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Henry Judd

Can the Marshall Plan Succeed?

Analysis of the Post-War Crisis of Capitalism

(September 1948)

From The New International, Vol. XIV No. 7, September 1948, pp. 196–203.
Transcribed &marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).


On June 5, 1947, Secretary of State Marshall, in a now famous speech delivered at Harvard University, stated that

Our policy is ... the revival of a working economy in the world so as to permit the emergence of political and economic conditions in which free institutions can exist ... The program should be a joint one agreed to by a number, if not all, the European nations.

These words have now assumed the flesh and blood form of the European Recovery Program (ERP), better known as the Marshall Plan. This plan, backed by a financial appropriation by act of Congress of over $5 billion, is now in operation in sixteen nations of Western Europe.

Since Marshall’s first speech, within one year’s time, a statement of intent and principle has grown to enormous proportions. In its broadest aspects, and in the sense that the Marshall Plan represents the sum and total of American historic and strategic interests relative to the entire world, one may correctly include within its embrace such matters as the Truman Doctrine, as expressed over the issue of Greece, the program to bolster the Chiang Kai-shek regime of Kuomintang China, the European Reconstruction bill (ERP) adopted by Congress in April 1948 – in a word, all that enters into the framing and shaping of American imperialist policy.

In the more popular and truer sense, however, the Marshall Plan has come to mean that aspect of the whole program directed toward the reconstruction and stabilization of Western Europe and directly embodied in the above-mentioned ERP act itself. This popular narrowing down of the Marshall Plan, which makes the western half of the Old World the center of all efforts, has a definite validity since it is perfectly clear that the destiny of the plan, its failure or success, as well as its future evolution, depends upon what happens in the sixteen recipient nations of Western Europe, which are still the key arenas for the settling of world rivalries.

The question, for example, of whether or not American imperialism will be able to develop a similar program for the penetration of India and Asia (an Asiatic Marshall Plan) depends largely on what happens in Europe; in fact, one of the major considerations in Asiatic politics today is the fact that American capitalism cannot, at the moment, provide capital to such countries as India, Burma, Ceylon, Indo-China, etc., and thus strengthen the semi-independent regimes of these countries and further drive out British financial holdings. The drive and direction of the Marshall Plan then can conveniently be limited for our purposes to its program for Western Europe. One year’s steady but complex evolution was required to begin actual operation of ERP. Issues of political principle had first to be settled, beginning with the general conference of June-July 1947, held in Paris and attended by all European powers including Russia. At this conference, the exclusion of Russia from the scope of the plan was carried out, and Russian imperialism declared its holy war of opposition to American intervention in European political and economic life.

As is well known, all American efforts since this fatal moment of division have been bent toward setting the program into operation with the same energy that Russian imperialism has directed toward preventing its launching and development. We shall see later why this became the storm center of the American-Russian “cold war” for Europe.

Basis of the Marshall Plan

Then a series of congressional committees, prepared reports and recommendations for consideration, while Stalinist Russia hastily concluded treaties and alliances binding the occupied lands of Eastern Europe still closer, economically and politically, to the Kremlin. As various skimpy and emergency appropriations were hastily adopted for interim aid (to prevent a total collapse during the winter of 1947–48), the sixteen nations, participating in still another Paris session, accepted six basic principles laid down by Secretary Clayton of the United States:

  1. Immediate action for financial and currency stabilization.
  2. Guarantee of each nation’s production schedules.
  3. Agreement to reduce trade barriers.
  4. Budgetary allowances for capital needs that would have to be financed through the World Bank.
  5. A system of organization for administering and checking the plan when it came into operation.
  6. Recognition of common objectives and responsibilities.

Once these principles had been agreed to, the formulators of the plan were able to proceed with concrete legislation and enabling action. We shall not review the long, protracted course of the bill through Congress, except to point out that its vital need was shown by the fact that all political wings of the American bourgeoisie, while differing on details, finally united behind it on principle.

