The Ethics of the European Recovery Program (The Marshall Plan)
The Problem
The scene in Europe following WW II was one of starvation. Farmland and the infrastructure needed to transport food had been destroyed and many famers were among the twenty million killed in the war. In the years of 1946-1947, the Soviet Union alone lost two million to starvation. Combined with the horrible winter of 1946-1947, these factors meant that most of Europe was entering into a famine.
The scene in Europe was also one of poverty. Industrial output was severely limited following WW II. Nearly all factories had been damaged, and what factories were left often could not find workers, as they had been killed, hurt, of rendered too weak by starvation to work. Most nations in Europe (everyone but Switzerland and Portugal) could not do anything to fix this, as tax revenue was significantly reduced because of economic and industrial output crashing. Additionally, countries spent significant portions of their net national wealth on the war effort and accumulated enormous national debts.
Another crisis was brewing politically. The Soviet Union had established puppet states in Eastern and Middle Europe, and it forced those countries to adopt communism. Furthering the Crisis for America, more and more western European nations were also looking like they might turn to communism to fix their dire economic situation, which would massively increase the Soviet Union’s geopolitical power. America viewed this as a threat. It feared that its European allies would fall to communism if the communist countries recovered faster.
The three problems that the world faced were European starvation, European poverty, and Communist expansion in Europe. The stakeholders were Western European Civilians, Soviet Civilians, America, the Soviet Union, and European Governments.
Solution
To solve the three problems of starvation, poverty, and Communist expansion, America deployed the European Recovery Program (also known as the Marshall Plan). The ERP had a four-fold purpose: it would raise industrial production 30% above 1938 levels, it would raise agricultural production 15% above 1938 levels, it would combat the expansion of Communism with economic and political stability, and it would expand trade (Congressional Research Service, p. 16). Any European nations that wanted to participate could, including the Soviets and their puppet states.
To achieve its ends, the ERP created a series of programs. The program of Dollar Aid gave hard currency to European nations for the purpose of buying commodities, such as food, fuel, and machinery (THE ECONOMIC COOPERATION AUTHORITY). Also, a small part was used to rebuild European infrastructure. The Dollar Aid Program over its four-and-a-half-year life span distributed 11.7 billion dollars (some 134 billion today).
Another program was the counterpart fund. The fund was controlled and financed by the European governments and provided for their most pressing needs (Economic Cooperation Administration, p. 5). For every dollar of ERP aid a country received, it had to deposit an equivalent amount of its own money into the counterpart fund. Of the counterpart fund, 40% went towards transportation and communication, 14% in agriculture, 16% in manufacturing, and 14% in low-cost housing, the remainder being miscellaneous (Congressional Research Service, p. 12). The fund reached a maximum of 8.6 billion dollars (some 98.7 billion today).
The last significant program was the technical assistance program. It financed the “Americanization” of the factories in Europe. The American mode of manufacture produced much more than the European one (it took four times as long to produce inferior products in European factories according to a Senate statement report) (Committee on Appropriations, p. 3.). To update the factories in Europe, America sent private industry CEOs and managers. They met and consulted with the Europeans, conducted management seminars, and hammered out business deals with the newly efficient Europeans. In sum, they taught Europe how to boost productivity and streamline operations. Although less than 1% of the total plan went to this project, it is believed that this was one of the most effective aspects of the ERP.
Results
The ERP’s Positive Results
Of its four goals, the ERP succeeded in increasing Industrial output, expanding trade, and containing communism through economic and political stability. However, it failed to meet its agricultural goal, falling 4% short (Brown and Opie, p. 249-255). In sum, the ERP was a resounding success. Compared to 1948, industrial production rose 55% and agricultural production rose 37% by 1951 (Congressional Research Service, p. 16). Per capita food consumption reached pre-war levels by the ERP’s end in all countries that took part in the ERP, however, this food was mostly imported from America as Europe still could not completely grow its own food.
