2008/07/17

Marshall Plan


There's something bugging me. Sometimes I hear that people express their belief in a huge effect of the Marshall Plan. Some people truly think that it was the major and decisive driver of European recovery, the cause for the economic miracle of Germany and Italy.

Well, that's very, very close to nonsense.
The miraculously high growth rates in the 50's and 60's were caused by the availability of millions of well-educated, experienced and hard working citizens and a very low economic output level in the late 40's.
Even the most simple economic models for this like the Exogenous growth model indicate that a very high rate of economic growth is normal in such a situation.

Another reason why the Marshall plan wasn't nearly as influential as many seem to believe:
Western Germany and Italy - both countries with excellent growth rates - didn't receive much money from the funds per capita. Germany only got loans, and only late.
France and UK, two countries with less miraculous economic recovery, received much more money.

Western Germany actually paid more for reparations than it received Marshall Plan loans.

Check these two articles for further details.


So why do I rant about this in a national security blog? Simple; the Marshall Plan story is part of the modern belief that we (Western nations) can somehow build up foreign countries.
Sure, there's some truth in it, but we need to get the factors right.
The aid needs to be significant per capita, the education level needs to offer growth potential, the money needs to be directed into investments (infrastructure and productive businesses) and the conditions need to be promising (low inflation, political stability).

The driving force for European post-war economic growth was European, not the Marshall Plan. The Marshall Plan did not prove that economic aid can do miracles and turn an entire region into a prospering, friendly region.

S O

3 comments:

  1. "Sure, there's some truth in it, but we need to get the factors right."

    This is an excellent comment and one I had not considered. Always had the short view that the Marshall Plan helped prime the pump and then all was good.

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  2. More than that, Marshall plan was initiated when Marshall himself arrived in Germany and ran some basic calculation on effects of Morgenthauer Plan, which was put into effect.

    The overall cost of dislocating and/or getting rid of large part of german life force was so high that in the long run West wouldn't be able to hold West Germany in any aggresion scenario with USSR.

    So Marshalls Plan in case of Germany was actually a reparation for Morghentauer's Plan.

    Another fact you got wrong.

    Anyways, first time I comment on your blog. Many things you get right, many things you get wrong. I obviously see your point of view on Germany to be skewed - but that's universal, nationality runs in our tribal mind.

    Other than that I am disturbed at your lack ot unifying politics, military and economics into a single organism that drives the world. I mean the view that those are forces clashing between each other is false, it's rather unified field of excercising power.

    The huge spending behind f-16 or others programs were not militarily driven per se. But it helped US to mantain supremacy in South Korea (KF-16); Japan (Mitsubishi F-16). More than that, military spending nowadays is rather seen as an R&D into the new. New Boxers for Jaegers? Not only will it bolster domestic arms industry [ military industry (economics) being officially supplied politically agreed overspending - it's all unified, again], it will fuel new breakthroughs. It will help the industry in maintenance of service etc.

    Basically you can view every military overpriced toy as a stample, a prototype of what West will patent, protect and sell to others.

    Same with EU - EU is not about French-German-UK triad, it's about milking the others from money, indebting them in french-german-uk banks. Kpz Keiler-70 was a waste of money? Look at sales of Leo2. Jaguar. Tornado made fly-by-wire possible, from what I read it's again Europeans who pioneered it. List goes on.
    Of course not all of military products turn into viable sell-outs, but the sales after the R&D in longer run make those technological leaps cheaper to achieve in first place, maintain patent-wise position in market and it's a closed loop, sort of.

    Spend huge amounts of money -> achieve sales to drive costs down -> spend more money -> achieve breakthrough -> be ahead in warfare and economy (patents) -> sell/profit even more from the technology you just created.

    Anyway nice reading, keep it up :)

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    Replies
    1. You didn't actually prove me wrong on anything about the Marshall Plan.

      About your attempt to think of all state actions as being about power; I'm from the philosophical and economics school, and I think the point of a state is to supply public goods. Defence ought to be a public good for the benefit of the population, not a politicians' toy for power games.

      The German arms industry rarely if ever creates much technological progress in those large development projects. The leaps were mostly made in the ongoing background research. The big ticket programs rather merely make use of what inventions have piled up, and Boxer is largely devoid even of that.

      Large military R&D projects are NOT profitable. They would be done by the industry at its own expenses if they were. The sales of Leopard 2 which were not about refurbished old tanks pale in comparison to the many tank development projects which yielded no or few sales. Look at old "Jane's Armour and Artillery" editions for a taste of how suicidal commercial development of AFVs is.

      Military contracts for the industry are actually to some degree poisonous; the industry does a much better job at selling robots and machinery B2B than at selling robots such as a RWCS to the military bureaucracy. It's the same companies in Germany, they can shove engineers from one division to another.

      Concerning "be ahead in warfare" by technological "breakthrough", consider this
      http://defense-and-freedom.blogspot.de/2007/07/diminishing-technological-advantages.html

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