DAWES PLAN: WHY IT WAS DEVELOPED, CONSEQUENCES - HISTORY - 2025

The Dawes Plan is the temporary economic aid plan presented in 1924 by the United States, Belgium, France and Great Britain. It was aimed at Germany during the period after the First World War (1914-1918) and the Second World War (1938-1945).

The plan was designed because Germany, after its defeat in World War I, was punished by the Treaty of Versailles. In this treaty there were economic sanctions that forced it to pay to the countries attacked during the Great War.

Charles Dawes

Its name is due to the fact that the commission to develop the plan was chaired by the American financier Charles Dawes. At that time, he was the director of the United States Budget Office.

Background

By the end of the First World War, all European countries had been in complete ruin. The death toll across Europe amounted to about 10 million human beings. The number of people with disabilities was approximately seven million and the seriously injured were around fifteen million.

These deaths and injuries increased the economic and social crisis that hit Europe after 1918 and increased during the 1920s. The vast majority of those killed and injured were men of productive age.

In addition, years of bombing and military outposts during the four years of the great multinational conflagration destroyed labor camps and industrial facilities. This left almost all European countries in a deep situation of productive chaos.

What was the Dawes Plan?

The Treaty of Versailles proposed the payment of sanctions by Germany to the attacked countries. These payments were too heavy for the collapsed postwar German economy. Therefore, Germany was not canceling those impositions.

The plan was to make the payments on an annual basis. It also proposed a reduction in fees and a broader range of dates between payments; in this way the German country was given time to complete the amounts to be paid.

In this context, Germany tried to renegotiate the terms of payment of the debts imposed by the Treaty of Versailles. Faced with these attempts, France responded negatively. She even went further and invaded, with the help of the Belgian armies, some German productive areas.

The region that was functioning as the center of economic restructuring for Germany was the Ruhr mining area. From there the German nation carried out a project of economic reactivation through mining extraction and export.

In 1924 a Germany burdened by the weight of war debts requested a moratorium on payments. By then, since November 1923, the United States, Great Britain, Belgium, Italy and a reluctant France were working on the corrective plan for these war reparations: it was the Dawes Plan and it was presented on April 9, 1924.

Why was it developed?

The objective of the Dawes Plan was to facilitate the economic improvement of Germany so that it could pay the debts to the European countries.

Thus, these countries could pay the debts to the United States of America, in addition to removing Germany from the sphere of influence of the nascent international power, Russia, and its project for the Union of Soviet Socialist Republics, USSR.

The core of the plan was the credit contribution that Germany would receive for its economic recovery: eight hundred million marks. On April 16, 1924, the government of Germany gave its consent and accepted the plan. In London, in August of that same year, the Dawes Plan came into effect.

The Crack of 29, the great depression

The entire Dawes Plan system functioned as a self-feeding structure, a permanent recycling. The United States had served as a lender and supplier of manufactures to the European countries of the Entente since 1917.

The debt of the victors in the First World War was very high and it was very expensive to pay it. Due to having been defeated, Germany had to pay a very high amount of money to those countries that had won the war.

After the war, the United States - through its banking system - would provide Germany with a way to pay the victors of the Great War; then they could pay the United States their debts. It was the ideal plan: everyone won.

However, the financial crisis in the United States occurred, from 1928 until the so-called Crack of 29, with the abrupt fall of the Stock Market and the accelerated deterioration of the American banking system.

This forced the cessation of loans and financing that from those banks gave life to the Dawes Plan. He also condemned the system that worked by self-recycling the European / American economy. The plan was canceled.

Relationship with the Young Plan

In its place the Young Plan would enter the scene, which took the baton from where the Dawes Plan was left and provided other mechanisms that would try to de-ballast the agreements that were reached after the economic conditions of a given country.

When no more financial resources came to Germany - and therefore to Europe - the money received by those countries amounted to about eight billion dollars in credits. It was the year 1930.

The gold standard as the governing canon for the economy of nations added more and more accessions, at the time of the fall in supply and demand that caused the serious financial crisis. That system dragged down the banking institutions of Europe.

As this system already made it clear that it was not guaranteed, there was a need to reform the financial reparation conditions that would be imposed on Germany, with new payment guarantees, with new terms (until 1988) and with new payment percentages.

Thus, when the Allied Reparations Committee met in Basel (Switzerland) in August 1929, the Young Plan was signed. As an adjustment to the Dawes Plan, the payment term would no longer be left open but instead set specific dates and stipulated shorter-term actions.

Consequences

The most relevant consequences were the departure of the French forces from the German Ruhr region and the payment of one billion marks a year which, over a period of four years, gradually ended up being two and a half billion.

Also a notable consequence was the international supervision of the German Central Bank, the Reichsbank. The plan was governed by the slogan: "business, not politics."

References

1. Kitchen, M. (1992) The interwar period in Europe, Madrid, Alianza Universidad,
2. Lozano Cámara, Jorge J. (2004). Dawes plan. Recovered in: classhistoria.com
3. MLA style: Charles G. Dawes - Biographical. Nobelprize.org. Nobel Media AB 2014. Recovered at: nobelprize.org
4. Mosley, L. (1974), The failure of democracies, Barcelona, ​​Caralt.
5. Walters, FP (1971), History of the League of Nations, Madrid, Tecnos.