BFI

This extremely short news item (which may be a fragment of a longer one) depicts Winston Churchill about to undergo his first big international test as Chancellor of the Exchequer, a position he had held for just two months following the November election of Stanley Baldwin's Conservative government. The occasion was the Paris Conference of Allied Finance Ministers, held with the primary aim of discussing the issue of Germany's war reparations following World War I.

Over the past two years, it had become increasingly clear that Germany was incapable of meeting its obligations under the 1919 Treaty of Versailles. After internal economic pressures had led to it defaulting on agreed payments in 1923, French and Belgian troops occupied the Ruhr valley, one of Germany's major industrial sites. Aside from the political impact, this was one of the key factors that triggered a disastrous bout of hyperinflation, which crippled the economy.

Accordingly, the Allied Reparations Committee asked the American economist Charles G. Dawes to devise a more workable system of reparations repayment. Unveiled in August 1924 and implemented in September, and proposed official recognition of the German Reichsbank and allowing Germany to apply for foreign loans, not least from the United States. Payment of reparations duly recommenced, and the Paris Conference was held in January 1925 to determine how they should be divided up amongst the Allied nations. Topical Budget's bluntly-worded headline echoed widespread British opinion that the government that Churchill represented was doing too much for too little reward.

The Paris Conference was also historically important for its acknowledgement of the United States as a full and active participant in what were technically European discussions, another side-effect of the Dawes Plan. Dawes himself won the Nobel Peace Prize for his work, though his plan would have disastrous long-term consequences in that it would lock participating nations into a vicious cycle of debt (Germany would borrow from the US to pay reparations to European nations which would then pay off debts to the US), which would be contributing factors in the Wall Street crash of 1929 and the ensuing Great Depression and rise of Adolf Hitler.

Michael Brooke

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