Walrus Cam Video
Interest Rates: The Phantom Menace: Hoisted from Paul Krugman's Archives from 2009

Today's Economic History: John Maynard Keynes on the Necessity of a Generous Peace After World War I

Note to self:

Perhaps I imposed too much of my own preconceptions on Skidelsky. But I had always seen Skidelsky as arguing that Keynes saw:

  1. France as dominated by politicians—Clemenceau, Poincare, Laval, plus Moreau--hostile to European settlement and recovery, in part because a rapidly recovering Europe would soon be one with a much more powerful and dominant Germany.
  2. Germany as tenuously ruled by proto-Adenauers trying to retain power under immense pressure from both the anti-liberal left and the anti-liberal right.
  3. Failure to restore prosperity as likely to unleash even worse things than World War I.
  4. Hence a tilt to Germany and its proto-Adenauers and against France and its poiticians in the hope of making the Germany that would dominate Europe a liberal one and keeping France too weak to impede sensible reparations and economic policies...

Cf: Stephen A. Schuker (2014): J.M. Keynes and the Personal Politics of Reparationshttp://www.tandfonline.com/loi/fdps20

John Maynard Keynes: 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. We assume some of the most peculiar and temporary of our late advantages as natural, permanent, and to be depended on, and we lay our plans accordingly. On this sandy and false foundation we scheme for social improvement and dress our political platforms, pursue our animosities and particular ambitions, and feel ourselves with enough margin in hand to foster, not assuage, civil conflict in the European family.

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….

Europe is solid with herself. France, Germany, Italy, Austria and Holland, Russia and Roumania and Poland, throb together, and their structure and civilization are essentially one. They flourished together, they have rocked together in a war, which we, in spite of our enormous contributions and sacrifices (like though in a less degree than America), economically stood outside, and they may fall together. In this lies the destructive significance of the Peace of Paris. If the European Civil War is to end with France and Italy abusing their momentary victorious power to destroy Germany and Austria-Hungary now prostrate, they invite their own destruction also, being so deeply and inextricably intertwined with their victims by hidden psychic and economic bonds….

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. Seated indeed amid the theatrical trappings of the French Saloons of State, one could wonder if the extraordinary visages of Wilson and of Clemenceau, with their fixed hue and unchanging characterization, were really faces at all and not the tragi-comic masks of some strange drama or puppet-show….

If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp. Nothing can then delay for very long that final civil war between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing, and which will destroy, whoever is victor, the civilization and the progress of our generation. Even though the result disappoint us, must we not base our actions on better expectations, and believe that the prosperity and happiness of one country promotes that of others, that the solidarity of man is not a fiction, and that nations can still afford to treat other nations as fellow-creatures?...