Keynes Euro Equilibrium


Although Keynes was still years away from the strong form of his heterodox economic claim—that the economy would not tend automatically toward equilibrium and thus stood in need of regular or occasional government intervention—the outline of that argument was beginning to come into view in The Economic Consequences of the Peace. What made a Carthaginian peace so damaging, he argued, wasn’t really or at least wasn’t only the devastating toll it would take on the culture, society, and ordinary people of a hobbled Germany.

The real problem, Keynes argued, was that a broken Germany threatened the new, complex, and fragile equilibrium of Europe, an entity he frankly admitted not to have really noticed before coming to Paris: “At any rate an Englishman who took part in the Conference of Paris and was during those months a member of the Supreme Economic Council of the Allied Powers, was bound to become, for him a new experience, a European in his cares and outlook.”20 What was significantly economic about The Economic Consequences of the Peace was not, after all, its specific predictions about what would happen next in Germany, but, rather, Keynes’s as yet inchoate theory of Europe as a new and complex kind of economic totality.

To become a European meant a few things for Keynes. First, it meant freeing oneself from Little Britain, from the grubby and shortsighted provincialism that, in Keynes’s view, prevented Lloyd George from seeing what was really at stake at Versailles.

Second, it meant looking past the nation and the “national, racial, or political” hatreds that irrationally fanned the flames of war. And, thus, it meant looking toward the promise of Europe as a whole: “We must pray [that] the souls of European peoples [will] turn away this winter from the false idols which have survived the war that created them, and substitute in their hearts for the hatred and the nationalism, which now possess them, thoughts and hopes of the happiness and solidarity of the European family.”21

However, the economic and aesthetic equilibrium necessary to achieve widespread prosperity and to avoid another war had to confront a seemingly diabolical level of complication. If that were the case, Keynes believed, then any system that could support such an equilibrium would have to rely not on the invisible hand of the market, but, rather, on the visible and deliberate hand of rational, directed, and humane intervention.