Young Plan
Encyclopedia
The Young Plan was a program for settlement of German
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...

 reparations
World War I reparations
World War I reparations refers to the payments and transfers of property and equipment that Germany was forced to make under the Treaty of Versailles following its defeat during World War I...

 debts after World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...

 written in 1929 and formally adopted in 1930. It was presented by the committee headed (1929–30) by American
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 Owen D. Young. After the Dawes Plan
Dawes Plan
The Dawes Plan was an attempt in 1924, following World War I for the Triple Entente to collect war reparations debt from Germany...

 was put into operation (1924), it became apparent that Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...

 could not meet the huge annual payments, especially over an indefinite period of time. The Young Plan reduced further payments to 112 billion Gold Mark
German gold mark
The Goldmark was the currency used in the German Empire from 1873 to 1914.-History:Before unification, the different German states issued a variety of different currencies, though most were linked to the Vereinsthaler, a silver coin containing 16⅔ grams of pure silver...

s, US $8 billion in 1929 (US$ billion in ) over a period of 59 years (1988). In addition, the Young Plan divided the annual payment, set at two billion Gold Marks, US $473 million, into two components, one unconditional part equal to one third of the sum and a postponable part for the remaining two-thirds.

The plan

The Committee, which had been appointed by the Allied Reparations Committee, met in the first half of 1929, and submitted its first report on June 7 of that year. In addition to Young, the United States was represented by J. P. Morgan, Jr.
J. P. Morgan, Jr.
John Pierpont "Jack" Morgan, Jr. was an American banker and philanthropist.-Biography:He was born on September 7, 1867 in Irvington, New York to John Pierpont Morgan, Sr. and Frances Louisa Tracy. He graduated from Harvard in 1886, where he was a member of the Delphic Club, formerly known as the...

, the prominent banker, and his partner, Thomas W. Lamont
Thomas W. Lamont
Thomas William Lamont, Jr. was an American banker.- Biography :Lamont was born in Claverack, New York. He graduated from Phillips Exeter Academy in 1888 and earned his degree from Harvard University in 1892. He became a generous benefactor of the school once he had amassed a fortune, notably...

. The report met with great objections from the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 but, after a first Hague Conference, a plan was finalized on August 31. The plan was formally adopted at a second Hague Conference, in January 1930.

Amongst other provisions, the plan called for an international bank of settlements to handle the reparations transfers. The resulting Bank for International Settlements
Bank for International Settlements
The Bank for International Settlements is an intergovernmental organization of central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks." It is not accountable to any national government...

 was duly established at the Hague Conference in January.

Subsequent Events

Between agreement and adoption of the plan came the Wall Street Crash of 1929
Wall Street Crash of 1929
The Wall Street Crash of 1929 , also known as the Great Crash, and the Stock Market Crash of 1929, was the most devastating stock market crash in the history of the United States, taking into consideration the full extent and duration of its fallout...

, of which the main consequences were twofold. The American Banking system had to recall money from Europe, and cancel the credits that made possible the Young Plan. Moreover, the downfall of imports and exports affected the rest of the world. By 1933, almost two-thirds of world trade had vanished. A new trade policy was set with the Smoot-Hawley Tariff Act
Smoot-Hawley Tariff Act
The Tariff Act of 1930, otherwise known as the Smoot–Hawley Tariff was an act, sponsored by United States Senator Reed Smoot and Representative Willis C. Hawley, and signed into law on June 17, 1930, that raised U.S. tariffs on over 20,000 imported goods to record levels.The overall level tariffs...

. The latter was influenced by nationalism and the adopted economic policy. Unemployment soared to 33.7% in 1931 in Germany, and 40% in 1932.

Under such circumstances, U.S. President Herbert Hoover
Herbert Hoover
Herbert Clark Hoover was the 31st President of the United States . Hoover was originally a professional mining engineer and author. As the United States Secretary of Commerce in the 1920s under Presidents Warren Harding and Calvin Coolidge, he promoted partnerships between government and business...

 issued a public statement that proposed a one-year moratorium
Hoover Moratorium
The Hoover Moratorium was a public statement issued by U.S. President Herbert Hoover on June 20, 1931, which he hoped would ease the coming international economic crisis, as well as provide time for recovery. Hoover's proposition was to put a one-year moratorium on payments of World War I and other...

 of the payments. He managed to assemble support for the moratorium from 15 nations by July 1931. But the adoption of the moratorium did little to slow economic decline in Europe. Germany was gripped by a major banking crisis. A final effort was made at the Lausanne Conference of 1932
Lausanne Conference of 1932
The Lausanne Conference was a 1932 meeting of representatives from Great Britain, Germany, and France that resulted in an agreement to suspend World War I reparations payments imposed on the defeated countries by the Treaty of Versailles...

. Here, representatives from Great Britain, France, Italy, Belgium, Germany and Japan gathered to come to an agreement. By that time it was clear that the deepening depression had made it impossible for Germany to resume its reparations payments. They agreed:
  • Not to press Germany for immediate payments.
  • To reduce indebtedness by nearly 90% and require Germany to prepare for the issuance of bonds. This provision was close to cancellation, reducing the German obligation from the original $32.3 billion to $713 million.
  • It was also informally agreed among the delegates that these provisions would be ineffective unless the US government agreed to the cancellation of war debts owed by the Allied governments.