The plan restricted communism by ending the debate surrounding whether Communism or Capitalism would recover faster. Where most of Europe was back to semi-normal by 1951, the Communist nations were still starving, had millions homeless, and the Soviet Union’s puppet states were being exploited to help the Soviet Union recover. The Soviets literally took the factories, everything from the bricks to the heavy machinery, and transported them to the Soviet Union to ease recovery. European civilians saw this and as a result, almost 84% of Europeans by 1951 were pro-capitalism (Committee on Foreign Relations, pgs. 22-24.). Because of the ERP, the Soviet Union lost its political sway over most of Europe.
The ERP’s Negative Results
When the ERP went into effect, it was clear to Stalin that he had to deploy a plan to compete with America or risk the loss of Soviet puppet states to the ERP. He came up with COMECON. This “economic” plan was meant to increase trade and to be a boon to communist economic growth. However, it was a disaster. It allowed different governments to set prices for all goods without any bearing on their market value and without consulting each other. Since all governments in the Soviet Block picked different prices for the same goods, all trade based on currency stopped. Governments then began trading goods for goods on a barter basis and exported more goods to the rest of the world so they could maintain their economies. Stalin was not happy with the effects of the plan, and he blamed foreign trade. He “encouraged” all members of COMECON to cease all trade with any nation not in COMECON. Surprisingly enough, this caused significant issues. Overall, COMECON greatly increased the dictatorial power of Stalin and other communist leaders, to the detriment of the people.
Moreover, the way America managed the implementation of the ERP with regards to the Soviet Union is pointed to as what started the Cold War. Even though Marshall himself said, “our policy is not directed against any country, but against hunger, poverty, desperation and chaos,” the communist leadership suspected that this was a plan directed at hurting the Soviet Union (George Marshall, 1957). Although this might not be exactly true, America did little materially to assuage their concerns and ignored Soviet input to the ERP, thus confirming what the leaders of the Soviet Union suspected, at least in the eyes of the Soviets. The Cold War, including all the civil wars and famines it caused, killed around twenty million people, or the same number of Europeans that died in WW II.
Analysis
The Ethical Aspect of the Decision to Act
The decision to act was created by cooperation between Congress and the Executive Branch, spearheaded by Secretary of State Marshall, who was the first to suggest a plan was needed in a 1947 speech (George Marshall, 1957). He was clear that the President and Congress would need to work closely together to see it through. He claimed that the situation is Europe was so dire that America must act. In congress, the ERP was appreciated because of the double effect of helping European nations recover and stopping the spread of Communism. The American government and European governments began hammering out a deal immediately.
This decision-making process seems ethical to me. It was not the closed-door type of action that led to the nuclear bombing of Japan, rather, it included a rich national debate between elected officials. Americans chose leadership who chose to spend tax money on European economy, with the support of the American civilians. In an ethically deficient decision-making process in the American government, one would expect to see something that seems obviously unethical to us, such as not consulting the American people about whether the nuclear bombs should be dropped or a president declaring war without congressional approval or any input by the people. Since America is a republic, a decision-making process must only consult the people or the people representatives in congress to be ethical, regardless of what the decision may be, the decision-making progress is ethical if this criterion is observed.
The Ethical Aspect of the ERP
To determine if the ERP was ethical, we can analyze it through Kantianism, Ethical Egoism, and Utilitarianism. Into that analysis can be weighed the Cold War and the role of the ERP’s in starting that war.
