Art. 13.-THE ECONOMICS OF THE PEACE.

1. The Economic Consequences of the Peace. By John Maynard Keynes, C.B. Macmillan, 1919.

2. The Peace Treaty and the Economic Chaos of Europe. By Norman Angell. Swarthmore Press, 1919.

3. The New Germany. By George Young. Constable, 1920.

FEW, if any, writers on public finance or on the dismal science of Political Economy have leaped so rapidly into fashion and celebrity as Mr Keynes. Half a century after Adam Smith's death, when Sir Robert Peel's Cabinet was converted from Protection to Free Trade, not a single member of it had read 'The Wealth of Nations.' Neither Malthus, Ricardo, Karl Marx, Bastiat, Friedrich List, Bagehot, Jevons, Henry George, nor any other economists who have disclosed unsuspected truths, exposed popular fallacies, or invented potent fictions, ever took the City and the West End by storm as Mr Keynes has done with a single stroke.

Various explanations may be offered for the success of the book. The subject was not new or attractive. Publishers tell one that English readers are sick of the war and want to forget all about it. Pleasure, sport, love stories with happy endings-these are eagerly bought, or borrowed from the lending libraries. But, if people want to forget the carnage, they are immensely curious and anxious about the economic consequences of the struggle. War, like a tree, is judged by its fruits. Men and women, who had never dreamt of inquiring into the mysteries of the currency, are now eager to learn about the Bradbury,' the franc or the mark; why dollars are dear, and lire cheap; why the peseta is at a premium; why Russian roubles and Austrian crowns barely pay for printing, and, above all, why everything is dear. Here in England the intoxication which greeted the Armistice has been followed by the customary headache. The promises and pledges of the General Election were incapable of fulfilment; and, as time advances, the Georgian Eldorado, with its plentiful supply of cheap houses for all, low taxes and abundance, seems to be fading away. Above all, the German indemnity, which was to pay for the war, is not forthcoming.

Now Mr Keynes' book was well adapted to the autumnal mood of a disappointed and disillusioned public, which wanted to know the cause of its disappointment and its disillusionment. The crowd had celebrated the Armistice with spontaneous emotion, and the Peace with official rejoicings. But the fruits of peace, instead of ripening, seemed to have turned sour at Paris. Was it conceivable that the great men who had won the war had failed to win the peace, that the Treaty, so long in coming, was not, after all, a masterpiece of human wisdom? The continuation of conscription and 'D.O.R.A.,' of high prices, high taxes, heavy expenditure and borrowing, suggested that something must be wrong, Suddenly there steps forth from among the experts, who attended and advised the Big Four, a person as discontented as these bewildered murmurers. When the advice he tendered was definitely rejected-in the first week of June 1919-he resigned, and wrote this book, in which are stated, as he puts it, the grounds of his objection to the Treaty, or rather to the whole policy of the Conference towards the economic problems of Europe.'

There is something piquant in his position. There is nothing of the pacifist about our author. So far as we know, he had no qualms of any kind about the war, or even about the policy of the 'Knock-out Blow.' He was satisfied with the war aims of Mr Asquith and the war aims of Mr Lloyd George. He was not a regular civil servant, but his temporary attachment to the British Treasury during the war was so highly valued that they made him their official representative at the Paris Peace Conference; and he also sat as deputy for the Chancellor of the Exchequer on the Supreme Economic Council. Thus he was able to watch the leading actors in the peace drama; and the fascination of the book lies partly in his delineation of their characters, but still more in the dramatic skill with which he deduces from their characters, and from their political interests or commitments, what he regards as the unwisdom, injustice, imperfection, and impracticability of the Peace Treaty.

Once more let us be under no mistake as to Mr Keynes' own convictions. He is no apologist for Germany. The hanging of the Kaiser does not appeal to him, because (as he tells us on his very first page) it was the German

people who,' moved by insane delusion and reckless selfregard,' overturned the foundations on which the other nations of Europe were building in peaceful and unsuspecting security. For this crime obviously no punishment would be too heavy, no indemnity too large. The Kaiser, on this showing, was only an instrument of the popular will. 'Delirant Achivi,' and, for once in a way, 'plectitur rex.' But Mr. Keynes is a practical economist. From the stand-point of abstract justice, he agrees, the Germans ought to pay for the whole cost of the war, because they were solely responsible for it. There would be precedent for this, for they made the French pay the whole cost of the war of 1870-1, viz. 200 millions sterling. But the cost of this war was at least 24,000 millions sterling; so that the interest on it for one year would be six times the capital sum paid by France to Germany.

