John Maynard Keynes

“ Then the capitalists believed in themselves, in their value to society, in the propriety of their continued existence in the full enjoyment of their riches and the unlimited exercise of their power. Now they tremble before every insult -- call them pro-Germans, international financiers, or profiteers, and they will give you any ransom you choose to ask not to speak of them so harshly. They allow themselves to be ruined and altogether undone by their own instruments, governments of their own making, and a Press of which they are the proprietors. ”

“ I have paid little heed in this book to Russia, Hungary, or Austria. [11] There the miseries of life and the disintegration of society are too notorious to require analysis; and these countries are already experiencing the actuality of what for the rest of Europe is still in the realm of prediction. Yet they comprehend a vast territory and a great population, and are an extant example of how much man can suffer and how far society can decay. Above all, they are the signal to us of how in the final catastrophe the malady of the body passes over into malady of the mind. ”

“ But further, the governments of Europe, being many of them at this moment reckless in their methods as well as weak, seek to direct on to a class known as 'profiteers' the popular indignation against the more obvious consequences of their vicious methods. These 'profiteers' are, broadly speaking, the entrepreneur class of capitalists, that is to say, the active and constructive element in the whole capitalist society, who in a period of rapidly rising prices cannot but get rich quick whether they wish it or desire it or not. ”

“ Then man shakes himself, and the bonds of custom are loosed. The power of ideas is sovereign, and he listens to whatever instruction of hope, illusion, or revenge is carried to him on the air. As I write, the flames of Russian Bolshevism seem, for the moment at least, to have burnt themselves out, and the peoples of Central and Eastern Europe are held in a dreadful torpor. The lately gathered harvest keeps off the worst privations, and peace has been declared at Paris. But winter approaches. Men will have nothing to look forward to or to nourish hopes on. ”

“ We are thus faced in Europe with the spectacle of an extra-ordinary weakness on the part of the great capitalist class, which has emerged from the industrial triumphs of the nineteenth century, and seemed a very few years ago our all-powerful master. The terror and personal timidity of the individuals of this class is now so great, their confidence in their place in society and in their necessity to the social organism so diminished, that they are the easy victims of intimidation. ”

“ The profiteers are a consequence and not a cause of rising prices. By combining a popular hatred of the class of entrepreneurs with the blow already given to social security by the violent and arbitrary disturbance of contract and of the established equilibrium of wealth which is the inevitable result of inflation, these governments are fast rendering impossible a continuance of the social and economic order of the nineteenth century. ”

“ If, however, a government refrains from regulation and allows matters to take their course, essential commodities soon attain a level of price out of the reach of all but the rich, the worthlessness of the money becomes apparent, and the fraud upon the public can be concealed no longer.
The effect on foreign trade of price-regulation and profiteer-hunting as cures for inflation is even worse. Whatever may be the case at home, the currency must soon reach its real level abroad, with the result that prices inside and outside the country lose their normal adjustment. ”

“ There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose. ”

“ The coal production of Europe as a whole is estimated to have fallen off by 30 per cent; and upon coal the greater part of the industries of Europe and the whole of her transport system depend. Whereas before the war Germany produced 85 per cent of the total food consumed by her inhabitants, the productivity of the soil is now diminished by 40 per cent and the effective quality of the livestock by 55 per cent. [1] Of the European countries which formerly possessed a large exportable surplus, Russia, as much by reason of deficient transport as of diminished output, may herself starve. ”

“ Men will not always die quietly. For starvation, which brings to some lethargy and a helpless despair, drives other temperaments to the nervous instability of hysteria and to a mad despair. And these in their distress may overturn the remnants of organisation, and submerge civilisation itself in their attempts to satisfy desperately the overwhelming needs of the individual. ”

“ It is an extraordinary fact that the fundamental economic problem of a Europe starving and disintegrating before their eyes, was the one question in which it was impossible to arouse the interest of the Four. ”

“ In relation to other continents Europe is not self-sufficient; in particular it cannot feed itself. Internally the population is not evenly distributed, but much of it is crowded into a relatively small number of dense industrial centres. This population secured for itself a livelihood before the war, without much margin of surplus, by means of a delicate and immensely complicated organisation, of which the foundations were supported by coal, iron, transport, and an unbroken supply of imported food and raw materials from other continents. ”

“ The countries of Europe fall into two distinct groups at the present time as regards their manifestations of what is really the same evil throughout, according as they have been cut off from international intercourse by the blockade, or have had their imports paid for out of the resources of their allies. I take Germany as typical of the first, and France and Italy of the second. ”

