Put the conditions of the Peace into action will lead to non-ceasing catastrophe that will lead the death of millions of Germans by starvation, not to mention is lack of ability to produce coal in Germany due to the occupation of the land to produce coal by France.
Brockdorff doubts that the Allied Powers will even consider the economic consequences of the peace and “those who sign the Treaty will sign the death sentence of millions of German men, women and children.”
Keynes divides the situation into three categories; the falling off of the European productivity, the difficulty of transport and exchange and Europe’s incapability to consume its supplies.
The decrease of Europe’s productivity is difficult to estimate and is evident without any proof or reasoning whatsoever, as it has been the main principle of Mr. Hoover’s warnings. What caused such problems was the violence in Russia and Hungary, Poland’s and Czechoslovakia’s inexperienced new government, lack of sufficient labor in Europe due to either army drifting or loss in war, agricultural insufficiency due to the ruining of the soil throughout the war, and above all the mental and physical unsettlement of the working class.
Mr. Hoover addresses the unemployment rate due to the post-war exhaustion in Europe (15 million families were receiving unemployment allowance). In Germany, there is an avoiding to labor and the capital that anything they might produce after the barest level of existence will be taken away from them eventually.
Keynes then reminds the reader some of the problems; the production in Europe has decreased 30%. Before the war, Germany produced 85% of food consumed by its population, the fertility of the soil has now diminished by 40% and food stock diminished by 55%.
Russia which always exports food may starve, Hungary pillaged by Romania. Coal can be imported/exported but the breakdown of the prevents the process along with the breakdown of the European currency system prevents another option which is the manufacturing of the goods.
But even in spite of Germany’s losses in the war, Germany’s position is probably not so serious as its neighbors. Russia’s condition in the stocks is desperate and at the same time is the most fundamental factor in its economic crisis. Modern industrial life depends on transportation, and people can not live without that option.
Keynes also regards Europe as “a country population able to support life on the fruits of its own agricultural production but without the accustomed surplus”. He mentions that Europe’s industrialization causes the lack of livelihood and may not import.
Lenin says that the best way to destroy the Capitalist system was to debauch the currency. Inflation is continued to be diminished. There are, however, some profiteers who are “object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat.” And, according to Keynes, Lenin was right.
“Equilibrium of wealth is an inevitable result of the inflation, but they have no plan for replacing it”, Keynes said. Capitalists allow themselves to be ruined by their instrument, governments.. etc.
Inflation is dramatically increasing in Europe; in Germany (1 Mark = less than 1 cent), in Italy it’s fallen down to its half, France is living in an uncertainty. But they never lost their value for the world beyond. But amongst the nation, the currency is a worthless piece of paper…
But even so, the problem is found in foreign trade. The price of imported commodities, when converted at a current rate of exchange, is far in excess of the local price cannot be imported by the private agencies and must be given by the government due to the lack of a chance to trade.
Keynes divides Europe into two groups: one that cannot import due to the Blockade (Germany) and one that cannot import except with the help of the allies (Italy).
There are three separate obstacles to the resumption of the trade; imbalance in the internal prices and international price due the currency price difference amongst the nation, few credit abroad for the individual and disordered currency system due to the increasing note circulation.
In France, money circulation is 6 times more than it was before the war, and the exporting rate is 40% percent less; France imports are a lot more than the exports. In July 1919, the import rate is 200% percent higher than the export rate in France. Italy and Austria not differ a lot in terms of the economical crisis overshadowing the European continent.
In Italy, there are fewer crises than in France, for throughout the war Italian finance was more enterprising than the French, and were made to impose taxes and pay for the war.
The peace, in summary, will result a mass starvation and unemployment that will tear Europe apart leaving incurable wounds from there the blood will eternally bleed..
In chapter VII titled “Remedies”, however, Keynes becomes more optimistic and provides a “remedy” that will, in his opinion at least, solve the post peace crises. In this chapter as well he excludes Britain from “Europe”. The problems in England are serious. More industrialization, less agriculture and increasing population in Europe, increasing of note circulation... etc. What is then to be done?
Keynes suggests the “Revision of the Treaty”, “the settlement of inter-ally indebtedness and an international loan and the reform of the currency and establishing relations between Central Powers to Russia.