While Truman’s proposal for a five-year bill, financed at $17 billion to begin with, was not adopted, the measure finally approved is equivalent to what he had proposed for the first year in his own bill. In summary form it is as follows:

  1. The sum of $5.3 billion is provided for, to be expended over the first twelve-month period, with a contemplated total outlay of $17 billion within five years.
  2. Of the first year’s expenditures, $3.8 billion will go for direct relief commodities (food, fuel, fertilizer) and the balance of $1.5 billion for machinery, equipment and raw materials. This relation between relief commodities and capital goods is to change each year, as the plan succeeds, and ultimately farm equipment, raw materials and machinery are to form the bulk of shipments.
  3. An elaborate administration is created, with a single, president-appointed authority at its top, empowered to make grants or loans. Elaborated treaties and agreements will, with each specific country, decide whether economic aid will be in the form of grants that will never be repaid, or loans and their conditions; as well as the quantity, type and nature of the aid. These treaties are being worked out, subject to approval by the American Senate and the respective parliamentary bodies of the sixteen governments. Statements of intent to abide by all stipulations of the ERP Act have already been signed.
  4. The four main items to be shipped during 1948 are: coal, steel, grains and machinery.

Over-All Objective

What is the intent of this program, in terms of its own designers? We may summarize it as follows, from Truman’s original Marshall Plan message to Congress delivered on December 19, 1947:

First, the program is designed to make genuine recovery possible within a definite period of time ... Second, ... the funds and goods which we furnish will be used most effectively for European recovery. Third, the program is designed to minimize the financial cost to the United States, but at the same time to avoid imposing on the European countries crushing financial burdens ...

Other objectives were listed, but these are the significant ones. Naturally, these aims are contained within the ERP as a whole, whose over-all objective is never mentioned or even implied in the legislation itself. This objective has often been stated in The New International and other Marxist publications – the stabilization and revival of European economy so that it may act as both a social and military bulwark against Russian expansionism, but a reconstruction so limited as not to offer serious rivalry to the organic need of American capitalism for mastery of the world market.

The numerous conditions and significant qualifications contained in the Marshall Plan and the ERP Act have been listed and described in sufficient detail by Homer Paxon in his article dealing with this subject (New International, July 1948), and need not be repeated. In fact, one of our serious disagreements with Comrade Paxon is over the undue and one-sided emphasis he places on these qualifications which, as we shall try to show, set desired but unrealizable goals for American imperialism.

What concerns us primarily, now that the bare facts of the ERP have been stated, is the question of its workability, the effects it may produce, and its possible social consequences. As Comrade Paxon pointed out in his article, the concrete imperialist details of the Marshall Plan itself will not be known until the sixteen specific treaties have been negotiated, ratified, signed and published.

Complexity of Relationships

The complex economic forces involved flow not in one direction (between America and the Europe it seeks to dominate) but in many. We must examine the relationship between: (a) America’s economy and that of Europe; (b) the relationship between European economy and that of the world; (c) the relationship between the economies of Eastern and Western Europe – East-West trade relations; and finally (d) what effects any Marshall Plan recovery, no matter how small, will have upon all this.

It is this complexity of relationships which is far more important than the conditions and “strings” of the ERP Act itself, the vast physical destruction of Europe by the war, and the reactionary terms of the treaties which American imperialism will try to impose upon the sixteen nations of Western Europe.

But even before taking up this question we must first briefly pose yet another problem: What is the nature of the economic difficulties of Europe? From what and out of what must Europe recover? What, precisely, is wrong with European economy?

Only if we understand this can we deal with the real question of what results the Marshall Plan will have, if any, and whether the prospect for European reconstruction has any reality.


As posed in the original Truman report to Congress, the problem of Europe is essentially one of a maladjustment and malfunctioning of the established European economy.

This is alleged to be principally the result of the war and contingent factors. “The end of the fighting in Europe left that continent physically devastated and its economy temporarily paralyzed.” Natural catastrophes enhanced the problems: “... difficulties were greatly increased during the present year, chiefly by a bitter winter followed by floods and droughts, which cut Western Europe’s grain crop to the lowest figure in generations and hampered production of many other products.”

The malfunctioning of European economy, according to the report, consisted essentially in the following :

... these elements of international trade were so badly disrupted by the war that the people of Western Europe have been unable to produce in their own countries, or to purchase elsewhere, the goods essential to their livelihood. Shortages of raw materials, productive capacity, and exportable commodities have set up vicious circles of increasing scarcities and lowered standards of living.

The Marshall Plan is to solve all this. How? The same report gives the reply:

... [by] breaking through these vicious circles by increasing production to a point where exports and services can pay for the imports they must have to live. The basic problem in making Europe self-supporting is to increase European production.

This is the fundamental thesis of Marshall Plan doctrine. The question is: Does it correspond to reality?

The above explanations – the very way of posing the problem – is superficial and false. The familiar phenomena of inflation, devaluation of currencies, monetary controls, etc., are but symptoms of more serious difficulties.

