The Marshall Plan and the Road to Recovery: Learning from the Past Crises The Role of the Strategist State Prof. Claude Rochet Athens, Mars 5 th 2014
Lessons from the Marshall Plan
Dec 05, 2014
The Marshall Plan and the Road to Recovery: Learning from the Past Crises
Meeting with the Independent Hellens, Athens March 5th 2014
Meeting with the Independent Hellens, Athens March 5th 2014
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The Marshall Plan and the Road to Recovery:
Learning from the Past CrisesThe Role of the Strategist State
Prof. Claude RochetAthens, Mars 5th 2014
Before the Marshall Plan: The Morgenthau Plan
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Deindustrialization
Weak Political power
= a clear intention of destroying a country=> Fostering a negative synergy among ALL European countries
The Malthusian consequences of a Morgenthau plan
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No industry => Malthusian trap
No industry => economic collapse
No industry => Negative synergies, recession for all
Rediscovering the traditional mercantilist wisdom
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Speech by G. Marshall June 5th 1947
Town and industries are at the heart of economic synergies as engines of wealth creation
What the Marshall Plan was NOT?
Only a massive transfer of monetary ressource to finance imports from the US
Just a political operation to contain communism
The catalyst of European recovery
Monetary orthodoxy Free market orthodoxy
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What it was: Strong public intervention: Gov’t failures are always
preferable to market failures Alleviation of war controls on prices and quotas,
exchange rate stability, BUT under mixed economies re-distributional systems
Priority to productive investments Considering the economy as a whole and not specific
firms as market mechanisms would do + Knowledge transfer => Strong multiplier effect Political consensus on welfare state Bretton-woods system: no currency straitjacket
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A key issue neglected by the folk vision of the Marshall plan:
Knowledge transfer accounted for 1,5% of the total cost of the plan (20bnUS$)
4-6 weeks study tours were organized in the US to learn management methods
Productivity solutions suited to local conditions Workers Unions supported the plan under the condition that
productivity benefits will be shared between owners, workers and consumers
This resulted in dramatic productivity increase of 25-50% with no increase in fixed assets, and an historic increase of TFP
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Why it succeeded?: Applying the old recipes
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Searching for synergies between economic activities
All activities are not alike and growth is an uneven process
Increasing returns
Increase the technological content of products and labour
Prodty increase in the absence of a manufacturing sector
Play it again, Sam!
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As Time Goes by, the fundamental things apply… Why did the plan worked:
- Linking agriculture and industry- Creating free-trade zone, BUT within
symmetrical partners- Relying on technologies and activity
specific sectors
These are the principles formulated by F. List in 1841
The preconditions for wealth, democracy and political freedom are all the same: a diversified manufacturing sector
Troïka policies are akin to Morgenthau plans (1)
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De-industrialization as a massive destruction weapon….
Troïka policies are akin to Morgenthau plans (2)
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… with a particular emphasis on Greece
Morgenthau plan in action
Troïka policies are akin to Morgenthau plans (2)
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Morgenthau plan in action
A process of primitivization:• Loss of skills and
emigration• Retrogression to
primitive state
Unemployment (% GDP)
Investment (% GDP)
Lessons from the past: Development is an uneven process Activities are not alike Wealth is not valued by hours of work but
with knowledge Infant activities protection is needed to
preserve the first mover advantage High quality activities spill over all the society
=> civic humanism
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The issue of Good and strong Gov’t is still topical as a condition for growth
Clisthenes’ principles: isotopia, isonomia, isocratiaAllegory of the Good Governement, Sienne Town Hall, by A. Lorenzetti
What is the role of a strategist state?
1. A strategic vision borne by sovereign state
2. Power and plenty are linked3. Understanding the role of high
quality activities4. Modernization of public
administration and political strategy are closely intertwined
5. Promoting the entrepreneurs and fighting the rentiers
6. Keeping a tight rein on finance
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14Since 1720, financial
follies are alike
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