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 Keynes' Economic Consequences of the Peace, The top best books on Globalization

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The Economic Consequences of the Peace Paperback – October 18, 2016

by John Maynard Keynes (Author), Paul A. Volcker (Introduction)

      First published in 1919, John Maynard Keynes’s The Economic Consequences of the Peace created immediate controversy. Keynes was a firsthand witness to the negotiations of the Paris Peace Conference, as an official representative of the British Treasury, and he simultaneously sat as deputy for the chancellor of the Exchequer on the Supreme Economic Council. In these roles, he was able to perceive with great clarity the tenor and perspective that would come to shape Europe after the First World War. What he saw disturbed him greatly, and eventually he resigned from both these roles, convinced that there was no longer any way to avoid an unjust peace treaty.

      After his resignation, Keynes began work on The Economic Consequences of the Peace, which argues that the peace made at the end of World War I was an unfair, dehumanizing one for Germany and the other vanquished countries. Keynes’s warning proved prophetic when Hitler and the Nazi Party rose to power fourteen years later as a direct result of the disastrous economic condition in Germany. Keynes’s predictions helped cement his status as one of history’s leading economists. His works are essential reading today for anyone who wishes to understand modern governments and economies. This edition also includes an introduction from former Chairman of the Federal Reserve Paul Volcker, who elegantly contextualizes the continuing relevance of Keynes’s work to contemporary society.

Review

      “The Economic Consequences of Peace” was written after World War I in 1919 by John Maynard Keynes. Keynes was a British economist who argued that stiff penalties on Germany would torment their economy, which would then hurt the European economy. He was opposed to the Treaty of Versailles because he believed it would have economic consequences on Europe and the world. This analysis will cover the situation Keynes was addressing and the issues he acknowledged within his book. It will give Keynes ideas to fix the economy and a brief analysis if these ideas would be effective.

      John Maynard Keynes was born in Cambridge, England on June 5th, 1883. Keynes was best known as an economist, but he was also a journalist and financier. In 1915, at the beginning of World War I Keynes took a role within the government as part of the treasury committee. His role was to study the British’s relations with its allies and recommend the best way to conserve Britain’s small supply of foreign currency. Keynes ideals were later reverted in 1919 when he accompanied British Prime Minister, David Lloyd George to the Paris Peace Conference. He was attending the event as George’s economic advisor. Keynes couldn’t understand or support the burdensome policies that were being given against Germany after their defeat. Keynes acknowledged that these stiff requirements wouldn’t just cause economic struggle in Germany but would translate to struggle throughout Europe. By charging Germany large annual payments they would only hurt Britain’s own export efforts. Keynes quickly resigned from his position when he returned home from the conference. In the summer of 1919, Keynes wrote the book, “The Economic Consequences of Peace” in protest to the harsh legislation created at the conference.

      A major idea from Keynes was to forgive all internal government war debts. The Great War had consumed so many resources from every single country involved. During the war Britain had financed every allied country the funds needed to fully participate in combat. Britain couldn’t afford to supply themselves along with everyone else, so they loaned money from the United States. The United States wouldn’t loan money to any countries besides Britain and France because of their credit issues and risk involved with not getting money back. Essentially, at the end of the war every allied country owed Britain money and Britain was indebted to the United States. There was a much better chance that the United States would get their money from Britain, than the British getting their money from France, Russia, Italy and Belgium. Keynes identified in 1916 that this would give the United States financial dominance over the world. He stated in 1918 that Britain’s war debt “will cripple our foreign development in other parts of the world and will lay us open to future pressure by the United States of a most objectionable description”.6 Keynes’ idea of forgiving all allied debts was to give every country a new start and allow their economies to recover. If the United States controlled all the financial power, then Europe would slowly develop into a depression. All the European allies agreed with Keynes, but the United States weren’t fond of the idea. It would’ve put the financial responsibility of World War I on them. I believe Keynes opinion was correct. With all the allies being that closely connected within the war they should work as a team to help create an established post-war world and economy. I believe the United States could’ve handled the financial burden. They didn’t have any destruction in their homeland and their facilities could still be productive and help support the economy.

      Keynes established that Europe needed a loan system to help rebuild all the cities and towns from the destruction they faced in World War I. Keynes believed that Britain needed to acquire a large upfront contribution of the debt, then receive annual payments from debtors for the rest of the sum over several decades. Keynes wanted the upfront payment to Britain to be property, so they could levy the land. Thus, Britain could slowly take back the money they shared over the years and will be able to prosper in their future activities. The acquisition of land will allow Britain to gain revenues off more taxation on the inhabitants.

      This revenue will be put back into the economy and allow the interest rates to stay minimal. I agree with Keynes thinking on this matter. When governing a country, it isn’t all about the financial context but also the well-being of the citizens. If the government can keep the citizens happy by establishing quality living conditions and maintaining a steady economy. By land acquisition in Britain, it would also allow the other countries involved (France, Russia, Italy and Belgium), to maintain financial freedom. They wouldn’t have debt weighing down their every move. Keynes was focused on the monetary position with his recommendation, but I also see the benefits on country moral and quality of life to the citizens.

      John Keynes wasn’t a supporter of the current League of Nations. He believed the format was flawed and needed to be reformed. It didn’t make sense that a unanimous vote from members was needed to make any changes to the legislature. Keynes felt that this system wouldn’t lead to any adjustments from the group. Any corrupt movements or diverse thinkers would lead to any progression being stinted. I believe Keynes had a good point. Since the League of Nations was a group of leaders from all over the world put together to establish peace it should be democratic. Everyone needs to have equal vote and majority should rule.

      Keynes has produced several unique ideas for the economic well-being of Britain in the early 1900’s. Although many of his ideas weren’t introduced at the time he shared them. We can see now how they could’ve had positive influence on the world. Keynes had a brilliant economic mindset and it was clearly demonstrated in his recommendations within his document.

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Further Reading:

- https://fivebooks.com/best-books/larry-summers-globalization/

- https://www.amazon.com/dp/1510714391/ref=as_at?tag=fivebooks001-20

- https://socialsciences.mcmaster.ca/econ/ugcm/3ll3/keynes/pdf%26filename%3Dpeace3.pdf

- https://www.studocu.com/en-gb/document/university-of-guelph/the-modern-world-fw/document-analysis-assignment/5881647

- Fuller, Edward W., and Robert C. Whitten. "Keynes and the First World War." Libertarian Papers 9, no. 1 (2017): 8-11. Accessed March 19, 2019. 

- Janes, Dominic. "Eminent Victorians, Bloomsbury Queerness and John Maynard Keynes' The Economic Consequences of the Peace." Literature and History 23, no. 1 (April 1, 2014): 19-32. Accessed March 18, 2019. 

- Keynes, John M. The Economic Consequences of Peace. Cambridge: King's College, 1919. 

- Markwell, Donald. "The Paris Peace Conference and a Need for International Action." In John Maynard Keynes and International Relations: Economic Paths to War and Peace, 48-63. Oxford, 2006.

- Skidelsky, Robert. "John Maynard Keynes: A Biography." The Economist as Saviour 2 (1994): 465-71. Accessed March 18, 2019.

- Toye, Richard. "Keynes's Economic Consequences of the Peace: A Reappraisal." Twentieth Century British History 27, no. 2 (June 2016): 330-32. Accessed March 19, 2019.