The Marshall Plan — the U.S. aid program that helped rebuild Western Europe after World War II — is now regarded as a masterstroke of strategic economic thinking and diplomatic skill. At the time of its implementation, however, it faced significant skepticism. We spoke with Benn Steil, director of international economics at the Council on Foreign Relations, about his new book on the Plan. He argues that it was essential for the creation of the E.U. and of NATO and that its success contains lessons modern politicians need to learn.
Octavian Report: What drew you to the Marshall Plan as a subject? Why now?
Benn Steil: I confess that at the time I decided to write this book, I had no idea that the contemporary atmosphere would be what it is.
This is a book I decided to write about six years ago when I was finishing up my last book, which was called The Battle of Bretton Woods. That dealt with an earlier period, the 1944 Bretton Woods International Monetary Conference. The Marshall Plan played an important cameo in that book.
I think when I got to writing that cameo I had an epiphany that this was really a fundamental rejection of the one-world vision that FDR's foreign and economic policymakers had about the post-war world.
FDR had premised his vision on four assumptions. First, that the British Empire could be peaceably dismantled; second, that the Soviets could be co-opted into a permanent peacetime alliance with the United States; third, that Germany could be profitably dismembered and deindustrialized (that was the so called Morgenthau Plan); and finally, that a globally integrated economy could be rebuilt on the basis of short-term loans to countries with balance of payments difficulties. This was really the idea behind the IMF.
All those elements turned out to be wrong. By the time we get to 1947, the British Empire is collapsing violently because of Britain's impending bankruptcy. The Soviets were not going to cooperate with the United States in Europe or elsewhere. They were pressing territorial claims in Iran and Turkey throughout 1946. Germany was descending into chaos and disorder; the United States realized that the occupation was going to be long and painful and expensive unless they reversed policy. And finally, nobody wanted to borrow from the IMF. They preferred to maintain inconvertible currencies and simply not open up their trading regimes. So all these premises turned out to be wrong.
By the spring of 1947, you have Dean Acheson — Marshall's Deputy Secretary of State — concluding that these four elements that FDR had taken for granted were based on "misconceptions of the state of the world around us, both in anticipating post-war conditions and in recognizing what they actually were when we came face-to-face with them. Only slowly," he said, "did it dawn upon us that the whole world order that we had inherited from the 19th century was gone and that the struggle to replace it would be directed from two bitterly opposed and ideologically irreconcilable power centers."
This is a story I wanted to tell at the time — the repudiation of the Bretton Woods one-world vision. As I sat down to write it, I really had no idea that it would have the sort of contemporary relevance I think it does now, given the fundamental changes in foreign policy philosophy that we are currently going through with the Trump administration.
OR: The Marshall Plan itself is well-known in very general terms. What were its actual constituent elements and motivating ideas?
Steil: We need to begin with Truman to explain that. There’s a myth about Harry Truman. He had a very different view of what post-war U.S. relations with the Soviet Union should be like than FDR did; some argue that Truman therefore bears a lot of responsibility for the Cold War. I think that's inaccurate.
I think as a personal diplomat, there's no doubt he was very different from FDR. He had far less patience with Stalin's machinations than FDR, but after he became President in April 1945, he was really fundamentally determined to carry out FDR's post-war vision — including trying to maintain good cooperative relations with the Soviet Union.
But as I mentioned earlier, Stalin had a very different game plan. Stalin had said rightly at the Tehran Conference in 1943 that "the best friendships are those founded on misunderstandings." And there's no doubt that he and FDR managed to maintain good relations during the war on the basis of willful misunderstanding.
In particular, FDR believed or wanted to believe that the Soviets after the war would effectively contain themselves. And Stalin believed or wanted to believe that the Americans would disengage from Europe just as they had after World War I.
Neither of those things turned out to be true. When Truman saw that Stalin was determined to expand his borders and his influence after the war, when the British, in February of 1947, announced that they could no longer support militarily or financially the regimes in Ankara or Athens, Truman decided that he had to find a way to contain the Soviet Union.
But the idea behind the Marshall Plan was that the U.S. needed a way to counter Soviet conventional-force dominance in Europe with something other than military force. There were several reasons for this. First of all, it was clear that there were parts of Europe under Soviet military domination and that the U.S. had no real prospect of changing this without using atomic weapons. Secondly, Truman was actually determined to fulfill FDR's pledge of withdrawing the troops from Europe within two years after the war. This was really seen as a political imperative at the time because the American population was not going to tolerate an extended large-scale occupation of Europe.
So the idea the State Department developed was that it would use American economic dominance — at its all-time high after the World War II — to counter the Soviets' conventional-force dominance in Europe. We would use our economic might to provide massive financial aid for those countries that were not under Soviet domination in order to create a powerful belt of strong, independent, democratic, capitalist allies who could effectively fend for themselves without having to rely on the American military.
As I explain in the book, that vision was only partially fulfilled on its own. It wasn't completely fulfilled until 1949 when the United States reluctantly committed to the creation of the North Atlantic Treaty Organization to provide Marshall aid with what was effectively a military escort.