StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

The Slowdown in the Growth Rate of the U.S. Economy From 1973 to 1995 - Essay Example

Comments (0) Cite this document
Summary
The US economy exhibited a dramatic slowdown between the years 1973-1995 when compared to the two decades before that period and the years since 1995. Volumes have been written to explain the elusive reason of this prolonged downturn…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER93.5% of users find it useful
The Slowdown in the Growth Rate of the U.S. Economy From 1973 to 1995
Read Text Preview

Extract of sample "The Slowdown in the Growth Rate of the U.S. Economy From 1973 to 1995"

The Slowdown in the Growth Rate of the U.S. Economy From 1973 to 1995. The US economy exhibited a dramatic slowdown between the years 1973-1995 when compared to the two decades before that period and the years since 1995. Volumes have been written to explain the elusive reason of this prolonged downturn, but economists have been unable to reach a consensus on the cause. The reasons have ranged from low levels of education and an untrained workforce to the spike in petroleum prices that began in 1973. Most economists that have examined this problem have attempted to find a single suspect or a magic bullet. However, the case is much more complex than that. The downturn was caused by a confluence of negative factors that combined to form the perfect economic storm. The most influential factors that caused the downturn during the period of 1973-1995 were the high cost of oil, the low investment of R&D, and a low confidence in fiscal economic policies.
No single factor garners more attention as the cause of the drop in productivity beginning in 1973 than the price of oil. It is a highly visible economic factor and their rising prices coincided in time with the downturn. This coincidence alone is not significant evidence and Olson argues that the cost of energy is too minor to account for the dramatic drop (46). However, Jorgenson points to a second price rise beginning in 1978 and contends that the high price of oil was responsible for a loss of productivity growth in over 80% of the 35 industrial sectors that the study analyzed (34). Economists have questioned this contention by pointing to the collapse of oil prices in 1986 and asking why productivity did not recover (Olson 57). The high cost of energy was passed along and buffered and Olson contends that oil "...had a significant indirect impact on the productivity slowdown" (44). These indirect influences will tend to aggregate over time and there would not be a direct coincidence with time. The lingering effects of spiking continued to effect productivity long after they had fallen as productivity was being decreased by other factors as well.
Technology and the changing face of the automated workplace have also played a part in the downturn. Technology comes from research and development. Griliches points out that research and development levels had begun to rise as early as 1978 (14). The time lag between research and reward may account for the long lead time between a reduction of R&D and a slowdown in productivity. The research during World War II contributed to the economic boom of the 1950s. Research and development was cut back in the early 1960s, but its effect was not felt until the 1970s. Likewise the increase in R&D spending in the early 1980s did not reflect an increase in productivity until the 1990s. This is made even more clear by the role that information technology (IT) played in the recovery in the mid 1990s. Stiroh argues that there is a, "...deeper relationship between IT investment and productivity growth" (1574). This IT and its related technologies were developed during the period of the 1970s and 1980s when R&D spending was rising. The decline in R&D spending in the 1960s served as a catalyst for the lower productivity a decade later.
As the price of oil and lack of emerging technology was pushing productivity down, the less quantifiable issue of confidence in government economic policy also played a role. Jermann and Quadrini contend that, "...the mere prospect of high future productivity growth can generate [. . .] an economic expansion as well as sizable gains in current productivity of labor" (414). This is what was absent during the period of 1973-1995. The post Watergate era that began in 1973 was followed by a series of weak presidencies that were unable to build confidence in their economic policies. Ronald Reagan was the only president to be reelected during this era and his policies had been based on the theory of supply side economics, which is a topic of much debate. Without the belief in a future prospect of increased productivity, there can be little reason to invest in the present.
In conclusion, there was no single cause of the downturn in productivity between 1973 and 1995. Most researchers agree that the rising cost of oil played a significant part either directly or indirectly. The reduction of research and development funding in the 1960s left industry with fewer emerging technologies to exploit. While these critical factors drove down productivity, the government was unable to gain the confidence of the market, the consumer, or the business community. The cause of the downturn during this period was a multi-faceted failure that became the perfect economic storm.

