Cooperation for Recovery: The Marshall Plan

Dollar Catalyst

In his historic speech at Harvard’s graduation ceremony in June 1947, George Marshall announced the U.S. plan to give additional economic aid to Europe. The offer was made to all of Europe, including the U.S. wartime enemies and the Communist countries of Eastern Europe. However, the recipients would be required to work together to formulate a unified recovery plan.

The European Response

"When the Marshall Plan proposals were announced, I grabbed them with both hands. I felt that it was the first chance we had ever been given since the end of the war to look at [the] European economy as a whole."

Ernest Bevin
British Foreign Secretary

Sixteen European countries responded by cooperating on a general reconstruction plan that was accepted by the United States. In the end, a total of $13.6 billion (equivalent to $88 billion in 1997 money) was appropriated to the plan. The Marshall Plan was a success. By 1950, the participating countries had returned to, or exceeded, their prewar production levels.

The European Recovery Program (ERP - The Marshall Plan) helped Europe to:

credits

• Finance its imports and debts without the burden of future repayment
• Replace, rebuild and expand both private industry and public infrastructure
• Eliminate bottlenecks in production
• Restore consumption to a politically acceptable level
• Establish and fund the European Payments Union to promote multilateral, rather than bilateral, trade
• Eliminate the worldwide dollar shortage

Conditionality

Marshall aid came with "conditionality" - countries wishing to participate had to agree to:

• Develop multilateral payment and trade within Europe
• Move toward currency convertibility
• Move toward eliminating discrimination against U.S. imports
• Encourage reductions in public spending
• Relax government controls such as rationing
• Increase exports to the United States