A Case Study on Trianon

Hungary's economic takeoff¹ occurred between 1867 and 1913, By 1913 the country was firmly on the road of speedy industrialization. Until this time Hungary was steadily reducing the gap which existed between itself and the industrialized centers of Europe.

Much had to be done still. The country was still behind the Western, Central and Northern European states with regard to per capita Gross National Product; life expectancy at birth; adult literacy rate; the distribution of Gross Domestic Product with respect to agriculture, manufacturing, services; private per capita consumption; and other economic success indicators. But a process of structural transformation was under way. The share of industrial production, manufacturing and services increased. Capital- and skill-intensive activities come into their own.

Conventional agriculture, however, still dominated and coexisted with a relatively modern industrial sector which produced and exported, among other products, vehicles, electric bulbs and pharmaceuticals. The role of the state was significant in establishing the socio-economic infrastructure (the legal regulation of economy, the establishment of a satisfactory educational and sanitary system, the development of the road and railway network and a central banking system). The state, however, did not play a significant role in the production of national income and national wealth, leaving relatively free hand for the private sector by using for inducements tax allowances and state subventions.²

The Hungarian economic historian Ivan T. Berend observed that the economy of Hungary at the end of the 19th century was autarkic, i.e., independent of the world market, since the country was integrated into the Monarchy which consisted of 50 million people and had a common currency. We would like, however, to add that one of the reasons for Hungary's economic success was that if the need had arisen, the country had every possibility to be part of the interdependent European economy. In other words, Hungary was not

pressed into autarky by projectionist tariff policies or conditions adverse to foreign trade. Independence from the world economy comes about naturally in every large country with regional specialization. In pre-1914 Europe, including East Central Europe, the interference of frontiers and tariffs was at the minimum, and the effect of the so-called "protection duty system" was marginal. In this period, producers could utilize a wide market outside of their large area. About 300 million people lived in Russia, Germany and Austria-Hungary alone. In this area the movement of the factors of production-labor, capital, and technology-was almost totally free. The Monarchy had a common currency, but in fact all the European currencies were maintained at a stable relation to gold and to one another. This situation created an inducement for international cooperation based on specializations. Another necessary prerequisite for a smooth interdependency was that all the trading areas were secure with respect to property and persons. Europe, at this time, was certainly characterized by law and order. This state of affairs had never been experienced before.

The statistics to prove this European interdependence and cooperation are overwhelming. Industrialization needs energy, and the main source of energy, at this time, was coal. Germany was the most active in supplying coal to neighboring states. The output of German coal grew from 30 million tons in 1871 to 190 million in 1913. Since Germany had surplus capital, this flowed to labor-surplus countries such as Hungary where the marginal productivity of capital was much higher. The rate of return for a unit of capital investment, was thus in these countries more profitable than in Germany. It is estimated that from Germany's prewar total foreign investments of about 6.25 billion dollars, around 2.5 billions were invested in Europe's less developed countries such as Austria-Hungary, Romania, Bulgaria, and Turkey. This capital flow was often accompanied by German managers who were the source of technological know-how and various organizational skills. These assets were badly needed in the labor-surplus economies.

Hungary responded favorably to these conditions. From 1867 to 1913, the national income in real terms more than quadrupled. Between 1900 and 1913 the annual rates of growth increased to 3.8 percent per year. If we look at the growth figures for the manufacturing sector, we can observe the country's dramatic takeoff. Starting from

a meager baser industrial development in Hungary rocketed in this period. Between 1867 and 1900 the industrial rate of growth was 6.2 percent, and between 1900 and 1913 it is calculated to be 5.1 percent.³

A serious objection to this "golden economic period" of 1867 to 1913 is that economic development generated a considerable maldistribution of wealth and a serious income inequality. Therefore, it is sometimes claimed, this process, from the point of view of the peasants and workers, was a mirage.

We propose, however, on the basis of the Kuznets hypothesis,⁴ that this period of speedy industrialization occurred because of inequality of the urban income distribution. However, using the Hungarian experience, urban is stressed since we would like to amend the Kuznets hypothesis by proposing that the unequal distribution of income in the non-urban areas often stabilizes under-development. The reason for that is that the aristocratic or ecclesiastic feudal rich are normally characterized by conspicuous consumption on their estates and during their foreign travels. The significant increments of wealth at the end of the 19th century were controlled, however, by a new class, the urban nouveau riche, which preferred the newly acquired power and its consolidation to the pleasures of immediate consumption. Therefore, the significant investments in this period came from the savings of the new urban industrial class, from the parvenues, whom the Hungarian landed aristocrats often considered to be without manners, but whose daughters they occasionally married to save their ancestral lands from bankruptcy.⁵

The saving habits of the new industrial class spread. The Hungarian skilled working class was beginning to accumulate money for the education of a son, for the dowry of a daughter, and generally, for the purchase of a durable consumer good.

