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

Summary

This Crash Course episode explores the transformative period of the mid-to-late 1970s in U.S. history, marked by economic challenges including inflation, slow growth, and the decline of manufacturing. The script discusses the impact of global competition, oil shocks, and political responses under Presidents Ford and Carter. It highlights the era's influence on contemporary economic inequality and the shift towards conservative economic policies, setting the stage for Reaganomics.

Takeaways

• 📚 The script discusses the mid-to-late 1970s as a transformative period in American history, with significant economic and social changes.
• 🛑 The 1970s marked the end of 25 years of economic expansion and prosperity, leading to inflation and slow growth, a situation referred to as 'stagflation'.
• 🚗 The decline of the U.S. manufacturing industry was a result of global competition, particularly from countries like Japan and Germany, which had been economically bolstered post-WWII.
• 💵 The U.S. experienced an export trade deficit for the first time in the 20th century in 1971, importing more than it exported, partly due to the strong dollar linked to gold.
• ⛽ Two oil shocks in the 1970s, in 1973 and 1979, had severe impacts on the U.S. economy, causing gasoline shortages, price increases, and contributing to inflation.
• 📉 The economic downturn of the 1970s contributed to the rise of economic inequality and a halt in real wage growth for two decades.
• 🏦 Gerald Ford's presidency was marked by an unpopular pardon for Richard Nixon and an unsuccessful 'Whip Inflation Now' campaign.
• 🌐 Jimmy Carter's presidency was characterized by efforts to combat stagflation through spending cuts and deregulation, and a focus on human rights in foreign policy.
• 🕊️ Carter's Camp David Accords were a significant diplomatic achievement, attempting to foster peace between Egypt and Israel.
• 📉 The Iranian Revolution and the hostage crisis significantly damaged Carter's image, contributing to a perception of weakness in his presidency.
• 🔑 The economic challenges of the 1970s shifted American political thought towards individual economic decisions over government intervention, setting the stage for future policy changes.

Q & A

What significant period in American history is discussed in the script?

The script discusses the mid-to-late 1970s, a period of momentous change in American history.

Why was the 1970s considered a turning point in the American economy?

The 1970s marked the end of 25 years of economic expansion and prosperity, leading to inflation, slow growth, and a decline in manufacturing.

What was the impact of the decline in U.S. manufacturing on the workforce?

The decline in manufacturing led to a decrease in manufacturing jobs, with the percentage of Americans working in manufacturing dropping from 38% in 1960 to 28% in 1980 and 9% today.

How did the economic policies after World War II contribute to the economic challenges of the 1970s?

Post-World War II policies promoted the economic growth of Japan, Germany, South Korea, and Taiwan, which later became strong competitors to U.S. manufacturing due to their protected industries and subsidized defense.

What was the effect of the oil shocks in the 1970s on the U.S. economy?

The oil shocks led to a quadrupling of oil prices, long lines for gasoline, higher prices for goods, and contributed to the phenomenon known as stagflation, characterized by high inflation and unemployment.

What was the 'Crisis of Confidence' speech by President Jimmy Carter, and why was it significant?

The 'Crisis of Confidence' speech addressed a perceived loss of American spirit and unity of purpose, and it is significant because it is considered a reflection of Carter's political challenges and contributed to a significant drop in his approval rating.

What economic phenomenon was referred to as 'stagflation', and when did it occur?

Stagflation refers to the combination of stagnant economic growth, high inflation, and high unemployment, which occurred in the 1970s.

What was the 'WIN' program proposed by President Gerald Ford, and what was its outcome?

The 'WIN' program, which stood for 'Whip Inflation Now', was a plea for Americans to spend less and be better shoppers. It did not significantly improve the economy, and inflation dropped only slightly while unemployment increased.

How did the economic challenges of the 1970s shape the political landscape in the U.S.?

The economic challenges led to a decline in support for New Deal liberalism and an increase in the appeal of conservative ideas such as lower taxes, reduced regulation, and cuts in social spending.

What was the impact of the Iranian Revolution and the hostage crisis on President Carter's administration?

The Iranian Revolution and the subsequent hostage crisis significantly damaged Carter's image, contributing to the perception of him as weak and ultimately affecting his re-election chances.

How did the economic theories of the time influence government policy during the 1970s?

The breakdown of the Phillips Curve, which suggested that unemployment and inflation were inversely proportional, undermined the Keynesian consensus on government intervention in the economy and opened the door for a shift towards individual economic decisions influencing economic policy.

