For the American economy, the 1970s have been like the month of March in reverse: They came in like a lion and they're leaving like a crazed bull elephant.
When the decade began, most seers were at least cautiously optimistic. To be sure, unemployment was edging uncomfortably toward 5 percent, inflation was "raging" at 5 percent or faster and interest rates were at 6 percent.
But the Vietnam war was drawing to a close, the social turmoil of the late 1960s appeared to be abating and it seemed as though the boom days of the pre-Vietnam era were about to resume.
The '70s were to see the restoration of economic stability.
Now, just 10 years later, that start-of-the-decade picture looks rosy indeed.
Inflation, never a serious long-term problem before the 1970s, is running at a staggering 13.2 percent annual rate -- with little sign that it will slow significantly during the next several months.
The unemployment rate now is 5.8 percent -- but that's considered "full" employment now, in contrast to a 4 percent rate a decade ago. And the forecasts are that it will top 7.5 percent if the recession takes hold as predicted.
And interest rates are at 13 percent, with scant relief in sight.
Moreover, the U.S. economy faces serious structural problems, many of which weren't even envisioned when the 1960s faded into history:
Inflation has become entrenched in the American economy, producing radical changes in the behavior of consumers and businesses -- and turning economics topsy-turvy in the process.
Scarcity, not abundance, has become the nation's major challenge for the 1980s -- particularly involving oil and other energy sources -- threatening to force cutbacks in the American life style.
The United States has become newly vulnerable to international economic actions -- especially production cutbacks by the oil-exporting countries and declines in the value of the dollar.
Governments have become less able to control -- or even influence -- economic forces in the face of today's sharply higher inflation rates and enormous fluctuations in dollar holding and other balances.
Moreover, the magnitudes become greater virtually with each passing day:
When the 1970s began, although the actual rise in consumer prices was about 5 percent, the underlying inflation rate was only 3 percent. By mid-decade it had risen to 6 percent. Today it's up to 9 percent.
The other numbers have swelled as well. The federal budget, which was only about $200 billion in 1970, is pushing $615 billion this coming year. The so-called "dollar overhang" abroad, then $300 billion, is $800 billion today.
"Things are more unscrewed now than they were in the early 1970s," says a high government policymaker who played a key role as well a decade ago. "Nothing is taken for granted anymore."
Small wonder, then, that uncertainty prevails in nearly every aspect of the nation's economic life. And -- perhaps inevitably -- as a consequence, Americans have become more conservative, both in their political philosophy and expectations.
Although the shift still hasn't taken hold fully in some American families, what the 1970s really marked was a time when the United States was forced to recognize the new economic reality: The American cornucopia had a limit after all.
For years, the nation had been living on momentum from post-World War II days, when the United States was paramount and growth here was virtually unfettered. When things began to change, no one made any effort to keep up.
When the reckoning day finally came, it brought on a decade of turmoil and undoing of the status quo. It was a time when events overtook the government's unwillingness to face the issues. and they did so with a vengeance.
The 70s included these developments:
The first devaluation of the U.S. dollar in 34 years -- on Aug. 15, 1971, when the Nixon administration was forced to cut the link between the dollar and gold to stave off a run on the U.S. currency.
The dollar wad devalued formally again in February 1973 and informally on successive occasions under pressure from the international currency markets over the past few years. But that initial break was a traumatic one.
The first national experiment with peacetime wage and price controls -- again launched by the Nixon administration, on Aug. 15, 1971, to help shock the nation out of its inflationary psychology.
The controls blew apart in 1973 after the White House, anxious about the 1972 election, used them as a cover to overstimulate the economy. For a few months, however, the controls worked and well -- and were popular, to boot.
A staggering increase in oil prices, first quadrupling in 1974 and then soaring to $40 a barrel on the spot market in 1979 -- distorting previous economic relationships and imposing heavy economic burdens on oil-using countries.
The sharp increases in oil prices had a ripple effect throughout the economy. In essence, it ended the availability of cheap energy that had contributed, unrecognized, to the nation's earlier growth.
Two successive bouts of double-digit inflation -- in 1974, following the previous year's world economic boom and the huge increase in oil prices, and in 1979, again after steep energy price increases.
