What were the stipulations for repayment of the Marshal Plan aid to Europe? I look forward to your feedback
davidmich
On p. 280 of Niall Ferguson’s “Colossus”, Ferguson refers to:
“The most famous example of U.S. capital export was, as we have seen, the Marshal Plan, the high watermark of official unrequited transfers to foreign governments.”
Why does he say “unrequited” here? Were they not repaid?
Here:
From the Wikipedia article:
“The final German loan repayment was made in 1971.[85] Since Germany chose to repay the aid debt out of the German Federal budget, leaving the German ERP fund intact, the fund was able to continue its reconstruction work. By 1996 it had accumulated a value of 23 billion Deutsche Mark.[86]”
"The Marshall Plan money was in the form of grants that did not have to be repaid…
…[88] In addition to ERP grants, the Export-Import Bank (an agency of the U.S. government) at the same time made long-term loans at low interest rates to finance major purchases in the US, all of which were repaid.
Here’s an earlier thread on this topic. It tracks what I’ve heard elsewhere, that the Marshall Plan overall was heavily weighted toward grants rather than loans. If memory serves, aid to Germany was primarily loans, however, which was probably preferable for political reasons, with the war being so recent.
Thanks Tom Tildrum, but it still begs the question whether European countries other than Germany will repay the US or whether they will continue to defer payment.
I would also like to know why Niall Ferguson states in “Colossus”(2005):
“The most famous example of U.S. capital export was, as we have seen, the Marshal Plan, the high watermark of official unrequited transfers to foreign governments.”
In three years 1948-51 the ERP gave away $12.4 billion (about 5% of the 1948 American GDP of $270 billion–comparable to $750 billion out of a $15 trillion U.S. economy in 2009) for modernizing the economic and financial systems and rebuilding the industrial and human capital of war-torn Europe. The aid went to Britain, West Germany, France and Italy and smaller nations outside theSoviet orbit. It required each government to set up a national economic plan, and for the countries to cooperate in terms of financial and trade flows.
The money was not a loan and there was to be no repayment.[1]
Washington spent such vast sums because it thought it was cheaper than the rearmament that isolationism or rollback policies would entail. In the long run, the logic went, a prosperous Europe would be more peaceful, and would make its main trading partner, the US, more prosperous.
“The United States finally gave $13.4 billion over four years; each year it was about 1 percent of the American Gross Domestic Product. It was the equivalent of $600 billion in 2005 dollars, but the money went much farther because Europe did not start from scratch—it had enormous reservoirs of human talent and organizational skills, and a large but broken infrastructure that could be fixed.
The American grants included currency for loans, but went primarily (70%) towards the purchase of commodities from U.S. and Canadian suppliers: $3.5 billion was spent on raw materials; $3.2 billion on food, feed and fertilizer; $1.9 billion on machinery and vehicles; $1.6 billion on fuel.”…
notes
↑ The issue of repaying World War I loans had been mess that no one wanted to repeat. Likewise the Lend Lease during the war usually did not involve repayment.
Unrequited transfers = grants, because they don’t have to be repaid. The Marshall Plan was the high-water mark because we’ve never done a grant program of that size since.
Not sure what you mean about continuing to defer repayments. Who’s doing that? With some exceptions, I think most other countries got mostly grants.
Note that about 3/4ths of that money was spent here in America, buying things. So it was effectively an economic stimulus plan for the US economy, like FDR’s New Deal.
It was part of the reason the post-war period was an economic ‘good times’ in the US, while many European countries were going thru tough times. (Also a partial reason that the US economy faltered later on – much of the infrastructure in Europe was new/rebuilt after the war, and many companies also had new buildings & equipment, while US states & companies failed to invest as much into their infrastructure. This eventually caught up with them, when, for example, European & Japanese car companies were able to out-produce Detroit automakers.)