Mbeki: 'Why Can't We Have the Same Aid and Generous Loans?'

By Mbeki, Thabo | New African, February 2005 | Go to article overview

Mbeki: 'Why Can't We Have the Same Aid and Generous Loans?'


Mbeki, Thabo, New African


This is Part Two of a special series of articles about global approaches to poverty eradication and economic development, written by the South African president, Thabo Mbeki. Here, he argues that European reconstruction after World War II was deliberately engineered by the US through aid and generous loans, and not through foreign direct investment by the private sector as demanded of Africa today by the same US, Europe and the Bretton Woods institutions. Part One appeared in New African, December 2004 (p36-38).

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Let us consider the post-war European Recovery Programme, the Marshall Plan. Speaking at Harvard University on 5 June 1947, US Secretary of State George C. Marshall said: "The truth of the matter is that Europe's requirements for the next three or four years of foreign food and other essential products--principally from America--are so much greater than her present ability to pay that she must have substantial additional help, or face economic, social, and political deterioration of a very grave character."

This had been preceded by President Harry Truman's 12 March 1947 address to the US Congress, when he asked for funds to help Greece and Turkey, which the US government believed would fall victim to socialist revolutions.

Truman said: "The seeds of totalitarian regimes are nurtured by misery and want. They spread and grow in the evil soil of poverty and strife. They reach their full growth when the hope of a people for a better life has died. We must keep that hope alive. The free peoples of the world look to us for support in maintaining their freedoms. If we falter in our leadership, we may endanger the peace of the world--and we shall surely endanger the welfare of our own nation."

With regard to the Marshall Plan, the 26 August 1947 US State Department document we cited in Part One (NA, Dec 2004) said: "Programme submitted for US consideration must contain these elements: Concrete proposals for area-wide recovery of agriculture and basic industries--coal, steel, transport, and power--which are fundamental to viable European economy. Proposals must correlate individual national programmes and individual industry programmes and give priority to projects promising quickest expansion of output."

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In a contemporary report, the US Marshall Foundation says: "The Marshall Plan was a rational effort by the United States aimed at reducing the hunger, homelessness, sickness, unemployment, and political restlessness of the 270 million people in 16 nations in West Europe. Marshall Plan funds were not mainly directed towards feeding individuals or building individual houses, schools, or factories, but at strengthening the economic superstructure (particularly the iron-steel and power industries). The programme cost the American taxpayers $11,820,700,000 (plus $1,505,100,000 in loans that we repaid) over four years, and worked because it was aimed at aiding a well-educated, industrialised people temporarily down but not out. Over its four-year life, the Marshall Plan cost the US 2.5 to five times the per cent of national income as current foreign aid programmes. One would need to multiply the programme's $13.3 billion cost by 10 or perhaps 20 times to have the same impact on the US economy now as the Marshall Plan had between 1948 and 1952."

The report also makes the important point that, "Americans were reluctant to invest in Europe because their profits were available only in local currencies that were little desired by US businesses and investors".

The May 2003 edition of the US Harper's magazine published an article by William Finnegan entitled "Economics of Empire". He wrote: "[The] pillars of the post-war international financial order were conceived during the latter part of World War II at a conference of American, British, and European economists and civil servants held in Bretton Woods, New Hampshire, and dominated intellectually by John Maynard Keynes. …

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