Marshall Plan Lessons for Iraq

02/06/2009 05:12 am ET | Updated May 25, 2011
  • Nicolaus Mills Professor of American Studies, Sarah Lawrence College

By Nicolaus Mills

A soon-to-be-released government study of the American-led reconstruction of Iraq, which President Bush once called "the greatest financial commitment of its kind since the Marshall Plan," has labeled
the program a $100 billion failure. The report is one that the Obama administration will need to scrutinize if it is to avoid the failures of the Bush administration.
But if President Obama wants to make sure that in continuing the Iraq rebuilding process, he does not repeat the mistakes of the Bush administration, he will not just look at the new Iraq study. He will look at how at how the Marshall Plan, which by its conclusion cost over $13 billion (roughly $579 billion as an equivalent share of four years of America's current GNP) succeeded.
It is no accident that the Marshall Plan raised industrial production in Western Europe 64 percent, food production 24 percent, coal production 27 percent, and aluminum production 69 percent. In contrast to American aid in Iraq, Marshall aid to Western Europe, which began in 1948 and continued into 1952, was conceived in a way that insured that European self-help would be maximized while corruption and bickering would be minimized.
The Marshall Plan rested on three principles that were lacking in American aid to Iraq. First, the recipients of American aid must be active, not passive, partners. Second, especially at the top, the American officials administering aid must be free from political partisanship and cronyism. Third, there must be continual oversight on how American aid is used in order to avoid corruption.
Marshall himself made sure that the Europeans were treated as partners in the Marshall Plan and given responsibility for dividing up the aid they received. In his June 5, 1947, Harvard commencement speech in which he announced the Marshall Plan, Marshall, in his role as secretary of state, made it clear that America was not going to treat Europe as a charity case. "It would be neither fitting nor efficacious for our Government to undertake to draw up unilaterally a program designed to place Europe on its feet economically. This is the business of the Europeans," Marshall declared.
Marshall meant what he said, and the result was that the European nations were put in a position in which they had to figure out how to cooperate with each other in apportioning American aid before Marshall ever asked Congress for funding. The Europeans spent much of the summer and fall of 1947 negotiating with each other before they reached agreement on how to divide up American aid, but the time that it took for them to achieve this understanding was worth it. America avoided being put in the position of international referee and the countries of postwar Europe, especially France and Germany, learned quickly (as the ethnic groups in Iraq did not) that their survival depended upon moving beyond traditional rivalries.
The second principle of the Marshall Plan, bipartisanship, came into play at the program's start when President Truman named a lifelong Republican, Paul Hoffman, the former president of Studebaker, as the first administrator of the Marshall Plan. Hoffman believed, as he wrote in his autobiography, "Today there can be no such thing as a Republican foreign policy or a Democratic foreign policy," and he never violated Truman's trust. Hoffman appointed longtime Democrat Averell Harriman---"my first recruiting success," he later said---to the Marshall Plan's second most administrative important position, special representative in Europe, and he made sure that the Marshall Plan never became what he called a "political dumping ground for unqualified politicians." As a consequence, from the start the Marshall Plan was run, as the American aid program in Iraq was not, by topnotch officials, who never had to compromise their standards.
This emphasis on competence, which was the reverse of the Heritage Foundation's 2000 advice to the Bush administration to "make appointments based on loyalty first and expertise second," was crucial. It meant that the Marshall Plan administrators on the ground could keep pilferage and black market operations to a minimum and focus on the third principle of the Marshall plan, financial accountability.
The controllers of the Marshall Plan missions in each European country were responsible for maintaining complete records of the arrival and distribution of goods, and they were able to follow through on their oversight responsibility. On selected items, the controllers even traced materials from their port of arrival to their use in factories and farms.
In addition, the missions in each European country gained further financial leverage because when Europeans bought American goods supplied by the Marshall Plan and paid for them with European currency, America deposited in central European banks the equivalent amount of money in American dollars. These counterpart dollars (minus 5 percent reserved for use by the United States) were then employed to benefit the European country holding them, but only after the country and American officials agreed on how the dollars should be spent. While the counterpart funds were used on a variety of projects, from paying down national debt to modernizing factories, they were never just squandered. The Marshall Planners always knew where the counterpart funds went.
The result was a program that didn't merely help Western Europe get back on its feet. It set Western Europe on the path to today's European Union. The Europeans knew ahead of time that if they failed to work together or squandered Marshall aid, which they were repeatedly told was limited to four years, they were not going to get more funding. Marshall himself made that clear in early 1948, assuring the Senate Foreign Relations Committee, "Our aid will not be given merely by turning money over to the European governments."

Nicolaus Mills, a professor of American Studies at Sarah Lawrence College, is author of "Winning the Peace: The Marshall Plan and America's Coming of Age as a Superpower."