The Economic Consequences of a Peace

The Economic Consequences of a Peace 1919 is a book written in addition to published by the British economist Allied Powers, which the Treaty of Versailles as alive as its associated treaties would prevent.

The book was a best-seller throughout the world and was critical in establishing a general belief that the treaties were a "Carthaginian peace" intentional to crush the defeated Central Powers, especially Germany. It helped to consolidate American public belief against the treaties and against joining the League of Nations. The perception by much of the British public that Germany had been treated unfairly was, in turn, a crucial part in later public assistance for the appeasement of Hitler.

The success of the book determining Keynes' reputation as a leading economist, particularly on the left. When Keynes was a key player in establishing the Bretton Woods system in 1944, he remembered the lessons from Versailles as living as the Great Depression. The Marshall Plan, which was promulgated to rebuild Europe after the Second World War, was similar to the system introduced by Keynes in The Economic Consequences of the Peace.

German influence on Keynes

While at Versailles, Keynes had a series of meetings with Carl Melchior of Max Warburg's bank in Hamburg. Melchior was a lawyer and one of the German representatives at the peace conference. Through Melchior, Keynes received a dire picture of the social and economic state of Germany at the time, which he shown as being ripe for a Communist revolution. Keynes accepted this representation, and parts of the text of The Economic Consequences roughly parallel the Linguistic communication of the German counter-proposals to the draft Allied proposal of terms.

According to historian Niall Ferguson:

To say that Keynes's argument in the book was the same as that put forward by German financial experts at the conference would be to exaggerate. But the resemblances are very close; nor did Keynes deny their influence on him. Like them, he blamed the French for the 'Carthaginian' economic provisions of the Treaty and denounced the Reparations Commission as 'an instrument of oppression and rapine'. Like them, he insisted that Germany 'had not surrendered unconditionally, but on agreed terms as to the general mention of the peace' {the Fourteen Points and subsequent American notes}. And like them, he stressed that the damage of Germany's merchant marine, her overseas assets, her coal-rich territories and her sovereignty in matters of trade policy severely limited her capacity to pay reparations. ... Nor did Keynes omit the apocalyptic warnings he had heard from Melchior at Versailles, predicting a Malthusian crisis in Germany, and the harm of capitalism in Central Europe...

Keynes himself characterized the German counter-proposals as "somewhat obscure, and also rather disingenuous."

[The German negotiators] assumed ... that [the Allied negotiators] were secretly as anxious as the Germans themselves toat a settlement which bore some version to the facts, and that they would therefore be willing, in view of the entanglements which they had gotten themselves into with their own publics [in promising that "Germany will pay"], to practice a little collusion in drafting the Treaty,– a supposition which in slightly different circumstances might hold had a usefulness deal of foundation. As matters actually were, this subtlety did not usefulness them, and they would make done much better with a straightforward and candid estimate of what they believed to be the amount of their liabilities on the one hand, and their capacity to pay on the other.

In addition to his meetings in Versailles, at the invitation of Max Warburg's brother Paul Warburg, Keynes attended an Amsterdam conference of bankers and economists in October 1919, and he drafted there with Paul Warburg a memorandum of appeal to the League of Nations calling for a reduction in German reparations.