The Revision of the Treaty
Basically, there are territorial disputes after the Treaty was signed. He uses article V of the treaty that says “Except where otherwise expressly provided in this Covenant or by the terms of the present Treaty, decisions at any meeting of the Assembly or of the Council shall require the agreement of all Members of the League represented at the meeting and article X by which “The Members of the League undertake to respect and preserve as against external aggression the territorial integrity and existing political independence of all Members of the League”. Those two articles together destroy the concept of the League as an instrument for progress and peace with a fatal result for the status quo, but, however, articles XI and XVII have the possibility of preventing the war amongst the nations excluding Germany, which was forced to sign for it. Keynes afterwards offers a strategy for Reparation; if the amount is more than needed by the Allies, it should be condensed to 10 billion dollars, then he suggests the armistice of Germany reckoned as 2.5 billion dollars without evaluation as item by item, dissolve the Reparation Commission and must be a part of the League of Nation that includes Germany looked upon as representative within it.
Coal and Iron:
- Annex V must be cancelled, and Germany’s obligation to make good France’s loss of coal through the destruction of her mind should remain until Germany pays its due.
2. Germany should receive back both the mines and territory without payment. France should supply Germany from Lorraine with at least 50%.
3. Problems in Upper Silesia should be held and in coming to a final decision the regard will be pay by the principles of the allies.
4. The Coal Commissions that belongs to Allies must become a part of the league of nation and must include Germany as representative.
Tariffs, a free trade union, must be established in the League. No protectionist tariffs must be established. Germany. Poland, newly formed states and Mandated States must be a member of the union. It has to include some countries like the UK.
Fixing the Reparation will renew hope of peace and Germany’s ability to pay within its capacity. If they aim intentionally at the impoverishment of Central Power, vengeance will be easily emerged…
The Settlement of Inter-Ally Indebtedness
Keynes suggests a readjustment of the payment and debts. The whole of the payments made by Germany would then be subject to the prior change of repairing material injury done to those countries and provinces which suffered actual invasion by the enemy and Britain must review the treaty.
Keynes also says that more prosperity would come by the aid of the United States with two financial proposals. First is the absolute cancellation of the debts between the allies. As well as the USA must give even more money to prosper Europe, since USA’s losses are much less than those of Europe.
Controversies, however, are very foolish, since there is no reason from sacrifices equilibrium. 1. The amount of money England borrowed from the States were approximately the same as England gave to other Allies during the same period (excluding sums given by the United States before the war) so that almost the whole of England’s debts to the United States was incurred to assist her Allies. 2. England gave about 5 billion dollars for foreign securities.
3. England’s population was about one half as much as the United States. English government’s wealth should be put at about to fifth as the United States.
A debtor nation does not love its creditor. The existence of debts will crush the finance and the economy of a debtor. Keynes regard the whole position “is in the highest degree artificial, misleading and vexation. We shall never be able to move again, unless we can free ourselves from these paper shackles”. That is to say that Europe will stop prospering unless the debts are cancelled. Europe must not depend on the largesse of the States, rather than on its own labor.
An International Loan
Restoration and economic refreshment cannot be done without the excess aid of the United States, and shall be involved in the European affairs. If America remembers what Europe meant to her the mother of art and knowledge would interest herself in to prove decisive issues for the civilization of mankind?
Expenditure out of the loan should be the subject to general, but not detailed supervision by the leading countries.
Relations of Central Europe to Russia
The union of forces between Russia and Germany are looked upon greatly and its efficiency and effectiveness of the unity is unthinkable. Besides, a new military power establishing itself in the east with its spiritual home in Brandenburg, drawing to itself all the military talent and all the military adventurers who regret democracy.
Before the war, Western and Central Europe imported a great amount of its cereals from Russia. In 1980, Russia’s productivity greatly increased and it would be foolish, then, to impose a blockade on Russia.
Keynes warns then that detailed opposition of Germany or Russia, Europe must be prepared to expect the consequences of the feelings. The rest is now up to the world…
___________________________________________________________________________Essay: “Summary of John Maynard Keynes’ “The Economic Consequences of the Peace””.