The Marshall Program in Operation
THIS CHAPTER will be devoted to a brief discussion of the operation of the European Recovery Program with special emphasis upon the relationship of the Marshall program to certain American domestic economic and foreign political interests and objectives.1 Chapter 16 will be devoted to an evaluation of the progress of the European Recovery Program in the realization of its objectives, together with a discussion of the outlook for aid to Western Europe in relation to the defense program. In order to set the stage for this discussion, we shall begin with a review of Europe's economic position at the end of 1947.
The explanation of the economic crisis in Europe in 1947, two years after hostilities had ceased and after large outpourings of American aid, must be found in a complex of internal and external factors, some shortrun and some fundamental in nature. Statistics of production and income alone do not reveal the magnitude of Europe's problem. In fact, in a number of fields European recovery, particularly outside of Germany, was much more rapid during the two years following the end of World War II than it was for a similar period after World War I.2 The adverse short--term factors in the European situation in 1947 were (1) the crop failures on the Continent and the severe winter which interfered with production and transportation in Britain and on the Continent, (2) the near breakdown of intra-European trade caused by payments difficulties, (3) the shortage of coal caused by the low level of German production, (4) the price inflation in Europe coupled with an administration of rationing and price controls which made farmers unwilling to sell their produce to the cities, and (5) the price inflation in the United States which greatly reduced the purchasing power of Europe's gold and dollar____________________