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John Maynard KeynesThe Economic Consequences of the Peace
Nonfiction | Book | Adult | Published in 1919A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Themes
Germany’s War Guilt, European Economic Integration, and the Treaty of Versailles
The main theme of The Economic Consequences of the Peace is the harm that implementing the Treaty of Versailles (1919) after World War I would cause not only to Germany but to all of Europe. Because Keynes’s forecast—one of the earliest—on this subject turned out to be accurate in many ways, it is important to examine his arguments.
Keynes builds the case for continental European integration in every chapter of this book by using historical developments in the late 19th century, the technological advancements created by the two waves of the Industrial Revolution, the population growth, the logistical organization, and the reliance on importing resources and raw materials from the outside world such as the overseas European colonies. Russia can be excluded from this list because it was and remains a resource-rich country. Of course, the European economy of the late 19th and early 20th centuries was not integrated at the level of the 21st-century European Union and its single currency. However, continental Europe shared and continues to share many traits:
England still stands outside Europe. Europe's voiceless tremors do not reach her. Europe is apart and England is not of her flesh and body. But Europe is solid with herself. England is not of her flesh and body. But Europe is solid with herself. France, Germany, Italy, Austria and Holland, Russia and Roumania and Poland, throb together, and their structure and civilization are essentially one (6).
It is noteworthy that Keynes excludes his homeland, Britain, from this equation. However, his reasoning makes sense. Not only was Britain the biggest empire with a large pool of external resources, but it was also a major maritime power not subject to the same level of constraints as continental Europe.
At the center of the continental European economy in the late 19th and early 20th century was the economic and industrial powerhouse that was Germany. Not only did Germany challenge Britain in this regard but it also expanded into Africa and Asia as an imperialist power. The German unification and territorial expansion of 1871 led by Chancellor Otto von Bismarck played no small role in these developments. Despite lacking certain resources, Germany was rich in mining and developing iron and coal industries. The country’s production of these heavy industries was organized in such a way that these commodities were, at times, extracted in one location and processed in another. Germany invested heavily in countries like Russia. At the same time, Britain was one of Germany’s major trade partners despite the rivalry. All of its economic choices led to the level of interconnected that Keynes emphasizes throughout the book.
For this reason, the Treaty of Versailles struck Germany in the most painful ways. The Allies confiscated the merchant fleet that would allow it to continue selling goods. Losing its mining regions such as Saar to the Allies and losing territories that processed its mining products, for instance, to Poland, meant that Germany was not going to be able to participate in basic economic life that would allow it to stay afloat and pay massive reparations on top of that.
The author does not question German war guilt per se and takes it for granted. His belief, therefore, is rooted in the fact that excessively punishing Germany would harm it for a significant length of time, including its younger generation that was not complicit in causing the war. The second reason is the level of European economic interconnectedness and logistical organization of the industries in which punishing Germany would harm all of Europe. The third reason is that the Allies’ claims were not rooted in reality, but rather in emotion and revanchism. For example, Keynes argues that “[i]n so far as the main economic lines of the Treaty represent an intellectual idea, it is the idea of France and of Clemenceau” (17). The author’s argument, therefore, is, in part, ethical, and, in part, scientific, as he calls it.
It is important to note that many scholars have since argued that the causes of World War I were far more complex than singlehandedly placing the war guilt on Germany. For example, Europe had a complicated system of secret alliances that challenged each other. Indeed, Wilson’s Fourteen Points argued against such secret treaties. There was also an imperial rivalry between the European powers at this time. Some historians even refer to World War I as an imperialist war in which, ironically, three major empires dissolved: the Austro-Hungarian, Ottoman, and Russian Empires.
In many ways, Keynes’s forecast turned out to be accurate. Within the next few years, Weimar Germany faced economic collapse and hyperinflation, in which bread cost an unimaginable 200 billion German marks. The country was unable to pay reparations, which led Belgium and France to invade its rich industrial area, the Ruhr, in 1923, causing the Ruhr Crisis.
