Dawes Plan 1924

Dawes Plan 1924


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After the First World War Germany had great difficulty paying the reparations that had been agreed under the terms of the Treaty of Versailles. When the German government failed to keep up the payments in 1923 French and Belgian troops occupied the Ruhr. This was followed by massive inflation and growing unemployment in Germany.

Charles G. His report, published in April, 1924, proposed a plan for instituting annual payments of reparations on a fixed scale. He also recommended the reorganization of the German State Bank and increased foreign loans.

German politicians like Adolf Hitler and Alfred Hugenberg attacked the Dawes Plan because it did not reduce the reparations total. They also disliked the idea that foreigners would have control over the German economy.

The Dawes Plan was initially a great success. The currency was stabilized and inflation was brought under control. Large loans were raised in the United States and this investment resulted in a fall in unemployment. Germany was also able to meet her obligations under the Treaty of Versailles for the next five years. The Wall Street Crash created problems for the German economy and so a new commission under another banker, Owen Young, was set up to consider reparations in 1929.


The Weimar Republic

The first elections for the new Republic were held on the 19 January 1919. They used a voting system called Proportional Representation .

The Social Democratic Party won 38% of the vote and 163 seats, the Catholic Centre Party won 20% of the vote and 91 seats and the Democratic Party won 19% of the vote and 75 seats. The rest of the seats were divided up between the smaller parties.

Whilst the Social Democratic Party had won the most votes, they did not win a majority (over 50%). Therefore, the Social Democratic Party joined a coalition with the Catholic Centre Party and the Democratic Party to make up a majority. This coalition then had the task of drawing up a constitution for the new republic.

As Berlin was still in the grips of revolution, the market town of Weimar was chosen as the meeting place. This venue gave the new nation the name the ‘Weimar Republic’.


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Dawes Plan

Definition and Summary of the Dawes Plan
Definition and Summary: The Dawes Plan was a plan for the collection of the German reparations following WW1. The Dawes Plan was worked out by an international committee of experts under the chairmanship of the American banker Charles G. Dawes as a war reparations payment plan for Germany. It was proposed by the Dawes Committee on April 9, 1924, and accepted by the Allied and German Governments on August 30, 1924.

Dawes Plan
Calvin Coolidge was the 30th American President who served in office from August 2, 1923 to March 4, 1929. One of the important events during his presidency was the Dawes Plan.

The Dawes Plan Facts for kids
The following fact sheet contains interesting facts and information on the Dawes Plan for kids.

Facts about the Dawes Plan for kids

Dawes Plan Fact 1: Following WW1 (28 July, 1914 - 11 November, 1918), the 1919 Treaty of Versailles addressed War-Guilt provisions and demanded massive amounts of money, called Reparations, from Germany as compensation for the Great War.

Dawes Plan Fact 2: Germany and the Weimar Republic was on the brink of financial collapse and was in danger of not being able to pay its wartime reparations. German reparations had been set at nearly 20 billion marks and was finding it difficult to meet its obligations. The aim of the Dawes Committee was to find a solution to the problem.

Dawes Plan Fact 3: The Dawes Plan was a reparations payment plan for Germany worked out by an international committee of experts under the chairmanship of the American banker Charles G. Dawes.

Dawes Plan Fact 4: The committee convened during 1923-1924 and consisted of 10 representatives, two each from the United States, Belgium, France and Great Britain who worked on the pact.

Dawes Plan Fact 5: America was experiencing the Economic Boom of the 1920's. Before WW1 America had been in debt to Europe. After WW1 the situation was reversed and the former Allies owed the US more than $10 billion for the cost of food supplies and armaments.

Dawes Plan Fact 6: The Dawes Plan was presented by Charles Dawes, who was also the US budget director, and proposed by the Committee on April 9, 1924. The plan was to gave Germany longer to pay its heavy war reparations and the pact agreed to an American loans to Germany of 800 million gold marks.

Dawes Plan Fact 7: The Great Britain and France also agreed to accept less in reparations and pay more on their war debts to the United States.

Dawes Plan Fact 8: The Plan was accepted by the Allied and German Governments on August 30, 1924.

