MR. J. M. KEYNES was the most important of the advisers of the most important of the governments represented in the great Conference of Paris. An economist of high repute, he was taken into the Treasury during the war, and the reputation to which he owed his selection for this special employment was so much enhanced that he was chosen to speak for that department when the Allies met to arrange the terms of peace. He took the leading part in the long and difficult deliberations over reparation that occupied so much of the time of the Big Four, and he sat in Mr. Bonar Law's place at the Supreme Economic Council when the Chancellor could not attend. He resigned when the policy of the Conference took a course that seemed to him fatal and irrevocable.

The publication of this book* is, therefore, not merely an act of conspicuous courage and public spirit; it is an infinitely more important event than any speech that has been made on the peace by any of its authors. He tells us what he thinks; they tell us what they force themselves to think. As a piece of literature it is beyond praise; if many economists had his wit, his eloquence, his easy address in stating and analyzing confused and intricate problems, their science would never have been called dismal. His portraits of the three chief figures are masterpieces. But the book which would live by these qualities alone is yet more valuable, because it tells the world how the peace looks to the best minds that were engaged on its probThe Economic Consequences of the Peace. John Maynard Keynes. London: Macmillan & Co. 279 pages, 8s. 6d. net.

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lems. Its appearance is a political event of great moment, for it gives to all the men and women who know that Europe has gone wrong at this crisis in her history clear and definite guidance on the measures that can and should be taken to retrieve these errors so far as it is still possible to retrieve them.

A story was going round Paris last spring of a famous dialogue between Lord Robert Cecil and one of the most intransigeant of his French colleagues. 'You want to destroy Germany, and you want at the same time to enrich France,' said Lord Robert. 'Unfortunately, revenge and avarice are in this case incompatible.' A good part of Mr. Keynes's book is really the demonstration and illustration of this thesis. The peace ruins Germany, and at the same time it promises to the Entente Powers an indemnity which is not put into figures in the treaty, but is meant to correspond in the public mind to the fantastic sums that were named on Coalition platforms a year ago. Now it is a simple thing to ruin Germany, but to ruin Germany or any other industrial state without ruining her neighbors is a less simple or straightforward matter; to ruin her and then to bleed her is the dream of a madman. The peace in its present form satisfies the desire for vengeance at the cost of the welfare of the world; it is not tenderness for Germany but care for mankind that makes every reasonable man condemn it when he realizes its character.

Not, of course, that this is the only standard. Peace was promised on certain terms. Mr. Keynes's comparison of the terms on which the armistice

was arranged with the terms of the treaty will not be read by any selfrespecting Englishman without acute discomfort. Those of us who were following the proceedings from the outside regarded the moment when the President was brought to accept the charge for separation allowances as falling within the reparation which the armistice terms recognized as the most definite moment of capitulation. It is interesting to see that this is Mr. Keynes's view. His analysis of the casuistical processes by which the more subtle minds of his colleagues persuaded the President that his words meant less and less until they came to mean nothing at all makes one wish that we had similarly intimate pictures of the play of character in other great debates in the history of the world. As a human drama it is an absorbing spectacle. But for us Englishmen, whose reputation for centuries will depend on these events, the history of these transactions is a painful exhibition of the easy transitions by which a nation that started with lofty scruples and high-minded ideals may be brought by its leaders into a fatal compromise of all its principles.

Why did the treaty go wrong? The leading cause is given in a passage toward the end of Mr. Keynes's book.

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. Reparation was their main excursion into the economic field, and they settled it as a problem of theology, of politics, of electoral chicane, from every point of view except that of the economic future of the states whose destiny they were handling.

This problem was pressed on the Four by their most competent advisers. If America can claim credit for Mr. Hoover, we may remember with some satisfaction in this dark hour

when famine is no longer a shadow on the horizon, when whole peoples are dying because the great statesmen who met in the President's mansion had no time for such trifles, that Sir William Goode, Sir William Beveridge, and Mr. Keynes himself, to mention only some of the British Staff, were not less insistent on the urgency of this problem. French sentiment never forgave the President his reluctance to visit the devastated districts. That was one of his capital mistakes. But he and Mr. Lloyd George made a greater, for if they had seen with their own eyes the misery of the world of Central and Eastern Europe, with whose calamities they were toying, these advisers would not have been put on one side, nor would General Smuts and Lord Robert Cecil have pleaded in vain with the masters of the fate of Europe.

