Customer Reviews

The Economic Consequences of Peace

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Keynes took the opportunity proffered to him in 1919 to voice the fears of many of his fellow countrymen that the treaty recently signed at Versailles stripping Germany of it's colonies, a substantial portion of it's population, all it's overseas concessions, its air force, any place at the League of Nations and an enormous amount in reparations payments to be made over the coming years, was an act of consummate folly that would only lead to future war. He took great pains to point out the folly of the French position at the conference, namely to be as extreme as possible, cognisant of the fact that their claims would be moderated and noted that in several cases where the British and US delegations had no specific interest, provisions were passed 'on the nod' which even the French would not have subscribed to. Keynes was damning about both Clemenceau and Wilson and pointed out that almost everything had been done which 'might impoverish Germany now or obstruct her development in future' and that to demand such colossal reparations without any real notion of whether Germany had the means to pay was foolhardy in the extreme.

Keynes book provided a fulcrum for British doubt about the treaty and an avenue for British sympathy with the fledgling German Republic. Keynes made treaty revision a thing of morality and enlightened self interest to avoid 'sowing the decay of the whole of civilised life of Europe'.

Great British economist John Maynard Keynes second book recounts his assessment of the economic consequences of the Treaty of Versailles, where he was a member of British delegation as an economic expert.
Keynes starts with providing a dazzling psychological analysis on how the treaty came to be.
"When President Wilson left Washinghton he enjoyed a prestige and a moral influence throughout the world unequalled in history ... Never had a philosopher help such weapons wherewith to bind the princes of this world. How the crowds of the European capitals presses about the carriage of the President! With what curiosity, anxiety, and hope we sought a glimpse of the features and bearing of the man of destiny who, coming from the West, was to bring healing to the wounds of the ancient parent of this civilization and lay for us the foundations and the future"
Alas, this was not to be. American idealism, French quest for security and British distaste for alliances and hypocrisy created an unworkable solution. Soul of the treaty was sacrificed to placate domestic political process, and as the result put Germany in the position of defiance and economic insolvency; the position which at the bottom drew sympathy from the former Allies and as the result contributed to brutality of the second conflict.
Keynes draws a picture of pan-European economy which was destroyed by the treaty and rightfully predicted that not only Germany will not be able to pay, but will be obligated to pursue the expansionist policy at the expense of her weak Eastern neighbors. Treaty did not contain any positive economic programme for rehabilitation of the economic life of Central powers and Russia. One just could not disrupt the economic position of the greatest European land power, at the same time strengthening it geo-politically and suffer no horrible retribution. ""The Peace Treaty of Versailles: This is not Peace. It is an Armistice
for twenty years." - said Foch about such a agreement.

The late James J. Martin remarked that those who did not think that The Versailles Peace Conference did not have anything to do with World War II should read Keynes to correct this false notion. John Maynard Keynes (1883-1946)was one of the early "revisionists" who clearly saw how destructive the Versailles Treat was. He also had insight into the political leaders who forced this Carthaginian peace on the Germans.

Keynes was a representative of the British delegation to Versailles in 1919 and soon resigned in protest. He diagnosed the defects of Pres. Woodrow Wilson who was supposedly the most influential man at Versailles. Keynes accurately described Pres. Wilson as a naive Don Quixoti who had no knowledge of European History or basic diplomacy. Wilson was under the illusion that his status would be enough to impose his Fourteen Points and League of Nations on Eureopan leaders who were hard hearted and did not care for such naive idealism. Pres. Wilson was in a den of thieves and was not aware of it. Wilson could not evaluate the situation and was too self righteous to negotiate intelligently. Pres. Wilson thought he would impose the Versailles in the Americans, get the Americans to join the League of Nations, and end sin throughout the world. He obviously failed miserable as events proved. Members of the United States even refused to ratify the Versailles Treaty, and the Americans never did join the League of Nation.

Keynes goes into precise detail to explain what the World War I and the Versailles Treaty was doing and would do to those in German and in Central and Eastern Europe. Keynes gave pricise details of malnutrition, lack of medical care, etc. and also gave a precise account of the health effects that deprivation caused these people.

Keynes is just as precise in explaining the effects of looting the Germans with a huge reparation bill of $50 billion. If one can account for the increase of inflation between 1919 and now (2006), the bill may be fifty to a hundred times higher. This imposition was placed on Germans who lost their merchant marine fleet, colonies, and territroy. Added to that was the privations of World War I and the cruel blockade of the Germans by the British after hostilities ended.

However, Keynes was perceptive enough to know that if the German economy collapsed, eventually the European economies would also collapse. The Germans were advanced in steel production, chemical industries, etc. Prior to World War I, the Euroepans, friends and foes, relied more on German economic production and trade than they willing to admit. In other words, if the German economy collapsed, it was only a matter of time that much of Europe would follow.

Keynes wrote this book in 1919, and events in Europe took place as Keynes suggested they would. Those who argue that the "allies" should have intervened in German earlier that 1939 should realize that the time for interventions was in 1919 when a sensible peace treaty based on negotiations would have muted any German resentment. The laissez-faire and free market lads have blamed Keynes for all the woes in the West since World War I. The fact is Keynes did not create the modern state and the problems that have occured. All he did was view a bad situation and made a reasoned response to it.

This book achieved instant fame when it was published in 1919, not only for its scathing criticism of the Versailles Treaty but also for its personal attacks against leading signatories (especially Clemenceau and Wilson). For a book focused primarily on economic concerns, the text is surprisingly easy to read. However, the book's poor organization vitally detracts from its effectiveness. The principle reason the book is still famous today lies in the fact that it was written by none other than John Maynard Keynes, the founder of 20th century style, gov't & debt driven economics.

The book is organized into chapters on pre-war Europe, Allied statesmen, summary of key treaty points, reparations, post-war Europe predictions, and Keynes' suggestion of remedies to provide a practical treaty settlement. Unfortunately, within each chapter things are jumbled together without clear rhyme or reason. (Is this indicative of Keynes' own personal organization and logical thinking?)

Within the book, he makes a very practical (but politically infeasible) argument for a non-vindictive treaty. He basically suggests that the Allies should forget both about reparations and repayment of wartime debts from the other Allies, and instead they should settle (though not ideally) for frontier adjustments and confiscation of only German gov't property. (Did the German gov't sponsor Keynes' work in writing this book?)

Keynes argues that a crushing reparations burden on the German people would disincent them to produce anything beyond a mere subsistence minimum and discourage entrepreneurial enterprise. There is some logic in this point; however, later on he goes on to state that the US should forgive its $10 billion debt to its wartime allies ($5 billion of which was owed by the UK). Forgive me if I'm wrong, but doesn't such a move disincent American entreprises from entrepreneurship as well. It's extremely hypocritical that the Allied gov'ts desperately sought loans from the US during the war and then once it was over to claim that they couldn't pay them. If they didn't want to repay, then they shouldn't have borrowed the money - period. (If I borrow money to buy a home, the bank won't ever agree to forgive my debt - regardless of whether I'm out of work, injured, or the house burns down. I don't see why gov'ts should get any exceptional treatment.)

Notwithstanding his problems with disorganization and inconsistent logic, Keynes does produce a reasonable, brief list of treaty rememdies, especially in his efforts to restore economic life throughout Central and Eastern Europe. Not until the advent of the Cold War and the interests of extending American political influence would Keynes' policies largely succeed (albeit yet again to the detriment of American taxpayers).

Overall, I felt the book was ok. I would only recommend it if you have an interest in reading all of Keynes' work. Don't expect to find any theoretical economic insights in the book, though.