Explain the "economic consequences of the peace" that John Maynard Keynes warned about as an outcome of the Treaty of Versailles.economic consequences of the peace

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droxonian eNotes educator| Certified Educator

As part of the Treaty of Versailles, Germany, as the aggressor declared responsible for WWI, was to be subjected to punishing financial consequences, as well as being placed under other constraints relating to its armed forces, for example. Keynes was a very outspoken critic of this plan, as he felt it would lead not only to financial ruin for Germany, but also to social consequences which could have serious repercussions in future years. As was later proven, as Germany hobbled towards fascism in the early 1920s, Keynes's prediction was correct.

One of the main issues Keynes saw with the Treaty in its final form was that it was being driven by the French, who had suffered terribly in WWI and who also wished to emulate the punishment that had been enacted upon them by the Germans at the end of the Franco-Prussian war, almost forty years earlier. The French demanded reparations from Germany for all damages caused by the war; in effect, Keynes saw, the point of this was to destroy Germany entirely as a great power, as its economy had already been dealt serious blows by the war itself. Keynes was particularly horrified by provisions in the Treaty stating that if the German nation did not keep up its repayments, other countries (namely France) would be allowed to invade it. Note that the area between France and Germany, the Sudetenland, had been the focus of much fighting all the way back to the Franco-Prussian war and beyond, so this was evidently, Keynes felt, a "vengeance" move from France.

In "The Economic Consequences of the Peace," Keynes made very clear that he felt "the forces of Reaction and the despairing consequences of Revolution" could be the only possible outcome of impoverishing the German nation in this way. He also predicted that this would cause the "horrors" of WWI to "fade into nothing," so violent would be the German response to this humiliation and suffering at Allied hands. And indeed, by 1923, under the Weimar government, German inflation was such that people were pictured pushing wheelbarrows full of Deutschemarks to the shops to purchase single loaves of bread; it was no coincidence that German bitterness against the nations who had treated them so badly drove the rise of Adolf Hitler and subsequent fascist outrage.

hi1954 eNotes educator| Certified Educator

Keynes believed the economic consequences of the Treaty for Europe would be disastrous, and create conditions leading to a general collapse of European economies and, eventually, another general war.  He turned out to be completely correct.

He pointed out in his book, The Economic Consequences of the Peace, that the European powers had ignored the letter and spirit of Wilson's Fourteen Points, and were asking reparations from Germany that were impossible.  Reparations demanded included damages of war per se, as well as damages to the national economies; the costs of feeding the populations after the war; the cost of looted materials including timber and iron ore, livestock, household items, etc.; damages to civilians who lost property or were deported; essentially anything the Allies chose, whether directly war related (bombing damages, etc.) or not.  No attention was paid to the fact that damage was caused by the other powers allied with Germany- Germany was forced to accept total responsibility for the war and total economic responsibility as well.  There was no acknowledgement that other countries' plans and political issues also brought on the war, such as France, Russia, Montenegro or Bulgaria.

The worst of this, according to Keynes was that

"The treaty includes no provisions for the economic rehabilitation of Europe-  nothing to make the defeated Central empires into good neighbors, nothing to stabilise the new states of Europe, nothing to reclaim Russia..."

He pointed out nothing was decided at Versailles to help rebuild the economy of France or Italy or to set up economic cooperation among the nations.  He added that "the fundamental problem of a Europe starving and disintergrating before their eyes" was the one thing the Council of Four (UK, France, US and Belgium) completely neglected.  The crushing conditions of the Treaty assured an economic disaster on the mainland of Europe, and the rise of a backlash in Germany leading to another general European war.

The first link below leads to the complete text of Economic Consequences.


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