To what extent did the Dawes and Young plans cause the Great Depression to have a large economic impact on Germany?

1. Identification and Evaluation of Sources
2. Investigation
3. Reflection

This study considers the claim that the Dawes and Young Plans significantly impacted Germany's economy during the Great Depression. The Dawes and Young plan themselves, their consequences on German culture, and how these plans might have exacerbated the effects of the Great Depression are the focus of this inquiry.

The Dawes Plan and The New Economics is the first source that I examine. This text was authored by American economist George P. Auld and included a preface by Rufus C. Dawes. The book was released in 1927. I can deepen my comprehension by reading about the Dawes Plan and the reparations controversy in this source. This information comes from a reliable source because its author, Auld, was a key figure in the plan's development and an Accountant General for the Reconstruction Committee. This material is pertinent to my research and merits attention because of Auld's position and participation in it. However, the source's genesis also offers constraints. Auld's goal in creating this book was to demonstrate how Germany's reparation issue was to blame for European economic unrest. In order to persuade the reader that the world needs to pay attention to revitalizing Germany's economy, Auld focuses on Germany's debt. Auld provides a biased argument against restitution as a result, therefore the source is constrained. Auld's failure to evaluate the potential drawbacks of the strategy is another drawback to be taken into account. Despite the content's value in terms of the plan's exact features and Auld's own knowledge, it is not advisable to use this source as your only source of information.

The Economic Consequences of the Peace, a 1919 book by English economist John Maynard Keynes, is the second source I carefully analyze. One of the most important economists of the 20th century was Keynes. His economic theories continue to be used widely today and have had a significant impact on the modern economy. He initially had a big impact on the Versailles Peace Conference as well. The reputation of Keynes in the economic community and his personal involvement with the Treaty of Versailles are what give this source's origin legitimacy and increase its worth. Keynes gives information that is generally reliable.

Keynes analyses the treaty and its restrictions from an economic perspective in "The Economic Consequences of the Peace." The goal of Keynes' book was to critique the Treaty of Versailles and the harsh conditions it placed on Germany as well as to draw attention to the serious economic consequences that would follow. This goal does have both advantages and disadvantages. The book's goal results in a bias in favour of Germany. Keynes harshly attacks the Treaty and the politicians involved, ignoring their intentions and justifications in the process. The reader's perception of the necessity of the Treaty is skewed as a result. Despite this restriction, the goal and substance were still very helpful to my investigation. The goal and information in this source helped me broaden the angle and extent of my research by revealing that the Treaty of Versailles was a crucial component that compounded the consequences of the Great Depression.

The German economy was in shambles at the end of World War One. The Treaty of Versailles (Knox, "Treaty of Versailles," 1919) now required the Germans to pay war reparations, which were confirmed to be a total of 6.6 billion pounds in 1922 ("Decision of the Reparation Commission on the Subject of the Payments to be Made by Germany in 1922," 1922). This was because the Germans had used all of their gold reserves to finance the war (Strachan, 2001). Germany lacked the resources necessary to fulfil its war reparation responsibilities within the time limit specified by the Treaty due to widespread unemployment and a severely diminished production capacity.

An English economist named John Maynard Keynes prophesied in 1919 that the harsh terms of the Treaty, such as territory loss and the imposition of reparations, would cause economic ruin in Germany and lay the groundwork for social unrest and violent uprising. (1919 Keynes). I dare say that revenge won't limp if our goal is to make Central Europe poor. The atrocities of the later German war will vanish into nothing before the forces of Reaction and the desperation-inducing convulsions of Revolution, which will destroy, whoever is the victor, civilization and the advancement of our generation. (1919 Keynes). Keynes objected, but the Treaty of Versailles was ultimately ratified.

Early in the 1920s, a large portion of the global population began to fear that Germany's faltering economy was a sign that all of Europe was on the verge of an economic collapse, which would have significant repercussions for the rest of the globe (Gilbert, 1926). Another reason that led nations, most notably the United States, to aid Germany was the menace of communism. Because of this, the Germans and the Allies established a commission under the direction of German politician Gustav Stresemann and American financier Charles Dawes to create a strategy for reviving the German economy and restructuring the reparations payments (Auld, 1927).

The German debt was restructured under the Dawes Plan such that Germany would pay 2.5 billion marks a year until the debt was paid off after five years at a rate of 1 billion marks annually (Langridge, 2019). This resulted in a decrease in the total payout to 13.2 billion marks. Flexibility was also possible because the amount received depended on how the economy was doing (Langridge, 2019). The plan needed financial support to be successful. Germany received a loan of around $200 million USD in 1924, mostly through Wall Street bonds issued in the US to stimulate the economy (Walsh, 2016).

As envisioned, the Dawes Plan helped the German economy bounce back. The Stresemann era, sometimes known as the Stresemann years, was a time of political and economic stability for Germany from 1923 until 1929. Germany's economy was booming, and it was able to start making the reparations payments on time (Langridge, 2019). The impressive growth was seen in industrial output, which reached a level that was 33% higher than it had been before World War One when Germany was one of the continent's top economies (Langridge, 2019).

It is crucial to remember that Germany's economic recovery was heavily dependent on foreign debt, namely 133 loans from the United States at a combined $1.3 billion (Langridge, 2019). Germany would be in a risky economic situation as these loans could be cancelled at any time and would need to be repaid in full (Langridge, 2019).

