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7 Politics and Policies in the 1970s and Early Twenty-first Century The Linked Recessions judith stein The Great Recession had its origins in the political economy created by politicians and business leaders in the 1970s. The decisions made and patterns put in place reshaped the structure of the U.S. economy and politics, fostering the wage stagnation, indebtedness, and global imbalances that led to the Great Recession and continue to afflict workers and their unions. There were two crises of political economy in the twentieth century, the first in the 1930s, and the second in the 1970s. People trying to understand the Great Recession often look back to the Great Depression. Especially for people on the left, the 1930s was the heroic era of working-class agency and progressive reform. But they also look back to the Great Depression because there is a robust literature on the 1930s—the causes and ending of the depression, the rise of the labor movement, and the transformation of the political system. Nevertheless, because the economy of the 1930s was self-contained, its dynamics are unlike those of the contemporary economy. Americans reformed their economy, society, and politics in the 1930s with minimal concern that imports would replace domestic production or exports could expand demand. Global connections were few and marginal to the recovery. Corporations complained about New Deal reforms, but they had no better opportunities outside of the United States. The economies of the 1970s and the contemporary world are global. Both contained imbalances among the major trading nations that led to recession. The likeness between the crisis of the 1970s and the Great Recession has been obscured because the literature on the 1970s is slight. Histories of the 1930s are organized around the questions of the Great Depression. Except for Peter Gourevitch’s Politics in Hard Times, an international comparison of responses to economic crises in the 1890s, the 1930s, and the 1970s, most works on the 1970s are not organized around the economic crisis.1 That a book on the decade can have the title Something Happened says much about the popular notion that nothing significant happened during the decade.2 To be sure, some scholars have noticed that profits fell sharply in the 1970s, which produced a “crisis of legitimation.” Others concluded that the state could no longer fulfill its social obligations or there was a “fiscal crisis of the state.” Jurgen Habermas and James O’Connor offered a Marxist version of this problem, and Daniel Bell a non-Marxist.3 But this literature addressed the nature of capitalism, not the specifics of the 1970s. Even so, that analysis has remained on the margins of historical interpretation. There is a growing literature on the 1970s.4 Political historians have mapped the rise of a New Right leading to Ronald Reagan’s election in 1980.5 Labor historians have traced conflicts over race, gender, and culture, rank-and-file movements in unions, and the rise of public-sector unionism. But the works do not yield a synthetic understanding of the decade. Historians portray a Whiggish rise of the New Right but fail to ask why the right was so convincing in the late 1970s but not earlier. Labor historians scrutinize every fissure within the working class. Many conclude, in the words of Jefferson Cowie, that the working class “died of many external assaults upon it, yes, but mostly of its own internal weakness,” without examining the external assaults.6 But it is possible to find a theme that makes more sense of the decade if we examine capital as well as labor, and economic policy as well as social and cultural policy. The most important change affecting workers in the public and private sectors in the 1970s was that the long period of postwar economic growth ended between 1973 and 1975. Productivity had slowed in the late 1960s and plummeted in the 1970s. From 1973 to 1976 it actually fell 0.54 percent.7 (The productivity of Japan and West Germany rose 6 percent and 3 to 4 percent, respectively.8 ) Wages began stagnating in 1973. Unemployment peaked at 9 percent in May 1975, in the midst of the deepest recession since the 1930s. The recession of the 1970s was synchronized. It affected the whole developed world. It was caused everywhere by rising oil prices and glutted markets for tradables—mainly manufactured goods. It challenged previous ways of managing economies. In the United States, as classic Keynesianism employing macroeconomic techniques...

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