Experts may invoke the specter of stagflation, but don’t look for a return of the economic conditions of the 1970s. We have too far to fall
Are the 1970s returning to haunt us this Halloween? Increases in the consumer price index indicate rising inflation, and job growth has not matched expectations. As a result people on the Street have begun to talk about the return of stagflation – rising unemployment and prices – a phenomenon associated with the 1970s.
There appear to be some similarities between now and then. Jimmy Carter, who lived in the White House from 1977 to 1981, presided over a weak economy that turned him into a one-term president who faced a challenge from Edward Kennedy and the liberal wing of his party for the 1980 nomination. Joseph Biden worries that a deteriorating economy might make it impossible for him to pass his legislative agenda and win a second term.
Both presidents faced significant outside threats. Carter inherited the Opec – a very familiar acronym to people at the time – oil crisis from his discredited predecessor who was nearly impeached, and Biden inherited a pandemic from his predecessor who was impeached twice. Both of these crises led to economic problems: not enough gas to support the American lifestyle in the 70s and shortages of many goods due to supply chain problems in this decade.
Both presidents faced foreign challenges that threatened to disrupt the economy. In the 70s, Japan appeared to be replacing the United States as the industrial leader of the world – symbolized by the Sony sign at the top of what used to be the Pan American Building. People complained that Japan did not play fair, flooding our market with their cars but not allowing our cars to enter their market. Not that many people wanted our gas-guzzling, shoddily produced Fords and Chevrolets.
In the 2010s, the major economic threat appears to be China, which, some say, steals our intellectual property, underpays its workers and does not abide by international labor or environmental standards.
And both presidents came to power in the aftermath of foreign wars that ended badly. In Carter’s time, the defeat in Vietnam preoccupied foreign policymakers, and Biden recently presided over the end of the seemingly futile American effort in Afghanistan.
One can always find parallels, but the country was different during the tenure of outsider Carter than it is in the administration of insider Biden. In the 70s, baby boomers entering the labor force found it hard to get jobs. In the 2010s help wanted signs seem to be everywhere.
Simply put, things were worse then than they are today, and it might help us to remember that in the present overwrought atmosphere in which pundits pontificate about a return to the bad old days of the 1970s.
Jimmy Carter presided over the end of the postwar economic boom that was unprecedented in its dimensions. Real weekly wages rose nicely from 1955 to 1973 and then began a decline that undermined the American standard of living and led to major changes as more women joined the labor force. In 1974-75 at the end of the Nixon and the beginning of the short-lived Ford administration the unemployment rate reached 9%, the highest it had been since the Great Depression. Meanwhile, the American cost of living increased 133% between 1972 and 1982. Between 1973 and 1974 and again between 1974 and 1975 the gross national product failed to grow enough to counter the inflation rate and real GNP declined.
Things grew worse as the 70s advanced. On 17 December 1978, Opec representatives announced their decision to raise export prices by 14.5% during the coming year. That led to even more severe economic problems that have no present-day parallels. The consumer price index in May and June 1979 disclosed a 12.5% annual inflation rate.
Average gasoline prices had risen 55% since January, and oil prices had doubled in just over half a year. By 23 June 1979, the American Automobile Association reported that 58% of the nation’s gas stations were closed because of low inventories. Fistfights broke out among frustrated customers in gas lines. It was not an insurrection like the one last January, but it marked a similar breakdown in order.
The respected social analyst Michael Harrington said that the 70s shattered the conventional wisdom of the 1960s that the government could manage the economy, just as the 1930s caused people to reconsider their faith in the private sector’s ability to prevent a depression.
In other words, the 70s marked an era of major change – away from the optimism of the postwar era and toward a new despair and cynicism that, in a sense, has never left. Nothing so fundamental or so transforming is happening now.
The catalogue of problems that people faced in the 1970s included double-digit inflation, double-digit unemployment, 20% mortgage rates, the collapse of the manufacturing sector, a 600% jump in the price of gold, and a 300% rise in the price of basic consumer goods. Prices may be going up at the supermarket, but we are not nearly there yet.
Just think of what happened to Youngstown, Ohio, when the bottom fell out of the steel industry in the summer and fall of 1977. The closing of the Youngstown steel mills caused the city to lose more than 25,000 of its residents, reducing its 1980 population to 115,511 (from a high of 170,000 in 1930). The city lost its moniker of Steeltown USA and became dependent on its hospitals and other non-profits for its survival. All one can now see of the steel plants in the Mahoning River Valley are slabs of concrete.
So, no matter how often the experts invoke the specter of stagflation, don’t look for a return of the economic conditions of the 1970s. We have too far to fall.
Edward Berkowitz writes on American social welfare policy, recent American history, and American cultural history
Source: Read Full Article
