Diplomacy and Economics in Interwar Europe

In what ways were diplomacy and economics linked in this decade?

In my opinion, diplomacy and economics were linked in the 1920s in essentially two regards, i.e., with regard to French-German relations and to American-European relations. On the one hand, the economic situation in Germany had a direct impact on the extent to which it was able to meet its responsibilities to pay reparations to France, with immediate repercussions in most cases to the diplomatic relationship between the two countries. On the other hand, as the United States drifted into neutrality and non-interventionism, the extent to which this position was reflected in its economic relationship with Europe at large was also affected.

On the former point, the key example is likely the French occupation of the Ruhr in January 1923, which came with a German default on coal payments per the Treaty of Versailles. Kathleen Burk describes the crisis thus: "[French Prime Minister] Poincaré finally decided that the only way Germany would pay reparations on the scale which had been agreed was if the United States loaned her the money, and France occupied the Ruhr essentially to force the Americans to do so."[1] The diplomatic and economic response was the Dawes Plan, which "tacitly assumed an immediate end to the economic occupation and reduction of the military occupation to a skeleton force."[2] The occupation of the Ruhr notwithstanding, the Dawes Plan was effective in forestalling complete collapse of the German economy and so can be considered a diplomatic victory.

On the latter point, Burk's review of Melvyn Leffler's The Elusive Quest praises Leffler's approach to American policy during the 1920s as properly considering both economic expansionism and political isolationism.[3] Pointing out the primary American goal of providing security for France and revitalizing Germany's economy, she notes that the U.S. policy on Europe was one that had abandoned the notion of European stability as "not of vital importance."[4] That the Coolidge administration nevertheless implemented the Dawes Plan indicates that the U.S. regarded the German economy as more important than French security. Thus, the U.S. had conceded the supremacy of economics over diplomacy, although the plan affected both economics and diplomacy positively in Europe, at least with regard to forestalling a war between France and Germany and/or German collapse.
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[1] Kathleen Burk, "Economic Diplomacy Between the Wars," Historical Journal, 24, no. 3 (1981): 1005.
[2] Sally Marks, "The Myths of Reparations," Central European History, 11, no. 3 (1978): 246.
[3] Burk, ibid., 1011.
[4] Ibid.