The Economic Consequences of the Peace

by John Maynard Keynes

John Maynard Keynes (1883-1946) was a British economist whose theories had a profound impact on twentieth century history and economic practice. Born and raised in Cambridge, England to highly successful, intelligent parents John and Florence Keynes, he attended Eton and King's College, Cambridge where he joined the intellectual group called "The Apostles" with the likes of Leonard and Virginia Woolf, E. M. Forster and Bertrand Russell. After attending the Paris Peace Conference as economic advisor to Prime Minister Lloyd George, Keynes resigned from a prominent position in the Treasury and published "The Economic Consequences of the Peace" (1919), a stinging indictment of the Versailles Treaty. Keynes expressed his opposition to the political practices that were taking place, and the work gained him instant notoriety. The impact of this, and other, works on economic method, theory and policy led to what is now termed the "Keynesian Revolution" of the twentieth century, and helped shape modern macroeconomics.

Genres: Economics, History, Nonfiction, Politics, Philosophy, Classics, War

120 pages, Kindle Edition

First published January 1, 1919

About the author

John Maynard Keynes, 1st Baron Keynes (CB, FBA), was an English economist particularly known for his influence in the theory and practice of modern macroeconomics.

Keynes married Russian ballerina Lydia Lopokova in 1925.

NB: Not to be confused with his father who also was an economist. See John Neville Keynes.

Reviews

[Jon Nakapalau · Rating 5 out of 5]

It is downright scary how accurate JMK was when he predicted that harsh economic sanctions would lead Germany down the path to extremism...another book that should be read by elected officials and military leaders. I see many similar situations occurring right now - and I do believe there is the potential for extremists to use the current economic situation to further their political agenda.

[Jonathan · Rating 4 out of 5]

I can't speak to the merits of Keynes' economic analysis or his evaluation of the post-world war international situation, even to compare it to subsequent historical events. That said, he returns again and again to the principle that states with industrialized economies are interconnected and fragile, and that wealth is contingent on the ability of each to exchange goods efficiently with each; this is surely right at the levels discussed here, and a powerful lament about the waste of total war.

The chapter describing the negotiation sessions between Clemenceau, Lloyd George, the Presbyterian minister Woodrow Wilson, and that forgettable Italian head of state are worth reading on literary merits alone. His psychological profiles reflect some poetic license but he still makes the long days of diplomacy in that fireside chamber enthralling.

The oddest parts about this, in some ways, are the passages playing up the long years of suffering endured by Europe and the bleak expected future of tired populations too hungry to rebel against ineffectual governments. He felt -- as many probably did -- that he might be writing at the end of the world. The writing is so blue as to approach purple, but it's not unjustified. They did in many ways see the end of their world.

[Graham Tapper · Rating 4 out of 5]

John Maynard Keynes is nowadays recognised as one of the greatest economists in history. But, his greatest assessment, that of the consequences of the peace settlement imposed in Europe and in particular upon the defeated nations, primarily Germany, at the conclusion of the First World War was, at the time, largely ignored.

The Peace of Paris was an attempt by the victorious nations, led by France, to extract reparation from the defeated nations, mainly Germany, for the total cost of the war. There had never before been a war even remotely like WWI and so there was no way of judging or estimating either the actual cost nor of the likelihood that the defeated nations would ever be likely to even be capable of meeting that cost, whatever it might be.

Various national leaders attended the negotiations but the primary ones were Britain's Lloyd George, France's Clemenceau and America's Pres. Woodrow Wilson. All came to the conference with very different objectives.

History has cast Clemenceau in the role of arch villain for the consequences of the peace terms imposed on Germany but Keynes saw it in a different light and cast the blame in a very different direction. Clemenceau, he concludes, did only what any prudent negotiator would do: ask for the Earth in expectation of getting half of it. It wasn't, Keynes concludes, his fault that not only did he obtain the Earth but more besides.

Lloyd George had only the objective of achieving election as Prime Minister in the General Election that was to be held shortly after the conference, and only wanted to do as much as was necessary to cast himself in as good a light as possible with the British Electorate.

But, it was for Woodrow Wilson that Keynes reserved his venom. He characterises the American President as having such modest intellect and leadership ability that it would take America nearly one hundred years to once again elect a President of comparable incompetence; no guessing who that was. Not only was Woodrow Wilson not fit for purpose but, so certain was he in his own ability (notice a trend here?) that he refused to accept advice even from his appointed advisers.

The consequence was that the negotiated peace treaty was so unfair that there never was any hope that it terms could be fulfilled by those nations upon whom it was imposed, not within even two generations. The inevitable outcome, he concludes will be the descent of Europe into turmoil, conflict and further more war. How right he was.

Keynes book is surprisingly readable. Yes, it does contain a lot of data but mostly it is an understandable and well reasoned work that anyone, that even someone without an economics background would find it easy to grasp his arguments.

So, next time someone asks you why Hitler came to power you can reply with confidence, "Because no one listened to John Maynard Keynes".

[Andreas · Rating 4 out of 5]

Before I started reading the General Theory, I thought it useful to get acquainted with Keynes' style of writing with this book, the readability of which was assured to me in Ahamed's Lords of Finance.
Keynes writes in a somewhat archaic fashion, which shouldn't surprise (you might want to check out a Youtube film in which he applauds the abandoning of the Gold Standard, Keynes could feature in any Downton Abbey episode). But the book is no difficult read, especially if you are a little familiar with the Versailles Treaty. Still, as a historian I was somewhat embarrassed how little I really knew about it. Keynes mainly reports the facts in the Treaty, but he also helpfully paints the circumstances of the signing: president Wilson is a slightly autistic reverend, who is characterised by cognitive dissonance, Clemenceau a relentless avenging angel and Lloyd George an opportunistic politician on the verge of an election.
Some details of the Treaty shocked me. A Carthaginian peace (which I had to look up) is no exaggeration. Even all property owned by private German citizens abroad was declared forfeited. Germany lost most of its coal and iron ore mines in territory, and was under the obligation of exporting the proceeds of what it it still owned abroad. It really is no mystery why Germans felt humiliated.
The true value of the book (for Europe's current woes) is in the later chapters. Keynes explicitly advocates a debt jubilee between the Allied nations. It is because France and Italy are so indebted towards the USA, that they were almost forced to demand absurd retribution from Germany: the alternative was declaring bankruptcy. To start investing in the rebuilding of Europe, governments needed a clean slate of debt incurred in the war.
Of course, Europe's current debt levels, i.e. Italy's 130%/GDP is no result of a war but of bad policy, but the results are the same: high levels of both private and public debt stifle innovation and investment. I don't see how growth can be spurred in Europe without some measure of debt forgiveness.

