Blueprint For Recovery


Blueprint for Recovery
The Situation in Europe
A lthough “V-E Day” brought the struggle against Nazi Germany to an end, the peace still had to be won, and this required, above all, the reconstruction of economic and political systems badly damaged by World War II.
The Europeans strove mightily to mend the damage. But even as Marshall spoke at Harvard, capital equipment remained hopelessly obsolete or in need of wholesale repair. The depletion of gold and dollar reserves made it difficult to import essential items and use existing facilities efficiently. Food shortages and inflation discouraged maximum efforts by a demoralized work force; shortages of coal, steel, and other basic resources further restrained production; and the severe winter of 1946-47, the worst in modern memory, nearly wiped out earlier economic gains. In 1947, Western Europe’s agricultural production averaged only 83 percent of its prewar volume, industrial production only 88 percent, and exports a bare 59 percent. Translated into human terms, these figures added up to widespread fatigue and a pervasive sense of pessimism about the future.
Making matters worse, the economic crisis worked like a superheated crucible to inflame already serious political and diplomatic problems. In France and Italy, worsening economic conditions undermined governmental authority. In Britain, the winter crisis and the drain on reserves triggered a decision to withdraw British forces from Greece, a country racked by a bitter civil conflict that compounded the economic dislocations growing out of the war. The situation was the same in Germany. Economic conditions there remained the worst in Western and Central Europe, prompting the American occupation authorities to warn that widespread poverty was fostering a popular discontent upon which the Communists were capitalizing.
Policy-makers in Washington also worried about the situation in Germany. They had rejected early postwar proposals, notably the Morgenthau Plan, that would have prevented Germany from again becoming a unified industrial state, urging instead that reparations be held to a minimum and that a revitalized Germany be reintegrated into the European community. There were many reasons for the new policy. But of them, none was more important than the conviction in Washington that stability across the Continent depended on recovery in Germany, which had long been the hub of the European economy.
The German problem exacerbated existing divisions between the former Allies, particularly those between the United States and the Soviet Union. According to wartime agreements, Germany had been divided into American, British, French, and Soviet occupation zones. The zones were to be treated as an economic unit and were to give way to a central administration and then to a new German government. Progress in this direction, however, had foundered on the incompatible interests of the victorious powers. They could not resolve their differences over the amount and form of reparations or over the level of industry and the degree of central administration to be accorded a united Germany. Nor could they agree on arrangements for international control of the Ruhr, where the great coal and steel industries constituted the basis of Germany’s economic and military might.
These and other differences came to a head at the foreign ministers conference that convened in Moscow between January and April 1947. The negotiators were unable to agree on the terms of a German settlement. Secretary of State Marshall, who headed the American delegation, left the conference convinced that Soviet leaders hoped to gain politically from a deadlock that would deepen the economic crisis in Central and Western Europe, pave the way to victory for the Communist parties in France, Italy, and Germany, and thereby open the door to an expansion of Soviet influence in an area deemed vital to American security. “The patient is sinking while the doctors deliberate,” Marshall told a radio audience shortly after his return from Moscow.
Origins of a Recovery Plan
A fter returning from Moscow, Marshall set the wheels of American recovery planning in motion. He instructed the State Department’s Policy Planning Staff and other agencies to report on Europe’s need for economic assistance and on the conditions that should govern American aid.
These reports were then combined with recommendations coming from other quarters, notably from Under Secretary of State William L. Clayton, to lay the

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