Some of the most important legacies of the war were in the international sphere. Shortly after the war ended, President Wilson sailed for Europe to take part in the Paris peace conference that would negotiate the Treaty of Versailles to end the war. Ultimately, a treaty was hammered out by the Big Four: Britain, France, Italy, and the United States. The United States, however, never ratified the treaty. It was bottled up in the Senate, where Republicans insisted on changes to which Wilson would not agree. Under the treaty, Germany was forced to admit responsibility for the war, to transfer land and other resources to the Allies, and to pay reparations that were later set at $56 billion in gold dollars. That would be about $730 billion in 2011 money using the consumer price index in the United States as the inflator, a large sum for a defeated nation to repay.
John Maynard Keynes, who attended the conference as part of the British delegation, wrote a brilliant critique of the Treaty: The Economic Consequences of the Peace (1919), one of the most powerful polemics ever written by an economist and still well worth reading. Keynes argued that Allied demands for reparations went far beyond any that could be reasonably calculated on the basis of the understanding that had produced the Armistice. The treaty, in other words, was punitive and imposed excessive penalties on Germany and Austria. He argued, moreover, that Germany would never be able to make the reparation payments. To do so, Germany would have to run a persistent balance-of-payments surplus by decreasing its imports and increasing its exports. But Germany could not reduce its imports significantly, because they included necessities like food and fertilizer, and Germany could not increase its exports significantly, because its trading partners would erect tariff barriers to protect their domestic industries from competition. Keynes’s argument started a long debate among economists over the “transfer problem” that still has not been resolved.
Keynes’s argument was later answered in The Carthaginian Peace: Or the Economic Consequences of Mr. Keynes, a brilliant polemic by the French economist Etienne
Mantoux (1946). Mantoux (who died in action while serving with the Free French Forces) in World War II, argued that Germany’s ability to create a powerful military force in the 1930s proved that it had the capacity to make the required transfers if sufficient political will could be mustered. But few would argue today with Keynes’s plea for a less punitive peace. The German belief that the peace was unjust contributed to what then seemed unthinkable—a Second World War.
World History
