Title: Changes in the American Economy: The Energy Crisis, Deindustrialization, and the Service Economy
1Changes in the American Economy The Energy
Crisis, Deindustrialization, and the Service
Economy
2Stagflation
- 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.
3Stagflation
Compare the rates of inflation between 1972 and
1980 to those of the 1980's and 1990's.
4Stagflation
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.
5Stagflation
In 1975, unemployment reached almost 9, the
highest level since the Great Depression at that
time.
6The Oil Crisis Begins
- 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.
7The Oil Crisis Begins
- 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.
8The Oil Crisis Begins
- Gas prices suddenly doubled and fueling stations
frequently ran out of gas. - The oil crisis effected almost every sector of
the economy .
9Coping with the Energy Crisis
- 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.
10Coping with the Energy Crisis
- 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.
11Coping with the Energy Crisis
- 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.
12Economic Policies of President Ford
- 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 anti-recessionary measures.
13Economic Polices of President Ford
- 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.
14Deindustrialization
- "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.
15Deindustrialization
- 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.
16Deindustrialization
- 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.
17Deindustrialization
- 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.
18The Decline of Organized Labor
Membership in AFL-CIO Unions
- AFL-CIO lost over 4 million members between 1970
and 1982. Along with declining membership came
decreased political power for organized labor.
19The Service Economy
- 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.
20The Rustbelt and the Sunbelt
21The Rustbelt and the Sunbelt
- 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 out-migration as manufacturing jobs moved
south and abroad.
22The Rustbelt and the Sunbelt
- 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.
23Working Women
- 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.
24Working Women
- 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 low-wage, non-union industries.
25The Feminization of Poverty
- 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.
26The Feminization of Poverty
- 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.
27Economic Policies of President Carter
- 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.
28Economic Policies of President Carter
- 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.
29President Carter and the Continuing Energy Crisis
- 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.
30President Carter and the Continuing Energy Crisis
- 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).
31President Carter and the Continuing Energy Crisis
- 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.
32Photo and Graph Citations
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0frame/70s.htm - Slide 8 http//inflationdata.com/inflation/image
s/charts/OilPrices.gif - Slide 9 http//images.encarta.msn.com/xrefmedia/s
haremed/targets/images/pho/t049/T049147A.jpg - Slide 10http//img.timeinc.net/time/magazine/arch
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vision/images/lowrez/tdih1017.jpg - Slide 12 http//money.cnn.com/2006/05/18/comment
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r.exe/feddal/b00004196919900112905450 - Slide 16 http//www.econedlink.org/lessons/EM208
/images/chart3.gif - Slide 17 http//www.library.pitt.edu/labor_legac
y/images/deindustrializationBILL2.jpg - Slide 18 http//www.afscme.org/images/ffch1.gif
- Slide 19 http//www.uaw.org/publications/jobs_pa
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cts/31/32716/figures/DIVI712.jpg - Slide 23 http//occawlonline.pearsoned.com/boo
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