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Marshall Plan Summary and Significance

United States & Europe [1948-1952]

By Ayesh Perera, Last Updated: Sept 24, 2021

The Marshall Plan, also known as the European Recovery Program (ERP), was an American foreign aid initiative to Western Europe in the aftermath of WWII. Beginning in April 1948, the Marshall Plan would transfer over $13 billion to restore Western European economies by modernizing industry, removing trade barriers, rebuilding war-torn regions, and preventing the spread of communism. The program would operate for 4 years, and result in the deregulation of economies, an increase in productivity and the alleviation of poverty. The Marshall Plan would also play a vital role in the expansion of US influence during the Cold War.

Key Facts & Summary
  • The Marshall Plan was an American foreign aid initiative in the aftermath of WW II to restore Western European economies.
  • Proposed by Secretary of State George Marshall, and signed into law as the Economic Cooperation Act by President Truman, the program would operate from 1948 until 1952.
  • The Marshall Plan transferred over $13 billion to 16 countries; it restored European economies by modernizing industry, removing trade barriers, rebuilding war-torn regions, and increasing productivity.
  • The USSR, though invited to participate in the program, rejected the offer and compelled its Eastern Bloc allies to do the same, while accusing the United States of expanding its clout via economic aid.
  • The need to alleviate poverty in postwar Europe and halt the spread of communism constituted the primary reasons for Americans’ support for the Marshall Plan.
  • The Technical Assistance Program of the Marshall Plan played a vital role in improving the productivity of European manufacturing, enhancing European technology, and modernizing European business practices.
  • Initiatives of the CIA under the Marshall Plan included the launching of the Congress for Cultural Freedom as well as support for civic associations to promote liberal democracy in Europe.
  • The cost of the Korean War and the need for rearmament eroded America’s support for the Marshall Plan whose functions were replaced by the Mutual Securities Act of 1951.
  • The Marshall Plan is generally credited with aiding Western Europe’s unprecedented economic growth for nearly two decades and strengthening the Western powers in the Cold War.
  • After two years of the plan and less than five years after World War II, most of the areas were at or near prewar levels and industrial production was not merely at prewar levels but 15 percent above.
Marshall Plan Countries

This map shows the countries that were part of the Marshall Plan. Almost all European nations outside the Soviet bloc were members of the plan from the beginning. The two exceptions were Spain, which as a dictatorship under Franco was not invited to participate, and West Germany, which was under Allied occupation and did not become a full member until 1949, after a significant measure of self-government had been restored. Graphs on the map compare agriculture, industry, and foreign-trade levels in 1950, the midpoint of the Marshall Plan, with prewar production in 1938.


WW II had destroyed much of Europe. Industrial facilities and major cities had been devastated by the aerial bombardment campaigns.

Moreover, the airstrikes on transportation infrastructure had left villages and small towns economically isolated. By the end of the war, millions of refugees would be in temporary camps, surviving on the aid provided by the United States.

From July 1945 until July 1946, the US would ship nearly 17 million tons of food to both Europe and Japan, providing nearly 400 calories per day to about 300 million people. Despite these efforts, much of Europe was suffering from severe food shortages as well as unemployment.


In addition to ensuring the survival of starving populations across war-torn Europe, the Marshall Plan raised the gross national product of its European recipients by nearly 25%. Moreover, it prevented the spread of communism and Soviet influence which could have been detrimental to free enterprise, religious liberty and liberal democracy which characterized most Western nations.

The Soviet Union refused to participate in the Marshall Plan for a variety of apparent reasons. Accepting aid from the United States would open the Eastern Bloc to the influence of Western ideals of individual rights, free enterprise and religious freedom which are considered repugnant to communism. Moreover, these countries could escape Soviet control and become potential allies of the United States, thereby shifting the balance of power in favor of the West.

Though the Economic Recovery Act of 1948 was signed into law by President Truman, Secretary of State and former General George Marshall is generally credited with proposing the plan to aid the economic restoration of postwar Europe.

Concerns over Germany

West Germany had seen the destruction of nearly 5 million apartments and houses due to bombing. It also had to deal with the influx of nearly 12 million refugees from the East.

However, Germany’s industrial production had been almost halved, and its food production remained nearly two-thirds of its pre-war levels. In the immediate aftermath of the war, the US and the UK had been focused on military disarmament in Germany.

Nonetheless, by 1947, the United States began to realize that the reconstruction of a productive German industrial base was essential to the economic recovery of Europe. The embargoes on raw material and the removal of equipment, initially intended to disarm Germany, had to be reconsidered.

