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 Remarks by Treasury Secretary Robert E. Rubin on the 50th Anniversary of Marshall Plan George Washington University


6/2/1997

I’m pleased to have be eninvited to speak to you today on the occasion of the 50thAnniversary of the Marshall Plan, and I am honored to be withthose of you here who worked on the Marshall Plan.

Let me start by looking back fora moment, and then I’d like to discuss the carrying forwardof the spirit and vision of 1947 to the World of today andtomorrow.

Fifty years ago, George Marshallspoke at Harvard and proposed the outlines of the relief plan forEurope that would bear his name. At a time when we were exhaustedfrom war, a time when the temptation to withdraw frominternational engagement was strong, we reached out with adramatic infusion of aid for a Europe in crisis. The costs of theMarshall Plan were immense -- $13 billion over three years, ornearly 10% of the Federal budget at the time. But the return onour investment was equally immense. The Marshall Plan was crucialto the rebuilding of Europe and the strength and prosperity ofthe Western economies. That Plan -- its spirit and vision --marked one of America’s finest moments.

There is no doubt that, in moralterms, the Marshall Plan was the right thing to do. But theMarshall Plan was also vitally in our economic and nationalsecurity interest. America needed then -- and needs today -- aprosperous and thriving world to remain prosperous and thrivingherself. Visionaries such as George Marshall understood that.Though Marshall was a military man, he knew that victory did notcome when the guns were laid down and the flag was raised ...that victory would only come when the conditions for long termpeace and prosperity were established. He knew, in short, thatstability today could quench conflict tomorrow, that the mosteffective diplomacy is preventive diplomacy.

Today the legacy of the MarshallPlan is clear. It helped build a European continent bothprosperous and free, one moving ever closer to integration. Itfirmly set the United States on the course of leadership andengagement in international affairs. And it showed that we hadlearned the lesson from our decision after World War I towithdraw from global affairs.

The imperative for U.S.leadership and engagement in the global economy have not changedsince the Marshall Plan -- though the circumstances obviouslyhave. In fact, in some respects that imperative have increased,just as the centrality of economics to foreign policy, which wasgreat then, has also in some respects increased. In 1947, 12percent of our economy relied on trade. Today, that figure hasmore than doubled. In 1947, the vast preponderance of leadingU.S. corporations viewed themselves as American companies withoffices abroad. Today, they see themselves as global corporationsbased in the United States. In 1947, capital markets weenational, with very little flow across country borders. Today,there is an enormous integrated global capital market, with vastcross-border investment and financing flows every day.Technology, political change, and market openings have sped oureconomies toward integration and created new opportunities forgrowth, but also new risks. It is no exaggeration when we saythat our economic well-being is enormously and irreversiblylinked to the rest of the world. I saw a column the other day inwhich the author was decrying the globalization of economic life.I think he might as well have been decrying the rise and fall ofthe tides. The reality in my view is not at issue. The onlyquestion at issue is whether we turn this to our advantage --with the great benefits that can flow therefrom -- or we turn ourback on reality, with the results that usually flow from that.There is no question where George Marshall would have come out.

Fostering a healthy globaleconomy is enormously in our interest in 1997, as it was in 1947.At that time, to confront the economic challenge of post warEurope, Marshall laid out a three-part strategy: providing muchneeded capital to reconstruct devastated nations; conditioningthat assistance on key economic policy reforms; and integratingEurope in the international community. That conditionality andthat vision of integrated economies are now sometimes forgotten,but they were an integral part of the Marshall Plan.

The strategy for promoting growthand economic well being in both the developed and the developingcountries of today’s economy is very similar: supportingsound economic policies in conjunction with providing assistance,now largely through the international financial institutions andtheir policies of conditionality; breaking down barriers toeconomic integration, including through the trade liberalizingefforts of NAFTA, GATT, APEC and the Free Trade Area of theAmericas; and providing capital, though in today’s worldthis is increasingly by promoting conditions that attract flowsof private capital.

And that highlights a centraldifference between the challenge of rebuilding Europe in 1947 andthe challenge of spurring development and growth around the worldtoday. In the 1940's, there were no global capital markets. TheMarshall Plan’s $13 billion in directgovernment-to-government lending was critical to thereconstruction of Europe. Now, the key to development and growthis less official aid, whether bi-lateral or through theinternational financial institutions, although that remainsimportant, than creating the environment that will attractprivate investment.

And key to creating thatenvironment is another product of this remarkable period ofinternational vision and leadership in the late 1940s, theBretton Woods Institutions -- the International Monetary Fund andthe World Bank -- and their more recent companion institutions,the regional development banks and the GATT/WTO.

