The Marshall Plan: Economic Effects and Implications for Eastern Europe and the Former USSR

The Marshall Plan Barry Eichengreen and Marc Uzan Europe's post-World War II experience with the Marshall Plan is frequently invoked by advocates of Western aid for Eastern Europe and the former USSR. Yet previous analyses of the Marshall Plan are uniformly sceptical that it had important economic effects. This paper finds, in contrast, that the Marshall Plan contributed importantly to Europe's recovery from World War II. Strikingly, however, the obvious channels through which the Marshall Plan could have affected recovery – stimulating investment, augmenting imports, and financing infra-structure repair – were relatively unimportant. Rather, post-war Europe was suffering a marketing crisis, in which political instability, shortages of consumer goods and fears of financial chaos led producers to hoard commodities and workers to limit effort. The Marshall Plan solved this marketing crisis by facilitating the restoration of financial stability and the liberalization of production and prices; this was its crucial role. These conclusions have obvious implications for Western aid to Eastern Europe and the successor states of the former USSR.