Economic Crisis

Published: 1971
Play Audio Archive Story - UPI
President Richard Nixon signs the message he gave to Congress in which he proposed a $1.1 billion revenue sharing program for rural America, saying it would provide orderly development of rural areas and help them stem migration to the cities. He delivered the message on Capitol Hill on March 10, 1971 in Washington. (UPI Photo/Darryl Heikes/Files)

Announcer: As the year began, many people were asking, “How long can this continue?” They were referring to the economy of the United States. 1970 was the most inflationary year since the Korean War, and there seemed to be no relief coming. Prices of food and services, construction costs and wages, like a determined mountain climber, went higher in 1971. Taxes increased in kind and amount. A steamroller effect kept the trend going, and unemployment figures added to the woe. And people complained.

Senator George McGovern: "This Administration, which pledged to slow inflation and reduce unemployment, has instead given us the highest rate of inflation and the highest rate of unemployment in a decade."

Announcer: Senator George McGovern of South Dakota wasn't the only one to voice dissent with the Administration economy policy; but it was in what might have been a more objective frame of mind that Senator Mike Mansfield of Montana added his view.

Senator Mike Mansfield: "What we're in is not a Republican recession or a Democratic recession; both parties had much to do with bringing us where we are today. But we're facing a national situation which calls for the best which all of us can produce, because we know the results will be something which we will regret."

Announcer: But no matter who was to blame, if anyone, it was clear something had to be done. Then on a Sunday night in August, Americans listened and the President spoke.

President Richard M. Nixon: "The time has come for decisive action, action that will break the vicious circle of spiraling prices and costs. I am today ordering a freeze on all prices and wages throughout the United States for a period of 90 days. I am relying on the voluntary cooperation of all Americans, each one of you -- workers, employers, consumers -- to make this freeze work. Working together, we will break the back of inflation."

Announcer: To promulgate a wage price freeze was a complete turnaround in Nixon's policy, and Senator Jacob Javits of New York praised the decision.

Senator Jacob Javits: "The President's new economic policy and his dedication of the nation to a new prosperity without war spells action. It is bold and welcome."

Announcer: Labor leaders criticized the move, saying it discriminates against workers. Some Democrats said the action was long overdue, Hubert Humphrey for one.

Senator Hubert Humphrey: "Well, thank goodness the President has finally acted; but the fact is that for two years, he refused to act. As a results, millions of Americans are unemployed, thousands of Americans investors have been rubbed out in the stock market, millions of our young people are without work or hope."

Announcer: The day after the announcement, the President's economic medicine acted like shot of penicillin on the New York Stock Exchange. Its busiest day in history saw close to 32,000 shares traded, and never before had the Dow Jones averages jumped 32.93 points in one day.

But despite the initial surge the stock market was sluggish the rest of the year, and it eventually dropped to new 1971 lows. Economic experts said the confusion and uncertainty about the success of the new economic game plan was the cause.

Phase II of Nixon's plan began with the formation of two Boards to shape and enforce new economic controls. The Pay Board said wages had to be held at a maximum 5.5% rise a year. The Price Board said most items could not have a price rise of more than 2.5% every year.

Looking ahead to 1972, the President was optimistic.

President Richard M. Nixon: "Some of you have heard me say that 1972 will be a very good year for the American economy. Let me broaden that estimate tonight. The coming year can be more than a very good year for the American economy. It can be great year for America and the world. It can be year for the first time in 15 years in which we can achieve our goal of prosperity in a time of peace."

Announcer: Great Britain in 1971 had an economic controversy of its own. For ten years, the British Government had sought to join the European common market, and every time they tried the French and Charles De Gaulle stood in the way. But after a final 12-hour talk by British Prime Minister Edward Heath and French President George Pompidou, the way was clear for Britain's entry into the cooperative.

Prime Minister Edward Heath: "For my part, I have no doubt at all that the discussions which we have had will prove of real and lasting benefit, not only to Britain and France, but to Europe as a whole."

Announcer: This turning point in the history of Europe was met by some Londoners with more than a dash of skepticism. This man, for instance, had fears of his own.

Unknown Speaker: "We'll be talking Viva la France, oui, oui and all that carryon. I mean, some more so we're Cockneys."

Announcer: Well, if the common market was not too big appeal for some Englishmen to swallow, the change in their currency system was.

Announcer: This jingle was a part of the radio campaign to educate the populace with the new decimal system of counting money. The changeover went smoothly, but it reminded some old-timers about the good old days when a penny was a penny.

Unknown Speaker: "A penny? I could ride a donkey in Worthing for a penny. I could tie my hair up with ribbon, which only cost a penny a yard."

Unknown Speaker: "I should like to remind you that in my early teaching days about 70 years ago, a penny was a very valuable thing and one thought twice how to use it. Look, I think I'm right in saying was a penny a pint."