Why it’s so hard to repeat the Marshall Plan
By far the most critical complementary factor was credible US security assurances. These were not part of the State Department’s original plan for the Marshall Plan, but soon became so, at the insistence of France and the United Kingdom, in the form of the United Nations Treaty Organization. ‘North Atlantic (NATO) born in April 1949. Because the countries eventually covered by the Marshall Plan were not as vulnerable geographically to the threat of Soviet attack as were, for example, eager Czechoslovakia and Poland but unfortunate, the United States could credibly guarantee its security. This fact has allowed the Marshall countries to specialize and integrate economically – especially with the recent deadly adversary and industrial power, Germany (or rather the western part of it) – rather than pursuing ineffective autarkic policies. to ensure the supply of steel and other vital products. for unaided self-defense.
It should be noted that the United States committed relatively large annual sums to European relief efforts, through the United Nations Relief and Rehabilitation Administration, in 1946 and 1947, with no significant effect on economic recovery. This aid, unlike Marshall aid supplemented by security, did not prevent the Soviet Union from successfully undermining democratization, economic reform, and private investment in Central Europe.
Fast forward to the 21st century, and we see that the United States has committed $50 billion After to war reconstruction in Afghanistan and Iraq than it did, in current dollars, to the 16 Marshall countries combined – again, with little to show for it. The main reason was the inability of the United States to defeat the Taliban insurgency in Afghanistan and the Iranian-sponsored militias in Iraq. In such precarious security environments, never conducive to Western-style market reform to begin with, the domestic and foreign private investment needed to generate robust and sustained economic growth never materialized.
Another challenge that would-be Marshall planners face is that the goals behind the aid they seek require that it be conditional on recipients pursuing policies consistent with those goals.
More recently, impassioned calls for future Marshall Plans in Syria and Ukraine completely ignore the critical element of security. Without the removal of Bashar al-Assad and the neutralization of the ongoing Iranian threat, at a minimum, Syria has no prospect of mobilizing aid to generate private investment and growth. Similarly, Ukraine will never attract private investment as long as it remains in the shadow of a Russia willing and able to unleash large-scale destruction at any time. And while the creation of NATO was integral to the success of the Marshall Plan, ending the prospect of Ukraine’s incorporation into the alliance is a central Russian war goal.
Another challenge that would-be Marshall planners face is that the goals behind the aid they seek require that it be conditional on recipients pursuing policies consistent with those goals. In the late 1940s and early 1950s, the United States had great difficulty convincing the beneficiaries of the Marshall Plan to pursue their preferred economic policies. France, for example, insisted on channeling aid towards industrial modernization while the United States wanted it to focus on fiscal and monetary stabilization. In Italy, the situation was reversed, with Washington demanding more modernization and less pre-Keynesian macroeconomic orthodoxy. The reason these governments were able to ignore U.S. threats to cut aid is that they knew there was only one real, non-negotiable condition: that they keep the Communists out of their coalitions. This condition they happily fulfilled. In the end, the economies of these countries recovered, if not in the way and as quickly as Washington wanted them to, and the aid thus achieved its broader economic and political objectives. But in culturally and geographically less hospitable terrains, such as Afghanistan and Iraq, where corruption is much harder to eradicate, the absence of plausible alternative friendly governments meant that conditionality was virtually impossible to enforce. Help would come regardless of what they did – at least until the United States accepted that they would never achieve their goals and left.
A third related challenge facing aspiring Marshall planners is that some of their goals will inevitably be incompatible. The Truman administration fought this problem intensively in Germany. Should he favor denazification or economic recovery? Which of the country’s victims would be compensated, and which creditors reimbursed? Would the aid favor American exporters, at the cost of an aggravation of the shortage of dollars in Europe, or German exporters, to the detriment of American jobs? Such compromises would be evident in a post-conflict Ukraine or a post-Putin Russia. To what extent should donor aid support donor industry and jobs versus those in the recipient country or those in more efficient third countries? How can the commercial and security interests of the US, EU, Ukraine and Russia be reconciled and balanced? Since defensive and offensive military capabilities are often in the eye of the beholder, can capabilities on one side be increased without increasing concerns on the other? If not, what should be the priority? These are questions that go far beyond, and can be considerably more important than, how much money will be mobilized.
The Marshall Plan has such a pull on well-meaning policymakers and commentators because it seems to hold the promise of buying peace and prosperity in troubled regions.
The Marshall Plan has such a pull on well-meaning policymakers and commentators because it seems to hold the promise of buying peace and prosperity in troubled regions. But the plan didn’t actually do that; it was only a pump primer for a much larger effort to forge alliances in service of protecting US political, economic, and security interests. The instances in which it can be replicated are severely limited by issues of geography, adversary resistance, and conflicting recipient priorities. By all means, we must continue to think big when the problems are big, but money can only ever be part of the solution.
Benn Steil is director of international economics at the Council on Foreign Relations and the most recent author of The Marshall Plan: The Dawn of the Cold War.
This year, the German Marshall Fund celebrates its 50th anniversary and the 75th anniversary of the Marshall Plan. These historic moments are an opportunity to highlight the accomplishments of one of the most important American diplomatic initiatives of the 20th century and how its legacy lives on today through the GMF and its mission. Learn more about GMF at 50.