How Economist John Maynard Keynes Essentially Predicted World War II

In 1919, British Economist John Maynard Keynes predicted how the Treaty of Versailles would lead to economic and political turmoil.

Feb 7, 2024By Maria-Anita Ronchini, MA History & Jewish Studies, BA History

john maynard keynes predicted wwii


In the introduction of his 1931 Essays in Persuasion, British Economist John Maynard Keynes described his works as “the croakings of a Cassandra who could never influence the course of events in time.”


Like Priamus’ daughter condemned to issue warnings destined to go unheeded, in 1919, Keynes was also frustrated with his useless attempts to convince the world leaders of the dangers of imposing harsh peace terms on Germany. After resigning from his position at the Paris Peace Conference, Keynes decided to share his concern about the precarious postwar order in The Economic Consequences of Peace. In his most famous (and debated) work, Keynes correctly predicted how the “Carthaginian” Treaty of Versailles would cause financial and political instability, eventually leading to World War II.


Who was John Maynard Keynes?

(From right to left) Bertrand Russel, John Maynard Keynes, and Lytton Strachey. Source: University of Cambridge Faculty of History


The son of an economist and one of the first female students at Cambridge University, John Maynard Keynes followed in his parent’s footsteps and enrolled at Cambridge, where he studied politics and economics. During his time at the British university, Keynes joined “the Society,” an exclusive club whose associates included most members of the future Bloomsbury group, a circle of British writers, artists, and philosophers.


John Maynard Keynes. Source: The New York Times


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After completing his studies, Keynes was appointed at the Indian Office in Whitehall, where he analyzed Indian currency and finance. After returning to his alma mater to teach economics until 1915, Keynes worked at the Treasury during the rest of the war years. In 1919, the 35-year-old John Maynard Keynes traveled to Paris to join the peace conference as David Lloyd George’s economic adviser. After World War II, he played a crucial role in rebuilding the international economic order.


John Maynard Keynes at the Paris Peace Conference

John Maynard Keynes (center) with colleagues at the Paris Peace Conference. Source: Inside Story


Before joining the Paris Peace Conference, Keynes had already reflected on how to reconstruct Europe’s economy after the conflict. In 1916, he co-authored a Memorandum on the Effect of an Indemnity, one of the first documents addressing the possibility of obtaining war reparations from Germany. In 1918, Keynes continued to analyze the question of reparations and argued that the defeated power would likely be unable to sustain the cost of the war.


In Paris, Keynes reiterated his skepticism about the wisdom of imposing harsh terms on Germany. During the negotiations, he designed and presented to Lloyd George an alternative peace plan. In the document, Keynes called for the cancellation of inter-allied debts and the imposition of more lenient provisions in the treaty with Germany. While the British prime minister liked the “Keynes plan,” the other leaders did not opt to adopt its terms.


Portrait of John Keynes by Duncan Grant, 1917. Source: Charleston in Lewes


As the Paris negotiation process continued, Keynes wrote to his Bloomsbury friends to vent his frustration with the world leaders’ lack of insight in building the postwar order.


“I wish I could tell you,” he wrote on March 16, 1919 to Vanessa Bell, “every evening of the twists and turns of the day for you’d really be amused by the amazing complications of psychology and personality and intrigue which make such magnificent sport of the impending catastrophe of Europe.”


Similarly, in May, he shared his worries about the dangerous consequences of the terms hammered out at the conference in a letter to Duncan Grant: “The Peace is outrageous and impossible and can bring nothing but misfortune…no one in England yet has any conception of the iniquities contained in it.”


A month after his letter to Grant, Keynes, exasperated by the rejection of his suggestions for more “affordable” provisions, decided to leave the conference earlier. He left Paris in June. “I can do no more good here….The battle is lost,” dejectedly wrote Keynes to Lloyd George.


“Keynessandra:” The Economic Consequences of the Peace

Charleston House (Sussex), where John Maynard Keynes wrote The Economic Consequences of the Peace. Source: South Downs National Park


When Keynes had already opted to resign from his position at the Paris Peace Conference, Jan Christian Smuts, a South African statesman and the main advocate for a moderate peace, encouraged him to write “a clear, connected account of what the financial and economic clauses of the Treaty actually are and mean and what their probable results will be.” Upon his return to England, Keynes followed Smuts’ suggestion. He went to Vanessa Bell’s house in Sussex to write The Economic Consequences of the Peace.


