Bryan Caplan  

American Politics & Economics: The Seventies vs. Today

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Cloning for Kids... The Seventies...
I'm too young to remember much about the politics and economics of the Seventies.  From books, though, I get the impression that American political economy was in complete disarray: high inflation, high unemployment, crazy price controls, regulatory explosion, crushing taxes, loss of central bank credibility, vague talk about Central Planning.  I suspect that people will look back on our era in much the same way.  The list of ills will vary a bit, but the phrase "complete disarray" will frequently appear.

Question for those older and wiser than myself: When you were actually living through the Seventies, did public policy and the overall health of the economy seem worse than today?  The same?  Better?  When you answer, try to avoid hindsight bias; I want to know how the situation looked to you at the time.


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COMMENTS (28 to date)

I suspect thats really hard to do. Our opinions/experiences are retroactively affected by subsequent events.

Bill Woolsey writes:

Worse

That the inflation rate was rising was worrisome.

Arthur_500 writes:

I recall the great fear of the price controls as it was considered the end of American Capitalism as we know it. Certainly they did not last for long.

When the rationing came about for fuel, many were angry that things were being rationed. However, there were many more who had lived through WWII and knew that rationing was best for all, over a short term.

What bothered many, including myself, was the high rates of interest. Borrowing came to a screeching halt. Not only could you not get a loan but you could not afford the interest rates. Projects came to a halt. Many say it was the interest rates that killed nuclear power more than the protests.

Throughout all this I believe the American Dream was still alive and well. We could live through these anomolies and things will get better. I can only say that anecdotal evidence indicates this time things are different.

The President has engaged in activities that make the Nixon Price Controls seem a complete joke. He has taken over companies and thrown business law out the window. The Legislative Branch has enacted a law requiring citizens to purchase something in order to be an American citizen. Merle Haggard, who wrote a song in support of the new President, actually has come out publicly and said this dream was shattered. He has enacted changes in Financial process, without legislation, that affects the little guy selling automobiles to those with poor or non-existant credit. now he is going after more financial regualtion to make sure that nothing ever bad happens again.

Remember SarBOx? This set of laws would stop people from doing things that are illegal. We all know that criminals follow the new laws even though they ignored the old ones.

I really think this time things are different. I have never heard of so many people scared for their future.

russell1200 writes:

Worse because it was so unexpected.

The decline of the rust belt was huge.

John Fox writes:

In answer to your question, on the surface it seemed roughly the same as today. The predominant economic worry at the time was runaway inflation, and most people attributed that to an externality in the form of oil prices (although it was probably due as much if not more to central bank action). Unemployment and sluggish economic growth were also worries. The regulatory burden was not considered a problem by most people, as that was somewhat taken for granted. Remember, elements of our economy had been planned centrally during the Cold War and WW II, and many people believed those policies were successful. Then as now there were large ideological differences between, for lack of better terms, free marketers and central planner types. The political needle shifted abruptly with the arrival of Reagan and then Volcker.

Two significant differences though. First, many people ascribed our problems not to central planning but to a natural evolution of our society. Many if not most people thought that as a society, we were basically "beyond our prime." This was reinforced by the fact that the economic maladies of the 70s seemed to go on-and-on and never end. Many citizens resigned themselves to this being a permanent state of affairs. Second, people with free market views were more isolated from their peers and the society at large. The internet and cable TV didn't exist. Main stream thought was very heavily influenced by major news organizations....which then as now tend to be biased towards "central planning".

SydB writes:

"The political needle shifted abruptly with the arrival of Reagan and then Volcker."

Volcker came first. Brought by Carter.

Jim Ancona writes:

I graduated from high school in 1974. I was probably quite a bit more politically aware than the average person of my age. I agree that avoiding hindsight bias is difficult. The other problem with recalling the sort of perception Bryan asks about is that you also have to ask "Compared to what?" The 70's followed the 60's, a time of social and political (if not economic) upheaval. The 50's may have been relatively tranquil, but they followed the Great Depression and WW II.
So as I recall the 70's looked pretty messed up economically, particularly wage/price controls, the oil embargoes (with resulting price controls and gas lines) and double-digit inflation. Inflation seemed to me to be something that would likely persist for a long time, much like deficits and entitlements look today and I was pleasantly surprised when Volcker brought it under control relatively quickly in the 80's.
My father lost his job around the time I graduated from high school and never got an equivalent one again. But I suspect that having lived through the Depression and WW II give him a perspective that those Brian's age and younger, who have experienced only unprecedented growth and economic stability until now, may lack.

