Rebuilding Austria - The Marshall Plan

"Without generous foreign aid, Austria would have been plunged into such misery for an indefinite period of time that a slow redevelopment would only have been possible at the greatest cost and under the most extreme hardship." (Franz Nemschak, Director of the Austrian Institute of Economic Research, WIFO, in 1955).

The European Reconstruction Plan (ERP), also called the Marshall Plan after the U.S. Secretary of State who introduced it, has been repeatedly praised as the most successful initiative of U.S. foreign policy and the most effective reconstruction program in history. Without it, reconstruction of the Austrian economy after World War II would have been inconceivable. Although the so-called Austrian "economic miracle" of the 1960s was essentially based on the hard work of the reconstruction generation, its genesis was stimulated and accelerated by the post-war American aid programs.

In 1945, before the European Reconstruction Program was introduced, massive food supplies came to Austria through the U.S. Government Aid and Relief in Occupied Areas (GARIOA) program. In addition, there were CARE packages in 1945/46, a private U.S. citizen initiative, and the United Nations Relief and Rehabilitation Administration (UNRRA) in 1946, which was primarily funded by the U.S. From 1945 to 1947, the U.S. financed 88% of the Austrian imports and was still funding 57% in 1948. This shows that the extent of economic aid provided before the Marshall Plan was as critical to Austrian recovery as the plan itself.


Exhibit
On March 17, 2005, a special exhibition was opened at the Technisches Museum in Vienna, Rebuilding Austria, commemorating the contribution of the American Marshall Plan to Austria's post-war prosperity. During the opening ceremony, Austrian Federal Chancellor Wolfgang Schüssel thanked the American nation for its generosity. The Austrian historian, Guenter Bischof, gave the introductory speech and contributed an essay to the catalogue, which is available in German and English. His essay has also been used as background material for the current article. The exhibit will run until October 2. Among the highlights of the exhibition are an original CARE package (Cooperative for American Remittances to Europe); ten original sacks of flour provided to Austrian bakers by mills in Denver, Colorado, Saint Louis, Missouri, and New Orleans, Louisiana; and a trunk of books which was circulated throughout Austria as "spiritual food."


Genesis
When the armed conflict ceased on May 8, 1945, Austria was divided into four occupied zones: Soviet, American, British and French. These zones were strictly separated from each other until the fall of 1945. The Soviet zone in the Eastern half of Austria remained separated even until 1953. During an inspection tour of Vienna in 1946, the U.S. diplomat and State Department expert, Charles Kindleberger, described the ultimate consequences of separation in the following manner: "The four power occupation of Austria was a frightful mistake. Again, the U.S. got the raw deal. The Russians got the bread-basket, the British got the coal, the French got the scenery this time, with all its tourist potential, and the Americans got gar nichts."

The provisional governments in the four zones tried to survive with the help of the occupying powers and by means of primitive barter with neighboring regions. People in Vorarlberg and Tyrol tried to revive the textile industry with supplies from Switzerland and the inhabitants of Tyrol, Salzburg, and Upper Austria started a brisk trade and black market with Bavaria. The foreign coal supplies were a major problem. Polish coal had to be paid for in scarce dollars and there was no coal available from the Ruhr because of the unsolved German reparations issue. The Soviet occupying power had impounded the entire oil production in the Marchfeld, an area northeast of Vienna, as a "German asset." The Soviets also seized, dismantled and removed factories as reparations, and requisitioned hundreds of railroad cars. The American, French and British, however, handed over companies and other property in their zones to the Austrian government for "safekeeping," with but a few exceptions.

Apart from the shortage of industrial raw materials, the food shortage was the most serious issue. To feed the hungry populace was the greatest humanitarian problem. Traditional food producers in neighboring Eastern Europe could not help because of similar post-war problems or because of increasing tensions between the East and the West. From 1945 to 1947 Austrian farmers were only half as productive as in 1937. Many Austrian farmers preferred selling their products on the black market at higher prices rather than meeting special government allotments at controlled prices. Since there was no solidarity between the rural and the starving urban populations, CARE packages often helped to meet some of the food shortages, making all the difference between a rumbling and a full stomach.

A Tightrope Walk
The establishment of the Marshall Plan occurred during the turmoil of the beginning of the Cold War and was one answer to three crises in Europe: the weakening of the British Empire; the threat to the internal stability of France, Italy and Austria posed by Communist parties; and the economic and moral decline of West Germany. In 1946, U.S. economists and diplomats started discussing a long-term recovery program for Western Europe. They concluded that it would be impossible to save the European economy without cooperation among the individual countries and the complete integration of West Germany. Preserving the economic unity of Austria was particularly difficult because of the Soviet occupation, the beginning of the Cold War and the threat of the division of Austria. Because of Moscow's presence at the ERP negotiations and its reluctance to have Austria profit from the ERP, the process of acquiring funds for Austria was a difficult and delicate one.

The European Recovery Program was initiated by the American Secretary of State, George C. Marshall, and was intended as a program of self-help. Between 1948 and 1952, it contributed approximately $14 billion in aid to 16 European countries. At the time, this sum corresponded to 1 to 2% of the American GDP or $80 per American. This was about five times the amount of today's U.S. foreign aid (excluding Iraq). Of the 14 billion dollars, Austria's share was around one billion dollars of interest-free donations. In other words, each Austrian individual received the equivalent of $132.

The first ERP supplies reached Austria in the summer of 1948. Direct aid for Austria amounted to $217 million in the first year. In addition Austria received "indirect" aid of $63.5 million in the form of "drawing rights" for trade between participating European countries. Initially, 88% of the foodstuffs and 73% of the coal came from the ERP. There was also a "Schilling side" to the ERP. The proceeds in schillings from the sale of Marshall Plan goods were transferred to an ERP counterpart fund which served as a principal reservoir for post-war Austrian national investments.

The Marshall Plan had provided Austrian policy-makers with the means to make the country economically independent. In 1952/53, how- ever, the U.S. exerted pressure on Austrian policy-makers to impose unpopular measures. These included requiring farmers to yield to prices supported by ERP food imports, compelling workers to give up projects financed by counterpart funds, and forcing the grand coalition to give up their dependence on U.S. aid for its full employment strategy.

The Marshall Plan not only accelerated Austria's economic recovery and its political and cultural orientation towards the Western world, but it continues to have an effect on Austria's economy. In 1961 the American Ambassador to Vienna transferred the entire counterpart funds generated by U.S. supplies since 1947, amounting to ATS 11.2 billion, to the Austrian government. Thus the ERP Fund was established and is still active today. Between 1962 and 1998 the ERP Fund granted Austrian businesses a total of ATS 90 billion in numerous long-term low interest loans.

Guenther Bischof is Professor of History and Director of Center Austria and Interim Director of the Eisenhower Center for American Studies at the University of New Orleans.