Transcript Changes in the American Economy: The Energy Crisis

Changes in the American
Economy:
The Energy Crisis,
Deindustrialization, and
the Service Economy
Stagflation
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Throughout 1970's, the American
economy was plagued by the
unprecedented combination of soaring
prices, the high unemployment, and
low economic growth.
Economists dubbed the phenomena
"Stagflation," a period of rising prices
in a stagnant economy.
The high standard of living in the US
following World War II 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.
The Oil Crisis Begins
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By the late 1950's, the demand for oil in the United States outstripped domestic
production capabilities.
By 1970's, the US imported a third of its oil, making the American economy vulnerable
to geopolitical upsets in the Middle East.
The Oil Crisis Begins
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On October 6, 1973, the Yom Kippur
War began when Egypt and Syria
attacked Israel from two sides.
The US airlifted supplies to Israel,
prompting OPEC to levy an oil
embargo against Israel's allies that
lasted until March 18, 1974.
The Oil Crisis Begins
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Gas prices suddenly doubled and fueling stations frequently ran out of gas.
The oil crisis effected almost every sector of the economy .
Coping with the Energy Crisis
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The oil embargo led to dramatically
increased prices for all types of fuel,
including 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
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President Nixon appealed to the nation
to make sacrifices in the name of
conserving energy.
He warned that the country was
"heading toward the most acute
shortages of energy since World War
II.”
The 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
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Nixon also urged the use of coal and
nuclear power rather than the limited
commodity of oil.
He 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
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Gerald Ford inherited an economy in
crisis when replaced Richard Nixon in
August 1974.
Ford lacked the economic vision to
curb the effects of stagflation.
Ford attempted to initiate a grassroots
anti-inflation campaign, but the Whip
Inflation Now (WIN) program was
little more than a public relations
maneuver.
Skeptical Americans began wearing the
red and white WIN buttons upside
down to stand for "No Instant
Miracles."
After a few months, the WIN effort
was abandoned as sluggish industrial
and business productivity along with
rampant unemployment compelled
Ford to focus on broader antirecessionary measures.
Economic Polices of President Ford
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As a Republican, Ford believed that a
balanced federal budget and reductions
in government spending were the best
way to curb inflation.
Democrats in Congress favored
increased federal spending as a
stimulus to economic and job growth.
Ford admitted in 1975, “the state of
the Union is not good.”
Ford vetoed more major bills than any
president in the 20th century.
Despite the legislative battle,
recessionary pressures eased somewhat
by 1976.
Deindustrialization
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"Deindustrialization" refers to a shift
away from a manufacturing-based
economy.
In the United States and Europe,
deindustrialization has preceded a shift
to a service-based economy.
The trend toward deindustrialization
began in the 1960's and continues into
the present day, as the service sector
overtakes the manufacturing sector.
Deindustrialization
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During the 1970's, the oil crisis and the falling productivity of the US manufacturing
sector sped the decline of several industries, including steel, automobiles, and
electronics.
The industrial production index measures the total output of US factories. A decline in
production indicates slow economic growth.
Deindustrialization
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Increases in foreign industrial efficiency allowed Europe, Asia, and Latin America to
effectively compete by producing quality goods for a lower cost.
Many American companies began outsourcing labor to foreign countries to remain
competitive.
This chart illustrates the balance of trade. The United States increasingly imports more
than it exports.
Deindustrialization
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Structural unemployment often spikes
during deindustrialization.
In this case, "structural
unemployment" refers to
unemployment that occurs during the
transition from a manufacturing to a
service economy because workers lack
skills, education, experience, or
proximity to the new types of jobs
available.
The Decline of Organized Labor
Membership in AFL-CIO Unions
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AFL-CIO lost over 4 million members between 1970 and 1982. Along with declining
membership came decreased political power for organized labor.
The Service Economy
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Economies in the developed world typically change over time. Agrarian economies
first transition to industrial, then develop into service economies.
Service industries include retail, wholesale, banking, public utilities, entertainment, etc.
This graph shows the eclipse of the manufacturing sector by the service sector by the
early 1980's. The trend toward deindustrialization resulted in a service-based economy.
The Rustbelt and the Sunbelt
The Rustbelt and the Sunbelt
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The economic region known as the
Manufacturing Belt became known as
the Rust Belt by the 1970's, as
manufacturing and heavy industry
declined due to high energy costs and
foreign competition.
Cities in the Rust belt were subject to
unemployment, underemployment in
low-paying service jobs, "white flight"
to the suburbs, and general outmigration as manufacturing jobs
moved south and abroad.
The Rustbelt and the Sunbelt
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Meanwhile, Sunbelt states in the West and Southwest continued to enjoy the economic
growth trend spurred by Cold-War defense spending and an influx of retirees.
The South profited from a booming agribusiness industry and the California's Silicon
Valley became the hub of the technology industry.
