Reparations

The victorious Allies of WWI imposed harsh reparations on Germany, which were both economically and psychologically damaging. Historians have long argued over the extent to which the reparations led to Germany’s severe economic depression in the interwar period.

World War I reparations were imposed upon the Central Powers during the Paris Peace Conference following their defeat in the First World War by the Allied and Associate Powers. Each defeated power was required to make payments in either cash or kind. Because of the financial situation Austria, Hungary, and Turkey found themselves in after the war, few to no reparations were paid and the requirements were cancelled. Bulgaria paid only a fraction of what was required before its reparations were reduced and then cancelled. Historian Ruth Henig argues that the German requirement to pay reparations was the “chief battleground of the post-war era” and “the focus of the power struggle between France and Germany over whether the Versailles Treaty was to be enforced or revised.”

The Treaty of Versailles and the 1921 London Schedule of Payments required Germany to pay 132 billion gold marks (USD $33 billion) in reparations to cover civilian damage caused during the war. This figure was divided into three categories of bonds: A, B, and C. Of these, Germany was only required to pay towards ‘A’ and ‘B’ bonds totaling 50 billion marks (USD $12.5 billion). The remaining ‘C’ bonds, which Germany did not have to pay, were designed to deceive the Anglo-French public into believing Germany was being heavily fined and punished for the war.

Because of the lack of reparation payments by Germany, France occupied the Ruhr in 1923 to enforce payments, causing an international crisis that resulted in the implementation of the Dawes Plan in 1924. This plan outlined a new payment method and raised international loans to help Germany to meet her reparation commitments. In the first year following the implementation of the plan, Germany would have to pay 1 billion marks. This would rise to 2.5 billion marks per year by the fifth year of the plan. A Reparations Agency was established with Allied representatives to organize the payment of reparations. Despite this, by 1928 Germany called for a new payment plan, resulting in the Young Plan that established the German reparation requirements at 112 billion marks (USD $26.3 billion) and created a schedule of payments that would see Germany complete payments by 1988. With the collapse of the German economy in 1931, reparations were suspended for a year and in 1932 during the Lausanne Conference they were cancelled altogether. Between 1919 and 1932, Germany paid fewer than 21 billion marks in reparations.

The German people saw reparations as a national humiliation; the German Government worked to undermine the validity of the Treaty of Versailles and the requirement to pay. British economist John Maynard Keynes called the treaty a Carthaginian peace that would economically destroy Germany. His arguments had a profound effect on historians, politicians, and the public. Despite Keynes’ arguments and those by later historians supporting or reinforcing Keynes’ views, the consensus of contemporary historians is that reparations were not as intolerable as the Germans or Keynes had suggested and were within Germany’s capacity to pay had there been the political will to do so.

Background

Most of the war’s major battles occurred in France, substantially damaging the French countryside. Furthermore, in 1918 during the German retreat, German troops devastated France’s most industrialized region in the north-east (Nord-Pas de Calais Mining Basin). Extensive looting took place as German forces removed whatever material they could use and destroyed the rest. Hundreds of mines were destroyed along with railways, bridges, and entire villages. Prime Minister of France Georges Clemenceau was determined, for these reasons, that any just peace required Germany to pay reparations for the damage it had caused. Clemenceau viewed reparations as a way of weakening Germany to ensure it could never threaten France again. Reparations would also go towards the reconstruction costs in other countries, including Belgium, which was also directly affected by the war.

Reparations: Avocourt, 1918, one of the many destroyed French villages where reconstruction would be funded by reparations.

British Prime Minister David Lloyd George opposed harsh reparations, arguing for a smaller sum that was less damaging to the German economy so that Germany could remain a viable economic power and trading partner. He also argued that reparations should include war pensions for disabled veterans and allowances for war widows, which would reserve a larger share of the reparations for the British Empire. Woodrow Wilson opposed these positions and was adamant that no indemnity should be imposed upon Germany.

