Divide and Invest

The Marshall Plan was the most successful U.S. foreign policy program of the Cold War, and arguably the most successful in all of U.S. history. In France, Italy, the United Kingdom, West Germany, and beyond, the plan’s $13 billion in aid expedited economic recovery, buoyed morale, and eroded the appeal of communism. All that is well known. But what is often forgotten is that the Marshall Plan also ratcheted up Cold War tensions. By spurring the economic revival of the western occupation zones in Germany and their eventual merger into the country of West Germany, it rekindled fears across the continent, east and west, about the specter of renewed German power. That, in turn, led to the establishment of NATO and the division of Europe.

These are the themes of Benn Steil’s well-crafted new book, The Marshall Plan: Dawn of the Cold War, which puts the initiative in grand strategic perspective. Steil, a fellow at the Council on Foreign Relations, argues that although the Marshall Plan was a strategic success, it also contributed mightily to the evolving Cold War. What is more provocative, he shows that key U.S. policymakers—such as Secretary of State George Marshall, the plan’s namesake, and George Kennan, the head of the State Department’s new Policy Planning Staff—understood that the initiative would trigger a Soviet clampdown in Eastern Europe and solidify the division of the continent. According to Steil, the administration of President Harry Truman was wise to accept this unhappy tradeoff. The Marshall Plan worked, Steil concludes, “because the United States aligned its actions with its interests and capacities in Europe, accepting the reality of a Russian sphere of influence into which it could not penetrate.”

POSTWAR PLANNING

Steil attributes the realism that infused U.S. strategic thinking during this period to a growing interest in geopolitics and the influence of such thinkers as the British geographer Halford Mackinder. That is true, but even more important were the lessons that the United States had just learned from waging war against Nazi Germany and militaristic Japan. In 1945, two years before Marshall announced that the United States was willing to contribute to a European recovery program, some of the country’s most renowned experts on international relations—Frederick Dunn, Edward Mead Earle, William T. R. Fox, Grayson Kirk, David Rowe, Harold Sprout, and Arnold Wolfers—authored a study for the Brookings Institution in which they found that the country’s overriding national security imperative was to prevent any adversary or coalition of adversaries from gaining control of Eurasia. The great lesson of World War II, they argued, was that enemies that could harness the resources, industrial infrastructure, and skilled labor of all of Europe and Asia might also be tempted to attack and wage a protracted war against the United States. Military planners went so far as to turn the study into a classified official document of the Joint Chiefs of Staff.

In the spring of 1947, what U.S. officials feared most was not Soviet military aggression. They worried even more about the economic challenges, social turmoil, and political disarray facing Western Europe, which were occurring at the same time that the Soviet Union was establishing a domineering presence in Eastern Europe. Communist parties already enjoyed strong support in France and Italy, and a veritable civil war was under way between the left and the right in Greece. In the middle of Europe, Germany was divided into four occupation zones, its recovery thwarted by wartime agreements regarding reparations and limits on industrial production and by growing disunity among the victorious powers. In particular, France and the Soviet Union feared Germany’s resurgence and wanted to control key parts of its industrial infrastructure in order to keep the country weak. But without German coal, steel, and machinery, the rest of Europe could not easily recover. As conditions continued to deteriorate, U.S. policymakers began to worry that the Kremlin might be able  to achieve hegemony over all of Europe without firing a single bullet.

Most experts at the time understood that a key part of the problem was the “dollar gap”: many countries did not have enough hard currency to purchase the food and fuel they needed to import for reconstruction. Frigid temperatures and heavy snows in the winter of 1947 exacerbated these shortages. Forced to improvise, governments established quotas for imports, controls on foreign exchange, and bilateral agreements to trade by bartering. Throughout Europe, autarky spread, and government planning took root. In the United Kingdom, the Labour Party nationalized major industries and created a comprehensive welfare state, which magnified the country’s financial challenges. With London looking to economize abroad, British diplomats told their American counterparts in February 1947 that the United Kingdom would withdraw from the eastern Mediterranean, leaving a power vacuum in Greece and Turkey. Across the world, liberal capitalism and open markets seemed imperiled.

TAKING ACTION

At the center of Washington’s response to these challenges was a remarkable group of U.S. policymakers, diplomats, and generals: Marshall, Kennan, Dean Acheson, Lucius Clay, William Clayton, W. Averell Harriman, and Robert Lovett. These leaders had absorbed the lessons of the past, and they grasped the intersecting economic, financial, and strategic problems before them. After talking with Stalin in Moscow in April 1947, Marshall concluded that deliberation and negotiation meant procrastination, and that procrastination meant defeat. Stalin, he intuited, was biding his time, waiting for conditions to worsen in Western Europe, and hoping to capitalize on the deterioration. The United States had to take action. When he returned from Moscow, Marshall ordered Kennan and the Policy Planning Staff to devise a program for European recovery. And in June, Marshall introduced this new U.S. strategy in a commencement address at Harvard University.

