Charles Dawes: An Economic Explorer
Charles Dawes was arguably the most important man of the 1920’s not just in America, but in the world. He was an engineer, lawyer, financier, general/logistics coordinator for the entire American Expeditionary Force, Vice President under Coolidge, and key architect of the ambitious Dawes Plan. His significance is without question, but few Americans know his name. Even if they do, the extent of his work is not known. He made his start as a lawyer but made his fortune as an oil and gas man. He worked on the Presidential campaign of William McKinley. By 1902 he became the bank president for Central Trust Company of Illinois where he would stay for the next fifteen years.[1]
He joined the AEF in 1917 at the age of 52, he was a close personal friend of General John Pershing, and lobbied him to get Dawes a commission as an army engineer.[2] Dawes devised a way to get army men quickly from inside the boat topside; however, this was not to be his primary function. Pershing needed a man to figure out the abysmal supply situation faced by the AEF, and he tapped Dawes. One problem faced by the AEF was a lack of coal. German U-boats kept sinking the British ships who supplied coal to France. As a result, the British stopped shipping the critical resource. He tackled this problem by freeing up some U.S. Navy ships (which had been hesitant to part with any strategic supplies) sending coal to England to make up for shortfalls and having the English with additional American support to restart supply runs.[3] His defining economic policies were always about saving money and efficiency. Another policy he used was shipping materials from the U.S. to France, thereby saving space. It also had the added benefit of helping the flagging French economy, by keeping their factories running, and gaining the trust of the French.[4] This would be instrumental in his later career getting the French on board with the Dawes Plan. He headed up the General Purchasing Board. The Statistical Bureau, the Control Bureau, the Board of Contracts and Adjustments, the Bureau of Accounts, the Technical Board, and the Financial Requisitions Office were all brain-children of Dawes.[5] This allowed him to help figure out AEF expenditures and more importantly understand the supplies needed for their future campaigns. The army needed workers, and he looked to get Italian support. They were unwilling to help; however, Dawes knew they wanted a loan, and made it a condition of that loan that the Italians provided support.[6] He saved the U.S. government $20 million dollars from September 1917 to November 1918.[7]
He was a republican who wanted to rein in the size of government. After the end of the Great War government expenditures were 18.5 billion dollars in 1919, up from 750 million dollar budgets annually from Roosevelt and Taft.[8] In 1921 the Budget and Accounting Act created the modern system whereby the President outlines a budget and the U.S. Congress passes it. Prior to this the Ways and Means Committees’ in the Senate and the House created budgets.[9] Dawes was chosen to be the first budget director for President Harding. He was given just five men to work with, in running the new office. Dawes worked with aplomb to end needless spending going so far as to only allow his men to have one pencil and it could not be replaced unless there was only two inches left.[10] He did not just use penny pinching, he made all federal departments use the same legal forms to make things simpler, but also save money. With his ministrations the budget of 1922–23 was $3.5 billion dollars, $2 billion less than 1921.[11] He left after one year in office (this was planned) and went back home.
Pretty soon Dawes was called to duty again when Calvin Coolidge needed a Vice President after Coolidge replaced Harding after his death. Dawes was given the unenviable task of stabilizing Germany in 1924 and Western Europe. The Germans had experienced massive hyperinflation due to the Weregild Clause of the Treaty of Versailles. Patterson writing in 1925 exclaimed of the reparations, “In her (Germany) state of disorganization she was asked suddenly to reverse the process- to export annually 3,000,000,000 marks or $750,000,000 more than she imported. The idea was fantastic, and we know the result.” The plan masterminded by Dawes helped shore up the German and European economies. It was brilliant in its simplicity and was effective in what it was created to do. Americans loaned money to Germany at a low interest rate to pay back Britain and France. Britain and France could pay back the $10,000,000,000 owed to the U.S.[12] Germany was pulled back from the brink of economic ruin (for the moment) and Dawes would win a Nobel Peace Prize in 1925 for his work. The plan continued to be followed, until a new President (Hoover) was elected, and changes were made.
Dawes was an economic explorer/guide in a vast and tangled financial wilderness. His logistical knowhow kept troops supplied and helped win the Great War. Dawes championed small government and efficiency of pecuniary movement. The epoch of his career has become a minor footnote. This is due to the money problems that arose after he exited the political arena which led to the rise of Hitler. Regardless, he cut down dense monetary jungles with his words (or even a shortened pencil) and was at the very least, the most influential economic figure of the 1920’s.
Bibliography
Goedeken, Edward A. “A Banker at War: The World War I Experiences of Charles Gates Dawes.” Illinois Historical Journal 78, no. 3 (1985): 195–206. Accessed April 15, 2021. http://www.jstor.org/stable/40191858.
Goedeken, Edward. “Charles G. Dawes Establishes the Bureau of the Budget, 1921–1922.” The Historian 50, no. 1 (1987): 40–53. Accessed April 15, 2021. http://www.jstor.org/stable/24446946.
Patterson, Ernest Minor. “The Dawes Plan in Operation.” The Annals of the American Academy of Political and Social Science 120 (1925): 1–6. Accessed April 16, 2021. http://www.jstor.org/stable/1015627.
[1] Edward A. Goedeken.”A Banker at War: The World War I Experiences of Charles Gates Dawes.” Illinois Historical Journal 78, no. 3 (1985): 196. Accessed April 13, 2021. http://www.jstor.org/stable/40191858.
[2] Ibid., 196–197.
[3] Ibid., 200.
[4] Ibid., 201.
[5] Ibid., 202.
[6] The loan was $30,000,000 and the Italians sent 12,000 men.
Ibid., 203.
[7] Ibid., 200.
[8] Edward Goedeken. “Charles G. Dawes Establishes the Bureau of the Budget, 1921–1922.” The Historian 50, no. 1 (1987): 41. Accessed April 15, 2021. http://www.jstor.org/stable/24446946.
[9] Ibid., 42.
[10] Ibid., 47.
[11] This equates to an overall debt of $511,166,140,350.88. Annual payments were expected of $11,617,417,280.70 in 2021.
Ibid., 52.
[12] This equates to $154,000,000,000 in 2021.
