Essay Sample on Economic Stagnation in 1970

Introduction

The US economic growth keeps falling short of the expectations. The recession in the year 2009 was the worst. The recovery weaknesses have been surprising, the theory of convention states that when the economy has a big downturn, it will witness a big subsequent boom. Year1973 to 1976 is referred to as a transitional period in the US history this because it witnessed the American economic development and business-government relations dynamics. (Vogel 113). Before 1970, the US economy is said to have grown at a brisk rate while wages and employment grew at a good rate. The US managed to Fought the Cold war, war against poverty and race during this time. However,at the end of 1970's, there was an increase in civilian unemployment from four percent to six percent. In 1973, this rate then retreated to five percent and by mid-1975 only skyrocketed to nine percent, which is considered one of the highest rates since the period of great depression. The next two decades, the unemployment rate thus remained above the normal level where it remained at five percent. In 1979, the oil price topped $100 and in the following year on April it peaked at $117.7 . In 1980, inflation was high by the America historic standards excluding fuel and food that reached 12.4% on average. The G7 summit held in the year 1970's and 1980's provided a negotiating forum that discussed on issues to do with international economic relations that includes inflation, increased oil price ,economic stagnation, stabilization of finances such as US dollar, international trade liberalization.

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Stagflation

The Stagflation of 1970's increased the level of unemployment in the US because of the persistent inflation and stagnant business activities that were experienced. During this period, the Americans experienced an increase in prices of services and goods. The stagflation problem first began in 1973 with 73 to 75 recession. Where the Organization of Exporting Countries did declare oil embargo on Israel-Western nations. In 1979, the US government got an oil price shock caused by Iran revolution in January where the oil price doubled. This led to falling in growth and led to inflation. In 1980, federal reserve tried to fight the inflation that was caused by oil by raising their interest rate peaking at twenty percent. The inflation then responded by sagging to ten percent. However, the high-interest rates drove the economy back to recession in the first half of the year 1980. Oil prices decrease broke inflation whereby in 1982 the prices have slid down to an acceptable level. By 1983 the economy was back to recession and unemployment rate peaked at eleven percent. In order to resolve this, the federal reserve introduced the interest rate below ten percent. The question, however, remains to be what would have prevented us from experiencing the 1970's misery?. Arguments suggest the US economy was so much dependent on oil .One of the most important things to note is that regardless of how the year 1980 to 2000 produced, the policy makers traded off between unemployment and inflation will continue until there is a reliable way that will help to manipulate the aggregate supply.

Work Cited

Vogel, David. Fluctuating Fortunes. The Political Power Of Business In America. Basic Books, 1989, p. 113.