The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

Grandpa, the Marshall Plan, and me

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A photo of the author's grandfather, who was stationed in Marburg, Germany following WWII. Photo by author.

How has US foreign assistance funding changed over the last sixty years?

He was just 18 years old. This Nebraska boy, who had never left the state before being drafted, was in basic training in 1945, getting ready to go into battle like his brothers Ervin and Henry before him.

But then, the bombs were dropped on Hiroshima and Nagasaki.

My grandfather Julius now too would be going to Europe, but not to fight. He would have a largely administrative job in Marburg, Germany, processing the soldiers who were coming in to the now-occupied country. These were the early days of reconstruction – the days that gave way to what is often cited in US history as the beginning of US foreign assistance, the Marshall Plan.

Standing where my grandfather once stood in Marburg, Germany.

As I retraced my grandfather’s steps in Marburg this summer following a meeting hosted by the International Civil Society Centre on new business models for international civil society organizations, I couldn’t help but wonder how the 20th century concept of international development has evolved since the days when my grandfather walked those streets.

I got my first development job in Zimbabwe in 2002, at the height of hyperinflation, political violence, food shortages, and land reform/farm seizures. Though I had seen a bit of the world beyond Nebraska when I arrived and wasn’t 18 like my grandpa, we both saw some harsh realities.

But aid to Zimbabwe in the 21st century largely did not mirror the aid to Europe following WWII. The purpose of the Marshall Plan’s financial and technical assistance was to rebuild infrastructure, strengthen the economy, and provide stability to the region. US Secretary of State and General George C. Marshall had said that the real enemies of democracy were “hunger, poverty, desperation, and chaos.” Would US diplomats and USAID staff have described the purpose of US assistance to Zimbabwe in 2002 in the same way? Perhaps. But as I walked the streets of Marburg, I thought about this: In sixty plus years, how have the ways US foreign assistance funding is administered and managed changed?

When I came back home, I read up and found a useful OECD publication, “The Marshall Plan: Lessons Learned for the 21st Century.” Although times have certainly changed, US foreign assistance today indeed varies greatly from the Marshall Plan in four significant ways:

1. Marshall Plan funds were transferred to the governments of European nations.

Although the myth that US aid goes directly into the hands of foreign governments continues today, the reality is that in 2013, only 14.3 percent of USAID mission funds were awarded directly to partner country institutions, which include host country government agencies, private-sector firms, and local NGOs. Today, US aid is generally provided through US-based government contractors and US-headquartered NGOs.

Marshall Plan funds were jointly administered by the local governments and a US agency called the Economic Cooperation Administration in each country (a predecessor to USAID), which reported to the State Department and the Department of Commerce on the Marshall Plan. Luckily USAID Forward is bolstering its efforts to invest more funding directly in partner governments and local organizations, but much more progress is needed to make this a reality.

2. A management strategy of “listening” was used to administer Marshall Plan funds.

The Economic Cooperation Administration convened panels of government, business, and labor leaders to examine the local economies and see where aid was needed. In practice, US representatives listened to local officials and they set the priorities for reconstruction assistance.

We, in fact, made decisions about who would get how much, but based on what the Europeans had submitted,” explained US diplomat Jacob Kaplan, who was part of the ECA early on and interviewed for a foreign affairs oral history project. “There was a lack of arrogance, I believe, in our behavior… we didn’t behave like the classic hegemon.”

Results from recent studies such as The Listening Project, a comprehensive study of the ideas and insights of 6,000 people in poor countries, and The Learning Agenda on Local Capacity Development, demonstrate that a lack of listening to people on the receiving end of aid greatly hinders country and local ownership of aid today.

3. The Marshall Plan was focused on bolstering trade and developing mutual economic interests through private sector loans.

“Trade, not aid” and the private sector’s role is becoming a significant part of the development discourse for people in poor countries and in the US, but this approach was at the heart of the Marshall Plan over sixty years ago. Revolving loan funds for the business sector were solely focused on boosting the European economy and fostering trade (unashamedly with the US). These “counterpart funds” were government-administered funds that lent “money to private enterprises, which would spend the money rebuilding…The companies were obligated to repay the loans to the government, and the money would then be lent out to another group of businesses.” This bears little resemblance to today’s aid funding mechanisms and the charity model and humanitarian justifications offered for aid today.