The Paris Peace Conference opened on January 18, 1919, aiming to establish a lasting peace between the Allied and Central Powers. Demanding compensation from the defeated party was a common feature of peace treaties. However, the financial terms of treaties signed during the peace conference were labelled reparations to distinguish them from punitive settlements usually known as indemnities, intended for reconstruction and compensating families bereaved by the war. The opening article of the reparation section of the Treaty of Versailles, Article 231, served as a legal basis for the following articles, which obliged Germany to pay compensation and limited German responsibility to civilian damages. The same article, with the signatory’s name changed, was also included in the treaties signed by Germany’s allies.

Did Reparations Ruin the German Economy?

Erik Goldstein wrote that in 1921, the payment of reparations caused a crisis and that the occupation of the Ruhr had a disastrous effect on the German economy, resulting in the German Government printing more money as the currency collapsed. Hyperinflation began and printing presses worked overtime to print Reichsbank notes; by November 1923 one U.S. dollar was worth 4.2 trillion marks. Geoff Harcourt writes that Keynes’ arguments that reparations would lead to German economic collapse have been adopted “by historians of almost all political persuasions” and have influenced the way historians and the public “see the unfolding events in Germany and the decades between Versailles and the outbreak of the Second World War.”

But not all historians agree. According to Detlev Peukert, the financial problems that arose in the early 1920s were a result of post-war loans and the way Germany funded its war effort, not reparations. During World War I, Germany did not raise taxes or create new ones to pay for wartime expenses. Rather, loans were taken out, placing Germany in an economically precarious position as more money entered circulation, destroying the link between paper money and the gold reserve maintained before the war. With its defeat, Germany could not impose reparations and pay off war debts, which were now colossal.

Niall Ferguson partially supports this analysis. He says that had reparations not been imposed, Germany would still have had significant problems caused by the need to pay war debts and the demands of voters for more social services. Ferguson also says that these problems were aggravated by a trade deficit and a weak exchange rate for the mark during 1920. Afterwards, as the value of the mark rose, inflation became a problem. None of these effects, he says, were the result of reparations.

Several historians take the middle ground between condemning reparations and supporting the argument that they were not a complete burden upon Germany. Detlev Peukert states, “Reparations did not, in fact, bleed the German economy” as had been feared; however, the “psychological effects of reparations were extremely serious, as was the strain that the vicious circle of credits and reparations placed the international financial system.”

The Weimar Republic

In its 14 years in existence, the Weimar Republic faced numerous problems, including hyperinflation, political extremism, and contentious relationships with the victors of the First World War, leading to its collapse during the rise of Adolf Hitler.

Weimar Republic is an unofficial historical designation for the German state between 1919 and 1933. The name derives from the city of Weimar, where its constitutional assembly first took place. The official name of the state was still Deutsches Reich; it had remained unchanged since 1871. In English the country was usually known simply as Germany. A national assembly was convened in Weimar, where a new constitution for the Deutsches Reich was written and adopted on August 11, 1919. In its 14 years, the Weimar Republic faced numerous problems, including hyperinflation, political extremism (with paramilitaries – both left- and right-wing); and contentious relationships with the victors of the First World War. The people of Germany blamed the Weimar Republic rather than their wartime leaders for the country’s defeat and for the humiliating terms of the Treaty of Versailles. However, the Weimar Republic government successfully reformed the currency, unified tax policies, and organized the railway system. Weimar Germany eliminated most of the requirements of the Treaty of Versailles; it never completely met its disarmament requirements and eventually paid only a small portion of the war reparations (by twice restructuring its debt through the Dawes Plan and the Young Plan). Under the Locarno Treaties, Germany accepted the western borders of the republic, but continued to dispute the Eastern border.