Outlines

00:00

📚 Introduction to the 1970s in U.S. History

The video begins with John Green introducing the mid-to-late 1970s as a pivotal period in American history. He humorously notes the birth of himself and the death of Elvis Presley, but quickly transitions to the serious economic challenges of the era. The 1970s marked the end of a 25-year period of economic expansion, replaced by inflation and slow growth. Green highlights the decline of U.S. manufacturing due to global competition, the impact of the oil shocks in 1973 and 1979, and the political and economic shifts that occurred as a result. The video sets the stage for a deeper exploration of the economic and social turmoil of the decade.

05:01

💼 Economic Challenges and Political Responses in the 1970s

This paragraph delves into the economic turmoil of the 1970s, characterized by inflation, slow economic growth, and high unemployment, collectively known as stagflation. Green discusses the impact of the oil crises on the U.S. economy, the rise of Japanese cars due to their fuel efficiency, and the broader economic implications of rising oil prices. He also touches on the political responses to these challenges, including President Gerald Ford's WIN campaign and President Jimmy Carter's efforts to combat inflation through government spending cuts and deregulation. Carter's 'Crisis of Confidence' speech is highlighted, illustrating his call for a national renewal of spirit and values, which was largely perceived as a critique of the American people.

10:03

🌍 Foreign Policy and the Impact of the 1970s

The final paragraph focuses on the foreign policy of the 1970s, particularly under President Jimmy Carter. Carter's efforts to make human rights a cornerstone of U.S. foreign policy are discussed, along with his successes and failures. The Camp David Accords between Egypt and Israel are noted as a significant achievement, while his support for the Shah of Iran is highlighted as a major failure, leading to the Iranian Revolution and the hostage crisis. The Soviet invasion of Afghanistan and the resulting tensions with the U.S. are also covered. The paragraph concludes by emphasizing the economic challenges of the decade and their long-term effects on American politics and economic policy, setting the stage for the rise of conservative economic ideas.

Keywords

💡Crash Course

Crash Course is an educational video series that covers a wide range of topics, from history to science, in an engaging and accessible manner. In the context of this video script, it refers to the specific series on U.S. History, which aims to provide a comprehensive overview of the subject in an easily digestible format. The script mentions 'Crash Course' as the educational platform that hosts the U.S. History series.

💡Mid-to-Late 1970s

The mid-to-late 1970s refers to the period in American history that is marked by significant economic and social changes. The script discusses this era as a time of turmoil and transformation, including economic challenges and the decline of U.S. manufacturing, which had profound effects on the American people and the country's politics and economy.

💡Economic Expansion

Economic expansion is a period of increasing economic activity, typically characterized by growth in GDP, employment, and corporate profits. The script mentions the end of 25 years of broad economic expansion in the 1970s, indicating a shift from prosperity to economic hardship for many Americans.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The script describes the 1970s as a period of high inflation, which contributed to economic stagnation and a decline in the standard of living for many Americans.

💡Stagflation

Stagflation is a situation in which the economy is experiencing both stagnation and a high rate of inflation. The term is used in the script to describe the economic condition in the 1970s, where high inflation and slow economic growth occurred simultaneously, challenging the conventional economic theories of the time.

💡Manufacturing Decline

The manufacturing decline refers to the reduction in the importance and output of the manufacturing sector within an economy. The script discusses the decline of U.S. manufacturing in the 1970s due to global competition, which led to job losses and economic challenges for many American workers and regions.

💡Oil Shocks

Oil shocks refer to periods of sudden and significant increases in the price of oil, typically due to geopolitical events or supply disruptions. The script mentions two oil shocks in the 1970s, which had a profound impact on the U.S. economy, leading to increased energy costs and contributing to inflation and economic slowdown.

💡Gerald Ford

Gerald Ford was the 38th President of the United States, who served from 1974 to 1977. The script refers to Ford's presidency, particularly his decision to pardon Richard Nixon, and his economic policies, such as the WIN (Whip Inflation Now) campaign, which were not successful in addressing the economic challenges of the time.

💡Jimmy Carter

Jimmy Carter was the 39th President of the United States, who served from 1977 to 1981. The script discusses Carter's presidency, including his efforts to combat stagflation, his energy policies, and his foreign policy initiatives, such as the Camp David Accords and the response to the Soviet invasion of Afghanistan.

💡Deregulation

Deregulation is the process of removing or reducing state regulations in various sectors of the economy. The script mentions Carter's support for deregulation in industries such as trucking and airlines, which led to increased competition and lower prices but also to a decline in service quality.

💡Keynesian Consensus

The Keynesian consensus refers to the economic theory and policy approach that advocates for government intervention to manage economic activity and achieve full employment and price stability. The script explains how the economic crisis of the 1970s challenged this consensus by demonstrating that government action could not effectively solve macro-economic problems, leading to a shift in economic thinking.

