Presentation on theme: "Stagflation Throughout 1970's, the American economy was plagued by the unprecedented combination of soaring prices, the high unemployment, and low economic."— Presentation transcript:
1Changes in the American Economy: The Energy Crisis, Deindustrialization, and the Service Economy
2StagflationThroughout 1970's, the American economy was plagued by the unprecedented combination of soaring prices, the high unemployment, and low economic growth.Economists dubbed the phenomena "Stagflation," a period of rising prices in a stagnant economy.The high standard of living in the US following World War II suddenly began to lag behind that of Western Europe and Japan.Americans found it increasingly difficult to sustain a middle class lifestyle.
3StagflationCompare the rates of inflation between 1972 and 1980 to those of the 1980's and 1990's.
4StagflationGDP measures the total market value of all the goods and services produced within a region. Note the sharp decline in GDP beginning in 1973.
5StagflationIn 1975, unemployment reached almost 9%, the highest level since the Great Depression at that time.
6The Oil Crisis BeginsBy the late 1950's, the demand for oil in the United States outstripped domestic production capabilities.By 1970's, the US imported a third of its oil, making the American economy vulnerable to geopolitical upsets in the Middle East.
7The Oil Crisis BeginsOn October 6, 1973, the Yom Kippur War began when Egypt and Syria attacked Israel from two sides.The US airlifted supplies to Israel, prompting OPEC to levy an oil embargo against Israel's allies that lasted until March 18, 1974.
8The Oil Crisis BeginsGas prices suddenly doubled and fueling stations frequently ran out of gas.The oil crisis effected almost every sector of the economy .
9Coping with the Energy Crisis The oil embargo led to dramatically increased prices for all types of fuel, including gasoline, home-heating fuel, and electricity.Prices for virtually everything else rose in response to high energy costs, causing record inflation.Long lines for gasoline became everyday occurrences.
10Coping with the Energy Crisis President Nixon appealed to the nation to make sacrifices in the name of conserving energy.He warned that the country was "heading toward the most acute shortages of energy since World War II.”The President asked Americans to reduce air travel, reduce work and school hours, turn down thermostats by 6 degrees, and reduce highway speed limits to conserve energy.
11Coping with the Energy Crisis Nixon also urged the use of coal and nuclear power rather than the limited commodity of oil.He asked Congress to approve measures for increased exploration and extraction of domestic oil and to relax environmental standards that impeded energy requirements.
12Economic Policies of President Ford Gerald Ford inherited an economy in crisis when replaced Richard Nixon in August 1974.Ford lacked the economic vision to curb the effects of stagflation.Ford attempted to initiate a grassroots anti-inflation campaign, but the Whip Inflation Now (WIN) program was little more than a public relations maneuver.Skeptical Americans began wearing the red and white WIN buttons upside down to stand for "No Instant Miracles."After a few months, the WIN effort was abandoned as sluggish industrial and business productivity along with rampant unemployment compelled Ford to focus on broader anti-recessionary measures.
13Economic Polices of President Ford As a Republican, Ford believed that a balanced federal budget and reductions in government spending were the best way to curb inflation.Democrats in Congress favored increased federal spending as a stimulus to economic and job growth.Ford admitted in 1975, “the state of the Union is not good.”Ford vetoed more major bills than any president in the 20th century.Despite the legislative battle, recessionary pressures eased somewhat by 1976.
14Deindustrialization"Deindustrialization" refers to a shift away from a manufacturing-based economy.In the United States and Europe, deindustrialization has preceded a shift to a service-based economy.The trend toward deindustrialization began in the 1960's and continues into the present day, as the service sector overtakes the manufacturing sector.
15DeindustrializationDuring the 1970's, the oil crisis and the falling productivity of the US manufacturing sector sped the decline of several industries, including steel, automobiles, and electronics.The industrial production index measures the total output of US factories. A decline in production indicates slow economic growth.
16DeindustrializationIncreases in foreign industrial efficiency allowed Europe, Asia, and Latin America to effectively compete by producing quality goods for a lower cost.Many American companies began outsourcing labor to foreign countries to remain competitive.This chart illustrates the balance of trade. The United States increasingly imports more than it exports.
