The Marshall Plan Myth
The Marshall Plan Isn’t the Success Story You Think it Is
To this day, the Marshall Plan, that enormous government program for foreign aid and wealth redistribution, is still held up as a model of good government planning, and of the benefits of forcibly redistributing the taxpayers’ money.
In American politics, this opinion has nearly risen to the level of ultimate truth. For example, while domestic welfare programs are often met with derision from American conservatives, the Marshall Plan, which is founded on the same ideological foundation as the American welfare states, receives almost universal approval from Americans left and right.
Thus, it is not surprising that politicians and pundits continue to invoke the Marshall plan to push for more modern day programs based on the idea that if governments spread around the wealth, then prosperity will naturally result.
Tuesday in Europe, for example, European Parliament President Antonio Tajani invoked the Marshall plan to push for more EU spending programs in Africa designed to attract wealth there via sweetheart deals between European regimes and African contractors. Many of those firms, of course, are likely to be European-owned. And the scheme is reminiscent of the Marshall Plan, so it’s sure to be a success!
Not coincidentally, Tajani delivered his remarks on the 71st anniversary of Secretary of State George Marshall’s June 5, 1947 speech calling for what became the Marshall Plan. He outlined the plan to flood Europe with government welfare checks in order to help Europe overcome the fact that much of the continent’s capital had been destroyed in World War II.
The money spent totaled over 100 billion dollars in today’s dollars. And given that the American economy was but a small fraction of what it is today, this was an enormous sum.
The rhetoric behind the idea was nothing new. In 1947, it was routine to claim that government spending of the New Deal and World War II had ended the poverty of the Great Depression. That’s not the reality, of course. As economic historian Robert Higgs has shown, the New Deal made the Depression worse. Nor did World War II end the Depression. But at the time, this was a common misperception.
So, if redistributing the wealth worked so well to end poverty in the 1930s, why not do it all again in post-war Europe?
Moreover, it was a winning political strategy for President Truman. As noted by Charles Mee in his book The Marshall Plan:
[Truman needed] some large program that would let him recapture the initiative, something big enough to enable him to gather in all the traditional factions of the Democratic Party and also some middle-of-the-road Republicans, and at the same time, something that would hamper the Republican phalanx.
So, the US government set to work funneling taxpayer dollars to both foreign regimes and to American corporations who could leverage their political influence with foreign regimes to get some of that money.
But here’s the rub. There’s not actually evidence that this worked.
As Thomas Woods notes in this lecture on foreign aid, it’s easy to see why the Marshall Plan has the reputation it does. After all, the Marshall Plan was implemented in the late forties, and during that time, the economies of Western Europe greatly recovered.
But this is a case of mere correlation being woefully insufficient to prove causation.