ECONOMY JUNE 8, 1921
A prophet runs considerable risks; so perhaps he is entitled to boast a little when fortune smiles on him.
(I) In The Economic Consequences of the Peace I estimated the amount for which Germany was liable under the letter of the Treaty at $1o,- 6oo millions for damage and at $25,000 millions for pensions, making a total of $35,600 millions in all; and, in order to be on the safe side, I took the round figure of $40,000 millions as an amount "fully high enough of which the actual result may fall somewhat short." This estimate was attacked by many critics as being much too low. For example, Professor Allyn Young in your columns on February 25, 1920, a very friendly critic, thought that the liability for damage other than pensions was nearer to $20,000 millions than to my figure of $10,600 millions. French critics alleged much higher figures than this, and M. Klotz, speaking on behalf of the French government, put the total figure at $75,000 millions. Very strong language has been used about me in many quarters because I accused the French government of gravely overstating their claims.
In the meantime it has been the duty of the Reparation Commission to collect the figures and to submit them to a judicial examination, and on May 1, 1921, they announced the result,—namely $34,25O millions in all. My figure of $35,600 millions was, therefore, not very far out, and, so far from being unduly low, was, as I intended it to be, a little too high.
(2) The Treaty provided for certain specific deliveries from Germany prior to May 1, 1921, and these were estimated in Paris at a prospective value of $5,000 millions. I criticized this, and put the value at a maximum between $1,650 millions and $2,150 millions; this was exclusive of current deliveries of coal, etc., which I offset against the credits Germany would require for food—which has proved broadly correct. Inclusive of coal, etc., the Reparation Commission now put the figure at $2,000 millions. My totals are probably more correct than the details; but my judgment, as to the general magnitude of the figures involved, is proved to be right.
(3) I estimated that the balance available on May 1, 1921, after deducting the cost of the Armies of Occupation and food credits, would be about $500,000,000. The Reparation Commission announced a few days ago that they put such balance up to date at exactly this figure.
My estimates have turned out so very close to the facts, that some element of luck in my favor has evidently entered in; but, after all, I have been competing not with other reasoned estimates but, to a large extent, with random and insincere talk indulged in for political purposes, and with persons who were more concerned to shield their characters from the least taint or allegation of pro-Germanism than to triumph at a later date as statistical experts.
My other forecasts still lie in the future. In particular, I estimated that the highest amount which Germany could pay annually over a term of years was $500,000,000, though I expressed the further opinion that it would not be politic on our part to attempt to exact so much. The politicians still talk of vastly higher figures than this; but their ideas are moving downwards with a satisfactory velocity. I still predict that the day will come when everyone will recognize that the sum named above is the utmost that the Allies can ever hope to receive; and that to disturb the peace of Europe, in the hope to obtain, or rather in the pretense of hoping to obtain, the moon, would be an act of wickedness and folly.
John Maynard Keynes was a British economist whose books include The General Theory of Employment, Interest and Money.
This article originally ran in the June 8th, 1921, issue of the magazine.