The Marshall Plan

by Benn Steil

  Europeans followed the politics of the Marshall Plan with great interest. Yet public opinion was split as to the main American objective behind the plan. In both France and Britain, one in four thought it was humanitarian; the same proportion thought it was economic self-interest. One in seven believed it was to stop Communism. Italians were more generous: one in three thought the main motive was humanitarian.41 The Dutch were skeptical: only one in ten believed this. Four times as many believed it was economic self-interest.42

  European governments, for their part, were sensitive to both the substance and politics of the aid conditions being debated in Washington. The CEEC delegation to Washington, informally known as “the European Group,” several times expressed written concern about how the U.S. government might restrict the way in which their countries spend the proceeds of the domestic sale of American aid supplies—what became known as counterpart funds. “All those [in Europe] who . . . have continually opposed the so-called ‘Marshall Plan,’ ” said an October 27, 1947, European Group memo to the State Department, “will seek to show that the existence of these funds is capable of conferring upon the U.S. considerable powers infringing [our] independence.” They urged, therefore, that recipient governments, rather than an American agency, be permitted to control the allocation of such funds, in accordance with any agreements reached with the U.S. government.43

  The Kremlin viewed European enthusiasm for the Marshall Plan with alarm. In a Top Secret memorandum to Stalin on January 26, 1948, Central Committee AgitProp chief Suslov reported on the proceedings of the International Conference of Socialist Parties in Antwerp. “The ruling [democratic] socialist parties” of western Europe, he wrote, “view the Marshall Plan as an almost miraculous rescue,” and argued fiercely with their Czech and Polish counterparts against letting “ideological debate [hinder] rapid implementation.” Suslov warned that the Western Socialists had “one specific purpose—to organize opposition to the activities of the Communist Party.”44 A bulletin of the Soviet Military Administration in Germany expressed equal concern about developments in Germany. “Schumacher and his clique, standing at the head of the SPD, are dancing to the American tune.”45

  Another Central Committee report concluded that “the collusion of the Anglo-American imperialists on the Germany questions [that] took place after the breakdown of the London conference . . . on the basis of a refusal to cooperate with the Soviet Union” had led to “a division of Germany,” with “West Germany becoming a half-colony dependent on America and serving its imperialist plans.” The forces of “German reaction”—that is, the “ ‘two Christian parties’ ” (the CDU and CSU)—were now “consolidat[ing] power . . . on the basis of the acceptance of the ‘Marshall Plan.’ ”46

  A Russian magazine described Marshall as a “belligerent old man” set on destroying the U.N. and starting “a new criminal war.” Truman was likened to Hitler. The TASS news agency and Moscow radio directed a regular stream of vitriol at the Marshall Plan, which was then spread through Communist Party mouthpieces in Bulgaria, Czechoslovakia, Romania, Hungary, Poland, Albania, Yugoslavia, Italy, and elsewhere. The CIA monitored the broadcasts assiduously. State Department, War Department, and Office of Naval Intelligence officials in Europe reported back to Washington on developments in anti-American propaganda, which Voice of America radio transmissions then aimed to counter.

  Administration officials, Reston noted, were growing alarmed over what they saw as Washington’s incapacitation in the face of a disciplined and relentless Soviet campaign to spread its foreign policy through satellite governments. “[T]he classic doctrine of non-intervention,” these officials were concluding, “is a hazardous theory that requires reconsideration in the light of modern politics and ballistics.” Conservative congressmen, such as Massachusetts senator Henry Cabot Lodge, Jr., began proposing funds to translate American newspapers for European distribution, buy ad space in European media, and boost VOA range through investment in medium- and long-wave transmission. Though in the early fall there had been insufficient support to get a House bill boosting counter-Soviet VOA activities to the Senate floor, by the new year the atmosphere had changed dramatically. The Senate passed the bill unanimously on January 16, 1948. Truman signed it into law on the 28th.47

  Over the first quarter of 1948, Congress held frequent hearings into the Marshall Plan. Vandenberg vested enormous importance in them, determined as he was to compel public figures opining on the idea of a recovery program to state unequivocally what they actually wanted Congress to do. “We won’t hesitate to subpoena,” Vandenberg said, if they did not volunteer to clarify and defend their views publicly. This was representative democracy at its most robust, with citizens compelled to participate in order to ensure that the decisions taken had the fingerprints of all who were claiming, through the power of the media, to know what the government should do.