Solutions to help Germany at this stage also mimicked the author’s own proposals. For example, an important part of his final chapter, “Remedies,” is focused on offering Germany international loans to stabilize its economy and allowing the country to develop economically while paying a more reasonable amount of war reparations. In 1924, the Americans launched the Dawes Plan which offered Germany loans, initiated the restructuring of its Reichsbank, and stabilized its currency. The plan worked, and the subsequent 1929 Young Plan sought to determine its outstanding reparations and make them manageable. The Great Depression which commenced that same year halted this economic program. Four years later, Adolf Hitler—in part, a product of Europe’s woes at this time—came to power and rejected the obligations defined by the Treaty of Versailles altogether.
The Big Four and the Paris Peace Conference
Keynes famously resigned from advising the British Prime Minister David Lloyd George at the Paris Peace Conference (1919-1920) to protest the unfair and harmful terms of the Treaty of Versailles. He immediately began to write his book, The Economic Consequences of the Peace, which was released at the end of 1919. Yet it was not the economic arguments that caught the public’s attention. Instead, the book became known for its colorful and, at times, negative descriptions of the Big Four: the British Prime Minister Lloyd George, the French leader Georges Benjamin Clemenceau, the Italian Prime Minister Vittorio Orland, and, of course, the American President Woodrow Wilson. So much so that some considered Keynes to be too rebellious and seeking to cause scandal for scandal’s sake.
Overall, Keynes’s eyewitness account is an important historical document. It provides a unique look into the negotiations, the personalities and personality clashes, as well as the constraints under which the Big Four operated. These issues enhance the readers’ understanding of the reasons why the Treaty of Versailles turned out the way it did beyond the hard numbers presented in the economic chapters of this book.
For example, the author describes Orlando as being lost in translation: the Italian did not speak English and could not communicate with the Anglo-Americans directly. Indeed, he could not communicate with President Wilson who only spoke English. These seemingly small details underscore the complexity of the Paris Peace Conference, and, in part, help explain why Italy did not get some of its claims at that event.
President Wilson came across as a revered international leader who turned out to be vague, stubborn, and unable to compromise. Lloyd George seemed devilishly smart but was, at the same time, distracted by his domestic electorate and issues linked to Britain’s General Election of 1918. Of the four leaders, it was Clemenceau who was, perhaps, the most seasoned leader with a long career of activism, journalism, and politics. Yet, argues Keynes, it was revanchism, French interests at the expense of Germany, and exaggerated wartime claims that drove Clemenceau. And it was his ideas that were later expressed in the Treaty of Versailles, in the author’s view.
Of course, it is important to note that Keynes’s perceptions are not only somewhat subjective but also linked to the values of the time that the 21st-century reader may find perplexing. For example, Keynes relies on ethnocultural stereotypes tending, at times, toward xenophobia or racialism throughout the book. He links Wilson’s obstinate behavior with his Presbyterian upbringing. Keynes also believes that the Belgians were too concerned with their own interest to the point of using the invading Germans to their benefit. Similarly, for Clemenceau, the Germans only understood the language of power, as Keynes reports.
The British leader Lloyd George was effectively Keynes’s boss. For this reason, any descriptions of him that may have come across in a negative light would have been perceived in a particularly scandalous way when the book was first released. The author examined the way in which his former boss put too much emphasis on Britain’s victory in World War I as his political platform. In the author’s view, the latter was short-sighed. Nonetheless, Keynes complimented Lloyd George by calling him an excellent tactician:
What had really happened was a compromise between the Prime Minister's pledge to the British electorate to claim the entire costs of the war and the pledge to the contrary which the Allies had given to Germany at the Armistice. The Prime Minister could claim that although he had not secured the entire costs of the war, he had nevertheless secured an important contribution towards them, that he had always qualified his promises by the limiting condition of Germany's capacity to pay, and that the bill as now presented more than exhausted this capacity as estimated by the more sober authorities (64).