Highlights

Introduction to the mid-to-late 1970s as a pivotal period in American history.

Economic challenges of the 1970s, including inflation and slow growth.

Decline of U.S. manufacturing due to global competition and policy decisions post-WWII.

The impact of the U.S. trade deficit and the move off the gold standard under Nixon.

Shift in employment from manufacturing to service sectors and the effects on unions.

Geographical shifts in industry and the rise of the Sunbelt's political influence.

Urban decay in the Rust Belt and the fiscal crisis of New York City.

The oil shocks of the 1970s and their severe consequences for the U.S. economy.

Introduction of the term 'stagflation' and the economic policies of Gerald Ford.

Jimmy Carter's presidency, focusing on deregulation and energy policy.

Carter's 'Crisis of Confidence' speech and its political repercussions.

The Iranian Revolution and the hostage crisis that plagued Carter's presidency.

Carter's foreign policy, including the Camp David Accords and the response to the USSR's invasion of Afghanistan.

The rise of conservative economic ideas and the shift away from Keynesian economics.

The long-term effects of the 1970s on American economic inequality and political ideology.

The role of individual choices versus governmental policies in shaping economic outcomes.

Crash Course's mission and call to action for viewer support.

Transcripts

Hi, I’m John Green, this is Crash Course U.S. History and today we are going to talk

about one of the most important periods in American history, the mid-to-late 1970s.

Stan why is there nothing on the chalkboard?

We can’t find a picture of Gerald Ford somewhere around here?

Don’t worry Crash Course fans we got one.

Thanks for your support through Subbable.

It paid for this 90 cent Gerald Ford photograph.

These really are the years where everything changed in the United States and amidst all

that turmoil something wonderful was born.

Mr. Green?

Mr. Green?

Strong with the force, this episode is.

No, me from the past, Yoda doesn’t show up until Empire Strikes Back which came out

in 1980.

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 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, and for most Americans it sucked.

Intro 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 1970s is economics.

Twenty-five years of broad economic expansion and prosperity came to a grinding halt in

the 1970s meaning the our party was over.

And what did we get instead?

Inflation and extremely slow growth.

The worst hangover ever.

Just kidding, the worst hangover was The Depression.

The 2nd worst hangover was the 2008 recession, and then the 3rd worst hangover was Hangover

Part III.

It was the 4th worst hangover in American history.

Narrowly beating out America’s 5th worst hangover the Hangover Part II.

What happened to the American economy in the 1970s was the result both of long-term processes

and unexpected shocks.

The long-term process was the gradual decline of manufacturing in the U.S. in relation to

competing manufacturing in the rest of the world.

Part of this was due to American policy; after World War II, you’ll remember that we promoted

the economic growth of Japan, Germany, South Korea and Taiwan, ignoring the 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 Mercedes showed up, and you could drive them up to

like 40 thousand miles before they would break down and we were like, “wait a second”.

In 1971, for the first time in the 20th century, America experienced an export trade deficit,

importing more goods than it exported, 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 U.S. off the gold standard, hoping to make American goods cheaper overseas

and reduce imports, but that didn’t really work.

Because the U.S. was also competing against cheaper labor costs, and cheaper raw materials,

and more productive economies.

And in many cases this growing global competition put American firms that couldn’t compete

out of business.

This was especially true in manufacturing.

In 1960, 38% of Americans worked in manufacturing.

In 1980, it was 28%.

Today, it’s nine.

Not 9%, nine people.

Stan wants me to tell you that was a joke.

It actually is 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 deferred compensation so that they wouldn’t have to pay higher w ages to people

while they were working.

And this worked great, until people started to retire.

So by 1970, competition led employers to either eliminate high-paying manufacturing jobs,

or else to increase automation, or to shift workers to lower wage regions of the U.S.

or even overseas.

The American South benefitted from this trend because its anti-union stance was attractive

to manufacturers.

But then, non-union industries that were already in the South found that they had no way to

find new workers so the only way to survive was to move production overseas.

And also as industries moved production to the Sunbelt that increased the political influence

of the region, and because the South and Southwest are generally conservative politically, the

nation’s politics continued to move to the right.

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 1980 and smaller cities

fared even worse.

As industry moved 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 1975

New York City faced bankruptcy.

In addition to these long term structural changes to the American economy and our demographics,

the 1970s saw two oil shocks that sent the economy into a tailspin.

In 1973, in response to Western support of Israel, Middle Eastern Arab states suspended

oil exports to the U.S which led to the price of oil quadrupling.