In his retelling of the story of the Marshall Plan, Steil makes an important contribution by emphasizing the U.S. role in Germany’s recovery and the political and strategic consequences that flowed from it. Marshall and his colleagues understood that the western zones of Germany were vital to the overall reconstruction of Europe, since German coal, in particular, was necessary to fuel industrial production elsewhere. Indeed, Kennan’s first priority was to boost coal production in the Ruhr Valley. A few weeks after Marshall’s Harvard speech, the Joint Chiefs of Staff issued a new directive mandating that the occupation zones in Germany become self-supporting. This meant boosting the level of industrial production in the western zones of Germany, suspending the obligation to pay reparations to the Soviet Union, and, in effect, casting aside the Potsdam agreement of August 1945. In a memo they signed in July 1947, the U.S. secretaries of war, state, and the navy stated: “It is assumed that Germany must cooperate fully in any effective European plan, and that the economic revival of Europe depends in considerable part on a recovery in German production—in coal, in food, steel, fertilizer, etc., and on efficient use of such European resources as the Rhine River.”

In his retelling of the story of the Marshall Plan, Steil makes an important contribution by emphasizing the U.S. role in Germany’s recovery and the political and strategic consequences that flowed from it.

U.S. policymakers doggedly pursued Germany’s revival. Steil describes Clay, the military governor of the U.S. zone of occupied Germany, as “a dictator.” “He was a benign one by any reasonable standard, but a dictator nonetheless,” Steil writes. Clay was determined to see Germany committed to capitalism and integrated into the Western European economic orbit. If this meant dividing the country, so be it. If it meant losing Czechoslovakia and Poland to the Soviet bloc, so be it. U.S. officials were playing a strategic game, making sacrifices to pursue their priorities. In so doing, they were prepared to accept a long Cold War.

At the same time, Kennan and Marshall decided to extend the offer of aid to all European countries, including the Soviet Union. In his Harvard speech, Marshall said that the initiative was not aimed at any country or doctrine but merely intended to combat “hunger, poverty, desperation, and chaos.” This phrasing was shrewd. Presented as an anti-Soviet measure, the plan might have antagonized key constituents in Europe on whose support its success depended. But by conditioning participation on a set of principles that Stalin could not accept—because they would mean the revival of the western zones of Germany and the opening of Eastern Europe to trade and capital investment—U.S. policymakers were able to guarantee that the Soviets would not be able to sabotage the initiative from within. According to Steil, Kennan calculated that Stalin would reject collaboration, forbid his minions in Eastern Europe from cooperating, and clamp down in his sphere of influence.

Like many recent scholars who have studied Soviet foreign policy, Steil uses Russian sources to show that until the rollout of the Marshall Plan, Stalin was interested in sustaining some minimum form of cooperation with the West. The initiative took the Soviet leader “by surprise,” Steil writes. Stalin had “not yet concluded that cooperation—or his version of it—was at an end.” Now, however, the Soviet leader was faced with the specter of a German revival and Western penetration of his sphere of influence in Eastern Europe. “Forever traumatized by the Nazi invasion of 1941,” Steil emphasizes, Stalin “was determined never again to leave his country vulnerable to German military capacity and intentions.” As Kennan had predicted, Stalin orchestrated a communist seizure of power in Czechoslovakia, imposed more controls elsewhere, and blockaded Berlin. He wanted to thwart currency reform in the western zones and pressure Washington, London, and Paris to reverse their decision to boost industrial production and form West Germany. He failed.

ALLIANCE REVISITED

By blockading Berlin, which was already divided into separate sectors and was located deep inside the Soviet zone, Stalin precipitated the first great crisis of the Cold War and impelled Washington to reconsider its approach. The Marshall Plan was initially intended to avert U.S. political commitments and strategic obligations by spurring European recovery and undercutting support for popular communist parties. But it soon became evident that the plan might provoke war in the short term or leave Western Europe vulnerable to Soviet conquest in the long term. The French made clear that they would not accept U.S. or British initiatives in western Germany without security guarantees. They feared that these actions might provoke a Soviet attack, and they worried about the long-term consequences of a revived Germany.  

The North Atlantic Treaty, which established NATO, was a direct consequence of the Marshall Plan. With their strategy for European recovery imperiled by French intransigence, Marshall, Acheson, and Truman decided to assume entanglements that they had previously eschewed. As Steil argues, the Marshall Plan was fundamentally a geopolitical initiative to prevent Moscow from dominating Europe. U.S. policymakers recognized that Soviet hegemony on the continent would lead to new demands inside the United States for greater defense spending, more government control over the U.S. economy, increased monitoring of domestic subversives, and other infringements on basic freedoms. Concerns about the growth of communist power abroad and the prospect of a future war would likely result in more surveillance of dissidents, critics, and minorities, as it had just before and during World War II. With the American way of life at risk, even Thomas Jefferson’s proscription against “entangling alliances” no longer held sway.

