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Having read the "General Theory" many years ago as an undergraduate, I decided it was time to read "Economic Consequences of the Peace". Keynes attended much of the conference and wrote fascinating pen-portraits of the main players - Clemenceau believing in the inevitability of eternal conflict and wanting a Carthaginian Peace; Wilson having high moral principles but insufficient intellect to stand up to Clemenceau; and Lloyd George converted to an ever more oppressive treaty by the need to win an early general election in Britain. These pen-portraits alone make the book worth reading, but of much greater interest is the analysis of the terms of the Peace.

In my judgement the key observations Keynes made in this book about the state of Europe in 1919 and about the Versailles Treaty were:
1. Not only Germany but also much of Europe (excluding Britain) was in a poor economic condition and would find recovery difficult.
2. One particular factor he noted was the existence of inflation and the danger of it continuing, worsening and damaging economies. He said the problem was serious throughout Europe and particularly Germany, which already had a large budget deficit.
3. The Treaty contributed nothing towards creating a fair, functioning and integrated economic system in Europe.
4. The Treaty breached the terms of the Armistice Agreement in the level of reparations and territorial adjustment, which was morally reprehensible. Germany had not surrendered unconditionally but was treated as though she had.
5. Germany could not possibly pay the full amount of reparations on given knowledge and all reasonable assumptions about the immediate economic future. In addition reparations were unfair in that unlike an indemnity the amount was unknown and unknowable.
6. The combination of points 4 and 5 (plus the obnoxious and inaccurate "war guilt" clause) meant that Germany would feel victimized and betrayed, whereas the Treaty should have sought the reconciliation of nations. Keynes predicted a future war.

The only point on which one might conceivably say that Keynes was not fully vindicated was the first: much (but not all) of Europe boomed in the 1920s. However, it can be argued that Keynes was not fundamentally wrong even on this issue. Those who believe there were structural weaknesses in the major economies, or who follow the line of the Austrian School in arguing that the Great Depression arose from an expansion of the money supply in the 1920s that artificially inflated the economy with an inevitable slump to follow the boom, will argue Keynes was right about the fragility of European economies.

Among the dissenting voices to the view that Keynes was largely correct on almost all issues was Étienne Mantoux, who in 1945 wrote "The Carthaginian Peace, or the Economic Consequences of Mr. Keynes". Mantoux ignored almost all the six points listed above and concentrated instead on showing that German coal and iron production were higher than Keynes predicted, and that Germany was better off than he supposed. However, Mantoux's figures are all based on the actual inter-war situation, where Germany paid only one-eighth of the reparations and developed with the aid of American loans, whereas Keynes' predictions depended on the Allies squeezing Germany until the pips squeaked. In addition Keynes had stressed that predictions cannot be perfect, and changing circumstances change outcomes.

Keynes was correct in his assessment of the effect of reparations and the weakness of Germany in 1919, for when the Allies attempted to extract maximum payments in the years 1919-23 Germany suffered from economic disasters without parallel in a democracy. With a desperate economic situation and unable to pay reparations, Germany suffered the occupation of the Ruhr by the French in January 1923. It meant that Germany had no goods to trade. The result was that Germany resorted to printing (even more) money to repay reparations and loans. This led to hyperinflation. Keynes was also vindicated in his prophecy of inflation elsewhere in Europe by the inflations in Danzig, Estonia, Hungary, Latvia, Poland and Russia. Mantoux's specific points about iron and steel not only ignored the fact that the production was with the aid of US loans and the non-payment of reparations, but also ignored myriad other contrary economic indicators, including not only the 1923 hyperinflation but also the fact that Germany had 30% of its workforce unemployed in 1932.

Keynes was correct in saying that the Treaty would not bring peace. A hatred of the Treaty and the oppressive French occupation of the Ruhr helped to undermine the Weimar Republic, bringing Hitler to power and precipitating the Second World War. Keynes played a role in the settlement after the Second World War. His words of wisdom about the failures of the Versailles Treaty were heeded, and principles of cooperation and rebuilding meant a prolonged period of peace and prosperity in Europe after 1945 - a striking contrast to the failure of Versailles to achieve this.

Finally, it has been claimed that the book created (or at least encouraged) appeasement in the 1930s by convincing Britain and the US that the Treaty was unfair to Germany. This is impossible to prove. More important in creating sympathy for Germany was the French occupation of the Ruhr 1923-25, and the main causes of appeasement were anyway miscalculation and the desire for a quiet life among people who had lived through the horrors of the 1914-18 war. It should be noted that Keynes was one of the earliest and most passionate opponents of appeasement. On this too Keynes was proved right.
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TOP 1000 REVIEWERon 28 October 2014
Keynes's Consequences of the Peace remains a classic and is probably the best book to read on the subject of German WWI reparations. Published at the end of 1919 and after Keynes had resigned from the British peace delegation, the book was a call to limit the damage, reduce reparations, and put in place a European trade and economic structure, including free trade and the cancellation of inter-allied war debts, to allow the continent to recover. An important reason, meanwhile, for Keynes's call was that the Versailles treaty did not set the amount for German reparations: rather these were left to a Reparations Commission, which would spend another eighteen months before fixing a number. Thus Keynes's book was not just back sniping, it was programmatic.

