Brad DeLong and Barry Eighengreen in 1991 tried to analyze what made the Marshall Plan successful. I'm not sure how well their argument holds up under modern scrutiny -- they were specifically analyzing the Marshall Plan's efficacy in relation to a "New Marshall Plan" for post-Soviet nations -- and I definitely couldn't contrast it with modern US policy in Iraq. But I can outline it at least.

Basically, DeLong and Eichengreen's argument goes that the actual cash involved in the Marshall Plan wasn't really the straw that stirred the drink. It was significant, but it was nowhere near enough to get the job done. The Marshall Plan's real achievement in getting Europe's economic juices flowing again were the strict terms of promoting market policies that the Americans attached to all aid.

The Marshall Plan gave the US significant leverage over how recipient governments spent the funds. To give one example:

Along with the carrot of Marshall Plan grants, the U.S. also wielded a stick. For every dollar of Marshall Plan aid received, the recipient country was required to place a matching amount of domestic currency in a counterpart fund to be used only for purposes approved by the U.S. government. Each dollar of Marshall Plan aid thus gave the U.S. government control over two dollars' worth of real resources. Marshall Plan aid could be spent on external goods only with the approval of the United States government. And the counterpart funds could be spent internally only with the approval of the Marshall Plan administration as well.

So the US was working with twice the cash they were putting in, and they had absolute veto power over how that cash was spent. This again is not to say that the cash alone was enough (especially with hindsight), it's the veto power that's significant here. Veto power that Marshall Plan administrators were happy to use. West Germany had funds withheld until they balanced the books on their national rail service, France was forced to continue balancing its budget in 1948 despite the protests of French officials.

And this was just one of the "sticks" that Plan administrators were more than willing to use. For example, the Plan also gave non-cash aid on certain line items like coal and timber. But when Britain started building public housing, Plan administrators took away its timber aid. Another requirement of receiving aid was signing a bilateral trade pact with the US.

So the US had tons of leverage over European policy. And they used this leverage largely to crack down on production quotas, trade controls, and to otherwise promote very market-friendly policies. This, in DeLong and Eighengreen's view, is the real achievement of the Marshall Plan. It pushed Europe's economic system from large postwar and post-Depression governments with strong controls over many parts of the economy to much more laissez-faire mixed economies.

Importantly, Marshall Plan administrators not only required putting these policies in place, but they also successfully promoted and sold the idea of markets as solutions to skeptical European leaders. None of this would've been any good if it all just got reversed once the aid grants ended. The Plan's chief administrator, Paul Hoffman, was relentless in selling leaders on market forces (it somehow feels appropriate to mention that Hoffman started his career as a car salesman). A nice quote from the paper:

Acheson describes watching Hoffman “preach…his doctrine of salvation by exports” to British Foreign Secretary Ernest Bevin. “I have heard it said,” wrote Acheson, “that Paul Hoffman… missed his calling: that he should have been an evangelist. Both parts of the statement miss the mark. He did not miss his calling, and he was and is an evangelist.”

I should also mention that there are questions about how much impact the Bretton Woods System's control over global inflation had to do with Europe's recovery. But I've never really looked into that, so I can't really say much more on it.

Although it has become something of an axiom in certain American intellectual circles that the Marshall Plan and its satellite economic program, the European Recovery Program (ERP), were instrumental in helping rebuild Western Europe, the historians' assessments of these programs is quite mixed. Very few historians would ascribe American foreign aid as decisive for reconstruction, a sentiment which is often expressed in op-ed pages as economic historians have discovered a myriad of other, non-American factors at play in reconstruction. Instead, the arguments are more nuanced with the trends in scholarship favoring an interpretation that American aid was only a tangential factor for West German recovery.

The papers and other works of Brad DeLong and Barry Eighengreen represent the strands of scholarship that take a positive assessment of the Marshall Plan. Both economic historians argue that the ERP money allowed for a boost at the right time and place to enable recovery. In the case of Germany, they argue that ERP monies greased the German economy during a difficult transition time of Ludwig Erhard's currency reform. The expansiveness of the Marshall Plan also facilitated the integration of the West German economy into the larger European whole and helped create the economic mechanisms for this cooperation. But DeLong and Eighengreen are careful not to overstate the size of US aid, but rather note it helped recovery by encouraging a more efficient use of resources. By the same token, Knut Borchardt has argued that it was not the scale of US ERP aid that mattered for Germany, but rather what the US helped build up. Borchardt argued that key sectors of the economy damaged by the war, like electricity or textile production, were impediments to economic recovery and ERP aid to these sectors allowed the latent strengths of the German economy to function.

