Question

1. Explain the development of French economic policy from the laissez-faire liberalism of the 19th century to post-World War II planning.

2. When and why was the Marshall Plan adopted? What were its main features? What evidence is there as to its effect?

These questions are short essay questions. Please provide detailed explanations, graphs or reasons. Thank you.

Answer 1

1. Laissez-faire theory is usually associated with economists known as Physiocrats, who flourished from about 1756 to 1778 in France. In classical economics, as it evolved in Great Britain under the influence of philosopher and theorist Adam Smith, laissez-faire policy received strong support.

Belief in laissez-faire during the 19th century was a popular view. His supporters cited the presumption of a natural economic order in classical economics as justification for their belief in individual uncontrolled behavior. Laissez-faire was both a philosophy of politics and economics. The prevalent idea of the 19th century was that people should achieve the best outcomes for the society they were part of, following their own desired ends. The state's role was to maintain order and safety and prevent conflict with individuals ' effort to achieve their own desired goals.

The influence of philosophy reached its peak around 1870. The drastic changes caused by industrial growth and the introduction of mass production methods in the late 19th century proved inadequate as a guiding philosophy to the laissez-faire doctrine. In the aftermath of the Great Depression of the twentieth century, laissez-faire yielded to Keynesian economics named for its originator, John Maynard Keynes— who believed that government would alleviate unemployment and increase economic development through tax policies and government spending.

In many nations, Keynesianism gained broad support and shaped fiscal policies of state. The idea of laissez-faire was resurrected later in the 20th century by the school of monetarism, which promoted carefully controlled rises in the rate of growth of the money supply as the best way to achieve economic stability.

2. Marshall Plan, essentially a European Recovery Program, a U.S.-sponsored program aimed at rehabilitating the economies of 17 Western and Southern European countries to establish stable conditions under which democratic institutions could survive. The US believed that the post-World War II period's poverty, unemployment, and dislocation strengthened communist parties ' appeal to voters in Western Europe. Secretary of State George C. Marshall proposed the concept of a European self-help initiative to be sponsored by the United States in a speech at Harvard University on June 5, 1947.

Based on a single strategy for economic recovery in Western Europe developed by a group of 16 nations, the U.S. Congress approved the development of the European Recovery Program, which President Harry S. Truman signed into law on April 3, 1948. Nearly all European countries, including those under military occupation by the Soviet Union, were originally offered aid. Nevertheless, early on, the Soviets withdrew from participating in the project and were soon followed under their control by the other Eastern European nations.

16 nations, headed by the United Kingdom and France, set up the Committee of European Economic Cooperation to implement a four-year recovery program to organize European involvement. This body was eventually replaced by the permanent Body for European Economic Cooperation (OEEC), finally admitted to West Germany.

The design for the Marshall was very good. During this time, Western European countries involved reported a 15-25% rise in their gross national products. The project made a significant contribution to the rapid regeneration of the chemical, electronics and steel industries in Western Europe. Under the Point Four Program introduced in 1949, Truman expanded the Marshall Plan to less developed countries around the world.