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Marshall Plan & our economic downturn

March 26, 2009

While it is appropriate to question the Obama team’s bailout policy, much of the current criticism against Timothy Geithner and the administration by current pundits– specifically the ideologues on the right– would rather find the country in economic collapse than stand behind this administration’s attempt to stave off this crisis. It is one thing to hear this language uttered by Rush Limbaugh, but frightening to hear contextualized and justified in CNN discussions. If CNN is going to frame this perspective, we need to hear some of the more fundamental questions posed.

Throughout the discussions and dialogue, one question that I do not hear uttered is, ” how did the United States become so successful to begin with?” When both pundits and politicians talk about American ingenuity and hard work and the superiority of the American capitalist system, what is it that they are referring to? At what point did the United States and the dollar begin to dominate international currency and the world market economy?

One approach that needs further critical and historic examination is the Marshall Plan, often synonymous with the Truman Doctrine or the European Recovery Program (ERP).

For those unfamiliar with the Marshall Plan, we need to turn our attention to the end of WWII.

Formally, the United States entered into the war in 1942 with Japan attacking Pearl Harbor, the U.S. military baseĀ in the Pacific. The war though had been raging in China when Japan invaded Manchuria in 1937 and in Europe since 1938 when Germany invaded and annexed Austria. During the early years of the war, the United States had remained neutral while our manufacturing base grew, contributing to the success of the U.S. economy at that time. We had been supplying weapons, resources and materials to both sides of the war, and the longer we remained neutral, the longer manufacturers and exporters could profit from the war.

During the war, much of the Allies manufacturing base was destroyed, and the economies were quickly heading to ruin. After the attack on Pearl Harbor however, the US officially declared war and committed ourselves to a three-year international campaign to stop the axis power. The fight over world domination by the Axis-power was arguably an attempt to control territories and resources. Those who controlled territories and resources were able to assert power and influence on the new burgeoning global trade and the international market. Although for somewhat different reasons, both Germany and Japan considered imperial expansion as the best means for acquiring labor, material and resources and WWII should be viewed as the logical result of 19th century and early 20th century colonialist policies.

When WWII ended and the Axis were defeated, the United Nations officially formed as a way to establish an international confederation of states whereby peace might ensue. Part of this peace process was to end colonialism and pursue a new era when territories of both axis and allied powers would be mandated towards self-governance.

Chronologically, this narrative of international organization should begin earlier with Woodrow Wilson’s “Fourteen points,” a speech he gave shortly after the first World War in which he outlined a map towards global peace, an end to further world wars. This led to the development of the League of Nations, the failed precursor to the United Nations. Woodrow Wilson, unfortunately did not have the congressional support he needed to ratify this international peace agreement, in part due to the conflict he had with Congress, and so the United States did not ratify this Charter. At the height of WWII, when the war was leading to all out armageddon, many in Congress felt a sense of responsibility for not having ratified the League of Nations. There was discussion in Congress whereby if the US had signed on to the League of Nations, then neither Hitler nor Hirohito would have likely succeeded to the extent that they did.

In 1944-5, as it became apparent that the allied forces were going to win the war, international meetings led by FDR, Churchill and Stalin were taking place. When there was official talk announcing an attempt to organize a new international league, Congress appointed two senators, Senator Connally and Senator Vandenberg to report back to Congress the events that the State Department– the department responsible for negotiations within this new international organization– were negotiating in both San Francisco and Dumbarton Oaks. In 1946, Congress had given authority to the President to ratify the UN Charter, thus establishing a new legally binding treaty with the United Nations. It was agreed that it would be centered in New York and paid for most heavily by the United States.

A couple of reasons as to why the United States was going to be hosting the United Nations was that a) the U.S. at the time, had not suffered the devastation that Europe had suffered and b) that the United States economy had not been devastated by the war, rather, it had profited from it, and so there was an obligation to commit to a greater financial share.

