The Economic Consequences of the Peace

"It’s among the dozen—perhaps half-dozen—most influential economics books that have ever been written. For a hundred years, it has set the terms of the debate over the Versailles Treaty. It galvanized the political dialogue around what was going to take place post-World War I. This book, combined with subsequent events, shaped the much more generous approach that was taken to the defeated countries in creating an international system after World War II. “There will be a tendency, after any period when things go well for people, to become complacent and take more risks.” From an economic point of view, it highlighted the importance of the transfer problem—the fact that when you force a country to pay resources, it not only loses those resources but, because it has to sell more, it puts its goods on sale, which is further impoverishing. And it established a model that no economist has subsequently lived up to, the model of an economist as both an analyst and an extraordinary polemicist. Not many economists have the powers of description of a skilled novelist or a journalist. But as Keynes punctures what he sees as the pompous moralism of Woodrow Wilson or the small-minded hypocrisy of Lloyd George and Georges Clemenceau, it’s an extraordinarily vivid depiction of not just the outcome, but also the process. All analogies are imperfect—and it’s always wrong to analogize without reflection on difference—but it is relevant to situations like the debt burden facing Greece and other questions on the European periphery. It is relevant, more broadly, to the need for a global order and global cooperation if the descent of the global economy is to be avoided."