We have seen that Australia’s experience of the depression of the 1890s was far more severe and prolonged than that of comparable countries like the United States and Canada, or of trading partners like Great Britain (see Chapter 3). The Great Depression of the 1930s, however, prostrated the entire world. Although Western European industrial economies such as Britain weathered the storm better than other countries, they did so because the cheapness of the primary products they imported brought down their cost of living, and also brought down the costs of manufacture, which subsidised their recovery (see Chapter 4). These same circumstances reduced the likelihood that a primary exporter like Australia could trade its way quickly out of the slump. Australia’s terms of trade deteriorated by 39 per cent between 1928–29 and 1932–33 alone (Bambrick 1970, p. 5; see also Figure 5.1 in Chapter 5).

For both depressions, Australian unemployment remained high 10 years after the crises began; a labour census taken in the winter of 1939 found that 15 per cent of men aged between 18 and 64 had no jobs (Butlin 1955, pp. 14–19, 227–32). On the earlier occasion, in the 1890s, the United States – already the largest national economy – rebounded quickly, but on the second occasion it too suffered persistent unemployment, with 15 per cent of its men acknowledged to be still out of work in 1939. At first sight, the United States and Australia seem to have been poles apart – one a source of capital and the other a borrower – although they were both among the few economies sought after by international investors just before 1929, and each would be devastated by the suddenness of the collapse of its capital base. At first sight also, the United States government acted imaginatively (if almost four years late) through President Roosevelt’s New Deal, but in reality both Australia and the United States were federations where power was fairly decentralised before the 1930s. The central governments had few major functions apart from foreign affairs (especially waging and paying for wars), the management of immigration and the levy of a protective tariff. In the United States, the stimulus imparted by the New Deal was countered by the states and cities cutting back their conventional spending, and in Australia – as we shall see – spasmodic state initiatives were muffled by a timid federal government.