From 1930 onward, President Hindenburg used emergency powers to back Chancellors Heinrich Brüning, Franz von Papen, and General Kurt von Schleicher. The Great Depression, exacerbated by Brüning’s policy of deflation, led to a surge in unemployment. In 1933, Hindenburg appointed Adolf Hitler as Chancellor with the Nazi Party as part of a coalition government. The Nazis held two out of the remaining 10 cabinet seats. Von Papen as Vice Chancellor was intended to work behind the scenes to keep Hitler under control, using his close personal connection to Hindenburg. Within months the Reichstag Fire Decree and the Enabling Act of 1933 brought about a state of emergency: it wiped out constitutional governance and civil liberties. Hitler’s seizure of power (Machtergreifung) brought the republic to an end. As democracy collapsed, a single-party state founded the Nazi era.

Challenges and Reasons for Failure

The reasons for the Weimar Republic’s collapse are the subject of continuing debate. It may have been doomed from the beginning since even moderates disliked it and extremists on both the left and right loathed it, a situation referred to by some historians, such as Igor Primoratz, as a “democracy without democrats.” Germany had limited democratic traditions, and Weimar democracy was widely seen as chaotic. Weimar politicians had been blamed for Germany’s defeat in World War I through a widely believed theory called the “Stab-in-the-back myth,” which contended that Germany’s surrender in World War I had been the unnecessary act of traitors, and thus the popular legitimacy of the government was on shaky ground. As normal parliamentary lawmaking broke down and was replaced around 1930 by a series of emergency decrees, the decreasing popular legitimacy of the government further drove voters to extremist parties.

The Republic in its early years was already under attack from both left- and right-wing sources. The radical left accused the ruling Social Democrats of betraying the ideals of the workers’ movement by preventing a communist revolution, and sought to overthrow the Republic and do so themselves. Various right-wing sources opposed any democratic system, preferring an authoritarian, autocratic state like the 1871 Empire. To further undermine the Republic’s credibility, some right-wingers (especially certain members of the former officer corps) also blamed an alleged conspiracy of Socialists and Jews for Germany’s defeat in World War I.

The Weimar Republic had some of the most serious economic problems ever experienced by any Western democracy in history. Rampant hyperinflation, massive unemployment, and a large drop in living standards were primary factors.

In the first half of 1922, the mark stabilized at about 320 marks per dollar. By fall 1922, Germany found itself unable to make reparations payments since the price of gold was now well beyond what it could afford. Also, the mark was by now practically worthless, making it impossible for Germany to buy foreign exchange or gold using paper marks. Instead, reparations were to be paid in goods such as coal. In January 1923, French and Belgian troops occupied the Ruhr, the industrial region of Germany in the Ruhr valley, to ensure reparations payments. Inflation was exacerbated when workers in the Ruhr went on a general strike and the German government printed more money to continue paying for their passive resistance. By November 1923, the US dollar was worth 4,2 trillion German marks. In 1919, one loaf of bread cost 1 mark; by 1923, the same loaf of bread cost 100 billion marks.

Hyperinflation in Weimar Republic: One-million mark notes used as notepaper, October 1923. In 1919, one loaf of bread cost 1 mark; by 1923, the same loaf of bread cost 100 billion marks.

From 1923 to 1929, there was a short period of economic recovery, but the Great Depression of the 1930s led to a worldwide recession. Germany was particularly affected because it depended heavily on American loans. In 1926, about 2 million Germans were unemployed, which rose to around 6 million in 1932. Many blamed the Weimar Republic. That was made apparent when political parties on both right and left wanting to disband the Republic altogether made any democratic majority in Parliament impossible.

The reparations damaged Germany’s economy by discouraging market loans, which forced the Weimar government to finance its deficit by printing more currency, causing rampant hyperinflation. In addition, the rapid disintegration of Germany in 1919 by the return of a disillusioned army, the rapid change from possible victory in 1918 to defeat in 1919, and the political chaos may have caused a psychological imprint on Germans that could lead to extreme nationalism, later epitomised and exploited by Hitler.

It is also widely believed that the 1919 constitution had several weaknesses, making the eventual establishment of a dictatorship likely, but it is unknown whether a different constitution could have prevented the rise of the Nazi party.

