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Europe and the United States

Early in the 20th century in the United States, a mental hygiene movement developed, aiming to prevent mental disorders. Clinical psychology and social work developed as professions. World War I saw a massive increase of conditions that came to be termed " shell shock ".

World War II saw the development in the U.S. of a new psychiatric manual for categorizing mental disorders, which along with existing systems for collecting census and hospital statistics led to the first Diagnostic and Statistical Manual of Mental Disorders. The International Classification of Diseases (ICD) also developed a section on mental disorders. The term stress, having emerged from endocrinology work in the 1930s, was increasingly applied to mental disorders.

Electroconvulsive therapy, insulin shock therapy, lobotomies and the neuroleptic chlorpromazine came to be used by mid-century. In the 1960s there were many challenges to the concept of mental illness itself. These challenges came from psychiatrists like Thomas Szasz who argued that mental illness was a myth used to disguise moral conflicts; from sociologists such as Erving Goffman who said that mental illness was merely another example of how society labels and controls non-conformists; from behavioral psychologists who challenged psychiatry's fundamental reliance on unobservable phenomena; and from gay rights activists who criticised the APA's listing of homosexuality as a mental disorder. A study published in Science by Rosenhan received much publicity and was viewed as an attack on the efficacy of psychiatric diagnosis.

Deinstitutionalization gradually occurred in the West, with isolated psychiatric hospitals being closed down in favor of community mental health services. A consumer/survivor movement gained momentum. Other kinds of psychiatric medication gradually came into use, such as "psychic energizers" (later antidepressants) and lithium. Benzodiazepines gained widespread use in the 1970s for anxiety and depression, until dependency problems curtailed their popularity.

Advances in neuroscience, genetics, and psychology led to new research agendas. Cognitive behavioral therapy and other psychotherapies developed. The DSM and then ICD adopted new criteria-based classifications, and the number of "official" diagnoses saw a large expansion. Through the 1990s, new SSRI -type antidepressants became some of the most widely prescribed drugs in the world, as later did antipsychotics. Also during the 1990s, a recovery approach developed.