Young Plan

The Young Plan was a program for settlement of German reparations debts after World War I written in 1929 and formally adopted in 1930. It was presented by the committee headed (1929-30) by American Owen D. Young. After the Dawes Plan was put into operation (1924), it became apparent that Germany could not meet the huge annual payments, especially over an indefinite period of time.

The plan

The Committee, itself appointed by the Allied Reparation Committee, met in the first half of 1929, and submitted its first report on June 7 of that year. In addition to Young, the United States was represented by J. P. Morgan, Jr., the prominent banker, and his partner, Thomas W. Lamont. The report met with great objections from the United Kingdom but, after a first Hague Conference, a plan was finalized on August 31. The plan was formally adopted at the second Hague Conference, in January 1930.

Amongst other provisions, the plan called for an international bank of settlements to handle the reparations transfers. The resulting Bank for International Settlements was duly established at the Hague Conference in January.

Between agreement and adoption of the plan came the Wall Street Crash of 1929, of which the main consequences were twofold. The American Banking system had to recall money from Europe and cancel the credits that made possible the Young Plan. Moreover, the downfall of imports and exports affected the rest of the world. By 1933, almost two-thirds of world trade had vanished. A new trade policy was set with the Smoot-Hawley Tariff Act. The latter was influenced by nationalism and the adopted economic policy. Unemployment soared to 33.7% in 1931 in Germany, and 40% in 1932.

Under such circumstances, U.S. President Herbert Hoover issued a public statement that proposed a one-year moratorium of the payments. He managed to assemble support for the moratorium from 15 nations by July 1931. But the adoption of the moratorium did little to slow economic decline in Europe. Germany was gripped by a major banking crisis. A final effort was made at the Lausanne Conference in 1932. Here, representatives from Great Britain, France, Italy, Belgium, Germany and Japan gathered to come to an agreement. By that time it was clear that the deepening depression had made it impossible for Germany to resume its reparations payments. They agreed:

• not to press Germany for immediate payments.
• To reduce indebtedness by nearly 90% and require Germany to prepare for the issuance of bonds. This provision was close to cancellation, reducing the German obligation from the original $32.3 billion to $713 million.
• It was also informally agreed among the delegates that these provisions would be ineffective unless the US government agreed to the cancellation of war debts owed by the Allied governments. Hoover made the obligatory public statement about the lack of any connection between reparations and war debts. When the moratorium expired, the situation returned to the terms of the Young Plan, but the system had collapsed. Germany did not resume payments and once the National Socialist government consolidated power, the debt was repudiated. After Germany’s defeat in World War II, an international conference decided (1953) that Germany would pay the remaining debt only after the country was reunified. Nonetheless, West Germany paid off the principal by 1980; then in 1995, after reunification, the new German government announced it would resume payments of the interest.

This agreement had been preceded by bitter diplomatic struggles, and its acceptance aroused nationalist passions and resentment. It also weakened, rather than helped the advocates of a policy of international understanding.

Opposition to war reparations: the "Liberty Law"

Although the Young plan had effectively reduced Germany's obligations, it was opposed by parts of the political spectrum in Germany. Conservative groups had been most outspoken in opposition to reparations and seized on opposition to the Young Plan as an issue. A coalition was formed of various conservative groups under the leadership of Alfred Hugenberg, the head of the German National People's Party. One of the groups that joined this coalition was Adolf Hitler and the National Socialist German Workers Party, a group which had previously been dismissed as an extremist fringe by the more mainstream conservative parties.

The coalition's goal was the enactment of the Freiheitsgesetz ("Liberty Law"). This law would renounce all reparations and make it a criminal offense for any German official to cooperate in their collection. It would also renounce the German acknowledgement of "war guilt" and the occupation of German territory which were also terms of the Versailles treaty.^[1]

Under the terms of the German constitution, if ten percent of the eligible voters in the country signed a petition in favor of a proposed law, the Reichstag had to put the matter to a vote. If the Reichstag voted against the law, the proposal would automatically be put to a national referendum. If fifty percent of the people voted in favor of it, it would become a law.

The Liberty Law proposal was officially put forth on October 16, 1928. The Nazis and other groups held large public rallies to collect signatures. The government opposed the Liberty Law and staged demonstrations against it. However, the coalition succeeded in collecting enough names to put the proposal before the Reichstag. The Reichstag voted the bill down by a 318-82 margin. In the subsequent popular vote on December 22, the Liberty Law referendum only received 13.8 percent of the votes in its favor.^[2]

While the Liberty Law was not enacted in 1929, the campaign for it was a major factor in bringing Hitler and the Nazis into the political mainstream. Following the defeat, Hitler denounced Hugenberg and said the loss was a result of his poor leadership. Hugenberg and many other conservatives soon found themselves being eclipsed by the Nazis. Hitler would later enact by decree most of the proposals of the Liberty Law after achieving powar.

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
• 1929, The Year of the Great Crash, William K. Klingaman, 1989