Marshall Plan and US economic dominance

Identification Large economic assistance program provided by the United States to Western European nations to help them recover from World War II

Date July 12, 1947-1951

The Marshall Plan helped reopen the wealthy foreign markets of Europe to American products. Fear existed that, if Western Europe was not rebuilt, the U.S. economy could slide back into depression. The success of the Marshall Plan contributed to an extended period of U.S. economic dominance.

When World War II ended in 1945, the United States had recovered from the Great Depression. The American economy was responsible for producing as much as one-half of the world’s output at the time. Europe and Asia, however, had been devastated by the war. Their economies were still experiencing a depression. Recognizing the importance of foreign markets, the United States feared that its economy could also fall back into depression if previously wealthy foreign consumers did not reacquire the resources they needed to buy American goods.

Cold War Concerns

The United States had another great fear as well. Though aligned with the Soviet Union during the war, the United States had already begun to perceive this former ally as a threat. The Soviets maintained a troop presence in the nations of Eastern Europe after the war and imposed one-party dictatorships on those countries. In addition, they required them to adopt government-owned, centrally planned economies, thus mostly preventing private businesses from operating. The United States believed that the Soviet Union sought to spread communism globally.

To address both of these fears, the United States adopted the Marshall Plan, also known as the European Recovery Program. Named after Secretary of State George C. Marshall, who initially proposed it, the program provided $13 billion in financial assistance and preferential treatment in trade to participating nations. Furthermore, it required countries receiving assistance to coordinate their efforts to rebuild their economies. This required cooperation led to the creation of the Organization for European Economic Cooperation (OEEC), the precursor to the Organization for Economic Cooperation and Development, which further facilitated trade among the wealthiest countries in the world.

The goal of the program was twofold: to prevent communists from acquiring power in Western Europe and to reopen markets in the region to American products. These national security and economic goals appeared to be linked. If the Soviet Union expanded its influence, it would not only enhance its ability to attack the United States and its allies but also reduce the number of markets available to American business. Thus, by keeping communists out of power, the United States believed it would be protecting its national security as well as its economic interests.

Historical Basis

The Marshall Plan was part of a broad approach to U.S. foreign economic policy after 1945. The United States realized that its response to the onset of the Great Depression in 1929 failed. At the time, American leaders pursued protectionist policies in an attempt to recover from the severe economic downturn. In 1930, the United States passed the Smoot-Hawley Tariff Act, which significantly increased tariffs on imported products. In response, other powerful countries also raised their tariffs, leading to a reduction in global trade and exacerbating the world economic crisis.

As World War II was coming to an end, the United States embraced more open trade. It took the leading role in creating a new global financial system by establishing the Bretton Woods institutions—the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (the World Bank)—as well as the General Agreement on Tariffs and Trade (GATT). Together, these institutions encouraged free trade by aiding countries that developed balance-of-payments problems and reducing tariff rates. As long as many countries remained crippled by the damage caused by the war, however, it would be extremely difficult for these new global institutions to create a more open exchange of goods and services across international borders. Thus, a large economic aid package to those states severely damaged could easily be justified, and the United States had the economic clout to provide this kind of assistance.

Successes

The Marshall Plan is widely considered to have been a successful U.S. foreign policy initiative. In regard to national security, recipient countries became major allies of the United States, as most joined the North Atlantic Treaty Organization (NATO), a military alliance initially formed to contain possible Soviet expansion into Western Europe. Though the communist parties were relatively strong in France and Italy, they never came to power in those countries.

The Marshall Plan also produced favorable results for the U.S. economy. Though the program represented approximately 3 percent of the American gross national product (GNP), it helped recipient countries recover from the devastation caused by World War II. In doing so, trade between the United States and Western Europe increased dramatically after 1945. Foreign investment expanded substantially as well. The United States did not fall back into depression, as many had feared might happen. European cooperation partially fostered by the program has continued. Furthermore, the United States remains the richest country in the world, long after World War II and the Great Depression. Finally, global trade is much more open now than it was in 1945, serving as evidence of progress toward the U.S. economic goal established at the time.

Bibliography

Behrman, Greg. The Most Noble Adventure: The Marshall Plan and the Time When America Helped Save Europe. New York: Free Press, 2007. Examines the history of the Marshall Plan and provides a detailed account of the roles of various individuals who contributed to its creation and deployment.

Djelic, Marie-Laure A. Exporting the American Model: The Post-War Transformation of European Business. New York: Oxford University Press, 2001. Analyzes the strengths and weaknesses of the U.S. business model as applied in France, Italy, and West Germany.

Gaddis, John Lewis. We Now Know: Rethinking Cold War History. New York: Oxford University Press, 1997. Utilizes information declassified soon after the Cold War ended to revisit several events of that era. Suggests the prolonged heightened tensions between the United States and Soviet Union were unavoidable.

Mills, Nicolaus. Winning the Peace: The Marshall Plan and America’s Coming of Age as a Superpower. Hoboken, N.J.: John Wiley & Sons, 2008. Makes a strong case that the Marshall Plan serves as an example of successful nation-building. Provides a rich history of the program as well.

Schain, Martin A., ed. The Marshall Plan: Fifty Years After. New York: Palgrave, 2001. Collection of articles that address the impact of the Marshall Plan on the evolution of political and economic integration in Western Europe as well as the region’s postwar recovery.