Economic disaster and extreme poverty reigned in Europe by the close of World War II in 1945. Industrial production was low, huge numbers of people were unemployed and thousands were homeless. In Germany alone, around 25 percent of all urban housing had been destroyed, and gross domestic product was down by a staggering 70 percent. Millions were starving. Communist parties, encouraged by the poverty and desperation of most European citizens, had become a significant presence in the governments of Italy and France by 1947. Although the United States was somewhat committed to a non-intervention policy, many in the U.S. government predicted that if they did not become involved, the Soviet Union would gain a foothold in European politics through communism's rising popularity.
In June of 1947, U.S. Secretary of State George Catlett Marshall revealed an international aid strategy that would support the European economy and undercut Soviet influence in Europe at the same time. This strategy came to be known as the Marshall Plan. He chose to reveal this plan during a speech he was scheduled to give at Harvard upon receiving an honorary doctorate. Speaking to the public and the press first, rather than to Congress or any governmental committee, gave him the advantage of avoiding isolationist politicians and showing Congress a plan that already had popular approval.
In 1948, Congress passed the Economic Assistance Act, which led to the establishment of the Economic Recovery Plan (ERP), better known as the Marshall Plan. Upon signing the bill, President Harry Truman wrote, "Few presidents have had the opportunity to sign legislation of such importance. ... This measure is America's answer to the challenge facing the free world today." Over the course of four years, Congress allocated $13.3 billion to countries in Western Europe. The plan encouraged economic cooperation within Europe, thus creating the conditions for the European Economic Community and, later, the European Union [source: Library of Congress].
Marshall served as Secretary of State until 1949, and then as Secretary of Defense for one year during the Korean War. He received the Nobel Peace Prize in 1953 [source: Nobel].
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