Address by James M. Silberman at the Award Ceremony, USAID
Education and Training Workshop, August 13, 2003
The Marshall Plan Study Tour Program
One might ask today in reviewing the Marshall Plan Technical Assistance (MPTA) experience:
1. Is the Marshall Plan study tour program developed 50 years ago dated and not relevant? Secondly,
2. Is the Marshall Plan study tour program designed largely for the industrialized European nations, applicable to the small struggling economies we are dealing with in developing countries? Thirdly,
3. Did the success of the Marshall Plan technical assistance program depend largely on the developed institutions of European infrastructure, banking, judicial systems, and trade structures, which are largely deficient or lacking in developing nations?
I will try to deal with these questions particularly as they relate to your education and training program responsibilities in AID.
To begin, the Marshall Plan was established in 1947 as an independent agency. A central office was set up in Washington, with a co-office established in Paris. Industry and labor officers in European embassies served as field officers.
One should add that the MPTA program operated separately from the Marshall Plan grant program, with completely separate staffs and budgets.
1. Is the Marshall Plan Technical Assistance program dated?
I believe not. Examine for example the objectives and required program performance of the Administration’s Millennium Challenge Account (MCA). These parallel in many respects those faced successfully by the Marshall Plan Technical Assistance approach and program. In fact the MCA criteria echo the eligibility conditions, host country participation, and measurable results in raising living standards sought for and achieved by the MPTA program (see Annex).
Furthermore, many of today’s AID projects had origins in the MPTA program. These included, among others, micro-enterprise assistance centers, mass education programs, development banks, and foreign investment promotion agencies.
Marshall Plan type study tours have recently been successful in some former Soviet Union nations, which have industry and agriculture sectors that are unfamiliar with modern practices, institutions, and globalization.
Finally, I believe Marshall Plan style study tours have significant potential for raising productivity and economic growth in countries outside Eastern Europe and the former Soviet Union. Countries such as India, Pakistan, Nigeria, Indonesia, and South Africa have large diverse indigenous industries that produce primarily for domestic markets, such as small scale dairy products and food processing, home construction, furniture, appliances, and clothing. These industries now operate without the technical expertise that could be brought thru contacts with developed country firms. They could benefit from enhanced exposure to more industrialized country industry sectors to raise their productivity, lower costs, and expand affordability of goods and services to their populations.
2. Is the MP study tour approach applicable to developing nations?
It is important to note that the MP study tour and associated technical assistance programs were administered not only for the 15 European nations but were also utilized by 16 developing countries, including, Yugoslavia in Europe; Brazil, Chile, Mexico, El Salvador, and Costa Rica in Latin America; Japan, Taiwan, South Korea, and Philippine in the Far East; India, Pakistan, and Nepal in South Asia; and Iran, Lebanon, and Israel in the Middle East.
For some of these 16 nations such as Japan, Taiwan, South Korea, and Israel the study tour programs lifted their industries and agriculture to high Western standards of productivity; for others important steps to future growth were achieved.
3. Did the success of the Marshall Plan Technical Assistance program depend largely on European developed institutions?
Despite European advanced civil society, developed infrastructure, and broad industrial base, industry in postwar Western Europe critically needed restructuring because it was not only destroyed, but was badly out of date although fully operational before the war. Management and plant organization reflected an earlier era of small-scale production. Modern marketing and distribution channels were undeveloped. Cartels and restrictive business practices were disincentives for productivity improvement. Factories and farms were isolated from each other and from advances made elsewhere.
These conditions may not have been equivalent to the lack of adequate institutions in developing nations, but the negative factors in Europe were powerful disincentives for change and improvement.
In spite of these negative conditions, the Marshall Plan study tours succeeded in reversing static technology, and increased industrial and educational productivity levels dramatically in periods as short as 3 to 5 years.
The study tour program also raised European living standards significantly.
A number of developing nations such as Taiwan and Korea, lacking even the European type institutions of governance, trade and banking nevertheless achieved in a somewhat longer period leaps to the forefront of international competitiveness from an existing agriculture and craft industry base.
The Marshall Plan study tour program was an outgrowth of the troubling political conditions in Europe in 1948; a widespread public demand for improved standards of living; comprehensive sector surveys which revealed serious technology gaps to be remedied; determination of government and industry leaders to undertake national productivity drives to close the technology gaps; and courage by the Marshall Plan leaders to launch the necessary large scale technical assistance program, a program unprecedented at the time.
The concept of productivity and its important impact on production, wages, prices and ultimately on the standard of living was not well understood in Europe, particularly in Britain, France and Germany. This lack of understanding is also true today for most developing nations. The U.K. began to understand this relationship only after the first groups of study tours returned with their comprehensive study tour reports. In the case of France, it took months of dialogue with Monet, head of the Planning and Reconstruction Commission, his staff of economists, statisticians, and engineers and taking them along on my surveys of French plants before they fully understood the relationship.
Once productivity was understood, the highest levels of government at ministerial rank and top industry, labor, and university leaders undertook leadership initiatives. They assumed national commitments, and launched nationwide drives to increase productivity.