What is interesting and important in Steil’s account is his emphasis on U.S. initiative. When Acheson succeeded Marshall as secretary of state, in 1949, he “pushed Kennan’s early containment ideas into the realm of offense.” Acheson, Steil writes, “was determined to challenge Moscow on every front—political, economic, and military—after first creating ‘situations of strength.’” Steil does not argue that the United States caused the Cold War or that it could have been avoided if Washington had followed an alternative course. But he does say that the Marshall Plan “accelerated and intensified” existing tensions. 

Still, Steil praises the Marshall Plan abundantly. He argues that the aid hastened economic growth, rejecting the claims of economic historians such as Alan Milward, who have maintained that Western European recovery would have occurred without the Marshall Plan. And Steil agrees with scholars such as the historian Michael Hogan, who have described how U.S. policymakers skillfully adapted to accommodate the preferences of French and Italian governments. Washington’s priority was thwarting the communist left in Europe, not promoting financial stability or boosting U.S. exports.

LESSONS FOR TODAY

In his concluding chapter, Steil draws some surprising comparisons between the 1940s and the post–Cold War years. Rather than focusing on the prospects of a reconfigured Marshall Plan for Mikhail Gorbachev’s or Boris Yeltsin’s Russia, Steil emphasizes the misguided strategic thinking of U.S. officials over the past quarter century. Quickly dismissing the idea that a huge economic aid program could have worked without inappropriate intrusion into Russia’s domestic life, Steil dwells on U.S. support for the expansion of NATO. Steil writes that U.S. President Bill Clinton and his advisers naively challenged Russia’s security perimeter, not realizing that “each inch of eastward expansion was bound to increase Russian distrust of the West.” Whereas the architects of the Marshall Plan and NATO “acknowledged that a line was being drawn, and were willing to bear the necessary costs to defend it,” the Clinton administration “was denying the line’s existence.” As Steil concludes, “Great acts of statesmanship are grounded in realism no less than idealism. It is a lesson we need to relearn.”

But defining what constitutes “realism” is always a daunting challenge. Steil suggests that the United States must realistically accept a Russian security sphere in Europe. “Radical changes in Russia’s external environment were bound to have security implications,” he writes. But where do legitimate Russian interests cease, and where should realistic redlines be drawn today? Realism in 1947 clearly meant safeguarding Western Europe and western Germany from Soviet domination, but what constitutes realism now when it comes to the Baltic states, Crimea, and eastern Europe? Steil (understandably) does not answer these confounding questions with the specificity readers might crave. 

Nonetheless, his careful analysis of the Marshall Plan illustrates what it takes for an administration to reboot its foreign policy after a disastrous start. Truman’s first 20 months in the White House were disappointing. The new president, by his own admission, was ill prepared to lead the country after President Franklin Roosevelt’s death. More often than not, Truman was frustrated and confused. His advisers fought with one another, and his first secretary of state, James Byrnes, seemed to deliberately keep him in the dark. Meanwhile, spiraling inflation and massive labor strife eroded his popularity. In an October 1945 letter, Truman wrote, “The Congress is balking; labor has gone crazy; management is not far from insane in selfishness. My Cabinet, at least some of them, have Potomac fever. There are more prima donnas per square foot in public life here in Washington than in all the opera companies ever to exist.” 

Yet after the Democrats’ devastating defeat in the 1946 congressional elections, Truman recalibrated. He appointed a new secretary of state, and Marshall, ably assisted by Acheson and others, created an orderly policy apparatus, led by Kennan’s Policy Planning Staff. Through careful study, these policymakers came to the conclusion that the real threats to U.S. interests in Europe were economic disarray and political upheaval, not Soviet military capabilities. They set U.S. priorities accordingly: reconstructing and integrating Western Europe, reviving and unifying the western zones in Germany, and thwarting the rise of the European left. They grasped the costs: a division of Europe, the “loss” of China, and an intensifying Cold War. To implement their strategy, they worked tirelessly to establish a collaborative bipartisan relationship with Senator Arthur Vandenberg of Michigan, the Republican chair of the Senate Foreign Relations Committee, without whose help the Marshall Plan would not have passed. Recognizing the importance of public opinion, they launched a massive public relations campaign and knowingly manipulated anticommunist slogans to mobilize support. They carefully crafted a budget that accounted for their foreign policy initiatives and placed appropriations for reconstruction ahead of funding for rearmament. And when it became necessary, they changed their approach, grudgingly accepting the need for strategic commitments and the consummation of the North Atlantic Treaty. That is what it took to make the Marshall Plan a success.