What is the Purpose of Dawes Plan?
The Dawes Plan was a plan that was made in 1924 that settled the matter of reparations for the 1st World War that Germany was required to pay. The Dawes Plan was introduced by Charles G. Dawes. He chaired it and the Dawes Committee proposed it. This plan resulted in a crisis in the diplomacy of Europe after the 1st World War besides the Treaty of Versailles. As the Dawes Plan solved a severe international crisis, in 1925, Charles Dawes shared the Nobel Peace Prize for his contributions. Now that you know the Dawes plan definition, it’s time to know the history and impact it had on people.
Dawes Plan History
On the 16th of August, 1924, the Dawes Plan came forward and it was signed in Paris. This was accomplished under Gustav Stresemann, the Foreign Secy. of Germany. Stresemann had the charge of getting back Germany its global reputation. Nonetheless, in November 1923, he resigned from the post of Chancellor but continued to remain as Foreign Secretary of Germany. This happened to be an interim measure and so became unworkable. In 1929, the Young Plan Stresemann was adopted to replace it.
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Dawes Plan and Young Plan
In late 1923, the Reparation Commission with the stalemate of European powers over the reparation of Germany formed a committee and this was done for reviewing the situation. Under the Dawes and Young plan, the yearly reparation payments of Germany were lessened; however, the full amount that needs to be paid remains undecided. In Berlin, economic policymaking was rearranged under a novice currency and foreign supervision and in this circumstance, the Reichsmark, the new currency, was adopted.
Belgium and France abandoned the Ruhr and various foreign banks loaned the government of Germany $200 million to encourage economic stabilization. J.P. Morgan, the US financier, floated the loan on the market of the US and it was oversubscribed fast. In the next 4 years, US banks lent Germany sufficient money so that it could meet its different repayment payments to some nations, like the UK and France. In turn, these nations utilized their reparation payments from a country like Germany for servicing their war debts to the US.
The Young Plan
In 1928, the experts formed another committee for devising a final settlement to the reparations problem of Germany. In 1929, Owen D. Young chaired the committee. He provided a plan that lessened the total sum of reparations that were demanded of Germany. Another loan was floated in the foreign market and this one totalled an amount of $300 million. The Young Plan was also called for establishing a Bank for International Settlements and it was designed for facilitating the reparations’ payment.
Both Dawes and Young Plan happened to be vital US efforts that left lasting results. However, the Young Plan had a long-lasting effect. The BIS (Bank for Int'l. Settlements) continue to operate in the form of a forum for cooperation and consultation of a central bank. The experience of the US with inter-allied war debts too continued to affect its foreign policy and this effect became proven in the 1934 Johnson Act, the Lend-Lease Program that happened during World War II, and the Neutrality Acts.
Significance of the Dawes Plan
The Dawes Act authorized the federal govt. to break up different tribal lands and it did it by partitioning them into several individual plots. Only the Native Americans who did accept the individual allotments were permitted to turn into citizens of the US. Dawes Plan facts proved that Dawes Act assimilated Native Americans into mainstream United States society as it annihilated their social and cultural traditions. Due to the Dawes Act, more than 90 million acres of land that belonged to the tribals were stripped from the Native Americans before they were sold to the non-natives. It’s potentially the most vital factor in the Dawes plan history.
Dawes Plan Summary
The Dawes Plan treated the stabilization of currency as well as balancing of budgets in the form of interdependence, although provisionally separable for tests. Additionally, it holds that currency stability can be maintained if the budget is balanced normally whereas the budget can be balanced when a reliable and stable currency does exist. Both are required for enabling Germany to meet its internal needs and treaty payments.
Dawes Plan loan amount began at one billion gold marks and that too in the 1st year and it rose to 2.5 billion by the year 1928.
Dawes Plan facts and significance
Dawes Plan economic growth was abundant. It allotted vocational training, land, divine intervention, and education.
The majority of the Native Americans weren’t trained for being farmers.
Every Native head of the American family was provided three hundred and twenty acres of grazing land. If they happened to be single, then they were provided eighty acres.
Before the Dawes and Young Plan, one hundred and fifty million acres did belong to the Native Americans. After two decades, 2/3rds of this land belonged to these Native Americans.
Despite the good intentions of its creator, the Dawes Act turned into highly disastrous legislation regarding Native Americans.
Even so, the Dawes and Young Plan were significant U.S. efforts that had lasting consequences.
FAQs on Dawes Plan
1. What exactly was the Dawes Plan introduced in 1924?
The Dawes Plan was an arrangement formulated in 1924 by a committee led by American banker Charles G. Dawes. Its primary purpose was to resolve the issue of World War I reparations that Germany was unable to pay. The plan provided a staggered payment schedule for Germany, reorganised its national bank, and included a significant loan, mostly from the United States, to help stabilise the German economy.
2. What were the key components or main points of the Dawes Plan?
The Dawes Plan was structured around several key actions designed to make reparations feasible and stabilise Germany. The main components were:
The withdrawal of French and Belgian troops from the Ruhr valley, which they had occupied.
A restructuring of reparation payments, starting with one billion marks in the first year and increasing to 2.5 billion marks annually after five years.
The reorganisation of the German central bank, the Reichsbank, under Allied supervision to stabilise the currency.
Granting a large loan of 800 million marks to Germany, primarily from American banks, to kickstart its economy.
3. What were the immediate causes that made the Dawes Plan necessary?
The Dawes Plan was created to address a severe economic crisis in Germany following World War I. The primary causes included:
Hyperinflation: The German currency had become virtually worthless by 1923, making it impossible for the government to function or pay reparations.
The Ruhr Crisis: When Germany defaulted on its payments, French and Belgian troops occupied the industrial Ruhr region, leading to economic paralysis.
Infeasible Reparations: The original amount demanded in the Treaty of Versailles was considered unmanageable for Germany's crippled economy.
4. What were the main effects of the Dawes Plan on Germany and international relations?
The plan had significant immediate effects. For Germany, it led to the stabilisation of its currency, a decrease in unemployment, and a period of relative economic prosperity known as the 'Golden Twenties'. Internationally, it eased tensions between Germany and the Allies, leading to the withdrawal of troops from the Ruhr. Germany was able to resume reparations payments, which restored faith in the international financial system.
5. Why did some German political groups, such as the Nazis, strongly oppose the Dawes Plan?
Despite its economic benefits, many German nationalists, including Adolf Hitler and his Nazi Party, opposed the Dawes Plan. They viewed it as a national humiliation because it placed Germany's finances and railways under foreign control. They argued that it did not reduce the total reparation debt and was simply another way for the Allies to exert power over Germany, forcing it to accept the 'war guilt' clause of the Treaty of Versailles.
6. How did the Dawes Plan's success ultimately lead to a long-term problem for the German economy?
The short-term success of the Dawes Plan masked a critical long-term weakness: it made the German economy heavily dependent on American loans and investments. This created a fragile economic structure. When the U.S. stock market crashed in 1929 (the Wall Street Crash), American banks recalled their loans from Germany, plunging the nation into a severe economic depression, which ultimately helped extremist parties like the Nazis to gain more support.
7. What is the main difference between the Dawes Plan and the Young Plan?
The main difference lies in their scope and finality. The Dawes Plan (1924) was a temporary measure designed to stabilise the German economy so it could resume paying reparations; it did not set a final total or a deadline. In contrast, the Young Plan (1929) was intended as a permanent settlement. It significantly reduced the total reparation amount from 132 billion to 112 billion gold marks and established a firm payment schedule lasting 59 years, ending the foreign controls imposed by the Dawes Plan.
