ECON 202 Discussion 1: 1970s US Economy

This discussion board post focuses on the economic history of the United States during the 1970s, specifically addressing the phenomenon of stagflation, which combined low economic growth with high unemployment and inflation. The discussion highlights the failure of the Phillips Curve during this period and the political factors that influenced the US economy, including the reconstruction of Western Europe and Japan, the oil crisis, and the weakening of the US dollar. The post also includes responses from other students, discussing the economic recovery in the 1980s and the economic boom of the 1990s.

Running Head: ECON 202 Discussion 1March 7, 2018
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“DISCUSSION-1
ECONOMIC HISTORY BY DECADE (1970’S)
IN USA”
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Running Head: ECON 202 Discussion 1March 7, 2018
Hi Everyone,
I am Tania Farhat and want to discuss on the most terrific economic decade of 1970’s in USA. It
is much interesting decade to me for discussing as it is the time of war and there is the great
inflation as well as the great recession. The stock market in this decade was in mess.
In this era it has been observed that the economy as seemed to be trapped into new nightmare
called “stagflation” because of the low economic growth along with high unemployment which is
known as “stagnation” in other words for the presence of high inflation rate. As per the “Phillips
Curve” which came in 1960’s, there is the stable inverse relationship between unemployment as
well as inflation. But in 1970’s this concept became totally wrong under the situation of recession.
Under recession time, the policymakers had to lower the interest rates by increasing the
government spending. This in turn lower taxes for stimulating the demand as well as bring down
the unemployment rate through the process of lowering the inflation rate. But when they were
dealing with inflation, there were two ways. One way was to raise the interest rates by lowering
the spending and the second way was to raise the taxes by reducing the demand for the purpose to
cool off the economy through the cost of increasing in unemployment rate. In this way, the high
inflation rate as well as the high unemployment rate situation has been appeared and that lack the
solution of the orthodox policy (Hacker, 2008).
In addition with this, I would like to discuss more about the political scenario of this decade as it
had a great impact on the economy of USA that time. The capitalistic United States government
took the encouragement for the reconstruction of economies belonging to Western Europe as well
as Japan in which the communism had got the superiority over capitalism. That had the great
impact on the enhancement of the competition among the US firms especially within the “core”
manufacturing industries such as steel as well as auto. The resistance worked upon the U.D
dominance within global South and those manufacturing companies has the access of cheap
materials as well as energy resources. In 1973, the embargo of Western buyers through the
petroleum-producing countries as well as the oil-price hike has got coincided with the low point
within US for protecting the military and also the political power in international platform after
their defeat in Vietnam (Heymann, 2018).
Furthermore, as per the world gold reserve, US had acquired only 29.9% of total reserve in 1970s
whereas it accumulation was 36.9% in European Community. Thereby, the position of the dollar
in US became weak whereas the Deutsche mark as well as Japanese yen had risen in significant
amount. There was total dollar crisis in the early of 1970’s and thus US had to suspend the
exchange of dollars for gold in rest of the countries. Gradually, the system of floating exchange
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Running Head: ECON 202 Discussion 1March 7, 2018
rate system has come up along with the complete ending of Bretton Woods’s system. This became
a significant symbol within on behalf of America’s “decline” (Dezhao, 2016).
References
Dezhao, C. (2016). The "Decline" of U.S. Economy: A Historical Comparison. Retrieved from
http://www.ciis.org.cn: http://www.ciis.org.cn/english/2011-11/18/content_4635120.htm
Hacker, J. S. (2008). The great risk shift: The new economic insecurity and the decline of the
American dream. London: oxford University press.
Heymann, M. (2018). 1970s: Turn of an Era in the History of Science?. Centaurus., 453-287.
Hi Susan Franklin,
I am also interested the changes had seen in economy in this era of 1970's. My specific interest in
this zone is about the situation was created in this era especially about the high unemployment
with high inflation rate. In that situation economy was seemed to be stagnant. Although all the
hard and crunch situations was overcome and finally USA has received a good leader as Jimmy
Carter as presidency in 1980 along with under the administration of Ronald Reagan all kind of
economic reformations finally recover the growth of United States. In this era the GDP growth has
found as the minimum as 3.2 % of annual change. This decade has shown the pathetic situation of
starvation as well as the unemployment all over the United Nation.
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Running Head: ECON 202 Discussion 1March 7, 2018
Hi Robert,
I support your views that the decade of 90's is considered as the economic boom in United States.
The GDP growth has increased from the low percentage like 1.8 to 3.14%. It remains increasing
throughout the decade and by 2000 GDP growth became 7.7%.
It is only possible as you suggested above because of the globalization as well as the technology
has changed the economy of the nation. Also for this growth only there was the stabilization of
employment and that has been observed in this decade only.
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Running Head: ECON 202 Discussion 1March 7, 2018
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