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The Economic Consequences of the Peace

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In this section of his book The Economic Consequences of the Peace, John Maynard Keynes discusses what he believes to be the failings of the Treaty of Versailles.  He believes that the treaty will cause the economic situation in Europe to worsen, as well as fail to prevent future animosity amongst the opposing countries, stating that it contains “…nothing to make defeated Central Europe into good neighbors.”  Keynes’ views appear to be more similar to those of Woodrow Wilson in his 14 Points than those expressed in the official treaty, arguing that the treaty did too much to harm Germany.

Keynes offers many predictions as to how the treaty will throw Germany and blames the selfish wants of the leaders who drafted it for this.  He writes that the treaty has given Germany no means as to care for its people–most of the war debts have been placed upon them, making importing necessary resources from other countries near impossible.  Germany had already been weakened by the Allied Blockade during the war, making famine and death on a large scale inevitable under the conditions which the treaty created.  Immigrating out of Germany was also a challenge due to the large amounts of animosity directed toward them after the war, and the Treaty of Versailles forced them to take all blame for the war.  All of these harsh punishments both directly and indirectly imposed on Germany created a lasting bitterness which eventually led to even greater conflict.

Keynes’ views on post-war European economics are similar to those of Mark Mazower, who ascertains in Dark Continent that “Europe’s economic life was in chaos” (Mazower 104).  While Keynes focuses on Germany, he also argues that the rest of Europe is unprepared for such a great economic disaster that is to come.  His predictions that this economic turmoil will lead to even more conflict are accurate, as it allowed for the rise of vengeful leaders.  The poor economic conditions of post-war Europe are one of the greatest indirect causes of World War II.

John Maynard Keynes: The Economic Consequences of the Peace, 1920.

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In this article, Keynes talks about the Treaty of Versailles, and it’s failure to address the economic issues of a post-Great War Europe. He states that victorious Allied powers fail to realize that the stability of Europe, and thereby the stability of both France and Britain as well, is reliant on a complicated system of continental and global trade, which the Treaty attempts to disintegrate.

He focusses on Germany and uses them as a representative of post-war Europe. He believes that the booming population levels, in relation to the rapidly increasing pre-war industrial levels, would not be able to survive with the territorial and financial sanctions the Treaty proposes. His prediction is proven by Mazower in his text “Dark Continent”. Mazower states that because the smaller Central and European nations did not have sufficient resources, they suffered in the post-Great War period. It was only with American loans were they able to initially recover, and thus through American liquidation during the Great Depression they were thrown back into economic turmoil. Alternatively, Russia was self-sufficient during the interwar period, and thus was an economic success, admittedly with a large human cost (Mazower, p.124-5). Finally, Mazower states that while autarky was a good short term plan, in the long run it was detrimental to the Russian economy (Mazower, p.119), especially in comparison to the trading-centric post-World War Two continental economies.

While Keynes’ criticisms are economically valid, he fails to address the volatile political situation of 1919. A perfect example of this revenge-based politics is the War guilt clause written into the Treaty of Versailles. This was unnecessary addition economically, but was an important political addition, especially to the democratic governments in Britain and France. In my opinion, Keynes, while economically correct, fails to acknowledge the context of the Treaty signing, and thus fails to provide viable alternative solutions.