ABSTRACT
In June 1919 J. M. Keynes resigned as senior representative of the British Treasury at the Paris Peace Conference. Six months later he published a vitriolic denunciation of the Versailles Treaty and so initiated a controversy which divides historians to this day. The Economic Consequences of the Peace1 was a brilliant work of high polemics – ‘one of the finest pamphlets in the field of political economy [if not] … in the English language’2 – but coming from the pen of one who had so recently been intimately involved in the negotiations on the economic clauses of the treaty it was widely assumed by contemporaries to represent ‘a factual economic analysis that could be trusted even if other aspects of the book might be less reliable’.3 Keynes's purpose in publishing such a work was to undermine the moral and economic bases of the treaty. In the former case he argued explicitly that the terms meted out to the defeated powers were inconsistent with undertakings given at the time of the Armistice, and implicitly that they were an affront to that spirit of magnanimity in victory which he believed to be an essential hallmark of European and British civilisation.4 On the economic follies perpetrated by the peacemakers Keynes was equally unmerciful in his strictures. The statesmen assembled in Paris had failed to comprehend the fragility of the international financial and trading mechanism that had been destroyed by the war. The commonly accepted view that the pre-1914 international economy was inherently stable was an illusion: ‘Very few of us realise with conviction the intensely unusual, unstable, complicated, unreliable, temporary nature of the economic organisation 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.’5 Deficient in foodstuffs and raw materials, industrialised Europe had achieved a sustained improvement in living 25standards by expanding its manufactured exports to the primary producing regions of the world and the mechanism of exchange had been provided by a mutilateral trading system which had permitted the flow of merchandise and finance with minimal disruption. Now, as a consequence of the war, this organisation had been destroyed, the stream of supplies disrupted and a substantial part of the European population deprived of its means of livelihood. The international gold standard had been abandoned, currencies destabilised and banking and credit systems either suspended or seriously distorted by the exigencies of war. What was required of the peacemakers, therefore, was the negotiation of a treaty which would avert the threat of starvation and revolution in Europe by restoring international economic stability as soon as possible. At the very least they should refrain from adding to the dislocation directly attributable to the war. Instead, they indulged in the lunacy of attempting to reconstruct the economy of Europe on the prostration of its central pillar – Germany.