  Vandenberg proved a master at eliciting the testimony his skeptical colleagues needed to hear. Frequently, he effectively delivered the testimony himself, leaving the witnesses to agree with him enthusiastically.

  “As I understand you,” he said to Army Secretary Kenneth Royall during his Senate testimony on January 15, “what you were saying is that if it were not for the prospect of organized stabilization as a source of security you envision an alternative situation which would require immediate and measurable appropriations for larger-scale national armaments than have been thus far requested?”

  “That is correct, sir,” Royall responded.

  “Put still more bluntly, is it fair to say that your judgment offers us the choice, in part, between appropriations for economic cooperation on the one hand, or greater appropriations for military purposes in the interests of our ultimate national security?”

  “That is my judgment,” offered Royall.48

  One of the many remarkable aspects of the debate was the outsized role of the House, which is normally the junior partner to the Senate in matters of foreign relations. But the central place of money in the Marshall initiative thrust the House, owing to its “power of the purse,”49 into the position of full partner. In total, the House Foreign Affairs Committee would hear testimony from twenty-five administration spokesmen, and hear or receive testimony from 150 private citizens. The transcripts filled 2,296 pages. The Senate Foreign Relations Committee would hear roughly half as much testimony: nine governmental and eighty-six other witnesses, generating 1,466 pages.50

  The scope of the questioning was exhaustive: economics, administration, geopolitics, and military considerations. How much aid should there be? In grants? In loans? On what time scale? What should be the aims? What strings should be attached? Who should run the program? How will currencies be stabilized? How will inflation be controlled? How will trade be revived? How will Germany be handled? How will the Russians react? How will we deal with them?

  In his House testimony on January 12, Marshall tried to train the spotlight on Soviet intentions by quoting CPSU Central Committee secretary Andrei Zhdanov: “As to the USSR, it will bend every effort in order that this plan be doomed to failure.” Four days later, on January 16, the British Foreign Office revealed a copy of a secret Cominform document entitled “Protocol M,” laying out a scheme to undermine the Marshall Plan through mass worker strikes in western Germany. The timing could not have been better for the White House, as the document buttressed Marshall’s claims of an “alien hand” working to undermine European recovery. Moscow, however, attacked the document as a forgery. Upon conclusion of the American legislative drama, an embarrassed British intelligence service would declare that it had been.51

  The theme of war and peace was a constant in the hearings. Ambassador Douglas, testifying on January 9, echoed Marshall’s argument that the alternative to a recovery program was “continued and larger expenditures for national defense.”52 Forrestal, elevated to defense secretary in September 1947, said the ERP would be “far less expensive than standing isolated and alone in an unf
riendly world.”53 On the 20th he told the House that failed legislation would mean moving the political frontier “from Europe to somewhere in the Atlantic Ocean.”54 John Foster Dulles, who would become Dewey’s foreign policy adviser in the coming presidential campaign, told the Senate that if France were left to go communist, Congress would be hit with a military appropriations request that would make the ERP bill look “like a bag of peanuts.”55

  But Congress still wasn’t buying the either-or, aid-or-war, framing. Might the aid plan itself “possibly lead to war?” Rep. Lawrence Smith (R-WI) asked the secretary of state. No, Marshall insisted—to the contrary, it should “avoid the issue.” Yet Smith’s concern was sound. If Congress backed the ERP, ever greater political and economic differences would come to define the nations that found themselves on opposing sides of the line Marshall referred to in his November testimony. It took no leap of imagination to conclude that the hardening of such differences would, in short order, take on a military dimension, as each side bound together—with its American or Soviet patron—to prevent the other encroaching into its prerogatives.

