The Marshall Plan
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The left-leaning Social Democrats (SPD) had a much more spirited debate over the initiative. British zone SPD chairman Kurt Schumacher had to implore party delegates to ditch slogans condemning “dollar imperialism,” and instead to focus on the “100 million Europeans who were going hungry.” Marshall, he reminded them, had pledged not to remake Europe solely through “the orthodox and missionary methods peculiar to American capitalism.” Schumacher was attracted by what he saw as elements of a planned economy in the initiative. It was, he argued, economic crisis that brought Hitler to power, and the United States was now indispensable in preventing another one.
Schumacher was a passionate advocate of German unification, who, unlike Adenauer, would have accepted German political neutrality as its price. This stance should have tilted him toward Moscow. Yet he initially clung to the hope that the Marshall Plan might provide an impetus to unification: a resolution of the party congress offered that the “irresistible magnetism” of a revitalized bizone economy would serve to bring this about. Moscow’s post-Paris condemnation of the Plan rendered this argument implausible, but also served to reinforce Schumacher’s support for it on the grounds that the Soviets were now working against German interests.
Only the Wirtschaftsrat’s Communist representatives opposed the Marshall Plan on the basis that it would impede reunification. Communist rejection of the Marshall Plan, however, found little support among the West German public. An October 1947 poll in the American zone reported 78 percent in favor of the Plan, with most believing that Washington’s primary motivation was preventing Communists from coming to power in western Europe. Underpinning popular support for the Marshall Plan was the belief that it represented a renunciation of the Morgenthau Plan. “Including Germany in the task of European rehabilitation,” Stuttgart’s Wirtschaftszeitung wrote, “means conceding to it the means for the full use of its economic strengths.”133 It meant that the United States would allow no return to the economic and political autarky of the interwar years, which many held to be the source of the country’s problems since the 1930s.134
Ulbricht, however, remained confident Germans would put unity before all else. “It is imperative to keep in mind,” he wrote to Soviet Central Committee AgitProp chief Mikhail Suslov on December 12, “that it was not yet evident to everyone that a defense of German unity also means a battle against bizonal politics and against the Marshall Plan. This is only becoming apparent to many now, in connection with the debates at the London conference.”135
Across the Atlantic, Walter Lippmann opposed the new American thinking on West German statehood. “[T]he idea has been abandoned by all responsible men that western Germany should be formed as a state and that we should make a separate peace with it.”136 It would make “deeper and more permanent the division between east and west,” with enormous economic and political costs.137 An opponent of Kennan’s “containment” ideas, he equally opposed linking the Marshall Plan to any sort of West European military alliance. It would only “confirm the most serious charge which the Communists . . . make against the Marshall Plan.”138 Yet he was also convinced that the development of massive U.S. airpower supremacy over the Soviet Union was essential to the success of the Plan. “Since Mr. Molotov intends to keep the Red Army in the center of Europe,” he wrote, “we have no choice but to build up and maintain an operational striking force capable . . . of delivering a sustained assault at long range.”139 James Reston also declared U.S. policy “weak,” in that “it is not combined with a clear commitment by the United States to use its power against any future aggressor in Europe.”140
The view was taking hold that the Marshall Plan was a necessary but not sufficient response to the stalemate over Germany. A free and self-sustaining western Europe would have to be defended by a credible American military posture. “We had better stop kidding ourselves,” one official told Reston anonymously. “While we talk about recovery in Washington and London, the Communists are wrecking our recovery plans in France and Italy. We cannot deal with this problem through economic aid alone.”141 The Marshall Plan needed a martial plan.
The Wall Street Journal took a different line. It was critical of the economic assumptions behind the Marshall Plan, and more broadly of the wisdom of “the planners in Washington.” Yet it also believed, as did many of the Plan’s prominent supporters, that the administration’s traditional refrain—that the Plan was a much less costly alternative to war—was ridiculous:
There is a close relationship between the [Marshall] program and a big military budget, but it has never been a choice between the one and the other. On the contrary, the more actively we intervene in European affairs, the more we jostle that political powderkeg, the more it behooves us to look to our own defenses. [The Marshall Plan] is no more an alternative to rearmament than was the lend-lease program before the last war, although the avowed purpose of lend-lease was to keep us out of the fighting.142
Given the reality of the Communist threat from without and within, there was little chance that Marshall Plan countries would follow through on making themselves economically interdependent, and thereby undermining their self-sufficiency, unless, in Reston’s words, “they have assurance that they will not be abandoned in the event of aggression.” As to Marshall’s determination to move ahead with West German industrial revival and statehood, France “never will cooperate . . . unless she has the backing of United States power.”143
For his part, Stalin did not want or anticipate war at this point, but he had begun preparing for it. Since 1945, the Soviet armed forces had been slashed from eleven million to under four million, and military spending from 54 percent of the budget to 18 percent. In November 1947, however, the Politburo ordered a quadrupling of tank production and a tripling of artillery production for 1948. Troop increases would follow a year later, beginning with parachute and transport divisions. The United States was “conducting a cold war, of nerves, with the aim of blackmail,” Stalin’s deputy Georgy Malenkov told Italian Socialist Pietro Nenni, but “the Soviet Union will not allow itself to be intimidated.”144
MARSHALL, WHO REFUSED TO USE the term “Marshall plan,” went before Congress to defend it for the first time on November 10, 1947, at a joint meeting of the Senate Committee on Foreign Relations and the House Committee on Foreign Affairs. Feeling the strain of the campaign, he was putting the odds of a bill’s passage at no better than fifty-fifty.145 The result was a much starker East-versus-West framing than he had offered previously.
