Pitched Unfairly

European Recovery Program Office of the Secretary of State · Washington

A cure, not a palliative.

A four-year recovery plan for Western Europe, written by Western Europe.

Recovery plan · Harvard Yard · June 5, 1947

ERP / 02 / The situation

Two years on, Europe still can't pay its way.

Daily diet, most Europeans
1,500 calories or less
Winter of 1946 to 1947
Drought, then frost, took the wheat

1947, as a share of 1938

Farm output 83
Industrial output 88
Exports 59

ERP / 03 / Root cause

The rubble isn't the root cause. The circle is.

"This visible destruction was probably less serious than the dislocation of the entire fabric of European economy."

George C. Marshall, Harvard, 1947
The dollar gap Europe spends its dollars staying alive

01Factories lack fuel and parts

02Shops have nothing farmers want

03Farmers keep grain and feed it to stock

04Cities go short of food

05Dollars go on food, not machines

Aid breaks
it here

ERP / 04 / Goal and time frame

One goal, one deadline, and an end date written into law.

Goal: Europe "independent of extraordinary outside economic assistance." Economic Cooperation Act, Sec. 102

Act signed 1948/49 Apr 1948 Food, fuel, fertilizer
Congress votes again 1949/50 Jul 1949 Machines and raw materials
Congress votes again 1950/51 Jul 1950 Trade and payments
Congress votes again 1951/52 Jul 1951 Wind down
Closes June 30, 1952

ERP / 05 / Who writes the plan

Europe wrote the plan. Washington edited the number.

"This is the business of the Europeans. The initiative, I think, must come from Europe."
  1. Jun 5, 1947Marshall speaks at Harvard
  2. Jul 2Molotov leaves the Paris talks
  3. Jul 12Sixteen nations meet as the CEEC
  4. Sep 22Their report goes to Washington

$22.4 B

Europe asked

CEEC report, Sep 1947

$17 B

Truman asked Congress

Dec 1947

$13.3 B

Europe received

Apr 1948 to Jun 1952

ERP / 06 / The pillars

Four pillars. Production carries the weight.

  1. 02Financial stabilityStable currencies, a valid exchange rate, balanced budgets.
  2. 03TradeMore exchange between members, lower tariff barriers.
  3. 04CooperationOne joint organization and one follow-up system.

01 Production

  • Coal
  • Steel
  • Transport
  • Food

Named in every bilateral agreement, in this order.

ERP / 07 / Funding

$13.3 billion. Europe split it.

Recipient

United Kingdom

$3.19B23.9%of the total

Click a country

ERP / 08 / Conditions

The aid has conditions, and gets spent twice.

  1. DollarsECA pays the US supplier for wheat, coal, machines
  2. Francs, lire, marksThe buyer in Europe pays in local currency
  3. Special accountThe government reinvests it, with ECA approval

95% rebuilds at home 5% covers US admin costs

Department of State
Memorandum

To
Each participating country
Re
Bilateral agreement, Sec. 115(b)
Due
Within three months
  • Raise output of coal, steel, transport and food
  • Stabilize the currency and balance the budget
  • Cut trade barriers with the other members
  • Pay local currency for grant goods into a special account
  • Report to Washington every quarter
  • Open the books on request
Conditions apply

ERP / 09 / Governance

Europe proposes. Washington approves. Everyone reports quarterly.

National programsProposed splitAppropriatesNegotiatesQuarterly reportsCoordinatesQuarterly, via the PresidentReports
80th CongressFunds 12 months at a time. Joint watchdog committee.
ECA, WashingtonPaul Hoffman, cabinet rank. Approves programs.
Special RepresentativeAverell Harriman, Paris. Ambassador rank.
OEEC, ParisEurope's own body. Proposes the split, checks progress.
ECA mission, each capitalRanks right after the ambassador.
Participating governmentsWrite programs. Sign agreements. Run special accounts.

ERP / 10 / Milestones

Prewar output, passed in 1949.

Western Europe, 1951

132+32%

Industrial output, prewar 1937 = 100

Prewar 95107119132
  1. 1948ECA and OEEC open
  2. 1949Prewar output passed
  3. 1950Payments Union opens
  4. 1951Nearly a third above prewar

ERP / 11 / Risks

Four risks on the register. Two of them happened.

RiskOwnerMitigationStatus
Moscow says no Bevin and Bidault Invite the Soviets anyway. Proceed with or without them. Happened Molotov walks, Jul 2, 1947
Congress calls it "Operation Rat-hole" Sen. Vandenberg Fund twelve months at a time, add a watchdog committee, hire a car executive to run it. Passed 17 senators vote no
Aid feeds inflation Each finance ministry Park local currency in special accounts until it funds agreed projects. Contained Counterpart funds
Rearmament eats the budget Unassigned None in the plan. Happened From 1950, Korea

ERP / 12 / The ask

Twelve months and $5.3 billion to start. Then we report back.

  • $4.3BGrantsAuthorized for the first twelve months
  • $1BLoansThrough the Export-Import Bank
  • 16Co-authorsThe nations that wrote the plan

ReturnAn assured peace.

Signed into law April 3, 1948