Hughes' dictatorial manner did not sit well with those adversely
affected by his actions. In determining the appropriate tonnage and
ratios, Hughes resorted to a stringent formula that overrode the
recommendations of the General Board, the policy arm of the U.S. Navy
Department, which had counted on the completion of the 1916 naval
construction plan. He enraged the admirals who believed that such
drastic cuts jeopardized national security and naval defense. They
also protested treaty prohibitions against fortifying American
islands in the Pacific. The British admiralty was equally furious at
Hughes for forcing it to revise its naval blueprints to conform with
the weight restrictions. The French delegates were irate over the
secret rendezvous of the spokesmen of the Big Three (the United
States, Great Britain and Japan) who were empowered by their
governments to make decisions on the spot. The French hissed,
accusing Hughes of engaging in an Anglo-American conspiracy to assign
their nation a parity with Italy, a country they considered to be of
lesser nobility. (Some things never change.)

While progress in naval disarmament captured worldwide attention,
redressing the imbalance in the power structure in the Far East and
Pacific, where many vested commercial interests were directly
affected, required a more subtle diplomacy. Hughes identified a
debilitated China as the main source of turbulence in the region. The
primary task of the follow-on negotiations was to render "the
greatest help possible to the Chinese people in developing a stable
and effective government really representative of the people of
China." Hughes justified American intrusion into Chinese affairs on
the basis of the Open Door policy, which had acquired a strategic
import well beyond its initial aim of creating equal opportunity for
trade. Hughes saw the Open Door doctrine, broadened in 1900 to
include the recognition of the territorial integrity of China, as
consistent with both a strong American role in the Far East and its
anti-imperialist code of conduct.

These broader Open Door principles were fully embodied in a
nine-power treaty drafted by former Secretary of State Elihu Root, a
delegate to the conference. Its declaration of intent, acclaimed as
the "Magna Carta for China", reflected a moral pledge to guarantee
its territorial integrity, but it relied only on the good faith of
the signatories to honor their legal commitments. Other more concrete
achievements are worth noting, however. Through the good offices of
Hughes and the chief British delegate, Lord Balfour, Japan returned
Shantung to China--as noted above--which it had taken from Germany
during the Great War, while Great Britain and France relinquished
some of their holdings on China's coastline. Additional specific
steps were taken to strengthen China's political and economic
structures.

The 1921-22 Washington Conference changed the course of U.S. foreign
policy in the Far East. Britain wisely conceded the inevitability of
sharing power with the United States in East Asia and came to
strongly support American positions. Japan, then governed by a
liberal regime, was also amenable to moderating its policies and
looked forward to improving trade relations with China. While the
agreements and resolutions lacked provisions for enforcement, relying
on consultation if disputes in the area should arise, they did manage
to quell the roiling waters of the Far East and Pacific for a decade.
To Secretary of State Henry Stimson's later dismay, the measures
assiduously put in place at the conference fell apart in September
1931 when Japan disregarded its treaty commitments and invaded
Manchuria. After the Japanese attack on Shanghai in January 1932,
Stimson wrote a letter to Senator Borah that released the United
States, and by implication the other signatories of the Washington
Conference as well, from their pledges to uphold the 1921-22
covenants. Japan's flagrant violation of Chinese sovereignty, and the
unwillingness of the United States to stand against it, represented
the final unraveling of Hughes' efforts to provide stability and
security in the region. Hughes, by then Chief Justice of the Supreme
Court, felt obliged to abjure public comment on the matter.

The Dawes Plan

A prime illustration of Hughes' special talents for developing
pragmatic solutions to problems was his adroit management of
intergovernmental indebtedness following the Great War. A unique
initiative, the Dawes Plan, rescued Germany from an economic crisis
that threatened to disrupt the flow of reparations to the victors
and, in turn, Allied loan repayments to the United States. The task
was not a simple one: Hughes had to balance the need for the
cooperation of the affected parties, the repayment of the war debts,
the Allies' right to restitution as set forth in the Versailles
Treaty, and the immediacy of Germany's financial crisis.

