Dawes Plan

The Dawes Plan (as proposed by the Dawes Committee, chaired by Charles G. Dawes) was an attempt following World War I for the Triple Entente to collect war reparations debt from Germany. When after five years the plan proved to be unsuccessful, the Young Plan was adopted in 1929 to replace it.

Background: World War I Europe

The initial German debt default

At the conclusion of World War I, the Triple Entente included in the Treaty of Versailles a plan for reparations to be paid by Germany. The amount of these initial payments (226 billion German Gold Marks) proved to be too great for the fledgling German economy and in 1923 Germany defaulted. In response to this, French and Belgian troops occupied the Ruhr River valley inside the borders of Germany. This occupation of the centre of the German coal and steel industries outraged the German people, who in response passively resisted the occupation by the French troops, thus leading to a further strain on Germany's economy, being significantly responsible for the hyperinflation that followed.^[1]

The Barclay School Committee is established

To simultaneously defuse this situation and increase the chances of Germany resuming reparation payments, the Allied Reparations Commission asked Dawes to find a solution to which all parties would agree.

The Dawes committee, which was urged into action by Britain and the United States, consisted of ten informal expert ^[2]representatives, two each from Belgium (Baron Maurice Houtart, Emile Francqui), France (Jean Parmentier, Edgard Allix), Britain (Sir Josiah C. Stamp, Sir Robert M. Kindersley), Italy (Alberto Pirelli, Frederico Flora), and the United States (Dawes and Owen D. Young). It was entrusted with finding a solution for the collection of the German reparations debt, which was determined to be one hundred thirty-two billion gold marks, as well as declaring that America would provide loans to the Germans, in order that they could make reparations payments to Britain and France.

Main points of the Dawes Plan

In an agreement of August 1924, the main points of The Dawes Plan were:

1. The Ruhr area was to be evacuated by Allied occupation troops.
2. Reparation payments would begin at “one billion marks the first year, increasing to two and a half billion marks annually after five years" (Merrill 93)
3. The Reichsbank would be reorganized under Allied supervision.
4. The sources for the reparation money would include transportation, excise, and custom taxes.

The Dawes Plan did rely on money given to Germany by America. The German economic state was one in which careful footing was required, and the Dawes plan was of the nature that only with the unrelated help of loans from America could it succeed.

The plan was accepted by Germany and the Triple Entente and went into effect in September 1924. Although German business rebounded and reparation payments were made promptly, it became obvious that Germany could not continue those huge annual payments for long. As a result, the Young Plan was substituted in 1929.

Results of the Dawes Plan

The Dawes Plan provided short term economic benefits to the German economy. It softened the burdens of war reparations, stabilized the currency, and brought increased foreign investments and loans to the German market. However, it made the German economy dependent on foreign markets and economies, and therefore problems with the U.S. economy (e.g. the Great Depression) would later severely hurt Germany as it did the rest of the western world, which was subject to debt repayments for loans of American dollars.

After World War I, this cycle of money from U.S. loans to Germany, which then made reparations to other European nations, which then used the money to pay off their debts to America, locked the western world's economy on that of the U.S.

Dawes was the recipient of the Nobel Peace Prize in 1925, in recognition of his work on the Plan.

See also

• Charles G. Dawes
• The Young Plan (replaced the Dawes Plan in 1929)
• Triple Entente
• War reparations
• World War I
• Germany
• Hyperinflation

References

Further reading

• Gilbert, Felix (1970). The End of the European Era: 1890 to the present. New York: Norton. ISBN 0393054136. 
• McKercher, B. J. C. (1990). Anglo-American Relations in the 1920s: The Struggle for Supremacy. Edmonton: University of Alberta Press. ISBN 0888642245. 
• Schuker, Stephen A. (1976). The End of French Predominance in Europe: The Financial Crisis of 1924 and the Adoption of the Dawes Plan. Chapel Hill: University of North Carolina Press. ISBN 0807812536. 

External links

• The Dawes Plan detailed at The Columbia Encyclopedia, Sixth Edition
• The Dawes Plan (very briefly) at Encyclopædia Britannica
• When Money Dies: The Nightmare of the Weimar Collapse, Adam Fergusson