As important as the arguments maintained by Borchardt and DeLong are, they are something of a minority opinion in the historiography of German economic recovery. Much of their pro-Plan arguments acknowledge that ERP monies on their own were not enough to rebuild the German economy. The more mainstream historiographic interpretation of the Marshall Plan is that of Werner Abelshauser who contends that beneath the rubble were strong potential for growth. Part of Abelshauser's rubble argument is literal; he notes that while Allied bombing knocked down factory walls, the machinery often remained intact and was of the type that could be readily converted for civilian use. Additionally, Germany he contends also had other latent factors that made recovery much more likely than not. Both expellees from Eastern Europe as well as refugees from the Soviet zone meant that Germany's potential workforce swelled. In the latter case, refugees from the Soviet zone often made the choice to leave after evaluating their options, so there was a degree of self-selection among migrants in which ones with the most training left a zone in which the Soviets were ruthlessly ripping apart its industrial infrastructure. Thus while the external outlook for Germany looked bleak, the Western zone possessed an underlying vitality that the Marshall Plan took credit for developing. Abelshauser has also called Germany "the step-child" of the Marshall Plan, noting that it receive considerably less aid than other European countries. Nonetheless, Abelshauser noted that there were signs of growth in the German economy even before the currency reforms of 1948 and other economic historians have shared this assessment. Alan Milward has noted that much of the doom and gloom expressed by European politicians and economists if the US abandoned Europe was boilerplate and "emininetly successful policy though it was, the postwar European world would have looked much the same without [the Marshall Plan]." Alan Kramer's survey of the postwar West German economy has noted as well that much of the country was primed for a takeoff. Even accounting for wartime damage, Kramer notes that the Western zone had nearly twice as many machine tools as Great Britain and these were of a more modern type. What was needed according to Kramer was both time to adjust to new political realities, and the repair of transportation infrastructure. It was here according to Kramer that ERP aid made its weight known as it gave West German consumers and workers breathing room adjust to recovery.

While Milward's dismissal of the ERP is something of an outlier position in scholarship, even Abelshauser has conceded to Borchardt after a series of sharp debates on the importance of the Plan to bottlenecks, the consensus view of German economic recovery favors the more skeptical interpretation of ERP's efficacy. Recent work in FRG social history has also shown that for many Germans, the Wirtschaftswunder only really began to be felt in the mid- to late-1950s. In a survey of East German consumption, Mark Landsmann has aptly noted that the life during the Western zone's economic recovery aped the GDR's slogan "Produce More—Live Better" better than workers in the East. While Marshall Plan public diplomacy fueled expectations of an economic recovery, the results of the "miracle year" of 1948 took a long time to filter down.

Herein lies part of the problem in evaluating the Marshall Plan's overall effectiveness. The Plan itself wore many hats and the line between purely economic policies and political ones was quite fuzzy and indistinct. Looking at the ERP through the lenses of success or failure, or simple causation often obscure the complicated interactions that made recovery possible. This is why the comparison between Iraq and postwar Germany is a fraught one. Both states had fundamentally different economies, social structures, and political contexts of occupation that made them very different beasts. One of the cliches of literature critical of post-Iraqi Freedom such as Rajiv Chandrasekaran's Imperial Life in the Emerald City was that American occupation authorities often consumed books on the Japanese and German occupation on their flight over to Baghdad, but no one read books on Iraqi history or society. This was despite the fact that a number of historians of the occupations, such as John Dower were openly critical before the invasion, and a number afterwards, such as a 2003 GHI conference on the faults of comparing Iraq to Germany. Moreover, a number of Bush officials appeared to be acting out a script that eschewed a nuanced reading of the available scholarship on German occupation and reconstruction. Paul Bremer's breathless announcement of "de-Ba’thification" and his defense of it in his memoirs drew explicit parallels to denazification, which is odd given that the bulk of historical scholarship on denazification is that it was something of a failure in its outcomes. Both Rice and Rumsfeld invoke the spectre of Nazi "Werewolves" in speeches delivered on August 2003 when the insurgency intensified, a comparison that one researcher in postwar resistance, Perry Biddiscombe, somewhat problematic. Although professional historians often hate the term "lessons of history," in the Iraq 2003 v. Germany 1945 case, the "lesson" is that the two are quite different enough cases that parallels can only be made at the loosest of levels.

Hi, friends,

This is just a reminder that AskHistorians exists to discuss history, that is, events and phenomena that occurred prior to 20 years ago. While we do allow comparison questions with the modern world, we ask that answers focus on the past events rather than the modern ones, for the purpose of understanding the past.

Thanks!