Dawes Plan

 

presented in 1924 by the committee headed (1923–24) by Charles G. Dawes to the Reparations Commission of the Allied nations. It was accepted the same year by Germany and the Allies. The Dawes committee consisted of ten representatives, two each from Belgium, France, Great Britain, Italy, and the United States; it was entrusted with finding a solution for the collection of the German reparations debt, set at almost 20 billion marks. Germany had been lagging in payment of this obligation, and the Dawes Plan provided that the Ruhr area be evacuated by Allied occupation troops, that reparation payment should begin at 1 billion marks for the first year and should rise over a period of four years to 2.5 billion marks per year, that the German Reichsbank be reorganized under Allied supervision, and that the sources for the reparation money should include transportation, excise, and custom taxes. The plan went into effect in Sept., 1924. Although German business picked up and reparations payments were made promptly, it became obvious that Germany could not long continue those huge annual payments. As a result, the Young Plan was substituted in 1929.

The Dawes Plan (as proposed by the Dawes Committee, Chaired by Charles G. Dawes) was an attempt following World War I for the Allies to collect war reparations debt from defeated post-World War I Germany. When (after five years) the plan failed to operate as expected, the Young Plan was adopted in 1929 to replace it.

Background: Post-World War I Europe

The initial German debt default

At the conclusion of World War I the Allies imposed in the Treaty of Versailles, a plan for reparations to be paid by Germany. This was inspired by Charles Dawes. The amount of these payments proved to be too great for the flagging 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 center of the German coal and steel industries both outraged the German people and put further strain on Germany's economy, being heavily responsible for the hyperinflation that year.

The Dawes Committee is established

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

The Dawes committee consisted of ten 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 (Owen D. Young, Charles G. Dawes). It was entrusted with finding a solution for the collection of the German reparations debt following World War I, set at 132 billion gold marks.

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 1 billion marks for the first year and should rise over a period of four years to 2.5 billion marks per year.
3. The German Reichsbank would be reorganized under Allied supervision.
4. Foreign loans (primarily from the United States) would be made available to Germany.
5. The sources for the reparation money should include transportation, excise, and custom taxes.

The plan was accepted by Germany and the Allies in the same year and went into effect in September 1924. Although German business picked up and reparation payments were made promptly, it became obvious that Germany could not long continue those huge annual payments. 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, such that problems to come in America (e.g. the Great Depression) would directly and severely hurt Germany as it would 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.

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

See also

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

References

• Anglo-American Relations in the 1920s: The Struggle for Supremacy, B. J. C. McKercher, 1991.
• The End of the European Era: 1890 to the Present, Gilbert & Large, 2002.

External links

• The Dawes Plan detailed at The Columbia Encyclopedia, Sixth Edition
• The Dawes Plan (very briefly) at Encyclopædia Britannica

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