Mr. Keynes shows in detail that the economic losses inflicted upon Germany make it absolutely impossible for her to carry out the terms of the treaty. Her economic outlawry is complete, and she becomes the absolute vassal of the Reparation Commission. She has to pay not a fixed indemnity but an indeterminate sum, and the arrangements imposed on her treat her as an estate in bankruptcy, to be administered by a foreign and a hostile body. Could anybody have read such a savage punishment into the conditions of the armistice? After a careful estimate of her liabilities, which he puts at £8,000,000,000, Mr. Keynes gives us the following picture of Germany's position.

On the assumption that Germany cannot pay more than £150,000,000 annually until 1936 (that is 5 per cent interest on £3,000,000,000), the £5,000,000,000 on which interest is deferred will have risen to £10,000,000,000, carrying an annual interest charge of £500,000,000. That is to say, even if Germany pays £150,000,000 an

nually up to 1936, she will, nevertheless, owe us at that date more than half as much again

as she does now (£13,000,000,000, as compared with £8,000,000,000). From 1936 onward she will have to pay us £650,000,000 annually in order to keep pace with the interest alone. At the end of any year in which she pays less than this sum she will owe more than she did at the beginning of it.

And the state which is seriously expected to make these payments is first to be passed through every process that can impoverish her or obstruct her development. She loses 60,000,000 tons of coal by territorial changes, and she is to be compelled to export 45,000,000 tons by way of reparation to France, Belgium, Luxembourg, and Italy. Even if her production is maintained she will only have 60,000,000 tons of coal for her own requirements, whereas she will need nearly twice that amount to keep her industries and railways going. This is only one way in which Germany will be crippled. That she must suffer and that she ought to suffer nobody doubts, but the amazing thing is that the Paris politicians can pretend to think that after reducing her industrial efficiency by every means they can devise they can still draw as much wealth from her as if she were in the heyday of her industrial prosperity.

Why was the sum that Germany was to pay left indeterminate? The answer is no longer a secret. Week after week the Big Four wrangled over the share that France and England were to take. Mr. Lloyd George did not dare to tell the British electorate, who had been told that the whole cost of the war could be got out of Germany, that they had been deceived by their government at the December election. M. Clemenceau did not dare to mention a figure to his countrymen, because no figure that could be stated would come up to their expectations. It looked as if the treaty must wait indefinitely. Then a happy thought

struck these statesmen. Let us name

no figure at all, but let us draw up categories of obligation, make Germany accept them, and then go on year after year taking whatever we can get out of her.

In other words, the fate of the peace was sealed when Mr. Lloyd George decided to make the indemnity the election cry, for he went to Paris the prisoner of the most reckless pledges ever given by a statesman. In December he could have saved Europe. He could have asked the British people, who had made such sacrifices for a great cause, to make yet another. He could have arranged with America for the canceling of foreign war debts, an act that would have helped France and Italy infinitely more than any indemnity they can get out of Germany. He could have worked with America on the lines of Mr. Hoover, for the economic restoration of Europe. He would have conferred an immense benefit on his own country by helping Europe to her feet, by renouncing any claim for reparation until France and Belgium had been indemnified, by fixing a definite sum for Germany to pay and a sum that Germany could pay, and by joining in an international loan to set industry going again throughout the world. England loses more, taking the lowest consideration, by the interruption of the trade of the world than she can gain by any reparation she can ever receive.

Mr. Keynes makes a series of proposals at the end of his book. He would put the amount to be paid by Germany at 2,000,000,000 and he would count the surrender of warships, submarine cables, war material, state property in ceded territory, and Germany's claims against her former allies at 500,000,000. The remaining 1,500,000,000 should be paid in 30 annual installments of 50,000,000, and

Germany should choose her own way of meeting this annual charge. He would modify or rearrange the condi-, tions about coal in such a way as to permit the continuance of Germany's industrial life. He would establish a Free Trade Union under the auspices of the League of Nations, and compel Germany, Poland, the new states which formerly composed the AustroHungarian and Turkish Empires, and the mandated states to join this union for ten years.

These proposals, he considers, would 'do something appreciable to enable the industrial populations of Europe to continue to earn a livelihood.' But more than this is needed. Inter-Allied

debts should be forgiven. This is asking a sacrifice of the United States, but her sacrifices in the war have been conspicuously lighter than those of her European allies. Further, for the immediate needs of Europe he proposes an international loan. But all this programme depends on the abandonment of the spirit and policy that have brought Europe to the brink of ruin. Mr. Keynes's book should be studied with care by all the politicians who find themselves called on in a year may or two to rescue the world from the consequences of the catastrophe of Paris. It gives a definite and reasoned policy to the forces of democracy in this country, in America, and in Europe as a whole.