The 1970s - the history of economic stagflation in the United States. The root causes of stagflation are that scientific and technological development is at a low ebb, the share of export trade is declining, and the real economy lacks growth points.
Expansionary fiscal policy and monetary policy in the transition period not only failed to stimulate economic growth, but instead "added fuel to the fire."
The continued depreciation of the US dollar, high oil prices and food shortages have driven up already high inflation.
The impact of stagflation Stagflation has had an extremely negative impact on private investment. A large number of companies have closed down, workers have lost their jobs, and economic growth has stagnated.
During the entire stagflation period, the U.S. stock market went through six rounds of adjustments. The stock market went down before the economic recession, and the stock market stabilized before the economy stabilized.
While Western economies were experiencing stagflation, U.S. credit expansion actually contributed to the economic development of less developed countries and the expansion of world trade.
Getting out of stagflation After the Reagan administration's structural fiscal policy and tightening monetary policy, the United States ushered in a peak of economic growth in 1983. This round of stagflation lasted for 13 years.
“Stagflation” in economics refers to the economic phenomenon in which production stagnates, unemployment increases, and inflation coexist.
Stagnation of production is an important manifestation of economic stagflation.
The "Dictionary of Modern Economics" edited by American scholar D. Greenwall explains stagnation as: "actual output or income remains unchanged, declines, or increases but is much slower than the achievable growth rate."
Therefore, the stagnation of production during the stagflation period does not just refer to the decline and stagnation of production in the crisis phase of the capitalist economic cycle. It is a phenomenon that exists for a long time across economic cycles.
Therefore, the economic crisis and slow economic growth stage experienced by the United States from 1970 to 1982 of the last century basically belonged to the "stagflation" stage.
The market generally believes that the stagflation in the United States at that time and the subsequent economic crisis were mainly caused by rising energy prices.
Today, oil prices are high again, and the "subprime" crisis is getting worse.
Will the United States return to the dilemma of recession and inflation?
Taking history as a mirror, we can learn about the rise and fall. This article discusses the causes of stagflation, its impact on the stock market and the global economy, and how to get out of stagflation. I hope it can inspire readers.
Causes of "stagflation" in the United States from 1970 to 1982 During the "stagflation" stage, the United States experienced four economic crises (according to NBER statistics, the economic bottom was November 1970, March 1975, July 1980,
November 1982).
During these economic crises, while production declined and unemployment soared, prices generally rose sharply instead of falling, becoming a unique economic phenomenon in which high inflation rates, high unemployment rates, and low economic growth coexisted.
This phenomenon is relatively rare in the history of American economic development.
From the post-World War II period to 1970, the United States experienced four economic recessions (according to NBER statistics, the economic bottoms were October 1949, May 1954, April 1958, and February 1961).
When an economic recession occurs, production declines, unemployment increases, and prices will also fall; after the crisis, production increases, employment increases, and prices will rise.
What causes high inflation to coexist with high unemployment and economic sluggishness?
We should also start with the causes of stagflation.
The lack of growth points in the real economy is the root cause of "stagflation". The U.S. economic stagnation began in 1969, when the inflation rate was about 5%.
Why is the U.S. economy “stagnating”?
The reasons are: First, the stimulation of US consumption and economic growth by the war is gradually disappearing.
For example, the US industrial boom in the 1950s and 1960s benefited from the pent-up demand for fixed assets, residential buildings, and durable consumer goods accumulated during the world wars, as well as the stimulation from the Korean and Vietnam wars.
These factors have gradually disappeared since the 1970s.
Second, technological development is at a low ebb.
In the late 1940s, capitalist countries such as the United States took the lead in launching the third scientific and technological revolution, led by the invention and application of atomic energy and electronic information technology. Since the 1950s and 1960s, it has promoted the rapid growth of American industry.
However, after nearly 20 years of technological upsurge, by the early 1970s, the driving force of the third technological revolution had significantly weakened.
Until the late 1970s and early 1980s, on the basis of the third scientific and technological revolution, the application of cutting-edge technologies such as microelectronics technology, bioengineering, new materials, aerospace engineering, ocean engineering, and nuclear energy technology worldwide was the main symbol.
The new technological revolution of the new technological revolution has reached another climax.
Third, the US export trade volume in the world market began to decline.
Since the 1960s, due to the development of economic globalization and regionalization, restrictions on the international flow of commodities and production factors have been greatly reduced, and competition in the world market has intensified.
In 1947, U.S. exports accounted for about one-third of world exports, which dropped to 23.5% in 1948, 18.2% in 1960, and 15.5% in 1970.