A Revision of the Treaty - John Maynard Keynes - ebook
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The Economic Consequences of the Peace, which I published in December 1919, has been reprinted from time to time without revision or correction. So much has come to our knowledge since then, that a revised edition of that book would be out of place. I have thought it better, therefore, to leave it unaltered, and to collect together in this Sequel the corrections and additions which the flow of events makes necessary, together with my reflections on the present facts. But this book is strictly what it represents itself to be—a Sequel; I might almost have said an Appendix. I have nothing very new to say on the fundamental issues. Some of the Remedies which I proposed two years ago are now everybodyʼs commonplaces, and I have nothing startling to add to them. My object is a strictly limited one, namely to provide facts and materials for an intelligent review of the Reparation Problem as it now is. “The great thing about this wood,” said M. Clemenceau of his pine forest in La Vendée, “is that, here, there is not the slightest chance of meeting Lloyd George or President Wilson. Nothing here but the squirrels.” I wish that I could claim the same advantages for this book.

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Table of Contents

CHAPTER I - The State of Opinion

CHAPTER II - From the Ratification of the Treaty Of Versailles to the Second Ultimatum Of London

EXCURSUS I

EXCURSUS II

CHAPTER III - The Burden of the London Settlement

EXCURSUS III

EXCURSUS IV

CHAPTER IV - The Reparation Bill

CHAPTER V - The Legality of the Claim for Pensions

John Maynard Keynes

A Revision of the Treaty

First digital edition 2018 by Fabio De Angelis

PREFACE

The Economic Consequences of the Peace, which I published in December 1919, has been reprinted from time to time without revision or correction. So much has come to our knowledge since then, that a revised edition of that book would be out of place. I have thought it better, therefore, to leave it unaltered, and to collect together in this Sequel the corrections and additions which the flow of events makes necessary, together with my reflections on the present facts.

But this book is strictly what it represents itself to be—a Sequel; I might almost have said an Appendix. I have nothing very new to say on the fundamental issues. Some of the Remedies which I proposed two years ago are now everybodyʼs commonplaces, and I have nothing startling to add to them. My object is a strictly limited one, namely to provide facts and materials for an intelligent review of the Reparation Problem as it now is.

“The great thing about this wood,” said M. Clemenceau of his pine forest in La Vendée, “is that, here, there is not the slightest chance of meeting Lloyd George or President Wilson. Nothing here but the squirrels.” I wish that I could claim the same advantages for this book.

J. M. Keynes.

CHAPTER I - The State of Opinion

It is the method of modern statesmen to talk as much folly as the public demand and to practise no more of it than is compatible with what they have said, trusting that such folly in action as must wait on folly in word will soon disclose itself as such, and furnish an opportunity for slipping back into wisdom,—the Montessori system for the child, the Public. He who contradicts this child will soon give place to other tutors. Praise, therefore, the beauty of the flames he wishes to touch, the music of the breaking toy; even urge him forward; yet waiting with vigilant care, the wise and kindly savior of Society, for the right moment to snatch him back, just singed and now attentive.

I can conceive for this terrifying statesmanship a plausible defense. Mr. Lloyd George took the responsibility for a Treaty of Peace, which was not wise, which was partly impossible, and which endangered the life of Europe. He may defend himself by saying that he knew that it was not wise and was partly impossible and endangered the life of Europe; but that public passions and public ignorance play a part in the world of which he who aspires to lead a democracy must take account; that the Peace of Versailles was the best momentary settlement which the demands of the mob and the characters of the chief actors conjoined to permit; and for the life of Europe, that he has spent his skill and strength for two years in avoiding or moderating the dangers.

Such claims would be partly true and cannot be brushed away. The private history of the Peace Conference, as it has been disclosed by French and American participators, displays Mr. Lloyd George in a partly favorable light, generally striving against the excesses of the Treaty and doing what he could, short of risking a personal defeat. The public history of the two years which have followed it exhibit him as protecting Europe from as many of the evil consequences of his own Treaty, as it lay in his power to prevent, with a craft few could have bettered, preserving the peace, though not the prosperity, of Europe, seldom expressing the truth, yet often acting under its influence. He would claim, therefore, that by devious paths, a faithful servant of the possible, he was serving Man.

