Evidence from 12 European countries showed alarming rises in crime, alcoholism, drug abuse, depression, suicide and eating disorders. One in three men had a criminal conviction by the age of 30.
"The surprising conclusion is that the enormous economic changes of the 20th century are probably not the direct cause of psychosocial disorders, particularly not unemployment," Professor Smith said. "A huge body of research evidence shows that family discord, lack of parental support and involvement and inappropriate parenting, increases the risk that children will develop psychosocial problems."
He added: "Parents who know what their children are doing, who are interested in them, do things with them, care about them and who provide warmth and affection and appropriate and consistent discipline tend to have children who turn out well."
Successful parents showed "consistency and warmth", told children what was acceptable and what was not, and sometimes temporarily rejected them.
Young people, Professor Smith said, faced particular difficulties with the transition to adult life because the period of adolescence was "longer and more defined".
More young people were going into higher education and more were out of work, which extended the transition. They had sex at an earlier age and had to cope with the emotional and sexual consequences of broken relationships at an earlier age.
Rising expectations also played a part. "It may well be the contrast between what people would like to happen in their lives and the reality of what is available to them has become much more extreme and much more difficult to handle than in the past when people had fewer opportunities and more limited vision," Professor Smith said.