"The rapid growth of productivity in Hungary (on the eve of the First World War) is striking when compared with other European countries," states I. Ratus.⁶ This phenomenon may be explained on the basis of the Gerschenkron's hypothesis which refers to the development characteristics in the initial period of industrialization in some European countries; it proposes that these can be explained better if reference is made to the relative backwardness prior to the great spurt."⁷

Indeed, Hungary started her capital accumulation late and the improvement of her capital productivity even later. (Japan's economic development shows similar characteristics after the Second World War.)

The war of 1914-1918, which set Europe ablaze, halted this development process. The Treaties of Versailles, Saint German, Trianon, Neuilly and Sevres embodied the results of long and bitter negotiations between the United States, France, England and Italy.

It is proposed by many that these treaties failed to heal the wounds after the war and were not able to reestablish the conditions for normalcy. Moreover, it is assumed that they were directly responsible for a divided, Balkanized, nationalistic Europe; and indirectly for the Great Depression which started off by the collapse of the New York Stock Exchange on October 24, 1929; for the German remilitarization, the birth of Hitler's National Socialist Movement; and ultimately for the Second World War.

A controversy, however, continues among historians as to whether these treaties were just, or too harsh, or not harsh enough.

After the war, on December 4, 1918, president Woodrow Wilson sailed from New York on an army transport, accompanied by Mrs. Wilson and by a whole caravan of savants loaded down with statistics and documents. He left a nation whose sentiments were divided between sharp resentment and apprehensive hope for the best, but he landed on a continent which was prepared to offer him a triumphal reception such as the world had never seen before. The six weeks between his landing at Brest and the opening of the Paris Peace Conference consisted of a series of processions through England, France and Italy, in which the governments and the people strove to outdo each other in expressing their enthusiasm for the leader of the great and victorious crusade for justice and democracy. Sovereigns spiritual and temporal and heads of governments heaped on him all the honors in their power, and crowds of workingmen stood for hours in the rain to catch a glimpse of him at railroad stations. Even from neutral Holland, divided Ireland and hostile Germany came invitations to the President, and he would probably have been received by those as enthusiastically as by British, French and Italians.

For the war had been ended, Europe thought, on the basis of the ideals of President Wilson. Those ideals had been expressed, however, in vague and general terms, and every government

thought that its own war aims coincided with them. Suddenly released from the strain of a long and terrible war, each nation believed that all its troubles were suddenly to be ended by the principles of Woodrow Wilson. Both Yugoslavia and Italy claimed Istria and Fiume, and each felt itself supported by the principles of President Wilson. To Frenchmen those principles meant that Germany must pay for the war forced on France, and to Germans they meant that a ruined France and an uninvaded Germany could start again on the same footing. The autonomy of Austria-Hungary, listed among Wilson's Fourteen Points, gave confidence for Austrians and Hungarians that nothing would change that much.

They contained, among others, the following recommendations: All covenants of peace should be made public and there should be no secret arrangements between nations; the freedom of the seas must be assured and the economic barriers hampering international trade should be eliminated; national armaments must be reduced and budgets should serve primarily peaceful civilian purposes; the concept of the colonial areas should be reevaluated and various sovereignty claims must be given attention; Russia should be left alone to determine her own political development; Alsace-Lorraine should be freed of the burdens of the Prussian occupation; the people of Austria-Hungary, whose place among nations should be safeguarded and assured, must be given the freest opportunity of autonomous development.

