Fist Of History

December, 2015Archive for

The Great Stagflation and Modern America

Tuesday, December 22nd, 2015

The-United-States-Energy-CrisisThe United States has faced a series of major economic issues in its history, the two most commonly discussed are the Great Depression (1929 to 1942 arguably) and the Great Recession (2008 – 2009 officially) but between those two is a lumpy, difficult to fathom, general economic decline that ran from 1971 until roughly 1982 which could be considered the Great Stagflation.  It was the hallmark of the 1970s United States economy, with a solid impact on the British economy as well.  Within the United States it was caused by an intersection of several different policy issues, economic impacts, and major events, such as the two oil shocks that took place in that decade as OPEC reduced oil production in response to the United States’ position towards Israel.

nixon-elvisNixon, who had a very loose concern for domestic economic issues, made the problems worse when facing the gold crisis of 1971.  Briefly the United States pegged the dollar to a fixed conversion rate and other currencies were fixed to the United States dollar.  During the early 1970s the dollar ended up being worth less in actual goods and services than its fixed gold value, leading to other nations beginning to convert their dollar holdings into gold.  Nixon nipped that problem by simply ending the gold conversion of dollars “temporarily” and then imposing price controls to take the sting out of the sudden devaluing of the United States dollar as foreign governments dumped their now non-convertible dollars.  This was fine for Nixon, he was facing re-election in 1972 and he simply wanted domestic voters to feel that their paychecks remained the same, it didn’t matter to him what happened to the economy post-1972 as much, he simply planed to fix it then.

win_sloganOne of the impacts of this, and other factors such as rising foreign competition that cut the United States share of global trade, spiked inflation rates.  This combined though with an unusual factor, as rising inflation eroded the buying power of domestic wages in the United States, organized labor was powerful enough to demand wage increases from companies to offset the inflation.  This reduced the amount of capital available for investment and the economic instability and uncertainty that rising inflation caused discouraged many businesses from entering into any major investments.  This led to economic stagnation, the production of goods and services simply didn’t expand to meet the growing money supply, which caused shocking inflation rates.  (During the height of the crisis inflation rates of 10% were not uncommon in a single year.)

prop13_ballotNormally economic cycles tweak the system, but the events of the 1970s reshaped the United States economic and political landscape.  First, rising inflation pushed up the tax brackets which working and middle class employees were taxed at, as the brackets were not indexed in the 1970s to inflation.  So although the relative buying power of a paycheck remained the same, the bite taken out by state and local taxes went up for many workers, reducing their overall net pay.  This combined with many states reporting record surpluses due to the revenues taken in, and a resistance by those state governments to return the surpluses to the voters.  (California was notorious for this, socking away much of the surplus for future anticipated shortfalls or new programs once the economy settled down.)  Property taxes shot up as well, as the paper value of homes skyrocketed due to inflation and people saw their property tax bills rocket upwards, further reducing their buying power.

prop13The result was a general tax revolt across the United States as citizens, in state elections and in 1980 with the election of Ronald Reagan and a Republican Congress, demanded their tax burden be lowered.  What made this shift particularly unique though was that prior to the late 1970s and early 1980s the United States populous had been less leery of inflation, and higher taxes, and more leery of the government reducing its safety nets.  By the height of this crisis the United States citizenry had changed their demands, inflation control and lower taxes were more critical to them than safety nets, especially safety nets that seemed to re-route funds from middle class pockets to the poor, minorities, and immigrants.

the-time-is-now-reagan-posterWhich state governments, and the federal government, responded to with great gusto.  The federal government, and state governments, slashed social welfare programs aggressively and changed the regulatory client to make the government more pro-business.  This combined with a focused effort to reduce the power of organized labor and allowing unemployment to spike, and a sharp early 1980s recession, to crush inflation.  In many ways since then the United States as a nation has not looked back, and other nations have followed its model, focusing on tight government services, reduced social support for the lowest portions of society, and keeping the tax burden controlled.

