Stagflation in the 1970s From U.S. Department of State

Stagflation in the 1970s From U.S. Department of State

The term "stagflation" -- an economic condition of both continuing inflation and stagnant business activity, together with an increasing unemployment rate -- described the new economic malaise. Inflation seemed to feed on itself. People began to expect continuous increases in the price of goods, so they bought more. This increased demand pushed up prices, leading to demands for higher wages, which pushed prices higher still in a continuing upward spiral. Labor contracts increasingly came to include automatic cost-of-living clauses, and the government began to peg some payments, such as those for Social Security, to the Consumer Price Index, the best-known gauge of inflation. While these practices helped workers and retirees cope with inflation, they perpetuated inflation. The government's ever-rising need for funds swelled the budget deficit and led to greater government borrowing, which in turn pushed up interest rates and increased costs for businesses and consumers even further. With energy costs and interest rates high, business investment languished and unemployment rose to uncomfortable levels.

In desperation, President Jimmy Carter (1977-1981) tried to combat economic weakness and unemployment by increasing government spending, and he established voluntary wage and price guidelines to control inflation. Both were largely unsuccessful. A perhaps more successful but less dramatic attack on inflation involved the "deregulation" of numerous industries, including airlines, trucking, and railroads. These industries had been tightly regulated, with government controlling routes and fares. Support for deregulation continued beyond the Carter administration. In the 1980s, the government relaxed controls on bank interest rates and long-distance telephone service, and in the 1990s it moved to ease regulation of local telephone service.

But the most important element in the war against inflation was the Federal Reserve Board, which clamped down hard on the money supply beginning in 1979. By refusing to supply all the money an inflation-ravaged economy wanted, the Fed caused interest rates to rise. As a result, consumer spending and business borrowing slowed abruptly. The economy soon fell into a deep recession.

Many Americans, particularly working class and middle class whites, responded to the turbulence of the late 1960s–the urban riots, the antiwar protests, the alienating counterculture–by embracing a new kind of conservative populism. Sick of what they interpreted as spoiled hippies and whining protestors, tired of an interfering government that, in their view, coddled poor people and black people at taxpayer expense, these individuals formed what political strategists called a “silent majority.”

In some ways, though, 1960s liberalism continued to flourish. For example, the crusade to protect the environment from all sorts of assaults–toxic industrial waste in places like Love Canal, New York; dangerous meltdowns at nuclear power plants such as the one at Three Mile Island in Pennsylvania; highways through city neighborhoods–really took off during the 1970s. Americans celebrated the first Earth Day in 1970, and Congress passed the National Environmental Policy Act that same year. The Clean Air Act and the Clean Water Act followed two years later. The oil crisis of the late 1970s drew further attention to the issue of conservation. By then, environmentalism was so mainstream that the U.S. Forest Service’s Woodsy Owl interrupted Saturday morning cartoons to remind kids to “Give a Hoot; Don’t Pollute.”

During the 1970s, many groups of Americans continued to fight for expanded social and political rights. In 1972, after years of campaigning by feminists, Congress approved the Equal Rights Amendment (ERA) to the Constitution, which reads: “Equality of rights under the law shall not be denied or abridged by the United States or by any state on account of sex.” It seemed that the Amendment would pass easily. Twenty-two of the necessary 38 states ratified it right away, and the remaining states seemed close behind. However, the ERA alarmed many conservative activists, who feared that it would undermine traditional gender roles. These activists mobilized against the Amendment and managed to defeat it. In 1977, Indiana became the 35th–and last–state to ratify the ERA.

Disappointments like these encouraged many women’s rights activists to turn away from politics. They began to build feminist communities and organizations of their own: art galleries and bookstores, consciousness-raising groups, daycare and women’s health collectives (such as the Boston Women’s Health Book Collective, which published “Our Bodies, Ourselves” in 1973), rape crisis centers and abortion clinics.
The Antiwar Movement

Even though very few people continued to support the war in Indochina, President Nixon feared that a retreat would make the United States look weak. As a result, instead of ending the war, Nixon and his aides devised ways to make it more palatable, such as limiting the draft and shifting the burden of combat onto South Vietnamese soldiers.