Until the 1970s, inflation through most of the postwar era had held to somewhere between one percent and 2 percent a year. The speedup began with the Vietnam war, then accelerated sharply in the early 1970s.
The longest and deepest recession since the end of the Great Depression, in the late 1930s -- the 1974-75 down-turn presided over by the Ford administration. The jobless rate then leaped to just under 9 percent.
Although the downturn eventually braked inflation to below 5 percent in 1976, it failed to slow prices to their pre-1973 pace -- leading economist to doubt anew how successful the government could be in battling inflation.
A full-fledged overhaul of the ailing international monetary system, ending in a move to floating exchange rates -- the first major restructuring since the Bretton Woods agreements of 1944.
Although the floating-rates concept has been criticized, there's little doubt that the elimination of fixed exchange rates helped the world economy adjust to the oil-price rise and other jolts. It also worsened U.S. inflation.
A marked falloff in the nation's productivity growth, which previously had buffered the United States from inflation. Output per work hour, which once grew by 3 percent a year, now is declining -- and seemingly can't be reversed.
A major shift in the demographics of the American work force, which has made it more difficult to keep the jobless rate low. In particular, wives have entered the job market in droves. And teenagers also have been a big factor.
The progression through the U.S. economy of the population "bulge" brought on by the much-publicized baby boom of World War II. The "bulge" which overtaxed schools in the '50s and '60s, overtaxed everything else in the '70s.
In retrospect, the economy seems to have survived these shocks far better than might have been expected. Apart from some mid-decade crimping and chafing, prosperity generally has continued even in the face of turmoil.
For example, despite the huge influx of women, the nation has provided jobs for millions of new workers -- and good jobs, at that. Inflation has hurt some families, but others have prospered from it. And the poor have held up well.
But the shocks also have brought about a major shift in the structure of the economy that portends serious limitations both for the 1980s and possibly the 1990s: It has skewed the consequences of rising demand.
Before the changes of the 1970s, creating additional demand in the U.S. economy merely resulted in an increase in overall ouput. But today, increases in demand produce more inflation instead.
What that means, in plain terms, is that the pie no longer can grow at the same pace it used to, and that we all may have to settle for less -- in real terms, at least, if not in inflated dollars.
So far, as the 1970s draw to a close, Americans largely have avoided making that adjustment, resorting to a variety of temporary economic ruses to offset their declining real income:
Families have been dipping into their savings at unprecented rates to avoid cutting back on their living standards.Nationally, savings stood at 4.3 percent of disposal income last quarter -- the lowest in recent memory.
Women have been taking jobs in record numbers to bolster family spending power -- to the point where one-earner families now clearly are falling behind the rest of U.S. society. Some 51.4 percent of American women now are working.
Consumers have taken on more and more debt through credit cards and short-term loans. The rationale is simple: With interest tax-deductible, borrowing is a bargain -- even at high interest rates.
Homeowners have refinanced their houses to take advantage of the increased equality that inflation has amassed for them in recent years. Housing prices have soared, but many families have reaped financial windfalls. h
Investment patterns are changing dramatically. Those with money to invest are putting it into commodities and assets such as gold rather than into stocks and bonds. Savings and loan institutions now feel strapped.
But the signs are that the pinch is becoming too tight, and that the adjustment will have to come as the 1980s begin. Indeed, some families already are beginning to cut back. The question is, how long will it last?
If the 1970s have been the decade of turmoil, then the '80s seem likely to be the period of adjustment -- when the United States will have to lower its economic sights, and when everyone will have to settle for slightly less.
Moreover, barring a deep recession, Americans can expect less help from the government than they might have once. With inflation now so stubborn, almost any president will be limited in what new programs he can propose.
The nation also will be restricted significantly by the energy situation. Even if Iran does not cut production, the United States still will have to conserve to help hold oil prices down. And that will mean a cutback in living standards.
To a nation used to a horn of plenty, such a reappraisal no doubt will be painful. But, given the alternatives, it seems all but inevitable. Unless wages explode unexpectedly, real income is bound to decline.
The goal no doubt will be to make the coming decade like March used to be: Right now, the '80s seem to be coming in like a crazed bull elephant. The hope is that we'll be able to send them out like a lion, if not a lamb.