[Matt · Rating 5 out of 5]

Keynes wrote this book in 1919, after having served as a delegate at the Versailles conference.

### The pre-war situation
A major theme of the book is the stability in Europe being in fact threatened by the final settlement. Contrasting the political climate of Europe with the one in England, Keynes says:

> But perhaps it is only in England (and America) that it is possible to be so unconscious. In continental Europe the earth heaves and no one but is aware of the rumblings.

He then goes on to describe the instability of the pre-war situation. He splits his analysis into a few topics:

1. Population
Germany, Austria-Hungary, and Russia all saw incredible periods of growth in the decades preceding the war. "The disruptive powers of excessive national fecundity may have played a greater part in bursting the bonds of convention than either the power of ideas or the errors of autocracy."

2. Organization
The borders of Europe were mostly open and the tarrif barriers low. Each country was dependent on the rest of the continent. "Over this great area there was an almost absolute security of property and of person."

The author mentions that "round Germany as a central support the rest of the European economic system grouped itself". A hundred years later, the same could easily be said of today's economy.

3. The psychology of society
Keynes mentions an implicit agreement between classes where the poorer classes would stoically accept their fate while the richer classes would save most of their gains away and thus invest back in the economy. Keynes states that "the principle of accumulation based on inequality was a vital part of the pre-war order of Society and of progress as we then understood it." But he warns that "the laboring classes may no longer be willing to forego so largely, and the capitalist classes, no longer confident of the future, may seek to enjoy more fully their liberties of consumption so long as they last, and thus precipitate the hour of their confiscation."

4. The relation of the old world to the new
Europe had a surplus of manufactured goods that various countries could export to the New World. However, the Old World was for the most part dependent on the New for its food supplies.


### The conference
Keynes then goes on to describe the conference, starting with the French Foreign Minister, Clemenceau. The author underlines Clemenceau's point of view:

> in the eyes of one who took the view that European civil war is to be regarded as normal, or at least a recurrent, state of affairs for the future, and that the sort of conflicts between organized great powers which have occupied the past hundred years will also engage the next. According to this vision of the future, European history is to be a perpetual prize-fight, of which France has won this round, but of which this round is certainly not the last.

Keynes admonishes Clemeanceau severely for that line of thinking, calling this policy "the one of an old man". Keynes writes "the war has bitten into his consciousness somewhat differently from ours, and he neither expects nor hopes that we are at the threshold of a new age."

Moving on from the French Foreign Minister, Keynes describes Woodrow Wilson, often refered to as "The President". The expectations of Europeans were great from what they had seen and heard in the President's Fourteen Points. But these expectations were quickly dispelled. Keynes compares the President to a preacher, more than a statesman. The President's slow wit and his lack of understanding of the European situation pushed the other foreign delegates to draft sophisms in the "august language of freedom and international equality", which Wilson then accepted as right. The ultimate treaty then had the seal of the President, but little of the substance of the inspiring Fourteen Points.

Quoting from a diplomatic note, Keynes writes that the Allied governments:

> ... declare their willingness to make peace with the Government of Germany on the terms of peace laid down in the President's Address to Congress of January 8, 1918 ...

That the ultimate treaty was not loyal to the substance of the Fourteen Points can then be seen as a breach of the pre-existing understanding. This Germany claimed but no Allied power was willing to admit fault.

### Reparation
Keynes then goes on to discuss the impossible reparation clauses contained in the treaty.

He mentions the general election that Lloyd George called while the negotiations were occurring. Lloyd George kept his seat but campaign promises radicalized the British position.

Keynes summarizes thus:

> I believe that the campaign for securing out of Germany the general costs of the war was one of the most serious acts of political unwisdom for which our statesmen have ever been responsible. To what a different future Europe might have looked forward if either Mr. Lloyd George or Mr. Wilson had apprehended that the most serious of the problems which claimed their attention were not political or territorial but financial and economic, and that the perils of the future lay not in frontiers or sovereignties but in food, coal, and transport. Neither of them paid adequate attention to these problems at any stage of the Conference.

### Europe after the treaty

As for remedies to the ills brought by the treaty of Versailles, Keynes makes a few suggestions.

###### The revision of the treaty
Keynes spends some time looking at the covenant of the League of Nations and emphasizes that the usefulness of the League is far from certain.

He also proposes to limit the reparation fees to 10 billions dollars, to dismiss the Reparation commission, and to let Germany pay the debt as she sees fit. Any complaints on the part of the Allies concerning payments could be lodged at the League of Nations.

Keynes also recommends the establishment of a free trade zone for Germany, Austria, and the former states within Austria-Hungary.

###### The settlement of inter-ally debt
Keynes proposes that the reparation payments be made first to Belgium and France, and that Great Britain could go so far as to waive claims on cash payments.

Keynes also proposes to completely and mutually cancel the debt that occurred during the war among all Allies.

###### An international loan and currency reforms
In the post-war situation, Keynes write that Europe has immediate needs that can only be tended to with an international loan coming from the United States.

He also speaks vaguely of a "general reorganization of the currency".