This policy seemed to work at the beginning of Nixon’s term in office. When the United States invaded Cambodia in 1970, however, hundreds of thousands of protestors clogged city streets and shut down college campuses. On May 4, National Guardsmen shot four student demonstrators at an antiwar rally at Kent State University in Ohio. Ten days later, police officers killed two black student protestors at Mississippi’s Jackson State University. Members of Congress tried to limit the president’s power by revoking the Gulf of Tonkin resolution authorizing the use of military force in Southeast Asia, but Nixon simply ignored them. Even after The New York Times published the Pentagon Papers, which called the government’s justifications for war into question, the bloody and inconclusive conflict continued. American troops did not leave the region until 1973.
The Watergate Scandal

As his term in office wore on, President Nixon grew increasingly paranoid and defensive. Though he won reelection by a landslide in 1972, he resented any challenge to his authority and approved of attempts to discredit those who opposed him. In June 1972, police found five burglars from Nixon’s own Committee to Re-Elect the President in the office of the Democratic National Committee, located in the Watergate office building. Soon, they found that Nixon himself was involved in the crime: He had demanded that the Federal Bureau of Investigation stop investigating the break-in and told his aides to cover up the scandal.

In April 1974, a Congressional committee approved three articles of impeachment: obstruction of justice, misuse of federal agencies and defying the authority of Congress. Before Congress could impeach him, however, President Nixon announced that he would resign. Gerald Ford took over his office, and–to the distaste of many Americans–pardoned Nixon right away.

After Watergate, many people withdrew from politics altogether. They turned instead to pop culture–easy to do in such a trend-laden, fad-happy decade. They listened to 8-track tapes of Jackson Browne, Olivia Newton-John, Donna Summer and Marvin Gaye. They made latch-hook rugs and macramé, took up racquetball and yoga, read “I’m OK, You’re OK” and “The Joy of Sex,” went to wife-swapping parties and smoked even more pot than they had in the 1960s. In general, by the end of the decade, many young people were using their hard-fought freedom to simply do as they pleased: to wear what they wanted, to grow their hair long, to have sex, to do drugs. Their liberation, in other words, was intensely personal. http://www.history.com/topics/1970s

As the 39th president of the United States, Jimmy Carter struggled to respond to formidable challenges, including a major energy crisis as well as high inflation and unemployment. In the foreign affairs arena, he reopened U.S. relations with China and made headway with efforts to broker peace in the historic Arab-Israeli conflict, but was damaged late in his term by a hostage crisis in Iran. Carter's diagnosis of the nation's "crisis of confidence" did little to boost his sagging popularity, and in 1980 he was soundly defeated in the general election by Ronald Reagan. Over the next decades, Carter built a distinguished career as a diplomat, humanitarian and author, pursuing conflict resolution in countries around the globe.

Born in Plains, Georgia, on October 1, 1924, James Earle Carter Jr. attended the U.S. Naval Academy at Annapolis, graduating in 1946. Shortly thereafter he married Rosalynn Smith, a fellow native of Plains; the couple would have four children. Carter's seven-year career in the Navy included five years on submarine duty. In 1953, he was preparing to serve as an engineering officer on the submarine Seawolf when his father died. Carter returned home and was able to rebuild his family's struggling peanut warehouse business after a crippling drought. Active in community affairs and a deacon at the Plains Baptist Church, Carter launched his political career with a seat on his local board of education. In 1962, he won election to the Georgia State Senate as a Democrat; he was reelected in 1964. Two years later, he ran for the governor's office, finishing a disappointing third. The loss sent Carter into a period of depression, which he overcame by finding renewed faith as a born-again Christian. He ran again for the governorship in 1970 and won. A year later, Carter was featured on the cover of Time magazine as one of a new breed of young political leaders in the South, known for their moderate racial views and progressive economic and social policies.

