The Economic Consequences of the Peace by John Maynard KeynesReview by: H. O. M.Journal of the Royal Statistical Society, Vol. 83, No. 2 (Mar., 1920), pp. 296-298Published by: Wiley for the Royal Statistical SocietyStable URL: http://www.jstor.org/stable/2341085 .

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296 Reviews of Statistical and Economirc Books. [Mar.

typical case of integration, where businesses combine in series, resulting in the emergence of mighty self-contained units making full use of standardization and specialization. The British cotton industry has automatically achieved local specialization in classes of goods and yet remained mainly free from combination. One might add that if Dr. Marshall were writing at the present moment he would probably be concerned at the invasion of Lancashire by the principle of combination, introduced for the worst of reasons, the financial. Much is expected from voluntary co-operation of pro- ducers for the improvement of technique and for constructive work in marketing especially in connection with the export trade, but Dr. Marshall rejects the common claim that combination in cartels or trusts tends to stabilize home industry, and supports his view by the experience of Germany under cartels.

The concluding chapter treats of the decline of exclusive class advantages in industry. The claim of the worker is for an increased share of control of industry, but, though much control may be diffused, important decisions on the taking of risks and in particular as to new ventures must remain in the hands of the owners who bear the risks.

A word of reference must be said as to the two-hundred pages of appendices dealing with special points. Incidentally they show that the " theorist " is not necessarily unfitted for the work of the " historian." In the last of the series it is argued on familiar lines that the " State " is unsuited for the management of industry, even of mining. H.W.M.

3.-The Economic Consequences of the Peace. By John Maynard Keynes. 279 pp., 8vo. London: Macmillan and Co., Limited, 1919. Price 8s. 6d.

This remarkable book should serve the future as an epitome of all that is best and of some of the defects in English academic liberalism. To set forth the wickedness and folly of a great inter- national crime without varnish or hedging, and yet without bitterness or animosity, might seem an emotionally impossible task. Almost as difficult intellectually was it to cast up and reduce to the terms of a balance sheet the waste of war, the possibilities of peace. Yet both these tasks are accomplished. In the reviews which I have read-and I have searched for possible antagonists-I have found no serious challenge of Mr. Keynes' facts, no sober strictures on his temper. His opponents for the most part confess their impotence by ignoring his theses.

As compared with the " perfect " book of my imagination, I find the work defective in three ways. First, there is not enough knowledge of economic conditions; secondly, the sociology is not quite coherent; thirdly, I distrust the psychology. In all three there is involved one main defect, the defect of Mr. Keynes' quality, viz., academic liberalism. In common with liberals generally, Mr. Keynes has ceased to believe in social automatism. And yet we do not find in the book any plea for a frank abandonment of the

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1920.] Reviews of Statistical and Economnic Books. 297

traditional bases of social life. Rather we are urged to get back as soon as we can to as much as can be recaptured of the status quo ante bellum. To permit, e.g., the " natural " localization of industries in reference to supplies of coal and iron and the existing distribution of human economic efficiency. It is, I admit, difficult to press this criticism without incurring the charge of frivolity. Some machinery we must have for thinking about these difficult problems. The bases of the liberal system of thought may be shattered ; but the " working " hypothesis " remains, and, in default of another, we are justified in using it, provided that it does not lead us to impossible conclusions. But some of Mr. Keynes' conclusions are, as I think, impossible.

I hold this to be true in particular of the kernel of his book, viz., the impression which he succeeds in conveying that the maxi- mum which Germany could pav would suffice, granted a moderate exercise of generosity by England and America to set the top spinning again without monstrous hardship or serious injustice to any of the parties concerned. I suggest, on the contrary, that a policy of considered and considerable sacrifice by England, America (and possibly some neutrals), was and is the only clean way out.

