The Dawes Plan succeeded very well from 1924 to 1929. It formed the
basis for Germany's reintegration not only into the international
economic system but into the international security system as well.
It encouraged France and Britain to develop a new strategy of
security cooperation toward Germany. In 1925 they signed the Lucarno
security treaty with Germany, and in 1926 Germany entered the League
of Nations. The new American strategy of economic engagement seemed
to be working far better than the earlier French strategy of military
containment.

But as Charles Kindleberger famously demonstrated in his 1973 book,
The World in Depression 1929-1939, an open international economic
system requires an "economic hegemon" to keep it running, in bad
times as well as good. The economic hegemon performs three essential
functions: (1) providing long-term loans and investments (as in the
Dawes Plan); (2) providing short-term credits and foreign exchange in
times of currency crises; and (3) opening its markets to receive the
exports of economies that are passing through recession. Britain had
performed these functions before the First World War, and they in
turn had provided the economic foundations for the Hundred Years
Peace. After the war, however, Britain no longer had the economic
strength to play the hegemon role, even though it still had the will.
Conversely, the United States now had the economic strength but had
not yet developed the will. The Dawes Plan was only one step in the
right direction, and it was a step in only one dimension. Still, for
a few years in the prosperous 1920s, the international economy seemed
to be operating well enough without an economic hegemon.

The prosperous and open international economic system of the 1920s
allowed the victor powers to engage in a strategy of security
cooperation (or even appeasement, then still an innocuous term).
Given the success of the strategies of economic engagement and
security cooperation, the strategy of military containment appeared
unnecessary or even counterproductive, and it was largely abandoned
even by France. But, with the exception of the Dawes Plan, neither
Britain nor the United States stepped forward to assume leadership in
managing either the German problem or the international economy, in
good times or bad.

With the beginning of the Great Depression (which Kindleberger
ascribed to the failure of the United States to act as an economic
hegemon), the prosperous and open economic system of the 1920s
collapsed and was replaced with the impoverished and closed economic
system of the 1930s. Whereas the prosperity system had permitted a
strategy of appeasement, the poverty system required a strategy of
containment. But for political reasons (polarization between the Left
and the Right), France in the 1930s no longer had the political will
to provide leadership for such a strategy.

Leadership in managing the German problem fell by default to Britain,
which had never been a strong believer in the strategy of military
containment. It chose instead a modest version of the strategy of
economic engagement, at a time when the conditions of the Depression
made this no longer adequate and attractive for Germany. Further,
economic engagement seemed to imply a strategy of security
appeasement, which was now even less appropriate for Germany. As for
the United States, with the collapse of the Dawes Plan it gave up on
any effort to manage the German problem at all.

Thus, by the early 1930s, none of the three victor powers from World
War I--France, Britain and the United States--was pursuing a coherent
and consistent strategy to preserve its victory. With the coming to
power of the National Socialist regime, Germany decided to manage the
German problem in its own way. The Second World War was the result.

On the other side of the world in East Asia, the United States
pursued a quite different strategy. Here it faced the rising power of
Japan, which had been an ally of Britain since 1902 and which was one
of the victor powers in the First World War. Japan's growing military
and economic strengths and its ambitions in China presented a serious
challenge to the dominant powers in East Asia in the early 1920s, the
United States and Britain.

The Republican administration of President Warren G. Harding, and
particularly his secretary of state, Charles Evans Hughes, took the
lead in designing an innovative strategy of security cooperation to
deal with Japan. It convened a conference in Washington in 1921-22,
out of which came the following security elements: the Washington
Naval Treaty, an agreement between the United States, Britain and
Japan to limit the numbers of their battleships; the Four-Power
Treaty, which provided for consultations on security issues among
these three powers plus France; and the Nine-Power Treaty, which
provided for common principles and cooperation in regard to China.
These arrangements, which were later called "the Washington system",
were an elaboration of the U.S. strategy of security cooperation.
However, the United States did not develop a comparable strategy of
economic engagement for Japan, to serve as the basis for this
security strategy. Instead, it largely relied on conventional
international trade between the two nations, which seemed sufficient
in the prosperous and open international economy of the 1920s. But
with the beginning of the Great Depression, this international trade
largely collapsed, and the collapse of the Washington system of
security cooperation soon followed.

Thus by the mid-1920s, the United States had conceived of some
important elements for a victor strategy. In Europe, the Dawes Plan
echoed the nineteenth-century British use of financial power in an
open international economy. In East Asia, the Washington system
echoed the nineteenth-century British use of naval power and balance
of power management. But there was not much of a U.S. security
strategy in Europe or of a U.S. economic strategy in East Asia. The
U.S. victor strategies after the First World War had not added up to
a grand design. They failed to prevent the Great Depression and the
ensuing Second World War.

Why did the United States fail to adopt a coherent and consistent
victor strategy after World War I? The traditional explanation blames
American immaturity and "idealism", and the resulting "isolationism."
A related explanation blames the isolationism and protectionism of
the Republican Party. However, the Dawes Plan and the Washington
system were quite sophisticated projects (even by British standards)
that can hardly be described as isolationist--and these were projects
advanced by Republican administrations.

The main reason why the United States did not have a coherent and
consistent victor strategy was that its victory in 1918 was too
complete. As a result, in the 1920s the United States faced no
obvious great power adversary or "peer competitor", which could have
concentrated the American mind and provided the desirable coherence
and consistency. Conversely, in the 1930s the Great Depression
produced a real American isolationism. It also produced real great
power adversaries (Germany and Japan), but these posed quite
different strategic threats in quite different regions. This too made
it difficult for the United States to compose a coherent and
consistent strategy.

Living With Victory After the Second World War

The United States learned profound lessons from the failure of the
Versailles and Washington systems to manage the German and Japanese
problems and to prevent the Second World War. As it turned out, these
lessons were largely expanded versions of the lessons that the Wilson
administration, the Harding administration and the American bankers
had already learned from the First World War. As World War II was
drawing to a close, the United States took the lead in establishing a
number of international institutions that would complete the first
but abortive steps taken after the previous war.

Security cooperation and economic engagement.

On the security dimension, the United Nations was to succeed and
perfect the League of Nations. On the economic dimension, three
organizations were to help the United States perform the role of
economic hegemon, one for each of the three functions identified by
Kindleberger. The task of long-term lending would be promoted by the
International Bank for Reconstruction and Development (the World
Bank); the task of short-term currency support would be promoted by
the International Monetary Fund; and the task of opening trade would
be promoted by an International Trade Organization (ITO). Together,
the three organizations were known as the Bretton Woods system. As it
happened, the Republican-controlled U.S. Senate rejected the ITO
treaty in 1947, but a less institutionalized arrangement, the General
Agreement on Tariffs and Trade, took its place. (Almost fifty years
later, the World Trade Organization was established, and this at last
completed the original grand design.) The overall victor strategy of
the United States was one of security cooperation based upon economic
engagement.

This strategy--and its elaborate United Nations and Bretton Woods
systems--might have been perfect for dealing with the German and
Japanese problems that existed after the First World War. But the
problems that now existed were altogether different. Whereas after
the first war Germany was not defeated enough, after the second it
was defeated too much. The victorious allies, including the United
States, could easily, and almost automatically, impose the
alternative and simpler victor strategy of territorial division and
military occupation, and at first they did so.

Essay Types: Essay