what economic conditions or problems led to a stagnant economy during the 1970s

Written by: Gregory L. Schneider, Emporia Land Academy

By the end of this section, you will:

• Explain the causes and effects of continuing policy debates about the role of the federal government over time

The American economy in the 1970s suffered from high inflation, high unemployment, an energy crisis, a declining dollar, high authorities spending, and jobs going overseas because of deindustrialization that had been accelerating since World War Two. In 1972, Washington Post columnist Joseph Kraft labeled the miracle "stagflation." It would have taken a expert leader to deal with these problems simultaneously affecting the American economy. However, Richard Nixon was distracted by the Watergate scandal and forced to resign in August 1974; Gerald Ford was a caretaker president who pardoned Nixon of all crimes related to Watergate and thus seemed to ensure his own electoral defeat in 1976. Jimmy Carter, an outsider in Washington, DC, who had served one term as Georgia'southward governor earlier announcing his candidacy for the presidency in 1974, won only a narrow victory and became linked to the brackish economy, a factor contributing to his defeat by Ronald Reagan in 1980.

Few economists could explain the simultaneous rise of inflation and unemployment. The reigning orthodoxy of British economist John Maynard Keynes was that in that location should be a tradeoff between aggrandizement and unemployment: when one was up, the other was downwards. Only this thought did not seem to apply in the 1970s as, inexplicably, both indicators rose at the aforementioned time, slowing economic growth to i.3 percent from 1973 and 1982. Stagflation challenged the very notion of Keynesian stimulus, the idea that the government could "prime the pump"of the economic system through increased spending, considering additional government spending or revenue enhancement cuts (to encourage individual spending) would further fuel inflation, whereas decreased government spending or tax increases would exacerbate stagnation. I group of economists wanted to stimulate economic growth through tax cuts, providing an incentive to investors that they believed would contribute to economic growth. This "supply-side revolution," driven by tax cuts, was the primary policy behind the Reagan era of the 1980s.

John Maynard Keynes was one of the virtually influential economists of the twentieth century.

What had caused high aggrandizement in the first identify? Years of authorities spending on the Vietnam War and Cracking Gild domestic programs of Lyndon Johnson, combined with Johnson'south refusal to raise taxes to pay for the costs of authorities, led to massive inflationary pressures with quickly increasing prices in the early 1970s. Large increases in government spending and the decision of the Federal Reserve Board to keep interest rates low (from 1969 until 1979) led to the "corking aggrandizement" every bit prices soared throughout the decade. Nixon's attempt to deal with inflation was to employ wage and toll controls on the economic system. Dubbed the New Economic Policy, the phased-in controls did cipher to tamp down inflation, and when the initial controls were lifted, inflation skyrocketed.

Added to this was the emergence of global competitors from Nihon to the European Common Market (the predecessor of the European Marriage), which challenged American potency in manufacturing during the postwar period, specially in steel and automobiles. Nothing hurt more than the emergence of the free energy cartel known as OPEC (Organization of the Petroleum Exporting Countries). As western economies became more dependent on imported foreign oil, OPEC showed its power past embargoing oil in retaliation for America'south back up of Israel in the Yom Kippur War in 1973, and again during the 1979 Iranian revolution. Each time, oil prices skyrocketed, leading to gasoline lines, shortages, and higher prices for consumers, manufacture, and transportation. American consumers used to cheap gasoline now saw a gallon of gas triple in price.

Jimmy Carter came to the presidency determined to go a handle on these problems. A detail-oriented manager, Carter was a business organization executive and not beholden to the traditional spending policies or dominant liberalism of the Democratic Political party. A fiscal conservative consumed with decision-making government spending, he likewise believed the administration could control inflation, in part by cutting regulations and, therefore, prices on the airline, trucking, and railroad industry. Thus, he oft antagonized special interests and those on Capitol Hill who believed in the continuation of the status quo.

Jimmy Carter framed himself equally a Washington outsider who would shake up the status quo. For example, subsequently his inauguration, he bankrupt tradition by walking, non riding, to the White House with his wife.

Carter tackled the energy consequence first, a costly mistake. Wearing a cardigan sweater, he addressed the nation in February 1977, asking Americans to decline their thermostats to 65°F at dark. He also endorsed having a national 55 mile-per-hour speed limit and conserving energy equally much as possible. He chosen the energy crisis "the moral equivalent of state of war," but free energy was not a height priority for the electorate, whereas jobs and inflation were. The neb Carter endorsed took more than ii years to pass Congress, which haggled over cut regulations on natural gas production and other difficult issues.

