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Dawes Plan

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Dawes Plan

After reading about the harsh fallout from World War I and the Treaty of Versailles, you would be forgiven for thinking that the 1920s were a dark time for Weimar Germany. The reparations of the Treaty were devastating and climaxed in the hyperinflation of 1923. However, after the Dawes Plan (1924), the "Golden Age" for Weimar Germany arrived.

Hyperinflation

This refers to steep and alarming increases in prices. This means that the real value of the money becomes far less.

Dawes Plan for Germany

With the country on its knees, something had to be done, but why was Germany in such a perilous position?

Treaty of Versailles (1919)

Allies

A term for the group of countries fighting against Germany and the Central Powers in World War I. They included Russia, France, Japan, British Empire, the United States and Belgium.

The post World War I treaty devised by the Allies forced crippling concessions upon Germany. They lost all their power FAST in the following ways:

Financial: war reparations payments (money to pay for the damage caused) totalling £6,600 billion. The Allied Reparations Commission were responsible for calculating the damage done to civilians and property of the Allies.

Acceptance of blame: Germany had to accept total responsibility for World War I.

Security: disarmament meant only 100,000 men were allowed in the German army. Limits on navy warships.

Territory: loss of German colonies, demilitarisation and occupation of the Rhineland by France for 15 years. This led to the Allied Occupation of the Ruhr (1923) (their industrial heartland) after failed reparation payments, paralysing the German economy further.

The Occupation of the Ruhr occurred in 1923. French and Belgian troops entered the Ruhr and destabilised German industry because Germany was not meeting the reparations payments. The passive resistance of the workers in the region contributed to the collapse of the German economy and the hyperinflation of the same year.

Hyperinflation

Dawes Plan Children create a tower with the worthless mark in 1923 StudySmarterChildren create a tower with worthless mark in 1923, Wikimedia Commons

Children create a tower with the worthless mark (1923), Wikimedia Commons
After the Treaty of Versailles, a serious amount of debt began to amass for Weimar Germany. An isolated economy, harsh war reparationsand a lack of industry left the German economy in a desperate situation. In January 1921, it was 64 German marks to the dollar, but by November 1923, just before the introduction of the "gold" mark, the exchange rate had rocketed to 4.2 trillion marks to the dollar!

Political Instability

The political uncertainty after the last Kaiser meant that until the Dawes Plan in 1924, Germany was a hotbed for extremist activity. Defeat and the resulting humiliation from the Treaty of Versailles left many Germans resorting to quick-fix ideas. Both sides of the political spectrum felt the shortcomings of their government and fury at their treatment at Versailles.

Weimar: German government from 1919-33.

Social Democratic Party: The dominant political party after World War I. It favoured democracy and political discussion over extremism.

Kaiser: The previous title that a leader of Germany held, characterised by individual will over a political discussion.

Chancellor: The leader of the country, who needed to pass laws through the Reichstag (government) unless it was an emergency.

Extremist: To refer to a group of people at one end or the other of the political spectrum,

Left-wing: Political ideology focussed on equality and rights of the worker. Example party: German Communist Party.

Right-wing: Political ideology that often favours nationalism and private ownership. Example party: the Nazi party.

Left-wing parties such as the German Communist Party believed that the new constitution did not benefit ordinary workers. They regularly disrupted the German economy with strikes.

Right-wing parties such as the Freikorps (which was made up of high-ranking military figures from World War I) and the Nazi party signalled their intent to seize power through protests. The most audacious attempt came in the form of the Munich Beer Hall Putsch in 1923, where the Nazis tried to seize control of the Bavarian government.

In 1923 the Nazi party organised a failed coup known as the Munich Beer Hall Putsch. They attempted to seize power in Bavaria but were foiled because they did not receive the support they expected from the police and the army. It was a failure in the short term and Hitler went to jail.

Dawes Plan Definition

The Allied Reparations Commission calculated the damages of World War I as an astonishingly large amount, equating to trillions in today's money. This figure was unrealistic, and in 1923, as hyperinflation and the Occupation of the Ruhr unfolded, British, Italian and United States members of the Committee met to assess the situation with a more rational eye. They sought out the expertise of US banker Charles Dawes who proposed a plan to make the reparations more manageable. In addition, the German National Bank (Reichsbank) would accept United States loans to galvanise the economy. The US had emerged from World War I as a leading economic force, and their involvement was principally due to their desire for a peaceful Europe and economic growth.

By far the most important contribution (of the Dawes Plan) is that it furnished to Europe and to the world a breathing spell, time in which to face its problems and see them through."