Hughes singled out as the root cause of Europe's economic decline the
huge reparations indemnity that the victors of the Great War were
exacting from Germany. Reparations starved the German economy of
capital and fueled inflation. The devaluation of the mark and the
contraction of the German economy, in turn, affected trade with the
rest of Europe, augmenting economic woes elsewhere on the continent.
In late March 1921, a distraught German government, unable to meet
the terms of a rigid payment schedule, beseeched the U.S. government
to intervene on its behalf. Not one to rush into a delicate situation
without forethought, Hughes declined to act; but did not rule out an
American role at some future date. In the meantime, he commenced to
think and plan.

In Hughes' view, the situation could never be rectified if left in
the hands of biased politicians who, by their instincts and
predilections, were incapable of reaching a realistic settlement
based on what Germany could pay. Their persistent haggling was much
in evidence at a series of meetings of the Reparation Commission
established under the Versailles Treaty to assess Germany's
obligation. On December 29, 1922, an exasperated Hughes finally
determined that the issue should be turned over to "men of highest
authority in finance in their respective countries" who could best
judge the state of Germany's economy and its capacity to manage the
indemnity. But neither France nor Belgium were amenable. In
retaliation for Germany's default on its reparations, their troops
seized the Ruhr in early January 1923. Amid a general strike and
panic in German markets, the country's credit collapsed and the
German mark was rendered virtually worthless.

Hughes now saw the urgency of the problem and, luckily, American
intervention was aided by a change of heart in the office of the
French Prime Minister, Raymond Poincaré. Once France softened its
position, Hughes created an American presence in new negotiations of
the Reparation Commission by urging the creation of two independent
committees with no connection to the Versailles Treaty. Hughes then
selected three prominent financiers as unofficial advisers to these
committees--Charles B. Dawes, Owen D. Young and Harry P.
Robinson--with the understanding that they were to serve as private
citizens and to make recommendations only. Judicious and correct,
Hughes had the invitations mailed to their homes, lest some
Congressmen contend that the U.S. government was slighting the
Senate's direction to keep a distance from Versailles.

Dawes, a Chicago banker and former head of the Bureau of the Budget,
chaired the more prominent of the two committees. He identified as
central to the restoration of Germany's credit the twin tasks of
budget balancing and currency stabilization. That judgment served as
the basis from which all measures of reform evolved. His final
report, which extended far beyond the original mandate, was a
comprehensive examination of the structural problems in the German
economy. It prescribed the steps required to restore the government's
solvency and allow the country to meet its financial
responsibilities. The thickly-documented economic blueprint was
welcomed by American and European businessmen, who saw the need to
base Germany's economy on sound fiscal principles.

Hughes' perception of Europe's worsening economic condition and his
faith in the Dawes Plan obliged him to campaign for its acceptance
during a visitto Europe in the summer of 1924. In France, he told
Premier Edouard Herriott that his cabinet "must endorse" the plan. In
Germany, he warned Foreign Minister Gustav Stresemann that, if the
Dawes recommendations were not accepted, America "was finished" with
trying to mediate the problem. Hughes was a brinksman extraordinaire
(when Richard Nixon was only eleven years old). To Hughes, the Dawes
Plan was the best way to ensure the peace and prosperity of the
continent, which ultimately would benefit the United States in trade
and war debt repayments. While the plan was clearly an American
initiative, it was unofficial and did not require approval by the
Congress. (Nor, therefore, could it be derailed by the Congress.)

The Dawes Plan did not require any Congressional appropriations. The
financial transfusion that began in October 1924 relied primarily on
the American private sector as the source of funding. Wartime
animosities were set aside as individual investors rushed to take
advantage of the higher yields offered on German government bonds
backed by gold when they were floated on the New York Stock Exchange.
In total, Germany received an estimated $2.5 billion, which was
deposited into reparations accounts, and $2.6 billion returned in
time to the United States from 15 debtor nations. For the next five
years the German reichsmark fluctuated less on the foreign exchanges
than did other European currencies, and American businesses profited.