Self-Determination and New States

The dissolution of the German, Russian, Austro-Hungarian, and Ottoman empires created a number of new countries in eastern Europe and the Middle East, often with large ethnic minorities. This caused numerous conflicts and hostilities.

Geopolitical Consequences of World War I

The years 1919-24 were marked by turmoil as Europe struggled to recover from the devastation of the First World War and the destabilizing effects of the loss of four large historic empires: the German Empire, Austro-Hungarian Empire, Russian Empire, and the Ottoman Empire. There were numerous new nations in Eastern Europe, most of them small.

Internally these new countries tended to have substantial ethnic minorities who wished to unite with neighboring states where their ethnicity dominated. For example, Czechoslovakia had Germans, Poles, Ruthenians and Ukrainians, Slovaks, and Hungarians. Millions of Germans found themselves in the newly created countries as minorities. More than two million ethnic Hungarians found themselves living outside of Hungary in Slovakia, Romania, and Yugoslavia. Many of these national minorities found themselves in bad situations because the modern governments were intent on defining the national character of the countries, often at the expense of the minorities. The League of Nations sponsored various Minority Treaties in an attempt to deal with the problem, but with the decline of the League in the 1930s, these treaties became increasingly unenforceable. One consequence of the massive redrawing of borders and the political changes in the aftermath of World War I was the large number of European refugees. These and the refugees of the Russian Civil War led to the creation of the Nansen passport.

Ethnic minorities made the location of the frontiers generally unstable. Where the frontiers have remained unchanged since 1918, there has often been the expulsion of an ethnic group, such as the Sudeten Germans. Economic and military cooperation among these small states was minimal, ensuring that the defeated powers of Germany and the Soviet Union retained a latent capacity to dominate the region. In the immediate aftermath of the war, defeat drove cooperation between Germany and the Soviet Union but ultimately these two powers would compete to dominate eastern Europe.

At the end of the war, the Allies occupied Constantinople (Istanbul) and the Ottoman government collapsed. The Treaty of Sèvres, a plan designed by the Allies to dismember the remaining Ottoman territories, was signed on August 10, 1920, although it was never ratified by the Sultan.

The occupation of Smyrna by Greece on May 18, 1919, triggered a nationalist movement to rescind the terms of the treaty. Turkish revolutionaries led by Mustafa Kemal Atatürk, a successful Ottoman commander, rejected the terms enforced at Sèvres and under the guise of General Inspector of the Ottoman Army, left Istanbul for Samsun to organize the remaining Ottoman forces to resist the terms of the treaty.

After Turkish resistance gained control over Anatolia and Istanbul, the Sèvres treaty was superseded by the Treaty of Lausanne, which formally ended all hostilities and led to the creation of the modern Turkish Republic. As a result, Turkey became the only power of World War I to overturn the terms of its defeat and negotiate with the Allies as an equal.

Europe in 1923: The dissolution of the German, Russian, Austro-Hungarian, and Ottoman empires created a number of new countries in eastern Europe, such as Poland, Finland, Yugoslavia, and Turkey.

Self-Determination

The right of peoples to self-determination is a cardinal principle in modern international law. It states that peoples, based on respect for the principle of equal rights and fair equality of opportunity, have the right to freely choose their sovereignty and international political status with no interference. The explicit terms of this principle can be traced to the Atlantic Charter, signed on August 14, 1941, by Franklin D. Roosevelt, President of the United States of America, and Winston Churchill, Prime Minister of the United Kingdom. It also is derived from principles espoused by United States President Woodrow Wilson following World War I, after which some new nation states were formed or previous states revived after the dissolution of empires. The principle does not state how the decision is to be made nor what the outcome should be, whether it be independence, federation, protection, some form of autonomy, or full assimilation. Neither does it state what the delimitation between peoples should be—nor what constitutes a people. There are conflicting definitions and legal criteria for determining which groups may legitimately claim the right to self-determination.