###### The relationship between Central Europe and Russia
Here, Keynes lauds the non-intervention that Germany has pledged towards Russia and its territories. He writes:

> Let us then in our Russian policy not only applaud and imitate the policy of non-intervention which the government of Germany has announced, but, desisting from a blockade which is injurious to our own permanent interests, as well as illegal, let us encourage and assist Germany to take up again her place in Europe as a creator and organizer of wealth for her Eastern and Southern neighbors.

[Ethan Mckenzie · Rating 5 out of 5]

Very interesting and helpful to anyone trying to understand the fundamental connection between the Treaty of Versailles, the Great Depression, the rise of fascism, and the resultant second world war. It also gives insight into one of the most influential economists of the modern age- always useful. His thoughts, perhaps unsurprisingly, seem mostly to have been misinterpreted or watered down- which is both unsurprising, and probably why it seems like most people today have a low opinion of Keynes.

[Keen Reader · Rating 2 out of 5]

2.5 Stars!

This short account is surprisingly salient and sagacious, with Keynes making many fine points and forecasting many of the problems and consequences that would and could come about as a result of the disastrous Treaty of Versailles. Yes of course it proves to be dry and dated in many places, but overall Keynes was on the money about the potential trouble ahead, and what a price it proved to be.

[Giulio Ciacchini · Rating 3 out of 5]

There is no answer to these objections as matters are now. If I had influence at the United States Treasury, I would not lend a penny to a single one of the present Governments of Europe. They are not to be trusted with resources which they would devote to the furtherance of policies in repugnance to which, in spite of the President's failure to assert either the might or the ideals of the people of the United States, the Republican and the Democratic parties are probably united. But if, as we must pray they will, the souls of the European peoples turn away this winter from the false idols which have survived the war that created them, and substitute in their hearts for the hatred and the nationalism, which now possess them, thoughts and hopes of the happiness and solidarity of the European family then should natural piety and filial love impel the American people to put on one side all the smaller objections of private advantage and to complete the work, that they began in saving Europe from the tyranny of organised force, by saving her from herself. And even if the conversion is not fully accomplished, and some parties only in each of the European countries have espoused a policy of reconciliation, America can still point the way and hold up the hands of the party of peace by having a plan and a condition on which she will give her aid to the work of renewing life.

This is a fascinating book with a core message that, in hindsight, was remarkably insightful. Keynes' warning that the harsh terms of the Treaty of Versailles would lead to economic collapse and political instability—ultimately paving the way for World War II—was spot on. His critique of the Allied leaders and his call for a more pragmatic, economically sound peace settlement make this a historically significant work.
However, for the average reader today, the book can feel overly technical and outdated. Keynes dives deep into economic figures, trade balances, and financial mechanisms that were crucial in 1919 but aren’t particularly relevant unless you study economic history or policy in detail. While the broad argument remains compelling, much of the book is filled with intricate economic calculations and discussions on postwar reparations that don’t add much to a modern understanding of its key lesson.

If you're a historian or an economist, this book is a valuable primary source. But for a general reader looking for an engaging account of how economic missteps shaped the 20th century, there are more accessible analyses available. The central idea—that economic punishment after war leads to instability—is crucial, but the way it’s presented makes this a tough recommendation unless you have a strong interest in the subject.

[Guido Profitos · Rating 4 out of 5]

Ya conociendo el desenlace de la historia, al leer este libro que trata principalmente sobre el Tratado de Versalles y en general sobre la posguerra de la Primera Guerra Mundial y del porvenir de Europa, uno no deja de vislumbrar cómo las decisiones mal encaminadas que se tomaron en a posguerra (y en este tratado en particular) fueron el claro germen de la Segunda Guerra Mundial y por ende de todo lo que siguió a ella. La impotencia, la desesperación, y sobre todo la incomprensión, llevó a que las decisiones tomadas fueran devastadoras. Hoy en día seguimos viviendo algo similar. A pesar de haber transcurrido un siglo, y de la gran revolución vivida en cuanto a los avances científicos, tecnológicos, materiales, y demás, seguimos inmersos en conflictos continuos, que se suceden uno tras otro y que no son menos atroces que los de antaño. La incomprensión sigue siendo dueña de nuestras vidas y no deja de cuestionar si el avance vivido en los últimos tiempos ha sido tal.

Creo que no queda más que seguir anhelando y trabajando en pos de lo que Keynes -en otro libro- con cierta inocencia o con gran optimismo, veía como algo cercano:

"No está lejos el día en que el problema económico estará en el asiento de atrás donde debe ir, y el corazón y la cabeza serán ocupados o re ocupados por nuestros problemas verdaderos, los problemas de la vida y de las relaciones humanas, de la creación, el comportamiento y la religión."

[Lily Summers · Rating 4 out of 5]

I enjoyed this book. John Maynard Keynes eloquently explains beautifully why Germany cannot pay for the reparation and the demands inflicted upon them by the allies. The reasoning behind Wilson (Vague, nebulous 14 points), Clemenceau (Revanche) and Lloyd George (Politics in winning the 1918 GE) and their motive in the negotiations in Paris. John Maynard Keynes also suggests amendments to the Treaty of Versallies to ensure that yes, Germany can pay some reparations ($10bn), but it's done in a way that they can actually pay. Plus, one that can ensure economic growth in europe is revived.

But it's an excellent economic book on why the Treaty of Versallies is utterly hopeless and shows why hyperinflation in Germany, the rise of Hitler, economic problems for europe for two decades was in a way, inevitable.

[Allan · Rating 5 out of 5]

An eloquent book toof not only Economics, but compassion. The aftermath of world war one led the victorious countries to demand of Germany Reparations which were not only impossible to fulfill but ultimately would prevent the Global economy from recovering any time soon. Keynes proposed a more realistic and compassionate solution to the aftermath of world war one which would have fed the global economies, and ultimately allowed Germany to recover sufficiently to pay a significant amount to the victors. Had his plans been implemented I think there could be a strong case that world war II could have been avoided. This was a great read and highly recommended!

