The Dawes Plan: A Centennial Retrospective and Re‐Evaluation

ABSTRACT The Dawes Plan was implemented in 1924 to address Germany's World War I reparations. Although it ended Germany's monetary chaos and hyperinflation in 1923, bringing short‐term peace and prosperity to the nation, the foreign debt Germany accumulated during the plan worsened the economic impact of the Great Depression during the early 1930s. This article reviews the origins and contents of the Dawes Plan by surveying contemporaries' views and expectations when the plan started as well as Germany's actual economic developments during the plan. We also reflect upon the debates in the Dawes Plan literature. The literature has evolved from focusing on internal distribution conflict to international distributional conflict, connecting the fragile boom of the 1920s to the woes of the early 1930s. Finally, we compare the plan with two other war reparation plans to see what features a workable one should have. A workable war reparation plan must be effectively enforced and should address the transfer problem. The Dawes Plan fell short in both areas, suffering from a serious incentive‐compatible problem that sealed its failure from the start.