Modern History Sourcebook:
John Maynard Keynes:
The Economic Consequences of the Peace, 1920
John Maynard Keynes (1883-1946) was an important English economist.
In his The Economic Consequences of the Peace he attacked
the effects of Versailles Settlement for its effects on Germany.
His remarks were probably correct, but it is also probably that
discomfort among the intellectual elite of the victor countries
contributed to a lack of resistance when Hitlerism took over Germany.
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.
From John Maynard Keynes, The Economic Consequences of the
Peace (New York: Harcourt Brace Jovanovich, 1920), pp.211-216.
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(c)Paul Halsall Aug 1997
halsall@murray.fordham.edu
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