IV.

The Great Depression

The most widespread, protracted, and severe period of mass unemployment in modern times was the Great Depression, which followed the Wall Street Crash in 1929. The depression left 14 million unemployed in the United States, 6 million in Germany, and 3 million in Great Britain. In Australia the crisis was especially severe, with over 35 per cent of the workforce being unemployed by the early 1930s, many of whom remained so until World War II. Social dislocation, widespread migration in search of jobs, and political extremism became commonplace. Deaths from malnutrition-related diseases increased substantially across the industrialized world.

The Great Depression caused substantial shifts in attitudes towards unemployment, expressed particularly in the New Deal policies of US President Franklin D. Roosevelt, who introduced social security, unemployment benefit, and public works programmes to utilize surplus labour. The economic recovery produced by these measures demonstrated that unemployment actually worsened a depression by causing a slump in demand, and that payment of unemployment insurance was a far lesser burden to the economy than the loss of unemployed workers’ spending power. The depression also inspired John Maynard Keynes to write his greatest work of economic theory, The General Theory of Employment, Interest, and Money (1936), which stated that an economy in depression would remain so unless revived by government spending. He thus induced a tendency in Western governments to diminish unemployment by running up large budget deficits.