This resulted in long lines for gasoline, dramatically higher oil prices, and Americans

deciding to purchase smaller, more fuel efficient cars, which is to say Japanese cars.

Also, prices of everything else went up 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 $1.10.

The paint that covers the green parts of not-America, oil based.

The plastic that comprises the DVD’s of Crash Course World History, available now

at DFTBA.com, oil based.

Those were a fantastic bargain and they would have been way more expensive if the price

of oil was higher.

And then, in 1979, a second oil shock hit the United States after the Iranian revolution.

Wait Stan, did we say 1979?

We’ve got to put up a picture of Jimmy Carter.

Bam!

Sorry, Gerald Ford there’s a peanut farmer in town.

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 born: the misery index, the combination

of unemployment and inflation.

At the beginning of the decade it was 10.8, by 1980 it had doubled.

If you’re looking for the roots of America’s contemporary economic inequality, the 1970s

are a good milestone, since according to our old friend Eric Foner, “beginning in 1973,

real wages essentially did not rise for twenty years.”

[1] Americans got to experience the joy of two

years of Gerald Ford before poor Jimmy Carter had a chance to fail at improving the economy.

The only president never to have been elected even to the vice presidency, Gerald Ford was

so insignificant to American history that we already replaced him on the chalkboard.

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 in 1976.

Coincidentally, WIN 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.

Thirty-five years later Charlie Sheen would turn winning into an incredibly successful

social media campaign, but sadly at the time there was no Twitter.

Inflation did drop, but unemployment went up, especially during the recession of 1974-75

where it topped 9%.

Now, 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.

Then, in 1976, we got a new president: Jimmy Carter.

Now Jimmy Carter is generally considered by historians to have been a failure as president.

Although, he is often seen as a really good ex-president.

He tried to fight the inflation part of stagflation, but to do it he acted in some rather un-New

Deal Democrat ways.

He cut government spending, deregulated the trucking and airline industries, and he supported

the Fed’s decision to raise interest rates.

Oh, it’s time for the mystery document?

The rules here are simple...

I read the mystery document, I guess the author, and if I’m wrong I get shocked.

Alright, let’s see what we’ve got today.

“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.

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 and 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.”

It’s Jimmy Carter’s “Crisis of Confidence” speech, my favorite speech ever made that

also cost a 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.

The rest of the speech talks about how Americans’ values are out of whack, how Americans are

wasteful, and need a new 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.

You get reelected by telling Americans, “more, more, always more, more for you.

More.

More.

More.

I promise.”

The 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 as a great example of

Carter’s political ineptitude.

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 was 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 Three Mile Island in 1979 when radioactive vapor was

released into the air.

This of course spurred public fears of a nuclear meltdown and drove a huge anti-nuclear energy

movement.

But some of Carter’s more conservative policies did ultimately have an impact, like his support

for deregulation of the airlines.

Before airline deregulation, prices were fixed, so airlines had to compete by offering better

service.

Now, of course, flights are much cheaper and also so much more miserable.

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 Carter

tried to turn away from the Cold War framework and focus instead on combatting 3rd world

poverty and reducing the spread of nuclear weapons.

Let’s go to the Thought Bubble.

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.

This 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 lasted.

But the U.S. continued to support dictatorial 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 fuelled anti-American sentiments in Iran.

Those boiled over in the 1979 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’s ARGO

notwithstanding -- added to the impression that Carter was weak.

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 II and proclaimed the Carter Doctrine, which was basically said that the U.S. would

use force, if necessary, to protect its interests in the Persian Gulf region.

In direct response to the Soviets, the U.S. put an embargo on grain shipments and organized

the boycott of the 1980 Olympics in Moscow.

Thanks for another dose of good news Thought Bubble.

So despite focusing on Carter, I’ll again stress that the real story of the 1970s 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 individuals.

Oil shocks and inevitable systemic changes led to the poor economy and that weakened

support for New Deal liberalism and increased 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.

More abstractly, the economic crisis of the 1970’s dealt a serious blow to the Keynesian

consensus that Government action could actually solve macro-economic problems.

I mean according to the economic theory that had prevailed for the previous 50 years, unemployment

and inflation were supposed to be inversely proportional, the so-called Phillips Curve.

When that relationship broke 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.

Now that might sound like a small thing, but whether you think of individual choices or

governmental policies really make economies work or not work turns out to be pretty freaking

important.

And this has come to really shape the contemporary American political landscape especially when

it comes to taxes.

Which we’ll talk about more next week.

Thanks for watching.

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________________ [1] Foner.

Give me Liberty ebook version p. 1097