Works Cited

Griliches, Zvi . "Productivity Puzzles and R&D: Another Nonexplanation." The Journal of Economic Perspectives 2.4 (1988): 9-21. JSTOR. 26 Oct. 2007.

Jermann, Urban J., and Vincenzo Quadrini. "Stock Market Boom and the Productivity Gains of the 1990s." Journal of Monetary Economics 54 (2007): 413-32. Elsiver. 26 Oct. 2007.

Jorgenson, Dale W. "Productivity and Postwar U.S. Economic Growth." Journal of Economic Perspective 2.4 (1988): 23-41. JSTOR. 26 Oct. 2007

Olson, Mancur. "The Productivity Slowdown, The Oil Shocks, and the Real Cycle." The Journal of Economic Perspectives 2.4 (1988): 43-69. JSTOR. 26 Oct. 2007.

Stiroh, Kevin . "Information Technology and the U.S. Productivity Revival." The American Economic Review 92.5 (2002): 1559-76. JSTOR. 26 Oct. 2007 Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“The Slowdown in the Growth Rate of the U.S. Economy From 1973 to 1995 Essay”, n.d.)
The Slowdown in the Growth Rate of the U.S. Economy From 1973 to 1995 Essay. Retrieved from https://studentshare.org/macro-microeconomics/1521201-the-slowdown-in-the-growth-rate-of-the-us-economy-from-1973-to-1995
(The Slowdown in the Growth Rate of the U.S. Economy From 1973 to 1995 Essay)
The Slowdown in the Growth Rate of the U.S. Economy From 1973 to 1995 Essay. https://studentshare.org/macro-microeconomics/1521201-the-slowdown-in-the-growth-rate-of-the-us-economy-from-1973-to-1995.
“The Slowdown in the Growth Rate of the U.S. Economy From 1973 to 1995 Essay”, n.d. https://studentshare.org/macro-microeconomics/1521201-the-slowdown-in-the-growth-rate-of-the-us-economy-from-1973-to-1995.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF The Slowdown in the Growth Rate of the U.S. Economy From 1973 to 1995

S&T Debt Factors

The agreement contains a credit default contracts that include credit default swaps, default index contracts, credit default options, and credit default basket options. One can use these as part of the mechanism that is collateralized by debt obligations. The goal should be to establish a price for a given risk and controlling credit based on risk. The credit can be allowed by minimization of risk. Credit controllers should develop versatile tools that transfer risk away from a lender’s balance sheet.
d) With reference to the proposed debt counseling business, illustrate and explain exactly how you would organize the debt counseling operation, taking particular care to explain how and when you would receive payment for...
6 Pages (1500 words) Case Study

The Importance of Tourism to the World Economy

Since the eighties, perceived risk research has been of ongoing interest to tourism researchers, Dolnicar (2005) and Dickson, Chapman, and Hurrell (2000)  states. Contributions often include those which investigate positive risk as a factor in increasing tourists who are seeking a thrill. On the other hand, there are also those who view these risks as something negative, thus avoiding the destinations which are haunted by different risks such as diseases, terrorism and other forms of political instability (Dickson & Tugwell, 2000).

The current qualitative research inquired about the risks perceived by young people as regards both domestic and international traveling. A sample of 23 was interviewed for this purp...
15 Pages (3750 words) Research Paper

The Role of Telecommunications in Growth

If information is significant to advancement, then telecommunications, as a way of sharing information is not only a relationship between people, although a connection in the sequence of the advancement processes itself. The role of telecommunications in broadcasting information can be predominantly important in rural regions where other methods of acquiring and transmission information for instance personal contact, transport, and postal services are expected to be less available.
Distance signifies time, in an all the time more time-conscious world. In economies that rely forcefully upon agriculture or the mining of resources, remoteness from urban markets has usually been improved only with the setting up of enhanced trans...
23 Pages (5750 words) Assignment

The Growth of the Service Industry

The expansion of the service sector has unquestionably generated economic prosperity, but it has eminently contributed to social injustice and inequality. Consequently, I believe that while the growth of the service industry has great economic intuition, it is eventually socially detrimental and distancing society from achieving paradigms of social equilibrium.
Service, by definition, is the exchange of a commodity that has no tangible form; whereas industry is described as the people or organizations engaged in a particular type of enterprise. The service industry is then simply defined as an aggregation of commercial entities that provide services rather than physical objects. The non-material nature of services can be dist...
9 Pages (2250 words) Case Study

