Footnotes in Foreign Relations 1:1

By Steven Specht No comments

Feckless Negotiators

TLDR: US policy or lack thereof in the early 1920s helped pave the way for Nazi Germany.

Reparations after war were common in Europe, so it wasn’t unusual that Germany got stuck footing the bill for WWI in the 1919 Treaty of Versailles. After all, the Germans did the exact same thing to the French in 1871 in… a different Treaty of Versailles.

(There have been at least four different Treaties of Versailles.)

However, there has to be a will and ability to pay the reparations.

Germany was long on ability and short on will (at least the non-Triumphy kind).

The reparations were to come in part from coal mining and heavy industry which the Germans had plenty of. However, the Kaiserreich spent the entire war high on its own propaganda supply, leaving the German people in complete disbelief as to how they lost the war while surrounded on all sides by an entire hemisphere united against them.

So, German workers went on strike in protest of the perceived unfairness of it all.

The Weimar Republic flung up its hands and said “we can’t pay reparations if people won’t work!”

Things escalated.

France and Belgium decided to invade a sizeable chunk of Germany to force coal miners and others back to work. It looked like WW 1½ for a moment.

Cooler heads prevailed and a delegation from the United States helped settle the dispute.

The Reparations Committee of 1923 resulted in the Dawes Plan named after soon-to-be Vice President Charles Dawes who chaired the committee. This plan set up a more detailed payment structure, negotiated the removal of French/Belgian troops, and averted war (for a few years). Heck, Charles Dawes even got a Nobel Peace Prize for his efforts!

So far so good.

Unfortunately, the most powerful member of the committee wasn’t Charles Dawes but John Foster Dulles (the airport guy). John Foster Dulles was a prominent member at the law firm Sullivan & Cromwell. The mission at S&C was to help corporations expand through whatever means necessary. (I’ll probably talk more about S&C and their involvement in the Panamanian revolt that helped create the Panama Canal in another installment.)

John Foster Dulles and his brother Allen were more concerned with promoting the clients of S&C than they were representing the long-term interests of the US Government that appointed John Foster to the committee.

What they really accomplished was opening up the German economy to take loans from US banks and invest in US technology, services, and infrastructure. In current dollars, Germany received loans of nearly $1 trillion for the privilege of buying from US companies seeking to expand abroad.

The incredible wealth wrought from these liberal trade agreements made it easy to look the other way when the German domestic scene became problematic a decade later.

When I say “look the other way” I mean that Allen Dulles went so far to say that Adolf Hitler and Joseph Goebbels were basically misunderstood good guys (loosely paraphrased for brevity).

Banks like JP Morgan gave them loans to buy technology from IBM they would use for a census that made streamlined ethnic cleansing. They bought technology from Ford for the war machine. Dupont was invested heavily in IG Farben (another Sullivan & Cromwell client) and the two companies worked together to develop a number of crucial items for future war fighting including synthetic rubber. (IG Farben is less known for rubber and more known for its development of Zyklon-B that was used to gas approximately 1 million Jews in concentration camps.)

Though both Dulles brothers and their law firm would cut ties with Nazi Germany in 1935 and actively work to defeat them during the war, the momentum had already been achieved.

So emboldened by their perceived power, some of these companies even egged on the planning of a coup that would involve the American Legion marching on Washington under their chosen dictator Major General Smedley Butler. The plan was foiled when Smedley notified Congress and all of the planners said “no, we were just joking about overthrowing the government.”

As for the Dawes Plan, it wasn’t successful in solving the reparations issue and by the time another plan was created, the Nazis were in power and they said they wouldn’t pay a red 10 Pfennigs.

After WWII, payments were resumed with the adoption of the London Agreement on German External Debts in 1953. The final payment on all accumulated debt from WWI, WWII, and the Marshall Plan was on October 3, 2010.

It’s possible Nazis could have come to power anyway. There are a lot of moving parts in place and the Weimar Republic had a tiger by its tail when they didn’t put Hitler in front of a firing squad after he led a failed coup in 1923.

However, the US Government outsourcing responsibility to a private citizen and his corporate clients with no oversight made the process a whole lot easier.

Something to think about next time you change planes in DC.

Steven Specht is a law professor with an MA in International Relations and a JD that specializes in International Law