  Some congressmen urged the secretary of state to begin preparing for war. Rep. Chester Merrow (R-NH) suggested to Marshall that the United States was, in “building those countries up” on the western side of his line, making them into “rich prizes for an aggressor.” The Soviet Union, he pointed out, had “three times the fighting planes that we have.” The United States, he said, needed urgently to “develop an air force that could make our will felt around the world.” Otherwise, the time “may come when the 16 nations will be overwhelmed and we can do nothing about it.”56

  Not all the Plan’s supporters were singing from Marshall’s hymn sheet. Financier-philanthropist Bernard Baruch, testifying on January 19, said that the Marshall Plan was no more than a good start; it had to be accompanied by political and military union in western Europe. The United States and its European allies, he argued, should “mutually guarantee . . . against aggression. By guarantee, I mean a firm promise to go to war in joint defense if any of them are attacked.”57 Such testimony was a distinctly discordant note for an administration anxious to highlight a prospective peace dividend.

  Across the Atlantic, however, Bevin echoed Baruch. “I have done and will continue to do all I can to bring the Marshall Plan to fruition,” he said. “But essential though it is, progress in the economic field will not in itself suffice to call a halt to the Russian threat.”58 “The time is ripe for the consolidation of western Europe,” he declared. “We are entitled to organize kindred souls in the West, just as [the Soviets] have organized kindred souls in the East.”59 As Reston would point out, such an organization would require American military backing.60

  The price tag for the Marshall Plan was also a major theme of the hearings. In the debate over cost, Congress was not, strictly speaking, vetting the administration’s estimate of the sums needed to generate European recovery so much as scrutinizing the administration’s estimate of what Congress was willing to authorize. Yet sums were put forth in testimony as the finished products of a great scientific exercise and defended as if they represented “liberty itself.”61 One administration official boasted to Reston that, to prepare for a presentation before Vandenberg’s committee, his statisticians had made forty thousand calculations to back a single conclusion.62

  Reston’s source was most likely the leader of the statisticians, Paul Nitze, who, in Clayton’s words, knew “more about the Marshall Plan than perhaps any other individual” in Washington. Using primitive computers borrowed from the Prudential Life Insurance company, Nitze and his staff churned out the mass of calculations and charts that formed the “Brown Books” on recipient countries’ finances, production, and needs. Embodying the irony of the capitalist planner, Nitze was the man who determined how much rice, rubber, iron, and the like would be required where and when and what it would all cost.

  As the repository of the vast mass of numbers behind the Marshall Plan, he was naturally a man whom its opponents sought to discredit. Rep. John Taber (R-NY) went so far as to solicit, through a secret intermediary, “derogatory information” on him from the FBI. What came back was speculation that his parents were Communists. At hearings on how to appropriate aid, Taber set out to undermine Nitze’s aura as a data wizard by insisting on going alphabetically through every country, and then commodity, in his Brown Books and forcing him to justify each figure from memory. He got as far as Austrian commodities beginning with “p,” which revealed Nitze’s inability to recount supply and demand estimates for pulses. “The man knows nothing!” shouted Taber. During the weeks of hearings, covering forty-three sessions, Nitze lost fifteen pounds from stress and overwork.63

  Yet on February 21, a major legislative hurdle was cleared. Vandenberg reported the ERP bill out of his committee, unanimously, to the full Senate for a vote. In the course of the hearings, he had forced two key concessions from the White House: enabling independent administration of the program, and eliminating the politically toxic $17 billion four-year price tag. He slashed this figure to a less challenging $5.3 billion initial one-year appropriation, without brooking any challenge to the White House’s full estimate of what was needed.

  Meanwhile, over in Europe, events were helping to boost congressional support.

