Theodore Geiger was a U.S. State Department economist during the early years of the Cold War. After serving as part of a special U.S. mission to help the Europeans restart their economies after World War II, he joined the Marshall Plan administration team as a top aide to Assistant Administrator Richard Bissell. The COLD WAR production team interviewed him in November and December of 1995.

I traveled over pretty much all of Western Europe during 1945, '46 and '47 ... and so I had good opportunity to observe not only what the governments were saying about the conditions, but also what people in the street were doing: what they could buy to eat, what their clothing looked like, and more particularly the housing in which they were living, which were often wrecked buildings that had just been temporarily set to accommodate a family, but no amenities of any kind. ...

The winter of 1946-47 turned out to be an extremely bad winter: heavy snow, unusual cold in Europe -- northern and central Europe particularly. Transportation broke down, fuel became very short. The most common fuel was coal in those days, not only for industrial purposes but also for heating homes, cooking and so on, and coal is a heavy commodity -- had to be transported by rail or by road, and with the railroads iced up and not operating, with inadequate rolling stock, with the roads not yet repaired from the devastation of the war, it was very difficult to get coal to where it was needed. ... In London during the winter of '46 and '47, we had no heat from 8 a.m. until 4 p.m., and you couldn't even boil water during that period. So things were very difficult, and they were deteriorating rapidly.

Because of the severe winter, the winter wheat crop failed. They replanted in the early spring of '47; but then floods washed away the seeds; [and] there wasn't enough seed. So the food situation became very grim.

Many [industrial] plants could not produce because they could not get raw materials, or they could not get power from the power stations, or their machinery had broken down and there were no repair parts to be had. So production began to drop very precipitously during the spring of 1947. And the governments did not have the foreign exchange to import the needed parts and the needed raw materials, the needed food and the needed fuel.

All of the countries in Europe, except for Switzerland, were running very serious deficits in their government budgets. Revenue was falling off because the economic activity was going down; therefore the taxation didn't produce the amount of revenue needed. They couldn't float bonds in the market because nobody had the capital to buy their bonds, so they printed money, and inflation therefore was running at a very rapid rate. ...

I can say that the political situation was equally serious. Naturally, with deteriorating economic conditions, workers went on strike because they weren't being paid [or because] their wages were inadequate in view of the inflation. There were demonstrations in the streets. The communist parties, particularly in France and Italy, were growing in size. They held enormous demonstrations which paralyzed the streets.

And so the political situation interacted with the economic situation. As political unrest and strikes and demonstrations grew, that had a further adverse effect on production; and in turn, the decline of production had stimulated further the political unrest. So it was an interacting situation.

You had these weak centrist coalition governments in France and Italy ... and of course, only a military occupation government in Germany. And so there was great alarm on the part of the non-communist political parties on the continent, and of the government officials ... at the deteriorating political and economic situation. And [there was] fear that domestic communists in Western Europe would become so active and so disruptive that it would lead to economic collapse -- which was probably going to happen anyway unless something was done -- and this would give an opportunity to the Soviets to extend their influence in Western Europe.

There was also fear at that time ... [that] there was an enormous disparity between the armed forces which Russia had poised in Eastern Germany and what the Americans had left in Europe. And so there were always stories in the paper or on the radio about how the Red Army could sweep through the Channel in a week, and this further exacerbated the psychological situation in Europe. People felt that after the exhaustion and the terror and the sacrifice of the war years, that there was nothing in their future for them. Economic conditions were getting worse, political conditions were getting worse; they were powerless to make any decisions about their own future. So, psychologically there was a substantial deterioration of morale in Western Europe during the spring of '47.

The beginning of February '47 until the beginning of June '47 is known to American historians as the 15 weeks which changed the orientation of American foreign policy. ... At the beginning of February, the British informed the United States government that they could no longer carry on the responsibility for the economic and military security of the eastern Mediterranean, particularly Greece and Turkey.

In the United States, this came as a major shock, because in 1946 a Republican Congress had been elected for the first time since 1932, and the Republicans came to power with quite different ideas of what American policy should be, both domestic and foreign. ... They thought that foreign aid was just a giveaway, and that money was being thrown down rat holes in Europe and elsewhere in the world, and so they were determined, in the budget that was going to be passed, their first budget, to cut foreign aid and so on.

And this fitted in pretty well with the general sentiment in the United States. Don't forget that the American people had had 10 years of the most severe depression of modern times, the Great Depression. ... Then came the war, in which their consumption was cut still further. ... They were earning good salaries; they had the money, but there were no goods to spend it on. So here everybody in the United States was looking forward to the postwar years in which they could make up all this forgone consumption of the past 15 years. ...

[But] however isolationist the American people and the Republican Party were becoming, there was one threat which they all accepted, and that was the threat of communism. The Greek-Turkey crisis brought home to them the fact that the communists were continuing to advance. Not simply beyond the northern part of the Balkans, which the Red Army had occupied and was taking over; but also [in] Greece, where the communists were in arms against the government, [and] Turkey, where the Soviets had demanded that the Turks give them bases in the Dardanelles, which would have enabled them to control the waterway from the Black Sea to the Mediterranean. [The Soviets were] also bringing pressure on Iran. And it looked as though the eastern Mediterranean and the Middle East would go [communist] -- if not direct control, at least communist influence during those years.

That was a very great shock to the American people. The importance of that was realized by Senator Vandenburg of Michigan, who was the president pro tem of the Senate and the chairman of the Foreign Relations Committee of the Senate. He was the man who understood what was at stake, who said, "We have got to reverse this trend toward isolationism. There is too much at stake for the United States to withdraw from its world responsibilities." And he was able to convince his fellow Republicans to go along with the legislation that President Truman proposed, to provide economic and military aid to Greece and Turkey and on a substantial scale. And that legislation passed toward the end of March of 1947. So that was a 180-degree change in the orientation of American foreign policy.