Thus, the US adopted an altered approach with plan JCS 1779 which declared that a “prosperous Europe” needed “the economic contributions of a stable and productive Germany,” and substantially reduced the restrictions placed on steel production.

This, however, was merely an initial step in a massive project to rebuild Germany and Western Europe.

Communist Threats

In the meantime, Moscow-sponsored communist parties were rising in Italy and France, while a communist insurgency was beginning to threaten Greece.

The situation was compounded by Britain’s inability to continue its assistance to its European peers. Under these circumstances, the need to contain Soviet geopolitical expansion became increasingly evident.

The suppression of free enterprise, religious liberty, democracy and political freedom, which the rise of communism accompanied, elicited the concern of the free world.

Thus, on the 12th of March, in what would be described later as the announcement of the Truman Doctrine, President Harry Truman declared America’s commitment to “support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures.”

George Marshall and Soviet Negotiations

Having received his first commission as a 2nd lieutenant, Marshall had risen through the ranks to serve as Chief of Staff of the United States Army under President Franklin D. Roosevelt.

On the 21st of January 1947, General Marshall was sworn in as Secretary of State under President Truman. His apolitical personality as well as service to the nation as a warrior and statesman made him an ideal pick for the office.

Following Marshall’s appointment, a meeting was held between US and Soviet officials to discuss the future of Germany. The Americans wanted to create an economically stable Germany and sought accounts of German infrastructure and plants eliminated from the Soviet-occupied zone.

The Soviets however, withheld the details and called for the unconditional fulfillment of reparation claims, thereby delaying the economic rehabilitation. Following more than a month of negotiations, Soviet Foreign Minister Vyacheslav would reject all American and British offers.

Moreover, Stalin too, personally met with Marshall only to demonstrate little interest in addressing Germany’s economic woes.

The Marshall Plan Speech

Despite the failed discussions with the Soviets, the United States was convinced that a solution to Europe’s economic problems could not be delayed.

Consequently, the American position on European reconstruction would soon have to be clarified. Thus, on the 5th of June, standing on the steps of Harvard Yard’s Memorial Church, Marshall outlined his proposal in his address to the graduating class of Harvard University.

In his offer of American aid to restore European economies, Marshall noted that “the United States should do whatever it is able to do to assist in the return of normal economic health to the world.”

He pointed out that without such a response, there could be “no political stability and no assured peace.” Marshall also promised that this was a campaign “against hunger, poverty, desperation and chaos,” and that “any government” willing to “assist in recovery will find full co-operation on the part of the United States.”

He pointed out that the chief objective of the plan was the “revival of a working economy in the world so as to permit the emergence of political and social conditions in which free institutions can exist.” The speech did not contain specific details or numbers.

Marshall’s proposal invited European countries to create their own plans for recovery, with the promise that the United States would fund the programs. The hope was that the economic restoration which would follow would create a politically stable Europe.

European and Soviet Reaction

Marshall had included an explicit invitation to the Soviets to be part of the program, even though Congress would be unlikely to approve of massive aid to the USSR.

Meanwhile, French Foreign Minister Georges Bidault and British Foreign Secretary Ernest Bevin started preparing a European response to the offer. This would result in the creation of the Committee of European Economic Cooperation.

The USSR was invited by Britain and France to participate. However, by July 1947, the discussion would break down, with the USSR on one side, and the UK and France on the other. France and Britain would subsequently declare their intention to consider the Marshall Plan either with or without the Soviet Union.

They would invite 22 European nations to partake in the program, and 16 of them would subsequently accept the invitation.

Eastern Bloc Rejection

The Soviets’ rejection of the plan was soon accompanied by provocative action. The United States was described as an imperialist power promoting anti-Soviet activity, and allies of America were described as enemies.

The US was also blamed for the losses which the communists would incur in elections in France, Italy and Belgium. The Soviets, moreover, isolated Western embassies in the USSR and encouraged Italian and French communists to sabotage the implementation of the Marshall Plan.

Additionally, Czechoslovakia’s foreign minister Jan Masaryk was called to Moscow and rebuked by Stalin for considering the Marshall Plan, while the Polish prime minister Józef Cyrankiewicz was rewarded with a Soviet trade agreement for rejecting American assistance.

The remaining Eastern Bloc countries too, rejected the Marshall Plan. In a speech to the United Nations in 1947, Andrei Vyshinsky, the deputy foreign minister of the Soviet Union, accused the United States of attempting to impose its interests upon independent states via economic resources, and violating the principles of the United Nations.

The USSR however, proposed its own alternative to the Marshall Plan through the Molotov Plan. Many Eastern Bloc states would participate in this program. It must be noted that although Yugoslavia was initially among the states which joined the communist countries that opposed the Marshall Plan, later, its foreign policy relationship with the United States saw dramatic improvement.

