Just after the World War I, a plan was made by the Dawes committee, which was chaired by the eponymous Charles G. Dawes. It was called the Dawes Plan.
It was a treaty that declared that Germany was responsible for the reparations to the Allies. This plan was agreed upon in 1924. There are several reasons as to why it was proposed. Given here is an explanation of what the plan was, and what were the factors that led to its proposal.
When and Why?
The Triple Entente (Britain, France, and Russia), had signed the Treaty of Versailles, a peace treaty between the Allied Powers and Germany in 1919. In this treaty, it was stipulated that the defeated nation, Germany, had to pay for all the losses that the Allied nation had suffered during the war.
The total amount that Germany was asked to pay was around 226 billion German Gold Marks. But just 2 years after this was decided upon, Germany declared that they could not pay the money. A solution was requested by the Allied Reparations Commission, and it came in the form of this plan in 1924.
What is It?
When Germany declared that they were not able to pay the amount, the Dawes Committee was approached. This committee was initiated by Britain and the United States, and there were 10 members in this committee: 2 members each from Belgium, Britain, United States, France, and Italy, headed by one of the Americans, Charles Dawes.
According to this Plan, it was decided that Germany would take loans from the United States, so that they could repay Britain and France. The economic crux of this plan:
- The Reichbank would have to be reorganized under the supervision of the Allies.
- The Allied occupation troops would have to evacuate the Ruhr area, as it was an important reason for the financial strain on Germany.
- The reparation payment would begin at 1 billion Marks a year in the first year, and would increase up to 2 and a half billion after 5 years.
- The last condition was that the main source of the reparation money will be the excise, the custom taxes, as well as transportation.
This plan was good news for Germany, as it lessened their burden of reparation, but on the other hand this made them more dependent on foreign economies. As a result, if the US economy suffered, Germany was also affected.
Dawes Plan and Young Plan
After this plan was introduced, it became obvious that Germany would take time to pay back all the loans as well as the losses that had occurred due to the war. Hence, in 1929, the Young Plan was introduced, and was put into effect in 1930.
This committee was headed by the second member of the United States in the Dawes committee, Owen D. Young. This Plan further reduced the total payment to around 112 billion Gold Marks.
Charles G. Dawes won the 1925 Nobel Peace Prize (shared) for his crucial role in making this plan come true, and thus aiding the continuation of the newly achieved peace.