Marshall’s testimony is striking for the brusqueness with which he passes from asserting the “tremendous gravity” of Europe’s economic problems, on which he had previously tended to linger, to laying down the Cold War basis for an aid plan. Which countries were in and which were out would, he said, be determined “roughly [by] the line upon which the Anglo-American armies coming from the west met those of the Soviet Union coming from the east.” These were shades of Churchill’s “iron curtain” speech the year prior. No longer was there any pretense that borders created by war were temporary, that the positioning of forces should no longer matter, that Europe could be reconstructed on principles divorced from power. “To the west of that line the nations of the continental European community have been grappling with the vast and difficult problem resulting from the war with their own national traditions, without pressure or menace from the United States,” he said. But “developments . . . to the east of that line bear the unmistakable imprint of an alien hand.”146 Marshall, who had recoiled at anticommunist rhetoric in Truman’s “doctrine” speech, and carefully avoided it in his own at Harvard, was now dialing it up to win over Congress. Marshall would years later claim that he “did not want to fight [for the plan] on this basis.” But “Vandenberg stated we would have to fight this out on an anti-Communist line,” and the senator “was our principal adviser on the basis of U.S. political problems.”147
Truman took the torch on November 17, delivering his first “Special Message to
Congress” on the Marshall Plan. “The future of the free nations of Europe hangs in the balance,” he said, and “the manner in which we exert our strength . . . will have a decisive effect upon the course of civilization.”148 His much longer address of December 19 painted the consequences of failure to act in stark political terms. He warned of the need to defend freedom and the rule of law in Europe against “those who would use economic distress as a pretext for the establishment of a totalitarian state.” If such forces were to gain the upper hand, “it might well compel us to modify our own economic system and to forego, for the sake of our own security, the enjoyment of many of our freedoms and privileges.” This is why the United States had “so vital an interest in strengthening the belief of the people of Europe that freedom from fear and want will be achieved under free and democratic governments.” It would not be easy, however. “We must not be blind to the fact that the communists have announced determined opposition to any effort to help Europe get back on its feet.” He left unspecified which communists these were, but warned, none too subtly, that “attempts by any nation to prevent or sabotage European recovery for selfish ends are clearly contrary to [the] purposes” of the Charter of the new United Nations.149 This served to rebut charges that the United States was acting outside the U.N. while asserting that Soviet behavior was undermining it.
FOLLOWING THE PRESIDENT’S DRAMATIC MARCH 1947 address, Many Republicans had felt they had been maneuvered into supporting Greek and Turkish aid by the suggestion that rejecting it meant being soft on Soviet aggression. They were determined not to let the White House corner them again. Vandenberg at the time called for a moratorium on further aid appropriations in that session of Congress. By November, however, the tone in Washington had changed. Vandenberg and Marshall were meeting at Blair House, the White House guest residence, twice a week, on average, with the media unaware of their coordination. With a year to go until a critical presidential election, even the leading Republican contender, New York governor Thomas Dewey, issued a powerful statement of endorsement.150
“If, as Bismarck says, history occurs when things happen,” The Washington Post observed, “the last five months have teemed with history.”151 There had, Reston observed, been an “astonishing development of American public opinion” toward the idea of a broad-scale European aid program. “The future historian,” Reston said, was “likely to be more impressed by the advances that have been made this summer in getting the nations of the West together on a common task than by anything else.”152 Yet Republican congressmen still demanded to see the situation for themselves, and their visits to Europe did much to blunt the line that the White House was exaggerating the need for American assistance. The House of Representatives, Reston observed, was now not just divided into parties, “but into those who went away and those who stayed home.”153
In November, the administration named the Marshall Plan the “European Recovery Program” (ERP), with the word “recovery” intended to highlight the difference with other aid initiatives since the war’s end.154 The numerous congressional hearings over the ERP that took place between the fall of 1947 and the spring of 1948 brought out the sweeping breadth of the administration’s aims, all of which had taken form in a matter of months after Britain’s imperial collapse back in February.