The Economic Consequences of the Peace was published at the end of 1919 and quickly became an international bestseller. By August 1920, the book sold over 100,000 copies. It was also translated into more than a dozen languages. The success of the book turned John Maynard Keynes into a celebrity. After the end of World War II, his view of the Treaty of Versailles as a “Carthaginian peace” became the orthodox theory about the Paris Peace Conference and its disastrous effects. From an unheeded Cassandra, Keynes became the prophet who predicted the rise of National Socialism in Germany and World War II.


Letter from Charles Waldstein to John Keynes. The letter was found in the Marshall Library’s copy of André Tardieu’s 1921 book The Truth about the Treaty, a polemic response to Keynes’ essay on the Treaty of Versailles. In the letter, Waldstein encouraged Keynes to reply to Tardieu’s attacks. Source: Marshall Library, University of Cambridge


“My purpose in this book,” wrote Keynes, “is to show that the Carthaginian Peace is not practically right or possible.” According to the British economist, the Allied powers were more concerned with exacting revenge rather than building a stable financial and economic order in postwar Europe. However, by seeking to crush the defeated enemy, the world leaders assembled in Paris “invite[d] their own destruction also, being so deeply and inextricably intertwined with their victims by hidden psychic and economic bonds.”


In his scathing critique of the treaty, Keynes was not solely concerned with its immediate repercussions on Europe’s economy. Indeed, he feared that financial instability, coupled with the defeated powers’ resentment for what they believed an unjust punishment, would inevitably sow the seeds of another conflict.


Though The Economic Consequences of the Peace became an international sensation, Keynes was destined to be a 20th-century Cassandra. Leonard Woolf, Virginia Woolf’s husband, jokingly nicknamed him “Keynessandra.” In the 1930s, a series of amendments mellowed the terms of the Treaty of Versailles, but it was too late to prevent the outbreak of World War II.


A “Carthaginian Peace” that “leaves Europe more unsettled than it found it”

Special edition of the Berlin Lokal Anzeiger announcing the provisions of the Versailles Treaty, May 8, 1919. Source: Deutsches Historisches Museum, Lebendiges Museum Online


“Germany,” wrote Keynes in a 1920 article published by Everybody’s Magazine, “bears a special and peculiar responsibility for the war itself, for its universal and devastating character.” Yet, the British economist challenged the legitimacy of the so-called War Guilt Clause of the treaty, arguing that imposing punitive peace provisions on the defeated Central power would only “run the risk of completing the ruin which Germany began.”


Rather than seeking to destroy Germany, Keynes believed that the “Big Four” ought to ward off the risk of a future conflict. However, he bitterly remarked that the “future life of Europe” was not the main concern of the world leaders. They were too preoccupied with revenge, “imperial aggrandizements,” “the future enfeeblement of a strong and dangerous enemy,” and demanding high war reparations from Germany to pay their own debts. Ultimately, the Allies, especially France, opted to guarantee their security by weakening Germany.


At Versailles, the delegation of the newly formed Weimar Republic signed a treaty that decreed the disarmament of their country and reduced its territory by 10 percent. Other provisions demanded that Germany renounce its colonies and agree to cover the entire cost of the war. However, warned Keynes, the treaty “includes no provisions for the economic rehabilitation of Europe – nothing to make the defeated Central empires into good neighbors, nothing to stabilize the new states of Europe.”


According to Keynes, a stable political landscape could only rest on strong economic and financial foundations. The events that led to the outbreak of  World War II seemed to prove the economist’s points.


The Dangers of Financial Instability & Inflation

A 20 million German mark banknote issued on July 25, 1923. Source: Spurlock Museum of World Cultures, University of Illinois Urbana-Champaign


In his essay, Keynes lamented that asking Germany to “make compensation for all damage done to the civilian population of the Allied and Associated Powers and to their property” was the extent to which the Allied powers concerned themselves with the European economic future. Yet, Keynes was convinced that allowing the Weimar Republic to strengthen its economy was the key to rebuilding Europe after the destruction brought by the war.


“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,” argued the British economist.


According to Keynes, the economies of the European countries were too interdependent to survive on their own. Most importantly, setting too high a sum in reparations meant that Germany would no longer sustain the cost of its imported goods. However, its neighboring countries relied on their exports to the central power to drive their economies. To further complicate an already difficult situation, the Treaty of Versailles did not include a solution to the inflation problem caused by the war. “An inefficient, unemployed, disorganized Europe faces us, torn by internal strife and international hate, fighting, starving, pillaging, and lying,” warned Keynes.


French troops in Duisburg during the occupation of the Ruhr, 1923. Source: Deutsches Historisches Museum, Lebendiges Museum Online


In 1923, Keynes’ dire prediction became true. As Germany failed to pay the due installment of war reparations, France and Belgium invaded the coal-rich Ruhr region in western Germany. The Weimar government responded by halting production and printing more currency to face the higher prices. The hyperinflation that followed brought Germany to the brink of collapse.


