| The Energy Crisis, Deindustrialization, and the Service Economy (1973-2000) |
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Sections:- The Oil Crisis Begins
- Coping with the Energy Crisis
- Economic Policies of President Ford
- Deindustrialization
- The Service Economy
- The Rustbelt and the Sunbelt
- Working Women
- The Feminization of Poverty
- Economic Policies of President Carter
- President Carter and the Continuing Energy Crisis
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| Historical Context
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. 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. Gas prices suddenly doubled and fueling stations frequently ran out of gas. The oil crisis effected almost every sector of the economy and greatly contributed to the economic troubles of the 1970's.
Questions to consider:
1. Compare the rate of US oil consumption to the price of oil in the 1970's. Did rising prices curb demand for oil in the United States?
2. Compare the oil prices during the 1970's to inflation rates in the previous section. What relationship do you observe? What does this relationship reveal about the impact of oil prices on the US economy as a whole?
3. What effect did the end of the embargo have on the rate of increase for oil prices? How long was this effect sustained?
4. Do you think a similar situation could reoccur? Why or why not? |
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| Historical Context
The 1973-1974 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.
On November 7th, 1973, 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" and outlined specific measures for citizens and lawmakers to adopt in order to cope. The president's comments illustrate the pervasive nature of the energy crisis and the adjustments Americans were compelled to make in response to it.
Attached Document
Included here is Nixon's address on the energy crisis.
Questions to consider:
1. What steps does President Nixon ask Congress and other government entities to take?
2. What does the president ask of individual Americans?
3. What kind of lifestyle changes would individuals experience as a result of the energy crisis?
4. What effect do you think energy conservation measures had on American businesses?
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| Historical Context
Gerald Ford inherited an economy in crisis when replaced Richard Nixon in August 1974. Ford lacked both the economic vision to curb the effects of stagflation and confidence of Congress and the people. Along with reduced federal spending and interest rate stabilization measures, Ford attempted to initiate a grassroots anti-inflation campaign. The voluntary 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.
President Ford's ideological inclinations stood in direct contrast to those of the heavily Democratic Congress. 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. He vetoed more major bills than any president in the 20th century, only to have a number of them overridden. Despite the tension between the legislative bodies and the White House, recessionary pressures eased somewhat by 1976.
The next document is an edited version of the 1975 State of the Union address. In these excerpts, the President deals with the economic realities of the era quite candidly, admitting, "the state of the Union is not good."
Attached Document
In his "Whip Inflation Now" speech, President Ford outlines ten economic priorities for Congress and proposes the voluntary WIN program for citizens.
Questions to consider:
1. What does the President ask of Congress in the WIN Speech? What does he ask of the American people?
2. Read the text of the WIN Speech carefully. What specific, actionable measures does Ford propose? Which directives seem vague?
3. In the State of the Union Address, what initiatives does Ford propose to stimulate economic rebound?
4. What elements of Ford's economic recovery plan have the potential to clash with the preferences of the Democratic Congress?
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| Historical Context
"Deindustrialization" refers to a shift away from a manufacturing-based economy. In the United States and Europe, deindustrialization preceded a shift to a service-based economy. 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. 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. The trend toward deindustrialization began in the 1960's and continues into the present day, as the service sector overtakes the manufacturing sector.
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.
The first chart shows a key economic indicator, the industrial production index, which measures the total output of US factories. A decline in production indicates slow economic growth.
The second chart illustrates the balance of trade. The United States increasingly imports more than it exports.
The pair of productivity (output per hour of labor) graphs illustrate the decline in worker productivity in the 1970's and early 1980's.
Question to consider:
1. Why do you think products became expensive to produce in the US compared to other countries? List a few possible reasons |
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| Historical Context
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.
Question to consider:
1. What kind of skills and training would be most beneficial to a person entering the job market in the 1970's and 1980's? |
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| Historical Context
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.
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 California's Silicon Valley became the hub of the technology industry. As population in the Sunbelt increased, so did the region's political influence.
Questions to consider:
1. Which states experienced the largest population growth? Which states lost the most population?
2. How did deindustrialization affect migration patterns? |
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| Historical Context
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. However, 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.
Questions to consider:
1. List some reasons why women's participation in the workforce increased rapidly during the 1970's. Consider the changing economic and social conditions.
2. What accounts for the wage gap between the genders? List a few possible explanations. |
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| Historical Context
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. 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.
Question to consider:
1. What does the term "feminization of poverty" mean and why did this phenomena occur?
2. Gender roles and the status of women in society were in flux during the 1970's. List some of the positive aspects of the women's movement and compare them to the financial hardships endured by many women in the 1970's. What are your observations and reflections on this subject? |
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| Historical Context
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.
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.
Attached Documents
Included here is President Carter's Economic Recovery Program and his Anti-Inflation Program.
Questions to consider:
1. Compare and contrast the two documents below. How did Carter's economic policies change?
2. Do you think that the state of the economy in the 1970's was within the president's control? Why or why not? |
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| Historical Context
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.
President Carter's 1977 televised speech on energy emphasizes the dangers of United States energy dependence and excessive consumption. He outlines ten proposals for energy independence, emphasizing conservation, and entreats Americans to make sacrifices in the national interest. Carter characterized the energy crisis as "the moral equivalent of war," which critics derisively nicknamed "meow." The conservation measures were vehemently opposed by the oil and auto industries, and accordingly the subsequent National Energy Act of 1978 focused on increasing domestic production rather than conservation. Nevertheless, 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.
Following the 1979 Islamic Revolution in Iran, Ayatollah Khomeini stopped all oil shipments, further exacerbating US energy woes. That summer, the president canceled his vacation and assembled a group of Americans at Camp David for a candid discussion about America's problems. In July the president delivered a televised address that became known as the "Malaise Speech." In it, the president entreats Americans to return to the attitudes and values of the past that made America strong and to share the responsibility of energy conservation. Congress eventually rejected most of the energy proposals in Carter's speech. Furthermore, the public and the press responded defensively and Carter's approval rating plummeted to an irrevocable low. Although the speech was a frank diagnosis of the country's ills, Carter was criticized for "blaming" the American people and offering few solutions.
Attached Documents
Included here are Carter's proposals on energy and his famous "Malaise" speech.
Questions to consider:
1. What concerns about energy addressed by Carter are still relevant today?
2. Summarize the main points of Carter's energy proposals in both speeches. What does the President ask of the American people?
3. What characteristics of Carter's speech making style caused many Americans to become disheartened or apathetic toward the president and his proposals?
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