Hoover made the obligatory public statement about the lack of any connection between reparations and war debts, however in December 1932, the U.S. Congress rejected the Allied war debt reduction plan, which technically meant that the war reparations and debt reverted to the debt reduction previously granted Germany by the 1929 Young Plan. However, the system had collapsed, and Germany did not resume payments. Once the National Socialist government consolidated power, the debt was repudiated and Germany made no further payments. By 1933, Germany had made World War I reparations of only one eighth of the sum required under the Treaty of Versailles. The plan ultimately failed not because of the U.S. Congress' refusal to go along but because it became irrelevant upon Hitler's rise to power.

After Germany’s defeat in World War II, an international conference (London Agreement on German External Debts, 1953) decided that Germany would pay the remaining debt only after the country was reunified. Nonetheless, West Germany
West Germany
West Germany is the common English, but not official, name for the Federal Republic of Germany or FRG in the period between its creation in May 1949 to German reunification on 3 October 1990....

 paid off the principal by 1980; then in 1995, after reunification, the new German government announced it would resume payments of the interest. Germany was due to pay off the interest to the United States in 2010, and to other countries in 2020. In 2010, Time magazine reported that Germany made "final reparations-related payment for the Great War on Oct. 3, nearly 92 years after the country's defeat by the Allies."

This agreement had been preceded by bitter diplomatic struggles, and its acceptance aroused nationalist passions and resentment. It also weakened, rather than helped, the advocates of a policy of international understanding.

Opposition to war reparations: the "Liberty Law"

Although the Young plan had effectively reduced Germany's obligations, it was opposed by parts of the political spectrum in Germany. Conservative groups had been most outspoken in opposition to reparations and seized on opposition to the Young Plan as an issue. A coalition was formed of various conservative groups under the leadership of Alfred Hugenberg
Alfred Hugenberg
Alfred Ernst Christian Alexander Hugenberg was an influential German businessman and politician. Hugenberg, a leading figure within nationalist politics in Germany for the first few decades of the twentieth century, became the country's leading media proprietor within the inter-war period...

, the head of the German National People's Party
German National People's Party
The German National People's Party was a national conservative party in Germany during the time of the Weimar Republic. Before the rise of the NSDAP it was the main nationalist party in Weimar Germany composed of nationalists, reactionary monarchists, völkisch, and antisemitic elements, and...

. One of the groups that joined this coalition was Adolf Hitler
Adolf Hitler
Adolf Hitler was an Austrian-born German politician and the leader of the National Socialist German Workers Party , commonly referred to as the Nazi Party). He was Chancellor of Germany from 1933 to 1945, and head of state from 1934 to 1945...

 and the National Socialist German Workers Party, a group which had previously been dismissed as an extremist fringe by the more mainstream conservative parties.

The coalition's goal was the enactment of the Freiheitsgesetz ("Liberty Law"). This law would renounce all reparations and make it a criminal offense for any German official to cooperate in their collection. It would also renounce the German acknowledgement of "war guilt" and the occupation of German territory which were also terms of the Treaty of Versailles
Treaty of Versailles
The Treaty of Versailles was one of the peace treaties at the end of World War I. It ended the state of war between Germany and the Allied Powers. It was signed on 28 June 1919, exactly five years after the assassination of Archduke Franz Ferdinand. The other Central Powers on the German side of...

.

Under the terms of the German constitution
Weimar constitution
The Constitution of the German Reich , usually known as the Weimar Constitution was the constitution that governed Germany during the Weimar Republic...

, if ten percent of the eligible voters in the country signed a petition
Petition
A petition is a request to do something, most commonly addressed to a government official or public entity. Petitions to a deity are a form of prayer....

 in favor of a proposed law, the Reichstag
Reichstag (Weimar Republic)
The Reichstag was the parliament of Weimar Republic .German constitution commentators consider only the Reichstag and now the Bundestag the German parliament. Another organ deals with legislation too: in 1867-1918 the Bundesrat, in 1919–1933 the Reichsrat and from 1949 on the Bundesrat...

 had to put the matter to a vote. If the Reichstag voted against the law, the proposal would automatically be put to a national referendum
Referendum
A referendum is a direct vote in which an entire electorate is asked to either accept or reject a particular proposal. This may result in the adoption of a new constitution, a constitutional amendment, a law, the recall of an elected official or simply a specific government policy. It is a form of...

. If fifty percent of the people voted in favor of it, it would become a law.

The Liberty Law proposal was officially put forth on October 16, 1928. The Nazis and other groups held large public rallies to collect signatures. The government opposed the Liberty Law and staged demonstrations against it. However, the coalition succeeded in collecting enough names to put the proposal before the Reichstag. The Reichstag voted the bill down by a 318-82 margin. In the subsequent popular vote on December 22, the Liberty Law referendum only received 13.8 percent of the votes in its favor.

While the Liberty Law was not enacted in 1929, the campaign for it was a major factor in bringing Hitler and the Nazis into the political mainstream. Following the defeat, Hitler denounced Hugenberg and said the loss was a result of his poor leadership. Hugenberg and many other conservatives soon found themselves being eclipsed by the Nazis. Hitler would later enact by decree most of the proposals of the Liberty Law after achieving power.

Further reading

  • Anglo-American Relations in the 1920s: The Struggle for Supremacy, B. J. C. McKercher, 1991
  • The End of the European Era: 1890 to the Present, Gilbert & Large, 2002
  • 1929, The Year of the Great Crash, William K. Klingaman, 1989
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