Decline in Production

Who would maintain, for example, that the recent action of the Allied authorities in wiping out in one brutal blow vast masses of worthless inflated marks in Western Germany will have nothing but a momentary effect unless this step is accompanied by a tremendous spurt in productivity and a resumption of the flow of normal goods to the consumer’s market? The malady of European economy is organic and deep-going; it lies in the development of European capitalism itself. The war must be considered as a part of this development, or else it loses all meaning. The war, as a French economist has pointed out, “did not overturn ‘economic mechanisms,’ but only exacerbated them.” (Jacques Charriere, La Revue Internationale, page 82, October 1947.)

The examination and tracing back of symptoms, however, is useful in leading us to. the disease itself. The disruption and malfunctioning of European economy assumes many sympomatic fprms and appears in all fields: currency, trade, commerce, shipping, levels of productivity, etc. It is idle to point out that the physical resources of the Continent still largely remain. Which fact is more significant, for example, in understanding the problem of Germany today? – the fact that beneath the ruined cities and alongside the rubbled factories, that nation’s resources in coal, iron ore, technical skill, etc., remain substantially intact (quite capable of plunging into a planned and ordered reconstruction of the ruins); or the fact that a truncated Germany, politically split and ideologically demoralized beyond belief, will never succeed in lifting itself up higher than its knees so long as the present political situation remains?

And Germany is but the sharpest image of the whole of Europe. The same lesions and diseases that affect Germany are present elsewhere, although to a lesser degree. Let us examine some of these factors.

Buried in the confusion between symptoms and organic causes of the crisis, the president’s original report does suggest the principal factor – the decline in production – but nowhere does it develop or explain this. Charriere has summarized this as follows: “Europe has seen the volume of its production diminish.” He summarizes four contributing factors to this decline, brought about by World War II. In an article entitled The Economic Disintegration of Europe and Its Decadence (La Revue Internationale, December 1945), Charles Bettelheim has analyzed in fine detail the pre-war decline of the productive forces. Charriere’s summary is as follows:

  1. destruction and using up of means of production by military operations, or acts of military occupation;
  2. exhaustion of stocks, liquidation of means of international payment, wearing out of machines without their replacement;
  3. restrictions on international exchange and therefore on production In neutral countries; and
  4. the destruction or paralysis of the productive apparatus in conquered countries, and principally in Germany. To this we must add the concentration on production of means of destruction in the pre-war and war period – that is, for almost ten years!

Structural Crisis of Capitalism

But these factors only contributed to and hastened the process of decline. European economy had long since ceased its expansion and had begun to turn inward upon itself, devouring its stored-up capital. The percentage of European production (excluding Russia) in total world industrial production declined as follows:

1913 – 46.6 per cent of world production
1928 – 40.8 per cent of world production
1938 – 39.5 per cent of world production

The fall of European commerce was from 66.5 per cent of total world commerce in 1900 to about 62 per cent on the eve of the war. The same decline can be shown for European banking, export of capital, etc., in relation to the balance of the world. The role of the “special” factors brought about by the war has been to so accentuate these declines that one can only speak now of a fundamental structura1 crisis of European capitalism.

To all of this may be added the following generalizations and observations about the actual nature of European capitalism today. Much could be said to detail these observations, but there is neither space nor time:

  1. A worn-out, aged technology, unrationalizcd and antique (in contrast to America), in the principal European countries.
  2. National markets too narrow and bound to permit industrial expansion (particularly in the case of France, whose trustified system deliberately narrows down consumers’ purchasing power).
  3. A very low man-hour rate of productivity.
  4. A feeble agricultural productivity (largely due to the backwardness of methods employed and the social structure of land-holding).
  5. A limited supply of raw materials.
  6. A social structure and stratification in each European country which hampers invention, improvement and expansion.
  7. A high cost of productivity which tends to eat into prior accumulations of surplus capital which are thus used solely for continuation of production, rather than renewal and expansion.
  8. Crushing public war debts.
  9. The further depressing effect upon production that American competition exerts.

America Comes Out on Top

These are the facts which lead Charriere to the apt and fully justified conclusion that all this runs counter to the possibility of “... a new extension of the productive forces of the European countries on the basis of their existing economic structures ...” (Ibid., page 87.) To further round out the picture we return again to the Truman report:

... the peoples of Western Europe depend for their support upon international trade. It has been possible for some 270 million people, occupying this relatively small area, to enjoy a good standard of living only by manufacturing imported raw materials and exporting the finished products to the rest of the world. They must also import foodstuffs in large volume, for there is not enough farm land in Western Europe to support its population even with intensive cultivation and with favorable weather. They cannot produce adequate amounts of cotton, oil and other raw materials. Unless these deficiencies are met by imports, the production centers of Europe can function only at low efficiency, if at all.