Dawes Plan Fact 9: The provisions of the pact were that:

● Reparation payments should begin at 1 billion marks for the first year
● That payments would rise over a period of 4 years to 2.5 billion marks per year
● That the sources for the reparation money should include excise and custom taxes
● That the German Reichsbank should be reorganized under Allied supervision

Dawes Plan Fact 10: Germany ended up not only paying their war reparations but also found themselves in debt to American banks.

Dawes Plan Fact 11: The provisions of the Dawes Plan was only viable as a short term solution as Germany could not continue the huge annual payments especially over an indefinite period of time..

Dawes Plan Fact 12: The 1929 Young Plan was therefore substituted to reduce the total amount of reparations due from Germany and extended the payment period until 1988. However due to the 1929 Wall Street Crash the Young Plan only remained in effect until July 1931 and was officially abolished in 1932.

Additional Facts and Information
For visitors interested in the history and foreign policy in the 1920's refer to the following articles:


American assistance to Weimar Germany

Foreign support in the mid-1920s, particularly American assistance in the form of loans and investment, was essential to the economic recovery of the Weimar Republic. Bookended by the Dawes Plan (1924) and the Young Plan (1929), this support helped haul the republic back from the brink of economic and social collapse and kick-started what is often called the ‘Golden Age of Weimar‘.

This assistance came with risks and dangers, however. Rather than becoming self-sufficient, the economy of the Weimar Republic became too reliant on foreign capital and loans. When the United States economy began to fail in late 1929, the effects in Germany were particularly severe.

Background

By the end of 1923, Weimar Germany was in a parlous state both politically and economically. Germans had suffered through one of the worst currency inflations in human history and many did not expect Friedrich Ebert or the government to last another year.

Washington watched these developments with an anxious eye. It was highly concerned about the German economy, which seemed beyond hope of recovery. The Treaty of Versailles had stripped Germany of 13 per cent of its territory, 15 per cent of its farmlands, a quarter of its coal mines and three-quarters of its iron production.

The Allied commission had imposed a staggering reparations debt so large that even quarterly instalments seemed impossible. The hyperinflation crisis had gutted the German financial sector and wiped out the savings of the Mittelstand (middle classes).

Fears of communist revolution

As the German economy approached meltdown, the prospects of a communist revolution or a militaristic coup loomed large. The National Socialists’ failed Munich putsch in November 1923 seemed an omen of things to come.

The United States was also concerned that the collapse of the German economy might cause shockwaves across Europe. If Germany could not meet her reparations obligations, the French could possibly instigate another war. If Germany was to fall to communism, a powerful alliance with Soviet Russia might develop that could threaten the rest of Europe.

The Americans also had their own interests in mind. The US was itself owed large sums by Paris and London. Repayment of these war loans hinged on the French and British taking receipt of German reparations.

The Dawes Committee

In 1924, Washington organised a ten-man international committee to investigate the situation in Germany and consider the problem of reparations.

At the head of this committee, they placed Charles G. Dawes, a wealthy Chicago banker, a veteran of World War I and former brigadier-general. A no-nonsense man who spoke as he thought, Dawes told delegates to the committee that the heavy-handedness of Versailles placed Europe in a dangerous position. He called for more practical approaches to the treatment of Germany:

“What is the question today? Upon what does the success of this committee depend? Upon its powers of persuasion? Primarily, no. Upon its honesty and ability? Primarily, no. It depends upon whether, in the public mind and the conscience of the Allies and of the world, there is an adequate understanding of the great disaster that faces Europe unless ‘common sense’ is crowned king.”

The Dawes Plan

In April 1924, the committee submitted its proposed solution to the German question. It formed the basis of what became known as the Dawes Plan. It was accepted by the German government, then ratified by the Reichstag and Allied governments in August the same year.

