Marshall Plan: Notes for UPSC World History

The Marshall Plan (officially the European Recovery Program, ERP) was a series of relief programs initiated in 1948 aid in the recovery and reconstruction of Western Europe. It is named after George Marshall, who was the U.S. Secretary of State.

The Marshall Plan will be featured as an important topic in the World History section of the IAS Exam.

What was the purpose of the Marshall Plan?

The United States transferred over $12 billion (equivalent to over $128 billion as of March 2020) in economic recovery programs to Western European economies after the end of World War II. The main aim of the United States Government was to reconstruct war-ravaged areas, modernize industry, improve the European economy and contain the influence of the Soviet Union as well as communism. The Marshall Plan required an opening of historical borders between old European rivals, removal of several trade barriers and adoption of modern business procedures.

One can safely say that the Marshall Plan was an effective instrument used during the Cold War to prevent the spread of communism.

How was the aid from the Marshall Plan distributed among the recipients?

The aid coming from the Marshall Plan was divided as per the capita basis with a larger amount going to major economic powerhouses. This was done due to the belief that the recovery of these countries was necessary for the revival of the economy of Europe as a whole. A slightly higher proportion of aid was directed towards the core allied nations, particularly those that would go on to become the founding members of the North Atlantic Treaty Organisation (NATO), with a lesser amount going towards the former Axis and neutral nations.

The largest recipient of Marshall Plan money was the United Kingdom (receiving about 26% of the total), followed by France (18%) and West Germany (11%). Some eighteen European countries received Plan benefits. Although offered participation, the Soviet Union refused Plan benefits, and also blocked benefits to Eastern Bloc countries, such as Hungary and Poland. 

The table below highlights the amount each country received as per the Marshall Plan:

Distribution of aid from the Marshall Plan

Country 1948/49 ($ millions) 1949/50 ($ millions) 1950/51 ($ millions) Cumulative ($ millions)
Austria 232 166 70 468
Belgium 195 222 360 777
Denmark 103 87 195 385
France 1085 691 520 2296
Greece 175 156 45 376
Italy 594 405 205 1204
Luxembourg 195 222 360 777
Netherlands 471 302 355 1128
Portugal 0 0 70 70
Sweden 39 48 260 347
Switzerland 0 0 250 250
Turkey 28 59 50 137
United Kingdom 1316 921 1060 3297
West Germany 510 438 500 1448
Total 4924 3652 4155 12,731

What was the outcome of the Marshall Plan?

From 1946 to 1952, Europe saw its fastest economic growth unparalleled in its history with industrial production peaking at 35%. Even agricultural output exceeded compare to that of pre-war levels. This time period also saw the end eliminated food shortage which was rampant following the end of World War II. Western Europe embarked upon an unprecedented period of growth and recovery which saw the standard of living rise over the next two decades. Additionally, the long-term effect of economic integration raised European income levels substantially, by nearly 20 % by the mid-1970s. There is some debate among historians over how much of these figures can be (or should be) credited to the Marshall Plan.

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The political implications of the Marshall Plan included ending austerity methods which reduced discontent and largely negated the popularity of communist parties in Western Europe. As such, it can be said that the Marshal Plan enured that communism faded away from Western Europe. The trade relations fostered by the Marshall Plan gave way to the creation of NATO that would form one of the two blocs of the Cold War. The additional implication was that the European continent stood more divided more than ever since the First World War, symbolised by the non-participation of the Eastern Bloc

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The Marshall Plan played a decisive role in European integration since it established guidelines to strengthen integration among European nations for continued peace and prosperity of the continent. But the effects failed and instead, the focus would now be on economic cooperation. Rather, it was the separate European Coal and Steel Community, which did not include Britain, that would eventually grow into the European Union. However, the OEEC served as both a testing and training ground for the structures that would later be used by the European Economic Community. 

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