From this description of what General Marshall has referred to as the “organic dislocation” of European economy (although, to him, it has been caused by the war exclusively), we must briefly examine the structure and nature of American economy as it stands isolated in the same world of which Europe forms one part. As is well known, to an even greater extent than Europe’s productive capacity has fallen, that of America has leaped forward. This is, of course, at the center of Europe’s difficulties.

This dual growth of American productive forces (absolute, in terms of its past capacities; relative, in terms of its supremacy over Europe and its percentage of world production) has made of American capitalism the undisputed head of the capitalist world. The productive index of the United States rose from 100 in 1939 to 218 in 1943. During the war and immediate post-war period, the destruction of capital and means of production created an insatiable market which resolved the production-consumption problem and encouraged this unprecedented expansion. America contributed 50 per cent of total world industrial production before the war. This went up to as high as 65 per cent during and after! Two specific examples will further illustrate this:

Steel –

America produced 32 per cent of world supply in 1938
America produced 70 per cent of world supply in 1945

Iron Ore –

America produced 37 per cent of world supply in 1938
America produced 71 per cent of world supply in 1945

Interrelation of Europe and US

The direct effect, of course, of this huge volume of production is shown in the export statistics of the United States. We cite but one example of this: In 1944, the value of American exports was 4½ times that of its exports in 1939! This export rate has held fairly steady since 1944 and its decisive nature is suggested by a modest statement in a government report quoted by Charriere:

“It is only through the re-establishment of an increased level of production and commercial exchange throughout the entire world that the United States can guarantee over the coming years a lifting of exports permitting the highest possible production and the full use of labor power.”

To this decisive theme we must, naturally, return later and in greater detail.

Our brief survey of European economy and American economy in their mutual isolation has indicated the contrary tendencies of both. Of still greater importance is the interrelationship, both traditional apd present, of these two great productive areas.

Here, too, we shall see that a most striking change has occurred, causing its share of malfunctioning and “dislocation” to drive Europe to its present disintegration. Again, we can only describe this relationship in its broadest outlines. The Truman report gives us an indication of the character of this relationship:

In the past, the flow of raw materials and manufactured products between Western Europe, Latin America, Canada and the United States has integrated these ureas in a great trading system. In the same manner, Far Eastern exports to the United States have helped pay for the goods shipped from Europe to the Far East. Europe is thus an essential part of a world trading network. The failure to revive fully this vast trading system ... would result in economic deterioration throughout the world. The United States, in common with other nations, would suffer. [Emphasis mine – H.J.]

Because of its food and raw-material lacks, the foreign trade of Europe has always been proportionately greater than that of the United States. In 1938, the sixteen Marshall Plan nations (including Western Germany) imported 50 per cent of the world’s total imports, as contrasted with 8 per cent for America (The Nation, January 3, 1948). The cost of these imports was paid for by industrial exports to the world, including a highly significant exchange of industrial products for food and materials between Western and Eastern Europe. Services such as shipping, banking and income from capital investments abroad furnished the balance for payments of imports not covered by export trade. That is to say, the nations of Western Europe had huge colonial empires to exploit in Africa, the Near East, Latin America and, above all, Asia. This entire relationship, as is well known, between capitalist Western Europe and the colonial world was destroyed during World War II.

One Great Debtor Area

Here, obviously, is one of the key factors behind the unbalancing of pre-war economic relationships. The British, French, Dutch, Belgian and Spanish colonial empires, in one or another fashion, have gone up in smoke as significant trading and commercial enterprises for Western Europe. Together with this, the financial position of Europe has been reversed. Whereas England, at least, had remained a creditor nation after the First World War, even this asset has now been lost, although England still has large amounts of capital invested abroad and not yet liquidated. In the words of Sternberg,

“... today Europe is one great debtor area and no longer able, as in the past, to pay for imports with interest from foreign investments.”

