Introduction to War Reparations
Reparations, War, payments by a defeated nation to its conquerors as compensation for destruction during war. The Allied powers claimed heavy reparations from Germany after World War I but had difficulty collecting them. After World War II the Soviet Union and, to a lesser extent, the Western allies, collected reparations in materials directly from occupied German territory. After both wars, loans to defeated countries exceeded the reparations paid by them.
The chief justification for claiming reparations after the two World Wars was that Germany and its allies were guilty of starting the wars. Thus, the idea behind these reparations differed from earlier ideas of claiming tribute or war indemnity. After various 19th-century wars, victors demanded war indemnities simply to help them pay for military expenses. The largest amount was paid by France in 1870 after the Franco-Prussian War. At that time Germany demanded 5,000,000,000 francs. Much of this sum was tribute, since Germany's war expenses had not been that high.
After World War I
The Allied powers in Europe demanded heavy reparations from Germany. The United States backed Allied claims, although it claimed no reparations itself. The Allied Reparations Commission fixed the sum necessary to rebuild areas devastated by the German armed forces at $33,000,000,000, of which France was to receive 52 per cent. The term of payment was to extend over a period of 42 years.
In 1922 Germany asked for a delay, or moratorium, claiming that the country was not able to meet the heavy payments. Great Britain favored the German request, but France opposed it. German payments in goods, particularly coal, were closing world markets to British exports and were partly responsible for increasing British unemployment. France, however, needed German materials and suspected that Germany was attempting to escape all payment of reparations.
Relations between Britain and France became strained over the question of a moratorium. In January, 1923, in spite of strong British protests, French troops occupied the Ruhr, the most heavily industrialized area in Germany. In defiance, most workers in the Ruhr refused to work in the mines and factories. This further weakened the German economy. Later that year the country fell into financial chaos, as the irresponsible printing of new money by the government caused wildly escalating inflation. The German mark dropped to less than a thousand-billionth part of its 1913 value.
The Dawes Plan. In December, 1923, the Reparations Commission appointed an international commission to study Germany's financial condition and work out a just plan for reparations payments. Under General Charles G. Dawes (later Vice President of the United States), the new commission worked out a plan for stabilizing German currency and balancing the country's budget. It was accepted by the former Allied powers. An important part of the plan was a loan of $200,000,000 to Germany, raised largely in the United States and Great Britain.
Reparations payments, supervised by Allied officials, continued under the Dawes Plan for about five years. The plan worked well in accomplishing its limited objectives, although Germany's payments never exceeded 4 per cent of its national income and the country received more in loans than it paid in reparations.
The Young Plan. In 1929 Allied officials agreed, at the Germans' request, to reconsider the terms for Germany's payment of reparations. They created a second commission, which met in Paris. This commission drew up the Young Plan, named for its chairman, Owen D. Young of the United States. (Young, like Dawes, was acting as a private citizen, not an agent of the United States government.)
Under the Young Plan, Germany was given full responsibility for its financial operations and the payment of reparations. The plan called for the establishment of an international bank, officially constituted in May, 1930, to take over some of the work of the administrative staff created under the Dawes Plan. It provided for 57 annual payments by Germany, running to 1987. After slight revisions, the plan was adopted early in 1930 at a conference meeting at The Hague. Later that year, however, the Great Depression hit Germany.
In 1931 President Herbert Hoover proposed a year's moratorium on all intergovernmental debts. The proposal was accepted by other governments. In June, 1932, an international conference met at Lausanne, Switzerland, and canceled all German reparations until world economic conditions improved. The Treaty of Lausanne marked the end of Germany's payments, for after Adolf Hitler's rise to power in 1933 Germany repudiated all reparations.
After World War II
Germany. The question of reparations after World War II came up even before the end of the war. At the Yalta Conference (February, 1945), the Soviet Union proposed that German reparations be set at approximately $20,000,000,000, of which the Soviets wanted half. Although neither the United States nor Great Britain agreed to the specific Soviet proposals, the Yalta Conference did decide that Germany should be made to compensate the Allies for war damage. Allied claims of damages reached $320,000,000,000, but it was recognized that Germany could not pay this enormous total.
The Allied Commission on Reparations, established at Yalta, met in Moscow in June and July, 1945. The delegates agreed on a plan that provided for the following:
- Greatest possible compensation in goods would be made to the Allies on the basis of their contributions and losses in bringing about Germany's defeat.
- The German economy would be limited to the capacity required to meet minimum civilian needs.
- Enough German industry would be maintained to supply those needs without additional Allied support.
This plan was approved with reservations at the three-power conference held at Potsdam in July, 1945. Reparations were to be obtained only from the various occupation zones, and no country was to draw from other than its own area. However, the Soviet Union was to receive, in addition to reparations from the eastern zone, 10 per cent of the industrial equipment removed from the western zones, plus an additional 15 per cent that the Soviets would pay for with food, coal, and other products. To supervise the removal of equipment, the Allied Control Council was created.
The percentage of reparations which each country was to receive was decided at an 18-nation conference on reparations, held in Paris in November and December, 1945. The conference established the Inter-Allied Reparations Agency, composed of a representative of each of the nations, to allocate German reparations payments.
The reparations plan was based on the assumption that Germany would have a unified economic system despite its division into four zones of occupation. Unification, however, never occurred. Instead, the British, French, and American zones were merged in 1949 to form the Federal Republic of Germany, and the Soviet zone became a separate country. By 1949, when reparations payments to the West ceased, the Allies had dismantled more than 300 plants, taking parts and industrial equipment valued at approximately $413,000,000. The United States received about one-fourth of the total.
Japan. The original Allied policy on Japanese reparations was based on a report made in April, 1946, by Edwin J. Pauley of the United States. It called for payments to countries injured by Japan and outlined a method for dismantling Japan's war industry. An Allied reparations committee approved this policy but was unable to agree on the amount of reparations. Claims totaled $54,000,000,000—an obviously impossible figure—of which China demanded 40 per cent and the Philippines 15 per cent.
When it became clear that the reparations committee was making no progress, the United States authorized General Douglas MacArthur, Allied military commander in Japan, to make “interim" payments. Under this program, Japan delivered industrial equipment worth $40,000,000 to China, the Philippines, Great Britain, and the Netherlands. In addition, Japanese assets in Allied countries—worth more than $3,000,000,000—were taken over as reparations.
Meanwhile, the United States had reversed its policy. Instead of reducing Japan's industrial might, the United States decided it was necessary to strengthen the conquered country's economy. Since continued reparations payments would have the opposite effect, the United States ended the program of interim reparations in 1949.
Japan signed a peace treaty with 49 nations, including the United States, in 1952. One provision of the treaty stated that Japan was to negotiate with Allied countries desiring reparations. Under this provision, Japan agreed to pay, over a period of years, reparations totaling $1,190,000,000 to Burma, Indonesia, the Philippines, and Thailand. Most of these reparations were to be paid in goods, services, and investments.