Conférence in Athens on the Marshall plan

1. The Marshall Plan and the
Road to Recovery:
Learning from the Past Crises
The Role of the Strategist State
Prof. Claude Rochet
Athens, Mars 5th 2014

2. 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

3. 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

4. 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

5. 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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6. 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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7. 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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8. Why it succeeded?:
Applying the old recipes
All activities are not alike and growth is an
uneven process
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Searching for synergies between
economic activities
Increase the technological content of
products and labour
Prodty increase in
the absence of a
manufacturing sector

9. 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

10. Troïka policies are akin to
Morgenthau plans (1)
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De-industrialization
as a massive
destruction
weapon….

11. Troïka policies are akin to
Morgenthau plans (2)
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… with a
particular
emphasis on
Greece
Morgenthau
plan in action

12. Troïka policies are akin to
Morgenthau plans (2)
Investment (% GDP)
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Morgenthau
plan in action
A process of
primitivization:
• Loss of skills and
emigration
• Retrogression to
primitive state
Unemployment (% GDP)

13. 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, isocratia
Allegory of the Good Governement, Sienne Town Hall, by A. Lorenzetti

14. What is the role of a
strategist state?
1. A strategic vision borne by
sovereign state
2. Power and plenty are linked
3. Understanding the role of high
quality activities
4. 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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Since 1720, financial
follies are alike

15. Thank you!
Claude.Rochet@univ-amu.fr
http://claude-rochet.fr
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