Dawes Plan
An American banker rescheduled German reparations in 1924 and the money went round in a circle for five years. The problem the plan addressed was that the sum fixed in 1921 — 132 billion gold marks — could not be paid, and the attempt to enforce it by occupying the Ruhr had produced a hyperinflation that destroyed the German economy and cost France more than it collected. Charles Dawes chaired a committee of experts that reported in April 1924. Its terms were practical rather than punitive. The total was left untouched and the annual payments were reduced and graduated, rising over five years; the Reichsbank was reorganised under partial foreign supervision; the railways and industry were mortgaged as security; the Ruhr was evacuated; and, decisively, an American loan of 800 million gold marks was floated to get the new currency started. That loan set the pattern. American banks lent to German municipalities and companies, Germany paid reparations to France and Britain, and they repaid war debts to the United States, which lent the money again. It worked while the lending continued. The Young Plan in 1929 reduced the total and rescheduled it over fifty-nine years, and the Wall Street crash that October ended the American lending within months. German unemployment reached six million by 1932, and reparations were suspended at Lausanne that year and never resumed. Dawes shared the Nobel Peace Prize for it in 1925 and was vice-president of the United States at the time. The plan's real author was a committee of bankers, and its real mechanism was that American capital was substituting for a political settlement nobody was prepared to make.
- Year: 1924 CE
- Category: Economic
