Another extract from my book-in-progress, Economic Consequences of the Pandemic

The 20-year armistice from 1919 to 1939 was a period of economic stagnation in Europe, punctuated by crises which had disastrous economic and political effects. And while the US boomed in the 1920s, the Great Depression that began in 1929 caused massive unemployment and suffering which lasted through the 1930s. What lessons can we learn for the present?

One of the striking discoveries of the Internet age for me is that, no matter how original and idiosyncratic you imagine your thoughts to be, someone else has already thought them[1].

My book-in-progress, The Economic Consequences of the Pandemic is largely about the mistakes made between 1919 and 1939, and what we can learn from them. This period is usually called ‘interwar’, going along with the conventional naming of World War I and World War II, implying two separate conflicts.

I’ve long thought of these conflicts as one long war, with the Cold War that followed as a falling out between the victors. In this context, it struck me that the ‘interwar’ period 1919-39 would better be described as a 20-year armistice.

In formal terms, the Armistice of 1918 was ended by the signing of peace treaties between the Allies and the defeated Central Powers, most importantly the Treaty of Versailles with Germany, signed on 28 June 1919, five years to the day after the assassination of Archduke Franz Ferdinand.

The starting point of my book is Keynes’ critique of the Treaty of Versailles, The Economic Consequences of the Peace. Given the failure of the Treaty to secure peace, it makes sense to regard the subsequent 20 years as one long armistice, ending in a renewal of the same war. Going to Wikipedia to check info on some technicalities of the Versailles Treaty, I found the following statement attributed (as usual, dubiously [2]) to French Marshal Ferdinand Foch “”this (treaty) is not peace. It is an armistice for twenty years.” So, Foch (or whoever actually coined the phrase) was way ahead of me. Foch’s view was that the treaty was not hard enough on Germany, and would therefore not remove the threat of German aggression

Whatever its provenance, I’m adopting the term[3], even if I can’t claim credit for it.

fn1. As with most things attributed to the Internet, this idea was around much earlier, a notable example being Merton’s discussion of multiple discoveries

fn2. The quote can’t be traced back before 1939 suggesting a case of what I would call prophetic hindsight (the technical term, it appears is vāticinium ex ēventū Foch’s position directly opposed to Keynes who was concerned with the economic part of the peace, notably reparations, rather than with the military and territorial clauses) . Both saw the Treaty as unlikely to secure peace.

fn3. It follows, I think that the best term for the entire conflict from 1914 to 1945 is The Great War, the name originally given to what is now called World War I.

The idea that we should tax the rich to fund public services and transfers to the poor seems obvious from an egalitarian perspective, at least as long as we are in a society with significantly unequal incomes. But it has been challenged recently by some advocates of Modern Monetary Theory.

[note: The meaning of ‘rich’ is rarely spelt out, and isn’t very helpful. Hardly anyone is willing to admit to being rich, so the discussion tends to focus on a handful of cases like Bill Gates, rather than on people in the top 1 per cent or 10 per cent of the income distribution. So, from now on, I’m going to use the term ‘high-income’ and refer to proposals raising taxes on some subset of the top 10 per cent.]

Over the fold, an extract from my book-in-progress, The Economic Consequences of the Pandemic