- Ernest M Patterson1

Gustav Stresemann

The German politician who played the largest role in the implementation of the Dawes Plan was Gustav Stresemann. He was prominent in the Social Democratic Party and became the Chancellor of Weimar Germany in 1923. As Chancellor, he stopped resistance to the Occupation of the Ruhr and introduced a more stable "gold" mark, replacing the worthless paper one, to combat hyperinflation and save the German economy.

Dawes Plan A portrait photograph of Gustac Stresemann StudySmarterGustav Stresemann, Wikimedia Commons

Foreign Minister

Stresemann's early success faltered when he lost the backing of his party after just three months. They perceived his reaction to the Munich Beer Hall Putsch in 1923 as too soft. He had a greater and longer-lasting tenure as Foreign Minister where under his stewardship Germany accepted the Dawe's Plan in 1924. Stresemann's politics were pragmatic. He was adamant that pride should be put to one side to steer his country through the crisis and pay its reparations.

After the Dawes Plan, Weimar Germany was once more a player on the international stage. Stresemann's greatest achievement was their entrance to the League of Nations in 1926. For this, he won a Nobel Peace Prize. In 1929, when the shortcomings of the Dawe's Plan were becoming clear, he negotiated another economic treaty, the Young Plan. He died soon after from a heart attack and would never be able to see its results.

Effects of the Dawes Plan

The Dawes Plan moderated the effects of the Treaty of Versailles. It proposed:

  1. Withdrawal of French and Belgium troops from the Ruhr.
  2. Reparations at a fixed yearly scale: 2.5 billion gold marks after the first year.
  3. The United States brokered loans of $800 million for the German economy.
  4. German National Bank (Reichsbank) was restructured by the Allies.
  5. Expansion of the United States' influence on Europe led to an economic and cultural "Golden Age" for the Weimar Germany (1924 - 9) and an emphasis on Berlin.

Dawes Plan Positives and Negatives

PositivesNegatives
  • The Dawes Plan stopped Germany from being isolated on the international stage. It led to their introduction to the League of Nations in 1926.
  • Success derived from the Dawes Plan was only a temporary solution. The US loans plunged the country into even greater debt than before.
  • It stabilised the currency and controlled hyperinflation.
  • No total was set for reparations. Germany was still at the mercy of the Allied Reparations Commission, which decided how much it should pay. The Young Plan in 1929 would solve this.
  • The withdrawal of foreign troops from the Ruhr in 1925 allowed German factories to run again. In 1928, German industrial output was higher than pre-war levels.
  • The plan was only an economic failure away from exposure. This was evident after the Wall Street Crash and the resulting Great Depression in 1929 and the early 1930s.
  • Germany met their reparations payments between 1924 and 1929 which led to some increased trust and respect from its European counterparts.
  • Unemployment remained high throughout the country. There were still 1.9 million out of work in 1929.
  • State schemes in 1927 brought insurance, pensions, healthcare and public facilities. This increased the popularity of the government.
  • Germany was dependent on imports and spent more than it produced. Their debt grew because of high spending after 1925.
  • With political extremism quashed, the Nazi and Communist parties both performed poorly in December 1924 elections.
  • Right-wing politicians resented German dependence on the US. Hitler, the leader of the Nazi party, was furious about Germany seeking foreign help.

Did you know?

The years of the Dawes Dawes Plan Fritz Lang's Metropolis poster 1927 StudySmarterFritz Lang's film Metropolis (1927), Wikimedia CommonsPlan coincided with a "Golden Age" for the Weimar Republic where Berlin was the cultural metronome.

  • Science gained prominence with the work of Albert Einstein, who was living and working in Germany in the 1920s.
  • Philosopher Martin Heidegger published "Being and Time" in 1927.
  • The Bauhaus school of architecture and visual arts demonstrated Weimar Germany's modernist art scene.
  • Germany imported modern classical music and jazz from the United States culture.
  • Fritz Lang's "Metropolis" was an experimental classic film that conjured the reputation of Weimar Germany as a site of Expressionism.
  • Excess and decadence were rife in cabaret clubs. Progressive views of sexuality, prostitution and drugs were all widespread in Weimar Berlin.

Dawes Plan Significance

The Dawes Plan was an effective political tool and achieved much of what it set out to. Critical issues such as reparations, the Ruhr and hyperinflation were all tackled. It was also important for bringing Weimar Germany back to the negotiating table as an equal in the League of Nations. Symbolically, this was huge in the quest to maintain peace.

