The 1930s: A New Form of Luddism Prevails
Soon after the 1929 stock market crash, by 1930, the crash itself was often
attributed to the surplus of goods made possible by new technology:
When the climax was reached in the last months of 1929 a period of adversity
was inevitable because the people did not have enough money to buy the
surplus goods which they had produced.25
As noted above, fear of robots was not strong in most of the 1920s, when the
word robot was coined. The big wave of fear had to wait until the 1930s.
Historian Amy Sue Bix (2000) offers a theory to explain why the 1920s were
fearless: the kinds of innovations that received popular acclaim in the 1920s
didn’t obviously replace jobs. If asked to describe new technology, people in
most of the 1920s would perhaps think first of the Model T Ford, whose sales
had burgeoned to 1.5 million cars a year by the early part of the decade. Radio
stations, which first appeared around 1920, provided an exciting new form of
information and entertainment, but they did not obviously replace many existing
jobs. More and more homes were getting wired for electricity, with many
possibilities for new gadgets that required electricity. Labor unions in the 1920s
tried to sound alarms about machines replacing jobs—and they sounded those
alarms with increasing force as the 1920s proceeded—but the public didn’t react
much. The labor unions’ alarms were not contagious because people had not
heard many stories about inventions replacing jobs.
By the 1930s, Bix notes, the news had replaced stories of exciting new
consumer products with stories of job-replacing innovations. Dial telephones
replaced switchboard operators. Mammoth continuous-strip steel mills replaced
steel workers. New loading equipment replaced coal workers. Breakfast cereal
producers bought machines that automatically filled cereal boxes. Telegraphs
became automatic. Armies of linotype machines in multiple cities allowed one
central operator to set type for printing newspapers by remote control. New
machines dug ditches. Airplanes had robot copilots. Concrete mixers laid and
spread new roads. Tractors and reaper-thresher combines created a new
agricultural revolution. Sound movies began to replace the orchestras that played
at movie theaters. And of course the decade of the 1930s saw massive actual
unemployment in the United States, with the unemployment rate reaching an

estimated 25% in 1933.
It is difficult to know which came first, the chicken or the egg. Were all these
stories of job-threatening innovations spurred by the exceptional pace of such
innovations? Or did the stories reflect a change in the news media’s interest in
such innovations because of public concern about technological unemployment?
The likely answer is “a little of both.”

Underconsumption, Overproduction, and the Purchasing
Power Theory of Wages
Unlike the technological unemployment narrative, the labor-saving machines
narrative was strongly connected to an underconsumption or overproduction
theory: the idea that people couldn’t possibly consume all of the output produced
by machines, with chronic unemployment the inevitable result. This theory’s
origins date back to the mercantilists in the 1600s, but popular use of the terms
underconsumption and overproduction first appears in ProQuest and Google
Ngrams around the time of the depression of the 1870s. Henry George described
the overproduction theory in his 1879 book Progress and Poverty, during the
depression of the 1870s, concluding it was an “absurdity.”26
The theory of overproduction or underconsumption picked up steam in the
1920s. It was mentioned within days of the stock market crash of October 28–29
1929, in interpreting the crash.27
The real peak of these narratives was in the 1930s. Underconsumption
narratives appeared five times as often in ProQuest News & Newspapers in the
1930s as compared with any other decade. The narrative has virtually
disappeared from public discourse, and the topic now appears largely in articles
about the history of economic thought. But it is worth considering why it had
such a strong hold on the popular imagination during the Great Depression, why
the narrative epidemic could recur, and the appropriate mutations or
environmental changes that would increase contagion. Today, underconsumption
sounds like a bland technical phrase, but it had considerable emotional charge
during the Great Depression, as it symbolized a deep injustice and collective
folly. At the time, it was mostly a popular theory, not an academic theory.
Despite the obvious reality that deflation necessitates wage cuts, an opposing
“purchasing power theory of wages” became popular in the 1930s. This theory
said that “excessive competition” had forced down wages to such an unfair low
level that workers could not afford to consume the output. Thus the Depression
could be cured by forcing all employers to raise wages. The economist Gustav
Cassel in 1935 called these ideas “charlatan teachings” that “have recently taken
a conspicuous place in popular discussion of social economy as well as in
political agitation.”28
But the public did not dismiss such charlatan teachings. In the 1932