The Economic Consequences of the Peace

“Very few of us realize with conviction the intensely unusual, unstable, complicated, unreliable, temporary nature of the economic organization by which Western Europe has lived for the last half century. […] Moved by insane delusion and reckless self-regard, the German people overturned the foundations on which we all lived and built. But the spokesmen of the French and British peoples have run the risk of completing the ruin, which Germany began, by a Peace which, if it is carried into effect, must impair yet further, when it might have restored, the delicate, complicated organization, already shaken and broken by war, through which alone the European peoples can employ themselves and live.”

In the beginning of the book, Keynes discusses the development of the European economy in the late 19th and early 20th centuries as part of his background information. The continent featured technological advancement, especially in the German industries, and a relatively high standard of living. Europe was not self-sufficient, especially when it came to raw materials imported from the New World. Keynes makes a Malthusian argument to show that population growth in Europe and in the New World negatively affected Europe’s access to supplies.

Additionally, Keynes does not fundamentally disagree with the premise that Germany caused World War I. What he argues is that the integration level of the European economy is such that excessively punishing Germany would harm the rest of Europe. His prediction was accurate for many reasons, ranging from the dismal conditions in 1920s Weimar Germany and the Great Depression to the rise of Adolf Hitler based, in part, on these grievances.

“Paris was a nightmare, and every one there was morbid. A sense of impending catastrophe overhung the frivolous scene; the futility and smallness of man before the great events confronting him; the mingled significance and unreality of the decisions; levity, blindness, insolence, confused cries from without,—all the elements of ancient tragedy were there.”

Keynes presents the atmosphere of the conference in literary, theatrical terms to set the mood for his description of the events that follows. Keynes uses his strengths both as an economist and as a literary writer to convey the folly of the proceedings and to emphasize the potential destructiveness of the treaty.