The Economic Crisis of the 1970s By Neil Hammond

1970s After WWII, Am prosperity seemed normal – Cheap energy – Strong manufacturing base at home 1970s was a tough decade economically

Roots of the Economic Troubles Mid 1960s. LBJ paid for Vietnam and Great Society without raising taxes – Led to inflation

1970s and Oil By 1970, the US was dependent on foreign oil 1973 O.P.E.C. raised prices – Tied to war with Israel – US one of the countries affected bc of support – Oil and gas prices contributed to the recession of 1970s

Declining Manufacturing Base Increased competition from Germany and Japan – Particularly auto industry Stagflation How to respond? – Traditional Keynesian response DID NOT work – Nixon 1) cut spending and raise taxes (not popular) 2) Tried to get the fed to raise interest rates 3) 90 day freeze on wages … fed regulations limiting future wage and price increases (not successful)

Ford Fails Watergate … N resigned By 1975 US economy in worst shape since Great Depression (unemp 9%) W.I.N. – Reduce oil and gas … conserve energy – Little impact – Tried to cut spending … vetoed 50 bills passed by Dem Congress – ALL failed to revive economy

The Weakening of Détente Retained Kissinger Helsinki Accords – US recognized borders of E Europe after WWII – USSR agreed to recognize certain human rights – USSR failed to live up to this … turned many off d é tente

1976 Election Rep = Ford Dem = Jimmy Carter Carter – Former Gov of GA – Outsider … promised to restore morality to govt

Carter’s Jumbled Economic Policies 1 st … increased govt. spending and cut taxes – Inflation rose – He delayed tax cuts and vetoed his own spending bills 2 nd … reduced money supply (raising interest rates) … failed Tried to get the US to reduce its dependency on foreign oil … created Dept of Energy – 2 nd Mid East crisis in 1979

Carter’s Jumbled Foreign Policy “ Moral ” foreign policy – 1978 Gave Panama control of PCanal (finalized in 1999) Criticized USSR – D é tente eroded further – 1979 invasion of Afghanistan – 1980 Olympics Camp David Accords – Peace between Israel and Egypt – Huge deal … but oversahdowed

Iranian Hostage Crisis 1979 Islamic revolution in Iran Shah overthrown … took sanctuary in US – Revolutionaries stormed US embassy – 52 Ams hostage – Pressure … US seemed powerless … negotiations got nowhere – Daring rescue attempt … helicopters crashed – Not resolved until Reagan ’ s admin