Lecture 4 Flashcards
Dawes Plan
In 1923, Germany defaults on its reparations payments. France occupies the Ruhr valley to encourage Germany to produce more coal and steel and thereby pay its reparations faster. Germany engages in a campaign of passive resistance, deliberately altering the value of their currency and working very slowly, so that the payment of reparations is even slower than before. The currency manipulation is one of the causes of hyperinflation in Germany in the 1920s. The situation is untenable.
The result is a series of attempts to restructure reparations payments, led by American bankers as private citizens (because forgiving war debt is anathema). The Dawes Plan (1924) and Young Plan (1929) alter the payment schedules and amounts of reparations.
Dawes: negotiated French withdrawal from the Ruhr; created a payment plan for the reparations.
John Maynard Keyes
“Economic consequences of the peace published in 1919”
Accompanying Prime Minister David Lloyd George to Versailles Peace Conference in France as an economic adviser, Keynes was troubled by the political chicanery and burdensome policies that were to be imposed upon the defeated Germany. He resigned his post, depressed, to quote from a letter to his father, by the impending “devastation of Europe.”
He took an activist’s stance, however, by transforming personal distress into public protest. In two summer months he composed the indictment of the Versailles settlement that reached the bookstores by Christmas 1919 as The Economic Consequences of the Peace. The permanent importance of this polemical essay lies in its economic analysis of the stringent reparations placed upon Germany and the corresponding lack of probability that the debts would ever be paid.
The book was a best-seller throughout the world and was critical in establishing a general opinion that the treaties were a “Carthaginian peace” designed to crush the defeated Central Powers, especially Germany. It helped to consolidate American public opinion against the treaties and against joining the League of Nations. The perception by much of the British public that Germany had been treated unfairly was, in turn, a crucial factor in later public support for the appeasement of Hitler.
Black Tuesday
Stock Market Crash of 1929: please listen to the Tickertape podcast for further information about the stock market crash, caused by an overvalued stock market.
Impact of the crash: America calls in its loans (previously given to Germany to help pay back reparations) so the crisis extends to Germany. The tight connections between world economies through reparations and debt mean that the crisis in the US becomes widespread; imperial and colonial relationships means it spreads around the world.
States do all the wrong things to sort out the crisis:
- Beggar thy neighbour policies/high tariffs: to protect their own economies, states take a variety of measures to protect local industry. This makes the problem worse, because they can’t get money from trade.
- Smoot-Hawley tariffs highest in 100 years
- Currency changes: the British take the pound off the gold standard in 1931 without warning, causing currency fluctuations in states relying on the pound for their own currency. The US abandons the gold standard in 1934.
- No real international coordination/cooperation: Bad because states aren’t working together in the 1930s – so they are out of the habit of coordination
Smoot-Hawley Tariff Act
Stock Market Crash of 1929: please listen to the Tickertape podcast for further information about the stock market crash, caused by an overvalued stock market.
Impact of the crash: America calls in its loans (previously given to Germany to help pay back reparations) so the crisis extends to Germany. The tight connections between world economies through reparations and debt mean that the crisis in the US becomes widespread; imperial and colonial relationships means it spreads around the world.
States do all the wrong things to sort out the crisis:
- Beggar thy neighbour policies/high tariffs: to protect their own economies, states take a variety of measures to protect local industry. This makes the problem worse, because they can’t get money from trade.
- Smoot-Hawley tariffs highest in 100 years
Global trade plummeted, contributing to the ill effects of the Great Depression. The 1930s are characterized by isolationism and an inability to work together.