The Versailles treaty has a bad reputation in popular memory, especially British. While historians originally also tended to be critical, the last decades have seen a reassessment, and a recognition that the peacemakers faced an imperfect job no matter what, and could not magically solve the destruction and disorders wrecked by WWI. Some historians now even argue that the reparations were not punitive, and that Germany could afford to pay them. In my view this goes too far, and Keynes's book is quite convincing in this respect. The reparations total discussed in Keynes's book, $40 billion, was of the order of the total size of pre-war German GDP, perhaps more, and more than ten times total German exports. The amount eventually proposed by the Commission, while smaller at a nominal $31 billion, remained huge in proportion to the German economy. Entirely accessible to the layman, written with complete clarity, and short, this is essential reading for anyone with even a passing interest in history and the peace of 1919.
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TOP 1000 REVIEWERon 7 September 2006
For Keynes, the Peace Treaty of Paris after World War I was a matter of life and death, of starvation and existence, and the fearful convulsions of a dying civilization.

But the negotiating politicians had absolutely no vision. Clemenceau wanted a Carthaginian peace, President Wilson was essentially a theologian and Lloyd George yielded to national electoral chicane.

The victors had no magnanimity. `The future life of Europe was not their concern; its means of livelihood was not their anxiety. Their preoccupations related to frontiers and nationalities, to imperial aggrandizements, to the future enfeeblement of a strong and dangerous enemy, to revenge and to the shifting of their unbearable financial burden on to the shoulders of the defeated.

But for Keynes, the policy of reducing Germany to servitude for a generation was abhorrent and detestable: `Nations are not authorized, by religion or natural morals, to visit on the children of their enemies the misdoings of parents or of rulers.'

Keynes had the decency to leave the negotiations from the moment he saw the looming disastrous results.

Keynes brilliantly calculated that Germany could not pay the imposed debt. He foresaw the coming German hyperinflation. He clearly recognized the danger of `a victory of reaction' (the right) in Germany, because it would endanger the security of Europe and the basis of peace.

Eventually that's what happened with all its disastrous consequences for Europe.

His prediction of millions of dead from starvation in Germany didn't occur.

This sometimes rather technical book is still a very worth-while read. His author was a visionary.
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on 22 February 2015
This is a useful book for anyone who, like me, is trying to get up to speed on economic science in order to understand the world's current parlous state. I love Keynes's writing style - very elegant and clear, almost Austenian - but because he is having to back up his argument (that the reparations the Allies are demanding of a defeated Germany are unfaire and too onerous and will be, ultimately, counter productive) with a vast array of facts and figures, I got a little bogged down in the detail and have, for the while, put it on one side. But it is a classic to which I intend to return.
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on 7 January 2016
A well-written explanation of how Allied politicians should have treated Germany at the end of WW1 and of how, alas, their short-term personal and national self-interests instead set the scene for WW2.
Keynes wrote this in 1919, with the horrors of Flanders, the Somme, etc., still raw, so this cogent public argument for magnanimity on the part of the victors took courage, as did the naming of those who failed to show it and who thereby failed the next generation.
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on 12 July 2015
A really interesting and eye-opening book by a man who was far, far more fascinating and interesting than I had ever expected. It is unexpectedly easy to read, despite the habit of using five or six adjectives or phrases when one (sometimes none) would do. A must read if you are interested in the end of WW1 and some of the real reasons for WW2. I was actually astounded in places!
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on 6 September 2010
The book is a classic which I'm pleased to own, but there are major printing errors which result in many footnotes being incomplete. I have drawn this to the attention of the publishers.

David Griffiths
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on 14 March 2013
Just as good as I remembered it; a classic text, with the eerie prediction of another war in 20 years, which came true. I would highly recommend it as a seminal text on the impact of Versailles.
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on 12 May 2014
Absolutely staggering perception of the problems of the day, and turned round by understanding of the interwar years. Hard going at times but probably due to the 1919 style of writing.
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on 11 September 2011
The Economic Consequences of the Peace by John Maynard Keynes was written before Hitler came to power and should have been a warning to all at the time of the consequences of victors treating an enemy too harshly. Given the economic conditions we find ourselves in and the war on terror Keynes' work serves as a reminder of the need to give one's enemy hope for a better future as defeat looms near.
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