Kantianism would, unsurprisingly, approve of the ERP. Kant’s categorical imperative asks three questions. First, are we using people as mere means? In the case of the ERP, America was not using anyone as mere means, as America was helping Europe at the same time it was stopping Communism. The second question we must ask is whether universalizing that maxim causes a contradiction. The maxim of America’s action can be viewed two ways: either it is meant to stop starvation and suffering, or it is meant to compete with the Soviet Union. It is generally accepted that if America created the ERP while the communist threat didn’t exist, it would not have been as extensive. Thus, the maxim of America’s action is that “it is okay to throw huge amounts of resources into a staving economy to stop the spread of Communism.” This maxim does not cause a contradiction, so it is ethical according to that question. The third question is whether we would want to live in a world where the maxim of our action becomes a universal law. On this question I, with the benefit of hindsight, would still have answered yes. However, if I had lived then, I don’t believe I would have agreed that the ERP is ethical if I learned that it would start the Cold War and lead the world to the brink of World War again. Surely if Europeans (who had just gotten out of a major war) knew that their continent was yet again having battle lines drawn on it, they would have rejected the ERP (O’Brien). It doesn’t seem to matter to Kantianism what the end is. So, even if the ERP caused the Cold War, Kantianism would still agree with it. This seems unreasonable, until we remember that Kant would have us tell the truth regardless of what happens when we tell the truth. Kantianism would claim that the ERP is ethical because it is in accordance with his categorical imperative.
Ethical Egoism is another framework we can analyze ERP through. For Ethical Egoism, only actions that benefit your own self-interest have moral worth (Rachels, 73). This does not mean that actions must only serve your own interests, it simply means that what makes an action ethical is its benefit to the doer (Rachels, 73). This doctrine of self interest makes sense when we look at the ERP. European nations and America benefited greatly. America benefited because it prevented the spread of Communism and American trade with Europe increased significantly. In 1947, ERP countries imported 14% of their commercial (as opposed to military) imports from America, but by 1952, almost 50% of all ERP countries commercial imports came from America. This seems to be a net gain for America. However, one could argue that it hurt America by giving away too much money, as the American government’s budget was only 30 billion in 1948. The thirteen-billion-dollar plan does not seem hard for the American government today who spends six trillion dollars a year, but back then, it made the American government drop other priorities. However, some things that were needed desperately a few years ago were no longer needed. For example, the 71% of government spending that America put towards in war machine for WW II. As it was winding down, funds from it were diverted to the ERP, meaning America did not have to draw its funds from a place that would negatively affect it. Ethical Egoism doesn’t care about the deaths from the Cold War or the fact that Stalin used the ERP as an excuse to worsen the lives of his people. The only way the ERP can be ethical is if it benefited America overall, and it did. Thus, Ethical Egoism supports the ERP.
To see if the ERP is ethical according to Utilitarianism, we can lay out its pros and cons and attempt to decern if more suffering or happiness resulted, the pros being the things that increase happiness and the cons being the things that decrease happiness, while giving everyone’s happiness equal consideration. First, the pros of the plan.
One pro is that thousands if not millions of Europeans avoided starvation. As mentioned previously, the Dollar Aid program provided money for Europeans to eat and supported the reconstruction of infrastructure that is critical for the transportation of food. Obviously, this greatly increase the happiness of the roughly 270 million Europeans living on the continent, as you can’t be happy if you starve.
Another pro is the economic growth in Europe. with the 55% rise in industrial production, the European economy boomed back to life, reaching its previous GDP only four years after the end of the war. Even the American promise of this increase in prosperity greatly increased European happiness. As George Kennan noted, “The psychological success at the outset was so amazing…” (Mee, p. 246).
Another pro is America’s economic growth. The recovering European economy had limited ability to make their own goods, and now had the resources to spend on food, fuel, and machinery that America could produce. This helped America transition from a militarized economy back to a civilian economy without the negative effects that occurred during the first World War, namely there was no economic depression following WW II, largely because demand was kept up because America created another market to sell goods in.
There were significant negative aspects to the plan as well.
One con is that Stalin reacted to the ERP by increasing his control on his people and causing widespread suffering among them. As mentioned in Results, COMECON significantly hurt the economy of the Communist nations. COMECON also caused suffering by “encouraging” COMECON nations to not trade with non-COMECON nations. Since Utilitarian view all human happiness as equal, it is also important that COMECON influenced 450 million civilians while the ERP only had, excluding America who didn’t really need help, 270 million. If the suffering of those 450 million was severe enough, COMECON alone could make the ERP unethical.
