At the 11th hour of the 11th day of the 11th month in 1918, the Great War ended. This is the origin of Veterans Day. In Great Britain and many countries of the former empire, it is Remembrance Day. World War I cost more than 16 million lives, another 50 million to 100 million from the war-related 1918 flu pandemic, toppled four empires and birthed the Soviet Union.
As we approach the 100th anniversary of the war’s beginning, attention should be paid, even to the economic issues.
Following the end of the war, the Versailles peace conference imposed a highly punitive peace against Germany, even though the Kaiser had abdicated and the new social democratic government had adopted President Woodrow Wilson’s Fourteen Points. But Wilson, although well meaning and beloved, was rolled by the more calculating French Prime Minster Georges Clemenceau and his British counterpart, David Lloyd George.
Two men who left the conference disgusted were John Maynard Keynes, a British Treasury official, and Herbert Hoover, the future American president who had led Belgian relief during the war and fed much of Europe afterward. He had earned his nickname, “The Great Humanitarian.”
Keynes knew the peace treaty was a disaster that would cause high inflation, perpetual debt and set the table for another war. He lamented that Hoover’s view, for a generous peace, had not prevailed. Hoover had the “knowledge, magnanimity and disinterestedness” Keynes wrote, that would have given the world a “good peace” had they been followed.
In Keynes estimation, Hoover was the only person who left Versailles with his reputation enhanced.
Keynes immediately started writing The Economic Consequences of the Peace, a book that became an international best seller. Some historians argue that it helped turn the Senate against ratifying the treaty and joining the League of Nations. But another element in that outcome was Wilson’s unwillingness to compromise.
In addition to his other warnings about the “Carthaginian peace” was that it would make necessary economic integration of Europe impossible.
When the contractions beginning in 1929 turned into the Great Depression, both Keynes and Hoover agreed that the origins lay in the Versailles peace. Keynes worst fears were realized when World War I in Europe continued in 1939, driven by a former Austrian corporal.
This is why the United States, which crafted the peace after World War II, set in place such elements as the Bretton Woods monetary system, International Monetary Fund, World Bank, the push for trade liberalization that continues to this day, and, later, the Marshall Plan. Germany and France began a relationship that would lead to the European Union.
There hasn’t been a world war since. That’s not all because of economics. But avoiding the mistakes of 1919 in 1945 certainly helped. Happy Veterans Day.