Among the contents of the Dawes Plan were the following points:

  • A raft of reform measures to the German economy, including new taxes and the introduction of the gold standard to stabilise currency values. The Reichsbank was to be reorganised and modernised, with British and American assistance.
  • A new, more affordable schedule for annual reparations payments to ease the strain on German reserves. Annual amounts were reduced and scaled (1 billion marks in 1924 increasing to 2.5 billion marks in 1929), to allow the German economy breathing space for recovery.
  • Importantly, the Dawes Plan facilitated a series of massive loans to Germany. The first, totalling 800 million marks, was pumped into Germany’s industrial sector to restore production. Half of this amount was provided by American bankers.
  • France agreed to withdraw its troops from the industrial Ruhr region, allowing German production there to recommence and recover.

Reviving the economy

Though it was only intended as an interim or temporary measure, the Dawes Plan had an immediate effect. It allowed the German economy to recover from its post-war malaise and kick-started a brief period of growth and prosperity.

Vast amounts of money poured into Germany, most of it from the United States. The impact of these loans was most visible in the industrial sector. New factories and infrastructure projects were initiated, leading to job creation and a sharp fall in unemployment.

The living standards of many Germans began to increase for the first time since before World War I. There were improvements to German cities, including the construction of new houses and facilities such as shops and cinemas. Germany’s share of world trade increased and by 1929, her exports were 34 per cent higher than in 1913.

Nationalist objections

Not everyone supported or accepted the Dawes Plan. German communists condemned this American assistance as economic imperialism, an attempt by the United States to exert political and economic influence over Germany. They also criticised the plan for encouraging capitalist profit and greed.

The National Socialists (NSDAP), themselves greatly weakened by the events of November 1923 and the imprisonment of Adolf Hitler, dismissed the Dawes Plan as a stunt. NSDAP leaders believed Germany should refuse to make any reparations payments and described the Dawes Plan as the work of self-serving Jewish bankers.

A superficial measure

The Dawes Plan allowed for the recovery of German industry, the restoration of a stable currency and a better way of life for millions of Germans. For the most part, however, these positive outcomes were superficial or occurred in the short-term.

The consensus among most historians and economists is that the Dawes Plan placed too much emphasis on loans and not enough on internal restructuring or reforms. The German economy became too reliant on foreign money, capital and trade instead of generating these things domestically. Any economic recession abroad, particularly in the United States, would have immediate knock-on effects in Germany.

The Dawes Plan also failed to solve the reparations dilemma. Despite the reduction in quarterly instalments, Germany met some of its obligations but continued to default on others.

The Young Plan

These ongoing problems and concerns led to the formulation of a new agreement called the Young Plan (1929). This spread Germany’s annual reparations payments over a 59-year period, with the final payment to be made in 1988.

Under the Young Plan, Germany’s annual payments were pegged at a maximum of two billion gold marks – but Berlin had an option to defer up to two-thirds of this amount if economic circumstances made paying the full instalment impossible.

American assistance continued in the late 1920s with the finalisation of the Young Plan. The committee chairman, Owen D. Young, was named Time magazine’s Man of the Year (1929) for his leadership of the committee.

A historian’s view:
“In 1924, the Dawes Plan seemed brilliant. It was no deed of vague kindness but a vigorous piece of financial manipulation. It was the work of a clever man who had succeeded in everything he had tried. Dawes was taken for a wizard. It was concluded that he had found a cure when he had only discovered a palliative… Tinkering only created large problems for the future, but tinkering was the style tolerated in the government of 1924.”
Elizabeth Stevenson

1. By the end of 1923, Germany was confronted by the risk of economic collapse and the danger of a militarist coup or communist revolution,

2. The United States was concerned about the political and economic ramifications of the Germany economic collapsing and the effects of this in Europe.

3. In 1924, a committee led by Charles Dawes submitted an interim plan for reviving the German economy, including revised reparations payments and US loans.

4. Though unpopular with German nationalists, the Dawes Plan was effective, allowing Germany’s economy to recover and grow, at least in the short term.

5. Germany became reliant on foreign loans and failed to meet all her reparations obligations, however, leading to the development of the Young Plan in 1929.

Citation information
Title: “American assistance to Weimar Germany”
Authors: Jennifer Llewellyn, Steve Thompson
Publisher: Alpha History
URL: https://alphahistory.com/weimarrepublic/american-assistance/
Date published: September 30, 2019
Date accessed: Today’s date
Copyright: The content on this page may not be republished without our express permission. For more information on usage, please refer to our Terms of Use.