President Wilson's Point X dealing with "Autonomy in Austria-Hungary" gave serious hopes to Hungarian politicians for a preparation of a peace settlement that would preserve all or most of Hungary's historic territories. Foreign support, especially from Switzerland, was also indicated for the peace negotiations.⁸

By January 18, 1919, when the Versailles Conference opened, it became obvious, however, that the Wilsonian ideas which had given hope to the world for the reestablishment of the interdependencies of nations and the continuation of the prewar system which had brought peace and prosperity, would not prevail. The enemy: the concept of a revanchard policy and nationalism, thought to have been defeated by, the Fourteen Points, was still very much alive. President Wilson advocated an American kind of patriotism, the love of one's fatherland and its tradition. He had a reverence for the memory of great historical events, a preference for the features peculiar to one's community. However, France's nationalism at that

time was different from this concept. After so many defeats and humiliations from German military adventures, France felt that the time had come to strike back. The leader of the French radicals, Georges Clemenceau [who had the nicknames le Tombeur de ministeres and later le Tigre], felt that France alone could solve the political, military and economic problems of Europe. To assume this role Clemenceau demanded a huge reparation for his country. Undeniably, France had suffered the most.

Under Clemenceau's influence more and more politicians during the Peace Conference (including some Americans) asked, "Is what Wilson proposes for Europe America's business?"⁹

Leading the French delegation at the Paris Peace Conference, Clemenceau became the main antagonist of Woodrow Wilson.

The person who formulated the most articulate opposition to Clemenceau, basically on economic grounds, was John Maynard Keynes later Baron Keynes of Tilton], the English economist and monetary expert who in 1919 became principal treasury representative at the Peace Conference but resigned in protest against what he considered the inequitable and unworkable economic provisions of the Treaty. His Economic Consequences of the Peace¹⁰ vividly presented his views and won him world fame. Keynes criticized the Treaty from the point of view of classical economics. He contrasted the narrow, autarkic nationalism inherent in the Treaty and the Balkanization of large areas to small dependent mini-states guarded by trade barriers with the relatively free pre-1914 European economy based on stable convertible currencies and low tariffs. He foresaw that German economic weakness and the dissolution of the Monarchy would lead the whole of Europe to ruin.

Keynes believed in an economically integrated Europe and felt that peace treaties should heal wounds and reestablish a system of interdependent economies with maximum free movements of the factors of production. He also favored a coordinated economic policy among nations since he believed in the "we live or die together" concept.

"Paris," wrote Keynes in his sharp critique, "was a nightmare, and everyone there was morbid. ..." Its atmosphere was "hot and poisoned," its halls "treacherous ..." Paris was a "morass." The European statesmen of the Conference were "subtle and dangerous spellbinders," the "subtlest sophisters and the most hypocritical draftsmen"; what inspired them was "debauchery of thought and

speech ... greed, sentiment, prejudice and deception. ..." Their labors were "empty, arid and intrigue ... the dreams of designing diplomats ... the unveracities of politicians ... the endless controversy and intrigue," were "contorted, miserable, utterly unsatisfactory in all parties." President Wilson was a "blind and deaf Don Quixote," he was "playing blind man's bluff" in the party; he ended in "collapse" and "extraordinary betrayal." The Treaty was clothed with "insincerity," with "an apparatus of self-deception," with "a web of Jesuit exegesis," which were to distinguish it "from all its historical predecessors." Its provisions were "dishonorable ... ridiculous and injurious ... abhorrent and detestable"; they revealed "imbecile greed ... senseless greed overreaching itself"; they represented "oppression and rapine." The Treaty "reduced Germany to servitude," and it refused Germany "even a modicum of prosperity, at least for a generation to come." The Terms of Peace "perpetuated its economic ruin," if it were enforced, "Germany must be kept impoverished and her children starved and crippled." Thus the Peace that would "sow the decay of the whole civilized life of Europe," was "one of the most outrageous acts of a cruel victor in civilized history."

Keynes's basic message was that the politicians of the Conference failed to apprehend "that the most serious of the problems which claimed their attention were not political or territorial but financial and economic and the future lay not in frontiers or sovereignties but in food, coal and transport." Compared to these, other issues such as "territorial adjustment and the balance of power, were unreal and insignificant." Keynes insisted that the Treaty was a betrayal of European and American ideals and was an economic absurdity, an instrument of systematic oppression and murder.

Keynes's study was distributed in the bookstores in the United States in January 1920. Wilson's popularity was already on the wane. The book was used by the President's opponents to accuse him of being unable to stand up for his own ideals, for his country's wishes, of letting himself be terrorized by Clemenceau and hypnotized by Lloyd George. The opposition against Wilson made serious use of Keynes's book and argued that the German Treaty consigns Europe to perpetual famine and chronic revolution and that unless the Treaty is completely revised and rewritten, it must inevitably result in the destruction of the economic system of Europe which will result in turn in the loss of millions of lives and in revolution after

revolution, which necessarily follows when people find themselves in the condition to which the people of Europe will be reduced. "The Treaty in its consequences," argued Senator Borah, "is a crime born in blind revenge and insatiable greed."¹¹

These words were clearly paraphrasing Keynes's critique.