4. The Marshall Plan was largely considered a success.

Aid, in its current form, faces many detractors. The Marshall Plan is often credited (to some debate) as a contributing factor in Europe’s recovery and revitalization from 1948 to 1952, which saw the fastest period of grown in European history.

But I can’t help but think if anyone would be willing to attribute any of Zimbabwe’s development to international aid. Few Zimbabweans I’ve known, who once took such pride in their education system and status as “breadbasket” to the region, are comfortable with relying on the generosity of outsiders when Zimbabwe has tremendous mineral wealth and loses billions in illicit financial outflows each year – a point Mugabe highlighted to the SADC leaders this week. It’s obviously difficult to determine the success of over thirty years of US foreign assistance to Zimbabwe within such a politically-charged environment. However the country has made progress on its own in reducing HIV rates, for example, despite the unpredictability of aid funding to Zimbabwe.

Former US diplomat Samuel Laeuchli argues that it is very different thing to rebuild an economy than to develop one in the first place and that the Marshall Plan should not serve as a model for international development. Yet something clearly still resonates with people about the Marshall Plan today. There are proponents of “Marshall Plans” for Haiti, Africa, least-developed countries, Europe in the time of austerity, or for an entire global eco-social market economy or structural transformation.

Our aid sector and US government agencies seem to be reflecting on their history, as I did when I climbed up to Landgrafenschloss, the castle where my 18-year-old grandfather once looked out over Marburg. Today we still act as if tons of aid money will lead to societal transformations. The Marshall Plan may not have been perfect, but its fundamental approach strengthened local systems, local economies, and put the people it aimed to support in the driving seat.

Can we say the same about ourselves today?

“That men do not learn very much from the lessons of history is the most important of all the lessons that history has to teach.” ~Aldous Huxley

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  1. Pingback: How Matters /  Grandpa, the Marshall Plan, and me

  2. gawain

    Thanks, Jennifer for this great post. Those photos are so awesome. How great to be able to trace back that spot and bring something personal with you.

    Some reactions/responses to your post:

    1. On your first point, I don’t think it’s really fair to use USAID govt-to-govt transfers exclusively. MCC, PEPFAR, and State Dept funds ought to be included in fairness and then the total/percentage would certainly be higher. It’s certainly a valid point, but maybe not the right comparison.

    2. Your second point is important – about listening. But again, not really an apples to apples comparison. US was hardly listening to “the people”, but rather elites (and often highly educated and competent advisors). That should be true for modern foreign aid as well. But it should be expanded to “listen” to a much broader cross-section of society to ensure that aid does not exacerbate existing inequalities and injustices.

    3. Certainly the marshall plan is considered a success. I think we should also note that a lot of current foreign aid is massively successful (as pointed out often by Bill Gates – see his annual letter and the “living proof” project). Importantly, the scale of the marshall plan was much bigger than aid is now: both as a commitment of US GDP and as a share of the recipient economies (I believe) is much bigger than aid is. So it wouldn’t be totally fair to compare their accomplishments.

    4. Overall, I think the comparison and learning from the marshall plan is valuable and valid. But the differences in the situations are pretty important and tend to prejudice in favor of the European project.
    * It’s MUCH easier to rebuild something than to build it in the first place. I’m sure you could find a GDP chart for the Marshall plan economies and find that their GDPs crashed at the end of the war. Growth after the war was a rebound rather than new territory to them. They could follow well-established economic (and even physical) pathways. Although a lot of infrastructure was destroyed or made obsolete by the war, a lot remained and just needed to be brushed off, refurbished, repurposed. [I note that you acknowledge this point in the blog]
    * Fair or not, the cultural, educational, language connections were very high b/w US and Europe. In many ways it was grandchildren helping out their grandparents. Most of US foreign aid is trying to work with and help people from societies where the connectivity is weaker. The challenges of bridging cultures, languages, values is much bigger.
    * The purpose of Marshall plan was strategic. A lot of shortcuts were permitted (like rehabilitating a lot of nazis and collaborationists) in favor of building an anticommunist bulwark. We no longer have that strategic purpose and therefor have a lot more trouble with the shortcuts (human rights violators, democracy governance, corruption, etc.). For better or worse, we’re MUCH more sensitive to those issues and much less committed to the development project if there are “complications”. Or maybe it’s better to say that we conceive of the development project very differently now in that it includes all those intangibles rather than simply standing up economic growth.

    Reply
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