Discussion 9

Briefly discuss the term "stagflation" and the economic and energy crisis of the 1970s? What was the response by presidents in the 1970s?

The 1970s were a challenging time politically for the American population due to the progression of the Vietnam War and the growing disdain for the federal government. In addition, the U.S. economy also underwent a crisis that left many Americans unable to find jobs or have confidence in spending their money. The term “stagflation”, which means stagnant economic growth and high inflation, describes the economic conditions during this period. There were many factors in the cause of stagflation, with one being increased government spending during the Vietnam War. Another factor causing stagflation was the rise of oil prices in the U.S.. In 1973, the United States faced an oil embargo from the Arab Petroleum Exporting Countries due to supporting Israel in its war against Egypt. This significantly increased gas prices and resulted in long wait-times at gas pumps. The increase in gas prices also played a role in moving the U.S. from a manufacturing economy to a service economy. About 1 out of every 8 workers in America were employed in the automobile industry during the start of stagflation. However, the rising cost of gas led many Americans to turn toward foreign car manufacturers who produced cars with better gas mileage. Because of this, many American manufacturers had to lay off workers. The decline in manufacturing and rise of unemployment left many Americans with little confidence to spend their money on consumer goods, which contributed to stagnant economic growth. In 1971, the U.S. reached a merchandise trade deficit, which meant that it was importing more goods than it was importing. This deficit severely impacted manufacturing cities and caused many people to move out of cities toward sunbelt states.

The presidents of the 1970s had different methods of attempting to deal with the ongoing economic and energy crisis. President Nixon attempted to deal with inflation by taking the U.S. off of the gold standard and freezing wage increases. However, his successor Gerald Ford did not have much of a plan for combating stagflation. President Ford took office after Nixon resigned due to the Watergate scandal and was thrown into the economic crisis without a plan. He promoted the WIN campaign, which aimed to “Whip Inflation Now” by freezing prices and telling consumers to spend less and save energy. Ford’s campaign did not succeed in dealing with stagflation and left the next president to deal with the issue. President Carter primarily focused on energy conservation to deal with inflation and promoted ways of relying less on foreign oil, such as nuclear energy. Ultimately, none of these responses by presidents caused stagflation to immediately stop and the economic and energy crisis carried on into the 1980s.