1973–1975 recession
The 1973–1975 recession or 1970s recession was a period of economic stagnation in much of the Western world during the 1970s, putting an end to the overall post–World War II economic expansion. It differed from many previous recessions by involving stagflation, in which high unemployment and high inflation existed simultaneously.
United States
Among the causes were the
The recession in the United States lasted from November 1973 (the Richard Nixon presidency) to March 1975 (the Gerald Ford presidency),[3] and its effects on the US were felt through the Jimmy Carter presidency until the mid-term of Ronald Reagan's first term as president, characterized by low economic growth. Although the economy was expanding from 1975 to the first recession of the early 1980s, which began in January 1980, inflation remained extremely high until the early 1980s.
The U.S. Bureau of Labor Statistics estimates that 2.3 million jobs were lost during the recession; at the time, this was a post-war record.[4]
Although the recession ended in March 1975, the unemployment rate did not peak for several months. In May 1975, the rate reached its height for the cycle of 9 percent.
United Kingdom
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The recession also lasted from 1973 to 1975 in the United Kingdom. GDP declined by 3.9% depending on the source. It took 14 quarters for the UK's GDP to recover to that at the start of recession.
The oil crisis was largely to blame for the downturn in the United Kingdom, just as it was in the US, although an additional crisis came in the form of the Three-Day Week, which was the result of fears over power shortages as a miner's strike was announced in December 1973. The three-day week was a state of emergency imposed by Conservative prime minister Edward Heath, which came into force on 1 January 1974, meaning that commercial users of electricity were limited to three specific consecutive days' consumption of electricity, and forbidden to work longer hours of those days, although services deemed essential were exempted from these regulations. Electricity blackouts across the country were widespread.
There was also double-digit inflation during this period, which peaked at more than 20%.[7]
Edward Heath's offer of a 13% pay rise was rejected by the miners, and he then responded by calling a snap election on 28 February 1974 in what he saw as an opportunity for the electorate to show the miners that the government – and not the miners or the unions – were responsible for running the country. Most opinion polls suggested that the Tories would be re-elected with a majority, but when the election results came through on the morning of 1 March 1974, no party had an overall majority. The gap between Ted Heath's Tory government and the Labour opposition led by Harold Wilson (who had been prime minister for nearly six years until his surprise defeat by Heath's Tories in the 1970 election) was so narrow that the Tories received the most votes but Labour won slightly more seats.
Heath fought to keep the Tories in government by attempting to form a coalition with the Liberal Party and offering a cabinet post to Liberal leader Jeremy Thorpe, but this attempt to remain in power proved unsuccessful for Heath and he was forced to resign as prime minister on 4 March, paving the way for Harold Wilson's Labour to return to power as a minority government[8] before winning a second election on 10 October by a majority of just three seats.[9]
Economic growth was re-established in 1975 as the recession's end was declared, but Britain's economy remained shaky. Inflation remained high, strikes continued to cripple manufacturing and public services, unemployment continued to rise above the 1,000,000 mark, and just after the resignation of Harold Wilson as prime minister in March 1976, his successor James Callaghan was forced to call on the International Monetary Fund for a multibillion-pound bail-out in an attempt to bolster Britain's flagging economy.
The Labour government's tiny majority was wiped out by early 1977 as a result of by-election defeats, and Callaghan managed to form a
In the first year of the Thatcher-led Tory government inflation rose to 15.3%, but then fell to 5% by the time of their election win in 1983.[11] However, the monetarist policies designed to curb inflation caused a recession in 1980 and resulted in a steep rise in unemployment from 5.4% (1,390,46 people) to 11.5% (3,104,66 people).[12] It was not until 2000, by which time Labour had been re-elected as New Labour under Tony Blair that unemployment fell to the level in 1979.[13]
Rest of the world
The oil crisis of 1973 also had similarly large negative effects on other countries that relied heavily on imported oil, such as France, Sweden, Japan, Finland, Belgium, Luxembourg, and Denmark.
