and Study Guide Lesson 3 Ford and Carter ESSENTIAL QUESTION How do you think the Nixon administration affected people s attitudes toward government? How does society change the shape of itself over time? Reading HELPDESK Content Vocabulary inflation the loss of value of money embargo a government ban on trade with other countries stagflation persistent inflation combined with stagnant consumer demand and relatively high unemployment Academic Vocabulary theory a hypothesis meant for argument or investigation deregulation the act or process of removing restrictions or regulations
TAKING NOTES: Organizing ACTIVITY Complete the graphic organizer below by listing the causes of economic problems in the 1970s. IT MATTERS BECAUSE The postwar economic boom Americans had experienced was ending by the time Richard Nixon resigned. Presidents Gerald R. Ford and Jimmy Carter attempted to lead the United States through both domestic and foreign crises. The Economic Crisis of the 1970s GUIDING QUESTION What economic conditions or problems led to a stagnant economy during the 1970s? American prosperity seemed normal after World War II. Prosperity relied on easy access to global raw materials and a strong manufacturing base at home. In the 1970s, prosperity was replaced by a decade of hard times. A Mighty Economic Machine Slows Economic troubles started in the mid-1960s. President Johnson increased deficit spending to fund the Vietnam War and the Great Society without raising taxes. This pumped money into the economy, but by the 1970s this spending caused rapid inflation, or the loss in value of money. Rising oil prices also caused problems. By 1970 the United States had become dependent on imported oil. The Organization of Petroleum Exporting Countries (OPEC) is a cartel controlled by Arab countries. In 1973 it used oil as a political weapon when war broke out between Israel and its Arab neighbors. OPEC announced an embargo, or trade ban, on petroleum to countries that supported Israel. OPEC raised the price of crude oil by 70 percent. A few months later the price of crude oil increased by another 130 percent. Oil prices continued to rise after the embargo ended. They rose from $3 per barrel in 1973 to $30 per barrel in 1980. This meant that Americans had less money for other goods, which contributed to a recession. A Stagnant Economy Declining manufacturing was another economic problem. By 1970 many U.S. factories were older and less productive than those in competing countries. In 1971 the nation imported more than it exported for the first time since 1889.
Many factories closed and millions of workers lost their jobs. Nixon faced a new economic problem in the early 1970s. The problem was nicknamed stagflation. Stagflation combined inflation and a stagnant economy with high unemployment. Some economists supported the theory that inflation could happen only when demand for goods was high. They did not know what economic policy the government should follow in order to fight inflation and the recession. Nixon wanted to control inflation. The government first tried to cut spending, to raise taxes, and to get the Federal Reserve to raise interest rates. These methods failed. Nixon set a 90-day wage and price freeze. He also issued rules limiting future increases. This was not successful. Identifying Cause and Effect Why were some economists unsure of how to fight stagflation? Ford and Carter Battle the Economic Crisis GUIDING QUESTION How did Ford and Carter try to resolve the nation s domestic issues? Inflation was still high when Nixon resigned in 1974. The unemployment rate was over 5 percent. It would now be up to the new president, Gerald Ford, to deal with stagflation. Ford Tries to Whip Inflation Unemployment had risen to nearly 9 percent by 1975. Ford started a plan called WIN ( Whip Inflation Now ) but it had little impact on the economic situation. He tried other measures to reduce inflation. He tried keeping taxes low. But these plans also failed to restore the economy. Ford s Foreign Policy Ford continued Nixon s general foreign policy plan. He kept Kissinger on as secretary of state and continued to try to reduce tensions between nations. Ford met with leaders of NATO and the Warsaw Pact to sign the Helsinki Accords in August 1975. Under the accords, the parties recognized the post World War II borders of Eastern Europe. The Soviets promised to support certain human rights, but this did not always happen. In May 1975, soon after Communists took control of Cambodia, Cambodian forces captured the Mayaguez, an American cargo ship. Ford sent U.S. Marines to take back the ship, but Cambodia had already secretly let the crew go. The marines were unaware of the crew s safety and recaptured the ship. Forty-one servicemen died in the battle. The Election of 1976 Ford ran against former Georgia governor Jimmy Carter in the presidential race. Carter had no experience in Washington. Carter ran as an outsider promising to