He may judge rightly that this is the best of which a democracy is capable,—to be jockeyed, humbugged, cajoled along the right road. A preference for truth or for sincerity as a methodmay be a prejudice based on some esthetic or personal standard, inconsistent, in politics, with practical good.

We cannot yet tell. Even the public learns by experience. Will the charm work still, when the stock of statesmenʼs credibility, accumulated before these times, is getting exhausted?

In any event, private individuals are not under the same obligation as Cabinet Ministers to sacrifice veracity to the public weal. It is a permitted self–indulgence for a private person to speak and write freely. Perhaps it may even contribute one ingredient to the congeries of things which the wands of statesmen cause to work together, so marvelously, for our ultimate good.

For these reasons I do not admit error in having based The Economic Consequences of the Peace on a literal interpretation of the Treaty of Versailles, or in having examined the results of actually carrying it out. I argued that much of it was impossible; but I do not agree with many critics, who held that, for this very reason, it was also harmless. Inside opinion accepted from the beginning many of my main conclusions about the Treaty. But it was not therefore unimportant that outside opinion should accept them also.

For there are, in the present times, two opinions; not, as in former ages, the true and the false, but the outside and the inside; the opinion of the public voiced by the politicians and the newspapers, and the opinion of the politicians, the journalists and the civil servants, upstairs and backstairs and behind–stairs, expressed in limited circles. In time of war it became a patriotic duty that the two opinions should be as different as possible; and some seem to think it so still.

This is not entirely new. But there has been a change. Some say that Mr. Gladstone was a hypocrite; yet if so, he dropped no mask in private life. The high tragedians, who once ranted in the Parliaments of the world, continued it at supper afterwards. But appearances can no longer be kept up behind the scenes. The paint of public life, if it is ruddy enough to cross the flaring footlights of to–day, cannot be worn in private,—which makes a great difference to the psychology of the actors themselves. The multitude which lives in the auditorium of the world needs something larger than life and plainer than the truth. Sound itself travels too slowly in this vast theater, and a true word no longer holds when its broken echoes have reached the furthest listener.

Those who live in the limited circles and share the inside opinion pay both too much and too little attention to the outside opinion; too much, because, ready in words and promises to concede to it everything, they regard open opposition as absurdly futile; too little, because they believe that these words and promises are so certainly destined to change in due season, that it is pedantic, tiresome, and inappropriate to analyze their literal meaning and exact consequences. They know all this nearly as well as the critic, who wastes, in their view, his time and his emotions in exciting himself too much over what, on his own showing, cannot possibly happen. Nevertheless, what is said before the world is, still, of deeper consequence than the subterranean breathings and well–informed whisperings, knowledge of which allows inside opinion to feel superior to outside opinion, even at the moment of bowing to it.

But there is a further complication. In England (and perhaps elsewhere also), there are two outside opinions, that which is expressed in the newspapers and that which the mass of ordinary men privately suspect to be true. These two degrees of the outside opinion are much nearer to one another than they are to the inside, and under some aspects they are identical; yet there is under the surface a real difference between the dogmatism and definiteness of the press and the living, indefinite belief of the individual man. I fancy that even in 1919 the average Englishman never really believed in the indemnity; he took it always with a grain of salt, with a measure of intellectual doubt. But it seemed to him that for the time being there could be little practical harm in going on the indemnity tack, and also that, in relation to his feelings at that time, a belief in the possibility of boundless payments by Germany was in better sentiment, even if less true, than the contrary. Thus the recent modification in British outside opinion is only partly intellectual, and is due rather to changed conditions; for it is seen that perseverance with the indemnity does now involve practical harm, whilst the claims of sentiment are no longer so decisive. He is therefore prepared to attend to arguments, of which he had always been aware out of the corner of his eye.

