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Does Central America need a ‘Marshall Plan’?

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Julián Castro is running for the Democratic nomination for president. Castro was Secretary of Housing and Urban Development under president Barack Obama, and before that he was mayor of San Antonio, TX. He is currently polling at a little over 1%, and he reported raising $1.1 million in campaign funds in the first quarter of the year.

As a Mexican-American, Castro is currently the only Latino candidate. As such, it is not surprising that he has put immigration at the center of his campaign. Castro aims to provide an alternative answer to the problem of illegal immigration compared to president Trump’s hard-line immigration policies, such as separating migrant children from their parents and thus-far unsuccessfully campaigning to build a wall along the Mexican border.

So what would Castro do differently?

Unlike fellow-candidate Sen. Elizabeth Warren (D-MA), who has a detailed plan for every conceivable policy issue outlined on her Medium account, the wonky details of Castro’s plan are still in development. The short version, as reported by The Guardian last month, involves,

rapid immigration reform to carve out a pathway to citizenship for all 11 million people living without permission in the country; a radical restructuring of the federal agency Immigration and Customs Enforcement (ICE) to make it more humane; and the beefing up of security at border entry points using new technologies.

In brief, Castro’s plan is not über-libertarian. He favors a pathway to citizenship for undocumented immigrants (which has had bipartisan support in the past), restructuring ICE, and increasing border security.

I state this at the outset simply to note that the issue is complex and multifaceted, and clear thinking requires that we don’t just group people into big, catch-all categories of “for” or “against” immigrants or open borders or whatnot. Christians should care both about the laws of their own nations as well as the well-being of their neighbors in need. And clear thinking helps us do that better.

In particular, I’d like to focus on just one aspect of Castro’s immigration position, which he breaks into three broad categories on his website. The categories include (1) “Reforming our Immigration System”; (2) “Creating a Humane Border Policy”; and (3) “Establishing a 21st Century ‘Marshall Plan’ for Central America.” It is the last of these three, his new Marshall Plan, that I want to examine.

On the face of it, there is some decent justification for Castro’s proposed Marshall Plan (so-named for the post-WWII US aid to Western Europe). No one wants to leave their country-of-origin. (I don’t even want leave my city-of-origin.) But when conditions become unbearable for the well-being of one’s family, people seek refuge abroad. It would be ideal if everyone entered the country legally, but that isn’t always the case. Actually, most illegal immigration in the last decade comes from people who enter legally but overstay their visas. That said, desperate circumstances bring desperate economic calculations. Some people still do cross the border illegally. That people risk the hardship of being undocumented immigrants in the United States indicates that their countries-of-origin have gravely failed them. The difficulty of the trip and the near-certainty of poverty awaiting them are weighed to be worthwhile costs of fleeing suffering in their homelands.

So I will begin by saying that Castro’s general idea — that improved conditions in Central American countries would decrease the number of people fleeing them — is, indeed, both reasonable and humane. But is a new Marshall Plan the way to achieve that?

While Castro includes several bolded subheadings under his Marshall Plan category, much, unfortunately, is left to the imagination. The most charitable reading would be that Castro wants to increase aid to Central American countries, but at the same time that he wants to increase transparency and efficiency in the use of that aid.

Again, I think he’s right to emphasize the need for increased rule of law, anti-corruption efforts, and so on. But he isn’t clear how that will be accomplished. Furthermore, as he noted in his interview with The Guardian, “oftentimes strongmen leaders have used the US as a foil to prop themselves up.” How would increasing US involvement, including, according to his website, “[t]arget[ing] illicit networks and transnational criminal organizations,” improve our relations with Central Americans and reduce the anti-American rhetoric of “strongmen leaders”?

Worst-case scenario, Castro is simply presuming that the post-WWII economic recovery of Western Europe, and West Germany especially, was caused by the Marshall Plan.

While I’m unsure whether the Marshall plan was, on-the-whole, good or bad, it can be plainly stated that it did not cause what has been called the “German economic miracle.” As economist David R. Henderson noted for the Concise Encyclopedia of Economics,

The reason is simple: Marshall Plan aid to West Germany was not that large. Cumulative aid from the Marshall Plan and other aid programs totaled only $2 billion through October 1954. Even in 1948 and 1949, when aid was at its peak, Marshall Plan aid was less than 5 percent of German national income. Other countries that received substantial Marshall Plan aid exhibited lower growth than Germany.

Moreover, while West Germany was receiving aid, it was also making reparations and restitution payments well in excess of $1 billion. Finally, and most important, the Allies charged the Germans DM7.2 billion annually ($2.4 billion) for their costs of occupying Germany. (Of course, these occupation costs also meant that Germany did not need to pay for its own defense.) Moreover, as economist Tyler Cowen notes, Belgium recovered the fastest from the war and placed a greater reliance on free markets than the other war-torn European countries did, and Belgium’s recovery predated the Marshall Plan.

To be fair to Castro, perhaps this all just amounts to bad branding for his proposal. But presuming he intends some connection between his new, Central American Marshall Plan and the original one, the idea that Central America could benefit just like Western Europe did is misguided. As a matter of historical fact, the Marshall Plan did not cause the post-WWII economic recovery of Western Europe in general nor West Germany in particular. In general, economic liberalization was the driving force. Currency reform and the removal of price controls were the key German policies, and they were enacted overnight against the recommendation of occupying powers, such as the US and the UK.

According to The Guardian, Castro wants to focus especially on El Salvador, Guatemala, and Honduras. Many of the recent asylum-seekers at the Mexican border came from the latter two of these countries. Looking at their most recent rankings on the Heritage/Wall Street Journal Index of Economic Freedom, these countries all have declined in the areas of “Government Integrity,” “Judicial Effectiveness,” “Business Freedom,” “Monetary Freedom,” and “Trade Freedom.” Furthermore, all post low scores in terms of “Property Rights” and “Labor Freedom,” though some are trending upward. Of these things, what can a foreign country most easily and directly effect?

I can think of only one: trade freedom. Now, in the past the US has tried to improve many areas through stipulations attached to aid. But a look at these countries and others that have received considerable US aid shows that doesn’t often play out as we’d like it. Increasing our trade relationship, however, would by its nature require the lowering of trade restrictions and, thus, the increase of trade freedom. It wouldn’t be an economic miracle, but perhaps it could be a start.

In the end, I’m skeptical how much power the US really has over the inner-workings of foreign economies, especially when the proposal is only to use soft power like the prospect of increased aid. Rather than an example to emulate, the lesson to be learned from the Marshall Plan should be how limited efforts to improve a nation’s economy and decrease corruption and crime from the outside can be. That sort of change must come from within.


Image credit: Former Secretary of Housing and Urban Development Julian Castro speaking with supporters at a campaign rally for Democratic gubernatorial nominee David Garcia at Azukar Coffee in Phoenix, Arizona by Gage Skidmore

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Dylan Pahman Dylan Pahman is a research fellow at the Acton Institute, where he serves as managing editor of the Journal of Markets & Morality. He earned his MTS in Historical Theology from Calvin Theological Seminary. In addition to his work as an editor, Dylan has authored several peer-reviewed articles, conference papers, essays, and one book: Foundations of a Free & Virtuous Society (Acton Institute, 2017). He has also lectured on a wide variety of topics, including Orthodox Christian social thought, the history of Christian monastic enterprise, the Reformed statesman and theologian Abraham Kuyper, and academic publishing, among others.

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