Passing to detail, the treatmient of the Reparation Problem is incomplete and unsatisfactory. It is brought to terms of such moderate compensation for property owners in devastated territories as would satisfy a British " Treasury " official. Now, where " marginal " injury is in question this commonsense solution is sensible enough; but where economic vitality has been attacked I submit that it is wholly inadequate. It is required in some way to compensate France and Serbia for the injury which their economic vitality has suffered, and this can never be done satisfactorily by casting up accounts of missing cattle and villages destroyed. Here, too, a deficiency of thorough knowledge becomes obvious. Mr. Keynes is soaked in the Peace Treaty and in the superficial statistics of the existing economic situation, but his book betrays no deep acquaintance with the details of Europe's economic conditions. The defect is glossed over by the lines on which the author has chosen to attack the problem but it is very evidently there for the careful reader. We are told that the " economic development " of Serbia is " low." Is that really all we need to know ? We are told nothing at all about the economic development of France. No attempt is made even to outline the relative position of French economic life before the war and now. As regards Germany, rather more is attempted, but the resultant sketch is not, to me at least, convincing. The thesis that iron and coal production approaching pre-war dimen- sions are necessary to the maintenance of Germany's population is disputable. " Key " industries are " keys " to an existing order of society; but society is highly adaptable. Even before 1860 Germany, with relatively slight development of these " keys;" had a large population, and there has been progress since then in agricul- tural technique and in other directions. Might, e.g., not German engi- neering, by developing in the higher branches, employ larger numbers

VOL. LXXXIII. PART II. X

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298 Reviews of Statistical and Economic Books. [Mar.

on a considerably smaller bulk of steel, obtained with a considerably smaller quantity of coal ? Again, the psychological factor is neglected. It would have been valuable to present some study of this aspect of the problem, to show clearly why it is that German finance has been so weak since the Armistice, that her handling of the coal and iron which remain to her has been so unsatisfactory.

The treatment of Russia, of the new border nations, of the new nations within old Austria, is even less complete. They are not left out, for it is an essential part of Mr. Keynes' " scheme " that they should be re-knit by German and British efficiency into an integral economic organism. But a proposal of this character, if it is to count for more than an expression of hope, should be based upon a considerable knowledge of the conditions, and there are no indications of such knowledge. To many readers a crowning merit in the work has seemed to be that it is not overloaded with fact-that it " reads like a novel." This quality is a merit provided that the generalisations are really the genuine intuitions of a mind soaked in knowledge of the subject. It is, on the other hand, an additional danger where a brilliant writer brings surface facts to apparent order by the aid of general principles.

Lastly, a word on Mr. Keynes' handling of the Peace Conference. His view is that the negotiations before the Armistice gave the possibility of a good peace, and that this possibility was defeated by the folly, weakness and wickedness of Lloyd George, Wilson and Clemenceau. The book has thus the crowning Liberal demerit of flattering the average man at the expense of his chosen leaders. There is, of course, action and reaction in these matters; but if one must take a stand on the question of responsibility, I could as easily hold governments rather than peoples responsible for the war as believe that the " ambition " of Lloyd George explains the election of 1918. The first need of the world seems to me to be to develop the truth, that you and I and the man in the street are responsible for what happens. That so gifted a writer as Mr. Keynes takes the opposite line is disconcerting. H.O.M.

4.-Economirc Phenomena Before and After War: A Statistical Theory of Modern Wars. By Slavko Secerov. vi + 226 pp., 8vo. London: George Routledge and Sons, Ltd., 1919. Price Ios. 6d.

This book, which is a thesis approved for the degree of master of science (economics) in the University of London, is stated by the author to embody the result of his search for a " scientific synthetic explanation of modern wars by means of economic statistical data, so far as they exist, in the statistics of consumption, production and natural growth of population, in the several countries investigated."

The theory propounded is, briefly, that there is in modern comn- munities a continuous accumulation of capital which leads to a disproportionate production of " primary " and " secondary " goods in those communities, primary goods being agricultural pro- ducts and raw materials, and secondary goods being industrial

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