David Peter Jensen and Phillip Bryson, David M. Kennedy Center
The European Recovery Program, commonly known as the Marshall Plan, is generally hailed as the greatest success in the history of U.S. foreign aid. From 1948 through 1951, the Marshall Plan supplied $13.3 billion dollars of aid to Western Europe. Over the duration of the Marshall Plan, the economies of Western Europe made significant recovery from post-war chaos and poverty. Most remarkable was the recovery of the West German economy. In recent decades, however, scholars have questioned the significance of the Marshall Plan to the German “Wirtschaftswunder.” Led by German scholar Werner Abelshauser, these revisionists point to other political and economic factors that influenced the German reconstruction. Intrigued by this debate over the actual success of the Marshall Plan in Germany, I undertook research to discover the role of the ERP in economic recovery in the West German coal and steel industries.
Total Marshall aid to West Germany from 1948 to 1951 equaled $1.39 billion—only one tenth of total aid to Europe. Britain and France received between two and three times more, both in total and per capita aid. Yet it was Germany’s economy that raced most decisively forward among all European countries. Thus, a pressing question is whether Germany’s economic success was really a result of Marshall aid, and, if so, to what extent? In approaching this question, I decided to focus upon the heavy industry sectors of coal and steel for several reasons. First of all, as of 1948, these two sectors had historically been the most significant sectors of the German economy. Second, post-WWII Allied policy with regard to Germany, including the ERP, focused heavily on the issue of West German coal and steel production. Third, the coal and steel industries were concentrated in the Ruhr region in northwestern Germany. This geographic consolidation would simplify the task of analyzing the effects of the ERP on these sectors.
I approached the research as an investigation in economic history. Having only a basic background in economics—not enough experience to undertake a quantitative study of data—I decided the best tactic would be to make comparisons of existing research on the subject. I thus gathered a large volume of information on West German economic history, the Marshall Plan, the coal and steel industries, and the economic history of the Ruhr region. My sources covered a time span from the early 1950s until the present, and included an equal amount of sources in both German and English. Although multiple scholars had addressed the role of the Marshall Plan in post-WWII West German reconstruction, and many discussed reconstruction in various economic sectors, only a few offered in-depth information on the role of the Marshall Plan in coal and steel recovery. However, through drawing from a wide range of sources, I was ultimately able to obtain sufficient information for my research.
The challenges facing the German coal industry in 1948 were very different from those facing the iron and steel industry. The Allies uniformly wanted to increase German coal output; at the same time, they were determined to strictly limit steel production. Prior to WWII, the Ruhr region had been the primary producer of high-grade hard coals in continental Europe. Thus, the Allies—particularly France—hoped to be able to tap German fuel resources to aid their own rebuilding. In the process, however, the Allies imposed some difficult burdens on the German coal industry. The Allies’ Joint Export and Import Agency (JEIA) stipulated exports of German coal at fixed prices. While the world price for coal was $25-30/ton, JEIA set the price for German coal at $10.50/ton. At such prices, the Ruhr coal mines could only expect economic losses. Even after JIEA price restrictions were dissolved in 1949, German economics minister Ludwig Erhard decided to regulate heavy industry, and thus the coal industry was still powerless to set its own prices. Without freedom to set prices, the mining enterprises had no means to finance continuation and expansion of their operations. This is where the Marshall Plan came in.
The capital stock and labor endowment in the Ruhr coal industry was comparable to what it had been before the war, but capital depreciation, economic restrictions, inadequate housing, and low worker morale proved to be serious obstacles to recovery. Fortunate for the industry was the fact that it received the largest share of Marshall funds and counterpart funds in comparison to other economic and industrial sectors. Marshall funds (and counterpart funds) proved most important in projects to rebuild and repair housing units that had been destroyed during the war. Important aid also came in the form of machinery and other investment capital. In 1949, for example, counterpart funds contributed 47% of the gross investment to the coal industry. Despite these incoming funds, however, the actual investment needs of the coal industry remained far from being met. While coal production in the rest of Europe had largely recovered to prewar levels by 1951, Ruhr coal production lagged far behind, producing in 1951 only 75% of what it had in 1938. Only several years later would Ruhr coal enterprises regain efficient levels of production, and never again would they regain their prewar importance. Thus, while the Marshall Plan did positively impact the coal industry, it played more the role of counter-balance than cure.
The steel industry, on the other hand, was seen as a threat to European security and French economic prosperity. The Allies thus used the Level of Industry Plan of 1946 to severely limit iron and steel production in West Germany. Production ceilings were set and dozens of important steel production facilities were scheduled for dismantling. However, negotiations surrounding the Marshall Plan served to relax some of these limitations. In August 1947, following the Marshall proposal, a new Level of Industry Plan was agreed upon, sparing many facilities that were to be dismantled. Production limits were raised to reasonable levels. The Marshall Plan significantly curbed Allied opposition to the reconstruction of German industry. However, Allied policy with regard to the iron and steel industry did not fundamentally change until 1950, when the outbreak of the Korean War fueled skyrocketing world demand for steel. At this time the Marshall Plan finally began concentrating resources into the investment-starved iron and steel industry. The steel industry thus became the major recipient of Marshall aid during the last two years of the plan, and rapid recovery and growth followed.
The Marshall Plan did indeed play an important role in German reconstruction, but this role must be qualified. In terms of tangible material aid, the Marshall Plan was less considerable than is commonly supposed. However, the aid came into industries that had sufficient capital but were severely hampered by other restraints. Thus, benefits of the aid were multiplied as bottlenecks were opened and capital could be better utilized. Equally important, the Marshall Plan positively influenced Allied policy toward Germany, and the plan brought new optimism and hope to the German economy and investors. The Marshall Plan itself did not cause the German recovery, but it was a valuable tool in helping Germany to help itself.