The employment of imperialism through the expansion of empires and the concept of political sovereignty, as developed after the Treaty of Westphalia, also explain the emergence of self-determination during the modern era. During and after the Industrial Revolution, many groups of people recognized their shared history, geography, language, and customs. Nationalism emerged as a uniting ideology not only between competing powers, but also for groups that felt subordinated or disenfranchised inside larger states; in this situation, self-determination can be seen as a reaction to imperialism. Such groups often pursued independence and sovereignty over territory, but sometimes a different sense of autonomy has been pursued or achieved.

The revolt of New World British colonists in North America during the mid-1770s has been seen as the first assertion of the right of national and democratic self-determination because of the explicit invocation of natural law, the natural rights of man, and the consent of and sovereignty by, the people governed; these ideas were inspired particularly by John Locke’s enlightened writings of the previous century. Thomas Jefferson further promoted the notion that the will of the people was supreme, especially through authorship of the United States Declaration of Independence which inspired Europeans throughout the 19th century. Leading up to World War I, in Europe there was a rise of nationalism, with nations such as Greece, Hungary, Poland, and Bulgaria seeking or winning their independence.

Woodrow Wilson revived America’s commitment to self-determination, at least for European states, during World War I. When the Bolsheviks came to power in Russia in November 1917, they called for Russia’s immediate withdrawal as a member of the Allies of World War I. They also supported the right of all nations, including colonies, to self-determination. The 1918 Constitution of the Soviet Union acknowledged the right of secession for its constituent republics.

This presented a challenge to Wilson’s more limited demands. In January 1918 Wilson issued his Fourteen Points that among other things, called for adjustment of colonial claims insofar as the interests of colonial powers had equal weight with the claims of subject peoples. The Treaty of Brest-Litovsk in March 1918 led to Russia’s exit from the war and the independence of Armenia, Finland, Estonia, Latvia, Ukraine, Lithuania, Georgia, and Poland.

The end of the war led to the dissolution of the defeated Austro-Hungarian Empire and the creation by the Allies of Czechoslovakia and the union of the State of Slovenes, Croats and Serbs and the Kingdom of Serbia as new states. However, this imposition of states where some nationalities (especially Poles, Czechs, and Serbs and Romanians) were given power over nationalities who disliked and distrusted them eventually helped lead to World War II. Also Germany lost land after WWI: Northern Slesvig voted to return to Denmark after a referendum. The defeated Ottoman empire was dissolved into the Republic of Turkey and several smaller nations, including Yemen, plus the new Middle East Allied “mandates” of Syria and Lebanon (future Syria, Lebanon and Hatay State), Palestine (future Transjordan and Israel), Mesopotamia (future Iraq). The League of Nations was proposed as much as a means of consolidating these new states, as a path to peace.

During the 1920s and 1930s there were some successful movements for self-determination in the beginnings of the process of decolonization. In the Statute of Westminster the United Kingdom granted independence to Canada, New Zealand, Newfoundland, the Irish Free State, the Commonwealth of Australia, and the Union of South Africa after the British parliament declared itself as incapable of passing laws over them without their consent. Egypt, Afghanistan, and Iraq also achieved independence from Britain and Lebanon from France. Other efforts were unsuccessful, like the Indian independence movement. Italy, Japan, and Germany all initiated new efforts to bring certain territories under their control, leading to World War II.

The Kellogg-Briand Pact

The Kellogg-Briand Pact intended to establish “the renunciation of war as an instrument of national policy,” but was largely ineffective in preventing conflict or war.

The Kellogg–Briand Pact (or Pact of Paris, officially General Treaty for Renunciation of War as an Instrument of National Policy) is a 1928 international agreement in which signatory states promised not to use war to resolve “disputes or conflicts of whatever nature or of whatever origin they may be, which may arise among them.” Parties failing to abide by this promise “should be denied of the benefits furnished by this treaty.” It was signed by Germany, France, and the United States on August 27, 1928, and by most other nations soon after. Sponsored by France and the U.S., the Pact renounces the use of war and calls for the peaceful settlement of disputes. Similar provisions were incorporated into the Charter of the United Nations and other treaties and it became a stepping-stone to a more activist American policy. It is named after its authors, United States Secretary of State Frank B. Kellogg and French foreign minister Aristide Briand.

