Cover Story Africa
Contrary to popular opinion, re-industrialisation of Europe was the main focus of the Marshall Plan, using the traditional policy toolbox, including heavy protection of manufacturing industries.
The Marshall Plan T
he Marshall Plan was not a simple programme for transferring massive sums of money to struggling countries, but an explicit – and eventually successful – attempt to reindustrialise Europe, say Erik Reinert and Ha-Joon Chang.
It follows that if Africa really wants economic prosperity, it
should study and draw valuable lessons from the Marshall Plan’s dark twin: the Morgenthau Plan implemented in Germany in 1945. Reinert tells the story best: When it was clear that the Allies
would win the Second World War, the question of what to do with Germany, which in three decades had precipitated two World Wars, reared its head. Henry Morgenthau Jr, the US secretary of the treasury from 1934 to 1945, formulated a plan to keep Germany from ever again threatening world peace. Germany, he argued, had to be entirely deindustrialised and
turned into an agricultural nation. (Africa, are we listening?) All industrial equipment was to be removed or destroyed, the mines were to be flooded with water or concrete. Tis programme was approved by the Allies during a meeting in Canada in late 1943, and was immediately implemented when Germany capitulated in 1945. During 1946 and 1947, however, it became clear that the Morgenthau Plan was causing serious economic problems in Germany: deindustrialisation caused agricultural productivity to plummet. Tis was indeed an interesting experiment. Te mechanisms of synergy between industry and agriculture,
so key to Enlightenment economists, also worked in reverse: kill- ing industry reduced the productivity of the agricultural sector. Many of those who had lost their jobs in industry returned to the farm, and the biblical mechanisms of diminishing returns became the dominating mechanisms in the economy. Te former US president, Herbert Hoover, who at the time
played the role of the old and wise statesman, was sent to Germany with orders to report to Washington what the problem was. His investigation took place in early 1947, and he wrote three reports. In the last, dated 18 March 1947, Hoover concluded: “Tere is the illusion that the New Germany left after the annexations can be reduced to a ‘pastoral state’. It cannot be done unless we exterminate or move 25,000,000 out of it.” Observing the dark consequences of deindustrialisation, Hoo-
ver had reinvented the old mercantilist theory of population: an industrial state can feed and maintain a far larger population than an agricultural state occupying the same territory. In other words, industry greatly increases a country’s ability to sustain a large population. Te fact that famines only occur in countries specialising in agriculture underlies the power of industry, of
22 | April 2011 New African
(1880-1959), the man after whom the Marshall Plan was named
George Catlett Marshall
the division of labour and of the importance of the intersectorial synergies that create and maintain welfare. Less than three months after Hoover submitted his report, the Morgenthau Plan was silently buried. Te Marshall Plan [named after the former chief-of-staff of the army, George Catlett Marshall] was devised to produce exactly the
opposite effect, namely to reindustrialise Germany and the rest of Europe. Te Plan was announced by Marshall in a speech at Harvard University on 5 June 1947. Its details were negotiated at a meeting held in Paris from 12 July 1947 onwards. Implementation was started in 1948 and ended in 1951, channelling $13bn (equiva- lent to $130bn in 2007) into the war-torn economies of Europe. George Catlett Marshall (1880-1959), a five-star general in
1944, was noted for his exemplary service during the Second World War. He became secretary of state and later secretary of defence, and was awarded the Nobel Peace Prize in 1953 for his role in the Marshall Plan. In the case of Germany, the Marshall Plan demanded that industry was to be returned to its 1936 level, which was considered the last “normal” year before the War. “Today’s problem,” says Reinert, “is that the dominating barter-focused economic theory fails to appreciate the difference between a Marshall Plan and a Morgenthau Plan. “Politicians today abuse the concept of a Marshall Plan by using it to describe any large transfers of resources to poor countries. It cannot be emphasised strongly enough that the kernel of Marshall’s plan was reindustrialisation; the demand and supply of capital was per se entirely secondary to the principal strategy of developing the industrial life of a nation.” Generally, the Marshall Plan was implemented with heavy
tariff protection of national industries and strict rules for currency transactions. It was fully acknowledged that jobs needed long- term protection, and that foreign exchange was a scarce resource. In Norway, for example, this resulted in a total prohibition on imports of clothing until 1956, combined with severe restrictions on the transfer of funds abroad. Importing cars for private use was prohibited until 1960.
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