He criticized the motives and abilities of
Wilson, Lloyd George and Clemenceau,
and he accused them of violating both the
spirit and the letter of President Wilson’s
“Fourteen Points.” He expressed regret
that the conferees had not included in the
treaty any ideas for helping the economics
of Germany or Europe to recover back to
their pre-war levels. In Keynes’ opinion,
not including any German representatives
in the crafting of the treaty was yet another
indicator of the Allied negotiators’ primary
interest in punishment and vengeance, not
in reconciliation. Importantly, by attacking
the basic morality of the treaty as soon as
he did after its signing, Keynes was largely
responsible for establishing the tone of the
debate over its effectiveness.
The reaction to Keynes’ book was swift.
Many observers praised his detailed analy-
sis of the reparations issue and the likely
impact of other economic terms. But
even those who supported the essence of
his arguments had to acknowledge their
own inability to verify Keynes’ economic
assumptions and calculations. Therefore, it
was difficult for any reader to validate his
prediction of economic doom for Germany
and Europe. Some reviewers did question
his version of the pre-1914 European econ-
omy. None, however, were able to marshal
the amount of facts Keynes presented as
he documented his assertions about Ger-
many’s past strengths and the need for the
treaty to recognize their future importance.
More fundamentally, many critics
believed the author’s unflattering por-
traits of the main Allied negotiators and
their actions during the crafting of the
treaty undermined his economic analysis.
They viewed the book not as a dispas-
sionate commentary on the treaty’s eco-
nomic terms, but as an emotional argu-
ment against the basic premise of both
the peace conference and the treaty. For
the most part, readers expressing their
agreement or disagreement with Keynes’
political or economic observations did so
because they validated their own personal
or institutional opinions. Few commented
on the wisdom or feasibility of his spe-
cific suggestions for improving the treaty.
Indeed, it quickly became apparent that
the exhausted negotiators would not con-
sider any of them.
During the past 100 years, many authors
have examined the accuracy of Keynes’
analysis and predictions. Few have done
so without the benefit of hindsight, that
is without referring to the way the flow
of events in the 1920s and 1930s affected
Germany’s fortunes and Keynes’ financial
predictions. It’s worthwhile pointing out
that in 1920, no one knew the following
• A weak German government would be
unable to prevent the rampant inflation
that ruined their economy during the
• The Reparations Commission would be
unable to develop one simple level of
reparations that Germany could reason-
ably be expected to pay over a defined
period of time. Moreover, the decisions
made by the commission in 1921 would
have to be revisited by the Dawes Plan
in 1924 and the Young Plan in 1929.
• Changes in the purchasing power of
various currencies would materially
affect the value of the amounts of cur-
rency and payments in kind to be deliv-
ered by Germany.
• German officials and ordinary citizens
alike would use Keynes’ vitriolic state-
ments about the proceedings and the
results at Versailles as a justification for
their own rejection of the treaty’s most
• No Allied country would be able to
enforce most of the territorial and mili-
tary restrictions called for in the treaty.
• The US Senate’s refusal to ratify the
treaty would remove that country from
any role in helping rehabilitate Europe.
• Economic downturns around the world
during the 1920s would exacerbate
problems Keynes had not even men-
• In subsequent decades, Keynes himself
would materially modify his beliefs in
the economic orthodoxy he advocated
and supported in 1919.
• A disillusioned young war veteran
would exploit the difficult economic
and social conditions in post-war Ger-
many and feed his misguided version of
nationalistic, anti-Semitic, anti-capital-
ist, anti-Marxist pride to the detriment
of millions of innocent souls.
Some of Keynes’ economic analysis
did turn out to be accurate. Germany
would claim great difficulty in struggling
to pay reparations. But he could not have
known how its leaders’ rejection of the
treaty’s principles affected their willing-
ness, not their ability, to comply with
its terms. Keynes’ apprehensions about
the economic revitalization of Germany
and Europe were on point. But it seems
improper to ignore the impact of domestic
politics in Germany’s economic problems
in the 1920s, let alone the impact in the
later years of the Great Depression.
Given the intensity of the economic
troubles Germany and all of Europe
encountered throughout the two decades
following the publication of The Economic
Consequences, it is easy to conclude that
Keynes was very accurate in his analy-
ses and projections. Unfortunately, it’s
impossible to examine the counterfactual
question of how those economics would
have progressed if Keynes had not writ-
ten his book. Did Keynes really predict
the future? Or did he give fellow analysts
of the Treaty of Versailles sufficient data
points they could accept or reject in order
to justify their own version of the treaty’s
impact? The controversy continues.
Michael A. Martorelli is a Director
Emeritus at Fairmount Partners and a
frequent contributor to Financial His-
tory. He earned his MA in History from
American Military University.
Hession, Charles H. John Maynard Keynes: A
Personal Biography of the Man Who Revo-
lutionized Capitalism and the Way We Live.
Macmillan Publishing Company. 1984.
Keynes, John Maynard. The Economic Conse-
quences of the Peace. Macmillan & Co. 1919.
Lepper, Larry. “The Rhetorical Consequences
of Mr. Keynes: Intellectuals and the Com-
munication of Economic Ideas.” Thesis sub-
mitted to Victoria University of Wellington.
Mantoux, Etienne, R.C.K. Ensor, et al. The
Carthaginian Peace or The Economic Con-
sequences of Mr. Keynes. Oxford University
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