Consequently, in spite of the Committee which advised the Prime Minister just before the General Election that Germany could pay the whole cost of the war, Mr Keynes arrived at the conclusion that they could not; and of this the Big Four seem gradually to have been persuaded. But, while the Big Four thought Germany could pay a third of the cost, Mr Keynes thought they could only pay one-twelfth-i.e. 2000 millions. Further, he argues, there is a moral as well as an economic limitation upon the sum which Germany could be called upon to pay by way of reparations and indemnities. He reminds us that the Armistice was not an unconditional surrender. It was a military and naval triumph for the Allies; but the German commanders laid down their arms and their negotiators surrendered their fleet in accordance with the terms offered by President Wilson and endorsed (with two reservations) by his Allies.

If we turn now from Mr Keynes' general ideas and attitude to the book itself we find a very skilful and artistic arrangement by which the reader is led through green and flowery paths into the financial labyrinth, and thence-after severe but endurable trials with statistics— into a view of the state of Europe and a survey of 'remedies.' 'Bad Faith' is the inscription which Mr Keynes would write above 'Chapter IV: The Treaty.' He regards the Peace Conference as a battle between President Wilson's pledges-the 14 Points-and the war

aims of M. Clemenceau and his Allies, their principal objects being the enfeebling of a dangerous enemy, and above all the shifting by the victors of their unbearable financial burdens on to the shoulders of the defeated.' His survey of the Armistice conditions and of the Treaty itself in this chapter makes for, and is intended to prove, the startling proposition that the Peace of Paris is legally as well as morally invalid. If his argument (pp. 51-59) is sound-as it seems to be a solemn agreement was entered into between the Allies and Germany. After summarising the documents exchanged between the German Government and President Wilson (Oct. 5-Nov. 5, 1918), Mr Keynes says:-

'The nature of the Contract between Germany and the Allies resulting from this exchange of documents is plain and unequivocal. The terms of the peace are to be in accordance with the Addresses of the President, and the purpose of the Peace Conference is "to discuss the details of their application." The circumstances of the Contract were of an unusually binding character; for one of the conditions of it was that Germany should agree to Armistice terms, which were to be such as would leave her helpless. Germany having rendered herself helpless in reliance on the Contract, the honour of the Allies was peculiarly involved in fulfilling their part, and, if there were ambiguities, not using their position to take advantage of them.'

It is perhaps hardly necessary to refer to the contention that the Allies were not bound by the agreement of November 1918, involving adhesion (subject to two reservations) to the principles laid down in President Wilson's Fourteen Points and certain subsequent speeches, were it not that this contention appears to have been upheld by Sir Herbert Stephen in a long letter to the 'Times' (Feb. 27). If not stated totidem verbis, this may be inferred, and indeed is the only inference to be drawn, from the argument that the agreement with Germany was not a 'contract' in the legal sense of the word, because there was no law to enforce and no independent authority to appeal to, and because the language of the Fourteen Points was vague and rhetorical. This may be all true, but what does it matter? We ought never to have accepted the Fourteen Points as the basis of a

treaty, but, having accepted them, we were in honour bound to carry them out, interpreting their ambiguities, e.g. in regard to 'reparation and indemnities,' in a fair and honourable way. The question whether the interpretation put upon them, in regard to certain particulars, was one which they could fairly bear, is another matter, which Sir Herbert does not discuss. We may pass over the contumely which he pours out on the author for 'an unprecedented breach of official confidence a breach which, by the way, has never been shown to go beyond describing, possibly caricaturing, his superiors in their more secluded moments-for this only reminds us of the legal maxim: 'When you have a bad case, abuse the plaintiff's attorney.' But we must protest against the immoral doctrine that, because an agreement is not a legal 'contract,' it is therefore not binding. If this is not the inference to be drawn, what is it? Surely the 'scrap of paper' view of international agreements was never defended by such a piece of legalistic quibbling before.

When the draft Treaty was presented to the German Peace delegates, adds our author, 'the German commentators had little difficulty in showing that the draft Treaty constituted a breach of engagements and of international morality comparable with their own offence in the invasion of Belgium.' Mr Keynes calls the Treaty 'vindictive, perfidious and egotistic'; but, in his judgment, the quality' which chiefly distinguishes the transaction from all its historical predecessors' is its insincerity. These are hard words, and if applied to the Treaty as a whole, quite unjustifiable. Mr Keynes, however, confines himself almost entirely to the economic clauses. Even so, his epithets can hardly be defended, but his general contention deserves the closest scrutiny.

The object of the two introductory chapters, in which Mr Keynes gives us an economic sketch of Europe before the war, is to show the inter-dependence of the Continental States, in spite of the protective tariffs by which most of them tried to secure a certain amount of industrial isolation. His principal conclusion is that Germany was the central support around which the rest of the European economic system grouped itself. He goes so