As population in the Sunbelt increased, so did the region's political influence.
Working Women
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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
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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 lowwage, non-union industries.
The Feminization of Poverty
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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
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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 President
Carter
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As a rhetorical device during 1976
presidential campaign, Governor
Jimmy Carter combined the rate of
inflation (6%) and unemployment (8%)
into a "Misery Index" of 14.
At first, Carter modeled his economic
recovery program after FDR's New
Deal by advocating tax cuts, public
works, and employment programs to
stimulate the economy.
The Democratic Congress responded
with legislation in accordance with the
President's plan, but as unemployment
decreased, inflation continued to rise.
Economic Policies of President
Carter
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In response, Carter tried an almost opposite approach. He attempted to curb inflation
by slashing government spending, deregulating industries, and implementing wage and
price controls.
Many Democrats were alienated by what they perceived as a shift to the right in
presidential policies.
Despite the President's sincere efforts, the "Misery Index" soon rose to 21.
President Carter and the Continuing
Energy Crisis
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Although the oil embargo had ended
and gas lines had ceased by Carter's
presidency, the threat created by US
energy dependence loomed on the
horizon.
Carter characterized the energy crisis as
"the moral equivalent of war," which
critics derisively nicknamed "meow."
His calls for sacrifice and conservation
were opposed by the influential oil and
auto industries, and accordingly the
subsequent National Energy Act of
1978 focused on increasing domestic
production rather than conservation.
President Carter and the Continuing
Energy Crisis
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Carter was successful in creating the Department of Energy as a cabinet-level position,
and he continued to try and set an example for citizens by conserving energy in the
White House.
President Carter had solar panels installed atop the White House in 1979 (which
President Reagan later removed).
President Carter and the Continuing
Energy Crisis
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Following the 1979 Islamic Revolution
in Iran, Ayatollah Khomeini stopped
all oil shipments, further exacerbating
US energy woes.
In July the president delivered a
televised address that became known as
the "Malaise Speech," in which he
entreats Americans to share the
responsibility of energy conservation.
The public and the press responded
defensively and Carter's approval rating
plummeted.
Although the speech was a frank
diagnosis of the country's ills, Carter
was criticized for "blaming" the
American people and offering few
solutions.
Photo and Graph Citations
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Slide 2: http://www.time.com/time/covers/0,16641,19701214,00.html
Slides 3-5: http://facstaff.bloomu.edu/wblee/macdata1.htm
Slide 6: http://www.eere.energy.gov/vehiclesandfuels/images/facts/fotw376a.jpg
Slide 7: http://www.businessweek.com/1999/99_40/70frame/70s.htm
Slide 8: http://inflationdata.com/inflation/images/charts/OilPrices.gif
Slide 9: http://images.encarta.msn.com/xrefmedia/sharemed/targets/images/pho/t049/T049147A.jpg
Slide 10:http://img.timeinc.net/time/magazine/archive/covers/1973/1101731203_400.jpg
Slide 11: http://tesla.liketelevision.com/liketelevision/images/lowrez/tdih1017.jpg
Slide 12: http://money.cnn.com/2006/05/18/commentary/wastler/wastler/index.htm
Slide 13: http://www.pbs.org/wgbh/amex/vietnam/whos/images/whos-ford.jpg
Slide 14: http://www.library.pitt.edu/labor_legacy/deindustrializationDMS.htm
Slide 15: http://www.economagic.com/emcgi/charter.exe/feddal/b00004+1969+1990+0+1+1+290+545++0
Slide 16: http://www.econedlink.org/lessons/EM208/images/chart3.gif
Slide 17: http://www.library.pitt.edu/labor_legacy/images/deindustrializationBILL2.jpg
Slide 18: http://www.afscme.org/images/ffch1.gif
Slide 19: http://www.uaw.org/publications/jobs_pay/03/no1/pics/compare01.gif
Slide 21: http://www.pacpubserver.com/new/news/images/roeblingmill.jpg
Slide 22: http://wps.ablongman.com/wps/media/objects/31/32716/figures/DIVI712.jpg
Slide 23:
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Slide 24: http://www.breaktheglassceiling.com/images/graphs/narrowing-wage-gap.jpg
Slide 25-26: http://www.bsos.umd.edu/socy/vanneman/socy441/trends/fert.html
Slide 27: http://img.timeinc.net/time/magazine/archive/covers/1976/1101761115_400.jpg
Slide 28: http://www.house.gov/budget_democrats/images/presbudgets/fy2000/ch199.jpg
Slide 29: http://www.wku.edu/Library/onlinexh/sanders/cartoons/periscope/oneill_congress_perks.jpg
Slide 30: http://www.radford.edu/~wkovarik/envhist/RenHist/3.solar.pix/U1968698-Carter.6.20.79.jpg
Slide 31: http://img.timeinc.net/time/magazine/archive/covers/1979/1101791126_400.jpg