We explain what the Dawes Plan was and what its consequences were. Also, the historical context.
What was the Dawes Plan?
The Dawes Plan was a program to guarantee payment of German war reparations to the winning countries in the First World War (1914-1918).
It also had the objective of contributing to the stabilization of the economy in Germany after the crisis that led to hyperinflation in 1923. It was approved in August 1924 and applied from September 1924.
The government of the Weimar Republic had been forced to pay war reparations after the German defeat in World War I and the signing of the Treaty of Versailles in 1919.
The sum established by the Reparations Commission in 1921 was very high and Germany was unwilling to pay. In 1923, French and Belgian troops occupied the German Ruhr region due to German non-compliance and this caused an economic crisis in both Germany and France.
The governments of the United Kingdom and the United States convened a committee with the objective of presenting a report on the situation of war reparations and designing a proposal that would make compliance with payments possible.
The committee, chaired by the American banker Charles Dawes, presented the Dawes Plan in 1924, which proposed a payment plan and contemplated granting credits to Germany. The plan was accepted in August 1924 and began a period of political harmony and economic prosperity in Western Europe.
Frequently asked questions
What was the Dawes Plan?
The Dawes Plan was a program developed under the auspices of the United States to guarantee the payment of German war reparations to the victorious countries in the First World War. The Dawes Plan established a payment plan, encouraged lending to Germany, and promoted German monetary stability.
When was the Dawes Plan implemented?
The Dawes Plan was approved on August 16, 1924, and took effect on September 1, 1924. It was replaced by the Young Plan in 1929.
Who developed the Dawes Plan?
The Dawes Plan was prepared by a committee of experts chaired by the American banker Charles Dawes and made up of specialists from France, Belgium, the United Kingdom, Italy and the United States.
What was the impact of the Dawes Plan?
The Dawes Plan caused the withdrawal of Franco-Belgian troops occupying the German Ruhr region, stabilized the German economy and guaranteed the payment of war reparations to countries such as France and the United Kingdom. The implementation of the Dawes Plan inaugurated a period of monetary stability, economic prosperity and political harmony in Western Europe that was interrupted by the Great Depression in 1929.
The historical context
The Treaty of Versailles signed in 1919 imposed harsh peace conditions on Germany, which was considered responsible for the destruction caused during the First World War (1914-1918). In 1921, the Reparations Commission determined the amount that Germany had to pay to the winning countries, which amounted to 132 billion gold marks.
Because the German government defaulted on payments, in January 1923 the French government decided to occupy the Ruhr basin, a mining and industrial region of Germany. The German reaction was passive resistance: German workers in the region went on strike and economic activity stopped. This caused serious economic difficulties in Germany.
When the German government ceased passive resistance to the Franco-Belgian occupation of the Ruhr, The German economy and currency had completely collapsed. The French economy had also been affected and the franc had been devalued by 25%.
At that point, at the urging of British Prime Minister Stanley Baldwin, the American government decided to get involved. A committee of experts was convened to investigate the German economic situation in relation to the payment of repairs. This committee was made up of French, Belgian, British, Italian and American experts and was chaired by the American banker Charles. G. Dawes.
The consequences of the Dawes Plan
The committee to resolve the question of war reparations, under the chairmanship of American financier Charles Dawes, began meeting in January 1924 and submitted its report on April 9, 1924. The Dawes Plan was based on the principle of “business, not politics” and recommended the reorganization of the Reichsbank (German central bank) under allied supervision.
Under the Dawes Plan, reparations payments of one billion gold marks would be made annually, increasing at the end of a five-year period to two billion, five hundred thousand gold marks. .
Therefore, under this plan, the period for making payments would be extended and the annual amounts would be reduced to facilitate compliance with obligations. The key to the plan was that Germany would receive a foreign loan worth eight hundred million gold marks.
On April 16, 1924, The German government accepted the plan. At a Conference held in London in July and August 1924, the Dawes Plan was definitively accepted by all countries involved and It was approved on August 16, 1924. It came into force on September 1, 1924.
The implementation of the Dawes Plan led to the progressive evacuation of Franco-Belgian troops from the Ruhr and allowed the German economy to stabilize. The signing of the Locarno Treaties the following year strengthened diplomatic relations between the States, which experienced a period of détente, cooperation and economic growth.
In 1929 a new committee met and developed the Young Plan, a review of war reparations that replaced the Dawes Plan but whose implementation was hampered when the Great Depression began.
Who was Charles G. Dawes?
Charles G. Dawes (1865-1951) was an American financier and politician who combined his banking career with various public positions.
He was director of the Budget Office between 1921 and 1922 and, in 1924, chaired a committee charged with issuing a report on the issue of war reparations fixed to Germany by the Treaty of Versailles.
The Dawes Plan was delivered in April 1924 and approved in August. It was a key element for the normalization of diplomatic relations in subsequent years. Dawes received the Nobel Peace Prize in 1925.
Dawes was vice president of the United States from 1925 to 1929 and subsequently served as ambassador to the United Kingdom from 1929 to 1932. In 1932 he chaired the American delegation to the Geneva Disarmament Conference. He died in 1951.
References
- Aldcroft, D. H. (2003). History of the European economy 1914-2000. Criticism.
- Britannica, Encyclopaedia (2023). Charles G. Dawes. Encyclopedia Britannica. https://www.britannica.com/
- Britannica, Encyclopaedia (2023). Dawes Plan. Encyclopedia Britannica. https://www.britannica.com/
- Cabrera, M., Juliá, S. & Martín Aceña, P. (comps.) (1991). Europe in crisis. 1919-1939. Pablo Iglesias Editorial.
- Sevillano Calero, F. (2020). Europe between the wars. The disrupted order. Synthesis.
