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Fourth International, January 1949


Louis T. Gordon

The Marshall Plan and European Recovery


From Fourth International, Vol.10 No.1, January 1949, pp.7-10.
Transcription & mark-up by Einde O’Callaghan for ETOL.


From its very inception, the Marshall Plan, despite the frantic efforts of labor leaders, self-styled “Socialists” and “liberals” to portray it as a humanitarian project, was designed to avert the collapse of European capitalism – which would gravely endanger the capitalist system as a whole – while at the same time propping up American exports of goods and capital. To this end a certain measure of recovery in Europe is necessary. But the American capitalists cannot allow under any circumstance a real European recovery. On the contrary, they must prevent an independent development of productive forces in Europe capable of competing with American economy in order to help sustain business activity in the US.

The political objective of the Plan was to stabilize regimes in Western Europe capable of effectively backing American imperialism in event of a conflict with the USSR, and it was evident that the economic and political conditions attached to the “aid” would be increasingly rigid and brutal. The Marshall Plan has been in operation for some time now. The question is: Has experience shown that it embodies, as a bourgeois spokesman expressed it, the best of the American tradition – “generosity, daring and realism,” or is it rather a ruthless imperialist scheme?

How Much Recovery Is Necessary?

The Second World War radically disrupted the equilibrium of the capitalist world. Germany and Japan – vanquished and economically shattered – virtually disappeared from the scene, and can only recover under the rule of and to the extent desired by American capitalism. Europe, as a whole, emerged drastically impoverished while the US is now more powerful than ever, from an economic and political as well as from a military viewpoint. In 1947, American production was 76 percent higher than the 1935-39 average, and the productivity per worker, unlike in Europe, increased by 27 percent between 1938 and the first half of 1947.

The present plight of Western Europe is not due exclusively to war destruction. The dollar shortage it suffers, which is a reflection of the economic disequilibrium between America and Western Europe, has not been engendered but greatly aggravated by the war itself. It existed before. Western Europe was never able to sell to the US as much as it bought here. Now, however, many of the factors which in the past permitted Europe to offset this deficit no longer exist. Profits from foreign investments, thanks to which Europe used to be able to import about one-third more than it exported, are today negligible; South East Asia, a dollar-earning area, is in turmoil; finally the dollar shortage is so general that Europe cannot earn them by sales to the rest of the world. Therefore, the restoration of pre-war production levels is not enough by any means to correct the situation. As a UN survey notes, even “a recovery of oversea exports and the restriction of oversea imports to pre-war levels would still leave a gap of some $4 billion at current prices.” (UN Survey of the Economic Situation and Prospects of Europe, Geneva 1948.)

The US, unlike Britain when she was at the helm of capitalism, produces most of the raw materials she needs and her import needs are limited. This is the basic reason why the dollar shortage cannot be permanently solved and a stable equilibrium in the world market between the US and the rest of the world is unattainable. “The maladjustment can never be corrected,” admits the General Report of the Committee for European Economic Cooperation, “on a basis of expanding trade unless market conditions in the American continent permit to sell goods there in steadily increasing quantities and permit other countries to earn dollars there and use them to purchase from Europe.” Pleas are not enough, however, to convince the US to open her domestic market to European countries. Even those foreign markets which Europe has been able to retain in the postwar period, when scarcities were such that goods could be sold regardless of price, are already in danger of being lost to the more efficient American industry.

Nor can the European countries find a way out from this impasse by simply buying less from the US. Every attempt to do so will meet with fierce American opposition. “Aid” to Europe is restricted by the American doctrine of non-discrimination. This means that no European country can place barriers in the way of American trade. For instance, if a Western European country with a limited fund of dollars wishes to reserve them for essential goods, buying non-essentials elsewhere, it cannot ban the import of these non-essential products from the US without banning at the same time the import of the same goods from every other country.

The Marshall Plan

“The Foreign Assistance Act of 1948,” which includes the “Economic Cooperation Act of 1948,” was approved on April 3, 1948. Contrary to popular impressions, the ECA does not represent a basically new approach by Washington to the European problems. During the first two postwar years, 1946 and 1947, the US pumped into Europe approximately $12 billion in loans, credits and grants, including UNRRA contributions. Under the Marshall Plan this “aid” will presumably be more systematic and every dollar is expected to yield the maximum of political and economic benefits.