Carter announced his candidacy for president in 1974, just before his gubernatorial term was up. For the next two years, he traveled around the country making speeches and meeting as many people as possible. His core message was one of values: He called for a return to honesty and an elimination of secrecy in government, and repeatedly told voters, "I'll never tell a lie." At a time when Americans were disillusioned with the executive branch of government in the wake of the Watergate scandal, Carter managed to build a constituency by marketing himself as an outsider to Washington politics. He won the Democratic nomination in July 1976 and chose Senator Walter F. Mondale of Minnesota as his running mate. In the general election, Carter faced Republican incumbent Gerald R. Ford, who had succeeded to the presidency after Nixon's resignation. In November, Carter won a narrow victory, capturing 51 percent of the popular vote and 297 electoral votes (compared with Ford's 240).

As president, Carter sought to portray himself as a man of the people, dressing informally and adopting a folksy speaking style. He introduced a number of ambitious programs for social and economic reform, and included a relatively large number of women and minorities in his cabinet. Despite Democratic majorities in the House and Senate, Congress blocked Carter's proposal for welfare reform, as well as his proposal for a long-range energy program, a central focus of his administration. This difficult relationship with Congress meant that Carter was unable to convert his plans into legislation, despite his initial popularity. Carter's relationship with the public suffered in 1977, when Bert Lance–a close friend of the president whom he had named as director of the Office of Management and Budget–was accused of financial misdealings in his pre-Washington career as a Georgia banker. Carter initially defended Lance, but was later driven to ask for his resignation. Though Lance was later cleared of all charges, the scandal marred the president's much-vaunted reputation for honesty.

In 1977, Carter brokered two U.S. treaties with Panama; the following year, he presided over a tough round of meetings between Egypt's President Anwar el-Sadat and Israel's Prime Minister Menachem Begin at Camp David. The resulting Camp David Accords ended the state of war between the two nations that had existed since Israel was founded in 1948. Carter also reopened diplomatic relations between the United States and China while breaking ties with Taiwan, and signed a bilateral strategic arms limitation treaty (SALT II) with the Soviet leader Leonid Brezhnev. Throughout his presidency, Carter struggled to combat the nation's economic woes, including high unemployment, rising inflation and the effects of an energy crisis that began in the early 1970s. Though he claimed an increase of 8 million jobs and a reduction in the budget deficit by the end of his term, many business leaders as well as the public blamed Carter for the nation's continuing struggles, saying he didn't have a coherent or effective policy to address them. In July 1979, Carter called a special summit with national leaders at Camp David. His televised speech after the meeting diagnosed a "crisis of confidence" occurring in the country, a mood that he later referred to as a "national malaise.”

In November 1979, a mob of Iranian students stormed the U.S. embassy in Tehran and took its diplomatic staff hostage as a protest against the arrival in the United States of the deposed Iranian shah, Mohammad Reza Shah Pahlavi, in order to receive medical treatment. The students had the support of Iran's revolutionary government, led by Ayatollah Ruhollah Khomeini. Carter stood firm in the tense standoff that followed, but his failure to free the hostages led his government to be perceived as inept and inefficient; this perception increased after the failure of a secret U.S. military mission in April 1980. Despite sagging approval ratings, Carter was able to defeat a challenge by Senator Edward Kennedy to win the Democratic nomination in 1980. He was defeated by a large margin in the general election that year by Ronald Reagan, a former actor and governor of California who argued during his campaign that the problem facing the country was not a lack of public confidence, but a need for new leadership.

With his wife Rosalynn, Carter established the nonprofit, nonpartisan Carter Presidential Center in Atlanta in 1982. In the decades that followed, he continued his diplomatic activities in many conflict-ridden countries around the globe. In 1994 alone, Carter negotiated with North Korea to end their nuclear weapons program, worked in Haiti to ensure a peaceful transfer of government and brokered a (temporary) ceasefire between Bosnian Serbs and Muslims. Carter has also built homes for the poor with the organization Habitat for Humanity and worked as a professor at Emory University. He is the author of numerous books, the topics of which range from his views on the Middle East to memories of his childhood; they also include a historical novel and a collection of poetry. In 2002, Carter was awarded the Nobel Peace Prize. The prize committee cited his role in helping forge the Camp David accord between Israel and Egypt during his presidency, as well as his ongoing work with the Carter Center.

