TheAgitator.com
Marshall Plan Mythology
Monday, April 7th, 2003So last week marked the 55th anniversary of every leftist’s favorite metaphor — the Marshall Plan.
Named by the Brookings Institution as the “most successful government program of the 20th century,” George Marshall’s plan was, of course, for the United States to invest billions of dollars in foreign aid in post-war Europe to aid a swift recovery and to quickly bring Europe back into the world economy.
Because Europe did eventually get back on its feet (and then some), the Marshall Plan has been hailed by lefties everywhere as a shining example of the good government can do. It is the common cattle call among big government types each time they see a need to spend billions of tax dollars on problems they believe to be too big for the private sector to sort out on its own.
So we’ve had “a Marshall Plan for poverty,” a “Marshall Plan for illegal drugs,” a “Marshall Plan for controlling terrorism,” and a “Marshall Plan plan to stop AIDS in Africa.” Last week in the Washington Post, D.C. Board of Education President Peggy Cooper Cafritz called for a “Marshall Plan for D.C. schools,” this despite the fact that D.C. already spends more per pupil than any metropolitan school district in the country (and produces among the poorest results).
The first two examples listed above, of course, have been miserable failures. If throwing money at the problem is all the other “Marshall Plans” do, it’s a safe bet that they’ll fail, too.
The common libertarian response to all of this is that the Marshall Plan was a one-time thing. Unique circumstances. A unique outlay of aid to unique recipients. Germany, Japan and Western Europe already had a tradition of respect for such sustaining institutions as property rights, rule of law, free markets and invidual rights. So Marshall Plan aid worked there — and won’t work elsewhere — because Europe and Japan needed only a jump start. In the Third World — in Afghanistan, Iraq and sub-Saharan Africa — a similar aid plan won’t work, because such institutions don’t yet exist. Better to open trade with the developing world and let evolve economies reliant on contracts, markets and liberty.
I agree with most of that assessment. But I’d challenge the notion that the Marshall Plan was the overwhelming success conventional wisdom says it was.
George Mason economist Tyler Cowen effectively debunked the Marshall Plan myth five years ago, on the plan’s fiftieth anniversary. Cowen pointed out that the economies of the countries who received the most Marshall plan money (Britain, Sweden and Greece) grew the most slowly from 1947 to 1955, while those who received the least money (Germany, Italy and France) grew most quickly. France, Belgium and Austria, in fact, quickly embraced relatively market-friendly economies just after the war, and in fact began rapid growth before receiving aid. Greece and Austria stalled until the aid stopped flowing, then began to perk up.
Britain got more aid than any other country, embraced a quasi-socialist, redistributionist economy, and took the longest of any of aid-receiving countries to recover.
Again writing five years ago on the plan’s fiftieth anniversary, Cato’s Doug Bandow noted:
…the Marshall Plan model has routinely failed when applied elsewhere.Between 1948 and 1951, the U.S. provided about $13 billion in cash goods and services–about $90 billion in today’s dollars–to Europe. That was a significant amount of money, but is dwarfed by subsequent “Marshall Plans.”
For instance, since World War II the U.S. alone has provided $1 trillion (in current dollars) in foreign aid to countries around the world. The result? According to the United Nations, 70 countries, aid recipients all, are poorer today than in 1980. An incredible 43 are worse off than in 1970.
After the fall of the Berlin Wall, Germany launched its own massive Marshall Plan to rebuild the formerly Communist East. Bonn has spent about $600 billion since 1990; private firms, in response to special government incentives, have invested another $500 billion. The result is mass unemployment and underemployment, low productivity, uncompetitive industry, minimal growth and de facto bankruptcy.
Norbert Walter, chief economist at Frankfurt’s Deutsche Bank, told The New York Times that “Never before in history has one country spent so much money building pyramids.”