How much recovery does the Marshall Plan hope to achieve? It is not extremely ambitious. If everything goes according to schedule, by 1952, when “aid” is supposed to terminate, Western Europe – except Germany, Austria, Greece and Italy – is to reach the pre-war standard of living, and close the balance-of-payments gap. But even this is not as easy as might seem at first sight. According to the above-cited UN Survey, the 1938 level of industrial output was virtually reached, with the exception of Germany, by the last quarter of 1946. To restore pre-war living standards it will, therefore, be necessary to increase European production considerably above pre-war levels. Unless this is attained and unless additional markets are found for expanded exports, Western Europe will have no choice except to sharply reduce imports, with a consequent decline in standards of living.

“Recovery” and the European Workers

To increase production in the required measure is a task beyond the powers of capitalist Western Europe. But the European capitalists hope to be able to make the indispensable investments with American help.

Large-scale industrial expansion presupposes an expanding labor force. But Western Europe is experiencing, almost without exception, a shortage of manpower. This shortage can only be aggravated by any projects for rearming Western Europe, an integral part of the Marshall Plan. Eor, the more workers are diverted to unproductive purposes, such as armaments and other “defensive” projects or conscripted into the military forces, all the fewer will be available for the production of civilian goods for domestic consumption and exports.

New investment capital can be obtained at home only from the surplus value extracted from the exploitation of the workers. It is, therefore, a life-and-death question for the capitalists to get the workers to work longer hours, follower wages and thus speed up the “capital formation.” That is why the Laborite Attlee government as well as the “Third-Force” government of Queuille seek to force the miners, for example, to work longer hours, more intensely and for minimum real wages. The burden of capitalist “recovery” is thus unloaded on the workers’ shoulders.

The problem of problems for the capitalists is how low can this minimum be driven without the workers rebelling.

“In a totalitarian regime,” says Gottfried Haberler, almost regretfully, “discipline and efficiency are enforced at income levels which in a democracy would lead to unrest and a sharp fall in output per worker.” (Some Problems of the ERP, American Economic Review, September 1948)

In this connection the European labor leaders are assigned a decisive role. Their task is to restrain the workers’ demands, keep down their living standards while at the same maintaining “discipline and efficiency.” Let us not forget that American labor leaders, both AFL and CIO, are likewise contributing their full share to this end. They participate in Marshall Plan foreign missions and help “sell” the Plan to the European workers.

It is generally admitted that the proclaimed aims of the Marshall Plan cannot be achieved unless the following three conditions are met:

  1. – Trade inside Western Europe must be strongly activated.
  2. – East-West trade must be restored by and large.
  3. – The exploitation of colonial Asia must be resumed.

National frontiers and tariff walls are a major obstacle to Western European trade. Washington has been pressing for abolition of trade barriers between these countries, emphasizing that otherwise the success of the Marshall Plan cannot be assured. But there has been little change in the situation.

Trade Inside Western Europe

Even if a European customs union were established, which is hardly likely, many trade barriers would still remain. The economic interests of Western European countries are so conflicting that it is impossible to reconcile them within a capitalist framework. Back in 1944 Belgium and the Netherlands agreed to establish a customs union. But up to now they have been unable to unite their economies to any appreciable degree. If any further proof were needed, let us cite the progress report submitted by the CEEC, the Council of the European Marshall Plan countries, to Harriman, the “roving Marshall Plan Ambassador.” The experts who drafted this report agree that the different four-year plans presented are mutually incompatible and cannot be merged in the foreseeable future. Each country hopes (and plans) to improve its own position by exporting more to other European countries while at the same lime importing less from them. Furthermore, in almost every case, the respective plans envisage no solution of the dollar shortage by 1952.

At all events, the problem of intra-European trade has thus far defied all attempts to increase it, let alone solve it. A new payments scheme has been put into effect lately but it is already apparent that it will prove ineffective, if it does not hamper intra-European trade even further.

East-West Trade

Prewar annual trade between Eastern and Western Europe amounted to nearly 2 billion dollars. Today it has been reduced to a trickle. The resumption of East-West trade was, however, explicitly assumed in the CEEC report. The exchange of Eastern agricultural products and raw materials for Western industrial goods would help industrialize the East while reducing the West’s need of dollars, for Western Europe can buy food and raw materials in the US only at the expense of vitally needed capital equipment for its industries. Besides, heavy machinery is a major Western European export, for which the US is hardly an outlet.