The Golden Age of Weimar

The period from 1924 to late 1929 is often described as the ‘Golden Age of Weimar’. It is a time when the Weimar Republic enjoyed greater stability, economic security and prosperity, as well as improved living standards, at least in relation to previous years.

Reasons for recovery

The seeds of this German recovery were planted in the autumn of 1923, with the elevation of Gustav Stresemann to the chancellorship. Stresemann’s finance minister, Hans Luther, formulated a plan to arrest the hyperinflation crisis by introducing a new currency called the Rentenmark. Unlike the old paper mark, the value of the Rentenmark would be fixed to gold prices.

The Weimar government also declared its commitment to meeting reparations payments to the Allies. Germany was able to restore its foreign relations and seek a renegotiation of the reparations figure. The United States-led Dawes Plan was finalised in April 1924 and implemented four months later.

Between 1924 and 1929, the dying German economy was injected with more than $25 billion of foreign money. More than half of this money came from American loans most of the rest was facilitated by American bankers acting as intermediaries. The American government and US corporations also provided Germany with financial and industrial expertise.

The boom years

This support contributed to a surge in German production during the mid-1920s. New factories were constructed or converted, many using newly developed mechanisation and assembly-line techniques.

The restoration of reparation payments saw France and Belgium end their occupation of the Ruhr and withdraw in mid-1925. This freed up Germany’s industrial resources there and allowed production to return to its full potential, attracting investment and expansion.

From this point, Germany’s recovery was very rapid. Her economic growth after 1924 exceeded that of France and Britain. By 1929, Germany was producing 33 per cent more than before the war. Germany had regained its mantle as the second-highest producing industrial nation after the US.

Welfare and social spending

The economic revival of the mid-1920s enabled the introduction of social reforms and better standards of living.

The Weimar government, then dominated by the Social Democratic Party (SPD) and Centre Party, re-introduced and overhauled the Bismarckian welfare state to provide protection for the young, the aged, the unemployed and disadvantaged. The 1922 Youth Welfare Law, for example, declared that every German child had the “right to education, spiritual, physical and social fitness”.

The government sought to protect these rights by creating new institutions and employing social workers to accommodate children who were illegitimate, homeless, abandoned or at risk.

Further legislation in 1923 and 1927 established relief for those out of work. The Unemployment Insurance Law (1927) required workers and employees to make contributions to a national scheme for unemployment welfare. Other reforms provided benefits and assistance to war veterans, wives and dependents of the war dead, single mothers and the disabled.

Housing

Weimar governments also attempted to address a critical shortage of housing in parts of Germany. Article 155 of the Weimar constitution declared the state must “strive to secure healthy housing to all German families, especially those with many children”.

The government honoured this by initiating several visionary programs. It employed architects and planners to devise ways of alleviating housing shortages. Government investment, tax breaks, land grants and low-interest loans were also used to stimulate the building of new houses and apartments.

Between 1924 and 1931, more than two million new homes were built while almost 200,000 more were renovated or expanded. By 1928, homelessness has been reduced by more than 60 per cent.

Workers’ pay and conditions

The prosperity of the mid to late 1920s also benefited German workers. Unemployment was at four per cent in 1924 but the steep increase in industry and manufacturing caused it to steeply decline. By 1929, only 1.4 million out of 65 million Germans were without a job.

The stabilisation of currency and industrial boom also lifted the real value of wages, which increased each year from 1924. In 1927, real wages increased by nine per cent and in 1928 they rose by a further 12 per cent. This made Germany’s industrial workforce the best paid in Europe.

Workplace conditions also improved. Average working hours fell slightly while improved safety and practices produced a drop in workplace deaths and injuries.

Middle-class woes

The Weimar economic miracle did not benefit everyone. The Mittelstand or middle-class, for example, found little joy in this alleged ‘golden age’.