At the same time, he compares his former boss to a wizard-like, superhuman character ready to trick President Wilson who was akin to the naive Don Quixote:
To see the British Prime Minister watching the company, with six or seven senses not available to ordinary men, judging character, motive, and subconscious impulse, perceiving what each was thinking and even what each was going to say next, and compounding with telepathic instinct the argument or appeal best suited to the vanity, weakness, or self-interest of his immediate auditor, was to realize that the poor President would be playing blind man's bluff in that party (21).
The author also uses Wilson as a personification of the New World and Lloyd George—as one of Old World to argue that the New World was no match for the Old counterpart.
Keynes even spends a significant amount of time describing the physical appearance of both Clemenceau and Wilson. Clemenceau came across as a dignified older individual wearing “a square-tailed coat of very good, thick black broadcloth,” boots made of “thick black leather,” and “gray suede gloves” (17). He was not “lacking vigor” but nonetheless appeared to be a “very old man conserving his strength for important occasions” (17). Such descriptions make Clemenceau seem a wise and very experienced statesman. Yet this wise old man was motivated by revanchism and a “crushing” policy toward Germany (61). His “aim was to weaken and destroy Germany in every possible way, and I fancy that he was always a little contemptuous about the Indemnity; he had no intention of leaving Germany in a position to practise a vast commercial activity (61-62).”
Wilson, in contrast, “enjoyed a prestige and a moral influence throughout the world unequaled in history” (20). His dignified profile looked just like his official portraits. Yet behind this aristocratic appearance was a stubborn man who refused to compromise and who was unable to distill the vague ideas of the Fourteen Peace Points into a more practical format. His mind was “too slow and unresourceful,” in Keynes’s view (22). Whereas such qualifications make each of the leaders come across as unembellished and perfectly human, the reader can understand why the original audience of this book may have perceived them as scandalous.
Finally, Orlando received the least amount of attention from the author. Perhaps, Keynes considers his influence on the proceedings of the conference to be less important. The author uses him to make a point about language barriers. Orlando spoke French and could only communicate with Clemenceau directly. The President and British Prime Minister only spoke English. As result, Orlando was unable to communicate with his American counterpart and act more assertively.
Overall, Keynes’s personality sketches provide a rich layer of detail to a book that is otherwise focused on examining economic data. Here, the reader encounters Keynes, the man who was exacerbated by the Paris Peace Conference and its eyewitness—rather than Keynes, the objective economist.
Keynes’s Literary References and Their Meaning
An unexpected theme in Keynes’s book is its literary references. After all, when one thinks of texts on economics, one imagines data tables rather than Leo Tolstoy and Willian Shakespeare. Several literary references appear in those chapters in which the author discusses general questions, such as the mood at the Paris Peace Conference, not those that investigate the numerical data of the Treaty of Versailles. It appears that the author seeks to achieve maximum objectivity in his analytically oriented chapters. Yet, at the same time, as a participant and a critic of the Paris Peace Conference, he also seeks to create a space to express his disdain for the harm that the principal postwar agreement would cause to Germany and Europe. Keynes’s disdain must have been significant indeed if he chose to resign from a prestigious position at the British Treasury. Where words fail, well-known works of literature may be helpful.
Let us briefly examine four key literary references in The Economic Consequences of the Peace. They are Leo Tolstoy’s War and Peace (1865), Thomas Hardy’s The Dynasts (1904), William Shakespeare’s Macbeth (early 17th century), and Percy Shelly’s Prometheus Unbound (1820). All are well-known works that would be recognizable to the reader. Therefore, these texts provide an additional layer to understanding the complexities of international politics, economic entanglements, and historic precedents.
First, the author makes a reference to Leo Tolstoy’s long novel War and Peace. Tolstoy’s extensive book is an examination of life, relationships, society, and timeless philosophical questions during the Napoleonic Wars. Russians typically refer to this period as the War of 1812—the year when Napoleon’s troops invaded Russia. The turbulent events went as far as the burning of Moscow to avoid handing it over to the enemy. Three years later, however, Russian Cossacks were drinking champagne in the streets of Paris. For the British, the Battle of Waterloo (1815) would have been a key event in this context.
