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Pivotal Decade

Pivotal Decade: How the United States Traded Factories for Finance in the Seventies

Copyright Date: 2010
Published by: Yale University Press
Pages: 352
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  • Book Info
    Pivotal Decade
    Book Description:

    In this fascinating new history, Judith Stein argues that in order to understand our current economic crisis we need to look back to the 1970s and the end of the age of the factory-the era of postwar liberalism, created by the New Deal, whose practices, high wages, and regulated capital produced both robust economic growth and greater income equality. When high oil prices and economic competition from Japan and Germany battered the American economy, new policies-both international and domestic-became necessary. But war was waged against inflation, rather than against unemployment, and the government promoted a balanced budget instead of growth. This, says Stein, marked the beginning of the age of finance and subsequent deregulation, free trade, low taxation, and weak unions that has fostered inequality and now the worst recession in sixty years.

    Drawing on extensive archival research and covering the economic, intellectual, political, and labor history of the decade, Stein provides a wealth of information on the 1970s. She also shows that to restore prosperity today, America needs a new model: more factories and fewer financial houses.

    eISBN: 978-0-300-16329-2
    Subjects: Economics, History, Political Science

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
    (pp. ix-xiv)
    (pp. xv-xvi)
  5. CHAPTER ONE “The Great Compression”
    (pp. 1-22)

    AMERICANS IN 1945 were far richer than people of other nations. Still, only 54 percent of U.S. families possessed cars, and just 44 percent owned their own homes. More than 40 percent of the population lived below the poverty line. Over the next generation life improved for most Americans, and fears generated by the memory of the Great Depression faded away. By 1970, 63 percent of families owned their own homes, there were as many private cars as families, and only 10 percent were poor. After World War II, the economy grew 4 percent a year, and poor people gained...

    (pp. 23-50)

    IT IS COMMONPLACE for pundits to trace the current age of conservatism to the 1968 election of Richard M. Nixon. As early as 1969, Kevin Phillips, inEmerging Republican Majority,predicted a new cycle of Republican power, ending the Democratic era begun by Franklin D. Roosevelt in 1932. Phillips claimed that the migration of southern whites, urban Catholics, and suburbanites from Democratic ranks in 1968 was permanent, marking a rising conservatism in American politics. Some Democrats viewed the same landscape but sketched a resurrection. Richard Scammon and Ben Wattenberg hectored their party to attend to a new conservative majority anxious...

    (pp. 51-73)

    DEMOCRATS AND REPUBLICANS ignored the economic turmoil of 1971 during the presidential election of 1972. The scripts were written from memories of 1964 and 1968 and from consciousness of the overwhelming ascendancy of the Democratic Party. In 1972 Democrats outnumbered Republicans by nearly 2 to 1.¹ Democrats felt free to fight for control of what they believed was the nation’s governing party, cast out temporarily in 1968 by the public’s disgust over Lyndon Johnson’s war in Vietnam. Aided by rules that opened the race to outsiders by reducing the role of party officials, the reform Democrats nominated Senator George McGovern,...

  8. CHAPTER FOUR OPEC and the Trade Unionism of the Developing World
    (pp. 74-100)

    WHEN THE TV SERIESDallasfirst aired in April 1978, the nighttime soap opera of feuds, love, and greed among the oil producers in Texas captivated audiences despite the critics’ bad reviews. The main character, J. R. Ewing, was head of an independent company, not a satrap of a big international company. The fights between the Ewing and Barnes families over Texas oil were nostalgic returns to the years when American oil mattered.Dallasignored the shortages, boycotts, imports, high prices, and strategic vulnerabilities that characterized the oil business in the 1970s. WhetherDallasinstructed or reflected American understanding in...

    (pp. 101-129)

    BEFORE THE OIL PRICE REVOLUTION at the end of 1973, the United States seemed to be on the mend. The Paris Peace Accords were signed on January 27, 1973, officially ending direct U.S. involvement in the Vietnam war. The economy, after two devaluations in August 1971 and February 1973, seemed to be back on track. The cheaper dollar would encourage exports and discourage imports, ending the nation’s trade and payments deficits. Thus, the government felt free to end remaining controls on foreign direct investment, begun in the 1960s when balance of payments problems plagued the country. Exports began to rise.¹...

