1973–75 recession
The 1973–75 recession in the United States or 1970s recession was a period of economic stagnation in much of the Western world
Western world
The Western world, also known as the West and the Occident , is a term referring to the countries of Western Europe , the countries of the Americas, as well all countries of Northern and Central Europe, Australia and New Zealand...

 during the 1970s, putting an end to the general post-World War II economic boom. It differed from many previous recessions as being a stagflation
In economics, stagflation is a situation in which the inflation rate is high and the economic growth rate slows down and unemployment remains steadily high...

, where high unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...

 coincided with high inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

. The period was also described as one of "malaise
Malaise is a feeling of general discomfort or uneasiness, of being "out of sorts", often the first indication of an infection or other disease. Malaise is often defined in medicinal research as a "general feeling of being unwell"...

" (ill-ease; compare "depression
Depression (economics)
In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen by some economists as part of the modern business cycle....


Among the causes were the Vietnam War
Vietnam War
The Vietnam War was a Cold War-era military conflict that occurred in Vietnam, Laos, and Cambodia from 1 November 1955 to the fall of Saigon on 30 April 1975. This war followed the First Indochina War and was fought between North Vietnam, supported by its communist allies, and the government of...

, which turned out to be costly, economically, for the United States of America, the 1973 oil crisis
1973 oil crisis
The 1973 oil crisis started in October 1973, when the members of Organization of Arab Petroleum Exporting Countries or the OAPEC proclaimed an oil embargo. This was "in response to the U.S. decision to re-supply the Israeli military" during the Yom Kippur war. It lasted until March 1974. With the...

 and the fall of the Bretton Woods system
Bretton Woods system
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid 20th century...

. The emergence of newly industrialized countries
Newly industrialized countries
The category of newly industrialized country is a socioeconomic classification applied to several countries around the world by political scientists and economists....

 increased competition in the metal industry, triggering a steel crisis
Steel crisis
The steel crisis was a recession in the global steel market during the 1970s recession, following the end of the post-World War II economic boom and the 1973 oil crisis....

, where industrial core areas in North America and Europe were forced to re-structure. The 1973-1974 stock market crash made the recession evident.

The recession in the United States lasted from November 1973 to March 1975, although its effects on the US were felt until mid-term of Ronald Reagan's first term as president, characterized by low economic growth. Although the economy was expanding from 1975 to the first recession of the early 1980s
Early 1980s recession
The early 1980s recession describes the severe global economic recession affecting much of the developed world in the late 1970s and early 1980s. The United States and Japan exited recession relatively early, but high unemployment would continue to affect other OECD nations through at least 1985...

, which began in January 1980, inflation remained extremely high until the early years of the 1980's.

During this recession, the Gross Domestic Product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....

 of the United States fell 3.2 percent. Though the recession ended in March 1975, the unemployment rate did not peak for several months. In May 1975, the rate reached its height for the cycle of 9 percent. (Three cycles have higher peaks than this, the current cycle, where the unemployment rate peaked at 9.7 percent in August 2009 (currently 9.3%) in the United States, the Early 1980s recession
Early 1980s recession
The early 1980s recession describes the severe global economic recession affecting much of the developed world in the late 1970s and early 1980s. The United States and Japan exited recession relatively early, but high unemployment would continue to affect other OECD nations through at least 1985...

 where unemployment peaked at 10.8% in November and December 1982, and the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

, where unemployment peaked at 25% in 1933.)

United Kingdom

The recession also lasted from 1973–75 in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

. The GDP declined by 3.9% or 3.37% depending on the source. It took 14 quarters for the UK's GDP to recover to that at the start of recession.

The oil crisis was largely to blame for the downturn in the United Kingdom just as it was for the similar crisis in the States, although the real crisis came in the form of the Three-Day Week
Three-Day Week
The Three-Day Week was one of several measures introduced in the United Kingdom by the Conservative Government 1970–1974 to conserve electricity, the production of which was severely limited due to industrial action by coal miners...

 which was the result of fears over power shortages as a miner's strike was announced in December 1973. The three-day week was a state of emergency imposed by Conservative
Conservative Party (UK)
The Conservative Party, formally the Conservative and Unionist Party, is a centre-right political party in the United Kingdom that adheres to the philosophies of conservatism and British unionism. It is the largest political party in the UK, and is currently the largest single party in the House...

 prime minister Edward Heath
Edward Heath
Sir Edward Richard George "Ted" Heath, KG, MBE, PC was a British Conservative politician who served as Prime Minister of the United Kingdom and as Leader of the Conservative Party ....