One month later, the Treaty was defeated. The horrors of Versailles became a veritable article of faith. The United States believed that whatever may happen in Europe it was all the fault of the Peace Treaties. The United States repudiated the Versailles Treaty legally from the outset; Great Britain was to abandon it morally in the course of the next twenty years.

In the First World War strategic problems were no longer the exclusive province of the military; on the contrary, strategy had invaded politics and diplomacy and it was primarily the statesman who had to analyze its components. Clemenceau's famous quip that "war is too serious a matter to be left to the military" was echoed widely.

Hungary's role in the 1914-1918 war was an especially thankless one. Istvan Tisza, the prime minister, first thought with many others that the actions against Serbia, where Archduke Franz Ferdinand, an avowed enemy of the Hungarians, was killed, will be only a punitive police action. When he realized that he was wrong he tried to make the best of a bad job. Hungary, and Europe in general, after being bled white by four years of war, was indulging itself in exciting political experiments. Two generations later these experiments seem like the feverish attempts of college freshmen who would try out the various ideologies and systems they were acquainted with during the school year. "Socialism" was introduced in January 11, 1919; than the "dictatorship of the proletariat" has replaced the regime which distributed the lands, and asked them back for state ownership; after sporadic violence mixed with revolutionary rhetoric's, anarchy and chaos followed and finally Hungary shifted back to a more moderate "temporary socialist regime" which lasted seven days. Finally, on November 21, 1919, a new "coalition government" was formed which was formally recognized as a de facto government by the Allied and Associated Powers. In December 2, 1919, Clemenceau, as President of the Peace Conference, invited the Hungarian Coalition Government to send a delegation to the Peace Treaty. On May 1, 1920, the Hungarian Delegation departed and on June 4, 1920, the Peace Treaty in Versailles at the Palais du Trianon was signed.

The Treaty reduced the territory of Hungary from 325,411 square kilometers (without Croatia 282,870) to 92,833 square kilometers (28 percent, resp. 33 percent), and its population from 20,886,487 (without Croatia 18,264,533) to 7,606,971 (36.6 percent, resp. 41 percent) according to the census of 1910; thereby the density of the population was increased to 81.9 persons per square kilometer.¹²

The territorial and population loss in an economically integrated Europe would have been no great tragedy. With the free movements of the factors of productions, labor and capital, and with the return of convertibility among the currencies, the financial officials of the European countries would have worked on developing and increasingly harmonious cooperation. But Europe became isolated and Hungarian balance of payments carried continuous large deficits. Soon the international monetary system was disrupted.

The peacemakers realized that in view of the heavy loss of territory and population, reparation payments could not be immediately expected from Hungary. The amount of the reparation was, however, fixed later, in 1924, at 200 million gold crowns. The amount of compensation payable to Hungary by the Succession States for the so called biencedes, i.e., state properties in the territories separated from Hungary, however were never fixed. The idea of such compensation was canceled in 1930.

The main economic lines of the Treaty of Trianon, which was ratified by Act XXXIII of 1921 and entered on force on July 26, 1921, represented an intellectual idea which was France's and Clemenceau's own. France was bent on the economic subjection of the Central Powers. One should try to understand Clemenceau, even if he takes a different view of the Peace Treaty. France lost 1,251,000 men during the war, in addition 734,000 were crippled, 2,000,000 wounded and 438,000 prisoners martyred in German prisons. She lost 26 percent of her mobilized manpower and 57 percent of her soldiers under 31 years of age-the most productive part of the nation. In addition, a quarter of the productive capital was wiped out, her industrial districts in the north and in the east were systematically destroyed, countless children, women and girls fell into captivity.¹³

Clemenceau wanted to prevent a new war by making sure that Germany and her former allies are kept in poverty.