Why, then, if everything seems to be in favor of an expanding East-West trade and both Western and Eastern European countries desire it eagerly – why does this trade remain so small? The reasons are, of course, political. Everybody wants a resumption of East-West trade except the US, which by its policy bars the export of goods of “a military nature” to Eastern Europe. Included in this “military” cotegory are such items as radio tubes and ballbearings. The aim of this policy is to hamper the industrial development of Eastern Europe. The Marshall Plan Administrator is empowered to halt all exports of raw materials and semi-manufactured goods to recipient countries that might use them for producing goods of “a military nature” for trade with Eastern Europe. In this way, the US is able to control the trade policies of the recipient countries and to advance its own objectives against theirs.

Nonetheless, at least a partial revival of East-West trade cannot be ruled out. In the last few months it has increased a little despite the “cold war.” In the first half of this year Britain increased her trade with Eastern Europe by 20 percent while the US reduced it by one-third.

The Balance of Payments

The position of the imperialist powers in South East Asia – the Dutch in Indonesia, the French in Indo-China, the British in Malaya and Burma – is far from bright. “When the nations of Western Europe,” says the London Economist, “make a systematic estimate of the non-dollar areas that are open to them, they will discover that one of the most profitable of such areas in the pre-war world – South East Asia – is not likely to return to its old patterns of trade.” .Moreover, America is now less dependent on South East Asiatic products, because she manufactures synthetically one of the most important raw materials she imports from there – rubber. On top of that, US has begun to get tin and rubber directly from Siam.

Obviously, the problem of the balance of payments will hardly be solved by the exploitation of South East Asia. Nor can it be solved by intensifying trade with Latin America and the “triangular” offsetting of the balance of payments. Latin America itself is suffering such an acute dollar shortage that the possibilities of barter exchanges with the US are being explored. In addition, the American exporters would have to voluntarily relinquish their Latin-American market, which is not very likely, to say the least.

“Recovery Achieved”

To believe the headlines of the capitalist press, Western Europe is recovering at a very rapid pace. Reading carefully between the lines, however, one very soon realizes that this is far from being the case. True, Western European countries are now a little better fed. Agricultural production is improving. Yet they are fighting a losing battle so far as the primary objective is concerned of becoming self-sustaining by 1952. Only Belgium, primarily owing to the exploitation of the Congo, manages to get dollars, but her prosperity is more apparent than real. Recent reports indicate growing unemployment there.

In Greece, which received half a billion dollars for military and economic aid, neither have the guerillas been eliminated nor has the economic situation improved.

In Italy there are now 2,400,000 unemployed and even the Marshall Plan supporters concede that Italy is quite helpless to solve this problem. “There are very few signs of recovery despite the millions of dollars, worth of Marshall Plan goods which have poured into Italy since the program started last summer,” wrote a New York Herald Tribune correspondent from Rome.

In France, prices continue to rise, reconstruction is slow the currency remains unstabilized and the workers are seeing their standards of living continuously deteriorating. The Netherlands, unable to export to the US enough to offset her trade deficit, is imposing new strains on her economy by attempting to crush the Indonesian Republic.

In Great Britain, notwithstanding the “austerity” program and the billions in American loans and grants, the progress of the famous “battle of the gap” is not at all reassuring. Industrial production has ceased expanding since the end of last year. If exports do not rise sharply, imports will have to be reduced. On the other hand, increased exports without greater production will only mean less consumption at home. In either case the net result will be a lower standard of living.

A key feature of the Marshall Plan policy is the propping up of Germany as a bulwark against the USSR. It is generally understood that Germany is indispensable for European recovery. But what the American imperialists are doing there is to rebuild the country only to the extent it suits their political and military plans.

Washington has pumped into Western Germany great amounts both through the Marshall Plan and the Army. Although the economic picture has considerably improved lately, in September industrial production in Bizonia reached only 70 percent of the 1936 level. The population is now several millions larger than before the war owing to transfers of population. Therefore, even if the 1936 production levels were reached, the standard of living would still remain sharply below pre-war levels. The British-American plan envisages that Bizonia will attain 1936 production levels in 1952-53. But even then it is not expected that the problem of the balance of payments will be solved. On the contrary, it is frankly admitted that it will persist for a long time to come.

In the meantime, the US is taking full advantage of its position as ruler of Bizonia to take over complete control of German economy. American monopolists are planning to invest large sums and to utilize German capitalists as junior partners.