The texts of the treaty reads:

Persuaded that the time has come when a frank renunciation of war as an instrument of national
policy should be made to the end that the peaceful and friendly relations now existing between
their peoples may be perpetuated; Convinced that all changes in their relations with one another should be sought only by
pacific means and be the result of a peaceful and orderly process, and that any signatory Power which shall hereafter seek to promote its national interests by resort to war should be denied the
benefits furnished by this Treaty;
Hopeful that, encouraged by their example, all the other nations of the world will join in this
humane endeavour and by adhering to the present Treaty as soon as it comes into force bring their
peoples within the scope of its beneficient provisions, thus uniting the civilized nations of the
world in a common renunciation of war as an instrument of their national policy;
Have decided to conclude a Treaty…

After negotiations, the pact was signed in Paris at the French Foreign Ministry by the representatives from Australia, Belgium, Canada, Czechoslovakia, France, Germany, British India, the Irish Free State, Italy, Japan, New Zealand, Poland, South Africa, the United Kingdom, and the United States. It was provided that it would come into effect on July 24, 1929. By that date, the following nations had deposited instruments of definitive adherence to the pact: Afghanistan, Albania, Austria, Bulgaria, China, Cuba, Denmark, Dominican Republic, Egypt, Estonia, Ethiopia, Finland, Guatemala, Hungary, Iceland, Latvia, Liberia, Lithuania, the Netherlands, Nicaragua, Norway, Panama, Peru, Portugal, Romania, the Soviet Union, the Kingdom of the Serbs, Croats, and Slovenes, Siam, Spain, Sweden, and Turkey. Eight further states joined after that date (Persia, Greece, Honduras, Chile, Luxembourg, Danzig, Costa Rica and Venezuela) for a total of 62 signatories.

In the United States, the Senate approved the treaty overwhelmingly, 85–1, with only Wisconsin Republican John J. Blaine voting against. While the U.S. Senate did not add any reservation to the treaty, it did pass a measure which interpreted the treaty as not infringing upon the United States’ right of self-defense and not obliging the nation to enforce it by taking action against those who violated it.

A photo of the actual signed Kellogg-Briand Pact (1928).

Effect and Legacy

As a practical matter, the Kellogg–Briand Pact did not live up to its aim of ending war or stopping the rise of militarism, and in this sense it made no immediate contribution to international peace and proved to be ineffective in the years to come. Moreover, the pact erased the legal distinction between war and peace because the signatories, having renounced the use of war, began to wage wars without declaring them as in the Japanese invasion of Manchuria in 1931, the Italian invasion of Abyssinia in 1935, the Spanish Civil War in 1936, the Soviet invasion of Finland in 1939, and the German and Soviet Union invasions of Poland. Nevertheless, the pact is an important multilateral treaty because, in addition to binding the particular nations that signed it, it has also served as one of the legal bases establishing the international norms that the threat or use of military force in contravention of international law, as well as the territorial acquisitions resulting from it, are unlawful.

Notably, the pact served as the legal basis for the creation of the notion of crime against peace. It was for committing this crime that the Nuremberg Tribunal and Tokyo Tribunal tried and sentenced a number of people responsible for starting World War II.

The interdiction of aggressive war was confirmed and broadened by the United Nations Charter, which provides in article 2, paragraph 4, that “All Members shall refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any state, or in any other manner inconsistent with the Purposes of the United Nations.” One legal consequence of this is that it is clearly unlawful to annex territory by force. However, neither this nor the original treaty has prevented the subsequent use of annexation. More broadly, there is a strong presumption against the legality of using or threatening military force against another country. Nations that have resorted to the use of force since the Charter came into effect have typically invoked self-defense or the right of collective defense.