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Review of John Maynard Keynes, The Economic Consequences of the
Peace

by Thorstein Veblen


Political Science Quarterly, 35, pp. 467-472.

Quote:It is now something like a year since this book was written.
And much of its argument is in the nature of forecast which has
in great part been overtaken by the precipitate run of events
during these past months. Therefore it would scarcely be fair to
read the author's argument as a presentation of client fact. It
is rather to be taken as a presentation of the diplomatic
potentialities of the Treaty and the League, as seen beforehand,
and of the further consequences which may be expected to follow
in the course of a statesmanlike management of things under the
powers conferred by the Treaty and by the Covenant of the League.
It is an altogether sober and admirably candid and facile
argument, by a man familiar with diplomatic usage and trained in
the details of large financial policy; and the wide vogue and
earnest consideration which have been given to this volume
reflect its very substantial merit. At the same time the same
facts go to show how faithfully its point of view and its line of
argument fall in with the prevailing attitude of thoughtful men
toward the same range of questions. It is the attitude of men
accustomed to take political documents at their face value.

Writing at about the date of its formulation and before its
effectual working had been demonstrated, Mr Keynes accepts the
Treaty as a definitive formulation of the terms of peace, as a
conclusive settlement rather than a strategic point of departure
for further negotiations and a continuation of warlike enterprise
-- and this in spite of the fact that Mr Keynes was continuously
and intimately in touch with the Peace Conference during all
those devious negotiations by which the Elder Statesmen of the
Great Powers arrived at the bargains embodied in this instrument.
These negotiations were quite secret, of course, as is fitting
that negotiations among Elder Statesmen should be. But for all
their vulpine secrecy, the temper and purposes of that hidden
Conclave of political hucksters were already becoming evident to
outsiders a year ago, and it is all the more surprising to find
that an observer so shrewd and so advantageously placed as Mr
Keynes has been led to credit them with any degree of bona fides
or to ascribe any degree of finality to the diplomatic
instruments which came out of their bargaining.

The Treaty was designed, in substance, to re-establish the
status quo ante, with a particular view to the conservation of
international jealousies. Instead of its having brought a
settlement of the world's peace, the Treaty (together with the
League) has already shown itself to be nothing better than a
screen of diplomatic verbiage behind which the Elder Statesmen of
the Great Powers continue their pursuit of political chicane and
imperialistic aggrandisement. All this is patent now, and it
needs no peculiar degree of courage to admit it. It is also
scarcely too much to say that all this should have been
sufficiently evident to Mr Keynes a year ago. But in failing to
take note of this patent state of the case Mr Keynes only
reflects the commonplace attitude of thoughtful citizens. His
discussion, accordingly, is a faithful and exceptionally
intelligent commentary on the language of the Treaty, rather than
the consequences which were designed to follow from it or the
uses to which it is lending itself. It would perhaps be an
ungraceful overstatement to say that Mr Keynes has successfully
avoided the main facts in the case; but an equally broad
statement to the contrary would be farther from the truth.

The events of the past months go to show that the central and
most binding provision of the Treaty (and of the League) is an
unrecorded clause by which the governments of the Great Powers
are banded together for the suppression of Soviet Russia --
unrecorded unless record of it is to be found somewhere among the
secret archives of the League or of the Great Powers. Apart from
this unacknowledged compact there appears to be nothing in the
Treaty that has any character of stability or binding force. (Of
course, this compact for the reduction of Soviet Russia was not
written into the text of the Treaty; it may rather be said to
have been the parchment upon which the text was written.) A
formal avowal of such a compact for continued warlike operations
would not comport with the usages of secret diplomacy, and then
it might also be counted on unduly to irritate the underlying
populations of the Great Powers, who are unable to see the
urgency of the case in the same perspective as the Elder
Statesmen. So this difficult but imperative task of suppressing
Bolshevism, which faced the Conclave from the outset, has no part
in Mr Keynes's analysis of the consequences to be expected from
the conclave's Treaty. Yet it is sufficiently evident now that
the exigencies of the Conclave's campaign against Russian
Bolshevism have shaped the working-out of the Treaty hitherto,
beyond any other consideration. This appears to be the only
interest which the Elder Statesmen of the Great Powers hold in
common; in all else they appear to be engrossed with mutual
jealousies and cross purposes, quite in the spirit of that
imperialistic status quo out of which the Great War arose. And
the like promises to hold true for the future, until after Soviet
Russia or the Powers banded together in this surreptitious war on
Russia shall reach the breaking-point. In the nature of things it
is a war without quarter; but in the nature of things it is also
an enterprise which cannot be avowed.

