Will Americans Turn Inward? (Study The 1970s)

Forbes.com
4/18/09

If you think the national mood is low now, go back to 1973-76. Gas prices doubled in 1973. Stocks fell 48% between January 1973 and December 1974. The American vice president, Spiro Agnew, resigned in disgrace in November 1973. President Richard Nixon followed in August 1974. Saigon collapsed in April 1975 after U.S. armed forces withdrew from a war they were not permitted to win.

In November 1976, Americans elected as president a man almost no one outside of politics or the state of Georgia had known just one year earlier. Democrats captured 61 seats in the Senate, some of them such pacifists they wanted to shut down the Central Intelligence Agency. The Democrats took two-thirds of the seats in the House.

Economic growth was distinctly out of favor during the 1970s. America's bellwether state, California, had a governor, Jerry Brown, who spouted Zen Buddhism and slept on a mattress on the floor. Jerry Brown liked to recommend a book called Small Is Beautiful by E.F. Schumacher.

A "consensus" among correct-thinking scientists and environmentalists during the 1970s was the world's oil reserves would run dry soon, possibly by the 1980s and surely by the 1990s.

The novelist Kurt Vonnegut, worried about the resource drain, told college students that getting married and having babies was immoral. Newsweek ran a cover on the latest boogeyman, global cooling.

Thus does our current mess look like the 1970s more than anything. There are some notable differences, of course: House speculation, poorly understood credit derivatives, crazy leverage, bad accounting rules and lax SEC enforcement created today's woes.

In the 1970s, it was oil shocks, inflation, tax bracket creep and a growing welfare state. Those differences aside, we seem to have wound up in the same place. We are led by a government that once again (1) distrusts markets, (2) embraces oddly contradictory Keynesian deficit spending for growth and Malthusian limits to growth (except for the government) and (3) is run by a president with a deep regard for his own virtue.

Then as now, the U.S. economy will recover. But it is hard to imagine anything stronger than a tepid recovery--occasional bright periods of growth interrupted by numerous mini recessions, oil shocks and so forth. On the whole, this will produce European-style growth of 1% to 2%. If you doubt this, then think of the American industries whose top companies will shift capital and creative energy from growth investment to regulatory compliance: banking, for one.

Automobiles. Oil and gas. Electric utilities. Pharmaceuticals. Picture yourself at a board meeting at any top company in these fields. You will hear defensive talk overwhelming growth talk.

How did ordinary Americans cope in the 1970s? Many turned inward. Writer Tom Wolfe captured the decade's mood in a 1976 essay called "The Me Decade and the Third Great Awakening." Wolfe used the term "awakening" as satire. What Wolfe described was far from the religious awakenings led by Jonathan Edwards in the early 18th century or by the abolitionists of the 19th century. Rather, the great awakening of the 1970s was a national plunge into self-absorption.

These were the years of psychological analysis, self-therapy, the jogging craze and cults. "Everyone, it seemed, had an analyst, adviser, guru, genie, prophet, priest or spirit," writes the Web site, eNotes. The 1960s sexual revolution hit Main Street in the 1970s, and divorces exploded. So did sexually transmitted diseases.

What happened during the 1970s was that the first wonder of the world, human energy and creativity, got diverted from serious economic pursuits to trivial pleasure pursuits. Tax, regulatory and inflation hurdles made economic pursuits, on balance, too bothersome for too many during the 1970s. I am reminded of the movie Cabaret, about debauched and inflation-ridden Germany during the 1920s. Hollywood period movies are never solely about the historical period portrayed on film. They are also statements about present. Cabaret debuted in 1972.

Not all Americans wasted their energies chanting "om" or swapping spouses. Some brave souls started companies. Federal Express, Southwest Airlines, Charles Schwab, Microsoft, Apple, Genentech, SAS Institute, Oracle and others were launched into the headwinds of the 1970s.

The same thing could happen again. One hopes, anyway, and crosses his fingers. As feckless as President Jimmy Carter turned out to be, he had the virtue of being an entrepreneur himself--a peanut farmer. He had the wisdom to know that deregulation could be better than regulation. Hence, Carter deregulated America's airline and trucking industries and let them compete on price.

Barack Obama is not an entrepreneur. No one close to him is. Not a single aide, adviser, Cabinet member or House committee chair. Obama almost never mentions small businesses in his economic speeches. It is clear that he would like to divert some portion of America's human creativity away from private economic pursuits and toward community building. That's just who Obama is, and it can be a noble goal. But Obama won't achieve it. The lessons of the 1970s are clear. When you put barriers in front of private economic gain, you won't get more community gain. You'll send a nation off a cliff of self-absorption and trivial pursuits.