On June 5th, Marshall gave a commencement address at Harvard. He stated: "It is logical that the United States should do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability and no assured peace. Our policy is directed, not against any country or doctrine, but against hunger, poverty, desertion, and chaos."
The plan was the clear reaction to the slow recovery of Europe from the destruction of World War II and the fear that the economic crisis that was engulfing Europe would lead to a strengthening of Communism in Europe.
On April 3, 1948 the Economic Cooperation Administration Act was signed into law and providing the legal framework for the aid. By 1951 a total of $13 Billion was granted to European governments, with the first aid going to Greece and Turkey.
The destruction in Europe had been massive. The biggest problem was housing. In London. 3.5 million homes had been destroyed., Ninety percent of Warsaw was destroyed, Only 27 percent of the homes in Budapest were habitable at the end of the war. Forty percent of the German housing stock was destroyed, as was 20 percent of French housing. This created a severe housing crisis that took years to overcome.
The second area that needed immediate attention was transport. When the war ended, there were no intact bridges across the Sienne from Paris to the sea and only one across the Rhine. Railroad stock and merchant marine fleets were severely damaged and took time to rebuild.
What was in relatively good shape was industrial capacity. Despite the heavy bombing, only 20 percent of the German industrial machinery had been destroyed by the war. The European countries could rebuild their railroads and other means of transport rapidly. The Germans moved quickest. At the end of the war, only 10% of their rails were operational; a year later, 93% of their rail lines were working.
Despite the progress made in some areas in the crucial area of food production, the Europeans had not bounced back. Food was in short supply throughout Europe. Two terrible winters in 1946 and 1947 had made the situation desperate. Beyond food, the fiscal condition of almost all the European countries was getting desperate. In 1946 the European countries ran a trade deficit with the USA of $4.74 Billion.
While the US government had already pledged aid to Greece and Turkey, it was clear to US policymakers that the needs were far beyond just those two counties. Will Clayton, Deputy Secretary of State for Economic Affairs, wrote a memo in which he said only immediate assertion of American leadership in Europe could avoid another war. "In every nation in the Eastern Hemisphere and some in the Western systematic campaigns were taking place to destroy national integrity and independence. Feeding on hunger, economic misery, and frustration, that attempt had already been successful in some liberated countries." He called for immediate and massive aid to Europe. His memo fell on ready ears since President Truman had concluded that this is what the US would have to do.
President Truman sent Dean Acheson, then the Undersecretary of State, to give a significant Foreign Policy speech in leu of Truman, who had to be off. In what President Truman in his memoirs called the Preview to the coming Marshall speech. On May 8 in Cleveland, Mississippi, Acheson spoke about the crisis in Europe and how the Europeans were quickly running out of money to fund their critical imports of food and other essentials. Acheson said time was running out. "Not only do human beings and nations exist in narrow economic margins, but also human dignity, human freedom, and democratic institutions.
It is one of the principal aims of our foreign policy today to use economic and financial resources to widen these margins. It is necessary for our national security. And for our duty and our privilege as human beings."
On May 27, Clayton sent another memo on his way back from a trip to Europe. He wrote: It is now obvious that we have grossly underestimated the destruction of the European economy by the war. … Millions of people in cities are slowly starving. ..
Clayton called for $2.5 billion in aid annually for three years to allow Europe to regain its footing.
Claytons call would soon become the policy of the US government. On June 5, 1947, General Marshall, now the Secretary of State, gave Harvard's commencement speech. In it, he called for massive aid for the Europeans. He went on to say :
It is already evident that before the United States government can proceed much further in its efforts to alleviate the situation and help start European world and sweater recovery, then must be some agreement on the countries of Europe as to what the requirements for the situation and the part those countries themselves will take in order to give proper effect whatever action may be undertaken by these governments.
British Prime Minister Anthony Bevan was the first to respond to Marshall's speech. He immediately arranged a meeting of the foreign ministers of France, Great Britain, and the Soviet Union to respond. The Soviets walked out of the meeting and said they did not want anything to do with the American aid. On July 4, the British and French foreign minister's invited 22 European countries to a meeting. On July 12, 16 European countries came together: Britain, France, Italy, Belgium, Luxembourg, Netherlands, Denmark, Norway, Sweden, Switzerland, Greece, Turkey, Ireland, Iceland, Austria, and Portugal. None of the future communist states took part. The aid from the Marshall plan was more extensive than all the foreign aid of the United States had given up to that date. By 1952 when the Marshall plan ended, $13 billion were given to European countries. The most significant recipients of that aid were Great Britain and France. To put that number in perspective, in 2020, that is equivalent to over $200 billion. But it made all the difference and things that eight European countries could feed the populations and meet their financial responsibilities.