After the war, Europe and Japan were in the midst of rebuilding. The U.S. was assisting in the rebuilding but there was however, a shortage of manufacturing facilities and resources in the war-torn countries. International labor had already organized and were overseeing international standards and cooperation that went on between nations in both manufacturing and shipping. This was for the most part, heavily influenced by the Soviets through the World Federation of Trade Unions (WFTU), hence the association between international labor as “communists.”

In 1947, the U.S. offered international aid to the war-torn countries of both eastern and western Europe, including the USSR. The USSR, for the most part rejected aid, because the intent of rebuilding was a national issue whereby the workers would perform the duty of rebuilding, and the USSR also had their own resources. The U.S. terms were that they would offer only a small portion of the requested resources needed to rebuild, while American labor would manufacture and transport the goods that the European markets lacked.

George Kennan heading the Policy Planning Staff at the State Department at that time drafted the outline of the aid program and it was decided that without this aid program the growth that the U.S. had gained since 1937 would begin to shrink and lead the country back into a recession. The United States had just gotten out of the Depression and fears that unemployment would lead to another economic collapse was felt throughout. The American Federation of Labor lobbied for congressional support of this aid program because it was an opportunity for U.S. style capitalism to assert and perpetuate growth. To challenge the Soviet influenced WFTU, the U.S. State Department and the Department of Labor created a new international union with support from the British Trade Union Congress and the Dutch Federation of Labor called the International Confederation of Free-Trade Unions (ICFTU).

The battle of ideas was beginning in earnest. As Paul Hoffman, the Administrator for the Marshall Plan wrote, it was a “battle between the assembly line and the communist-party line.”

Strategically, it was in the best interest for the U.S. to only give a small amount of the resources a country asked for while selling them American made goods. This need for resources also essentially allowed the U.S. to interfere with the sovereignty of other countries by monitoring their economic policies and quarterly progress reports. The U.S. established a system called “counterpart funds” in which it required participating importers to deposit with their respective governments an amount in local currency that was equivalent to the dollar and was a strategy for stabilizing local currencies against the dollar, objectively asserting the dollar as the international currency with which it has since remained.

As opportunistic as it was, the Marshall Plan is what gave the United States its dominance in the world market. The drafters of this plan however, knew that this was not an infinite system as many today might argue– particularly those continuing to uphold Reaganism or the idea of American led free-markets. As Senator Vandenberg said, the Marshall Plan was destined to be “the turning point in history for 100 years to come.”

70 years later, we can conclude that Vandenberg was off by 30 years, and it is critically important for the state of our country now to understand the role that this system– the Marshall Plan– initiated in the post- WWII world economy. It speaks volumes in terms of international labor, it gives definition to the cold-war, to the role of the dollar in financial markets, as well as to the internal struggles of colonies struggling for independence, as well as 70 years of destabilization efforts and recovery aid packages.

The Truman Doctrine may have now well run its course and it is time for this post-colonial Marshall Plan to end and for a new one to begin. Our economy has bottomed out not simply because of toxic mortgage lenders– although that was an accelerant– it bottomed out, it could be argued, because the system was built on an illusion that only the U.S. was able to dictate terms of financial stability in the international market.

During the upcoming G-20 economic summit, if a proposal is submitted for creating a new international currency, then it will finally signify the end of the Marshall Plan, the end of a doctrine that has led to America’s hegemony of power. The U.S. as a whole should look at some of the wealthy who have lost their social and economic rank from the Madoff scandal as a metaphor for our future. Reinventing our economy beyond the petty diatribe of ideologues intent on hanging onto an economic system that has run its course is and should be an international security issue.

For Obama, he may have just one job with which he can rest his laurels, to softly bring the U.S. economy down in a parachute. If he can soft land our economy to be on par with the rest of the world without throwing the country into massive unemployment or inciting a revolution, he will have done his job.

What does this have to do with Hawaii’s statehood? This might very well be the back drop of a much larger story…

Arnie Saiki

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