The American approach was different. Coningsby Dawson from the American Relief Administration took a more understanding view

of the fate of Eastern and Central Europe.¹⁴ Dawson came to the American Relief Administration at the end of November 1920 asking how he could serve the cause of humanity and of the United States. As a soldier he had fought heart and soul against armies from several of the countries for which he was pleading. He said: "That I should write in this spirit, pleading for our late enemies, may cause a slight amazement in a public that has read my war books. My reason-I will not say my excuse-is that I have visited our late enemies' need, and in the presence of human agony, animosity ceases. One ceases to wonder how far they are suffering in the outcome of their folly; America can have only a sole aspiration to bind up their wounds-especially the wounds of their children."¹⁵

Coningsby Dawson felt that the plight of Austria and Hungary was due in large degree to the terms of the Peace Treaty, which cut the natural boundaries and the trade avenues of these nations. "Central Europe wants to work" he said; "it is begging for the chance to work, but it cannot work while it is undernourished. Starvation is caused by the volcanic upheavals of war followed by a political redistribution which has destroyed economic stability and crisscrossed Central Europe with hostile tariff walls in places where the flow of trade was once traditional and amiable."¹⁶

In the Peace Treaty ideas corresponding to Dawson and formulated most eloquently by John Maynard Keynes were discarded, and the French concept of revenge, i.e., the act of doing harm to another in return for wrong or injury inflicted, was carried out. The Treaty was formulated with the central idea that the former enemies will remain enemies and an allied defense consonant with the security needs of the Allied and Associated Powers should make the Central Powers incapable of resuming hostilities. The punishment was not only addressed to the wrongdoers but to children and future generations. With the exception of the Americans, every delegation presented punitive actions as well as a demand for the total costs of the war.

Hungary, small and isolated, set out on a course which was forced on her and which was crippling her population. Heavy taxation and heavy-handed state intervention were introduced in an attempt to achieve a balanced budget. Every penny was needed.

The Government was authorized by Act IV of 1920 to provide for state expenditure until June 30th, 1920, on the basis of existing taxes and tariffs. These were not yielding enough revenue. So in order to

fill state coffers, the production and the sale of sugar was declared a State Monopoly, and the total sale price of this commodity was handed over to the Treasury. The same was done with petrol products. The government also received authorization to fix the price of salt (charged by a governmental Salt Monopoly) and to supplement custom duties by decree.

In accordance with the Act of 1920, a sales tax of 10 percent was levied on luxury commodities and by Act XXXIV duties on transfer of property were imposed.

The first provisional budget was presented to the House for the period February to April 1920. It provided for expenditures of 1.7 billion crowns and for revenues of 800 million crowns, thus leaving a deficit of 900 million crowns.

The government made additional desperate moves; it levied taxes on matches and substitutes, imposed a capital levy on savings and current deposits, introduced additional milling and sales taxes. Then came the severe decision which crippled the Hungarian economy for years to come: Act XLV of 1921, which imposed a capital levy on agricultural land, industrial plant, stocks of goods, raw material and other assets. This capital levy amounted to 6-20 percent of the land and had to be surrendered in natura. The capital levy payable by the merchants and commercial corporations amounted to 15-20 percent on the value of goods and materials in stock as well as on the firm's equipment, while industrial enterprises had to pay 10 percent on their total assets. All other assets in the form of commodities were subject to a capital levy of 5-20 percent of their value.

A poor and isolated Hungary did not help European recovery and strength. The continent was composed by countries guarding their "national sovereignty" jealously, and Hungary responded similarly. The pre-war cooperation between governments broke down. The consequence was for Hungary a continuous balance of payment deficit.

The country had to take additional steps. Act XXXV instructs the Government to reorganize the State Administration and effect

---

reductions in the number of State employees, so as to reduce by 20 percent the corresponding item in the Budget. The Hungarian National Assembly ratifies, by Act of 1924, certain moves concluded by the government in connection with the financial reconstruction of the country. A Central Bank, independent of the Treasury, was founded.

At that time public finances in Hungary were supervised by the authorities of the League of Nations, in particular Commissioner-General Jeremiah Smith, Jr., of Boston and his substitute Royall Tyler. The supervision was exercised by the Commissioner-General until July 1926 when it was terminated upon his own advice.

The actual results for the years 1924/25 and 1925/26 are in million pengo.¹⁷

TABLE II Actual figures for Hungarian budgets in million pengos

State Administration Revenue Expenditure Surplus State Undertakings Revenue Expenditure Deficit

1924/25 747 635.6 111.4 397.2 424.3 -27.1

1925/26 820.9 727.1 93.2 412.1 417.3 -5.2

With the budget of 1925/26 the pigeon was bringing the oil branch to Hungary.