Embracing nineteenth-century language that FDR had been determined to banish from diplomatic parlance, Forrestal highlighted the “imbalance” between the world’s “two great powers,” one that the United States needed to “redress” by rebuilding western Europe. Ambassador Douglas said that the Europeans needed to create “the type of economic federal union that we now have” in the United States, harking back to the replacement of the American Articles of Confederation with the Constitution in 1787.155 Marshall called European integration “one of the most important considerations in the entire program.”156 John Foster Dulles said it would create a “counterbalance to the Soviet system of police states.” West Germany would become part of a “solid front” whose defenses could not be “easily reduced even by Soviet power.” Failure to integrate, however, would perpetuate conditions that might lead more desperate European governments to “accept a Soviet-dictated peace.”157
But Soviet domination in Europe would not be the end of the story. The supplanting of democratic governments by totalitarian ones tied to Moscow, Douglas argued, would lead to state control of strategic economic assets that would imperil the economic security of the United States. This would in turn lead to demands at home for more government control over the American economy, which was “incompatible with the liberty” its citizens had enjoyed since the nation’s founding.158 America’s political isolation would, Harriman believed, necessarily lead to soaring defense expenditures and a militarization of society. The threat extended “even to our very form of government.”159 Hoffman argued that Americans could not “expect to isolate our free economy and have it work.”160 A proliferation of “government monopolies” in Europe, said General Electric chairman Philip D. Reed, would require parallel developments in the United States that would destroy “our free enterprise system.”161
Broadly, then, the administration’s case was that it was necessary to reorganize the economies of western Europe in America’s image to prevent its subjugation by Moscow, a development that would undermine the economy, security, and political system of the United States. The narrative did not go unchallenged.
Henry Wallace led the attack from the left. Far from reviving the European economy, he said, the ERP would undermine the most positive elements of it, such as nationalization of industry, social welfare expansion, and government controls on trade. The State Department, which he believed to have been captured by monopoly private interests, was determined merely to perpetuate Europe’s “semicolonial dependence on the United States.” Its program would cleave the continent into rival blocs, slow recovery by severing traditional East-West trade links, and fan international tensions—possibly leading to “World War III.”
In the United States, Wallace said, the ERP would boost the profits of agricultural, oil, steel, and shipping “trusts” at the expense of “American workers and farmers and independent businessmen,” who would have to contend with the resulting shortages, inflation, union busting, and social service cuts. In its place, Wallace advocated creation of a $50 billion fund, three times as large as the administration was calling for, run by the United Nations, which would finance a European “new deal.” The primary beneficiaries would be the victims of Nazi aggression, including the Soviet Union and the east European states. The U.N. would reverse the “Germany first” orientation of the administration’s plan.162
Ohio Republican senator and presidential candidate Robert Taft, who had been the most formidable congressional opponent of Bretton Woods three years earlier, led the attack on the ERP from the right. But his objections were less sweeping than Wallace’s. Taft backed the vision of an integrated western Europe, embracing western Germany, believing that such integration was necessary to keep the United States out of entangling commitments to prop it up. Taft also supported the principle of American economic aid to western Europe, which his ally Herbert Hoover said was necessary to create “a dam against Russian aggression.” Taft believed the administration’s request—$17 billion ($184 billion in today’s money) over four years—to be much too large, however. Aid at such a level would, he believed, create a dangerous dependency on the United States, sapping both private sector and governmental incentives to manage Europe’s own resources properly.
Democrats tried to undermine Taft by arguing that he was only aiding the Soviets and their supporters. “Those who oppose the Marshall Plan, I think,” said Illinois senator Scott Lucas before an eight-hundred-delegate Women’s Patriotic Conference on National Defense, “should suffer some slight embarrassment in finding themselves in agreement with the Communist Party.”163 But this argument failed to sway Taft’s fellow Ohioan, Republican representative Frederick Smith, who
considered the Plan itself “outright communism.”164
Free market commentator Henry Hazlitt testified similarly, advocating an aid package roughly half the size of the administration’s request, but conditioned on major changes in recipient-country policies. Hazlitt wanted to roll back the tide of nationalization, trade controls, and social welfare expansion that, he argued, would further constrain output, worsen inflation, and increase Europe’s “dollar shortage.” Let these currencies trade freely at more appropriate exchange rates—or return to the classical gold standard, in which interest rates moved to balance imports and exports—and the “shortage” would disappear. Instead, France was making it worse by forcing exporters to swap 90 percent of their dollar proceeds for francs at an unattractive rate, discouraging production for export.
The Marshall Plan as formulated, Hazlitt believed, was only going to further the assault on private enterprise that was the primary source of Europe’s economic woes. Like Wallace and the left, Hazlitt and the right also believed that the Marshall Plan would redound to the detriment of the U.S. economy, which would reel under the shortages and inflation it would trigger. Their remedies for such maladies, however, could not have been more different.165 In essence, Wallace saw laissez-faire as the Marshall Plan’s malevolent lodestar; Hazlitt, cursing the same navigational object, saw socialism.
With the vote approaching on interim aid to France ($328 million), Italy ($227 million), and Austria ($42 million),166 Taft launched a new series of attacks, thumping Marshall aid as inflationary, fiscally reckless, and conceptually misguided. “The Administration,” he said, “can’t get away from the New Deal principle that Government spending is a good thing in itself.” Fellow Republicans demanded answers: What do we get for our aid? Won’t meddling in Europe’s affairs feed the Russian narrative? Isn’t China more important? And most importantly, what if France and Italy go Communist anyway? If they “fell under Communist control,” Lovett told them, he would advise the president to cut off funds. But he hated having to say so publicly. The Communists, he told Marshall, would brandish his words “for propaganda purposes.” Yet it was, he was sure, “necessary . . . to stop this line of questioning” before it wrecked the prospects for aid.167