In the estimates of the Marshall Plan as originally outlined, the five-year deficit of the sixteen nations in trade with the entire Western Hemisphere is figured at between $20 and $22 billion – or approximately $4 to $4.4 billion each year. A chart in the New York Times (April 11, 1948) shows that whereas in 1938 there was a rough balance in European export and import life, in 1947 a total export trade of $6.1 billion left a deficit of $7.5 billion when deducted from the total import sum of $13.6 billion! No more graphic representation of the European disaster is possible.

But this deficit must be examined more concretely since it involves primarily the United States. Despite the undoubted increase in productivity, Europe’s deficit in 1947 (estimated at $7.5 billion above) represented a jump of $1.7 billion from the deficit of 1946, and this deficit increase was exclusively to the United States! That is to say, while production and trade were increasing, it was all in the wrong direction, from the viewpoint of Europe.

Imports increase more rapidly than exports, and 90 per cent of Europe’s current deficit flows from its unbalance of trade with the United States. A breakdown of the $7.5 billion deficit in 1947 indicates this:

$2.7 billion of deficit due to decline in profits from investments abroad, services, etc.
  1.2 billion of deficit due to decline, in volume of trade: i.e., lower exports, higher imports.
  3.6 billion of deficit due to price increases in imported goods, primarily from America.

$7.5 billions – total trade deficit.


The principal way in which this deficit manifests itself is the notorious shortage of dollars for payments. If, as has been estimated, the United States (at its present productivity and rate of employment) produces annually a surplus of goods estimated between $10 and $14 billion which cannot be consumed by the internal national market and must therefore be exported, it is clear that the wherewithal to purchase this must exist in the world market. American imperialism spent $16 billion in loans and advances in the interim period between the end of lend-lease and the start of the Marshall Plan. Yet the paucity of dollars for payment is as acute as ever!

The reason is, of course, that dollar pump-priming can never substitute for genuine exchange and trade, and if Europe can neither export nor find a willing American market if it could export, then the drainage of dollars is interminable and endless. This, as Charriere has explained, sets up an import-export relationship which is the exact opposite of the normal.

That is, the former basis of European economy in; relation to the world was a process of export-import-export. The mechanism today has become one of import-export-import “under which Europe must first import in order to live and reindustrialize itself before thinking of exporting, in payment, a part of its production.” (Ibid., page 90.)

An illustration of this is French trade in 1947. In that year, imports exceeded exports by 210 per cent, and 85 per cent of this deficit was to the United States.

A more striking example was the astounding speed with which the $4½ billion loan to England became exhausted and left England in essentially the same position as before the loan. As late as March 1948 England’s monthly trade balance was running against her at an average of $200 million monthly, despite the steady mounting of exports and productivity itself. Why? Because the volume of imports, far from decreasing as had been hoped for, leaped up to greater heights than ever, particularly in food, tobacco, oil, raw materials.

We have already cited the statement from the president’s report that it is precisely the intent of the Marshall Plan to break down this vicious cycle and thus induce the harmonious rhythm of international trade and commerce to re-enter the world of European economy, accompanied by a return of prosperity and economic revival. While our description up to this point has dealt by inference with the possibility of such a development, it is necessary to put the question directly and attempt an answer.

Can American capitalism, with its Marshall Plan and its billions, achieve its stated goal? If not, why not? If not, what will it achieve?


The problem of success or failure of the plan is in itself a complicated matter since it exists on various levels. One can consider it in terms of the stated and alleged purposes (as expressed in the introduction to the ERP Act, for example); or in terms of the economic reports of the sixteen participants (submitted in September 1947); or in terms of the actual trends of American imperialism and its objectives. According to its formulators, the plan will revive and reconstruct European economy, set in motion a new flow of international trade and undermine the basis for Stalinist expansionism which results from stagnation, etc.

These general objectives have been formulated more specifically by the Committee for European Economic Cooperation, the co-ordinating body of the Marshall Plan nations. They have set them down as follows:

  1. Increase of coal production to 584 million tons yearly (30 million tons above the 1938 level).
  2. Restoration of pre-war grain production.
  3. A 66 per cent expansion in pre-war electrical output.
  4. Development of pre-war oil-refining capacity to two and a half times its former volume.
  5. Expand inland transportation by 25 per cent.
  6. Rehabilitate and rebuild the merchant fleets.
  7. Supply from Europe itself the capital goods needed for this expansion.

These targets, endorsed by the United States, are to be achieved by the end of 1951, within four years. This applies to Europe’s expanded productive effort. Simultaneously, of course, it is proposed to re-establish normal trade relations with America (signifying an increase of American imports from the above expanded production, together with a large decline in exports from America) and to revive Europe’s trade with the rest of the world – above all, that trade which formerly existed between the eastern and western halves of the Continent.

