ABSTRACT
The period since the mid-1970s can be considered as serious an economic breakdown as the Great Depression. While the decline in activity and the rise in unemployment rates has not been as pronounced as during the 1930s, the period of high unemployment and stagnation has lasted twice as long. Given the severity of the depression, monetary policy was correctly seen by Keynes as ineffective. Recovery from the Great Depression required a strong stimulative fiscal policy involving deficit financing. Yet recovery had to await the stimulative fiscal measures associated with rearmament and the Second World War. Given the ideological climate of the times, deficit spending in peacetime on non-defense projects was unacceptable and remained so until after the Second World War.
