The emergence of mass unemployment: some questions of precision
In a recent article in this journal, Broadberry has argued that the mass unemployment of the interwar period was instigated by a 'supply side shock' coinciding with a raised exchange rate.2 The former resulted from a reduction in the length of the 'normal' working week which, according to Broadberry, raised real wages and lowered labour productivity. The government's efforts to appreciate the exchange rate were associated with the intention to restore the gold standard. To claim that such developments exacerbated the problems of the British economy at the end of the First World War is scarcely novel,3 but we believe that Broadberry's effort to explain the slump of the early I920s entirely in these terms is mistaken, as are his suggestions about the causes of mass unemployment throughout the interwar period. We also question the wisdom of drawing behavioural and macroeconomic conclusions from a macroeconomic model and data.