“ In a very short time, therefore, Germany will not be in a position to give bread and work to her numerous millions of inhabitants, who are prevented from earning their livelihood by navigation and trade. These persons should emigrate, but this is a material impossibility, all the more because many countries and the most important ones will oppose any German immigration. To put the peace conditions into execution would logically involve, therefore, the loss of several millions of persons in Germany. ”

“ The price of imported commodities, when converted at the current rate of exchange, is far in excess of the local price, so that many essential goods will not be imported at all by private agency, and must be provided by the government, which, in re-selling the goods below cost price, plunges thereby a little further into insolvency. The bread subsidies now almost universal throughout Europe are the leading example of this phenomenon. ”

“ A sentiment of trust in the legal money of the state is so deeply implanted in the citizens of all countries that they cannot but believe that some day this money must recover a part at least of its former value. To their minds it appears that value is inherent in money as such, and they do not apprehend that the real wealth which this money might have stood for has been dissipated once and for all. This sentiment is supported by the various legal regulations with which the governments endeavour to control internal prices, and so to preserve some purchasing power for their legal tender. ”

“ A country population able to support life on the fruits of its own agricultural production but without the accustomed surplus for the towns, and also (as a result of the lack of imported materials and so of variety and amount in the saleable manufactures of the towns) without the usual incentives to market food in return for other wares; an industrial population unable to keep its strength for lack of food, unable to earn a livelihood for lack of materials, and so unable to make good by imports from abroad the failure of productivity at home. ”

“ By the destruction of this organisation and the interruption of the stream of supplies, a part of this population is deprived of its means of livelihood. Emigration is not open to the redundant surplus. For it would take years to transport them overseas, even, which is not the case, if countries could be found which were ready to receive them. The danger confronting us, therefore, is the rapid depression of the standard of life of the European populations to a point which will mean actual starvation for some (a point already reached in Russia and approximately reached in Austria) . ”

“ But above all (to quote Mr Hoover) , 'there is a great relaxation of effort as the reflex of physical exhaustion of large sections of the population from privation and the mental and physical strain of the war'. Many persons are for one reason or another out of employment altogether. According to Mr Hoover, a summary of the unemployment bureaux in Europe in July 1919 showed that 15 million families were receiving unemployment allowances in one form or another, and were being paid in the main by a constant inflation of currency. ”

“ Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. ”

“ Europe consists of the densest aggregation of population in the history of the world. This population is accustomed to a relatively high standard of life, in which, even now, some sections of it anticipate improvement rather than deterioration. ”

“ In the first place, imported commodities are beyond the purchasing power of the great mass of the population, [4] and the flood of imports which might have been expected to succeed the raising of the blockade was not in fact commercially possible. [5] In the second place, it is a hazardous enterprise for a merchant or a manufacturer to purchase with a foreign credit material for which, when he has imported it or manufactured it, he will receive mark currency of a quite uncertain and possibly unrealisable value. ”

“ The value of the mark in terms of gold is about one-eighth of its former value. As world prices in terms of gold are more than double what they were, it follows that mark prices inside Germany ought to be from sixteen to twenty times their pre-war level if they are to be in adjustment and proper conformity with prices outside Germany. [3] But this is not the case. In spite of a very great rise in German prices, they probably do not yet average much more than five times their former level, so far as staple commodities are concerned ”

“ Economic privation proceeds by easy stages, and so long as men suffer it patiently the outside world cares little. Physical efficiency and resistance to disease slowly diminish, [12] but life proceeds somehow, until the limit of human endurance is reached at last and counsels of despair and madness stir the sufferers from the lethargy which precedes the crisis. ”

“ In Germany there is the added deterrent to labour and to capital (in so far as the reparation terms are taken literally) , that anything which they may produce beyond the barest level of subsistence will for years to come be taken away from them. ”

“ Although the public is buying bread at a high price, that price represents a loss to the government of about a milliard a year; (3) exports now leaving the country are valued at only one-quarter or one-fifth of the imports from abroad; (4) the national debt is increasing by about a milliard lire per month; (5) the military expenditure for one month is still larger than that for the first year of the war. ”

“ On 13 May 1919 Count Brockdorff-Rantzau addressed to the peace conference of the Allied and Associated Powers the Report of the German economic commission charged with the study of the effect of the conditions of peace on the situation of the German population. 'In the course of the last two generations,' they reported, 'Germany has become transformed from an agricultural state to an industrial state. So long as she was an agricultural state, Germany could feed 40 million inhabitants. As an industrial state she could ensure the means of subsistence for a population of 67 millions ”

“ In the latter stages of the war all the belligerent governments practised, from necessity or incompetence, what a Bolshevist might have done from design. Even now, when the war is over, most of them continue out of weakness the same malpractices. ”