Randy writes:

I'm from Iowa (originally). What I remember is farm foreclosures, expensive gas (and underpowered cars), and interest rates that now seem completely insane (I had a 21% car loan). I never had a problem finding work, but the jobs weren't anything to write home about, and didn't offer much hope of getting ahead. Fortunately I was young with no family and not much in the way of responsibilities - and the military was hiring...

Daniel Kuehn writes:

Not that I'm old enough to discuss the atmosphere of the 70s, but my impression is that despite the disarray today, a lot of economists feel like they have a better understanding of what's going on today. It's an unusual time, but not necessarily an unexplainable time. The impression I get of the 70s is that it left a lot of people scrambling not just because they didn't see it coming, but because they couldn't explain it well even after it happened.

I'm sure Ed Phelps and others would disagree and are reasonable exceptions, of course.

Steve Roth writes:

I recently asked my ex business partner (who I frequently accuse of libertopian nostalgiacism) what period he looks back on fondly as a model.

Funny, he mentioned the seventies -- when he was in high school and college.

This was in Seattle, where Boeing was in a deep dip, there were signs saying "Will the last person leaving Seattle please turn out the lights," and a quarter of the houses on my block (glorious views, today *highly* desirable) were boarded up and available for back taxes.

Go figger.

Ak Mike writes:

I was 17 going into the '70s, so 27 at the end of them. I think people were more focused on foreign affairs than now, mainly because of the Vietnam War that dominated the first half. Political stuff was far more dramatic than it is now - the war, the riots, Watergate, the resignation of the vice president and then the president, etc. I think there was a sense that economics was of secondary importance.

Inflation was certainly the big economic issue, and I recall a sense of helplessness about it - for example, Ford's ridiculous WIN button showing that at the highest level the leaders were clueless.

Floccina writes:

"did public policy and the overall health of the economy seem worse than today? "

Worse than today. Unemployment and inflation plus it seemed that quality of products had stopped improving in the 1970 in response to inflation. It at least had slowed.

Floccina writes:

Also inner cities seemed to by crumbling in the 1970s.

Jim Dew writes:

I was in my 20's during the 70s. Objective data: I had a neighbor hoarding gold and several friends drawn to the "self sufficiency" movement (raise your own goats, etc.). On top of that, we had disco. It was worse then.

Kevin Donoghue writes:

Perhaps the best way to tackle this question is to look at books actually published by popular economic commentators for the general public between 1970 and 1980. A few that come to mind are: JK Galbraith: Money, Whence it Came, Where it Went; Samuel Brittan, Economic Consequences of Democracy; Fred Hirsh, Social Limits to Growth; Milton Friedman, Free To Choose.

Then as now, financial markets (especially the FX market) were a mess and it was already pretty clear that economists really hadn't a clue about them. Energy markets, trade barriers and labour relations were in a much, much worse state.

John Fox writes:

At the risk of boring you, I wanted to build on my previous comments. First, most citizens in the 1970s didn't see themselves in a chaotic decade. Rather, they viewed their economic problems a natural evolution of our economy, combined with some bad luck in the form of high oil prices. Jimmy Carter personified this view by frequently going on television and telling people that he was doing all he could and they needed to just suck it up. Our experience in Vietnam didn't help. Many people thought we were over the hill as a society.

Second, as I said in my previous comments, there was very little coordination among free market thinkers, unless they tended to be at the top of their profession. Very few people knew who Milton Friedman was for example. Furthermore, I'm guessing that all but the most elite free market thinkers had a lower level of coordination amongst themselves than they do today. Most persons with free market views believed that they were in the right, but had limited channels to coordinate with others in order to reinforce and fortify their views. As a result, most were not equipped to market their views to the general public, much less their peers and friends. Consequently, there was a small, a very small portion of the population that was at all literate on matters of fiscal and economic import. For example, if you were to say that today the portion of the population that has a well rounded level of understanding of economics of such-and-such a level is 5%, that same number during the 1970s was more like 1%. The general level of economic and financial literacy (excluding for a moment just the Keynsian/central planning types) was much lower than today.

