marshall plan athens_rochet

The Marshall Plan and the Road to Recovery:

Learning from the Past CrisesThe Role of the Strategist State

Prof. Claude Rochet

Athens, 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 wasNOT?

Only a massive transferof monetary ressource to finance imports fromthe US

Just a political operationto 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

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 1841The 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 growthClisthenes’ principles: isotopia, isonomia, isocratia

Allegory 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 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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14Since 1720, financial

follies are alike

Thank you!

Claude.Rochet@univ-amu.fr

http://claude-rochet.fr

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