From its side, the American government states its concrete objectives as follows: a strong productive effort by each of the sixteen European nations; creation of internal financial stability within each country; maximum cooperation between the CEEC countries; and a solution of the trading deficit problem through the medium of increased European exports to America and elsewhere.

The Conference of the Sixteen has countered these generalities with its own set of generalities. Pointing out in its report that America accumulates a valueless credit balance due to the movement of goods and services in only one direction, the conference aims to restore the following conditions: adequate trade with overseas countries; renewal of revenues from merchant-marine activities and foreign investments; revival of commerce within Europe itself among the sixteen nations, with Germany and with the eastern sphere of Europe; the return of the fundamental exchange of Europe – that is, raw materials, food, fertilizers, etc., for machinery and manufactured goods.

The Goal: Back to 1938!

But enough of these wishful generalities and alleged objectives. The question is: What reality do they have?

It is clear from our report up to this point that we consider the Marshall Plan impossible of achievement so far as its stated goals, both in America and Europe, are concerned. We shall state in detail why, but first let us point out what has often been concealed within the mass of figures and percentages generally used to shroud the plan – that is, the relatively limited nature of the entire proposal, even if we assume the validity and attainability of its stated goals.

England’s Bevin stated this most clearly when he admitted, in Parliament, that complete success of the plan would only signify the restoration of the 1938 standards of living. And in Germany, still the key to Europe’s economic health, productivity by the end of 1951 – with full success – will still remain far below its 1938 level! In the other countries, 1938 production standards are the maximum goal, despite population increases, revival of agricultural production, imports, etc.

Thus the most optimistic prognosis is for a revival of that same economy, productivity and distribution which existed one year before the very war came which contributed so much to creating today’s problems. Such a goal is surely not only modest but, psychologically, self-defeating if it is supposed to arouse popular enthusiasm and interest.

Why the Plan Can’t Succeed

Yet, given the conditions of the plan and assuming the continuation of the present social structure in both America and Western Europe, the stated goals cannot be achieved or, even if some are achieved, the effect desired will not come about. We summarize our reasons for this statement:

(1) It is and will remain impossible for Europe to pay for the loans and grants it receives from America. Even the foreseen deficit of over $2 billion at the end of 1951 cannot be paid for. The only possible way for Europe to repay – a tremendous spurt in its export trade to America or the turning over to Europe by America of its Latin American markets and a snaring of its world markets – this way is forever closed to Europe by the very nature of American production, which more and more excludes the products of Europe while simultaneously reaching out to remove Europe from those very markets still remaining to it.

If European productivity should revive to the extent hoped for, to whom shall its excess products be sent? With whom shall it exchange its products for needed materials once American aid (on the ground that the crisis is past) has halted? These and a dozen other questions return us once more to the original nature of the crisis – its functional and structural character that makes it a part of the world crisis of capitalism itself.

(2) The nature of American production, with its huge volume of capital goods, semi-finished and finished products, is precisely the same as that which it seeks to revive in Europe through its aid program. It is impossible to seriously envisage an extensive exchange – on a normal market basis – between Western Europe and the United States. The very revival of European economy will only underline this difficulty which is so structural in character, that only the closest and most careful type of planning could resolve it: that type of planning which could come about only through a division of labor and productivity that would be international in scope, with the element of competition excluded.

(3) American economic aid is both insufficient and uncertain in nature. “My great fear,” said Administrator Hoffman to a Senate committee on April 21, “is that even with the most careful planning and the most rigorous supervision of expenditures, this amount may prove insufficient to accomplish the degree of recovery we seek.” The facts regarding the European Committee’s proposal for $22 billion for five years which was, in turn, reduced to $17½ billion by Truman and then cut down to a one-year appropriation by Congress, are too well known to need repetition. What will happen in the second year is still more uncertain and depends upon political events. Further, a continuation of the price trend eats into the appropriation itself.

(4) The Marshall Plan assumes the lowering of prices and the end of European inflation. But both these developments can come only with a fundamental success of the plan itself, and this is excluded. There is no sign in Europe today either of an end to the inflationary process or a lowering of prices. This could be shown, to one or another degree, country by country. There is little reason to expect much in this direction beyond a halt to the price rise (at current level), and a checking of inflation.