Stripped of their savings by the hyperinflation of 1923, the middle classes – managers, bureaucrats, bankers, clerks and other professionals – did not enter the ‘Golden Age’ in a position of strength. They also failed to benefit from most of its changes. White-collar workers did not enjoy the wage rises of the industrial sector, nor could they always access the benefits of the Weimar welfare state.

By the late 1920s, wages in the industrial sector had drawn level with those of the middle class – and in some cases they exceeded them. While unemployment fell generally, it remained high amongst white-collar professions. Government documents from April 1928 reveal almost 184,000 middle-class workers seeking employment – and almost half of them did not qualify for unemployment relief from the state.

These conditions fuelled middle-class resentment and suggestions the SPD-dominated government was favouring the working classes over the Mittelstand, once an admired and respected part of German society. Some claimed this was intentional, a subtle form of class warfare to impose “socialism by stealth”.

Unlike the workers, who were represented by the SPD and Communist Party (KPD), the middle classes had no obvious political party to turn to. By the late 1920s, the National Socialists (NSDAP) were able to tap into this middle-class resentment and disenchantment.

Rural disenchantment

German farmers also continued to struggle during the Golden Age. Like the middle-classes, this led many outside the cities and towns throwing their support behind right-wing parties.

Germany’s agricultural sector, devastated by war and government policies, suffered further during a European price slump in 1921. As primary producers selling essential foodstuffs, farmers remained relatively secure during the hyperinflation crisis.

By the mid-1920s, however, German farmers were being confronted with cheaper imported foods. This required them to modernise and improve productivity to remain competitive.

These changes required investment in new technologies, like tractors and other farm machinery. Some farmers borrowed heavily to purchase this equipment others did without it and struggled. Farmers regularly defaulted on debt payments and farm foreclosures increased markedly.

The ‘farmers’ revenge’

The plight of German farmers worsened due to a global grain surplus and price slump in 1925-26. In 1928, farmers initiated a series of small-scale riots – dubbed the ‘farmers’ revenge’ – in protest against foreclosures and low market prices.

By 1929, German agricultural production was at less than three-quarters of its pre-war levels. The political parties of the far-right attempted to win support from disgruntled farmers by emphasising the importance of agriculture and tapping into traditional values.

The NSDAP, for example, made extensive use of the slogan Blut und Boden (‘Blood and Soil’) and its agrarian, nationalist and racial connotations. Many farmers, struggling with large debts and unsympathetic lenders, were also receptive to anti-Semitic propaganda and conspiracy theories about Jewish bankers and financiers.

A historian’s view:
“The years 1925-28 were the heyday of the Weimar Republic. Prosperity was restored and the parliamentary institutions seemed to be accepted by the majority of the electorate. Indeed, no observer of the political scene in 1928 could have prophesied that five years later Hitler would be in power and parliamentary democracy in ruins. While the Volkisch and National Socialists still polled nearly two million votes in May 1924, by December this was reduced to 900.000, and in May 1928 to 800,000 votes. The voting strength of the communists equally declined, while that of the moderate parties increased.”
Francis Carsten

1. The years between 1924 and 1929 have become known as the Golden Age of Weimar, marked by economic recovery, growing prosperity and better living conditions.

2. This ‘Golden Age’ was driven by rapid industrial growth in Germany, underpinned by large American loans, capital investment and the restoration of foreign trade.

3. Increased prosperity and a stable currency allowed the Weimar government to introduce ground-breaking social policies, such as housing projects and a welfare system.

4. Industrial and blue-collar workers were the big winners as their wages rose considerably from the mid-1920s. The middle-class, in comparison, saw few benefits.

5. Another disgruntled group during this period were Germany’s farmers, who struggled with difficult market conditions, chiefly low food prices, which led to rising debt and foreclosures.

Citation information
Title: “The Golden Age of Weimar”
Authors: Jennifer Llewellyn, Steve Thompson
Publisher: Alpha History
URL: https://alphahistory.com/weimarrepublic/golden-age-of-weimar/
Date published: October 1, 2019
Date accessed: Today’s date
Copyright: The content on this page may not be republished without our express permission. For more information on usage, please refer to our Terms of Use.


