Versailles: the economic legacy

From the standpoint of international economic relations, the key implications of the Versailles Treaty were as follows. Signatories committed their countries to reconstructing a free and open multilateral trading system such as had existed before the First World War. Other economic institutions and arrangements, as distinct from the trading system, were noteworthy only to the extent that they worked towards this paramount goal. Moreover, in so far as those other arrangements, starting with the gold standard and international financial relations, had been integral to the success of the prewar trading system, there was a presumption that they too should be reconstructed along prewar lines. This approach was subject to multiple conflicts and contradictions. It did not take account of how the economic world had changed, creating a mismatch between prewar institutions and postwar circumstances. It enshrined—indeed, it gave legal content to—the conventional wisdom that to the victor go the economic spoils by imposing that self-same reparations burden on Germany and the other defeated Central Powers. It highlighted the conflicted nature of American attitudes towards management of the international economic system. And it did not give the Soviet Union, ultimately to emerge as the second of the twentieth century's two Great Powers, a seat at the table. While seeking to avoid exaggerating the parallels, I argue that the structure of international economic relations in the wake of the Cold War resembles in important respects the structure of those relations after the First World War.