In addition to World War I history buffs, this article is for people who detest John Maynard Keynes and the stimulus packages his theories justified – and which are still in use today – most notably by President Obama and most of the developed world last year.
As was reported in September, World War I is officially over, now that Germany has delivered its last chunk of reparations imposed on it at Versailles in 1918.
According to Fernando Gabriel of Portugal’s Diario Economico, not only is President Wilson’s post-war influence overblown, but it’s a myth that reparations imposed on Germany after World War I led to hyperinflation and the rise of Adolph Hitler. He calls into question this and other theories of economist John Maynard Keynes, whose work has been used not only to explain Hitler’s rise, but laid the basis for modern post-Depression economics, including the use of government stimulus packages in times of economic crisis.
For the Diario Economico, Fernando Gabriel writes in part:
The more acceptable approach to historical truth suggests a very different Germany after the Armistice; in particular in regard to the relationship between the macroeconomic policies pursued after the war and the reparations that Germany was forced to pay. The amount of reparations didn’t give rise to an unsustainable debt, nor were reparations the principal cause of German hyper-inflation. In 1921, as a percentage of GDP, German debt was less than Britain’s. And the reparations never exceeded 8.3 percent of German national income – far removed from the forecasts of 50 percent put forward by the “clairvoyant” Keynes. By the way, German macroeconomic imbalances were caused by the strategy advocated by Keynes: devalue the currency to increase exports and generate income to pay off foreign debt; increase public spending by boosting inflation and reducing the real value of domestic government debt.
Another persistent myth depicts American President Woodrow Wilson as a stubborn “destroyer of empires.” It is indisputable that Wilson believed in potentially dangerous ideological vacuities such as “making the world safe for democracy” – a slogan, the destabilizing potential of which is well-illustrated by the neo-conservatives, who are Wilson’s intellectual progeny. What’s doubtful is that Wilson’s convictions were at all decisive in regard to the geopolitical reordering of Europe.
The major preoccupation of the Allies was to prevent the “global revolution” announced by Trotsky. Wilson’s orders concerning the withdrawal of the U.S. military personnel who had fought in Europe are instructive in regard to the fear of the communist “contagion.” In 1919, concerned that Black soldiers returning from Europe would provide a means of disseminating Bolshevist ideas in the U.S., Wilson ordered a kind of “quarantine.” Why this applied only to Black soldiers isn’t clear, but the measure is informative of the fear of the spread of communism.
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