Author DM Celley

WILL THERE BE A NEW MARSHALL PLAN FOR EUROPE?

A few years after the end of World War II, George Marshall, a former general who became the U.S. Secretary of State, put together an aid package to help the economies of the war-torn countries in Europe to rebuild.  This package was referred to as the Marshall Plan.  As another war in Europe is now raging, this time between Russia and Ukraine, the question arises as to how Western European countries and America will plan for Ukraine’s economic recovery. 

The Original Marshall Plan:  Known as the European Recovery Program, the Marshall Plan transferred aid of over $115 billion in today’s dollars to programs in Europe designed to rebuild European economies, remove trade barriers, modernize industry, and stave off the spread of communism.  This amount equated to approximately five percent of America’s GDP for the year 1948.  It came along to replace other aid plans begun primarily by Henry Morgenthau, U.S. Secretary of the Treasury in the Roosevelt Administration.  The Marshall Plan neutralized foreign exchange speculation, and removed the reasons for trade protectionism to enable economic development and growth.

Administration of the Programs:  Contrary to other modern aid programs, the Marshall Plan’s administration did not center around sending large amounts of money to the recipient governments.  Instead, massive amounts of merchandise of all kinds originating mainly in America were shipped to European governments and then sold by them to businesses and individuals in local currency for the U.S. dollar equivalent.  These payments flowed into special accounts set up in the recipient government’s central banks enabling the governments to the funds for investment purposes, or paying off war debts as was the case for Great Britain.  The European recipient governments could choose whatever was needed to be delivered, and they generally utilized the aid in the manner that worked the best for their respective countries.  The local currency transactions in Europe served to inhibit inflation and stifle foreign currency speculation.  The U.S. dollar transactions remained for the most part in the U.S. economy providing postwar stimulus.  The programs were mostly for, but not limited to, commodities trade as the needs in Europe for food and fuel were excessive initially.  However, it also provided for the shipment of industrial items, and even included the rebuilding of armed forces. 

Political Considerations for the Marshall Plan:  The plan faced major opposition in congress which was dominated by conservative Republicans at the time.  It was viewed as a waste by providing financial support to socialist governments in Europe.  The argument in favor was that it would help to stabilize chaotic European economies and stave off the onrush of communism.  Further, the U.S. economy would also benefit with most of the production coming directly from this country.  Gradually, congress ascended toward public opinion that communism succeeded where poverty flourished, and the measure passed overwhelmingly.  The Truman Administration found in the process that it could not exclude one of its victorious allies, and offered to include the Soviet Union in the plan.  Ironically, after much hemming and hawing, Stalin rejected the plan and instructed all of the Eastern Bloc states to do likewise. 

Aid to Ukraine is Already Underway:   In the current European war, reconstructive aid to the Ukraine is already flowing alongside military aid.  The military aid features weapons and logistics, whereas the reconstructive aid applies initially to helping cover budget shortfalls for the Ukrainian government along with providing technical equipment needed to repair such lost services as the power grid.  Further, the aid comes not exclusively from America, but also from the European Union, individual European countries, and Asian countries.  Add to that a large number of institutional donors such as the World Bank, the European Bank for Reconstruction and Development, the European Investment Bank, and a host of other multilateral institutions are also involved.   As the war has progressed, these major institutional donors have planned and put together regular meetings to co-ordinate relief efforts.

Keeping Corruption Out of the Ukraine Equation:  Since Ukraine became a sovereign nation after the decline of the Soviet Union, it grew and came to be accepted as a mostly middle-class, middle-income society like much of Western Europe.  It also developed a reputation for official corruption.  This concern has surfaced more than once to donors and aid renderers since the war with Russia began and the country’s needs grew dramatically.  But positive steps have been taken, not the least of which is the development of Prozorro, a digital system for monitoring state procurement.  Thanks to this system, all the paperwork associated with government procurement can be viewed online.  This provides reporters, and watchdog groups, as well as law enforcement and interested parties the opportunity to see exactly what the government is doing with public resources.

Conclusions:  The Ukraine/Russian war has not reached the scale of World War II—a fact for which all the world can be grateful.  Therefore, the level of aid to Ukraine by Western European countries and America has not needed to approach that of the Marshall Plan as of yet.  The Marshall Plan itself served its purpose well, as the economic growth in Europe out of the disaster of World War II was tremendous for decades thereafter.  Communism, once a major threat to Europe has now all but departed even from Russia.

Sources:          The Economist, A New Marshall Plan?, November 12, 2022.

                        Wikipedia, Marshall Plan.

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