The Iran hostage crisis had its origins in a series of events that took place nearly a half-century before it began. The source of tension between Iran and the U.S. stemmed from an increasingly intense conflict over oil. British and American corporations had controlled the bulk of Iran’s petroleum reserves almost since their discovery--a profitable arrangement that they had no desire to change. However, in 1951 Iran’s newly elected prime minister, a European-educated nationalist named Muhammad Mossadegh, announced a plan to nationalize the country’s oil industry. In response to these policies, the American C.I.A. and the British intelligence service devised a secret plan to overthrow Mossadegh and replace him with a leader who would be more receptive to Western interests.

Through this coup, code-named Operation TP-Ajax, Mossadegh was deposed and a new government was installed in August 1953. The new leader was a member of Iran’s royal family named Mohammed Reza Shah Pahlavi. The Shah’s government was secular, anti-communist and pro-Western. In exchange for tens of millions of dollars in foreign aid, he returned 80 percent of Iran’s oil reserves to the Americans and the British.

For the C.I.A. and oil interests, the 1953 coup was a success. In fact, it served as a model for other covert operations during the Cold War, such as the 1954 government takeover in Guatemala and the failed intervention in Cuba in 1961. However, many Iranians bitterly resented what they saw as American intervention in their affairs. The Shah turned out to be a brutal, arbitrary dictator whose secret police (known as the SAVAK) tortured and murdered thousands of people. Meanwhile, the Iranian government spent billions of dollars on American-made weapons while the Iranian economy suffered.

By the 1970s, many Iranians were fed up with the Shah’s government. In protest, they turned to the Ayatollah Ruhollah Khomeini, a radical cleric whose revolutionary Islamist movement seemed to promise a break from the past and a turn toward greater autonomy for the Iranian people. In July 1979, the revolutionaries forced the Shah to disband his government and flee to Egypt. The Ayatollah installed a militant Islamist government in its place.

The United States, fearful of stirring up hostilities in the Middle East, did not come to the defense of its old ally. (For one thing, President Carter, aware of the Shah’s terrible record in that department, was reluctant to defend him.) However, in October 1979 President Carter agreed to allow the exiled leader to enter the U.S. for treatment of an advanced malignant lymphoma. His decision was humanitarian, not political; nevertheless, as one American later noted, it was like throwing “a burning branch into a bucket of kerosene.” Anti-American sentiment in Iran exploded.

On November 4, just after the Shah arrived in New York, a group of pro-Ayatollah students smashed the gates and scaled the walls of the American embassy in Tehran. Once inside, they seized 66 hostages, mostly diplomats and embassy employees. After a short period of time, 13 of these hostages were released. (For the most part, these 13 were women, African-Americans and citizens of countries other than the U.S.--people who, Khomeini argued, were already subject to “the oppression of American society.”) Some time later, a 14th hostage developed health problems and was likewise sent home. By midsummer 1980, 52 hostages remained in the embassy compound.

Diplomatic maneuvers had no discernible effect on the Ayatollah’s anti-American stance; neither did economic sanctions such as the seizure of Iranian assets in the United States. Meanwhile, while the hostages were never seriously injured, they were subjected to a rich variety of demeaning and terrifying treatment. They were blindfolded and paraded in front of TV cameras and jeering crowds. They were not allowed to speak or read, and they were rarely permitted to change clothes. Throughout the crisis there was a frightening uncertainty about their fate: The hostages never knew whether they were going to be tortured, murdered or set free.
The Iran Hostage Crisis: Operation Eagle Claw

President Carter’s efforts to bring an end to the hostage crisis soon became one of his foremost priorities. In April 1980, frustrated with the slow pace of diplomacy (and over the objections of several of his advisers), Carter decided to launch a risky military rescue mission known as Operation Eagle Claw. The operation was supposed to send an elite rescue team into the embassy compound. However, a severe desert sandstorm on the day of the mission caused several helicopters to malfunction, including one that veered into a large transport plane during takeoff. Eight American servicemen were killed in the accident, and Operation Eagle Claw was aborted.