IMF: Modern-day Marshall Plan?

By CNN Correspondent Garrick Utley

It was a June day in 1947. The university graduates sat patiently in their black caps and gowns, their diplomas in hand. Ahead lay lives to lead, careers to build, opportunities to seize. The graduates, at Harvard University, had grown up in the depression and knew of the carnage of the World War that had just ended. Fascism had been defeated, but now there was a new adversary. Communism, particularly Soviet communism, was no longer seen as a wartime ally, but a threat in what would come to be known as the Cold War.

The first battlefield of the Cold War lay across the Atlantic, where Europe lay ravaged. Two years had passed since Hitler's death in Berlin. But for those who had survived above his bunker, a potato was still a luxury, and the future a dispiriting question mark.

That, too, was part of the new world facing the young Harvard graduates as Secretary of State George C. Marshall addressed them, proposing a European Recovery Program that would come to bear his name. From 1948 to 1952, it extended nearly $17 billion (in 1947 dollars) in economic aid.

It worked. And it worked quickly. By 1952, the Marshall Plan had laid the foundation for the spectacular economic recovery that would follow. Democratic roots took hold again in Western Europe, which today has formed a European Union whose market size is larger than the United States, with a fledgling currency that one day may rival the dollar in strength, and at its center, Germany -- the defeated enemy as the economic power of Europe.

Today, we face another crisis. We read and hear of jittery stock markets and worry about what that means for our jobs, our mutual fund investments, our plans for the future and retirement. And we read and hear about another international effort to maintain free markets and political stability -- the International Monetary Fund. Is the IMF the Marshall Plan of today? Can people invest the same faith, as well as money, in it as a previous generation did in economic aid for Europe?

The purpose of the IMF is not to give money to build or rebuild economies, but to make loans to countries that have run into financial trouble and need a temporary bailout. The loans come from a fund financed by 182 member nations, with the United States contributing the largest portion, 18 percent. The goal is to prevent a breakdown in the international system of financial payments, mainly debts, that could weaken or collapse a nation's economy, or the world's.

The IMF's biggest test came in the 1980s when several countries, particularly in Latin America, found they could not repay or even service the interest on enormous loans they had received from private banks and other financial companies. From 1980 to 1985 the IMF loaned more than $25 billion to prevent financial collapse. In the 1990s it has also played a central and expensive role in the bailout of Mexico and Russia, as well as the tottering economies of Southeast Asia.

The IMF, like the Marshall Plan of half a century ago, may appear to be a "savior" riding to the rescue of nations in distress. The difference is that the Marshall Plan was only one part of a larger effort to face down the Soviet Union in the Cold War. There was also NATO, the creation of West Germany as a sovereign democratic state, and the start of the Common Market.

Today, there is an awareness voiced by U.S. President Bill Clinton and others that the IMF alone is not enough, that new initiatives and perhaps even regulations are needed to keep the global economy and financial system functioning. What does resemble 1947 is the degree to which we recognize that the times have changed, a new danger confronts us and action is needed. Now, as then, too much is at stake to do nothing.