John Maynard Keynes, a member of the UK delegation at the Paris Peace Conference in 1918 and a famous British economist, wrote in his 1920 book regarding the Treaty of Versailles: “The Treaty includes no provision for economic rehabilitation of Europe – nothing to make the defeated Central Powers into good neighbors, nothing to stabilize the New States of Europe, nothing to reclaim Russia.” He added that the Treaty of Versailles did not promote economic solidarity among the Allied powers themselves. (Keynes VI.1). MAIN CLAIM: The economic impact of the Treaty of Versailles was the instability of Germany’s economy and the deterioration of living conditions for its population, which prepared the ground for the coming of the fascist government.
The economy of Germany was in a grave state to the end of the World War 1. Indeed, in the course of the war, Germany was unable to export or to import goods of industry, which meant that its trade was severely restricted. To make the matters worse, food and all other resources got diverted from the population to the war efforts. In order to pay for the warfare, instead of raising the taxes, the Kaiser decided to borrow great amounts of money from the public by making people purchase the war bonds. He also printed more money to cover the deficit. By the end of the war, as a result of such financial and economic policies, Germany had ceased to be the second most progressive industrialized nation in the world. According to Kitson, “By the end of the war, the national income was two-thirds its pre-war level, and both industrial and agricultural production had fallen considerably” (86). The prices for food grew significantly because of the bad harvest in 1918. In addition to the economical disarray, Germany faced a considerable political crisis (Shepley 2).
Now, having outlined the economic conditions of Germany at the time, one should focus on the economic provisions of the Treaty of Versailles, which led the economy of the state out of control in the years to follow. One of the biggest financial burdens was the reparations bill. As Germany was recognized guilty in starting the war, it was made responsible for the economic burdens that the war had placed on the Allies. France, for example, openly pushed for stricter economic clauses as it expected Germany to “cover the costs of restoration of invaded territories and repayment of war debts [and that] a long period of stiff repayments … would have the added advantage of keeping Germany financially and economically weak” (Kitchen 19 in Atkinson par.8). Under the treaty, Germany was obliged to pay massive sums in reparations: £ 6,600 million or 132, 000 million gold marks had to be paid off over 42 years, as fixed in 1921. To compare, following 1919, the entire budget of Reich was needed only to pay off interest on wartime loans. In addition, Germany was derived of 75% of her iron ore resources, 25% of coal, as well as 15% of arable land (Kitson 86). As Germany was deprived of its resources and saw the supply of imported goods and raw materials broken, it saw its economic organization completely destroyed (Keynes VI.1). The treaty also exacerbated the unemployment levels in Germany, as one of its provisions was the disbanding of the biggest part of the military forces.
Overall, the Treaty of Versailles further destroyed the economic organization of the German state, provided for its economic instability, deprived it of its critical resources, and led to a rise in unemployment. That is why its economic effects can be described as grave. They spurred the public hysteria and the coming of fascists.
- Atkinson, James. The Treaty of Versailles and Its Consequences. Jimmy Atkinson, n.d., http://jimmyatkinson.com/papers/the-treaty-of-versailles-and-its-consequences/. Accessed 25 February 2017.
- Keynes, Maynard. The Economic Consequences of the Peace. New York: Harcourt, Brace, and Howe, Inc., 1920, Econlib.org, n.d., http://www.econlib.org/library/YPDBooks/Keynes/kynsCP6.html.
- Kitson, Alison. Germany, 1858-1990: Hope, Terror, and Revival. Oxford University Press.
- Shepley, Nick. Britain, France, and Germany and the Treaty of Versailles. Andrews UK Limited, 2015.