The Economic Consequences of the Peace by John Maynard Keynes

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The calculations of "diplomacy" lead us, therefore, nowhere. Crazy
dreams and childish intrigue in Russia and Poland and thereabouts are
the favorite indulgence at present of those Englishmen and Frenchmen who
seek excitement in its least innocent form, and believe, or at least
behave as if foreign policy was of the same _genre_ as a cheap
melodrama.

Let us turn, therefore, to something more solid. The German Government
has announced (October 30, 1919) its continued adhesion to a policy of
non-intervention in the internal affairs of Russia, "not only on
principle, but because it believes that this policy is also justified
from a practical point of view." Let us assume that at last we also
adopt the same standpoint, if not on principle, at least from a
practical point of view. What are then the fundamental economic factors
in the future relations of Central to Eastern Europe?

Before the war Western and Central Europe drew from Russia a substantial
part of their imported cereals. Without Russia the importing countries
would have had to go short. Since 1914 the loss of the Russian supplies
has been made good, partly by drawing on reserves, partly from the
bumper harvests of North America called forth by Mr. Hoover's guaranteed
price, but largely by economies of consumption and by privation. After
1920 the need of Russian supplies will be even greater than it was
before the war; for the guaranteed price in North America will have been
discontinued, the normal increase of population there will, as compared
with 1914, have swollen the home demand appreciably, and the soil of
Europe will not yet have recovered its former productivity. If trade is
not resumed with Russia, wheat in 1920-21 (unless the seasons are
specially bountiful) must be scarce and very dear. The blockade of
Russia, lately proclaimed by the Allies, is therefore a foolish and
short-sighted proceeding; we are blockading not so much Russia as
ourselves.

The process of reviving the Russian export trade is bound in any case to
be a slow one. The present productivity of the Russian peasant is not
believed to be sufficient to yield an exportable surplus on the pre-war
scale. The reasons for this are obviously many, but amongst them are
included the insufficiency of agricultural implements and accessories
and the absence of incentive to production caused by the lack of
commodities in the towns which the peasants can purchase in exchange for
their produce. Finally, there is the decay of the transport system,
which hinders or renders impossible the collection of local surpluses in
the big centers of distribution.

I see no possible means of repairing this loss of productivity within
any reasonable period of time except through the agency of German
enterprise and organization. It is impossible geographically and for
many other reasons for Englishmen, Frenchmen, or Americans to undertake
it;--we have neither the incentive nor the means for doing the work on a
sufficient scale. Germany, on the other hand, has the experience, the
incentive, and to a large extent the materials for furnishing the
Russian peasant with the goods of which be has been starved for the
past five years, for reorganizing the business of transport and
collection, and so for bringing into the world's pool, for the common
advantage, the supplies from which we are now so disastrously cut off.
It is in our interest to hasten the day when German agents and
organizers will be in a position to set in train in every Russian
village the impulses of ordinary economic motive. This is a process
quite independent of the governing authority in Russia; but we may
surely predict with some certainty that, whether or not the form of
communism represented by Soviet government proves permanently suited to
the Russian temperament, the revival of trade, of the comforts of life
and of ordinary economic motive are not likely to promote the extreme
forms of those doctrines of violence and tyranny which are the children
of war and of despair.

Let us then in our Russian policy not only applaud and imitate the
policy of non-intervention which the Government of Germany has
announced, but, desisting from a blockade which is injurious to our own
permanent interests, as well as illegal, let us encourage and assist
Germany to take up again her place in Europe as a creator and organizer
of wealth for her Eastern and Southern neighbors.

There are many persons in whom such proposals will raise strong
prejudices. I ask them to follow out in thought the result of yielding
to these prejudices. If we oppose in detail every means by which Germany
or Russia can recover their material well-being, because we feel a
national, racial, or political hatred for their populations or their
Governments, we must be prepared to face the consequences of such
feelings. Even if there is no moral solidarity between the
nearly-related races of Europe, there is an economic solidarity which we
cannot disregard. Even now, the world markets are one. If we do not
allow Germany to exchange products with Russia and so feed herself, she
must inevitably compete with us for the produce of the New World. The
more successful we are in snapping economic relations between Germany
and Russia, the more we shall depress the level of our own economic
standards and increase the gravity of our own domestic problems. This is
to put the issue on its lowest grounds. There are other arguments, which
the most obtuse cannot ignore, against a policy of spreading and
encouraging further the economic ruin of great countries.

* * * * *

I see few signs of sudden or dramatic developments anywhere. Riots and
revolutions there may be, but not such, at present, as to have
fundamental significance. Against political tyranny and injustice
Revolution is a weapon. But what counsels of hope can Revolution offer
to sufferers from economic privation, which does not arise out of the
injustices of distribution but is general? The only safeguard against
Revolution in Central Europe is indeed the fact that, even to the minds
of men who are desperate, Revolution offers no prospect of improvement
whatever. There may, therefore, be ahead of us a long, silent process of
semi-starvation, and of a gradual, steady lowering of the standards of
life and comfort. The bankruptcy and decay of Europe, if we allow it to
proceed, will affect every one in the long-run, but perhaps not in a way
that is striking or immediate.

This has one fortunate side. We may still have time to reconsider our
courses and to view the world with new eyes. For the immediate future
events are taking charge, and the near destiny of Europe is no longer in
the hands of any man. The events of the coming year will not be shaped
by the deliberate acts of statesmen, but by the hidden currents, flowing
continually beneath the surface of political history, of which no one
can predict the outcome. In one way only can we influence these hidden
currents,--by setting in motion those forces of instruction and
imagination which change _opinion_. The assertion of truth, the
unveiling of illusion, the dissipation of hate, the enlargement and
instruction of men's hearts and minds, must be the means.