[Fredric Dennis · Rating 5 out of 5]

While Keynes is generally recognized as one of the greatest economists, this book from 1920 shows just how perceptive his observation and thinking were. The book tells us more than we might want to know about the destructive and vindictive peace that was forced on Germany at the end of the Great War, going into detail about why Germany would have just cause for wanting to go to war with France less than twenty years later.

I especially liked Keynes candid observations of Wilson as not so bright, more of a pedant than a president. As history this is excellent and readable, despite the details on coal production and railway cars.

[Patrick · Rating 4 out of 5]

Keynes, pedantic prognosticator

JDN 2456589 PDT 15:46

A review of The Economic Consequences of the Peace by John Maynard Keynes.

The bad news: Most of the book is spectacularly boring to read, as Keynes deluges us with economic figures. I'm an aspiring economist, and even my eyes began to glaze over. Chapters IV, V, and VI can be safely skipped entirely.
One interesting thing about the figures is how small they seem; he recommends reparation funds of only $5 billion—and thinks even this may be too high—while the figures in the treaty he considers preposterous are on the order of $10 to $20 billion (actually he says "£200 milliard" etc., because he is an early-20th-century British gentleman, but I did the conversion for you). Germany's GDP is now $3.4 trillion, so how can $20 billion be such a burden? Well, there's been a lot of growth and a lot of inflation since 1920. Germany's GDP at that time was about $20 billion. (This is about the GDP of modern-day Zambia.) So Keynes's figures are absolutely correct. The actual reparations received were only about $3 billion, which is right about what he said would happen.

The good news: It really gets interesting when he starts making predictions. The predictions he makes are right, almost every last one of them—and they were made in an environment when everyone else was calling him mad. Reading the last few chapters, in which he predicts the dire outcomes of the Treaty of Versailles and the disasters it will lead to in the 20th century, you would think you were reading a history of the 20th century—except he is writing this history before it happened. I made a list of the events he clearly and specifically predicted:

1. Weimar hyperinflation: "A system of compelling the exchange of commodities at what is not their real relative value not only relaxes production, but leads finally to the waste and inefficiency of barter. If, however, a government refrains from regulation and allows matters to take their course, essential commodities soon attain a price level out of the reach of all but the rich, the worthlessness of money becomes apparent, and the fraud upon the public can be concealed no longer." "It is impossible at the present time to say what the mark will be work in terms of foreign currency three or six months or a year hence, and the exchange market can quote no reliable figure."
2. Balkanization: "Economic frontiers were tolerable so long as an immense territory was included in a few great Empires; but they will not be tolerable when the Empires of Germany, Austria-Hungary, Russia, and Turkey have been partitioned between some twenty different independent authorities."
3. Change of the League of Nations into a new body: "[...]that is no reason for any of us to decry the League, which the wisdom of the world may yet transform into a powerful instrument of peace, and which in Articles XI-XVII has already accomplished a great and beneficent achievement."
4. Obstruction due to international veto power: "Does not this provision reduce the League […] into a body merely for wasting time? If all the parties to the Treaty are unanimously of opinion [...] it does not need a League and a Covenant to put the business through."
5. The European Union: "A Free Trade Union, comprising the whole of Central, Easter, and South-Eastern Europe, Siberia, Turkey, and (I should hope) the United Kingdom, Egypt, and India, might do as much for the peace and prosperity of the world as the League of Nations itself."
6. World War 2: "If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp. Nothing can they delay for very long that final civil war between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing, and which will destroy, whoever is victor, the civilisation and the progress of our generation."

He didn't actually get everything right.
1. He overestimated the League of Nations: "These Articles, which provide safeguards against the outbreak of war between members of the League and also between members and non-members, are the solid achievement of the Covenant. These Articles make substantially less probable a war between organized Great Powers such as that of 1914. This alone should commend the League to all men."
2. He also failed to predict the rise of Stalinism: "As I write, the flames of Russian Bolshevism seem, for the moment at least, to have burnt themselves out, […]" "I see few signs of sudden or dramatic developments anywhere." But even then, he allows the possibility: "A victory for Spartacism [i.e., fascism] in Germany might well be the prelude to Revolution everywhere: it would renew the forces of Bolshevism in Russia, and precipitate the dreaded union of Germany and Russia;"
3. He predicted the collapse of the European food supply: "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)." This absolutely would have happened if not for the invention of the Haber-Bosch process and the industrialization of food production. Indeed, he even allows for that result, but is too cautious to predict it: "I assume that there is no revolutionary change in the yield of Nature and material to man's labor. It is not impossible that the progress of science should bring within our reach methods and devices by which the whole standard of life would be raised immeasurably, and a given volume of products would represent but a portion of the human effort which it represents now." In a later work, Economic Possibilities for our Grandchildren, he actually expands upon this concept into a (highly, uncannily accurate) prediction of the 21st century economy.
4. He errs most when disagreeing with himself, saying: "Thus the extraordinary occurrences of the past two years in Russia, that vast upheaval of Society, which has overturned what seemed most stable—religion, the basis of property, the ownership of land, as well as forms of government and the hierarchy of classes—may owe more to the deep influences of expanding numbers than to Lenin or to Nicholas; and the disruptive powers of excessive national fecundity may have played a greater part in bursting the bonds of convention than either the power of ideas or the errors of autocracy." I am far more inclined to agree with a statement he made later in the General Theory: "The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. "

