The Economic Consequences of the Peace

The Economic Consequences of the Peace (1919) is a book written by the British economist John Maynard Keynes. After the First World War, Keynes went to the Paris Peace Conference of 1919 as a member of the British Treasury. He felt sick and left early because he thought there was no way to make a fair agreement for everyone's economy.

In his book, Keynes argued that the Treaty of Versailles and other treaties would hurt not just Germany but all of Europe and even the Allied Powers. He believed the treaties were too harsh and would bring problems for everyone.

The book became very popular and helped many people think the treaties were too unfair to Germany. This idea later influenced some to support being too kind to Hitler in the 1930s. Keynes' book made him famous as an important economist.

Context

John Maynard Keynes was an economist who studied how to understand economics in tricky situations. In 1915, he left Cambridge University to help pay for World War I. This choice upset some of his friends because they were against the war.

Keynes became an important advisor for the British government. He traveled to the Versailles Conference to help plan the peace treaty. He thought there should be no payments from Germany or that they should be small. He also believed that old war debts should be forgiven to help Britain and that the United States should offer money to help Europe recover quickly.

However, the conference mostly talked about borders and safety instead of the economy. Keynes worried that the payments being talked about would hurt Europe. The leader of the United States, Woodrow Wilson, did not agree to forgive war debts, and his team would not talk about helping with money.

Because he was unhappy and feeling sick, Keynes quit his job on May 26, 1919, before the treaty was signed. He went back to Cambridge and wrote his book, The Economic Consequences of the Peace, in just two months. The book became very popular and influenced many people who were already worried about the treaty.

Contents

Introductory

John Maynard Keynes wrote about the situation before World War I. He said that people often did not realize how unusual and unstable the economic system of Western Europe was at that time. Many assumed things would continue to improve, but this was not a safe assumption. The war began because of mistakes and poor decisions, and Keynes worried that the peace treaty after the war would make things even worse.

Europe before the War

Before the war, life in cities like London seemed stable and permanent. People thought things would keep getting better. However, there were hidden problems like competition between countries and unfair business practices that could cause trouble.

Conference

Keynes was unhappy with the peace conference after the war. He thought the leaders had different ideas about what was right, and they did not consider the economic future of Europe. He believed that the peace treaty would cause more problems instead of fixing them.

Treaty

Keynes had two main concerns about the peace treaty. First, he thought Europe needed a fair and connected economic system to prosper, but the treaty made this difficult. Second, the treaty did not follow the promises made to Germany when the war ended, which hurt the honor of the Allied countries.

Keynes explained that the promises made to end the war included fair treatment for Germany and helping all countries work together. But the treaty did not follow these promises, especially regarding money payments from Germany and changes to its borders.

Europe

Keynes criticized the treaty for ignoring the economic needs of Europe. He said there were no plans to help the defeated countries, stabilize new nations, or support countries like Russia. The leaders focused on punishing Germany instead of thinking about the future.

Keynes warned that printing too much money would cause inflation and hurt people. He also said that controlling prices by law could stop people from producing goods, leading to shortages.

Keynes pointed out that Germany and other countries were printing lots of money to cover their expenses, which would lead to more inflation. He ended with a warning that when people suffer too much, they might look for extreme solutions.

Remedies

Keynes suggested ways to improve the situation and prevent future wars. He believed that changing people's minds through education and truth was important. His ideas later influenced the peace settlements after World War II.

German influence on Keynes

While at the peace conference, John Maynard Keynes met with Carl Melchior, a German representative. Melchior shared serious concerns about Germany's struggling economy and society, which Keynes included in his book.

Keynes also attended a meeting in Amsterdam in 1919, where he worked with Paul Warburg to ask for help in reducing the payments Germany needed to make.

Success

John Maynard Keynes' book became very popular when it was released in late 1919. It was a bestseller in many countries and was soon translated into many languages. In just six months, it sold 100,000 copies around the world. This success helped Keynes become known as a leading economist.

The book included strong opinions about the leaders at the Paris Peace Conference. Keynes described Georges Clemenceau, the leader of France, as someone who believed that Germans would only understand force and would not be fair in negotiations. He talked about Woodrow Wilson, the President of the United States, saying that he was not prepared for the difficult discussions and did not have good plans. Keynes also described David Lloyd George, the Prime Minister of the United Kingdom, as very good at understanding people’s thoughts and feelings. Finally, he mentioned Vittorio Emanuele Orlando, the Prime Minister of Italy, noting that communication was difficult because of language differences.

The book helped restore Keynes' reputation and he returned to Cambridge to continue his work as an economist, becoming a leading student of Alfred Marshall.

Impact in the United States

The book was very popular and influential in the United States. It came out just before the US Senate was deciding whether to join the League of Nations. The book helped strengthen the views of those who were against joining, called the "irreconcilables", and also made others, known as the "reservationists" and led by Henry Cabot Lodge, more unsure about the treaty’s terms. Lodge, a leader in the Senate, agreed with the book’s worries about how hard the treaty was on Germany and thought it would need to be changed later. While Keynes’ book helped change many Americans’ opinions against the treaty and the League of Nations, it was President Wilson’s poor handling of the situation and his health problems that ultimately led to America not joining the League of Nations.

Impact in the United Kingdom

John Maynard Keynes described the peace treaty after World War I as extremely harsh, comparing it to a "Carthaginian peace." Many people in Britain thought the treaty's terms were unfair. This belief influenced how Britain responded to later attempts to change the treaty, especially before the Munich Agreement. In Germany, most people already felt the treaty was unfair, and the book supported that view. France was careful about using force to make sure the treaty was followed, waiting for Britain's support. Before late 1938, Britain's public did not want to get involved in another war, making British support for France uncertain.

Reception

The book faced different opinions from various experts. French economist Étienne Mantoux argued that the book greatly damaged the reputation of the Treaty of Versailles. He compared it to a famous work by Edmund Burke because of its strong effect on public opinion. Mantoux disagreed with many of John Maynard Keynes’s predictions. For example, Keynes thought Europe’s iron production would drop, but it actually increased by 10% by 1929. He also believed Germany’s steel and iron output would fall, yet by 1927, steel production had risen by 30% and iron by 38% compared to before the war.

Some historians, like Sally Marks, felt that Germany could have paid the required reparations. Others, such as A. J. P. Taylor, believed the war had shaken old financial systems but did not weaken actual production abilities. More recent scholars argue the treaty was not as harsh as many thought at the time. The book remains important in discussions about economics and peace, with a conference held in 2019 to celebrate its centenary and a book published in 2024 highlighting its lasting relevance.