The End of Laissez-Faire

The Return of Laissez-Faire: The Economic Consequences of the Peace (1919) was written and published by John Maynard Keynes. Keynes attended the Versailles Conference as a delegate of the British Treasury and argued for a much more generous peace. It was a best seller throughout the world and was critical in establishing a general opinion that the Versailles Treaty was a "Carthaginian peace". It helped to consolidate American public opinion against the treaty and involvement in the League of Nations. The perception by much of the British public that Germany had been treated unfairly in turn was a crucial factor in public support for appeasement. The success of the book established Keynes' reputation as a leading economist especially on the left. When Keynes was a key player in establishing the Bretton Woods system in 1944, he remembered the lessons from Versailles as well as the Great Depression. The Marshall Plan after Second World War is a similar system to that proposed by Keynes in The Economic Consequences of the Peace. Keynes left Cambridge University to work at Treasury in 1915. He worked daily on financing the war effort during World War I. This disturbed many of the pacifist members of the Bloomsbury Group of which Keynes was a member. Lytton Strachey sent him a note in 1916 asking Keynes why he was still working at Treasury. Keynes quickly established a reputation as one of the Treasury's most able men and travelled to the Versailles Conference as an advisor to the British Government. In preparation for the conference, he argued that there should be no reparations or that, at worst, German reparations should be limited to £2,000 million. He considered that there should be a general forgiveness of war debts which he considered would benefit Britain. Lastly, Keynes wanted the US Government to launch a vast credit program to restore Europe to prosperity as soon as possible. Keynes' general concern was that the Versailles conference should set the conditions for economic recovery. However, the conference focused on borders and national security. Reparations were set at a level that Keynes perceived would ruin Europe, Woodrow Wilson refused to countenance forgiveness of war debts and would not even let the US Treasury officials discuss the credit program. While Keynes' proposals were far sighted, few others at the Versailles Conference understood their importance and Keynes' proposals would have been controversial in nations such as France, Britain and the US. During the conference, Keynes' health deteriorated and he resigned in frustration from his position in May, 1919. He retired to Cambridge and wrote The Economic Consequences of the Peace over two months in the English summer.