restore honesty to the federal government. He also promised to create or fix several domestic programs. Carter s moral image attracted many voters. He defeated Ford by only a small margin. Carter s Economic Policies Carter tried to use domestic policies to fix the economy. He tried to end the recession and reduce unemployment by increasing government spending and cutting taxes. Then he tried to ease inflation by reducing the money supply and raising interest rates. These measures did not work. Carter thought that the nation s most serious economic problem was that it depended on foreign oil. He asked Americans to fight against rising energy use. He also suggested a national energy program to conserve oil and to promote the use of coal and renewable energy sources. Carter even convinced Congress to create a Department of Energy. He asked Americans to reduce energy use. Some argued that Carter should deregulate the domestic oil industry, which would decrease dependence on imported oil. Carter agreed to support deregulation but he called for a special tax to keep oil companies from overcharging. Instability in the Middle East caused a second major fuel shortage in the summer of 1979. Under pressure, Carter gave a televised address. In it, he warned that Americans were losing confidence in the United States. The address became known as the malaise speech even though Carter had not used that word. Many Americans felt that Carter was blaming them for his failures. President Carter s difficulty in solving the nation s economic problems was partly due to his inexperience. He also had a hard time working with Congress. He made little effort to reach out to Washington s legislative leaders, and many of his energy proposals failed. By 1979 public opinion polls showed that Carter s popularity had dropped. Summarizing How did President Carter try to change the domestic oil industry? Carter s Foreign Policy GUIDING QUESTION What were President Carter s greatest foreign policy success and his greatest failure? President Carter had strong religious beliefs. He argued that the United States must try to be honest in dealing with other nations. But Carter experienced a huge international defeat. Morality in Foreign Policy Carter focused his foreign policy on human rights and arms limitation. Carter s foreign policy team worked to meet those goals. Andrew Young was part of the foreign policy team. He was the first African American ambassador to the _ United Nations.
Carter agreed to give up control of the Panama Canal. The United States had built the canal and operated it for 60 years. However, Panama taking control of the canal would remove a major symbol of U.S. interventionism. In 1978 the Senate approved two Panama Canal treaties. These transferred control of the canal from the United States to Panama on December 31, 1999. Also, Carter singled out the Soviet Union as a human rights violator. Relations between the two superpowers suffered again when Soviet troops invaded Afghanistan in December 1979. _ Carter responded by putting an embargo on the sale of grain to the Soviet _ Union and boycotting the 1980 Summer Olympic Games in Moscow. Détente was falling apart. Triumph and Failure in the Middle East In 1978 Carter helped create a historic peace treaty. The treaty was known as the Camp David Accords. The agreement was signed between Israel and Egypt. These two nations had been enemies for decades. Many Arab nations did not support the treaty. The treaty helped begin the slow peace process in the Middle East. Carter faced a crisis in Iran just months after the treaty was signed in 1979. The nation had long supported Iran s monarch because Iran was a major oil supplier and a barrier against Soviet growth. The monarch of Iran was called the shah. The shah had grown unpopular in Iran. His rule had been violent and he had made changes to Westernize the country. The Islamic clergy opposed the shah s reforms. Protesters forced him to flee in January 1979. An Islamic republic was then declared. Religious leader Ayatollah Khomeini led the new regime, or government. This new regime did not trust the United States because the United States had supported the shah. In November 1979 revolutionaries went into the U.S. embassy in Tehran and took 52 Americans hostage. The Carter administration unsuccessfully tried to negotiate the hostages release. In April 1980 Carter approved a rescue attempt that failed when several helicopters did not work correctly and one crashed in the desert. Eight servicemen died in the accident. The crisis continued. News programs every night reminded viewers how many days the hostages had been held. Carter s inability to free them cost him support in the 1980 election. On January 20, 1981, the day Carter left office, Iran released the Americans. This ended their 444 days in captivity. Evaluating How would you describe the philosophy of Carter's foreign policy?