The Marshall Plan: How Austria Benefited 70 Years ago

With an entire continent in ruins, the Marshall Plan planted the seeds for a peaceful, prosperous Europe

As the Second World War finally ground down to an end in Europe, Austria lay devastated, its economy in shambles, its territory carved up by the victorious Allied powers into zones of authority for the U.S., France, Britain and the Soviet Union.

At the end of 1945, well over 20 percent of the city of Vienna was in ruins from American, British, and Soviet bombing. Hundreds of apartment buildings, dozens of oil refineries, St. Stephen’s Cathedral, and even Tiergarten Schönbrunn, the oldest zoo in the world, were among the direct targets. More than a quarter of a million Austrians were homeless.

The question then fell to the Allied occupiers: What would become of the former Alpine Republic, then Ostmark of the German Reich? How could the wounds of war be healed?

Punishment was put aside. The devastating reparations demanded of Germany after its defeat in 1918 had triggered years of economic decline, hyperinflation, and the rise of the National Socialist German Workers’ Party, the Nazis.

Besides, the Allies had already chosen a different fate for Austria, which the 1943 Moscow Declaration had designated “the first free country to fall a victim to Hitlerite aggression.” The Allies wished “to see reestablished a free and independent Austria,” the declaration read, as a model for “neighboring states faced with similar problems, to find that political and economic security, which is the only basis for lasting peace.”

As such, the United States, now a world power in search of international markets, saw both a political and an economic interest in boosting the recovery in Europe.

What was needed was a strong Europe, not a weak one. Described by British statesman Winston Churchill as “the most unselfish act by any great power in history,” the Marshall Plan was perhaps more accurately a kind of enlightened self-interest, with support tied to the opening of European markets, and much of the aid money itself used to purchase U.S. goods. Either way, the greatest gift was the gift of hope.

Birth of the plan to save Europe

U.S. Secretary of State George Marshall, who served as chief of staff for the U.S. Army throughout the war, formulated a plan to offer unconditional aid to the devastated nations of Europe.

He laid out his vision in a commencement address at Harvard University in June 1947, spelling out the urgent need to avoid condemning millions to abject poverty without outside assistance. Europeans, he argued, needed to ensure free institutions and avoid suffering, so as to once again build political stability.

“The remedy lies in breaking the vicious circle and restoring the confidence of the European people in the economic future of their own countries and of Europe as a whole,” Marshall said.

Taking up his call, European leaders came together in the following months to devise a precise tabulation of what would be needed. Sixteen nations joined in September 1947 to officially form the Committee of European Economic Co-operation, the precursor to today’s Organization for Economic Co-operation and Development (OECD), headquartered in Paris. They came up with a total bill of $22 billion (about $227 billion in current dollars, that’s the annual revenue of the oil company Royal Dutch Shell or the GDP of Finland), representing the total cost of rebuilding the agricultural and industrial sectors of the countries hit hardest by the impacts of the war.

Once that report made its way to the U.S. Congress and debates were held across political parties, the final agreed amount came to $17 billion. President Harry Truman signed the act establishing the European Recovery Program on April 3, 1948. Almost immediately, American ships loaded with wheat, fuel, and other materials departed for European shores.

But Austria had already benefited from U.S. interim aid in the year before, having been one of the first recipients and receiving over $90 million. Only Italy and France received aid at the same time.

Over the course of the next four years, Austria received a total amount of $468 million, today’s equivalent of $4.7 billion when adjusted for inflation. It received around $100 per capita, trailing behind only the Netherlands and Iceland for the highest amount of per capita aid.

In the first year of the plan, most funds were spent on food and raw materials. In the remaining years, the money was invested in the reconstruction of industries and then export goods. Railways were constructed, bridges and streets rebuilt, and housing programs initiated. The economy slowly and surely recovered.

That Austria received so much aid from the Marshall Plan was unique – it was the only country to receive funds while still occupied by Soviet troops, according to author and historian Günter Bischof.

Overall, the American plan, now in its 70th anniversary year, has left a huge imprint on Austria. Markets evolved, trade began, and wealth gradually accumulated. But even more importantly, the Americans tied Marshall Plan aid to demands of closer cooperation between European nations. The European Coal and Steel Community, founded in 1951 by France, Italy, Germany and the Benelux countries, was strongly encouraged by the United States, and turned out to be the forerunner of today’s European Union.

The plan was not without its critics, however. Free market economists Wilhelm Röpke and Austrian-born Ludwig von Mises thought the program encouraged bad economic planning by subsidizing more socialist European nation states. Leftist intellectuals believed, not unfairly, that the Marshall Plan was a covert attempt to develop an “American bloc” against Soviet control of the East.

Regardless, the end result of the ambitious American recovery plan for Europe’s postwar devastation is a wealthy, powerful European continent that has recovered and prospered, offering liberties and freedoms for millions.

Anniversary of the Marshall plan

Thus far this year, dozens of celebrations between American and Austrian representatives have taken place in both countries to celebrate the 70th anniversary of Marshall’s call to peace.

Many of these celebrations have revolved around Günter Bischof, now the Marshall Plan Professor of History at the University of New Orleans, whose writing has helped make the case for the importance of the Marshall Plan to Austria’s postwar development. As head of Center Austria there, he has also fostered the exchange of students and faculty between the university and various universities in Austria.

Today, Marshall Plan residuals are used to fund cultural and educational exchanges between Austria and the U.S., including grants for entrepreneurs and startups.

“The Marshall Plan was, in retrospect, a brilliant and very successful idea. Which is why when we talk about crisis regions in Africa or the Near East, the idea of a Marshall Plan is often brought up,” said Wolfgang Petritsch, president of the Austrian Marshall Plan Foundation. It was an idea first put forward by former Chancellor Bruno Kreisky, who as early as 1959 proposed a Marshall Plan for developing countries.

In Austria in 2017, celebrating 70 years of the Marshall Plan, the American plan to rebuild Europe is again timely – a successful way to plant the seeds for the free institutions we enjoy today that gave hope to an entire continent exhausted from war.

Published in Metropole Magazine

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