Of course, with due deference to Crazy Horse, this says nothing about the rising use of psychedelics.

My conviction is that the 70's growth was constrained by the oil production crisis.

I'd refer to the interesting work of JP Jancovici, who redacted a good website on the subject.

Result of the [normalization] processing described above for the price of oil (constant 2004 dollars from 1979), compared - in a normalized way - to the"weakness of OECD growth" [NdE: 0 for max growth, 100 for weakest growth of years considered, so inverted AND normalized scale] of the following year, and the unemployement rate 3 years later. The highest for unemployement - for the period - was reached in 1983, 3 years after the highest for oil in 1980, then a new high arrives in 1993, 3 years after a "moderate peak" for oil in 1990, and at last a new high happens in 2003, 3 years after a relative high for oil in 2000.
Mean value for 3 years figured.

With a caveat:

Of course, the above graph has no predictive value yet, because correlations are observed a posteriori, and as long as a "physicial" law is not established otherwise, no definite prediction can be made by simply extrapolating what has been observed. In particular, if oil was the sole possible cause for the evolution of the unemployement rate, there would be not only a good correspondance for the trends, but also for the magnitudes, which is clearly not the case for the above graph.

My understanding is that the link between Energy consummation and growth is strong but the relationship between both is non linear, due to a (small) gain in energy efficiency trough the years, and a financiarization of the growth (when banks grow, this does not require as much energy, whereas when industry grows, this requires real energy). so a shift in the economic structure of France would affect the link between energy quantity and economic growth in the OECD area (globalization).

The peak in unemployment in the early 90's corresponds to the speculation-induced monetary crisis (Soros attack on pound) in the european monetary system just before the euro creation.

1970's corresponds to a change in the growth rate of oil production. from then on, we are entering a rationning world, where poverty is used as a way to keep some people out of the oil benefits.

Acting against this trend, on a longer temporal frame, requires that we collectively shift from main energy source. Which is obviously not the case.

In the US a major factor was a shift from a labor shortage to a labor glut as the Baby Boom generation flooded into the job market.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

Three related things happened in the 70s.

First, the European and Japanese reconstructions were largely completed. This reduced growth rates across the board in the American trading bloc (adding capacity means growth - maintaining it merely means not backsliding).

Second, the Americans involved themselves in unprofitable colonial wars in Indochina and elsewhere.

Third, Lower 48 peak oil happened.

This had a number of effects on the American economy, and therefore on the American trade bloc.

• The social contract in the American trade bloc was predicated on a certain rate of growth. Lower real growth means that someone needs to take a smaller slice of pie. Roughly speaking, that can be idle wealth and the banks (through inflation), it can be workers (through unemployment and wage dumping) or it can be firms (through squeezed margins). For a variety of reasons, manufacturing firms ended up siding with idle money over workers.


• The American oil companies no longer needed to care about employment. On the slide down the descending side of the lower 48 peak they could sell all the oil they could pump, regardless of the state of the macroeconomy. This incentivised their swing from the full employment coalition to the wage dumping coalition.


• The US flipped from the current account surplus side of the American trade bloc to the CA deficit side. This turned the Bretton Woods system from an advantage for the US into a disadvantage, so they killed it. This in turn prompted the EU to re-create a mini-Bretton Woods with the currency snake.

  But for various reasons, the EU surplus countries lacked the expertise or political will to recycle their surpluses the way the Americans had done. This made the European fixed exchange rate experiments unstable, and placed the onus of compensating for that instability on labor, leading to a structural bias for wage dumping and unemployment.



• The US, being the hegemon of its trade bloc, began imposing the folkviews of its new ruling coalition on its trade bloc, displacing the folkviews of the previous ruling coalition.

- Jake

Friends come and go. Enemies accumulate.

Holy crap - I was thinking of writing a very similar diary on exactly this topic with the same title.

Yes, clearly we wouldn't have had neolib credibility (such as it is) without their interpretation of the 70s.

But - let's not forget that the oil crisis was a political reaction by the Arab world to US support for Israel, not a production shortage.

And it led to oddly expedient pro-corporate policies in the West which derailed social democracy and limited the introduction of renewables in a way which benefited - and continues to benefit - OPEC, the UK (North Sea oil - until it ran out) and especially the Saudis.

