In a now-celebrated speech delivered at the Harvard University commencement on June 5, 1947, Secretary of State George Catlett Marshall (1880–1959) proposed a solution to the wide-spread hunger, unemployment, and housing shortages that faced Europeans in the aftermath of World War II. Marshall's address was the culmination of increasing U.S. concern over the disintegrating European situation. The physical destruction of the war and the general economic dislocation threatened a breakdown of moral, social, and commercial life. Raw materials and food were in short supply, and war-damaged industries needed machinery and capital before production could be resumed.
Marshall suggested that the European nations themselves set up a program for reconstruction, with United States assistance. This speech marked the official beginning of the Economic Recovery Program (ERP), better known as “The Marshall Plan.” Under the plan, the United States provided aid to prevent starvation in the major war areas, repair the devastation of those areas as quickly as possible, and begin economic reconstruction. The plan had two major aims: to prevent the spread of communism in Western Europe and to stabilize the international order in a way favorable to the development of political democracy and free-market economies.
European reaction to Marshall's speech was quick and positive. The British and French foreign ministers met and issued a joint communiqué inviting twenty-two European nations to send representatives to Paris to draw up a cooperative recovery plan. Sixteen of the invited countries accepted—all except the Soviet Union and areas under its power—and met in Paris in July 1947. The Paris Conference led to the establishment of the Committee for European Economic Cooperation that drew up a proposal for the planned European reconstruction and presented it to the U.S. government in September 1947.
Although others helped draft the Economic Assistance Act of 1948 that established the ERP, the plan was named for George C. Marshall because of his indispensable role, his influence, and his extraordinary prestige with Congress and the American people. A graduate of the Virginia Military Institute, Marshall was by World War II army chief of staff, a post he held throughout the war. He exerted tremendous influence during the war years and afterwards assumed key civilian posts in the Truman Administration. He became secretary of state in 1947 and later served as secretary of defense. For his efforts in reviving Europe, Marshall won the 1953 Nobel Peace Prize, the first professional soldier to receive it.
Over the four-years during which the Marshall Plan was formally in operation, Congress appropriated $13.3 billion for European recovery. Although modest in terms of Europe's total gross national product, the aid supplied critically needed materials to get production operating again. The United States also benefitted from the plan by developing valuable trading partners and reliable allies among the West European nations. Even more important were the many ties of individual and collective friendship that developed between the United States and Europe.
The plan was the boldest, most successful, and certainly the most expensive foreign policy initiative ever attempted in peacetime. A milestone in the growth of U.S. world leadership, the Marshall Plan has had far-reaching consequences. In the short run, it relieved widespread privation and averted the threat of a serious economic depression. In the long run, it enabled the West European nations to recover and maintain not only economic but political independence. It also paved the way for other forms of international cooperation such as the Organization for Economic Cooperation and Development (OCED), the North Atlantic Treaty Organization (NATO) and today's European Union.