The eurozone crisis and the Marshall Plan metaphor

Until the summer of 2012 I cannot find any use of the Marshall Plan as an analogy for understanding and resolving the eurozone sovereign debt crisis. The Marshall Plan had at its centre a massive sovereign debt relief programme that was particularly propitious for the new West Germany.

John Agnew
6 August 2012

Metaphors can be hard to avoid. Much thinking involves comparing something new and unfamiliar to something old and familiar that we believe we understand. Some philosophers have tried to think without metaphors, purporting to engage in “pure” description, but that has turned out to be rather fruitless. We are pretty much captive to our metaphors. What we can do, however, is bring them to the surface of our consciousness in order to assess their relative appropriateness in any specific case.

Nowhere is this more obvious than in stories about contemporary international events. As we search to understand them we have recourse to prior historical events, historical figures, literary analogies, and organizational models that provide both meaning and possible responses to what would otherwise seem like disparate and inexplicable happenings.  Some metaphors, such as ‘Munich’ as a metonym for the appeasement of dictators or ‘Vietnam’ for military interventions without exit strategies, have become clichés that arguably offer little intellectual purchase in many of the situations to which they are now applied.  But in communicating with other leaders and with publics, politicians need to use familiar terms to justify their action or inaction. ‘History’ then serves as a reservoir of ‘lessons’ imparted by well-known metaphors. That history has moved on becomes secondary to the need to express the unfamiliar in familiar language.   

One metaphor that always seems to come back to life whenever there is a political-economic crisis somewhere around the world is that of the Marshall Plan: the programme sponsored by the United States government in 1947 to help rebuild a Europe devastated by war. The invocation of the Marshall Plan usually implies the presence of a cataclysmic shock that cannot readily be blamed on any particular party; it also evokes the need for a powerful state to give incentives to make others respond collectively to that shock.  But these features are rarely spelled out. The metaphoric reference may take on a mystical aura.  In the early 1990s there were calls for a Marshall Plan for the former Soviet sphere of influence in the face of economic decline and political disintegration.  More recently, the threats from global climate change, the challenge of political change in the Middle East, and the problem of rebuilding war-torn countries in Africa have all led to its application. In none of these cases has it been entirely clear what exactly should be done that might be akin to what happened in Europe between 1947 and 1952.

Three elements to the successful deployment of the metaphor point to its use as a model for action rather than a simple rhetorical device. One is its harkening back to a dirigiste approach to political action rather than waiting for market-based initiatives. A second is its invocation or reminder of the need for urgency by those currently less affected by a crisis because it will eventually affect them too.  Finally, it implies a bold initiative that only a Great Power looking out for the collective interest can undertake.

Until the summer of 2012 I cannot find any use of the Marshall Plan as an analogy for understanding and resolving the Eurozone sovereign debt crisis. Depending on whom you ask, the following have been preferred: fiscal profligacy in southern Europe based on massive tax evasion reflecting a longstanding cultural image of this region’s population as indolent and corrupt compared to virtuous northerners; speculative exploitation of bond spreads within the Eurozone by bankers who, having brought on the financial crisis through their marketing of dubious financial products before 2008, attempted to recoup their losses through gambling on the sovereign bonds of those they had encouraged to borrow excessively; the mismatch between monetary policy, on the one hand, now operating zone-wide, and fiscal policy, on the other, still in the hands of states, that failed to follow similar routes to labour market and tax reform; the obsession of Germans, both economists and public alike, with the possible ravages of inflation should they rein in their current-account surplus in the interest of bailing out their Eurozone peers with current-account deficits due in part to trade imbalances with Germany; and the absence of a sufficiently autonomous Eurozone central bank, akin to the US Federal Reserve, that could directly manage runs on banks and the sovereign debt crisis. 

Arguably, each of these narratives has some merit. Each, though, also assumes a real crisis that may have exploded more rhetorically than it has practically. Many commentators agree that in theory the whole Eurozone’s financial system is so big that troubled countries’ (if restricted to Greece, Portugal and Ireland, at least) outstanding debts could be written down without much difficulty if only the appropriate institutional mechanisms (e.g. central bank coordination, minimal fiscal changes) were in place.   

This is where the Marshall Plan metaphor comes into play.  The first usage, by Hans-Werner Sinn in the New York Times (June 12, 2012) was to suggest that the recent German assistance to Greece made Marshall Plan assistance to West Germany seem like a mere pittance.  While US aid to West Germany by 1950 was cumulatively about 2 percent of GDP, he says, recent German aid to Greece exceeded 60 per cent of Greece’s GDP. So, the Marshall Plan is here invoked to celebrate Germany’s efforts in the Eurozone crisis.  From this viewpoint, the Marshall Plan was simply about US aid and future debt guarantees. What it completely misses, as has been pointed out by Albrecht Ritschl in The Economist Blog (June 15 2012), is that the Marshall Plan had at its centre a massive sovereign debt relief programme that was particularly propitious for the new West Germany.  As Ritschl puts it: “While Western Europe in the 1950s struggled with debt/GDP ratios close to 200%, the new West Germany state enjoyed debt/GDP ratios of less than 20%. This and its forced re-entry into Europe’s markets was Germany’s true benefit from the Marshall Plan, not just the 2-4% pump priming of Marshall aid.”     

Neither Greece nor the other Eurozone members with serious bond crises has received this sort of assistance.  So far, at least, Sinn’s claim that something equivalent to the Marshall Plan has been going on within the Eurozone, and thus there is no need for further economic unification (such as common Eurobonds, etc.) does not bear up. In fact, as Ritschl says, Germany has been behaving much more in line with the infamous Dawes and Young Plans in the 1920s, respectively, in first pushing massive borrowing and then, latterly, massive austerity programmes, rather than with the debt forgiveness extended to Germany under the Marshall Plan.

The obsessive fear of inflation in Germany (itself harking back to the ravaging inflation of the Weimar years), the widespread “pointing the finger” at those singularly “to blame” for the crisis, and the lack of a neat widely agreed narrative about the crisis and its solution, all point away from the full appropriateness of a neat analogy with the Marshall Plan.  What the metaphor does suggest, however, is that the “debt mutualisation” so alien to many German commentators in relation to the Eurozone crisis was central to German postwar recovery.  In the collective logic of hanging together for fear of hanging separately, the US Truman Administration embarked on a course of action that contemporary German public opinion would do well to contemplate. 

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