#95 – Marshall Plan II

Cam & Ray's Cold War Podcast

* Something that Marshall mentions only briefly in his speech is the effect that would have on the US economy. (around the 7’20″ mark)
* Europe’s economy might have been destroyed after the war, but America’s wasn’t looking too bulletproof, partly BECAUSE the European economy had been shattered.
* In 1947, there were serious concerns about the state of the US economy.
* Benn Steil:
* There was a report written in 1946, I think, by the SWNCC, the State, War and Navy department staff, which said “The conclusion is inescapable, that, under present programs and policies, the world will not be able to continue to buy United States exports at the 1946-47 rate beyond another 12-18 months.”
* They anticipated “substantial decline in the United States export surplus would have a depressing effect on business activity and empolyment in the United States.”
* And in 1946, the gross national product of the U.S. was already down 11.6% on the previous year, as the government stopped spending money on the war effort.
* Navy Secretary James Forrestal characterised American priorities in Europe as “economic stability, political stability and military stability… in about that order.”
* Undersecretary of State for Economic Affairs Clayton redefined the problem as one of disposing of America’s “great surplus.”
* He explained in May 1947 : “The capitalistic system, whether internally or internationally, can only work by the continual creation of disequilibrium in comparative costs of production.”
* “Let us admit right off that our objective has as its background the needs and interests of the people of the United States. We need markets — big markets — in which to buy and sell.”
* Clayton was saying implicitly what Dean Acheson had argued explicitly in 1944: the profitability of America’s corporate system depended upon overseas economic expansion.
* Marshall and other advocates of the program also spoke openly of the parallel between their policy and America’s earlier westward expansion across the continent.
* America needed to expand.
* But wait!? I thought it was the SOVIETS who were trying to take over the world?
* Marshall argued that the nation faced an either-or situation.
* He claimed that Unless the plan was adopted “the cumulative loss of foreign markets and sources of supply would unquestionably have a depressing influence on our domestic economy and would drive us to increased measures of government control.”
* So by defining America’s expansion as the key to prosperity, Marshall defined foreign policy as the key to domestic problems and to the survival of democracy at home.
* (The Tragedy of American Diplomacy – William Appleman Williams)
*
* If the European economy didn’t recover quickly, it would crash the US economy.
* It’s all connected.
* And if the European economy DID recover, but as part of a Soviet trading bloc, it would STILL crash the US economy.
* (Cox, Michael, and Caroline Kennedy-Pipe. “The Tragedy of American Diplomacy? Rethinking the Marshall Plan.”):
*
* And so they came up with a plan.
* A plan to give $13 billion to European countries over 4 years.
* So The Plan, Contrary to popular mythology, it was not just a simple program of aid.
* It had a TON of conditions.
* It wasn’t like the U.S. just dumped pallets of cash on Europe’s doorstep and said “have at it”.
* This was very carefully engineered and managed so that it would benefit the American economy.
* And Truman politically.
* As the influential British economist Sir Alec Cairncross pointed out, US Aid to Europe had been flowing across the Atlantic for the better part of two years even before Marshall’s speech.
* What made the June 1947 initiative different, he noted, was its attempt to link aid to the reform of European institutions and practices.
* Moreover, although the tone of the speech was mild and nonideological, its implications were anything but.
* it was the most dedicated effort so far to reduce Communist influence in Europe and was intended to affect not only the most obvious countries like France and Italy, but also the smaller states under Soviet control.
* This was certainly how George Kennan conceived of the Plan.
* Although Kennan continued to believe that the basic cause of the crisis in Western Europe was not Communism as such but the need to restore the continent’s economic health, he was in no doubt that the Plan had a deeply subversive purpose.
* Dean Acheson agreed, noting that what US “citizens and the representatives in congress alike always wanted to learn in the last analysis was how Marshall aid operated to block the extension of Soviet power and the acceptance of Commu nist economic and political organisation and alignment.
* At a meeting on 28 May 1947, when U.S. Officials decided that the East European countries would be allowed to participate in the program, they stipulated that any countries taking part would have to reorient their economies away from the USSR toward broader European integration – and capitalism.
* Because most of the resources and goods purchased with Marshall Plan funds came from the US itself, this benefited American exporters and domestic industries.
* It allowed the US to recover from a short-term economic slump in 1946-7 and enter a period of economic boom. (http://alphahistory.com/coldwar/marshall-plan/)
* But the real upshot of the Marshall Plan was a political maneuver to loot American taxpayers to keep influential American corporations on the government dole.
* The Plan’s legacy was the egregious and perpetual use of foreign aid for domestic political and economic purposes.
* It was the beginning of large scale Keynesian Economics during peacetime.
* Using government spending to bolster the economy.
* But of course “government spending” is the spending of the people’s money.
* The public treasury.
* And that money ends up going to private companies and their owners and shareholders.
* A little-known business group, founded in 1942 and called the Committee for Economic Development, was elevated into a think tank for a new international order—the economic counterpart to the Council on Foreign Relations.
* Founded by a group of business leaders led by Paul G. Hoffman, President of Studebaker Corporation; William Benton, co-founder of Benton & Bowles advertising firm; and Marion B. Folsom, treasurer of Eastman Kodak Company.
* These groups understood that they owed their profit margins to government subsidies provided by the New Deal and wartime production subsidies.
* Faced with post-war peace, they feared a future in which they would be forced to compete on a free-market basis.
* Their personal and institutional security was at stake, so they got busy dreaming up strategies to sustain a profitable statism in a peacetime economy.
* CED successfully worked to garner support among the American business community for the Marshall Plan.
* As Julius Krug, secretary of the interior, said in his memoirs, the Marshall Plan, “essential to our own continued productivity and prosperity,” was a Tennessee Valley Authority on a world scale.
* “It is as if we were building a TVA every Tuesday.”
* But it was going to take some selling both to the American people and the politicians.
* Unlike today, they weren’t as familiar with the concept of Keynesian Economics and how it benefited their constituents.

