In order to deal with the coronavirus, “we need a Marshall Plan immediately,” Senate Minority Leader Chuck Schumer declared more than a week ago. Schumer has not been alone in invoking the Marshall Plan as a model for dealing with the coronavirus crisis. Jim Cramer, CNBC’s most prominent economic analyst, has also called for an updated Marshall Plan, as has Senator Richard Blumenthal, the Connecticut Democrat.
They now have a down payment on their calls for a Marshall Plan in the $2 trillion aid package Congress and the Trump administration have agreed on. In addition to providing $100 billion for hospitals and health systems, the aid package will send direct payments to those earning up to $99,000 a year, expand and enhance unemployment benefits, extend loans to small businesses that will be forgiven if the businesses continue to pay their workers during the crisis, and aid distressed companies on the condition that the companies not engage in stock buybacks both while receiving government assistance for a year after that.
The $2 trillion package will certainly need additional appropriations, just as the Marshall Plan did after its first fiscal year, but in the words of Harvard economist Kenneth Rogoff, “It’s a tremendous first step.” The flaws in the aid package that have led New York Governor Andrew Cuomo to rightly complain that his state has been shortchanged can be made up if a new round of remedial appropriations comes quickly. The aid package has been negotiated with the intentions that made the Marshall Plan a success.
The Marshall Plan began in 1948 as an effort to help the nations of Western Europe recover from the devastation created by World War II, and by the time the plan was completed four and a quarter years later, the United States had transferred $13.2 billion to 16 Marshall Plan countries—roughly $800 billion in terms of our current gross domestic product, as Benn Steil has pointed out in his 2018 study The Marshall Plan: Dawn of the Cold War.
The plan took its name from George Marshall, President Harry Truman’s secretary of state from 1947 through 1948. Twice named Time’s man of the year, Marshall had earned the nation’s trust as Army chief of staff during World War II. What makes the success of his Marshall Plan a guide for today, when straight talk from the Trump administration has been scarce, is the frankness with which it was presented to the nation and the carefulness with which it was executed.
It was up to Americans and their government to “face up to the vast responsibilities which history has clearly placed upon our country,” Marshall declared in the June 5, 1947, Harvard University commencement speech in which he first outlined the thinking that would turn the Marshall Plan into a reality. Marshall saw world order in danger if the people of Europe continued to do without the basic necessities.
For Marshall, the great danger was that America would try to deal with the postwar economic crisis in Europe on a piecemeal basis. “Any assistance that this Government may render in the future should provide a cure rather than a mere palliative,” he told his Harvard audience. In his first day of testimony before the Senate Foreign Relations Committee, Marshall refused to downplay the cost of his plan. “It will impose a burden on the American tax payer. It will require sacrifices today in order that we may enjoy security and peace tomorrow,” he declared.
Marshall was as good as his word in making sure the plan bearing his name did not become a stopgap measure. He not only appeared before the Congress. He toured the country in order to explain his plan. “That’s the thing I take pride in, putting the damned thing over,” he would later say.
The “heroic adventure,” as future secretary of state Dean Acheson called the Marshall Plan, got under way in April 1948, and in its first fiscal year took up more than 10 percent of the federal budget. Marshall did not run the Marshall Plan. Its first administrator was a lifelong Republican, Paul Hoffman, the president of the Studebaker Corporation. Hoffman administered the plan with efficiency and took advantage of the plan’s built-in safeguards that did not allow the nations receiving Marshall Aid to divert it from uses that would build their economies and increase European trade.
A nation receiving Marshall Plan grant in dollars did not, for example, have to repay it. But the grant still came with strings attached. The nation receiving it was required to set aside a similar amount of money in its own currency, 95 percent of which the nation could then spend as it wished as long as it got approval from the Marshall Plan’s Economic Cooperation Administration.
The result was not a miracle, but it was an economic and psychological turnaround in Western Europe that never would have happened so quickly without American aid. By the end of 1951, industrial production among the Marshall Plan nations was 64 percent above 1947 and 41 percent above prewar levels. Food production was 24 percent above 1947 and 9 percent above prewar levels.
There is no George Marshall-like figure in the Trump administration, nor do we have the kind of congressional bipartisanship that in postwar America allowed Marshall to work closely with Republican Senate Majority Leader Arthur Vandenberg of Michigan to get the funding the Marshall Plan needed. But it is not necessary to replicate the identical conditions—particularly America’s postwar economic dominance—that fostered the Marshall Plan for the plan to serve as a model for combating the coronavirus crisis.
What makes the Marshall Plan relevant for today is the example it provides of how massive government intervention—with judicious safeguards—can end a crisis that shows no signs of self-resolving. The European recipients of Marshall Plan aid saw it change their spirits as well as their economies. “It was like a lifeline to sinking men,” Ernest Bevin, Great Britain’s foreign minister, observed after hearing Marshall’s Harvard speech. “It seemed to bring hope where there was none.”