Ultimately, however, whilst it satisfied everyone's need to take a breath, it did not go far enough. The reparations payment total was still huge, and the German economy was heavily dependent on the United States. The Dawes Plan was temporary and only somewhat successful in the short term, but it failed to have a lasting impact. The creation of the Young Plan in 1929 to further address the issue of reparations confirms this. The Young Plan seemed like it addressed the flaws of the Dawes Plan. Unfortunately, no one predicted that the biggest economic crisis the world has ever seen would strike in the same year.

Dawes Plan - Key takeaways

    • The Dawes Plan helped solve many issues in Europe.
    • It was a temporary solution that meant Germany could meet Allied demands after failing to pay reparations, but there was still no fixed date to end them.
    • The Dawes Plan tackled hyperinflation, reparations and the Occupation of the Ruhr.
    • Germany was heavily dependent on the United States loans from the Dawes Plan. This angered some right-wing politicians.
    • Foreign minister Stresemann knew the necessity of peace for economic growth in Weimar Germany and put German pride aside when negotiating the deal.
    • The German economy enjoyed some growth, but some issues such as unemployment remained.
    • The Young Plan was devised in 1929 to fix the shortcomings of the Dawes Plan.

References

  1. Ernest M Patterson, "The Dawes Plan in Operation", The ANNALS of the American Academy of Political and Social Science. 120, 1: 1-6 (1925).

Frequently Asked Questions about Dawes Plan

The Dawes Plan was an economic solution designed by the Allies to help Germany. 

It allowed Germany to pay back the war reparations from the Treaty of Versailles and kickstart its failing economy.

The main objective of the Dawes Plan was to let Germany meet their war reparations from the Treaty of Versailles.

The Dawes Plan led to the golden years of the Weimar republic. The economy grew, Germany joined the League of Nations in 1926 and was able to meet its reparations.

The Dawes Plan failed because it was heavily reliant on the US loans and the reparations payment total was still huge. This led to the creation of the Young Plan

Final Dawes Plan Quiz

Question

What was the primary role of the Reparations Commission?

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Answer

In accordance with articles 231-235 of the Treaty of Versailles, the Reparation Commission was tasked with estimating the damage done by Germany to Allied civilians and their property during World War I. 

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Question

What was the main objective of the Dawes Plan?

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Answer

The main objective of the Dawes Plan was to create a peaceful Europe. It achieved this by allowing the German economy to thrive whilst meeting their World War I reparations.

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Question

Why did the United States get involved in the Dawes Plan?

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Answer

The United States wanted a peaceful Europe to trade with. They were keen to exploit their strong financial position after World War I.

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Question

Who was Gustav Stresemann?

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Answer

Gustav Streseman was the German politician who played the biggest role in the Dawes Plan. His policies were pragmatic and allowed economic growth for Weimar Germany between 1924 and 1929.

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Question

What is hyperinflation?

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Answer

Hyperinflation is the steep increase of a currency by large amounts in a short space of time. It makes the real value of the currency far less. This occurred in 1923 in Germany.

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Question

After which event was the Dawes Plan agreed?

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Answer

The Munich Beer Hall Putsch 

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Question

Why did the French and Belgian troops occupy the Ruhr in 1923?

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Answer

Germany failed to meet reparations agreements.

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Question

What did the Dawes Plan help to stop?

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Answer

Extremist political parties

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Question

What happened to Germany in 1926

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Answer

They joined the League of Nations

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Question

What effect did the Dawes Plan have on Weimar Germany?

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Answer

The Dawes Plan helped undo some of the damage of the Treaty of Versailles. French and Belgian occupation of the Ruhr ended in 1925 and Germany met its war reparations. The economy was also galvanised but they were reliant on loans and unemployment remained high.

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Question

Why did the Dawes Plan fail?

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Answer

The Dawes Plan failed because it was only a temporary solution to diffuse the situation in Europe. The dependence on US loans gave the economy a positive jolt but problems remained and the Young Plan needed to address them.

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Question

Who was Charles Dawes?

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Answer

US banker

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Question

Which field developed slowly in Weimar Germany after the Dawes Plan?

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Answer

Agriculture

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Question

Which event followed the Wall Street Crash?

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Answer

The Great Depression

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Which party was in power during the Dawes Plan?

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Answer

Social Democratic Party

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Question

Which of these organisations did the Dawes Plan give the Allies control of?

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Answer

The German Federal Bank (Reichsbank)

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Who was in charge of the Reparations Commission?

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Answer

The Allies

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