The instruments to administer the new nationwide initiatives were National Productivity Centers composed of seconded industry and labor representatives, and government employees. The Productivity Centers ranged in size by country from 200 to 6 employees with a general average of 40 fill and part time persons.
The Productivity Centers administered the selection and arrangements of the groups to be sent on study tours from participants proposed by industry and labor associations. The centers also provided for the dissemination of the flow of U.S. data and reports from the 12 support aid projects, assisting the returned tour participants.
To begin, I carried out intensive surveys of 51 plants in the U.K. and France in mid 1948 and in 120 plants in France over two 3-month periods. I was often accompanied on these surveys by a number of government officials, cartel leaders, and industry managers. I also searched out hundreds of products in stores, assessed their design and construction, and calculated their real costs to consumers.
What I found in most cases were factories, equipment and production methods similar to what existed in the U.S. in the 1910-1920 period a generation earlier, and products that were designed and priced above the reach of the working class.
My major survey report finding to the Marshall Plan Administrator stated that ”…in mass production industries, the differences in efficiency between plants (in the U.S. and those) in the U.K. and France were so great and involved almost every element of management and production organization and practice that no series of studies, commission reports, or conventional private investment channels could provide industry in these countries with an understanding of the differences sufficient to undertake steps to bridge the gap”.
The pressures for rapid improvement in living standards at the time were great. Greece and Turkey had almost been lost to Communism. The French and Italian votes for Communist parties were close to 50% – not because the voters desired communist leadership, but their votes were cast as a protest to their low living standards, which continued even several years after the war ended. Capital flight from France ran about $1 billion a year; about equal to the MP grant aid they received.
With these conditions, I recommended and got approval for a very large-scale program of study tours, then called Productivity Teams, to be sent to the U.S. The choice of study tours for groups of enterprise staffs rather than tours for individuals was made because it was clear that no single manager, owner or technician sent alone on a study tour could grasp the range of complex factors contributing to higher American productivity; nor, on their return, could they convince the hierarchy of their owner, manager, supervisor, technician, and worker to undertake the extensive changes in the only old manufacturing system they knew.
The study tours were designed to include large and small firms within a sector with a mix of owners, managers, supervisors, technicians, foremen, and skilled workers for 6-week visits to comparable American companies. The study tours consisted of 14 to 20 persons, all committed to intensive observation and study. Some tours had fewer participants. In scale, the number of study tours was planned to include one representative from every single large and medium sized firm in each country.
The study tours were planned to be highly structured, with a designated leader and all members given specific observation, recording and writing responsibilities.
Independent members were required to take detailed notes on equipment, production methods, processes, workflow, workstations, product designs, output per man hour records, and other factors contributing to productivity.
The U.S. companies received the study tours as guests, and in all cases provided extensive pro-bono services by many of their staff to orient, lecture and take the participants through their facilities and offices.
The study tour members were obligated to write a book length report on their findings and to disseminate what they learned to other firms in the industry by visits to other plants and seminars, lectures, articles in trade journals and presentations at association meetings. Study tours were also organized by production functions, such as material handling, time and motion study, standardization, agricultural extension training, and others. Some tours consisted of parliament members, government officials and industry association members to examine their role in enhancing productivity.
The MPTA study tours and support aid programs were administered by very small staffs in Washington and Paris; as well as by relatively modest contracts with the U.S. Departments of Labor, Commerce, and Agriculture, plus services from a few NGOs. Expenditures for the entire study tours and support aid programs totaled $60m for the period through 1960. Program staff costs were a total of $15m at the peak of the program and were $31.5m for the 10-year period 1949-1959. By today’s standards this was a very low cost program. These costs were in 1959 dollars and should be multiplied by 5.8 to obtain today dollar costs – or $183 million in today’s costs for the 10 year period.
The first group of study tours came from the United Kingdom and the results were so successful from the start that for the 3-year fiscal period 1949-1951 a total of 86 British tours came to the U.S. By 1958 some 209 study tour had come from the U.K. and published 209 reports with a circulation of 1,000,000 copies. France sent over 500 study tours to the U.S. during the 10-year period of the Marshall Plan. Germany sent 300 study tours; the Netherlands sent 171 tours, Norway 134, Japan 45, and the European Productivity Agency 100 tours. All European nations sent study tours over the 10 years of the Marshall Plan and some 1,500 study tours were completed, with over 24,000 European participants, aside from a substantial number from the 16 developing nations in other regions.
Let’s look at the results of the 24,000 study tour participant visits to the U.S.
Productivity growth in Europe which had remained static at 1% growth annually since 1900, rose with unprecedented speed to close the gap with U.S. productivity growth levels, and even to exceed American growth levels in a very few years. Many European nations raised their annual productivity growth levels to 5 to 6 % in 3 to 5 years. Among industry sector examples, the French cotton textile industry increased productivity by 40%; the paper and pulp industry by 21%.
