This article appeared a couple of days ago and I can’t let it pass. The assertion that this economy is comparable to the 1970s is way, way off the mark. Trust me, I entered the civilian work force in 1974 and remember vividly the conditions then. Today’s economy is far worse.
For many Americans this feels like the worst economic crisis in their lifetimes, and some leading investors are starting to say they may be right.
… Most comparisons turn to the low growth, high inflation, weak dollar and soaring energy prices of the 1970s, but this time with a housing crisis and spiking commodities prices thrown in, all threatening a prolonged recession.
“It is the most serious financial crisis of our lifetime,” said billionaire investor George Soros, noting a growing effect on the U.S. economy as a whole, rather than just financial markets. “It is an idle dream to think that you could have this kind of crisis without the real economy being affected.
… Economist Jeffrey Sachs, who advised Eastern European governments after the fall of communism, also compared it to the early 1970s, which he said noted led to years of slow growth and economic difficulty.
“The ’70s were pretty bad,” Sachs said. “There were serious dislocations in the world economy. It was very tough and I hope we don’t go through that again.”
Younger people who didn’t live through the 1970s would probably read this stuff and think that it was really bad. Let me tell you, I’d trade today’s economy for the 1970s in a heartbeat! Here’s a comparison, based on my personal experience, to illustrate why today’s conditions are so much worse. At the time I entered the work force in 1974:
It was at the height of the Arab oil embargo, and I paid 45 cents per gallon for gas. Adjusted for inflation, that’s only $1.93 per gallon today. Instead, we’re paying $4.20 per gallon.
I was hired into a company from which I would retire thirty years later with a nice pension. In 1974 it was unheard of for a corporation not to offer a pension plan and full health coverage. Try finding that today.
My final year at Notre Dame cost just over $3,000. That’s less than $13,000 in today’s money but that same education today now costs over $40,000.
I was able to cover half of that tuition with a summer job making $3.65 an hour as an unskilled laborer working for a fence company. That’s $15.62 per hour in today’s money. How many summer kids are earning that kind of money now?
In 1974, U.S. per capita consumer credit was about $3800 (in 2005 dollars). Today it is about $8,000.
In 1974, our national debt was about $500 million, or about $2 trillion in today’s dollars. But today our national debt is approaching $10 trillion.
In 1974, our national debt per capita was about $10,000 (in 2005 dollars). Today, in 2005 dollars, it’s about $30,000.
In 1974 we had a trade deficit of about $4 billion, or the equivalent of about $17 billion in current dollars. Today, our trade deficit is approximately $750 billion, eliminating approximately 10 million jobs.
In 1974, we had a population of 213 million and were only slightly dependent on foreign oil. Today our population is 306 million and we are dependent on foreign suppliers for about 60% of our oil, giving them a stranglehold on our economy.
When you hear someone say that things are better today, or no worse than they were during some previous decade, ask someone who lived it whether or not that’s true. I’m sure that someone who lived through the Great Depression would tell you that today’s economy is better, but I doubt that anyone since then would make that claim.
What’s scary is that our economy has been so badly eroded by decades of enormous trade deficits that it could easily collapse into a situation in which the 1930s would look like the good old days.