From The Student Room

TSR Wiki > Study Help > Subjects and Revision > Revision Notes > History > Economic Consequences of WW1 and Reparations

---

• There was a massive direct cost to all nations involved in WWI
• The opportunity cost of all the resources used to destructive ends
• There was a change in the financial center of the world (from Europe and G.B. to the USA) since European nations became debtor nations
• A fall in European living standards (European countries had to cut down on imports)
• Increase in USA’s economic strength
• Decrease in international trade (lack of a stable currency)
• Worldwide markets shrunk
• Established trade patterns were disrupted
• Intense hatred between the two sides meant that is was (in the short term) impossible to reestablish previous trading patterns.
• Few saw beyond the short term, therefore most politicians sought revenge, and not the recovery of the defeated states (this was also the result of popular opinion)

Contents 1 The Reparations Problem 2 Major Developments 1921-1933 3 Evaluation of Reparations 4 Comments

The Reparations Problem

• Division amongst the allies on this topic
• The Germans did not believe such reparations could ever be paid (especially with its post-war losses)
• Countries relied on reparations to finance reconstruction and the delaying of reparation payments meant the delaying of the reconstruction process

Major Developments 1921-1933

• Genoa Conference (1922) — world economic conference
• Prosperity could only be restored if recovery plans included all countries (inter dependence of countries)
• The conference failed
  • The USA refused to attend
  • French did not admit the Russians/Germans
  • Germans & Russians had a revolution of their own
• The occupation of the Ruhr (1923)
• German workers refused to cooperate
• The French and the Belgian intervened but the cost of intervention outweighed any benefits made by the seizure of German goods.
• The German Economy collapsed — there was high inflation & it was unable to pay reparations
• There was social unrest in Germany (led to the rise of movements like the fascists) however, a coup led by Hitler and General Ludendorff failed
• Britain refused to support France/Belgium
• The Dawes Plan (1924)
• End of occupation of the Ruhr
• Two year moratorium of German reparation payments
• International loan for Germany
• Introduction of an annuity basis on reparations
• Financial controls imposed on Germany
• The Young Plan (1929)
• The total sum owed by Germany was cut down by 25%
• Annual payments fixed to run until 1966
• In the event of financial difficulties a part of the payment could be deferred for up to two years
• 1/3 of payments could be made in kind
• International controls (established by Dawes Plan) were abolished
• Bank for International Settlements established
• International loan made to Germany ($200 million)
• October 1929: Wall Street Crash
• 1931: Germany stops reparation payments
• 1932: Lausanne conference: fixed reparation payments very low
• 1933: Hitler became chancellor

Evaluation of Reparations

• Could Germany afford them?
• Keynes criticized reparations. He later admitted he might have underestimated Germany’s ability to pay reparations.
• Some argued that there was a lack of will in Germany to pay for reparations
• Some argue that Hitler spent more on rearmament (in a short time) then the total revised reparations payments
• How much did Germany actually pay?
• Estimations point to $9 billion but she receive $8 billion in loans
• Reparation payments did little to help the recovery of the allies
• Reparations contributed to inter-war period tensions
• Britain and France linked war debts and reparations and refused to pay war debts until reparations were paid to them

Comments