Indeed, the Napoleonic Wars were the most important international conflict in 19th-century Europe. The conflict concluded with the Congress of Vienna (1814-1815), which reestablished the balance of power on the continent. Periodically, European leaders met at subsequent events in the framework of the Concert of Europe to maintain peace. Of course, there were other armed conflicts in Europe in the 19th century, including the Greek war of independence (1821-1832), the Crimean War (1853-1856), and the Russo-Turkish War (1877-1878). However, these armed conflicts were more limited in scope than the Napoleonic Wars. Hence the perception of a relatively peaceful 19th century after Napoleon Bonaparte. Keynes, therefore, mentions the Napoleonic Wars as a point of comparison to World War I—the first international conflict of the 20th century. He also calls the latter a European civil war. Whereas the two conflicts were different in key areas, the fundamental questions about the European power balance and alliances remained the same.
The second reference is to Thomas Hardy’s The Dynasts—a closet drama, which relies on both prose and verse. This work also addresses the same subject, the Napoleonic Wars. However, the author brings it up to underscore his perception that the events at the Paris Peace Conference seemed otherworldly and beyond human agency. Specifically, Keynes includes Act 7, Scene I. This scene features an interaction between the Spirit of the Pities and the Spirit of the Years, “Why prompts the Will so senseless-shaped a doing?” the Spirit of the Pities addresses its counterpart (7). “I have told thee that it works unwittingly / As one possessed not judging,” the Spirit of the Years answers (7). The economist’s personal experience at the Paris Peace Conference made him feel that there was a sense of foreboding—of “events marching on to their fated conclusion” (6). It is understandable that the economist felt helpless when the British delegation failed to accept his sound advice. It is, perhaps, for this reason, that he makes it seem as if the events of Paris surpassed human agency.
Keynes emphasizes this unsettling feeling further when he brings up Act 1 Scene 1 from Shakespeare’s Macbeth:
Fair is foul, and foul is fair,
Hover through the fog and filthy air (25).
These famous lines underscore the deceptive appearances at the postwar conference. Indeed, they show a reversal of values: that which is bad—the Treaty of Versailles—is perceived as being good. The author also describes to the “witches of all Paris” (25) and the way in which “the subtlest sophisters and most hypocritical draftsmen were set to work” and deceived everyone around them. These were the diplomats and lawyers whom Keynes later charged with obfuscating the question of German reparations.
The final reference is to British author Mary Shelley’s novel Prometheus Unbound. Like Hardy’s work, Prometheus Unbound is also a closet drama. Its subject is an ancient Greek mythological figure of Prometheus who was punished by the gods for giving fire to humans. Keynes quotes the lines said by a Fury, a vengeful deity:
In each human heart terror survives
The ruin it has gorged: the loftiest fear
All that they would disdain to think were true:
Hypocrisy and custom make their minds
The fanes of many a worship, now outworn.
They dare not devise good for man's estate,
And yet they know not that they do not dare.
The good want power but to weep barren tears.
The powerful goodness want: worse need for them.
The wise want love; and those who love want wisdom;
And all best things are thus confused to ill.
Many are strong and rich, and would be just,
But live among their suffering fellow-men
As if none felt: they know not what they do (123).
These lines contain a number of relevant links to Keynes’s text. One of the overall themes in the Promethean myth is that of punishment, and that is the author’s view of the Treaty of Versailles. It is a punitive document rather than a pragmatic one. Second is the theme of vengeance. Keynes repeatedly indicts the Allies in general, and Clemenceau, specifically, for seeking revenge against Germany. Third is the apparent blindness on the part of the Allied leadership to the severity and the harm of the Treaty of Versailles, “they know not what they do” (123). Fourth is the theme of Promethean suffering. On the same page, the author underscores “the sufferings of the past five years” that ordinary Europeans experienced during World War I (123). This suffering may continue, in his view, because the provisions of the Treaty of Versailles would compound upon the dismal postwar conditions in Europe. Indeed, as Prometheus was meant to suffer eternally by being chained to a mountain, Germany was meant to pay reparations in perpetuity.
