It’s the Political Economy, Stupid
The Real Origins of the Cold War: An Economic and Geopolitical Inquiry into the Marshall Plan.
With thanks to the “real (A.W.) McCoy”
This paper analyzes the events that marked the beginning of the Cold War, specifically those that contributed to escalating tensions between the U.S. and the U.S.S.R. after World War II up until the 1950s, in order to induce from them the causes behind its outset. The analysis is pursued from an American perspective, and will thus principally focus on the political incentives involved on the U.S. side of the conflict. The events at the onset of the Cold War can be categorized into two types: economic and geopolitical. While the conventional narrative attributes the rising antagonism to ideological differences between capitalism and communism, their significance was secondary to the geopolitical tensions that were particularly heightened in the Berlin Airlift, the Greek Civil War, and the Turkish Strait Crisis. Furthermore, the motivations underlying these geopolitical conflicts, as well as actions taken by the U.S. to re-establish and dominate the international order, namely the North Atlantic Treaty Organization (NATO), the Marshall Plan, and the Bretton Woods financial arrangements, were primarily economic. Hence, concerns for free market, peace, and democracy are only veils, behind which hide the true intentions of the post-war powers, which in turn rely on the seemingly altruistic as well as alarmist postures to be legitimized. And the dominant geopolitical thinking only goes so far as it relates to economic power.
Since the Marshall Plan, also known as the European Recovery Program (ERP), embodies many of the main rationales behind the general U.S. Cold War policies, it is useful to begin the analysis by explaining the purposes of its architects. While the Second World War left much of the Eurasian landmass in shambles, the United States emerged from it as “the only fully functional industrial economy”. In view of its superior productive capacity relative to the rest of the world, as well as its competitive market potential in regions still recovering from the ravages of war, especially Europe, a multilateral international trade apparatus would work to the U.S.’ advantage for it renders foreign countries economically dependent upon the U.S. by restricting protectionist inclinations against American imports of goods and capital.
With a country’s economic dependence, the expectation was that its politics would “necessarily” fall under U.S. influence. In fact, the U.S.’ “interest in the establishment of multilateralism followed directly from… the belief that economic conditions determined political conditions.”¹ With the collapse of the European system of power and economy after the war, its restoration was an ideal chance for the U.S. to extend its reach into the area. According to a 1946 memorandum by Clark Clifford, the White House Counsel who later served as Secretary of Defense under President Johnson, “American economic strength, translated into programs of financial aid,” could help institute an “American-oriented” international economic system, the basis upon which the U.S. can consolidate its political leadership in the Western bloc and undermine elements that were opposed to it.² A 1966 summary of NSC 68,³ one of the most important national security documents outlining Washington’s Cold War strategy, before it was declassified and released a decade later, advocated for a rearmed Western bloc with the United States “at its political and material center with other free nations in variable orbits around it.”⁴ When the primary focus of the foreign aid program shifted from economic reconstruction to military rearmament, the effect was to “arrest a number of tendencies toward European independence of the United States and to place [assistance] within a framework structurally and administratively subordinate to” the U.S., as the industrial priority was shifted away from the production of consumer goods for export and domestic needs, and into that of armaments and other military supplies.⁵
It should thus come as little surprise for Washington to object to the Soviet Union’s domination over Eastern Europe, “clos[ing] this area to American commercial penetration and political influence.”⁶ Alarmingly, the prospects of Western European nations following suit were becoming more conceivable. Especially in France and Italy, the “disastrous economic conditions… had granted the Communists” immense popularity.⁷ Given the French and Italian Communist Parties’ membership in the newly-founded Cominform, the international organization of allied Communist Parties in Europe with the Soviet Union as its effective leader, it’s not unreasonable to assume that a Communist government in either country, through electoral means or otherwise, would deal a major blow to the multilateral framework of market economy preferred by the U.S. because of their loyalty to the Kremlin.
