade routes with Eastern Europe, Latin America and Asia? Even before the application of the Marshall Plan and before production has reached the levels forecast by the report, exports of most of the participating countries show a declining tendency due to the saturation, of the available markets and the impossibility of finding new ones. [3]

Therein lies the entire problem. Despite all natural obstacles, there would be a perspective of revival for European economy if there were a perspective of new markets. But the war has brought about a structural change in the capitalist world, dominated by the power of the United States. American development determines the elimination of other capitalist powers from the world market and limits them to the most meagre portion.
 

Washington’s Point of View

The report of the Sixteen, while being controlled by the experts of Washington, expresses the point of view of the European capitalists on the method of utilizing American funds for attaining restoration of the economy of Western Europe, at least in its dimensions and its possibilities of 1938. From another section, it clearly appears in this Report that the British capitalists and to a lesser extent, the French, are expecting to head this reorganization of Western Europe, by taking for themselves the lion’s share of American funds, and by leaving the development of the other European countries, especially Germany, as low as possible.

Events since the publication of the report demonstrate that Washington sees this question from another point of view. For America, it is not a question of a disinterested reconstruction of European economy; it is a question of reviving Western European capitalism only so far as this rise remains inoffensive to American economy and guarantees new outlets as well as all the political and military advantages which Wall Street considers indispensable to its world policies. From this point of view, Washington is preparing to grant aid which is: a) limited, so as not to risk a serious rehabilitation of European economy; b) directed and controlled, so as not to stimulate an independent development of European productive forces, capable of competing with its own economy; c) favoring. Germany rather than England and France, in order the more firmly to keep in its hands control over the totality of Western European economy, we will briefly analyze these considerations in the next issue.

 
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Footnotes

1. The Impact of Foreign Aid Upon the Domestic Economy, by the Council of Economic Advisers.

2. 32 million tons more coal compared with 1938, or 5.7%; 9.6 million tons more steel compared with 1938, or 20%; a two-thirds increase in productive capacity as compared with that of 1938.

3. For example, French exports have stagnated since the middle of 1946, and the portion destined for countries with “firm currencies,” primarily the United States, has even declined heavily. The same can be noted for Italian, Belgian and Dutch exports.
 

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