The Marshall Plan and “America First”

August 6, 2017

The Marshall Plan and “America First”

by Benn Steil


Image result for Harry Truman and The Marshall Plan
General George C. Marshall–Secretary of State


Over the years 1948-1952, the US devoted the equivalent of $800 billion in today’s dollars to the reconstruction of western Europe. But whereas the Marshall Plan is widely regarded as the largest and most effective foreign-aid program in history, it is less widely appreciated for being the most successful example of an “America First” foreign policy.

Six months into Donald Trump’s presidency, the White House website still proudly proclaims his administration’s new “America First Foreign Policy.” No longer will the United States allow its physical and economic security to be undermined by what Trump calls “bad deals.” Alliances and trade pacts will all be revisited and, where necessary, renegotiated to ensure that “American interests” are paramount.

What is striking about this policy, however, is not that it places American interests first. It is the misguided way in which those interests are being defined.

In the immediate aftermath of World War II, the US established cooperative structures designed to address the catastrophic failure of international economic and security arrangements in the inter-war years. From 1945 to 1949, the administration of President Harry S. Truman propelled the establishment of the United Nations, the International Monetary Fund, the World Bank, the General Agreement on Tariffs and Trade (GATT), and the North Atlantic Treaty Organization. And the 1947 Marshall Plan created the institutional machinery that, over the subsequent decade, paved the path to European integration and the eventual creation of the European Union.

On November 29, 1948, President Harry S Truman conferred with the top leaders of the Marshall Plan—(left to right) George C. Marshall, Paul G. Hoffman (1891–1974), and Averell Harriman (1891–1986).
On November 29, 1948, President Harry S Truman conferred with the top leaders of the Marshall Plan—(left to right) George C. Marshall, Paul G. Hoffman), and Averell Harriman

These ambitious undertakings were a conscious repudiation of George Washington’s admonition, delivered in his Farewell Address at the end of his presidency, that the US should avoid foreign entanglements, particularly with Europe. They were born not of charity or naiveté, but of a clear-eyed recognition that America’s role in the world had to change as its global connections, and therefore its vulnerabilities, expanded. As Senator Arthur Vandenberg, once a leading Republican isolationist, reflected: “My convictions regarding international cooperation and collective security for peace took firm form on the afternoon of the Pearl Harbor attack. That day ended isolationism for any realist.”

From Isolationism to Global America

Vandenberg became the Republican Party’s driving force in support of the legislation that financed the Marshall Plan, the 70th anniversary of which is being commemorated this summer. With Britain’s empire collapsing and Stalin’s ascendant, US officials under Secretary of State George C. Marshall set out to rebuild Western Europe as an integrated bulwark against communist authoritarianism. This massive, costly, and ambitious undertaking would confront Europeans and Americans alike with a vision at odds with their history and self-conceptions.

Over the years 1948-1952, the US devoted $130 billion in current dollars to the reconstruction of Western Europe. As a share of total US output over the period, this would be equivalent to $800 billion today. But whereas the Marshall Plan is widely regarded as the largest and most effective foreign-aid program in history, it is less widely appreciated as the most successful example of an “America First” foreign policy.

Of course, the humanitarian impulse underpinning the Marshall Plan remains at the heart of its enduring legacy worldwide. But the plan was, in fact, the first major component of the new Truman Doctrine, which pledged US support for “free peoples who are resisting attempted subjugation by armed minorities or by outside pressures,” and of George F. Kennan’s strategy to “contain” the Soviet Union. (Kennan’s famous “X” article in Foreign Affairs, “The Sources of Soviet Conduct,” also recently marked its 70th anniversary.)

Image result for Harry Truman and The Marshall Plan

President Harry S. Truman

Marshall’s State Department believed that unless war-torn Western Europe could be quickly rebuilt, and confidence in liberal-democratic government restored, the European public would seek salvation in populism and authoritarianism. Such a shift among America’s most important trading partners would in turn undermine America’s own physical and economic security, necessitating a massive increase in defense expenditure and government economic control. Only by ensuring that the US had strong, independent allies and stable trade and security relationships, Truman and Marshall believed, could it hope to maintain its own freedoms and way of life.

Establishing a stable environment within the 16 Marshall Plan countries, and thereby enabling trust and cooperation to take hold among government, business, and workers, was vital to the reestablishment of a market economy in Europe. And across the participating countries, US security guarantees and financial support were indispensable to enabling reconstruction and integration to proceed without generating unmanageable domestic or foreign conflict.