The early post-war period can best be represented with the values of the depreciated crown, which reflected Hungary's relative economic importance in the world market.

TABLE III. Quotation of the Hungarian Crown in Zurich

the value of 100 Crown in Swiss Francs (yearly averages)

1914 1915 1916 1917 1918 1919

99.03 80.83 63.06 45.76 44.92 15.42

1920 1921 1922 1923 1924 1925

2.34 1.48 0.47 0.089 0.0093 0.0073

---

It is proposed, again, that the value of 100 Hungarian Crowns expressed in Swiss Francs may be a good proxy to represent Hungary's relative economic strength in the international business community. If one analyzes the trends represented in Table III it can be observed that the importance of the Hungarian economy declined continuously from 1914 to 1918. This decline can be attributed to the war expenditures and the use of a productive labor force for nonproductive activities. In 1919 there was a dramatic drop, due to the various discontinuities in administration (the value of 100 Crowns dropped from 44.92 Swiss Francs in 1918 to 2.34 Swiss Francs in 1920).

The decline from 1920 to 1925 (from 2.34 Swiss Francs to 0.0073 Swiss Francs) represents the economic consequences of the Treaty of Trianon.²⁸

Historians usually cite a series of incidents which may have started the First World War, but there are serious disagreements about the real causes. After two generations the Treaty of Trianon and the post-war Treaties are still under discussion, but it is more and more difficult to reject John Maynard Keynes's arguments according to which nationality and political questions were nearly as important as laws concerning the economies of scale and unhampered trade and economic cooperation.¹⁹

As we look at Trianon two generations later, burdened as we are with everything that happened these past 60 years, we have to conclude that it contributed to the ills of the world by fragmenting and nationalizing an interdependent Europe. The victors, after the Second World War learned from this dismal experience and with the leadership of the United States tried to heal wounds. Indeed, the former enemies are now among the most reliable partners, both economically and militarily, America has.

Trianon, by breaking down an integrated Central Europe, violated the standards of rationality in human affairs. It proved once more the proposition that anyone who expects rationality in human history reveals his naivete.

Notes

1. Walt Whitman Rostow, then economic historian at the Massachusetts Institute of Technology, coined the expression and used it first in his Stages of Economic Growth (Cambridge, Mass.: M.I.T. Press, 1960). Takeoff is

---

defined as a stage in a country's economic development when both the technical know-how and the ability to obtain and use the inputs for industrialization are given.

2. Vide for the controversy of the role of the state: T. I. Berend and Gy. Ranki, "Az allam szerepe az europai 'periferia' XIX. szazadi gazdasagi fejlodesben." The Role of the State in the 19th Century Economic Development of the European "periphery." Valosag 21, no.3 (Budapest, 1978), pp. 1-11; L. Lengyel, "Kolcsonos tarsadalmi fuggoseg a XIX szazadi europai gazdasagi fejlodesben." (Socio-Economic Interdependence in the European Economic Development of the 19th Century.) Valosag 21, no.9 (Budapest, 1978), pp. 100-106.

3. Vide for data, T. I. Berend and Gy. Ranki, Underdevelopment and Economic Growth; Studies in Hungarian Social and Economic History (Budapest: Akademia Kiado, 1979); T. I. Berend and Gy. Ranki, "A gazdasagi nekilendules "emberi" tenyezoi az elmaradott europai orszagokban." (Human Factors in the Economic Upswing of Backward European Countries in the 19th Century.) Kozgazdasagi Szemle 25, no. 12 (Budapest, 1978), pp. 1430-44; T. I. Berend, "A Nagy Valsag es Kozep-Kelet Europa," (The Great Depression and East-Central Europe), Valosag 22, no, 11 (Budapest, 1979), pp. 1-10.

4. A more equitable distribution of income has been the often stated objective of developing countries. At the same time economic growth has also been portrayed as a major economic goal. Kuznets and others have questioned whether or not these goals are mutually exclusive and proposed that a more equitable distribution of income will lead to lower rate of savings and thus to lower rate of economic growth. S. Kuznets, "Economic Growth and Income Inequality," American Economic Review XLV (March 1955), pp. 1-28; "The Share and Structure of Consumption," Economic Development and Cultural Change XI, no, 2 (January 1963), pp. 80-96; "Distribution of Income by Size." Economic Development and Cultural Change X, no.2 (January 1962), pp. 92-124; Paul Jonas and Hyman Sardy, "The Distribution of Income and Their Effect on Economic Growth," Proceedings, American Statistical Association (December 1968), pp. 57-73.

