Criticisms and Negative Effects
John Maynard Keynes claimed that overall influence on the world economy of exacting reparations from Germany would have been disastrous.
Many observers hold that war reparations were an indirect, but major, cause of World War II. After the end of World War I, the 1919 Treaty of Versailles imposed heavy war reparations upon Germany. Some claim these reparations payments exacerbated German economic problems, and the resulting hyperinflation ruined the chances of the Weimar Republic with the public and allowed the rise of the Nazi Party and Adolf Hitler. After the Franco-Prussian War, the amount of reparations was set at a fixed value. Moreover, the post–World War I amount was subject to frequent recalculations, which encouraged Germany to obstruct payments. Eventually, all payments were cancelled after Hitler rose to power.
The experience of the post–World War I reparations led to the post–World War II solution, where winning powers were supposed to take reparations in machines and movable goods from the defeated nations, as opposed to money. Moreover, policies like the Marshall Plan emphasized shared economic development of the Western European states (removing much of what critics saw as the incentives giving rise to World War I) rather than punishment of the former Axis powers.
Read more about this topic: War Reparations
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