I spent the first half of spring break this
year on the edge of the Bois du Boulogne--the great park on the
west side of Paris in a large bend of the Seine--wandering around
western Paris and giving talks at the OECD, the Organization
for Economic Cooperation and Development, an organization housed
in one beautiful former Rothschild chateau and a number of more
modern office-like buildings that are less distinguished. I attended
a number of meetings. I listened to some undistinguished simultaneous
translations. I looked around at a large bureaucratic organization
that churns out unbelievable quantities of paper, much of it--since
the OECD largely moves by consensus and has some 29 member countries--drained
of any substance that some current national government thinks
might work to its short-run politicaldisadvantage. And as I sat
in large, windowless underground conference rooms decorated in
what I think of as 1960s chic--modernist colored glass chandeliers
and so forth--I found myself getting teary-eyed.
One reason I found myself getting teary-eyed
was that on the plane over to Paris I read a novel--Alan Furst's
The World at Night--about Paris under the Nazi occupation.
And the contrast between the Paris that I saw in my mind's eye
while reading the novel and Paris at the start of the twenty-first
century--free, rich, vibrant, and peaceful--was remarkable. Sixty
years ago the Nazis were two months away from conquering Paris.
Today it is hard to believe that the city will ever be (or was)
under threat of conquest).
A second reason was that Paris really is lovely
in the springtime.
A third reason was that to watch the OECD
go about its business reinforces one's sense of how well the
twentieth century has turned out. People at the end of the twentieth
century by and large gather not to talk of how to resist (or
assist) dictators or to wage (or avert) wars. Instead, they by
and large gather to talk--for the most part sincerely--of how
to spur economic growth and make the world more productive. The
hopes that the Rothschilds had when they gave the chateau to
the OECD have mostly been fulfilled. Post-World War II economic
growth--especially in western Europe--has been miraculous. And
in this relatively but not absolutely good outcome the OECD,
in its origin as a club of Marshall Plan donors and recipients
deciding how to organize recovery and allocate aid dollars, played
an important role.
The success of the post-World War II revival
can be gauged by matching its pace with the hobbled post-World
War I recovery of Europe. By 1949 average income per capita in
Britain, France and Germany had recovered to within a hair of
pre-war levels, some two years ahead of the post-World War I
pace. By 1952, seven years after the war and at the effective
end of the Marshall Plan, incomes per capita were 15 percent
above pre-war levels. Western Europe did not achieve a similar
degree of recovery in the 11 years separating World War I from
the Great Depression.
Post-World War II Europe managed to obtain
rapid political and financial stability on the one hand and avoid
extended controls on internal prices and quantities that would
disable the market mechanism on the other. The strong but moderate
labor movement, heavy reliance on market price signals to allocate
quantities, and extensive tax and transfer systems to somewhat
level the market-generated distribution of income together formed
an institutional régime that proved extraordinarily successful
when veiwed from a world-historical perspective.
What role did the Marshall Plan play in helping
Europe find its way to the high-growth post-WWII régime?
It did not make Europe prosperous by accelerating the pace of
European investment. It did not significantly transform Europe
by easing bottlenecks, for in a well-functioning market economy
it is hard to argue that such bottlenecks had more than a transient
impact on the level of production. Market economies are best
at finding and making use of possibilities for substitution.
But would the market economy have been allowed
to do its job? The disastrous outcome of laissez-faire policies
in the Depression left politicians ill-disposed to "trust
the market," and eager to embrace regulation and demand
stimulation. Had European political economy taken a different
turn, post-World War II European recovery might have been hobbled
by government actions that cramped market mechanisms. Perhaps
clumsy allocative bureaucracies would have rationed scarce foreign
exchange, and placed ceiling prices on exportables to protect
the consumption of urban working classes. The war had given post-WWII
Europe substantial experience with economic planning and rationing.
Militant urban working classes calling for wealth redistribution
and an end to the sytem tht had brought Great Depressions voted
Communist in such numbers as to make the Communist Party a potential
part of a permanent ruling political coalition in France and
In fact, the Marshall Plan era saw a rapid
dismantling of controls over product and factor markets in Western
Europe. It saw the restoration of price and exchange rate stability.
