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The Marshall Plan

Fact sheet prepared by the Office of Policy and Public Affairs, Bureau for European and Canadian Affairs, May 12, 1997

The Marshall Plan responded to a crisis in postwar Europe resulting from a decline in production, a shortage of capital, a serious balance-of-payments deficit, and food shortages. The harsh winter of 1946-47 intensified these problems, and the economic crisis brought new hardships to a region just recovering from the horrors of war. The situation threatened to cripple U.S.-European trade and to benefit the large communist parties active in several key European countries. European stability seemed at risk.

Secretary of State George C. Marshall unveiled the U.S. remedy in a Harvard University commencement speech on June 5, 1947. Describing the gravity of the situation in Europe, Marshall said the U.S. was prepared to "assist in the return to normal economic health to the world, without which there can be no political stability and no assured peace." He stressed that the initiative had to come from the European nations themselves, which would be expected to join in a cooperative effort.

The Europeans reacted immediately and enthusiastically. Representatives of 16 nations met as the Committee for European Economic Cooperation in Paris on July 12, 1947, to begin developing a recovery plan. This committee evolved into the Organization for European Economic Cooperation (OEEC), forerunner of today's Organization for Economic Cooperation and Development (OECD).

President Truman presented the European Recovery Program (the Marshall Plan's official title) to Congress on December 19, 1947, requesting $17 billion over four years. The Republican Party held a majority in both Houses, but good-faith negotiations and a bipartisan spirit, exemplified by Senator Vandenberg (R- Mich.), Chairman of the Senator Foreign Relations Committee, led to Senate approval on March 13, 1948, and House passage on March 31. President Truman signed the Economic Cooperation Act on April 3, 1948.

The U.S. administered the Marshall Plan through the Economic Cooperation Administration (ECA) under Paul G. Hoffman, President of Studebaker. W. Averell Harriman served as ECA Special Representative in Paris, with ECA mission chiefs in the recipient countries. Leading academics, businessmen, farm groups, and labor unions lent their support and staffed the program, making the ECA a remarkable network of government-private cooperation.

Sixteen countries--Austria, Belgium, Denmark, France, Greece, Iceland, Ireland, Italy, Luxembourg, The Netherlands, Norway, Portugal, Sweden, Turkey, the United Kingdom, and West Germany--received Marshall Plan assistance. The USSR and countries under its influence declined participation; clearly positive responses from the Polish and Czechoslovak Governments were vetoed by Moscow. The Plan, reduced somewhat by Congress, totaled $13.3 billion throughout the life of the program from 1948 to 1951. This would be more than $88 billion in today's dollars.

Grants made up more than 90% of the total, providing essential commodities and services, mostly from the United States. Goods included food, animal feed, fertilizer, fuel, raw materials, and production equipment. Grant project financing upgraded manufacturing, mining, transportation, and communications industries. This aid was multiplied through "counterpart funds." Grant recipients set aside equivalent funds in local currency, which were dispensed with approval of the ECA. This system vastly increased the resources available for reconstruction, while demanding partnership between the ECA and European governments.

The Marshall Plan also provided technical assistance, financing visits by American experts to Europe and European delegations to the United States. Delegations of managers, technicians, and labor leaders visited U.S. farms and factories covering almost every type of manufacturing, as U.S. firms opened their doors even to potential competitors. Europeans thus learned about U.S. production methods.

The Marshall Plan provided a critical margin to the Europeans' own economic efforts, as per capita GNP grew 33.5% in Western Europe from 1948 through 1951. This recovery set the stage for Europe's remarkable economic growth in the following years.

The architects of the Marshall Plan consciously promoted European integration. The Plan stimulated new forms of European cooperation via the OEEC, intra-European trade, and the European Payments Union, forerunner of the European Monetary System. These measures helped launch the process of integration leading to the European Community--now the European Union. The enhanced European cooperation, coupled with U.S. engagement, also facilitated the establishment of NATO in 1949.

The U.S. economy also benefitted from the Marshall Plan as the U.S. preserved and improved its trading relationship with Europe. By stimulating European productivity and accepting a greater volume of imports, the U.S. saw its own exports increase several-fold in the decades that followed.

The Marshall Plan left a legacy of U.S.-European friendship, transatlantic cooperation, U.S. engagement in Europe, and bipartisan U.S. support for that engagement. That legacy has guided U.S.-European relations ever since, and it serves as a beacon for the Euro-Atlantic Community today.

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