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Transcript
Changes in the
American Economy:
The Energy Crisis,
Deindustrialization, and the
Service Economy
Stagflation



Combination of soaring
prices, the high
unemployment, and low
economic growth.
Post WWII high standard
of living in the US
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
Stagflation
In 1975, unemployment reached almost
9%, the highest level since the Great
Depression at that time.
Cost of Living Changes
Item
1970
1979
CHANGE
Postage
Stamp
0.06
0.15
+0.09
Bread
0.24
0.40
+0.16
Milk
1.32
1.50
+0.18
Gas
0.40
0.90
+0.50
Car
$2,500.00
$5,012.00
+2,512.00
House
$40,000.00
$73,327.00
+33,327.00
Income
$8,933.00
$10,991.00
+2,058.00
The Oil Crisis Begins


By the late 50's, U.S. demand for oil outstripped
domestic production capabilities.
By 1970's, the US imported a 1/3 of its oil =
American economy vulnerable to geopolitical
upsets in the Middle East.
The Oil Crisis Begins



October 6, 1973, the
Yom Kippur War
began when Egypt and
Syria attacked Israel
from
US airlifted supplies to
Israel
OPEC levied an oil
embargo against
Israel's allies that
lasted until March 18,
The Oil Crisis Begins


Gas prices suddenly doubled and fueling stations
frequently ran out of gas.
Crisis effected almost every sector of the economy .
Coping with the Energy Crisis



Oil embargo led to
dramatically increased
prices for all types of
fuel: gasoline, homeheating 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

President Nixon appealed to the
nation to make sacrifices in the
name of conserving energy.


Warned that the country was
"heading toward the most acute
shortages of energy since
World War II.”
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


Nixon also urged the
use of coal and
nuclear power
Asked Congress to
approve measures for
increased
exploration and
extraction of
domestic oil and to
relax environmental
standards that
impeded energy
Economic Policies of President Ford





Whip Inflation Now (WIN) program
 Public relations maneuver
 Encouraging personal savings
and disciplined spending habits
 Abandoned after a few months
Believed that a balanced federal
budget and reductions in
government spending were the best
way to curb inflation.
Democrats favored increased federal
spending as a stimulus to economic
and job growth.
Ford admitted in 1975, “the state of
the Union is not good.”
Despite the legislative battle,
recessionary pressures eased
somewhat by 1976.
Deindustrialization
Refers to a shift away from a
manufacturing-based economy.
Trend began in the 1960's and continues into the
present day, as the service jobs overtake
manufacturing jobs.



Causes structural unemployment = occurs during
transition from manufacturing to service
economy


Because workers lack skills, education, experience, or proximity
to the new types of jobs available.
Oil crisis and the falling productivity of
manufacturing sector sped the decline of several
Deindustrialization


Increases in foreign industrial efficiency allowed
Europe, Asia, and Latin America to compete by
producing quality goods for a lower cost.
Many American companies began outsourcing
labor to foreign countries to remain competitive.
The 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.
The Service Economy

Service industries include retail,
wholesale, banking, public utilities,
entertainment, etc.
The Rustbelt and the Sunbelt


Economic region known as
the Manufacturing Belt
became known as the Rust
Belt
Cities in the Rust belt were
subject to unemployment,
underemployment in lowpaying service jobs, "white
flight" to the suburbs, and
general out-migration as
manufacturing jobs moved
south and abroad.
The Rustbelt and the Sunbelt
The Rustbelt and the Sunbelt

Sunbelt states in the West and Southwest
enjoyed continued economic growth trend
spurred by Cold-War defense spending and an
Economic Policies of Carter



As a campaign tactic,
Governor Carter combined
the rate of inflation (6%) and
unemployment (8%) into a
"Misery Index" of 14.
Modeled his economic
recovery program after
FDR's New Deal by
advocating tax cuts, public
works, and employment
programs to stimulate the
economy.
Despite the measures
unemployment decreased,
inflation rose.
Economic Policies of Carter


Carter attempted to curb inflation by slashing government
spending, deregulating industries, and implementing wage
and price controls.
Despite the President's sincere efforts, the "Misery Index"
soon rose to 21.
President Carter and the
Continuing Energy Crisis


Carter created the Department of Energy as a cabinet-level position,
He continued to try and set an example for citizens by conserving energy in
the White House.

Had solar panels installed atop the White House in 1979 (which President Reagan later
removed).
President Carter and the
Continuing Energy Crisis


After 1979 Islamic Revolution in
Iran, Ayatollah Khomeini
stopped all oil shipments, further
exacerbating US energy woes.
Carter delivered the "Malaise
Speech," = asks Americans to
share the responsibility of
energy conservation.


Both public & press responded
defensively


Speech was an honest
diagnosis of the country's ills
Carter was criticized for
"blaming" the American people
and offering few solutions
Carter's approval rating
plummeted.