Reasons for Economic Crisis, 1973-1980

Question 1

Energy Crisis

Reliance on Oil

Answer 1

America had 6% of population, but consumed 1/3 of the world’s oil
Around 30% was imported- mostly from Middle East

Question 2

Energy Crisis

Embargo

Answer 2

Nixon supported Israel in Yom Kippur War (1973), so OPEC put an embargo on USA
End of embargo, oil prices rose by 387%
American companies benfitted, consumers paid 30% more

Question 3

Energy Crisis

Winter 1976-77

Answer 3

Closure of schools + factories due to gas shortage and fuel stations shut on Sundays or reduced hours
Led to violence- ‘energy riot’ trucker barricades in Levittown, Pennsylvania, 100 injured, 170 arrested, 2 nights of violence

Question 4

Energy Crisis

Strike

Answer 4

165,000 United Mine workers began a 3 month strike in late 1977
Shortage of coal- school closures + shortened working weeks in East US

Question 5

Energy Crisis

Iran

Answer 5

1979- Fall of Shah + Islamist revolution doubled the price of oil
$3 a barrel in 1973, to $34 by 1979
58% of petrol stations closed

Question 6

International Competition and Decline of US Manufacturing

General Issues (Statistics)

Answer 6

US produced 25% of world’s goods in the 1970s, but struggled against technologically superior West Germany + Japan
Productivity rose only 1% 1972 to 1978
W. Germany and Japan had 4-5%

Question 6

International Competition and Decline of US Manufacturing

Electronics

Answer 6

Competition from Japanese (Hitachi, Sony, Toshiba) and European (Philips, Siemens) companies
And Sud Aviation in aerospace technology

Question 7

International Competition and Decline of US Manufacturing

Car Industry

Answer 7

Japanese companies had 23% of the market by 1981
American companies still produced ‘gas guzzlers’
Chrysler lost billions, needed $1.5 bn gov bailout in 1980
Car imports rose by 33% (annual trade deficit $40bn 1978-79)

Question 8

International Competition and Decline of US Manufacturing

Unemployment

Answer 8

Factory closures and restructuring
Many moved production abroad or bought cheaper foreign finished products
Permanent jobs in automible industry fells from 940,000 to 500,000 (1978 to 1982)
1974- General Motors, Ford, and Chrysler laid off 240,000 workers

Question 9

International Competition and Decline of US Manufacturing

Rust Belt

Answer 9

Industrial plants in parts of US woth cheaper labour
1967- 2/3 of manufacturing jobs in N.East and Midwest, 1992- 50%
Rust Belt lost jobs as manufacturing relocated to the Sun Belt- cycle of decline

Question 10

Government Policy

Ford:
Whip Inflation Now (1974)

Answer 10

Raised awareness by wearing a badge, Americans encouraged to cut mileage by 5% and stop throwing out food- voluntary, so ineffective

Question 11

Government Policy

Ford:
The Energy Policy and Conservation Act (1975)

Answer 11

Allowed domestic oil prices to rise slowly
Focus on making use of energy more efficient and decreasing demand for oil
But long-term solution

Question 12

Government Policy

Carter:
Voluntary Restraints (1977)

Answer 12

Suggested heating at a max of 18 in winter and air-con only kicked in at 26 in summer
Implemented in gov buildings, but not widely as non-compulsory

Question 13

Government Policy

Carter:
Public Works Act (1977)

Answer 13

$4bn public works programme, expanded Earned Income Tax Credit (for low income families with children)
1980- food stamps supported 21 million
Supported those in poverty, drove up inflation

Question 14

Government Policy

Carter:
Humphrey Hawkins Bill (1978)

Answer 14

Aimed to protect workers’ jobs, ensured fed gov would provide a job at last resort
Carter didn’t support, but it passed- he became unpopular with trade unionist as he was focused on inflation
Carter divisive, bill ineffective

Question 15

Government Policy

Carter:
National Energy Plan (1977)
National Energy Act (1978)

Answer 15

Plan tried to implement higher taxes on large cars, oil conservation through cutting travel, and alternative sources of power- opposed by states producing cars, oil, gas
Act deregulated natural gas prices- business community distrusted Carter, feared damage to industry + trade deficits

Question 16

Government Policy

Carter:
Department of Energy (1977)

Answer 16

Promoted conservation of domestic oil reserves + speed limits on car use
Promoted alternative sources of energy and tax credit to fuel-efficient products
US energy consumption fell 10% between 1979-1983

Question 17

Government Policy

Carter:
Airline Deregulation Act (1978)

Answer 17

Abolished Civil Aeronautics Board to create greater competition
Also applied to lorry + communications industry
Did increase competition and stimulate new investment + force inefficient firms to become efficient or close

Question 18

Government Policy

Carter:
Reversal on Economic Policy (1979)

Answer 18

26% approval ratings + disappointing results in mid-term elections
Research into synthetic fuel to limit dependence on oil + gas, cut public works, delayed tax reductions
Long-term solution, economy stagflation by 1980

Question 19

Government Policy

Carter:
Energy Security Act (1980)

Answer 19

Loans + incentives for alternate energy
Nuclear unpopular after Three Mile Island reactor meltdown in 1979
Environmentalists protested
Long term solution, but did raise awareness

Question 20

Government Policy

Carter:
Appointment of Paul Volcker (1980)

Answer 20

Appointed to Federal Reserve Boards
Raised interest rates to 20% (tight monetary policy)
Caused short term recession + increase in unemployment, but long term decrease in inflation