The speech was a very short one, and what Marshall offered -- after describing the situation in Europe and what the consequences might be of allowing the situation to continue to deteriorate -- Marshall then went on to make certain proposals, and these were absolutely unprecedented in terms of the way in which aid was given by one nation to another.

In the first place, he said, "This has to be a European initiative. The Europeans have to get together, decide on what their needs are, and form a single, unified program which will then be presented to the United States." And the United States would deal [with] these questions of how much aid, for what purposes, and so on, only with the Europeans collectively, not with the individual nations.

And it was this particular part of Marshall's speech that [British Foreign Minister Ernest] Bevin responded to. And the French Foreign Minister was Bidault, I think, and Bevin and Bidault issued an invitation then to all of the European countries. Marshall had made clear in the speech that this offer was being made to every European country. Now, he didn't mention the Soviet Union by name, but it was open to every European country willing to participate in a coordinated, cooperative program of the kind that the Americans were proposing. So Bevin and Bidault issued invitations to the Soviet Union, to all the Soviet satellite countries in Eastern Europe and so on.

Then the question was, [at] a conference in Paris ... whether they were going to respond to the American offer; and if they were going to respond, what their response should be. ... And the Soviets refused to attend. The Poles and the Hungarians and the Czechs sent representatives, but they were withdrawn [under] Soviet pressure.

Now the question is: Why did Marshall make this proposal at a time when it was clear that what later became the Cold War was becoming more and more obvious? And the explanation given by people like George Kennan and others, who were part of the decision-making process in the State Department, was that the United States did not want to be responsible for initiating the division of Europe, between East and West, and that this would be a last offer to the Soviets to participate in a cooperative way in the reconstruction of Europe. And if they refused to participate, it was their decision to divide Europe, not the U.S. decision. And this is what motivated that particular offer. Now, my own view is that they were hoping the Soviets would say no, because it would have been an impossible program to operate with Soviet participation: the Soviets would have sabotaged it and so on. And they immediately began attacking it as American imperialism, an American attempt to take over Western and Central Europe, and so on and so forth. So, the Americans made the offer, but in the back of their minds I'm sure there was a hope that the Soviets would refuse to participate.

The Truman administration had made the decision to make the main argument in favor of the Marshall Plan: the fact that in economic and social terms, it was absolutely essential, and that even if there were no communists in Europe, it would have been a necessity in order to prevent political and economic collapse in Western Europe.

And it was touch and go when both houses of Congress were finally considering legislation in December '47 [and] January and February of '48. And then the Czech coup occurred: the communist takeover by force in Czechoslovakia. And that was the final straw, because even the isolationists, or most of them, could see that the one thing that would convince them of the need for passing the program -- the communist menace -- was really so, and that the Russians were advancing westward with the takeover in Czechoslovakia. So [the Czech coup] helped, very importantly, to pass the legislation.

Actually, the Marshall Plan, from the U.S. point of view, was an extraordinary operation. The ECA [Economic Cooperation Administration] was a very small agency. When you think that in four years the ECA spent a total of $13.7 billion -- that's in 1950 dollars -- in present-day dollars that's about $124 billion. Well, think of an American agency today spending $124 billion in four years, without an enormous bureaucracy to do it, without just losing track of things and so on and so forth. The ECA was a very small organization. Fewer people spent more money in that agency than ever before or since in the United States Government. It was an extraordinary performance.

If I can paraphrase Churchill's famous remark, "Never before have so many owed so much to so few," I would say that as far as the ECA is concerned, never before in the history of the United States Government have so few people spent so much money with so little corruption, black marketeering, and so on and so forth.

It cost $80 per [U.S. citizen] ... Or if you want to put it in another way, in the four years of the Marshall Plan, the total amount came to 1.3 percent of U.S. gross national product produced in the four years. ... That's an extraordinary amount of money when you think that today the total foreign aid program for economic and military purposes of the U.S. Government is less than two-tenths of one percent of GNP. ... It was a significant portion of U.S GNP in the '40s and early '50s, and this was at a time when there were enormous arrears of consumption in the United States. The government could have spent the money on construction of roads, repair of bridges, all the things that had been neglected during the war and even during the Great Depression that preceded the war. So there was a real sacrifice on the part of the American people.

[But] this was not totally an altruistic effort. Churchill is reputed to have called the Marshall Plan "the most unsordid act in human history," and you know, it was unsordid. But the United States had enormous self-interest in the success of the Marshall Plan. Otherwise it wouldn't have been undertaken. It was recognized in the government, and eventually by the American people and by the Congress, that America had a vital stake in the recovery of Western Europe. ... If the United States had allowed Europe to collapse, it would have cost us much more than what we spent on the Marshall Plan -- a great deal more. So it was in the self-interest of the United States to finance this program. We were doing good; we were doing well by doing good. (Laughs) And you know, that's the best way to do good: if you yourself benefit from the good you're doing to other people.

In many ways, the most important long-term effect of the Marshall Plan was the program to reduce trade and payments barriers. This was done in various ways, by using Marshall Plan dollars which were not allocated to any particular country, but [to] a special fund [that enabled] a clearing system to be set up in Europe, called the European Payments Union, under which countries freely exchanged goods and paid for them in their local currencies. ...

And this is what led eventually to the European Economic Community, the European Union; [and] what is now leading to the final step of this process of European monetary integration and trade integration, which is the proposal for a single currency in Europe. It's taken 40 years for it to get there, but ... this was all started by the Marshall Plan.