It is quite needless to find fault with this urgent campaign
of the governments of the Great Powers against Soviet Russia or
to say anything in approval of it all. But it is necessary to
take note of its urgency and the nature of it, as well as of the
fact that this major factor in the practical working-out of the
Peace has apparently escaped attention in the most competent
analysis of the Peace and its consequences that has yet been
offered. It has been overlooked, perhaps, because it is a
foregone matter of course. Yet this oversight is unfortunate.
Among other things, it has led Mr Keynes into an ungracious
characterization of the President and his share in the
negotiations. Mr Keynes has much that is uncomplimentary to say
of the many concessions and comprehensive defeat in which the
President and his avowed purposes became involved in the course
of those negotiations with the Elder Statesmen of the Great
Powers. Due appreciation of the gravity of this anti-Bolshevist
issue, and of its ubiquitous and paramount force in the
deliberations of the Conclave, should have saved Mr Keynes from
those expressions of scant courtesy which mar his
characterization of the President and of the President's work as
peacemaker.

The intrinsic merits of the quarrel between the Bolsheviki
and the Elder Statesmen are not a matter for off-hand decision;
nor need they come in consideration here. But the difficulties of
the President's work as peacemaker are not to be appreciated
without some regard to the nature of this issue that faced him.
So, without prejudice, it seems necessary to call to mind the
main facts of the case, as these facts confronted him in the
negotiations with the Conclave. It is to be remarked, then, that
Bolshevism is a menace to absentee ownership. At the same time
the present economic and political order rests on absentee
ownership. The imperialist policies of the Great Powers,
including America, also look to the maintenance and extension of
absentee ownership as the major and abiding purpose of all their
political traffic. Absentee ownership, accordingly, is the
foundation of law and order, according to that scheme of law and
order which has been handed down out of the past in all the
civilized nations, and to the perpetuation of which the Elder
Statesmen are committed by native bent and by the duties of
office. This applies to both the economic and the political
order, in all these civilized nations, where the security of
property rights has become virtually the sole concern of the
constituted authorities.

The Fourteen Points were drawn up without due appreciation of
this paramount place which absentee ownership has come to occupy
in the modern civilized countries and without due appreciation of
the intrinsically precarious equilibrium in which this paramount
institution of civilized mankind has been placed by the growth of
industry and education. The Bolshevist demonstration had not yet
shown the menace, at the time when the Fourteen Points were drawn
up. The Fourteen Points were drawn in the humane spirit of
Mid-Victorian Liberalism, without due realization of the fact
that democracy has in the meantime outgrown the Mid-Victorian
scheme of personal liberty and has grown into a democracy of
property rights. Not until the Bolshevist overturn and the rise
of Soviet Russia did this new complexion of things become evident
to men trained in the good old way of thinking On questions of
policy. But at the date of the Peace Conference Soviet Russia had
come to be the largest and most perplexing fact within the
political and economic horizon. Therefore, so soon as a
consideration of details was entered upon it became evident,
point by point, that the demands of absentee ownership coincide
with the requirements of the existing order, and that these
paramount demands of absentee ownership are at the same time
incompatible with the humane principles of Mid-Victorian
Liberalism. Therefore, regretfully and reluctantly, but
imperatively, it became the part of wise statesmanship to save
the existing order by saving absentee ownership and letting the
Fourteen Points go in the discard. Bolshevism is a menace to
absentee ownership; and in the light of events in Soviet Russia
it became evident, point by point, that only with the definitive
suppression of Bolshevism and all its works, at any cost, could
the world be made safe for that Democracy of Property Rights on
which the existing political and civil order is founded. So it
became the first concern of all the guardians of the existing
order to root out Bolshevism at any cost, without regard to
international law.

lf one is so inclined, one may find fault with the premises
of this argument as being out of date and reactionary; and one
might find fault with the President for being too straightly
guided by considerations of this nature. But the President was
committed to the preservation of the existing order of
commercialized imperialism, by conviction and by his high office.
His apparent defeat in the face of this unforeseen situation,
therefore, was not so much a defeat, but rather a strategic
realignment designed to compass what was indispensable, even at
some cost to his own prestige -- the main consideration being the
defeat of Bolshevism at any cost -- so that a well-considered
view of the President's share in the deliberations of the
Conclave will credit him with insight, courage, facility, and
tenacity of purpose rather than with that pusillanimity,
vacillation, and ineptitude which is ascribed to him in Mr
Keynes's too superficial review of the case.

