Because the U. S. ability to trade with Europe was compromised with the outbreak of war in 1914, the restoration of international trade became a major focus of recovery efforts following the cessation of hostilities in 1918. Prior to the onset of World War I, the United States imported more goods from Europe than it had exported to the European continent. The destructive nature of the war severely crippled the European economy—both in terms of infrastructure and the availability of labor. Before the war U. S. citizens owed some $3 billion to Europeans. After the war, European citizens owed private Americans $3 billion and their governments owed another $10 billion. Wartime loans from the United States to Europe constituted the primary source of this capital imbalance.
Complicating the ability of European nations to repay these loans to the United States was the reparations that Germany owed to the international community as a result of the Treaty of Versailles in 1918. Ravaged by war, the French wanted to cripple Germany at the Peace Conference. Accordingly, the French along with the British included in the final treaty a “war guilt clause” that held Germany directly responsible for damages caused by the war. To determine the amount of reparations, the Versailles Treaty established a commission to make a specific dollar amount recommendation. In 1921, the Reparations Commission concluded that the German nation, which also had been ravaged by the war, owed the international community $33 billion.
The repercussions of this extensive bill undermined international economic relations for more than a decade. The international trade system depended on the flow of capital between nations to maintain at least a semblance of equitable trade relations between nations. European nations, which owed the United States some $13 billion, relied on U. S. investments and the sale of goods to raise the capital for repayment of these loans. In addition, the reparation payments from Germany served as a critical source of capital for loan repayments.
Given the extensive payments by the Reparations Commission forced on Germany in 1921, the German government soon found itself increasingly unable to make the necessary payments to the international community. By 1922-23, Germany defaulted on its payments. As reparations further eroded the German economy, other European nations were left without the necessary infusion of capital to meet their loan repayments to the United States. As a result, Great Britain began calling upon the United States to cancel the debts that they owed the American government and private banks. Great Britain argued that the United States should write off these loans and consider them part of their contribution to the Allied victory over Germany.
With the international economy in jeopardy, the U. S. government reevaluated the issue of German reparations. Accordingly, in 1924, under the auspices ofthe U. S. Department of State, Charles Gates Dawes was sent to Germany to discuss their economy and to devise a means for the government better to meet its international obligations under the Treaty of Versailles. The resulting Dawes Plan sharply reduced German reparations from $542 million to $250 million annually and renegotiated the schedule for the payment of these monies. Dawes also devised a systematic program to promote direct capital investment in the German economy by such leading U. S. financial institutions as the J. P. Morgan Company. Despite the revised schedule of payments, the Dawes Plan proved to be a superficial solution. The European economy could not bear the heavy weight of both loan repayments and reparations. Similarly, the U. S. economy could not provide enough capital to keep the European economy afloat. Reparations and debt issues contributed to the structural weaknesses in the world economy that led to the economic crash of the 1930s.
Further reading: Stephen A. Schuker, The End of French Predominance in Europe: The Financial Crisis of1924 and the Adoption of the Dawes Plan (Chapel Hill: University of North Carolina Press, 1976).
—David R. Smith
Debs, Eugene Victor (1855-1926) socialist leader, labor activist
Eugene V. Debs was one of the most prominent and effective socialist politicians and labor organizers of the late 19th and early 20th centuries. Born in Terre Haute, Indiana, in 1855, Debs left home at an early age and took a job at a local railroad as a locomotive fireman and quickly joined the Brotherhood of Locomotive Firemen. By 1880, Debs had become the secretary-treasurer of the national brotherhood. From this early involvement with organized labor, Debs became convinced that American capitalism and industry exploited workers, created a wealthy elite, and threatened to undermine traditional midwestern values.
Initially, Debs attempted to work within the political system to push for reform. In the early 1880s, he joined the Democratic Party, winning election to the Indiana state legislature in 1884. Despite this brief foray into mainstream party politics, Debs continued to focus his efforts on organizing railroad workers. In 1893 he became president of the nation’s largest union, the American Railway Union (ARU). Debs was immediately thrust into the national spotlight as he led the ARU in several railroad strikes between 1894 and 1895. In 1894 the ARU conducted a successful strike against the Great Northern Railroad and launched a similar strike against the Pullman Palace Car Company in May 1894. The Pullman Company had reduced wages by 25 percent in reaction to the Panic of 1893 and in the spring of 1894 refused to negotiate with the ARU. When the company refused to agree to arbitration, the Chicago ARU local voted to walk off the job.
Debs called for a national boycott of the Pullman Company, and sympathy strikes spread to 27 states, but he also rebuffed those in the ARU and the larger labor movement who advocated a general strike that would bring Chicago to a standstill. When violence broke out in Chicago and elsewhere, George Pullman called on Illinois’s progressive governor, John Peter Altgeld, to employ the state militia to restore order and break the strike. When Altgeld refused, President Grover Cleveland and Attorney General Richard Olney ordered 2,500 federal troops to take control of the situation and charged Debs with violation of the Sherman Antitrust Act (1890). The intervention of federal troops not only ended the strike, but also led to the destruction of the ARU when in 1895 Debs was sentenced to a six-month prison sentence for contempt of court.
Caricature of Eugene Debs, pictured wearing a crown labeled "Deb's American railway union" (Library of Congress)
Federal intervention and the final outcome of the Pullman strike convinced Debs that those who had advocated expanding labor politics into a larger class struggle had been correct and that Progressive and Democratic Party calls for gradual reform were doomed to failure. While in prison, Debs spent considerable time reading the works of Karl Marx and shortly after joined the recently formed Social Democratic Party (SDP). Debs assumed the post of secretary-treasurer of the SDP and attempted to reconcile differences between the SDP and the Socialist Labor Party, playing an instrumental role in merging the two factions into the Socialist Party of America (SPA). Debs also played a leading role in mobilizing the left wing of the labor movement between 1900 and 1920, helping to form the INDUSTRIAL Workers of the World in 1905. As head of the Socialist Party, Debs ran for the presidency in 1900, 1904, 1908, 1912, and 1920. Although he received only 96,000 votes in 1900, by 1904 the SPA had become the largest third party in the country. That year Debs received more than 400,000 votes and tallied 897,000 votes in 1912.
When war broke out in Europe in 1914, Debs and the SPA opposed American intervention and warned the public against American involvement. When Congress and President Woodrow Wilson declared war against the Central Powers on April 6, 1917, Debs reiterated his opposition to the war. Wartime legislation, specifically the Espionage Act of 1917 and the Sedition Act of 1918, made it illegal to criticize the American government and its involvement in the war. Debs, however, continued to criticize Wilson and the war effort. Following a speech in Canton, Ohio, Debs was arrested and charged with sedition. After a short trial, he was convicted, sentenced to a 10-year prison term. His prison term did not diminish his popularity among socialist voters. When Debs ran for the presidency in 1920 from his cell in the Atlanta Federal Penitentiary, he received almost 1 million votes. Nevertheless, the SPA and the socialist movement in general lost ground during the Red Scare of 1919-21. Debs was released from prison in 1921 and died five years later in 1926.
See also RADICALISM; socialism.
Further reading: Nick Salvatore, Eugene V. Debs: Citizen and Socialist (Champaign: University of Illinois Press, 1982); Marguerite Young, Harpsongfor a Radical: The Life and Times of Eugene Victor Debs (New York: Alfred Knopf, 1999).
—Harold W. Aurand and Robert Gordon
World History
