Marshall Plan: 70 Years

By Shlomo Maital

   Almost 70 years ago, Gen. (retired) Herbert Marshall gave the commencement address at Harvard University, on June 5, 1947. No such address then or now has had a greater impact. In his talk Marshall, a retired five-star general, offered war-torn war-destroyed Europe generous financial aid, $11-$13 b. (in today’s dollars, about $130 b., or 1.5% of the US GDP then). It was offered to Russia and Eastern Europe, too.

     There was only one condition, Marshall said. Europe has to decide how to divide the money among the member countries. If America decides, there will endless bickering.

     Marshall’s talk was broadcast on the BBC.   British foreign secretary Ernest Bevan heard it, and at once called his French counterpart. A meeting was quickly convened in Paris, a committee was launched, and the wheels were set in motion. The aid soon flowed. The rest is history. Without those resources, European recovery would have taken far far longer, and the German economic miracle would not have happened.   Never in history has a winning nation paid money to the losing nation in war (compare with the Treaty of Versailles, when Britain and France stripped Germany bare, in war reparations for World War I, and directly led to World War II and the rise of the Nazis).

     There is a key lesson in the Marshall Plan, which stands in stark contrast to modern Trumpism.   Marshall Plan indeed put “America First” – but how? By perceiving that only if Europe achieved strong economic recovery, built on market economics but with a strong social component, would Europe remain friends with America. And that was America’s vital interest.   Do you help yourself, by screwing your friends, or by helping them? It’s that simple.

     Today, economists call the Marshall Plan “incentive compatible”. That is, it is a plan that built-in encourages those it intends to help, to engage in constructive appropriate behavior. In the case of Europe: Stop squabbling, and start cooperating. This led directly or indirectly to the European Union.

       We need more plans that are incentive-compatible. Sometimes, what seems like altruism – helping others – is actually exceedingly self-serving. That was the secret of the Marshall Plan.

       And Marshall? He was a five-star general, a genius at organization, deeply bitter and frustrated because President Roosevelt would not send him over to Europe to fight, but instead kept him home to organize the 8 million US troops sent to fight. I need you here, said FDR.   As Secretary of State, Marshall brought great wisdom and skill to the job. The Plan he initiated is his immense legacy, one that changed the world forever.