Dawes Plan

Nicholas Gutierrez

Summary

The Dawes Plan of 1924 was formulated to take Germany out hyperinflation and to return Germany's economy to some form of stability. The Dawes Plan got its name as the man who headed the committee was an American called Charles Dawes.Under the Dawes Plan, Germany’s annual reparation payments would be reduced, increasing over time as its economy improved; the full amount to be paid, however, was left undetermined. Economic policy making in Berlin would be reorganized under foreign supervision and a new currency, the Reichsmark, adopted. France and Belgium would evacuate the Ruhr and foreign banks would loan the German government $200 million to help encourage economic stabilization. American financier J. P. Morgan floated the loan on the U.S. market, which was quickly oversubscribed. Over the next four years, U.S. banks continued to lend Germany enough money to enable it to meet its reparation payments to countries such as France and the United Kingdom. These countries, in turn, used their reparation payments from Germany to service their war debts to the United States. In 1925, Dawes was a co-recipient of the Nobel Peace Prize in recognition of his plan’s contribution to the resolution of the crisis over reparations.

Signifiance

There is no doubt that Germany was in a very parlous financial situation in 1923. The Allies could have played the card of ‘you deserve everything you get’ but it would have served little purpose except public popularity. It could be argued that those governments involved played a risky game as the public was barely in a forgiving mood – after all, the largest Commonwealth War Graves cemetery at Tyne Cot had only been finished in 1922. But those involved had to look at the bigger picture –especially the worry that those who had nothing might look to communism to see them through. The involvement of USA also calmed a lot of frayed nerves – the world’s most prosperous and powerful nation being willing to invest in Germany must have been reassuring. But the main weakness of the Dawes Plan was simple – it was short term; hence the 1929 young Plan. Its success also relied on Germany economically rallying, which was not guaranteed in 1924. Any economic disaster that occurred in the USA would have a dire knock-on effect on Germany – as was seen in October 1929 with the Wall Street Crash.

Bibliography

"The Dawes Plan, the Young Plan, German Reparations, and Inter-allied War Debts - 1921–1936 - Milestones - Office of the Historian." The Dawes Plan, the Young Plan, German Reparations, and Inter-allied War Debts - 1921–1936 - Milestones - Office of the Historian. Web. https://history.state.gov/milestones/1921-1936/dawes 20 Mar. 2015.



"The Dawes Plan of 1924." The Dawes Plan of 1924. Web. 20 Mar. 2015. http://www.historylearningsite.co.uk/dawes_plan_1924.htm