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Ford, Carter, and the Economic Malaise: Crash Course US History #42

From: U.S. History by Crash Course

In which John Green teaches you about the economic malaise that beset the United States in the 1970s. A sort of perfect storm of events, it combined the continuing decline of America's manufacturing base and the oil shocks of 1973 and 1979 and brought about a stagnant economy, paired with high inflation. Economists with a flair for neologisms and portmanteau words called this "stagflation," and it made people miserable. Two presidential administrations were scuttled at least in part by these economic woes; both Gerald Ford and Jimmy Carter are considered failed presidents for many reasons, but largely because of an inability to improve the economy. (hint: In reality, no one person can materially change something as big as the world economy, even if they are president, but one person sure can make a handy scapegoat!) So, by and large, the 70s were a pretty terrible time in America economically, but at least the decade gave us Mr. Green.

Full Transcript

Ford, Carter, and the Economic Malaise Crash Course US History 42

speaker01 00:00:00

Hi I'm John Green, this is Crash Course us history and today we're going to talk about one of the most important periods in American history, the mid to late 1970s. And why is there nothing on the chalkboard? We can't find a picture of Gerald Ford somewhere around here. Don't worry crash course bands, we got one. Thanks for your support through subtable and paid for this 90 cent Gerald Ford photograph. These really are the years when everything changed in the United States and amidst all that turmoil, something wonderful was born.

speaker01 00:25:00

Mr Green Mr Green strong with the force, this episode is no me from the past. Yoda doesn't show up till Empire Strikes back, which came out in 1000 and 980. I'm referring, of course, to the fact that we were born. It's the beginning of the John Green era. From here on out, almost every everything we discuss will have happened in my lifetime, or as most Crash Course viewers refer to it, that century before I was born. But it wasn't just the birth of me and the death of Elvis. The late 1970s were truly a period of momentous change. Most American Americans, it sucked.

speaker01 01:02:00

So how Americans reacted to those no good, very bad years really has shaped the world in which we find ourselves. The big story of the 1000 and 970 S is economics, 25 years of broad economic expansion in prosperity came to a grinding halt in thousand the 1970s, meaning that our party was over. And what did we get instead? Inflation and extremely slow growth. The worst hangover ever Just getting the worst hangover was the depression. The second worst hangover was the two recession, and then the third worst hangover was hangover part 3. It was the fourth worst hangover in America history narrowly beating out America, the fifth worst hangover, the hangover part.

speaker01 01:37:00

What happened to the American economy in the 19970 S was the result both of long-stem processes and unexpected shocks. The longest-term process was the gradual decline of manufacturing in the US in relation to competing manufacturing in the rest of the world, part of this due to American policy after World War 2.

speaker01 01:54:00

You'll remember that we promoted the economic growth of Japan, Germany, South Korea, and Taiwan, tariffs that they set up to protect nascent industries and effectively subsidizing them by providing for their defense and not having to build nuclear arsenals of their own really allowed them to invest in their domestic economies. And then one day, a bunch of Toyotas and Mer showed up, and you could drive them up to like 40000 miles before they would break down. And we were like, wait a second, in 1000 and 970 two-one for the first time in the 20 th century, America experienced an export trade deficit, importing more goods than it export, which is the same problem that my aunt has with QVC. I mean, they hardly import anything from her. One reason for this deficit was because the dollar was linked to gold, making it a strong currency, but also making American products more expensive abroad. So Nixon took the UA off the gold standard, hoping to make American goods cheaper overseas and reduce imports. But that didn't really work because the us was also competing against cheaper labor costs and cheaper raw materials and more productive economies. And in many cases, this growing global company put American firms that couldn't compete out of business, especially true in manufacturing.

speaker01 03:01:00

In 1960, 38% of Americans worked in manufacturing. In 1980, it was 28%. Today it's 9, not 9%. Nine people wants me to tell you that that was a joke. It actually is.

speaker01 03:14:00

9% unionized workers were hit particularly hard in the 1940s and 1950s. Unions had won generous concessions from corporate employers, including paid vacation and health benefits, and especially pensions, which employers would agree to as a kind of deference compensation, so they would have to pay higher wages to people while they were working, And this worked great until people started to retire. So by 1000 and 970, competition led employers to either to eliminate high paying manufacturing jobs or else to increase automation or to shift workers to lower wage regions of the us or even overseas. Meanwhile, the northern industrial cities, particularly the Rust belt of the Midwest were becoming the empty urban playgrounds that we know and love today. Detroit and Chicago had lost half of their manufacturing jobs by 1000 and 980 in smaller cities fared even worse. As industry away, they found their tax bases dried up and they were unable to provide even basic services to their citizens. I mean, with the world of Wall Street fat cats, this is hard to imagine today. But in 1009 75 New York City faced bankruptcy.

