The Economic Dimensions of the Marshall Plan in Greece, 1947-1952: the Origins of the Greek Economic Miracle'
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Apostolos Vetsopoulos University College London 'The Economic Dimensions of the Marshall Plan in Greece, 1947-1952: The Origins of the Greek economic miracle' Thesis submitted for the fulfillment of the requirements For the degree of Doctor of Philosophy London University of London, 2002 2 Acknowledgements During the time of research and writing of this thesis a lot of people provided me support and advice. It is my principal duty to express my gratitude to Professor Kathleen Burk and Professor David French of the University College London, the two supervisors, who followed this thesis from the beginning until the end with great interest and gave their solid advice generously. In particular, Professor Kathleen Burk, as the first supervisor, provided constant support and courage for me towards solving every obstacle in planning and writing my thesis. The other staff and my fellow graduate students of the History Department spared no help in exchanging ideas about the character of the thesis. I would like to thank Mr Paul R. Porter and Mr James Warren Jr. who served as experts in Greece during the Marshall Plan, and Aristotelis Sismanides who served in Washington DC helping the function of the Marshall Aid for Greece because they showed great eagerness to help the research of my thesis, explaining crucial questions. In particular, during the years of my research Mr James Warren Jr. became a great friend, trying to assist and many times advised me on clarifying points of my thesis, while he granted me important material from his personal archive. I am also indebted to the staff of the Public Record Office, Kew Gardens, London; the staff of the National Archives in Washington DC; the Staff of the Truman Library & Institute in Independence (MO), and especially the archivist Mr Dennis Bilger and the office manager Ms Lisa Sallivan for their valuable assistance to carry out the research of my thesis. Furthermore, I have to express my gratitude to the Royal Historical Society which provided me with the travel costs of a visit to the National Archives in Washington DC, the Graduate School and the Hale Bellot Fund of the UCL, which fmanced a part of my living expenses during a research trip to the US. In particular, I am indebted to the Truman Institute, which fmanced my travel costs and the living expenses of a research trip to Independence (MO). I am also grateful to my friends, the family of Mr Nikos Kantartzis and Mrs Magdalene Papapostolou who offered hospitality and support generously to me in Washington DC in April 1998 and May 2000, the family of Mr George Arsenis who offerd hospitality in New York in May 1998, the family of Mr Ratinder Kular who offered hospitality and assistance to me in London and Mr Kostas Tzavaras for his assistance in Greece. Finally, I would like to thank my parents Vassilios and Chryssoula Vetsopoulou whose support and courage were invaluable to carry out this research. 3 Abstract This thesis concerns the economic dimensions of the Marshall Plan in Greece from 1947 to 1952. The Marshall Aid Program and Mission contributed to the reconstruction and development of the Greek economy after the destruction of World War II and the Greek Civil War. However, because of the shortcomings of its backward economy, Greece was a special case in the implementation of the Marshall Plan in Europe. In particular, the problems of inefficiency and corruption influenced political and social issues on the decision-making process, while uniquely, the Marshall planners tried to create institutions in order to facilitate reconstruction and to improve Greek people's life. The implementation of the Marshall Plan aimed at the development of the Greek economy parallel to the economic development of the other European countries. The Marshall Plan tried to help the backward Greek economy participate in international trade, and created the foundations for the post-war development of the Greek economy. The principal argument of the thesis is that the Greek economy was too weak to absorb fully the enormous aid granted because private and state investments were too negligible to meet further economic development, while a number of Greek politicians and bourgeoisie prevented the implementation of the economic programme. This forced the American Marshall planners to 'freeze' a great part of the aid in order to cover the budget deficit and to hold inflation. The 'frozen' aid 'counterpart funds' were utilised in the two fiscal years following June 1952. Therefore, in the post-war period, the Marshall Plan was the first systematic effort to stabilise the Greek economy, thereby in due course enabling Greece to join the European Economic Community in 1980. 