John Maynard Keynes

“ But if America recalls for a moment what Europe has meant to her and still means to her, what Europe, the mother of art and of knowledge, in spite of everything, still is and still will be, will she not reject these counsels of indifference and isolation, and interest herself in what may prove decisive issues for the progress and civilisation of all mankind? ”

“ But it is doubtful how far he thought these characteristics peculiar to Germany, or whether his candid view of some other nations was fundamentally different. His philosophy had, therefore, no place for "sentimentality" in international relations. Nations are real things, of whom you love one and feel for the rest indifference—or hatred. The glory of the nation you love is a desirable end,—but generally to be obtained at your neighbor's expense. The politics of power are inevitable, and there is nothing very new to learn about this war or the end it was fought for ”

“ Policy makers that concentrate on an external trade war neglect the internal opportunities. There is the following sobering story about the economist John Maynard Keynes. From the early 1930s Keynes advanced his solutions to the Great Depression, and this culminated in his 1936 book that changed macro-economics. ”

“ The enemy peoples trusted him to carry out the compact he had made with them; and the Allied peoples acknowledged him not as a victor only but almost as a prophet. In addition to this moral influence the realities of power were in his hands. The American armies were at the height of their numbers, discipline, and equipment. Europe was in complete dependence on the food supplies of the United States; and financially she was even more absolutely at their mercy. Europe not only already owed the United States more than she could pay ”

“ When the gold value of the currency has fallen to a very low figure, it is easy for the Government, if it has any external resources at all, to give sufficient support to prevent the exchange from falling further for the time being. And since by that time the public will have carried their attempts to economise the use of money to a pitch of inconvenience which it is impracticable to continue, even a moderate weakening in the degree of their distrust of the future value of the money will lead to some increase in their use of it ”

“ The prosperity of Europe was based on the facts that, owing to the large exportable surplus of foodstuffs in America, she was able to purchase food at a cheap rate measured in terms of the labor required to produce her own exports, and that, as a result of her previous investments of capital, she was entitled to a substantial amount annually without any payment in return at all. The second of these factors then seemed out of danger, but, as a result of the growth of population overseas, chiefly in the United States, the first was not so secure. ”

“ Moved by insane delusion and reckless self-regard, the German people overturned the foundations on which we all lived and built. But the spokesmen of the French and British peoples have run the risk of completing the ruin, which Germany began, by a Peace which, if it is carried into effect, must impair yet further, when it might have restored, the delicate, complicated organization, already shaken and broken by war, through which alone the European peoples can employ themselves and live. ”

“ If capital and labour can freely move on a large scale between home and export industries without loss of relative efficiency, if there is no movement in the “equation of exchange” (see below) with the other country, and if the fluctuations in price are solely due to monetary influences and not to changes in other economic relationships between the two countries, then this further assumption may be approximately justified. But this is not always the case; and such a cataclysm as the war, with its various consequences to victor and vanquished, may set up a new equilibrium position. ”

“ The majority of statesmen and practical men in most countries, and nearly half of them even in Great Britain, the home of the opposite view, have remained faithful to the ancient doctrine; whereas almost all economic theorists have held that anxiety concerning such matters is absolutely groundless except on a very short view, since the mechanism of foreign trade is self-adjusting and attempts to interfere with it are not only futile, but greatly impoverish those who practise them because they forfeit the advantages of the international division of labour. ”

“ While it would be nice to say he underestimated himself and modestly assumed his contribution to be "a voice in a choir", Keynes was fully aware of the impact he and his fellow economists had on the world: "The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." ”

“ THE CONSEQUENCES TO SOCIETY OF CHANGES IN THE VALUE OF MONEY Money is only important for what it will procure. Thus a change in the monetary unit, which is uniform in its operation and affects all transactions equally, has no consequences. If, by a change in the established standard of value, a man received and owned twice as much money as he did before in payment for all rights and for all efforts, and if he also paid out twice as much money for all acquisitions and for all satisfactions, he would be wholly unaffected. ”

“ 'They are a lot of hard-faced men', he said, 'who look as if they had done very well out of the war.'
This was the atmosphere in which the Prime Minister left for Paris, and these the entanglements he had made for himself. ”

“ German foreign investments are as a rule in the form of bearer securities and are not registered. They are easily smuggled abroad across Germany's extensive land frontiers, and for some months before the conclusion of peace it was certain that their owners would not be allowed to retain them if the Allied Governments could discover any method of getting hold of them. These factors combined to stimulate human ingenuity, and the efforts both of the Allied and of the German Governments to interfere effectively with the outflow are believed to have been largely futile. ”

“ With the breakdown of money economy the practice of international barter is becoming prevalent. Nowadays money in Central and South-Eastern Europe is seldom a true measure of value in exchange, and will not necessarily buy anything, with the consequence that one country, possessing a commodity essential to the needs of another, sells it not for cash but only against a reciprocal engagement on the part of the latter country to furnish in return some article not less necessary to the former. ”

“ If only the President had not been so conscientious, if only he had not concealed from himself what he had been doing, even at the last moment he was in, a position to have recovered lost ground and to have achieved some very considerable successes. ”

