Question for econ historians: WTF happened to our economy around the 70s?!!?!

[uponit7771]

So I'm looking at a history of UE rates here (UE Rates) after 1948 and it seems for some time the UE rate was pretty stable but then the 70s hit and a good spike up to 9is and then Carter comes and UE rate goes down and another spike up during RayGun years and now Bush...

It seems like an argument can be made that if there's a structural issue with our economy it happened around the 70s and hasn't really stopped.

TIA for any input.

[sharesunited]

1. Mao died and China opened for business.

[uponit7771]

2. Hmmmm, Nixon went to China first.....

[kentuck]

3. The Vietnam War had ended...

and the Baby Boomers were coming full blast into the work force. By 1973-74, we had our first "oil shock". This was the first time we had ever waited in line to get gasoline. This was after the political nightmare of Watergate and Richard Nixon. Jimmy Carter inherited that in 1976. He laid the foundation to get us off of foreign oil. Ronald Reagan was able to reap the reward of Carter's actions on conservation and lessening our dependence. However, he did not pursue it and neither did any other President after him, until now. It took 4.00 per gallon gasoline to wake us up. But we are lulled by into complacency by the oil companies when they let their prices go under 2.00 per gallon - as they have time and time again.

There are many things that happened with our economy but that is my outline.

[librechik]

4. off the gold standard in 73; campaign to remove tenements/rooming houses

(beginning of our homeless problems)--but that's just a guess. There was also a spike in our dependence on Saudi oil at the same time. In short, we lost our independence as a country and went global

[uponit7771]

8. Why did Nixon take us off the gold standard?! It seems like there was no good from that decision ...

...that benefited the middle class long term

[Nederland]

14. Because the gold standard is idiotic

...and don't let any of the freaks from the far left or the far right tell you any differently.

[RoyGBiv]

28. +1

[kenny blankenship]

15. Dollars were supposed to be convertible to bullion. Dollars were piling up abroad

for a variety of reasons - among them military spending abroad, and increasing trade with outside world. With our government running deficits to finance the Vietnam War, any country could have been first to question the soundness of the dollar, but as it happened France was the first to say "Hey, we'd like to turn in these dollar credits for gold." Nixon slammed the gold window on them and announced we would be abandoning the Bretton Woods agreement that made US the international currency with a fixed gold bullion peg. If everyone had followed France's example -and we made good on the gold-dollar convertibility pledge- we would have no dollar standard AND we would've been out of gold as well.

[Nederland]

21. That's only part of the story

The real reason is that the gold standard is fundamentally idiotic. The amount of currency in circulation should vary according to how much economic activity there is, not how much gold you have sitting in a vault somewhere. That's why the Federal Reserve was created: so the money supply could be adjusted based upon real world economic activity and not subject to the completely unrelated fluctuations of a single mining industry.

[Odin2005]

30. Uh-oh, the Libertarian Gold Nuts are gonna give you an angry lecture...

[Recursion]

31. One simple sentence makes their head explode:

"Gold is a fiat currency also; its intrinsic value is rather low."

I love watching them try to turn that around in their brains.

[Odin2005]

26. LBJ and Nixon tried to pay for both guns and butter.

http://en.wikipedia.org/wiki/Bretton_Woods_system

The global monetary system had become disrupted by the late 60s and the resulting inflation and related wacky things involving the US's gold supply destroyed Bretton Woods.

[AngryAmish]

5. From after WWII to the 70s there was not much competition for US manufacturing around the world

China went communist and had such great ideas as The Great leap Forward and the CUltural Revolustion...a billion people living outside the world economy.

Russia has never been a world economic power (until the 90s).

Europe...half of Europe was behind the Iron Curtain,

We burned Japan to the ground then nuked two cities. It took them a while to catch up...until the 70s. S. Korea had WWII, then a civil war then a military junta.

France - socialists. Germany - bombed into the stone age.

Africa was a basketcase (still is). India was socialist and wanted to trade amongst itself...and kept having wars with Pakistan...the partition did not help.

So between 48 and the 70s the US was the worlds breadbaslet and factory. There s a good argument that we were overemployed. THis need for labor lead to the Women's Movement, Civil Rights and a lot of other things.

So good imports arrived about that time AND oil shocks from embargoes in the middle east.

[SoCalDem]

6. Millions of Boomers entered into the workforce

and as there were more workers, than jobs, the salaries started downward..and then union-busting and southern-state migration of rust-belt industries started too.

Air conditioning became widespread too, which helped speed up the migration.

It's too bad that the 20 years following WWII's end were not spent planning longterm for the huge influx of workers that was sure to come..and would stay for many decades to follow.

To hear legislators these days, you would think they just realized that Boomers were about to retire (or try to).. We were no surprise.. everyone knew about us, marketed to us, and loved the money we spent all these years

[uponit7771]

10. That makes sense, 75 million babys were born between 46 & 60 so by the 70s that was a lot of people

...coming out of high school and college into the work force.

[SoCalDem]

16. and Boomer women went into the workforce a LOT more than their mothers did

so those jobs were in addition to the ones held by men. During the war, most of the women who worked, went back home after the men came back.. Dads of Boomer women did not give up their jobs for their daughters. (or sons)

and post VietNam war, we had a lot of immigration rules changed. quotas pretty much went away

[Ganja Ninja]

7. The end of the war in Vietnam, the end of cheap US oil production, Nixon, Ford, Reagan, Bush 1

The middle east oil embargo. Free Trade. The long slow demise of labor unions.