  Communist rally in Prague after the party takes power in a coup, February 1948.

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  NINE

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  SUBVERSION

  DESPITE HAVING A MUTUAL ASSISTANCE Treaty with the ussr, Czechoslovakia, which bordered both western Germany and Ukraine, was a weak link in Stalin’s defensive perimeter. Its Communists trumpeted pursuit of the country’s “own path” to socialism, which explained why they enjoyed greater popular support there than elsewhere in the East. But the United States and Britain had, according to a European Department official of the Soviet Foreign Ministry, worryingly “established their own centers of influence” in the country. “Reactionary forces” had become “more active in the struggle against progressive forces in the country”—that is, the Communists.1 Given that Czechoslovakia was now one of the main sources of uranium for Moscow’s atomic weapons program,2 Stalin was on alert for signs of trouble.

  These signs had been building since the previous summer. On the eve of the Cominform gathering in September 1947, Molotov had complained to Zhdanov about the unreliability of the Czechoslovak armed forces, and ordered him to raise the matter in Szklarska Poręba. Masaryk, meanwhile, continued to lament being prohibited from going to Paris in July. “We know that the United States will not consider us its favorite sons after the rejection of the Marshall Plan,” he told the Czech paper Svobodné Slovo in October, “but we hope they will not completely forsake us.”3 In December, the Soviet embassy in Prague cabled Moscow about troubling political developments: “Reactionary elements within the country, actively supported by representatives of the West, [believe] that the parties of the right will receive a majority at the forthcoming [May 1948] elections and that the communists will be thrown out of the government.” Early in the new year, the National Socialists, the second largest party behind the Communists, expressed public regret about not having joined in the Marshall Plan.4 Elements in the Communist Party now began agitating for Moscow to intervene. Stalin, who had been careful not to hand the West propaganda opportunities or to provoke anti-Communist underground forces in the East, decided it was now time to make clear to which bloc the country belonged.

  This is what Kennan had warned would happen back in November. “As long as communist political power was advancing in Europe, it was advantageous to the Russians to allow to the Czechs the outer appearances of freedom.” It would permit the Czechs “to serve as bait for the nations further west.” But once the “danger of the political movement proceeding in the other direction” became apparent in Moscow, the Russians would no longer be able to “afford this luxury.” Czechoslovakia could stir liberal democratic forces elsewher
e in the East. At that point, the Russians will “clamp down completely on Czechoslovakia,” even though they “will try to keep their hand well concealed and leave us no grounds for formal protest.”5

  On February 18, 1948, the four Czechoslovak National Socialist ministers—Zenkl, Ripka, Drtina, and Education Minister Jaroslav Stránský—went to see Beneš to express their alarm over the Communist purging of the Interior Ministry. Hard-line minister Václav Nosek was systematically replacing police commissioners with party loyalists, ignoring protests that his actions were illegal.6 Above all else, Zenkl explained, it was “absolutely necessary to stop the communization of the police” and the distribution of their arms and ammunition. The National Socialists, Populists, and Slovak Democrats would therefore resign their twelve ministerial posts, amounting to half the cabinet, in advance of the Communist union congress on the 22nd. The mass resignation would prevent the Communists from shifting the spotlight from security to nationalization of industry, an issue on which they would gain support from the left-wing Social Democrats. The ministers wanted Beneš to demand the resignation of the remaining cabinet members from Gottwald, paving the way for either a new government that would reverse the security measures or new elections.

  Beneš, who had previously said that he “would not stand for non-Communist parties being eaten up one by one as had occurred in other eastern European countries,”7 buoyed them by agreeing to back new elections. The Communists, he said, would never give way, as they could not win elections without controlling the police. As for the Russians who were orchestrating the crisis, the brutal way they had blocked Marshall aid for the country still angered him. The Bolsheviks “shriek against Western imperialism to distract attention from their own aggressive expansionism,” Beneš said. “They are provoking the whole world” with their behavior.8