This chapter provides the background to World War I and the Treaty of Versailles. Keynes breaks the chapter into sections: “Population,” “Organization,” “The Psychology of Society,” and “The Relation of the Old World to the New” (10, 11, 12, 14, respectively). Keynes believes that it is important to examine the political, sociological, and economic developments in Europe, starting from the latter part of the 19th century to understand the way in which the continent became economically and culturally integrated. Understanding how this integration occurred frames Keynes’s perception of the Treaty of Versailles as a disaster.

Prior to World War I, Europe became unstable for three key reasons: First, Europe’s population grew. Second, the socio-economic relations, which Keynes calls “psychological instability,” between the working class and big business (capitalists) were unequal. Third, Europe greatly depended on certain supplies coming from the New World.

The author provides many examples of the 19th-century population growth in Europe. Unification-era Germany had a population of 40 million, which rose to 68 million by the start of World War I. Similar developments occurred throughout the continent in the Austro-Hungarian Empire and Russia. Keynes believes that the “great events of history are often due to secular changes in the growth of population and other fundamental economic causes” (10).