Marshall Plan

DEFINITION of 'Marshall Plan'

The Marshall Plan was a U.S.-sponsored program implemented following World War II to aid European countries that had been destroyed as a result of the war. It was laid out by U.S. Secretary of State George Marshall during an address at Harvard University in 1947. The plan was authorized by Congress as the European Recovery Program (ERP).

BREAKING DOWN 'Marshall Plan'

The Marshall Plan gave more than $13 billion in aid to European nations and was key in revitalizing their post-war economies. By the time U.S. funding ended in 1951, the economies of all the European recipients had surpassed pre-war levels. For this reason, the plan was considered a success. The cornerstone of the Marshall Plan lay in a simple concept. The secretary of state believed the stability of European governments depended on the economic stability of the people. Europe needed to rebuild transportation hubs, roads, agriculture, factories and cities that suffered major losses during the long war. The United States was the only major power that had not suffered damage during the war. It made sense that America step in to help rebuild.

Marshall also saw communism as a threat to European stability. The Soviet Union's sphere of influence increased during World War II, and tensions between eastern and western Europe intensified. The Soviet Union believed the Marshall Plan was a way to meddle in internal affairs of European countries. That belief prevented Poland and Czechoslovakia from accepting assistance from the United States.

Implementation

The $13 billion plan started with shipments of food and staples to European ports in the Netherlands and France. Tractors, turbines, lathes and other industrial equipment, and the fuel to power the machines, arrived soon afterward. Between 1948 and 1951, as much as 3% of what Americans produced went to the recovery effort in Europe. Accounting for inflation, the $13 billion aid package was worth $88 billion 50 years after Congress approved the plan.

The Marshall Plan was more than an economic one. The secretary of state thought the cooperation of all European nations would lead to greater unity. The foundations of the plan led to the creation of NATO as a defensive alliance against any future aggressors. Marshall earned the Nobel Peace Prize in 1953 for his efforts, but the lasting effects of the plan went well into the future.

Effects

The reliance on American aid opened up trading avenues between Europe and the United States. The call for unity among European nations formed the basic idea behind the European Union. Without American intervention, Europe's vast network of railroads, highways and airports would not exist in contemporary society. As President Harry Truman said, the United States was the "first great nation to feed and support the conquered."

RELATED TERMS
  1. The Marshall School Of Business ...

    The business school at the University of Southern California. ...
  2. Foreign Aid

    Foreign aid is money that one country voluntarily transfers to ...
  3. European Monetary System - EMS

    A 1979 arrangement between several European countries which links ...
  4. War Damage Insurance Corporation

    A government financial protection arm created during World War ...
  5. European Economic and Monetary ...

    The successor to the European Monetary System (EMS), the combination ...
  6. European Financial Stability Facility ...

    An organization created by the European Union to provide assistance ...
Related Articles
  1. Markets

    The Marshall Plan and the Revitalization of Post War Europe

    The Marshall Plan helped revive the economies of Western Europe after WWII largely by reforms that created greater economic cooperation in the region.
  2. Markets

    The German Economic Miracle

    After World War II, Germany was in ruins. Learn about the country's quick rise to the third strongest economy in the world.
  3. Personal Finance

    The Worst Things That Can Happen If You Don’t Pay Your Student Loans

    You may not get U.S. marshals knocking at your door, but why tempt fate? If you fall behind on payments, you have options. Ignoring the problem isn't one.
  4. Markets

    What is the European Union?

    The European Union is a group of European countries that participate as one unit in the global economy, and who mostly operate under one currency.
  5. Markets

    Economic Conditions That Helped Cause World War II

    Dire economic conditions following the First World War intensified antagonisms between nations that would eventually lead to the outbreak of World War II.
  6. Retirement

    Seven Fun Part-Time Jobs for Retirees

    Here are 7 fun and unusual part-time jobs for people who are recently retired and looking for mental and physical stimulation as well as some extra cash.
  7. Markets

    How Influential Economists Changed Our History

    Find out how these five groundbreaking thinkers laid our financial foundations.
  8. Markets

    How the Brexit Could Affect U.S. Investors

    Learn what Brexit is, who supports and opposes it, and when the referendum is to be held. Discover the possible consequences it may have on U.S. investors.
  9. Markets

    6 Risks International Stocks Face in 2016

    Learn about risk factors that can influence your investment in foreign stocks and funds, and what regions are more at-risk than others.
  10. Trading

    How Global Events Affect The Forex Market

    Learn how politics, war and natural disasters move the forex market, and how you should respond.
RELATED FAQS
  1. What was the Marshall Plan?

    The Marshall Plan was a U.S.-sponsored program implemented following the second world war to aid European countries that ... Read Answer >>
  2. How did World War II impact European GDP?

    Understand the effect of World War II on the European gross domestic product and what foreign and domestic factors influenced ... Read Answer >>
  3. Who discovered the law of supply and demand?

    Learn how the law of supply and demand affects the economy. This important economic principle is hundreds of years old but ... Read Answer >>
  4. Are eurodollars related to the currency called the euro?

    Eurodollars have little to do with the official currency of the European Union, the euro (EUR). In 1999, the euro was implemented ... Read Answer >>
  5. How did the Soviet economic system affect consumer goods?

    Discover how the now-defunct Soviet economic system affected domestic consumer goods markets. Communist ideology dictated ... Read Answer >>
  6. What caused the American Industrial Revolution?

    Read about the causes of the American Industrial Revolution, beginning with the first textile mill and throughout the rise ... Read Answer >>
Hot Definitions
  1. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  3. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  4. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  5. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  6. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
Trading Center