On This Day

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Associated Press
President Harry Truman signs the Economic Assistance Act.

On This Day: President Truman Signs Marshall Plan Into Law

April 03, 2011 07:00 AM
by Denis Cummings
On April 3, 1948, President Harry Truman signed into law the Economic Recovery Program, also known as the Marshall Plan, which would provide over $13 billion in aid to post-war Europe.

Marshall Plan Signed Into Law

In the years following the end of World War II, Western Europe’s economies were stagnant and its people suffered through high levels of poverty, unemployment and hunger.

“The physical destruction of the war and the general economic dislocation threatened a breakdown of moral, social, and commercial life,” writes the Library of Congress. “Raw materials and food were in short supply, and war-damaged industries needed machinery and capital before production could be resumed.”

With the Soviet Union spreading communism through Eastern Europe, the United States feared that Western Europe could fall to communism if the economy continued to disintegrate. On June 5, 1947, at the Harvard University commencement, Secretary of State George Marshall gave a speech proposing a massive relief effort to Europe.

“It is logical that the United States should do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability and no assured peace,” he said. “Our policy is directed not against any country or doctrine but against hunger, poverty, desperation, and chaos. Its purpose should be the revival of a working economy in the world so as to permit the emergence of political and social conditions in which free institutions can exist.”

In July, 16 Western European countries met in Paris and formed the Committee for European Economic Cooperation; the Soviet Union and five countries under its control refused to take part in the conference. The CEEC drafted a reconstruction plan in September and presented it to Congress, which developed the Economic Recovery Program over the next six months.

On April 2, 1948, the Foreign Assistance Act was passed in the Senate, officially establishing the Economic Recovery Program, better known as the Marshall Plan. Though Marshall himself was not heavily involved in its creation, the plan bears his name “because of his indispensable role, his influence, and his extraordinary prestige with Congress and the American people,” according to the LOC.

The following day, President Truman signed the bill into law. “Few presidents have had the opportunity to sign legislation of such importance,” he said. “This measure is America’s answer to the challenge facing the free world today.”

Analysis: Effect of the Marshall Plan

Over the next four years, the United States provided over $13 billion in loans, supplies, equipment and technical assistance to 16 European countries. In order to receive assistance, countries had to agree to implement liberal capitalist policies and expand trade with other European countries.

The Western European economy improved drastically during this time. “By the time the Marshall Plan ended in 1951, industrial production in Western Europe had risen 40 percent above the prewar level,” according to the Constitutional Rights Foundation. “Trade and exports also increased far above what they were before the war. People had returned to work and their standard of living was rising. Politically, communist parties lost influence everywhere.”

The impact of the Marshall plan in this recovery has often been debated. Economist Tyler Cowen has pointed out that the countries that received the most aid grew less than those that received much less funding, and many countries’ economies did not improve until after the end of Marshall Plan funding.

The true impact of the Marshall Plan, argues James Surowiecki in the New Yorker, was that it soothed economic fears, provided much-needed stability and forced countries to pursue sound economic principles. He quotes historian David Reynolds, who says, “Marshall’s offer was … as much about reassurance as recovery.”

Marshall Plan Resources

The Truman Library features a collection of policy papers, letters, speeches and other documents relating to the creation of the Marshall Plan.

The Library of Congress has a collection of pictures, maps, cartoons and other primary source material on the Marshall Plan from the U.S. and abroad.

The Marshall Foundation has the transcript and audio of Marshall’s speech at the Harvard commencement.

The National Archives features a copy of the first and last page of the Foreign Assistance Act of 1948.

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