He has an extremely high view of America, at a level that I would find almost unseemly among an American citizen: "After the United States came into the war her financial assistance was lavish and unstinted, and without this assistance the Allies could never have won the war, quite apart from the decisive influence of the arrival of the American troops." "The ungrateful Governments of Europe owe much more to the statesmanship and insight of Mr. Hoover and his band of American workers than they have yet appreciated or will ever acknowledge." "If I had influence at the United States Treasury, I would not lend a penny to a single one of the present Governments of Europe. They re not to be trusted with resources which they would devote to the furtherance of policies in repugnance to which, in spite of the President's failure to assert either the might or the ideals of the people of the United States, the Republican and the Democratic parties are probably united. But if, as we must pray they will, the souls of the European peoples turn away this winter from the false idols […] and substitute in their hearts for the hatred and the nationalism […] thoughts and hopes of the happiness and solidarity of the European family,—then should natural piety and filial love impel the American people to put on one side all the smaller objections of private advantage and to complete the work, that they began in saving Europe from the tyranny of organised force, by saving her from herself."
Then again, this is... a basically accurate prediction. The Marshall Plan absolutely was a concerted effort by the United States to save Europe from itself, and it worked spectacularly well. Is America really that great? I think in practice we fail to live up to our ideals; but then, what other nation is founded upon such ideals at all? We are the first nation on Earth to actually be founded, not for the advantage of a king, not in the name of a race or a religion—but in the name of an ideal, a principle of democracy and liberty based directly on Enlightenment philosophy. Perhaps we really are so great, or could be, did we not so often stumble in our own hypocrisy.
In his most distasteful moments, he comes across as intensely elitist; he speaks often of the foolishness of peasants and the great achievements of entrepreneurs "These 'profiteers' are, broadly speaking, the entrepreneur class of capitalists, that is to say, the active and constructive element in the whole capitalist society, who in a period of rapidly rising prices cannot be get rich quick whether they wish it or desire it or not. If prices are continually rising, every trade who has purchased for stock or owns property and plant inevitably makes profits."
He does have great compassion for the people of Germany, however: "The policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness should be abhorrent and detestable—abhorrent and detestable, even if it were possible, even if it enriched ourselves, even if it did not sow the decay of the whole civilised life of Europe."
He understands enlightened self-interest in a way that even modern game theorists don't: "If there is any force in this mode of thought, expediency and generosity agree together, and the policy which will bet promote immediate friendship between nations will not conflict with the permanent interests of the benefactor." "The more successful we are in snapping economic relations between Germany and Russia, the more we shall depress the level of our own economic standards and increase the gravity of our own domestic problems."

On the whole, Keynes is unmistakably brilliant, and his long-term predictions have a level of accuracy that is especially shocking in an age when modern neoclassicists could not see 2008 coming even in 2006. If nothing else, that alone should make us Keynesian.
Just skip Chapters IV-VI.

[Will Ansbacher · Rating 4 out of 5]

Prescient view of the fateful Paris Peace Conference in 1919 by one who was there as Britain’s representative. Very insightful as to the failings of the leaders involved, how inevitable it was that the ideals of Woodrow Wilson would be corrupted, and how impossible was the task they had set themselves given that the survival of Germany was not even an issue.

Although short, the later chapters are a bit bloodless (it is economics after all) and a little repetitive. The sum of about 3.5 billion pounds crops up over and over again – it’s essentially the amount that Keynes estimated was the true extent of the damage to the Allies’ economies as well as the amount Germany could pay without dire consequences. All very rational but unfortunately his wise counsel was ignored when revenge and reparations were the only forces operating.

[Abby Morris · Rating 4 out of 5]

thanks for keeping it short my guy! you definitely made a point. not really sure what it was but that’s okay. economics ehh. treaty of Versailles too tough 🥸

[Will · Rating 4 out of 5]

"What an extraordinary episode in the economic progress of man that age was which came to an end in August 1914! The greater part of the population, it is true, worked hard and lived at a low standard of comfort, yet were, to all appearances, reasonably contented with this lot. But escape was possible, for any man of capacity or character at all exceeding the average, into the middle and upper classes, for whom life offered, at a low cost and with the least trouble, conveniences, comforts, and amenities beyond the compass of the richest and most powerful monarchs of other ages.

The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend. He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality, could despatch his servant to the neighbouring office of a bank for such supply of the precious metals as might seem convenient, and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing coined wealth upon his person, and would consider himself greatly aggrieved and much surprised at the least interference.

But, most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable. The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion, which were to play the serpent to this paradise, were little more than the amusements of his daily newspaper, and appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalisation of which was nearly complete in practice."

[Lindsey · Rating 4 out of 5]

It was interesting to read a contemporary account of the Treaty of Versailles and to see how Keynes was able to foretell that the injust peace inflicted by the treaty on Germany would create an atmosphere amenable to intolerable reactionary philosophies formed by "whatever instruction of hope, illusion, or revenge is carried to him on the air." Keynes saw that the punitive measures in the treaty would impoverish the German people to a point beyond endurance, where they could be carried by ideologues. In fact he says, "If we aim deliberately at the impoverishment of Central Europe, venceance... will not limp. Nothing can then delay for very long that final civil war between the forces of Reaction and the despairing convulsion of revolution, before which the horrors of the late German war will fade into nothing, and which will destroy... the civilization and progress of our generation." (268) He can see the peace prompting and even assisting the rise of reactionary politics that seek vengeance and the reassertment of Germany's dominance. It's almost as if he sees fascism rising in the distance, with its uber-nationalist tones and imperial ambitions. His book, written in 1919, predicts the coming of WWII, which did eclipse the horrors of WWI, and between them and the Depression, it was as if all progress had been erased. It's amazing how someone originally on the committee writing the treaty was able to see the potential for horror and point it out, yet still be ineffectual in trying to change it. Keynes' predictions do not enumerate the horrors that he sees as possible, but they do clearly indicate that this treaty could and will be the catalyst for a confrontation like no other. And, according to many historians, Keynes was right in his interpretation. The Treaty of Versailles is seen as a major contributing cause to the rise of Hitler and WWII. It was really great to read this essay, predicting the future conclusions about the treaty.

