World War II: The Twenty Years ’ Crisis in Europe, 1919-1939

1. World War II: The Twenty Years’ Crisis in Europe, 1919-1939 Lecture 12: 17 March 2011J A Morrison

2. World War II: The Twenty Years’ Crisis in Europe, 1919-1938 The title—and organizing spirit—of this lecture comes from The Twenty Years’ Crisis, published by EH Carr in 1939.

3. “In 1918 world leadership wasoffered, by almost unanimous consent, to the United States…it was then declined...” EH Carr. The Twenty Years’ Crisis. (1939)

4. Lec 12: Twenty Years’ Crisis in Europe • The “Carthaginian Peace” • The 1920s • The 1930s • What caused the war in Europe?

5. Lec 12: Twenty Years’ Crisis in Europe • The “Carthaginian Peace” • The 1920s • The 1930s • What caused the war in Europe?

6. The term “Carthaginian Peace” comes from the destruction that followed Rome’s defeat of Carthage in the Third Punic War.

7. JM Keynes (and others) used the term to describe the Treaty of Versailles.

8. Why did the Allies impose a “Carthaginian Peace” in 1919?

9. I. THE CARTHAGINIAN PEACE • German Involvement at Paris • The Allies at Paris

10. Remember this key fact about the conclusion of World War I: Armistice at Compiègne, France (11 November 1918) Signing of Versailles Peace Treaty (28 June 1919)

11. Germany’s representative at Versailles, Count von Brockdorff-Rantzau, appealed in vain to the Allies for relief.

12. But with the German army demobilized and the American army finally built, Germany had little choice…

13. Germany did not get the deal at Versailles (June 1919) that its generals expected when they agreed to the Armistice (the previous November).

14. I. THE CARTHAGINIAN PEACE • German Involvement at Paris • The Allies at Paris

15. [You’ll note that this reviews some material covered in the first lecture…]

16. Having been the British Treasury’s representative at Paris, JM Keynes analyzed the dynamics among the Allies that led to the Treaty of Versailles. John Maynard Keynes (1883-1946)

17. Before the War, Europe benefitted from the tremendous integration of the First Era of Globalization.Keynes suggested that the European economies countries had grown dependent upon one another and upon the rest of the world in virtually every respect.Yet…

18. “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, nothing to reclaim Russia; nor does it promote in any way a compact of economic solidarity amongst the Allies themselves; no arrangement was reached at Paris for restoring the disordered finances of France and Italy, or to adjust the systems of the Old World and the New...” -- Keynes, JM. Economic Consequences of the Peace. 1919. Ch 6.

19. “It is an extraordinary fact that the fundamental economic problems 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.” -- Keynes, JM. Economic Consequences of the Peace. 1919. Ch 6.

20. How did Keynes’ explain this?  The politicians had the wrong ideas about international politics.

21. According to Keynes, there were two rival impulses at the Paris Peace Conference…

22. 1. France: Return Germany to pre-1870 Georges Clemenceau (1841-1929)

23. 2. Wilson: Bring Liberal Values and thus Peace to Europe Woodrow Wilson (1856-1924)

24. Ultimately, Clemenceau carried the day.But this is perplexing given the position of Wilson and the US after the war.

25. Wilson’s Moral & Political Authority “When President Wilson left Washington he enjoyed a prestige and a moral influence throughout the world unequalled in history…[Additionally,] 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…Never had a philosopher held such weapons wherewith to bind the princes of this world.” Keynes, JM. Economic Consequences of the Peace. 1919. Ch 3.

26. But Wilson was no Prophet! “The President was not a hero or a prophet; he was not even a philosopher; but a generously intentioned man, with many of the weaknesses of other human beings, and lacking that dominating intellectual equipment which would have been necessary to cope with the subtle and dangerous spellbinders whom a tremendous clash of forces and personalities had brought to the top as triumphant masters in the swift game of give and take, face to face in council -- a game of which he had no experience at all.” Keynes, JM. Economic Consequences of the Peace. 1919. Ch 3.

27. And he brought no Concrete Plan “It was commonly believed at the commencement of the Paris conference that the President had thought out…a comprehensive scheme not only for the League of Nations, but for the embodiment of the Fourteen Points in an actual treaty of peace. But in fact the President had thought out nothing; when it came to practice his ideas were nebulous and incomplete. He had no plan, no scheme, no constructive ideas whatever for clothing with the flesh of life the commandments which he had thundered from the White House.” Keynes, JM. Economic Consequences of the Peace. 1919. Ch 3.

28. Consequently, Wilson was forced to work with Clemenceau’s language. All Clemenceau needed to do was reconcile his vicious plans with Wilson’s abstract formulations.

29. Rather than dissecting Germany to ensure French security…Parts of Central Europe were reconstituted under Wilson’s principles of “self-determination.”

30. Despite its fancy appeals to rhetoric, the Treaty accomplished Clemenceau’s ambition to subordinate Germany.

31. So, Keynes’ explanation was simple… Wilson was an idealistic fool who had traded away all of the practical requirements for peace to pursue his dream of remaking the world.

32. Keynes argued that the peace would impoverish Germany.And impoverishment would lead to desperation.

33. Keynes’ Proposals • Central Europe: • Reduce reparations • Encourage industry • Promote free trade • Cancel war debts between Allies • New reconstruction loan to Europe

34. But, of course, Keynes failed to see the Treaty substantially revised.And these were the consequences…

35. Lec 12: Twenty Years’ Crisis in Europe • The “Carthaginian Peace” • The 1920s • The 1930s • What caused the war in Europe?

36. II. THE 1920s • A Return to Globalization? • The Pivotal Role of the US

37. The Treaty proved disastrous for Germany almost immediately.

38. Germany had extraordinary expenses (reparations) and less economic capacity (due to lost territory).

39. To keep the economy functioning while remitting massive sums for reparations, Germany resorted to hyperinflation—rapidly expanding the money supply.

40. German Hyperinflation “Loads of Money.”The Economist. 23 December 1999. German woman burning Papiermarks rather than buying firewood.

41. When Germany defaulted on its reparations payments in 1922, Belgium and France occupied the Ruhr Valley, Germany’s industrial center.

42. The mass unemployment that followed precipitated Hitler’s first attempt to seize power: the Beer Hall Putsch (November 1923).

43. Following service in WWI, the Austrian Adolph Hitler became a major figure in Germany’s fascistic Nazi Party in the 1920s. Hitler, c 1925.

44. Hitler’s revolt failed, and he was imprisoned.Hitler used the time in prison to dictate Mein Kampf.

45. The German government (the Weimar Republic) responded to the crisis by returning the mark to gold in 1924. The Reichsmark was valued at the prewar parity (1:24 US Cents).

46. Hoping to reconstruct the global economy, other states also returned to the international gold standard.

47. The Return to Gold • 1924: Austria • 1925: • Germany • Poland • Hungary • Belgium • Britain • 1926: France • 1927: Italy

48. II. THE 1920s • A Return to Globalization? • The Pivotal Role of the US

49. But this new global economy depended entirely on US involvement.

50. US Share of World Gold Supply Edie, Lionel D. “The United States' Share of the World's Gold.”The Journal of Business of the University of Chicago, Vol. 1, No. 3 (Jul., 1928), pp. 364-373.