Productivity gains by 1956 made possible wage increases of 113% in the French mechanical and electrical construction industries; 104% in the foundry industry, and 99% in the wool industry. Many firms even achieved significant increases in productivity of 25 to 50% with plant changes that required no capital investment. Agriculture in France is estimated to have increased productivity by 2% annually through the introduction of hybrid corn, farm extension services, and other innovations. Even European firms that faced little or no competition were moved by the national swell of productivity drives to go along fully with productivity improvements, with the help of some pressure from Monet’s Commission on rebuilding of French industry.
These productivity increases made possible widespread increase in wages, and reductions in product cost, with resulting improvements in living standards. The French Commission on Productivity predicted on the basis of careful studies in 1957 that they anticipated a 100% increase in living standards in 12 to 15 years. French purchasing power had risen only at an annual rate of ½% from 1928-1949, but from 1949-1952 it increased to a 2% annual rate, and increased to 7% for the period 1949-1957. The French standard of living rose by 3.5% in this latter period.
A second MPTA program was created in 1948 at the time the study tour program was started and administered by a small staff in Washington to assist the returning study tour participants with wide ranging technical support services. These included 11 different forms of support aid. Among them were:
Audio-visual presentations made by American firms for their own training purposes.
A mail inquiry service on technical and managerial problems.
Digests of hundreds of U.S. trade journals reporting technical advances.
Comparative productivity data for American plants by industry, firm, product, and man-hour output.
Training of managers, supervisors, and foremen through training of trainers.
Training statisticians in productivity measures.
Advisory services by American managers and production specialists.
Examples of the extent to which these technical aid services were used are of interest in assessing their success.
Virtually all nations requested training of their statisticians in U.S. developed productivity measurements.
Reports on U.S. factory productivity data were requested by France for 47 American industries; by Germany for 89 industries; by Austria for 50 industries; the U.K. for all industries; the Netherlands distributed these reports to all firms employing over 50 persons.
Technical digests of innovations in technology were culled from 300 American industrial, agricultural, and trade journals; these were distributed monthly, and translated into 22 languages, including all European languages plus Latin American Spanish, Turkish, Greek, Serb, Croat, Farsi, Arabic, Pushtu, Indonesian, Chinese, Japanese, Israeli, and Korean.
Britain acquired 472 American industrial films on production and training, borrowed 41,000 additional films, all shown to an audience of 1,850,000 persons. The Japanese borrowed almost 500 industrial films shown to an audience of over 300,000 persons; developed a large technical library, published over 400,000 copies of books on productivity, and had an audience of 500,000 persons viewing American industrial films. Taiwan assembled a collection of 2,400 books on industrial subjects, 8,000 industry catalogs, and 85 American industry journals. Training programs in productivity and management reached 4,000 persons in the Netherlands, 8,000 in Italy, 20,000 in Norway, and 6,500 in Turkey, and thousands in other nations. In French agriculture, 16,000 trained French teachers reached 500,000 farm youth guiding them in more advanced agricultural practices.
Even nations with protected economies like Brazil, Chile, Yugoslavia, Mexico, and India had active Productivity programs, in part to go along and keep abreast with programs in the European nations and also to gain productivity improvement for their domestic production.
Although European nations were provided unlimited access to U.S. consultants, through 1951 only 90 contract consultants were requested while countries asked for 4,400 participants on study tours. By early 1957, some 18,742 Europeans had been on study tours, while 971 U.S. consultants had been requested. American consultants and industry specialists were used to assist firms in problem areas in adopting U.S. technology and in training European company trainers in advanced management and production.
In summary to quote from one of our reports on the Marshall Plan Technical Assistance program:
“The technical assistance (TA) program of the Marshall Plan was the largest and most comprehensive program of assistance to civilian industry ever undertaken. In a few years and at low cost, this program reached almost every plant in every industry, marketing agency, and agricultural entity in war devastated countries of Western Europe, introducing them to a technology more than a generation in advance of what they were then using.”
For further information see The History of the Technical Assistance Programs of the Marshall Plan and Successor Agencies 1948 — 1961, by James M. Silberman, published by the Industry Development Division of the World Bank, November 1992.
Note: Answers to questions raised by members of the Workshop following the address have been incorporated into the text or added to the Annex.
There are numerous other parallels of the Marshall Plan Technical Assistance program to the Millennium Challenge Account (MCA) objectives.
1. The Marshall Plan Technical Assistance program for Europe had the same participatory process with federal and local leaders in formulating uses of external aid as sought by the MCA.
2. The Marshall Plan Technical Assistance program made maximum use of “new partners” via its extensive use of pro-bono private firms; both pro-bono and low cost contract government agencies, universities, and NGOs.
3. The MCA “potential for economic growth and poverty reduction” objective was also a basic tenet of the Marshall Plan Technical Assistance operations.
4. The Marshall Plan Technical Assistance system attracted very substantial “funding streams” from host countries, with effective “leverage effects”.
5. The Marshall Plan Technical Assistance program developed unprecedented “capacity for data development and continuance country and project performance” by its extensive training of government and industry statisticians throughout Europe and providing comparison data for U.S. firms and farms.
6. The Marshall Plan Technical Assistance program achieved outstanding increases in the standard of living in participating nations in the 10-year period of its operation.