Introduction
Population:
The population of the central European nations dramatically increased during the early twentieth century which may have led to an economic downturn. The population of Germany grew from 40 million in 1871 to roughly 68 million by 1914 and this was achieved by the transformation of the German economic structure from an agriculture and self-sustaining state to a complicated industrial structure with internal and external factors affecting the business environment. According to Keynes it was a machine that had to be run continuously and at full blast to find abode for their population at home and import food from abroad like a top that has to keep spinning faster to keep its balance. Austro-Hungarian Empire also had a population boost and their population increased from 40 million in 1890 to 50 million at the outbreak of the war. The combined population of the Germany and the Austro-Hungarian Empire was more than the total population of North America. This was the main military strength of the Central powers. According to Keynes if this population was deprived from the means of life they will become less dangerous to European order which is what happened in “The Peace Treaty” as these two empires were broken and Germany was forced to de-militarize after the war. Even Russia had a huge increase in population, its population increased from less than 100 million in 1890 to 150 million at the outbreak of the war. Keynes argues that this was the fundamental reason for the upheaval and overturn of the most stable social order in Russia as he says that national fecundity had bigger to role to play in breaking the social convention than the power of ideas and the errors in aristocracy. Increase in population was one of the major instability factors highlighted by Keynes and the damage of war was worsened by the central powers, as the empires were broken up and had war debts placed on them. The overpopulated countries had an economic downturns with too many people to feed with less capital due to the expenses of the war (Keynes 14-15).
Organization
Another instability factor which was highlighted by Keynes was organization of the system. Frontiers and tariffs were at a minimum and the currencies of the countries were balanced relative to gold and each other, which facilitated the easy flow of trade. This kind of long term stability laid the organization of coal transport and distribution which is the main reason for the industrial development in Europe. Germany’s coal output increased from 30 million in 1817 to 190 million in 1913, due to which Germany became a central economic support for the continent around it. As Germany’s pace increased, it became an outlet for others to release their products and also to get their required goods at low prices. This way Germany safely penetrated into its neighbors and the continent. These internal factors were not sufficient to make the population self-sustaining without external influences and this became a potential instability which was exacerbated after war, as Germany lost the war due to which its economy went down, with debts of war and a population to feed. The entire Europe’s development was based on the pace of the German’s and when they went down the entire continent had to suffer from it (Keynes 15-18).
Psychology
According to Keynes the psychology of the society played a major role in the intense industrial development that took place and due to this a change in the psychology would have changed the dynamics of trade at that time rendering to it be instability in the system. The society was poised in such a way that most of the capital was given into the hands of the people less likely to consume it. These rich people enjoyed the power and security of investment rather than the pleasures that were provided by immediate consumptions. This laid the foundation the Capitalist System as a regime of the rich spending on the pleasures derived from money would have been intolerable after sometime according to Keynes. They saved not for the betterment of the community but with narrowed goals of personal security, however this also benefitted the community as said by Keynes. The community was benefitted such as the railways that were built would not be possible in the country where wealth was divided equally. In this system the work of labor was not enjoyed fully initially but proved to be useful later. This system depended on the premise that laborers had little part in, Nature and the capitalists were producing but the capitalist could call the biggest part considering they would not consume it whole. In this way society was progressing as it was not working for small gains but security of the future. As the war broke out, capitalist saw their profits decreasing and returned to what they had and opened the possibility of consumption to laborers and the vanity in abstinence which meant they would not forego capital they used to before, and hence the society collapsed internally prematurely before the future investments became secure and worsened the effects of the war (Keynes 18-22).
Relation of the old war with new world
The relation of the old world with the new was another instability factor marked by Keynes which worsened the economic problems of Europe after the war. Europe, which was a part of the old world imported cheap food supplies from the new soils of America which was measured in terms of domestic labor required to produce exports. Due to this and other previous investments it was entitled to an annual amount of capital without any payment. But as the population of America grew its internal demand for wheat increased till a point that 90% of the wheat produced was being used internally due to which the real prices of the wheat went up decreasing hold of Europe on the food supply from the new world as Europe had to pay a higher price to obtain the same amount of bread and due to this it had to make sure that none of the principle sources get disorganized. This relation became instable which proves to be one the reasons for the downfall of the economy of Europe according to Keynes (Keynes 22-25).
Conclusion
Although other economist would find other peculiarities, Keynes has highlighted these four as being the most significant instability factors. He stated that it was a huge population dependent on an artificial organization and on an instable psychology of the laboring and capital classes and Europe’s unbalanced claim and total dependence on the food supply of the new world. Although Lenin would argue that population was the not main issue and would rather place the blame on errors in aristocracy and power of the new ideas in the economic spectrum. Keynes then states that the war worsened the effect as it shook the foundations of the systems and endangered the life of Europeans as its German based organization was destroyed and food supply was disrupted and livelihood was not available for the major masses (Keynes 26).
Works Cited
Keynes, John Maynard. Economic Consequences of the Peace. New York: Harcourt, Brace and Howe, 1920. Print.