Doing Well by Doing Good

Contrary to Soviet propaganda and revisionist Western accounts, America did not aid its allies by forcing its surplus production on them. Had that been the case, Europe’s balance-of-payments deficit (known then as “the dollar gap”) would have widened, which in turn would have frustrated America’s aim to foster European integration. Such a policy would also have exacerbated the postwar shortages that still affected the US economy.

Instead, the Truman administration, supported by a striking change in the priorities of American business lobbies, orchestrated a deft policy shift. Backed by a bipartisan consensus, Truman moved the US from protectionism toward encouragement of imports.

The Marshall Plan’s lead official in Europe, Ambassador Averell Harriman, was steadfast in insisting that “the purpose of [US aid] is to stimulate countries to help themselves,” and that, consistent with the legislation authorizing it, the funds could not be used “to buy surpluses” from “American industry.” In turn, the National Association of Manufacturers (NAM), America’s premier business lobbying organization at the time, warned its members that “efforts to direct [Marshall] funds to [exporting surpluses] must be firmly resisted.”

The Chamber of Commerce, America’s other major business lobby, echoed NAM, stating that “US exports [must] be consistent with the ability of our customers abroad to pay for them by their own exports.” A State Department directive further stressed that whereas the US sought “non-discrimination in world trade, it is recognized that during the period in which Germany’s balance of payments is in substantial disequilibrium, [it] will, like other countries in the Organization for European Economic Cooperation, find it necessary to restrict imports.” The State Department insisted, therefore, that the US High Commission in Germany not interfere in German trade policy.

Germany First

American underwriting of the European Payments Union (EPU) from 1950 to 1958 deliberately redirected West European imports from the US to Germany. Western Europe’s large dollar deficits between 1945 and 1948 reflected Germany’s disappearance as its main capital goods supplier. The region’s massive reconstruction needs therefore had to be met by the US. But it was an important goal of the Marshall Plan to eliminate simultaneously Germany’s need for American aid and its neighbors’ need for dollar imports by restoring Germany to its traditional export role.

This effort was assisted by a relaxation of official US resistance to currency devaluation abroad. The US recognized, for example, that if Germany could not devalue the new Deutschmark it would simply “revert to [the] tactics of the 1930s” through which it “fostered … exports by dumping and other unethical methods.”

This represented a departure from the mindset of Harry Dexter White, the architect of the 1944 Bretton Woods conference under President Franklin D. Roosevelt. White’s approach was to support US exports by prodding indebted countries to keep their currencies overvalued and to finance trade deficits with more debt – that is, IMF loans. By contrast, under the Marshall Plan, greater US openness to imports and a stronger dollar helped smooth implementation of the GATT and spur a revival of international trade generally.

By recreating a European division of labor, with Germany importing raw materials and exporting capital goods, the Marshall Plan succeeded in cutting the transatlantic umbilical cord through which Western Europe was sucking in unaffordable dollar imports of coal and other industrial supplies. As Europe’s dollar balance strengthened under the EPU, doubling between 1950 and 1956, its governments’ incentives to discriminate against dollar imports weakened as well. The higher dollar balance thus enabled the Marshall Plan countries to begin restoring currency convertibility after the EPU wound down.

The financial assistance provided by the Marshall Plan was also organized in a way that departed from earlier, less successful American efforts. Instead of extending new loans to Europe and deepening its indebtedness, the US wiped out Germany’s debt and extended grants-in-aid to the participating countries. The grants provided a cushion with which the recipient governments alleviated the short-term hardships and insecurity that accompanied important homegrown economic initiatives. And, by severely denting popular support for Western Europe’s Communist parties, which wanted to reject the aid, the Marshall Plan helped America achieve a primary political objective.

The Aid that Ties

The Marshall Plan was, of course, only one component of America’s containment strategy in the early years of the Cold War. Yet economic rehabilitation became a primary tool of its so-called strongpoint defense of critical geostrategic regions, in Northeast Asia as well as in Europe, aimed at building up independent, self-confident, and energetic centers of power capable of resisting Soviet pressure.

“The recovery of Western Europe is a twenty-five to fifty-year proposition,” Republican Senator Henry Cabot Lodge, Jr. wrote to Vandenberg in October 1947, “and … the aid which we extend now and in the next three or four years will in the long future result in our having strong friends abroad.” How right he was. America’s containment doctrine successfully guided US foreign policy between appeasement and war for four decades, and the Marshall Plan played a principal role in binding the West together for the struggle.