By the end of 1923, one dollar equaled 4.2 trillion marks. In Bavaria, Adolf Hitler attempted to seize power through a coup d’état, later known as the Beer Hall Putsch. While the coup failed, the Nazi party’s attack against the Treaty of Versailles resonated with many Germans, who were shocked by the punitive 1919 peace terms. The crisis was solved in 1924 when the Allies agreed to lower the amount of reparations Germany owned and granted the Weimar government a substantial loan.


However, the economic and political situation remained fragile. In the 1930s, the Great Depression provoked a new crisis. As Germany had become dependent on American loans, the Wall Street Crash led to the collapse of its economy. The Nazi party was able to channel the widespread frustration to win votes. In 1933, Adolf Hitler became Chancellor of Germany and led the European continent into World War II.


“Men will not always die quietly:” John Maynard Keynes, Nazi Germany, & World War II

General Field Marshal Paul von Hindenburg reviewing troops. Hindenburg was one of the main supporters of the so-called “Stab-in-the-back legend.” Source: Deutschlandfunk Kultur


Initially, the Weimar government refused to sign the Treaty of Versailles. While the 1918 terms of the armistice between Germany and the Entente were based on US President Woodrow Wilson’s Fourteen Points, the final peace provisions were harsher than expected. In May 1919, Count Ulrich von Brockdorff-Rantzau, then German Foreign Minister, declared that the treaty was a “death sentence” to millions of Germans.


Keynes, present during the Weimar minister’s speech, reminded his readers that “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 organization, and submerge civilization itself.”


On June 28, 1919, the German delegation finally agreed to sign the treaty. The decision provoked a wave of indignation and shock among the country’s population, with many Germans dubbing the peace a Diktat (dictated peace). In the ensuing atmosphere of general resentment and mistrust, the so-called Dolchstoßlegende (stab-in-the-back legend) gained traction. According to this legend, the guilt for the German defeat in 1918 did not “[apply] to the good core of the army,” as General Field Marshal Paul von Hindenburg declared during his testimony in front of the Parliamentary Committee investigating the causes of the country’s defeat. Misquoting a British general, Hindenburg argued that Germany had been “stabbed in the back” by the revolutionaries on the home front.


Accepted as fact by the majority of the population, the Dolchstoßlegende became a key feature of the far-right party, whose leadership accused the “November criminals” who signed the peace treaty of having betrayed their country.


German soldiers near Warsaw, c. September 1939. Source: Anne Frank House


In the years following the treaty, the punitive peace provisions contributed to alienating the Weimar government from its citizens. On the contrary, the nationalist parties, determined to dismantle the treaty, gained popularity.


“​​If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp,” wrote Keynes, “nothing can then delay for very long that final civil war between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing, and which will destroy, whoever is victor, the civilization and the progress of our generation.”


Between 1933 and the beginning of World War II, Adolf Hitler, first as Chancellor and then as Führer, set out to seek the “vengeance” predicted by Keynes. “We demand,” stated the second point of the program of the German Workers’ Party (the future Nazi party), “equality of rights for the German people in its dealings with other nations, and the revocation of the peace treaties of Versailles and Saint-Germain.”


In March 1935, in blatant disregard of the terms of Versailles, Hitler started (re)militarizing Germany. One year later, Hitler challenged the treaty by ordering the army to reoccupy the Rhineland. The attempts of the League of Nations to solve the crisis were largely unsuccessful.


Brest (France) destroyed by bombs, September 26, 1944. Source: US Department of Defense


Then, a year before the outbreak of World War II, Hitler, aiming to bring all European German-speaking people into a single “Greater Germany” and demanding the alleged right of the German people to their Lebensraum, ordered the Anschluss of Austria to Germany. In 1938, the Führer also sought to annex the Sudetenland, a region of Czechoslovakia where many ethnically German people resided.


In 1939, when the German army invaded Poland, one of the nations restored by the Treaty of Versailles twenty years before, the conflict feared and predicted by John Maynard Keynes became a reality.

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By Maria-Anita RonchiniMA History & Jewish Studies, BA HistoryMaria Anita currently works as a writer in Italy. She holds a BA in History from the University of Bologna and a MA in History & Jewish studies from LMU-Munich. Her primary interest is the relationship between memory and history. Maria Anita is passionate about analyzing the construction of historical narratives and collective memories. In her spare time, she enjoys reading, watching tv, and writing fiction.