Transcript AMH Chapter 21 Section 3

Chapter 21
Section 3
The Economic Crisis of the 1970s
Economics Problems Under Johnson
• Economic problems
started in the mid1960s under President
Johnson.
• During the Vietnam
War, he increased
government spending.
This led to inflation, or a
rise in the cost of
goods.
Oil Dependency
• The United States also
had become dependent
on oil imports, from
areas such as Africa and
Middle East.
OPEC
• In the early 1970s, the
Organization of
Petroleum Exporting
Countries (OPEC) began
using oil as a political
weapon.
• OPEC decided to
embargo, or stop
shipping, oil to
countries that
supported Israel.
Oil Embargo
• OPEC ended the
embargo a few months
after it began, but oil
prices continued to rise.
• Americans had little
money to spend on
goods.
– This caused a recession.
Stagflation
• By the 1970s U.S.
manufacturers faced
international
competition.
• Factories closed and
unemployment grew.
• Nixon faced stagflation,a
combination of inflation
and economic stagnation
with high unemployment.
Nixon’s Response
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•
•
•
Nixon tried to control inflation.
The government cut spending and raised taxes.
However, people opposed the idea of a tax hike.
Nixon then tried to get the Federal Reserve to
raise interest rates.
• He hoped this would reduce consumer spending.
– This plan failed.
• Nixon then placed a freeze on all wages and
prices.
– This plan also failed.
W.I.N.
• Inflation remained high
after Nixon resigned.
• Ford began a plan called
WIN—Whip Inflation
Now.
• He urged Americans to
use less oil and conserve
energy.
• Ford then tried cutting
government spending and
raising interest rates.
– Both plans failed.
Helsinki Accords
• Ford continued Nixon’s
foreign policy.
• In 1975 Ford and the
leaders of NATO and the
Warsaw Pact signed the
Helsinki Accords.
• They agreed to
recognize the borders of
Eastern Europe set up
at the end of World War
II.
Turning Against
• The Soviets promised to uphold basic human
rights.
– However, many Americans turned against Détente
because the Soviets failed to uphold their end of
the deal when they signed the Helsinki Accords.
Election of 1976
• The 1976 presidential
election pitted Ford against
Democrat Jimmy Carter.
• American voters saw Carter
as a moral and upstanding
individual who was
untainted by Washington
politics.
• Carter was a:
– Farmer
– One term governor of Georgia
– Trained as a nuclear engineer.
Carter’s Response to the Economy
• Carter dealt with the economy by increasing
government spending and cutting taxes.
• When inflation rose in 1978, he tried reducing
the money supply and raising interest rates.
– This was unsuccessful.
BIG Problem – Oil Dependency
• Carter felt the nation’s most
serious problem was our
dependence on foreign oil.
• To curb our dependence on
foreign oil, he proposed a
program to conserve oil and
to push for the use of coal
and renewable energy
sources.
• He also convinced Congress
to create a Department of
Energy.
Fixing the Oil Industry
• Many business leaders wanted Carter to end
regulations on the oil industry that made it
difficult for oil companies to make a profit, which
they could use to invest in new oil wells at home.
• Carter agreed to deregulate, but he created a
profit tax so that oil companies would not
overcharge consumers.
• Because of this tax, however, oil companies did
not have money for new wells.
Ambassador to the U.N.
• During Carter’s
presidency, he
appointed Andrew
Young as the first
African American
ambassador to the
United Nations.
U.S.A. should be honest
• Carter believed the
United States should deal
honestly with other
nations.
• President Carter decide to
remove a major symbol of
U.S. interventionism in
Latin America by turning
over control of the
Panama Canal to the
Panamanians.
Punishing the Soviet Union
• He pointed to the Soviet
Union as a violator of
human rights.
• When the Soviet Union
invaded Afghanistan in
1979, Carter placed an
embargo on the sale of
grain to the Soviet
Union and boycotted
the Summer Olympic
Games in Moscow.
Camp David Accords
• In 1978 Carter helped
set up the Camp David
Accords, a peace treaty
between Israel and
Egypt.
Iran 1979
• A few months later, Carter
faced conflict in Iran.
• The United States had
supported Iran’s ruler, the
Shah, but he was
unpopular with Iranians.
• In 1979 Iranian protesters
forced the Shah to leave.
• The Shah as the leader of
Iran was replaced by the
Ayatollah Khomeini after
the country was declared
an Islamic republic.
Freeing the Hostages
• The new government distrusted the United
States.
• In November 1979 revolutionaries took 52
hostages at the American embassy in Tehran.
• Carter tried unsuccessfully to negotiate for their
release.
• A rescue mission failed and resulted in the death
of eight American servicemen.
– The hostages were released the day Carter left office.