Sources:  Wikipedia articles on stagflation, the Nixon Shock, and the 1973-1975 recession, Investopedia article on the Great Inflation of the 1970s, Dollars and Sense article on the 1970s economic crisis, and chapters from The Seventies:  The Great Shift in American Culture, Society, and Politics by Bruce J. Schulman

American Fascism and Anti-Foreigner Movements [OPINION]

Monday, December 7th, 2015

An armed protest outside the Islamic Center of Irving

The tagline on the above photo is that it is an “armed protest” outside a Muslim civic center in Texas, it’s just one part of a broader series of incidents outlined in an article on Islamophobia written up in Vox.  As readers of this blog know I’m always a cautious one to draw links between Nazism and other movements, mainly because so many use Nazis and Nazism as a quick “go to” for concepts of evil, violence, or reactionary politics by extreme right-wing factions.  For me though reading about the current policies, including the sweeping series of new legislation going around various state governments outlawing “foreign law” for having any impact within their territories, and “protests” like the one above, smack of a similar mindset to early Nazi anti-Jewish activities.

Nazi-Boycott-1933-dThis is a classic image from 1933, put up during the mostly symbolic one day national boycott of Jewish shops and businesses organized by the Nazi party shortly after Hitler became Chancellor.  Historians debate how much impact it had on Germany’s economy, many German citizens simply ignored the boycott and shopped as normal, or deliberately sought out to patronize Jewish owned businesses as a form of protest.  But it featured large numbers of armed, uniformed figures in the SA (the Nazi party’s semi-unofficial military army of the party) standing outside businesses that had been vandalized to discourage people from going in and shopping.

Nazi_Boycot_1933_BThe Nazi boycott had a uniquely German feel to it, the storm troopers didn’t carry pistols or rifles, they wore snappy brown uniforms, and they used visual intimidation to complete their action.  But I look at the photo at the top of this blog post and I cannot help but see a parallel, although the “protest” photo at the top carries a uniquely American outlook.  But is armed men wearing jungle camouflage with an American flag that much of a difference than the Nazi storm troopers.  Both are using symbols of recognized organization and power, and both are drawing links to traditional images of power.  (The storm troopers wore the high boots used by the German military and their caps were modeled to look police or military in style.  The same with the belts.)  Some of the men in that “protest” shot could be considered to be using the imagery of the American military in making their stance.

What more deeply concerns me personally though is the legislative action being carried out by state governments.  According to the Vox article a good percentage of Americans feel that being Muslim should disqualify an individual from the office of President.  On 7 April 1933 the German government, under the control of the Nazi party, passed the “Law for the Restoration of the Professional Civil Service” – a law that ended employment in the civil service for “non-Aryans” – Jews – employed by the German government.

My worry is could such a law be passed in the United States?  I would like to think no, that such a thing could not happen in the United States, but I honestly wonder if some state governments might not pass a law like this on their own.  Furthermore I wonder if the federal government would crush such laws or let them go as “state privilege.”

American Nazi organization rally at Madison Square Garden, 1939A final note, for those out there who see Donald Trump and wonder if his rallies and his supporters touch on some of the same efforts and concepts of the Nazi party, you don’t have to seek that far.  The image above is a 1939 rally by the German American Bund, a genuine pro-Fascist Nazi party operating in the United States prior to World War II.  The image above is from their high-point rally, when 20,000 people attended Madison Square Gardens to see their rally.  I just post this because it shows how extremism, and even Fascism or its American equivalents, can wrap itself quite effectively in the flag of the United States.

Sources:  Vox article on American Islamophobia, US Holocaust Museum entry on the Jewish Business Boycott of 1933, Wikipedia article on the Jewish Business Boycott of 1933, Wikipedia entry on the Law for the Restoration of the Professional Civil Service of 1933,US Holocaust Museum entry on several early anti-Jewish Nazi laws,  Wikipedia entry on the German American Bund, and finally a blog post entry on the German American Bund