[Warpy]

9. The economy suffered a huge blow in the 70s

Foreign oil producing countries formed a cartel. Neither Nixon nor Ford seemed to be paying attention to what this would do to us and both failed to deal with it at all. Jacked up oil prices were making oil companies richer, so all was right with their world. The unemployment crisis of 1973-74 was largely due to oil shocks including embargoes over Israel.

Unfortunately, Carter was the beneficiary of their inaction and double digit inflation fueled by high oil prices plagued his administration. Eventually he did two things: he created the Strategic Petroleum Reserve which did actually threaten OPEC into reducing their prices and he allowed Volcker to increase interest rates to try to put the brakes on inflation. The miracle is that his administration saw a net increase in jobs.

The 70s set us up for Reagan, the biggest disaster ever to happen to the American people. What we're seeing now is the end result of all his policies. Until they're reversed completely, we're going to be marching toward serfdom.

[uponit7771]

12. Readin your first paragraph made my hair stand up, that sounds like EXACTLY what happened last

...year to our economy, letting a needed resource like gas fly out of control price wise is stupid....it's like they never learn.

[DeschutesRiver]

24. The one thing you can alway count on is that humans absolutely never learn

from their mistakes - well, in the short term, maybe. But in the long term? Nope. It is all there in the history books as proof.

I lived the experience of the 70s, and I've spoken to folks even older than I who lived through the tail end of our extermination of the natives to take this land from them, through the turn of the century as we advanced technologically, and the Great Depression and the wars that followed. It is the reason I tell all the young kids that this disaster we face today was 30 years in the making, by both elected democrats and republicans. And that since the time to pay the piper appears to be now, this thing won't be over for some time to come. At which point, they tell me I don't know what I am talking about. I tell them to pick up some history books on this, read up, and let me know. But that isn't going to happen, hey, maybe they like surprise endings better. The information is out there, and the internet would make it easy to be informed about where we are at right now and how we got here. But when you haven't lived very long yet, and haven't been through the really bad stuff that can happen, it is very hard to wrap your mind around it. Which is part of the reason why we are mostly programmed to keep repeating our mistakes. Human nauture in action.

I am getting too old to care terribly much about how humans repeat their errors, and now my only hope daily is that it doesn't get so bad that we go tribal and take too many steps back in time to a frightening standard of living. But I know it could happen - just don't know if it is our turn at that historically speaking, or not.

[taught_me_patience]

11. The advent of the computer

Enabled huge productivity gains across all industries. It allowed more automation in factories and manufaturing labor has fallen worldwide since. It has also allowed streamlining of service industries. Today, one analyst can be more productive than 50 mathmeticians in 1975.

[uponit7771]

13. Shouldn't that push industries to abosrb the rest of the work force?

[jpljr77]

17. Workforce increased very quickly and very massively due to two factors:

1) as already noted, Boomers becoming working age
2) women entering the workforce in large numbers

When the workforce expands that rapidly, of course unemployment it going to go up. Job creation actually wasn't that bad at the time, but it couldn't keep up.

[JHB]

18. "...and hasn't really stopped."

Up above you'll find most of the causes: renewed global competition, oil shocks, war, demographics, technology, etc.

One of the side effects of those was to undermine a number of New Deal regulatory practices, because the economy pushed conditions outside of where those regulations made sense. For example, savings and loans were limited by law in how much interest they could charge, but many needed to pay a higher interest rate to customers thanks to high inflation so that they wouldn't move their accounts elsewhere. So many S&Ls were forced into a position where they were paying more than they were taking in -- "bleeding money", as the phrase went.

In a logical world, this could have been addressed by merely adjusting the regulations to allow for a floating rate limit. But so much was happening, including the Conservatives starting to feel their oats and anti-regulatory, counter-New Deal ideology running through business schools, so that the people most aware of the problems were not pushing for mere adjustment, they wanted full-fledged deregulation. And in the economic environment of the 70s, it was a relatively easy sell.

And that is what "really hasn't stopped."

[branders seine]

19. the neocons and their cabal within the "national security" establishment

killed Kennedy, lynched Nixon (who deserved it), consolidated their relationship with international banking, and executed a coup within the republican party.

[Odin2005]

32. Paranoid nonsense with no basis in economic facts.

Learn some actual economic history.

[branders seine]

20. delete dupe

dup

[Birthmark]

22. There were many, many factors

Population increase, much greater participation of women in the work place, end of the VN war, going off the gold standard, OPEC oil embargo, and probably a few others. For all of that, over 10 million jobs were created under Carter.

[Javaman]

23. in 1972, the US reached peak domestic oil.

we surpassed our ability to produce enough oil for our nation. We had to start importing oil.

Then in the late 70's there was the Iranian revolution. We stopped importing oil from them.

then there was the oil embargo of the early 80's.

from that point on the repubs took the stupid ball and ran with it.

[eShirl]

25. the Oil Embargo!!

http://en.wikipedia.org/wiki/1973_oil_crisis#Chronology

[Odin2005]

27. The distruption of domestic manufacturing by companies going to developing countries.

Also, the Bretton Woods system collapsed as a result of inflation.

Paul Volker sewed up the gaping wound but it got infected by Reganomics and went septic.

[progressivebydesign]

29. Reagan's repeal of the ability to deduct consumer credit was the first salvo on the Middle Class. nt

[Hannah Bell]

33. profits crisis.