Considering the close links between the House of Saud and some of the US oil producers, it's tempting to wonder if perhaps the shock was exaggerated for deliberate political effect.

How much competition from Asia broke solidarity between different unions and inside unions. Asian competition effected different industries and firms differently. Some were disappearing while others were doing at least as well as previously. It is harder to reach unity when some are losing and others are winning than when all are losing.

The background to the '70s was

• the decline of the postwar reconstruction boom

• the arrival of the postwar baby boom on the labour market

• the end of postwar care of keeping buffer stocks (the US destocked grain through the '60s by giving it away)

• the switch from US current account surplus to deficit

• factors favourable to greater world trade aka globalisation : the rise of Asian industry; gradual speeding up of information processing and communications; an increase in the size and penetration of multinational companies, and the concomitant rise of a financial sector using the dollar as a vehicle currency

The shocks were

• the end of Bretton Woods and resulting uncertainty

• food crunch from 1972 (animal feed scarcity in US as a result of the failure of the Peruvian anchovy fisheries, disastrous harvest in USSR resulting in heavy buying on world markets), producing sharply rising food prices

• the OPEC embargo causing higher energy prices

Growth was likely to tail off in the Western world; rising commodity prices were bound to push the costs of production higher while fuelling wage demands, hence inflation; a population bulge, in these circumstances, was likely to produce unemployment.

Is this an explanation for stagflation, and is it a good enough narrative? I don't know.

On the ideological front, neoliberalism had got up a head of steam and become influential (this can be documented) while a "classical" brand of Keynesianism was just waiting to get sucker-punched by the fact that inflation and unemployment rose together - and so "Keynesianism" was proved to be "wrong" and the neolibs took over. We know the rest.

I apologize for not keeping me in the impersonal objective level that this site and my friends ETers deserve.

From my current state (psychologically, weak; physically, exhausted; emotionally empty; and ideologically, hopeless), I sing the palinode at this question:

On June 30, 1969 I finished my studies with 4.50 pesetas, and alone in this world. I rejected the power (which I could have obtained) and I despised the objective of money (which I could have obtained).

And, now, I sing the palinode, at this point in my life, hopeless about the future: The power and the money have won, and they will continue to win.

And I now should comment about the issue raised, but not at this time. I will read you with nostalgia.

1. China saw an opportunity to win the Cold War without firing a bullet.

2. Nixon "went to China" in order to gain access to their cheap slave labor pool.

3. Nationalism/patriotism ... the middle class and wealthy working together along boundary lines ... gave way to worldwide oligarchs working together to control all resources.

4. The wealthy were paying attention when the scientists said that human population growth was going to fuck the world ... including them with all their wealth. All computer models said the same thing ... come up with a plan to peacefully cull most of the earth's population or you are all screwed.

Welcome to today. Have a nice day.

They tried to assimilate me. They failed.

In Varoufakis' Global Minotaur the 70s are the time the US change their basic plan.
In the earlier version they based their hegemony on recycling their surpluses into their docile clients in Japan and Europe.
The new version was a giant vacuum cleaner that sucked capital into Wall Street by promising and delivering outlandish profits. After this change the oil price was no longer of vital importance to US global policy.

So in Varoufakis' story the oil shock is not a cause but a result.

The first graph in the second cited article says something:

This graph is very reminiscent to this often iterated:

The new graph shows that a clear gap started to open not with Reagan and Thatcher, but some 8 years earlier.

I bet that ideology was a leading rather than reacting narrative. As was stressed by Henry George, the classical economics accepted that workers' pay is not related to the value of their labor but to their bargaining choices. In other words, productivity gains are not supposed to be correlated to labor wages. Most of the workers (footballers and some other skills excluded) mostly get only what they would settle for. We see this interpretation getting the working status after the 1970s.

Another thing that happened in the 1970s is the beginning of the end of grandiose imagination. Recall David Graeber's

It's often said the Apollo moon landing was the greatest historical achievement of Soviet communism. Surely, the United States would never have contemplated such a feat had it not been for the cosmic ambitions of the Soviet Politburo. We are used to thinking of the Politburo as a group of unimaginative gray bureaucrats, but they were bureaucrats who dared to dream astounding dreams. The dream of world revolution was only the first. It's also true that most of them--changing the course of mighty rivers, this sort of thing--either turned out to be ecologically and socially disastrous, or, like Joseph Stalin's one-hundred-story Palace of the Soviets or a twenty-story statue of Vladimir Lenin, never got off the ground.