Following a series of disputes with the Soviet Union on matters ranging from the Yugoslav-Albanian integration to the support of communist insurgents in Greece, a significant rift emerged between Stalin and the Yugoslavian leader Josip Broz Tito.

In 1948, Yugoslavia would become and independent communist state, and subsequently receive substantial aid from the United States. However, this assistance was not considered part of the Marshall Plan.


Translating the Marshall Plan into reality, even among America’s friends, was not without challenge. 16 nations, each with its own interests, initially met in Paris to decide the nature as well as the distribution of American aid.

France did not want a Germany restored to the threatening power it used to be. The Benelux nations, comprising Belgium, the Netherlands and Luxembourg, on the other hand, despite having suffered under the Nazis, desired a strong German economy to engage in commerce with.

Scandinavian nations such as Sweden, meanwhile, wanted to preserve their trading relationships with the Eastern Bloc states. Finally, Britain protested against being treated in the same way as the other devastated powers and emphasized on its role during the war.

The United States, for its part, advocated European unity and free trade as a vital defense against communism. William Clayton, on behalf of the Truman administration, assured the Europeans that they could structure the recovery plan as they deemed appropriate but noted that procuring congressional approval might depend upon the plan’s amenability toward free trade and European integration which a majority in Congress seemed to support.

Finally, before the end of 1947, the Committee of European Economic Co-operation (CEEC) sent their plan to the United States. The Europeans requested $22 billion in aid. However, President Truman would reduce it to $17 billion in the bill he proposed to Congress.

Meanwhile, before the implementation of the Marshall Plan, Austria, Italy and France found themselves in dire straits and in need of urgent aid. On the 17th of December 1947, the United States allocated $40 million to Austria, France, Italy and China.

Congressional Approval

Congress, at this time, was under Republican control. However, the Republican Party was not destitute of internal conflict.

While the isolationist wing of the party led by Senator Kenneth Wherry of Nebraska argued that opposing communism via aid to socialist governments in Western Europe made no sense, the internationalist wing, led by Senator Arthur H. Vandenberg of Michigan, contended that the plan, though uncertain, could halt Soviet expansion, prevent further economic chaos and salvage Western civilization.

Though the economic merits of the proposal seemed dubious, most seemed to agree that a US aid program could play a vital role in combatting the spread of communism. In the end, an initial bill allocating $5 billion was passed with significant bipartisan support on the 13th of March 1948.

On the 3rd of April 1948, President Truman signed the Economic Cooperation Act (ECA) into law in order to administer the Marshall Plan. Over the 4 years of the Marshall Plan, Congress would allocate more than $12 billion in aid.

The countries which would benefit from the Marshall Plan were as follows:

  1. Austria
  2. Belgium
  3. Denmark
  4. France
  5. Greece
  6. Iceland
  7. Ireland
  8. Italy
  9. Luxembourg
  10. Netherlands
  11. Norway
  12. Portugal
  13. Sweden
  14. Switzerland
  15. Turkey
  16. United Kingdom

Domestic Support

The American public too, seemed to staunchly support the plan. The need to alleviate poverty in Europe, which would otherwise become fertile soil for the growth of communism, was a powerful ideological argument behind this support.

A variety of groups, ranging from business associations to religious societies saw the Marshall Plan as a relatively inexpensive solution to a pressing problem. The stimulation of the US export industry was expected, and major news outlets openly endorsed the program.

Notable opposition did stem from left-leaning politicians such as former Vice President Henry Wallace who argued that the plan would alienate the Soviets and polarize the West and the East.

However, the communist coup in Czechoslovakia in 1948 would vastly reduce this opposition, and soon, most of the nation seemed to back it.

The Marshall Plan in Action

The leading businessman Paul G. Hoffman was appointed as the first administrator of the Economic Cooperation Administration to lead the implementation of the Marshall Plan.

This appointment did much to dispel many people’s fear that the funds would be mismanaged and wasted. Additionally, the United States provided goods and services via transatlantic shipping to the participating governments which could then sell the commodities to local businesses.

Special accounts were set up in the central banks of the recipient nations to collect these funds from local buyers. Loans to businesses too, played a crucial role in the program. The approach yielded many benefits.

The US goods helped narrow the gap between the US dollar and European currencies, thereby aiding European reconstruction and facilitating trade with the United States. The accumulated funds also helped reduce war debts and increase long-term investments.