Foreign observers are apt to heed too little these unspoken sensibilities, which the voice of the press is bound to express ultimately. Inside opinion gradually affects them by percolating to wider and wider circles; and they are susceptible in time to argument, common sense, or self–interest. It is the business of the modern politician to be accurately aware of all three degrees; he must have enough intellect to understand the inside opinion, enough sympathy to detect the inner outside opinion, and enough brass to express the outer outside opinion.

Whether this account is true or fanciful, there can be no doubt as to the immense change in public sentiment over the past two years. The desire for a quiet life, for reduced commitments, for comfortable terms with our neighbors is now paramount. The megalomania of war has passed away, and every one wishes to conform himself with the facts. For these reasons the Reparation Chapter of the Treaty of Versailles is crumbling. There is little prospect now of the disastrous consequences of its fulfilment.

I undertake in the following chapters a double task, beginning with a chronicle of events and a statement of the present facts, and concluding with proposals of what we ought to do. I naturally attach primary importance to the latter. But it is not only of historical interest to glance at the recent past. If we look back a little closely on the two years which have just elapsed (and the general memory unaided is now so weak that we know the past little better than the future), we shall be chiefly struck, I think, by the large element of injurious make–believe. My concluding proposals assume that this element of make–believe has ceased to be politically necessary; that outside opinion is now ready for inside opinion to disclose, and act upon, its secret convictions; and that it is no longer an act of futile indiscretion to speak sensibly in public.

CHAPTER II - From the Ratification of the Treaty Of Versailles to the Second Ultimatum Of London

I. The Execution of the Treaty and the Plebiscites

The Treaty of Versailles was ratified on January 10, 1920, and except in the plebiscite areas its territorial provisions came into force on that date. The Slesvig plebiscite (February and March, 1920) awarded the north to Denmark and the south to Germany, in each case by a decisive majority. The East Prussian plebiscite (July, 1920) showed an overwhelming vote for Germany. The Upper Silesian plebiscite (March, 1921) yielded a majority of nearly two to one in favor of Germany for the province as a whole,[2] but a majority for Poland in certain areas of the south and east. On the basis of this vote, and having regard to the industrial unity of certain disputed areas, the principal Allies, with the exception of France, were of opinion that, apart from the southeastern districts of Pless and Rybnik which, although they contain undeveloped coalfields of great importance, are at present agricultural in character, nearly the whole of the province should be assigned to Germany. Owing to the inability of France to accept this solution, the whole problem was referred to the League of Nations for final arbitration. This body bisected the industrial area in the interests of racial or nationalistic justice; and introduced at the same time, in the endeavor to avoid the consequences of this bisection, complicated economic provisions of doubtful efficiency in the interests of material prosperity. They limited these provisions to fifteen years, trusting perhaps that something will have occurred to revise their decision before the end of that time. Broadly speaking, the frontier has been drawn, entirely irrespective of economic considerations, so as to include as large as possible a proportion of German voters on one side of it and Polish voters on the other (although to achieve this result it has been thought necessary to assign two almost purely German towns, Kattowitz and Königshütte to Poland). From this limited point of view the work may have been done fairly. But the Treaty had directed that economic and geographical considerations should be taken into account also.

I do not intend to examine in detail the wisdom of this decision. It is believed in Germany that subterranean influence brought to bear by France contributed to the result. I doubt if this was a material factor, except that the officials of the League were naturally anxious, in the interests of the League itself, to produce a solution which would not be a fiasco through the members of the Council of the League failing to agree about it amongst themselves; which inevitably imported a certain bias in favor of a solution acceptable to France. The decision raises, I think, much more fundamental doubts about this method of settling international affairs.