Conditions of ‘Aid’

Revealing of the imperialist character of the EGA is the manner in which this “humanitarian” plan has been carried out. Mr. Hoffman, the Marshall Plan Administrator, said to a reporter, “We haven’t any intentions of imposing our political or economic beliefs on other countries, nor of trying to influence them in making their own decisions.”

These lofty-sounding words have been belied time and again in practice. Thus, the nature of this political “noninterference” was crassly shown, for example, by the Italian elections, not to mention Greece. American economic “non-interference” has been no less cynical. Indeed the strings attached to the “aid” are so many and so stringent that one leading English newspaper The New Statesman and Nation has asked pointedly: “Can we afford Marshall Plan aid?”

Great Britain is forced to surrender every day another token of her independence. Sir Stafford Cripps, in accordance with Mr. Hoffman’s suggestion, recently “decided” to set up an American-British board to “study” British productive methods and issue “advice” on how to solve their problems. This touched off in Britain such a storm of opposition that Cripps was compelled to assure that the board would have only a limited scope.

The Marshall Plan enables American capitalism to control the economic life of Western Europe on an unprecedented scale. The US has already shown her power to effectively direct the investment policies of the CEEC countries. To qualify for Marshall Plan aid, a given country must sign a bilateral agreement with the US, according to which, among other things, it is required to submit to the Administrator, for his approval, “specific projects proposed by such country to be undertaken in substantial part with assistance furnished ...”

As America is not interested in the development of Europe’s economy, she demands investment in projects yielding “immediate results,” and not long range projects, like the development of hydroelectric stations, for instance. But short range projects cannot enable Western Europe to increase production on the necessary scale. American “criticism” has already led to a sharp reduction of the British investment plan, including such “unproductive” investments as those for low-rent housing.

Investment policies can be further controlled through the operation of the so-called “counterpart, funds,” ostensibly designed to help stabilize the financial and monetary systems of the Marshall Plan countries. For every grant (not loan) received, the beneficiary has to set aside a “commensurate amount” in local currency. The funds can be partly spent for productive purposes but only with the authorization of the Administrator. The funds also serve another purpose: they help America to stockpile strategic raw materials, as five percent of this money can be used to acquire such materials.

The American capitalists are striving to find markets for their industrial production and the Marshall Plan is already playing an important role in this connection. Aid is given “through grants or upon payment in cash, or on credit terms, or on such other terms of payments as he (the Administrator) may find appropriate.” The American monopolists are thus able, for instance, to demand cash for capital goods which they do not want to furnish, while offering as grants such finished products as they may wish to get rid of. In addition, the Marshall Plan Administrator is empowered, to ask the Secretary of State to decide that exports of certain commodities should be fostered to promote the security of the US.

Western Europe’s recovery suffered greatly as a result of the high prices of American food and raw materials, which absorbed loo large a share of their available resources. On the other hand, now that the Western European countries do not need to import as much food from the US as in the previous years, they are in danger of being forced, as a result of this year’s bumper crop in the US, to accept more food than they actually require.

The pressure of a sector of the American bourgeoisie to use the Marshall Plan merely as a dumping device has become so strong that Mr. McCloy, President of the International Bank for Reconstruction and Development, had to remind a gathering of the New York savings bankers, that the basic purpose of the Marshall Plan is to restore “a viable Europe” and not to serve as a stimulant for American exports.

The framers of the Marshall Plan openly stated that one of their main objectives was to improve conditions in Europe in order to permit successful private investment.

“As economic conditions in Europe improve and political conditions become more stable,” states the Outline of the European Recovery Program, “private financing may be expected to take up an increasing percentage of that portion of the financing which can appropriately be in the form of loans. Every encouragement should be given to early initiation of private financing. The administering agency should be in a position to undertake limited guaranties to encourage private investment to assume a larger role in the program than might otherwise be possible.”

The ECA promotes these aims energetically, to the disappointment of the European capitalists. When some recipient countries tried to forget that a part of the aid was supposed to be taken as loans, the ECA simply stopped issuing grants until the required loan agreements were signed.

The Marshall Plan legislation earmarks 300 million dollars to be used to guarantee private investors. This guaranty covers the convertibility into dollars of dividends and of liquidated capital up to the amount of money invested. Up to now however, only one project has been carried out under this guaranty, which is hardly considered quite enough in Wall Street.

