European Recovery Program

European Recovery Program (ERP), United States programme of financial assistance that helped to rebuild European countries devastated by World War II. It was commonly known as the Marshall Plan, named after US Secretary of State George Catlett Marshall. After the war, Europe's agricultural and coal production had nearly stopped, and much of the population was threatened with starvation. The Europeans also lacked dollars which would enable them to purchase new materials and machine tools from the United States to help restore their shattered economies. The United States responded for four reasons. First, Europe had been a large market for American goods, and without a prosperous Europe, the United States might have suffered a severe economic depression. Second, without American aid, Western Europe might succumb to communism, and US leaders considered that prospect a threat to American security. Third, Western Europe appeared open to influence by the Union of Soviet Socialist Republics (USSR), which the United States was beginning to see as its main rival. Fourth, West Germany (now part of the united Federal Republic of Germany), historically the continent's industrial hub, had to be rebuilt as a buffer against Soviet expansion; European fears of their World War II enemy would lessen only if the Germans were integrated into a larger Europe.

After careful planning, in June 1947 Marshall announced that if Europe devised a cooperative, long-term rebuilding programme, the United States would provide the necessary dollar funds. Great Britain and France called other Europeans, including the Soviets, together at Paris. When the Soviet delegates learned that the United States insisted on close Soviet cooperation with the capitalist societies of Western Europe and an open accounting of how funds were used, they left Paris and established their own plan to integrate Communist states in Eastern Europe. An economic curtain divided the continent.

The Congress of the United States distributed more than $13 billion in aid. Seventy per cent was spent on goods in the United States. The Economic Cooperation Administration distributed the money, and the Organization for European Economic Cooperation (OEEC) spent it. The largest amounts went to Great Britain, France, Italy, and West Germany, in that order. As Cold War tensions rose in 1949, the funds increasingly went into military expenditure rather than industrial rebuilding.

The programme achieved both its immediate and long-term aims: When the aid ended in 1952, Communist control of Western Europe had been averted, the region's industrial production stood 35 per cent above pre-war levels, and West Germany had become independent, and her economy was beginning to recover rapidly.

In 1961, the OEEC was succeeded by the Organization for Economic Cooperation and Development (OECD). The OECD broadened the scope of cooperation among member nations.