“ It is because, gentlemen, we do not regard ourselves as free. We are not here to consider as a novel proposal what reparation the enemy should in justice pay; we have not before us a blank page upon which we are free to write what we will. We have before us a page, it is true; but one which is already filled with writing, and at the bottom are the signatures of Mr. Wilson, of Mr. Orlando, of M. Clemenceau, and of Mr. Lloyd George. You are all aware, I am sure, of the writing to which I refer: it is the agreed basis of peace with Germany. ”

“ This was not so in England twenty-five years ago, any more than it is now in the United States. 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. ”

“ This is the policy of an old man, whose most vivid impressions and most lively imagination are of the past and not of the future. He sees the issue in terms of France and Germany, not of humanity and of European civilisation struggling forwards to a new order. The war has bitten into his consciousness somewhat differently from ours, and he neither expects nor hopes that we are at the threshold of a new age. ”

“ In Paris, where those connected with the Supreme Economic Council, received almost hourly the reports of the misery, disorder, and decaying organization of all Central and Eastern Europe, allied and enemy alike, and learnt from the lips of the financial representatives of Germany and Austria unanswerable evidence, of the terrible exhaustion of their countries, an occasional visit to the hot, dry room in the President's house, where the Four fulfilled their destinies in empty and arid intrigue, only added to the sense of nightmare. ”

“ During the lengthy process of production the business world is incurring outgoings in terms of money—paying out in money for wages and other expenses of production—in the expectation of recouping this outlay by disposing of the product for money at a later date. That is to say, the business world as a whole must always be in a position where it stands to gain by a rise of price and to lose by a fall of price. Whether it likes it or not, the technique of production under a régime of money-contract forces the business world always to carry a big speculative position; ”

“ Apart from other aspects of the transaction, I believe that the campaign for securing out of Germany the general costs of the war was one of the most serious acts of political unwisdom for which our statesmen have ever been responsible. To what a different future Europe might have looked forward if either Mr. Lloyd George or Mr. Wilson had apprehended that the most serious of the problems which claimed their attention were not political or territorial but financial and economic, and that the perils of the future lay not in frontiers or sovereignties but in food, coal, and transport. ”

“ Those who advocate the return to a gold standard do not always appreciate along what different lines our actual practice has been drifting. If we restore the gold standard, are we to return also to the pre-war conceptions of bank-rate, allowing the tides of gold to play what tricks they like with the internal price-level, and abandoning the attempt to moderate the disastrous influence of the credit-cycle on the stability of prices and employment? Or are we to continue and develop the experimental innovations of our present policy, ignoring the “bank ratio” ”

“ It is true that in 1870 no man could have predicted Germany's capacity in 1910. We cannot expect to legislate for a generation or more. The secular changes in man's economic condition and the liability of human forecast to error are as likely to lead to mistake in one direction as in another. We cannot as reasonable men do better than base our policy on the evidence we have and adapt it to the five or ten years over which we may suppose ourselves to have some measure of prevision ”

“ They are disposed to believe, therefore, by analogy with it, that a comparable system between Governments, on a far vaster and definitely oppressive scale, represented by no real assets, and less closely associated with the property system, is natural and reasonable and in conformity with human nature. I doubt this view of the world. Even capitalism at home, which engages many local sympathies, which plays a real part in the daily process of production, and upon the security of which the present organization of society largely depends, is not very safe. ”

“ For his losses in one capacity depend only infinitesimally on him personally refraining from action in his other capacity. The facts, that a man is a cannibal at home and eaten abroad, do not cancel out to render him innocuous and safe.
But there is a further reason, connected with the above but nevertheless distinct, why modern methods of production require a stable standard,—a reason springing to a certain extent out of the character of the social organisation described above, but aggravated by the technical methods of present-day productive processes. ”

“ If Europe is going to repay the $10,000,000,000 worth of financial assistance which she has had from the United States with compound interest at 5 per cent, the matter takes on quite a different complexion. If America's advances are to be regarded in this light, her relative financial sacrifice has been very slight indeed. Controversies as to relative sacrifice are very barren and very foolish also; for there is no reason in the world why relative sacrifice should necessarily be equal,--so many other very relevant considerations being quite different in the two cases. ”

“ But I still urge on France that her cause may be served by accuracy and the avoidance of overstatement; that the damage she has suffered is more likely to be made good if the amount is possible than if it is impossible; and that, the more moderate her claims are, the more likely she is to win the support of the world in securing priority for them. M. Brenier, in particular, has conducted a widespread propaganda with the object of creating prejudice against my statistics. Yet to add a large number of noughts at the end of an estimate is not really an indication of nobility of mind. ”

“ But with the growth of wealth and the diminishing marginal propensity to consume, it has tended to become increasingly internecine. The part played by orthodox economists, whose common sense has been insufficient to check their faulty logic, has been disastrous to the latest act. For when in their blind struggle for an escape, some countries have thrown off the obligations which had previously rendered impossible an autonomous rate of interest, these economists have taught that a restoration of the former shackles is a necessary first step to a general recovery. ”