Refereeing Mantoux-Keynes on the Treaty of Versailles

Over at Grasping Reality: Note to Self: Rereading Etienne Mantoux: La Paix Calomniée, ou les Conséquences Économiques de M. Keynes. “The Calumniated Peace” of Versailles. OK. So why is the title of the English translation The Carthaginian Peace? Who decided to replace “Caluminiated” with “Carthaginian”, and why?

Recall that Etienne Mantoux’s review of Keynes’s General Theory is quite bad. At its beginning:

With his fascination Keynes combines another of the serpent’s attributes–his disconcerting ability to molt at more or less frequent intervals, leaving his former conceptions behind him like so many old integuments from which the reader, somewhat disconcerted, must extract himself, having previously been at no little trouble to get in…. We are to witness a revolution. At least so one would gather from some of the more enthusiastic reviews, which go so far as to make Keynes (much to his disgust no doubt) the direct successor of Karl Marx. “My undertaking is one that has no equal, that none will ever equal. I would change the basis of society, shift the axis of civilization…” Is that facetious to place Proudhon’s ironic boasts beside Keynes’ ambitious sureness? Yet their two proposals are not so very unlike, for it is by decline of the rate of interest to zero that the latter would see our economic ills remedied. Curious that the most sharp-tongued economist of our time should come back, by this unexpected route, to the thought of the famous inventor of “credit gratuit”…

And at its end:

Is not this policy likely to beget inflation pure and simple, and present us once more with the excesses that have characterized all great crises, and that were indulged in con molto brio during the last?… Cannot Keynes, who has so much interest in the history of ideas, boast today of having failed not only to predict, but even to persuade? On March 7, 1931, an article appeared that ended, for generations perhaps, an era begun by Adam Smith in 1776. Keynes had always wondered whether he was really a liberal…. For many liberals, attached to free trade as the last symbol of their convictions, his conversion must have been a real tragedy. But then as always, Keynes acted in the best of faith. Today he has come round to an esoteric justification of the preconceptions of the man in the street… [are] sounder than the classical economist’s…. After all this manifestation of candor, Keynes may be yielding to the temptations of his genius for mystification. When… he… pays belated homage to Silvio Gesell… J. A. Hobson… Major Douglas… quotes Mandeville… he certainly hopes to scandalize…. He still belongs… to the antipuritan and anti-Victorian tradition… [of] Wells and Shaw. But behind this foolery, do we not sense some discomfiture, after a long and painful effort of conscience in quest of truth forlorn–à la recherche de la vérité perdue?

In these two paragraphs, Mantoux manages to:

1. Red-bait Keynes.
2. Misrepresent Keynes’s Wicksellian solution to the problem of the business cycle–use monetary policy to match the market to the natural rate of interest so that Say’s Law is true at full employment in practice, if possible, and to use other government policies to more directly boost investment to full-employment levels of not–as if it was Proudhon’s demand for “credit gratuit”.
3. Fail to understand that pretty much everything that had happened to the economies of western European in the decade before he wrote argued strongly against his belief that stimulative monetary and fiscal policies were always “likely to beget inflation pure and simple”, and that he had a good deal of rethinking to do.
4. Misrepresent Keynes’s advocacy in 1931 of an employment-boosting tariff as a third-best given that expansionary fiscal policy was off the table because of worry of the high debt and expansionary monetary policy was off the table because of Britain’s commitment to the gold standard.
5. Misrepresent Keynes’s attitude at the end of the General Theory: there is no discomfiture there to be sensed; rather it is a most triumphal assertion of ego, as Keynes tells all and sundry that he is certain that he has gotten it right and that it really matters.

Making my way through The Carthaginian Peace, I find it not much stronger than Mantoux’s review of the General Theory. Germany could have paid post-WWI reparations to France. Simply force the German government to tax, have it use its tax revenues to buy up shares of German capital, give the ownership shares to the French, have the French sell the shares back to Germans, and then have the French use the reichsmarks thus earned to buy imports from Germany. Allow the value of the franc to rise relative to gold and to the reichsmark so that France’s export industries wither and labor and capital are redirected to government-funded reconstruction work in northern France, and everything can work out. The problems, however are:

• If you require not the franc to appreciate but the reichsmark to depreciate, it is likely that there is no equilibrium: the more goods and services Germany transfers, the deeper in reparations debt it finds itself.
• If you require that France retain its export industries, there is once again no equilibrium.
• If you believe that Stresemann, Rathenau, Ebert, and company are worth backing–that a stable, Democratic Weimar Germany is in everyone’s interest–than the game is simply not worth playing at all.

I do not think Keynes got the analytics and the politics completely correct writing in 1919. But I do think he got both the analytics and the politics much more correct writing in 1919 than Mantoux did writing during World War II.

Did Keynes ever respond to Mantoux? I believe not. Did he even know about it (them)? I cannot tell…