If the Communists were to mount a serious political challenge to the existing establishments in these countries in the first place, the effects may be so disruptive that may lead to economic turmoil, to the direct disadvantage of U.S.’ material interests. As Secretary of Commerce Averell Harriman pointed out in a 1948 congressional hearing, the “production of many industrial and agricultural products in this country … has been developed based upon the participation of Europe in international multilateral trade”, and its decline may compel “costly” and “far-reaching readjustments” in the domestic economy and inhibit U.S.’ “ability to obtain needed imports and… essential raw materials.”⁸ Secretary of Agriculture Clinton Anderson concurred in a 1948 Committee on Foreign Relations hearing, stating that given the domestic “abundance of agricultural production,” the United States “need export outlets” in Europe, and that the effect of a disintegrated European economy on America “would not be pleasant to contemplate.”⁹ This was also the sentiment expressed by William L. Clayton, one of the architects of the Marshall Plan in the State Department, in a 1947 memorandum: without “prompt and substantial aid”, not only would Europe be “overwhelm[ed]” by sociopolitical disruptions as a result of recessions, but with “markets for our surplus production gone” the domestic U.S. economy would also suffer tremendously from unemployment and depression.¹⁰
On the other hand, the ERP would prove to be enormously beneficial to the domestic economy, specifically the military industry. Together with its passage came “the largest airplane and engine orders in peacetime history”, which would not have been possible without the lobbying efforts from the Aircraft Industries Association president Oliver Echols, Secretary of the Air Force Stuart Symington, and Secretary of Defense James Forrestal.¹¹ Business publications of the time “made it quite unmistakable that the aircraft industry would have collapsed had it not been for the big procurement orders that came in the wake of the war scare of 1948”, which was a public relations campaign for the Marshall Plan.¹² Besides the military industry, the Marshall Plan would also stimulate private investment of American surplus capital in Europe,¹³ as well as domestic demands for consumer goods such as automobiles.¹⁴
Besides the potential havoc that a closed Western European market would bring to the American economy, as well as the hegemonic political-economic potential from helping Western Europe rebuild its economy, there are several other related incentives behind the foreign aid program, including national security and geopolitics. “By national security, American officials meant the control of raw materials, industrial infrastructure, skilled manpower, and military bases.” Before the war, Western Europe “accounted for 50 percent of the world’s trade, owned nearly two-thirds of the world’s shipping, and produced… coal, steel, and chemicals in amounts slightly exceeding” America. In terms of national interest, to secure European “resources and economic-military potential” from rivals, which implies American access, would be “most fundamental”.¹⁵
The geopolitical dimension of this national security concern is based on the fear that Soviet access to the region, even if through non-military means involving local Communists, would “enhance [Russia’s] war-making capabilities enormously” so as to shift the balance of power in their favor and lessens the force and weight of U.S. military deterrence, which were a large part of why Soviet aggression was deemed improbable and “explicitly ruled out” by the war planners in Washington. According to George Kennan, a key diplomat involved in the development of the U.S. Cold War strategy, “the possibility of mobilization and employment of such tremendous economic and military strength… constitute[s] a real threat to the security of” the United States.¹⁶ With this potential security risk in mind, the course of action necessary to eliminate it would naturally be one that alleviates the worsening economic conditions that boosted the Communist Parties’ electoral appeal, which might mean their eventual acquisition of administrative power, hence the European Recovery Program.
Another source of motivation for foreign aid was domestic, namely the anti-communist ideology. Its importance is, however, only marginal and secondary when taking into account the context. With the Marshall Plan facing considerable opposition from a Republican-controlled Congress as well as lukewarm support from the public, William Clayton asserted, in a 1947 memorandum advocating for a $5 billion funding for the ERP, that the U.S. “will not take world leadership effectively unless [its] people… are shocked into doing so.”¹⁷ From this sort of attitude came the war scare of ‘48. Through a systematic media campaign of exaggerating the severity of the situations in Czechoslovakia, where it was believed that the Soviet Union had exerted its influence by means no less than a coup d’état, and Finland, with which the Soviet Union has signed a mutual defense treaty, the Truman administration had propped up an anti-Communist narrative that not only exploited fears against alleged totalitarian belligerence and worldwide subversion against peace and democratic values, but also camouflaged the real objectives of the ERP.
