By Jerry M. Rosenberg
We all grieve; we are all angry; we are all confused; and we are all uncertain where this ends. For me, there is a special connect. For the past 10 years I have spent two months each year, in Bergamo, Italy lecturing at their university. I have fallen in love with the Lombardy region, its people and never had a moment when I wasn’t adoring of its culture, food and way of life. Now, I cry for my friends in Bergamo and wonder of their future, wonder what this all means for Italy and ponder long-term what its fate will be. I am puzzled when trying to figure out how this proud and spectacular country can pull out of its misery and return to normalcy. I am reminded that when Florence and its art world was inundated with a destructive flood and damage, US charity came to its aid. Now, what can the US do to help restore Europe’s confidence and well-being.
On April 29, 1947, two years following the end of WW II in Europe, US Secretary of State George C. Marshall pleaded that “Europe is in a mess…Something will have to be done….” On nationwide radio he warned “The patient is sinking while the doctors deliberate.” Will Clayton, his Undersecretary of State declared, “If there was no aid, economic, social and political disintegration would follow.” Help was soon on its way.
Throughout 1947, the US State Department became increasingly aware of and concerned about Europe’s economic collapse. A once-hoped for rapid recovery after the war had not materialized, “America might have to support the reconstruction of Europe.” Marshall on national radio said “Disintegrating forces are becoming evident.”
As the Covid-19 spread, businesses throughout the Continent began to shut down in mid-March 2020. It was determined by governments that preserving jobs was the key plan at supporting companies and keeping every worker employed. It was clear that the coronavirus would take its toll but that Europe could anticipate a rapid recovery.
France, for example, became the test case for hastening the recovery from their recession by protecting businesses from going under and by avoiding mass joblessness. The idea was to have no layoffs or firm closures, and after the coronavirus passed to enable the economy to bounce back with minimal upheavals. The government had already spent 45 billion euros ($50 billion) to pay businesses not to lay off workers. 300 billion euros had been set aside in state-guaranteed loans for any struggling firms requiring assistance. The government of France would pay 80 percent of an employees’ salary enabling workers to stay on the payroll. Unemployment benefits would last up to two years. Although the risks are high, it was assumed that this program would keep laid-off workers less dissatisfied and that they would continue to purchase and consume goods thereby supporting the total economy. France’s economy is presently operating at two-thirds capacity. With a three-month coronavirus lockdown, its annual output could fall 8 percent.
The European Commission declared that other EU nations would also agree to this approach, or one similar, to maintain short-term work in order for people to retain their jobs throughout the crisis. The European Commission President Ursula von der Leyen on April 5th wrote in an op-ed piece How Our Europe Will Regain Its Strength “To lift the economy out of the valley, we will need massive investment in the form of a Marshall Plan (EU sponsored) for Europe.” She firmly argued that “A Marshall Plan (EU sponsored) of this nature will help build a more modern, sustainable and resilient Europe.”
Spain’s Prime Minister also made a similar plea, “Europe has to establish a wartime economy and put in place measures for the defense, the reconstruction and the economic recovery of Europe.” He argued that this should be done as soon as possible to offset the debts that many countries were accruing during the coronavirus pandemic. Sanchez wants a public investment that would be “the greatest mobilization of economic and material resources in history.” He noted that the EU was fighting “a war against an invisible enemy that is putting the future of the European project to the test….Either we rise to this challenge or we will fail as a union. We have reached a critical juncture at which even the most fervently pro-European countries and governments, as in Spain’s case, need real proof of commitment. We need unwavering solidarity.”
Nevertheless, another huge US sponsored financial aid package will be needed for Europe, the sooner the better. Europe cannot alone overcome the enormity of the coronavirus economic impact. The EU budget is not big enough to be the main tool to tackle their economic crisis, even with contributions from the European Central Bank of a $800 billion rescue package and an EU half a trillion euros plan to buttress their economies. Planning takes time and it is not too early to move ahead to save our closest of allies. Failure to respond to Europe’s pressing economic needs will be a major blow to both the United States and to the Continent.