[David Jenkins · Rating 5 out of 5]

Keynes is in the popular mind most known as an advocate of heavy government spending, or "pump-priming," to stimulate a weak economy and thus a partisan of continuing government deficits. This is something of an oversimplification: he in fact favored balanced budgets, with surpluses generated in times of prosperity used to stimulate the economy in recessions. As it happened, he wrote his most famous book, "General Theory of Employment, Interest and Money," during the Great Depression of the 1930s, when government spending was needed to boost the economy. However, in my opinion, regardless of the merits (or demerits, depending on your viewpoint) of his prescription during the depression, his most astute and amazing book is "The Economic Consequences of the Peace." It analyzes the deplorable nature of the Versailles Conference after World War I, which burdened Germany with obligations it could not possible meet and therefore led quite directly to World War II - an outcome Keynes accurately predicted. He correctly saw the short-sightedness and hysteria pervading this conference, in which all the participants (most particularly Woodrow Wilson) were driven not by a rational view of the issues, but by the thinking (or lack of thinking) in their home countries and their own ignorance of the realities of international relations. This is surely one of the most incisive analyses of international affairs ever written, and - although the immediate context of course no longer exists - can shed light on the deeply psychological nature of some of the issues facing the world today.

[Ludovica · Rating 4 out of 5]

Ho letto questo libro per motivi di studio: tra una lunga rosa di titoli, ho pensato che fare la conoscenza da più vicino di uno dei pensatori più influenti del secolo scorso potesse essere molto interessante; le mie aspettative non sono state tradite: dalle parole di Keynes traspare l'anima del suo tempo storico, e si intravede il lume della sua intelligenza, che anche a distanza di quasi un secolo continua a stupire per lucidità e apertura.
L'opera in sé è un saggio in cui l'autore discute in maniera efficace delle risoluzioni seguite al trattato di pace post WWI, riuscendo ad illuminare il lettore anche meno avvezzo a letture del genere sul discorso portato avanti.
In sintesi suggerirei questo volume per chiunque volesse fare una lettura tecnica sull'argomento, ma non lo escluderei nemmeno per coloro che desiderassero toccare con mano ed avere uno scorcio prezioso sulla mentalità di un uomo che molto ha fatto e cambiato e che può essere preso come esempio del migliore spirito di quegli anni.

[Jackson Cyril · Rating 5 out of 5]

Most of us are familiar with Lord Keynes' polemic against the "Carthaginian peace" of Versailles. Indeed much of the work is Keynes' examination of the Versailles treaty and his conclusion that the peace would only lead to trouble: "Never in the lifetime of men now living has the universal element in the soul of man burnt so dimly". But the initial chapters of the book are dedicated to a psychological examination of the four men who were the arbiters of peace-- and ends with an old fashioned dress down of Wilson. Worth reading.

[Sarah · Rating 3 out of 5]

This book offered a poignant analysis of the economic consequences of the agreements in the Treaty of Versailles, and surrounding events. Keynes's insights are both fascinating and enlightening. The explication of the inextricable links between nations, economies, trades, war reparations, power struggles, and leverages is gourmet food for thought, reminding readers that no events exist in silos apart from their historical contexts and players.

[Will · Rating 4 out of 5]

While the language can make it difficult to get through, this is a great period piece describing the brutal realities of the Treaty of Versailles, and its eventual economic consequences. The book makes a great case against sanctions of all sorts, with regard to both the internal misery inflicted upon the peoples of the country in question, but also how that misery may spill over and bring, at times, violent externalities to neighboring countries.

[Not-otter Otter · Rating 5 out of 5]

The purpose of this book is to explain Wilhelmine Germany's economic condition in 1919, in order to explain the consequences of the peace imposed onto the defeated Germany.

The author explains this lucidly with a mass of statistics large enough to be comprehensive, yet compact enough to be comprehensible.

[Iamreddave · Rating 4 out of 5]

The Versailles Treaty was bad here is why as seen in 1919
The book is free on gutenberg and theres a good free reading at https://librivox.org/the-economic-con...

I underlined more sections in this book than any book I can remember. With Brexit, Bank Bailouts and walls on the Mexican border unwise treaties are making a comeback.

[Joshua · Rating 4 out of 5]

There are few books that can cause a person to rethink how they view the world. For me, this was one of those books. The connection Keynes makes between the Treaty of Versailles and the rise of Hitler is very eye-opening to the long-term effects of economic oppression.

[Gerry · Rating 5 out of 5]

And now we know why Mr. Keynes was against the Treaty of Versailles, why he left, and most importantly why we all had to fight a Second World War. Simply a fascinating read and pieced brilliantly together for an easy to read form for 95% of the population anywhere.

[Fidel Morla · Rating 4 out of 5]

Good book.

This interesting one is about the European economy after WW1. It helps you to understand some "shoulds", "coulds" and "woulds" in the aftermath of the WW.

[Peter · Rating 5 out of 5]

John Maynard Keynes (rhymes with “Rains”) was arguably the most influential economist of the first half of the twentieth century, a man who changed the way economists looked at the economy. But this pamphlet is by the young Keynes, age 36, before he reached his prominence in macroeconomics. The Economic Consequences of the Peace (1920) was written after his attendance at the six-month Paris Peace Conference; it was an early contributor to the view that the 1919 Treaty of Versailles was the opening gun in World War II; while not entirely correct it was very clairvoyant. Its message must have contributed to the post-WWII Marshall Plan, a complete reversal of the tit-for-tat politics of Versailles, and in that sense The Treaty of Versailles might have made our modern life more secure.

This review will be in two parts. The first will be some observations on the context of the Treaty of Versailles and the national history of its main participants: France and Britain on the one side and Germany and Austria-Hungary on the other, with France and Germany most prominent. Following this will be some observations on what seems unique to me about Keynes’s take on the Treaty and its consequences.

The Context

In his preface, Keynes remarks,

If the European Civil War is to end with France and Italy abusing their momentary victorious power to destroy Germany and Austria-Hungary, now prostrate, they invite their own destruction also, being so deeply and inextricably intertwined with their victims by hidden psychic and economic bonds.

Thus, Keynes predicts that WWI’s peace set the stage for continuing social, political, and economic conflict such as that culminating (unknown to him in 1929) in WWII 20 years later. It is interesting that Keynes, a keen Internationalist, refers to the war as a Civil War (a war within a nation) rather than as a war between nations.