To some degree this came about because underlying political-economic
conditions were favorable (and no one in Europe wanted a repeat
of the interwar experience). To some degree this came about because
the governments in power believed that the "mixed economies"
they were building should have a strong pro-market orientation.
Marshall Plan aid gave them room to maneuver to carry out their
intentions: without such aid, they would soon have faced a harsh
choice between contraction to balance their international payments
and severe controls on admissable imports. To some degree this
came about because Marshall Plan administrators wished it--and
put pressure on European governments to decontrol and liberalize
even when they wished to do otherwise.
The Marshall Plan provided extra resources
to make financial stabilization more politically palatable. It
also gave politicians in Western Europe who did seek early stabilization
a trump-such stabilization was necessary for Marshall aid. The
U.S. refused to release French counterpart funds to the Treasury
in 1948 until the new government raised its taxes. French officials
were outraged: nevertheless, they took steps to obtain the quick
release of the funds. Countries had to agree to balance government
budgets, restore internal financial stability, and stabilize
exchange rates. Marshall Planners also sought a labor movement
interested in raising productivity rather than in redistributing
income from rich to poor. With labor peace a potential precondition
for Marshall aid, labor organizations were willing to push for
productivity improvements first and defer redistributions to
later. Morever, European labor movements split over the question
of whether Marshall aid should be welcomed--which left the Communists
on the wrong side, opposed to economic recovery.
The passage of the Marshall Plan was a near-run
thing. From the left, independent presidential candidate Henry
Wallace attacked it as a plot to transfer the wealth of the American
people to plutocrats at home and abroad. In Wallace's eyes, the
Marshall Plan was "the economic side of the bankrupt Truman
doctrine. While it is being sold to the American people as a
peaceful plan for cooperation and recovery, it will use the tax
dollars of the American people for the benefit of private capitalists
at home and abroad." Wallace saw the Marshall Plan as an
attempt by Truman and his advisors to create what we might think
of as fascism with a human face: although "cloaked in decent
language," the Marshall Plan had been "designed to
suppress the democratic movements in Europe."
From the right, Republicans like Senator Kenneth
Wherry, acting Majority Leader, attacked the Marshall Plan for
threatening to destroy free enterprise in Western Europe by encouraging
planning and to help Communism by encouraging East-West trade.
This attack was the first thin end of the wedge as Republican
conservatives shifted from attacking the Roosevelt-Truman administration
as too interventionist to attacking it as soft on Communism.
Later generations of conservatives like William F. Buckley would
be pleased at the thought that some of the mud slung by Senators
like Wherry, William Jenner, and Joe McCarthy--who claimed George
Marshall as a member of his pro-Stalin "conspiracy so black"--had
stuck not only to Truman and Acheson but to Marshall as well;
Buckley wrote that "Marshall no longer rides as high as
he once did in the esteem of his countrymen.To the extent that
McCarthy, through his careful analysis of Marshall's record,
has contributedhe has performed a valuable service."
Rather than listening to the left or the right,
the American Congress listened to people like George Marshall,
Dean Acheson, Harry Truman (who asked "Can you imagine the
plan's chance of passage in a Republican Congress in an election
year if it were named for Truman rather than Marshall?"),
and Arthur Vandenberg. It accepted Vandenberg's characterization
of the Marshall Plan as making it "the policy of the people
of the United States to sustain and strengthen principles of
individual liberty, free institutions and genuine independence
through assistance to those countries of Europe which participate
in a joint recovery program based upon self-help and mutual cooperation."
Vandenberg did not promise success, saying
that while "this act may well become a welcome beacon, if
a beacon is to be lighted at all it had better be lighted before
it is too late.There are no blueprints to guarantee results.
We are entirely surrounded by calculated risks. I profoundly
believe that the pending program is the best of these risks."
He went on to say that the Marshall Plan "can be the turning
point in history for a hundred years to come. If it fails, we
will have done our final best. If it succeeds, our children and
our children's children will call us blessed"
....If not for Truman, Marshall, Acheson,
and Vandenberg, it is hard to imagine that anything like the
Marshall Plan would have come to pass. As Louis Halle (1967)
says of these in his history of the Cold War: "I am not
one who thinks that great men make history. Still, I would rather
not do without them..."