Carter urged cuts in government spending, refusing to endorse a congressional jobs neb that would have triggered government-funded employment if the unemployment rate were greater than 5 pct. He also shook up the Federal Reserve Board in 1978 by appointing Paul Volcker, who was determined to get rid of inflation through interest-rate increases. This would make money expensive to borrow and would thereby slow economic action and rising prices. Carter backed the policy and did not undercut Volcker'south efforts. The result was interest rates every bit loftier as xviii percent on consumer loans by 1980, and this helped push the economic system into a recession but as Carter was running for reelection.

Before that election, Carter was worried about polls that showed a crunch of conviction among the American people. Pat Caddell, Carter's young pollster, had already told him the electorate was losing faith in democracy and the authorities's ability to deal with problems. The United States had withdrawn from the Vietnam War and done aught to foreclose the Northward Vietnamese from uniting the country nether communist control in 1975. The resulting Vietnam "malaise" had suggested at that place was little positive the United States could do in the world anymore. The polling data told Carter that many Americans no longer believed the future was theirs to make.

Jimmy Carter working at the White House in the 1970s.

Carter invited dozens of American politicians and ordinary citizens to the presidential retreat at Camp David to voice their concerns. They not simply told him about the problems the nation was facing with energy but, as Carter summed it up, they said, "Mr. President, we are confronted with a moral and spiritual crisis." Carter took these criticisms to heart, and on July xv, 1979, he addressed the nation from the Oval Part about the crisis of conviction in the nation. Although he never used the term, critics presently dubbed this address the "angst" speech.

Information technology was equally honest and soul-searching a speech as any modernistic president ever delivered. Carter called the problems facing the nation a "crunch of confidence":

"It is a crunch that strikes at the very heart and soul of our national volition. We can meet this crunch in the growing uncertainty of the meaning of our own lives and in the loss of unity and purpose every bit a Nation. The erosion of confidence in the future is threatening to destroy the social and political textile of the nation."

Carter said the malaise was caused by a profound distress, kickoff a generation earlier, at the fact that the government seemed no longer to work for a majority of Americans. Citing Caddell's polls, Carter said: "A bulk of our people believe that the side by side 5 years will be worse than the past five years. 2-thirds of our people exercise non even vote. The productivity of American workers is really dropping, and the willingness of Americans to save for the future has fallen below that of every western nation." Carter called for people to have "organized religion in each other, faith in our ability to govern ourselves, and organized religion in the future of this Nation." He urged Americans to say something good about the country in one case in a while.

Although his White Firm staff was leery of the speech and of the honesty with which Carter described the problems facing the nation, polls later on were very positive. But the next year, interest rates were rising, industries collapsing, and joblessness increasing, all while Carter was in the midst of the 444-day hostage crisis in Iran that strained the final year of his presidency. The words of his earlier speech rang hollow and were hands mocked every bit the "malaise speech communication." Equally Reagan said, "people who talk about an age of limits are actually talking about their own limitations, not America'due south." Ane scholar who summed upward the speech noted that Carter had run in 1976 promising "a government as good as the people" but in the "malaise speech" suggested that the American people themselves were no good.

Few politicians could have survived the tumultuous bug Carter faced in his four years in office. Given an opponent like Ronald Reagan, who was optimistic, touted plans to develop economic growth and confront the Soviet Wedlock, and possessed of a sunny organized religion in America, Carter was easily defeated.

Ronald Reagan won the presidential election of 1980 in a landslide victory over the incumbent Jimmy Carter. (credit: "Presidential Balloter Votes Results 1980" by Bill of Rights Institute/Flickr, CC Past 4.0)

Reagan led off his campaign with the quip: "A recession is when your neighbour loses his task. A depression is when you lose yours, and a recovery is when Jimmy Carter loses his." The malaise speech did not cause Carter'due south defeat, simply politically information technology did not help him, specially when things grew worse later he delivered it.