There is obvious truth in Keynes’s forecast of future conflicts with Germany: the proof is in the pudding. But the connection between the World Wars was deeper than German anger at the punitive peace, a punitive peace not unlike that imposed by Germany on France in 1871. WWI dramatically altered the rules, technology, and psychology of war; it made the next war more likely by inuring populations to the consequences of modern war. For example, WWI ushered in the new technology of mass death—long-range accurate artillery that distanced the killer from the killed: after the Battle of the Somme, with its 1,000,000 casualties on the first day, massive deaths on the field could no longer be a surprise. It initiated the notion that targeting civilians was acceptable, a dramatic change in the rules of war: no longer were massive deaths off the field a surprise. It altered the protocols of peace—prior to Versailles victors had drawn up a list of demands with some regard for the vanquished, then presented it to the defeated for negotiation, but the Treaty of Versailles was delivered to the Central Powers as an ultimatum, a small change, perhaps, but one that enhanced the German psychological propensity to feel disrespected.

As we know, the Treaty of Versailles was a punitive pact that, at France’s insistence, placed an onerous burden on Germany and Austro-Hungary for their initiation of WWI. This burden was in several forms: high reparations payments to be made in cash, land, and goods were required while simultaneously limiting Germany’s ability to pay. The effect was a restructure of its industrial capacity to produce goods for export that otherwise would have been consumed domestically. In short, the shoulders of workers were put to the wheel of enriching other nations while starving themselves. One consequence was domestic discontent and revolution, and a hyperinflation as the Reichsbank issued money hand over fist to to stimulate the economy, and to make reparations payments.

Possibly most important, the Treaty generated intense German anger against France and the U.S. fed by the view that the Treaty was unfair, and setting the stage for German aggression in 1939. If one looks at a broader history of European peace treaties, the reality was that they were generally punitive. After the Franco-Prussian War in 1870, Germany imposed heavy reparations on France in the form of monetary reparations and German occupation of Alsace-Lorrain, a primary iron and coal mining region. So there was fair-turnabout when the French did the same after WWI.

There are several factors mitigating the claim that the Treaty was excessively punitive—which it was. The initial amount of reparations was greater than the amount expected to be paid—the Allied Powers understood that the payments would be pared back considerably and saw the initial amount as symbolic; but it was that initial amount that helped light the path for Hitler. Also, Germany was essentially intact after WWI—its railroads were untouched, it suffered no damage to its cities, industrial resources, transportation, agriculture, or anything else; it suffered few civilian deaths. France, on the other hand, was devastated—cities destroyed, agricultural areas torn up, transportation network destroyed, and very high civilian deaths. There was great damage done by the Central Power invasion of France.

Historians point out that social memory is constantly revised as future events alter our view of the present and the past. For examples, the modern U.S. revisionism of the slavery epoch denies the merits of those ancestors who owned slaves even thought they were important figures in our history--Woodrow Wilson is now repellent to many because he was a racist. In the same fashion, no nation’s pre-WWI history was left unchanged by the arrival and aftermath of WWI: each nation simply revised its history to jibe with later events and to maintain its own sense of superiority and aggrievement. Thus, the Germans saw themselves as an aggrieved but victorious nation rather than as a presator and source of widespread death and damage.

Just as social memory is flexible, so it is also remarkably long-lasting—Serbs still recall with resentment their 1389 defeat at Kosovo by the Ottomons; American antagonisms still exist over the 150-year old Civil War; the French long remembered their treatment after the 1870 war with Germany. So it is no surprise that WWI changed national perceptions of their histories, or that German memories of their treatment after WWI led to a social memory of mistreatment.

Snippets from Keynes

• The primary figures at the Paris Peace Conference were the Council of Four: Lloyd David for Britain, Clemenceau for France, Wilson for the U.S., and Orlando for Italy). They each had their own agendas and two—Clemenceau and Lloyd David—were skilled sophists, strategists, and negotiators. One was a babe-in-arms (Wilson), and one received not a word of mention from Keynes (Orlando). Clemenceu, as head of the nation most harmed by the war, was a crafty old fox and the dominant figure.

• The purpose of the Peace Conference was drafting the Allies terms to be presented to the Central Powers for negotiating final terms. Clemenceau had a clear goal for the Treaty: he wanted to punish Germany and to return France and Central Europe to its pre-1870 balance. He insisted on peace terms that put Germany at an extreme disadvantage. In part this was intended as a negotiating tactic—ask for the most, then be prepared to be accept less—and he expected the initial terms would be modified in the final conference between the two sides. But the Peace Conference was stretched out to six months—in part because of Wilson’s lack of preparation and dithering over the League of Nations, in part because of Clemenceau’s delaying strategies—so that final negotiation with the Central Powers never happened. Instead, Germany and Austro-Hungary received a set of take-it-or-leave it demands to which they could reply but on which they could have no significant effect. As a result, Germany felt aggrieved and disrespected and the Treaty was perceived as even more onerous than the Allies expected.

• President Wilson was insufficient to Europe’s expectations of him as a world leader, and not even close to Lloyd George or Clemenceau in perspicacity and strategic thinking. Keynes says that Wilson was “slow and unadaptable,” was more like a Presbyterian minister than an intellectual, and was more attached to his rhetoric than to results. Conference participants expected him to arrive with a completely developed plan for the League of Nations, but he had only the rhetoric of his previous speeches, resulting in a great deal of time spent on the new peace institution. Keynes claims that Wilson would agree to almost anything as long as it could be couched in the language of his speeches. The result was that other three major Allied leaders in the Big Four—Clemenceau, Lloyd George, and Vittorio Orlando— ran rings around Wilson by proposing unacceptable terms that they knew Wilson would reject so that he would feel compelled to accept their the next proposal, which was the one they really wanted.

