Reparations revisited: the role of economic advisers in reforming German central banking and public finance

Robert Yee

doi:10.1017/s0968565019000258

Abstract

The economic advisers of the 1924 Dawes Committee enacted currency and banking reforms as a means of resolving financial and geopolitical problems. Although the committee members stated that they had no plans to resolve the Ruhr occupation, evidence from the technical advisers demonstrated the opposite. Economists Edwin Kemmerer, Joseph Davis and Arthur Young sought to appease Franco-Belgian demands for a resolution to the reparations debate by balancing the German budget and reorganising the banking system, thereby also addressing the question of military occupation. This research delves into the advisers’ reports on public finance, currency stabilisation and the gold standard, arguing that their attempts to assuage reparation-related concerns rested on major reforms to German central banking.

Highlights

The economic advisers of the Dawes Committee enacted currency and banking reforms as a means of resolving financial and geopolitical problems
The Dawes Committee emerged at the forefront of European negotiations surrounding the question of reparations
Much of the current literature has focused on the macroeconomic effects of the Dawes Plan from the point of view of Allied governments; the diplomacy of central banking and financial reform from the point of view of central banks; and the budgetary reforms from the point of view of the German government

Summary

Princeton University

The economic advisers of the Dawes Committee enacted currency and banking reforms as a means of resolving financial and geopolitical problems. Following the meeting with Schacht, the committee released its first communiqué, outlining the need for an international bank to stabilise the RM They were assisted by technical advisers, often university-trained economists whose main role was providing an outside perspective for the proceedings. Edwin Kemmerer, a Princeton economist and financial adviser to foreign governments (or ‘money doctor’), spearheaded this initiative and corresponded with each delegate over the course of the several months (Flandreau ; Schuker ) In his memoranda, he stressed the need for a single and unified currency in Germany.[7] A new central bank, one ‘independent of government control so far ... Kemmerer, ‘Can stability of a currency be attained and retained without a balanced budget?’ ( Jan. ), box , folder , ‘Edwin Kemmerer Memoranda’, . 9 Ibid., – . 10 BSC, Kemmerer, ‘Outline of plan for proposed German Bank’, –

Economic advisers

Reichsbank notes

Stockholms Enskilda Bank