5. Count Paul Teleki (1921, repr. 1975), p. 123, in his lectures given at Williams College, stated: "Many of the (Hungarian) nobles lived a peasant life." The eminent geographer, if one examines this statement from a sociological point of view, was probably wrong. Being a "peasant" at this time in Eastern Europe did not mean an individual whose occupation was agricultural work. A peasant was "somebody's peasant." Vide, Istvan Bibo, "A magyarsagtudomany problemaja." (The Problem of Hungarology), Uj Latohatar XXXI (Munchen, December 1980), p. 387.

6. Katus, "Economic Growth in Hungary During the Age of Dualism (1967-1913). A Quantitative Analysis." in T. I. Berend et, al., Social-

---

Economic Researches on the History of East-Central Europe (Budapest: Akademiai Kiado, 1970), pp. 35-70.

7. A. Gerschenkron, "Economic Backwardness in Historical Perspective," in The Progress of Underdeveloped Areas, ed. by Bert F. Hoselitz (Chicago: University of Chicago Press, 1962), Economic Backwardness in Historical Perspective (Cambridge, Mass.: Harvard University Press, 1962); "The Early Phases of Industrialization in Russia: Afterthoughts and Counterthoughts," in The Economics of Take-Off into Sustained Growth, ed. W. W. Rostow (New York: St. Martin Press, 1963); "The Discipline and I," Journal of Economic History XXVII (December 1967), pp. 443-59; Paul Jonas and Hyman Sardy, "The Gerschenkron Effect: A Re-Examination," The Review of Economics and Statistics Vol. LII, no.1 (February 1970), pp. 82-86.

8. Bela K. Kiraly, "Paul Teleki, the Theoretician of the Hungarian Revisionism," in Paul Teleki, The Evolution of Hungary and its Place in European History (Albany, New York: Academic International Press, 1921, reprint 1975).

9. Frank Vanderlip, a practical American financier, felt, "If we concentrated our wealth and efforts on America alone and were utterly careless of the fate of the rest of the world, I believe we would lose our soul. I believe that with that loss there could ultimately come a loss of our material advantages." Frank A. Vanderlip, What Next in Europe? (New York: Harcourt, Brace and Company. 1920), p. 46. It is, however, fair to add that West Germany's self-rehabilitation, after the Second World War, was eventually established by the Schuman Plan and by the initiatives of the French statesman-economist Jean Monnet-in a cooperative institution of the European Steel and Coal Community. Germany was reconciled with France by French initiatives, a reconciliation solemnly ratified by President de Gaulle and Chancellor Adenauer in the Cathedral of Reims in July 1962.

10. J. M. Keynes, The Economic Consequences of the Peace (New York: Harcourt, Brace and Howe, 1920), pp. 134-SI.

11. Congressional Record, Vol. 59, part 3, pp. 2696, et seq.

12. The Census of 1920 gives 86.1 persons per square kilometer.

13. Vide for the data Memorandum of the French Government on the Fixation of the Western Frontier of Germany, February 26, 1919. Quoted by Etienne Mantoux, The Carthaginian Peace (Pittsburgh, Penn.: University of Pittsburgh Press, 1921), p. 21.

14. Conigsby Dawson, It Might Have Happened to You (New York: John Lane Company, 1921).

15. Op. cit., p. 34.

16. Op. cit., p. 42.

17. One gold crown was equal to 17,000 paper crowns or 1.36 pengo in 1924; in 1925, since the pengo was stabilized on the basis of the pound sterling, one gold crown was equal to 14,500 paper crowns or 1.16 pengo.

---

18. Statistically inclined readers may be interested that it is possible to fit the 1914-1918 data in a power curve which give the result: SF = 105.60 T^-0.53, where SF stands for Swiss Francs, T for the time period (1914 = 1 . . . . 1918 = 5). The correlation coefficient is a significant r = 0.94. The data 1920-1925 can be best approximated by the logarithmic curve SF = 14.16 e^-1.31T (1920 = 1, ... 1925 = 6) with a correlation coefficient r = 0.96 significant at 0.05 level.

19. J. M. Keynes, The Revision of the Treaty (New York: Harcourt, Brace and Company, 1922).

---

A Case Study on Trianon