speaker01 04:12:00

In addition to these long term struggles, the changes to the American economy and our demographics, the 19970 s saw two oil shocks that sent the economy into a tail spin in the 19970 thre in response to Western support of Israel. Middle Eastern Arab states suspended oil exports to the U, which led to the price of oil quadruple. This resulted in long lines for gasoline, dramatically higher oil prices, and Americans deciding to purchase smaller, more fuel efficient Ait cars, which is to say Japanese cars, also prices of everything else because oil is either used for the production of or transportation of just about everything. I mean, with 70 S inflation, this 90 cent portrait of Gerald Ford would have cost at least a buck 10. The paint that covers the green parts, not America oil base that comprises the Dvd's of crash course world history available now at DF oil base. Those are a fantastic bargain and they would have been way more expensive if the price of oil was higher.

speaker01 05:04:00

And then in 19970 five-nines second oil shock hit the United States after the Iranian Revolution. Weight standard, we say 1000 and 970 five-nines got put up. A picture of Jimmy Carter, bam, sorry, Gerald Ford, there's a peanut farmer in town.

speaker01 05:16:00

So during the 1970s, inflation soared to 10% a year and economic growth slowed to 2.4%, resulting in what came to be known as stagflation. Unemployment rose, and a new economic statistic was the misery index. The combination of unemployment and inflation. At the beginning of the decade, it was 10, 8 by 1000 and 980, it had doubled. If you're looking for the roots of America's contemporary economic inequality, the 1000 and 970 S are a good mile since, according to our old friend Eric foner, beginning in 1009 73, a real wages essentially did not rise for 20 years.

speaker01 05:49:00

Americans got to experience the joy of two years of Jerry Ford before poor Jimmy Carter had a chance to fail at improving the economy.

speaker01 05:56:00

The only president never to have been elected, even to the vice presidency, was so insignificant in American history that we already replaced him on the chalk. One of Ford's first acts was to pardon Nixon, making him immune from prosecution for obstruction of justice. That very unpopular decision probably made it impossible for Ford to win 1972. Coincidentally, when was the only memorable domestic program that Ford proposed? It stood for whip inflation now, and it was basically a plea for Americans to be better shoppers, spend less and wear win buttons. 35 years later, Charlie Sheen would turn winning into an incredibly successful social media campaign, But sadly, at the time, there was no twin.

speaker01 06:33:00

Inflation did drop, but unemployment went up, especially during the recession of 1000 and 970 two-four in 1000 and 975, where it topped 9%. Ford would have liked to cut taxes and reduce government regulation, but the Democratic Congress wouldn't let him. So that's Ford probably best known today as the first president to be satirized on Saturday Night Live.

speaker01 06:52:00

Then in 1976, we got a new president, Jimmy Carter. And Jimmy Carter is generally considered by historians to have been a failure as president, although often as a really good ex-president tried to fight the inflation part of stagflation. And to do it, he acted in some rather a new-won Democrat ways. He cut government spending, deregulated the trucking and airline industries, and he supported the Fed's decision to raise interest rates.

speaker01 07:16:00

It's time for the mystery document. The rules here are simple. I read the mystery document. I guess the author, if I'm wrong, I get shocked all. Let's see what we got today.

speaker01 07:26:00

I want to speak to you first tonight about a subject even more serious than energy or inflation. I want to talk to you right now about a fundamental threat to American democracy. Democracy, I do not mean our political and civil liberties. They will endure, and I do not refer to the outward strength of America, a nation that is at peace tonight, everywhere in the world with unmatched economic power in military might, the threat is nearly invisible. In ordinary ways. It is a crisis of confidence, it is a crisis that strikes at the very heart and soul and spirit of our national will. We can see this crisis in the growing doubt about the meaning of our own lives and in the loss of a unity of purpose for our nation. The erosion of our confidence in the future is threatening to destroy the social and political fabric of America.