* Benn Steil:
* Henry Wallace, FDR’s old VP, the man who SHOULD be President, led the attack from the left.
* Far from reviving the European economy, he said, the ERP would undermine the most positive elements of it, such as nationalization of industry, social welfare expansion, and government controls on trade.
* The State Department, which he believed to have been captured by monopoly private interests, was determined merely to perpetuate Europe’s “semicolonial dependence on the United States.”
* Its program would cleave the continent into rival blocs, slow recovery by severing traditional East-West trade links, and fan international tensions—possibly leading to “World War III.”
* In the United States, Wallace said, the ERP would boost the profits of agricultural, oil, steel, and shipping “trusts” at the expense of “American workers and farmers and independent businessmen,” who would have to contend with the resulting shortages, inflation, union busting, and social service cuts.
* In its place, Wallace advocated creation of a $50 billion fund, three times as large as the administration was calling for, run by the United Nations, which would finance a European “new deal.”
* The primary beneficiaries would be the victims of Nazi aggression, including the Soviet Union and the east European states.
* But of course if the UN is running it, how can they make sure it will benefit U.S. interests?
*
* Henry A. Wallace’s Criticism of America’s Atomic Monopoly, 1945-1948 By Mayako Shimamoto:
* Wallace claimed that although Western Europe was forced to buy non-essential items from America, they were banned from buying essential items from their neighbors.
* The economically weak Western industries were vulnerable to competition with American corporations.
* So they American companies would end up dominating the market for those products in Europe, shutting out European manufacturers from their own markets.
* And Wallace could see, even then, that this was a giant sham.
* American money spent on this gigantic scheme of the ERP returned to American pockets.
* To Wallace’s eyes, the huge rush of American taxpayers’ money worked well as a pump primer, returning huge profits only to American corporations as a justifiable reward in the name of humanitarian aid programs.

* Steil:
* But the Marshall Plan wasn’t only getting attacked from the left.
* Guys like Ohio Republican senator and presidential candidate Robert Taft attacked it from the Right as well.
* Also four-term Republican congressman from Nebraska, Howard Buffett.
* Father of Warren Buffet.
* He was a critic of the Truman Doctrine as well.
* He once said, on the floor of Congress: Even if it were desirable, America is not strong enough to police the world by military force. If that attempt is made, the blessings of liberty will be replaced by coercion and tyranny at home. Our Christian ideals cannot be exported to other lands by dollars and guns. Persuasion and example are the methods taught by the Carpenter of Nazareth, and if we believe in Christianity we should try to advance our ideals by his methods. We cannot practice might and force abroad and retain freedom at home. We cannot talk world cooperation and practice power politics.
* He and Taft and others on the Right were critical of the MP, but not for the same reasons as Wallace.
* They didn’t have a problem with aid.
* They just believed the amount of funds Truman wanted Congress to approve — $17 billion ($184 billion in today’s money) over four years — was much too large.
* Taft argues that giving them too much money would create a dangerous dependency on the United States, sapping both private sector and governmental incentives to manage Europe’s own resources properly.
* It’s a big like people on the Right today saying that giving poor people welfare is just making them dependent on hand-outs.
* Like they will just put their feet up and say “that’s it for me for the rest of my life”.
* Which is horseshit, for the most part.
* Democrats tried to undermine Taft by arguing that he was only aiding the Soviets and their supporters.
* “Those who oppose the Marshall Plan, I think,” said Illinois senator Scott Lucas before an eight-hundred-delegate Women’s Patriotic Conference on National Defense, “should suffer some slight embarrassment in finding themselves in agreement with the Communist Party.”

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