After the initial successes of the Soviet space program, few of these schemes were realized, but the leadership never ceased coming up with new ones. Even in the eighties, when the United States was attempting its own last, grandiose scheme, Star Wars, the Soviets were planning to transform the world through creative uses of technology. Few outside of Russia remember most of these projects, but great resources were devoted to them. It's also worth noting that unlike the Star Wars project, which was designed to sink the Soviet Union, most were not military in nature: as, for instance, the attempt to solve the world hunger problem by harvesting lakes and oceans with an edible bacteria called spirulina, or to solve the world energy problem by launching hundreds of gigantic solar-power platforms into orbit and beaming the electricity back to earth.

...

What has changed is the bureaucratic culture. The increasing interpenetration of government, university, and private firms has led everyone to adopt the language, sensibilities, and organizational forms that originated in the corporate world. Although this might have helped in creating marketable products, since that is what corporate bureaucracies are designed to do, in terms of fostering original research, the results have been catastrophic.

I have been reminded of this by this Guardian piece on the occasion of Neil Armstrong's death: Neil Armstrong's death should be a wake-up call for the world

Neil Armstrong's death means that the first man on the Moon will never meet the first man on Mars. It is a chilling reminder that we are unlikely to reach another planet in the lifetimes of any of the surviving Apollo astronauts. It may not happen in my parents' lifetimes. I'm beginning to lose faith that it will even happen in my lifetime. How have we allowed this to happen?

...

I'll be 31 years old next month, and pretty soon I'll have to come to terms with the fact that I am a grown-up. Born just after the first Shuttle mission, I find myself trapped in the world of First Great Western trains, flying on aircraft designed in the sixties, watching my generation struggle to bear the brunt of an economic crisis, trying to find sense in a culture where Big Brother losers are given more press coverage than Olympic athletes.

There was so much optimism in my old sci-fi books, but now all we seem to hear are people droning on about how shit things are, how much shitter they're going to get, and whose fault it is that they got shit in the first place: the tedious drumbeat of the cowardly and insidious 'Broken Britain' mentality. I'm probably as guilty of that as anyone: it's easier to shout at things than it is to stand up and do something about them.

I think that's key: optimism has been replaced by a conservative pessimism that tries to convince us that we just can't afford things that we could afford when we were collectively much poorer, in the 1930s and in the aftermath of the destruction brought by WWII. As rootless puts it in his comment on Graeber,

In the early 1970s, even right wing "free market" enthusiasts like Milton Friedman thought that increasing prosperity would allow the government to just give every person a guaranteed income instead of operating an expensive and humiliating welfare system. Technical innovation, automation, spread of education and commerce, all this was going to create a world without limits for all of us. In that time people talked about "post scarcity", worried about the problems of an "affluent society", assumed humans would soon be traveling around planets, perhaps even around stars, and expected technology to produce wonder after wonder. In a mere 40 years we jumped to a world where "we can't afford" is the justification for throwing sick people out of hospitals into the street, for homeless vets on streetcorners, for slashing wages, making education unaffordable. We can't afford Isaiah  17:

Learn to do good; seek justice, relieve the oppressed, judge the fatherless, plead for the widow.

When I think of the global can't-do mentality I usually gravitate to two examples: the successful push in the 1980s to ban CFCs in order to halt or reverse the hole in the ozone layer has been followed by a shameful failure to act on climate change despite a string on international summits over nearly two decades. After the recent failure at Copenhagen, it's an open question whether it makes sense to even have a new round of climate change talks at the global level. The second example of global cooperation on a project of grand ambition is the eradication of smallpox. That is, unfortunately, a 'socialist' project, and I say 'unfortunately' because it means that, since the fall of the Soviet bloc and the triumph of neoliberalism it is impossible to imagine coordinated global action on such a scale. Now we depend on the Bill and Melinda Gates Foundation to decide to fund malaria vaccine research, and even if a vaccine is found I doubt a successful eradication campaign can be mounted by our current crop of global leaders.

See also metatone's earlier diary learned helplessness.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa