The Golden Age That Couldn't Last — The Economic Consequences of the Peace

Before 1870 Europe was substantially self-subsistent. After 1870 an unprecedented fifty-year expansion reversed the old pressure of population on food. American supplies, industrial returns, emigration, and a new traffic in oil-seeds from tropical Africa made food easier to secure as numbers grew. Labour's purchasing power over food rose until about 1900. What earlier economists would have called an economic Eldorado became ordinary expectation. Malthus's devil had been chained for half a century. Keynes writes that the age may have loosed him again.

The Londoner of 1914 could telephone for the world's products, invest on any continent, and travel without passport anxiety. He regarded this state of affairs as normal, certain, and permanently improvable. Militarism and imperial rivalry played the serpent in that paradise, yet they seemed only newspaper amusements. Keynes insists the episode ended in August 1914. On the eve of war Germany had grown from forty million people to sixty-eight million and had become an industrial machine that had to spin ever faster to employ its people and buy food abroad. Austria-Hungary and European Russia followed the same logic at even greater scale. Nearly three hundred million people lived within the Russian, German, and Austro-Hungarian systems, bound by reduced tariffs and gold-linked currencies. German coal output rose from thirty million tons in 1871 to one hundred and ninety million in 1913. Germany became the largest customer and supplier for much of the continent and sent capital eastward through peaceful penetration. Those numbers supplied military strength. Deprived of livelihood they remain a danger to European order.

The system also depended on a double bluff. Workers accepted little of the cake they helped bake. Capitalists were praised for saving rather than consuming it. The cake grew, but the war disclosed the possibility of consumption to all. Europe's claim on New World food was already becoming precarious as American domestic requirements approached production. The war then shook organisation, transport, and imported supplies. A great part of the Continent was sick and dying, its population in excess of the livelihood available. The Peace Conference still has to honour engagements and satisfy justice. It also has to re-establish life and heal wounds.