Changes in the American Economy: The Energy Crisis, Deindustrialization, and the Service Economy

Stagflation Combination of soaring prices, the high unemployment, and low economic growth. Post WWII high standard of living in the US suddenly began to lag behind that of Western Europe and Japan. Americans found it increasingly difficult to sustain a middle class lifestyle.

Stagflation Compare the rates of inflation between 1972 and 1980 to those of the 1980's and 1990's.

Stagflation GDP measures the total market value of all the goods and services produced within a region. Note the sharp decline in GDP beginning in 1973.

Stagflation In 1975, unemployment reached almost 9%, the highest level since the Great Depression at that time.

Cost of Living Changes Item CHANGE% Inc Postage Stamp $0.06$0.15+ $ % Bread$0.24$0.40+ $ % Milk$1.32$1.50+ $ % Gas$0.40$0.90+ $ % Car$2,500.$5,012.+ $2, % House$40,000.$73,327.+ $33, % Income$8,933.$10,991.+ $2,058.23%

The Oil Crisis Begins By the late 50's, U.S. demand for oil outstripped domestic production capabilities. By 1970's, the US imported a 1/3 of its oil = American economy vulnerable to geopolitical upsets in the Middle East.

The Oil Crisis Begins October 6, 1973, the Yom Kippur War began when Egypt and Syria attacked Israel from US airlifted supplies to Israel OPEC levied an oil embargo against Israel's allies that lasted until March 18, 1974.

The Oil Crisis Gas prices suddenly doubled and fueling stations frequently ran out of gas. Crisis effected almost every sector of the economy.

Coping with the Energy Crisis Oil embargo led to dramatically increased prices for all types of fuel: 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.

Coping with the Energy Crisis President Nixon appealed to the nation to make sacrifices in the name of conserving energy. Warned that the country was "heading toward the most acute shortages of energy since World War II.” 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.

Coping with the Energy Crisis Nixon also urged the use of coal and nuclear power Asked Congress to approve measures for increased exploration and extraction of domestic oil and to relax environmental standards that impeded energy requirements.

Economic Policies of President Ford Whip Inflation Now (WIN) program Public relations maneuver Encouraging personal savings and disciplined spending habits Abandoned after a few months Believed that a balanced federal budget and reductions in government spending were the best way to curb inflation. Democrats favored increased federal spending as a stimulus to economic and job growth. Ford admitted in 1975, “the state of the Union is not good.” Despite the legislative battle, recessionary pressures eased somewhat by 1976.

Deindustrialization Refers to a shift away from a manufacturing-based economy. Trend began in the 1960's and continues into the present day, as the service jobs overtake manufacturing jobs. = occurs during transition from manufacturing to service economy Causes structural unemployment = occurs during transition from manufacturing to service economy Because workers lack skills, education, experience, or proximity to the new types of jobs available. Oil crisis and the falling productivity of manufacturing sector sped the decline of several industries, including steel, automobiles, and electronics.

Deindustrialization Increases in foreign industrial efficiency allowed Europe, Asia, and Latin America to compete by producing quality goods for a lower cost. Many American companies began outsourcing labor to foreign countries to remain competitive.

The Decline of Organized Labor AFL-CIO lost over 4 million members between 1970 and Along with declining membership came decreased political power for organized labor. Membership in AFL-CIO Unions

The Service Economy Service industries include retail, wholesale, banking, public utilities, entertainment, etc.

The Rustbelt and the Sunbelt Economic region known as the Manufacturing Belt became known as the Rust Belt 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.

The Rustbelt and the Sunbelt

Sunbelt states in the West and Southwest enjoyed continued economic growth trend spurred by Cold-War defense spending and an influx of retirees.

Working Women High 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.

Working Women Women, 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.

The 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.

The 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. 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.

Economic Policies of Carter As a campaign tactic, Governor Carter combined the rate of inflation (6%) and unemployment (8%) into a "Misery Index" of 14. Modeled his economic recovery program after FDR's New Deal by advocating tax cuts, public works, and employment programs to stimulate the economy. Despite the measures unemployment decreased, inflation rose.

President Carter and the Continuing Energy Crisis Oil embargo & gas lines had ended Threat created by US energy dependence loomed on the horizon. Carter characterized the energy crisis as "the moral equivalent of war“. What exactly did Carter tell the American public about the energy crisis ? Read Carter’s speech

President Carter and the Continuing Energy Crisis Carter created the Department of Energy as a cabinet- level position, He continued to try and set an example for citizens by conserving energy in the White House. Had solar panels installed atop the White House in 1979 (which President Reagan later removed).

President Carter and the Continuing Energy Crisis After 1979 Islamic Revolution in Iran, Ayatollah Khomeini stopped all oil shipments, further exacerbating US energy woes. Carter delivered the "Malaise Speech," = asks Americans to share the responsibility of energy conservation. Speech was an honest diagnosis of the country's ills Both public & press responded defensively Carter was criticized for "blaming" the American people and offering few solutions Carter's approval rating plummeted.

Economic Problems As you watch the brief video clip… Make note of the economic problems Americans faced. Read Carter’s Speech How does he plan on fixing the economic problems facing the nation? Graph the outcomes

Economic Policies of Carter Carter attempted to curb inflation by slashing government spending, deregulating industries, and implementing wage and price controls. Despite the President's sincere efforts, the "Misery Index" soon rose to 21.