Perhaps the most significant analysis of the peace treaties and the reparations imposed by the victors upon the defeated central powers after the Great War was written by a young English economist, John Maynard Keynes. Keynes, who worked for British Treasury, was present as an advisor to Prime Minister Lloyd George in Paris for the debates surrounding the Versailles Treaties.
Keynes' most famous work is The General Theory of Employment, Interest and Money(1936) which influenced a generation of 'Keynesian' economists who looked to Keynes to explain the economics of the Great Depression.
An excerpt from John Maynard Keynes, "The Economic Consequences of Peace," 1920.
"This chapter must be one of pessimism. The Treaty includes no provisions for
the economic rehabilitation of Europe, - nothing to make the defeated Central
Empires into good neighbors, nothing to stabilize the new States of Europe,
nothing to reclaim Russia; nor does it promote in any way a compact of economic
solidarity amongst the Allies themselves; no arrangement was reached at Paris
for restoring the disordered finances of France and Italy, or to adjust the
systems of the Old World and the New.
The Council of Four paid no attention to these issues, being preoccupied with
others, - Clemenceau to crush the economic life of his enemy, Lloyd George to do
a deal and bring home something which would pass muster for a week, the
President to do nothing that was not just and right. It is an extraordinary fact
that the fundamental economic problems of a Europe starving and disintegrating
before their eyes, was the one question in which it was impossible to arouse the
interest of the Four. Reparation was their main excursion into the economic
field, and they settled it as a problem of theology, of politics, of electoral
chicane, from every point of view except that of the economic future of the
States whose destiny they were handling [. . .]
The essential facts of the situation, as I see them, are expressed simply.
Europe consists of the densest aggregation of population in the history of the
world. This population is accustomed to a relatively high standard of life, in
which, even now, some sections of it anticipate improvement rather than
deterioration. In relation to other continents Europe is not self-sufficient; in
particular it cannot feed itself. Internally the population is not evenly
distributed, but much of it is crowded into a relatively small number of dense
industrial centers. This population secured for itself a livelihood before the
war, without much margin of surplus, by means of a delicate and immensely
complicated organization, of which the foundations were supported by coal, iron,
transport, and an unbroken supply of imported food and raw materials from other
continents. By the destruction of this organization and the interruption of the
stream of supplies, a part of this population is deprived of its means of
livelihood. Emigration is not open to the redundant surplus. For it would take
years to transport them overseas, even, which is not the case, if countries
could be found which were ready to receive them. The danger confronting us,
therefore, is the rapid depression of the standard of life of the European
populations to a point which will mean actual starvation for some (a point
already reached in Russia and approximately reached in Austria). Men will not
always die quietly. For starvation, which brings to some lethargy and a helpless
despair, drives other temperaments to the nervous instability of hysteria and to
a mad despair. And these in their distress may overturn the remnants of
organization, and submerge civilization itself in their attempts to satisfy
desperately the overwhelming needs of the individual. This is the danger against
which all our resources and courage and idealism must now co-operate.
On the 13th May, 1919, Count Brockdorff-Rantzau addressed to the Peace
Conference of the Allied and Associated Powers the Report of the German Economic
Commission charged with the study of the effect of the conditions of Peace on
the situation of the German population. "In the course of the last two
generations," they reported, "Germany has become transformed from an
agricultural State to an industrial State. So long as she was an agricultural
State, Germany could feed forty million inhabitants. As an industrial State she
could insure the means of subsistence for a population of sixty-seven millions;
and in 1913 the importation of foodstuffs amounted, in round figures, to twelve
million tons. Before the war a total of fifteen million persons in Germany
provided for their existence by foreign trade, navigation, and the use, directly
or indirectly, of foreign raw material." After rehearsing the main relevant
provisions of the Peace Treaty the report continues: "After this diminution of
her products, after the economic depression resulting from the loss of her
colonies, her merchant fleet and her foreign investments, Germany will not be in
a position to import from abroad an adequate quantity of raw material. An
enormous part of German industry will, therefore, be condemned inevitably to
destruction. The need of importing foodstuffs will increase considerably at the
same time that the possibility of satisfying this demand is as greatly
diminished. In a very short time, therefore, Germany will not be in a position
to give bread and work to her numerous millions of inhabitants, who are
prevented from earning their livelihood by navigation and trade. These persons
should emigrate, but this is a material impossibility, all the more because many
countries and the most important ones will oppose any German immigration. To put
the Peace conditions into execution would logically involve, therefore, the loss
of several millions of persons in Germany. This catastrophe would not be long in
coming about, seeing that the health of the population has been broken down
during the War by the Blockade, and during the Armistice by the aggravation of
the Blockade of famine. No help however great, or over however long a period it
were continued, could prevent these deaths
en masse." "We do not know,
and indeed we doubt," the report concludes, "whether the Delegates of the Allied
and Associated Powers realize the inevitable consequences which will take place
if Germany, an industrial State, very thickly populated, closely bound up with
the economic system of the world, and under the necessity of importing enormous
quantities of raw material and foodstuffs, suddenly finds herself pushed back to
the phase of her development, which corresponds to her economic condition and
the numbers of her population as they were half a century ago. Those who sign
this Treaty will sign the death sentence of many millions of German men, women
and children."
I know of no adequate answer to these words. The indictment is at least as
true of the Austrian, as of the German, settlement. This is the fundamental
problem in front of us, before which questions of territorial adjustment and the
balance of European power are insignificant. Some of the catastrophes of past
history, which have thrown back human progress for centuries, have been due to
the reactions following on the sudden termination, whether in the course of
nature or by the act of man, of temporarily favorable conditions which have
permitted the growth of population beyond what could be provided for when the
favorable conditions were at an end."
To read the full text in PDF:
John Maynard Keynes, "The Economic Consequences of Peace," 1920
Source of Excerpt:
Modern History Source Book, Fordham University
Original Source: John Maynard Keynes,
The Economic Consequences of the Peace (New
York: Harcourt Brace Jovanovich, 1920), pp.211-216.