In this autumn of 1919, in which I write, we are at the dead season of
our fortunes. The reaction from the exertions, the fears, and the
sufferings of the past five years is at its height. Our power of feeling
or caring beyond the immediate questions of our own material well-being
is temporarily eclipsed. The greatest events outside our own direct
experience and the most dreadful anticipations cannot move us.

In each human heart terror survives
The ruin it has gorged: the loftiest fear
All that they would disdain to think were true:
Hypocrisy and custom make their minds
The fanes of many a worship, now outworn.
They dare not devise good for man's estate,
And yet they know not that they do not dare.
The good want power but to weep barren tears.
The powerful goodness want: worse need for them.
The wise want love; and those who love want wisdom;
And all best things are thus confused to ill.
Many are strong and rich, and would be just,
But live among their suffering fellow-men
As if none felt: they know not what they do.

We have been moved already beyond endurance, and need rest. Never in the
lifetime of men now living has the universal element in the soul of man
burnt so dimly.

For these reasons the true voice of the new generation has not yet
spoken, and silent opinion is not yet formed. To the formation of the
general opinion of the future I dedicate this book.

THE END

FOOTNOTES:

[157] The figures for the United Kingdom are as follows:

Net Excess of
Monthly Imports Exports Imports
Average $1,000 $1,000 $1,000

1913 274,650 218,850 55,800
1914 250,485 179,465 71,020
Jan.-Mar. 1919 547,890 245,610 302,280
April-June 1919 557,015 312,315 244,700
July-Sept. 1919 679,635 344,315 335,320

But this excess is by no means so serious as it looks; for with the
present high freight earnings of the mercantile marine the various
"invisible" exports of the United Kingdom are probably even higher than
they were before the war, and may average at least $225,000,000 monthly.

[158] President Wilson was mistaken in suggesting that the
supervision of Reparation payments has been entrusted to the League of
Nations. As I pointed out in Chapter V., whereas the League is invoked
in regard to most of the continuing economic and territorial provisions
of the Treaty, this is not the case as regards Reparation, over the
problems and modifications of which the Reparation Commission is supreme
without appeal of any kind to the League of Nations.

[159] These Articles, which provide safeguards against the
outbreak of war between members of the League and also between members
and non-members, are the solid achievement of the Covenant. These
Articles make substantially less probable a war between organized Great
Powers such as that of 1914. This alone should commend the League to all
men.

[160] It would be expedient so to define a "protectionist
tariff" as to permit (_a_) the total prohibition of certain imports;
(_b_) the imposition of sumptuary or revenue customs duties on
commodities not produced at home; (_c_) the imposition of customs duties
which did not exceed by more than five per cent a countervailing excise
on similar commodities produced at home; (_d_) export duties. Further,
special exceptions might be permitted by a majority vote of the
countries entering the Union. Duties which had existed for five years
prior to a country's entering the Union might be allowed to disappear
gradually by equal instalments spread over the five years subsequent to
joining the Union.

[161] The figures in this table are partly estimated, and are
probably not completely accurate in detail; but they show the
approximate figures with sufficient accuracy for the purposes of the
present argument. The British figures are taken from the White Paper of
October 23, 1919 (Cmd. 377). In any actual settlement, adjustments would
be required in connection with certain loans of gold and also in other
respects, and I am concerned in what follows with the broad principle
only. The total excludes loans raised by the United Kingdom on the
market in the United States, and loans raised by France on the market in
the United Kingdom or the United States, or from the Bank of England.

[162] This allows nothing for interest on the debt since the
Bolshevik Revolution.

[163] No interest has been charged on the advances made to
these countries.

[164] The actual total of loans by the United States up to date
is very nearly $10,000,000,000, but I have not got the latest details.

[165] The financial history of the six months from the end of
the summer of 1916 up to the entry of the United States into the war in
April, 1917, remains to be written. Very few persons, outside the
half-dozen officials of the British Treasury who lived in daily contact
with the immense anxieties and impossible financial requirements of
those days, can fully realize what steadfastness and courage were
needed, and how entirely hopeless the task would soon have become
without the assistance of the United States Treasury. The financial
problems from April, 1917, onwards were of an entirely different order
from those of the preceding months.

[166] Mr. Hoover was the only man who emerged from the ordeal
of Paris with an enhanced reputation. This complex personality, with his
habitual air of weary Titan (or, as others might put it, of exhausted
prize-fighter), his eyes steadily fixed on the true and essential facts
of the European situation, imported into the Councils of Paris, when he
took part in them, precisely that atmosphere of reality, knowledge,
magnanimity, and disinterestedness which, if they had been found in
other quarters also, would have given us the Good Peace.

[167] Even after the United States came into the war the bulk
of Russian expenditure in the United States, as well as the whole of
that Government's other foreign expenditure, had to be paid for by the
British Treasury.

[168] It is reported that the United States Treasury has agreed
to fund (_i.e._ to add to the principal sum) the interest owing them on
their loans to the Allied Governments during the next three years. I
presume that the British Treasury is likely to follow suit. If the debts
are to be paid ultimately, this piling up of the obligations at compound
interest makes the position progressively worse. But the arrangement
wisely offered by the United States Treasury provides a due interval for
the calm consideration of the whole problem in the light of the
after-war position as it will soon disclose itself.

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