Innovation and Growth

Although there is a large amount of literature about innovation in organizations, there is very little on the management style that should promote innovation. (Amar, 2002, p. 14) While innovation is a subject that has evoked keen interest, it is also a subject that has failed to uncover the secrets of what fires innovation in an organization. Researchers have focused on three major areas in relation to innovation in an organization.
For example, the adverse external environment has been found to encourage creativity and innovation. This, along with organizational structure, is likely to play a role in determining the level of innovation that exists in an organization. A study by Russell(1990) has revealed that innovation requ...
14 Pages (3500 words) Coursework

Effect of Corporations Moving Jobs Overseas on the Economy

The issue comes into focus, whenever there are political, economic debates or talks about H1B visa limits. The economic slowdown has further led to the intensification of these debates. But, despite apprehensions from different quarters, neither the companies nor the government has said a final word on the trend. Increasing levels of competition amongst the corporate houses have been one of the key highlights of the globalization era. Be it the retail sector, the banking, the automobile, the IT-enabled services, the white goods space, etc. the companies have always been on the lookout for reaching out to more number of customers while doing everything possible to please the existing lot. Leveraging the economies of scale has prove...
8 Pages (2000 words) Coursework

Approach to Education: Comparison of Philosophies of A S Neill & Paul Hirst

He believed that to impose anything by authority is wrong. The child should not do anything until he comes to an opinion – his own opinion- that it should be done. He states clearly his commitment to freedom of a child: ‘we set out to make a school in which we should allow children to be themselves. In order to do this, we had to renounce all discipline, all directions, all suggestions, all moral training, and all religious instruction. The child should never be forced to learn, Attendance at lessons should be voluntary whatever the age of the child. Only learning that is voluntarily undertaken has any value, and children will know themselves when they are ready to learn. (Summerhill , p.37)

Children will on...
9 Pages (2250 words) Report

The 1846 Invasion into Mexico by the U. S.: The Political and Economic Forces that Brought about the Invasion

Some of the territories led to a war with Mexico from which the United States emerged victorious, expanding its territories and decisively establishing its dominance in North America.

President Andrew Jackson led an example of an administration that set the stage for the way in which James Polk would lead. In 1817, as a still yet military leader, Jackson led the United States into the first of three conflicts with the Seminole Indians from which the acquisition of Florida from Spain would be negotiated and finalized. The situation with Spain was tenuous and should have been dealt with in a diplomatic and cautious manner, but in 1817 President Monroe wrote a letter to General Jackson stating that “Great interests...
8 Pages (2000 words) Article

Economy and Social Activity of The Broken Hill Community

Soon a retail industry was built up and the community began to grow and is considered to be a society with a civic nature (Learning Communities in Education and Training, 2009). The community of Broken Hill can be considered to be highly diverse with a census that was conducted in the area in 1996 showed that out of the then population there were 961 people who came from overseas and a large amount of those was not from an English speaking nation. The large composition of the population in the community at the time was aboriginals or Torres Strait Islanders. Broken Hill thus shows a varying ethnic community and a diverse mindset considering a large proportion of the people are from nations such as Greece, Malta and even Italy (Lea...
6 Pages (1500 words) Case Study

Characteristics of a Mixed Economy

Economic systems are crucial to the progress of a nation for they shape the way a nation’s economy operates. There are three major types of economic systems, namely: A planned economy which operates at the sheer instructions of the Government; Market Economy has complete independence in its operations and is at the disposal of the market forces of demand and supply, Mixed Economy is an amalgamation of features from both the previously mentioned economic systems and therefore has economy operating tools which are shared by the private sector and the public sector, hence it could be regarded as a balanced mixture of the political ideologies of capitalism and socialism (Schlesinger, 1962). A mixed economy is an intricate and co...
6 Pages (1500 words) Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic The Slowdown in the Growth Rate of the U.S. Economy From 1973 to 1995 for FREE!

Contact Us