Relationship with the Young Plan

In its place, the Young Plan would take the stage, which took the witness from where the Dawes Plan remained and provided other mechanisms that would seek to disperse the agreements that would be achieved following the economic conditions of a given country.

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

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

As this system 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 deadline would no longer be open, but it would set specific dates and stipulate shorter-term actions.


The Pattern Of Modernism During The Interwar Period 1919-1939

capitalism while industry was still a leading role (869). Britain owed a war debt to the United States, which they could only repay if Germany was consistent with paying its reparations. Restructuring of Germany’s debts under the Dawes Plan of 1924, stabilized the international capital markets. Meanwhile, France had suffered devastating human losses and destruction of property during the war (869). With the increase of taxes and continuous reparations paid by Germany, France was able to reconstruct itself


Dawes Plan 1924 - History

History of German-American Relations >
1901-1939: Early 20th Century

Germans in America | The German Language in the United States | German-American Relations

The Dawes Plan presented in 1924 by American banker Charles Dawes was designed to help Germany pay its World War I reparations debt. It eased Germany's payment schedule and provided for an international loan. In 1929, the Dawes Plan was replaced by the Young Plan which substituted a definite settlement that measured the exact extent of German obligations and reduced payments appreciably.

In 1928 Herbert Hoover, the first president of German ancestry, was elected.

The stock market crash of 1929 marked the end of an era of prosperity and led to the worst depression in American history. The German economy also faltered. Germany faced severe economic hardships, high unemployment, and runaway inflation. The days of the Weimar Republic were coming to an end.

The rise of Hitler's National Socialist Party and the resulting persecution of Jews and political dissidents brought about another break in German-American relations. However, an isolationist Congress and American public did not allow the administration of President Franklin D. Roosevelt to do much to resist Hitler's rise to power. The Reciprocal Trade Agreements Act of 1934 was severed. After the "Reichskristallnacht" in 1938, the American ambassador was recalled but diplomatic relations were not severed.

A new wave of emigration from Germany to the United States occurred. These refugees from Nazi Germany included Albert Einstein, Thomas Mann, Kurt Weill and Marlene Dietrich, and other artists, scientists, musicians, and scholars. With the exception of the German-American Bund, with Fritz Kuhn as its "Führer," there was little Nazi support in the United States. Most German-Americans were loyal to the United States and indifferent to the appeal of international Nazism.


Reparations

At the conclusion of World War I, Germany reluctantly agreed to pay unspecified reparations in the armistice agreement of November 1918. Later at Versailles they were required to sign a treaty that assigned full responsibility to them for causing the conflict (Article 231, the "war guilt clause") and called for the creation of an international reparations commission to determine the amount of damages.* The bill was tallied in April 1921, when the commission determined that damages caused by Germany amounted to $33 billion or 133 billion gold marks. Payments were to be made in cash or by such in-kind commodities as steel and coal. Representatives of the German government were extremely reluctant to shoulder this crushing debt and did so only under the full weight of international pressure. An initial payment of $250 million was made in September 1921. However, an economic crisis had gripped Germany, which caused runaway inflation and an end to additional installments. In May 1922, Allied governments granted Germany a temporary moratorium on reparations payments in the hope that their economy would recover during that period and enable the resumption of regular installment payments. France bitterly opposed the moratorium, having suffered severely from German aggression, but eventually agreed. At the end of the prescribed period, Germany was in no position to resume payments and defaulted. In January 1923, an impatient France, accompanied by a token Belgian force, marched into the Ruhr Valley and set up a military occupation, figuring that control of the valuable industrial area could help force the resumption of payments. The United States, of course, had not signed the peace treaty with Germany and had no claim to any reparations. However, hoping to avert a deepening of the international crisis, the Coolidge and Hoover administrations sponsored international plans to deal with the reparations issue:

  • The Dawes Plan (1924). The U.S. vice president helped to craft a plan for annual German installment payments, but avoided the more troublesome issue of the total amount owed.
  • The Young Plan (1929). A prominent U.S. financier worked to fashion a precise new German reparations formula to replace the Dawes Plan.

Watch the video: The Dawes Plan of 1924


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