So also his oversight of this paramount need of making the
world safe for a democracy of absentee owners has led Mr Keynes
to take an unduly pessimistic view of the provisions covering the
German indemnity. A notable leniency, amounting to something like
collusive remissness, has characterized the dealings of the
Powers with Germany hitherto. As should have seemed altogether
probable beforehand, the stipulations touching the German
indemnity have proved to be provisional and tentative only -- if
they should not rather be characterized as a diplomatic bluff,
designed to gain time, divert attention, and keep the various
claimants in a reasonably patient frame of mind during the period
of rehabilitation needed to reinstate the reactionary régime in
Germany and erect it into a bulwark against Bolshevism. These
stipulations have already suffered substantial modifications at
every point that has come to a test hitherto, and there is no
present indication and no present reason to believe that any of
them will be lived up to in any integral fashion. They are
apparently in the nature of a base for negotiations and are due
to come up for indefinite further adjustment as expediency may
dictate. And the expediencies of the case appear to run on two
main considerations: (a) the defeat of Bolshevism, in Russia and
elsewhere; and (b) the continued secure tenure of absentee
ownership in Germany. It follows that Germany must not be
crippled in such a degree as would leave the imperial
establishment materially weakened in its campaign against
Bolshevism abroad or radicalism at home. From which it also
follows that no indemnity should effectually be levied on Germany
such as will at all seriously cut into the free income of the
propertied and privileged classes, who alone can be trusted to
safeguard the democratic interests of absentee ownership. Such
burden as the indemnity may impose must accordingly not exceed an
amount which may conveniently be made to fall somewhat
immediately on the propertyless working class, who are to be kept
in hand. As required by these considerations of safety for the
established order, it will be observed that the provisions of the
Treaty shrewdly avoid any measures that would involve
confiscation of property; whereas, if these provisions had not
been drawn with a shrewd eye to the continued security of
absentee ownership, there should have been no serious difficulty
in collecting an adequate indemnity from the wealth of Germany
without materially deranging the country's industry and without
hardship to others than the absentee owners. There is no reason,
other than the reason of absentee ownership, why the Treaty
should not have provided for a comprehensive repudiation of the
German war debt, imperial, state, and municipal, with a view to
diverting that much of German income to the benefit of those who
suffered from German aggression. So also no other reason stood in
the way of a comprehensive confiscation of German wealth, so far
as that wealth is covered by securities and is therefore held by
absentee owners, and there is no question as to the war guilt of
these absentee owners.

But such a measure would subvert the order of society, which
is an order of absentee ownership in so far as concerns the Elder
Statesmen and the interests whose guardians they are. Therefore
it would not do, nor has the notion been entertained, to divert
any part of this free income from the German absentee owners to
the relief of those who suffered from the war which these
absentee owners carried into the countries of the Allies. In
effect, in their efforts to safeguard the existing political and
economic order -- to make the world safe for a democracy of
investors -- the statesmen of the victorious Powers have taken
sides with the war-guilty absentee owners of Germany and against
their underlying population. All of which, of course, is quite
regular and beyond reproach; nor does it all ruffle the course of
Mr Keynes's exposition of economic consequences, in any degree.

Even such conservative provisions as the Treaty makes for
indemnifying the war victims have hitherto been enforced only
with a shrewdly managed leniency, marked with an unmistakable
partisan bias in favor of the German-Imperial status quo ante; as
is also true for the provisions touching disarmament and the
discontinuance of warlike industries and organization -- which
provisions have been administered in a well-conceived spirit of
opéra bouffe. Indeed, the measures hitherto taken in the
execution of this Peace Treaty's provisional terms throw
something of an air of fantasy over Mr Keynes's apprehensions on
this head.
As some know, this document and Thorstein Veblen figure prominently in Guido Giacomo Preparata’s 2005 book Conjuring Hitler. The second chapter is entitled "The Veblenian Prophecy" and here is an excerpt:

…The only thinker of the age possessing the clairvoyant lucidity to assess and comprehend these transformations was the American Thorstein Veblen: after having examined the late development of the German Reich, he predicted its route and, more importantly, he alone became alive to the reawakening of a peculiar sort of religious furor, which the war seemed to have unleashed all across Germany. Already in 1915, he depicted what was in fact an amazing sketch that foreboded the haranguing Fuhrer; furthermore, in 1920, after the infamous Peace Treaty ratified in Versailles failed to carry out the dispositions which Veblen had thought necessary for disarming Germany and turning her into a peaceable partner of the Anglo-Saxon commonwealths, he prophesied by 20 years the forthcoming armageddon between Bolshevik Russia and Reactionary Germany (1941). This prophesy, uttered in a review of J.M. Keyne’s best-selling book on the Parisian Peace Treaty, stands possibly as Political Economy’s most extraordinary document – a testimony of the highest genius – and as the lasting and screaming accusation of the horrendous plot that was being hatched by the British during the six months of the Peace Conference following World War I. (Conjuring Hitler: How Britain and America made the Third Reich, Guido Giacomo Preparata, 2005, p 43)

Ron Williams