The War and its Immediate Aftermath
John Maynard Keynes - 1914 to 1919

Date Event
August 1914 World War 1 Begins

Chancellor of the Exchequer David Lloyd George reads a memorandum written by Keynes urging resistance to demands being made by bankers for the creation of new assets and suspension of liabilities.

Basil Blackett, working in the Treasury, writes in his diary, "Lloyd George has at last come down on the right side ... He has clearly imbibed much of Keynes' memorandum and is strong against suspension of specie payments..."
November 1914 News of the deaths at the front of friends and undergraduates comes to Keynes who is back at work in Cambridge.

He writes to G.L. Strachey, "I am absolutely and completely desolated. It is utterly unbearable to see day by day the youths going away, first to boredom and discomfort, and then to slaughter."

In April 1915, he writes to Duncan Grant, "It is horrible, a nightmare to be stopt anyhow. May no other generation live under the cloud we live under."
January 1915 Keynes joins the Treasury to assist Sir George Paish, whose role is to provide advice to David Lloyd George independent of that given by civil service officials.

Soon after his appointment, Keynes is asked by Lloyd George to comment on Lloyd George's views on the state of affairs in France. Keynes replies, "With the utmost respect, I must, if asked for my opinion, tell you that I regard your account as rubbish."
May 1915 Reginald McKenna replaces Lloyd George as Chancellor of the Exchequer. Keynes' role at the Treasury is formalised and he joins No. 1 Division, which deals with finance. Following this, he makes rapid progress in the Treasury.

Sir Otto Niemeyer and Sir Richard Hopkins wrote later:

"His quick mind and inexhaustible capacity for work rapidly marked out a kingdom for itself, and, before long he was a leading authority on all questions of external, and particularly inter-allied finance... It was Keynes who developed and applied the system of allied war loans... When America came into the war, the American Treasury found the system fully fledged and itself adopted a similar practice.
26 March 1916 Despite the war, Keynes - who is now based in London while working for the Treasury - continues to lead an active social life. He writes to his mother:

"I have been leading such a giddy life lately that there has been no time to write letters - only two evenings in the last fortnight when I haven't dined out."
Early 1917 Keynes' takes authority for Treasury 'A' Division, carved out of No. 1. Division. He is now in the key position at the centre of the inter-allied economic effort. His success in this role is universally acclaimed. This is as high as Keynes will rise in a formal administrative role in Government.
30 March 1917 In a letter to his mother, Keynes writes, in support of the Russian Revolution:

"I was immensely cheered and excited by the Russian news. It's the sole result of the war so far worth having... I see not the remotest chance, however, of any pro-Tsar counter-revolution..."
6 May 1917 In another letter to his mother, Keynes writes:

"Work has not been overwhelmingly heavy and the negotiations with the U.S., which occupy a good deal of my time, are going extremely well. If all happens as we wish, the Yanks ought to relieve me of some of the most troublesome of my work for the future. Relations with Russia, on the other hand are not what they should be. That's a piece of diplomacy over which we have blundered hopelessly, with our ridiculous tears for the Tsar and the rest of it."
24 December 1917 Keynes writes to his mother - again in a pro-Russian revolution, anti-British establishment tone:

"My Christmas thoughts are that a further prolongation of the war, with the turn things have taken, probably means the disappearance of the social order we have known hitherto. With some regrets I think I am not on the whole sorry. The abolition of the rich will be rather a comfort and serve them right anyhow. What frightens me more is the prospect of general impoverishment. In another year's time we shall have forfeited the claim we had staked out in the New World and in exchange this country will be mortgaged to America.

"Well the only course open to me is to be buoyantly bolshevik; and as I lie in bed this morning I reflect with a good deal of satisfaction that, because our rulers are as incompetent as they are mad and wicked, one particular era of a particular kind of civilization is very nearly over."
October 1918 Keynes and his future wife Lydia Lopokova are guests (independently of one another) at a party to celebrate the Russian Ballet in London.
Autumn 1918 Victory over Germany seems close. Keynes and 'A' Division begin to look in earnest at reparations - the financial compensation Germany should pay other countries for the war.

Looking at the performance of the German economy they conclude that Germany might possibly be able to pay £3,000 million, but £2,000 million is a more likely figure.

Charging £2,000 million at 5 percent interest would lead to annual interest payments of £100 million from Germany.

Meanwhile, an independent committee estimates the full cost of the war at £24,000 million and, at 5 percent of this sum, they conclude Germany should pay £1,200 million per year until the capital is paid off. (By way of contrast, to see how huge a sum this was, in 1931 Britain claimed it was economically impossible to pay off just £35 million per year to the U.S.)
11 November 1918 The war ends with an armistice.
January 1919 No food gets into Germany for four months - against the terms of the Armistice. The Germans must pay for food in gold but the French are blocking this - they want the gold as part of German reparations. British troops are sickened by the sight of sick and hungry children.
14 May 1919 Keynes writes:

"I have been as miserable for the last two or three weeks as a fellow could be. The Peace is outrageous... Meanwhile there is no food or employment anywhere, and the French and Italians are pouring munitions into Central Europe to arm everyone against everyone else."
28 May 1919 Harsh reparations are going to imposed on Germany. Harold Nicholson writes:

"Lunch with Maynard Keynes... Keynes is very pessimistic about the German Treaty. He considers it not only immoral but incompetent."


"...Keynes has been too splendid about the Austrian Treaty. He is going to fight. He says he will resign."
5 June 1919 Keynes writes to Prime Minister David Lloyd George:

"I ought to let you know that on Saturday I am slipping away from this scene of nightmare. I can do no more good here. I've gone on hoping even through these last dreadful weeks that you'd find some way to make of the Treaty a just and expedient document. But now it's apparently too late. The battle is lost."

Next: Keynes 1919 to 1926 - Personal Wealth, Reparations, Probability and the Gold Standard

Source: R.F. Harrod, The Life of John Maynard Keynes