On the morning of June 5, 1947, Secretary of State George C. Marshall drove out to Harvard to deliver a commencement address. He spent most of the speech on a topic nowhere in his title: the collapse of European industry, the worst winter in living memory, and an offer of American economic aid. The Marshall Plan that emerged — formally the European Recovery Program, signed into law as the Foreign Assistance Act of April 3, 1948 — channeled approximately $13.3 billion to sixteen Western European countries between April 1948 and December 1951, administered by the Economic Cooperation Administration under Paul G. Hoffman, and became the most successful foreign-aid program in American history.
The European Situation in 1947
Europe in the spring of 1947 was, by any measure, near economic collapse. The winter of 1946–1947 had been the worst in living memory: coal shortages idled factories, bread was rationed in France and Italy, and industrial production in Western Europe was still about 30 percent below 1938 levels. Communist parties in France and Italy, legitimate members of their postwar coalition governments, polled roughly a quarter to a third of the vote.
Will Clayton, the undersecretary of state for economic affairs, returned from a European tour in May 1947 and warned that the United States had perhaps eighteen months to act before the situation became irreversible. Marshall, with characteristic directness, agreed. The two men drafted the plan in a matter of weeks.
The Harvard Speech
Marshall delivered the announcement on June 5, 1947, before the graduating class at Harvard. He spent most of the speech on the European emergency, not on American strategy. “The patient must be allowed time to recover,” he said, “or even the best of programs will not avail.” The speech was deliberately stripped of political language. Marshall did not mention communism, the Soviet Union, or the Truman Doctrine. The omission was designed to make it easier for European governments of any political complexion to participate.
The Soviet Union was invited. Foreign Minister Vyacheslav Molotov led an 89-person delegation to the Paris conference in late June 1947. Within ten days, he had walked out, accusing the Americans of trying to detach the Soviet Union from its allies. Stalin then forbade the Eastern European governments to participate. Czechoslovakia, which had been enthusiastic, was forced to withdraw.
How the Plan Worked
Sixteen Western European countries ultimately took part: the United Kingdom, France, Italy, West Germany, the Netherlands, Belgium, Luxembourg, Austria, Denmark, Norway, Sweden, Ireland, Iceland, Portugal, Switzerland, and Turkey, plus the Free Territory of Trieste. The aid was distributed through the Economic Cooperation Administration, set up in April 1948, working in coordination with the European governments through the Committee of European Economic Cooperation, which later became the Organisation for European Economic Co-operation and ultimately the OECD.
The first year of the program was dominated by food and fuel; the second by industrial raw materials and capital goods. Counterpart funds — the local-currency proceeds of American aid sold in Europe — provided a parallel pool of capital for modernization. A technical-assistance program sent more than 2,500 European managers and officials to the United States on “productivity missions” and brought American experts to Europe to advise on industrial and agricultural practices.
What the Plan Achieved
By the time the ECA wound down its major operations in late 1951, Western European industrial production was 35 percent above the 1938 level. Communist electoral support in France and Italy had collapsed. The institutional infrastructure of European integration — the OEEC, the European Coal and Steel Community, the Treaty of Rome — was already in place. The Marshall Plan did not cause the Trente Glorieuses, the three decades of unprecedented growth that followed, but it laid the institutional and material foundation on which they were built. For the strategic context, see the Truman Doctrine and the Cold War’s broader origins and phases.