4 CONTENTS Abbreviations p8 Introduction 1. Pre-war, war-time and post-war political, economic and social conditions in Greece p. 10 2. The Greek political parties and their ideological character p. 21 3. The Greek Government appeal and American involvement in Greek affairs p. 27 4. The Porter Report p.29 5. The bi-partisan policy in the launching of the foreign aid programmes p. 32 6. Contribution of the thesis p 41 7. Methodology of the thesis p.46 Chapter One: The AMAG Mission in Greece from July 1947 to June 1948 1.1. The character of the AMAG Mission and the objectives of the AMAG Program in Greece p. 51 1.2. The roles of the AMAG Mission, the American Embassy and the Greek Government during the implementation of the AMAG Program p. 61 1.3. The policy of selling gold sovereigns by the Bank of Greece in relation to the weak drachma and the problem of gold in the economy and society p. 72 1.4. The contribution of the AMAG Aid Program to the Greek National Budget and the Balance of Payments—The problem of exporting Greek agricultural products p. 81 1.5. The credit policy in relation to the industrial and agricultural rehabilitation and expansion—The dimensions of the industrialisation question for the development of the Greek economy p. 87 Chapter Two: The first period of Marshall Plan in Greece from July 1948 to the end of the Greek Civil War in early Autumn 1949 2.1. The structure and character of the ECA Mission in Greece and the objectives and features of the Greek Four-Year Reconstruction Plan p. 98 5 2.2. The roles of the ECA Mission, the American Embassy and the Greek Govermnent—The conflict between the American Embassy and the ECA Mission p. 114 2.3. The economic policy of the Greek government from July 1948 to September 1949—The policy of gold sovereigns and credit in relation to the inflation and prices-wages issues p. 126 2.4. The contribution of the Marshall Aid Program to the National Budget and the Balance of Payments—The 'Counterpart funds' p. 136 2.5. The contribution of the Marshall Plan to the Greek reconstruction and investment programme—Attempts towards the reformation of the Greek administration and structural reforms p. 147 Chapter Three: The second period of the Marshall Plan in Greece from early Autumn 1949 to the outbreak of the Korean War in June 1950 3.1. The demilitarisation policy and the Marshall aid allotment to Greece for the second fiscal year 1949-50 p. 158 3.2. The roles of the Greek government, the American Embassy and the ECA Mission—The 'Grady Letter' p. 165 3.3. The economic policy of the Greek government from autumn 1949 to summer 1950—The policy of gold sovereigns and credit in relation to the inflation and prices-wages issues p. 177 3.4. The contribution of the Marshall Aid Program to the national budget and the balance of payments—The 'Counterpart funds' p. 185 3.5. The contribution of the Marshall Planners and Marshall aid to the Greek reconstruction and development programme. Attempts towards the reformation of the Greek administration and structural reforms p. 194 Chapter Four: The third period of the Marshall Plan in Greece from the outbreak of the Korean War in the summer of 1950 to June 1951 4.1. The outbreak of the Korean War and the rearmament policy—The Marshall Aid allotment to Greece from July 1950 to June 1951 p. 207 4.2. The roles of the American Embassy, the Greek government and the ECA Mission in the implementation of the Marshall Plan p. 221 6 4.3. The economic policy of the Greek government and attempts to implement a Stabilization Program—The policy of selling gold sovereigns and credit in order to counter inflation along with control of prices and wages p. 237 4.4. The contribution of the Marshall Aid Program to the national budget and the balance of payments—The problem of exporting Greek tobacco to the ECA countries p. 251 4.5. The contribution of Marshall aid to the Greek reconstruction and investment programme—Attempts towards the reformation of the Greek administration and structural reforms p. 264 Chapter Five: The last year of the Marshall Plan in Greece from July 1951 to June 1952—A period of decisions 5.1. The end of the Marshall Plan—The Marshall aid allotment to Greece for the fourth fiscal year 1951-52 p. 276 5.2. The roles of the Greek government, the American Embassy and the ECA Mission—American attempts to admonish the Greek government p. 284 5.3. The economic policy of the Greek government from the summer 1951 to the following summer 1952—the establishment of the Stabilization Program in relation to the policy of gold sovereigns and credit as well as to the inflation and prices-wages issues p. 294 5.4.