Global Labor’s Forgotten Plan to Fight the Great Depression

In the early 1930s, as global unemployment tripled in two years and the world plunged into the Great Depression, the world’s labor movements developed a program for fighting the global crisis through international public works.  It’s a little-known historical might-have-been that could have helped halt the Great Depression, the rise of Adolph Hitler, and the Second World War.  And, as the efforts of world leaders to address today’s “Great Recession” threaten to break down in nationalist rivalry and petty political bickering, it bears lessons – and perhaps an alternative vision – for today.

Workers and organized labor have historically advocated government public works as a solution to unemployment.  Not only would they provide jobs and income for those directly employed, but they would raise overall purchasing power, thereby creating demand for the products of other workers and creating a virtuous circle of economic growth.  In the context of swelling unemployment in the early Depression, discussion of national public works programs developed in many countries.

The proposal for international public works originated with General German Trade Union Alliance (ADGB), which included most of Germany’s trade unions and represented the great majority of its workers.  The plan won the support first of the German union alliance, then of unions around the world, and finally of the League of Nations’ International Labor Organization. 

The plan was worked out by the head of the Alliance’s statistical department, W.S. Woytinsky.  Woytinsky was a Russian émigré who had been president of the St. Petersburg Council of the Unemployed during the 1905 revolution and had organized mass action to force the city to provide public works employment.  Observing Germany’s combination of spiraling deflation and spiraling unemployment in the early 1930s, he came up with the idea of using credit expansion to finance massive public works.

Taking a cue from recent League of Nations policy proposals, Woytinsky proposed an international agreement that would allow the lowering the gold reserve requirements for national currencies.  That would let central banks create new money that could finance international public works and thereby create the purchasing power needed to reflate the economy.

In a June, 1931, article, Woytinsky proposed an “Action Program for Reviving the Economy.”  It called for the labor movement to “assume the role of conveyor of the idea of an activist world economic policy.”  It was up to the labor movement to “force the state and all public institutions to implement measures to revive the economy.”

Labor’s policy “must be a global economic policy.  All nations are suffering because the world economy is sick, and therefore they must all concentrate their forces upon joint action to overcome the worldwide crisis.”  The international agreement would provide an alternative to the rise of economic nationalism, supporting “tariff reductions and European economic unification” as well as “internationalization of wage policy and social policy.”  The program would also support workers’ fight for higher wages, shorter hours, social rights, and regulation of business.