Finally, the historical and geographical environment that surrounded us all favored the central planning thesis. With the exception of places like Hong Kong and Switzerland (and maybe a few others) the rest of the planet was either communist or socialist. And from what we were told, the communists were happy and successful! (we later learned that this was a fiction). In a historical perspective, there hadn't been what we today would call a President with free market ideas for as long as people could remember. Eisenhower and Kennedy perhaps had free market ideas, but if they did, they didn't push them aggressively.

Today free market advocates have the ability to communicate and learn from one another and that makes the political landscape very different. We also have the experience of Ronald Reagan in the rear view mirror. Although people have different views on the effectiveness of his policies, his effect on debate has been profound. It's hard to overstate what a complete shock Reagan was to those advocating central planning. He was the first 20th century American President to make a strong and compelling case against the central planning thesis.

agnostic writes:

The crime rate was soaring and all involved admitted that nothing they tried was having any effect (putting more cops on the street, patrolling more often, etc.). There was a sense of pessimism, hence the re-birth of the cop movie with the Dirty Harry series.

Also there was no identity politics after the early '70s. Blacks moved on and joined the mainstream, only the far radical fringe of feminists thought that all heterosexual sex was rape, and gays weren't raising a fuss over anything. Identity politics was a singularly early '90s thing, which many now forget and project back onto the late '60s and early '70s rebellion. That was instead about civil rights and smashing capitalism and imperialism.

SydB writes:

I don't see complete disarray today. During the 1970s, the political economy seemed directionless and clueless. Today, I think there is one primary issue: putting back in place the level of regulatory control that will reduce the probability of market breakdowns. That's all.

Joe Calhoun writes:

I was in college in the 70s. To comment on whether things seemed worse then would require that I remember something from that period of my life. Sorry, I got nothin'....

jean writes:

Unemployment was lower in Europe...

Ted Craig writes:

None of the comments on either this post or Arnold's (including Arnold's own) come from people who were older than 30 at the time. I question their accuracy in terms of the mood of the average voter as a result.

David S. writes:

My enduring economic memories of the 1970s are the frequent shortages of basic goods. Yes, WWII was worse, but that was caused by a war. We were not at war in the 70's once Vietnam ended.

One year (1971?) there was a shortage of Semolina wheat flour, so all the pasta disintegrated when cooked. Another year (1974?) there was no ground beef to be had. And of course there were the two gas shortages, one keyed to the 1973 Arab-Israeli war and the other to the 1979 Iranian Revolution. Sitting in gas lines for hours, worrying about odd and even license plates. Putting locking caps on your gas tanks.

The unemployment rate was every bit as bad as it is now, the inflation rate was much, much higher and there was this added element of being unable to buy basic goods. Economically, it was a very unpleasant time.

paofpa writes:

Inflation led to wage hikes which led to more inflation which led to more wage hikes. It also led to temporary increase in interest rates. It also led to a relative reduction in debt. The working complained, as always, but did not mind. The ones not working did. Because of it, my mortgage disappeared in four years. The wage hikes like the ones found in the past environment will not be here; but neither is much of the control.

MernaMoose writes:

did public policy and the overall health of the economy seem worse than today? The same?

Public policy seemed at least as bad, and probably worse.

The economy to me seemed worse then than it does now. But as I said on the other thread, how big an issue the economy is depends much on a) how high up the economic ladder you are and b) whether or not you've got a job. Today I'm a lot higher up the ladder and I haven't lost my job (yet).

For those of us living on the lower end of the economic ladder, inflation was a real pain that we experienced every day.

shecky writes:

My recollection is that at the time, things seemed much worse back then. There was little popular faith in market based economic solutions. The country, used to being the dominant world power, had been demoralized first by Vietnam, and later by the Iranian hostage crisis. And there was a sense that falling quality of life issues like crime were on an unstoppable trend in the wrong direction.

