Economic Patterns of the 1970’s and 80’s by Jason Lazar, Chris D’Arpa, and Danny Quackenbush

Economic Patterns of The 70’s and 80’s

Written By Jason Lazar, Chris D’Arpa, and Daniel Quackenbush

 

The Energy Crisis

 

The energy shortage occurred because of a worldwide oil shortage. Nations around the world started to conserve their non-renewable oil supplies in hopes to have some still available in the near future. Nations started to depend on the Middle East for oil because of their sheer abundance of it. During this oil shortage, the Arab and Israel states had a war called the Yom Kippur War. The Arabs lost because the west had helped out Israel. The Arabs then put and oil embargo on the west called the “Arab Oil Embargo.” Of the participants of the world were the largest oil producers such as Saudi Arabia, Iraq, and Kuwait. The gas prices would sky rocket, quadruple even. This devastated the American economy. This would lead to the Americas having stagflation. Stagflation is a word used to describe a period with a high rate of inflation combined with an economic recession. This would bring the U.S. gas prices to go from 35 cents a gallon in the beginning of 1970 to around 90 cents near the end of the 70s. The embargo would end less than a year later in March of 1974 but the effects would stay till the end of the century. Source: ElcoUSHistory.com/economics1970

 

Inflation

 

The inflation of the 1970s was terrible. There was a mix of a high demand and a low supply of things such as jobs, houses, cars etc. The reason for this high inflation was because no one wanted to take office as the Federal Reserve chairman. Also many people under estimated the effects of the inflation problems. No one really had a mandate to stop the inflation either. So what happened was that the prices kept on rising and rising. Another thing that caused inflation was that the investors and creditors had no confidence in the bank system. The lack of credibility and commitment cause inflation to rise. The three main reasons toward inflation are as follows:

1. The United States had a burst of inflation in the 1970s because until the 1980s no influential policy makers until Paul Volcker became Chairman of the Federal Reserve who placed a sufficiently high priority on stopping inflation.

2. The policies of the 1960s left economic policy makers of the 1970s with painful dilemmas. They were “Dealt with bad cards” These “bad cards” mixed with bad luck led to high inflation.

3. The last cause was that the great depression made it hard to believe that the business cycle was a fluctuation around rather than a shortfall below potential output and potential employment. Source: Investopedia.com/articles/economics/1970/inflation

 

Reaganomics

 

Reaganomics refers to the economic policies promoted by the U.S. President Ronald Reagan during the 1980’s. These policies are commonly associated with supply-side economics. Supply side economics advocated reducing tax rates so people could keep more of what they earned. The theory was that lower tax rates would induce people to work harder and longer, and that this in turn would lead to more saving and investment, resulting in more production and stimulating overall economic growth. Source: UShistory.org

 

 

Recessions

 

The nation endured a deep recession throughout 1982. Business bankruptcies rose 50 percent over the previous year. Farmers were especially hard hit, as agricultural exports declined, crop prices fell, and interest rates rose. But while the medicine of a sharp slowdown was hard to swallow, it did break the destructive cycle in which the economy had been caught. By 1983, inflation had eased, the economy had rebounded, and the United States began a sustained period of economic growth. The annual inflation rate remained under 5 percent throughout most of the 1980s and into the 1990s. Source: ElcoUSHistory.com/economics1970

 

Connection with Today’s Economy

 

Today’s economy is similar in a way to the economy of the 1970’s and 80’s. There is a high unemployment rate and high prices for oil. Oil is becoming scarcer and people are starting to depend on different sources of energy. The economy is slowly recovering, but there are still a lot of people jobless. The economy of today is quite similar to the economy of the 1970’s and 80’s.