Under lend-lease the government acted as purchasing agent. Under the Marshall Plan, however, most of the authorized purchases are made directly in the American market, because “normal channels of trade” have to be used as much as possible.

There are thousands of ways in which the US is able to interfere and impose its wishes upon the EGA countries. Many of them may not be recorded on paper, but the fact remains that the Marshall Plan countries can be simply blackmailed, as the aid can be withdrawn as soon as, “because of changed conditions, assistance is no longer consistent with the national interest of the US.”

In the light of all this, it was not surprising that last month the Swiss government refused to qualify for aid, although Switzerland formally participates in the Marshall Plan.

Recovery or War?

Since the Marshall Plan was first conceived, Washington has been trying to establish a European military alliance and to “convince” the Western European countries that they must rearm in order to protect themselves against “Russian aggression.”

Rearmament, however, even under new lend-lease arrangements, can be carried out only at the expense of recovery. Here we have the touchstone of the real aims ol the American imperialists: To what will they give priority – the recovery needs or to war preparations?

Recent developments have already in good part answered this question. The US is pushing through its military program with slight regard for any other consideration. It has been disclosed that Washington has secretly supplied military equipment for three French divisions. It has been American pressure that forced Britain to stop disarming and once again increase military expenditures, which are such a heavy drain on her resources. The Western European military union is being set up. Marshall Montgomery has started to discuss the unification of the military forces of Great Britain, France, Holland, Belgium, and Luxembourg. In this military alliance Washington also wants to include Norway, Denmark, Portugal, Eire and Franco Spain. Italy is likewise envisaged as a member. Negotiations for the formal entry of the US into this set-up under the label of the “Atlantic Pact” have reached an advanced stage.

In brief, the consolidation of a strong military bloc is becoming more and more the main purpose of American policy in Europe. A powerful group in American ruling circles wants to openly substitute military lend-lease for the Marshall Plan, arguing that such “aid” is, after all, the most effective way of “assisting” Europe.

But among European capitalists there is considerable doubt on this score. There have been objections to the effect that rearmament of Western Europe would impose too heavy a burden upon the slim resources of these countries at a time when they have to apply all their efforts to expanding civilian production.

“The US might supply Europe,” the N.Y. Times recently quoted a European expert as saying, “either with tanks or tractors but not with both in adequate quantities.” And the Times’ correspondent adds:

“Some leading European experts have said the dilemma is such that rearmament on the scale expected would destroy hopes for continuing US recovery aid in sufficient measure to achieve the goals set for 1952.”

What the rulers of Europe fear most of all is the reaction of the European masses if they are openly confronted once again with the offer of “guns instead of butter” as a prelude to turning the Old Continent itself into the battleground in the next atomic war.

As soon as the Marshall Plan was put in operation we Trotskyists predicted that although ostensibly designed to help Europe get back on its feet, it would, in practice, prevent the fulfilment of the very conditions it itself proclaimed as indispensable for recovery.

In spite of its huge size, the Marshall Plan does not constitute an answer to the fundamental problems facing Europe. Many responsible capitalist voices are beginning to admit it. “Even the chief architects of the European Recovery Program,” says the London Economist (June 26, 1948), “still fail to understand the true nature of the problem that has to be met.” And it goes on to add that the Marshall Plan will not solve the dollar shortage and merely has to be regarded as “a transition to some different patterns of international economic relationships.”

The Marshall Plan has not and will not restore equilibrium in the world market, nor effect the recovery of Europe. Europe’s problems cannot be solved within the framework of capitalism. Only a Socialist United States of Europe can solve them and raise the standards of living of the masses to unprecedented heights by planning a coordinated economy on a scientific basis, unfettered by artificial economic frontiers, and under the control of the workers themselves.

Neither will the Marshall Plan help to solve to any appreciable degree America’s own economic problems. In spite of Marshall Plan shipments, exports will be in 1948 at least 20 percent lower than in 1947. The most ambitious “foreign aid” program could, not avert a crisis eventually arising from the internal contradictions of American economy. The reason is that foreign trade did not play in the past, nor does it play now a decisive role in American economy as a whole. In America it is the internal market which is decisive and which has to absorb some 90 percent ol American production. And if for one reason or another this market should prove unable to absorb its share, no possible expansion of foreign trade could avert the consequences.

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