• Keynes estimated the total cost of reparations (to be spread over many years) required of Austria-Hungary and Germany at roughly $40 billion (about $548 billion in 2015 dollars). This was largely in the form of financial compensation (the first $5 billion was due in mid-1921), land transfers (Alsace-Loraine returned to France, Poland and the colonies were removed from German territory along with the coal-rich SAAR Basin and the iron-rich Ruhr), and other sources such as loss of its merchant marine fleet and of a large portion of its rolling stock, and a firm claim on any German assets—public or private—that the Reparations Committee chose. (Note: the Germans defaulted on the $5 billion payment due in 1921, leading the French to invade and occupy the Ruhr to assure its access to iron ore.)

• Germany’s ability to meet its reparations obligation was severely disadvantaged not by the war itself—it was almost untouched in its economic power but for the military lives lost—but by the Reparation terms: it lost valuable transportation resources (trains and ships), limiting its capacity for both domestic and international trade it lost valuable sources of income (iron ore, coal, the colonies); it lost its access to private foreign credit since its marketable assets, both private and public, were committed to reparations and not available as collateral. These losses were exacerbated by the emerging hyperinflation that depreciated its currency, thereby increasing the cost of imports, reducing revenues from exports, and restraining its net exports.

• Keynes argued that the confidence of the capitalist class had eroded in recent years (a reference to the arrival of communism in Russia) and that the effect of this treaty will be to severely undermine the confidence among the Germans and Austro-Hungarians in a better future with a fair distribution of income and resources. Inflation will occur with a consequence of unsettling the moral foundation of capitalism—that there is a fair distribution of income. The fluctuations in prices will lead to a decline in the average person’s standard of living, some people will starve, and the most capable will profit. Resentment will spread and invite revolution against the capitalism that has so benefited the western world. This seems particularly prescient because the German hyperinflation had not yet arrived, nor had the calamitous economic conditions it brought.

• On a purchasing power parity basis the German Mark is seriously overvalued: German prices have increased far more than the depreciation in the value of the mark. The result is a reduction in German exports and an in increase in its imports. This imbalance not only works against Germany’s ability to meet reparation demand, it also imposes additional economic hardships on a population that must pay more for imported goods, including foodstuff, but receives less buying power from its exports. Thus, Germany trembles even before a dime of reparations is paid.

My assessment of this short thesis is that it is brilliant. Keynes was not alone in his fears about the consequences of the peace, but he was right on target in his predictions. Germany did experience hyperinflation, a diminished standard of living, and a severe internal political disruption (though the Weimar Republic gave way to the Nazis rather than to the communists). The tragedy of the Paris Peace Conference and the Treaty of Versailles was certainly not the whole story, but it was undoubtedly a major factor on the road to World War II.

Yes, the details of Keynes’s cost benefit analysis of reparations is soporific. But his assessment of the Treaty’s impact is absorbing. This book it’s well worth the effort for military historians and economists with an interest in the Great War.

Five Stars.

[William Schrecengost · Rating 3 out of 5]

This was an interesting book written after WW1 on what kind of economic reconstruction was being done in Europe and what kind of punishment was being levied against Germany and her allies. Overall this book was good, especially for the historical aspect. He discussed what was being done in Europe, the problems in that, and his ideas on how to fix those problems. The first 2 parts were pretty good, the problem with the last is that Keynes doesn't really have very good ideas. Otherwise this was a really interesting read.

[Frank Stein · Rating 4 out of 5]

This is an odd and perplexing book, occasionally brilliant, more often dull, rarely without merit. It's partially John Maynard Keynes's cri de coeur about the ravished state of Europe after the First World War, and even more at the negotiations at Paris which tried to enforce what Keynes called a "Carthigian Peace."

Keynes is not coy about pointing fingers here, often accompanied by operatic language. Of the reparations conference at which he participated he wrote, "Paris was a nightmare, and every one there was morbid. A sense of impending catastrophe overhung the frivolous scene; [and one felt] the futility and smallness of man before the great events confronting him." Later he wrote that "one could wonder if the extraordinary visages of Wilson and of Clemenceau, with their fixed hue and unchanging characterization, were really faces at all and not the tragi-comic masks of some strange drama or puppet show."

By far these are the best parts of the book, where Keynes gives his own jaundiced view of the main conference participants, and locates its failures in their shortcomings. For French premier Clemenceau, Keynes blames his innate hatred of Germany, and his desire to punish but not amend a sworn enemy; for David Lloyd George of Britain, his overly attuned political sense, which caused him to promise his country more money from Germany than could possibly be had; for Woodrow Wilson of America, his self-righteousness and slowness, which allowed him to be bamboozled by opponents and then cover all with a false sheen of sincerity. Keynes's insights all have the ring of truth, and the reader wants more.

Most of the book, however, is taken up with detailed analyses of total German wealth and their ability to pay under different clauses of the reparation treaties. These can be surprisingly interesting at times, say, during discussions of how German ship tonnage was to be valued when set-off against other government claims, or how private claims against Germany were to be extracted from German citizens through the Reparations Committee. Keynes gives one a real sense of how important minor clauses in the treaty could be for the fate of Europe and for millions of German citizens. Still, going over innumerable millions and billions of estimated dollars for coal production, textile exports, soil productivity, etc., one feels the breadth of Keynes knowledge if not always his discretion. Overall, this part shows a writer very fond of back-of-the-envelope calculations, and of statistics fired at the reader haphazardly.

Despite claims that this book was uncommonly prescient, one can't be sure what Keynes was really predicting here. In his darker moments, he seemed to presage the end of the whole European enterprise, and a descent into poverty and starvation unequaled in centuries. In fact, most of the 1920s was an economic boom in Europe, halted in the 1930s not by reparations payments but by a financial crisis spiraling out of the United States. In any case, despite the focus on numbers, Keynes's claim for European decadence seems more spiritual than anything. As he says on the last page. "Never in the lifetime of men now living has the universal element in the soul of man burnt so dimly." This seems to be his true complaint and prediction.

Just how this book became a bestseller back in 1920 is somewhat mystifying, since even at the time many of his intricate arguments would have been abstruse, but one can appreciate the flair and honesty Keynes brought to the task, which was the description of a truly dark moment in human history.