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John Maynard KeynesThe Economic Consequences of the Peace
Nonfiction | Book | Adult | Published in 1919A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Background
Historical Context: Late-19th- and Early-20th-Century Europe
Keynes dedicates the beginning of the book, especially Chapters 2 and 3, to the important developments in Europe before World War I. Following the Napoleonic Wars (1803-1815), the remainder of the 19th century until 1914 was, relatively speaking, a peaceful time for the continent. Armed conflicts, such as the Crimean War (1853-1856)—in which Britain, France, and the Ottoman Empire invaded Russia—were limited in scope compared to extensive conflicts like the Thirty Years’ War (1618-1648), which was one of the longest and most destructive in European history.
In 1871, Italy and Germany both completed their respective unifications. The establishment of the German state in Central Europe affected the balance of power in the region. On the one hand, Germany was late to jump on board of the European colonialist project abroad, for instance in Africa, where it controlled several colonies. On the other hand, Germany became an industrial powerhouse and challenged Britain’s imperial dominance. In this book, Keynes pays attention to the way Germany, surpassed other European countries like France. He examines economic data and population size in Germany as compared to other countries to do so.
World War I brought an end to the old-world order, in which the Ottoman, Austro-Hungarian, and Russian Empires dominated global politics. Their dissolution created new states, such as Finland, Austria, Czechoslovakia, Poland, Turkey, and many others. At the same time, the death toll was devastating—with some estimating it to be around 25 million.
Political Context: The Paris Peace Conference of 1919
The Paris Peace Conference was the official event to conclude the war. The meeting produced the Treaty of Versailles and the international European peace organization, the League of Nations. The treaty defined the postwar settlement for Europe, in which the Allied victors—Britain, the United States, Italy, and France—dictated the terms to the vanquished Central Powers—Austria, Hungary, and Germany. The latter were excluded from setting the terms of the agreement. Russia, which underwent a revolution in 1917, was embroiled in a civil war and did not participate in the peace conference. Russia arrived at its own peace treaty with the Axis Powers, the Treaty of Brest-Litovsk (1918), in which it lost eleven countries of the former Russian Empire, including the Baltic states and Ukraine.
The Treaty of Versailles ordered Germany (the Weimar Republic until 1933) to pay significant reparations, demilitarize, and give up lands to its neighbors France, Czechoslovakia, Poland, and Belgium. Austria’s loss of Sudetenland to Czechoslovakia also became important in 1938 with Adolf Hitler’s annexation of the region that year. The Reparations Commission, which the author describes as dictatorial, observed reparations payments. The Inter-Allied Military Commission, in turn, controlled Germany’s demilitarization terms. That country was forced to limit its army to 100,000 men, reduce both the export and import of materiel, and reduce its arms in general.
The territorial provisions compounded by the economic terms of the Treaty of Versailles created a number of border conflicts. The Ruhr Crisis (1923-1925) occurred because Germany failed to pay reparations as a result of its dismal postwar economic situation. France and Belgium invaded that region as a result. In 1925, the Pact of Locarno confirmed the new German borders when it came to its neighbors Belgium and France. Adolf Hitler and his followers viewed all of these issues as grievances.
The terms of the Treaty of Versailles led to the hyperinflation of the German currency, as its devaluated was accompanied by rapidly rising prices. In 1923, a single loaf of bread went from costing 250 marks to 200 million marks. The Dawes (1924) and Young (1929) Plans led by the United States restructured German reparations debt, offered loans through foreign banks, and introduced a new currency. Germany’s conditions improved but the Great Depression of 1929 led to a global economic downturn negatively affecting Germany once again. In 1933, Adolf Hitler with the populist backing of the Nazi (National Socialist) Party rose to control Germany. His supporters viewed the Treaty of Versailles and its consequences as one of the main causes of their country’s hardships. Hitler simply rejected the terms of the Treaty.
The League of Nations established at the Paris Peace Conference and based on Wilsonian ideals proved to be ineffective. In 1928, several countries also signed the Kellogg-Briand Pact against war. Yet three years later, its signatory, Japan, attacked China under the false pretext of the Manchurian Incident. Japan ignored its obligations under the Pact and as part of the League of Nations and simply left the latter in 1933. The Abyssinian Crisis of 1935 saw another Pact signatory, Italy, invade Ethiopia. The League’s inability to intervene damaged its reputation further.
In March 1938, Nazi Germany absorbed Austria as part of its Anschluss. In October, Germany annexed Sudetenland, which was transferred to Czechoslovakia from the dissolved Austro-Hungarian Empire after World War I. In September 1939, Germany invaded Poland with Britain and France declaring war on Germany days later. This event marked the official start of World War II—the most devastating conflict in recorded history. By looking at these events of the interwar period, Keynes’s statement in the beginning of this book—in the context of the Treaty of Versailles negotiations—about “events marching on to their fated conclusion” is eerily relevant (6).