In contrast today, it seems the same kind of hopelessness really isn't there. Even among the disgruntled tea party types, I get the sense that the gloom and doom is more show than not. A feeling that the negative trends are going to hurt the country as a whole more then them personally.

Rebecca Burlingame writes:

I graduated from high school in 1973 and spent two years in college before going into office work. While I was not economically aware in those days, I can tell you that it was tempting then to just go out into the world, grab a job and easily make house payments from secretarial work. Had I known just how much that would change I definitely would have finished a couple of degrees for teaching, I am going back now for remedial math now as I continue to study economics issues on my own.

Boonton writes:

One of the hard things about these types of comparisions is how difficult it is to part your own growth from the larger economy. Most people, for example, dramatically increase their income from their 20's to 30's to 40's simply due to advancing in the job market and building their skills and connections. Yet its hard to part this from overall economic growth which plugs along at a more modest pace of a few percentage points.

Another thing is how tricky it is to part the narratives that were laid down after the era from what people actually experienced during that era. For example, deregulationa nd Vocker were not introduced by Reagan but by Carter...even military rearmament.

That being said, my memories of the 70's were episodic and brief since I was just a kid. I remember my mom complaining about 'all that inflation' during the election that brought Reagan in. I have a fuzzy memory of news reports about an impending strike and my mom buying meat at the supermarket to stock up. Other than that I have watched a lot of sci-fi movies from the era and from them it seems:

* Central planning was accepted but considered kind of irrelevant. In movies like Logan's Run and Star Trek goods are so easily available, energy is so cheap that what you want is basically there. No one seem to worry about meeting market demands but then no one seems to have to worry about doing any actual planning in central planning.

* Leaders tend to be straight foward. Take the old Battlestar Galactica. They arrive at some world with human like aliens on it suffering from pollution or impending nuclear war. The wise leaders have the solutions to these 'primitive' problems. Leaders, like Adama, are pure goodness. Or if they are pure evil. Nixon, for example, is depicted as a schemer but still he is basically intelligent. Today, though, leaders are depicted as ignorant. Adama today is unsure of himself, unable to know the consquences of his decisions. He is still good but good results are not guaranteed from following him. Bush, likewise, is not often depicted as a schemer but a fool. A man who thinks he is pulling all the strings but is as ignorant as a child to how the world really works.

I suppose this carries over to other media. Vietnam, for example, is often depicted as a foolish mistake....getting into someone else's fight. But compare that to The Hurt Locker. There is no 'someone else', its numerous 'insurgents' who seem to have no common agenda, good or bad. No common cause who seem to blow each other up as much as Americans. Might society today have adopted a Hayek inspired meme that says society itself is basically incomprehensibly complicated?

nohype writes:

"When you answer, try to avoid hindsight bias; I want to know how the situation looked to you at the time."

Is that possible?

In the 1960s, when I was an undergraduate, the elite of the economics profession (Samuelson, Heller, Okun, Tobin, etc.) was convinced that it could fine-tune the economy. As the 1970s unfolded, history laughed at these people. The press had lots of stories about the crisis in economics, and few if any of those stories recognized that only one school of thought, the dominant Keynesian one, was having that crisis. Then as now the newspaper and television media were economically illiterate.

Arthur Burns was on paper the most capable person ever to lead the Fed, but in practice he was a disaster. Sometimes credentials do not tell you much. (But Burns might have been better than his successor, the forgettable and forgotten G. William Miller.)

The public, the intelligentsia, and even many economists supported the introduction of wage-price controls. Then as today people who have faith in markets were considered to be dogmatic ideologues while those who have faith in government were considered to be reasonable pragmatists.

By the end of the decade, inflation was double digits and I did not see how it would end because I did not believe that the Fed would have the courage to act as it did in the early 1980s. There is good reason that Paul Volcker is considered to be one of the great Fed Chairmen.

The problem with trying to be objective is that the problems of the 1970s disappeared because we had a change in leadership that took us on a different path. So in retrospect we know that the problems of time were solvable and so they see less important. We do not know if we will get the leadership in the next few years that will put us on a path that will resolve our current problems. So we do not know how serious today's problems are.

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