In drafting President Harry Truman’s speech known to later generations for spelling out the Truman Doctrine, widely seen as the start of the United States’ active involvement in the Cold War, Clark Clifford made multiple suggestions to then Secretary of State Dean Acheson for the speech’s inclusion, emphasizing the geopolitical significance of Greece with respect to the Middle East, as well as the latter’s “great natural resources”.¹⁸ The underlying geopolitical reasoning sees Greece and Turkey as not only the Soviet Union’s potential entrance into the Mediterranean, but also an essential access point “to the oil resources of the Middle East, upon which American planners were depending for programs of European recovery”.¹⁹ Neither suggestions, however, made it onto the final draft, since the public was “not accustomed to thinking… in strategic-military terms in time of peace.”²⁰ Instead, the final draft underscored the concern for the worldwide survival of “free institutions”, and by submitting that the “national integrity” of Greece was integral to “world freedom and world peace” it stressed the necessity to prevent the “full growth” of Communist totalitarianism by means of foreign aid, and characterizes the U.S.’ intention as humanitarian and ideological, with mentions of the Middle East only in passing and no reference to its economic significance.²¹
As it was in the case of Greece and Turkey, in which even Secretary of State George Marshall, his predecessor James Byrnes, and George Kennan all expressed doubts about the extent to which Truman had pushed his ideological rhetoric,²² the problem was grossly exaggerated during the war scare. In Czechoslovakia, the coup d’état, which saw the country’s only moderates in government, foreign minister Jan Masaryk and president Edvard Beneš, ousted from power, was in fact a measure of “consolidation of Soviet control over an area it already dominated”, rather than one of “expansion westward”, the mainstream narrative supported by the media. Similarly, the Finno-Soviet Treaty was a policy arrangement in addition to the existing “Soviet military authorities” in Finnish territory.²³
The fears and speculations on the possibilities of a hot conflict with Russia were also unfounded, as public statements from neither Truman nor Marshall indicate any serious concern for an imminent war, but only an undefined “new international crisis.”²⁴ In any case, by translating the ideological rationale from Greece and Turkey to Czechoslovakia and Finland, the war scare had all but ensured the “rapid ratification” of the ERP despite earlier resistance from the House Republicans,²⁵ who had previously wanted to cut the proposed Pentagon budget “by 10 percent” but, by utilizing their antagonism towards the Soviet Union and their fears of Communist expansions, “voted $822 million more… than [what] Truman was willing to spend” in early 1948.²⁶
These interconnected geopolitical concerns and economic motivations reflected in the proposal and implementation of the Marshall Plan were also central to many other U.S. Cold War policies and its general strategic actions. Here we shall examine the attitudes held and policies undertaken in the contexts of the Italian election of 1948, the East-West division of post-war Germany, as well as the establishment of the North Atlantic Treaty Organization (NATO).
Accepting the view that the “Russians neither wanted nor expected a military contest with” the U.S. unless the European balance of power was to shift significantly in their favor through non-military methods, George Kennan weighed in on the 1948 Italian election in a March telegram to the Secretary of State. Given that Italy was key to conserving the balance of power, Kennan stated that it’s preferable for the election to “not take place at all than” letting the Communists achieve electoral success. Specifically, he advocates for outlawing the Communist Party of Italy, which may elicit a civil war that would “result in much violence” and casualties, but may still “be preferable to a bloodless election victory” for the Communists, “send[ing] waves of panic to all surrounding areas.”²⁷
In accordance with his thinking, a National Security Council report, produced around the same time as Kennan’s telegram, states that a Communist victory in Italy would have a “demoralizing effect throughout Western Europe, the Mediterranean, and the Middle East.” In the event the Communist Party wins the election legally and gains power in the Italian government, the report recommends “a limited mobilization” for military intervention as well as military and financial assistance to the anti-Communists. Otherwise, non-military measures should be taken to guarantee that the Communists do not take over or even participate in the government.²⁸
Such a concern for the balance of power would also come into play in the partition of Germany into the eastern and western zones. In a 1946 telegram from Kennan to the Secretary of State, he favors “rescu[ing] western zones of Germany by walling them off against eastern penetration” over a single unified state “extensively vulnerable to Soviet political penetration and influence” since it may likely be the case that there were “no other single political force therein [the latter scenario] which could stand up against” the Soviet-sanctioned Communist elements.²⁹ Note that this was two years before the Berlin Airlift, and three before the official break-up of Germany in 1949, contrary to the mainstream narrative that such a division was in the sole favor of the Soviets.