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Review Questions

1. As a nontraditional Democrat, President Jimmy Carter believed he should

1. increase regime spending
2. cutting government spending
3. expand the welfare state
4. support federal jobs programs

2. A primary economic concern of the American people during the Carter administration was

1. oil and energy costs
2. federal government spending
3. new international economical competition, especially with Nihon
4. end of the Bretton Woods organisation

3. Jimmy Carter'south economic policies included all the following except

1. the passage of a jobs bill that called for government-funded employment
2. the shaking up of the Federal Reserve with "aggrandizement militarist" leadership
3. cuts in government spending
4. the goal of becoming an free energy-efficient nation

4. In interpreting his ain pollster'south data, President Carter believed

1. Americans wanted the United States to remain in the Vietnam War
2. many Americans felt the future was not theirs to make whatsoever longer
3. the federal government could solve most domestic problems
4. America could unilaterally handle all globe crises, given the funding

5. In his "malaise voice communication," President Carter cited poll information suggesting the public believed

1. they could overcome whatever obstruction they faced
2. the economic problems faced by the United States could be easily solved
3. the side by side five years would be worse than the previous five years
4. the increase in interest rates would slow inflation

vi. Overall, President Carter's "angst speech communication"

1. was initially accepted by Americans, but came to hurt his chances of reelection
2. was accepted by the American people, helping to turn around a slow economy
3. was rejected by the American people outright every bit a hurtful and elitist voice communication
4. was reluctantly approved by Americans but the solutions proposed in it failed

Gratis Response Questions

1. Explain the principal causes of the "Not bad Inflation" and the worsening economy of the 1970s.
2. Explicate the controversy created by President Carter's "malaise" speech.

AP Practice Questions

"In a nation that was proud of hard piece of work, potent families, close-knit communities, and our organized religion in God, as well many of us now tend to worship cocky-indulgence and consumption. Homo identity is no longer defined past what one does, but past what one owns. But we've discovered that owning things and consuming things does not satisfy our longing for meaning. We've learned that piling up material appurtenances cannot fill the emptiness of lives which have no confidence or purpose.

The symptoms of this crisis of the American spirit are all effectually u.s.. For the first fourth dimension in the history of our country a majority of our people believe that the side by side five years volition be worse than the past v years. Two-thirds of our people exercise not even vote. The productivity of American workers is actually dropping, and the willingness of Americans to salve for the future has fallen below that of all other people in the Western globe."

President Jimmy Carter, Energy and the National Goals – A Crisis of Confidence, July 15, 1979

Refer to the excerpt provided.

1. Which of the following was a pregnant bear on of the voice communication excerpted here?

1. The economy began a deadening but steady upswing.
2. The Islamic republic of iran hostage crisis came to a sudden and dramatic conclusion.
3. Ronald Reagan won the next presidential ballot by a landslide.
4. Wage and price controls were implemented by the federal government.

2. Which of the post-obit post-Earth War II developments contributed most to the situation described past President Carter in the excerpt?

1. The Cold War
2. Consumerism
3. Busing to reach integration
4. The "new" industrial revolution

3. Which of the following economic policies did President Carter support as a solution to the issues described in the extract?

1. The use of federal authority to redistribute wealth through taxation
2. Federal government creation of jobs such as those in the New Deal
3. A return to laissez-faire economics
4. Federal deregulation of major industries

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Primary Sources

Jimmy Carter, Address to the Nation on Free energy, April 1977. https://millercenter.org/the-presidency/presidential-speeches/april-18-1977-address-nation-free energy

Jimmy Carter, "A Crisis of Confidence" speech, July 1979. https://www.americanrhetoric.com/speeches/jimmycartercrisisofconfidence.htm

Suggested Resources

Bliven, Carl Due west., Jr. Jimmy Carter'due south Economic system: Policy in an Age of Limits. Chapel Hill, NC: University of North Carolina Printing, 2001.

Domitrovic, Brian. Econoclasts: The Rebels Who Sparked the Supply-Side Revolution and Restored America's Prosperity. Wilmington, DE: ISI Books, 2009.

Eizenstat, Stuart E. President Carter: The White House Years. New York: Thomas Dunne Books, 2018.

Hayward, Steven F. The Age of Reagan: The Fall of the Old Liberal Order, 1964-1980. New York: Prima Publishing, 2001.

Horowitz, Daniel. Jimmy Carter and the Energy Crisis of the 1970s: The "Crisis of Confidence" Speech of July 15, 1979. Boston: Bedford, 2004.

Samuelson, Robert J. The Great Inflation and Its Aftermath: The Past and Future of American Abundance. New York: Random House, 2008.

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Source: https://billofrightsinstitute.org/essays/jimmy-carter-and-the-malaise-speech

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