Difficulties do not arise in simple cases. The League of Nations will be called in where there is a conflict between opposed and incommensurable claims. A good decision can only result by impartial, disinterested, very well–informed and authoritative persons taking everything into account. Since International Justice is dealing with vast organic units and not with a multitude of small units of which the individual particularities are best ignored and left to average themselves out, it cannot be the same thing as the cut–and–dried lawyerʼs justice of the municipal court. It will be a dangerous practice, therefore, to entrust the settlement of the ancient conflicts now inherent in the tangled structure of Europe, to elderly gentlemen from South America and the far Asiatic East, who will deem it their duty to extract a strict legal interpretation from the available signed documents,—who will, that is to say, take account of as few things as possible, in an excusable search for a simplicity which is not there. That would only give us more judgments of Solomon with the assʼs ears, a Solomon with the bandaged eyes of law, who, when he says “Divide ye the living child in twain,” means it.

The Wilsonian dogma, which exalts and dignifies the divisions of race and nationality above the bonds of trade and culture, and guarantees frontiers but not happiness, is deeply embedded in the conception of the League of Nations as at present constituted. It yields us the paradox that the first experiment in international government should exert its influence in the direction of intensifying nationalism.

These parenthetic reflections have arisen from the fact that from a certain limited point of view the Council of the League may be able to advance a good case in favor of its decision. My criticism strikes more deeply than would a mere allegation of partiality.

With the conclusion of the plebiscites the frontiers of Germany were complete.

In January 1920 Holland was called on to surrender the Kaiser; and, to the scarcely concealed relief of the Governments concerned, she duly refused (January 23, 1920). In the same month the surrender of some thousands of “war criminals” was claimed, but, in the face of a passionate protest from Germany, was not insisted on. It was arranged instead that, in the first instance at least, only a limited number of cases should be pursued, not before Allied Courts, as provided by the Treaty, but before the High Court of Leipzig. Some such cases have been tried; and now, by tacit consent, we hear no more about it.

On March 13, 1920, an outbreak by the reactionaries in Berlin (the Kapp “Putsch”) resulted in their holding the capital for five days and in the flight of the Ebert Government to Dresden. The defeat of this outbreak, largely by means of the weapon of the general strike (the first success of which was, it is curious to note, in defense of established order), was followed by Communist disturbances in Westphalia and the Ruhr. In dealing with this second outbreak, the German Government despatched more troops into the district than was permissible under the Treaty, with the result that France seized the opportunity, without the concurrence of her Allies, of occupying Frankfurt (April 6, 1920) and Darmstadt, this being the immediate occasion of the first of the series of Allied Conferences recorded below—the Conference of San Remo.

These events, and also doubts as to the capacity of the Central German Government to enforce its authority in Bavaria, led to successive postponements of the completion of disarmament, due under the Treaty for March 31, 1920, until its final enforcement by the London Ultimatum of May 5, 1921.

There remains Reparation, the chief subject of the chronicle which follows. In the course of 1920 Germany carried out certain specific deliveries and restitutions prescribed by the Treaty. A vast quantity of identifiable property, removed from France and Belgium, was duly restored to its owners.[3] The Mercantile Marine was surrendered. Some dyestuffs were delivered, and a certain quantity of coal. But Germany paid no cash, and the real problem of Reparation was still postponed.[4]

With the Conferences of the spring and summer of 1920 there began the long series of attempts to modify the impossibilities of the Treaty and to mold it into workable form.

II. The Conferences of San Remo (April 19–26, 1920), Hythe (May 15 and June 19, 1920), Boulogne (June 21, 22, 1920), Brussels (July 2–3, 1920), and Spa (July 5–16, 1920)

It is difficult to keep distinct the series of a dozen discussions between the Premiers of the Allied Powers which occupied the year from April 1920 to April 1921. The result of each Conference was generally abortive, but the total effect was cumulative; and by gradual stages the project of revising the Treaty gained ground in every quarter. The Conferences furnish an extraordinary example of Mr. Lloyd Georgeʼs methods. At each of them he pushed the French as far as he could, but not as far as he wanted; and then came home to acclaim the settlement provisionally reached (and destined to be changed a month later) as an expression of complete accord between himself and his French colleague, as a nearly perfect embodiment of wisdom, and as a settlement which Germany would be well advised to accept as final, adding about every third time that, if she did not, he would support the invasion of her territory. As time went on, his reputation with the French was not improved; yet he steadily gained his object,—though this may be ascribed not to the superiority of the method as such, but to facts being implacably on his side.