With the industrial and agricultural capacity in both Italy and Germany, the Soviet Union would have visible advantages over America, not accounting for the losses of foreign markets in both countries. The implication of the risk in losing access to these European markets would be so serious that it’s not deemed worthy to take it on to begin with, hence proposals that aim to eliminate that risk in the first place through electoral intervention and territorial partition.
During a 1949 Senate hearing on the NATO pact, when asked if the administration “planned to send ‘substantial’ numbers of United States troops to shore up European defenses” against the “twenty-five fully-armed Russian divisions” in Central Europe, the response from Dean Acheson and Omar Bradley, the Chairman of the Joint Chiefs of Staff, was “a clear and absolute ‘No.’” Given the consistent commitment to the policy of “disarmament and demilitarization” of post-war Germany, this begs the question on the purpose for which NATO is formed, since it “did not possess the manpower to quell a conventional attack”. The underlying concern, according to Harriman, was that if the pact was not to be, then “a reorientation” would ensue in Europe, “re-strengthening [elements in favor of] appeasement and neutrality.” And with the ERP “reviving Europe economically,” the hope was to buttress the U.S.’ “ties with, and influence over, Europe by” building formal channels for military aid.³⁰
By examining the motivations and reasonings behind the Marshall Plan, one of the major achievements in the Truman White House as well as a landmark U.S. Cold War policy, we tried to ascertain the origins of the Cold War, particularly focusing on the American side of the equation. While ideological justifications certainly exist, they are secondary to deeper geopolitical and economic causes, and were used primarily as an instrument through which systemic motivations were fulfilled, as opposed to being a part of the systemic cause itself. Much of the thinking that went into Cold War policy planning traces itself back into the domestic economy, where profits were made through certain actions undertaken and arrangements implemented, such as the foreign aid program that helps rebuild Western Europe, and open up its economies for American goods and capital to dominate. On the other side of the coin, the fear of oversea economies closing up, excluding itself from U.S. economic and thus political influence, as well as dealing a blow to its domestic economy by bereaving it of its export outlets, had driven the United States into adopting a multilateral framework of international trade in which such protectionist tendencies are more easily checked. On another level of geopolitics, intertwined with international political economy, the U.S. curbs Communist influence in Western Europe and the Mediterranean (Italy, Greece, and Turkey) in order to secure the western passageway into the Middle East, the resources from which were needed for reconstruction and consolidation of multilateral commerce, while locking the Soviet Union away from the same access to the greater Mediterranean and the Middle East. Also crucially, the international commercial and mutual-defense system as supported by the U.S. were to be set up in a way that enhances its world hegemony, an objective in direct conflict with that of the Soviet Union in Eastern and Central Europe.
¹ Freeland, 19–20
² Ibid., 324
³ LaFeber, 90, n. 36
⁴ Phillips, 307
⁵ Freeland, 332–3
⁶ Freeland, 21
⁷ Brogi, 79
⁸ U.S. Congress, 249
⁹ Ibid., 315
¹⁰ U.S. Department of State. Memorandum
¹¹ Kofsky, 172–3, 177
¹² Ibid., 2
¹³ Freeland, 164
¹⁴ Kofsky, 170
¹⁵ Leffler, 277
¹⁶ Ibid., 278–280
¹⁷ Fossedal, 217
¹⁸ Jones, 156
¹⁹ Freeland, 75
²⁰ Jones, 162
²¹ Truman
²² Freeland, 100–1
²³ Ibid., 278
²⁴ Ibid., 282, 285
²⁵ Ibid., 276
²⁶ Kofsky, 172
²⁷ U.S. Department of State. The Director
²⁸ U.S. Department of State. Report
²⁹ U.S. Department of State, The Chargé, 519.
³⁰ LaFeber, 77–8
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