After 1973, it appeared that the American Century was finished after a mere thirty years, and the writings of Richard Barnet, Daniel Bell, Paul Kennedy and Michael Crichton explained why the new age was one of limits. The United States had to adjust to being one power among many--a power also in inevitable decline like Great Britain earlier in the century. Détente also reflected this multi-polar reality and adjustment to decline, as did the politics of domestic populists like Ross Perot, but this was most emphatically not the mood of Ronald Reagan, or even neo-Wilsonians like Bill Clinton, which only indicates how transitory all such academic fads and fashions can be in the age of instant media. Writing at the end of the Second Gilded Age, Will Hutton was at the opposite pole from the pessimists of the 1970s, warning of a revived American Empire that had no concept of limits and was once again on the verge of total hegemony in culture, economics and politics. This was not at all the consensus during most of the period, although no one doubted the United States still retained considerable power even at its nadir in the 1970s.
Nevertheless, in the 1970s and 1980s, the Declinist thesis seemed most plausible, not least in the Rust Belt regions of the Northeast and the ghettos of the decaying industrial cities. Economic and social deterioration was real enough in those places, easily measurable by statistics and common sense observation. In addition, the cost of imported oil rose 200% in 1970-79, by which time 45% of the U.S. supply came from imports, and the jump in oil prices led to “a period of stagnation and inflation that lasted almost a decade.” Even America’s supposedly devoted clients like the Shah of Iran took advantage of its distress, raising the price of oil by 40% in December 1973, while the Saudi Arabian royal family kept the oil embargo going until March 1974. American oil companies also took advantage, as their profits rose 150% in 1972-74 alone, and they bought up coal, natural gas and solar power companies in hopes of rising prices. By the end of the decade, seven of the fifteen largest coal companies also happened to be oil companies.[1]
Costs for imported oil rose from $2.8 billion in 1970 to nearly $50 billion by the need of the decade, and gas and electric rates increased 99% in 1973-77. The driving public even had to reduce their speed to 55 MPH, although, this went up to 65 and 70 again during the laissez faire 1980s. In the second great oil shock after the 1979 Iranian Revolution, oil prices rose another 36% in a month, and also led to rampant corruption in the U.S., for the large oil companies deliberately withheld supplies to drive up prices and put independent producers and distributors out of business. Actual oil imports never dropped at all in the shock but oil company profits rose 200% and their market share grew 25%.[2]
A peculiar kind of globalization occurred in this period, fueled by the inflation that followed in the wake of the oil shocks. By 1977, a third of American exports went to the Third World, as did 40% of Europe’s, particularly to the OPEC nations. Direct investment grew from $3.5 billion to $13.5 billion in 1970-70, and capital markets from $2.7 billion to $48.1 billion. Brazil got $31 billion in loans in 1973-79, Mexico, $36.7 billion and Eastern Europe $60.1 billion, building up the debt crisis that plagued the world throughout the Second Gilded Age. By 1986, general purpose lending from Western banks to Soviet Bloc countries was $1.6 billion per month, and total debt stood at $127 billion. This helped bring about the collapse of Eastern Europe although the bankers who made the loans hardly intended to destroy their customers. In 1982-88, nearly thirty countries were in default or near-default on $650 billion in debt.[3]
For the Global South, the higher cost of imported oil was greater than all foreign aid they received. Worldwide, inflation increased by one-third in the 1970s, even before the 1979 shock, and growth rates for non-oil Third World countries fell from 6% a year in 1968-72 to 2.5% by 1982, while consumer prices rose 37%. These crises destabilized important U.S. allies like Turkey, which used half its export earnings to pay for oil and had a military coup in 1980, as well as Latin America from Argentina to Mexico (especially Central America, which experienced a bloodbath in the 1980s). Overall, “a full list of the countries whose political objectives were threatened by economics would be almost endless.”
Oil shocks combined with “irresponsible lending” pushed the region’s debt up to $400 billion by 1981, with $40 billion a year in interest payments, and half of this debt “became flight capital in the United States or other havens.” Democracy never really existed in Latin America, and was “chronically subject to maladministration and corruption” which make any resolution of its social and economic difficulties problematic. The Reagan administration devoted almost all its attention in the 1980s to Central America, a sub-region of relatively minor importance, while the economies of all the larger nations were undergoing their worst crisis since the Great Depression. Robert Wesson thought that greater access to U.S. markets might beneficial to some of them, but obviously offered no miracle cures for the Latin South.[4] In retrospect, the crisis was the main factor than led to the end of the Cold War and the collapse of many authoritarian regimes on both sides of the Iron Curtain, although at the time, it simply seemed like mass misery and unemployment, and there was no guarantee about the outcome.
[1] Walter Isaacson, Kissinger: A Biography (NY: Simon & Schuster, 1992), 562; Barnet, 44, 98, 275-78
[2] James William Coleman, The Criminal Elite: Understanding White-Collar Crime, 4th Edition (NY: St. Martin’s Press, 1998), 49; Barnet, 47-52, 61-98; Paterson, 31
[3] Richard E.Feinberg, The Intemperate Zone: The Third World Challenge to U.S. Foreign Policy (NY: Norton, 1983), 41-42, 89; Roger W. Robinson, “Financing the Soviet Bloc”, in Annalese Anderson and Dennis L. Bark, eds, Thinking About America: The United States in the 1990s (Stanford: Hoover Institution Press, 1988), 207
[4] Feinberg, 37, 123-25; Robert Wesson, “Latin America and the Caribbean: Neighbors and Friends?”, in Anderson and Bark, 103-14
