The Marshall Plan by Benn Steil

Author:Benn Steil [Steil, Benn]
Language: eng
Format: epub
Publisher: Simon & Schuster
Published: 0101-01-01T00:00:00+00:00

“THE [BERLIN] CRISIS,” WROTE THE new Republic, “Is certain to figure in future textbooks on economics. Seldom before has Gresham’s famous law that ‘bad money drives out good’ had such a proving ground.”18 The Allies, in their earlier determination to leave space for a currency compromise with Moscow, had burdened West Berlin with a currency regime that no competent economist could endorse. East marks, which no one wanted, were accepted for government transactions at par with west marks, which everyone hoarded. Arbitrage incentives driven by perverse price-control, rationing, and tax-accounting regimes worsened shortages. Murphy decried the fact that two thirds of the food provided for Berlin was being paid for in east marks—which was “so much waste paper.”19 And so in early 1949, currency chaos brought the interests of Washington and West Berlin closer together, even as it drove those between Washington and its wartime partners further apart.

Clay wanted to push the east mark out of West Berlin by declaring the West German deutschmark the sole legal tender. The State Department saw diplomatic as well as economic benefits in the move, concluding it would “be viewed as proof of Western . . . determination to remain in Berlin, which might in turn make [the Soviets] reassess the value of the blockade.” For Britain, however, this was a step too far. “Bevin,” Lovett observed, was “concerned [it] might slam the door on a settlement” with Moscow. Robertson insisted that Germans “would never accept” a divided Germany. Murphy suspected the French did not even want Berlin “tied in politically with the West.” He condemned “the British and French attitude” as craven. Washington, Clay concluded, needed to “demand acquiescence in our policy . . . as a condition to our continued financing of the German deficit.” And if that didn’t do the trick, he suggested, “we have other resources to force the issue.”20

That a technically simple monetary reform should cause such a rupture in Allied unity might appear strange, but the political significance of the move was considerable. First and foremost, it played to the agenda of West Berlin’s new leaders, who were pressing “irrevocably to tie [the] Western sectors” of the city “with the Western zones” of Germany. Reuter wrote an impassioned letter to Clay arguing that with the Russians “no longer execut[ing] any powers” in West Berlin, “there can no longer be objections, relating to the law of nations, to the inclusion of the three western sectors . . . into the ERP”:

Whilst therefore legal barriers no longer exist, political as well as economic reasons make the inclusion of the western sectors of Berlin into the ERP a matter of utmost importance. Berlin is situated as an outpost of Europe in the struggle against Russian expansionist efforts. Her task has become a European problem. . . . [Inclusion] would mean not only critical economic relief but also a moral support of the population of Berlin and an important demonstration against the Russian plans for strangulation.21

But for the French and the British,

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