14: THE END OF THE COLD WAR, THE GULF The 1970s As the international system fluctuates, the climate in the United States is also changing. The sixties get mainstreamed and the “hippie style” becomes fashion— Sonny and Cher seem to be the epitome of this. After 1970, passions in America began to cool. All of the factors that led to the polarization and conflagration in the late sixties faded. Nixon brought the troops home, campuses quieted down after the costs of protest became too high, the Democratic party moved to the left to accommodate dissent, blacks gained a larger political voice, and black separatism faded. Watergate revelations had led to a decline of police-state tactics and “caretaker” presidents, and President Ford and President Carter moved forward to heal the nation. Economic Crisis and Stagflation The turn to the personal in the 1970s coincided with a dramatic shift in the nation’s fortunes. As the nation put both the hopes and the rage of the 1960s behind it, it also left behind the growth of the economy of the 1960s. Underlying the political malaise of the 1970s was an economic crisis. The 1960s vision of unlimited economic growth and prosperity faded rapidly in early 1970s. Cold War Economy The origin of the 1970s economic crisis lay with Lyndon Johnson’s liberal dream of both bread and guns. LBJ refused to raise taxes and, therefore, caused budget deficits in paying for the Vietnam War. At the time, in 1968, it was the largest deficit in U.S. history at $25 billion, but deficits under Ronald Reagan total over $200 billion. Nixon continued these policies, as he was unwilling to pay the cost of the military out of taxes. He was unable to cut back social programs. This led to deficits of $40 billion in 1972 and inflation of 8%. Structural Problems Of course, the U.S. economic problems had structural roots deep in international economics as well. The rebuilt economies of Germany and Japan could now out- produce us. American corporations chose to move production offshore rather than pay American wages. This leads to a trade imbalance, costs jobs, and fuels inflation. The problem was, as we now know, that the United States no longer controlled its own economy. The Arab Oil Embargo in 1973 confirmed this. A rapid
