Light in the Dark: Germany’s Dawes Plan

By Brenda Pedreschi

The important role of Allies in the recovery of Germany economy is undeniable.

Germany has lost the WWI entering a time of economic depression as it have received a reparation payment imposed by the treaty.

In order to survive the crisis after the Treaty of Versailles Germany established in 1919 a federal republic and parliamentary representative democracy which replaced the imperial form of government. It was named after Weimar, the city where the constitutional assembly took place.

In its 14 years, the Weimar Republic was faced with numerous problems, including hyperinflation, political extremists on the left and the right and their paramilitaries, and hostility from the victors of World War I, who tried twice to restructure Germany's reparations payments through the Dawes Plan and the Young Plan.

Weimar Germany was not able to recover by itself neither to pay all its loans, external help was needed. Important achievement of a temporally success needs to be attributed to nations that send represents on the committee. Even though the main interest of this nations was to avoid any revolution in Germany as Russia was seen as the main enemy of the moment after the establishment of communism. On the other hand economists didn’t count on a worldwide crisis as the Wall Street Cash and the following depression, no one could be prepared for it nor were the Germans, nor was the Dawes Plan.

The five nations represented on the Dawes Committee were USA, Great Britain, Italy, Belgium and France. Each nation gave two experts in finance. There was a common motive for finding some way to restructure Weimar’s economy.

The Dawes Plan of 1924 was formulated to take Weimar Germany out of hyperinflation and to return Weimar’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.

The Dawes Plan was needed to solve financial problems inside Germany, without it the payment for reparations imposed by the treaty after WWI would have destroyed Germany causing bigger struggles and crisis not only in economic aspects but also in the whole nation.

  

What was seen as a temporally succeed of this plan is especially regarded to those nations who agreed to loan Weimar Germany large sums of money that would be invested into the economy.

One of the main strokes of the Dawes plan was the remove of troops from the Ruhr, because this passive resistance had led to Germany’s most important economic zone simply not working and producing the money it should have been producing, by removing Belgium troops the Ruhr was given back to Germany and Italy.

The payment was needed to be restructured in order to be more “German friendly¨, therefore a second stroke of the Dawes plan was the reparation payment restructuration.

A third point was treat on the committee, the restructuring of Weimar’s national bank, the Reichsbank, which would be supervised by the Allies. While this may have been interpreted as direct interference by outside powers, it was not an issue and the Weimar government accepted the terms

It’s important to recognize that the Allies could have played the card of “you deserve everything you get” toward Germany but even though WWI affected every nation, they found ways to help with the stability of German economy; the questioning might be how long would this last? No one could predict a disaster as the Wall Street Crash, that crucial period when the Dawes Plan apparently succeeds came to an end and Germany suffered the Great Depression.

References

http://www.historylearningsite.co.uk/young_plan_1929.htm

http://www.historylearningsite.co.uk/dawes_plan_1924.htm

http://www.historylearningsite.co.uk/weimar_depression_1929.htm