The first of the series, the Conference of San Remo (April 19–26, 1920), was held under the presidency of the Italian Premier, Signor Nitti, who did not conceal his desire to revise the Treaty. M. Millerand stood, of course, for its integrity, whilst Mr. Lloyd George (according to The Times of that date) occupied a middle position. Since it was evident that the French would not then accept any new formula, Mr. Lloyd George concentrated his forces on arranging for a discussion face to face between the Supreme Council and the German Government, such a meeting, extraordinary to relate, having never yet been arranged, neither during the Peace Conference nor afterwards. Defeated in a proposal to invite German representatives to San Remo forthwith, he succeeded in carrying a decision to summon them to visit Spa in the following month “for the discussion of the practical application of the Reparation Clauses.” This was the first step; and for the rest the Conference contented itself with a Declaration on German Disarmament. Mr. Lloyd George had had to concede to M. Millerand that the integrity of the Treaty should be maintained; but speaking in the House of Commons on his return home, he admitted a preference for a not “too literal” interpretation of it.

In May the Premiers met in privacy at Hythe to consider their course at Spa. The notion of the sliding scale, which was to play a great part in the Paris Decisions and the Second Ultimatum of London, now came definitely on the carpet. A Committee of Experts was appointed to prepare for examination a scheme by which Germany should pay a certain minimum sum each year, supplemented by further sums in accordance with her capacity. This opened the way for new ideas, but no agreement was yet in sight as to actual figures. Meantime the Spa Conference was put off for a month.

In the following month the Premiers met again at Boulogne (June 21, 1920), this meeting being preceded by an informal week–end at Hythe (June 19, 1920). It was reported that on this occasion the Allies got so far as definitely to agree on the principle of minimum annuities extensible in accordance with Germanyʼs economic revival. Definite figures even were mentioned, namely, a period of thirty–five years and minimum annuities of three milliard gold marks. The Spa Conference was again put off into the next month.

At last the Spa meeting was really due. Again the Premiers met (Brussels, July 2, 3, 1920) to consider the course they would adopt. They discussed many things, especially the proportions in which the still hypothetical Reparation receipts were to be divided amongst the claimants.[5] But no concrete scheme was adopted for Reparation itself. Meanwhile a memorandum handed in by the German experts made it plain that no plan politically possible in France was economically possible in Germany. “The Note of the German economic experts,” wrote The Times on July 3, 1920, “is tantamount to a demand for a complete revision of the Peace Treaty. The Allies have therefore to consider whether they will call the Germans sharply to order under the menace of definite sanctions, or whether they will risk creating the impression of feebleness by dallying with German tergiversations.” This was a good idea; if the Allies could not agree amongst themselves as to the precise way of altering the Treaty, a “complete accord” between them could be re–established by “calling the Germans sharply to order” for venturing to suggest that the Treaty could be altered at all.

At last, on July 5, 1920, the long–heralded Conference met. But, although it occupied twelve days, no time was found for reaching the item on the agenda which it had been primarily summoned to discuss—namely, Reparations. Before this dangerous topic could be reached urgent engagements recalled M. Millerand to Paris. One of the chief subjects actually dealt with, coal, is treated in Excursus I. at the conclusion of this chapter. But the chief significance of the meeting lay in the fact that then for the first time the responsible ministers and experts of Germany and the Allied States met face to face and used the methods of public conference and even private intimacy. The Spa Conference produced no plan; but it was the outward sign of some progress under the surface.

III. The Brussels Conference (December 16–22, 1920)