, which came into force on 1 January 1974, meaning that commercial users of electricity were limited to three specific consecutive days' consumption of electricity, and forbidden to work longer hours of those days, although services deemed essential were exempted from these regulations. Electricity blackouts across the country were widespread.

There was also double-digit inflation during this period, which peaked at more than 20%. The trade deficit was massive and national debt was rising sharply.

Edward Heath's offer of a 13% pay rise was rejected by the miners, and he then responded by calling a snap election
United Kingdom general election, February 1974
The United Kingdom's general election of February 1974 was held on the 28th of that month. It was the first of two United Kingdom general elections held that year, and the first election since the Second World War not to produce an overall majority in the House of Commons for the winning party,...

 on 28 February 1974 in what he saw as an opportunity for the electorate to show the miners that the government - and not the miners or the unions - were responsible for running the country. Most opinion polls suggested that the Tories would be re-elected with a majority, but when the election results came through on the morning of 1 March 1974, no party had an overall majority. The gap between Ted Heath's Tory government and the Labour
Labour Party (UK)
The Labour Party is a centre-left democratic socialist party in the United Kingdom. It surpassed the Liberal Party in general elections during the early 1920s, forming minority governments under Ramsay MacDonald in 1924 and 1929-1931. The party was in a wartime coalition from 1940 to 1945, after...

 opposition led by Harold Wilson
Harold Wilson
James Harold Wilson, Baron Wilson of Rievaulx, KG, OBE, FRS, FSS, PC was a British Labour Member of Parliament, Leader of the Labour Party. He was twice Prime Minister of the United Kingdom during the 1960s and 1970s, winning four general elections, including a minority government after the...

 (who had been prime minister for nearly six years until his surprise defeat by Heath's Tories in the 1970 election
United Kingdom general election, 1970
The United Kingdom general election of 1970 was held on 18 June 1970, and resulted in a surprise victory for the Conservative Party under leader Edward Heath, who defeated the Labour Party under Harold Wilson. The election also saw the Liberal Party and its new leader Jeremy Thorpe lose half their...

) was so narrow that the Tories had the most votes but Labour had slightly more seats.

Heath fought to keep the Tories in government by attempted to form a coalition with the Liberal Party
Liberal Party (UK)
The Liberal Party was one of the two major political parties of the United Kingdom during the 19th and early 20th centuries. It was a third party of negligible importance throughout the latter half of the 20th Century, before merging with the Social Democratic Party in 1988 to form the present day...

 and offering a cabinet post to Liberal leader Jeremy Thorpe
Jeremy Thorpe
John Jeremy Thorpe is a British former politician who was leader of the Liberal Party from 1967 to 1976 and was the Member of Parliament for North Devon from 1959 to 1979. His political career was damaged when an acquaintance, Norman Scott, claimed to have had a love affair with Thorpe at a time...

, but this attempt to remain in power proved unsuccessful for Heath and he was forced to resign as prime minister on 4 March, paving the way for Harold Wilson's Labour to return to power as a minority government before winning a second election
United Kingdom general election, October 1974
The United Kingdom general election of October 1974 took place on 10 October 1974 to elect 635 members to the British House of Commons. It was the second general election of that year and resulted in the Labour Party led by Harold Wilson, winning by a tiny majority of 3 seats.The election of...

 on 10 October by a majority of just three seats.

Economic growth was re-established in 1975 as the recession's end was declared, but Britain's economy remained shaky. Inflation remained high, strikes continued to cripple manufacturing and public services, unemployment continued to rise above the 1,000,000 mark, and just after the resignation of Harold Wilson as prime minister in March 1976, his successor James Callaghan
James Callaghan
Leonard James Callaghan, Baron Callaghan of Cardiff, KG, PC , was a British Labour politician, who was Prime Minister of the United Kingdom from 1976 to 1979 and Leader of the Labour Party from 1976 to 1980...

 was forced to call on the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...

 for a multi-billion pound bail-out in an attempt to bolster Britain's flagging economy.

