During the 1970s business conditions and the economy began to disappoint the expectations that Americans had built up during the post-World War II years. International events—the most important being the two oil crises of 1973-1974 and 1979—served as bookends for a decade that saw rampant inflation and slow economic growth, an unprecedented combination that led to a new term being coined, Stagflation. It also led to a decade-long lesson for the great institutions of the United States—the government, big business, labor unions -—of their growing powerlessness to affect the economy by the means of the previous forty years.
The effects of the Vietnam War and Presi-dent Lyndon Johnson's Great Society programs on the U.S. economy came in the 1970s in the form of increasing inflation. Inflation was also exacerbated by President Richard Nixon's political unwillingness to curb government spending and his politically motivated destruction in 1971 of the Bretton Woods currency-exchange mechanism, which had helped to keep inflation in check since the aftermath of World War II. With the U.S. dollar no longer convertible to gold at a set price, inflation rose, and Nixon responded with wage and price controls.
The increased federal involvement in the...
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