Moreover, payment for the goods in domestic currency by local businesses and individuals also addressed the problem of inflation by removing much money from circulation. Furthermore, the Economic Cooperation Administration (ECA) established by the Economic Cooperation Act, had prominent American businessmen as its envoys in European capitals to advise on the program.

The Organization for European Economic Co-operation (OEEC) collectively represented the recipient nations under the leadership of the British civil servant Oliver Franks. While at the outset the provision comprised mainly food and fuel, later the primary focus was on meeting reconstruction needs.

The ECA also stipulated that the recipient governments invest more than half of the funds in industry. These funds contributed immensely to Germany’s reindustrialization. 40% of the German coal industry’s investments during this time, for instance, stemmed from the ECA funds.

Technical Assistance

Increasing the productivity of European economies was a high priority to the United States. America’s Bureau of Labor Statistics (BLS) would play a vital role in the Technical Assistance Program of the Marshall Plan.

Since the early 1940s, the BLS had been studying methods of labor productivity. Under the Marshall Plan, the BLS would utilize the expertise it had accumulated by implementing productivity drives in the European nations which were receiving American aid.

Additionally, the BLS analyzed the output rates across various European economies to identify the weaknesses and strengths of each nation’s industrial production. The Technical Assistance Program, moreover, would fund 24,000 European industrialists, engineers and leaders to visit the United States and observe American mines, factories and manufacturing plants.

France for instance, sent nearly 4,700 businessmen on about 500 missions to tour American farms, stores, factories and offices. They were impressed by how an American worker could buy a new automobile following just 9 months of work as opposed to more than two years of work as was the case in France.

The European visitors were able to observe American technology, identify productive deficiencies in Europe, and thereby craft plans to improve European production upon their return. Despite its primary focus on improving productivity, the Technical Assistance Program’s impact went far beyond economics.

During the visits to the United States, the Europeans observed fascinating aspects of American society. They saw private citizens and government officials collaborate in a pluralist society. They also encountered thriving civic societies and open universities committed to democracy.

These Europeans returned home with many American ideals in addition to expertise on raising economic productivity.

The Marshall Plan and the CIA

Manifold were the anti-American organizations funded by communists in Europe. The success of the Marshall Plan required an appropriate response to the aggression of the communists.

The Central Intelligence Agency (CIA) received about 5% of the funds allocated for the Marshall Plan. Via the Office of Policy Coordination (OPC) funds were directed to support various newspapers, student groups, labor unions, intellectuals and artists.

The Congress for Cultural Freedom (CCF) was also founded with the assistance of the CIA on the 26th of June 1950. Comprising prominent intellectuals from Western Europe and the United States, the organization sought to promote principles of liberal democracy and counter Soviet efforts to appeal to intellectuals.

The CCF would later expand to nearly 35 countries, publish over 20 prestigious magazines, hold art exhibitions and organize high-profile conferences. This project would play a significant role in decreasing the ideological appeal of communism as well as Soviet expansion.

End and Impact

The years of the Marshall Plan, from 1948 until 1952, marked the fastest growth period in the history of Europe. The poverty and starvation at the end of WWII soon disappeared.

Agricultural production grew substantially beyond the pre-war levels and industrial production rose by 35%. Western Europe would experience two decades of unprecedented growth as well as substantial improvement in the standards of living with higher income levels.

While the Marshall Plan was not the sole cause of the European economic revival, its role in effecting crucial structural adjustments cannot be gainsaid. Additionally, the political impact of the project could not escape notice.

American aid helped many European nations relax rationing and austerity measures. This reduced discontent and engendered political stability. The clout of the communists abated, and their ideology lost popularity. The cost of the Korean War and the need for rearmament would raise opposition to America’s funding of European economies.

However, despite the end of the Marshall Plan, America’s commitment to alleviate poverty and counter communism would continue. The Mutual Security Act of 1951 would replace multiple functions of the Marshall Plan, and the trade relations fostered by the ECA would aid the rise of the North Atlantic Treaty Organization (NATO).

The Marshall Plan had also provided a testing ground for structures which would later contribute to European integration while simultaneously amplifying the division between Western Europe and the Eastern Bloc.

Despite the diversity of the views concerning the merits of the Marshall Plan, its crucial role in preserving the free world during the Cold War is widely acknowledged.

Cite this Article (Chicago Style)

Perera, A.. "Marshall Plan Summary and Significance." World History Blog, July 09, 2021. .html.

About the Author

Ayesh Perera recently graduated from Harvard University, where he studied politics, ethics and religion. He is presently conducting research in neuroscience and peak performance as an intern for the Cambridge Center for Behavioral Studies, while also working on a book of his own on constitutional law and legal interpretation.

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