The Labour government's tiny majority was wiped out by early 1977 as a result of by-election defeats, and Callaghan managed to form a coalition
Lib-Lab pact
In British politics, a Lib-Lab pact is a working arrangement between the Liberal Democrats and the Labour Party.There have been four such arrangements, and one alleged proposal, at the national level...

 with the Liberals to hang onto power. The pact concluded in the summer of 1978, by which time economic growth had picked up (although unemployment now stood at a postwar high of 1,500,000), and opinion polls suggested that Labour could form a majority government if a general election was held. However, Callaghan ruled out an election in September 1978, and within weeks a series of strikes began which would spark the Winter of Discontent
Winter of Discontent
The "Winter of Discontent" is an expression, popularised by the British media, referring to the winter of 1978–79 in the United Kingdom, during which there were widespread strikes by local authority trade unions demanding larger pay rises for their members, because the Labour government of...

 in which Britain came to a virtual standstill with numerous strikes in the public sector. In March 1979, a vote of no confidence issued by Tory opposition leader Margaret Thatcher
Margaret Thatcher
Margaret Hilda Thatcher, Baroness Thatcher, was Prime Minister of the United Kingdom from 1979 to 1990...

 sparked the collapse of the Labour government and in the election
United Kingdom general election, 1979
The United Kingdom general election of 1979 was held on 3 May 1979 to elect 635 members to the British House of Commons. The Conservative Party, led by Margaret Thatcher ousted the incumbent Labour government of James Callaghan with a parliamentary majority of 43 seats...

 in May that year, the Tories returned to power, with Labour's failure to oversee a strong economic recovery following the earlier recession seen as one of the key factors in their electoral defeat.

The two major factors of the 1973–75 recession - inflation and strikes - were conquered during the first term of the Thatcher-led Tory government, with inflation falling to a 15-year low and strikes to a 30-year low by the time of their election win
United Kingdom general election, 1983
The 1983 United Kingdom general election was held on 9 June 1983. It gave the Conservative Party under Margaret Thatcher the most decisive election victory since that of Labour in 1945...

 of 1983, but the monetarist
Monetarism is a tendency in economic thought that emphasizes the role of governments in controlling the amount of money in circulation. It is the view within monetary economics that variation in the money supply has major influences on national output in the short run and the price level over...

 policies designed to curb inflation saw unemployment rise from 1,500,000 to 3,200,000 during that time and it was not until the turn of the 21st century, by which time Labour had been re-elected as New Labour under Tony Blair
Tony Blair
Anthony Charles Lynton Blair is a former British Labour Party politician who served as the Prime Minister of the United Kingdom from 2 May 1997 to 27 June 2007. He was the Member of Parliament for Sedgefield from 1983 to 2007 and Leader of the Labour Party from 1994 to 2007...

 that unemployment fell below the level that it had risen to as a result of "Old" Labour's failure to sustain economic recovery after the 1973–75 recession.

The economic recovery in the UK and the US coincided with the election of conservative governments. In the UK, Margaret Thatcher reversed the trend of the 1970's and went on the win 3 landslide elections. In the U.S. the Reagan-Bush Republicans likewise won three straight landslide electoral victories. After Reagan retired due to term limits in 1989 and Margaret Thatcher resigned in 1990, their perspective successors, George H.W. Bush and John Major reversed the trend of lower taxes and government regulation. The economy soon stalled into recession and ultimately contributed to a return of Labour Government in the UK (finally coming in 1997
United Kingdom general election, 1997
The United Kingdom general election, 1997 was held on 1 May 1997, more than five years after the previous election on 9 April 1992, to elect 659 members to the British House of Commons. The Labour Party ended its 18 years in opposition under the leadership of Tony Blair, and won the general...

,after a surprise Conservative win in 1992
United Kingdom general election, 1992
The United Kingdom general election of 1992 was held on 9 April 1992, and was the fourth consecutive victory for the Conservative Party. This election result was one of the biggest surprises in 20th Century politics, as polling leading up to the day of the election showed Labour under leader Neil...

)and Democratic leadership in the U.S in 1992.

See also

  • 1970s Energy Crisis
    1970s energy crisis
    The 1970s energy crisis was a period in which the major industrial countries of the world, particularly the United States, faced substantial shortages, both perceived and real, of petroleum...

  • List of recessions in the United States
  • List of recessions in the United Kingdom
  • Steel crisis
    Steel crisis
    The steel crisis was a recession in the global steel market during the 1970s recession, following the end of the post-World War II economic boom and the 1973 oil crisis....

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.