In Sweden's particular case, the recession proved devastating to the shipping, ship-building, and logging and mining industries. The increase in oil prices caused export revenues from shipping to drop by 25% within a few years. Sweden at this time had the world's second largest ship building industry (after Japan), and the spillover effects devastated shipbuilders (Swedish shipbuilders lost some 3 billion SEK in 1974), which in turn led to problems in Sweden's steel industry. The loss of shipbuilding jobs devastated port cities such as
Some newly industrialized countries saw some diversionary benefits from the crisis, namely Spain, Korea, Taiwan, Singapore, Mexico, and Brazil, as their low-cost environments attracted new investments and gave their products a competitive edge over competitors in higher-cost, developed countries suffering from higher energy costs. These countries gained increased market share both in their domestic markets and abroad at accelerating rates during the 1970s.
Economic recovery
In the United States, the economic recovery from the 1973 to 1975 recession had many of the characteristics of a typical U-type recovery. GNP (the measure at the time) reached and exceeded its pre-recession level by first quarter 1976. Industrial production had recovered to its pre-recession levels by the end of 1976.[17]
The major influence of the experience of the 1974 recession came in the form of the concept of
The interpretation regarding the cause of stagflation was and continues to be controversial.
See also
- 1970s energy crisis
- List of recessions in the United States
- List of recessions in the United Kingdom
- Phillips curve
- Steel crisis
References
- ^ Martha C. White (12 January 2009). "This Recession Was Brought to You by the Letters U, V and L". The Big Money.
- ^ "Stagflation
- ^ "NBER Business Cycle Expansions and Contractions". NBER. Archived from the original on 5 July 2007. Retrieved 1 October 2008.
- ^ "Unemployment continued to rise in 1982 as the recession deepened" (PDF). Bureau of Labor Statistics. U.S. Bureau of Labor. Retrieved 15 October 2018.
- ^ Labor Force Statistics from the Current Population Survey, Bureau of Labor Statistics. Retrieved on 19 September 2009
- ^ "The Recession of 2007-2009" (PDF). Bureau of Labor Statistics. Retrieved 27 September 2012.
- ^ Stevenson, Tom (11 February 2012). "Lessons to be learnt from rampant inflation of the 70s".
- ^ "1974 Feb: Hung parliament looms". BBC News. 5 April 2005.
- ^ "1974 Oct: Wilson makes it four". BBC News. 5 April 2005.
- ^ "1979: Thatcher wins Tory landslide". BBC News. 5 April 2005.
- ^ "Changes in the economy since the 1970s - Office for National Statistics". www.ons.gov.uk. Retrieved 30 December 2019.
- )
- ^ "Changes in the economy since the 1970s - Office for National Statistics". www.ons.gov.uk. Retrieved 30 December 2019.
- ISBN 9780886450632. Retrieved 12 March 2019.
- ^ "Consumer Price Index: Sweden". St. Louis FRED. Federal Reserve Bank of St. Louis. January 1955. Retrieved 12 March 2019.
- ^ Horváth, Dezsö (1982). Small Countries in the World Economy: The Case of Sweden. Institute for Research on Public Policy. p. 42.
- ^ Zarnowsky & Moore. "The Recession and Recovery of 1973-1976" (PDF). www.nber.org.
- ^ "Labor Force Statistics from the Current Population Survey". www.bls.gov. Bureau of Labor Statistics.
- ^ Baker, Dean. "The Federal Reserve Board Responds to Bankers". www.cepr.net.
- ^ Morris; et al. "After the Phillips Curve: Persistence of High Inflation and High Unemployment" (PDF). www.bostonfed.org. Federal Reserve Bank of Boston.
- ^ Okun, Arthur. "A Postmortem of the 1974 Recession" (PDF). www.brookings.edu. The Brookings Institution.
- ^ Williams, James. "Oil Price History and Analysis". www.wtrg.com/prices.htm.
Further reading
- ISBN 978-0226213514.
- Silber, William L. (2012). Volcker: The Triumph of Persistence. New York: ISBN 978-1608190706.
- Wells, Wyatt C. (1994). Economist in an Uncertain World: Arthur F. Burns and the Federal Reserve, 1970–1978. New York: ISBN 978-0231084963.