America's Changing Economy During The 1970s

The nation’s economic power and international influence during the 1970s was almost entirely affected by the changing economy. The events and trends that came with America shifting away from a manufacturing market resulted in high unemployment and inflation. The nation faced competition from Europe and Asia as their economies grew with the help of U.S. aid. The nation eventually hit stagflation, and the inability of any U.S. President to combat it led to a decrease in confidence. Tensions in American-Middle Eastern relations also led to Americans losing faith in its government and leaders, eventually leading to a new way of thinking all together. After WWII, America promoted the economic growth and subsidized the defenses of Japan, Germany, South Korea, and Taiwan, allowing them to spend more energy and time fueling their economies. Soon, America was competing against the more productive markets of these nations, resulting in many American corporations being put out of business. Union workers were hit hard, as their positions were eliminated completely or they were forced to shift to lower wage
jobs. In addition to this, two oil shocks hit America during the late 1970’s, causing oil prices to quadruple. Coupled with an overall energy shortage, the U.S. encountered a scarcity of raw materials, and the general prices of everything soared. Soon, America faced a new phenomenon called stagflation, the combination of unemployment and inflation. All three presidents of the era did their best to combat stagflation, but none succeeded. Nixon’s goal was to end inflation, and to do this he ended the dollars convertibility into gold, and when inflation returned, he imposed price controls. The price controls produced food shortages, and they were eventually ended by 1974. Ford proposed his WIN (Whip Inflation Now) plan, which encouraged the public to conserve energy, but it had little effect on the nation’s economy. His successor, Carter, freed banks from congressional control, which caused interest rates to rise, rents to double, small businesses to go under, and tuition and unemployment to skyrocket. Because unemployment and inflation were previously believed to be inversely proportional, when that relationship broke down it undermined the entire idea of government intervention. The American people lost faith that the government could actually solve macroeconomic problems. Many began to believe that individual choices create the course of the economy rather than government policies.

On an international scale, U.S.
tensions with the Middle East hit a previously unmatched high. America’s need for oil fueled its relationship with Iran and it’s support for the shah. The shah, however, was widely unpopular in Iran, and America’s support fueled anti-American sentiments in Iran. These sentiments boiled over during the Iranian Revolution in 1979, and when the shah received cancer treatment in the U.S., it prompted the storming of the U.S. embassy in Tehran and the capture of 53 Americans. Dubbed the Iranian Hostage Crisis, the captured Americans were not released until Reagan’s inauguration, 444 days later. Carter’s inability to free the Americans resulted in him being viewed as weak by the nation. Americans lost faith in the government’s ability to protect and look after them, further challenging their confidence in the nation’s international
influence.

The 1970s in the U.S. was a period of great economic struggles that no president seemed to be able to ease. The American people lost faith in their government due to its lack of ability to create change. By the 1980s a majority of Americans agreed with the statement “the people running the country don’t really care what happens to you”. The stagnant economy and failures with international affairs clouded the nation in misery and desperation. During the 1970s, Britain suffered some of the same post-war economic problems as the U.S. In the early 70s, their economy suffered from labor strikes instead of inflation, but in 1973 they were hit by oil crisis just as the U.S. was. Near the end of the 70s there was another break down in the unions and it lead to the Winter of Discontent. During this time, the unemployment rates skyrocketed, mirroring those in America.