When the Berlin Wall fell in 1989, so did the communist alliances, which had been built and maintained by Soviet domination and the Kremlin’s willingness – as demonstrated in Hungary in 1956 and Czechoslovakia in 1968 – to impose its will by force. By contrast, the alliances America built, having been forged on genuine partnership and enduring American allegiance, were as strong as ever.

But for how much longer will they remain so? Trump has already walked away from the Trans-Pacific Partnership and the Paris climate agreement. He has threatened to tear up the North American Free Trade Agreement and toyed with the sanctity of America’s commitment to the security of its NATO partners. In the name of “America First,” Trump risks transforming US allies into free agents – all of whom, like Trump, will go in search of a better deal. In an age in which America’s relative economic and military power is necessarily declining, this is foolhardy.

Article 5 of the North Atlantic Treaty – NATO’s mutual defense guarantee – has been invoked only once in the Alliance’s 68-year history. It was invoked not by the US, but by its allies, after New York and Washington, DC, were attacked on September 11, 2001. Could the Trump administration count on such solidarity today? If not, it should ask whether it really wants to allow China, Russia, and others to rewrite the global norms that formed the foundation of America’s post-war prosperity and security. 


14 thoughts on “The Marshall Plan and “America First”

  1. LaMoy and CLF.

    The shift today under Trump is towards America at the expense of the global community. It is short sighted and misguided foreign policy which is not sustainable in the long term. For one thing the world has changed into a networked community of interdependent actors who can only prosper through cooperation for mutual benefit.–Din Merican

  2. The Europeans expanded their influence in the Americas-Mid East-Africa-Asia-Australia-NZ-Other countries including small Island States and many other places first as visitors/traders/missionaries and then colonized the areas by their military might [and collusion with local corrupted leaders] and took over the control and exploit of its natural/human resources and captive markets for their products. The control was further executed via the almost wiping out of local natives [as in present USA/Australia/some other countries].
    Almost all colonized countries when became independent either via force or other reasons, were left in violence and some of which are even after six decades still subject to internal violence and killing.

    After independence the ‘colonization’/’control’ the former rulers ‘assisted’ which assistance appears to have been via economic policies which may be more biased towards the former rulers.

    It is stated above that ‘Over the years 1948-1952, the US devoted the equivalent of $800 billion in today’s dollars to the reconstruction of western Europe. But whereas the Marshall Plan is widely regarded as the largest and most effective foreign-aid program in history, it is less widely appreciated for being the most successful example of an “America First” foreign policy. This view could also apply to Japan and other countries and in the case of Hawai it became a State of USA and thus ceased to exist as an individual country though with local consent.

    The main aspect which probably is not to the liking of USA politicians could be that its former ‘dependents’ [or in the view of USA their ‘economic saviors’] are now economically stronger and may have also overtaken the USA economically resulting in not needing USA leadership or assistance and this IS NOT ACCEPTABLE.

    At one time Rome wanted to be the Ruler of the world. Later some European countries had the same ambitions and thus divided the world among themselves. Germany and Japan had same ambitions and since the WW2 USA may have had similar ambitions. The rise of EU and China may be seen as obstacles to USA ambitions for continued world domination may be the main reason for current USA leadership for this AMERICA FIRST policy.

    History tells us that sometimes some ambitious countries/leaders may even start conflicts either indirectly or even directly to achieve their ambitions and the many conflicts around the world may be the ‘indirect’ means for their ambitions.

    There have been several Hollywood/Bollywood/Mollywood/Other countries movies showing this scenario.

    • //for one thing the world has changed into a networked community of interdependent actors who can only prosper through cooperation for mutual benefit.
      Jill Stein clearly articulated what Dean Din mentioned. But, the establishment within both parties are unwilling to face that realization. America is getting old.

  3. It’s always bogged my mind why the US only supported Europe with Marshall Plan. Should the plan have also extended to Asia from the start in April 1948, there might not be a People’s Republic of China in October 1949, and China today would still be known as the Republic of China.

    Donald Trump has said in his speech: “My foreign policy will always put the interests of the American people, and American security, above all else. That will be the foundation of every decision that I will make. America First will be the major and overriding theme of my administration.” It sounds uncontroversial because American foreign policy should put the interests of American people and American security above all, just like China or Malaysia should do the same for its country. But for anyone who knows American history, the phrase “America First” comes with a dishonorable past.

