A year after the war's end, the German economy was still mired in shortages, hobbled by a depreciated currency, stalled reconstruction, and vastly diminished production of mines and factories. The rest of Europe was doing little better, as the delicate postwar economy appeared snarled in bottlenecks and demoralization. The 1946 harvest had been meager; and the winter particularly severe. Tenuous coalitions between East and West were breaking down over ideological divisions. The East European countries that Soviet troops had occupied were forced into satellite status as Communist people's parties or spurious political fronts tightened their control over government, industry, and the press. This was the challenge facing Secretary of State George Marshall. His response, given at a speech before Harvard's graduating Class of 1947, was a proposed multiyear commitment of foreign aid to "cooperative" European governments, in order to alleviate the dollar shortage, speed up recovery, and stave off a slide toward fascism or communism.
The United States had been supporting Europe through the U.N. Relief and Rehabilitation Agency. While the U.S. provided more than 80 percent of UNRRA aid it had only one vote in 17, and faced competing agendas from the Soviet Union, the United Kingdom, and Canada. In a critical memorandum on Marshall aid, Undersecretary for Economic Affairs William Clayton wrote "We must avoid getting into another UNRRA. The United States must run this show." Although the Soviet Union and Eastern European countries were asked to participate, in the Paris Conference that would develop Marshall's ideas further, they all refused. The French paper L'Humanité reacted like many other communist publications, claiming that "After disorganizing the national economies of the countries which are under the American yoke, American leaders now intend conclusively to subjugate the economy of these countries to their own interests," while Soviet Foreign Minister Vyacheslav M. Molotov stated that the Soviet government "rejects this plan as totally unsatisfactory."
Sixteen Western European nations, including representatives for the Western zones of occupation in Germany, attended. This established the Committee of European Economic Cooperation (CEEC)… and further cemented the divisions between Western and Eastern Europe. Two months later, on September 22, 1947, CEEC issued its final report. This program called for almost $30 billion of American assistance over four years--$19.9 billion for the European debt to the United States and $8.3 billion for net imports from the rest of the American continent. Almost immediately this figure came under attack in Congress. Some Congressmen sought reduced funding; others maintained their long-standing commitment to American isolationism. The influential Senator Robert Taft believed the Marshall Plan would help "socialism" and sought to reduce funding; he was cut off by Robert Vandenberg's famous riposte, "When a man is drowning 20 feet away, it's a mistake to throw him a 15-foot rope."
The Marshall Plan was followed and supplemented by a joint role in the creation of the North Atlantic Treaty Organization in 1949, and the Berlin airlift of 1948-1949. This helped to bring western Europe together… and helped to heal the growing differences between the United States and Great Britain, which was still clinging to its self-image as a world power and which saw the U.S. as competition. It also served to weaken powerful domestic communist parties in France and Italy. Marshall aid enabled Europe to plan more securely and to embark on an essential program of fixed investment.
In the four years between 1948 and 1952 the Marshall Plan channeled some $l3 billion in reconstruction aid and technical assistance to 16 European countries. The Program officially ended on December 31, 1951, forty-five months after its inception. Aid rendered to Europe during the life of the Marshall Plan amounted to roughly 1.2 percent of the gross national product (GNP) of the United States. During that period, Europe's GNP rose from $119.6 billion in 1947 to almost $159 billion in 1951 - an increase of 32.5 percent. Industrial production increased 40 percent over 1938 levels and agricultural output exceeded the prewar figure by 11 percent. In 1950, the volume of intra-European trade stood at 24 percent above the 1938 level and by 1953, it had topped 40 percent. Third World countries, which enjoyed favorable terms of trade, saw a disproportionate rise in exports; and world trade experienced a resurgence which lifted it for the first time above the levels of 1929. The program not only revived Europe, but reestablished a vital triangular trade between Western Europe, the United States, and their trading partners in the developing world. At the time it accentuated the division between West and East; later, it would prove to be an important step on the road toward European unification.