The Dawes Plan as a way of economic resuscitation of Germany in the mid-1920s

After the defeat of the German Empire in the First World War of 1914-1918, the Treaty of Versailles was concluded. Under its conditions, Germany was to pay reparations to the Entente countries. The size and timing of the compensation payments were not exactly regulated by the peace treaty. After 2-3 years, Germany faced economic difficulties. In 1924, to restore the balance of payments of the German economy, the Dawes plan was developed.

Franco-German confrontation in the Ruhr area

One of the countries that relied on reparations was France. When Germany began to have problems with the payment of reparations after the beginning of a serious economic crisis, President Poincare decided to introduce French troops into the Ruhr area. As you know, Ruhr is the richest region of natural resources in Germany. There different types of coal are mined, which at that time was widely used both in industry and on the railroad. The invasion of France into this German territory had several tasks:

• Ensuring the permanent receipt of reparation payments for France;
• Access to German natural resources for French industrialists;
• Weakening the influence of Britain and the United States in European politics.

The resistance of Germany lasted 8 months. In the autumn of 1923, the German government ran out of funds to finance the fight against French expansion. France tried to subordinate Germany to itself, which was not included in the plans of other world leaders.

The work of the commission of experts to study the financial situation of Germany

In November 1923, the international community established a commission, which later developed the Dawes plan. In the commission's activities, professional economists from Europe, as well as individual experts from the United States, took part. In the structure of the body, two committees were set up. The first dealt with the restoration of the German currency. The sphere of activity of the second division included questions of the search for the possibility of return to the country of capital drawn abroad. This money could go to the resuscitation of the economy, because only the successful economic development of Germany could ensure the payment of reparations.

Development and adoption of the strategy of the Entente countries

January 14, 1924 in London, a meeting of the committee of experts. The expert community was headed by American lawyer Charles Dawes. Before the commencement of the work of the committee, a group of experienced financiers spent several days in Germany to study the real picture of the level of the economy. On the basis of the data obtained, a report was prepared, which was made public at a meeting in London.

Speaking about the Dawes plan briefly, he solved the problem of restoring the solvency of the German economy to pay reparations. Structurally, the report was divided into three parts. In the first, the idea was voiced that reparations are just Germany's foreign debt to Western partners, and not a way of punishing those deprivations that the Entente countries experienced during the war years.

The Dawes Plan envisaged granting Germany a loan to restore the economy in the amount of 800 million marks. The main difference between this loan and the current cooperation programs between the borrowing countries and the IMF is that Germany has transferred to the special tax commissioners the possibility of controlling budget revenues. In addition, a special society was created, which was handed over to the German railway system for 40 years. In fact, the control over the strategic object passed into private hands. The government also lost control over the money, because the right to print currency was received by a specially created bank that was under the control of the allies. Also the Dawes plan established the introduction of large taxes from the country's population. The main sources of the reparation fund were the incomes of private companies and the state budget of the country.

Consequences of Allied Policy

The adoption of the Dawes Plan had both positive and negative consequences for European countries. It was possible to achieve:

• Stabilization of the economic situation in Germany;
• Renewal of reparation payments.

Negative moments:

• Impoverishment of the population;
• The introduction of burdensome taxes for the population led to an increase in the level of protest moods in the society;
• The coming to power in 1933 of the Nazis and Adolf Hitler.