East-West Trade

(5) The weight of unknown and uncertain factors – largely political – is ignored. Yet we know how completely determining they can be. Strike movements in the Marshall Plan countries, political events such as the struggle of Tito with Stalin, and the resistance of the presidents of. the German Laender (states) to working the program for a Western German government tend to unbalance all economic aspects of the program. Finally, the factor of open Russian-Stalinist sabotage efforts (see below) can hardly be expected to add to the chances for even limited successes.

To this must be added a final and perhaps decisive proof of the impossibility for the Marshall Plan to work out in practice. This involves a question we have largely neglected in this study until this point, but which merits a separate and distinct section. That is the question of trade relations between Eastern and Western Europe, its trends and possible developments. Western Europe, always an area with a deficit in food, has long been helped by Eastern Europe (Poland, Hungary, Rumania, etc.), an area normally provided with a food surplus. In addition, the East has huge resources of timber, minerals, petroleum and by-products of its peasant economy.

The split of Germany into East and West which has so largely guaranteed that nation’s stagnation and inability to rise above its war ruins is but one aspect of the deeper split between Eastern and Western Europe. What this has meant in economic terms can be illustrated by a few figures.

In 1947, trade and commerce between East and West amounted to only 56 per cent of its pre-war rate. In 1948, up to this moment, the situation has definitely worsened and the rate for the year will be still lower because of the well-known deterioration in political relations. A contrast of pre-war and current trade emphasizes this point:

Total trade in 1938 – $7 billion. Total trade in 1948 – $4 billion.

Percentage of Western Europe’s world trade that came from Eastern Europe: 1938 – 10%, 1947 – 4%.

Percentage of Western Europe’s world trade that went to Eastern Europe: 1938 – 10%, 1947 – 6%.

It should not be imagined that, despite this decline, intra-European trade is without importance, particularly for the Stalinist-occupied lands which, in 1947, sent 40 per cent of their exports to Western Europe, and which supplied that area with some grain, much coal, potash and timber. Yet the trend is toward further decline and only a sharp reversal in the political atmosphere will change this. The importance of this in relation to the Marshall Plan is that all estimates, both European and American, assume the revival rather than further decay of this traditional intra-European trade!

The dollar deficit of Western Europe contributes largely to this trade decline since, as the New York Times (May 22) comments,

“... the decline in the exchange in goods among the European countries will turn out to be much greater than expected as the result of the jamming up of payment mechanisms established under bilateral payment agreements.”

Further, this decline will add to the dollar deficit because

“Now the prospect is that even more purchases will be made in the Western Hemisphere, not because of the physical impossibility of supplying the items in Europe but because the countries cannot get dollars and cannot solve the intra-European payments problems.”

No Revival Ahead

Here again we see the functional nature of the European economic crisis. Could the situation be helped? Clearly yes, by a revival of investment in Eastern Europe which would increase the production of exportable commodities now being purchased with deficit dollars.

... on the strictly economic View there is no question that a dollar invested in Poland or Czechoslovakia would do fur more to improve the over-all European position than a dollar invested anywhere in ERP Europe.

So reports the New York Times. The already famous examples of Polish coal illustrates the point:

... Polish economic officials were seriously troubled [!] by the prospective glut of coal if output continues to expand at present rates. Already Polish coal is being sold with difficulty in Northern and Western Europe ...

At the same time, France is importing huge supplies of coal from America, unable to take Polish coal because it cannot pay for it with so-called hard currency.

Thus East and West are mutual victims of both Russian and American policy. American imperialism not only refused aid and capital investment to the countries of Eastern Europe, but would not permit even the establishment of a dollar supply pool in Western Europe to facilitate intra-European trade! For its part, Stalinist Russia pushes industrialization at a forced tempo in the occupied lands, both to increase the amount of capital goods it may plunder from these lands and also to increase their internal consumption of raw materials formerly exported, thus lowering intra-European trade from yet another direction.

The economic basis of the current struggle between Tito and Stalin has one of its roots in this policy, which the Yugoslav dictator feels strong enough to resist. While American and Russian imperialism have entirely different characteristics, their effects upon the two occupied or controlled blocs of Europe are not dissimilar. Both are sick and malfunctioning. The East cannot send food and materials to the West while the West cannot send to the East the machinery and equipment needed to extract and move this material and food.

As New York Times European financial expert M.L. Hoffman points out:

Eastern Europe is as far as Western Europe from being able to lift itself by its own bootstraps. Only if Russia could offer vast quantities of capital goods and industrial materials for food could a permanent solution to Eastern Europe’s problems be found wholly within the Russian orbit. [February 8, 1948.]

