That 70's Show
By Brendan Wilson
The 1970’s are back! Not the Led Zeppelin, Charlie’s Angels, Miami Dolphins 1970’s. I mean the raging inflation, multiple energy crises, looming threat of nuclear war 1970’s.
I had considered my decade juxtaposition days over after my comparison of the roaring 20’s and the 2020’s aged like warm milk, but last month’s 9.1% inflation reading, Russia’s invasion of an independent neighbor, and the leader of the free world's bicycle summersault have pulled me back into the game.
The 70's were known for wide lapels, inflation, energy crises, political upheaval, and Cold War drama. We know nothing of the first because we now wear pajamas to work, but the rest, unfortunately, are all too recognizable today.
Those with enough miles on the odometer recall LBJ's Great Society programs, which transferred enormous wealth from the government to individuals during the 60’s and 70’s. This sent more dollars chasing the same amount of goods and resulted in upward pressure on prices.
Making matters worse were a pair of energy crises then sent gas prices higher than Jeff Bezos's phallus rocket. The first of which hit in 1973, when OAPEC cut oil production and embargoed the US in retaliation for its support for Israel during the Yom Kippur War. A few years later, Iranian revolutionaries ousted the American backed Shah and installed a theocracy in Tehran. Both shocks choked off the flow of oil to the US, resulting in soaring prices and gas rationing. Unchecked inflation combined with a period of low growth to create the stagflation that menaced the US economy for years.
Today’s inflation is also rooted in government policy. Between the Trump and Biden administrations, the federal government shelled out $5 trillion in pandemic relief, much of it making its way to individuals and small businesses. Cash flush Americans essentially under house arrest hit the “Buy it Now” button at record levels, supercharging demand for physical goods that an economy hampered by staff reductions was not prepared to deliver. Additionally, Russia’s invasion of Ukraine reduced the flow of its energy to western markets and trapped a substantial proportion of the world’s grain. A juiced money supply, a demand shock, and a supply shock have combined to respawn the abominable beast of stagflation.
Today’s war in Ukraine should also evoke deja vu. In 1979, Soviet troops poured into neighboring Afghanistan to exert broader control over the government in Kabul. What was supposed to be a special military operation turned out to the be a multi-year slog, killing countless civilians and, through massive losses of money and men, served as a major impetus for the collapse of the Soviet Union a decade later. Just as the US provided clandestine support to the Afghani Mujahedeen 40 years ago, the west has united to provide support to Ukrainian fighters against their Russian invaders.
Finally, the 70’s saw the resignation of Nixon, his pardon by his one-term successor, Gerald Ford, and the failure of Jimmy Carter to chart a path back to "normal governance” in the aftermath of Republican political tragicomedy. Today, Biden seems intent on repeating a Carter term marked by ineffective leadership and legendary bad luck. He has failed to deliver on his promise to heal political division and return the country to “normal” leadership after the tumultuous Trump years. Instead, we have economic stagnation, inflamed political polarization, and a culture war that cleaves the nation in two. Both age and inaptitude will render him a one-term president.
With the echoes of the 1970’s reverberating, what lessons can be applied today?
Firstly, the inaction of Arthur Burns during his 9-year tenure as Fed Chair allowed inflation to erode wealth at a rate of 7% per year. It wasn’t until Carter installed Paul Volcker, the 6’7” cigar puffing inflation assassin, in 1979 that rates were hiked to a level high enough to snuff out excessive price growth.
Last month, inflation reached a 40-year high of 9.1%. Fortunately, current Fed Chair Jerome Powell seems to have learned from the folly of Burns’ inaction. The Fed has already moved to aggressively hike increase rates and are reportedly considering a further increase of 75 basis points at their next meeting later this month. Of course, the Volcker hikes brought on a painful recession 40 years ago, but the bitter taste of the medicine will be warranted by the cure of disease.
As for energy, the dual crises of the 70’s spurred several significant policy and cultural shifts. The first speed limit and fuel efficiency standards were signed into law, improving fuel economy sharply over the ensuring decades. Driver preference for vehicle size switched from the muscle car to the compact, helping to curtail per capita fossil fuel use. Additionally, bipartisan collaboration funneled federal dollars into development of wind and solar technology, which have decreased in cost over the decades.
In the interests of both the climate and energy independence, we should continue these improvements. Development of wind and solar is crucial, but they will never replace fossil fuels on their own. Modern and safe nuclear energy plants, which produce enormous energy with little waste, must be budgeted and developed in the years to come.
In the Ukraine, the US must follow the Soviet-Afghan playbook. It should continue to provide robust support for Kyiv while avoiding direct engagement with Russia’s troops. Ukraine will almost surely become the viper nest that Afghanization was, bleeding Russia of blood, treasure, and eventually, domestic support. The war could bring down Putin’s government as Afghanistan brought down the Soviet Union.
Finally, as Carter was a transitional figure bridging a politically turbulent time with the Morning in America that followed, so must Biden be. Americans must choose a leader in 2024 that respects our institutions but is willing to improve them; that is proud of our history while willing to acknowledge our errors; and that understands that the world is better, safer, more prosperous place when America is strong and united at home.
The outlook seems bleak. Consumer confidence and presidential approval ratings are at all-time lows and the belief that the country is headed in the wrong direction is nearly universal. But our dynamism and resilience will allow us to overcome the challenges that plagued the 70's and point us once more in the right direction.
Corbett, M. (n.d.). Oil shock of 1973–74. Federal Reserve History. Retrieved July 22, 2022, from https://www.federalreservehistory.org/essays/oil-shock-of-1973-74
Dunbar, B. (2015, April 14). Glenn responds to 1970s Energy Crisis. NASA. Retrieved July 22, 2022, from https://www.nasa.gov/centers/glenn/about/history/70s_energy.html
Magazine, S. (2021, May 13). Gas shortages in 1970s America sparked mayhem and forever changed the nation. Smithsonian.com. Retrieved July 22, 2022, from https://www.smithsonianmag.com/smart-news/1970s-gas-shortages-changed-america-180977726/#:~:text=%E2%80%9CAs%20a%20result%2C%20the%20response%20to%20the%201970s,fossil%20fuels.%20Livia%20Gershon%20%7C%20%7C%20READ%20MORE