The Dawes Plan came to an end in 1929, at which point the United States, the Dawes Plan's largest donor, devised a new strategy for paying off the remaining German debt known as the Young Plan (The Young Plan: Facts, Summary, Renewal & Consequences, n.d). By rescheduling payments on 59 annuities to run until 1988, the Young Plan "considerably decreased the total amount of the reparations payable by Germany (by around 17%)." (The Young Plan: Facts, Summary, Renewal & Consequences, n.d). Many experts at the time thought that Germany needed to implement austerity measures and reduce its borrowing. The Young plan included these austerity measures, which drastically curtailed Germany's ability to borrow abroad—by 90%. (The Young Plan: Facts, Summary, Renewal & Consequences, n.d).

The world economy entered one of the longest, deepest, and widest depressions of the 20th century on October 24, 1929, when the Wall Street stock market started to plummet (Duhigg, 2008). American banks were under a lot of strain as a result of the financial crisis. Due to this pressure, the German government was urged to repay the debts in full by the American creditors (Langridge, 2019). Germany's economy would collapse as a result.

Germany's production and exports declined during the Great Depression as a result of its inability to keep borrowing the amount of money required to support its economy. Specifically, industrial production fell by 39%, and export value fell by 55% between 1929 and 1932. (Feinstein, Temin, & Toniolo, 2008). The United States began enacting tariff barriers to safeguard their businesses, which worsened Germany's economic predicament. As a result, German industrial exports lost access to their biggest global market (Llewellyn & Thompson, 2019). GDP dropped by 36.76% as a result of decreased output and exports (Ritschl,2013)

Employment fell dramatically as a result of the huge reduction in industrial production, and by the end of 1929, the number of unemployed people had reached millions and was still rising (Dimsdale, Horsewood, & Van Riel, 2006). Three-quarters of German workers were unemployed by 1933. (Llewellyn & Thompson, 2019). The consequences of the Great Depression were felt by everyone, regardless of status (Llewellyn & Thompson, 2019). Massive food shortages meant that millions of people could not afford to eat, and the number of deaths from starvation increased (Llewellyn & Thompson, 2019).

The Dawes and Young Plans exacerbated the consequences of the Great Depression on Germany. The Dawes Plan offered foreign loans and unnecessarily increased Germany's reliance on foreign debt, while the Young Plan curbed excessive borrowing by enacting stringent austerity measures. The two programmes operated in concert. The Borchardt hypothesis, which Ritschl (1998) cites, claims that "the stabilization policy in Germany during the Great Depression was credit constrained and that lack of budgetary discipline during the preceding years was instrumental in creating this constraint," states that "the policy was credit constrained" (p. 49, Ritschl, 1998). Ritschl (1998) contends that the stabilization of the balance of payments mandated by the Young Plan accounts for the majority of the decrease in German national goods during the Great Depression (p. 49, Ritschl, 1998).

It is impossible to compare Germany's economic hardship during the Great Depression to that of other nations because of the Treaty of Versailles, which saddled Germany with reparations that were impossible to repay. Germany was able to jump-start and expand its economy thanks to the Dawes plan, which made it possible for Germany to borrow foreign capital, particularly from the United States. The Dawes Plan was replaced by the Young Plan, which further restructured the debt but also included significant austerity measures. The Young Plan's credit limits had the most effect on the economy during the Great Depression. According to studies, the Dawes and Young Plans contributed significantly to the Great Depression's negative effects on the German economy. It may be claimed, though, that the Dawes and Young Plans weren't the only ones at fault. One of the major factors was the Treaty of Versailles' blatant injustice. Germany's only choice after the Treaty was to implement the Dawes Plan. Germany may have avoided much of the economic distress that fueled the National Socialist movement and ultimately led to World War Two if they had not been forced to pay costly war reparations.

This research has provided me insight into the approaches historians take and some of the difficulties they encounter when conducting historical research. I acquired the core abilities necessary to carefully and critically assess sources during the course of this investigation.

There is no definitive truth in history, which sets it apart from other fields of study. Historical events become arbitrary after the specific names and dates since they are entirely subject to individual interpretation. The overwhelming volume of material available was one of the biggest obstacles I had to overcome during my inquiry. I mostly found secondary materials for my inquiry on search engines like JSTOR and Google Scholar, which give users access to reliable academic publications. However, there was still a wide range of opinions, which made it difficult to reach an objective judgment.

I was consistently learning new facts and viewpoints through reading numerous books, journal papers, and websites. I discovered journal excerpts and pieces authored by historians like Strachan that we utilized as sources in school. These articles were used since I knew they were from reliable sources.

Altering the scope of my research was another way for me to make sure that I was presenting an investigation free of any prejudices. My initial focus was on how the Dawes Plan led to a greater economic impact of the Great Depression on Germany. From further readings, I realized that the issue was far more complex than what my initial question was addressing, and I could not draw an objective conclusion. In order to guarantee that my analysis covered all pertinent elements, I changed the scope, so I also chose to consider the Young Plan's effects. I was able to present a far more fair and impartial investigation after expanding my horizons.

I think the most common difficulty historians encounter while conducting historical research is coming to impartial, objective judgments. A historian's job is to gather as many different perspectives on historical events as they can in order to give information that is as close to being entirely accurate as possible. In order to make sure their conclusions are precise, in-depth, and well-supported, many historians may need to regularly alter the scope of their research.