speaker01 08:10:00

It's Jimmy Carter's crisis of confidence speech, my favorite speech ever made, that also cost the president 20 points of approval rating. So Carter says that Americans have lost their ability to face the future and some of their can do spirit.

speaker01 08:23:00

The rest of the speech talks about how Americans values are out of whack, how Americans are wasteful and need a more vibrant approach to the energy crisis. Let me tell you a lesson from history. Jimmy Carter, you don't get reelected by telling Americans how to do more with less, get reelected by Americans more and more, always more, more for you, more, more and more. I promise this speech ultimately called for a renewal of spirit, but all people remember is the part where Jimmy Carter was criticizing them and It's Gone Down is a great example of Carter's political ineptitude.

speaker01 08:51:00

Domestically, Carter paid lip service to liberal ideas like energy conservation, even installing solar panels on the White House. But his bigger plan to solve the energy crises, investment in nuclear power and nuclear power did grow, although never to the extent we saw in certain European countries, partly because of the accident at 3 mi Island in 19970 eight-nine when radioactive vapor was released into the air. This, of course, spred public fears of a nuclear meltdown and drove a huge anti nuclear energy movement. Now, in many ways, Carter was more important as a foreign policy president, but as with his energy initiatives, he's mostly remembered for his failures, aiming to make human rights a cornerstone of America's foreign policy. Jimmy Car tried to turn away from the Cold War framework and focus instead on combating third world poverty and reducing the spread of nuclear weapons. Let's go to the thought bubble.

speaker01 09:37:00

Carter's notable changes included cutting off aid to Argentina during its Dirty War and signing a treaty in 1978 that would transfer the Panama Canal back to Panama. His greatest accomplishment was probably brokering the Camp David Accords. Historic peace agreement between Egypt and Israel has, as we all know, led to a lasting peace in the Middle East. Just kidding, but it has been a step in the right direction and one that's last, but the us continued to support dictates regimes in Guatemala, the Philippines, and South Korea. Carter's most significant failure in terms of supporting international bad guys, though, is the Shah of Iran. Iran had oil and was a major buyer of American arms, but the Shah was really unpopular and our support of him fueled anti theam oficial sentiments in Iran, those boiled over in the 19970 eight-nine Iranian revolution, especially after Carter allowed the Shah to get cancer treatments in America, which in turn prompted the storming of the American embassy in Tehran and the capture of 53 American hostages. The Iranian hostage crisis lasted 444 days and although Carter's secretary of state did negotiate their release, it didn't happen until the day Carter's successor, Ronald Reagan, was inaugurated. The inability to free the hostages and the botched rescue attempt, Affleck go notwithstanding, added to the impression that Carter was weak.

speaker01 10:49:00

Events in the Middle East also increased Cold War tensions, especially after 1979, when the USSR invaded Afghanistan. Carter claimed that the invasion of Afghanistan was the greatest threat to freedom since World War Two, and proclaimed the Carter Doctrine, which basically said that the us would use force if necessary to protect its interests in the Persian Gulf region. In direct response to the Soviets, the us put an embargo on grain shipments and organized the boycott of the 1980 Olympics in Moscow.

speaker01 11:16:00

Thanks for another dose of good news, thought Bubble. So despite focusing on Carter I'll again stress that the real story, the 19 9 70s was the economy. High inflation and high unemployment had monumental effects in shaping America and no president could have dealt with it effectively. Not Carter, not Gerald Ford, not anyone. The truth is, history isn't about individual oil shocks and inevitable systemic changes led to the poor economy and that weakens support for New Deal liberalism and increase the appeal of conservative ideas like lower taxes, reduced regulation, and cuts in social spending, all of which, for the record, started under the Democrat Jimmy Carter, not the Republican Ronald Reagan.

speaker01 11:54:00

More abstractly, the economic crisis of the 1000 and 970 S dealt a serious blow to the Keynesian cons that government action could actually solve macroeconomic problems. I mean, according to the economic andic theory that had prevailed for the previous 50 years, unemployment and inflation were supposed to be inversely proportional. The so-called Philips curve when that relationship grew down and we had both high inflation and high unemployment, it undermined the entire idea of government intervention, and that opened the door for a different way of thinking about economics that emphasized the economy as an aggregate of individual economic decisions. Sound a small thing, but whether you think individual choices or governmental policies really make economies work or not work turns out to be pretty freaking important. And this has really come to shape the contemporary American political landscape, especially when it comes to tax.

speaker01 12:45:00

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