We conclude, then, that a Europe split into two such economically divergent camps excludes in and of itself any possibility for a substantial and full revival of the Continent as a whole, let alone only the western section.


“The USSR will put all effort into seeing that the Marshall Plan is not realized.”Zhdanov, September 1947

If the history of our world, in political terms, since the end of World War II is the story of the struggle between Russia and America and the slow hardening of these differences into incompatible social, economic and ideologic walls, then we may also say that the struggle over the Marshall Plan has been and will remain the most concrete expression of this antagonism. The remarks of Zhdanov, contained in the same speech that ordered the revival of the international Stalinist movement in the form of the Cominform, have been the basis of Russian policy for the past period.

The opposition of Russia and its Stalinist parties everywhere, as well as the methods pursued, is well known. The aggressive side of this struggle against America is conducted on the plane of sabotage, terror, political action and the diverting of social struggles in Western Europe and elsewhere into desired channels. We limit ourselves here to a few words on the economic aspect of this opposition.

Russian Drive for Industrialization

As already mentioned, the ruling group of the Kremlin – primarily concerned with its national all-Russian interests – desires the speediest possible industrialization of those territories it influences or controls to one or another degree. This pressure for feverish industrialization has, as we see in the case of Yugoslavia, a disastrous effect on the relatively backward and undeveloped countries of the Russian bloc, and can readily have such serious consequences on the efforts of the local Stalinist bureaucratic-collectivist rulers that they, much in the manner of a national bourgeoisie of a truly colonial country, will risk taking the path of opposition to the Russian “motherland.”

The basis of this Russian drive for forced industrialization is not merely to take the occupied lands out of the orbit of traditional European trade und economy, but also to satisfy the endless Russian need for machinery and capital goods of all types. Any examination of the economic facts of the Russian bloc (insofar as they are known) and the published trade treaties between the Kremlin and its various satellites can only lead to the conclusion that the people of the occupied lands benefit in no way, as a mass, from their enforced membership in this bloc. On the contrary, their recovery is hindered, their conditions worsened, and living standards lowered.

This we can see up to the present moment, despite the oft-heard rationalization of many intellectuals and semi-Stalinists, that (in spite of everything) the Russian method will justify itself by raising the level of productivity. The actual relationships of the bloc give no basis for this belief.

This relationship – a subject for further and independent examination – clearly creates its own difficulties. While differing in both nature and detail from the difficulties imposed upon Western Europe by American imperialism, it has this in common with the latter: the slowing-up of normal economic recovery; the discouragement of all national initiative; the wholesale robbery of the products of this laborious productivity and, most important of all, the steady strangulation of the vital economic interdependence of the two halves of the European continent.

Both sectors of Europe thus have the same general misfortune of having fallen victim to a superior and exploitive foreign power. In this sense, the movement for a reunification of Europe, independent of both external powers, must be the central strategic aim of any political tendency on the Continent which wishes to play a progressive role.

Limited Recovery

In summary, then, what is the indicated evolution of the Marshall Plan, in terms of political realities rather than expressed goals or formal declarations? Charriere (page 94, loc. cit.) motivates the American aid program in the following terms:

“... the aid and loan policy of American capitalism to the European countries can have no other fundamental principle than political goals, to the extent that this imperialist power considers its political security is placed in danger through the existence of too miserable populations ...”

A “controlled lifting of their living standard” is the attempted answer of America, and this is the essence of the Marshall Plan. Within the framework set by American capitalism – a framework that arises out of its own development and needs – the Marshall Plan constitutes a limited recovery effort.

This limited effort will succeed only to a still more limited extent, for reasons we have already indicated. There will be a partial economic revival in Europe, productive in nature, but its scope will be hardly extensive enough to make any fundamental change in the situation, and surely insufficient to be, in and of itself, a decisive answer to the problem of Stalinist expansionism. It will be far too limited, tenuous and shaky for that. At best, it will provide a breathing spell within which the possibility for new ideologic currents to develop exists. But nothing more will be settled.

From the point of view of America, Charriere is quite correct in stating that

“The fundamental problem of the existence of a surplus of production is not resolved by the extension of a monopolist imperialism. These difficulties will be carried along step by step until the conquest of almost the totality of means of production and markets. This imperialism will then find itself, on a world scale, confronted with the same problems that it cannot solve on its own territory, but at this stage the safety valve of exports financed by loans will no longer exist.”

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