    (pp. 130-153)

    ELECTIONS in the United States are mixtures of ideology and constituency, policy and personality. For much of the voting season in 1976, ideology was neutered by the size of the Democratic primary field, the absence of Hubert Humphrey (the lone candidate who stood for a clear alternative to Ford economics), and the nonideological posture of Jimmy Carter, the nominee who squeaked through. President Ford faced a spirited challenge from Governor Ronald Reagan of California. But the president was able to deploy conservative economics more effectively than the governor did. Reagan had energized social conservatives, but they were too few to...

  11. CHAPTER SEVEN International Keynesianism in a Troubled World
    (pp. 154-175)

    GERALD FORD AND JIMMY CARTER discussed the nation’s economic troubles during the 1976 presidential campaign, but ignored the international connections summed up in the phrase “crisis of the west.” Although the first presidential debate, held in Philadelphia on September 23, focused on the economy, not a word was uttered about the renewal of the U.S. pledge that both men embraced—to accept the exports of economically stressed allies as an aid to global recovery.¹ They again ignored foreign economic policy in their second debate—which featured foreign policy—as the Soviet Union, the Middle East, and the Panama Canal took...

    (pp. 176-204)

    CARTER’S principal economic adviser during the campaign was Lawrence Klein, a professor at the Wharton School of the University of Pennsylvania and a leading Keynesian. Klein would win a Nobel prize in 1980 for econometric models that charted business fluctuations. Such models, like the Wharton Forecast, which he created for the United States, facilitated Keynesian planning.¹ In December 1976, the month before Carter took office, the Wharton Forecast was “bearish.” GDP was rising at about 4 percent, but after the deep recession of 1974–75 the economy would require several quarters of 6 or 7 percent growth to bring down...

  13. CHAPTER NINE From Virtuous Circle to Perfect Storm: OIL CRISIS, II
    (pp. 205-224)

    PRESIDENT CARTER and the Democratic Party assumed that the new oil politics and global industrial competition had shocked but not transformed the dynamics of the American economy. Consequently, they had applied traditional Keynesian medicine to the patient. The results to this point: GDP grew 5.5 percent in 1977 and 3.2 percent in 1978. The rate of unemployment fell from 7.1 to 5.9 percent. Inflation was under control. The OECD average was 8 percent for 1977, compared with a U.S. rate of 6.5 percent.¹ The real price of imported oil declined because of stable OPEC prices plus dollar depreciation. The American...

    (pp. 225-261)

    “THE GNOMES of Zurich got their way,” lamented Arthur Okun, economic adviser to presidents Kennedy and Johnson, referring to the Federal Reserve Board’s decision to raise interest rates in November 1978.¹ But one year later, when the unsatiated gnomes demanded more, he agreed: “They had to do something in the tightening direction.”² That something was a revolution in Fed operations that produced very tight money and a year of volatile rates. First the Fed raised the discount rate—the fee it charged banks for borrowing—by a full percentage point, to 12 percent. Then, the superbank raised mandatory reserves, which...

  15. CHAPTER ELEVEN Age of Inequality
    (pp. 262-300)

    PRESIDENT Ronald Reagan transformed the economy and politics. A new recipe for economic growth prescribed freeing capital from taxes and unions and liberating markets from government rules. Reagan reduced taxes on capital, dismantled business regulations, privileged the fight against inflation, tolerated high unemployment, fought unions, promoted an expensive dollar, and championed free trade. His policies altered the composition of the U.S. economy. They promoted financial services and real estate and injured manufacturing. They benefited affluent workers more than poor ones, reinforcing the inequality that began in 1973. Although the president did not produce a Republican majority, GOP affiliation rose from...

  16. NOTES
    (pp. 301-356)
  17. INDEX
    (pp. 357-367)