The Dawes Plan & Economic Crisis- Nick Pallone

Timeline

Invasion of the Ruhr- January 1923

Introduction of Rentenmark- 1923

Replacement of Rentenmark with Reichsmark- 1924

Acceptance of The Dawes Plan- August 1924

J.M. Keynes' words of economic wisdom- 1926

The Young Plan- 1929

Black Monday- October 1929

Hitler appointed Chancellor- 1933

Reunion with the Saar- 1935

The Dawes Plan

The Dawes Plan was created to make reparations payments easier for Germany to execute, as well as coming to an agreement with the allies and Germany as to the scheduling of payments, their fixed amounts, and the fixed total amount to be paid by Germany.

Prior to the implementation of the Dawes Plan, Germany was inconsistent and late with its reparations payments, asking to post-pone its payments due in January and February in 1922. This was partly due to domestic problems in Germany and its pressure to meet payments on time. These problems worsened, and Germany again requested a postponement of payments for 4 years in November 1922 because of economic difficulties to meet the reparations.

The invasion of the Ruhr actually suspended payments for awhile, and German inflation soon developed exponentially fast. However, both France and Germany suffered from a deadlock in the Ruhr crisis both economically and for France, in the international community as well, so both nations agreed to find a way out; and then came the Dawes Plan.

The Dawes Plan was chaired by an American economist, and the plan was very successful, however both with the Dawes Plan and its successor, the Young Plan (1929)- it relied too heavily on American and foreign loans to Germany so that when Black Monday hit, it all fell apart.

The Dawes Plan was accepted at the London Conference in July to August, 1924. It’s main ideas were this: Germany would receive an initial loan from the U.S. of $200 million dollars as well as from other foreign countries, Germany’s payments would be rescheduled to 1 billion gold marks the first year to 2.5 billion from the fifth year onwards, certain German taxes and bonds were used to invest money in the payments to help ensure their due payment, there would be a Reparations Agency established to oversee payments, and finally that France would evacuate the Ruhr in a years’ time.

The Wall Street Crash in the U.S. cause a cease in capital loans to European investments, which heavily affected the Dawes and Young plans. As J.M. Keynes wrote in 1926, that the time for which these arrangements would succeed was “in the hands of the American capitalist”. The economic disaster brought a sense of “every man for himself”, and soon many nations abandoned the Gold Standard, and there was a rush to hide behind tariff barriers in attempts to dull the domestic effects of the crisis. Only France, Italy and Poland, of the major European states kept the Gold Standard. The economic depression played a role in the rise of the Nazi Party between 1930-1933, as well as fascism and self-interested nationalism. These effects were also aided by the new grounds for international appeasement set by the crisis. As nations like Britain and America recovered, they found little room to spend on heavy arms, as the cost of another war would be devastating.

It is important to note the Nazi Party grew in power because the collapse of the Weimar Republic, and partially due to the economic crisis,Germany was eventually left under Hitler’s rule, who turned Germany back into the most powerful industrial and military power. Hitler sought to build Germany back up, and began challenging the Treaty of Versailles; at this time many British politicians argued that the treaty had been too harsh and that revisions should be made, providing support for Hitler. One of the revisions made was in 1935, the Saar Plebiscite. Inhabitants of the Saar voted in majority to be reunited with Germany which was in accordance with the treaty and so was administered by the League of Nations. The Saar was a major political victory for Hitler, as people actually voted to be part of Germany- increasing his support and power.