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The period of economic prosperity, which the USA enjoyed for over forty years (after the Great Depression), was over by the 1970s. After 1972, the country faced stagflation – a serious stagnation (recession) combined with double-digit inflation. Economic recession became a tool in the 1976 election company of Jimmy Carter, who used economic misery as an effective tool against President Ford. However, when Carter became President, he was unable to stop the process. The annual inflation rate went from 5 % to 14,5 % and the price of gasoline almost doubled.
Part of the reason for economic recession was that American dependence on oil increased, and country was using more oil than it was producing. High oil prices helped inflation, and inflation produced higher interest rates. The companies could not afford to borrow money to expand so unemployment rose. Besides, the "Big Three" automakers (Ford, General Motors and Chrysler) were no longer able to sell their large, heavy cars in big numbers, instead consumers demanded smaller, more fuel-efficient cars. Dramaticaly fall in sales led to a massive unemployment, especially in the regions where the auto industry had supplied many of the jobs.
Though the Carter administration tried various measures to cope with the problem, the rate of inflation was higher by the time he left the office than it had been before. Early 1980s was a difficult time for American economy – the period of recession coupled with high oil prices leading to decline of farming and lowered productivity of the US industry. Besides, economic rivals of the USA such as Germany and Japan were getting a bigger share of world trade.
No wonder that presidential elections of 1980 were won by Ronald Reagan, whose tactics was to ask a single question: "Ask yourself, are you better off than you were four years ago?" As a president Reagan achieved steady popularity during two terms in office and became a figure of reassurance and stability for many Americans.
Reagan proposed using supply-side economics to cut inflation and increase employment. His belief that Americans should not rely on government too much and that government should not intrude too deeply into Americans' life led to the cut of social programs. Next step of the Reagan administration was cutting taxes on companies and reducing regulations on business, which be believed was a measure to promote greater consumer spending, saving and investment.
After the first three years of Reagan's presidency the USA entered a new period of economic growth – the Gross National product grew and from 1983 to 1988 the US economy created more than 13 million new jobs.
However, the Reagan administration failed to cut government spending, moreover, spending on military programs greatly increased. This led to the increase of national debt and, finally, to the new recession period, which was faced by the Bush administration. During Bush's presidency the country experienced a new period of recession when the largest companies announced downsizing – a big cut in labor force to remain competitive. Though the Bush administration tried to cope with economic problems, the lack of positive tendencies in American economy led to his defeat to Clinton in 1992.
The next president Bill Clinton continued the attempts to shrink the government and reduce the regulations of American business. By the end of the 20th century falling oil prices and technological development – especially in the field of the computers – helped the US economy create new jobs and expand to the global markets.
Task 1. Express your opinion on the capitalist economy, taking into consideration the following ideas:
1.Positive sides of capitalism – increased competition, consumers benefit from better service and lower costs.
2.Negative sides of capitalism – economy goes in circles of booms and busts, after economic growth people face recession or even depression; not much attention is given to social programs.
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