The Marshall plan in Austria - an analysis

The Marshall Plan in Austria

1 Introduction: The Austrian “Economic Miracle” After

World War II

The Austrian Republic, which had been unable to survive economically in the aftermath of World War I, recovered surprisingly quickly from the serious economic consequences of World War II. In fact, it became one of the world’s wealthiest nations within a few years only, achieving extraordinarily high growth rates and per-capita income increases on an international scale.

Which factors contributed to this “economic miracle” in the years following World War II? According to Bischof (2005:13-14), both endogenous and exogenous explanations can be emphasized. The Austrians’ industriousness, creativity, inventiveness and entrepreneurial spirit in trade and industry, the marketing of the Austrian landscape by tourism, and the corporate system balancing the interests of different groups are among the endogenous reasons which played an important role in the quick reconstruction. Of equal importance was the impact of exogenous factors, especially of American foreign aid programs. Immediately after the war, the mere survival of the Austrian population was ensured by food supplies from the GARIOA and the UNRRA which were funded mainly by the USA. An interim aid program of the American Congress followed in 1947/48, until the Marshall Plan came into effect from 1948 to 1952.

The economic and political conditions in Western Europe after World War II differed significantly from those after World War I (Hansen 2001:275-276): Firstly, because of air warfare and the movement of the war fronts over large distances, material destruction was far greater. Secondly, besides the USA, the Soviet Union had become a superpower; Western Europe’s influence was reduced to a buffer zone between East and West. Thirdly, a more interventionist economic policy replaced the previously liberal attitude. Politically, left-wing movements had gained popularity in European countries. Finally, the status of Germany and its eventual future independence were unclear.

Comparing the Marshall Plan with the economic aid provided by the League of Nations after World War I – a credit amounting to 611 million Gold Crowns with

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The Marshall Plan in Austria

an interest of 11 percent, both instruments imposed strict economic conditions, but the Plan was more obliging and flexible in moments of crises. Moreover, the Plan’s much greater success is due to its character as partly interest-free donations: From about 1.6 billion dollars US economic aid, Austria received almost one billion as grants.

The Marshall Plan, whose historical role for Austria is a topic that has been rather neglected by historians for several decades, employed a recovery strategy which was comprised of three stages (Lacina 2000:11-12). Initially, in 1948/49, direct aid in the form of mainly food and raw materials was offered. In 1950/51, the focus lay on the reconstruction and adaption of basic industries. Finally, in 1952/53, most financial means were devoted to manufacturers of finished products and of export goods and to the tourism industry.

The Plan became stressed particularly in 2005 which was a year of many

anniversaries for the Republic of Austria: the 60 th anniversary of the end of World War II, the 50 th anniversary of the signing of the State Treaty which finally put an end to Austria’s occupation by the allied powers, and the 10 th anniversary of Austria’s accession to the European Union. In this context it should be highlighted that by participating in the Marshall Plan, Austria was also embarking on a future of participation in European integration. Therefore, the Marshall Plan’s role lies far beyond a simple economic aid program. Several exhibitions and publications in 2005 made sure that these events did not fall into oblivion.

By writing this paper I would like to make a contribution to the memory of the Marshall Plan which was the biggest reconstruction aid project ever. Perhaps no country benefited more from it than Austria: Between 1948 and 1952, the United States supported Austria with goods worth approximately one billion dollars, which cost each American tax payer 80 dollars. Each Austrian received 133 dollars from the Plan, more than any other of the sixteen participating Western European countries. Apart from its economic effect, the Marshall Plan also transported the American way of life to Western Europe and Austria.

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The Marshall Plan in Austria

I would like to start this paper by giving an overview of how Austria’s economic

situation was like immediately after the end of World War II. The following chapter discusses the birth of the Marshall Plan, first on the Western, then on the Eastern side of the Atlantic. Then I will focus chronologically on the stages of Austria’s participation in the Plan, before its impact on Austrian post-war identity-building will be explained. A conclusion will finish the paper.

2 The State of Austrian Affairs from 1945 to 1946 –

Shortage Economy

The whole European continent suffered severely from the destructions caused by World War II (Bischof 2005:18). Austria’s economy shared the fate with many other European countries – it was highly irritated due to heavy bombardments by the allied forces from 1943 to 1945 which had damaged many cities and transportation facilities; hundreds of thousands of people were killed; general confusion and apathy reigned. An economically very productive group, the Austrian Jews, were missing because they had emigrated or had been murdered in the Holocaust. During the last weeks of the war, the Nazis themselves ruined still existing infrastructural facilities when fighting the advancing Red Army. Soldiers of the Soviet Union dismantled factories and requisitioned numerous engines and railroad cars as reparations. Besides material destructions, they raped tens of thousands of Austrian women, thus nourishing pre-existing anti-Bolshevist prejudices and contributing to Austria’s orientation towards the West.

After the ceasefire on 8 May 1945, Austria was divided into four occupied zones by the Soviet Union, the USA, Great Britain, and France (Bischof 2005:19-20). These zones were strictly separated from each other in economic terms until the fall of 1945, the Soviet zone until 1953. Each zone had a provisional Austrian government which cooperated with the respective occupying power in order to survive economically. Barter with neighboring regions and cross-border commodity trade resembled medieval economic organisation. Starting up the industrial production, bottlenecks particularly in foreign coal supplies became obvious: Austria was short of

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The Marshall Plan in Austria

dollars and thus unable to pay for Polish coal; coal from the Ruhr region was not available before a solution to the German reparations issue was found. Austria was unable to solve the energy issue with its own resources: The entire Austrian oil production in the Marchfeld region had been confiscated by the Soviets as “German asset”, and the Nazis had ripped off the Austrian lumber and coal supplies prior to and during the war. The steel and chemicals, aluminium and pulp fibers industry – those sectors in which the Nazi armaments industry had invested, particularly in Upper Austria – succeeded in achieving European standards comparatively quickly once raw materials became available again.

An even more serious problem than the lack of raw materials for industrial reconstruction was of humanitarian nature: the food shortage. Since neither seeds, nor fertilizers, nor human resources were available during the last weeks of the war in spring 1945, agriculture produced only a third of the early war and pre-war years; in the French zone only two percent of the grain demand could be covered by domestic production (Bischof 2005:20-21). Only in 1953 agricultural production reached the pre-war level. Particular hardship followed the extremely cold and snowy winter of 1946/47. There were serious disparities between urban and rural regions: Urban dwellers were much worse off than farmers in the countryside who preferred selling their products on the black market for prices well above those set by the government. Austria’s Eastern neighbors either could not or were unwilling to grant relief because of similar bottlenecks and the beginning Cold War. All occupying powers except for the Americans were busy with their own financial and supply problems, thus it was mainly the USA which helped out with programs like GARIOA and UNRRA in 1945/46.

The bottleneck economy which was overcome only after the implementation of the Marshall Plan in 1948 posed a serious threat to Austria’s political stability: The Austrian government under Chancellor Leopold Figl considered resigning in the fall of 1946 because of its incapability to solve the food crisis. This could have caused riots similar to those in Hungary in 1947 and in

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The Marshall Plan in Austria

Czechoslovakia in 1948. In fact, hunger revolts broke out in Vienna in May 1947 which might have launched a communist insurrection.

3 The Birth of the Marshall Plan in 1946/47

3.1 The American Origins of an Economic Aid Program for

Western Europe

The discussion about a long-term recovery program for Western Europe started in 1946. In the light of the weakening of the British empire, the threat to the interior stability of France and Italy by communist movements, and the economic and moral decline in West Germany, American diplomats and economists pointed out the necessity of a cooperation between the individual European countries as well as an integration of (West) Germany (Bischof 2005:24). The genesis of the Marshall Plan is therefore grounded both in economic considerations – an economic collapse of Western Europe should be avoided, and in political goals – communism should be contained as expressed in the Truman Doctrine in 1947.

In January 1947, former Republican President Herbert Hoover was sent on a special mission to Germany and Austria by President Truman with the goal to find out more about the economic situation, particularly the food shortage. His three reports issued in March definitely contributed to the realization of the Marshall Plan (Mähr 1989:57).

The determining factor for the launch of a comprehensive European recovery program was the escalating economic and political situation in spring 1947. The endless dollar shortage for imports from the USA, the harsh winter in 1946/47, and the increasing tensions between East and West deteriorated the situation. At the Moscow Conference of Foreign Ministers neither the German Question nor the legal conditions for Austria had been agreed upon. In France, Italy and Germany the communists were part of the government; in Hungary they seized exclusive power in May 1947. US Secretary of State George C. Marshall used a dramatic metaphor when he said at a speech on the radio in April 1947: ”While the doctors deliberate, the patient is dying.” (Bischof 2005:25- 26).

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The Marshall Plan in Austria

Who were the “doctors” besides Marshall himself?

Among the many fathers of the Marshall Plan a few should be mentioned explicitly: George F. Kennan in the State Department’s Policy Planning Staff, the Deputy Secretaries of State William Clayton and Dean Acheson. These men’s ideas inspired Marshall’s famous speech in Harvard on 5 June 1947 which is considered to be the starting point for

US Secretary of State George C. Marshall (http://www.a525g.com/histoire/plan-marshall.htm)

Much convincing had to be done in the United States in order to put the Plan into action: A massive propaganda campaign should argue both the taxpayers and the Congress into the approval of the financial aid.

But also all over Europe the Marshall Plan was

accompanied by an American information and propaganda machinery. A share as large as five percent of the available ERP funds served this purpose as well as the battle of some intellectuals against communism (Bischof 2005:63). Exhibitions, posters, competitions, newspaper articles, stamps, books, and radio and film programs were meant to

Marshall Plan propaganda poster

(http://www.geschiedenisvoorkinderen.nl/eeuw/Koude%20oorlog.htm)

What were America’s motives behind the Marshall Plan aid (Hansen 2001:284)? Besides protecting democracy and Western political ideas, motives of a self-interested nature played a decisive role: The US economy was in a mild recession in 1947, and increasing exports had an expansionist effect on the economy. According to “New Left” historians, US fears of exclusion from the European state trading system played their part, too. The Plan also reflected the

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