    Douglas Stuart Jr., the son of a vice president of Quaker Oats, and his fellow students of Yale University organized the America First Committee in spring 1940. He and Gerald Ford, the future American president, and Potter Stewart, the future Supreme Court justice, drafted a petition stating, “We demand that Congress refrain from war, even if England is on the verge of defeat.” Their solution to the international crisis lay in a negotiated peace with Hitler. Other Yale students – including Sargent Shriver, who served in the Kennedy and Johnson administrations, and Kingman Brewster, the chairman of the Yale Daily News, future president of Yale and ambassador to the Court of St. James – joined their isolationist crusade.

    I’m still not clear what Trump’s America First is. Honestly, I’ve not seen Trump has any “foreign policy” or policy about anything. But it’s extremely unfortunate that he chose to brand his foreign policy with the noxious slogan “America First,” the name of the isolationist, defeatist, anti-Semitic national organization that urged the US to appease Adolf Hitler – The America First Committee.

  4. Din, i had predicted many moons ago on this blog, of a return to Fortress America and the Monroe Doctrine. But i didn’t figure it would a Drumpfian nightmare!

    My take was that far from being Isolationist, American foreign policy had always been predicated on Unilateralism and sometimes non-interventionism – as and when it suits them. America was and will remain great, but i don’t necessarily want to be American. Why? Their misplaced sense of “Manifest Destiny”, which is nebulous as the Crab Nebula. They seem to be all over the place but going no place (Utopia).

    Drumpf is just a negative blip on the radar, that revealed the soft underbelly of Redneck angst. This Dystopia will pass, as the Americans wake up from their perpetual adolescent wet dream. They always do – the last time was on 911. And boy, did they mess up the world after that!

    They cannot get through their thick skulls that Power and Money does not always equate to Success. And Drumpf unfortunately has a Neanderthal skull, as genetics will reveal.

    The very economic structure, industrial-commercial destiny and democratic ideals of USA mitigate against a Drumpfian Utopia of Transient Exceptionalism, Infantile Greed and Isolationist Hubris.

    On a longer term basis, USA will outperform, yet undermine her peers including PRC, Russia and Europe. The thing is that they underestimate their deep well of multidisciplinary wisdom, ancestry and demographics after being a nation of Immigrants for more than 3 centuries. It won’t be overly Hispanic, Black, Asian nor WASP, but a melting pot of omnivorous, multi-ethnic Unitarianism and rapid mimetic evolution. Evolution occurs not when the fittest survive, but when there is sufficient diversity to mitigate adversely changing environments. (PRC doesn’t fit into this equation, unfortunately. Sorry.)

    Even Drumpf’s misguided efforts to reduce immigration by half by emulating Oz’s methodology, will bring positive benefits. Why? Cuz USA has transitioned or is transitioning much faster than the rest of the world (including Japan) into a postindustrial era called Rev 4.0, where Quantum computing, AI and Automation will become key enablers of a new economy and post-humanity.

    Now, if we could just get some brainiacs to smooth out the process.. Drumpf is still in the Iron, Coal and Steam Age and playing with his ‘brazen’ nether parts!
    What do you expect, CLF and LaMoy, when America has people like Senator Lindsay and Madeleine Albright who think America is an exceptional and indispensable nation. America is today a clumsy and immature nation under Trump and the people around him. Americans have not woken up to the fact that America can no longer be counted to do the right thing. Look at Afghanistan, Libya, Syria, Iraq, Somalia,and of course Vietnam, Laos and Cambodia. South China Sea, Iran and North Korea could be next.The Dr Stranglove aka POTUS Trump is running wild. –Din Merican

  5. “Trump is running wild.”

    Nope. He’s running on the spot.
    Nothing is getting done.
    Without Tillerson, he doesn’t have a clue of what’s it all about.

    Transactional politics in the normative sense, means ‘bunga mas’ sorta archaic diplomacy – ‘You give, i pat you on the head’. His Make America Great ‘Again’ (?) means building physical walls/barriers and bringing archaic, polluting industries and investments back to the rust belt and badlands. Instead of enabling new technologies, cleaning the environment and revivifying agribusinesses, he glorifies gilded doorknobs and bidets.

    The folks who voted him in can’t even squat cuz they are ‘exceptionally’ obese. Yet, they consider themselves ‘healthy’. All that noise of doing their enemies in – remains just farting incontinence.