Another con is that the way America executed the plan caused what most historians see as the start of the Cold War. Sam O’Brien, a noted Cold War scholar, says that most historians “see the plan as playing a central role in the emerging Cold War struggle, and some even claim that it intentionally contributed to the tensions that shaped the Cold War” (O’Brien). This war killed twenty million, displaced millions more, and resulted in several genocides. Although the ERP alone didn’t cause the Cold War, its influence cannot be denied. If America had handled the ERP differently, the Cold War could have been less deadly.
When viewed through Utilitarianism, it seems the ERP had more significant cons than pros. This conflicts with common sense, however, but that is expected with Utilitarianism. Utilitarianism does not consider motives. Thus, actions that seem ethical at the time, such as helping a starving continent, can be unethical later if the results cause pain, such as COMECON. Additionally, even though America was not responsible for the Soviet’s actions, the con of the Soviet’s actions still taints the ERP’s ethicality.
All these ethical frameworks considered; we can safely say that the ERP was (for the most part) ethical.
What Could be Done Differently in the Future
However, the ERP was not perfect. While the deal itself was appropriate for the situation America found itself in, America’s execution of it antagonized the Soviets in a situation where relations could have been improved. If a similar situation happens today, I would suggest that to fix the ERP, we simply should make it ethical according to Utilitarianism. Out of the three frameworks I analyzed, only Utilitarianism suggests the ERP lacks moral worth. Inclusion of the Soviet Union and its puppet states in the ERP would solve this.
Technically, the Soviet Union was invited to negotiate the ERP. However, America knew that the Soviets would not accept money from America. In fact, contemporaries believed that if the Soviet Union asked for assistance, Congress would not have passed the ERP.
I would advise foreign policy makers to work with the Soviets regarding the ERP. They wanted to make two changes to the bill. First, they wanted to lower the aid amount that went to Germany and second, they wished to be given complete control of all funds that East Germany would receive. These two demands would have significantly harmed the people of Germany, who to this day still benefit from loaning out the money they received. However, America continuing with the ERP without Soviet support confirmed to Stalin that America was out to create an “anti-Soviet” block. If there was a chance that by working with the Soviets, the the Cold War could have been avoided, then the net happiness of all people would increase even if Germany suffered.
One of the cons, COMECON, would be eliminated by working with the Soviet Union instead of ignoring their demands. The Cold War would continue, but it might be less intense because the Soviets would not see America as completely uncompromising.
References:
Congressional Research Service. (2018, January 18). The Marshall Plan: Design, Accomplishments, and Significance.
THE ECONOMIC COOPERATION AUTHORITY. The George C. Marshall Foundation. (n.d.). Retrieved from https://www.marshallfoundation.org/marshall/the-marshall-plan/history-marshall-plan/economic-cooperation-authority/.
Economic Cooperation Administration. COUNTERPART FUNDS: Europe's Contribution to the Marshall Plan.
Committee on Appropriations. Conditions in Europe in the Spring of 1951. U.S. Senate.
Brown, W. A., & Opie, R. (1957). American Foreign Assistance. Brookings Inst.
Committee on Foreign Relations. United States Aid Programs in Europe. U.S. Senate.
(The "Marshall Plan" speech at Harvard University 5 June, 1947. OECD. (n.d.). Retrieved December 9, 2021, from https://www.oecd.org/general/themarshallplanspeechatharvarduniversity5june1947.htm.
Mee, C. L. (1985). The marshall plan: The launching of the pax americana. Simon and Schuster.
O’Brien, S. (2014, April 23). Questioning the marshall plan in the buildup to the Cold War. Inquiry Journal. Retrieved December 9, 2021, from https://www.unh.edu/inquiryjournal/spring-2014/questioning-marshall-plan-buildup-cold-war.
Rachels, S., & Rachels, J. (2020). The elements of moral philosophy (9th ed.). McGraw-Hill Create.