17DeindustrializationStructural unemployment often spikes during deindustrialization.In this case, "structural unemployment" refers to unemployment that occurs during the transition from a manufacturing to a service economy because workers lack skills, education, experience, or proximity to the new types of jobs available.
18The Decline of Organized Labor Membership in AFL-CIO UnionsAFL-CIO lost over 4 million members between 1970 and Along with declining membership came decreased political power for organized labor.
19The Service EconomyEconomies in the developed world typically change over time. Agrarian economies first transition to industrial, then develop into service economies.Service industries include retail, wholesale, banking, public utilities, entertainment, etc.This graph shows the eclipse of the manufacturing sector by the service sector by the early 1980's. The trend toward deindustrialization resulted in a service-based economy.
21The Rustbelt and the Sunbelt The economic region known as the Manufacturing Belt became known as the Rust Belt by the 1970's, as manufacturing and heavy industry declined due to high energy costs and foreign competition.Cities in the Rust belt were subject to unemployment, underemployment in low-paying service jobs, "white flight" to the suburbs, and general out-migration as manufacturing jobs moved south and abroad.
22The Rustbelt and the Sunbelt Meanwhile, Sunbelt states in the West and Southwest continued to enjoy the economic growth trend spurred by Cold-War defense spending and an influx of retirees.The South profited from a booming agribusiness industry and the California's Silicon Valley became the hub of the technology industry.As population in the Sunbelt increased, so did the region's political influence.
23Working WomenHigh inflation, a series of recessions, and the changing role of women in society encouraged more females to enter the workforce throughout the 1970's.Working women became the norm, as more households depended on two incomes.
24Working WomenWomen, especially women of color, continue to make substantially less money than their male counterparts.Several factors account for this wage gap, including discrimination and female concentration in low-wage, non-union industries.
25The Feminization of Poverty Despite increased participation in the labor force and the progress made during the women's movement, women experienced a decline in economic status during the 1970's.
26The Feminization of Poverty Low pay and inflation combined with increased rates of divorce and teenage pregnancy led to a phenomena known as "the feminization of poverty," as females became increasingly economically marginalized.
27Economic Policies of President Carter As a rhetorical device during 1976 presidential campaign, Governor Jimmy Carter combined the rate of inflation (6%) and unemployment (8%) into a "Misery Index" of 14.At first, Carter modeled his economic recovery program after FDR's New Deal by advocating tax cuts, public works, and employment programs to stimulate the economy.The Democratic Congress responded with legislation in accordance with the President's plan, but as unemployment decreased, inflation continued to rise.
28Economic Policies of President Carter In response, Carter tried an almost opposite approach. He attempted to curb inflation by slashing government spending, deregulating industries, and implementing wage and price controls.Many Democrats were alienated by what they perceived as a shift to the right in presidential policies.Despite the President's sincere efforts, the "Misery Index" soon rose to 21.
29President Carter and the Continuing Energy Crisis Although the oil embargo had ended and gas lines had ceased by Carter's presidency, the threat created by US energy dependence loomed on the horizon.Carter characterized the energy crisis as "the moral equivalent of war," which critics derisively nicknamed "meow."His calls for sacrifice and conservation were opposed by the influential oil and auto industries, and accordingly the subsequent National Energy Act of 1978 focused on increasing domestic production rather than conservation.
30President Carter and the Continuing Energy Crisis Carter was successful in creating the Department of Energy as a cabinet-level position, and he continued to try and set an example for citizens by conserving energy in the White House.President Carter had solar panels installed atop the White House in 1979 (which President Reagan later removed).
31President Carter and the Continuing Energy Crisis Following the 1979 Islamic Revolution in Iran, Ayatollah Khomeini stopped all oil shipments, further exacerbating US energy woes.In July the president delivered a televised address that became known as the "Malaise Speech," in which he entreats Americans to share the responsibility of energy conservation.The public and the press responded defensively and Carter's approval rating plummeted.Although the speech was a frank diagnosis of the country's ills, Carter was criticized for "blaming" the American people and offering few solutions.