    The American ‘resolve’ has devolved into shooting blanks or continue to march on the spot – until a new POTUS takes over. Witness the FUBAR between Qatar vs Arab League, N. Korea impasse, Mexico n Cuba bullying and bitching about Russia and PRC – without nary an idea of what the long term game plan is? American ‘football’ and ‘world series’ indeed – when his oblivious Jewish SIL is in charge of Israeli-Palestinian rapprochement?

    Economic Sanctions only work in the Land of Milk and Honey. It’s sad that the Americans never learn that.

    • //Economic Sanctions only work in the Land of Milk and Honey. It’s sad that the Americans never learn that.
      It worked a few times, 16 times.

      One of which is related to this post on Marshall Plan, on excluding Dutch from the Marshal Plan. Thus, we have Indonesia, our neighbor! How can we expect ASEAN to work when we don’t even bother to teach each other’s history (not to mention culture).

      //1948-1949: the United States vs. Netherlands

      As the Dutch East Indies struggled to become an independent Indonesia after World War II, the United States suspended the Marshall Plan aid to authorities in the region after the Dutch arrested Indonesian leaders. After threats of sanctions, the Dutch agreed to Indonesian independence in 1949. The sanctions cost 1.1% of the Dutch gross national product.

      — those were the days when America was truly first. How many in this generation of voters still remember why America was considered first then.

  6. Aren’t you listening, katasayang?
    The Land of Milk and Honey can also imply the Land of Milk and Tulips – i.e Western Economies. All the jazz about Ceylon, India, Taiwan, S.Korea etc really count?

    It doesn’t work with N. Korea, Cuba, Russia and other non-‘Democratic’ countries.

    • Thank you. I am sure he would be glad there is interest in his fight. A Confucius Social Democrat is what I could piece together of him. His kind is not exactly welcomed in his time, and current time. My mom’s middle name originally had a word ‘beauty’ which is also the word for ‘America’. This great grand father specifically requested the name to be changed, once he learned about it. It reflected the thoughts of a few about America, in reaction to General Marshall’s assessment of China, which LaMoy has raised. Who knows what China is going to be…

      — Translated from

      Peng Chi Xia (1877-1976), the car Gaoling village, the end of the Qing Xiang. Before the Revolution of 1911 graduated from Guangdong Law School. In the first year of the Republic of China (1912), by Zhu Zhixin (now Guangzhou City letter letter is to commemorate his) to join the alliance, to join the democratic revolutionary movement.

      The first year of the Republic, Peng Qixia was elected as the senator of Guangdong Province, the following year was elected the first senator, resident in Beijing. Ren within the opposition against Yuan Shikai emperor, against Zhang Xun restoration, was arrested and imprisoned. At the beginning of the great revolution, he wholeheartedly advocated Sun Yat-sen’s “Russia, the Communist Party, the support of agriculture and industry” three policies, personally returned home to launch the peasant movement, to carry out the “second five” rent reduction struggle to become a firm new democratic revolutionaries.

      In six years, Peng Xu Xia was ordered to go to Shanghai to investigate the opium case, check the vice president Feng Guozhi involved, immediately exposing the text.

      In the past two years, the direct warlord Cao Kun bribery elected president, Peng Chi Xia unmoved, traveled to Shanghai, and the Guangdong nationality of eight members of the joint power of the country, solemnly denounced Cao Kun briber selected president, rape public opinion crimes. Soon, with Sun Yat-sen south, to support Sun Yat-sen anti-law movement and organization of the Guangzhou military government.
      In the thirteenth year of the Republic of China, Peng Xu Xia formally used the “Chixia” alias to publish the “Heart” special issue, indicating that the political stance advocating the revolution of workers and peasants.

      In the fifteen years of spring, Peng Hongxia returned to Longchuan, joined the workers and peasants revolutionary movement, was elected county farmers Association. After the “four one or two” incident, the Kuomintang rightist “Qing party”, he once shelter the provincial capital, the law firm, and actively support the Longchuan Provincial Institute to carry out the activities of saving the country. In twenty-six years, returned from Guangzhou to Longchuan, has served as a member of the Longchuan County anti-enemy members, the district head of Li Tsui, Guo Xian primary school principals and other duties.

      On the eve of liberation, Peng Chuxia went to Taiwan to visit relatives. In the winter of 1949, he returned to Longchuan County as a member of the County Construction Committee and a member of the Standing Committee of the people’s congresses of all walks of life. In 1955, he was a librarian of Guangdong Provincial History and History Museum, engaged in Guangdong literature and history research work. 1976 end of life in Guangzhou, at the age of 99 years old.

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