In Europe, southern countries are slipping rapidly. For Germany, the partial worker-factory shutdown has already cost their treasury about 500 billion Euros. For the full year, the German economy is expected to shrink 4.2 percent. Just in February, Italy was saddled with a public debt of 130 percent of its GDP, bringing the nation back into recession for a third time in a decade. Growth had fallen 10 percent. Today, life in Italy is far worse. The virus had shrunk 9.6 percent in the second quarter, while Spain saw an economic decline of 8.9 percent in the same period. France’s first quarter 2020 was flat, and moving to a severe slowdown.
The European Union is aware that its members are in trouble while the Paris based Organization for Economic Development expects a financial fall from an already weak growth in 2019 to be even less in 2020. The decline in southern Europe alone could be a 5 percent drop in the economy with the arrival of the coronavirus, quickly impacting on the rest of the EU nations and beyond. Some even question whether the EU can survive this crisis. As doors open and people return to work, neighbors and friends, the future will, at that time, have to define the new normal.
The destructive World War II and the threat of a Soviet Union intent on moving in on nations of Europe brought quick action from the President and the US Congress. Truman would say “In all the history of the world, we are the first great nation to feed and support the conquered.” The present reality of the coronavirus is equally devastating, with governments, medical professionals, and scientists working diligently to conquer the disease.
Without Truman’s determination to share American bounty with war-stricken citizens of Europe, the Marshall Plan would not have gone forward to Congress. The President was committed to spread “the faith” of freedom and democracy, and was convinced that the stricken nations of Europe needed everything and could afford to purchase nothing, “We are the giant of the economic world. Whether we like it or not, the future pattern of economic relations depends upon us.”
What about the tomorrows? Action from the United States is assuredly needed. We are aware that the European Recovery Program, popularly referred to as the Marshall Plan, not only encouraged, but even forced western European countries to think together, not separately, about recovery programs. The by-product was the eventual evolution of the 27 nation European Union, founded in 1958. The financial, humanitarian gift from the United States went to 17 countries, with no interest. Congress, following long and emotional debates, swiftly approved nearly $13.2 billion in aid (about $140 billion in today’s dollars.) The grants were 1.1 percent of U.S. output at the time. Initially, there was considerable public resistance to support the program. Our Treasury was down, having consumed most of it for the war effort. Only 14 percent of Americans believed in foreign aid. Some prominent government officials feared passage of the bill would result in an immediate tax hike, and worse, would be “throwing good money away.” Marshall counter-argued “This program will cost our country billions of dollars. It will impose a burden on the American taxpayer. It will require sacrifices today in order that we may enjoy security and peace tomorrow.”
Today, the threat is not the Soviet Union, as it was then, but the growing menace and death rate from the coronavirus. WW II left physical destruction in Europe demanding huge funds for rebuilding and reconstruction. The coronavirus leaves a trail of fear, joblessness, unemployment, business failures, corporate collapses, and an inability for most people to pay for daily expenses including housing, food and health needs. Lives remain at stake!
On April 9th it was reported that more than 16.6 million US citizens, over a three-week period, were jobless, unemployed or furloughed and had filed for government assistance. Washington’s response thus far is to have available for people to apply to various federal agencies for relief. The approach contrasts sharply to the programs set up throughout Europe, which prefers to have no layoffs during the crisis and to save the national economies. Nevertheless, the European Union will need help from the US.
We are rich enough with a $21 trillion economy to come to the rescue of our friends and allies in Europe. The process of calculating how much funding to give can be determined by careful analysis balancing the needs of European nations with open arms to bring them back as a prosperous continent. The mechanics are workable as the US government would set offices up in Europe’s capitals to monitor how the funds were being used, all with accountability and transparency. Europe and America’s recovery can go hand in hand. We must aid our friends across the Atlantic. If not some argue that the EU will crumble.
The Continent’s internal aid program coming from within the European Union and its other agencies will be monumental, while the U.S. contribution might be referred to as a New US European Marshall Plan. As a substitute title, some are now referring to a US-European Partnership Recovery Program. Working in tandem, an economic revival will come to pass. “Now is the time for all democracies to stand together and for American leadership to shine.”
From 1948 to 1951 Western Europe required and received U.S. help. When describing how the Marshall Plan saved the “free world” Secretary of State Dean Acheson (Secretary of State following Marshall) declared that his participation in the program was being “present at the creation.”
Jerry M. Rosenberg is Professor Emeritus of International Business at Rutgers University and author of several books on the 1948 Marshall Plan. He is presently writing a book on Coronavirus and A New US-European Marshall Plan.