Take the case of the developingcountries around the globe which have undergone a remarkabletransition over the last twenty-five years. In Asia, in LatinAmerica, in Central Europe, in country after country there is analmost universal emerging consensus that free-market economicsare the key to prosperity with many countries in each of theseregions achieving great improvement in economic conditions overthe recent years or, in some cases, particularly in Asia, overrecent decades. And the International Financial Institutions havebeen central to this, investing in education, health care, andthe other underlying requisites for a successful market-basedeconomy, and encouraging sound financial and other policies byconditioning their assistance, just as the Marshall Plan didfifty years ago. This in turn is critical to our country, asprosperity in developing countries and in the countriestransitioning from Communism furthers political stability andDemocracy, all of which contribute to economic activity in ourcountry and enhances our national security.

However, despite all of theprogress with respect to the developing and transitioningcountries, the challenge of bringing the whole of theworld’s population into the economic mainstream remains, andour future -- our economic well being, our national security, ourenvironmental conditions, and our public health -- depends onmeeting the challenge. The World Bank estimates that 1.3 billionpeople live on less than one dollar per day, and even in many ofthe countries where significant progress has been made, thosegains are not irreversible.

Many parts of Asia have achievedeconomic conditions unimaginable 30 years ago, but a vast numberof Asians still live in poverty. And with Africa there is a wholecontinent that has remained mired in poverty, though somecountries have begun to adopt reform regimes and have begun toexperience real economic improvements. Applying the spirit andvision of the Marshall Plan to Africa, I don’t think thatthere is any question that an economically successful Africa isnot only in the interest of Africans, but is important in ourinterests as well.

Towards these ends, theAdministration is working with a bi-partisan group in Congress ondeveloping a vigorous African strategy and with the InternationalFund Institutions to greatly increase their focus on Africa. AnAfrica that succeeds in a commitment to democracy, economicreform, and sustainable development will provide higher standardsof living for its people and be more stable politically andsocially. That, in turn, will benefit American businesses andworkers, but it will also strengthen or national security bylessening the need to respond to crises in Africa.

However, every component offorward-looking inter-national economic policy immediatelyencounters the debate about our country’s role in the globaleconomy and more generally in the world -- just as the MarshallPlan triggered an enormous debate in its day. That debate can beseen on a number of fronts. One is the area of resources.

We are the world’s largestand richest economy by far, and yet we are the largest debtor tothe United Nations and we account for the lion’s share ofthe arrearages to the World Bank and its sister multi-lateraldevelopment banks. We were instrumental in creating thoseinstitutions, and now we threaten their health.

Similarly, on tradeliberalization, as nations around the world join together in allsorts of ways, as with the common market in Europe, MERCOSUR inLatin America, and ASEAN in Asia, the United States seemsincreasingly resistant to trade liberalization. This movementtowards integration will continue, with us or without us; theonly question is whether we will be inside, and participate inthe benefits, or on the outside, much to our detriment.

To secure the political supportto maintain our leadership abroad requires building publicsupport for these forward looking policies. This, too, GeorgeMarshall understood very well. When he spoke at Harvard in 1947about his proposal to help Europe he recognized the politicalchallenge ahead when he said: "An essential part of anysuccessful action on the part of the United States isunderstanding on the part of the people of America of thecharacter of the problem and the remedies to be applied.Political passion and prejudice should have no part." Afterhe made the proposal, President Truman, Republican Senator ArthurVandenberg and members of both parties launched a campaign toeducate the public about the Plan and build support for it. TheMarshall Plan, which was initially met with skepticism andopposition, eventually passed overwhelmingly in both houses ofCongress.

Today, we face that samechallenge of building in Marshall’s words, an understandingon the part of the people of America of the character of theproblem and the remedies to be applied. Those in government whoare committed to meeting that challenge cannot do so alone. Allwho understand how vitally our well being is linked to the wellbeing of the rest of the world need to join together in buildinga shared understanding among all Americans of that vital linkage.

After World War II, much of thesupport for the Marshall Plan came from the urgencies of the ColdWar. Today, there are also great urgencies for Americanleadership in the world, but they are less obvious and moredifficult to understanding, making the challenge of buildingpublic support all the greater. I would like to conclude byurging that you leave today’s program at George WashingtonUniversity not only with a deepened understanding of the MarshallPlan and General George Marshall, but with a commitment tohonoring his spirit and vision to the

challenges of today -- includinghelping to build this shared understanding amongst all ourcitizens of our common interest with the rest of the globe. Ihave focused primarily on economic interdependence thisafternoon, but in today’s world national security, publichealth, environmental protection, crime, terrorism have allbecome issues that no nation -- even the richest and mostpowerful -- can face alone. Surely one of the great lessons ofthe 20th Century, a lesson George Marshall clearly understood, isthat withdrawal from international affairs cannot work. When wewithdraw, we suffer; when we engage, we prosper. Thank you verymuch.

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