Upvote:2
The practice of 'make work' was quite common long before the great depression. If the US army did study it (and I have no information if they did or not) then it would not have been for soldiers to dig the holes, but for the desperate to be given a means of earning some income - the theory being that work was better then charity and any work was better then no work. In parts of Ireland, you can see beautiful dry stone walls that were built up and over mountains by wealthy land owners during the famine (1845-1852) to give their starving tenants the income to pay their rent (and feed their families).
Background reading and references: The use of work vs charity to deal with poverty: Irish Poor Law - 1838
Interesting essay on what lead to the Irish famine being so severe: http://www.clarelibrary.ie/eolas/coclare/history/prefamine_clare.htm
Upvote:35
Keynes suggested it during the Great Depression. It's not exactly the same, but I think what you've heard was a mutation after so many years.
The actual quote from his book was:
And the second mention of "dig:"
The General Theory of Employment, Interest and Money (London: Macmillan, 1936), p. 129.