Ford; Carter; and the Economic Malaise: Crash Course US History #42 Video Lecture - World Knowledge

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.
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________________
[1] Foner.
Give me Liberty ebook version p. 1097