So to sum: the plan — while significant at the time — was really pittance of what we give today in aid, the foreign aid we’ve given out since the war has had no real results (and has probably been detrimental), Europe recovered largely on its own — and there’s some evidence that Marshall Plan aid actually hindered development, and those countries most cited as post war success stories were the countries who got the least amount of aid.
Speaks volumes, doesn’t it?, that “the most successful government program of the twentieth century” needs to rest on those kinds of qualifiers.
Another funny aspect of this 50-year-long circus that is often overlooked is how small the Marshall plan aid was, relative to even the burned-out economies in the 1945-1955 period. 90 billion in 2003 dollars over a decade for an area which had a population of around 225 million works out to about to a whopping 50 dollars per person per annum. Not something you rebuild an industial economy on, that’s for sure.
In fact, at the time of the program it was assumed that this was wholly a therapeutic measure to alleviate only the absolute worst aspects of depravation after the war. The fear at the time was that starvation among part of the population would lead to a Communist takeover. The plan’s “reconstruction,” if you will, as a rebuilding measure is a narrative which has mostly been created after the 1950’s to justify all that other worthless crap in the post.
Ah the magic of numbers. The reason that Germany, France and to a lesser extent Italy were the highest growing is that they were the economies most ravaged by the war and most in need of rebuilding….. It’s a base effect. Consider what building one huge manufacturing plant (say a car factory) would do to the GDP of Afghanistan (not to say that I am in favor of such a thing with my tax dollars)!
In general though, your points are well taken, but consider what the alternative might have looked like. I think the risk of a Communist Europe was too great not to spend some money trying to influence the creation of a capitalist one….. The damage done to Germany in WWI and the reparations that country had to pay was a contributing factor in the rise of fascism. One can imagine what reactionary political forces could have evolved in a post-war Europe left to their own devices….
True Paul, but Austria was a part of Germany proper from Aunschluss in 1938 to 1945, so its devastation was just as bad as pre-1938 (or post-1945) Germany for the most part. And still, the aid amounts were _extremely_ small relative to the size of the Euro-economies even right after the war.
And Radley’s point was that a massive cash-infusion in order to achieve some far-fetched goal is more often than not bet tilted against you. Where the Marshall plan succeeded it did so by having very limited goals (an end to the temporary starvation) and a very limited time frame (a decade). This is a quality not shared by all of the modern “Marshall Plans,” which are open ended both in time frame and in goal-orientation.
Good point “other” Paul. I have no data about the amount of destruction Austria suffered during the war though I would be surprised if it was as bad as that of Germany proper. While I know that much of Vienna was rebuilt after the war, it does not look like the city was leveled.
I was not in any way defending future “Marshal Plan”-style spending programs… Though I think from your comment that we can agree that there may be times where some specific economic assistance is warranted. In general I think that long-term largesse hurts the recipient as well as ourselves.
I was merely 1) pointing out that the data can be used to back either point of view and 2) there was a political motivation in addition to any economic one at that time.
I don’t get what the “Marshall Plan for Poverty” et al has all that much to do with the original Marshall plan… it seems like they just want to link themselves to a success for propaganda purposes. They’re different things intended for different problems and their probability of success or failure will have little to do with how they are named.
Repeat for “War on drugs”…
With the apparent failure of the Marshall plan to deliver with its economic goals, is it possible the reason for the plan was ’soley’ political? It is generally accepted, i am sure, that this side of the plan was by far the most successful. Perhaps this is why later Marshall Plans have failed to achieve any economic results. They are not geared towards manipulating a continent into following a certain ideology…
Really Marshall paln has done the magic!Great kudos! to the then secretary of state…George C.Marshall.But why has this same plan which was a success in Europe as it poses economic recovery failed in the thirld-world countries? Post me a responce!!!
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The Marshall Plan for Mediocrity
Speaking of The Balko, I noticed a link to his nice debunking of the Marshall Plan Myth, of which Balko summarizes:
the plan — while significant at the time — was really pittance of what we give today in aid, the foreign aid we’ve given out since…
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