U.S.-AID: What a Difference 50 Years Make

By Jim Lobe Reprint | | Print |

Jim Lobe

WASHINGTON, Jun 8 1997 (IPS) - With U.S. foreign aid at a 50-year low, what remains of the Foreign Policy Establishment here spent the past week in nostalgic celebration of the birth of the Marshall Plan.

The plan, under which 13 billion dollars in grants and loans were provided to western Europe between 1948 and 1951 (88 billion dollars in 1997 dollars), is credited with spurring western European economic recovery from World War II and laying the foundations for what has become the European Union (EU).

Secretary of State Madeleine Albright flew last Thursday to Harvard University, the site where, on Jun. 5, 1947, then- Secretary of State General George C. Marshall gave the address that launched the fabled plan that bore his name. Chancellor Helmut Kohl of Germany, a major beneficiary of the Marshall Plan, placed a wreath at Marshall’s grave at Arlington National Cemetery, across the Potomac River.

He was then regaled as the guest of honour Thursday night at a ‘Gala 50th Celebration of the Marshall Plan’, which included, among others, former French President Valery Giscard d’Estaing, former German Chancellor Helmut Schmidt, and former Dutch Prime Minister Ruud Lubbers. Gulf War hero, ret. General Colin Powell, in whom many see a certain likeness to Marshall, served as master of ceremonies.

The week’s events were tinged with a certain wistfulness, and for good reason. The internationalist vision which inspired Marshall has faded steadily since the collapse of the Soviet Union, the global foe against which the plan’s authors successfully rallied public opinion and the Congress.

So persuaded was the country of the merits of the plan, that, at its height in 1949, Congress appropriated the equivalent of three percent of the gross domestic production (GDP) of the United States that year for economic assistance abroad. Virtually all of the money went to western and southern Europe.

The equivalent today would be over 200 billion dollars — or roughly 20 times what Washington currently provides all developing countries in economic and development aid.

Winston Churchill described the plan as “the most unsordid act in history.” While the photos of malnourished and bedraggled European children certainly tugged at the heartstrings of Midwestern mothers and even penny-pinching lawmakers, the plan itself was an act of careful strategic calculation.

Policy-makers like George Kennan, Dean Acheson, Clark Clifford, and Charles Bohlen — the architects of post-war U.S. foreign policy — believed that Europe was in deep distress and that the rising influence of Communist parties, especially in France and Italy, boded ill for U.S. interests on the continent.

They also believed that the plan could be crafted in a way that would make it virtually certain that the Soviet Union, with which tension had been steadily rising for more than a year, would not take part. If it did, the plan would be doomed in Congress.

Moscow did not disappoint. Invited to the Paris conference to discuss the initiative, Foreign Minister Vyacheslaw Molotov walked out after six days, taking Soviet satellites in Eastern Europe with him. He balked at U.S. demands that all of the resources for European recovery be pooled and that all aid recipients open their books to U.S. scrutiny.

Molotov called the plan “nothing but a vicious American scheme for using dollars to buy its way” into Europe’s affairs and predicted that it would “divide Europe into two groups of states.”

The Soviet foreign minister was not far off about the plan’s practical effect, if not its intent. According to historian Ronald Steel, the plan provoked a defensive reaction in Moscow which tightened its hold on the eastern bloc and mounted a coup d’etat against Czechoslovakia in February, 1948. The Cold War was on.

Nor was the U.S. public forced to scrimp and save to pay for the aid. It had emerged from the war not only relatively unscathed, but downright prosperous. Its economy accounted for about half of the world’s total production at the time, while strong unions and the guarantee of a college education for returning soldiers ensured a sharp rise in the size and wealth of the middle class.

All of this could be lost if Europe fell into depression, President Harry Truman warned a sceptical Sam Rayburn, the powerful Speaker of the House of Representatives. “You and I have both lived through one depression, and we don’t want to have to live through another one, do we, Sam?” Truman said.

Moreover, much of the plan’s resources were actually spent in the United States, as Europeans used the money to import factory equipment from the only place where it was available. Big U.S. manufacturing and consumer products companies, whose operations abroad were minimal or non-existent before the war, opened offices and plants in Europe to position themselves for a boom.

European entrepreneurs were also brought to the United States to learn the latest management, marketing, and production techniques. Many of them ended by working for U.S. industry.

Success was stunning. Western European economies grew by as much as 20 percent a year during the four years of the plan. Industrial production increased over the period by more than 36 percent. Western Europe was back on its feet, and the Communist threat had receded.

The plan was so successful that it spawned a mythology, according to historian Walter McDougall, who notes that pundits and presidents have since called for a ‘Marshall Plan’ for Southeast Asia, Latin America, the Caribbean Basin, and, most recently, the Middle East.

In his view, the plan became the latest manifestation of “global meliorism” in U.S. foreign policy: the “assumption that the United States can, should, and must reach out to help other nations share in the American dream.”

Now, however, that notion has fallen into disrepute, despite strenuous efforts by Albright and others to revive it. As a percentage of its GDP, U.S. aid to developing countries is the lowest of all industrial countries at 0.10 percent.

Today, she told her Harvard audience, “the greatest danger to America is not some foreign enemy; it is the possibility that we will fail to heed the example of (Marshall’s) generation; that we will… forget what the history of this century reminds us: that problems, if left unattended, will all too often come home to America.”